Water Authority Proposes Restructured Water Transfer Agreement

 
Short Title
Water Authority Proposes Restructured Water Transfer Agreement
Up-front Funding, No Permanent Fallowing, and Key Assurances for Imperial Valley at Heart of Proposal that Restructures First 15 Years of the Deal
August 26, 2002

The San Diego County Water Authority Friday released details of a proposed restructured water transfer agreement with the Imperial Irrigation District (IID) that directly responds to concerns raised in Imperial Valley since the historic accord was signed in April 1998. The restructuring of the deal's first 15 years, officials say, amounts to a monumental step forward in resolving all outstanding issues.

A pivotal feature of the restructured first 15 years is the Water Authority's offer to provide $130 million in up-front funding to pay for development of on-farm and system improvements, economic and job stimulus programs and environmental mitigation. The Water Authority would provide up-front funding for on-farm conservation/system improvements that could grow to $40 million, funding for community benefit programs amounting to nearly $40 million (including an up-front payment of $5 million) and up-front funding for environmental mitigation funding of $50 million. Each of the funds would be managed through escrow accounts established for those purposes. In addition, the Water Authority will provide $35 million in one-time, up-front incentive payments to farmers who enroll acreage in the 10-year temporary and voluntary fallowing program. In all, the up-front payments amount to $130 million.

Importantly, the restructured agreement creates no material salinity impacts on the Salton Sea.

"We have spent a good amount of time listening to the questions and concerns of the Imperial Valley," said Jim Turner, chairman of the board of directors of the San Diego County Water Authority. "This restructured proposal directly responds to Imperial Valley's concerns by providing funding for community benefits, up-front funding for on-farm conservation investments by farmers, payments to farmers consistent with those received by farmers in the Palo Verde Irrigation District, payments to the Imperial Irrigation District to cover administrative and lost water sales and power generation revenues and a $50-million environmental mitigation fund.

"Importantly, this proposal resolves the thorniest issue standing in the way of the water transfer agreement: the Salton Sea. This proposal will result in no material increase in salinity in the Salton Sea," Turner said.

The concepts behind the restructured proposal were initially presented by Authority representatives to IID's negotiating team on Tuesday. The Water Authority formally transmitted the proposal to IID's chief negotiator Friday, Aug. 23. The proposal features a significant restructuring of the first 15 years of the 75-year transfer, with the original terms of the IID-Water Authority transfer taking over in year 16. Under the latest proposal, the first 15 years will begin with a retransfer of water the Metropolitan Water District has rights to under a proposed water transfer agreement with farmers in the Palo Verde Irrigation District to the San Diego County Water Authority. The PVID transfer water will start with a 20,000 acre-foot retransfer in the first year and will ramp up according to the schedule in the original water transfer agreement between IID and the Water Authority. The PVID retransfer will continue for eight years. In year six, the PVID transfer will begin to ramp down as water from IID's temporary and voluntary fallowing program begins to ramp up from year six through year 10. Beginning in year 11, IID will begin to ramp down the fallowing while simultaneously replacing the fallowing water with water conserved on-farm or through system improvements. By year 15, the 10-year temporary fallowing program will end and all water transferred to the Water Authority will be produced through on-farm and system improvements according to the original terms of the IID-Water Authority transfer agreement.

"This creative and collaborative approach was developed in response to IID's concerns that temporary fallowing in Imperial Valley last no longer than 10 years," Turner said. "We listened to IID's concerns and have successfully addressed them."
 

Limited, Temporary, Voluntary Fallowing

During the peak years of the fallowing period under the restructured proposal, approximately 10 percent of farmland in Imperial Valley would participate in a voluntary, temporary and rotational fallowing program. The Water Authority would provide up-front funding of $40 million for farmers and IID to invest in the on-farm and system water conservation measures.

No land would be permanently retired under the program. The program would remain voluntary for those who want to participate. A unique feature of this proposal is the land rotation and management aspect of the program, which would allow agricultural land to become more productive.


 

Payments to Farmers


Farmers electing to participate in the program would receive a one-time sign-up incentive of $700 per acre (payable in 2003), plus annual payments of $550 per acre (2002 dollars compounded annually at 2.5 percent) beginning in 2008. In addition, an escrow account would be created and funded with $40 million to provide up-front funding for on-farm and system conservation equipment; the account would be funded at $800 for every acre fallowed under the temporary fallowing program. This funding would be used as up-front money to invest in the capital costs of the on-farm and system water conservation projects. Once the transition to on-farm conservation is made, payments to the landowners/farmers would be consistent with the IID/Water Authority agreement (approximately $240 per acre-foot in 2002 dollars).

In all, payments to farmers participating in the voluntary program could amount to $354 million in just the first 15 years of the water transfer program.

"The payments to Imperial Valley farmers under this proposal would be similar to the terms of a proposed agreement between the Metropolitan Water District of Southern California and farmers in the Palo Verde Irrigation District," said Maureen Stapleton, general manager of the Water Authority.
 

Payments to Imperial Irrigation District


During the first 15 years of the agreement, the Imperial Irrigation District would receive payments for lost water sales and power (hydroelectric generation) revenues and administrative costs of $25 per acre-foot of water produced for transfer. Beginning in year 2013 through 2017, the Water Authority would also make payments to IID of $175 per acre-foot (2002 dollars compounded annually at 2.5 percent) for water conserved and transferred through system improvements. In all, payments to IID would grow to $73 million over the 15 years.
 

Community Benefits


To help foster economic and job stimulus and to fully compensate for socio-economic impacts of the temporary fallowing, the restructured proposal creates a community benefits escrow account funded at the equivalent of $100 per acre per year of enrolled land fallowed under the temporary fallowing program. Under this program, the Water Authority would provide an up-front payment of $5 million, followed by per-acre payments that would grow the escrow account to nearly $40 million in the first 15 years.

The restructured program would minimize the job losses associated with fallowing, and could fund economic development programs, including meaningful job creation and infrastructure improvements in the early stages of the agreement. Annual community benefits payments could pay for economic diversification programs, infrastructure projects, employment development and training programs in Imperial Valley.

"Including the direct community benefit escrow account, the in-flow of economic stimulus in Imperial Valley during the first 15 years of this agreement will amount to more than $535 million," Stapleton said. "The cumulative positive impact in terms of job creation and economic investment will be greater than any comparable period in the Valley's history.

"We believe this restructured proposal represents the very essence of the win-win agreement our two agencies signed in April 1998," she said.
 

Environmental Mitigation Fund


The Water Authority would create a $50 million environmental fund for the costs of mitigating environment impacts. The restructured program is designed to satisfy the requirements of the state and federal regulatory agencies to avoid major impacts on the Salton Sea. The environmental fund would cover any mitigation costs needed in the future for other environmental concerns, thus leaving the Imperial Valley farmers and community harmless from environmental cost impacts of the transfer program.
 

Satisfies All Benchmark Conditions and Delivery Schedules of the QSA


"Our two agencies, along with Metropolitan Water District and the Coachella Valley Water District, have been meeting with state and federal officials to fashion the details of a program that will benefit the Imperial Valley, the San Diego region, and will assist California in its plan to reduce Colorado River water use," Stapleton said. "We are confident that this restructured proposal accomplishes all of these objectives.
 

Key Assurances Provided to Imperial Valley


Other details of the program include a total water transfer reaching up to 200,000 acre-feet of water, the same quantity specified in the original 1998 transfer agreement. The agreement is backed by state legislation (SB 482) that includes a "no chase" clause, meaning no water agency or person would be able to request any additional fallowing by IID. Only IID would be able to initiate any future fallowing agreements. The legislation also protects IID against reasonable and beneficial use challenges during the term of the agreement.

"State legislation supports our restructured agreement and addresses what we call the 'slippery slope,' by providing the protection IID had been seeking with regard to outside challenges on its water use and future demands for it to fallow agricultural land," Stapleton said.

"Another huge advantage of our restructured deal is the ability to transfer water without having material impacts the Salton Sea and the Sea's reclamation effort. The rate at which salinity increases at the Sea will remain about the same, regardless of our program. The restructured proposal removes what IID and the Valley's farmers have seen as a potentially insurmountable liability," Stapleton added. "Importantly, the restructured deal provides additional time for state and federal officials to develop and implement potential programs aimed at reclaiming the Sea."

The term of the agreement would remain at 75 years. Because up-front money was added to the agreement, the authority is proposing that the initial term should be reduced to 30 from 45 years and the renewal term increased to 45 from 30 years so that the water transfer agreement is consistent with the terms of a related water exchange agreement between the Authority and Metropolitan Water District.

The San Diego County Water Authority is a public agency serving the San Diego region as a wholesale supplier of water from Northern California and the Colorado River. The Water Authority works through its 23 member agencies to provide a safe, reliable water supply to almost three million county residents.

# # #