Testimony of Mark Sanchez, Executive Director

Albuquerque Bernalillo County Water Utility Authority

June 27, 2007

Senate Committee on Energy and Natural Resources

Senate Bill 1171

Mr. Chairman and members of the committee, my name is Mark Sanchez. I am
the executive director of the Albuquerque Bernalillo County Water
Utility Authority (the Authority).

The Authority was created by the New Mexico State Legislature in 2003 as
a partnership between the City of Albuquerque (the City) and Bernalillo
County. The Authority is the successor in interest to the City for
rights to the San Juan-Chama project which was authorized in Public Law
87-483.

The Authority would like to thank the Committee for the opportunity to
testify on Senate Bill 1171 and specifically the leadership of Chairman
Senator Bingaman and Senator Domenici on this important settlement and
legislation. We also would also like to recognize the State of New
Mexico, the Navajo Nation and others who have worked very hard on
negotiating this settlement.

We understand that S. 1171 settles the Navajo Nation's water rights
claims on the San Juan River in New Mexico in addition to providing
water supplies for the Navajo-Gallup water supply project. The Authority
supports settling the Navajo claims and strongly endorses the provision
of drinking water under the Navajo-Gallup water supply project. We
understand that resolving the Navajo's claims reduces the risk from
potentially larger claims which could and most likely would affect the
available water supply in the San Juan River for non-Indian uses.

My testimony today is focused on the impacts of the settlement on the
long-term availability of water from the San Juan-Chama project, which
diverts water from southern Colorado into New Mexico by way of the San
Juan River and the Rio Chama. The San Juan-Chama project was authorized
in Public Law 87-483 along with the Navajo Indian Irrigation Project
(N.I.I.P.). Specifically, I'll be providing some background on our
involvement with the project and why it is so critical to our community.
I will also be making you aware of the Authority's concerns about
certain sections of the legislation as it is written. I wish to make it
clear that we are

Testimony of Mark Sanchez, Executive Director

Albuquerque Bernalillo County Water Utility Authority

Senate Committee on Energy and Natural Resources, Senate Bill 1171

June 27, 2007

Page 2

committed to continue working with our Congressional delegation, the
State, and the Navajo Nation in addressing our concerns and
recommendations to preserve and protect the San Juan-Chama project.

[Background on Albuquerque's Involvement in the San Juan-Chama
Project]{.underline}

A conceptual framework for importing Colorado water into the Rio Grande
basin from the San Juan River into the Rio Chama (hence San Juan-Chama)
was developed in the technical documentation for dividing the waters of
the Rio Grande in 1928. The Bureau of Reclamation at that time
recognized that the City of Albuquerque was going to need additional
supplies in the future and conceptually designed a couple of options for
importing the water.

The legislative history for the San Juan-Chama project clearly shows
that the City was the primary beneficiary of the project. The water was
needed because the Albuquerque was not specifically provided any native
water supplies under the Rio Grande Compact. In 1963, the City signed
the first contract for an annual amount of 53,200 acre-feet of San
Juan-Chama water that was reduced in a contract amendment in 1965 to
48,200 acre-feet per year.

Under the City's and now the Authority's contract, we are required to
fully repay the United States all the costs for municipal and industrial
supplies apportioned under the San Juan-Chama project, including
interest during construction. We are also required to pay our
proportional share of the operation and maintenance costs for the
project on an annual basis. To date, we have invested more than \$50
million for San Juan-Chama water and will continue to make payments
until 2020.

Testimony of Mark Sanchez, Executive Director

Albuquerque Bernalillo County Water Utility Authority

Senate Committee on Energy and Natural Resources, Senate Bill 1171

June 27, 2007

Page 3

[Albuquerque's Need for San Juan-Chama Water]{.underline}

In the early 1960s, the technical understanding in the Middle Rio Grande
region was that the aquifer was a limitless resource that would meet the
needs of the City in perpetuity. The City was required to provide
surface water supplies to offset the impacts of using ground water and
signed the contract for San Juan-Chama water to provide that offset.

In 1994, the United States Geological Survey published a report that
completely changed our understanding of the aquifer, the relationship
between the Rio Grande and the aquifer, and which concluded that sole
reliance on the aquifer will lead to widespread land surface subsidence.

The City's response was almost immediate. In 1995, the City immediately
began a water conservation program and began looking at alternatives for
providing a sustainable supply. In 1997, the City Council adopted a new
strategy to use San Juan-Chama water as a drinking water source. Since
1997, we have been working toward using surface water from the San
Juan-Chama project as a drinking water source. The \$450 million San
Juan-Chama Drinking Water Project will come on-line in 2008 and will
represent 90% of our supply at that point and will be our primary source
of supply well into the future. The Drinking Water Project includes a
new diversion on the Rio Grande, a state-of-the-art water treatment
plant, and 46 miles of raw water and transmission pipelines to integrate
the surface water into the existing water system.

[Other San Juan-Chama Contractors]{.underline}

The Authority's customers are not the only ones relying on San
Juan-Chama water. In addition to Authority, there are more than fifteen
San Juan-Chama contractors, including the City of Santa Fe and the City
of Espanola, that are planning and developing direct diversion and use
of San

Testimony of Mark Sanchez, Executive Director

Albuquerque Bernalillo County Water Utility Authority

Senate Committee on Energy and Natural Resources, Senate Bill 1171

June 27, 2007

Page 4

Juan-Chama water. From a population perspective, San Juan-Chama water
will meet the demands of more than one-third of the State of New Mexico
in the Rio Grande Valley. It is critical that these interests in the Rio
Grande are protected in this settlement.

[Authorizing Legislation -- Public Law 87-483]{.underline}

Under Section 11 on the authorizing legislation, the San Juan-Chama
project and the N.I.I.P. project and other contracts entered into for
delivery from the Navajo Reservoir were required to share in the
available supply in any year in which the Secretary anticipated a
shortage.

Specifically, the Secretary was required to determine that sufficient
water to fulfill said contract is likely to be available and also the
following:

Section 11, (a), paragraph 2:

"*The Secretary shall not enter into contracts for a total amount of
water beyond that which, in his judgment, in the event of shortage, will
result in a reasonable amount being available for the diversion
requirements for the Navajo Indian irrigation project and the initial
stage of the San Juan-Chama project as specified in sections 2 and 8 of
this Act*."

The April 2007 Hydrologic Determination was signed by Secretary of
Interior, Dirk Kempthorne on May 23, 2007, fulfilling the obligation to
determine that sufficient water is likely to be available for the
settlement. However, the second requirement specifically relates to the
sharing of shortages and the water supply that would be available to
both the N.I.I.P. and the San Juan-Chama project. To date, we have not
reached an understanding with the Bureau of Reclamation or the State of
New Mexico regarding a determination about the water that could be
available to

Testimony of Mark Sanchez, Executive Director

Albuquerque Bernalillo County Water Utility Authority

Senate Committee on Energy and Natural Resources, Senate Bill 1171

June 27, 2007

Page 5

the San Juan-Chama project during a shortage and how new contracts could
affect the water supply.

In the Section 8 of the authorizing legislation, Congress imposed
several operational conditions for operating the San Juan-Chama project.
Under paragraph (a) the project diversions are limited to 1.35 million
acre-feet in any ten year period and the maximum diversion in one year
is 270,000 acre-feet. Paragraph (b) states that the project shall not
cause injury, impairment, or depletion of existing or future beneficial
uses of water within the State of Colorado. Under paragraph (b), each of
the three diversions in Colorado have monthly bypass flow requirements
which provide for passing water to downstream users in Colorado for uses
in Colorado under the Upper Colorado River Basin compact.

[Hydrologic Analysis of Settlement]{.underline}

The Authority has hired a consultant to complete an independent
hydrologic analysis of the impacts of the Settlement on the San
Juan-Chama project as it relates to the frequency and extent of
shortages. The Authority anticipates completion of the hydrologic
analysis within the next few weeks and would like to share that
information with interested parties at that time. There may be changes
to the legislation which may affect our hydrologic analysis so we
reserve the right to provide additional feedback during this process.

[Specific Comments on S. 1171]{.underline}

Section 101 -- Navajo Reservoir Water Bank

The creation and utilization of excess capacity in the Navajo Reservoir
provides flexibility for users in the San Juan basin specifically
downstream of the reservoir. It is unclear what water

Testimony of Mark Sanchez, Executive Director

Albuquerque Bernalillo County Water Utility Authority

Senate Committee on Energy and Natural Resources, Senate Bill 1171

June 27, 2007

Page 6

qualifies to be placed in the water bank and more importantly how that
water is to be administered to prevent unintended consequences of
reducing the ability to store native water in the Navajo Reservoir.
Although the legislation states that the water bank shall be operated in
a manner that "does not impair the ability of the Secretary of the
Interior to deliver water under contracts entered into under Public Law
87-483," more specific language should be developed to address what
impairment means. Does impairment mean that water that could be stored
in the reservoir is lost because there is no capacity to store it?
Although the water stored in the water bank is not subject to shortages
or releases to meet environmental needs, could this banked water be used
to exchange for offsetting implementation of shortages?

Section 102 -- Amendments to Public Law 87-483

Section 102 (a)(2)(b)(1) -- the legislation provides for a maximum
diversion right over a ten year period for the Navajo Indian Irrigation
Project to be the lesser of 508,000 acre-feet per year or the quantity
of water necessary to supply an average depletion of 270,000 acre-feet
per year. Although these figures were the subject of intense
negotiations, it seems that because there are two different figures that
an effort to clarify how these are to be used or what they represent
should be specified so as to avoid future misinterpretation.

Section 102 (a)(2)(b)(2) -- this provision allows an increase of
diversion, but does the 270,000 acre-feet of depletions still apply? It
is unclear whether this provision allows for increases in consecutive
years or just one year in a ten year period. If a shortage was declared
for two

years in a row, would increased diversions be allowed in the following
years to make up the difference? We suggest adding language that this
increase in diversion not be allowed in any year where the Secretary
determines that the increase may increase the likelihood of a shortage
in subsequent years.

Testimony of Mark Sanchez, Executive Director

Albuquerque Bernalillo County Water Utility Authority

Senate Committee on Energy and Natural Resources, Senate Bill 1171

June 27, 2007

Page 7

Section 102 (a)(2)(d) -- the language in this section does not appear to
limit the use of Navajo Indian Irrigation Project water to New Mexico.
As the water for the settlement is from New Mexico's apportionment of
Upper Colorado River water, any use of the water should be limited
exclusively in New Mexico. We suggest the addition of a provision
limiting the uses to New Mexico.

Section 102 (b) - Runoff Above Navajo Dam

It appears that this section was intended to clarify the language in the
original legislation, but the original language is left in the bill,
which may lead to some confusion. Also, the additions that

are provided in the section don't necessarily clarify how shortages are
to be determined or apportioned. One of the Authority's primary concerns
regarding this settlement is the potential for increases in shortages
and who participates in the available supply when shortages are shared.
The Authority would like to work with everyone involved to develop
language that clarifies who participates in the available supply, how
shortages are to be calculated, and specifically limiting the ability to
add more shortage partners in the future.

Section 102 (b)(d)(1) -- the term "normal" diversion requirements is
used in describing the method of apportionment of water. It is not clear
in the paragraphs following what "normal" diversion requirements mean
except for the San Juan-Chama project, which provides a definite figure.

Section 102 (b)(d)(1)(A) -- it is not clear who "contractors" are in
this section and it appears that the language should clarify that the
diversion requirement is either the normal diversion requirement or in
accordance with cropping plans prepared, whichever is lower.

Testimony of Mark Sanchez, Executive Director

Albuquerque Bernalillo County Water Utility Authority

Senate Committee on Energy and Natural Resources, Senate Bill 1171

June 27, 2007

Page 8

Section 102 (b)(d)(1)(B) -- if we know who and what the water delivery
contracts are, they should be specified in the legislation rather than
referred to in general language so as to avoid confusion in the future
and to provide certainty for those contracts that are part of the
sharing of shortages.

Section 102 (b)(d)(3) -- this new language allows the State to
arbitrarily reduce the amount of water for Navajo contractors and the
San Juan-Chama project to meet the Upper Colorado River Basin Compacts.
The State of New Mexico has stated on a number of occasions that they
have the ability to limit diversions under State law to meet compact
requirements. In addition, this provision is unconstitutional because
this provides the state the opportunity to avoid priority

administration by arbitrarily deciding to reduce diversions by only some
entities and not others. The Navajo Reservoir and San Juan-Chama
contractors are not the only uses of the basin and should not be singled
out to meet compact obligations nor pay the price for over-diversions by
others. This language does not appear in the Jicarilla water rights
settlement nor any other settlement and does not belong in this
legislation. It should be deleted.

Section 102 (b)(e)(1) -- this language attempts to prioritize how
shortages are allocated, but could also be read to say that this is the
order in which entities get water. This should be clarified to meet the
intent that Arizona, aquifer storage and recovery, etc., are the lowest
priorities.

Section 102 (b)(e)(3)(g) -- this section gives the Secretary the ability
to revise a shortage, but it is unclear how water is to be physically
administered. For example, if the early runoff predictions are low and a
shortage percentage is applied during spring runoff and later in the
summer months rainfall allows for removing the shortage, how can the San
Juan-Chama project increase

diversion given the bypass flow requirements? In other words, the San
Juan-Chama project could suffer a shortage because of early runoff
predictions while others don't suffer a shortage

Testimony of Mark Sanchez, Executive Director

Albuquerque Bernalillo County Water Utility Authority

Senate Committee on Energy and Natural Resources, Senate Bill 1171

June 27, 2007

Page 9

when intermittent rainfall allows for increased diversion later in the
year and San Juan-Chama is not allowed to increase diversions due to
bypass flow requirements.

Section 102 (b)(e)(3)(h) -- the Authority advocates that a
sharing-of-shortage agreement between the parties be developed and
approved such that the Secretary has specific direction as to how and
when to apply shortages. This would simplify this difficult situation
and would provide certainty to all of the parties about how and when
shortages are to be applied.

Section 303 -- Delivery and Use of Northwestern New Mexico Rural Water
Supply Project Water

Section 303 (b)(3) -- the ability to increase allocations is very
troubling as additional uses from the Navajo Reservoir will obviously
increase the likelihood of shortages to other contractors including the
San Juan-Chama project. Why would the new users and contractors for the
reservoir have the right to increased allocations when other contractors
do not have the same ability? This should be clarified.

Section 307 -- San Juan River Irrigation Projects

Section 307 (a)(1) and (2)

Under Section 11, paragraph (a) of Public Law 87-483, the water
requirements for the existing Fruitland, Hogback, Cudia and Cambridge
Indian irrigation was limited to a total amount of irrigation of 11,000
acres. These two new sections increase that amount to more than 12,200
acres of land, thereby increasing the amount that is not subject to
sharing of shortages. We assume that the original language would govern
the amount for sharing of shortages, but this should be clarified.

Testimony of Mark Sanchez, Executive Director

Albuquerque Bernalillo County Water Utility Authority

Senate Committee on Energy and Natural Resources, Senate Bill 1171

June 27, 2007

Page 10

Section 401 - Agreement

Section 401 -- it is unclear whether this legislation defines the Navajo
Nation's water rights or if there are additional documents that
supplement their right. If in accordance with Section (a)(1), this
legislation governs over other agreements, court decrees, etc., then we
would suggest that this legislation be amended to avoid future
confusion.

Section 401 (b)(1)(b) and (c) -- this is the same comment as previous as
it relates to how sharing of shortages are to be calculated. Which is
the correct figure and how is it to be used for determining
apportionments?

Section 401 (f)(2)(iv) -- it is unclear what happens to the agreement,
sharing of shortages, etc., if the agreement is null and void. If titles
I and III are void, does that also void the authorization in Public Law
87-483? Does the acreage for Fruitland, etc. remain at 11,000 acres? It
seems that clarification is needed to provide direction about what
happens in the event that titles I and III are void.

Additional Comments:

1\. In earlier drafts of the legislation, the Authority expressed
concerns about protecting the use of San Juan-Chama water in the Rio
Grande under Public Law 108-447 (2004). We would like to ensure that
nothing in this settlement affects that legislation.

2\. The Authority, other San Juan-Chama contractors and the State of New
Mexico have expressed concerns about how efficiently the San Juan-Chama
project is being operated. The

Testimony of Mark Sanchez, Executive Director

Albuquerque Bernalillo County Water Utility Authority

Senate Committee on Energy and Natural Resources, Senate Bill 1171

June 27, 2007

Page 11

Secretary of Interior should be directed to efficiently operate the San
Juan-Chama project to maximize diversions on the San Juan River that are
allowed under Public Law 87-483.

The impacts from any future reductions in San Juan-Chama diversions as a
result of this settlement could be significantly reduced by requiring
the Secretary of Interior to maximize the operations of the San
Juan-Chama project. For example, the Bureau of Reclamation UC Regional
Director arbitrarily increased the bypass flow requirements for the
Little Oso diversion in 1977 which had the effect of reducing firm yield
by 400 acre-feet per year. There are other operational issues that
affect the project which should be examined and reported to the San
Juan-Chama contractors.

3\. The Bureau of Reclamation has produced many different hydrologic
analyses of the available water supply for San Juan-Chama project
diversions. The most recent average annual diversion for the San
Juan-Chama project as shown in the Bureau's Hydrologic Determination
signed by the Secretary of Interior states that 105,200 acre-feet would
be available on an average basis. It is not clear whether the Draft 1999
Hydrology Report to examine the San Juan-Chama Firm Yield used that
figure or something higher or lower. It is critical that the hydrology
that the Bureau is using on the San Juan river match the figures used by
the Bureau in the Rio Grande. This is very important as the State and
others are negotiating other Indian and non-Indian water rights
settlements based on the availability of the 2,990 acre-feet of
uncontracted-for-water. The question is whether the revised hydrology
shows whether the 2,990 acre-feet is really available or whether that
use will cause shortages for other San Juan-Chama contractors.

4\. The two legislative acts, the Settlement Act and Senate 1171, are
supposed to complement each other as they relate to Navajo water rights.
There is differing language between the two Acts as to how available
supplies will be calculated and how shortages will be allocated. The two
Acts should use the same language or be merged into one Act to avoid
discrepancies.

Testimony of Mark Sanchez, Executive Director

Albuquerque Bernalillo County Water Utility Authority

Senate Committee on Energy and Natural Resources, Senate Bill 1171

June 27, 2007

Page 12

I would like to thank the members of the Committee for taking the time
to hear the Authority's input on behalf of the community we serve.