HomeMy WebLinkAbout11.18.19 Email from Paul Gosselin - Agenda Item 4.03 - Part 1 Snyder, Ashley
From: Gosselin, Paul
Sent: Monday, November 18, 2019 8:10 AM
To: BOS
Cc: McCracken, Shari; Clerk of the Board; Buck, Christina; Hatcher, Casey
Subject: Agenda Item 4.03
Attachments: 00124_Draft AIP Revised May 20 2019.pdf;Agreements in Principle_Contact
Extension_final.pdf; Butte County Comments_Contract Extension Amendments.pdf; Butte
County Comments_SWP Contract CWF.pdf; Butte Objective 042913.pdf; SWC CE
Objectives_SWCCE-0001_4-26-2013.pd f
Board Members—
At tomorrow's Water Update, I will give an update on the State Water Project Contract negotiations. I attached a
number of documents as background. Additionally, DWR has posted information on two
webpages. https://water.ca.gov/Programs/State-Water-Project/Management/Delta-Conveyance-Amendment
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Let me know if you have any questions.
Thank you.
Paul
Paul-Gosselin, Director
Butte County Department of Water and Resource Conservation
308 Nelson Avenue
Oroville, CA 95965
Office: (530)552-3590
Cell: (530) 574-7443
1
DRAFT WORKING DOCUMENT FOR PUBLIC DISCUSSION
Draft 4 — May 20, 2019
Doc# 00124
Draft Agreement in Principle for the SWP Water Supply Contract Amendment
for
Water Management
This straw proposal for a draft Agreement in Principle (AIP) is from the Consolidated
Talking Points as of May 30, 2018 from the contract amendment negotiations. Many
provisions are under discussion and the workgroup will update the Draft AIP after future
public negotiations. [Format used in this document is preliminary and is subject to
revision.]
DRAFT Proposed Project Objectives
The California Department of Water Resources and the PWAs have agreed to the
following proposed project objectives for amending the SWP water supply
contract:
1) Supplement and clarify terms of the SWP water supply contract that will provide
greater water management regarding transfers and exchanges of SWP water
within the SWP service area;
PRINCIPLES TO ACHIEVE DRAFT PROPOSED OBJECTIVE FOR WATER
MANAGEMENT TOOLS AND ACTIONS
1. Water Transfers.
1.1. Terms of a Transfer Agreement: The PWAs shall determine duration and
compensation for all transfers; this includes allowing single, Transfer
Packages and multi-year transfers to be as long as the remainder of the term
of the contract.
1.2. Transfer Package Definition: A Transfer Package is comprised of two or
more transfer agreements between the same PWAs. If a transfer package is
presented to DWR for approval, DWR shall consider each proposed transfer
within the package at the same time and shall apply the transfer criteria listed
below in the review of each transfer. DWR shall not reclassify a Transfer
Package or Transfer as an exchange.
1.3. All contract language in Article 56(d) and language related to the Turnback
Pool shall be removed.
2. Water Exchanges.
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2.1 Article 56(f) will be revised to include language permitting consideration of
hydrology under a bona fide exchange and will include the following criteria
for return ratios:
For SWP allocations >= 50%, return ratio is up to 2: 1
For SWP allocations > 25 and < 50%, return ratio is up to 3: 1
For SWP allocations >15% and <=25%, return ratio is up to 4: 1
For SWP allocations <=15%, return ratio is up to 5:1
2.2. The PWAs shall use the applicable return ratio using the SWP allocation at
the time the exchange transaction is executed between the PWAs.
2.3. Notice to Contractors 17-11 Attachment A, Section A, Bona Fide Exchanges,
Item 4 Cost compensation reads as follows: Maximum cost compensation for
a bona fide exchange may not exceed the exchanging PWAs combined
conservation facilities, transportation facilities, and fixed charges (capital and
minimum charges including capital surcharges). The allocation percentage in
the denominator of the compensation calculation will be set by the SWP
allocation which has incorporated the May 1 monthly Bulletin 120 runoff
forecasts. If exchanges are requested prior to the allocation identified above,
DWR will provide timely approval with the obligation of the PWAs to meet the
requirement of the maximum compensation — if the compensation exceeds
the maximum, the PWAs will re-visit the agreement and adjust the
compensation. If a cost adjustment is made, the PWA must notify DWR.
3. Transfers and Exchanges, including Transfers and Exchanges using
Carryover Water in San Luis Reservoir (SLR).
3.1. Buyers and Sellers in Same Year. PWAs may be both buyers and sellers in
the same year and enter into multiple transfers and/or exchanges in the same
year.
3.2. Basic Criteria Required for Proposed Transfers and Exchanges.
3.2.1 Transfers and exchanges must be transparent.
3.2.2 Transfers and exchanges must not harm non-participating PWAs.
3.2.3 Transfers and exchanges must not create significant adverse
impacts in a PWA service area.
3.2.4 Transfers and exchanges shall comply with all applicable laws and
regulations.
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3.2.5 Transfers and exchanges shall be scheduled only if they do not
impact normal SWP operations.
3.2.6 Transfers and exchanges shall not impact the financial integrity of
the SWP.
3.2.7 A PWA may petition the DWR Director for an exception in the
following cases. In each case, the PWA must provide explanatory
information to the DWR Director.
• A transfer or exchange does not meet the basic criteria, but
the PWA feels that there is compelling need to proceed with
the transfer or exchange.
• A PWA that has received water in a transfer or exchange
cannot deliver all of the water from the transaction in the
same calendar year and wishes to carry over the water in its
name.
The DWR Director shall have discretion to approve exceptions.
3.3. Dispute Resolution Process, Prior to Executing an Agreement. PWAs
and DWR shall comply with the following process to resolve disputes if a
PWA that is not participating in the transfer or exchange claims that the
proposed transfer and/or exchange has a significant adverse impact.
3.3.1 Any claim to a significant adverse impact may only be made after
the submittal of a term sheet to DWR and before DWR approves a
transfer/exchange agreement.
3.3.2 In the event that any dispute can't be resolved among the PWAs,
DWR will convene a group including DWR (the Chiefs of SWPAO,
Legal, and Operations or their designees) and the PWA parties
involved (PWA representatives to be chosen by each PWA party).
Any PWA claiming an adverse impact must submit written
documentation to support this claim and identify a proposed
solution. This documentation must be provided 2 weeks in
advance of a meeting of the group that includes SWPAO, Legal,
Operations and the involved PWA representatives.
3.3.3 If this group can't resolve the dispute, the issue will be taken to the
Director of DWR.
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3.3.4 The DWR Director's decision will be the final.
3.4. Water Delivery Priorities: Exchange and transfer water shall be scheduled
in accordance with Article 12 (f) priorities retaining the associated priority
level. The transfer water will not have the protection of Article 14(b) and the
delivery cannot impact any other PWAs.
3.5 Although DWR will not be a party to any transfer or exchange agreement
between the PWA's, DWR and the PWAs shall enter into an agreement to
address DWR's role in effectuating the transfer or exchange. Such
agreement shall include certain standardized provisions designed to protect
SWP operations, finances and liability, along with other provisions tailored to
the particular transaction or as otherwise agreed among DWR and the PWAs.
3.6 Timely Processing. DWR will timely process requests to be incorporated
into the schedule to deliver water that given year.
3.7 Shortages: In regards to shortages, DWR retains authority as set forth in
Article 18(a).
3.8 Article 21.
3.8.1 Tulare Lake Basin Water Storage District, Empire Westside
Irrigation District, Oak Flat Water District, and Kings County may
transfer a portion of their Article 21 water to another PWA.
3.8.2 The DWR Director, in his or her discretion, may approve the
transfer of a portion of other PWA's allocation of Article 21 water to
another PWA where there is a special need for the transfer. The
Department will prepare criteria to be applied for the review of a
PWA request to transfer Article 21 water. This will not impact the
Department's process for allocating Article 21 water.
4. PWA Due Diligence.
4.1 Each PWA participating in an exchange or transfer shall confirm the following
in a resolution or other appropriate document approving the transfer or
exchange, including the use of stored water/carryover water, if applicable,
provided to DWR as follows:
4.1.1 That the PWA has complied with all applicable laws for this
transfer/exchange and shall specify the notices that were provided
to the public agencies and the public regarding the proposed
transfer or exchange.
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4.1.2. That the relevant terms of the transfer/exchange have been
provided to all State Water Project PWAs and the SWC Water
Transfer Committee;
4.1.3. That the PWA is informed and believes that this transfer/exchange
will not harm other SWP PWAs, or impact SWP operations.
4.1.4. That the PWA is informed and believes that the transfer/exchange
will not affect its ability to make all payments, including payments
for its share of the financing costs of DWR's Central Valley Project
Revenue Bonds, when due, under its water supply contract.
4.1.5. That the PWA has considered the potential impacts of the
transfer/exchange within the PWA's service area.
4.2. Add language to the contract that requires PWAs parties to an exchange or
transfer to publicly post and provide information to non-party PWAs.
The PWAs and DWR agree that DWR will send a Notice to Contractors to
outline the following process related to transparency for transfers and
exchanges:
At the time the PWA parties submit the Contract Information Form to DWR,
they will provide the Contract Information Form to the non-party
PWAs. During the time period beginning with the PWA parties submitting the
Contract Information Form to DWR and the time before there is a final
agreement with DWR for storage or conveyance, the PWA parties will publicly
post information regarding the transfer or exchange. If applicable, the PWA
parties will request the State Water Contractor Board to support the water
transfer. If the State Water Contractor board votes to support the transfer or
exchange, the General Manager will send a letter of support to DWR and to
the non-party PWAs. Once a storage or conveyance agreement is completed
it will be provided to the non-party PWAs.
4.3. If requested by the DWR Director with respect to any confirmation of Basic
Criteria for Transfers, Exchanges and Carryover Water, the PWA shall
cooperate with DWR in providing DWR with information supporting the basis
for the confirmation or basic criteria.
5. Stored Water/Carryover Water.
5.1. Store and Transfer SWP Water in the Same Year. Modify Article 56(c)(4)
and any other applicable sections to allow PWAs to store and transfer Table
A water in the same year and modify Article 56(c) and any other applicable
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sections to allow a PWA to transfer Table A water to another PWA's service
area. DWR will continue to coordinate through the PWAs under the existing
SWP contracts.
5.2 Carryover Water Program: Carryover Water Program shall require transfers
and/or exchanges of carryover water in years of need, as confirmed by the
receiving PWA, to meet the following criteria:
5.2.1 Carryover water available for transfer or exchange in this amendment
is defined only as stored water described in Article 56(c)(1) and
56(c)(2) and not 12(e).
5.2.2 Carryover water may only be exchanged or used in single-year
transfers.
5.2.3 The PWA purchasing the carryover water must take delivery, in its
service areas, unless an exemption is granted under 5.2.8.
5.2.4 A PWA may transfer or exchange up to 50% of its carryover water.
5.2.5 A PWA may transfer/exchange greater than 50% of its carryover water,
if the PWA demonstrate that the transfer or exchange of carryover
water will not prevent it from meeting critical water needs in the current
year or the following year and obtain approval by DWR Director.
5.2.6 All transfer and exchange of carryover water are subject to section 4.2.
5.2.7 The PWA receiving the water must confirm that the PWA has a need
for that water for use within its service area during the current year
unless an exception is granted under 5.2.8.
5.2.8 A PWA may request an exception for the following, but not limited to,
from the DWR Director:
5.2.8.1 For any exceptions to the criteria listed above;
5.2.8.2 Requests for the transfer and exchange of stored (or
carryover) water prior to this water being displaced; and
5.2.8.3 Using San Luis Reservoir as the transfer/exchange point.
II. ENVIRONMENTAL REVIEW PROCESS
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1. DWR and the PWAs agree that this AIP is intended to be used during the
environmental review process for the California Environmental Quality Act
(CEQA), to define the proposed project description for the purposes of CEQA,
and to permit the next steps of the SWP water supply contract amendment
process, including scoping and the preparation of the EIR. The AIP principles are
not final contract language and do not represent a contractual commitment by
either DWR or the PWAs to approve any proposed project or to sign contract
amendments. By concurring with the AIP, DWR and the PWAs express their
intent to move forward with the CEQA process with DWR as lead agency and the
PWAs as responsible agencies, and ultimately develop a proposed project
consisting of contractual amendments consistent with the AIP principles and
prepare the EIR for consideration by DWR and the PWAs.
2. At the end of the CEQA process and in compliance with CEQA, DWR and the
PWAs will each individually evaluate the EIR and contract amendments, exercise
their independent judgment, and determine whether or not to certify the EIR,
approve the proposed project and sign the contract amendments or to approve
an alternative project. Consequently, even though DWR and the PWAs have
agreed to the AIP for the purposes described in the preceding paragraphs, DWR
and each PWA retain their full discretion under CEQA to consider and adopt
mitigation measures and alternatives, including the alternative of not going
forward with the proposed project.
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AIP Concerning Extension of SWP Water Supply Contracts
Execution Version June 18, 2014
Page 1 of 18
00202
DATE: June 18, 2014
SUBJECT: Agreement in Principle Concerning Extension of the State Water Project' Water
Supply Contracts
This document contains a statement of principles that could provide the foundation for an
agreement between each State Water Project Contractor2 (Contractor) and the Department of
Water Resources (DWR or Department)that will extend and otherwise amend the Water Supply
Contract between such Contractor and DWR.
Outline of Agreement in Principle
I. Objective 1 Term of Contract
II. Objective 2A Reserves
III. Objective 2B Accounts (SRA, SSA, FCA)
IV. Objective 2C Flow of Funds
V. Objective 2D Financial Management
VI. Objective 2E Supplemental Billing
VII. Objective 2F Cost Recovery
VIII. Objective 2G SWRDS Reporting Principles
IX. Objective 2H 51(e) Revenue Reporting Requirements
X. Objective 3A Simplification of Billing
Xl. Objective 3B Replacement Accounting System
XII. Objective 3C Article 1(hh)
XIII. Objective 3D Billing Authorization
XIV. Objective 4 BDCP and DHCCP Participation
XV. Provision 1 Other Contract Provisions
XVI. Provision 2 Environmental Review Process
XVII. Provision 3 Authorized Representative Signatures
The State Water Project is the name commonly used to refer to the State Water Resources Development System(Water Code
Section 12931)
2 The State Water Project Contractors includes Alameda County Flood Control and Water Conservation District(Zone 7),Alameda
County Water District,Antelope Valley-East Kern Water Agency, Castaic Lake Water Agency,City of Yuba City,Coachella Valley
Water District, County of Butte, County of Kings,Crestline-Lake Arrowhead Water Agency, Desert Water Agency, Dudley Ridge
Water District, Empire West Side Irrigation District, Kern County Water Agency, Littlerock Creek Irrigation District,The Metropolitan
Water District of Southern California, Mojave Water Agency, Napa County Flood Control and Water Conservation District, Oak Flat
Water District, Palmdale Water District, Plumas County Flood Control and Water Conservation District, San Bernardino Valley
Municipal Water District, San Gabriel Valley Municipal Water District,San Gorgonio Pass Water Agency, San Luis Obispo County
Flood Control and Water Conservation District,Santa Barbara County Flood Control and Water Conservation District, Santa Clara
Valley Water District, Solano County Water Agency,Tulare Lake Basin Water Storage District,and Ventura County Flood Control
District.
AIP Concerning Extension of SWP Water Supply Contracts
Execution Version June 18, 2014
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00202
STATEMENT OF PRINCIPLES
I. OBJECTIVE 1:TERM OF CONTRACT
A. Water Supply Contract Term Extension
1. Extend term of the SWP water supply contracts to December 31, 2085.
II. OBJECTIVE 2A: RESERVES
A. General Operating Account(GOA)
1. Uses of GOA-Cash flow deficiencies resulting from chargeable water supply purposes
and/or during a SWRDS emergency for any SWRDS purpose.
2. SWRDS Emergency-An immediate, urgent, critical, unexpected, or impending situation
that, in the judgment of the Director, Department of Water Resources (Director), may cause
or pose a risk of causing injury, loss of life, damage to the property, impairment of the
financial condition, and/or interference with the normal activities of the State Water
Resources Development System which requires immediate attention and remedial action.
3. Initial Cap - Increase the authorized General Operating Account(GOA) initial cap to $150
million in Article 51(a)(3).
4. Cap Adjustment Determination - Every five years subsequent to the year of the initial cap
increase, there shall be a business case analysis on the GOA authorized cap including an
evaluation of the cap and business risks associated with SWRDS cash flow provided to the
SWRDS Finance Committee for recommendation to the Director regarding a GOA cap
adjustment. If there is a decrease in the cap (but the cap shall not be lower than $150
million), the excess funds would be transferred to the SWRDS Reinvestment Account (SRA).
5. Cap Adjustment Funding Source (Pre-2035) -Shall be the Director's discretion to use 51(e)
revenues3, investment earnings retained in the GOA, and transfers of funds from the SRA
and SWRDS Support Account (SSA).
6. Cap Adjustment Funding Source (Post-2035)-Shall be the Director's discretion to use the
investment earnings retained in GOA and the funds within the SRA and SSA.
7. Rate of Funding for Cap- Limitation on the amount($2 million per year) and timing of
additional contributions to the GOA contained in Article 51(e)(3)(v)will be deleted. DWR
will be able to use any amount of available 51(e) revenues to increase funds in the GOA up
to the authorized maximum GOA funding level and such funding shall be subordinate to the
annual rate management reductions to the Contractors.
3 The definition and calculation of 51(e) revenues will be included in the contract amendment language.
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Execution Version June 18, 2014
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8. GOA Replenishment- Replenishment of the use of GOA funds will come from charges to the
Contractors to the extent the expended funds were spent on chargeable water supply
purposes and from the SSA or other available revenues for costs not chargeable to the
Contractors.
9. GOA Reporting- DWR will prepare monthly reports on the balance and use of the GOA for
the Director, which will be provided to the SWRDS Finance Committee.The SWRDS Finance
Committee will periodically review reporting frequency and make recommendations to the
Director regarding reporting frequency.
10. GOA Investment Earnings-shall be used as follows:
a) Funding GOA to authorized GOA funding level;
b) Transferred, at the discretion of the Director,to the SSA and/or to the SRA.
III. OBJECTIVE 2B:ACCOUNTS(SRA, SSA, FCA)
A. SWRDS Reinvestment Account(SRA)
1. Effective Date of SRA-The SRA shall be established and take effect upon the effective date
of the contract extension amendment.
2. SRA Uses-The primary purpose is to provide a post-2035 SWRDS revenue stream by
investing SRA funds in chargeable SWRDS facilities and programs.
3. Funding Source -At the discretion of the Director, available Article 51(e)(1)(ii) revenues
collected by the State pre-2035.The Director also has discretion to transfer funds from the
SSA or the GOA.
4. Cap on SRA-There will be no Cap or Cap Adjustments to the SRA.
5. SRA Investments -At the discretion of the Director, authorized SRA investments shall be as
follows:
a) Investment in SWRDS capital facilities, recovered at the prevailing municipal bond
market rates corresponding to the SWRDS bond rating at the time of financing, in
maturity ranges that may extend 10 to 50 years, provided that if the capital asset
being financed has a useful life of less than 10 years, the investment may be
recovered over a comparable period of less than 10 years;
b) Bridge financing of capital costs in lieu of the SWRDS commercial paper program;
and
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Execution Version June 18, 2014
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c) Allowable investments for SWRDS that generate a monetary return on investment.
6. Use of SRA Funds-At the discretion of the Director, the SRA funds, including but not limited
to investment earnings, shall be used to:
a) Provide a source of replenishment funds to the SSA;
b) Provide a source of funds to be held in the SRA for investment purposes; and
c) Provide a funding source for funding level adjustments to the GOA.
7. SRA Review-The SWRDS Finance Committee is to be consulted about the investments and
activities to be funded from the SRA.
8. SRA Reporting- DWR will prepare regular reports on the SRA for the Director, which reports
will be provided to the SWRDS Finance Committee.
B. SWRDS Support Account(SSA)
1. Effective Date of SSA-The SSA shall be established and take effect upon the effective date
of the contract extension amendment.
2. SSA Uses-The purpose of the SSA shall be to provide a source of funds to pay for non-
chargeable expenditures where there are no funds or revenue sources available to pay for
such costs. If reimbursement or a source of revenue is received after the expenditure is
incurred this revenue shall be deposited in the SSA.
3. SSA Review-The SWRDS Finance Committee shall be consulted about the projects and
activities to be funded from the SSA.
4. SSA Reporting- DWR will prepare regular reports on the SSA for the Director, which will be
provided to the SWRDS Finance Committee.
5. Initial Cap -There would be no cap on the SSA.
6. Funding Source for Initial Funding-51(e) revenues and/or the remaining balance of the
State Water Facilities Capital Account(FCA) once the FCA is closed.
7. SSA Replenishment-Shall be accomplished through 1) reimbursements received for
expenditures made from the SSA; 2) at the discretion of the Director,transfers from the SRA
and/or from the GOA's available investment earnings, 3) deposits, in the discretion of the
Director,from other available revenues, and 4) interest and other investment income
retained in the SSA. DWR will not charge the Contractors to replenish the SSA for costs not
chargeable to the Contractors under the Water Supply Contracts.
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8. SSA Interest Earnings—At the Director's discretion, retained in the SSA to reduce the annual
SRA replenishment requirement.
C. State Water Facilities Capital Account(FCA)
1. The State Water Facilities Capital Account (FCA) pursuant to Article 51(c)(2)(v) shall be
reviewed by the SWRDS Finance Committee after five years from the date of the contract
amendment to recommend to the Director whether or not it should be closed and the
balance of the account transferred to the SSA.
IV. OBJECTIVE 2C: FLOW OF FUNDS
A. Maintain the Monterey Amendment Article 51 Flow of Funds with the following
edits/additions:
1. Increase Annual Rate Reductions to$48 million.The Annual Rate Reductions shall no longer
apply after December 31, 2035 and the applicable provisions in Article 51 shall be deleted as
of that date.
2. After the$48 million in annual rate reductions, the Director shall have the discretion to
allocate and transfer up to 80%of available 51(e) revenues, as determined on a projected
basis, and up to 100%on an actual basis into one or more of the following accounts:
a) General Operating Account (GOA)
b) SWRDS Support Account (SSA)
c) SWRDS Reinvestment Account (SRA)
After funds are deposited into a, b, and c above, any remaining available 51(e) revenues will
remain in the Systems Revenue Account and will be tracked separately in DWR's Enterprise
Resource Planning (ERP) system.The Director will have full discretion over the use of these
funds. DWR will prepare financial reports annually with supporting documentation of the
determination and provide these reports to the Finance Committee.
3. Contractors shall agree to forego additional rate management reductions including
additional rate management reductions to make up for deficiencies in past projected rate
management reductions or to provide any additional rate management reductions above
$48 million annually pursuant to Article 51(e)(3). Effective with the contract amendment,
Article 51(e)(3) shall be deleted.
4. The contract amendment shall specify those provisions in Article 51 that shall remain in
effect after December 31, 2035 (such as the General Operating Account provision as it may
be amended) and those provisions that will no longer apply after December 31, 2035 and
shall be deleted as of that date.
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5. Contractors shall agree to waive and release issues related to DWR's recent adjustment of
the Contractors' responsibility for facilities south of Dos Amigos.
V. OBJECTIVE 2D: FINANCIAL MANAGEMENT
A. State Water Resources Development System Finance Committee
1. Immediately,the Department of Water Resources shall establish a joint Department of
Water Resources and Contractor finance committee (Committee).
2. The membership of the Committee shall include both representatives from the Department
of Water Resources and representatives from the Contractors.
3. The primary purpose of the Committee shall be to make recommendations to the Director
of the Department of Water Resources concerning the financial policies of the State Water
Resources Development System.
4. The Department of Water Resources and the Contractors shall describe the scope of the
committee in a charter mutually agreeable to the Department of Water Resources and the
Contractors.
VI. OBJECTIVE 2E: SUPPLEMENTAL BILLING
A. Supplemental Billing
1. The supplemental billing provisions authorized under Article 51(c)(4) shall remain in effect
through December 31, 2035, unless the Director determines in his or her discretion to
eliminate the use of supplemental billing prior to that date or upon Director's acceptance of
a recommendation from the SWRDS Finance Committee. In full consultation with the
SWRDS Finance Committee, DWR will review the System cash balances when the System's
forecasted 120 days cash balance becomes critical.The Committee will make a
recommendation for action to the Director.The supplemental billing provision may only be
used when available System cash balances are projected to be less than an amount equal to
90 days operating expenditures4.The term "available System cash balances" shall mean the
funds in the following California Water Resources Development Bond Fund accounts:
System Revenue Account (to the extent the funds in the System Revenue Account are not
projected to be needed for payment of Burns-Porter General Obligation Bond debt service
for the next two years), GOA, SRA and SSA(to the extent the funds in the SSA are not
projected to be needed for non-chargeable expenditures for the next two years).
4 A description of"operating expenditures"will be included in the contract amendment language.
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VII. OBJECTIVE 2F: COST RECOVERY
A. Cost Recovery
1. In general, DWR should seek reimbursement for all SWRDS costs from the appropriate
customers and users of SWRDS facilities, including the State. With respect to those SWRDS
costs that are reimbursable by the Contractors, DWR should allocate financial responsibility for
such costs in a manner that is both lawful and equitable,and which endeavors to recover such
costs from the appropriate Contractors. If the Department proposes to not charge any
Contractor the full amount that the Department is entitled to charge the Contractor under the
contract, DWR shall bring a written proposal to the Finance Committee for purposes of
developing a recommendation to the Director regarding the proposal. DWR shall submit such
proposal in writing to the Finance Committee 90 days in advance of the Director issuing any
decision and within such 90 day period the Finance Committee shall provide the Director with a
recommendation regarding such proposal.Such proposals will comply with the structure set
out in II.D.2 of the SWRDS Finance Committee Charter.
VIII. OBJECTIVE 2G: SWRDS REPORTING PRINCIPLES [EXHIBIT TO THE CONTRACT]
A. During the term of the water supply contracts, it is likely that financial reports and financial
management reports will change in scope, nature, and frequency. Regardless of the exact
reports used, such reports shall follow the below principles and guidelines to the extent
applicable.
1. Principle 1: Financial reporting will be generated from the general ledger or data
warehouse of the financial information system (system of record), such as SAP.
• The financial system of record is the authoritative source for financial reporting data
values in a system.To ensure data integrity, there must be one, and only one,
system of record for financial reporting values.
2. Principle 2: Financial reporting is not limited to annual financial statements but will be
developed for regular reporting periods.
3. Principle 3: Financial management reporting generated from other financial systems,
such as Utility Cost Accounting Billing System (UCABS), will identify and analyze
significant variances from prior years or budgets.
4. Principle 4: Financial reporting and financial management reporting will identify unusual
items and exceptions, and these items will be documented, reviewed, and resolved by
management.
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5. Principle 5: DWR will use standardized System-wide business rules and utilize a
centralized financial system, such as SAP, UCABS, or other system, to provide
controls/validations to ensure data integrity and reliable reporting.
6. Principle 6: DWR will use standardized data integrity rules in the development and
publication of reports, including but not limited to the following:
(1) Data integrity refers to the accuracy and consistency of data stored in a database,
data warehouse, data mart or other construct.
(2) Data integrity processes verify that data has remained unaltered in transit from
creation to reception or remains unaltered in transit from one system to the next.
a. Data used outside of the Enterprise Resource Planning (ERP) systems to
meet the reporting needs of Program will undergo any number of operations
in support of decision-making, such as capture, storage, retrieval, update
and transfer. It is important to have confidence that during these operations,
the data will be kept free from corruption, modification and remain
unaltered.
(3) Data with "integrity" has a complete or whole structure. Data values are
standardized according to a data model and/or data type. All characteristics of the
data must be correct—including business rules, relations, dates, definitions and
lineage—for data to be complete.
(4) Data integrity is imposed within an ERP database when it is created and is
authenticated through the ongoing use of error checking and validation routines.
(5) Data integrity state or condition is to be measured by the validity and reliability of
the data values.
(6) Data integrity service and security maintains information exactly as it was input, and
is auditable to affirm its reliability.
The SWRDS Finance Committee is charged with providing financial policy recommendations to
the Director, and the Director has final discretion on whether or not to accept the
recommendations. While the SWRDS Finance Committee is not charged with reviewing the
content of financial reports, timely and accurate financial reporting and financial management
reporting provides technical committees access to useful information that can be used to
formulate proposals on financial policy matters that may be brought to the SWRDS Finance
Committee.
IX. OBJECTIVE 2H: 51(e) REVENUE REPORTING REQUIREMENTS
A. 51(e) Revenue Report
1. Create and distribute the Annual Rate Reduction Determination Report. In addition, display
the distribution of Gross Annual Revenues before Recreation, Fish and Wildlife
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Expenditures, Facilities Capital Account and Rate Management Credits and Net Annual
Revenues after Rate Management Credits to the accounts listed in item 2 below.
2. Create and distribute quarterly an Activity Report by fund-account for all uses, including but
not limited to the following accounts:
a) General Operating Account (GOA)
b) SWRDS Support Account (SSA)
c) SWRDS Reinvestment Account (SRA)
d) Systems Revenue Account, 51(e) Sub-Account
e) Davis-Dolwig Fund
f) Facilities Capital Account
g) Suspended Costs
3. The Activity Report shall display the annual and accumulated 51(e) revenue and expenditure
activity, including the beginning balance, the annual activity and the ending balance for the
year.
4. Reporting data shall be auditable which includes an audit trail from the costing ledgers to
the general ledger or the Bulletin 132 estimates to the Activity Report.
5. Report should have sufficient detail to provide comprehensive accounting of annual 51(e)
revenues and the uses the of annual 51(e) revenues to enable the SWRDS Finance
Committee to assess the utilization of these revenues.
X. OBJECTIVE 3A: SIMPLIFICATION OF BILLING
A. Implement the Freeze-Go Billing Methodology
1. The freeze-go date shall be January 1 of the first calendar year starting six(6) months after
the contract extension takes effect, but not earlier than January 1, 2017, provided that if the
Department determines it to be necessary, the Department may rely on estimates and later
true-up for billing and reporting purposes in the initial implementation years after the freeze
go date.
2. Methodology will recover all costs incurred on and after the freeze-go date, by converting
and authorizing repayment on a Pay-As-You-Go methodology.
3. Amend the definition of the Project Repayment Period to apply only to those costs incurred
prior to the freeze-go date.
4. The term of the Project Repayment Period,January 1, 1961 through December 31, 2035,will
remain the same.
5. The Water Systems Revenue Bond Surcharge will apply only to those costs incurred prior to
the freeze-go date and will terminate at the completion of the Project Repayment Period.
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6. Amend the definition of the Project Interest Rate to apply only to those costs incurred prior
to the freeze-go date. No interest rate, including the Project Interest Rate, shall be applied
to the over/under charges for costs incurred after the freeze-go date.The Project Interest
Rate will remain 4.610%.
7. In identifying "costs incurred"for purposes of determining whether the cost is incurred
before the freeze-go date or on or after the freeze-go date, the following shall apply:
a) Variable costs shall be deemed to occur when the goods or service is provided,
regardless of when the expenditure for such goods or service is recorded in the financial
information system;
b) Capital and minimum costs shall be deemed to occur when the expenditure for the
goods or service is recorded in the financial information system, regardless of the date
the goods or service is provided.
B. Defining the Pay-As-You-Go Repayment of Costs Incurred On and After the Freeze-Go Date
1. The annual cost recovery within a bill year for estimated annual operation, maintenance,
power, and replacement costs for project conservation facilities.
2. The annual recovery of actual debt service, including repayment of the SRA, created by
SWRDS financing activities, within a bill year for financed capital transportation and
conservation facilities.
3. A capital asset which has a short useful life and/or will not have a substantial cost, may be
charged to the Contractors in the year the cost is incurred.The SWRDS Finance Committee
may review and make recommendations to the Director regarding the policy of charging the
costs of such assets.
C. Defining the Pay-As-You-Go Repayment of Actual Debt Service from SWRDS Financing Capital
Costs On and After the Freeze-Go Date
1. Authorize DWR to finance 100%of all capital costs.
2. Authorize DWR to use various methods of financing including Water System Revenue Bonds
and SRA, with each method providing an annual repayment schedule which includes a
principal and interest (debt service) component over the life of the financing.
3. Authorize DWR to bill an amount that is equal to the accumulated annual debt service
payments due per the debt service schedules for SRA investments or matching dollar for
dollar the SWRDS annual debt service payments including the bond cover requirements,
providing 100%capital cost recovery at the financed interest rate over the term of the
financing while meeting the additional bond debt cover requirements.
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Xl. OBJECTIVE 3B: REPLACEMENT ACCOUNTING SYSTEM (RAS)
A. Elimination of the Replacement Accounting System (RAS)
1. Eliminate the Replacement Accounting System (RAS) for Transportation and Conservation
Facilities with the intent to have replacement costs treated as a minimum or capital cost.
2. The unencumbered cash balance of the RAS funds are to be returned to the SWP
Contractors using the RAS allocation methodology.
XII. OBJECTIVE 3C:ARTICLE 1(hh)
A. Expanding Water System Facilities Authorized to be Financed by Water System Revenue
Bonds Under Article 1(hh)
1. Eliminate the January 1, 1987 date for existing facilities within Article 1(hh)(8); provision to
now read as follows, " Finance all repairs, additions, and betterments to conservation or
transportation facilities and to all other facilities described in this sub-article (hh) except for
item (5)the land acquisition prior to December 31, 1995 for the Kern Fan Element of the
Kern Water Bank."
2. Add provision to expand Article 1(hh)to include "Finance all other capital projects (i.e.
projects and programs for which revenue bonds can be sold) mutually agreed upon in
writing by DWR and 80%of the affected Contractors, provided that the approving
Contractors'Table A amounts exceed 80%of the Table A amounts representing all affected
Contractors". "Affected Contractors" means those Contractors which would be obligated to
pay a share of the debt service for such project.
XIII. OBJECTIVE 3D: BILLING AUTHORIZATION
A. Billing Authorization
The Department, in fixing and establishing prices, rates, and charges for water and power, shall
include as a reimbursable cost of any state water project an amount sufficient to repay all costs
incurred by the department, directly or by contract with other agencies, for the preservation of
fish and wildlife and determined to be allocable to the costs of the project works constructed for
the development of that water and power, or either. Costs incurred for the enhancement of fish
and wildlife or for the development of public recreation shall not be included in the prices, rates,
and charges for water and power, and shall be nonreimbursable costs.
Such recreational purposes include, but are not limited to, those recreational pursuits generally
associated with the out-of-doors, such as camping, picnicking, fishing, hunting, water contact
sports, boating, and sightseeing, and the associated facilities of campgrounds, picnic areas,
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water and sanitary facilities, parking areas, viewpoints, boat launching ramps, and any others
necessary to make project land and water areas available for use by the public.
In administering this Contract "development of public recreation" shall include recreation
capital and operation and maintenance.
XIV. OBJECTIVE 4: BDCP AND DHCCP PARTICIPATION
This Objective will not be part of the SWP contract amendment based on this AIP. Instead,
Contractor participation in the BDCP and DHCCP will be addressed through a separate public
negotiation and environmental review process to develop appropriate SWP water supply
contract amendments. DWR has begun the administrative process that will be used to facilitate
the public negotiations of such amendments.The first public negotiation session is scheduled
for December 2014.
XV. PROVISION 1—OTHER CONTRACT PROVISIONS
Except as amended, all provisions of the Water Supply Contract shall be and remain in full force
and effect.
XVI. PROVISION 2—ENVIRONMENTAL REVIEW PROCESS
DWR and the Contractors agree that this AIP is intended to be used during the environmental
review process for the California Environmental Quality Act (CEQA), to define the proposed
project description for the purposes of CEQA, and to permit the next steps of the water supply
contract extension process, including scoping and the preparation of the EIR.
The AIP principles are not final contract language and do not represent a contractual
commitment by either DWR or the Contractors to approve any proposed project,to sign
contract amendments, or to extend the contract. By concurring with the AIP, DWR and the
Contractors express their intent to move forward with the CEQA process with DWR as lead
agency and the Contractors as responsible agencies, and ultimately develop a proposed project
consisting of contractual amendments consistent with the AIP principles and prepare the EIR for
consideration by DWR and the Contractors.
At the end of the CEQA process and in compliance with CEQA, DWR and the Contractors will
each individually evaluate the EIR and contract amendments, exercise their independent
judgment, and determine whether or not to certify the EIR, approve the proposed project and
sign the contract amendments or to approve an alternative project. Consequently, even though
DWR and the Contractors have agreed to the AIP for the purposes described in the preceding
paragraphs, DWR and each Contractor retain their full discretion under CEQA to consider and
adopt mitigation measures and alternatives, including the alternative of not going forward with
the proposed project.
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XVII. PROVISION 3—AUTHORIZED REPRESENTATIVE SIGNATURES
DWR and each Contractor may express concurrence with this AIP by having their authorized
representatives sign below. DWR and each Contractor will use their best efforts to make a
decision whether to sign the AIP by September 1, 2014.The AIP may be signed in counterparts.
STATE OF CALIFORNIA
DEPARTMENT OF WATER RESOURCES
By:
Name:
Title:
Date:
ALAMEDA COUNTY FLOOD CONTROL AND WATER CONSERVATION DISTRICT,ZONE 7
By:
Name:
Title:
Date:
ALAMEDA COUNTY WATER DISTRICT
By:
Name:
Title:
Date:
ANTELOPE VALLEY—EASTERN KERN WATER AGENCY
By:
Name:
Title:
Date:
CASTAIC LAKE WATER AGENCY
By:
Name:
Title:
Date:
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CITY OF YUBA CITY
By:
Name:
Title:
Date:
COACHELLA VALLEY WATER DISTRICT
By:
Name:
Title:
Date:
COUNTY OF BUTTE
By:
Name:
Title:
Date:
COUNTY OF KINGS
By:
Name:
Title:
Date:
CRESTLINE LAKE ARROWHEAD WATER AGENCY
By:
Name:
Title:
Date:
DESERT WATER AGENCY
By:
Name:
Title:
Date:
AIP Concerning Extension of SWP Water Supply Contracts
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DUDLEY RIDGE WATER DISTRICT
By:
Name:
Title:
Date:
EMPIRE WESTSIDE IRRIGATION DISTRICT
By:
Name:
Title:
Date:
KERN COUNTY WATER AGENCY
By:
Name:
Title:
Date:
LITTLEROCK CREEK IRRIGATION DISTRICT
By:
Name:
Title:
Date:
MOJAVE WATER AGENCY
By:
Name:
Title:
Date:
THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA
By:
Name:
Title:
Date:
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NAPA COUNTY FLOOD CONTROL AND WATER CONSERVATION DISTRICT
By:
Name:
Title:
Date:
OAK FLAT WATER DISTRICT
By:
Name:
Title:
Date:
PALMDALE WATER DISTRICT
By:
Name:
Title:
Date:
PLUMAS COUNTY FLOOD CONTROL AND WATER CONSERVATION DISTRICT
By:
Name:
Title:
Date:
SAN BERNARDINO VALLEY MUNICIPAL WATER DISTRICT
By:
Name:
Title:
Date:
SAN GABRIEL VALLEY MUNICIPAL WATER DISTRICT
By:
Name:
Title:
Date:
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SAN GORGONIO PASS WATER AGENCY
By:
Name:
Title:
Date:
SAN LUIS OBISPO COUNTY FLOOD CONTROL AND WATER CONSERVATION DISTRICT
By:
Name:
Title:
Date:
SANTA BARBARA COUNTY FLOOD CONTROL AND WATER CONSERVATION DISTRICT
By:
Name:
Title:
Date:
SANTA CLARA VALLEY WATER DISTRICT
By:
Name:
Title:
Date:
SOLANO COUNTY WATER AGENCY
By:
Name:
Title:
Date:
TULARE LAKE BASIN WATER STORAGE DISTRICT
By:
Name:
Title:
Date:
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VENTURA COUNTY FLOOD CONTROL DISTRICT
By:
Name:
Title:
Date:
Water and Resource Conservation Paul Gosselin, Director
308 Nelson Avenue 1: 530.538.4343 buttecounty.netiwaterresourieconsentation
n Oroville, California 95965 F: 530.538.3807 bcwatertatbuttecctunty,not
DuiLe LounLY
WATER&RESOURCE CONSERVATION
November 29, 2017
Theresa A. Lightle
State Water Contractors
Sr. Financial Management Analyst
1121 L Street, Suite 1050
Sacramento, CA 95814
Re: State Water Project Contract Extension (Part 2 of 2)
Dear Ms. Lightle:
We appreciate the briefing and opportunity to comment on the State Water Project
(SWP) contract extension amendments (Part 2 of 2). The contract extension
amendments adequately reflect the intent of the three objectives agreed upon by the
State Water Contractors and the Department of Water Resources. The details in the
contract amendment reflect careful thought and analysis. However, the contract
amendment is inadequate in regards to allocating costs associated with California
WaterFix (previously the Bay Delta Conservation Plan).
We are concerned that the SWP contract extension amendment would result in
California WaterFix costs to be charged to l'utte County. Butte County will not agree to
a contract extension until the SWP contract includes amendments that assure that Butte
County would not be subject to any costs associated with the California WaterFix. Butte
County has held this position from the onset of the contract extension negotiations.
During the negotiations, Butte County and Plumas County proposed Objective 4 to
address our concerns regarding costs associated with California WaterFix.
Unfortunately, a decision was made to address the California WaterFix costs through a
separate negotiation. That negotiation process held one meeting in 2014, but no action
has occurred since then. We appreciate your view that north of Delta contractors will
not be obligated for California WaterFix costs, but there have been contrary statements
presented to us regarding this issue. The lack of clarity and legal assurance is
troubling.
In summary, the draft SWP contract extension (Part 2 of 2) language is unacceptable as
it would result in Butte County assuming costs associated with California WaterFix. We
are not authorized to agree to contract extension amendments until the contract
includes assurances that Butte County will not be obligated for any costs associated
with California WaterFix.
Reg,a rd),
Paul Gosselin, Director
Cc: Bruce Alpert, Butte County Council
Water and Resource Conservation Paul Gosselin, Director
PP07 „
308 Nelson Avenue T: 530.552.3595 buttecounty,netiwaterresou[ceconservation
..4010Enr""
Oroville, California 95965 F: 530.5383807 bcwater(9)butte(ouni ymet
mucte Louncy
WATER&RESOURCE CONSERVATION
January 9, 2019
Ted Alvarez, State Water Project, Analysis Office
Department of Water Resources
P.O. Box 942836
Sacramento, CA 94236.
By e-mail to: led varezgwater ca go v and cwf alnendinentrOwatere agov
Cassandra Enos-Nobriga, Executive Advisor
State Water Project Department of Water Resources
1416 Ninth Street, Room 1148-3
P.O. Box 942836
Sacramento CA 95814
By e-mail to: Contra et Arnendiment corm nelitsrri!wal r,ea.go v
RE: State Water Project -
Water Supply Contract Amendments for Water Management and California WaterFix
Dear Mr. Ted Alvarez and Ms. Cassandra Enos-Nobriga:
Butte County is one of the 29 State Water Project (SWP) Contractors, also referred to as Public
Water Agencies (PWAs). Butte County has participated actively in the development of
California Environmental Quality Act (CEQA) and the public negotiations among SWP PWAs
leading to the Notice of Preparation (NOP) for both the Contract Extension Project(CEP) and
the California Water Fix (CWF).
From the onset of the CEP negotiations, Butte County sought to have a contractual assurance
that it would not be obligated to pay for the costs associated with the CWF. After a long delay,
we are encouraged that the Agreement in Principal (AlP) for the CWF provides the assurance
which specifically exempts the North of Delta PWAs from all applicable CWF costs. The
assurances provided in the SWP CEP AIP and the CWF AlP are suitable to bring to the Butte
County Board of Supervisors for consideration in the next few months.
Despite the positive attributes in the SWP CEP and CWF amendments, Butte County continues
to have concerns with the Department of Water Resources' sequencing and piecemealing of the
three CEQA documents relating the CWF and the CEP. Butte County has actively participated
in the development of the Bay Delta Conservation Plan (BDCP) process, which later became
the CWF, and has submitted comments on various regulatory proceedings related to the
BDCP/CWF. We remain troubled that the CEQA analyses for the CWF Final EIR/EIS, the
Final Impact Report CEP and the Draft Environmental Report Validation Action for the CWF
remain inadequate.. By reference, Butte County concurs,joins in and incorporates by reference
herein the comments submitted on December 18, 2018 by Plumas County and submitted on
December 11, 2018 by Roger Moore.
We are encouraged with the AIP for the SWP CEP and CWF amendments. However, we
remain concerned that the BDCP/WaterFix and its related EIR/EIS do not comply with State
water law and inadequately assess the environmental and socioeconomic impacts.
.
Smeerey,
(
C—
4,(7,
_
° -----".--
Paul Gosselin, Director
Cc: Bruce Alpert, Butte County Counsel
Butte County Board of Supervisors
Governing Board, Plumas County Flood Control and Water Conservation District
Bob Perreault, Manager, Plumas County Flood Control and Water Conservation District
Roger Moore, Law Office of Roger Moore
LAW OFFICE OF ROGER B. MOORE
LAND, WATER AND ENVIRONMENTAL LAW
337 17TII STREET, SUITE 211
OAKLAND,CALIFORNIA, 94612
LANDWATER,COM, R BM((_i.)LANDWATER.COM, 510-548-1401
ADMITTED IN CALIFORNIA
December 11, 2018
Karla Nemeth, Director
California Department of Water Resources
1416 9th Street, Room 1115
Sacramento, CA 9581
via email (Jan iene.Friend water.ca.gov)
Re: Prematurity of Final Decision By Lead or Responsible Agencies to Authorize
DWR's Proposed "Contract Extension" Amendments
Dear Ms. Nemeth:
We represent counties and other agencies from the Delta region and northern
Sacramento Valley in the coordinated proceeding in Sacramento County Superior Court
on DWR's proposed California WaterFix project (JCCP 4942), including the Counties of
San Joaquin, Contra Costa, Solano, Yolo, Butte, and Plumas, as well as Central Delta
Water Agency, Contra Costa County Water Agency, Plumas County Flood Control and
Water Conservation District, and Local Agencies of the North Delta. In DWR's pending
WaterFix validation action in JCCP 4942, these public agencies, among others, dispute
DWR's authority to impose billions of dollars in revenue bond debt for California WaterFix
under the State Water Project (SWP) contracts and other laws.
DWR's efforts to impose binding debt for the Delta Tunnels project (a.k.a.
"WaterFix") also relate closely to its proposed "contract extension" amendments to SWP
contracts set to expire starting in 2035. The beleaguered and massively expensive Delta
Tunnels project is and remains, the proverbial elephant in the room. The amendments not
only extend the contracts through 2085; they also propose to remove existing constraints
on covered "facilities" that would otherwise prevent imposing revenue bond debt for
WaterFix, and potentially other costly projects opposed by some contractors and the public.
Four members of Congress, noting that "it is clear that DWR's request for a contract
extension is rooted in its desire to bond the cost of WaterFix,"recently warned that making
"such a significant and costly decision" would be premature and risky prior to
determination of the validation action (Exhibit I). Moreover, proceeding to final approval
Karla Nemeth, Director
California Department of Water Resources
December 11, 2018
Page 2
would piecemeal consideration of the extension amendments from a second set of"water
supply" contract amendments facilitating WaterFix,for which Draft EIR comments are not
due until January 9, 2019.
When DWR certified its Contract Extension Final EIR on November 13, 2018, it
did not make a final project decision, and instead indicated that the State Water Project
Analysis Office and Office of Chief Counsel would first issue a"follow-on"memorandum
and recommendation. Metropolitan Water District of Southern California (MWD) and
Santa Clara Valley Water District (SCVWD) appear to have improperly calendared the
contract extension for consideration as responsible agencies without even waiting for the
lead agency's evaluation and project decision, much less any opportunity for public review
and discussion. To avoid a high potential for confusion, uncertainty, and prejudice,
decisions must clearly inform the public of the timing of any Notices of Determination
under CEQA, and any final authorizations subject to the requirements of the validation
statute (Code Civ. Proc., §§ 860, et seq.).
As detailed below, it is both premature and risky for DWR as lead agency, or any
responsible agencies,to finally authorize DWR's proposed contract extension amendments
at this time. First, deficiencies in the record preclude final determination by both lead and
responsible agencies under CEQA. Absent from the documents referenced in DWR's
November 13, 2018 certification memorandum and the responsible agency agenda items
are the complete hearings, oral and written testimony (including testimony from one of the
undersigned counsel attached in written form as Exhibit 2), and correspondence from
closely related legislative hearings on DWR's proposed contract extension. Hearings
before the Senate Natural Resources and Water Committee (SNRWC) on July 3, 2018 and
the Joint Legislative and Budget Committee (JLBC) on September 11, 2018, bear directly
on the environmental review for the contract extension. This includes the foundational
issue of the extension project's relationship to the Delta Tunnels and the separately
reviewed Water Supply Contract Amendments—yet this critically important relationship
is not analyzed in DWR's Final EIR and certification.'
See, e.g., DWR's Water Supply Contract Extension web page, including all linked
documents (haps://water.ca.(,oylProgarns/State-Water-Project/Manawnent/Water:
Sittpply-coptrAct:Extension); SNRWC's web page, including all linked documents for July
3, 2018 hearing and web link to video recording of hearing
(1-itjps://sn t r.sena tesa,go v/con ten t/2018-i n lo rmational overs il?ht-heari n gs); JLBC's web
page,including all linked documents for September 11, 2018 hearing and cancelled August
30, 2018 hearing (https://www.senate,ca.vv/letislativebudget); video link to September
11, 2018 JLBC hearing on proposed SWP contract extension
(http://calchannel.granicus.com/MediaPlayer,plip7view id.,5820).
2 See, e.g., SNRWC Background Brief to July 3, 2018 hearing, p. 17 (referencing the
recognition of SWP contractors and DWR that the proposed contract extension
amendments are "a necessary, but not sufficient condition to incorporate WaterFix into
2
Karla Nemeth, Director
California Department of Water Resources
December 11, 2018
Page 3
Second, 2018 comments, mainly referenced to legislative hearings, underscore the
prematurity of final approval. Public agency critics throughout California, from Plumas
County and the Delta Counties Coalition to San Diego County, criticized DWR's efforts
to finalize the contract extension without integrated review of all DWR's proposed
amendments related to the Delta Tunnels, including the Water Supply Contract
Amendments still awaiting public comment and completion of review. (Exhibit 3.) The
Legislative Delta Caucus observed that these "poorly defined" amendments would have
"potential adverse impacts far beyond their apparent scope. There is much that remains
unknown regarding the extensive changes to the SWP contracts that are being proposed
and how the changes will impact property taxes, water rates,the fiscal integrity of the SWP
and General Fund." (Exhibit 4.) Following the 2018 legislative hearings, more than a
dozen organizations identified numerous changed circumstances requiring additional
environmental review since public comment closed in October 2016, only to have DWR,
in its November 13, 2018 certification memo, respond with the non-sequitur that the
general issue areas were discussed in 2016 (Exhibit 5). Commentary in major newspapers
criticized the defective process and lack of transparency surrounding the contract extension,
as well as DWR's attempts to leverage WaterFix indebtedness without adequate review
and debate (Exhibit 6).
Third, testimony at the September 11, 2018 JLBC hearing undermines the premise
of independence from WaterFix upon which DWR's separate Contract Extension Final
EIR is founded. That includes your own testimony on DWR's behalf, following
questioning from Senator Richard Pan, that DWR plans to "use these amendments to
finance WaterFix," and the testimony of Rachel Ehlers of the Legislative Accounting
Office that the contract extension amendments would "affect and facilitate" WaterFix.
Facilitation of WaterFix through the contract extension amendments is also addressed in
the testimony of Congressman McNerney and of Roger Moore at the same hearing.
Fourth, DWR sidesteps meaningful analysis of a major project element. (See, e.g.,
Planning and Conservation League v. Department of Water Resources (2000) 83
Cal.App.4th 892, 904-920 (requiring CEQA analysis prior to amending contract
provision).) As addressed in the legislative testimony of Roger Moore, echoing
commenters on the Draft EIR (Exhibit 2), DWR's extension amendments would eliminate
limitations on covered "facilities" under article 1(hh)(8) of current SWP contracts that
would otherwise render WaterFix ineligible for revenue bond financing. The Final FIR
fails to address public comments on impacts that would reasonably result from such a
change in language. (See, e.g., PCL, et al.'s October 16, 2016 EIR Comments, p. 6, and
Ex. A, p. 4.) By contrast, DWR's assurance that projects facilitated by the contract
the SWP," and the contention of many organizations that contract amendments remain
premature while WaterFix issues are unresolved).
3 Video link to September 11, 2018 JLBC hearing, op cit.; see also Exhibit 5,pp. 2, 5, fn.
2, 16-17 (quoting DWR Director's testimony) and p. 13, fn. 46 (referencing testimony of
Roger Moore).
3
Karla Nemeth, Director
California Department of Water Resources
December 11, 2018
Page 4
extension will be covered by separate CEQA review (e.g., FEIR 2-10, 134) ring hollow.
DWR's Delta Tunnels EIR and project approval neither admitted nor analyzed dependence
on a subsequent SWP contract amendment. Critically, CEQA review of later-approved
projects would come too late to address the consequences of redefining covered"facilities,"
because the current contract language would already be eliminated.
Fifth, the FEIR undermines its premise that the contract extension amendments
proposed by DWR have independent utility as a"separate,independent project"addressing
debt compression problems. (FEIR, 2-9.) Debt compression is based on the comparatively
short maturity dates of existing SWP contracts. (id.) And the FEIR recognizes that the
Evergreen Clause in Article 4 of the SWP contracts already provides a way to extend these
dates. (E.g., FEIR, 2-3 to 2-5, 2-33.) DWR has not shown its version of the amendments,
including the proposed facilities redefinition, to be necessary to ensure continued water
deliveries or responsibly address operation and maintenance needs. By facilitating the
issuance of potentially billions of dollars to construct the Delta Tunnels project, and
perhaps other projects not currently eligible, DWR may under the guise of risk reduction
force a risky escalation of indebtedness.
Sixth, as addressed in the written testimony of Roger Moore and the comments of
the Delta Counties Coalition (Exhibits 2, 3), Water Code prerequisites for proceeding to
finality on the extension amendments (Wat. Code, §§ 147, 147.5) still have not been met.
Lastly, to avoid the piecemealing problem discussed in Plumas County's letter
(Exhibit 3), all DWR's proposed amendments must be reviewed and considered together
prior to finality, including the proposed extension amendments and Water Supply Contract
Amendments.
Respectfully,
Roger B. Moore
Law Office of Roger B. Moore
/.--
,,,---)
,L, / 0,7
Thomas H. Keeling
Freeman Firm, a PLC
,
Attorneys for Public AgencieT O'nnty of
San Joaquin, Central Delta& ter Agency,
9,„
County of Contra Costa, Contra Costa
County Water Agency, County of Solano,
4
Karla Nemeth, Director
California Department of Water Resources
December 11,, 2018
Page 5
County of Yolo, County of Butte, County of
Plumas, and Plumas County Flood Control
and Water Conservation District
Osha Meserve
Soluri Meserve, a Law Corporation
Attorney for Local Agencies of the North
Delta
cc: Metropolitan Water District of Southern California
Santa Clara Valley Water District
State Water Contractors, Inc.
5
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44610
L AS Co Ty FL II e • CONTI. •L & COl sE v Til DISTICT
c/o LUMAS COU TY IEP TME T OF U LIC 0 KS
1834 East Main Street, Quincy, CA 95971 Telephone: (530)283-6268
Jeff Engel, Chair, Governing Board
Robert A. Perreault,Jr., District Manager
December 18, 2018
To: Mr.Ted Alvarez, State Water Project,Analysis Office
Department of Water Resources
P.O. Box 942836
Sacramento, CA 94236.
By e-mail to: ted,alvareLeilater.cmov and oAff amendment water.ca.gov
To: Cassandra Enos-Nobriga, Executive Advisor,State Water Project
Department of Water Resources
1416 Ninth Street, Room 1148-3
P.O. Box 942836
Sacramento CA 95814
By e-mail to: ContractAmendment_comments@water.ca.gov
RE: State Water Project
Water Supply Contract Amendments for Water Management and California WaterFix
Dear Mr. Ted Alvarez and Ms. Cassandra Enos-Nobriga:
Introduction and Background:
Plumes County Flood Control and Water Conservation District (Plumes) is one of 29 State Water
Project Contractors, now called Public Water Agencies (PWAs).
Plumes has participated actively in the development of CEQA and the public negotiations
among SWP PWAs leading to the Notice of Preparation (NOP) for both the Contract Extension
Project (CEP) and the California Water Fix (CWF). Plumes has provided comments on the Draft
Environmental Impact Reports (DEIRs) and also the Agreements In Principle (AlPs) for both the
DEIR for the CEP and for the NOP for the CWF.
Plumas intends to sign the A|P for the CWF. Plumas supports the AlP for the CWF because it
specifically exempts the North of Delta Public Water Agencies (PWAs), including Plumas, from
all CWF costs (with the possible exception of blended power rates.) The AlP for the CWF also
includes new water management tools to enable SWP PWAs downstream of DWR's C)rox7|>e
Reservoir that sign both the SWP CEP A|P and the CWF A|P to better cope with the real
potential for more unreliable water exports from the Delta despite the additional exports
enabled by the CWF.
Plumas continues to oppose the DWR's sequencing and p|ecemneaHn0 of the three CEQA
documents relating the California WaterFix (CWF) and the Contract Extension Project (CEP).
These partial CEQA analyses are the Final EIR/EIS for the BCDP now the CWF, the Final Impact
Report for the Contract Extension Pject (CEP FEIR) and the Draft Environmental Report for the
California WaterFix, the CWF DEIR .
Plumas incorporates DWR's CEP FEIR "Responses to Comments" and the economic analysis
used by DWR to determine positive economic benefits of the CWF into our comments for the
CWF DEIR. Plumas brings old and new information together to reiterate past concerns raised by
Plumas that are now heightened by new information that has become available after the CWF
Notice of Preparation (NOP) and that are not yet incorporated into the FEIR for the CWF. The
Plumas Comments on the NOP for the CWF DEIR are incorporated herein for reference.
As we describe in our comments below, DWR's failure to incorporate new information into the
DEIR for the CWF undermines DWR's obligation as the Lead Agency for the CEP and CWF CE[l4
processes to uphold "the statutory requirement and the significance of this obligation to the
financial integrity of the State Water Project... (CEP FE/?, p. 2-25) Plumas provides new
information and links this new information to the financial integrity of the SWP and the
equitable cost allocation for the CWF. Plumas requests that DWR acknowledge that in the face
of these uncertainties DWR must look at the whole pject. because portioning and sequencing
the DEIR for the CWF creates real risks for the financial stability of the SWP and long-term
affordability inequities among SWP PWAs, which are DWR's Project Objectives for the CWF
DEIR.
Plum:as appreciates that DWR notes in the "Response to Comments" in the CEP FEIR that DWR
relies on, "the statutory requirement and the significanceofthis obligation to the financial
integrity of the State Water Project... (CEP FEIR, p. 2-25) as DWR exercises its agency discretion
on the scope and timing of CEQA analyses and certifications.
"DWR and the PWAs have a common interest to ensure the efficient delivery of SWP water
supplies and to ensure the SWP's financial integrity. In order to address water management
flexibility and to allocate costs for California WaterFix, DWR and the PWAs agreed to the
AU Supplement and clarify terms of the SWP water supply contract that will provide greater water
management regarding transfers and exchanges QJSWP water supply within the SWP senvke
area.
(2) Provide a fair and equitable approach for cost allocation of California WaterFix
Plumas recommends that the CWF FEIR describe the whole project as presented by DWR
Director Karla Nemeth in testimony to the Joint Legislative Committee on the September 11,
20I8, "Karla Nemeth starting 2:20:27 to 1:13:43:Senator Pan: HI do not hear an answer to my
question.0 Director Nemeth, ''Yes we will use these amendments to finance WaterFix...We have
a category in our existing contracts that describes the ability of the Department to fund p ' cts
in the Delta including delta facilities and that would include WaterFix.
o.VoK/mcdio @ 9
Although CEQA does not require economic analysis,the positive economic benefits described in
the EIR/EIS for the CWF are nonetheless important findings for securing bond financing for the
CWF. Therefore the whole project properly includes new information about the increasingly
uncertain economic benefits of the CWF that are now available by incorporating predicted
environmental changes, changing water management priorities by federal water contractors
and purveyors, and pending actions by State and Federal Agencies into the FEIR for the CWF.
In summary these new uncertainties include:
(1) Predicted significant decreases in inflows to the Central Valley Project's Shasta Reservoir and the
SWP Oroville Reservoir in the 4th Climate Assessment published in late October 2018,
(2) New federal priorities for increased exports from the Delta to the San Luis Reservoir for the
benefit of CVP Contractors becomes available from the US Bureau of Reclamation COA letter in
August and further federal policy directives released in November 2018,
(3) The inability of the CWF in November of 2018 to obtain commitments by the federal
government for this funding year for WWFIA loans of up to 49%of the latest 19.9-billion-dollar
debt estimate for the CWF.
(4) Uncertainty about the future carry over storage and operations at the SVVPOrmvUe Reservoir in
the face of an insuffiency determination made public by the Federal Energy Regulatory
Commission (FERC) regarding DWR's dam safety repairs at Oroville in FERC's October 2018
letter to DWR.
(5) Uncertainties about the regulatory responses to the uncertainties listed above by the State and
Federal agencies that in the past have responded to unavailable water supplies to the SWP by
reducing export flows from the Delta to the to the San Luis Reservoir for both CVP and SWP
Contractors.Although the State Water Resources Control Board's July 2018 Framework for the
Sacramento/Delta Update to the Bay-Delta Plan is delayed pending further negotiations, it has
not been withdrawn.
In summary, these five issues, are new information released during the period between the
close of the CWF NOP comment period and the close of the comment period for this CWF DEIR.
For Plumas these five issues present new and potentially cumulatively significant financial and
environmental risks heretofore unanalyzed in past environmental documents for both the CWF
and the CEP, and that are currently proposed to remain undisclosed, unanalyzed and
unaddressed in the CWF DEIR. CEQA does not require DWR to analyze the proposed project
(CEP)in combination with California WaterFix as part of a single project in a single Eli?because:
(1) the proposed projectiCEP} and California WaterFix are not a reasonably foreseeable
consequence of one another; and (2) the proposed project {CEP} has significant independent
utility, including independent benefits and independent purposes and objectives."(CEP FEIR,p. 2-
7).
According to DWR Director Nemeth's September 11th testimony this premise is no longer
accurate. The insistence by DWR in the CWF DEIR that it has the discretion under CEQA to
continue piecemealing and sequencing CEQA in the face of this new information, in effect,
allows DWR to continue ignore inconsistencies in its approach to analyzing economic and
environmental costs and benefits of the CWF, which in turn, undermines the fundamental basis
for achieving the CWF DEIR Project Objectives for maintaining the financial integrity of the SWP
and equitably apportioning costs for the CWF (and now including unnamed future SWP
projects) after the certification of the CEP FEIR.
Therefore, Plumas recommends the CWF FEIR reconsider the whole project as the CWF and CEP
Projects. "CEQA Guideline § 15378(6) sets forth a list of what the term "project" does not
include. Guideline § 15378(b)(4) in the list exempts from being a "project/' The creation of
government funding mechanisms or other government fiscal activities, which do not involve any
commitment to any specific project which may result in a potentially significant physical impact
on the environment. The government's fiscal activities involved here do involve commitment to
a specific project, in fact a number of projects. It is clear under the CEQA Guidelines including §
15378(b)(4) that "the creation of government funding mechanisms or other government fiscal
activities" which involve commitment to a specific project or projects which may result in a
potentially significant physical impact on the environment, is an activity, a "project,"which must
be preceded by preparation of a legally sufficient EIR. CEQA must "be interpreted in such
manner as to afford the fullest possible protection to the environment within the reasonable
scope of the statutory language."
Specific Comments on the five new issues:
(1) Significant decreases in inflows to the Central Valley Project (CVP) Shasta and the Stage
Water Project (SWP) Oroville reservoirs are predicted in the 4th Climate Assessment:
The 4th Climate Assessment warns that the historic patterns of inflow into the SWP's Oroville
Reservoir are predicted to decline over the life of the CWF.
Fro the 4th Cli ?cite ASSeSSille t:
3.2.2.1 Suifac ,-W ter Sup lies
The seasonal availability of surface-water supplies will change, with potentially large impacts on
local to state-scale water management systems.
The impacts of a changed climate on surface water amounts and timing in the Sierra Nevada
have important implications for water supplies. Observed trends towards earlier peak stream
flow will likely continue through the 21st century, with peak stream flows arriving 20-40 days
earlier than the mid-20th century in many rivers (Stewart et al. 2004, Fritze et al. 2011).
Eventually, warming will drive snowmelt into the earliest spring and latest winter months, when
the sun is not high in the sky, so that ultimately snowmelt is likely to slow (Musselman et al.
2017). Nonetheless, earlier peak stream flow will result in greater winter flows with attendant
enhancements of flood risks, and less stream flow in the longer, drier summers. Declines in
summertime stream flow are particularly important because California's Mediterranean
precipitation regimes is such that it routinely experiences a "seasonal drought" in summer, a
highly predictable dearth of precipitation during the warm seasons. is summertime drought
coincides with when both natural and human communities rely on water reserves stored in
snowpack or reservoirs to survive until the next wet season is when the fuels that support wild
fires cure to their driest points. Thus reductions in summertime surface-water availability place
the water supplies for natural and human communities at great risk, as well as elevating wild re
risks.
As the source of so much of California's water, management of the Sierra Nevada region's water
resources is key to managing water supplies throughout the region and throughout the State.
With projected changes in snowpack, snowmelt and stream flow timing (Fig. 2.8), flood risk,
evaporation rates, groundwater, and upstream water uses, even the state's largest scale water-
storage and conveyance systems may be challenged. Knowles et al. (in review) simulated the
effects of the same 10-model ensemble of climate projections presented in Section 2 on water
conditions in a modified version of the U.S. Bureau of Reclamation (USBR) and California
Department of Water Resources's CALSIM II model of water- management operations by the
State Water Project (SWP), USBR's Central Valley Project (CVP), and other less extensive water
supplies and conveyances in the Central Valley. e amount of water stored in the major reservoirs
of the western Sierra Nevada by the end of the water year (the "carryover storage") gives a
useful indication of the resilience of the large- scale systems to manage long-term drought
shortages.
Fig. 3.2.2 shows that, on average over projections from ten climate models responding to
RCP4.5 and RCP8.5 greenhouse-gas forcings, carryover storage in the largest reservoirs (i.e.,
Shasta at the head of the CVP and Oroville at the head of the SWP) decline markedly, by roughly
one-third over the course of this century. is decline in carryover storage will severely impact
reservoir operations, limiting their capacity to ensure adequate water supply for dry years.
Declines are smaller farther south, becoming almost nonexistent south of the American River
basin (Folsom). Presumably, large declines in the northern Sierra Nevada reflect the dramatic
reduction of seasonal storage in the snowpacks of that lower, warmer part of the range (Figs.
2.5 and 2.6). Farther south, snowpacks survive somewhat better, and constraints on reservoir
releases to the San Joaquin River and water users in the San Joaquin Valley are such that
reservoirs continue to serve at least this most basic of reservoir functions (carryover storage)
throughout the century.
(Source:Fourth Climate Change Assessment Sierra Nevada Region 47)
[Figure 3.2.2 follows on the next page.)
I VII -7, "1, 1111, Oil 21 ," 1111 r r;i4 1.:41
ricatvgg 4;21, III, 11111 ^.0 I I I II I I iaOl 11 I 11' III
II 11111111 V I 'I A ij,1 di ill I Ili.. I I I ill I I
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1411 11
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1:/ti.14:1 ;"(J,;;) ;"0C-11;) ill
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Prolec:ed end-of-vvater-,f^ear s'Icrages h seven major reseRfoirs along
tie western ramparts o:the Sierra Nlevaca (see inset map), from
corribl nation of 0.11'odei clIn'ate-ciange ensenibile, :le Variable
Caoacity hydrologic model, ad a modified ,,ersiol of tne
US3R/DWI Calsim U ,' ate,-niariagemen*: model (based on data from
KnolAdes et al„ r revievv),
This new information becomes important for this DEIR CEQA analysis because DWR utilizes the
"climate change" rationale provided by the Brattle Group in the Sunding Economic Study for
five billion dollars in benefits from implementations the CWF in mitigating sea level rise in the
Delta predicted for the project life of the CWF.
modeling indicates that Delta exports ore highly sensitive with respect to sea level rise. A
rise in sea level means more salinity intrusion from the ocean via the San Francisco Bay,
affecting the water quality of exports and requiring more fresh water to be released from
upstream reservoirs to meet salinity standards. By 2100, a 2-foot sea level rise becomes a more
important contributor to reduced annual south-of-Delta export than does annual inflow change,
a result also shown by Fleenor et al. (2008). The DWR study published by Wang et al. (2011)
concludes that sea level rise can be expected to reduce Delta exports by over 119,000 acre-feet
annually by mid-century, and by over 520,000 acre-feet annually by 2100. Construction of the
WaterFix would prevent these losses by giving water managers the capability to divert water
directly from the Sacramento River upstream of the Delta."
It is important to note that the inclusion of the climate mitigation benefits in the Delta creates a
positive cost-benefit ratio for the CWF and without the sea level rise protection benefits, the
CWF is not a cost-effective investment according to the Sunding-Battle Group's economic
analysis. It is also important to note that DWR's only possible rationale for not including and
analyzing the predicted effects of climate change on inflows to the CVP's Shasta facility and the
SWP's Oroville facility is that this information became available after the July 2017 Certification
for the California Water Fix EIR/EIS and DWR's finding that the Sunding-Battle Group's
economic analysis s consistent with the DWR's economic analysis guidelines.
DWR argues in the responses to comments for the Contract Extension Project (CEP) FEIR, "DWR
is not avoiding the demands facing the State and the Delta with regard to these issues. As
recognized in the DEIR, there are administrative and legislative efforts that address these
concerns as part of other comprehensive statewide processes. This EIR does not need to address
all issues facing the SWP or the Delta. DWR leaves resolution of these broader issues to other
established planning, legislative and regulatory processes. CEQA Guidelines Section 15165
provides that "[w]here one project is one of several similar projects of a public agency but is not
deemed a part of a larger undertaking or larger project, the agency may prepare one EIR for all
projects, or one for each project, but shall in either case comment upon the cumulative effect.
The California Supreme Court held that "an EIR must include an analysis of the environmental
effects of future expansion or other action if: (1) it is a reasonably foreseeable consequence of
the initial project; and (2) the future expansion or action will be significant in that it will likely
change the scope or nature of the initial project or its environmental effects. Absent these two
circumstances, the future expansion need not be considered in the Ell?for the proposed project."
Laurel Heights Improvement Assn. v. Regents of University of California (1988) 47 Cal. 3d 376,
396
Although climate change is not a consequence of the Proposed Project, it does affect the
economic benefits analyzed for the Proposed Project that in turn affect the financial
affordability of the Proposed Project and the financial integrity of the SWP that it becomes part
of with adequate financing. Plumas asks the DWR to use the newly available available science
provided in the 4th Climate Assessment in the CWF FEIR to disclose and evaluate new
information about a broader range of climate factors affecting SWP operations in the Delta
than sea-level rise. The CWF FEIR should discuss the cumulative effect of the full range of
climate change factors on the economic benefits of the CWF as declining inflows and sea level
rise affect the physical operations of the SWP over the next 85 years. For reference, economic
benefits are based on the following water yields in the Sunding-Brattie Group report which may
not be accurate for climate change and other factors as we discuss in further detail below.
Table 2:
Average Annual fields(Acre-Feet) for
State •ter Project and C P South of lelta r ater Service "natractors
in the 9,000-cfs•SWP/CVP Scenario
SWP Agencies CVP Agencies
Urban Agricultural
Proposed Project 1,992,232 719,733 950,923
No Tunnels 1,547,885 479,000 634,822
Incremental Yield 444,348 240,733 316,101
Source:California Department of Water Resources.
Table 3:
Average A pool Yields(Acre-Feet)for
St te Water Project Co tractors i the 9,1 Wen S Only Scenario
SWP Agencies
Urban Agricultural
Proposed Project 2,091,829 771,619
No Tunnels 1,547,885 479,000
Incremental Yield 543,945 292,618
Source:California Department of Water Resources.
(2) Federal priorities for increased exports from the Delta to San Luis Reservoir (SLR) for the
benefit of CVP Contractors, and
(3) The inability of the CWF to obtain commitments by the Federal Government in this
funding cycle for loans of up to 49%of the now 19.9 billion dollar debt estimate for the CWF.
In light of recent actions by the Bureau of Reclamation (BOR) and the Department of Interior
(DOI) regarding the supremacy of federal water exports from the Delta it becomes difficult to
argue that the CEP and CWF DEIRs are not about management and operations of the SWP and
only about financing the management and operations of the SWP because both of the CEP and
the CWF AlPs concern themselves with allocating SWP storage and deliveries from San Luis
Reservoir, and especially concern themselves with carry over storage and banking provisions
and priorities in the San Luis Reservoir times of water surplus and shortage. Below San Luis
Reservoir, the CEP and the CWF are interlinked by the shared SWP and CVP storage and
conveyance in the South of Delta service areas and they both depend on the "common pool" of
the Delta.
Specifically, Plumas argues that given new federal priorities for operations of the CVP, DWR can
no longer assert that "The lead agency has the authority and responsibility to initially frame the
scope of its proposed purpose and objectives. As discussed in Response to Comment 5-11, the
lead agency is free to limit its proposed objectives to the issues it wants to address and is not
obligated to look at broader issues or concerns."(CEP FEIR, p.2-10)
In the Master Responses to the CEP FEIR, DWR states that "CEQA does not require an agency to
examine a project and objectives that are completely different from the one it has chosen to
pursue. This (CEP DEIR) is not an EIR on the operation and maintenance of the SWP...The DEIR
does not evaluate issues such as impacts attributed to the operation of the SWP, all of the
problems facing the Delta, or activities relating to water conservation and water supply. These
would continue to exist even if there were no proposed project. As a result, under CEQA, they
are considered part of the baseline conditions and are not environmental impacts of the
proposed project. Therefore, in the DEIR DWR is not required to mitigate or consider alternatives
for impacts attributed to the on-going operation and maintenance of the SWP. (CEP FEIR, p. 2-
7)
However, Plumas asserts that that legal premise changed on August 17, 2018, when the US
Bureau of Reclamation (BOR) sent a letter to DWR opening renegotiations on the Coordinated
Operating Agreement (COA). The COA governs the SWP and CVP operations in the Delta and in
the San Luis Reservoir. As the BOR letter states,
"There have been numerous meetings over the past two years, which have included Central
Valley Project (CYP) and State Water Project (SWP) contractors. This has included considerable
productive discussion and sharing of information and data through which we have learned a
great deal about our respective operations as they have evolved over the years.At this point, we
have concluded the Article 14(a) review process. Unfortunately, we have been unable to
mutually agree on revisions to COA for maintaining conformity with the objectives and
principles embodied in the 1986 COA and underlying technical studies. Absent mutual
agreement on revisions needed to COA, Reclamation respectfully makes this Notice of
Negotiations in accordance with Article I4(b)(2). I am designating Mr. Federico Barajas as the
Lead Negotiator for Reclamation and request DWR identify their Lead Negotiator. It is
suggested the respective leads immediately form their negotiating teams and proceed with
negotiations within the next 30 calendar days in order to allow for satisfactory conclusion of an
agreement within twelve months of the date of this letter,per COA.
In a November 19, 2018 letter to the Delta Stewardship Council (DSC), a coalition of
environmental groups support the concerns raised by five Counties within the legal Delta by
commenting that, "The WaterFix project is a partnership between DWR and the U.S. Bureau of
Reclamation. New, repeated declarations of federal policy to maximize exports, regardless of
the consequences for the Delta, have undermined the credibility of any evidence that the Bureau
of Reclamation will adhere to the Delta Plan policies, mitigation measures, and "adaptive
management"for the project...Water Code § 85320(b)(2)(A) contains specific requirements for
incorporation of the project into the Delta Plan including "operational requirements and flows
necessary for recovering the Delta ecosystem and restoring fisheries under a reasonable range
of hydrologic conditions, which will identify the remaining water available for export and other
beneficial uses."Section 85320(b)(2)(B) requires comprehensive review of "A reasonable range
of Delta conveyance alternatives, including through-Delta, dual conveyance, and isolated
conveyance alternatives . . ." The Delta Reform Act cannot be reasonably construed to make
everything in it meaningless if the federal partner in the project should wish to maximize
exports... The Presidential Memorandum, along with such other recent federal actions as the
August 17, 2018, Secretary of the Interior Memorandum, show that it would require ignoring
"practical reality" and defy common sense were the DSC to make a finding that the WaterFix
Tunnels project is consistent with the policies of the Delta Plan. The project is a joint one of
California's DWR, and the U.S. Bureau of Reclamation. The federal policy is now to maximize
exports regardless of the consequences for Delta water flows and Delta water quality. These
critical federal documents will have to be officially noticed before any decision could be
considered, let alone reached,finding consistency of the Covered Action with the Delta Plan."
Therefore the CWF FEIR must now address the possibility that changed CVP operations will
affect SWP operations in ways that could affect the ability of the SWP to store and deliver SWP
water from the Delta to the San Luis Reservoir that is needed to achieve the physical benefits
described for the CEP and the CWF and the economic benefits presented in the Sunding-Brattle
Group economic analysis for the CWF. Delaying the release and certification of the CWF FEIR
until the COA negotiations are concluded and until after the DSC issues its "Findings of
Consistency" is one reasonable approach in the face of this new information.
In addition, the Delta Conveyance Finance Authority (DCFA)'s LOI seeking an initial $1.6 billion
in funding for the project's design and construction and discussions of securing up to 49
percent of the CWF's total eligible costs through WIFIA loans was denied for 2018. Plumas
requests that the DWR delay the CWF FEIR until after DWR Capital Improvements Plan becomes
available so that the public can understand the magnitude of debt associated with financing the
whole project including the CWF and unanalyzed future SWP projects that the DWR is intending
to finance through bonds, loans and user charges using the Ail provisions for the CER FEIR and
the CWF DEIR
(4) Uncertainty about the future carry over storage and operations at the SWP Oroville
Reservoir in the face of insufficiency determinations by FERC regarding DWR's dam safety
repairs,
In October 2018 the Federal Energy Regulatory Commission (FERC) questioned the durability of
the repairs to Oroville Dam and Spillway in mega-flood events which are predicted to occur
more frequently in the future in the 4th Climate Change Assessment. Although it remains
unclear what FERC will require to ensure dam safety under these future circumstances, the
presumption of historic carry-over storage in the SWP's largest facility is questionable given the
Army Corps' existing requirement for lower carry-over storage at Oroville until safety concerns
are addressed by DWR to the satisfaction of the ACOE and the FERC.
(5) Uncertainties about the regulatory responses to the uncertainties listed above by the
State and Federal agencies that in the past have responded by reducing export flows
Plumas commented about the proposed revised Delta flows in the State Water Resources
Control Boards' Although the State Water Resources Control Board's July 2018 Framework for
the Sacramento/Delta Update to the Bay-Delta Plan is delayed pending further negotiations, it
has not been withdrawn. As DWR comments in the CEP FEIR, "When exporting water from the
Delta, DWR must comply with all current State and federal regulatory requirements in effect at
the time of the export pumping, including numerous environmental standards, laws, and
regulations relating to reservoir releases and Delta inflow and outflow, Delta water quality,fish
protection, environmental needs, water rights, and the needs of other users. The needs of other
users include in-Delta users and the water rights of the areas of origin of Delta inflow. These
requirements include applicable State Water Resources Control Board (State Water Board)
orders, United States Army Corps of Engineers (USAGE)permits, Biological Opinions (BiOps) and
other regulatory constraints including any relevant judicial orders in effect at the time of the
operation. They have established water quality and flow requirements and limits on the rate of
export of water that can be pumped by the state and federal pumping plants. Therefore,
compliance is included in the proposed project and all of the alternatives analyzed in the DEiR.
Approval of the proposed project would not alter the SWP obligation and commitment to
comply with all current and future applicable regulatory requirements, including biological
opinions and water rights decisions."(CEP FEIR, p. 2-11) Plumas Commented extensively on the
NOP for the CWF DEIR that proposed changes to the Delta inflows and exports could
significantly change the water timing and availability of exports from the Delta to San Luis
Reservoir and that therefore extending new contracts and financing new projects under the
CECiA presumptions of unchanged SWP operations is premature. Since these actions are
proposed and pending, the CWF FEIR should be delayed until new regulatory effects on the
financial integrity of the SWP are available for analysis. Otherwise the perception and concern
by Plumas and others that premature Contract Extensions do preempt agency and legislative
authorities over SWP operations in the Delta and the SLR remains unclarified by DWR in the
FEIR for the CWF.
(6) Affordability and equity cost-allocation issues: Provide a fair and equitable approach for
cost allocation of California WaterFix (and other new SWP Projects.
Now that the CEP and the CWF are one project according to Director Nemeth, there are now
two inconsistent approaches for allocating new project debt identified in the CEP FEIR and in
the CWF DEIR that need to be reconciled in the final CWF FEIR. The CWF DEIR AlP reaffirm the
proposed PWA governance structure in the CEP FEIR whereby 80% of Contractors determine
the allocation of costs for new SWP projects. The CVVFA|P also specifically exempts North of
Delta PWAs for CWF costs. The CEP FEIR offers no "opt out " provisions for PWAs for future
SWP projects apparently authorized with the certification of the CEP FEIR that do not see
benefits for their service areas that justify incurring new SWP debt for financing new SWP
projects. Plumas has commented on the inequity of this approach for PWAs without "blank
check taxing authority in the CEP CEQA process and the EVVF CEQA process. Plumas appreciates
that DWR notes in the "Response to Comments" in the CEP FEIR, the following statement:
"Given the statutory requirement and the significance of this obligation to the financial integrity
of the State Water Project, DWR does not intend to make changes to this provision and expects
that the Proposition 13 exemption for priorvmteropproxed/ndebteuneosw/8/continueb0000/v
during the extended term of the Contracts." (CEP FE1R, p. 2-25). Herein DWR acknowledges that
Contractors with "blank check" taxing authority, generally the largest state and federal water
purveyors in the SWP and CVP water supply and delivery systems, are also the P\VAsthmt now
decide under the CEP FE|RA|P, who benefits and pays for new SWP projects. This creates a
foreseeable "worst case"scenario as described for the five issues discussed above, where PWAs
that are subject to Proposition 13 and Section 218 voting requirements may not be able to
afford their full Table A deliveries if SWP operations and SWP capital improvements costs rise
even as their SWP water supplies become less reliable. Over time, the PWAs with blank check
taxing authority, under this worst case scenario are positioned to obtain majority shares the
State Water Project because of their blank check taxing advantage. Since there is no DWR
Capital Improvements Plan available, the SW PWAs thiat must justify the financial benefits of
additional new debt for new SWP projects on top of existing debt face very difficult
circumstances given their Proposition 13 and Section 218 voting obligations. Therefore equity
and A|P uniformity reasons and the need to reconcile inconsistencies for the "whole project",
now the CEP FEIR and the CWF DBR; Plumas again requests that "opt out" provisions like those
afforded in the CWF A|P be made available for financing future SWP projects that are
contemplated in the Contract Extension Pro^gctA|P. Consistency is achieved for all SWP PWAs
with the highest level of equitable cost allocation among PWAs for new projects through the
"opt out" or exemption provisions that the CWF DEIR A|P currently affords.
Plumas-Specific Comments:
Plumas appreciates that DWR's "Responses to Comments" for in the CEP FEIR do address some
of the Plumas concerns about being forced to finance new SWP debt without an "opt out"
provision in the new CEP contracts. The CEP FEIR states for that DWR will extend the current
SWP Contract between the Plumas County Flood Control and Water Conservation District
(Plumas) and the Department of Water Resources for another 50 years to 2085, upon receipt
on an Article 4 letter from Plurnas. "The current SWP Contracts are not uniform as both Plumas
County FC&WCD and the Empire West Side ID did not sign the Monterey Amendments and DWR
honored the original contracts that they signed without a problem." (CEP FEIR Letter 7-11, p.
160)
"Under the No Project Alternative, DWR takes no action, and DWR and the Contractors would
continue to operate and finance the SWP under the Contracts to December 31, 2035. Upon
receipt of Article 4 letters from the Contractors (at least 6 months prior to the existing expiration
date for each Contract) the term of the Contracts would be extended beyond their current
expiration dates. Under this alternative, the Contracts would not expire beginning in 2035.
Water service would continue beyond 2035 to all Contractors, consistent with the Contracts
including the existing financial provisions. Annual revenue and water supply cost recovery would
continue consistent with the current Contracts." Until the Contractors submit their Article 4
letters to extend their Contract expiration dates and the extended Contract expiration date is
determined, DWR would not sell bonds with maturity dates past 2035 to finance SWP capital
expenditures and therefore the current compression in the recovery of capital costs and the
bond financing costs would be exacerbated."(CEP FEIR, p. 2-2)...."Article 4 states that, by
written notice to DWR at least 6 months prior to the expiration date of a Contract, the
Contractor can elect to receive continued service after the expiration of the term under the
following conditions unless otherwise agreed to: (1) service of water in annual amounts up to
and including the Contractor's maximum annual Table A amount; (2) service of water at no
greater cost to the Contractor than would have been the case had the Contract continued in
effect; (3) service of water under the same physical conditions of service, including time, place,
amount and rate of delivery; (4)retention of the same chemical quality objective provision;and
5) retention of the same options to use the SWP transportation facilities as provided for in
Articles 18(c)and 55, as applicable. "(CEP DEIR,p. ES-3).
In the CEP FEIR, DWR also clarifies the anticipated benefits of mingling existing debt with new
SWP debt for as yet unidentified SWP Projects by identifying near term new SWP Projects:
"These benefits {of combining current debt with new debt} include the ability to continue to
finance projects such as repairs to the California Aqueduct, replacement of aging pumps,
generators, and other equipment and implementing low greenhouse gas(GHG) emission energy
projects. Capital project that could be financed in whole or in part by the sale of longer term
bonds (if available as the result of Contract extension)include: (1)reinforcing Perris Dam at Lake
Perris against seismic failure and maintaining other SWP facilities to current seismic safety
standards; (2) reconstructing the Ronald B Roble Thermalito pump-generating plant in the
aftermath of a damaging fire to the facility;(3) implementing the Oroville hydroelectric license
project; and (4) obtaining a renewed Federal Energy Regulatory Commission (FERC) license for
the SWP's southern hydroelectric plants."(CEP FEIR,p. 2-10).
For reference, the following these Projects are not included in the u1hh" Provisions of the
Existing SWP Contracts: "Article 1 (Existing SWP Water Supply contract) (hh) "Water System
Facilities" shall mean the following facilities to the extent that they are financed with water
system revenue bonds or to the extent that other financing of such facilities is reimbursed with
proceeds from water system revenue bonds: (1) The North Bay Aqueduct, (2) The Coastal Branch
Aqueduct, (3) Delta Facilities, including Suisun Marsh facilities, to serve the purposes of water
conservation in the Delta, water supply in the Delta, transfer of water across the Delta, and
mitigation of the environmental effects of project facilities, and to the extent presently
authorized as project purposes, recreation and fish and wildlife enhancement, (4)Local projects
as defined in Article 1(h)(2) designed to develop no more than 25,000 acre-feet of project yield
from each project, (5) Land acquisition prior to December 31, 1995,for the Kern Fan Element of
the Kern Water Bank, (6) Additional pumps at the Banks Delta Pumping Plant,(7) The
transmission line from Midway to Wheeler Ridge Pumping Plant,(8) Repairs, additions, and
betterments to conservation or transportation facilities existing as of January 1, 1987, and to all
other facilities described in this subarticle (hh) except for item (5), <Attachment L> (9)A project
facilities corporation yard, and(10)A project facilities operation center/'
Plumas thanks DWR for offering Plumas the "opt out" provision for debt from new SWP
projects that is afforded by extending the existing contract,with DWR and including the Plumas
Amendment and the final payment to the Monterey Plaintiffs that was stipulated in the
Monterey Settlement Agreement.
Thank you for the opportunity to comment.
Submitted •
eff Engle, Chair
emel.dist.5@gmail.cprn
Governing Board
Plumas County Flood Control and Water Conservation District
and
Plumas County Board of Supervisors
cc. Board of Supervisors, County of Plumas—pcbs@countvofplumas.co
cc. Governing Board, Plumas County Flood Control and Water Conservation District—
p_cbs@couroSyoftplum §..c.qm
cc. Bob Perreault, Manager, Plumas County Flood Control and Water Conservation District—
bobperreaull@sountvofglumas.com
cc. Randy Wilson, Director, Plumas County Planning Department—
randiwilson@courttypfplumas.com
cc. Craig Settlemire, County Counsel, County of Plumas—csettlemirePcogotypiplurnas.com
cc. Honorable Ted Gaines, Senate District 1
cc. Honorable Brian Dahle, Assembly District 1
cc. Bruce Alpert, County Counsel, County of Butte
cc. Paul Gosselin, Director, Department of Water and Resource Conservation, County of Butte
460 T WATER AND RESOURCE CONSERVATION
,J 308 Nelson Avenue, Oroville, CA 95965
Telephone: (530)538-4343
o Fax: (530)538-3807
""` www.buttccounty.net/watcrandresourcc
0 a bcwatcr(cPbuttccounty.nct
cou
Paul Gosselin,Director
April 29, 2013
State Water Project Contract Extension Process
Butte County List of Objectives for Extending the Long Term Water Supply Contracts
Butte County agrees with the three objectives (desired outcomes) submitted by the
State Water Contractors on April 26, 2013. In addition, Butte County brings forward the
objective (desired outcome) for consideration in the State Water Project Water Supply
Contract Extension negotiations:
To ensure that contractors shall have the option and right to opt out of the
cost and other burdens and benefits of the Bay Delta Conservation Plan and
any implementing and related projects.
SWC Submission #: SWCCE-0001
SWC m Negotiation Submission #:
STATE WATER CONTRACTORS
1121 L Street, Suite 1050
Sacramento, CA 95814-3944
(916) 447-7357
www.swc.org
Draft-Subject to Review, Draft No. 7
April 26, 2013
State Water Project Contract Extension Process
State Water Contractors (SWC)1 Objectives as of April 26, 2013
Project: State Water Project Water Supply Contract Extension
Objective (Desired Outcome)
1 To continue to receive a long-term water supply from the SWP as provided under
Article 4 of the Water Supply Contract beyond 2035.
2 To ensure that DWR can finance SWP expenditures beyond 2035 no later than
December 31, 2014.
3 To ensure that DWR can extend cost recovery of SWP expenditures as defined in the
Water Supply Contracts beyond 2035 no later than December 31, 2014.
1 The SWC organization is a nonprofit mutual benefit corporation that represents and protects the common interests of its 27
member public agencies in the vital water supplies provided by California's State Water Project("SWP"). Each of the SWC
member agencies holds a contract with the California Department of Water Resources("DWR")to receive water supplies from
the SWP. Collectively,the SWC members deliver water to more than 25 million residents throughout the state and more than
750,000 acres of agricultural lands. SWP water is served from the San Francisco Bay Area,to the San Joaquin Valley and the
Central Coast,to Southern California. The SWC's members are:Alameda County Flood Control and Water Conservation
District Zone 7;Alameda County Water District;Antelope Valley-East Kern Water Agency;Casitas Municipal Water District;
Castaic Lake Water Agency;Central Coastal Water Authority;City of Yuba City;Coachella Valley Water District;County of
Kings;Crestline-Lake Arrowhead Water Agency;Desert Water Agency;Dudley Ridge Water District;Empire-West Side
Irrigation District;Kern County Water Agency;Littlerock Creek Irrigation District;Metropolitan Water District of Southern
California;Mojave Water Agency;Napa County Flood Control and Water Conservation District;Oak Flat Water District;
Palmdale Water District;San Bernardino Valley Municipal Water District;San Gabriel Valley Municipal Water District;San
Gorgonio Pass Water Agency;San Luis Obispo County Flood Control&Water Conservation District;Santa Clara Valley Water
District;Solano County Water Agency;and Tulare Lake Basin Water Storage District.
1iIfafe