California Increases Fines for Unauthorized Water Diversions and Uses

As California prepares for future cycles of water scarcity, the Legislature continues to prioritize enhancing regulations to address critical water supply needs, secure the rights of diverse water holders, and protect essential environmental resources. On September 22, 2024, Governor Newsom signed AB 460 into law, a bill that significantly increases fines for unauthorized water diversions and other violations of state orders related to water use. AB 460 was introduced in response to limitations in existing California Water Code provisions that capped the maximum fines for violations of appropriative water diversions and uses to $500 per day. During the drought conditions in 2022, the California State Water Resources Control Board (the Board) issued emergency drought curtailment orders on the Shasta River in order to protect salmon and senior water rights holders. Violators were subject to the statutory maximum fines, but the $500 maximum per day limitation proved insufficient to deter many from continuing to divert water from the river. AB 460 increases the penalties that the Board can impose under different circumstances and strengthens the Board’s enforcement powers in a manner that proponents hope will prevent future noncompliance.

The Board serves several important roles managing the use of the state’s water resources. As a permitting and water rights agency, it oversees the allocation and regulation of appropriative rights to surface water acquired after 1914. While the Board does not issue permits for riparian, overlying, or pre-1914 appropriative rights, it has at least some oversight and enforcement powers in relation to the exercise of all water rights in the state. For instance, under Water Code Section 1831, the Board can issue cease-and-desist orders when it determines, among other issues, that there has been a violation of (1) one of its orders or regulations; (2) any permit term or condition; (3) extraction restrictions imposed on groundwater pumpers under the Sustainable Groundwater Management Act (SGMA); (4) the California Constitution’s provisions against an unreasonable use of water; and (5) use of potable water for non-potable uses. The Board can also conduct investigations, issue orders, and make determinations on the extent and validity of any right to surface water, including pre-1914 appropriative and riparian rights. This comprehensive approach ensures that the state’s surface water resources are managed sustainably while upholding the rights of various users and protecting environmental needs. Consequently, the increased fines established by AB 460 could impact a diverse array of water users across the state.

Under AB 460’s changes, the maximum fine imposed under Water Code Section 1846 will increase to $1,000 per day for anyone who violates (1) a permit, license, certificate, or registration issued by the board; (2) a regulation or order adopted by the Board; or (3) a condition or reporting requirement for the diversion of floodwaters for groundwater recharge. If the noncompliance is the diversion of water in violation of a curtailment order adopted by the Board, the maximum fine will be $10,000 for each day the violation occurs, and $2,500 for each acre-foot of water diverted, beginning on the first day on which the violation occurs.

AB 460 also increases penalties for certain violations of cease-and-desist orders issued by the Board. Violation of a cease-and-desist order during a critically dry year that immediately follows two or more consecutive below normal, dry, or critically dry years, or during a period in which the Governor has declared a drought state of emergency, is already subject to a $10,000 per day fine under the Water Code. AB 460 increases the fine for all other violations of a cease-and-desist order from $1,000 per day to $2,500 per day. As described above, the Board’s authority to issue cease-and-desist orders extends not only to violations of permitted appropriative water rights, but also to violations of other orders and regulations, unreasonable uses of water generally, and groundwater pumping in violation of SGMA restrictions. AB 460’s penalties could therefore also have implications many types of water users, including pre-1914 appropriative, riparian, and certain groundwater users in SGMA-regulated basins.

Finally, to ensure long-term future compliance, AB 460 adds a provision to the Water Code that requires the Board to adjust for inflation all civil and administrative liabilities or penalties it imposes or in a water right action brought at the request of the Board. The requirement to adjust for inflation does not impact the other statutory fines under AB 460, described above. The Board must annually adjust the penalties it imposes for these violations beginning January 1, 2026.

The new law acknowledges the growing importance of access to water, particularly in times of scarcity, and aims to alter the economic dynamics so that paying penalties or fines is no longer a financially prudent option. It remains to be seen whether the value of continued water use will outweigh the costs from the new penalties imposed. The increase in liabilities and penalties under AB 460 underscores the caution California water diverters and users should exercise in complying with applicable legal requirements.

If you would like to learn more about the implications AB 460 may have on your project, please reach out to Allen Matkins’ Natural Resources team.