Page 7 - Beaumont Basin Watermaster
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consensus  regarding  timing  of  when  an  overlying  right  becomes  an
                              appropriative right.

                              BCVWD  Counsel  Jim  Markman  indicated  that  over  the  years,  he  has
                              spoken to various overlyers who are trying to monetize their rights more
                              quickly or in addition to what they need for development. He explained
                              that the mechanism is a conversion where the overlyer forgoes pumping
                              the amount of water necessary to serve a project on his property, and
                              that amount of water goes to the public water supplier who is required
                              to serve the project. This has been done in the Chino Basin for 40 years.
                              The Beaumont Basin judgment is different in that it is more complex,
                              Markman  explained.  He  said  the  transfer  appears  to  occur  for  two
                              reasons: when someone hooks up a meter and starts serving potable
                              water to a development or as it goes on over time. The calculation of
                              the  amount  of  water  that  has  converted  is  reported  annually  to  the
                              Watermaster through meter readings (deemed to have been pumped)
                              and the overlyer has a right backing up that pumping. Markman posited
                              that it appears the transfer is annual and can only be transferred when
                              the water is actually moving through the meter; that is the mechanism.
                              He acknowledged there are ambiguities in the judgment.

                              Counsel Markman also pointed to the BBWM policy that if an overlyer
                              does not pump its overlying allocation in a given year, the amount not
                              pumped  is  distributed  into  the  storage  accounts  for  all  of  the
                              appropriators on a pro-rata basis – so it cannot be counted twice. Those
                              two things occur annually, he stated. Markman said he had read of other
                              things  being  done  and  has  been  in  meetings  where  developers  or
                              landowners ask for early allocations leading to the question whether the
                              public water supplier can serve anywhere within the service area with
                              this add-on production right, because it is being forgone by the overlyer.
                              If nothing is being built, the overlyer would have forgone it anyway, and
                              then the lack of production would have been distributed to everyone
                              else’s storage account, Markman pointed out. He recommended walking
                              back the procedure and further study by the Watermaster Committee to
                              create a policy to reconcile all of the viewpoints and different potential
                              accountings. The result may entail an amendment to the judgment that
                              is clear and can be put in front of the court.

                              Markman counseled that the BCWVD does not see the transfer occurring
                              until the water flows with an accounting every year including the un-
                              pumped water that is distributed every year to the appropriators. He
                              indicated support for formation of an ad hoc committee.

                              Member Zoba said he believes the current wording in the draft annual
                              report makes sense and suggested that some of the discussion seemed
                              opportunistic to create a third party beneficiary which would receive this
                              water. An overlyer has three options to use their water: pump it and
                              use it on the property, not pump it (at which point it becomes an unused

               BEAUMONT BASIN WATERMASTER COMMITTEE - MINUTES 2019-03-06                          PAGE 4 OF 8

                                        Beaumont Basin Watermaster - March 27, 2019 - Page 7 of 58
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