November 1, 2002 

Via Email and First Class Mail 

Michael J. Ryan 

U.S. Bureau of Reclamation 

Shasta Area Manager 

16349 Shasta Dam Boulevard 

Shasta Lake, CA 96019-8400 

 Re: Settlement Contractors’ Further Red-Lined Draft of Renewal Contract for 

Discussion at the November 4, 2002 Negotiating Session 

Dear Mr. Ryan: 

 In preparation for our November 4, 2002 negotiating session, I am enclosing an 

October 31, 2002 draft of the Settlement Contract. This draft includes and highlights 

revisions discussed during the last two negotiating sessions. The provisions that have been 

tentatively agreed to are not shaded. Accordingly, our further negotiations and discussions 

should primarily focus on the shaded provisions. Following is a discussion of the shaded 

provisions, and an explanation of the further modifications proposed by the Settlement 

Contractors: 

 1. Article 3(c)(1): During the last two negotiating sessions on October 7 and 

October 21, 2002, Reclamation did not provide a specific counter-proposal to the Settlement 

Contractors’ proposed redraft of Article 3(c)(1), which the Settlement Contractors provided to 

Reclamation on October 1, 2002. Instead, Reclamation stated that it would not accept the 

Settlement Contractors’ redraft, but that it would consider further proposals from the 

Settlement Contractors. The Settlement Contractors remain disappointed with Reclamation’s 

refusal to develop a counter-proposal on this important issue. In any event, as a further good 

faith attempt to break the deadlock on this matter, the Settlement Contractors have proposed a 

new Article 3(c)(1) as shown. Under this provision, the proposed base supply rescheduling 

fee would generally be imposed on a greater frequency than as set forth in USBR Exhibits 9 

and 10 in these negotiations. The 50% multiplier for the two rate components is intended to 

account for that fact, as well as the fact that the Settlement Contractors will only be receiving 

75% of their supplies during Shasta Critical Years. 
Michael J. Ryan 

November 1, 2002 

Page 2 

This new Article 3(c)(1) has no reference to Term 91 as the trigger for when the fee is 

imposed. This is consistent with the fact that Term 91 does not apply to the Settlement 

Contractors’ water rights, and this helps to address the Settlement Contractors’ significant 

concerns with any attempt to expressly refer to Term 91 as the basis for any decisions or 

imposition of fees under the Settlement Contracts. The Settlement Contractors have 

described these concerns in detail during previous negotiation sessions. The Settlement 

Contractors will not agree to any provision within these contracts that refers to Term 91. 

Finally, this proposal is subject to: (1) the Settlement Contractors’ review and 

consideration of Reclamation’s forthcoming proposal regarding how it intends to account for 

the monthly diversion of Project Water versus Base Supply Water under the Settlement 

Contracts; and (2) the Settlement Contractors’ further consideration of how the imposition of 

the proposed base supply rescheduling fee under Article 3(c)(1) will affect their ability to 

participate in the Phase 8 process. I know you are not concerned about how these 

negotiations relate to the Phase 8 process, but the Settlement Contractors are. 

2. Article 3(e): After further review and consideration, the Settlement 

Contractors propose adding the additional underlined text to the end of Article 3(e) (the new 

3(f)). This provision is consistent with the CVPIA water transfer language agreed to by 

Reclamation for the interim renewal contracts for Sacramento Valley CVP water service 

contractors. 

3. Articles 8 and 29: In order to provide incentives for water conservation, and 

consistent with our discussions during the October 21, 2002 negotiating session, the 

Settlement Contractors have revised the proposed provisions in the Settlement Contractors’ 

Exhibit 13, and these revised provisions are set forth in Articles 8(a) and 29(a).

4. Article 9(b): A redraft of the so-called water quality provision is set forth in 

Article 9(b). I have retained some of the modifications Reclamation proposed in its last draft 

and have, as discussed, underscored the importance of the issue and the requirement that the 

Parties use their best efforts to resolve any dispute. 

 Finally, the Settlement Contractors understand that Reclamation will be providing the 

following in conjunction with the November 4, 2002 negotiating session: (1) Reclamation’s 

proposal regarding how it intends to account for the monthly diversion of Project water versus 

Base Supply water under the Settlement Contracts, and Reclamation’s justification for this 

proposed accounting procedure; (2) Reclamation’s interpretation of whether the provisions of 

Articles 8(f), 8(g) and 30 provide assurances to the Settlement Contractors that any changes to 

Reclamation’s proposed accounting procedures are subject to prior review by and consultation 

with the Settlement Contractors; and (3) a status report on Reclamation’s analysis regarding 

how any base supply rescheduling fees paid under Article 3(c)(1) would be credited against 

the Settlement Contractors’ repayment obligations. 
Michael J. Ryan 

November 1, 2002 

Page 3 

 Please do not hesitate to contact me if you have any questions or need additional 

information regarding these matters. 

 Very truly yours, 

 Stuart L. Somach 

 General Counsel 

 Glenn-Colusa Irrigation District 

SLS:sb 

Encl. 

cc: Kevin O’Brien 

 Mark Atlas 

 Paul Bartkiewicz 

 William Baber 

 John Kenny 

 Van Tenney 

 William Menke 

 Dennis Michum 

 David Guy 

 Marc Van Camp 

 Andrew Hitchings