Agreement Reached on Landmark Colorado River Water Accords.

Business/News Editors

LA QUINTA, Calif.--(BUSINESS WIRE)--Oct. 16, 2002

Hertzberg-Led Negotiations Produce Agreements on

Imperial-San Diego Water Transfer and

Quantification Settlement Agreement

Following two months of negotiations led by Speaker Emeritus Robert Hertzberg with the assistance of Assemblyman Dennis Hollingsworth and state and federal officials, four California water agencies reached an agreement early today that advances landmark agriculture-to-urban water transfers and provides a basis for settling nearly seven decades of disputes among California Colorado River water agencies. Hertzberg hailed the effort for promising a "lasting peace on the river."

The agreement, which provides a framework to execute the Quantification Settlement Agreement by Dec. 31, 2002, must still be ratified by each agency's board of directors and translated into signed contracts. Execution of the QSA is a requirement for preservation of the federal Colorado River Interim Surplus Guidelines that would provide a "soft landing" for California while it reduces its take on the Colorado River. Under a seven-state agreement, California has 15 years to reduce its draw on the river from about 5.2 million acre-feet to its basic annual apportionment of 4.4 million acre-feet a year in the absence of surplus water. During the 15-year ramp-down period, California will continue to receive surplus water from the river.

The agreement was negotiated, under Hertzberg's guidance and with bipartisan support of Hollingsworth and other legislative colleagues, by officials from the Imperial Irrigation District, the San Diego County Water Authority, the Coachella Valley Water District and the Metropolitan Water District of Southern California. The marathon talks included participation of officials from the California Department of Fish and Game, Department of Water Resources, U.S. Bureau of Reclamation and Fish and Wildlife Service. Representatives of environmental organizations also attended the discussions.

"The success of these negotiations should be a case study in Government 101," Hertzberg said. "This is how government is supposed to work: in the best interest of the people and all parties involved."

Hertzberg acknowledged the years of hard work that led up to the historic accords.

"A lot of people deserve credit for this major accomplishment," he said. "Former Interior Secretary Bruce Babbitt and the Clinton Administration, the Bush Administration and a bipartisan group of state legislators put an enormous amount of energy and work into this monumental effort.

"I applaud the four agencies for their shared determination -- and stamina -- during this grueling process," he said. "I particularly want to thank the president and the governor and their representatives for their steadfast help and support of these negotiations. I am also very grateful for the bipartisan help and participation of my colleagues in the Legislature."

Said Assemblyman Dennis Hollingsworth, who participated in the negotiations with Hertzberg, "I was pleased to be a part of the Speaker Emeritus' efforts that have bridged the gaps between administrations, regions and political parties.

"These long negotiations have resulted in a historic agreement that provides a certain water source for my constituents in San Diego and ensures the reliability of California's Colorado River supplies," Hollingsworth said. "I also commend IID, Imperial County and the farmers' representatives for protecting the important agricultural economy and way of life of the Imperial Valley."

Under the agreement, water transfers from Imperial Valley to San Diego County could begin next year. IID agreed to a combined temporary fallowing and system improvement program during the first 15 years of the transfer. In the 16th year of the agreement, all temporary fallowing would end and all water for transfer would be produced through on-farm and system conservation measures.

Under the pacts reached early today, the first 15 years of the Imperial Irrigation District-San Diego County Water Authority transfer will be restructured. In order to meet benchmark requirements for California reduction in Colorado River water use, IID will deliver one million acre-feet of water over the first 15 years. That represents a reduction from the minimum 1.6 million acre-feet (and 2.1 million acre-feet maximum) called for in the agencies' 1998 water transfer deal. Payment terms were also revised, with San Diego agreeing to a payment schedule that provides up to 15 years of certainty on price. The transfer will begin in 2003 at a set price and either party could trigger price "resets" in any year after year five; a reset could increase or decrease the per-acre-foot price paid by the Water Authority. In year 16 of the transfer (2019), payments will revert to the original terms of the 1998 water transfer agreement.

Other financial terms of the deal include an up-front payment by the Water Authority of $10 million for socioeconomic impacts to a local Imperial Valley entity that will be created to administer the funds. Beginning in year 2010, IID -- in cooperation with Imperial Valley farmers -- will make additional annual payments into the fund until it has contributed another $10 million. In addition, the Water Authority will pay any actual socioeconomic impacts associated with the 10-year fallowing program above $20 million. IID and the farmers will begin crediting the Authority for its $10 million up-front payment beginning in year 15.

In the first year of the transfer, 2003, IID will transfer 10,000 acre-feet to the Water Authority. The annual quantities would increase over the term of the agreement to 130,000 acre-feet in year 15 (2018). The quantities would increase to 200,000 acre-feet annually by the 19th year (2021) and remain fixed there for the duration of the transfer agreement. The 75-year agreement is comprised of two terms: an initial 45-year term and a 30-year renewal; either party can compel the 30-year renewal term.

As part of the pacts reached early today, the San Diego County Water Authority will receive additional water over the first 15 years from the Metropolitan Water District of Southern California's land management, crop rotation and water supply program with the Palo Verde Irrigation District. In all, the Authority will receive nearly 1.4 million acre-feet of transfer water in the first 15 years.

Metropolitan Water District, IID and Coachella Valley Water District officials also reached related agreements on additional transfers and conservation programs contained in the Quantification Settlement Agreement. The QSA settles disagreements over IID's and Coachella's entitlements to Colorado River water. Under the QSA, IID's basic apportionment to Colorado River water will be fixed -- quantified -- at 3.1 million acre-feet a year. Coachella's basic apportionment will be quantified at 330,000 acre-feet per year. In addition, IID agreed to transfer up to 100,000 acre-feet to CVWD at a cost ranging from between $50 and $125 per acre-foot, subject to annual escalation. MWD will also provide additional water to CVWD. CVWD's total water supply will be unchanged from the QSA. Metropolitan has the option to purchase any amount of transfer water Coachella elects to decline under the agreement.

In addition, Metropolitan will receive nearly 78,000 acre-feet of water conserved through the concrete lining of the All-American Canal in Imperial Valley. The canal lining project will also yield 16,000 acre-feet of water annually for the San Luis Rey Indian settlement. Funding for the canal-lining project was provided in state legislation approved in 1998. The QSA also provides the consents necessary for the Palo Verde-Metropolitan and IID-CWA water transfer agreements to proceed.

"This is truly a historic moment, not only in terms of San Diego County's water reliability, but for the entire state of California," said Jim Turner, chairman of the San Diego County Water Authority board of directors and a member of the Authority's negotiating team.

"The Water Authority greatly appreciates Bob Hertzberg's leadership, tenacity and unique brand of humor during these negotiations," added Jim Bond, secretary of the Authority's board of directors and member of the negotiating team.

IID General Manager Jesse Silva said, "We have worked for over six years to reach this point, and even though we have not gained all we had hoped from the original agreement, we are still optimistic that there are pluses for all parties, including IID."

"The flexibility that these agreements can provide us in supplying water for more than 17 million Southern Californians cannot be understated," said MWD Chairman Phillip J. Pace. "It is a credit to Bob Hertzberg's determination, hope and tenacity that these negotiations have succeeded."

Tellis Codekas, a Coachella Valley Water District director and a member of CVWD's negotiating team, said, "This will allow the Coachella Valley to resolve its overdraft at affordable prices."

On Sept. 26, the California Water Resources Control Board gave conditional approval for the Imperial Irrigation District-San Diego County Water Authority water transfer. The State Board will hold a workshop on the conditional approval on Oct. 16. A final decision granting permission for the transfer is expected shortly thereafter.