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| ! |           | ## Department of Energy    |          |           |   |
| [ |           |                            |          |           |   |
| ] |           | Bonneville Power           |          |           |   |
| ( |           | Administration\            |          |           |   |
| m |           | P.O. Box 3621              |          |           |   |
| e |           |                            |          |           |   |
| d |           | Portland, Oregon           |          |           |   |
| i |           | 97208-3621                 |          |           |   |
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|   |           |                            |          |           |   |
|   |           |                            |          |           |   |
|   | In reply  |                            |          |           |   |
|   | refer to: |                            |          |           |   |
|   |           |                            |          |           |   |
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Doug Marker

Director

Fish and Wildlife Division

Northwest Power Planning Council

851 S.W. Sixth Ave., Suite 1100

Portland, OR 97204-1348

Dear Doug,

This letter is our response to your October 19, 2001 decision memo on
your FY2002 funding recommendations for the Mountain Columbia province.
We have reviewed your recommendations and have some general comments,
followed by project specific comments and a summary table of our funding
decisions.

We are pleased that there is overall broad agreement on the funding
priorities for the Mountain Columbia province. You will see on the
attached summary list that we agree with funding qualifications you have
placed on projects that will require further negotiations with the
project sponsors to successfully implement these projects. These areas
of agreement are not repeated in this letter but only on attached
summary list. We will closely track these requirements to be able to
report back to you that these specific areas have been addressed within
the final project development process.

We still have significant concern for the projects, which we initially
grouped as "Potentially Fundable After Completion of Subbasin Planning
-- No Comments/Qualifications or With Comments/Qualifications". There
are a total of seven projects in this category, with a combined FY2002
budget of \$5,509,540. Five of the projects are multi-year projects that
maintain their 2002 budgets for two to three years. In addition, three
of the projects have multi-year Operations and Management budgets
totaling approximately \$361,000 per year. These are significant
increases with multi-year commitments being made before subbasin
planning is completed. If these new projects represent the highest
priority for the province following the subbasin summaries and
subsequent review process, why is there a need for continued subbasin
planning in the province? We believe that there should be a consistent
application of funding criteria across provinces, and a clear decision
made on funding new projects that are not ESA related, before subbasin
planning is completed. To address these concerns we have broken these
projects into two groups. The first group which includes: 24018 - Secure
and Restore Critical Fish and Wildlife Habitat, 24015 - Wetland/Riparian
Protection, Restoration, Enhancement and Maintenance in the Coeur
d'Alene Subbasin, 24012 - Riparian Habitat Preservation -- Weaver Slough
and McWinegar Slough and 24017 - Restoring Bull Trout Habitat in the
Blackfoot River's North Fork. We are requesting further review of these
projects before Bonneville can make a final funding decision.

The second group which includes: 199004400 - Implement Fisheries
Enhancement Opportunities on the Coeur d'Alene Reservation, 24005 --
Smith Creek Restoration, 24023 - Purchase Conservation Easements from
Plum Creek Timber Company (PCT) along the Fisher River, 24008 -- Genetic
Inventory of Bull Trout and Westslope Cutthroat Trout in the Pend
Oreille Subbasin, 24003- Acquire and Conserve High Priority Bull and
Westslope Cutthroat Habitat in Trestle Creek. This group of projects can
be funded, but Bonneville will apply the general and specific funding
qualifications listed below.

Group One: Projects That Require Further Review

The two large land acquisition projects, i.e. 24018, Secure and Restore
Critical Fish and Wildlife Habitat, and 24015, Wetland/Riparian
Protection, Restoration, Enhancement and Maintenance in the Coeur
d'Alene Subbasin present a particular funding challenge. Both of these
projects require multi-million dollar expenditures over at least a
three-year period. This level of expenditure does not appear to be
prudent until subbasin planning is completed and can confirm that these
are the highest and best priorities for the province. Bonneville
proposes that a moderate level of funding based around specific criteria
should be established for these two projects. In addition for 24015,
funding for this project will be based on the successful execution of
the planning and selection process that the project sponsor has outlined
in its response to the ISRP. It appears that the process outlines a
logical stepwise means of identifying, prioritizing and subsequently
purchasing wildlife mitigation properties. Funding will be based on a
yearly funding process, which will require successful execution and full
expenditure of the first year's funds until subsequent second and third
funding allocations are made available. The project sponsor will be
required to work closely with Bonneville to assure the proper land
procurement process is followed in a systematic stepwise process.

24012 - Riparian Habitat Preservation -- Weaver Slough and McWinegar
Slough -- This project will be funded only after further review. Our
first concern is that it appears this project should be considered for
funding under the Montana Wildlife Agreement. As presented this is a
wildlife mitigation project separate from the Salish Kootani land
acquisition proposal. The project sponsor has verbally stated that the
project objectives are more appropriately focused on the riparian
protection/restoration for aquatic purposes and should be considered as
fisheries mitigation for Hungry Horse Dam. Bonneville can only evaluate
this project of the project based on what was presented in the project
proposal. Any change in scope would require review by the Council.
Secondly, as a wildlife project, based on subbasin planning concerns, it
would be necessary to assure that these lands are the highest priority
for such significant lands expenditure. This concern relates back to
implementing large land acquisition projects before the completion of
subbasin planning. Although it appears to have wildlife benefits and is
locally supported, the question of how it fits into an overall strategy
is not clearly defined.

24017 - Restoring Bull Trout Habitat in the Blackfoot River's North Fork
-- Funding approval for this project will be based on further project
review with the project sponsor. There are three issues to be
reviewed. 1. Are the bull trout in the project area in jeopardy since
the Blackfoot was considered a core area in the Montana Recovery Plan?
This is a question that could presumably be answered in a subbasin plan,
which would take the broader review of all bull trout populations with
the Blackfoot drainage, and show whether this is really the priority
area for work to remove the Blackfoot drainage bull trout population
from jeopardy. 2. The length of the proposed water leases ranges from
10-30 years. Longer-term benefits need to be investigated with
provisions for lease renewals, long-term releases, or outright water
rights purchases. 3. The project proposal involves work in spring
creeks. Adequate evidence of bull trout use of these systems needs to be
documented.

Group Two: Fundable projects that have substantial subbasin planning
concerns

Bonneville's will require a yearly review of each project's
accomplishments before committing to subsequent year's funding. This
multiyear funding will also be reviewed in relationship to the progress
of subbasin planning within the province. Funding will be committed on a
one year basis only, with no guarantee of subsequent funding until each
project has been reviewed based upon the project's specific
deliverables, other qualifications and the overall status of subbasin
planning within the Mountain Columbia Province.

199004400 - Implement Fisheries Enhancement Opportunities on the Coeur
d'Alene Reservation -- This is an ongoing project that has proposed a
budget increase for \$728,000 in FY2001 to \$1,174,365 in FY2002. We
have additional concerns in addition to your comments to follow the
ISRP's requirement of development of an adequate M&E plan and subsequent
project goals and objectives. These are: 1. The
Construction/Implementation phase of the project contains approximately
\$245,081 for active in-channel restoration. In almost all other
watershed restoration projects within the program, in-channel
restoration projects have been eliminated, focusing rather on passive
restoration techniques. Is it the intent of the Council to allow funding
for this project objective? 2. The O&M phase budget does not appear to
be an O&M budget, but rather an Information and Education budget.
Information and Education objectives have received considerable scrutiny
from the Council over the past year. Is it the intent of the Council to
allow funding of this objective of the proposal? Funding for this
project will consequently be based on the development of an M&E plan,
and refinement of the projects goals and objective before the other
project objectives are implemented. Active in-channel restoration and
O&M implementation will also be delayed pending your subsequent review
of our concerns.

24010 - Reconnection of Floodplain Slough Habitat to the Kootenai River
-- After a subsequent project review, we have determined that this
project does not meet the US Fish and Wildlife Service's Biological
Opinion (BiOp) for the upper Columbia. We no longer recommend funding
based on meeting a BiOp requirement, but will fund the feasibility phase
this project, with subsequent funding based upon the M&E results of the
feasibility phase and the subbasin-planning schedule.

24021 - Implement Floodplain Operational Loss Assessment, Protection,
Mitigation and Rehabilitation on the Lower Kootenai River Watershed
Ecosystem - After a subsequent project review, we have determined that
this project does not meet the US Fish and Wildlife Service's (USFWS)
Biological Opinion for the upper Columbia. We no longer recommend
funding based on meeting a BiOp requirement, but will fund the project
based upon the favorable recommendations of the ISRP and CBFWA. We will
also review the possibility of linking this project with proposal
24010 - Reconnection of floodplain slough habitat to the Kootenai River.
CBFWA said 24010 should wait until 24021 was completed, but 24021's
focus is on terrestrial species and not aquatic species. There appears
to be the potential for this project to include review of Kootani River
slough habitat for aquatic species.

Secondly we have noted that your funding recommendations have asked for
USFWS assurance that BPA recommended ESA projects meet BiOp criteria. We
recognize this is a valid request, but as the implementing agency for
the BiOp related projects Bonneville will retain the prerogative to make
the final funding decision on BiOp related projects.

24023 - Purchase Conservation Easements from Plum Creek Timber Company
(PCT) along the Fisher River -- Funding will be allocated on a yearly
basis, and only after project deliverables are verified. Successful
project implementation will require assurances that prescribed land and
water management activities can be adequately enforced such as meeting
water allocations in all years and flow conditions, and adherence to
prescribed forest management practices.

24008 -- Genetic Inventory of Bull Trout and Westslope Cutthroat Trout
in the Pend Oreille Subbasin -- This project will supply valuable
information to the subsequent subbasin planning process. Consequently it
will be important that the project is completed in a timely manner and
that reports and recommendations are accessible to the subbasin planning
process for potential future project development.

24003- Acquire and Conserve High Priority Bull and Westslope Cutthroat
Habitat in Trestle Creek -- This project will be funded ahead of
subbasin planning, but the project sponsor will be required to work
closely with Bonneville to assure the proper land procurement process is
followed in a systematic stepwise process.

Additional project specific comments:

199608720 -- Focus Watershed Coordination in the Kootani River Watershed
-- We still have concerns that the project sponsor has not adequately
involved the entire watershed in this project. We urged the sponsor to
utilize another entity that could better represent the entire watersheds
coordination needs. With that in mind we have the Kootenai River Network
leading this project thru an MOU with the sponsor. If that works out
satisfactory then we will contract with them directly in the future.

199404900 - Improving the Kootenai River Ecosystem -- Fund as part of
meeting USFWS BiOp requirements. We believe that after the initial three
year funding cycle that this project should be reviewed for a
substantial cost share from BC Hydro before Objective 1, Arrow Reservoir
fertilization is reconsidered for funding.

We look forward to working with you to review the projects of concern in
this province and on future province funding decisions.

Sincerely,

Sarah R. McNary

Director For Fish and Wildlife