A Settlement Contractor’s Story RD 108

March 19, 2012

1. Why we have Settlement Contracts?

2. What are Settlement Contracts?

3. Current Challenges?

Why we have Settlement Contracts? Sacramento River at Wilkins Slough 1931

RD108’s first 40 years 1870 - 1914

• Primarily performing “Reclamation”

– Levee Construction and Drainage System (levee and ridge cut photo)

RD108’s Water Rights

• Pre-1914

• Riparian Water Rights – Jameno Rancho

• State Water Licenses

– 3+1 SR and 1 CBD

• Settlement Contract

The Early Drought Years • 1920

– District Considers challenging excessive diversion by GCID – Appoints first “Water Conservation Officer” – Major SR diverters coordinate with “Water-Master of Emergency

Conservation Conference” – District paid to defend against claim by City of Antioch “Junior”

• 1924

– Dry, but significant cooperation prevents new legal challenges – RD108 adopts first allocation rules

• 1925

– District helps fund Carquinez (Sic) Dam Investigation – Formation of Knights Landing North Water Users Association

The Early Years (continued)

• 1931 drought prompted State development of Central Valley Project concept

• The depression left California unable to fund

• US takes over project under Reclamation Reform Act (USBR)

• Includes 160 acre limitation – Challenged by Senator Downey as “supplemental” – RD108 urges Senators Hiram Johnson and Sheridan Downey to once

again challenge 160 ac. but fails

• 1945 Shasta Dam Complete

Shasta Controls Sacramento River • Reduced winter flows and increased summer flows

– Settlement Contractors are direct diverters – Summer water now available, but whose? – Stored water vs. natural flows?

• Sacramento River Water Users Committee was formed as an offshoot to the CVFCA

• 1951 SR diverters filed protests to USBR water right application asserting prior

rights and “Area of Origin” rights

• The State Engineer oversaw the dispute but parallel contract negotiations continued

• 1955 extensive joint cooperative studies were undertaken to determine rights

• 1950’s included the creation of the State Water Rights Board

• 1960 State Board rendered a decision recognizing prior rights, but RD108/others found it inadequate and contract negotiations continued

Alternatives Analyzed

• 1962 District hired W. R. Gianelli to prepare an alternative water supply report – Looked at groundwater, alternative surface

storage and recapture system

– Alternatives proved more expensive (USBR $2/acre-feet), but were not subject to 160 acre limitation

– Did recommend installation of recapture system and drilling of 12 test holes and completion of 3 groundwater wells

Final Negotiations

• 1963 Secretary of Interior, Stuart Udall sent 3 representatives to try and resolve the remaining contract issues – USBR threatened adjudication of water rights on the

Sacramento River – USBR also asserted that they were due past payment plus

interest for water since completion of Shasta – USBR gave a deadline of the start of the 1964 irrigation season – A final meeting was held in DC with the Secretary of the Interior

in 1963 (immediately prior to Kennedy’s assassination) – With the reduction in the volume of water classified as “Project

Water” a deal was struck – Acreage limitation was applied only to the “Project Water”

portion of the contract as well

What are Settlement Contracts?

RD108’s Contract • 1964 Contract (Passed 2,547,716 to 0)

– 199,000 AF of “Base” Supply – 54,700 AF of “Project” Supply ($2/AF but not really)

• First 10 years was “take and pay” obligation • After 1974 it was “take or pay”

• 1974 Project Water was reduced to 33,000 AF

– District reuse system – Contractor Association allowed pooling

• All Contracts

– Retained original water rights – All Contracts were for 40-year terms – Act as Foundation for operation of CVP

Shortage Provision

• In a “Critical Year” i.e. the projected inflow into Lake Shasta is less than 3.2 million AF then Base and Project water are reduced by 25%

• Consecutive Year Provision - If inflow is greater than 3.2 but less than 4.0 million AF then the amount short of 4.0 million AF is added to 3.2 million AF to determine the critical year threshold for the following year

Current Inflow to Shasta

Historical Shasta Inflows

Contract Renewal

• Negotiations begin in 2000

• Contracts extended by Senator Feinstein 2 years

• Renewed prior to 2005 Irr. Season through 2045 – $2/AF no longer applies “paid project cost”

– 75% “take or pay” instead on 100%

– Cost to move/store “Base Supply”

– Addition of Article 3i “no liability”

Current Challenges?

• 2005 contract renewal is being challenged by Natural Resource Defense Council – USBR and SC say ESA Section 7 doesn’t apply due to

mandatory renewal; i.e. not discretionary action – Successful in federal “District Court”, Wanger – Appealed to 9th Circuit and heard in May of 2012, but

still waiting a decision

• USBR taking liberties with 3i contract provision

– USBR says shortage and SC say just liability – USBR has recognized priority of SC “Project” water – Disagreement is whether shortage would be “Breach”