You asked how CGS § 25-32, as amended by PA 07-244, addresses changes in ownership and use of water company lands. You also asked for suggestions how the legislature could make it more difficult to change the use of class I and class II land (generally water company land located in watersheds).

SUMMARY

Under CGS § 25-32, the sale, lease, or assignment of water company lands located within a watershed or a change in their use requires a Department of Public Health (DPH) permit. DPH regulations extend this requirement to off-watershed class II land. The statute and regulations do not define what constitutes a change of use.

Under the statute, a water company can only sell or otherwise dispose of land closest to water supply sources (class I land) to the state, a municipality, another water company, or, under limited circumstances, a conservation organization such as a land trust. The buyer must agree to maintain the land subject to the restrictions in the law and those imposed by the DPH permit. (DPH regulations do not permit sales or other dispositions at all. ) The law is less restrictive with regard to class II land, but in all cases, including changes of use, DPH can only grant a permit if it finds that the proposed action will not significantly harm the purity and adequacy of public water supply. A DPH permit is not required for the disposition or change of use of class III land.

PA 07-242 establishes specific requirements for the change of use of a 131. 4 acre parcel owned by the city of New Britain that consists of class I and class II land.

As noted in OLR report 2006-R-0597, the law also requires the approval of the Department of Public Utility Control (DPUC) to sell or otherwise dispose of land owned by a private water company. The law gives several types of entities a right of first refusal to buy the property, and specifies the priority of these rights. The law also establishes rules DPUC must follow in allocating the benefits of the sale between the company's shareholders and its ratepayers. These rules, in effect, give water companies an incentive to ensure that the land will be retained as open space.

The legislature has several options to make it more difficult to change the use of class I and class II lands. It could (1) make uniform for class I and class II lands the conditions that must be met before DPH can approve a change of use; (2) expand notice and hearing requirements for permits; (3) expand the right of first refusal provisions to cover changes of use proposed by private water companies and municipal water utilities; and (4) in the case of land owned by private water companies, exclude land used for purposes other than water supply from the company's rate base.

INTRODUCTION

The statutes have several definitions of water company. The one applicable to your questions is found at CGS § 25-32a, which defines a water company as a corporation, municipality, or other entity that serves two or more consumers or 25 or more individuals on a regular basis. Consumers include private homes, apartment buildings, and businesses. PA 07-244 expands this definition to include state agencies.

By law, there are three classes of water company land (CGS § 25-37c), with different restrictions on the sale or other disposition of each class. Class I land is water company property that is closest to a supply source, e. g. , within 200 feet of a well, or that meets certain geological criteria, e. g. , having a slope of 15% or more. Class II land is other property that is (1) within a watershed or (2) off a watershed but within 150 feet of a reservoir or a stream that flows into a reservoir. Class III land is other off-watershed land.

CURRENT CONDITIONS ON CHANGES IN OWNERSHIP OR USE

Under CGS § 25-32, the sale, lease, or assignment of any water company watershed lands or a change in their use generally requires a DPH permit. Building trails or pathways for pedestrians does not require a permit and certain recreational uses are allowed without a permit under CGS § 25-43c. As discussed below, PA 07-244 establishes specific conditions for the approval of a change of use of property owned by the city of New Britain.

Class I Land

Under CGS § 25-32, DPH can grant a permit for the sale of class I land to a state agency, municipality, or another water company. It can grant a permit for the sale of such land to a private land-holding organization (e. g. , a land trust) only if the water company that owns the land was denied a DPH permit to abandon a well or other supply source that is not currently used or needed. DPH can also permit the sale or assignment of a conservation restriction or public access easement to such organizations. In any case the purchasing entity must agree to maintain the land subject to provisions of the law and the permit. The purchaser must obtain a DPH permit to sell, lease, or assign the land or change its use. However, DPH regulations (Conn. Agencies Regs. § 25-37d-1 et seq. ) do not permit sales or other dispositions at all for class I land.

DPH can only grant a permit for the change of use of class I land if the applicant demonstrates that (1) the change will not significantly harm the purity and adequacy of the public drinking water supply and (2) is consistent with the company's water supply plan. The DPH regulations establish performance criteria DPH must consider in determining whether the change will harm water supply.

Class II Land

For all class II permit applications, including those for a change of use, the applicant must demonstrate that the proposed action will not have a significant adverse impact on the purity and adequacy of public water supply. The DPH regulations establish performance criteria DPH must consider in determining whether the proposed action will harm water supply.

DPH can impose conditions or restrictions on the permit it considers necessary to maintain the purity and adequacy of water supply. To grant a permit, DPH must find that these restrictions can be enforced on subsequent owners of the land and that, given these restrictions, the proposed action will not have a significant adverse impact on the purity and adequacy of public water supply. By law, DPH must consider seven factors in making its decision and is not bound by precedent in granting these permits. These factors include such things as the creation and control of sources of contamination by the proposed action.

DPH can issue a permit for a sale, lease, or assignment of class II lands to another water company, municipality, or nonprofit land conservation organization. DPH cannot grant a permit unless:

1. the class II land is part of a larger parcel that also includes class III land and use restrictions will prevent the class II land from being developed; and

2. as a condition of the transaction, a permanent conservation easement is established to perpetually preserve the land predominantly in its natural condition for the protection of natural water resources and public water supplies while allowing for recreation consistent with such protection and the improvements needed to provide safe and adequate potable water.

The easement cannot allow the class II land to be developed for any commercial, residential, or industrial use. Nor can the land be used for recreational purposes requiring intensive development, such as golf courses, tennis courses, or ball fields. (CGS § 25-37i provides a narrow exception to the ban on golf courses. ) Motor vehicles other than water company vehicles and motorized wheelchairs cannot use the land, but trails can be established for pedestrians and non-motorized vehicles. The easement requirement does not apply when the class II land is needed to provide access to or egress from a parcel of class III land that has been approved for sale.

These provisions do not bar the lease or change of use of water company land for recreational purposes that do not require intense development. The provisions also do not prevent improvements for water supply purposes, leases of existing structures, or the placement of radio towers or telecommunications antennas on existing structures, although zoning restrictions may apply.

New Britain Provisions

PA 07-244 allows the city of New Britain to change the use of some of its water company owned lands to allow for extraction of stone or other materials from a parcel in Plainville, through a leasing process that is part of a contract with New Britain as a party. The act affects approximately 131. 4 acres of class I and class II lands.

The contract must require that, among other things, the lease and subsequent use of the land increases the future safe yield of a pure and adequate drinking water supply for New Britain and the surrounding area served by the city. By the lease's conclusion, the entity leasing the land must prepare the (a) site for a public drinking water reservoir capable of supplying an adequate safe yield of drinking water consistent with the most recently approved water supply plan, and (b) surrounding land for reforestation including sufficient tree plantings.

The act requires that certain things happen before New Britain can execute the contract. Among other things, an independent third party approved by DPH must conduct an environmental evaluation to evaluate the potential impact of the purity and adequacy of the existing and future public water supply. DPH must review of the evaluation to provide the New Britain Water Department with guidance on the suitability of the best management practices identified in the evaluation for protecting the public water supply and public health

Under the act, the lessee must get deed restrictions for a minimum of twice the acreage that has been approved for extraction activities. These restrictions must (1) prohibit the use and development of acreage adjacent to the site for anything other than open space purposes; (2) permanently dedicate such acreage for land uses such as public parks, forests, or natural areas, including reservoirs; (3) require such acreage to be preserved predominantly in its natural scenic and open space condition that can allow for camping, hiking, forestry, fishing, and conservation activities; and (4) prohibit all other building or development except as may be required for source protection and to meet water quality standards if used as a public water supply.

LEGISLATIVE OPTIONS

The legislature has several options to make it more difficult to change the use of class I and class II lands. It could make uniform the conditions that must be met before DPH can approve a change of use. By law, DPH cannot approve a change of use unless the applicant demonstrates that the change will not significantly harm the purity and adequacy of public drinking water supply. In addition, in the case of class I land, DPH must find that the change is consistent with the water company's water supply plan approved by DPH. The legislature could require that changes in use of class II land also comply with the company's supply plan. Conversely, current law requires DPH to consider seven factors in deciding to issue a permit for class II land, but does not have this requirement with regard to class I land (although some of them are included in the performance criteria specified by the regulations). The legislature could require that these factors be considered in all cases.

By law, DPH must provide notice of any application for the sale or change of use of water company land to the chief elected official and chief executive officer of each municipality where the land is located. The legislature could expand this notice requirement to include the Department of Environmental Protection and conservation organizations. DPH could use the list of conservation organizations created pursuant to CGS § 16-50c for this purpose. CGS § 16-50c gives such organizations, municipalities, and the state a right of first refusal to buy land from private water companies.

Currently, the law does not require DPH to hold a hearing on the permit application. (The regulations allow hearings, but according to DPH staff they are generally not held. ) The legislature could require such a hearing, perhaps in the municipality where the land is located. Requiring a hearing would also make the proceeding a contested case under the Uniform Administrative Procedures Act, allowing aggrieved parties to appeal DPH's decision to the courts.

As noted above, when a private water company proposes to sell its land, various entities have right of first refusal to buy the land. For example, other companies and municipalities can buy the land for water supply purposes and the state, municipalities, and land-holding organizations can buy the land for open space or recreational purposes. The legislature could require that when a private water company or municipal water utility proposes to change the use of its land, it offer to sell the land to these entities for these purposes.

The legislature could require the DPUC to hold a hearing to review the rate treatment of land owned by a private water company whose use is changed so that it is no longer used for water supply purposes. The legislature could require that the land be taken out of the company's rate base and thus not be used in determining rates if the land is used for commercial purposes, as distinct from open space.

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