CVP FRIANT DIVISIONSan Joaquin River Settlement

CVP FRIANT DIVISIONSan Joaquin River Settlement

FriantDamFriantFriantDamDam

SacramentoSan Joaquin DeltaSacramentoSacramentoSan Joaquin DeltaSan Joaquin Delta

Merced RiverMerced RiverMerced River

San Joaquin RiverSettlement:

Status Report

Ronald D. JacobsmaConsulting General ManagerFriant Water Users Authority

March 11, 2008

Friant Division Service Area and ContractorsFriant Division Service Area and Contractors

Alpaugh I.D.

Arvin-Edison W.S.D.

Atwell Island W.D.

Chowchilla W.D.

Delano-Earlimart I.D.

Exeter I.D.

Fresno I.D.

Garfield W.D.

Hills Valley I.D.

International W.D.

Ivanhoe I.D.

Kern-Tulare W.D.

Lewis Creek W.D.

Lindmore I.D.

Lindsay-Strathmore I.D.

Lower Tule River I.D.

Madera I.D.

Orange Cove I.D.

Pixley I.D.

Porterville I.D.

Rag Gulch W.D.

Saucelito I.D.

Shafter-Wasco I.D.

Southern San Joaquin M.U.D.

Stone Corral I.D.

Tea Pot Dome W.D.

Terra Bella I.D.

Tulare I.D.

City of Fresno

City of Orange Cove

City of Lindsay

Fresno Co. WWD #18

Madera County

M&I ContractorsM&I ContractorsM&I Contractors

Ag Water ContractorsAg Water ContractorsAg Water Contractors

Service AreaService AreaService AreaMerced CoMadera CoFresno CoTulare CoKern Co

MercedMercedMerced

BakersfieldBakersfieldBakersfield

VisaliaVisaliaVisalia

Madera CanalMadera CanalMadera Canal

Millerton LakeMillerton LakeMillerton Lake

Friant Kern CanalFriant Kern CanalFriant Kern Canal

FresnoFresnoFresno

SJR Channel Improvements

• Litigation Background– Federal Judge determined that USBR was not operating

Friant Dam (CVP) consistent with State Law (F&G code 5937) during “liability” phase of court proceedings, meaning water needed to be released to support historical (Salmon) fishery

– “Remedy” phase of court proceedings was scheduled for February of 2006

– Senator Feinstein and Congressman Radanovich prompted parties to undertake another attempt at Settlement

– Settlement Agreement reached In Summer of 2006

• Settlement Provides:– End of protracted litigation - Resolution of all legal

claims– Funding and Plan for San Joaquin River Improvements– Water Supply Certainty for 20 years or more– Opportunity to recover water and/or develop water

supplies– No additional financial exposure– Cooperation from federal, state and local governments

and plaintiffs provides greatest chance of success for future

– No material third party impacts

San Joaquin RiverEqual Primary Goals of Settlement

Restoration Goal

Water Management Goal

Settlement Goals• Restoration Goal

− Specified water deliveries for fishery releases based on hydrology (results in 15% average annual water supply impact for Long Term Contractors; overall water supply reduction of 19% in Friant Division (145kaf – 240kaf) )

− River improvements to support naturally reproducing self-sustaining anadromous fishery

• Water Management Goal− Water Recovery Account Plan-$10/a.f. in wet

conditions− Plan to get back water (recirculation, recapture and

reuse) to reduce or avoid water supply impacts− Utilize Transfers/Exchanges/groundwater programs

Why Water Management Goal Is

Critical• Approximately 15,000 mostly small family

farms on nearly one million acres of the most productive farmland in the world have relied on Friant Water supplies for the last half century

• Farmers, Farmworkers, Support Industries, and Communities are dependent upon Friant water Supplies for their livelihood

Friant LT Irrigation water contractor impacts

SETTLEMENTWithout buffer flows and

NO recovery of water supplies. THIS IS IMPACT TO BE

MITIGATED BY WATER MANAGEMENT GOAL.

ANTICIPATED JUDGMENT

Reduction in Water Deliveries 145,000 acre-feet 360,000 acre-feet

Current Riparian Releases 117,000 acre-feet 117,000 acre-feet

Additional Releases for Fisheries 320,000 acre-feet 632,000 acre-feet

Remaining Flood Releases 140,000 acre-feet 74,000 acre-feet

Farm land out of production 51,300 acres 116,000 acres

Lost Crop Production $159.3 million direct$264.9 million total

$372.5 million direct$621.0 million total

Income Impact $36.6 million direct$80.7 million total

$93.1 million direct$200.9 million total

Employment Impact(jobs lost)

1,360 direct3,070 total

3,490 direct7,660 total

Potential Consequences of Failure to Meet Water Management Goal

G.W. Basin G.W. Basin G.W. Basin

G.W. Basin

Water Management GoalWater Recovery

Opportunities

Purpose:

To reduce or avoid adverse water supply impacts to all of the Friant Division long-term contractors that may result from the Interim Flows and Restoration Flows provided for in the Settlement.

Where We Are Today

• SJR legislation, now embodied in HR 4074 as Title I (formerly HR 24) has passed House Natural Resources Committee

• Legislation on hold pending resolution of Congressional PAYGO budget rules for non-discretionary spending and further delineation and clarification of the implementation of the water management goal

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Chronology of San Joaquin River Litigation and Settlement December 1988 - The case now known as Natural Resources Defense Council v. Rodgers was first filed. Plaintiffs, a collection of 14 environmentalist and fishing organizations, claimed that the Bureau of Reclamation violated the National Environmental Policy Act (NEPA) by renewing the water districts' long-term CVP contracts without preparing an environmental impact statement (EIS). 1992 – At the judge's suggestion, Plaintiffs amended their complaint to add a claim that the Bureau had violated Section 8 of the Reclamation Act and the federal Administrative Procedure Act by not complying with Section 5937 of the California Fish & Game Code; plaintiffs assert Section 5937 requires the Bureau to release "sufficient" water from Friant Dam to keep the fish below the dam in good condition. This claim subsequently became the focal point of the litigation. 1992 - Congress enacts the Central Valley Project Improvement Act, 106 Stat. 4706-31, Pub. L. No. 102-575. The CVPIA prohibited the release of water from Friant Dam to restore the San Joaquin River except in accordance with a plan that Congress had determined to be "reasonable, prudent and feasible." 1994 – Friant filed papers with the court asking the judge to take action to dismiss the case. Friant argued that, on its face, the CVPIA pre-empted the application of Fish & Game Code Section 5937 at Friant Dam. The trial judge rejected defendants' claim of pre-emption, finding:

(1) the CVPIA did not facially pre-empt Section 5937, and (2) whether Section 5937 would be pre-empted as applied would have to be

determined on the facts. The court found that it was possible that Section 5937 could be implemented at Friant Dam in a manner consistent with the CVPIA's congressional directives.

1998 – The Ninth Circuit reviewed the judge's decision and upheld it in NRDC v. Houston, 146 F.3d 1118 (9th Cir. 1998). The Ninth Circuit ruled:

(1) Federal law does not, on its face, pre-empt plaintiffs' Section 5937 claim. Id. at 1131-32.

(2) Section 8 of the Reclamation Act requires the United States to comply with state water laws unless such law is directly inconsistent with clear congressional directives (as set forth in federal statute) regarding the project.

(3) Section 3406(c)(1) of the CVPIA did not pre-empt section 5937 "if the application of § 5937 could be implemented in a way that is consistent with Congress' plan to develop and restore fisheries below the Friant Dam in a manner that is 'reasonable, prudent, and feasible.'" Id. at 1132.

The Ninth Circuit sent the case back down to the trial court for the judge to determine: (1) whether Section 5937 applies to Friant Dam as a matter of federal law or under

State law, and (2) whether application of section 5937 is inconsistent with the CVPIA.

Id. at 1132.

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1999 – The Friant districts asked the Supreme Court to review the Ninth Circuit's decision. The Supreme Court rejected the request, thereby approving the Ninth Circuit's rulings. 1999 – 2003 – NRDC and Friant engaged in settlement negotiations, including using a mediator appointed by the Ninth Circuit. During the settlement negotiations, Friant and NRDC jointly engaged experts to determine how much water would be needed to restore the river. These experts produced a draft report known as the Stillwater Report, which called for water releases from Friant Dam to restore salmon runs to the river; the draft hydrographs in this report called for releases far greater than those under the 2006 Settlement Agreement. Spring 2003 – The settlement negotiations failed. For a settlement to be acceptable to the Friant community:

(1) The amount of water releases would have to be reduced; and (2) The water losses would have to be predictable and certain. NRDC had insisted

upon "adaptive management" of the river. Adaptive management is a scientific doctrine which urges "adapting" or changing human actions such as the river releases to respond to changing environmental conditions and circumstances. Under "adaptive management," the amount of water lost to Friant could not be predicted because, if the fish were not doing well, additional water would be released with the hope of improving their condition.

August 2003 – Plaintiffs reactivate the litigation and issue press releases blaming Friant for the failure of the settlement negotiations. Shortly thereafter, the judge reopens the case and issues a very abbreviated schedule. August 2004 – The judge issues a ruling that:

(1) Section 5937 of the California Fish and Game Code constitutes a reservation of water requiring that all "historic fisheries" existing prior to construction of Friant Dam be restored and maintained;

(2) for the San Joaquin River, the historic fisheries include salmon runs; and (3) the Bureau has violated Section 5937 by failing to release sufficient water from

Friant Dam to maintain salmon. Id. at 924-925.

The court did not determine how much water would have to be released. Rather, the court scheduled a "remedies" trial to determine:

(1) how much water would be needed to restore salmon to the river; and (2) whether the release of that amount of water would be inconsistent with the

CVPIA. Id. at 921, 925 n.13. The remedies trial was set on a very aggressive schedule for February 2006. Early 2005 – NRDC and some of the other plaintiffs file an unrelated suit challenging the 2004 Biological Opinion issued for the pumping operations by the federal and state water

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projects. NRDC and its colleagues argue that the pumping is illegal because it jeopardizes the Delta smelt, a small fish which is protected under the Endangered Species Act. July 28, 2005 – In the Friant case, the judge issues a decision finding that the Biological Opinions supporting the 2001 long-term renewals of the contracts were invalid under the federal Endangered Species Act. This left the door open for the judge to invalidate and reopen the terms of the contracts. August – September 2005 – The parties begin exchanging expert reports about how much water it would take to restore the river and how great the economic and environmental consequences would be. NRDC produces expert reports that claim the amount of water needed is much less than previously thought. As a starting point, NRDC sought releases from Friant Dam that would have reduced total water deliveries from Millerton Lake by at least 208,000 acre-feet per year, on average (which was less than they sought in the 1999-2003 negotiations), and the volume of water losses was not subject to any "ceiling." August 2005 – At the request of Senator Feinstein and Rep. Radanovich, the parties renew settlement discussions, using the additional information gleaned from their expert reports. September 13, 2006 – Settlement Agreement entered into, along with a Memorandum of Understanding with the State (MOU). The Settlement Agreement resulted in a flow requirement that was slightly higher (up to 10% of the daily flow requirements) than the floor established by NRDC's experts, but the Settlement provided certainty to the Friant contractors by fixing the amount of the releases for the 20-year duration of the agreement. In contrast to any decision that the court could render, which would necessarily be limited to the extent of the fish flows, the Settlement also included provisions to help the Friant contractors recover and make up their water supplies. Relative to the Water Management Goal (WMG), the Settlement Agreement:

(1) identifies the purpose of the WMG "…to reduce or avoid adverse water supply impacts" on Friant contractors that will result from restoration flows (¶ 2.);

(2) provides to achieve the WMG "will require the planning, implementation, and funding measures called for in this Settlement to reduce or avoid impacts to all the Friant Division long-term contractors caused by the Restoration Flows (including for example recirculation programs and expanded groundwater banking.)" (¶ 5.);

(3) requires the Secretary to "immediately … in consultation with the Plaintiffs and Friant Parties, … develop and implement … a plan for recirculation, recapture, reuse, exchange or transfer" of restoration flows. (¶ 16(a).);

(4) requires the Secretary to implement the Recovered Water Account (RWA) to make water available during wet conditions to the extent not needed for restoration flows at $10 per acre foot, to the extent restoration flows have not been offset by other means (such as recirculation) (at 1:1 rate; 1:1.25 for Buffer Flows). (¶ 16(b).);

The form of proposed legislation is attached to the Settlement and is a prerequisite to its implementation. (¶ 23.) If legislation "substantially in the form" of the attached draft is not

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enacted by January 31, 2006, the Settlement may be voided at the election of any party. (¶ 8.) September 21, 2006 – The House Water and Power Subcommittee conducts an oversight hearing to learn more about the Settlement and the draft legislation that the parties are requesting that Congress enact. Friant offers testimony in support of the Settlement. September 27, 2006 – After two weeks of intense negotiations, some led by Senator Feinstein personally, representatives of the Settling Parties and the third parties reach agreement on a "final" draft of the implementing legislation and sign a "Blood Oath" pledging "to oppose any amendments to said Legislation that are not agreed to by all the organizations." Signatories included representatives of: NRDC and its coalition, FWUA and those of its members which are parties to the litigation, the Exchange Contractors, Westlands Water District, San Luis Delta Mendota Water Authority, Kern County Water Agency and the San Joaquin River Tributary Association. (The State of California also participated in the negotiations of the legislation but did not sign the pledge due to federalism concerns.) December 6, 2006 – Rep. George Radanovich (R-Mariposa) and Sen. Dianne Feinstein (D-Cal.) introduce the negotiated version of the legislation as H.R. 6377, S. 4084. The 109th Congress adjourns shortly thereafter without taking action on the Settlement legislation. January 2007 – The new 110th Congress convenes under Democratic leadership. Because it is a new Congress, the Settlement legislation must be re-introduced, and Rep. Radanovich and Sen. Feinstein introduce the legislation as H.R. 24 and S. 27. Congress implements new “PAYGO” rules affecting all legislation creating new entitlement programs or other forms of “automatic” or “direct spending” not subject to annual appropriations. The rules require that new direct spending be offset by an equal amount of budget reductions or revenue increases elsewhere in the federal budget. The Settlement legislation falls under the PAYGO rules because it dedicates Friant surcharge and capital repayment revenues to Settlement implementation without further annual appropriations. February 2007 – At Senator Feinstein's request, Friant produces a report listing "potential projects and programs" that could be undertaken to meet the Settlement's Water Management Goal. March 1, 2007 – The House Water and Power Subcommittee conducts its legislative hearing to take testimony about H.R. 24. Friant submits testimony, including the report on Friant's Water Management Goal projects and programs, in favor of the bill to the Subcommittee for the hearing record. April 18, 2007 – Congressional Budget Office (CBO) estimates that the provisions of H.R. 24/S. 27 dedicating the Friant surcharge and capital repayment revenues to implementation of the Settlement would create $217M in "direct spending" and the legislation's financing provisions would create another $23M in revenue "losses" during the same period. Therefore, the bill is given a "PAYGO" score of $240M; this amount must be offset by revenue increases or spending cuts elsewhere in the federal budget. The inability to find

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offsets to fund the bill's PAYGO score holds up further progress on the legislation in the House. May 3, 2007 – The Senate Energy and Natural Resources Committee conducts its legislative hearing to take testimony about S. 27. Friant submits testimony in favor of the Settlement legislation. May 25, 2007 – Judge Wanger issues a decision in the unrelated NRDC v. Norton Delta smelt case. In that decision, the judge invalidates the Biological Opinions issued for the Delta smelt and further limits the ability of the state and federal water projects to pump water out of the Delta. This decision increases the difficulty of returning the San Joaquin River flows to Friant (as contemplated by the Water Management Goal's Recirculation Plan) by recapturing the water at the pumps in the Delta. Summer 2007 – The Settling Parties work with House Natural Resources Committee staff to identify potential PAYGO "offsets" for the Settlement bill, but little progress is made. Late October 2007 – To reduce the PAYGO score, the Settling Parties propose to have the Friant contractors advance their repayment of their remaining capital obligations, which would require them to convert their 9(e) water service contracts to 9(d) repayment contracts. The idea presents complicated issues for Friant Districts, but the House Natural Resources Committee informs Members that it last voting session ("markup") of the year will be in early November. The Friant districts and the Third Parties give tentative, "conceptual" approval to the 9(d) concept in order to allow the bill to be approved by the Natural Resources Committee. Friant and the Third Parties reserve the right to withdraw their support for the proposal. The 9(d) proposal does not provide a large enough offset, so the Natural Resources Committee Leadership adds other "placeholder" offsets that would increase certain oil and gas fees. These offsets are controversial even among Members who support Settlement, including Rep. Radanovich. A Committee markup is scheduled for Nov. 7. Rep. Costa, a Member of the Natural Resources Committee, asks the Settling Parties to consider a set of amendments for the Committee markup to clarify the Water Management Goal. The Parties consider the amendments, which are also endorsed by Reps. Radanovich and Cardoza, and inform Rep. Costa that they are not acceptable in their present form. The Parties ask Rep. Costa to withhold the amendments on the condition that the Settling Parties work to reach an agreement on the issue before the bill reaches the House floor. Rep. Costa agrees and states that he will not allow the bill to advance to the floor without such an agreement. November 5, 2007 – Rep. Costa introduces a new bill, H R. 4074, that incorporates: (1) the original Settlement bill, H.R. 24; (2) the 9(d) proposal; (3) the Committee's offsets and (4) the text of separate legislation (H.R. 2498) by Rep. Costa to authorize funding for a development of a regional water management plan. The Nov. 7 markup is postponed until Nov. 15.

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November 15, 2007 – The House Natural Resources Committee meets to consider H.R. 4074. Several Members of both parties raise objections to the oil and gas offsets. Rep. Costa offers assurances that the oil and gas offsets will not be part of the final legislation to reach the House floor. The Committee votes 25-15 to approve H.R. 4074. Rep. Costa states "his priority now is to get an agreement by the Settling Parties on implementation of the Settlement's Water Management Goal and to find a way to meet Congressional PAYGO requirements. . . ." December 2007 thru February 2008 – Friant works to develop a final 9(d) proposal that will not impose additional costs on Friant Districts. At the same time, Friant and the Settling Parties engage in negotiations to reach agreement on amendments to clarify and solidify the implementation of the Water Management Goal. 2.25.08