Page 193 I I . A century ofsewice. July 28, 2015 BOARD AGENDA MEMORANDUM Information SUBJECT Request for Forbearance Arizona Extraordinary Conservation Program Proposal DEPARTMENT Executive PRESENTER Chuck Cullom, Central Arizona Project Colorado River programs manager Background The Arizona Department of Water Resources and the Central Arizona Water Conservation District have requested llD?s consideration and approval of an exhibit to the 2007 Lower Colorado River Intentionally Created Surplus Forbearance Agreement, to which ND is a signatory, for program to create extraordinary conservation ICS. The creation of extraordinary conservation ICS is governed by Section 3.3.1 of the 2007 Colorado River Basin Interim Guidelines for Lower Basin Shortages and Coordinated Operations for Lake Powell and Lake Mead. The ICS program outlined in Arizona?s proposal was developed to increase surface elevations in Lake Mead to help avoid lower basin shortages that will largely affect Central Arizona Project when Lake Mead?s elevation declines below 1075. CAP is implementing two activities it proposes for extraordinary conservation ICS consideration: (1) agricultural pool demand reduction and (2) long?term contract supply replacement. The agricultural pool demand reduction activity provides funding from CAWCD to participating irrigation districts to voluntarily forbear 23 to 75 percent of their contracted CAP water order, totaling 80,922 AF in 2015. The long-term supply replacement program involves the city of Phoenix taking delivery of 15,000 AF of local supplies provided by CAWCD that are stored in Lake Roosevelt. CAWCD will then reduce its 2015 diversion of Colorado River water by 95,922 AF, the total of the reduced uses associated with these two activities. Recommendation The CAP representative will provide a summary of Arizona?s 2015 ICS proposal and its request for llD?s approval of the attached forbearance agreement. Staff will request action at the next board meeting. Page 194 Exhibit Central Arizona Water Conservation District Intentionally Created Surplus Water Supply from Conserved Water m: Pursuant to Article 2, CAWCD will create the following types of Extraordinary Conservation 2.1 A. Fallowing of land that currently is, historically was, and otherwise would have been irrigated in the next Year; and, 2.1. H. Other extraordinary conservation measures, including development and acquisition of a non-Colorado River System water supply used in lieu of Mainstream water within the same state, as agreed upon by the Parties pursuant to this Forbearance Agreement. Under agreements CAWCD will execute with CAWCD customers holding contracts for the delivery of Central Arizona Project (CAP) water, CAWCD will conserve Colorado River water that would otherwise be delivered to these CAWCD water users from the Colorado River mainstem by offsetting or reducing that Colorado River water use. Such extraordinary conservation will be achieved by: fallowing irrigated agricultural lands within service area and use of local Arizona water supplies in lieu of Colorado River water which may include the transfer or delivery of long-term storage credits, investment in new conservation programs and infrastructure, investment in new water development projects and infrastructure, investment in new reuse programs, and investment in new demand reduction programs. Verification: On or before October 1 of each year, CAWCD receives water orders from all of its customers for the coming year. For each CAWCD customer participating in this Extraordinary Conservation (EC) program, CAWCD shall submit the participating customers' original water order to the United States Bureau of Reclamation prior to January 1 ofthe following year. By delivering local water supplies in lieu .of Colorado River water to CAWCD customers or by its customers? reducing their usage of water through extraordinary conservation programs, CAWCD will reduce its deliveries of lower Colorado River water by an equal quantity of water. This reduction in net deliveries will therefore result in an equivalent reduction in net diversions by CAWCD of Colorado River water at the Mark Wilmer Pumping Plant and a net reduction in releases from Colorado River system storage. Only those reductions in diversions to the Mark Wilmer Pumping Plant, as measured against CAWCD's original water orders submitted by CAWCD customers, shall be eligible for creation of EC pursuant to this Exhibit Total Amount of ICS Credited Annually: The amount of EC that can be created during any Year is limited to the reduction in deliveries to CAWCD Program participating customers from those CAWCD deliveries that were originally scheduled to be delivered to those CAWCD Program participating customers, provided that CAWCD does not divert such water. The volume of water conserved pursuant to this program eligible for the creation of EC ICS is further limited to 100,000 acre-feet per year and is subject to the following: Limitations on Creation of EC a) The amount of EC that CAWCD may create in any Year is limited to the amount of Colorado River water that, if added to its c0nsumptive use, would not result in an 1 Page 195 inadvertent overrun pursuant to the October 10, 2003 Inadvertent Overrun and Payback Policy. b) The total amount of annual EC ICS created by this program is limited to the amount of water that could have been delivered for beneficial use from the Colorado River. c) Underused or unused CAWCD apportionment is not eligible for creation of EC ICS. EC ICS may only be created on CAWCD water orders that are reduced by the delivery of local water supplies or through extraordinary conservation programs. d) EC ICS may only be created in 2015 and 2016. Limitations on Delivery of EC ICS In addition to the conditions specified in Article 2.6 of this Forbearance Agreement: a) CAWCD will limit the delivery of EC ICS to Direct Delivery Domestic Use as defined in Section XI.F.13. of the Secretary of the Interior's Record of Decision, Colorado River Interim Guidelines for Lower Basin Shortages and the Coordinated Operations for Lake Powell and Lake Mead, December 2007, and authorities pursuant to ARS 48-3700 et seq. b) CAWCD will not request delivery of EC ICS prior to January 1, 2020, unless the August 24-Month study in years prior to 2020 projects Lake Mead?s elevation to exceed 1,145 feet on January 1 ofthe subsequent year. In Witness of this Exhibit to the Forbearance Agreement, the Parties affix their official signatures below, acknowledging approval of this document on the day of 201_. Approved as to form: By: Chief Counsel Attest: By: Ned Hyduke General Manager Attest and Approved: By: THE STATE OF ARIZONA acting through the ARIZONA DEPARTMENT OF WATER RESOURCES By: Thomas Buschatzke Director PALO VERDE IRRIGATION DISTRICT By: Jack Seiler Chair IMPERIAL IRRIGATION DISTRICT By: Legal Counsel Approved as to form: By: Page 196 Stephen W. Benson President COACHELLA VALLEY WATER DISTRICT By: Legal Counsel Approved as to form: By: Jim Barrett General Manager THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA By: General Counsel Approved as to form: By: Jeffrey Kightlinger General Manager SOUTHERN NEVADA WATER AUTHORITY By: General Counsel Approved as to form: By: John Entsminger General Manager COLORADO RIVER COMMISSION OF NEVADA By: Deputy Attorney General Approved as to form: By: Jayne Harkins Executive Director The City of Needles By: City Attorney Edward Paget Mayor Page 197 (CAP CENT RAL ARIZONA PROIECT P.O. Box 43020 Phoenix AZ 85080 623-869?2333 3550 Central Ave Phoenix. AZ 85012 602?771-8500 April 21, 2015 Mr. Steve Benson Board President imperial irrigation District 333 E. Barioni Blvd. PO. Box 937 imperial. CA 9225] Dear Mr. Benson: The State of Arizona, acting through the Arizona Department of Water Resources (ADWR). and the Central Arizona Water Conservation District (CAWCD) request your consideration and approval of the attached exhibit to the 200?? Lower Colorado River Intentionally Created Surplus Forbearance Agreement (Forbearance Agreement) for CAWCD's Extraordinary Conservation (EC) program. In addition. we have attached the creation plan for your information. The attached exhibit was developed by CAWCD and ADWR to meet the purpose of the Forbearance Agreement. namely to help avoid shortages in the Lower Basin and to increase surface elevations in Lake Mead and Lake Powell to higher levels than would otherwise have occurred. Both purposes benefit all Lower Basin contractors and Hoover hydropower customers. As of April 20. 2015. Lake Mead is at elevation 108i .29 feet (39% of active storage), a mere 6 feet above the first shortage trigger defined in the 2007 Colorado River Interim Guidelines for Lower Basin Shortages and Coordinated Operations for Lake Powell and Lake Mead of 1075 feet. Current protections by the Bureau of Reclamation indicate a greater than 50% probability of shortage in the Lower Basin in 2017. In order to begin to address the risk of shortages. Lower Basin partners have initiated voluntary. cooperative efforts to increase reservoir storage in Lake Mead to avoid shortages in the Lower Colorado River system. The CAWCD EC program is a key part of Arizona's contribution to these interstate cooperative efforts. Please let us know when you intend to bring this issue ton/yard and how best we can support your effort. Our staff. Chuck Cuilom. CAWCD. and Nicole Klobas, ADWR. are available to respond to your questions and present or support presentations to you or your Board. Thank you for your prompt action and support of our efforts to build elevation in Lake Mead to avoid potential shortages, which would adversely impact oil Colorado River users. Sincerely. Li r51?, *5 r" is - David V. Modeer Thomas Buschatzke General Manager Director Central Arizona Project Arizona Department of Water Resources Page 198 Mr. Terry Fulp. Regional Director, USBR Mr. Jack Seller, Chair, PVID Mr. John Entsminger. General Manager SNWA Mr. Kevin Kelly, General Manager. IID Mr. Ned Hyduke, General Manager. PVID Mr. Jim Barrett. General Manager, CVWD Ms. Jayne Horkins, Executive Director, CRCN Mr. Bart Fisher, Chairman, CRBC Mr. Edward Paget, Mayor, City of Needles Ms. Tonya Trujillo. Executive Director. CRBC Mr. Jeff Kightlinger, General Manager. MWD Page 199 The Central Arizona Water Conservation District Plan for the Creation of Extraordinary Conservation Intentionally Created Surplus During Calendar Year 2015 Introduction This plan, prepared by and for the Central Arizona Water Conservation District (CAWCD) for the creation of Extraordinary Conservation Intentionally Created Surplus (ICS) has been prepared pursuant to the specifications outlined in Section 3.3.1 on page 40 of the Record ofDecision: Colorado River Interim Guidelines for Lower Basin Shortages and Coordinated Operations for Lake Powell and Lake Mead signed by the Secretary ofthe Interior (the Secretary) on December 13, 2007 (the Guidelines). The activities described in this plan have been incorporated into an exhibit (see attached) offered for approval by the parties to the December 13, 2007, Lower Colorado River Basin intentionally Created Surplus Forbearance Agreement (Forbearance Agreement): the Arizona Department of Water Resources (ADWR), the Palo Verde Irrigation District, the Imperial Irrigation District, the City of Needles, the Coachella Valley Water District, the Metropolitan Water District of Southern California, the Southern Nevada Water Authority, and the Colorado River Commission of Nevada. The projected yield from the extraordinary conservation activities contained within this Plan for calendar year 2015 are as follows: Extraordinary Conservation Activity Projected Yield (acre-feet) Activity 1 CAP Ag Pool Demand Reduction 80,922 Activity 2 - CAP Long-term Contract Supply Replacement 15,000 Total 95,922 Project Description: Activity 1 CAP Ag Pool Demand Reduction Under agreements approved and executed between CAWCD and 9 irrigation districts receiving CAP excess water, as defined in section ofthe Stipulated Judgment and the Stipulation for Judgment (including any exhibits to those documents) entered on November 21, 2007, in the United States District Court for the District of Arizona in the consolidated civil action styled CentralArizona Water Conservation District v. United States, et al., and numbered CIV 95-TUC-WDB (EHC) and CIV 95-1720- PHX-EHC (Stipulated Settlement), CAWCD will provide incentive payments to participating irrigation districts to reduce their use of their CAP excess pool allocation. The excess pool allocation to CAP irrigation districts is defined per CAWCD's "Policy on Excess Water Marketing for Non-Indian Agriculture Use 2004 through 2030 (Ag Pool Water)? dated May 18, 2000 and subsequent amendments. Page 200 The CAWCD established the following criteria to determine eligibility for irrigation districts to participate in the CAP Ag Pool Demand Reduction Program and receive incentive payments: (1) holding contracts for the delivery of Ag Pool Water; (2) forbearing a minimum of twenty-three percent and a maximum of seventy-five percent oftheir allocated Ag Pool Water, not to exceed 20,000 acre? feet; and (3) having accepted full delivery of their allocated Ag Pool Water each year during the period 2012-2014. The participating irrigation districts will voluntarily reduce their CAP excess pool water order consistent with the agreement executed with CAWCD. CAWCD will reduce its diversion and consumptive use of Colorado River water in an amount equal to the total reduction of CAP excess pool order collectively made by the participating irrigation districts. The scheduled reduction in water orders is as follows: Calendar Year 2015 Irrigation District Total Ag Pool Water Allocation (acre-feet) Demand Reduction Volume (acre-feet) Post-Demand Reduction Deliveries (acre-feet) Central Arizona Irrigation and 111,069 20,000 91,069 Drainage District Maricopa Stanfield Irrigation and 109,182 20,000 89,182 Drainage District New Magma Irrigation and Drainage 27,325 20,000 7,325 District Hohokam Irrigation and Drainage 35,898 6,351 29,547 District Ma ricopa Water District 4,000 3,000 1,000 Queen Creek Irrigation and Drainage 12,000 3,500 8,500 District Roosevelt Water Conservation District 5,000 3,750 1,250 Tonopah Irrigation and Drainage 3,460 2,595 865 District BKW Farms 1,635 1,226 409 Page 201 Kai Farms 1,000 500 500 TOTAL 310,569 80,922 229,647 CAWCD will reduce its diversion and consumptive use of Colorado River water in 2015 by 80,922 acre- feet consistent with the Ag Pool Demand Reduction agreements, thus conserving 80,922 acre-feet of Colorado River water. Term of Activity: Activity 1 -Ag Pool Demand Reduction The term ofthe agreements between CAWCD and the participating irrigation districts is calendar 2015 and 2016. The preliminary estimate for Ag Pool Demand Reduction for 2016 is 79,572 acre?feet. CAWCD will submit a separate Extraordinary Conservation ICS plan for Ag Pool Demand Reduction activities for 2016. Estimate of the Amount of Colorado River Water that Will be Conserved and Description of How it is Estimated: Activity 1 -Ag Pool Demand Reduction The estimated volume of Colorado River water conserved is determined pursuant to the demand reduction agreements executed between the participating irrigation districts and CAWCD as identified in the previous table. The demand reduction volume by each irrigation district is equal to the reduction of Ag Pool Water ordered from the amount allocated to that irrigation district pursuant to CAWCD policy. Each irrigation district is obligated to order and take delivery ofthe remaining allocated volume for beneficial use (identified in the previous table as "Post-Demand Reduction Deliveries?). In summary, the estimate ofthe amount of water conserved is defined in each of the demand reduction agreements. Proposed Methodology for Verification of the Amount of Water Conserved: Activity 1 Ag Pool Demand Reduction The methodology for verification is the measurement of reduced diversions and consumptive use by CAWCD. CAWCD will provide a water order to the U5. Bureau of Reclamation consistent with CAWCD customer demands prior to execution of Ag Pool Water demand reduction agreements. CAWCD, pursuant to Board policy, will not divert nor deliver the demand reduction amount as identified in the Ag Pool Water demand reduction agreements. CAWCD will forbear diversion and consumptive use of the 80,922 acre-feet of its original scheduled water order for 2015 pursuant to the Ag Pool Water demand reduction agreements. In addition, pursuant to Article 3.0.1 of the Guidelines, CAWCD will provide an annual certification report to demonstrate the amount of ICS created and that the method of creation was consistent with the Contractor?s approved ICS plan, a Forbearance Agreement, and a Delivery Agreement. The quantification ofthe creation of Extraordinary Conservation is determined by the reduction in Ag Pool water orders by the participating irrigation districts pursuant to the Ag Pool Page 202 Water demand reduction agreements and the forbearance of Colorado River diversions and consumptive use of that amount by CAWCD. Documentation regarding any state or federal permits or other regulatory approvals that have already been obtained by the Contractor or need to be obtained prior to the creation of ICS: Activity 1 - Ag Pool Demand Reduction Consistent with the terms of the Stipulated Settlement and the CAWCD Policy on Excess Water Marketing for Non?Indian Agriculture Use - 2004 through 2030 (Ag Pool Water), the CAWCD Board has discretion over marketing, diversion, and delivery of excess CAP water. CAWCD consulted with ADWR regarding the consistency of the Ag Pool Water Demand Reduction activity with Arizona's water management goals. Additional regulatory compliance activities are not required. Project Description: Activity 2 CAP Long-term Contractor Supply Replacement Under an agreement approved and executed between CAWCD and the City of Phoenix (Phoenix), CAWCD will replace a portion 15,000 acre-feet) of Phoenix's scheduled CAP water order with the delivery of local supplies held by CAWCD. Phoenix?s 2015 CAP water order presently includes and will continue to include a request for its full 36,144 acre-foot entitlement to non-Indian agricultural priority water acquired by assignment from the Hohokam Irrigation and Drainage District as a replacement for Cliff Dam water (the ?Hohokam Water?). CAWCD will reduce its 2015 Colorado River order, thereby reducing its diversion and consumptive use of 15,000 acre-feet of Colorado River water, thus conserving 15,000 acre-feet of Colorado River water. In lieu of delivering 15,000 acre-feet of Hohokam Water to Phoenix, CAWCD will arrange for the delivery to Phoenix of 15,000 acre?feet of water credited to CAWCD currently in storage behind Roosevelt Dam (in Lake Roosevelt). delivery of Lake Roosevelt water to Phoenix will take place on the same schedule CAWCD would have used to deliver Phoenix?s Hohokam Water. Term of Activity: Activity 2 CAP Long-term Contractor Supply Replacement The term ofthe agreement between CAWCD and Phoenix is calendar 2015. Estimate of the Amount of Water that Will be Conserved and Description of How it is Estimated: Activity 2 - CAP Long-term Contractor Supply Replacement The estimate ofthe volume of water conserved is determined per the supply replacement agreement executed between Phoenix and CAWCD. Phoenix is obligated to order and take delivery ofthe full amount of its Hohokam Water and CAWCD will replace a portion (15,000 acre-feet) ofthat water order with a local water supply, reducing CAWCD's diversion and delivery of Colorado River water by an equal amount. In summary, the estimate of the amount of water conserved is defined in the supply replacement agreement. Page 203 Proposed methodology for Verification of the Amount of Water Conserved: Activity 2 - CAP Long- term Supply Replacement The methodology for verification is the measurement of reduced Colorado River water deliveries. CAWCD, pursuant to Board policy, will not divert nor deliver the 15,000 acre-feet as identified in the supply replacement agreement. CAWCD will simply forbear diversion and consumptive use ofthe 15,000 acre-feet of its scheduled Colorado River water order for 2015 pursuant to the supply reduction agreement. The quantification of the creation of Extraordinary Conservation ICS is determined by the reduction in Phoenix's Hohokam Water delivery pursuant to the replacement supply agreement and the forbearance of Colorado River diversion and consumptive use of an equal amount by CAWCD. Documentation regarding any state or federal permits or other regulatory approvals that have already been obtained by the Contractor or need to be obtained prior to the creation of ICS: Activity 2 CAP Long-term Supply Replacement CAWCD consulted with the ADWR regarding the consistency ofthe replacement supply activity with Arizona's water management goals. Additional regulatory compliance activities are not required. Page 204 This page intentionally left blank