United StatesDepartment of the Interior

%AUop~U

June9, 1997

U.S.Fish and Wildlife Service U.S.Bureau ofReclamationRegion 1 Mid-Pacific Region911 N.E. 11thAvenue 2800CottageWayPortland OR 97232-4181 SacramentoCA 95825-1898

DearInterestedParty:

Subject: Central Valley Project Improvement Act Administrative ProposalonUrbanWaterSupplyReliability

In September1995, theDepartmentoftheInterior(Interior) invited thepublic to identifyconcernstheyhadregardingimplementationoftheCentralValleyProjectImprovementAct(CVPIA). Tofacilitatepublicinput anddiscussion,representativesofInteriorhelda seriesofpublic meetingsbetweenSeptember1995andApril 1996. Duringthesemeetings,12 majorareasofconcernwereidentified, andindividualsvolunteeredto form work teamsanddiscussthespecificissuespertainingto thoseareas.In April 1996,Interiorcommittedto thepreparationofanAdministrativeProposalfor eachofthe12 areasofconcernto addresstheprincipal issuesraisedby stakeholdersduringthepublic forumandwork teammeetings.

To thatend,InteriorcirculatedthedraftAdministrativeProposalon UrbanWaterSupply.Reliability on June14, 1996, for reviewby interestedparties,andreceivedwrittencommentsfrom 7 parties.Enclosedis thefinal AdministrativeProposalonUrbanWaterSupplyReliability whichhasbeenrevisedto reflectkey commentsreceived,aswell aspreviouslyraisedconcerns.

We would like to extendourappreciationto all thosewhoparticipatedin ourpublic processtofind waysto resolvethis andotherCVPIA implementationissues.Completionofthis andotherfinal proposalswill notendtheneedfor stakeholderinvolvementin the implementationof theCVPIA. We look forward to workingwith you andothermembersofthepublic in thefuture aswe implementtheCVPIA.

Copiesofthis final proposalcanbe accessedon theMid-PacificRegion’shomepageathttp:/wwiv.nip.usbr.goV or canbe obtained bycalling Ms. Alisha Sterud at 916/979-2435(TDD 916/979-2310).

Michael J.Regional etorU.S. Fish d Wildlife ServiceRegion1

Enclosure

RogerK.RegionalDirectorU.S. BureauofReclamationMid-Pacific Region

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CVPIA ADMINISTRATiVE URBAN WATER 5~J~pJJyPROPOSAL RELIABILITY

INTRODUCTION

In September1995,theDepartmentofthe Interior (Interior) invited thepublic to identify anyconcernstheyhadregardingimplementationoftheCentralValleyProjectImprovementAct(CVPIA) (ITitle XXXIV ofPublicLaw 102-575).Tofacilitatepublicinputanddiscussinn,

representativesofInteriorheldaseriesofpublicmeetingsbetweenSeptember1995andApril 1996. Duringthesemeetings,12 majorareasofconcernwereidentified,’andindividualsvolunteeredto formworkteamsanddiscussthespecificissuespertainingtothoseareas.InApril 1996,Interiorcommittedtopreparationof“AdministrativeProposals”oneachofthe12 areasofconcern,addressingtheprincipalissuesraisedbystakeholdersduringthepublicforumandwork teammeetings..Tothatend,InteriorcirculatedadraftAdministrativeProposalon UrbanWaterSupplyReliabilityonJune14, 1996,for reviewby interestedparties.Writtencommentsonthedraftproposalwerereceivedfrom sevenparties.ThisAdministrativeProposalonUrbanWaterSupplyReliabilityhasbeenrevisedto reflectthekeycomme,~tsreceived~onthedraftproposalaswell aspreviouslyraisedconcerns.Responsesto specificcommentsareprovidedin theattachedappendix.

BACKGROUND

In Januaxy1993,CentralValley Project(GyP)urbancontractorsmetwith Reclamationtodiscusstheimpactsofthe4 previousyearsofdroughtonurbancommunitiesandto relaytheirconcernthaturbancontractorsneededareliablecontractwatersupplyfor futuredroughtcontingencyplanning.Additionally,thedroughthighlightedthedifferentMunicipalandIndustrial(M&I) contractshortageprovisions2thatexistamongM&I contractorsandthepotentialinequitiesthatcouldexistwhenCVPwateris allocatedusingsuchshortageprovisions.TheurbancontractorsalsopointedoutthatoneofthepurposesoftheCVPIA is to achieveareasonablebalanceamongcompetingdemandsfor theuseofCVPwaterincludingM&l needs.As aresultofthismeeting,ReclamationundertookdevelopmentofaCVPM&I WaterShortagePolicy. ThegoaloftheM&I WaterShortagePolicywasto developaCVP-wideM&I watershortageprovisionthateventuallywouldbe negotiatedwith all CVP M&I contractorsandincorporatedinto theircontracts,provideaminlinumlevel ofwatersupplythat,in combination

The 12 areasofconcernarethefollowing: conservation,contracting,AnadromousFishRestorationPlan(AFRP),managementofSection3406(b)(2)water,RestorationFund,urbanreliability, transfers,refugesupply,SanJoaquinRiver,Trinity River, StanislausRiver, andthestakeholderprocess.

2 CVP M&I contractualshortageprovisionsrangefrom thosethataresilent ontheissue

of apportionmentofGyPwatersupplybetweenagriculturalandM&I contractorsto thosecallingfor agriculturalcontractorsto havetheirwatersupplyreducedby 25 percentofcontractsupplybeforeanywatershortagecanbeimposedon M&I contractors.

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9

cvpxA ADMINISTRATIVE URBAN WATER SUPPLYPROPOSAL . . . RELIABILITY

with M&I contractorsdroughtwaterconservationmeasures,wouldsustainurbanareasduringdroughtsituations,andlastlyprovidesufficientinformationto urbancontractorsfor useindevelopmentoffuturedroughtcontingencyplanning.Thisproposalisnotintendedto adverselyimpactfulfillmentoftheenvironmentalrequirementsoftheCVPIA.

TheDraft M&I WaterShortagePolicywasreleasedto all interestedparties,organizations,contractors,andagenciesfor commentonFebruary17, 1994w ThisdraftinterimpolicyidentifiedthreelevelsofWatersupply: aregulatorylevelwheretheminimumwatersupply.wouldbethegreaterof75 percentofcontractentitlementor85 percentofhistoricusage;ahydrologicshortagewithaminimumlevelof75percentofhistoricuse;andfinally, apublichealthandsafetywatersupplylevelthatwouldbetriggeredwhenCVPwatersupplieswereseverelyconstrained.After revi~wingcomments,ReclamationadoPtedthedraftasaninterimpolicy onwhichto basecontractamendments,pendingcompletionofongoingstudiesassociatedwith theCVPyieldandthePrograniniaticEnvironmentalImpactStatement(PEIS)requiredunderSection3409oftheCVPIA.

OnOctober12, 1995,CaliforniaStateSenateBill 1011(CaliforniaAct) wassignedinto law..TheCaliforniaActhighlightedtheconcernsoftheCVPurbancontractorsby emphasizingthecritical importanceofurbanwatersupplyreliability by requiringurbansuppliersto prepareawatershortagecontingencyanalysisdetailingspecificactionstheymusttakeduringwatershortages.It alsorequiresurbanwatersuppliersto accomplishanassessmentofthereliability ofits waterserviceto its customers.

ActualM&I deliveriesin 1994wereapproximately336,000acre-feet(19percent)oftotal CVPwaterdeliveriesofapproximately1,759,000acre-feet.ProjebtedM&I demandin theyear2022isapproximately683,000acre-feet,whichtranslatesinto 18 percentofprojectedtotal deliveriesof 3,859,000acre-feet3.

~ Actualdeliveriesandprojecteddemandswereobtainedfrom the1996CVP IrrigationandM&I ratesettingbooks. Totaldeliveriesincludeonly thoseamountsofCVP watermadeavailablefor M&I andagriculturalusesandexcludesdeliveriesofbasesuppliesunderSacramentoRiversettlementcontracts,GyPwaterdeliveredundertheExchangecontracts,andCVPwaterdeliveredunderFriant Division contracts.

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CVPIA ADMINISTRATIVE URBAN WATER SUPPLYPROPOSAL RELIABILITY

SUMMARY OFISSUES

TheUrbanWaterSupplyReliabilityWork Teamidentified13 issues.’ Interiorconsidered3 ofthe13 issuesaskeyissueswhichthisadministrativepaperaddresses.Thethreeissuesare(1) whatminimumlevel.ofreli~bilityshouldbeprovidedto urbanwatercontractors,(2)Mwshouldotherwatersuppliesdevelopedbyacontractorbe consideredfprotectedin urbanshortageallocations,and(3) whatshouldbethereliability ofwaterconvertedor transferredfromirrigationto M&I use? Eachofthekeyissuesisdiscussedbelow.

DISCUSSIONOF ISSUESAND INTERIOR PROPOSALS

What Minimum LevelofReliability ShouldBeProvided to Urban Water Contractors?

StakeiwlderViews. Urbancotitractorsbelievethatareliablewatersupplyisneededto sustain.theurbaneconomyandsupporturbanpopulations.Additionally,urbancontractorsbelievethatlong-terminfrastructureandlanduseplanning,aswell asmanufacturing,commercial,orresidentialcapitalinvestment,cannotbesupportedby short-termadministrativepoliciesaffectingthereliabilityofurbanwatersupplies.Theurbancontractorssupporttheirpositionbystatingthat: M&I contractorspayhigherratesfor CVPwaterthanagriculturalcontractors;urbanareashavemoregrossregionalproductth~.nagriculturalserviceareas;agriculturalareashavegreaterability to tolerateandadjustfor watershortages(urbanareascanreduceuseduringwatershortages,buttheflexibility to reducewaterusepastacertainpointis severelylimited); andlastly,urbanareasneedto knowthereliability ofCV?suppliesin ordertodeterminetheinvestmentneededto firm up suppliesofwateraspartoftheirdroughtcontingencyplanningprocess.

AgriculturalcontractorsbelievethattheCV? alreadyisoverlyconstrainedandthattheguaranteeofanyminimumlevel ofreliability to oneclassofCV?urbancontractorswill impactagriculturalwaterserviceusersandshouldrequireareallocationofGVP costs.Agriculturalcontractorsbelievethaturbancontractorsshouldfirm up theirreliability throughvoluntarywatertransfers.AgriculturalcontractorsbelievetheGVPIAgaveM&I contractorsaccessto -

agriculturalwaterandthatanyadditionalreliability shouldbethroughawilling buyerandsellerarrangement.Additionally,agriculturalinterestsarguethat“fairness”dictatesthatgivingpreferenceto urbancontractorsin thedeliveryofCVP waterisnotjustifiablegiventhe

‘ AttachmentA containsalistof issuesidentifiedby theUrbanWaterSupplyReliability•Team.

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CVPIA ADMINISTRATIVE URBAN WATER SUPPLYPROPOSAL . RELIABILITY

demands5thathavealreadybeenplacedon theCV?watersupplyby theCV?IA,EndangeredSpeciesAct of 1973(ESA),andBay-Delta. Furthermore,agriculturalinterestsbelievethat if apreferenceisgWento urbancontractorsin waterallocationsduringdroughtyears,then~agriculturalinterestssho•uldbecompensated.Lastly,if apreferenceisgivento urbancontractorsbecausetheyarepayingahighercostfor thewater,thentheremaybesomeagricultural -

contractorswith particularlyhi~,hvaluecropsthatmaywantto paymorefor greaterwatersupplyreliability fromtheCV?.

Interior Response.Reclamation’sexperiencefrom thelastdroughtwhereM&I contractorssubmittednumerousrequestsfor hardshipandcritical needswaterbecausereducedwaterallocationsdidnotmeettheirminimumwatersupplyneedsdemonstratedthaturbancontractorsneedaminimumlevelofwatersupplyreliability. Reclamation,however,believesthatscarcewatersuppliesavailableduringbelownormaltypewateryearsrequiremorestringentmeasuresto ensurethatavailablewaterisprudentlyandWiselyused. Themostimportantmeasureisthaturbancontractorswhoreceivethisminimumlevelofreliability mustbeimplementingsignificantwaterconservationpractices.

Reclamationproposesto simplify andclarify theDraft M&I WaterShortagePolicy thatwasreleasedfor commentin February1994by reducingthepolicy from threelevelsto two. Onelevel will showtheminimumlevelofreliability to be 75 percentofhistoricuseadjustedforgrowth’ andadjustedfor quantitiesofwaterassociatedwith theimplementationofanyextraordinarywaterconservationactionand/orpractice.7Thesecondlevelwill reflectapublichealthandsafetylevel. Thisshortagepolicy wouldgiveurbanintereststheinformationtheyneedfor wateroperationplanningandyetgiveReclamationtheflexibility to operateandmanagetheCV?duringtimesorwatershortage.

~AgriculturalinterestsreferenceSection3406(b)(2),refugewatersuppliesandTrinityRiverflows; ESArequirementsonpumping,temperaturecontrol, andgateclosures;Bay/DeltaAccordrequirementsfor increasedoutfiowandrestrictedpumping;FolsomReservoirreoperation,newdemandson thesystemby newcontractsorcontractorsthathavenotexercisedtheircontractto date(PublicLaw 101-514contracts,EastBayMunicipal Utility District -

(EBMUD]).

6 “Adjustedfor growth” refersto aprocesswherebyReclamationreviewshistorical

deliveryrecordsfor pastwaterusageandallowscontractorsto providedocumentationto supportanyincreasesin thehistoricalrecordbaselinepopulations/industry.It wouldbecappedat thelevel offull contractualamounts.

~An extraordinaryWaterconservationactionorpracticeis consideredto beanyconservationactionorpracticeimplementedby an urbancontractorthat is morestringentthanrequiredby Reclamation’s“Criteria for EvaluatingtheAdequacyofAll WaterConservationPlans”datedSeptember30, 1996,asamended,supplemented,orreplaced.

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CYPIA ADMINISTRATIVE URBAN WATER SUPPLYPROPOSAL . RELIABILITY

Onceadopted,Reclamationproposes.to implementsuchanM&T WaterShortagePolicyin awaythatminimizesimpactsto agriculturalcontractors.An analysiswill bedoneto quantifyany

~ impactsandexplorepossiblemitigationmeasuresbeforethispolicyis finalized. Thispolicy,asmodified,will continuetobeonlyaninterimpolicyuntil ongoingstudiesassociatedwith theCV?yield andthe PETS required under Section3409oftheCYPIA are completed. Once~uchstudiesandthePETSarecompleted,thegoalis tomodify theM&I WaterShortagePolicyagain,if necessary,makeit availablefor publicreviewandcomment,completeanyadditionalapplicableenvironmentalrequirements,andultimatelyadoptafinal policy.

HowShouldOtherWater SuppliesDevelopedby a Contractor BeConsideredlProtectedInUrbanShortageAllocations?

Stakekolder Views. SomeCV?contractorshaveanumberofsourcesofwatersupply. Othersrely entirelyontheCV?for watersupply.In makingallocationsto M&I contractorsduringshortageyears,shouldReclamationtakeinto accounttheavailabilityoftheseothersupplies?Shouldthereliability ofCVPwatersupplygivento acontractorwhoreliessolelyon theCV?begreaterthanthereliability ofCVPwatersupplygivento acontractorwhohasdevelopedotherwatersupplies?Additionally,shouldtheCVPprovidea levelofreliability to M&I contractorswhohaveothersourcesofsupplywhentheresultwouldbereduceddeliveriesto agriculturalcontractors?

UrbancontractorsandotherinterestsbelievethattheavailabilityofotherWatersuppliesshouldnotbetakeninto accountby Reclamationin makingallocationsto M&I contractors.Aecordingto urbancontractors,additionalinvestmentsin alternativeor supplementalsourcesofsupplywerenotintendedto increasetheyield oftheCV?,butto minimizecurrentandfuture shortageswithin thecontractor’sservicearea.Urbancontractorsbelievethatevenif theshortagesarelimited to 25 percentofsupply,someurbanpopulationswill nottoleratethemandatoryrationing,conservation,andeconomicdisruptionthatmayberequiredto achievea25-percentreductionin wateruse.Urbanconttactorsfurtherstatethatby includingavaflablesuppliesfromathersources,Reclamationwouldsubstantiallydiminishthevalueofexistinginvestmentsanddeterthedevelopmentofnewsourcesofsupply. Therewouldbeno incentivefor contractorstodeveloplong-termwaterlransfers,waterbanldngprograms,orotherprojectsthatincreasetheavailabilityofdry yearsupplies.Lastly,urbaninterestscontendthatall M&I contractorsareallocatedCV?costsonanequalbasisand,therefore,it wouldbeinequitableto createdifferencesin theallocationofbenefits. However,urbancontractorsalsorecognizethattheremaybetimeswhenwatersupplyconditionsaresocritical thatall sourcesofsupplymustbetakeninto accountwhenmakingCV? allocations~suchaswhentheCV?cannotdeliveraminimumsupplyto thewildlife refugesorwhendeliveriesto agricultureareso low thatmaintenanceoftreesandvinesis injeopardy.

Otherurbancontractorsstatethattheydonothavethefinancialresourcesto developalternativesourcesofsupply,andtheyneedgreaterprotectionin shortagesituations.

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CVPIA ADMINISTRATIVE URBAN WATER SUPPLYPROPOSAL - RELIABILITY

Agriculturalcontractorsareconcernedthat limited CVPwatersuppliesmaybegivento anM&Icontractorthathastheresourcesandcapabilityofdevelopingits ownreliability. TheyquestionthewisdomofgivingsuchM&I contractorsthisbenefitattheexpenseofotherCV? contractors.

Interior Response.Reclamationstronglyencouragesall of its contractorsto develop -

supplementalsourcesofwatersupply. It isnotReclamation’sintentto penalizeanycontractorwhohasasupplementalsourceofwatersupplywhencalculatingtheminimumlevelofwatersupplyduringwatershortages.ThedecisionofwhetherReclamationwill considerothersourcesofwatersupplyavailableto its M&I contractorsdependson theoverallwateryeartypeandCV?systemoperationalconstraints.Forexample,in previousyearsofcritical wateravailability,ReclamationhasaskedM&I contractorsto identify theminimumamounttheyneedto•supplementtheirothersourcesofwatersupply. Undersuchsituations,thewaterallocationmaydropbelow75 percentofhistoricusageto someM&I contractors.

The availabilityofotherwatersuppliesispartofthedecisionmakingprocess.By basingtheallocationon 75 percentof“historic use,”wepartly incorporatetheimpactofotherwatersupplies.However,Reclamationwill needtoworkwith thecontractorswith diversifiedwatersuppliesonacontractor-by-contractorbasisto ensurethatReclamation!spolicy doesnotencouragewaterusesimply to increasetheamountcalculatedasanurbancontractor’shistoricusefor purposesofhavingalargerallocationduringcritical wateryears.As partofthehistoricusecalculationfor watershortageallocations,Reclamationwouldbewilling to adjustthecalculatedurbancontractor’shistoric usequantityWanurbancontractorcoulddemonstratethatitusedits supplementalwatersuppliesfirst beforeusingCV?watersupplies. TheuseofsupplementalwatersuppliesbenefitstheCV?duringall wateryeartypes.

ReclamationrecognizesthatM&I contractorsneedaminimumlevel ofreliability andyetthatlevelshouldnotbe sohighthatit becomesadisincentiveto M&I contractorsto firm up othersourcesofwatersupplies.Reclamationisworkingwith CV?contractorssouthoftheSacramento-SanJoaquinDeltaonadraftreallocationagreementthroughwhichM&T contractorsareattemptingto firm up suppliesin dry years.Additionally,to encourageotherM&Icontractorsto firm up theirexistingsupplies,Reclamationcouldproposeatwo-tier levelofreliability. Thefirsttier wouldbegivento M&I contractorsasaminimumreliability levelregardlessofothersupplies.The secondtierwould beahigherpercentage,butwould requireanM&I contractortopayachargefor thisadditionallevel ofreliability. In essence,theCV?couldbethe“other sourceofsupply” for someM&I contractors.Thetwo-tier levelofreliabilitymaybe exploredin future discussions.Suchdiscussionswill beopento thepublicandwewill also

Oneurbancontractoraskedwhat wouldbethewaterallocationto anurbancontractorwho hasnot usedCVPwaterin thepastbut mayneedto obtainCVP waterduringawatershortyear. Reclamationrecognizesthatthisis alegitimateconcernandReclamationhasworkedinthepastwith suchcontractorsandwill work in thefuturewith suchcontractorsin allocatihgawatersupply.

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CVPIA ADMINISTRATIVE - URBAN WATER SUPPLYPROPOSAL RELIABILITY

seekpubliccommentsonanytwo-tierproposal.The UrbanWaterSupplyReliabilityWorkTeamwill alsobenotifiedoffuturediscussionson thisapproachandbegivenanopportunitytoparticipatein futuremeetings.

WhatShouldBetheReliability ofWaterConvertedorTransferredfrom Irrigation tuM&I Use?

StakeholderView. Agriculturalinterestsbelievethatthewatershortagecriteriawhichappliestoagriculturalwaterconvertedto M&I waterthroughcontractassignmentorwatertransfersshouldnotchangebecauseofsuchconversionorwatertransfer. If urbanwatersupplyreliability isappliedwhenwateris convertedortransferredto M&I, otheragriculturalcontractorswill beimpactednegatively.

Someurbaninterestsgenerallyagree. Otherurbancontractorsbelievethatthereliabilityassociatedwith theconversionofwaterfrom agricultureto M&1 usecouldbepermittedprovidedthatthechangesoccurredoveraspecificnumberofyears. Watersupplycontractscouldberenegotiatedfor increasedreliability from suchconversions.Additionally, urbaninterestsbelievethatincreasedreliability couldbeearnedby watersupplycontractorswith aprovenhistoryofefficientconservation.

Interior Response.InteriorbelievesthatthedraftM&I WaterShortagePolicy, oncefinalized,shouldapplyonlyto thatportionofCV?waterusedhistorically for M&I purposesandidentifiedasprojectedM&I demandasofSeptember30, 1994. September1994wasselectedbecauseitwastheendofthefiscalyearin whichthedraftM&I WaterShortagePolicywasreleasedforcomment.As such,Reclamationagreeswith maintainingthesamewatershortagecriteriaaswasapplicableto thewaterbeforethetransferorconversionoccurredon all actionsafterSeptember30, 1994. However,anurbancontractorcouldrequestthatapermanentconversionfrom anagriculturalshortageto anM&I waterreliability shortagebeauthorized,providedthatthereareno adverseimpactsto agriculturalorotherurbanwatersupplies.

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