UNITED STATES

DEPARTMENT OF THE INTERIOR

BUREAU OF RECLAMATION

Central Valley Project, California

[LONG-TERM RENEWAL CONTRACT BETWEEN THE UNITED STATES]{.underline}

[AND]{.underline}

[SANTA CLARA VALLEY WATER DISTRICT]{.underline}

[PROVIDING FOR PROJECT WATER SERVICE AND REPAYMENT]{.underline}

[FROM THE DELTA DIVISION AND SAN FELIPE DIVISION]{.underline}

THIS CONTRACT, made this \_\_\_\_\_ day of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 200\_ in pursuance generally
of the Act of June 17, 1902 (32 Stat. 388), and acts amendatory and
supplementary thereto, including, but not limited to, the Acts of August
26, 1937 (50 Stat. 844), as amended and supplemented, August 4, 1939 (53
Stat. 1187), as amended and supplemented, July 2, 1956 (70 Stat. 483),
June 21, 1963 (77 Stat. 68), August 27, 1967 (81 Stat. 173), October 12,
1982 (96 Stat. 1263), October 27, 1986 (100 Stat. 3050), as amended, and
Title XXXIV of the Act of October 30, 1992 (106 Stat. 4706), all
collectively hereinafter referred to as Federal Reclamation law, between
THE UNITED STATES OF AMERICA, hereinafter referred to as the United
States, and SANTA CLARA VALLEY WATER DISTRICT, hereinafter referred to
as the Contractor, a public agency of the State of California, duly
organized, existing, and acting pursuant to the laws thereof;

WITNESSETH, That:

[EXPLANATORY RECITALS]{.underline}

\[1^st^\] WHEREAS, the United States has constructed and is operating
the Central Valley Project (Project), California, for diversion,
storage, carriage, distribution and beneficial use, for flood control,
irrigation, municipal, domestic, industrial, fish and wildlife
mitigation, protection and restoration, generation and distribution of
electric energy, salinity control, navigation and other beneficial uses,
of waters of the Sacramento River, the American River, the Trinity
River, and the San Joaquin River and their tributaries; and

\[2^nd^\] WHEREAS, the United States constructed the Delta Division
Facilities, the San Felipe Division Facilities and related facilities,
which will be used in part for the furnishing of water to the Contractor
pursuant to the terms of this Contract; and

\[2.1\] WHEREAS, the Contractor **is** dependent upon San Luis Reservoir
for the conveyance of Project Water from the Delta Division to the San
Felipe Division Facilities; and

\[3^rd^\] WHEREAS, the rights to Project Water were acquired by the
United States pursuant to California law for operation of the Project;
and

\[3.1\] WHEREAS, the Contractor**'**s groundwater basins have previously
been overdrawn in the absence of a supply from the Project and the lands
of the Contractor and its inhabitants are in need of continued Project
Water for beneficial uses and purposes; and

\[4^th^\] WHEREAS, the Contractor and the United States entered into
Contract No. 7-07-20-W0023, **dated June 7, 1977**, which established
terms for the delivery to the Contractor of Project Water from the Delta
Division Facilities and San Felipe Division Facilities from **January 1,
1988** through **December 31, 2027** (hereinafter referred to as
"Existing Contract"); and

\[5^th^\] WHEREAS, the United States and the Contractor have, pursuant
to Subsection 3404 (c)(3) of the Central Valley Project Improvement Act
(CVPIA), subsequently entered into a binding agreement, identified as
Binding Agreement No. 7-07-20-W0023-BA which sets out the terms pursuant
to which the Contractor agreed to renew the Existing Contract before its
expiration date after completion of a programmatic environmental impact
statement (PEIS) and other appropriate environmental documentation and
negotiation of a renewal contract, and which also sets out the
consequences of a subsequent decision not to renew; and

\[6^th^\] WHEREAS, Section 3404(c) of the CVPIA provides for long-term
renewal of the Existing Contract following completion of appropriate
environmental documentation, including a PEIS pursuant to the National
Environmental Policy Act (NEPA) analyzing the direct and indirect
impacts and benefits of implementing the CVPIA and the potential renewal
of all existing contracts for Project Water; and

\[7^th^\] WHEREAS, the United States has completed the PEIS and all
other appropriate environmental review necessary to provide for
long-term renewal of the Existing Contract; and

\[8^th^\] WHEREAS, the Contractor has requested the long-term renewal of
the Existing Contract, pursuant to the terms of the Existing Contract,
Federal Reclamation law, and the laws of the State of California, for
water service from the Project, and has further requested that the
renewed contract be both a repayment contract with respect to the San
Felipe Division Facilities (historically referred to as the
"out-of-basin" facilities); and Water Service Contract with respect to
the Project Facilities exclusive of the San Felipe Division Facilities
(historically referred to as the "in-basin' facilities), and Reclamation
is agreeable to such conversion; and

\[9^th^\] WHEREAS, the United States has determined that the Contractor
has fulfilled all of its obligations under the Existing Contract; and

\[10^th^\] WHEREAS, the Contractor has demonstrated to the satisfaction
of the Contracting Officer that the Contractor has utilized the Project
Water supplies available to it for reasonable and beneficial use and/or
has demonstrated projected future demand for water use such that the
Contractor has the capability and expects to utilize fully for
reasonable and beneficial use the quantity of Project Water to be made
available to it pursuant to this Contract; and

\[11^th^\] WHEREAS, water obtained from the Project has been relied upon
by urban and agricultural areas within California for more than 50
years, and is considered by the Contractor as an essential portion of
its water supply; and

\[12^th^\] WHEREAS, the economies of regions within the Project,
including the Contractor's, depend upon the continued availability of
water, including water service from the Project; and

\[13^th^\] WHEREAS, the Secretary intends through coordination,
cooperation, and partnerships to pursue measures to improve water
**supplies**, water quality, and reliability of the Project for all
Project purposes; and

\[14^th^\] WHEREAS, the mutual goals of the United States and the
Contractor include: to provide for reliable Project Water supplies; to
control costs of those supplies; to achieve repayment of the Project as
required by law; to guard reasonably against Project Water shortages; to
achieve a reasonable balance among competing demands for use of Project
Water; and to comply with all applicable environmental statutes, all
consistent with the legal obligations of the United States relative to
the Project; and

\[15^th^\] WHEREAS, the parties intend by this Contract to develop a
more cooperative relationship in order to achieve their mutual goals;
and

\[15.1\] WHEREAS, the Contractor has utilized or may utilize transfers,
contract assignments, rescheduling and conveyance of non-Project Water
under this Contract as tools to minimize the impacts of Conditions of
Shortage and to maximize the beneficial use of Project Water; and

\[15.2\] WHEREAS, the parties desire and intend that this Contract not
provide a disincentive to the Contractor in continuing to carry out the
beneficial activities set out in the Explanatory Recital immediately
above; and

\[16^th^\] WHEREAS, the United States and the Contractor are willing to
enter into this Contract pursuant to Federal Reclamation law on the
terms and conditions set forth below;

NOW, THEREFORE, in consideration of the mutual and dependent covenants
herein contained, it is hereby mutually agreed by the parties hereto as
follows:

[DEFINITIONS]{.underline}

1\. When used herein unless otherwise distinctly expressed, or
manifestly incompatible with the intent of the parties as expressed in
this Contract, the term:

\(a\) "Calendar Year" or "Year" shall mean the period January 1 through
December 31, both dates inclusive;

\(b\) "Charges" shall mean the payments required by Federal Reclamation
law in addition to the Rates and Tiered Pricing Component specified in
this Contract as determined annually by the Contracting Officer pursuant
to this Contract;

\(c\) "Condition of Shortage" shall mean a condition respecting the
Project during any Year such that the Contracting Officer is unable to
deliver sufficient water to meet the Contract Total;

\(d\) "Contracting Officer" shall mean the Secretary of the Interior's
duly authorized representative acting pursuant to this Contract or
applicable Federal Reclamation law or regulation;

\(e\) "Contract Total" shall mean the maximum amount of water to which
the Contractor is entitled under subdivision (a) of Article 3 of this
Contract;

\(f\) "Contractor\'s Service Area" shall mean the area [within the
Contractor's jurisdiction]{.underline} to which the Contractor is
permitted to provide Project Water under this Contract, as [set
forth]{.underline} ~~described~~ in Exhibit "A" attached hereto, which
may be modified from time to time in accordance with Article 35 of this
Contract without amendment of this Contract;

\(g\) "CVPIA" shall mean the Central Valley Project Improvement Act,
Title XXXIV of the Act of October 30, 1992 (106 Stat. 4706);

(g.1) "Delta Division Facilities" shall mean those existing and future
Project facilities in and south of the Sacramento-San Joaquin Rivers
Delta, including, but not limited to, the Tracy Pumping Plant, the
O'Neill Forebay, the O'Neill Pumping/Generating Plant, and the San Luis
Reservoir, used to divert, store and convey water to those Project
Contractors entitled to receive water conveyed through the Delta-Mendota
Canal.

(h) "Eligible Lands" shall mean all lands to which Irrigation Water may
    be delivered in accordance with Section 204 of the Reclamation
    Reform Act of October 12, 1982 (96 Stat. 1263), as amended,
    hereinafter referred to as RRA;

(i) "Excess Lands" shall mean all lands in excess of the limitations
    contained in Section 204 of the RRA, other than those lands exempt
    from acreage limitation under Federal Reclamation law;

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(j) "Full Cost Rate" shall mean an annual rate, as determined by the
    Contracting

Officer that shall amortize the expenditures for construction properly
allocable to the Project irrigation or M&I functions, as appropriate, of
facilities in service including all O&M deficits funded, less payments,
over such periods as may be required under Federal Reclamation law, or
applicable contract provisions. Interest will accrue on both the
construction expenditures and funded O&M deficits from October 12, 1982,
on costs outstanding at that date, or from the date incurred in the case
of costs arising subsequent to October 12, 1982, and shall be calculated
in accordance with subsections 202(3)(B) and (3)(C) of the RRA. The Full
Cost Rate includes actual operation, maintenance, and replacement costs
consistent with Section 426.2 of the Rules and Regulations for the RRA;

\(k\) "Ineligible Lands" shall mean all lands to which Irrigation Water
may not be delivered in accordance with Section 204 of the RRA;

\(l\) "Irrigation Full Cost Water Rate" shall mean the Full Cost Rate
applicable to the delivery of Irrigation Water;

\(m\) "Irrigation Water" shall mean water made available from the
Project that is used primarily in the production of agricultural crops
or livestock, including domestic use incidental thereto, and watering of
livestock;

**(m.1) "Joint Service Area" shall mean the combination of the
Contractor's Service Area and service areas of the other San Felipe
Division contractors as shown on Exhibit "A" attached hereto, which may
be modified by mutual agreement of the parties to this Contract without
amendment of this Contract.**

> \(n\) "Landholder" shall mean a party that directly or indirectly owns
> or leases

nonexempt land, as provided in 43 CFR 426.2;

\(o\) "Municipal and Industrial (M&I) Water" shall mean Project Water,
other than Irrigation Water, made available to the Contractor. M&I Water
shall include water used for human use and purposes such as the watering
of landscaping or pasture for animals (e.g., horses) which are kept for
personal enjoyment or water delivered to landholdings operated in units
of less than five acres unless the Contractor establishes to the
satisfaction of the Contracting Officer that the use of Water Delivered
to any such landholding is a use described in subdivision (m) of this
Article;

\(p\) "M&I Full Cost Water Rate" shall mean the Full Cost Rate
applicable to the delivery of M&I Water;

\(q\) "Operation and Maintenance" or "O&M\" shall mean normal and
reasonable care, control, operation, repair, replacement (other than
capital replacement), and maintenance of Project facilities;

\(r\) "Operating Non-Federal Entity" shall mean the Operating
Non-Federal Entity(ies) and their successors or assigns, which have the
obligation to operate and maintain all or a portion of the Project
facilities including the San Felipe Division Facilities pursuant to
written agreements with the United States. When this Contract was
entered into, the Operating Non-Federal Entity(ies) were the San Luis &
Delta-Mendota Water Authority with respect to the Delta Division
Facilities, and Santa Clara Valley Water District with respect to
certain San Felipe Division Facilities, and San Benito County Water
District with respect to certain San Felipe Division Facilities;

\(s\) "Project" shall mean the Central Valley Project owned by the
United States and managed by the Department of the Interior, Bureau of
Reclamation;

\(t\) "Project Contractors" shall mean all parties who have water
service contracts for Project Water from the Project with the United
States pursuant to Federal Reclamation law;

\(u\) "Project Water" shall mean all water that is developed, diverted,
stored, or delivered by the Secretary in accordance with the statutes
authorizing the Project and in accordance with the terms and conditions
of water rights acquired pursuant to California law;

\(v\) "Rates" shall mean the payments determined annually by the
Contracting Officer in accordance with the then current applicable water
ratesetting policies for the Project, as described in subdivision (a) of
Article 7 of this Contract;

\(w\) "Recent Historic Average" shall mean the most recent five year
average of the final forecast of Water Made Available to the Contractor
pursuant to this Contract or its preceding contract(s);

(w.1) "San Felipe Division Facilities" shall mean **those existing and
future Project facilities generally west of San Luis Reservoir,
including but not limited to, the Pacheco** Pumping Plant, Pacheco
Substation, Pacheco Tunnel**,** including the inlet works in and under
San Luis Reservoir, Pacheco Conduit, Pacheco Bifurcation Structure,
Santa Clara Tunnel and Conduit, **Coyote Pumping Plant,** Hollister
Canal and Conduit, San Justo Dam and Reservoir used to divert, store and
convey water to Project;

\(x\) "Secretary" shall mean the Secretary of the Interior, a duly
appointed successor, or an authorized representative acting pursuant to
any authority of the Secretary and through any agency of the Department
of the Interior;

\(y\) "Tiered Pricing Component" shall be the incremental amount to be
paid for each acre-foot of Water Delivered as described in subdivision
(j) of Article 7 of this Contract;

\(z\) "Water Delivered" or "Delivered Water" shall mean Project Water
diverted for use by the Contractor at the point(s) of delivery approved
by the Contracting Officer;

(aa) "Water Made Available" shall mean the estimated amount of Project
Water that can be delivered to the Contractor for the upcoming Year as
declared by the Contracting Officer, pursuant to subdivision (a) of
Article 4 of this Contract;

(bb) "Water Scheduled" shall mean Project Water made available to the
Contractor for which times and quantities for delivery have been
established by the Contractor and Contracting Officer, pursuant to
subdivision (b) of Article 4 of this Contract; and

[TERM OF CONTRACT]{.underline}

2\. (a) (1) This Contract shall be effective January 1, 200\_ through
December 31, 20\_\_, and supercedes the Existing Contract, except to the
extent otherwise provided herein. In the event the Contractor is
declared invalid or unenforceable by a final decree of a court of
competent jurisdiction, the Existing Contract shall be revived as though
it had not been superseded or terminated by execution of this Contract.

\(2\) In the event the Contractor wishes to renew this Contract beyond
February 28/29, 20\_\_, the Contractor shall submit a request for
renewal in writing to the Contracting Officer no later than two (2)
years prior to the date this Contract expires. The renewal of this
Contract insofar as it pertains to the furnishing of Irrigation Water to
the Contractor shall be governed by subdivision (b) of this Article, and
the renewal of this Contract insofar as it pertains to the furnishing of
M&I Water to the Contractor shall be governed by subdivision (c) of this
Article.

\(b\) (1) Under terms and conditions of a renewal contract that are
mutually agreeable to the parties hereto, and upon a determination by
the Contracting Officer that at the time of contract renewal the
conditions set forth in subdivision (b)(2) of this Article are met, and
subject to Federal and State law, this Contract, insofar as it pertains
to the furnishing of Irrigation Water to the Contractor, shall be
renewed for a period of 25 years.

\(2\) The conditions which must be met for this Contract to be renewed
are: (i) the Contractor has prepared a water conservation plan that has
been determined by the Contracting Officer in accordance with Article 26
of this Contract to meet the conservation and efficiency criteria for
evaluating such plans established under Federal law; (ii) the Contractor
is implementing an effective water conservation and efficiency program
based on the Contractor's water conservation plan as required by Article
26 of this Contract; (iii) the Contractor is operating and maintaining
all water measuring devices and implementing all water measurement
methods as approved by the Contracting Officer pursuant to Article 6 of
this Contract; (iv) the Contractor has reasonably and beneficially used
the Project Water supplies made available to it and, based on projected
demands, is reasonably anticipated and expects to fully utilize for
reasonable and beneficial use the quantity of Project Water to be made
available to it pursuant to such renewal; (v) the Contractor is
complying with all terms and conditions of this Contract; and (vi) the
Contractor has the physical and legal ability to deliver Project Water.

\(3\) The terms and conditions of the renewal contract described in
subdivision (b)(1) of this Article and any subsequent renewal contracts
shall be developed consistent with the parties' respective legal rights
and obligations, and in consideration of all relevant facts and
circumstances, as those circumstances exist at the time of renewal,
including, without limitation, the Contractor's need for continued
delivery of Project Water; environmental conditions affected by
implementation of the Contract to be renewed, and specifically changes
in those conditions that occurred during the life of the Contract to be
renewed; the Secretary's progress toward achieving the purposes of the
CVPIA as set out in Section 3402 and in implementing the specific
provisions of the CVPIA; and current and anticipated economic
circumstances of the region served by the Contractor.

\(c\) This Contract, insofar as it pertains to the furnishing of M&I
Water to the Contractor, shall be renewed for successive periods of up
to forty 40 years each, which periods shall be consistent with the
then-existing Reclamation-wide policy, under terms and conditions
mutually agreeable to the parties and consistent with Federal and State
law. The Contractor shall be afforded the opportunity to comment to the
Contracting Officer on the proposed adoption and application of any
revised policy applicable to the delivery of M&I Water that would limit
the term of any subsequent renewal contract with the Contractor for the
furnishing of M&I Water to less than 40 years.

\(d\) The Contracting Officer shall make a determination ten years after
the date of execution of this Contract, and every five years thereafter
during the term of this Contract, of whether a conversion of the
relevant portion of this Contract to a contract under subsection 9(d) of
the Reclamation Project Act of 1939 can be accomplished pursuant to the
Act of July 2, 1956 (70 Stat. 483). The Contracting Officer shall also
make a determination ten years after the date of execution of this
Contract and every five years thereafter during the term of this
Contract of whether a conversion of the relevant portion of this
Contract to a contract under subsection 9 (c)(1) of the Reclamation
Project Act of 1939 can be accomplished. Notwithstanding any provision
of this Contract, the Contractor reserves and shall have all rights and
benefits under the Act of July 2, 1956 (70 Stat. 483). The Contracting
Officer anticipates that during the term of this Contract, all
authorized Project construction expected to occur will have occurred,
and on that basis the Contracting Officer agrees upon such completion to
allocate all costs that are properly assignable to the Contractor, and
agrees further that, at any time after such allocation is made, and
subject to satisfaction of the condition set out in this subdivision,
this Contract shall, at the request of the Contractor, be converted to a
contract under subsection 9(d) or 9(c)(1), whichever is applicable of
the Reclamation Project Act of 1939, subject to applicable Federal law
and under stated terms and conditions mutually agreeable to the
Contractor and the Contracting Officer. A condition for such conversion
to occur shall be a determination by the Contracting Officer that,
account being taken of the amount credited to return by the Contractor
as provided for under Federal Reclamation law, the remaining amount of
construction costs assignable for ultimate return by the Contractor can
probably be repaid to the United States within the term of a contract
under subsection 9(d) or 9(c)(1), whichever is applicable. If the
remaining amount of costs that are properly assignable to the Contractor
cannot be determined during the term of this Contract, the Contracting
Officer shall notify the Contractor, and provide the reason(s) why such
a determination could not be made. Further, the Contracting Officer
shall make such a determination as soon thereafter as possible so as to
permit, upon request of the Contractor and satisfaction of the
conditions set out above, conversion to a contract under subsection 9(d)
or 9(c)(1), whichever is applicable, of the Reclamation Project Act of
1939. In the event such determination of costs has not been made at a
time which allows conversion of this Contract during the term of this
Contract or the Contractor has not requested conversion of this Contract
within such term, the parties shall incorporate in any subsequent
renewal contract as described in subdivision (b) of this Article a
provision that carries forth in substantially identical terms the
provisions of this subdivision. [Provided, however,]{.underline} That
with respect to the San Felipe Division Facilities, conversion to a
contract under subsection 9(d) or 9(c)(1), whichever is applicable, of
the Reclamation Project Act of 1939, may occur independently of the
conversion provided for in this subdivision (d) of this Article.

[WATER TO BE MADE AVAILABLE AND DELIVERED TO THE CONTRACTOR]{.underline}

3\. (a) During each Year, consistent with all applicable State water
rights, permits, and licenses; Federal law; and subject to the
provisions set forth in Articles 11 and 12 of this Contract, the
Contracting Officer shall make available for delivery to the Contractor
152,500 acre-feet of Project Water for irrigation and M&I purposes.
Water Delivered to the Contractor in accordance with this subdivision
shall be scheduled and paid for pursuant to the provisions of Articles 4
and 7 of this Contract.

\(b\) Because the capacity of the Project to deliver Project Water has
been constrained in recent years and may be constrained in the future
due to many factors including hydrologic conditions and implementation
of Federal and State laws, the likelihood of the Contractor actually
receiving the amount of Project Water set out in subdivision (a) of this
Article in any given Year is uncertain. The Contracting Officer's
modeling referenced in the PEIS projected that the Contract Total set
forth in this Contract will not be available to the Contractor in many
years. During the most recent five years, the Recent Historic Average of
Water Made Available to the Contractor was \_\_\_\_ acre-feet. Nothing
in subdivision (b) of this Article shall affect the rights and
obligations of the parties under any provision of this Contract.

\(c\) The Contractor shall utilize the Project Water in accordance with
all applicable legal requirements.

(c.1) In the event any Project Contractor (other than a Cross Valley
Contractor) that receives Project Water through the Delta Division
Facilities obtains a contractual agreement that the Contracting Officer
shall make Project Water available at a point or points of delivery in
or north of the Delta, at the request of the Contractor and upon
completion of any required environmental documentation, this Contract
shall be amended to provide for deliveries in or north of the Delta on
mutually agreeable terms. Such amendments to the Contract shall be
limited solely to those changes made necessary by the addition to such
alternate points of delivery in or north of the Delta;
[Provided,]{.underline} That the Contracting Officer's use of the Harvey
O. Banks Pumping Plant to deliver Project Water does not trigger this
right of amendment.

\(d\) The Contractor shall make reasonable and beneficial use of all
water furnished pursuant to this Contract. Groundwater recharge programs
(direct, indirect, or in lieu), groundwater banking programs, surface
water storage programs, and other similar programs utilizing Project
Water or other water furnished pursuant to this Contract conducted
within the **Joint** Service Area which are consistent with applicable
State law and result in use consistent with Federal Reclamation law will
be allowed; [Provided]{.underline}, That any direct recharge program(s)
is (are) described in the Contractor's water conservation plan [or the
water conservation plan(s) of other contractor(s) within the Joint
Service Area]{.underline} submitted pursuant to Article 26 of this
Contract; [Provided, further]{.underline}, That such water conservation
plan demonstrates sufficient lawful uses exist in the **Joint** Service
Area [or the service area(s) of other contractor(s) within the Joint
Service Area]{.underline} so that using a long-term average, the
quantity of Delivered Water is demonstrated to be reasonable for such
uses and in compliance with Federal Reclamation law. Groundwater
recharge programs, groundwater banking programs, surface water storage
programs, and other similar programs utilizing Project Water or other
water furnished pursuant to this Contract conducted outside the
**Joint** Service Area may be permitted upon written approval of the
Contracting Officer, which approval will be based upon environmental
documentation, Project Water rights, and Project operational concerns.
The Contracting Officer will address such concerns in regulations,
policies, or guidelines.

\(e\) The Contractor shall comply with requirements applicable to the
Contractor in biological opinion(s) prepared as a result of a
consultation regarding the execution of this Contract undertaken
pursuant to Section 7 of the Endangered Species Act of 1973 (ESA), as
amended, that are within the Contractor's legal authority to implement.
The Existing Contract, which evidences in excess of \_\_\_\_\_ years of
diversions for irrigation and/or M&I purposes of the quantities of water
provided in subdivision (a) of Article 3 of this Contract, will be
considered in developing an appropriate baseline for biological
assessment(s) prepared pursuant to the ESA, and any other needed
environmental review. Nothing herein shall be construed to prevent the
Contractor from challenging or seeking judicial relief in a court of
competent jurisdiction with respect to any biological opinion or other
environmental documentation referred to in this Article.

\(f\) Following the declaration of Water Made Available under Article 4
of this Contract, the Contracting Officer will make a determination
whether Project Water, or other water

available to the Project, can be made available to the Contractor in
addition to the Contract Total under this Article during the Year
without adversely impacting other Project Contractors. At the request of
the Contractor, the Contracting Officer will consult with the Contractor
prior to making such a determination. If the Contracting Officer
determines that Project Water, or other water available to the Project,
can be made available to the Contractor, the Contracting Officer will
announce the availability of such water and shall so notify the
Contractor as soon as practical. The Contracting Officer will thereafter
meet with the Contractor and other Project Contractors capable of taking
such water to determine the most equitable and efficient allocation of
such water. If the Contractor requests the delivery of any quantity of
such water, the Contracting Officer shall make such water available to
the Contractor in accordance with applicable statutes, regulations,
guidelines, and policies. Subject to existing long-term contractual
commitments, water rights and operational constraints, long-term Project
Contractors shall have a first right to acquire such water, including
Project Water made available pursuant to Section 215 of the RRA.

\(g\) The Contractor may request permission to reschedule for use during
the subsequent Year some or all of the Water Made Available to the
Contractor during the current Year, referred to as "rescheduled water".
The Contractor may request permission to use during the current Year a
quantity of Project Water which may be made available by the United
States to the Contractor during the subsequent Year referred to as
"preuse." The Contracting Officer's written approval may permit such
uses in accordance with applicable statutes, regulations, guidelines,
and policies.

\(h\) The Contractor's right pursuant to Federal Reclamation law and
applicable State law to the reasonable and beneficial use of Water
Delivered pursuant to this Contract during the term thereof and any
subsequent renewal contracts, as described in Article 2 of this
Contract, during the terms thereof shall not be disturbed so long as the
Contractor shall fulfill all of its obligations under this Contract and
any renewals thereof. Nothing in the preceding sentence shall affect the
Contracting Officer's ability to impose shortages under Article 11 or
subdivision (b) of Article 12 of this Contract or applicable provisions
of any subsequent renewal contracts.

\(i\) Project Water furnished to the Contractor pursuant to this
Contract may be delivered for purposes other than those described in
subdivisions (m) and (o) of Article 1 of this Contract upon written
approval by the Contracting Officer in accordance with the terms and
conditions of such approval.

\(j\) The Contracting Officer shall make reasonable efforts to protect
the water rights necessary for the Project and to provide the water
available under this Contract. The Contracting Officer shall not object
to participation by the Contractor, in the capacity and to the extent
permitted by law, in administrative proceedings related to the Project
Water rights; [Provided,]{.underline} That the Contracting Officer
retains the right to object to the substance of the Contractor's
position in such a proceeding; [Provided further,]{.underline} That in
such proceedings the Contracting Officer shall recognize the Contractor
has a legal right under the terms of this Contract to use Project Water.

[TIME FOR DELIVERY OF WATER]{.underline}

4 (a) On or about February 20 of each Calendar Year, the Contracting
Officer shall announce the Contracting Officer's expected declaration of
the Water Made Available. Such declaration will be expressed in terms of
both Water Made Available and the Recent Historic Average and will be
updated monthly, and more frequently if necessary, based on then-current
operational and hydrologic conditions and a new declaration with
changes, if any, to the Water Made Available will be made. The
Contracting Officer shall provide forecasts of Project operations and
the basis of the estimate, with relevant supporting information, upon
the written request of the Contractor. Concurrently with the declaration
of the Water Made Available, the Contracting Officer shall provide the
Contractor with the updated Recent Historic Average.

\(b\) On or before March 1 and at such other times as necessary, the
Contractor shall submit to the Contracting Officer a written schedule,
satisfactory to the Contracting Officer, showing the monthly quantities
of Project Water to be delivered by the United States to the Contractor
pursuant to this Contract for the Year commencing on such March 1. The
Contracting Officer shall use all reasonable means to deliver Project
Water according to the approved schedule for the Year commencing on such
March 1.

\(c\) The Contractor shall not schedule Project Water in excess of the
quantity of Project Water the Contractor intends to put to reasonable
and beneficial use within the **Joint** Service Area or to sell,
transfer or exchange pursuant to Article 9 of this Contract during any
Year.

\(d\) Subject to the conditions set forth in subdivision (a) of Article
3 of this Contract, the United States shall deliver Project Water to the
Contractor in accordance with the initial schedule submitted by the
Contractor pursuant to subdivision (b) of this Article, or any written
revision(s), satisfactory to the Contracting Officer, thereto submitted
within a reasonable time prior to the date(s) on which the requested
change(s) is/are to be implemented.

[POINT OF DIVERSION AND RESPONSIBILITY FOR DISTRIBUTION OF
WATER]{.underline}

5\. (a) Project Water scheduled pursuant to subdivision (b) of Article 4
of this Contract shall be delivered to the Contractor at **the headworks
of the Santa Clara facilities** and **at** any additional point or
points of delivery either on Project facilities or another location or
locations mutually agreed to in writing by the Contracting Officer and
the Contractor. **The Contractor is also a California State Water
Project (SWP) contractor. At the request of the Contractor, and with
written approval of Contracting Officer and the State of California
Department of Water Resources (DWR), Project Water may be made available
to the Contractor for delivery through SWP facilities to the extent that
such delivery of Project Water, in the determination of the Contracting
Officer after consultation with the Contractor, does not (i) impact or
violate any agreements that exist between the Contracting Officer and
DWR at the time such change in point of delivery is made, (ii) adversely
impact Project operations; (iii) adversely impact other Project
Contractors; (iv) result in an increase of the amount of Project Water
the Contractor is entitled to receive pursuant to the applicable Year's
allocation of south-of-Delta Project contractors; and (v) violate CVP
water right permits or licenses.**

\(b\) The Contracting Officer, either directly or indirectly through its
written agreement(s) with the Operating Non-Federal Entity(ies), shall
make all reasonable efforts to maintain sufficient flows and levels of
water in Project facilities to deliver Project Water to the Contractor
at the point or points of delivery established pursuant to subdivision
(a) of this Article.

\(c\) The Contractor shall deliver Irrigation Water in accordance with
any applicable land classification provisions of Federal Reclamation law
and the associated regulations. The Contractor shall not deliver Project
Water to land outside the **Joint** Service Area unless approved in
advance by the Contracting Officer.

\(d\) All Water Delivered to the Contractor pursuant to this Contract
shall be measured and recorded with equipment furnished, installed,
operated, and maintained by the Contracting Officer either directly or
indirectly through its written agreement(s) with the Operating
Non-Federal Entity(ies), unless undertaken by the Contractor with the
consent of the Contracting Officer, at the point or points of delivery
established pursuant to subdivision (a) of this Article. Upon the
request of either party to this Contract, the Contracting Officer shall
investigate, or cause to be investigated by the appropriate Operating
Non-Federal Entity(ies), the accuracy of such measurements and shall
take any necessary steps to adjust any errors appearing therein. For any
period of time when accurate measurements have not been made, the
Contracting Officer shall consult with the Contractor and the
appropriate Operating Non-Federal Entity(ies), if any, prior to making a
final determination of the quantity delivered for that period of time.

\(e\) Absent a separate contrary written agreement with the Contractor,
neither the Contracting Officer nor any Operating Non-Federal
Entity(ies) shall be responsible for the control, carriage, handling,
use, disposal, or distribution of Water Delivered to the Contractor
pursuant to this Contract beyond the point or points of delivery
established pursuant to subdivision (a) of this Article. The Contractor
shall indemnify the United States, its officers, employees, agents, and
assigns on account of damage or claim of damage of any nature whatsoever
for which there is legal responsibility, including property damage,
personal injury, or death arising out of or connected with the control,
carriage, handling, use, disposal, or distribution of such Water
Delivered beyond such point or points of delivery, except for any damage
or claim arising out of: (i) acts or omissions of the Contracting
Officer or any of its officers, employees, agents, and assigns,
including the Operating Non-Federal Entity(ies), with the intent of
creating the situation resulting in any damage or claim; (ii) willful
misconduct of the Contracting Officer or any of its officers, employees,
agents, and assigns, including the Operating Non-Federal Entity(ies);
(iii) negligence of the Contracting Officer or any of its officers,
employees, agents, and assigns including the Operating Non-Federal
Entity(ies); or (iv) a malfunction of facilities owned and/or operated
by the United States or the Operating Non-Federal Entity(ies).

[MEASUREMENT OF WATER WITHIN THE CONTRACTOR'S SERVICE
AREA]{.underline}[^1]

6\. (a) The Contractor has established a measuring program satisfactory
to the Contracting Officer. The Contractor shall ensure that all surface
water delivered for irrigation purposes [to the Contractor's
customers]{.underline} within the Contractor's Service Area is measured
at each agricultural turnout and such water delivered for M&I purposes
[to the Contractor's customers]{.underline} is measured at each M&I
service connection. The water measuring devices or water measuring
methods of comparable effectiveness must be acceptable to the
Contracting Officer. The Contractor shall be responsible for **ensuring
that its retail customers** are installing, operating, and maintaining
and repairing all measuring devices and implementing all water measuring
methods at no cost to the United States. The Contractor shall use the
information obtained from such water measuring devices or water
measuring methods to ensure its proper management of the water, to bill
water users for water delivered by the Contractor; and, if applicable,
to record water delivered for M&I purposes by customer class as defined
in the Contractor's water conservation plan provided for in Article 26
of this Contract. Nothing herein contained, however, shall preclude the
Contractor from establishing and collecting any charges, assessments, or
other revenues authorized by California law. The Contractor shall
include a summary of all its annual surface water deliveries in the
annual report described in subdivision (c) of Article 26.

\(b\) To the extent the information has not otherwise been provided,
upon execution of this Contract, the Contractor shall provide to the
Contracting Officer a written report describing the measurement devices
or water measuring methods being used or to be used to implement
subdivision (a) of this Article and identifying the agricultural
turnouts and the M&I service connections or alternative measurement
programs approved by the Contracting Officer, at which such measurement
devices or water measuring methods are being used, and, if applicable,
identifying the locations at which such devices and/or methods are not
yet being used including a time schedule for implementation at such
locations. The Contracting Officer shall advise the Contractor in
writing within 60 days as to the adequacy, and necessary modifications,
if any, of the measuring devices or water measuring methods identified
in the Contractor's report and if the Contracting Officer does not
respond in such time, they shall be deemed adequate. If the Contracting
Officer notifies the Contractor that the measuring devices or methods
are inadequate, the parties shall within 60 days following the
Contracting Officer's response, negotiate in good faith the earliest
practicable date by which the Contractor shall modify said measuring
devices and/or measuring methods as required by the Contracting Officer
to ensure compliance with subdivision (a) of this Article.

\(c\) All new surface water delivery systems installed within the
Contractor\'s Service Area after the effective date of this Contract
shall also comply with the measurement provisions described in
subdivision (a) of this Article.

\(d\) The Contractor shall inform the Contracting Officer and the State
of California in writing by April 30 of each Year of the monthly volume
of surface water delivered within the Contractor's Service Area during
the previous Year.

\(e\) The Contractor shall inform the Contracting Officer and the
Operating Non-Federal Entity on or before the 20th calendar day of each
month of the quantity of Irrigation Water and M&I Water taken during the
preceding month.

[RATES AND METHOD OF PAYMENT FOR WATER]{.underline}

7\. (a) The Contractor shall pay the United States as provided in this
Article for all Delivered Water at Rates, Charges, and the Tiered
Pricing Component established in accordance with: (i) the Secretary's
ratesetting policy for Irrigation Water adopted in 1988 and the
Secretary's then-existing ratesetting policy for M&I Water. Such
ratesetting policies shall be amended, modified, or superceded only
through a public notice and comment procedure; (ii) applicable Federal
Reclamation law and associated rules and regulations, or policies; and
(iii) other applicable provisions of this Contract. Payments shall be
made by cash transaction, electronic funds transfer, or any other
mechanism as may be agreed to in writing by the Contractor and the
Contracting Officer. The Rates, Charges, and Tiered Pricing Component
applicable to the Contractor upon execution of this Contract are set
forth in Exhibit "B," as may be revised annually.

\(b\) The Contracting Officer shall notify the Contractor of the Rates,
Charges, and Tiered Pricing Component as follows:

\(1\) Prior to July 1 of each Calendar Year, the Contracting Officer
shall provide the Contractor an estimate of the Charges for Project
Water that will be applied to the period October 1, of the current
Calendar Year, through September 30, of the following Calendar Year, and
the basis for such estimate. The Contractor shall be allowed not less
than two months to review and comment on such estimates. On or before
September 15 of each Calendar Year, the Contracting Officer shall notify
the Contractor in writing of the Charges to be in effect during the
period October 1 of the current Calendar Year, through September 30, of
the following Calendar Year, and such notification shall revise Exhibit
"B."

\(2\) Prior to October 1 of each Calendar Year, the Contracting Officer
shall make available to the Contractor an estimate of the Rates and
Tiered Pricing Component for Project Water for the following Year and
the computations and cost allocations upon which those Rates are based.
The Contractor shall be allowed not less than two months to review and
comment on such computations and cost allocations. By December 31 of
each Calendar Year, the Contracting Officer shall provide the Contractor
with the final Rates and Tiered Pricing Component to be in effect for
the upcoming Year, and such notification shall revise Exhibit "B."

\(c\) At the time the Contractor submits the initial schedule for the
delivery of Project Water for each Year pursuant to subdivision (b) of
Article 4 of this Contract, the Contractor shall make an advance payment
to the United States equal to the total amount payable pursuant to the
applicable Rate(s) set under subdivision (a) of this Article, for the
Project Water scheduled to be delivered pursuant to this Contract during
the first two calendar months of the Year. Before the end of the first
month and before the end of each calendar month thereafter, the
Contractor shall make an advance payment to the United States, at the
Rate(s) set under subdivision (a) of this Article, for the Water
Scheduled to be delivered pursuant to this Contract during the second
month immediately following. Adjustments between advance payments for
Water Scheduled and payments at Rates due for Water Delivered shall be
made before the end of the following month; [Provided]{.underline}, That
any revised schedule submitted by the Contractor pursuant to Article 4
of this Contract which increases the amount of Water Delivered pursuant
to this Contract during any month shall be accompanied with appropriate
advance payment, at the Rates then in effect, to assure that Project
Water is not delivered to the Contractor in advance of such payment. In
any month in which the quantity of Water Delivered to the Contractor
pursuant to this Contract equals the quantity of Water Scheduled and
paid for by the Contractor, no additional Project Water shall be
delivered to the Contractor unless and until an advance payment at the
Rates then in effect for such additional Project Water is made. Final
adjustment between the advance payments for the Water Scheduled and
payments for the quantities of Water Delivered during each Year pursuant
to this Contract shall be made as soon as practicable but no later than
April 30th of the following Year, or sixty days after the delivery of
Project Water rescheduled under subdivision (g) of Article 3 of this
Contract if such water is not delivered by the last day of February.

\(d\) The Contractor shall also make a payment in addition to the
Rate(s) in subdivision (c) of this Article to the United States for
Water Delivered, at the Charges and the appropriate Tiered Pricing
Component then in effect, before the end of the month following the
month of delivery; [Provided]{.underline}, That the Contractor may be
granted an exception from the Tiered Pricing Component pursuant to
subdivision (j)(2) of this Article. The payments shall be consistent
with the quantities of Irrigation Water and M&I Water Delivered as shown
in the water delivery report for the subject month prepared by the
Operating Non-Federal Entity(ies) or, if there is no Operating
Non-Federal Entity, by the Contracting Officer. The water delivery
report shall be deemed a bill for the payment of Charges and the
applicable Tiered Pricing Component for Water Delivered. Adjustment for
overpayment or underpayment of Charges shall be made through the
adjustment of payments due to the United States for Charges for the next
month. Any amount to be paid for past due payment of Charges and the
Tiered Pricing Component shall be computed pursuant to Article 20 of
this Contract.

\(e\) The Contractor shall pay for any Water Delivered under subdivision
(a), (f), or (g) of Article 3 of this Contract as determined by the
Contracting Officer pursuant to applicable statutes, associated
regulations, any applicable provisions of guidelines or ratesetting
policies; [Provided]{.underline}, That the Rate for Water Delivered
under subdivision (d) of Article 3 of this Contract shall be no more
than the otherwise applicable Rate for Irrigation Water or M&I Water
under subdivision (a) of this Article;

\(f\) Payments to be made by the Contractor to the United States under
this Contract may be paid from any revenues available to the Contractor.

\(g\) All revenues received by the United States from the Contractor
relating to the delivery of Project Water or the delivery of non-Project
water through Project facilities shall be allocated and applied in
accordance with Federal Reclamation law and the associated rules or
regulations, and the then current Project ratesetting policies for M&I
Water or Irrigation Water.

\(h\) The Contracting Officer shall keep its accounts pertaining to the
administration of the financial terms and conditions of its long-term
contracts, in accordance with applicable Federal standards, so as to
reflect the application of Project costs and revenues. The Contracting
Officer shall, each Year upon request of the Contractor, provide to the
Contractor a detailed accounting of all Project and Contractor expense
allocations, the disposition of all Project and Contractor revenues, and
a summary of all water delivery information. The Contracting Officer and
the Contractor shall enter into good faith negotiations to resolve any
discrepancies or disputes relating to accountings, reports, or
information.

\(i\) The parties acknowledge and agree that the efficient
administration of this Contract is their mutual goal. Recognizing that
experience has demonstrated that mechanisms, policies, and procedures
used for establishing Rates, Charges, and Tiered Pricing Component,
and/or for making and allocating payments, other than those set forth in
this Article may be in the mutual best interest of the parties, it is
expressly agreed that the parties may enter into agreements to modify
the mechanisms, policies, and procedures for any of those purposes while
this Contract is in effect without amending this Contract.

\(j\) (1) Beginning at such time as deliveries of Project Water in a
Year exceed 80 percent of the Contract Total, then before the end of the
month following the month of delivery the Contractor shall make an
additional payment to the United States equal to the applicable Tiered
Pricing Component. The Tiered Pricing Component for the amount of Water
Delivered in excess of 80 percent of the Contract Total, but less than
or equal to 90 percent of the Contract Total, shall equal one-half of
the difference between the Rate established under subdivision (a) of
this Article and the Irrigation Full Cost Water Rate or M&I Full Cost
Water Rate, whichever is applicable. The Tiered Pricing Component for
the amount of Water Delivered which exceeds 90 percent of the Contract
Total shall equal the difference between (i) the Rate established under
subdivision (a) of this Article and (ii) the Irrigation Full Cost Water
Rate or M&I Full Cost Water Rate, whichever is applicable.

\(2\) Subject to the Contracting Officer's written approval, the
Contractor may request and receive an exemption from such Tiered Pricing
Component for Project Water delivered to produce a crop which the
Contracting Officer determines will provide significant and quantifiable
habitat values for waterfowl in fields where the water is used and the
crops are produced; [Provided]{.underline}, That the exemption from the
Tiered Pricing Component for Irrigation Water shall apply only if such
habitat values can be assured consistent with the purposes of the CVPIA
through binding agreements executed with or approved by the Contracting
Officer prior to use of such water.

\(3\) For purposes of determining the applicability of the Tiered
Pricing Component pursuant to this Article, Water Delivered shall
include Project Water that the Contractor transfers to others but shall
not include Project Water transferred to the Contractor, nor shall it
include the additional water provided to the Contractor under the
provisions of subdivision (f) of Article 3 of this Contract.

\(k\) For the term of this Contract, Rates applied under the respective
ratesetting policies will be established to recover only reimbursable
O&M (including any deficits) and capital costs of the Project, as those
terms are used in the then-current Project ratesetting policies, and
interest, where appropriate, except in instances where a minimum Rate is
applicable in accordance with the relevant Project ratesetting policy.
Changes of significance in practices which implement the Contracting
Officer's ratesetting policies will not be implemented until the
Contracting Officer has provided the Contractor an opportunity to
discuss the nature, need, and impact of the proposed change.

\(l\) Except as provided in subsections 3405(a)(1)(B) and 3405(f) of the
CVPIA, the Rates for Project Water transferred by the Contractor shall
be the Contractor's Rates adjusted upward or downward to reflect the
changed costs, if any, incurred by the Contracting Officer in the
delivery of the transferred Project Water to the transferee's point of
delivery in accordance with the then applicable Project ratesetting
policy. If the Contractor is receiving lower Rates and Charges because
of inability to pay and is transferring Project Water to another entity
who's Rates and Charges are not adjusted due to inability to pay, the
Rates and Charges for transferred Project Water shall not be adjusted to
reflect the Contractor's inability to pay.

(m) Pursuant to the Act of October 27, 1986 (100 Stat. 3050), the
    Contracting

Officer is authorized to adjust determinations of ability to pay every
five years.

[REPAYMENT OF PROJECT WORKS]{.underline}

[7.1 (a) Repayment of San Felipe Project Works. The unpaid balance of
reimbursable capitalized costs for the San Felipe Division facilities as
of \_\_\_\_\_\_\_\_ was \_\_\_\_\_\_\_\_\_\_\_. The Contractor and San
Benito County Water District are each entering into contracts with the
United States committing to repay their separate, individual shares of
these costs. The Contractor shall have the obligation to repay
\_\_\_\_\_\_\_\_\_\_ as set forth in Exhibit \_\_\_ attached
hereto.]{.underline}

[(b) Reach 1 Facilities. The unpaid balance of reimbursable capitalized
costs of the facilities from the Pacheco tunnel inlet to and including
the Pacheco Bifurcation Structure, hereinafter called Reach 1, as of
\_\_\_\_\_\_\_\_\_\_ was \$\_\_\_\_\_\_\_\_. The Contractor shall have
the obligation to repay \$\_\_\_\_\_\_ for Reach 1 as set forth in
Exhibit \_\_\_ attached hereto.]{.underline}

[(c) Reach 2 and Reach 3 Facilities. The unpaid balance of reimbursable
costs of the facilities from, but not including the Pacheco Bifurcation
Structure, to and including the Watsonville Turnout facility,
hereinafter referred to as Reach 2, and the remaining capitalized cost
of the facilities from, but not including the Watsonville Turnout
facility, to and including Coyote Pumping Plant, hereinafter referred to
as Reach 3, as of \_\_\_\_\_\_\_\_\_ was \$\_\_\_\_\_\_. The Contractor
shall have the obligation to repay \$\_\_\_\_\_\_\_\_\_\_\_ for Reaches
2 and 3, as set forth in Exhibit \_\_\_\_ attached hereto.]{.underline}

[(d) Upon full repayment of these amounts, the Contractor shall have no
further repayment obligations associated with the capitalized costs of
the facilities as specified in subdivision (b) and (c) above, or as
cumulatively set forth in (a) above, for the period up to the date set
forth above.]{.underline}

[(e) Capitalized Interest. The interest rate for the repayment of the
portion of the Pacheco Tunnel inlet used for M&I purposes shall be 3.137
percent per annum.]{.underline}

[(1) The interest rate for repayment of the portion of the San Felipe
Division Facilities, not including the Pacheco Tunnel inlet, used for
M&I purposes shall be 3.5 percent annum.]{.underline}

[(2) The interest rate for repayment of Interest During Construction for
the San Felipe Division Facilities allocated to the M&I function shall
be a weighted rate of \_\_\_\_ percent per annum.]{.underline}

[(3) Unpaid capital interest accruing prior to October 2004 shall be
repaid at a rate of \_\_\_\_ percent per annum consistent with the
Agreement For Settlement of the CVP M&I Ratesetting Lawsuit entered into
in 2005 to resolve *City of Fresno v. United States,* Civ. No. F-03-5350
(E.D. Cal.).]{.underline}

[(f) Prepayments and Relief from Payment Schedule]{.underline}

[(1) The Contractor may, instead of making the payments provided for in
subdivisions (a), (b) and (c) above, at any time, submit full or partial
advanced payment on any or all of the facilities described in those
subdivisions. If, at any time prior to the expiration of this Contract,
the Contractor desires to make full payment for any or part of the
Contractor's share of Reach 1 and the San Benito Facilities, the
appropriate reimbursable repayment amount for such facilities will be
determined by the Contracting Officer and provided to the Contractor.
Upon full payment of this amount, the Contractor shall have no further
repayment obligations associated with the capitalized costs of the
facilities as specified in (a), (b) and (c) above for the period up to
\[the date certain\] set forth in those subdivisions]{.underline}

[(2) If circumstances arise that compromise the Contractor's ability to
make payments according to Exhibit \_\_\_, the Contracting Officer may
adjust the schedule for payment and installment amounts consistent with
reclamation law.]{.underline}

[(g) Capital Replacements and Additions.]{.underline}

[(1) The Contractor may, at its option, and with the prior approval of
the Contracting Officer, perform with its own funds any future capital
construction or capital replacement work. Upon completion of the work,
and acceptance by Reclamation, such capital assets shall be donated to
Reclamation pursuant to an asset valuation that includes all costs
related to the project, including, but not limited to, the costs for
studies, planning, engineering, materials, contracts, and labor. In
recognition of the nonreimbursable allocation of the San Felipe Division
costs for the conservation and development of fish and wildlife
resources and the enhancement of recreation opportunities, 10% of the
total costs of each donated capital asset shall be credited to the next
scheduled payment(s) due from the Contractor.]{.underline}

[(2) In the event funding is not provided by the Contractor, the United
States remains responsible for any necessary future capital work, and
such work shall be undertaken in consultation with the Contractor.
Repayment for the Contractor's appropriate share of such future work
shall be provided for through a separate contract or, at the
Contractor's option, the parties may agree to revision or addition of
exhibits to this Contract without amending the Contract.]{.underline}

[NON-INTEREST BEARING OPERATION AND MAINTENANCE DEFICITS]{.underline}

8\. The Contractor and the Contracting Officer concur that, as of the
effective date of this Contract, the Contractor has no non-interest
bearing O&M deficits and shall have no further liability therefore.

[SALES, TRANSFERS, OR EXCHANGES OF WATER]{.underline}

9\. (a) The right to receive Project Water provided for in this Contract
may be sold, transferred, or exchanged to others for reasonable and
beneficial uses within the State of California if such sale, transfer,
or exchange is authorized by applicable Federal and State laws, and
applicable guidelines or regulations then in effect. No sale, transfer,
or exchange of Project Water under this Contract may take place without
the prior written approval of the Contracting Officer, except as
provided for in subdivision (b) of this Article, and no such sales,
transfers, or exchanges shall be approved absent all appropriate
environmental documentation, including but not limited to, documents
prepared pursuant to the NEPA and ESA. Such environmental documentation
should include, as appropriate, an analysis of groundwater impacts and
economic and social effects, including environmental justice, of the
proposed water transfers on both the transferor and transferee.

\(b\) In order to facilitate efficient water management by means of
water transfers of the type historically carried out among Project
Contractors located within the same geographical area and to allow the
Contractor to participate in an accelerated water transfer program
during the term of this Contract, the Contracting Officer shall prepare,
as appropriate, all necessary environmental documentation, including but
not limited to documents prepared pursuant to NEPA and ESA, analyzing
annual transfers within such geographical areas and the Contracting
Officer shall determine whether such transfers comply with applicable
law. Following the completion of the environmental documentation, such
transfers addressed in such documentation shall be conducted with
advance notice to the Contracting Officer, but shall not require prior
written approval by the Contracting Officer. Such environmental
documentation and the Contracting Officer's compliance determination
shall be reviewed every five years and updated, as necessary, prior to
the expiration of the then existing five year period. All subsequent
environmental documentation shall include an alternative to evaluate not
less than the quantity of Project Water historically transferred within
the same geographical area.

\(c\) For a water transfer to qualify under subdivision (b) of this
Article, such water transfer must: (i) be for irrigation purposes for
lands irrigated within the previous three years, for M&I use,
groundwater recharge, groundwater banking, or similar groundwater
activities, surface water storage, or fish and wildlife resources; not
lead to land conversion; and be delivered to established cropland,
wildlife refuges, groundwater basins or M&I use; (ii) occur within a
single Year; (iii) occur between a willing seller and a willing buyer;
(iv) convey water through existing facilities with no new construction
or modifications to facilities and be between existing Project
Contractors and/or the Contractor and the United States, Department of
the Interior; and (v) comply with all applicable Federal, State, and
local or tribal laws and requirements imposed for protection of the
environment and Indian Trust Assets, as defined under Federal law.

[APPLICATION OF PAYMENTS AND ADJUSTMENTS]{.underline}

10\. (a) The amount of any overpayment by the Contractor of the
Contractor's O&M, capital, and deficit (if any) obligations for the Year
shall be applied first to any current liabilities of the Contractor
arising out of this Contract then due and payable. Overpayments of more
than \$1,000 shall be refunded at the Contractor's request. In lieu of a
refund, any amount of such overpayment at the option of the Contractor,
may be credited against amounts to become due to the United States by
the Contractor. With respect to overpayment, such refund or adjustment
shall constitute the sole remedy of the Contractor or anyone having or
claiming to have the right to the use of any of the Project Water supply
provided for herein. All credits and refunds of overpayments shall be
made within 30 days of the Contracting Officer obtaining direction as to
how to credit or refund such overpayment in response to the notice to
the Contractor that it has finalized the accounts for the Year in which
the overpayment was made.

\(b\) All advances for miscellaneous costs incurred for work requested
by the Contractor pursuant to Article 25 of this Contract shall be
adjusted to reflect the actual costs when the work has been completed.
If the advances exceed the actual costs incurred, the difference will be
refunded to the Contractor. If the actual costs exceed the Contractor\'s
advances, the Contractor will be billed for the additional costs
pursuant to Article 25.

[TEMPORARY REDUCTIONS\--RETURN FLOWS]{.underline}

11\. (a) Subject to: (i) the authorized purposes and priorities of the
Project and the requirements of Federal law and (ii) the obligations of
the United States under existing contracts, or renewals thereof,
providing for water deliveries from the Project, the Contracting Officer
shall make all reasonable efforts to optimize Project Water deliveries
to the Contractor as provided in this Contract.

\(b\) The Contracting Officer or Operating Non-Federal Entity(ies) may
temporarily discontinue or reduce the quantity of Water Delivered to the
Contractor as herein provided for the purposes of investigation,
inspection, maintenance, repair, or replacement of any of the Project
facilities or any part thereof necessary for the delivery of Project
Water to the Contractor, but so far as feasible the Contracting Officer
or Operating Non-Federal Entity(ies) will give the Contractor due notice
in advance of such temporary discontinuance or reduction, except in case
of emergency, in which case no notice need be given;
[Provided]{.underline}, That the United States shall use its best
efforts to avoid any discontinuance or reduction in such service. Upon
resumption of service after such reduction or discontinuance, and if
requested by the Contractor, the United States will, if possible,
deliver the quantity of Project Water which would have been delivered
hereunder in the absence of such discontinuance or reduction.

\(c\) The United States reserves the right to all seepage and return
flow water derived from Water Delivered to the Contractor hereunder
which escapes or is discharged beyond the **Joint** Service Area;
[Provided]{.underline}, That this shall not be construed as claiming for
the United States any right to seepage or return flow being put to
reasonable and beneficial use pursuant to this Contract within the
**Joint** Service Area by the Contractor or those claiming by, through,
or under the Contractor.

[CONSTRAINTS ON THE AVAILABILITY OF WATER]{.underline}

12\. (a) In its operation of the Project, the Contracting Officer will
use all reasonable means to guard against a Condition of Shortage in the
quantity of water to be made available to the Contractor pursuant to
this Contract. In the event the Contracting Officer determines that a
Condition of Shortage appears probable, the Contracting Officer will
notify the Contractor of said determination as soon as practicable.

\(b\) If there is a Condition of Shortage because of errors in physical
operations of the Project, drought, other physical causes beyond the
control of the Contracting Officer or actions taken by the Contracting
Officer to meet legal obligations then, except as provided in
subdivision (a) of Article 18 of this Contract, no liability shall
accrue against the United States or any of its officers, agents, or
employees for any damage, direct or indirect, arising therefrom.

(c ) In any Year in which there may occur a Condition of Shortage for
any of the reasons specified in subdivision (b) of this Article, and
subject to subdivision (d) of this Article, and subject to subdivision
(d) of this Article, the Contracting Officer will first allocate the
available Project Water consistent with the Central Valley Project M&I
Water Shortage Policy in its form on the effective date of this Contract
for determining the amount of Project Water available for delivery to
the Project Contractors. Subject to the forgoing allocation, in any Year
in which there may occur a Condition of Shortage, the Contracting
Officer shall then apportion Project Water among the Contractor and
others entitled to Project Water from Delta Division Facilities under a
long-term water service or repayment contracts (or renewals thereof or
binding commitments therefore) in force on February 28, 2005, as
follows:

\(1\) The Contracting Officer shall make an initial and subsequent
determination as necessary of the total quantity of Project Water
estimated to be scheduled or actually scheduled under subdivision (b) of
Article 4 of this Contract and under all other long-term water service
or repayment contracts then in force for the delivery of Project Water
by the United States from Delta Division Facilities during the relevant
Year, the quantity so determined being hereinafter referred to as the
scheduled total;

\(2\) A determination shall be made of the total quantity of Project
Water that is available for meeting the scheduled total, the quantity so
determined being hereinafter referred to as the available supply;

\(3\) The total quantity of Project Water estimated to be scheduled or
actually scheduled by the Contractor during the relevant Year, under
subdivision (b) of Article 4 hereof, shall be divided by the scheduled
total, the quotient thus obtained being hereinafter referred to as the
Contractor's proportionate share; and

\(4\) The available supply shall be multiplied by the Contractor's
proportionate share and the result shall be the quantity of Project
Water made available by the United States to the Contractor for the
relevant Year in accordance with the schedule developed by the
Contracting Officer under subdivision (c)(1) of this Article 12, but in
no event shall such amount exceed the Contract Total. In the event the
Contracting Officer subsequently determines that the Contracting Officer
can increase or needs to decrease the available supply for delivery from
Delta Division Facilities to long-term water service and repayment
Contractors during the relevant Year, such additions or reductions to
the available supply shall be apportioned consistent with subparagraphs
(1) through (4), inclusive.

\(d\) Project Water furnished under this long-term renewal contract for
M&I purposes will be allocated in accordance with the Central Valley
Project M&I Water Shortage Policy. Such policy shall be amended,
modified, or superceded only through a public notice and comment
procedure. **\[Contractor Specific\].**

\(e\) By entering into this Contract, the Contractor does not waive any
legal rights or remedies it may have to file or participate in any
administrative or judicial proceeding contesting (i) the sufficiency of
any Central Valley Project M&I Water Shortage Policy; (ii) the substance
of such a policy; (iii) the applicability of such a policy; or (iv) the
manner in which such policy is implemented in order to allocate Project
Water between M&I and irrigation purposes; [Provided,]{.underline} That
the Contractor has commenced any such judicial challenge or any
administrative procedures necessary to institute any judicial challenge
within six months of the policy becoming final. By agreeing to the
foregoing, the Contracting Officer does not waive any legal defenses or
remedies that it may then have to assert in such a proceeding. Nothing
contained herein shall be interpreted to validate or invalidate the
Central Valley Project M&I Water Shortage Policy.

[UNAVOIDABLE GROUNDWATER PERCOLATION]{.underline}

13\. To the extent applicable, the Contractor shall not be deemed to
have delivered Irrigation Water to Excess Lands or Ineligible Lands
within the meaning of this Contract if such lands are irrigated with
groundwater that reaches the underground strata as an unavoidable result
of the delivery of Irrigation Water by the Contractor to Eligible Lands.

[RULES AND REGULATIONS]{.underline}

14\. (a) Except as provided by the San Felipe Division Act of August 28,
1967 (81 Stat. 173), the parties agree that the delivery of Irrigation
Water or use of Federal facilities pursuant to this Contract is subject
to Federal Reclamation law, including but not limited to the Reclamation
Reform Act of 1982 (43 U.S.C.390aa et seq.), as amended and
supplemented, and the rules and regulations promulgated by the Secretary
of the Interior under Federal Reclamation law.

[WATER AND AIR POLLUTION CONTROL]{.underline}

15\. The Contractor, in carrying out this Contract, shall comply with
all applicable water and air pollution laws and regulations of the
United States and the State of California, and shall obtain all required
permits or licenses from the appropriate Federal, State, or local
authorities.

[QUALITY OF WATER]{.underline}

16\. (a) Project facilities used to deliver Project Water to the
Contractor pursuant to this Contract shall be operated and maintained to
enable the United States to deliver Project Water to the Contractor in
accordance with the water quality standards specified in subsection 2(b)
of the Act of August 26, 1937 (50 Stat. 865), as added by Section 101 of
the Act of October 27, 1986 (100 Stat. 3050) or other existing Federal
laws. The United States is under no obligation to construct or furnish
water treatment facilities to maintain or to improve the quality of
Water Delivered to the Contractor pursuant to this Contract. The United
States does not warrant the quality of Water Delivered to the Contractor
pursuant to this Contract.

\(b\) The O&M of Project facilities shall be performed in such manner as
is practicable to maintain the quality of raw water made available
through such facilities at the highest level reasonably attainable as
determined by the Contracting Officer. The Contractor shall be
responsible for compliance with all State and Federal water quality
standards applicable to surface and subsurface agricultural drainage
discharges generated through the use of Federal or Contractor facilities
or Project Water provided by the Contractor within the Contractor\'s
Service Area.

[WATER ACQUIRED BY THE CONTRACTOR]{.underline}

[OTHER THAN FROM THE UNITED STATES]{.underline}

17\. (a) Except as provided by the San Felipe Division Act of August 28,
1967 (81 Stat. 173), water or water rights now owned or hereafter
acquired by the Contractor other than from the United States and
Irrigation Water furnished pursuant to the terms of this Contract may be
simultaneously transported through the same distribution facilities of
the Contractor subject to the following: (i) if the facilities utilized
for commingling Irrigation Water and non-Project water were constructed
without funds made available pursuant to Federal Reclamation law, the
provisions of Federal Reclamation law will be applicable only to the
Landholders of lands which receive Irrigation Water; (ii) the
eligibility of land to receive Irrigation Water must be established
through the certification requirements as specified in the Acreage
Limitation Rules and Regulations (43 CFR Part 426); (iii) the water
requirements of Eligible Lands within the Contractor\'s Service Area can
be established and the quantity of Irrigation Water to be utilized is
less than or equal to the quantity necessary to irrigate such Eligible
Lands; and (iv) if the facilities utilized for commingling Irrigation
Water and non-Project water are/were constructed with funds made
available pursuant to Federal Reclamation law, the non-Project water
will be subject to the acreage limitation provisions of Federal
Reclamation law, unless the Contractor pays to the United States the
incremental fee described in 43 CFR 426.15. In determining the
incremental fee, the Contracting Officer will calculate annually the
cost to the Federal Government, including interest of storing or
delivering non-Project water, which for purposes of this Contract shall
be determined as follows: The quotient shall be the unpaid distribution
system costs divided by the total irrigable acreage within the
Contractor's Service Area. The incremental fee per acre is the
mathematical result of such quotient times the interest rate determined
using Section 202(3) of the Act of October 12, 1982 (96 Stat. 1263).
Such incremental fee will be charged to each acre of excess or full cost
land within the Contractor's Service Area that receives non-Project
water through Federally financed or constructed facilities. The
incremental fee calculation methodology will continue during the term of
this Contract absent the promulgation of a contrary Reclamation-wide
rule, regulation or policy adopted after the Contractor has been
afforded the opportunity to review and comment on the proposed rule,
regulation or policy. If such rule, regulation or policy is adopted it
shall supercede this provision.

\(b\) Water or water rights now owned or hereafter acquired by the
Contractor, other than from the United States may be stored, conveyed
and/or diverted through Project facilities, subject to the completion of
appropriate environmental documentation, with the approval of the
Contracting Officer and the execution of any contract determined by the
Contracting Officer to be necessary, consistent with the following
provisions:

\(1\) The Contractor may introduce non-Project water into Project
facilities and deliver said water to lands within the **Joint** Service
Area, including Ineligible Lands, subject to payment to the United
States and/or to any applicable Operating Non-Federal Entity of an
appropriate rate as determined by the applicable Project ratesetting
policy, the RRA, and the Project use power policy, if such Project use
power policy is applicable, each as amended, modified or superceded from
time to time.

\(2\) Delivery of such non-Project water in and through Project
facilities shall only be allowed to the extent such deliveries do not:
(i) interfere with other Project purposes as determined by the
Contracting Officer; (ii) reduce the quantity or quality of water
available to other Project Contractors; (iii) interfere with the
delivery of contractual water entitlements to any other Project
Contractors; or (iv) interfere with the physical maintenance of the
Project facilities

\(3\) Neither the United States nor the Operating Non-Federal
Entity(ies) shall be responsible for control, care or distribution of
the non-Project water before it is introduced into or after it is
delivered from the Project facilities. The Contractor hereby releases
and agrees to defend and indemnify the United States and the Operating
Non-Federal Entity(ies), and their respective officers, agents, and
employees, from any claim for damage to persons or property, direct or
indirect, resulting from the act(s) of the Contractor, its officers,
employees, agents, or assigns, in

\(i\) extracting or diverting non-Project water from any source, or (ii)
diverting such non-Project water into Project facilities.

\(4\) Diversion of such non-Project water into Project facilities shall
be consistent with all applicable laws, and if involving groundwater,
consistent with any applicable groundwater management plan for the area
from which it was extracted.

\(5\) After Project purposes are met, as determined by the Contracting
Officer, the United States and the Project Contractors entitled to
receive Project Water through Delta Division Facilities shall share
priority to utilize the remaining capacity of the facilities declared to
be available by the Contracting Officer for conveyance and
transportation of non-Project water prior to any such remaining capacity
being made available to non-Project contractors. Other Project
Contractors shall have a second priority to any remaining capacity of
facilities declared to be available by the Contracting Officer for
conveyance and transportation of non-Project water prior to any such
remaining capacity being made available to non-Project contractors.

[OPINIONS AND DETERMINATIONS]{.underline}

18\. (a) Where the terms of this Contract provide for actions to be
based upon the opinion or determination of either party to this
Contract, said terms shall not be construed as permitting such action to
be predicated upon arbitrary, capricious, or unreasonable opinions or
determinations. Both parties, notwithstanding any other provisions of
this Contract, expressly reserve the right to seek relief from and
appropriate adjustment for any such arbitrary, capricious, or
unreasonable opinion or determination. Each opinion or determination by
either party shall be provided in a timely manner. Nothing in
subdivision (a) of Article 18 of this Contract is intended to or shall
affect or alter the standard of judicial review applicable under Federal
law to any opinion or determination implementing a specific provision of
Federal law embodied in statute or regulation.

\(b\) The Contracting Officer shall have the right to make
determinations necessary to administer this Contract that are consistent
with the provisions of this Contract, the laws of the United States and
of the State of California, and the rules and regulations promulgated by
the Secretary of the Interior. Such determinations shall be made in
consultation with the Contractor to the extent reasonably practicable.

[COORDINATION AND COOPERATION]{.underline}

19\. (a) In order to further their mutual goals and objectives, the
Contracting Officer and the Contractor shall communicate, coordinate,
and cooperate with each other, and with other affected Project
Contractors, in order to improve the operation and management of the
Project. The communication, coordination, and cooperation regarding
operations and management shall include, but not be limited to, any
action which will or may materially affect the quantity or quality of
Project Water supply, the allocation of Project Water supply, and
Project financial matters including, but not limited to, budget issues.
The communication, coordination, and cooperation provided for hereunder
shall extend to all provisions of this Contract. Each party shall retain
exclusive decision making authority for all actions, opinions, and
determinations to be made by the respective party.

\(b\) Within 120 days following the effective date of this Contract, the
Contractor, other affected Project Contractors, and the Contracting
Officer shall arrange to meet with interested Project Contractors to
develop a mutually agreeable, written Project-wide process, which may be
amended as necessary separate and apart from this Contract. The goal of
this process shall be to provide, to the extent practicable, the means
of mutual communication and interaction regarding significant decisions
concerning Project operation and management on a real-time basis.

\(c\) In light of the factors referred to in subdivision (b) of Article
3 of this Contract, it is the intent of the Secretary to improve water
supply reliability. To carry out this intent:

\(1\) The Contracting Officer will, at the request of the Contractor,
assist in the development of integrated resource management plans for
the Contractor. Further, the Contracting Officer will, as appropriate,
seek authorizations for implementation of partnerships to improve water
supply, water quality, and reliability.

\(2\) The Secretary will, as appropriate, pursue program and project
implementation and authorization in coordination with Project
Contractors to improve the water supply, water quality, and reliability
of the Project for all Project purposes.

\(3\) The Secretary will coordinate with Project Contractors and the
State of California to seek improved water resource management.

\(4\) The Secretary will coordinate actions of agencies within the
Department of the Interior that may impact the availability of water for
Project purposes.

\(5\) The Contracting Officer shall periodically, but not less than
annually, hold division level meetings to discuss Project operations,
division level water management activities, and other issues as
appropriate.

\(d\) Without limiting the contractual obligations of the Contracting
Officer under the other Articles of this Contract, nothing in this
Article shall be construed to limit or constrain the Contracting
Officer's ability to communicate, coordinate, and cooperate with the
Contractor or other interested stakeholders or to make decisions in a
timely fashion as needed to protect health, safety or the physical
integrity of structures or facilities.

[CHARGES FOR DELINQUENT PAYMENTS]{.underline}

20\. (a) The Contractor shall be subject to interest, administrative and
penalty charges on delinquent installments or payments. When a payment
is not received by the due date, the Contractor shall pay an interest
charge for each day the payment is delinquent beyond the due date. When
a payment becomes sixty (60) days delinquent, the Contractor shall pay
an administrative charge to cover additional costs of billing and
processing the delinquent payment. When a payment is delinquent ninety
(90) days or more, the Contractor shall pay an additional penalty charge
of six (6%) percent per year for each day the payment is delinquent
beyond the due date. Further, the Contractor shall pay any fees incurred
for debt collection services associated with a delinquent payment.

\(b\) The interest charge rate shall be the greater of the rate
prescribed quarterly in the Federal Register by the Department of the
Treasury for application to overdue payments, or the interest rate of
one-half of one (0.5%) percent per month prescribed by Section 6 of the
Reclamation Project Act of 1939 (Public Law 76-260). The interest charge
rate shall be determined as of the due date and remain fixed for the
duration of the delinquent period.

\(c\) When a partial payment on a delinquent account is received, the
amount received shall be applied, first to the penalty, second to the
administrative charges, third to the accrued interest, and finally to
the overdue payment.

[EQUAL OPPORTUNITY]{.underline}

21\. During the performance of this Contract, the Contractor agrees as
follows:

\(a\) The Contractor will not discriminate against any employee or
applicant for employment because of race, color, religion, sex, or
national origin. The Contractor will take affirmative action to ensure
that applicants are employed, and that employees are treated during
employment, without regard to their race, color, religion, sex, or
national origin. Such action shall include, but not be limited to, the
following: Employment, upgrading, demotion, or transfer; recruitment or
recruitment advertising; layoff or termination, rates of payment or
other forms of compensation; and selection for training, including
apprenticeship. The Contractor agrees to post in conspicuous places,
available to employees and applicants for employment, notices to be
provided by the Contracting Officer setting forth the provisions of this
nondiscrimination clause.

\(b\) The Contractor will, in all solicitations or advertisements for
employees placed by or on behalf of the Contractor, state that all
qualified applicants will receive consideration for employment without
discrimination because of race, color, religion, sex, or national
origin.

\(c\) The Contractor will send to each labor union or representative of
workers with which it has a collective bargaining agreement or other
contract or understanding, a notice, to be provided by the Contracting
Officer, advising the said labor union or workers\' representative of
the Contractor\'s commitments under Section 202 of Executive Order 11246
of September 24, 1965, and shall post copies of the notice in
conspicuous places available to employees and applicants for employment.

\(d\) The Contractor will comply with all provisions of Executive Order

No. 11246 of September 24, 1965, as amended, and of the rules,
regulations, and relevant orders of the Secretary of Labor.

\(e\) The Contractor will furnish all information and reports required
by said amended Executive Order and by the rules, regulations, and
orders of the Secretary of Labor, or pursuant thereto, and will permit
access to its books, records, and accounts by the Contracting Officer
and the Secretary of Labor for purposes of investigation to ascertain
compliance with such rules, regulations, and orders.

\(f\) In the event of the Contractor\'s noncompliance with the
nondiscrimination clauses of this Contract or with any of the said
rules, regulations, or orders, this Contract may be canceled,
terminated, or suspended, in whole or in part, and the Contractor may be
declared ineligible for further Government contracts in accordance with
procedures authorized in said amended Executive Order, and such other
sanctions may be imposed and remedies invoked as provided in said
Executive Order, or by rule, regulation, or order of the Secretary of
Labor, or as otherwise provided by law.

\(g\) The Contractor will include the provisions of paragraphs (a)
through (g) in every subcontract or purchase order unless exempted by
the rules, regulations, or orders of the Secretary of Labor issued
pursuant to Section 204 of said amended Executive Order, so that such
provisions will be binding upon each subcontractor or vendor. The
Contractor will take such action with respect to any subcontract or
purchase order as may be directed by the Secretary of Labor as a means
of enforcing such provisions, including sanctions for noncompliance:
[Provided, however]{.underline}, That in the event the Contractor
becomes involved in, or is threatened with, litigation with a
subcontractor or vendor as a result of such direction, the Contractor
may request the United States to enter into such litigation to protect
the interests of the United States.

[GENERAL OBLIGATION\--BENEFITS CONDITIONED UPON PAYMENT]{.underline}

22\. (a) The obligation of the Contractor to pay the United States as
provided in this Contract is a general obligation of the Contractor
notwithstanding the manner in which the obligation may be distributed
among the Contractor\'s water users and notwithstanding the default of
individual water users in their obligations to the Contractor.

\(b\) The payment of charges becoming due hereunder is a condition
precedent to receiving benefits under this Contract. The United States
shall not make water available to the Contractor through Project
facilities during any period in which the Contractor may be in arrears
in the advance payment of water rates due the United States. The
Contractor shall not furnish water made available pursuant to this
Contract for lands or parties which are in arrears in the advance
payment of water rates levied or established by the Contractor.

\(c\) With respect to subdivision (b) of this Article, the Contractor
shall have no obligation to require advance payment for water rates
which it levies.

[COMPLIANCE WITH CIVIL RIGHTS LAWS AND REGULATIONS]{.underline}

23\. (a) The Contractor shall comply with Title VI of the Civil Rights
Act of 1964 (42 U.S.C. 2000d), Section 504 of the Rehabilitation Act of
1975 (P.L. 93-112, as amended), the Age Discrimination Act of 1975 (42
U.S.C. 6101, et seq.) and any other applicable civil rights laws, as
well as with their respective implementing regulations and guidelines
imposed by the U.S. Department of the Interior and/or Bureau of
Reclamation.

\(b\) These statutes require that no person in the United States shall,
on the grounds of race, color, national origin, handicap, or age, be
excluded from participation in, be denied the benefits of, or be
otherwise subjected to discrimination under any program or activity
receiving financial assistance from the Bureau of Reclamation. By
executing this Contract, the Contractor agrees to immediately take any
measures necessary to implement this obligation, including permitting
officials of the United States to inspect premises, programs, and
documents.

\(c\) The Contractor makes this agreement in consideration of and for
the purpose of obtaining any and all Federal grants, loans, contracts,
property discounts, or other Federal financial assistance extended after
the date hereof to the Contractor by the Bureau of Reclamation,
including installment payments after such date on account of
arrangements for Federal financial assistance which were approved before
such date. The Contractor recognizes and agrees that such Federal
assistance will be extended in reliance on the representations and
agreements made in this Article, and that the United States reserves the
right to seek judicial enforcement thereof.

[PRIVACY ACT COMPLIANCE]{.underline}

24\. (a) The Contractor shall comply with the Privacy Act of 1974 (5
U.S.C. 552a) (the Act) and the Department of the Interior rules and
regulations under the Act (43 CFR 2.45 et seq.) in maintaining
Landholder acreage certification and reporting records, required to be
submitted to the Contractor for compliance with Sections 206 and 228 of
the Reclamation Reform Act of 1982 (96 Stat. 1266), and pursuant to 43
CFR 426.18.

\(b\) With respect to the application and administration of the criminal
penalty provisions of the Act (5 U.S.C. 552a(i)), the Contractor and the
Contractor\'s employees responsible for maintaining the certification
and reporting records referenced in (a) above are considered to be
employees of the Department of the Interior. See 5 U.S.C. 552a(m).

\(c\) The Contracting Officer or a designated representative shall
provide the Contractor with current copies of the Interior Department
Privacy Act regulations and the Bureau of Reclamation Federal Register
Privacy Act System of Records Notice (Acreage Limitation\--Interior,
Reclamation-31) which govern the maintenance, safeguarding, and
disclosure of information contained in the Landholder\'s certification
and reporting records.

\(d\) The Contracting Officer shall designate a full-time employee of
the Bureau of Reclamation to be the System Manager who shall be
responsible for making decisions on denials pursuant to 43 CFR 2.61 and
2.64 amendment requests pursuant to 43 CFR 2.72. The Contractor is
authorized to grant requests by individuals for access to their own
records.

\(e\) The Contractor shall forward promptly to the System Manager each
proposed denial of access under 43 CFR 2.64; and each request for
amendment of records filed under 43 CFR 2.71; notify the requester
accordingly of such referral; and provide the System Manager with
information and records necessary to prepare an appropriate response to
the requester. These requirements do not apply to individuals seeking
access to their own certification and reporting forms filed with the
Contractor pursuant to 43 CFR 426.18, unless the requester elects to
cite the Privacy Act as a basis for the request.

[CONTRACTOR TO PAY CERTAIN MISCELLANEOUS COSTS]{.underline}

25\. In addition to all other payments to be made by the Contractor
pursuant to this Contract, the Contractor shall pay to the United
States, within 60 days after receipt of a bill and detailed statement
submitted by the Contracting Officer to the Contractor for such specific
items of direct cost incurred by the United States for work requested by
the Contractor associated with this Contract plus indirect costs in
accordance with applicable Bureau of Reclamation policies and
procedures. All such amounts referred to in this Article shall not
exceed the amount agreed to in writing in advance by the Contractor.
This Article shall not apply to costs for routine contract
administration.

[WATER CONSERVATION]{.underline}

26\. (a) Prior to the delivery of water provided from or conveyed
through Federally constructed or Federally financed facilities pursuant
to this Contract, the Contractor shall be implementing an effective
water conservation and efficiency program based on the Contractor\'s
water conservation plan that has been determined by the Contracting
Officer to meet the conservation and efficiency criteria for evaluating
water conservation plans established under Federal law. The water
conservation and efficiency program shall contain definite water
conservation objectives, appropriate economically feasible water
conservation measures, and time schedules for meeting those objectives.
Continued Project Water delivery pursuant to this Contract shall be
contingent upon the Contractor's continued implementation of such water
conservation program. In the event the Contractor\'s water conservation
plan or any revised water conservation plan completed pursuant to
subdivision (d) of Article 26 of this Contract have not yet been
determined by the Contracting Officer to meet such criteria, due to
circumstances which the Contracting Officer determines are beyond the
control of the Contractor, water deliveries shall be made under this
Contract so long as the Contractor diligently works with the Contracting
Officer to obtain such determination at the earliest practicable date,
and thereafter the Contractor immediately begins implementing its water
conservation and efficiency program in accordance with the time
schedules therein.

\(b\) Should the amount of M&I Water delivered pursuant to subdivision
(a) of Article 3 of this Contract equal or exceed 2,000 acre-feet per
Year, the Contractor shall implement the Best Management Practices
identified by the time frames issued by the California Urban Water
Conservation Council for such M&I Water unless any such practice is
determined by the Contracting Officer to be inappropriate for the
Contractor.

\(c\) The Contractor shall submit to the Contracting Officer a report on
the status of its implementation of the water conservation plan on the
reporting dates specified in the then existing conservation and
efficiency criteria established under Federal law.

\(d\) At 5 year intervals, the Contractor shall revise its water
conservation plan to reflect the then current conservation and
efficiency criteria for evaluating water conservation plans established
under Federal law and submit such revised water management plan to the
Contracting Officer for review and evaluation. The Contracting Officer
will then determine if the water conservation plan meets Reclamation's
then current conservation and efficiency criteria for evaluating water
conservation plans established under Federal law.

\(e\) If the Contractor is engaged in direct groundwater recharge, such
activity shall be described in the Contractor's water conservation plan.

[EXISTING OR ACQUIRED WATER OR WATER RIGHTS]{.underline}

27\. Except as specifically provided in Article 17 of this Contract, the
provisions of this Contract shall not be applicable to or affect
non-project water or water rights now owned or hereafter acquired by the
Contractor or any user of such water within the **Joint** Service Area.
Any such water shall not be considered Project Water under this
Contract. In addition, this Contract shall not be construed as limiting
or curtailing any rights which the Contractor or any water user within
the **Joint** Service Area acquires or has available under any other
contract pursuant to Federal Reclamation law.

[OPERATION AND MAINTENANCE BY OPERATING NON-FEDERAL ENTITY]{.underline}

28\. (a) The O&M of a portion of the Project facilities which serve the
Contractor, and responsibility for funding a portion of the costs of
such O&M, have been transferred to the San Luis & Delta-Mendota Water
Authority, an Operating Non-Federal Entity by separate agreement
(8-07-20-X0354) between the United States and the Operating Non-Federal
Entity San Luis & Delta-Mendota Water Authority. That separate agreement
shall not interfere with or affect the rights or obligations of the
Contractor or the United States hereunder.

\(b\) The Contracting Officer has previously notified the Contractor in
writing that the Operation and Maintenance of a portion of the Project
facilities which serve the Contractor has been transferred to the
Operating Non-Federal Entity San Luis & Delta-Mendota Water Authority,
and therefore, the Contractor shall pay directly to the Operating
Non-Federal Entity San Luis & Delta-Mendota Water Authority, or to any
successor approved by the Contracting Officer under the terms and
conditions of the separate agreement between the United States and the
Operating Non-Federal Entity San Luis & Delta-Mendota Water Authority
described in subdivision (a) of this Article, all rates, charges, or
assessments of any kind, including any assessment for reserve funds,
which the Operating Non-Federal Entity San Luis & Delta-Mendota Water
Authority or such successor determines, sets, or establishes for the O&M
of the portion of the Project facilities operated and maintained by the
Operating Non-Federal Entity San Luis & Delta-Mendota Water Authority or
such successor. Such direct payments to the Operating Non-Federal Entity
San Luis & Delta-Mendota Water Authority or such successor shall not
relieve the Contractor of its obligation to pay directly to the United
States the Contractor's share of the Project Rates, Charges, and Tiered
Pricing Component except to the extent the Operating Non-Federal Entity
San Luis & Delta-Mendota Water Authority collects payments on behalf of
the United States in accordance with the separate agreement identified
in subdivision (a) of this Article.

\(c\) For so long as the O&M of any portion of the Project facilities
serving the Contractor is performed by the Operating Non-Federal Entity
San Luis & Delta-Mendota Water Authority, or any successor thereto, the
Contracting Officer shall adjust those components of the Rates for Water
Delivered under this Contract representing the cost associated with the
activity being performed by the Operating Non-Federal Entity San Luis &
Delta-Mendota Water Authority or its successor

\(d\) In the event the O&M of the Project facilities operated and
maintained by the Operating Non-Federal Entity San Luis & Delta-Mendota
Water Authority is re-assumed by the United States during the term of
this Contract, the Contracting Officer shall so notify the Contractor,
in writing, and present to the Contractor a revised Exhibit "B" which
shall include the portion of the Rates to be paid by the Contractor for
Project Water under this Contract representing the O&M costs of the
portion of such Project facilities which have been re-assumed. The
Contractor shall, thereafter, in the absence of written notification
from the Contracting Officer to the contrary, pay the Rates, Charges,
and Tiered Pricing Component specified in the revised Exhibit "B"
directly to the United States in compliance with Article 7 of this
Contract.

[OPERATION AND MAINTENANCE BY SANTA CLARA VALLEY WATER
DISTRICT]{.underline}[^2]

28.1 (a) The O&M of a portion of the San Felipe Division Facilities have
been transferred to Santa Clara Valley Water District by separate
agreements (Contract No. 6-07-20-X0290) between the United States and
the existing San Felipe Division Contractors. Unless otherwise expressly
set forth herein, nothing in this Contract is intended to affect the
rights and obligations set forth in Contract No. 6-07-20-X0290. The
United States and the Contractor agree that this Contract, and any
amendments or renewals thereto, shall be considered to be within the
definition of "Contract" as provided in Contract No. 6-07-20-X0290, so
that the execution of this Contract shall not impact the effectiveness
of Contract No. 6-07-20-X0290, and Contract No. 6-07-20-X0290 is hereby
deemed to so provide.

~~(b) Santa Clara Valley Water District, Operating Non-Federal Entity
has the right to charge, in addition to O&M charges set forth in
Contract No. 6-07-20-X0290, such rates and charges to future contractors
of the San Felipe Division Facilities as are reasonable.~~

[(b) If requested by the Contractor, the United States shall be
responsible for major repair or replacement of San Felipe Division
Facilities required as a result of disaster of obsolescence as
determined by the Contracting Officer.]{.underline}

~~(c) Notwithstanding the foregoing, if requested by the Contractor, the
United States shall be responsible for major repair or replacement of
San Felipe Division Facilities required as a result of disaster or
obsolescence as determined by the Contracting Officer. \[Undergoing
construction of language by Contractors\]~~

28.2 (a) Santa Clara Valley Water District, as the Operating Non-Federal
Entity, has the right to impose upon any entity other than San Benito
County Water District a charge to recover costs incurred by Santa Clara
Valley Water District for Reach 1 of the San Felipe Division Facilities,
in addition to O&M charges, provided that such charges are just and
reasonable.

\(b\) In any contract with any entity other than San Benito County Water
District to deliver Project Water or non-Project water through Reach 1
of the San Felipe Division Facilities, the Contracting Officer shall
require the contractor to pay to Santa Clara Valley Water District such
charges as are just and reasonable for the use of Reach 1 of the San
Felipe Division Facilities.

28.3 (a) The Contractor, as the Operating Non-Federal Entity, has the
right to impose upon any entity a charge to recover costs incurred by
the Contractor for Reach 2 of the San Felipe Division Facilities, in
addition to O&M charges, provided that such charges are just and
reasonable.

\(b\) In any contract with any entity to deliver Project Water or
non-Project water through the San Felipe Division Facilities, the
Contracting Officer shall require the contractor to pay to Contractor
such charges as are just and reasonable for the use of Reach 2 of the
San Felipe Division Facilities.

28.4 (a) Articles 17, 18, 19 and 20 of Contract No. 7-07-20-W0023 are
hereby incorporated into this contract as though fully set forth herein.

\(b\) The Contractor, as the Operating Non-Federal Entity, has the right
to impose upon any entity a charge to recover costs incurred by the
Contractor for Reach 3 of the San Felipe Division Facilities, in
addition to O&M charges, provided that such charges are just and
reasonable.

\(c\) In any contract with any entity to deliver Project Water or
non-Project water through the San Felipe Division Facilities, the
Contracting Officer shall require the contractor to pay to Contractor
such charges as are just and reasonable for the use of Reach 3 of the
San Felipe Division Facilities.

[CONTINGENT ON APPROPRIATION OR ALLOTMENT OF FUNDS]{.underline}

29\. The expenditure or advance of any money or the performance of any
obligation of the United States under this Contract shall be contingent
upon appropriation or allotment of funds. Absence of appropriation or
allotment of funds shall not relieve the Contractor from any obligations
under this Contract. No liability shall accrue to the United States in
case funds are not appropriated or allotted.

[BOOKS, RECORDS, AND REPORTS]{.underline}

30\. (a) The Contractor shall establish and maintain accounts and other
books and records pertaining to administration of the terms and
conditions of this Contract, including: the Contractor\'s financial
transactions, water supply data, and Project land and right-of-way
agreements; the water users\' land-use (crop census), land ownership,
land-leasing and water use data; and other matters that the Contracting
Officer may require. Reports thereon shall be furnished to the
Contracting Officer in such form and on such date or dates as the
Contracting Officer may require. Subject to applicable Federal laws and
regulations, each party to this Contract shall have the right during
office hours to examine and make copies of the other party\'s books and
records relating to matters covered by this Contract.

\(b\) Notwithstanding the provisions of subdivision (a) of this Article,
no books, records, or other information shall be requested from the
Contractor by the Contracting Officer unless such books, records, or
information are reasonably related to the administration or performance
of this Contract. Any such request shall allow the Contractor a
reasonable period of time within which to provide the requested books,
records, or information.

\(c\) At such time as the Contractor provides information to the
Contracting Officer pursuant to subdivision (a) of this Article, a copy
of such information shall be provided to the Operating Non-Federal
Entity.

[ASSIGNMENT LIMITED\--SUCCESSORS AND ASSIGNS OBLIGATED]{.underline}

31\. (a) The provisions of this Contract shall apply to and bind the
successors and assigns of the parties hereto, but no assignment or
transfer of this Contract or any right or interest therein shall be
valid until approved in writing by the Contracting Officer.

\(b\) The assignment of any right or interest in this Contract by either
party shall not interfere with the rights or obligations of the other
party to this Contract absent the written concurrence of said other
party.

\(c\) The Contracting Officer shall not unreasonably condition or
withhold approval of any proposed assignment.

[SEVERABILITY]{.underline}

32\. In the event that a person or entity who is neither (i) a party to
a Project contract, nor (ii) a person or entity that receives Project
Water from a party to a Project contract, nor (iii) an association or
other form of organization whose primary function is to represent
parties to Project contracts, brings an action in a court of competent
jurisdiction challenging the legality or enforceability of a provision
included in this Contract and said person, entity, association, or
organization obtains a final court decision holding that such provision
is legally invalid or unenforceable and the Contractor has not
intervened in that lawsuit in support of the plaintiff(s), the parties
to this Contract shall use their best efforts to (i) within 30 days of
the date of such final court decision identify by mutual agreement the
provisions in this Contract which must be revised and (ii) within 3
months thereafter promptly agree on the appropriate revision(s). The
time periods specified above may be extended by mutual agreement of the
parties. Pending the completion of the actions designated above, to the
extent it can do so without violating any applicable provisions of law,
the United States shall continue to make the quantities of Project Water
specified in this Contract available to the Contractor pursuant to the
provisions of this Contract which were not found to be legally invalid
or unenforceable in the final court decision.

[RESOLUTION OF DISPUTES]{.underline}

33\. Should any dispute arise concerning any provisions of this
Contract, or the parties' rights and obligations thereunder, the parties
shall meet and confer in an attempt to resolve the dispute. Prior to the
Contractor commencing any legal action, or the Contracting Officer
referring any matter to the Department of Justice, the party shall
provide to the other party 30 days' written notice of the intent to take
such action; [Provided]{.underline}, That such notice shall not be
required where a delay in commencing an action would prejudice the
interests of the party that intends to file suit. During the 30 day
notice period, the Contractor and the Contracting Officer shall meet and
confer in an attempt to resolve the dispute. Except as specifically
provided, nothing herein is intended to waive or abridge any right or
remedy that the Contractor or the United States may have.

[OFFICIALS NOT TO BENEFIT]{.underline}

34\. No Member of or Delegate to Congress, Resident Commissioner, or
official of the Contractor shall benefit from this Contract other than
as a water user or landowner in the same manner as other water users or
landowners.

[CHANGES IN CONTRACTOR'S SERVICE AREA]{.underline}

35\. (a) While this Contract is in effect, no change may be made in the
Contractor\'s Service Area, by inclusion or exclusion of lands,
dissolution, consolidation, merger, or otherwise, except upon the
Contracting Officer\'s written consent.

\(b\) Within 30 days of receipt of a request for such a change, the
Contracting Officer will notify the Contractor of any additional
information required by the Contracting Officer for processing said
request, and both parties will meet to establish a mutually agreeable
schedule for timely completion of the process. Such process will analyze
whether the proposed change is likely to: (i) result in the use of
Project Water contrary to the terms of this Contract; (ii) impair the
ability of the Contractor to pay for Project Water furnished under this
Contract or to pay for any Federally-constructed facilities for which
the Contractor is responsible; and (iii) have an impact on any Project
Water rights applications, permits, or licenses. In addition, the
Contracting Officer shall comply with the NEPA and the ESA. The
Contractor will be responsible for all costs incurred by the Contracting
Officer in this process, and such costs will be paid in accordance with
Article 25 of this Contract.

[FEDERAL LAWS]{.underline}

36\. By entering into this Contract, the Contractor does not waive its
rights to contest the validity or application in connection with the
performance of the terms and conditions of this Contract of any Federal
law or regulation; [Provided]{.underline}, That the Contractor agrees to
comply with the terms and conditions of this Contract unless and until
relief from application of such Federal law or regulation to the
implementing provision of the Contract is granted by a court of
competent jurisdiction.

[NOTICES]{.underline}

37\. Any notice, demand, or request authorized or required by this
Contract shall be deemed to have been given, on behalf of the
Contractor, when mailed, postage prepaid, or delivered to the Area
Manager, South-Central California Area Office, 1243 N Street, Fresno, CA
93721, and on behalf of the United States, when mailed, postage prepaid,
or delivered to the Board of Directors of the Santa Clara Valley Water
District, 5750 Almaden Expressway, San Jose, CA 95118-3686. The
designation of the addressee or the address may be changed by notice
given in the same manner as provided in this Article for other notices.

[CONFIRMATION OF CONTRACT]{.underline}

38\. The Contractor, after the execution of this Contract, shall
promptly seek to secure a decree of a court of competent jurisdiction of
the State of California, confirming the execution of this Contract. The
Contractor shall furnish the United States a certified copy of the final
decree, the validation proceedings, and all pertinent supporting records
of the court approving and confirming this Contract, and decreeing and
adjudging it to be lawful, valid, and binding on the Contractor.

IN WITNESS WHEREOF, the parties hereto have executed this Contract as of
the day and

year first above written.

THE UNITED STATES OF AMERICA

By:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Regional Director, Mid-Pacific Region

Bureau of Reclamation

SANTA CLARA VALLEY WATER DISTRICT

By:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

President of the Board of Directors

Attest:

By:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Secretary of the Board of Directors

[EXHIBIT A]{.underline}

\[Map or Description of Service Area\]

EXHIBIT B

\[Initial Rates and Charges\]

(/media/pszemraj/PeterTrove/project-files/DATA/ms-word-files/big-DOC/835626.doc)

[^1]: Contractor specific issue which may require additional language.

[^2]: Language still subject to modification