Arizona lawmakers defeat developer-backed groundwater bills as state sweeps $20M from rural water fund

Arizona lawmakers defeat developer-backed groundwater bills as state sweeps $20M from rural water fundThe Central Arizona Project successfully opposed a wave of state legislation designed to loosen Assured Water Supply rules, while navigating a state budget that swept millions from rural water infrastructure but bolstered Colorado River litigation reserves.

None of the 18 water bills opposed or tracked by the Central Arizona Project advanced into law during the 2026 session, maintaining current Assured Water Supply regulations.

The defeated legislation, pushed by the development industry amid ongoing lawsuits, would have added significant replenishment obligations to the Central Arizona Groundwater Replenishment District.

The newly passed $18.3 billion state budget swept $20 million from the Water Infrastructure Finance Authority's Water Supply Development Revolving Fund to the general fund.

The state budget appropriated an additional $6 million to the Colorado River Litigation Fund, bringing its total to $9 million.

During a record-breaking 2026 legislative session, the Central Arizona Project (CAP) successfully defended existing groundwater management frameworks against a wave of developer-backed bills aimed at loosening Assured Water Supply (AWS) rules in the Phoenix Active Management Area. At the August 6 meeting of the CAP Public Policy Committee, Legislative Affairs Manager Jeff Gray and Senior Legislative Affairs Analyst Jessica Newland Olin reported that none of the 18 state water bills CAP took a position on were enacted into law. The majority of these bills were opposed by the utility because they sought to override the state's pause on new AWS certificates and would have significantly increased the replenishment obligations of the Central Arizona Groundwater Replenishment District (CAGRD). Defeated measures included Senate Bill 1288, which would have required the Arizona Department of Water Resources to grant certificates to applicants holding pre-certificate physical availability determinations. According to Gray, this single bill could have resulted in an estimated 250,000 acre-feet of additional replenishment obligation for the CAGRD. Other defeated legislation, such as House Bill 2094, aimed to force the approval of pending certificates delayed by the state's recognition of unmet groundwater demand in the Phoenix area. Gray noted that the legislative push from the development industry is running parallel to ongoing litigation between homebuilders and the state over groundwater physical availability. 'These bills were meant to at least move forward on pieces of their objectives to move forward on certain developments,' Gray said, adding that the future of such legislative attempts will likely depend on the outcome of the ongoing appeals process. On the funding front, the recently passed $18.3 billion bipartisan state budget delivered mixed results for water infrastructure. Lawmakers swept $20 million from the Water Infrastructure Finance Authority's (WIFA) Water Supply Development Revolving Fund—which supports rural water projects—into the state's General Fund. CAP, alongside a coalition of water and business groups, had formally urged the legislature and governor to halt the sweeps of the principal infrastructure funds. However, the state's Long-Term Water Augmentation Fund was spared from further sweeps this year. The budget also bolstered the state's legal war chest, appropriating an additional $6 million to the Colorado River Litigation Fund, bringing the total available for potential interstate water disputes to $9 million. Additionally, lawmakers opted for a three-year freeze on new tax benefits for data centers rather than adopting a previously proposed fee on data center water usage. The freeze is expected to save the state an estimated $50 million while lawmakers evaluate the broader impacts of the facilities on local water and power resources. At the federal level, Gray highlighted that the Yavapai-Apache Nation Water Rights Settlement Act (S. 3617), which CAP supports, received its initial hearing in the Senate Indian Affairs Committee on July 29, positioning it for a potential future markup.