United States Department ofthe Interior

APR18 ~9B

U.S. Fish and Wildlife Service

Region 1

911 N.E. 11th Avenue

Portland OR 97232-41St

U.S. Bureau ofReclamation

Mid-Pacific Region

2800 Cottage Way

Sacramento CA 95825-1898

Subject: Final CVPIA Administrative Proposal on Water Transfers

Dear Interested Party:

In September 1995, the Department ofthe Interior(Interior) invited the public to identify their

concerns regarding implementation ofthe Central Valley ProjectImprovement Act (CVPIA). To

facilitate public input and discussion, Interiorrepresentatives held a series ofpublic meetings

between September 1995 and April 1996. During these meetings, 12 major areas ofconcern were

identified, and individuals volunteered to form work teams and discuss the specific issues pertaining

to those areas. In April 1996, Interior committed to the preparation ofan Administrative Proposal to

addressthe principal issues raised by stakeholders during the public forum and work team meetings.

To that end, Interior circulated the draft Administrative Proposal on Water Transfers on June 14, 1996,

forreview by interested parties, and received written comments from 14 parties. Enclosed is the final

Administrative Proposal on Water Transfers which has been revised to reflect key comments received,

as well as previously raised concerns.

Copies ofthis final proposal can be accessed on the Mid-Pacific Region’s home page at

http:/www.mp.usbr.gov or can be obtained by calling Ms. Alisha Sterud at 916/978-5195 or

TDD 916/978-5608.

Sincerely,

pear

Regioui~al Director

U.S. Fish and Wildlife Service

Region 1

Roger K. Patterson

Regional Director

U.S. Bureau ofReclamation

Mid-Pacific Region

w

Enclosure
CVPIA ADMINISTRATIVE WATER

PROPOSAL TRANSFERS

INTRODUCTION

In September 1995, the Department of the Interior (Interior) invited the public to identify their

concerns regarding implementation ofthe Central Valley Project Improvement Act, Title

XXXIV ofPublic Law 102-575 (CVPIA). To facilitate input and discussion, representatives of

Interior held a series ofpublic meetings between September 1995 and April 1996. During these

meetings, 12 major areas ofconcern were identified, and individuals voluntecred to form

working groupsto discuss specific issues pertaining to those areas. In April 1996, Interior

committed to the preparation of “Administrative Proposals” to address the principal issues raised

by stakeholders during the public forum and working group meetings. To that end, Interior has

issued final administrative proposals on the following six issue areas: Water Conservation,

Trinity River, San Joaquin River, Stanislaus River, Urban Reliability, and Management of

Section 3406(b)(2) Water (800,000 acre-feet.)

BACKGROUND

Section 3405(a) ofthe CVPIA authorizes all individuals or districts who receive Central Valley

Project (CVP) water under water service, repayment, water right settlement, or exchange

contracts to transfer all or a portion ofthe CVP water they receive under contract to any other

California water userfor any purpose recognized as beneficial under applicable state law.

Following enactment ofthe CVPIA, Interior prepared “Interim Guidelines for the

Implementation of WaterTransfers.” Reclamationreleased the draft interim guidelines for

public review and comment on January 14, 1993. The interim guidelines were finalized on

February 25, 1993. As stated in the final interim guidelines (hereafter, “watertransfer

guidelines”), Reclamation and the U.S. Fish and Wildlife Service (Service) each have unique

roles in reviewing and processing any proposed water transferprior to final approval.

SUMMARY OF TIlE ISSUES

There were 22 issues initially identified by the water transfer team.1 The major issues have been

consolidated into six major topics. These topics include the review and approval process, thirdparty impacts, applicability ofthe CVPIA to water transfers, transferable water, clarification of

the right offirst refusal, and area oforigin.

Review and Approval Process

The concerns raised in this areaincluded: defining the proper role ofthe contracting district in

reviewing and approving proposedwater transfers, streamlining the watertransfer processto

accelerate approvals, and clarifying calculation ofthe 20-percent threshold in section 3405(a)(l).

‘See Appendix B for a list ofall the issues.

1 April 16, 1998
CVPIAADMINISTRATIVE WATER

PROPOSAL TRANSFERS

TheRole of WaterDistricts in ReviewingandApproving Water Transfers. Section 3405(a)(l)

requiresthat transfers involving more than 20 percent of the CVP water subject to long-term

contract within any contracting district shall be subjectto the district’s review (see belowfor a

further discussion ofthis requirement). The watertransfer guidelines invite district comment on

the impacts that a proposed transfer, regardless of the quantity, may have on a district, even

though this is not required by the CVPIA. Section 3405(a)(l)(K) specifies that the Secretary of

the Interior (Secretary) shall not approve a water transfer ..... uniess the Secretary determines...

that suchtransfer will have no unreasonable impact on the watersupply, operations, or financial

conditions ofthe transferor’s contracting district.., or its waterusers.” The water transfer

guidelines direct individuals who wish to complete a water transfer to notify their district about

the proposed transfer. The water transfer guidelines give the district 45 days to notify

Reclamation ofthe impacts on its watersupply, operations, or financial conditions, and further

direct that any impacts identified by the district as being “unreasonable” be documented in

wnting.

Because ofpractical limitations on Reclamation’s ability to independently inquire as to each

district’s circumstances, Reclamation has been placing considerable weight on the comments it

receives from a district when making the determination required by section 3405(a)(l)(K) asto

whether or not a proposed transfer would have an “unreasonable impact.” Furthermore, the water

transfer guidelines have not attempted to define the criteria upon which the Secretary would

determine ifimpacts on a district’s water supply, operations, orfinancial conditions are

“unreasonable.”

Urban and environmental interests are concerned about the role the district has in this process.

Urban and environmental interestssupport a district-sensitive approach whereby the district’s

input and concerns are addressed. However, without objective criteria having been specified for

determining what constitutes “unreasonable impacts,” urban and environmental interests are

concerned that they could spend a significant amount oftime negotiating water transfers only to

have a district recommend that Reclamation determine that the water transfer has unreasonable

impacts on the district.

Agricultural interests believe that the district should be given the firstlevel ofapproval on water

transfers because the district has the technical capability to understand the impacts to the district.

Furthermore, agricultural interests believe that it would be difficult to specify objective criteria

for determining “unreasonable impacts” because most watertransfers are umque asto time,

place, and hydrologic conditions. Finally, ~griculturalinterests are concerned that if a district

can only comment on proposed water transfers and has no approval authority, then Reclamation

may approve proposed water transfersthat the district believes have unreasonable impacts on the

district.

InteriorResponse. Interior acknowledgesthe unique concerns raised by the interest groups.

Technical meetings were held by a subgroup ofthe watertransfer team to try to develop specific

objective criteriathat a district would use when documenting unreasonable impacts. The

2 April16, 1998
CYPIA ADMINISTRATIVE WATER

PROPOSAL TRANSFERS

technical team was not able to reach consensus on specific objective criteria. Further attempts to

draft general principles also proved unsuccessful. In the near future, Reclamation wiWagain

attempt to reach consensus on district criteria. While this process goes forward, Reclamation

will continue to solicit technical input from the contracting district asto the potential impacts of

watertransfers on it and will require thatdistricts provide sufficient evidence to support their

views that a proposed transfer would have “unreasonable” impacts on the water supply,

operations, or financial conditions ofa district. However, Reclamation will retain, asit always

has, the authority to make the determination required by section 3405(a)(1)(K).

How Can the Water Transfer ProcessBeStreandined? There was strong support, although not

complete consensus, among the interest groups that the watertransfer approval process needed to

be accelerated. Examples were given that demonstrated that the process could be cumbersome

and time-consuming. The team came to recognize that a streamlined process could be developed

to allow for accelerated consideration ofwater transfer proposals while at the same time ensuring

that environmental protections are in place.

InteriorResponse. Both Reclamation and the Service have been working since 1995 on a

processto accelerate the water transfer approval process. During 1995, Interiortested a concept

called programmatic review ofagricultural water transfers in four CVP divisions (see next

paragraph). In essence, this programmatic review required Interior to develop a list of

parametersthat agricultural water transfers within a divisionwould have to meet to be included

in the programmatic review document. Then, environmental documentation was completed on

the programmatic review document. Inpractice, a contractor requests that a water transfer be

approved, Interior personnel determine whetherthe proposed water transfer falls within the

programmatic review document, and, ifso, the transferis approved immediately. Ifthe proposed

watertransfer does not fall within the parameters ofthe programmatic review document, then a

separate analysis ofthe proposedtransfer and a separate environmental document must be

completed priorto the water transfer being approved.

Programmatic reviews have been accomplished for agricultural water transfers within the Friant

Division, San Luis/Delta-Mendota Division, Tehama-Colusa/Corning Canals Division, and

Sacramento River Division. Reclamation would consider applying the programmatic review and

approval process to other types ofwater transfers, such as agricultural water transfers, between

the East and West sides ofthe basins and North and South ofthe Sacramento-San Joaquin Delta,

and from agricultural use to municipal and industriall(M&I), orenvironmental use ifthe volume

ofprojected watertransfers indicates such ~need. The programmatic review process developed

specific criteria that agricultural water transfers must meet before suchtransfers are eligible to be

approved under this program. The programmatic reviewcriteria foragricultural water transfers,

along with the completed environmental documentation, have been made available to interested

parties and will continue to be made available forpublic review and comment in the future.

Clart/ication ofthe 20-PercentRule Contained in Section 3405(a)(1). The issues identified

are: (1)the role ofthe contracting districts and agencies in reviewing watertransfers exceeding

3 April 16, 1998
CVPIA ADMINISTRATIVE WATER

PROPOSAL TRANSFERS

20 percent of watersupply, and (2) how the 20-percent threshold ofsection 3405(a)(l) should be

calculated. Section 3405(a)(l) directs thattransfers involvingmore than 20 percent of the CVP

water subjectto long-term contract within a contracting district be subject to approval by the

district, in addition to approval by the Secretary, with the district applying the same criteria as

the Secretary. When the CVPIA was signed into law, then-President Bush expressed concerns

that section 3405(a) might be “construed to permit the exercise of Federal executive power by the

districts or agencies,” in a mannerthat would raise constitutional concerns. To avoid such

concerns, President Bush interpreted the section as creating an advisory role for the districts,

rather than a mandatory approval role. Because ofthe continuing questions over the section,

however, Reclamation has asked the Solicitor’s Office for advice regarding its implementation.

Reclamation will release the results ofthat reviewwhen completed and will notif~’ stakeholders

and the public ofany changes in implementation that the results ofthe legal review may require.

In calculating the threshold, agricultural interests believe that a district should have the option of

comparing the amount ofa transfer to either an individual transferor’s entitlement orto a

contracting district’s total CVP contract supply. Ifa district usedthe first option, then a proposed

transfer which would exceed 20 percent of an individual transferor’s entitlement would be

subject to the district’s review and comment, regardless ofthe proportion ofa district’s total CVP

contract supply that would be involved in the transfer. However, ifa district used the second

option, then a transfer could be for 100 percent ofa given transferor’s entitlement, but it would

only be subject to review and comment by a district under the 20-percent rule ifthe proposed

transfer exceeded 20 percent ofthe district’s total CVP contract supply. Urban and

environmental interests believe that the threshold should only be calculated based upon the

second.option.

InteriorResponse. Section 3405 (a)(l) states: “Transfersinvolving more than 20 percent ofthe

Central Valley Project water subject to long-term contract... .“ Interiorinterprets thissection to

mean that the 20-percent rule applies to the water provided through the district’s contract with

the United States and not to the individual transferor’s entitlement. There are two reasons for

this interpretation. First, the legislative language “Central Valley Project watersubject to longterm contract.” It is questionable whether members ofa district receive CVP water subject to a

long-term contract. More often, they receive an allocation ofCVP watersubjectto a district

charter/rules. Secondly, from a practical standpoint, in order for Reclamation to determine ifthe

20-percent rule was exceeded on individual transfers, Reclamationwould have to monitor each

district’s charter and rules as to each individual’s water entitlement. Such oversight would

severely hinder and constrain the movemelit ofwater and frustrate one ofthe purposes ofCVPIA

to expand the use ofwater transfers. Thus, an individual may transfer 100 percent ofhis/her

water allocation from a district and not exceed the 20-percent threshold as long asthe total water

supply being transferred is 20 percent orless ofa district’s CVP contractsupply. While this

results in a district not being invited to comment on whethersuch a proposed transfer meets all

13 conditions set forth in section 3405(a)(l)(A) through (M), the district would be asked, under

Section 3405(a)(l)(K), to comment on whether such an individual proposed transfer would have

4 April 16, 1998
CYPIA ADMINISTRATIVE WATER

PROPOSAL TRANSFERS

unreasonable impacts on the district. Therefore, Interior believes that the districts are afforded a

sufficient mechanism for protecting theirinterests.

Third-Party Impacts

Third-party impacts are those impacts on water users, other entities, orindividuals who are not a

party to a watertransfer arrangement. For example, third-party impacts may include impacts to

groundwater basins and their users, economic and social impacts to communities and individuals

in the area from which water is moved and in the area to which the water is proposed to be

transferred, and environmental impacts ofwater transfers.

Few people question that third-party impacts can occur from water transfers. However, the

degree ofimpacts and the appropriate mitigation forthird-party impacts is what would likely be

contested. CVPIA does contain some provisions that, to a degree, limit the extent ofthird-party

impacts. These include: (1) the 20-percent rule discussed above, (2) the right offirst refusal,

(3) conditions imposed on ground-water transfers, (4) determination ofimpacts on district

operations, watersupply, and financial conditions, (5) mitigation ofadverse impacts to fish and

wildlife resources, and (6) consistency with Federal and State law.

InteriorResponse. Interior believes that third-party impacts need to be quantified and mitigated,

as appropriate. Third-party impacts should be addressed when evaluating both short- and longtermwater transfers. Additionally, Interior has proposed establishing a water transfer

clearinghouse that would be operatedjointly by Interior and the State ofCalifornia Resources

Agency3 This clearinghouse would track water transfers and provide data that could be used to

quantify and evaluate third-party impacts. Terms and conditions on long-term water transfers

could be developed to ensure that third-party impacts, as they become known, are appropriately

addressed. Although third-party impacts are difficult to quantify on short-term water transfers,

successive short-term watertransfers would be treated as long-term water transfers under this

analysis. Information generated from the clearinghouse could also be used in accomplishing

long-term trend analysis on ground-water conditions as well as environmental analysis on the

changesin water use. Interior believes that any appropriate third-party impacts incurred because

ofwater transfers that are not mitigated by the CVPIA should be mitigated by the partiesto the

water transfer. Interior also realizes thatthird-party impacts are a significant concern to all

stakeholders and, as such, recognizes that its commitment to addressing third-party impacts is not

completed in this Administrative Proposal. This is an issue that will evolve as more information

becomes known.

Interior envisions that the water transfer clearinghouse will provide a unique opportunity for the

water user community to monitor the availability and use oftransferred CVP water. The

clearinghouse will provide datafor State and Federal agenciesto monitor trends and movement

ofwater to assist in ecosystem reviews and analyses. The water transferclearinghouse could

also list individual water transactions, thereby assisting, to some extent, other interest groups

such as agricultural lending institutions.

5 April 16, 1998
CVPIA ADMINISTRATIVE WATER

PROPOSAL TRANSFERS

Applicability ofthe CYPIA to Water Transfers

Three areas of concern on the applicability ofthe CVPIA water transfer provisions to existing

contractors were identified: (1) historical water transfers approved under separate authorities,

(2) Sacramento River settlement contracts, and (3) Exchange Entity contracts.

Historical Water TransfersApproved underSeparateAuthorities. Water transfers have been

accomplished historically throughout water projects. Pre-CVPIA water transfers were mostly

intra-division area transfers for periods of 1 year or less, and were made for water

management/efficiency purposes. When the CVPIA was enacted, the conditions imposed on

water transfers by section 3405(a) were perceived by some water contractors as an impediment to

the accomplishment of those types ofwater transfers. Additionally, Interior’s new review and

approval process under section 3405(a) appeared cumbersome to districts that were accustomed

to quick turnaround approval on water transfers.

Agricultural interests would like the water transfers which were historically made (pre-CVPIA)

to continue to be handled asthey were in the past, ratherthanbeing subject to the CVPIA water

transfer requirements. Environmental interests believe that a blanket exception to section

3405(a) for historical transfers cannot be given since many historical transfers may have had

adverse environmental impacts. However, the environmental community generally agrees that

some historical transfers could be approved on a pro forma basis, subject to specific criteria

consistent with section 3405(a).

Interior Response. Interior believesthat the programmatic reviewprocess on historical water

transfers will encompass the majority ofthe water transfer issues raised as a concern. For those

water transfers that are outside ofthe programmatic reviewprocess criteria, separate evaluations

will be made on a case-by-case basis.

Sacramento RiverSettlement Contracts.2 Sacramento Riversettlement contracts contain two

types ofwatersupply -- base supply and CVP water.3 These contracts were negotiated to settle

2 Sacramento Riversettlement contracts referto those contracts along the Sacramento

River that were negotiated to settle water right disputes and are titled, “Contract between the

United States and [entity], diverter ofwater from the Sacramento River sources providing for

project waterservice and agreement on div~ersion ofwater.”

~CVP, or “Project water,” is defined in such contracts as ..... all water diverted or

scheduled to be diverted each month during the period April through October ofeach year by the

contractor from its source ofsupply which isin excess ofthe base supply.”

4The term“Central Valley Projectwater” as defined in section 3403(f) means all waterthat

is developed, diverted, stored, or delivered by the Secretary in accordance with the statutes

authorizing the Central Valley Project and in accordance with the terms and conditions of water

rights acquired pursuant to California law.

6 April 16, 1998
CVPIA ADMNISTRXflVE WATER

PROPOSAL TRANSFERS

water right disputes along the Sacramento River and are not a recognition ofwaterright claims

or entitlement of either party. Base supply is the amount of water that the parties to the contract

agree that the contractor can divert at its own diversion point free of charge. CVP water isthat

quantity of water that mustbe paid for under the terms and conditions of the contract and in

accordance withFederal Reclamation laws.

Environmentalists believe that “CVP water,” asthat term is defined in section 3403(f) of the

CVPIA4, should be interpreted to include the base supply. Therefore, they argue the water

transfer provisions ofthe CVPIA would be applicable to both base supplyand CVP water.

Sacramento Riversettlement contractors do not believe that base supply is “CVP water” as that

term is defined in section 3403(f) ofthe CVPIA. Therefore, Sacramento River settlement

contractors do not believe that base supply water is subject to the CVPIA water transfer

provisions, although they acknowledge that project water diverted under their contract is subject

to the CVPIA transfer provisions.

Interior Response. Reclamation believes that base supply, as that term is defined in the

Sacramento Riversettlement contracts, is not CVP water withinthe meaning ofsection 3403(f)

ofthe CVPIA. Therefore, base supply water is not subject to the water transfer provisions ofthe

CVPIA. However, base supply water is subjectto the watertransfer provisions ofCalifornia

State law. Furthermore, all Sacramento Riversettlement contracts contain a provision that

requiresthe Contracting Officer to approve any transfers ofbase supply wateror CVP water.

Reclamation is working with the Sacramento Riversettlement contractors to develop water

transfer guidelines for base supply water.

ExchangeEntities Contract.5 The Exchange Entities claim that water provided by Reclamation

to the Exchange Entities pursuant to their contract is not CVP water and, therefore, such water is

not subject to the watertransfer provisions ofthe CVPIA. The Exchange Entities state that their

contract is, in effect, a waterrights settlement contract. They believe that Judge Wanger, in

Stockton East WD v. Oakdale Irrigation District/South San Joaquin Irrigation District, held that

water rights settlement water is not subject to the CVPIA because it is not CVP water.6

Therefore, by logical extension, the Exchange Entities believe thattheir contract water also is not

CYP water and is notsubject to CYPIA transferprovisions, but only to California law. Under

~The United States and the Contracting Entities(Central California Irrigation District,

Columbia Canal Company, San Luis Canal Company, and the Firebaugh Canal Company)

entered into a contract titled, “Second Amended Contract for Exchange ofWaters,” dated

September 15, 1967, revisedDecember 6, 1967, that superseded and replaced various Purchase

Agreements, Exchange Contracts, and deeds for the uses ofwater ofthe San Joaquin River.

These Contracting Entities are commonly referred to asthe Exchange Entities.

6 Interior does not agree with the Exchange Entities’ interpretation ofthisjudicial

decision.

7 April 16, 1998
CYPIA ADMINISTRATIVE WATER

PROPOSAL TRANSFERS

California law, Exchange Entities argue that they may transfertheir water outside ofthe

permitted place ofuse so long as no other water user would be harmedby the transfer (California

— Water Code § 1706).

A second issue raised by the Exchange Entities is whether a provision in their contract restricting

place ofuse may be enforced by Reclamation. The Exchange Entities believethat only

California water law should govern transfers ofexchange contractor water, and that California

law places approval authority squarely with the districts. However, regardless ofthe above

statements, the Exchange Entities are willing to comply with the CVPIA water transfer

provisions that have been issued. Environmentalists believe that the Exchange Entities are

receiving CVP waterand, therefore, are subject to the watertransfer guidelines.

Interior Response. The only water that the United States has authority to “exchange” with the

Exchange Entities is CVP water. Therefore, the water transferprovisions ofsection 3405(a) of

the CVPIA apply to water provided underthe Exchange Entities contract.

Transferable Water

The major issue is how Interior interprets the applicability ofCVPIA water transfer provisions to

water banking arrangements and conjunctive use programs. The concern is that voluntary

actions to store water for later use may not be possible ifsuchwater banking arrangements are

required to follow the water transfer provisions ofthe CVPIA. For example, if a water district

that historically used 85 percent ofits CVP water supply elects to enterinto an underground

storageprogram in another districtto store the remaining 15 percent ofits CVP water, will this

transaction be subject to the water transfer provisions ofthe CVPIA? Ifit is treated as a transfer,

then the conditions ofsection 3 405(a) concerning historic and consumptive use could preclude

the arrangement.

Agricultural and urban interests believe that water banking and conjunctive use programs were

designed to take advantage of “wet year water” availability and to store such water as needed for

future years. Environmentalists view water banking and conjunctive use programs astools that

can be and should be used to meet a host ofpresent and future watersupply needs.

Environmentalistssee the possibility ofdiverting and storing “wet yearwater” for the purposes

of water banking arrangements and conjunctive use programs.

InteriorResponse. Interior would suggest~that the water transfer guidelines not be the basis for

determining whether CVP water can be banked pursuant to sections 3408(c) and (d) ofthe

CVPIA for water banking or conjunctive use programs. Interiorsupports the development of

separate criteria for water banking and conjunctive use programs that will encourage and

facilitate suchprograms for effective water management.

8 April 16, 1998
CVPIA ADMTNISTRATIy’~ WATER

PROPOSAL TRANSFERS

Clarification of the Right ofFirst Refusal

Section 3405(a)(l)(F) states that any transfer of CVP water for use outside theCVP”... service

area shall be subject to a right offirst refusal on the same terms and conditions by entities within

the Central Valley Project service area.” Stakeholders raised the following questions and general

concerns: (1) whether the category ofentities that may claim a right offirstrefusal includes both

CVP and non-CVP contractors within the CVP service area, (2) what criteria should be used

when multiple entitiesrequest to exercise the right offirstrefusal, (3) whether a CVP contractor

who elects to claim the rightoffirst refusal is required to pay the $25 M&I surcharge fee ifthat

fee would have been required under section 3407 ofthe CVPIA from the entity displaced by the

CVP contractor’s exercise ofthe right offirst refusal, (4) whether a right offirst refusal must

apply to all or may apply only to a portion ofa proposed water transfer, and (5) whether the right

offirst refusal, which is a statutory requirement until September 30, 1999, should be made a

permanent requirement for water transfers.

Urban contractors generally recognize that the right offirst refusal appliesto all entities within

the CVP service area. CVP contractors believe that ifthey claim a right offirst refusal they are

not subject to paying the $25 M&I surcharge. CVP contractors believe that the $25 M&I

surcharge is essentially a connection fee to the CVP. Because they already are customers ofand

connected to the CVP, they believe the surcharge does not apply ifthey exercise a right offirst

refusal. Urban interests also believe that the right offirst refusal should be clarified to apply to

all or a part ofa proposed water transfer. This would allow smaller contractors to participate on

an equal footing with larger contractors. Lastly, although the right offirstrefusal only applies

through September 30, 1999, CVP contractors would like the right offirst refusal to be made a

permanent condition for watertransfers.

Environmentalists generally believe that the right offirst refusal requirementshould be

interpreted to keep the CVPIA Restoration Fundwhole. In other words, any exercise ofthisright

must meet the same terms and conditions included in the original transfer proposal including the

$25 M&I surcharge fee, ifit would have applied. Environmentalists generally agree with the

urban interests in that the right of first refusal could be clarified to~apply to all or a part ofa

proposed water transfer. Environmentalists also would support the extension ofthe rightoffirst

refusal beyond September 30, 1999, in implementing regulations as a recognizedmitigation

measure forthird-party impacts.

InteriorResponse. First, Interior agrees tl~at any entity, including bothCVP and non-CVP

contractors, in the CVP service area can claim a right offirst refusal. On an interim basis, we

have interpreted an entity to be an individual, any legal organization (e.g., trust, partnership,

corporation), or any government organization (e.g., local, state, or federal agency). Second, by

definition the water transfer processis a voluntary action. Therefore, for multiple requests on the

exercise offirst refusal, the transferor should determine who can exercise such a right, provided

that this action should not be usedto stop the exercise offirst refusal and the exercise offirst

refusal must be completed in the 90 daysfrom the date the transferwas first noticed as available

9 April 16, 1998
CVPIA ADMINISTRATiVE WATER

PROPOSAL TRANSFERS

for the right offirstrefusal. For example, if an entity exercisesthe right offirst refusal on the

40th day after the water transfer is noticed as available for the right of first refusal, then the

— transferor and such entity must complete all necessary actionsto exercise such right offirst

refusal by the 90th day from the date the water transfer was noticed.

Third, ifthe $25 M&I surcharge per acre-foot would havebeen required under section 3407 of

the CVPIA from the entity being replaced by the exercise of the right offirst refusal, then

Interior believes that the $25 M&I surcharge still applies because it is a term and condition ofthe

watertransfer proposal which must remain in place, asrequired by section 3405(a)(l)(F).

Fourth, Interior agrees that the right offirst refusal could apply to all or a portion ofthe proposed

transfer provided that the remaining portion ofthe transferstill would be viable. Lastly,

application ofthe right offirst refusal from date ofenactment (October 1992) until

September 30, 1999, gives the state and the interested public the opportunity to review the merits

ofthis watertransfer condition and to pursue this watertransfer condition through an amendment

ofthe State Water Code, ifthey so desire. Therefore, Interior would not support legislation to

modify the CVPIA to allowthis water transfer condition to continue beyond September 30,

1999.

Area ofOrigin

Reclamation has drafted a paper on the applicability ofarea oforigin statutes under California

water law to the CVP. That draftpaper was distributed and Reclamation is reviewing the

comments received. Reclamation does not consider the area oforigin issue to be a CVPIA

implementation issue, and, therefore, will not address it further in this paper.

10 April 16, 1998
CVPIA ADMINISTRATiVE WATER

PROPOSAL TRANSFERS

APPENDIX A - RESPONSE TO COMMENTS

Comment: The express and obvious intent ofthe CVPIA water transferprovisions is 10

encourage transfers ofCVP water by removing institutional barriers to suchtransfers. Inan

attempt to minimize the chance ofunevenor unfair treatment in considering and approving water

transfer proposals, Reclamation should work with stakeholders to develop reasonable and

objective criteria forthe evaluation ofdistrict impacts undersection 3405(a)(l)(K) ofthe

CVPIA. For example, all transfer impacts should be evaluated on a “with” versus “without”

transfer basis. Reclamation should develop a set ofcriteria for districts to use in developing

watertransfer programs. As an incentive to districtsthat establish watertransfer programs using

such criteria, districts would then be eligible forsome “special treatment” within Reclamation’s

water transfer approval process.

Response: Reclamation agrees that an objective ofthe CVPIA is to encourage water transfers.

The programmatic water transfer approval approach is one way forReclamation to eliminate

perceived institutional barriers to approving and reviewing water transfers. Another way to

eliminate institutional barriers would be for water districts to provide theirmembers with the

criteria they will use in evaluating membeij~initiated watertransfers. Some water districts have

developed suchwater transfer criteria. As mentioned in the Administrative Proposal, the water

transfer team did attempt to develop objective criteria to be used by districts in evaluating district

member water transfers; however, no consensus within the group could be reached. Subsequent

efforts to obtain consensus on general principles to be used by districts in evaluating water

transfers were also not fruitful. In the near future, Reclamation will again attempt to pursue the

generation of district watertransfer criteria, possibly using dispute resolution techniques to reach

agreement.

Comment: A principal concern is how, when, and to what degree will impacts ofa water

transfer upon a district and its other customers will be analyzed and addressed. It is

counterintuitive and inefficient to propose that thisissue be resolved by having the district

review a transfer proposal that Reclamation has already, or isprepared to, approve. This places

the district in the position ofhaving to prove (fully document and explain) why the transfer

would be harmful to the district or its customers almost after the fact. It would be more

appropriate ifReclamation and the transfer proponent were obligated to demonstrate

affirmatively that the proposedtransfer will have no significant adverse impacts on the district or

third parties. In this way, the approval aut1~ority remains with Reclamation, but no decision is

made until all parties are fully apprised ofall the facts.

Response: The process ofhaving the district reviewproposed watertransfers forimpacts on its

operationsis critical information thatReclamation needs in evaluating and approving water

transfers. Reclamation cannot determine affirmatively that the proposedtransfer will have no

significant adverse impacts on the district orthird parties without (1) incurring significant costs

that would be recovered from the transferor, and (2) obtaining access to the district’s records to

11 April 16, 1998
CVPIA ADMINISTRATIVE WATER

PROPOSAL TRANSFERS

review the district’s water supply, operations, orfinancial conditions. Additionally, such a

method would further delay the processing and watertransfer approval process. As stated in the

Administrative Proposal, Reclamation must rely on its contractors— the districts—to provide

such information documenting such impacts which will be used by Reclamation in evaluating

watertransfers. This evaluation must be completed prior to Reclamation approving a water

transfer, as section 3405(a)(l)(K) ofPublic Law 102-575 directs the Secretary not to approve

any water transfers unless the Secretary .... .deterinines... that such transfer will have no

unreasonable impact on the watersupply, operations, or financial conditions ofthe transferor’s

contracting district or agency orits water users.”

Comment: The collection and application ofcharges resulting fromwater transfers needs

clarification. Reclamation should provide an appendix that outlines what revenues will be

collected for specific types oftransfers, and where the revenues will be credited (e.g., transfer of

CVP agricultural water to a CVP M&I contractor), transfer ofExchange waterto a CVP M&I

contractor, orto a non-C VP M&I water user, etc.).

Response: Reclamation will include, in an appendix to the water transfer guidelines, a discussion

ofthe methodology used in computing water transfer fees and how the funds will be credited.

This methodology should be completed by December 1998 and will be available to all interested

parties.

Comment: We conceptually agree with the programmatic approach to reviewing historic

(pre-CVPIA) water transfers. However, the criteria forprogrammatic review ofsuch transfers

must ensure that only those historic transfers which will have a “net environmental benefit” will

be subject to the expedited review process. In addition, the criteria must ensure that streamlined

review and approval ofhistoric transfers does not increase the watersupply demands on the

CVP.

Response: Reclamation does not agree that the expedited review process should be limitedto

water transfers that have a “net environmental benefit.” However, theprogrammatic approach to

reviewing and approving water transfers must meet the terms and conditions required under the

CVPIA and all environmental requirements under law.

Comment: The Administrative Proposal should also clarify how Reclamation will respond to a

district’s comments which assert that negative impactswill result from a proposed water transfer.

As part ofthe district’s documentation oft1~eir claims, districts should be required to submit

objective, compelling evidence, and to identify reasonable mitigating measures that would

addressimpacts. Reclamation should establish a timely mechanism to ensure that the

transferring partiesreceive copies ofthe district’s comments, including all supporting material,

and that those parties have adequate opportunity to respond before the Secretarial decision is

made.

12 April 16, 1998
CYPIA ADMINISTRATIVE WATER

PROPOSAL TRANSFERS

Response: A water district wishing to prevent a watertransfer under section 3405(a)(l)(K) has

the obligation to demonstrate that a water transfer will unreasonably impact its water supply,

operations, or financial conditions. The Administrative Proposal has been changed to clearly

state that the district must provide sufficient evidence to support any impacts under section

3405(a)(l) (K) that would preclude water from being transferred. Reclamation would then

provide the district’s documentation to the transferor. The water transfer guidelines have

established a 45-day period fora district to respondto a water transferproposal. Ifthe district

does notrespond with comments within the 45-day period, Reclamation will start notifying the

district in writing that no impacts have been determined and Reclamation will continue to

process the water transfer proposal, unless Reclamation is aware ofinformationthat would

support the conclusion that transferwould have an unreasonable impact.

Comment: Issue is taken with the statement in the draft Administrative Proposal that there was

general consensus among the interest groups that the water transfer approval process needed to

be accelerated. One ofthe interest groups in this process does not consider itselfto be a part of

any such consensus. While the group does not advocate unnecessary delays or bureaucratic

complications, it also believesthat water transfers have potentially profound consequences and

must be pursued carefully and deliberately. Acceleration ofthe process is not an unqualifiedly

desirable end.

Response: Reclamation would agree with the statement that while there were some outstanding

concerns, there was a general consensus in the group that “acceleration ofthe processis not an

unqualifiedly desirable end.” As such, Reclamation’s programmatic watertransfer approval

process is limited to specific types ofwater transfers that meet the predetermined criteria. We

have modified the Administrative Proposal to make clear that the group did not reach consensus

on this issue.

Comment: Interior’s proposal of divisional programmatic reviewhas the potential for serving an

important function in the determination and avoidance or mitigation ofpotential impacts from

transfers while serving a streamlining function as well. What administrative authority do the

already completed programmatic review documents carry? In Interior’s proposal, the

programmatic review document carries very great weight in the approval ofwatertransfers. By

creating a division-wide “one-stop” approval mechanism incorporating environmental review,

the proposed programmatic review document is effectively serving as a sort ofProgrammatic

Environmental Impact Statement (PEIS). Any document ofsuch significance should be subject

to at least the same level ofcomment and review as a PEIS, yet it appears that programmatic

reviews have already been accomplished forlarge portions ofthe Central Valley with little or no

input from interest groups orthe public.

Response: Interior believes that there is merit in disseminating the programmatic review

documents and supporting environmental analysis to the public forreview and comment and will

do that in the future. The Administrative Proposal has been rewritten to make this commitment.

It should be noted that the programmatic water transfer documents prepared forthe major

13 April 16, 1998
CVPIA ADMINISTRATIVE WATER

PROPOSAL TRANSFERS

divisions ofthe CVP are designed to addressspecific types ofwater transfers such as

agricultural-to-agricultural movement ofwater under specific conditions. Proposed water

transfers within those divisions outside the specific conditions identified are still required to

complete separate environmental documentation.

£QrnIn~Ifl: Interior’s proposed solution ofdeveloping programmatic review and approval

documentsfor water transfers to help streamline the approval process is appropriate.

Programmatic reviews that were accomplished in 1996 appear to have been limited to transfers

for agricultural purposes only. The Administrative Proposal should include a specific

commitment to schedule and undertake programmatic reviews oftransfers from agricultural uses

to urban and environmental uses. There should also be some discussion ofways in which

Reclamation can streamline the processfor those transfers which require specific review.

Response: Interiorsupports the general concept ofprogrammatic review ofwater transfers from

agricultural agencies to M&I customers and/or environmental users. However, to date, there

have not been a significant number ofsuchwater transfers. As the number ofwater transfers are

projected to increase, programmatic approval will be considered. It should be noted, however,

that the parameters used in agricultural water transfers to M&I users may be more difficult to

analyze on a programmatic level.

Comment: We generally agree with Interior’s efforts to streamline the transferprocess, although

we are concerned that the public has not had sufficient opportunity to review the programmatic

review documents. We would suggest that these programmatic reviewdocuments utilize and

require broad stakeholder input, be limited in size/duration/scope, and be linked with the water

transfer clearinghouse (so that programmatic documents can be adjusted as more information

becomes available).

Response: Interior has included a commitment thatthe programmatic watertransfer review and

supporting environmental documents receive public review and comment in the Administrative

Proposal. It is our hope that in making these documents available for public review and

comment, we will receive broad stakeholderinput. The size, duration, and scope ofthe water

transfers are part ofthe key parameters now in the water transfer documents. Reclamation

already has stated that information obtained from the watertransfer clearinghouse will be used in

determining impacts ofwater transfers.

Comment: Itremains unclear how Interior’s approach to allowing the districts to review and

comment on water transfers will serve to promote the expanded use ofvoluntary, market-based,

user-initiated transfers; addressreasonable district concerns; and give real meaning to the

CVPIA’s 20-percent threshold. The key to this issue lies in the “public process” that the CVPIA

requires be used fortransfers involving more than 20 percent ofthe total district CVP allocation

in any year. But fortransfers involving less than 20 percent, some means must be found to limit

the overall scope ofreview by and, inherent therewith, potential arbitrary interference from the

districts.

14 April 16, 1998
CVPIA ADMINISTRATIVE WATER

PROPOSAL TRANSFERS

Response: Allowing districts to review water transfers neither promotes nor interferes with the

expanded use ofvoluntary, market-based, user-initiated transfers. It does, however, provide

Reclamation with valuable information needed to make its statutory determination that such a

transfer will nothave an unreasonable impact on the water supply, operations, or financial

conditions ofa district or its waterusers. In addition, it hopefully will addressreasonable district

concerns. As stated in your comment “real meaning to the CVPIA’s 20-percent threshold” will

occur in the public review process.

Comment: The discussion ofsuccessive short-term transfers in the draft Administrative Proposal

raises the question ofcumulative impacts. Significant third-party impacts could be precipitated

by a single short-term CVPIA transfer that combines with prior, non-CVPIA-caused conditions,

as well as by successive short-term CVPIA transfers.

Response: Interior agrees that adequate analysis ofproposed water transfers must include an

analysis ofcumulative impacts, suchas from successive short-term water transfers.

Comment: There should be a more complete discussion ofthe fact that the 20-percent threshold

in section 3405(a)(l) for district review and approval oftransfers was designed to limit the

potential impact of water transfers on third parties. Ifthe water transfer falls in the range of

20 percent or less ofthe district’s CVP contract quantity, the underlying assumption in the

CVPIA was that impacts on third parties would be nonexistent, negligible, or indistinguishable

from other economic influences.

Response: Interior agrees that the statute calls forpublic review for all water transfers exceeding

the 20-percent threshold. Interior, however, neither finds support in the statute orits legislative

history forthe assertion that the 20-percent limit in the statute was designed solely to limit the

potential impact ofwater transfers on third parties, nor agree that transfers ofless than

20 percent necessarily result in no third-party impacts.

Comment: The draft Administrative Proposal statesthat Reclamation believes a contractor’s role

in connection with proposed transfers exceeding the “20-percent threshold” described in

section 3405(a) is “an advisory one.” This assumption by Reclamation ignores the plain

language ofsection 3405(a)(l). Thatsubsection provides that proposed transfers shall be subject

to review and approval by the contractor ifthe 20-percent threshold is exceeded. By using

precisely the same language, Congress clearly intended forReclamation and contractors to have

the ~ authority fortransfers falling~respectively) below or above the 20-percent threshold.

Nevertheless, the Administrative Proposal concludes that, no matter how largethe transfer, the

affected contractor need only be asked for his opinion. Reclamation should solidify, not weaken,

contractor involvement in proposed watertransfers and should recognize the Congressional

mandate included in section 3405(a)(l) relative to transfers exceeding the 20-percent threshold.

To do otherwise violates the CVPIA and taints the Administrative Proposal.

15 April 16, 1998
CVPIA ADMINISTRATIVE WATER

PROPOSAL TRANSFERS

Response: In the Presidential signing document to Public Law 102-575, the President ofthe

United States cited constitutional concerns and therefore, interpreted the language of

section 3405(a)(l) to be authorizing an advisory role. Consequently, Interior was directed to

follow such an interpretation. [Acopy ofthe Presidential signing document is available upon

request.]

Comment: The draft Administrative Proposal also apparentlyconcludes that the definition ofthe

20-percent threshold is to be based on the cumulative totalofall water transfers involving a

contractor’s CVP watersupply rather than based on an individual transferor’s entitlement.

During meetings ofthe watertransfer workgroup, a number ofdiverse stakeholderinterests

suggested that each contractor should have the option of defining the 20-percent threshold as

either applying to that contractor’s overall water supply or each individual transferor’s

entitlement. The Administrative Proposal should explain why Reclamation has declined to

pursue an approach which received support from different stakeholder groups during the

meetings ofthe water transferworkgroup.

Response: The Administrative Proposal has been revised to clarify why Interior’s proposed

solution is 20 percent ofcontract entitlement ratherthan individual transferor’s entitlement.

Interior does not agree that districts should have the “option” ofchoosing one interpretation

versus another. Clearly, there should only be one interpretation ofa legislative statute.

Comment: A water transfer clearinghouse is a good idea, but its role should be expanded to

include an “electronic bulletin board” feature to facilitatetransfers involving, at a minimum, less

than 2Q percent ofa district’s contractual supply.

Response: The goals and objectives for the water transferclearinghouse are being finalized.

Reclamation does expect that an “electronic bulletinboard” will be one ofthe features used to

disseminate information.

Comment: Interior’s proposal sidesteps a number ofkey issues: what, after all, is an impact that

will be deemed “appropriate” formitigation? How would suchmitigation be provided? Should

the third-party benefits associated with such transfers be taken into account? The proposed

“clearinghouse” will not be sufficient to adequately address this important and complex issue. In

general, the CVPIA’s water transferauthorities provide important initial third-party protections

(e.g., by prohibiting adverse long-term impacts to ground-water resources, by requiring detailed

public review fortransfers involving more than 20 percent of a district’s total contractual supply,

by limiting transfers to their “consumptive “use” or “irretrievable loss” share, and by offering

local entities a right offirst refusal against off-Project transfers). With theseprotections in place,

and in addition to the clearinghouse mechanism discussed above, Interiorshould commit to

addressing this issue comprehensively, as a matter ofsubstance, policy, and process, through the

CALFED Bay-Delta program.

Response: The questions and specific answers are:

lb April 16, 1998
CVPIA ADMINISTRATIVE WATER

PROPOSAL TRANSFERS

1. “What, after all, is an impact that will be deemed “appropriate” for mitigation?”

Interior will attempt to identify impacts during the review ofthe water transfer

proposal. Impacts that are deemed appropriate for mitigation will be determined at that

time.

2. “How would such mitigation be provided?”

Mitigation commensurate with the adverse impacts, ifany.

3. “Should the third-party benefits associated with suchtransfers be taken into account?”

Benefits at both the transferor location and the transferee location are taken into

consideration.

4. “We do not believe that the proposed “clearinghouse” will be sufficient to adequately

address this important and complex issue.”

The clearinghouse provides a mechanism to track watertransfers. Reclamation

envisions that information from the clearinghouse will be used to quantify and evaluate

third-party impacts. Reclamation hopesto use this data to show correlations between

impacts and the movement ofwater overtime. The clearinghouse concept is a dynamic

process that will evolve over time as more information is leamed.

5. “In general, the CVPIA’s water transferauthorities provide important initial third-party

protections (e.g., by prohibiting adverse long-term impactsto ground-water resources,

by requiring detailed public review fortransfers involving more than 20 percent of a

district’s total contractual supply, by limiting transfersto their “consumptive use” or

“irretrievable loss” share, and by offering local entities a right offirst refusal against

off-Project transfers). With these protections in place, and in addition to the

clearinghouse mechanism discussed above, Interior should commit to addressing this

issue comprehensively, as a matter ofsubstance, policy, and process, through the

CALFED Bay-Delta program.”

Interior is an active memberofthe CALFED Bay-Delta program and will address water

transfer issues in that forum also.

Comment: The partiesto a transfer should be charged with mitigating any third-party impacts of

the transfer. Unfortunately, Reclamation’s proposal to create a clearinghouse would simply

document third-party impacts after the fact, and would not assist in addressing or mitigating

those impacts in advance. Simply cataloging third-party impacts afterthey have occurred will do

little to assist those who have suffered those impacts.

17 April 16, 1998
CVPIA ADMINISTRATIVE WATER

PROPOSAL TRANSFERS

Response: The Administrative Proposal points out that the quantification and evaluation ofthirdparty impacts is currently difficult to determine. Nevertheless, Reclamation is attempting to

determine such impacts before water transfers are approved. However, as data is gathered and

analyzed in the water transfer clearinghouse, we hope to improve upon our capabilityto predict

what third-party impacts will be as water transfers occur in the future. In the interim, any longterm water transfers will be conditioned such that, as third-party impacts are identified in the

water transfer clearinghouse, the parties to the ongoing long-term water transfers will be

responsible for appropriate third-party impact mitigation, as applicable.

~Qrn1n~nI: It is strongly recommended that the list ofreasonsthat make individual water

transfers unique (time, place, hydrological conditions) be expanded to include the impacts on

local communities. The water transfer guidelines should be amended to invite community

comment as well as district comment on potential effects ofproposed water transfers.

Individuals wishing to complete a transfer should be requiredto notify local communities, via

newspapers and community government, ofthe proposed transfer. The communities would have

the same 45-day comment period and same obligations to document unreasonable impacts that

districts do. CVPIA [section3405(a)(l)(K)] states that a transfer shall not be approved ifit has

an unreasonable impact on the water supply, operations, orfinancial conditions ofthe transferor’s

contracting district or agency or its waterusers

.

Response: It is Interior’s positionthat impacts on local communities should be addressed during

the environmental review process, which includesthe opportunity for public comment. In

addition, asthe water transfer clearinghouse becomes operational, an opportunity will exist for

local communities to take a proactive approach in addressing the water transferimpacts. Also,

on transfers subject to an exercise ofa right offirst refusal or involving more than 20 percent of

the CVP watersubject to a district’s long-term contract, the existing Interim Guidelines require a

transferor to publish notice ofhis intentto transfer in major newspaper(s) within the project

service area before submitting theirproposal to Reclamation. Interior remains committed,

however, to making the transfer programopen to public review and will explore waysto expand

the opportunity for public comment and participation.

=~rnrn~nI:No short- orlong-term water transfer which would add waterto areas along the west

side ofthe San Joaquin Valley which contributes to the salinity ofthe San Joaquin River should

be allowed without full mitigation ofboth the short- and long-term cumulative impacts.

Response: As discussed in the draft Admii~istrative Proposal and the Interim Guidelinesfor

Implementation ofthe Water TransferProvisions ofthe Central Valley ProjectImprovementAct,

Title XXXIVofPublic Law 102-575 (dated February 19, 1993), all proposed transfers will be

evaluated on either a programmatic orcase-by-case basis to ensure that third-party impacts of

transfers (which would include increased salinity in the San Joaquin River) are appropriately

addressed and mitigated. Interior has proposed establishment ofa watertransfer clearinghouse,

jointly operated by Reclamation and the State ofCalifornia Resources Agency, to track water

18 April 16, 1998
CVPIA ADMINISTRATIVE WATER

PROPOSAL TRANSFERS

transfers and to provide and maintain a database which could be used to quantify and evaluate

such impacts.

Comment: How the clearinghouse would be developed, managed, and funded is the subject of

some concern, but such a database could be useful in understanding long-term trends and impacts

ofwater marketing.

Response: The clearinghouse concept is still in its initial development. As such, the goals and

objectives are currently being discussed. Once the strategy, goals, and objectives are drafted,

they will be available for public review and comment before being finalized. Interior envisions

that the water transfer clearinghouse will be managed and funded by each ofthe participants. We

also envision that the water transfer clearinghouse will be a dynamic processthat evolves as

additional information is leamed.

Comment: The draft Administrative Proposal states that the terms and conditions on long-term

water transfers could be developed to ensure that third-party impacts are appropriately addressed.

This implies that Reclamation considers mitigation for such impacts to be very open-ended (i.e.,

the cost of a transfer could increase substantially during the termofthe contract). To eliminate

the impact ofthis open-ended risk on the water transfer market, Reclamation should, as soon as

possible, make clear its policies related to the use ofclearinghouse datato connect claims of

third-party impacts with specific water transfers.

Response: As stated in the Administrative Proposal, Interioris very concerned about identifying

and quantifying third-party impacts. A long-term water transfer may be approved because no

third-party impacts may be known or envisioned on the datethe long-term watertransfer is

approved. However, as impacts become known oridentified resulting from such long-term

water transfers, parties to such water transfers should mitigate for suchimpacts. Such mitigation

should not be the responsibility ofthe CVP contractors as a whole.

Comment: The programmatic review ofwater transfers proposed by Reclamation as a

streamlining process should include an assessment ofthird-party impacts, to the extent that this

can be identified at the programmatic level. The programmatic reviewshould include an

assessment ofboth negative and positive impacts ofwater transfers from the transferor’s area.

Response: The programmatic review processfor watertransfers will comply with all applicable

federal and state laws including the effect 9fsuch water transfers on the affected environment as

well asincluding an assessment ofthe impacts ofmoving the water from one area to another.

Comment: A forum should be created to monitor impacts associated with transfers to ensure that

mitigation forindividual transfers is appropriate.

Response: Currently, Reclamation releasesthe environmental documents associated with water

transfers to the public forreview and comment. Additionally, Reclamation has established the

19 April 16, 1998
CVPIA ADMINISTRATIVE WATER

PROPOSAL TRANSFERS

water transfer clearinghouse in order to provide the public with additional information on water

trends and, hopefully, document third-party impacts. Reclamation believes that asthe water

transfer clearinghouse evolves, parties will see mitigation impacts, and this forum will evolve to

meet the stakeholders’ needs.

~rnrn~nI: Any appropriate third-party impacts associated with water transfers that are not

mitigated by the CVPIA should be mitigated by the partiesto the watertransfer.

Response: Interior agrees. Interior is very concerned that parties who benefit from water

transfers mitigate for any adverse impacts ofsuch water transfers, as necessary, and that CVP

contractors as a whole are not tasked or expected to mitigate for impacts associated with water

transfers.

Comment: Interior’s proposal to develop a clearinghouse to track water transfers should be

applauded. The clearinghouse would serve as a useful tool for counties to adequately inform

parties ofthe type and number ofwater transfers being approved in the Central Valley.

However, it is not clear from the draft whetherthe proposed clearinghouse is only an idea or a

real project.

Response: Reclamation has already discussed the water transfer clearinghouse concept with the

State ofCalifornia Resources Agency, and they have tentatively agreed to pursue such a concept.

Currently, the staff assigned to this are developing proposed goals and objectives and reviewing

existing water transfer tracking systems. Reclamation envisions that, asthis process matures,

public workshops will be held and the water transfer clearinghouse process and procedures will

be discussed and finalized.

Comment: Exception is taken to the description in the draft Administrative Proposal as to

whether the Restoration Fund charges mitigate third-party impacts. In fact, the Restoration Fund

Roundtable was suggested as an alternative venue to discuss third-party impact mitigation, but

there was n~ suggestion, nor was there debate or disagreement, as to whether RestorationFund

charges already mitigated third-party impacts. The Restoration Fund clearly does not provide

mitigation for community or economic impacts.

Response: The Administrative Proposal has been appropriately changed to reflect the issue of

third-party impacts and the use of the Restoration Fund.

Comment: Many third-party impact issues could be most effectively addressed at the

programmatic level. Mostofthe discussion ofthird-party impacts in the Administrative

Proposal appears to focus on mitigation ofimpacts after they occur. Avoidance ofthird-party

impacts is equally important and usually cheaper and more effective. Such avoidance can be

accomplished by including consideration ofpotential third-party impacts in both programmatic

and individual proposal review.

20 April 16, 1998
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CYPIA ADMINISTRATiVE WATER

PROPOSAL TRANSFERS

Response: Reclamation agrees thatthe work team did reach consensus that there should be an

“active” notificationprocess where transferors would notify existing agricultural lenders that a

water transfer was being accomplished in orderto protect the asset values ofexisting agricultural

lenders’ loans. However, since the inception ofthe Administrative Proposal process, interior has

stated that ourrole was to facilitate the meetings and provide information and assistance as

necessaxy. Further, althoughwe were notpart of the “consensus process,” Interior agreed to

look closely at any consensus agreements thatresulted from these work teams. Interior has a

concern with inteijecting itself in the fiduciary relationship between our contractors and their

agricultural lenders. It is our beliefthatterms and conditions ofloans between our contractors

and lending institutions are private matters. Furthermore, if the concern is that lending

institutions are not notified ofwater transfers occurring on existing loans, then the water transfer

clearinghouse will provide a mechanism for agricultural lenders to monitor and obtain

information concerning the movement ofwater in the CVP.

Comment: The draft Administrative Proposal for making the transferprocess efficient does not

addressthe central policy issue ofwhetherthe CVPIA applies to watertransfers that were

undertaken and approved prior to enactment ofthe CVPIA.

Response: The CVPIA appliesto all watertransfers ofCVP water authorized underthe statute.

Comment: Since enactment ofthe CVPIA, Reclamation’s water transfer ‘policy’ and practice

has significantly disrupted the CVP water customers’ historical capability to execute short-term,

spot-market water management transfer/exchange/banking transactions. The draft

Administrative Proposal does not solve the problems associated with attempting to apply the

cumbersome bureaucracy ofthe CVPIA to such transfers.

Response: Interior disagrees. In 1995, Interior established a processto accelerate the approval

ofproposed water transfers using the CVPIA water transfer approval criteria. Interior’s

evaluation ofthe 1995 processrevealed thatwater transfers were not hindered or disrupted by

implementing CVPIA watertransfer procedures. This test was a success. Interior followed

through with this processin 1996, and in 1997, and again, the process accelerated the approval of

water transfers. Interior plans to continued this process in the future and modify and updatethe

process as we gain added knowledge and experience.

£~rnni~n~t: There is strong disagreement with Reclamation’s position that all transfers ofCVP

water must occur in accordance with segtion 3405(a), and Reclamation is urged to process

transfers, exchanges, and banking arrangen~1ents which could have been approved prior to the

CVPIA in the mannerin which transfers were processed before the enactment ofthe CVPIA. If

Reclamation refusesto acknowledge that proposals which could have been approved before

enactment ofthe CYPIA can still be processed in a pre-CVPIA manner, a programmatic

approach to streamlining transfer approval is vital andmust be implemented immediately.

22 April 16, 1998
I

CVPIA ADMINISTRATIVE WATER

PROPOSAL TRANSFERS

Response: Interiorintends to apply the CVPIA criteria to all water transfers ofCVP water w approved by the Contracting Officer. Reclamation believes thatits implementation ofthe

programmatic review forwater transfers using CVPIA criteria and individual review ofunique or

complex water transfers is a reasonable approach to streamlining the process. Our experience to

date withthe programmatic transfer approval process supports this conclusion.

(~rnrn~nt: Disagreement exists over Reclamation’s positionthat Sacramento River water rights

contractors’ base supply water should be treated as exempt from the CVPIA water transfer

provisions.

Response: As stated in the Administrative Proposal, the Sacramento River waterrights

contractor’s base supply is water thatsuch contractors divert free ofcharge and is not deemed

“Project” water undertheir contracts. Therefore, Interior does not interpret section 3405(a) as

applying to the base supply.

Comment: Whether or not the CVPIA is interpreted to apply to base supply, Reclamation must

address the fundamental concern that transfers ofbase supply water should not increase (rather

than simply reallocate) “baseline” diversions and depletions, reduce Restoration Fund revenues,

or otherwise frustrate the goals ofthe CVPIA. IfReclamation chooses not to address this issue

in the water transfer guidelines, it must do so in the base supply guidelines.

Response: Reclamation is also concerned that transfers ofbase supply water do not impact CVP

water rights. Although CVPIA transfer conditions do not apply to base supply water transfers,

Reclam.ation does have contractual authority to review and approve such water transfers.

Restoration Fund revenues are not being reduced by stating that CVPIA watertransfer provisions

do not apply to base supply water. In addition, Reclamation does not believe the goals ofthe

CVPIA will be frustrated by stating that CVPIA water transfer provisions do not apply to base

supply water. Reclamation will be working with the Sacramento Riversettlement contractors to

come to a mutual understanding on how base supply water transfers should be processed.

Comment: Sacramento River settlement contracts relate to “base supply” water and “project”

water. Base supply water is not subjectto the CVPIA, but is subject to the water transfer

provisions ofCalifornia state law. It would be helpful to the State Water Resource Control

Board (SWRCB) to have all CVP water contractors receive clearance from Reclamation prior to

submitting a petition to the SWRCB for transfer ofbase supply water.

Response: Reclamation agrees with yourcomment. Although base supply watertransfers will

be processed in accordance with state law, Reclamation does have contractual authority to review

and approve such watertransfers. The purpose ofdeveloping water transfer guidelines for base

supply water is to reach a mutual agreement between the Sacramento River Settlement

Contractors and Reclamation on the terms and conditions ofbase supply watertransfers.

Hopefully,such a base supply watertransfer guideline would accelerate Reclamation’s

contractual review and approval ofsuchtransfers. Existing CVPIA water transfer guidelines

April 16, 1998
CVPIA ADMINISTRATIVE WATER

PROPOSAL TRANSFERS

addressthe terms and conditions for processing Sacramento River Settlement contracts project

water transfers.

~rnni~nI:Transfers ofbase supply must be accomplished consistent with the monthly amounts

listed as base supply in settlement contracts.

Response: As stated in the Administrative Proposal, Reclamationwill be negotiating base supply

water transfer guidelines. Your commentidentifies one ofthe key issues that will be addressed

in that forum and not in this Administrative Proposal.

~Qznrn~ifl:Serious concern remains about Reclamation’s application ofsection 3405(a)(l)(B) to

transfers ofCVP water from the Exchange Contractors. Thatsection specifies that costs for CVP

water transferred to non-CVP users must be “repaid” at the “costofservice” or “full cost” rate.

The obligation to “repay” CVP costs in atransfer can exist, however, only where there is an

obligation by the transferor to repay CVP costs under its contract. Thus, this requirement applies

only to water transferred under contracts which contain a repayment obligation; that is, water

service orrepayment contracts. In recognition ofthe Exchange Contractors’ pre-existing water

rights, they are not subject to any repayment responsibility. Because the contract for delivery of

CVP water to the Exchange Contractors does not require that CVP costs be “repaid,” the “cost of

service” repayment charge should not apply to a transfer ofExchange Water. This interpretation

ofsection 3405(a)(l)(B) is consistent with the intent ofCongress. The purpose of

section 3405(a)(l)(B) is clearly to make sure that federal subsidies are not transferred to

non-CVP entities. When the Exchange Contractors’ CVP water is transferred, no transfer ofany

federal subsidy occurs. The requirement ofthat section is clearly satisfied without any additional

“cost ofservice” payment.

Response: Reclamation does not agree forthe following reasons:

1. CVPIA states in section 3405(a)(l)(B) that, “All water under the contract which is

transferred under authority of this subsection to any district or agency which is not a

Central Valley Project contractor... shall, if used forirrigation purposes, be repaid at

the greater ofthe full-cost or cost ofservice rates, or, ifthe water is used for municipal

and industrial purposes, at the greater ofthe cost ofservice ormunicipal and industrial

rates.” Clearly, the statute requires the collection ofone ofthe above water rates, and

provides no exception for watertransferred by the Exchange Contractors.

2. It is correct that the contract entei~ed into betweenthe United States and the Exchange

Entities does not contain a repayment obligation. This is a negotiated contract between

two parties; however, there are costs to the CVP forthis exchange agreement and the

movement ofwater. These costs, for the most part, are borne by all CVP contractors

under the CVP financial integration system. Therefore, Congress directed the United

States to recoup such costs in section 3405(a)(l)(B).

24 April 16, 1998
CYPIA ADMINISTRATIVE WATER

PROPOSAL TRANSFERS

Comment: The ability to bank CVP contract watershould not be limited solely to utilization of

Projectfacilities, but should generally include banking in non-Project facilities as well.

Response: WhileReclamation will address water banking in separate guidelines, Reclamation

does have authority under CVPIA to store CVP water in non-CVP facilities.

Comment: Separate criteria for water banking and conjunctive use programs should be

developed and Reclamation is urged to work closely with stakeholders to define waterbanking

and to develop water banking criteria. In order to maximize the water-related benefits ofthese

non-traditional watersupply programs, water banking criteria should allow a broad range of

water banking alternativesto evolve. Any proposal which involves the use of CVP allocations in

wet years to create a firmerwater supply in dry years should be viewed as a water banking

proposal.

Response: Reclamation will be holding public workshops and soliciting public comments on the

proposed criteria for water banking type arrangements. We anticipate that these workshops will

be held in late 1998.

Comment: The purpose ofthe limitation on transferable water contained in CVPIA

section 3405(a)(l)(A) was to prevent paper water transfers ofunused CVP contractual

entitlement. It should be recognized that some CVP contracts explicitly recognized and

anticipated increases in demand, and therefore contain provisions to accommodate these planned

increases. These contractors should not be prevented orrestricted from transferring CVP water

for which they are contractually obligated to pay, simply because they were either not receiving

any deliveries in 1992 or were not at full development at that time.

Response: CVPIA is very explicit on what water is available to the CVP contractorsfor transfer.

Section 3405 (a)(1) (M) ofthe CVPIA allows contractors within the watershed that had not

reached full project entitlement to transfer theirwater supply to other CVP contractors under

certain conditions.

Comment: With respect to the issues covered by the Administrative Proposal, we do not

necessarily disagree that a non-CVP “entity” within the CVP service areahas a right offirst

refusal under section 3405(a). However, we believe thatthe intentofthe right offirstrefusal is

best carried out if CVP contractors have a priority over others with the right in the event of

competing exercises ofthe right.

Response: Reclamation does not interpret CVPIA to state that CVP contractors within the CVP

service area have a priority over any other entity within the CVP Service Area. The

Administrative Proposal has been revised to incorporate a discussion on competing exercises of

the right offirst refusal.

25 April 16, 1998
CVPIA ADMINISTRATIVE WATER

PROPOSAL TRANSFERS

Comment: Strong disagreement exists that any party exercising its right offirst refusal be

obligated to pay the $25 “M&I surcharge” ifthat surcharge applied to the subject transfer. The

— purpose ofthe right offirst refusal was to ensure that those intended by Congress to benefit from

the CVP -- those in the CVP service area -- were afforded an opportunity to retain waterin the

CVP service areathat might otherwise leave the originally intended place ofuse to support urban

growth. Nowhere in the CVPIA isthere any indication that the goal ofproviding money to the

Restoration Fund takes priority over the goal underlying the right offirst refusal.

Response: Section 3405(a)(l)(F) ofthe CVPIA requiresthat entities exercising a firstright of

refusal be subjectto the same terms and conditions ofthe proposed transfer. Interior’s position is

that the $25 per acre-foot surcharge is a termand condition ofthe watertransfer. Therefore, it

remains applicable if a first right ofrefusal is exercised.

Comment: The $25 per acre-foot surcharge is not a negotiated termor condition of a water

transfer contract, but an incidental fee that would have only been legally collectible had the

water, in fact, been delivered to a non-CVP contractor. Just as other incidental fees (such as

those for conveyance and power) vary or are not applicable when water is delivered to a different

location under the right offirst refusal, so doesthe $25 per acre-foot surcharge not apply when

the water is delivered to a CVP contractor.

Response: While the $25 per acre surcharge is not a negotiated term, it is nonetheless a condition

for any transfer outside the CVP service area for M&I purposes. Therefore, it is Reclamation’s

position that the $25 per acre-foot surcharge is a termand condition ofthe water transfer as such

terms and conditions are used in section 3405(a)(l)(F) ofthe CVPIA.

Comment: The language ofthe CVPIA can be read to allow any entity within the CVP service

area to exercise the right offirst refusal. Reclamation should provide a legal definitionofthe

word “entity” for purposes ofexercising this right.

Response: The Administrative Proposal provides clarification on the definition ofan “entity”

that may exercise the rightoffirst refusal.

Comment: Reclamation should articulate its policy on recognizing the right offirst refusal when

more than one transfer ofCVP water is made to an areathat has not historically been served by

the CVP. The SWRCB must approve expansion ofthe CVP place ofuse to accommodate the

first CVP watertransfer, but it is not clear whether Reclamation interprets subsequent transfers

ofCVP water to the same area to be subject to the right offirst refusal.

Response: The CVPIA right offirst refusal under Federal law and a California SWRCB water

transfer action regarding a temporary expansion ofCVP waterrights place ofuse are two

separate and distinct processes. The right offirst refusal under section 3405(a)(l)(F) appliesto

transfers ofCVP water outside the CVP service area. The CVP service area is defined in

section 3403(e) of the CVPIA to mean that area ofthe Central Valley and San Francisco Bay

26 April 16, 1998
CVPIA ADMINISTRATIVE WATER

PROPOSAL TRANSFERS

Areawhere waterservice has been expressly authorized pursuant to the various feasibility studies

and consequent congressional authorizations forthe Central Valley Project. Each water transfer

— proposal, whether for a term ofone year or multiple years, to an entity located outside the CVP

service area is subject to the rightoffirst refusal. Ifa second water transfer proposal, Whether for

a termofone yearor multiple years, to the same or a different entity is negotiated, the rightof

first refusal is triggered on the second water transferproposal as well, because the “CVP service

area,” as defined by law, was not modified by the first transfer.

Comment: It may sometimes be the case that exercising the right offirst refusal on a portion ofa

transfer may reduce the benefitsto the original transferee suchthat the transfer is no longer

viable forthe original transferee. In that case, the party or parties exercising the right offirst

refusal should compensate the original transferee for all costs incurred in developing the transfer.

Response: A fundamental premise in exercising the right offirst refusal on a portion ofa water

transfer is that the remaining portion ofthe water transfer will still be viable to both the

transferor and transferee. Ifthe remaining portion ofthe water transfer is not viable, then the

exercise ofthe right offirst refusal cannot be accomplished on a portion ofa water transfer.

Reclamation would expect that the partiesto a water transfershould be able to work out all the

conditions for allowing a right offirst refusal on a portion ofa water transfer.

Comment: Reclamation should adopt the right offirst refusal as a permanent elementofits final

water transfer policy. This will assure that demands within the CVP service area are met prior to

the transfer ofwater outside ofthe service area.

Response: Section 3405(a)(3) clearly lists the conditions that apply to water transfers executed

after September 30, 1999. Therefore, Reclamation cannot adopt the right offirst refusal as a

permanent element ofits final water transferpolicy in conflict with the statutory provision.

Comment: Reclamation is requested to abide by its advanced notice ofproposed rulemaking

(59 Fed. Reg. 67265 (Dec. 29, 1994)), and ensure that formal rulemaking forthe CVPIA water

transfer provisions (CVPIA Section 3405(a)) will occur assoon as possible, and in compliance

with the National Environmental Policy Act requirements.

Response: Interioris currently drafting rules on water transfers and is well into the rulemaking

process. Interiorexpects the rules and regulations to be published sometime in 1999.

Comment: The draft Administrative Propo~al addressing water transfers does little to resolve the

very real implementation issues which have arisen relative to section 3405(a). Instead ofaction

items, the Administrative Proposal effectively offers only the prospect ofcontinuing dialogue.

While more dialogue is preferable to litigation or confrontation, the various stakeholders all seek

action, not discussions. Additionally, and as noted in the Administrative Proposal, at least 22

concerns were raised by members ofthe water transfer workgroup. While it is true that certain of

those issues are interrelated, the Administrative Proposal makes no effort whatsoever to address

27 April 16, 1998
CYPIA ADMINISTRATIVE WATER

PROPOSAL TRANSFERS

many ofthem -- even where they were discussed by the workgroup and progress towards

consensus was achieved. While work should continue with other stakeholders to address

— implementation issues arising in connection with section 3405(a). all issues should be displayed

and addressed.

Response: In AppendixB, Reclamation provides comments asto how each ofthe 22 issues has

been addressed or will be addressed in other forums.

Comment: The area oforigin issue is n~t a CVPIA implementation issue. However, one

issue -- an asserted area oforigin priority over other entities within the CVP service area in

exercising a CVPIA-authorized right offirst refusal -- still needs to be addressed by

Reclamation.

Response: Reclamation does not agree that an asserted area oforigin priority would take

precedence over any other exercise ofright offirst refusal in a watertransfer. Area of origin

statutes and any relative priorities are addressed in the California Water Code and Reclamation,

as a water right holder under California law, is complying with these statues ofthe California

Water Code.

Comment: Water transfers which directly or indirectly deprive a ‘Watershed of Origin’ user of

needed water is both bad policy and contrary to law. Likethe focus on transfers within a

division, Reclamation should also focus on ‘Watershed of Origin’ areas

Response: Reclamation complies with State ofCalifornia water codes such as the area oforigin

statutes. Reclamation does not consider the area oforigin issue to be a CVPIA implementation

issue and has prepared and distributed a draft paper discussing the applicability ofarea of origin

under California law to the CVP.

28 April 16, 1998
CVPIA ADMINISTRATIVE

PROPOSAL

WATER

TRANSFERS

APPENDIX B — WATER TRANSFER ISSUES

The 22 water transfer issues were summarized under the following general topics. Inresponse to

comments, Interior has restated each issue andhow it is being addressed.

REVIEW AND APPROVAL PROCESS

Issue #1. Delays and complexity ofinternal processing by Reclamation and coordination of

processing efforts with other agencies (i.e., State Water Resources Control Board,

U.S. Fish and Wildlife Service, and National Marine Fisheries Service).

Inconsistency ofadministration by Reclamation and Reclamation disincentives to

transfers. The programmatic water transfer approval process discussed in this

administrative proposaladdresses the issue.

Issue #4. Involvement/lack ofinvolvement in transfer administration/approval by district.

What procedures should govern district involvement? Addressedin this

administrative proposal.

Issue #11. Propriety ofrequiring districts to create water transfer programs for waterusers.

Addressedin this administrative proposaL

Issue #42. Need for objective criteria for conditioning or denying a transfer. Addressed in this

administrative proposaL

Issue #13.

Issue #15.

What standard should apply to the Secretary ofthe Interior’s review ofany district

input regarding proposed water transfers? The Districtshouldprovide its

evaluation ofwater transferspursuant to section 3405 (a)(J)(K), and the Secretary

should have and consider this input but should not be required to deferto the

District’s opinion.

Clarification of20 percent threshold (i.e., may each water user only transfer 20

percent ofthat user’s district supply, ormay a water usertransfer 100 percent ofits

supply so long asthe total amount transferred from that district is less than 20

percent). Addressed in this administrativeproposal.

THIRD-PARTY IMPACTS

Issue #10. Ground-water impacts (i.e., adequacy/propriety ofreview undertaken and

requirementsto protect ground water in area oftransfer). Who should be

responsible forreview and imposition ofground-water requirements? A mechanism

29 April 16, 1998
CVPIA ADMINISTRATIVE

PROPOSAL

WATER

TRANSFERS

has been proposed in the administrativeproposal to determine and quantify the

third-party impacts.

Issue #16. Determining and addressing third party impacts. Same response asto Issue #10

above.

Issue #17. Level ofenvironmental review for long-term transfers. Interior has not addressed

this issue in this administrativeproposal. Interior will continue tofollow

established environmental laws andprocedures.

Issue #19. Whether there should be a limitation on profits obtained through water transfers and

if so, whether excess profits should be used forfish and wildlife mitigation

purposes. Interior did not respondto this issue. Thefundamental premise ofwater

transfers is that the act is between willing buyers and sellers. CVPIA doesrequire

additional charges on water transfers and such charges are remittedto the U S.

Government.

CVPIA APPLICABILITY

Issue #2. Impedimentsto historical transfers, exchanges, and banking arrangements (i.e.,

Reclamation’s position that CVPIA transfer provisions preempt all other federal

authority for transfers ofCentral Valley Project (CVP) water). The issue was

addressed in the administrativeproposaL

Issue #3. Applicability orinapplicability ofCVPIA transfer provisions to Sacramento Valley

base supply water, exchange contractor water, water rights settlement water. This

issue was addressedin the administrative proposaL

Issue #8. Propriety ofReclamation’s determination relative to imposition ofincreased pricing

(for example, on base supply water, exchange contractorwater and water rights

settlement, orfor waterto be transferred for environmental purposes) and $25

municipal and industrial (M&I) surcharge. This issue was addressed in the

administrative proposaL

Issue #14.

Issue #18.

CVPIA transfer provisions vs. California law. What does “consistent with state

law” mean? Interior believes its actions are consistent with State ofCalifornia

water code and does notplan to further address this issue.

What, if any, procedures should be developed to amend contracts to accommodate

transfers? Interior partially addressedthis issue in this administrative proposal

through theprogrammatic water transfer approvalprocess. Interior is also willing

to negotiate more specific water transfer provisions in water service contracts.

30 April 16, 1998
CVPIA ADMINISTRATIVE WATER

PROPOSAL TRANSFERS

TRANSFERABLE WATER

Issue #5. “Wet” waterversus “paper” water issues (i.e., appropriateness of consumptive use

limitations/refill criteria). Is historic use the relevant measure fortransferable

water, or is contract quantitywithout regard to historic use more appropriate? How

should “conserved water” be defined and prioritized relative to transfers, and should

the CVPIA transfer provisions be applicable to conserved water? This issue was

partially addressedin the administrativeproposaL The development ofthe

Programmatic approval water transfer process addressed the issue ofhistoric use

and consumptive usefor intra-CVP division water transfers. However, the issue of

consumptive/historic use and the issue ofrecognizingpast water conservation

practices as the basisto transfer water today will be further addressedin the

CALFEDprocess and the rules and regulationsprocess~ not in this administrative

proposaL

Issue #6. ~Differentiationof“true” transfers from exchanges and water banking arrangements.

Interior has committedto develop water bankingcriteria separately and will

address this issue in thatforum and cod~5 ourposition in the rules and regulations

process.

RIGHT OF FIRST REFUSAL.

Issue #9. Clarification ofoperation ofright offirst refusal (e.g., method ofproviding notice, entities entitled to exercise right). Thisissue was addressed in the administrative

proposaL

LENDER CONCERNS

Issue #22. Agricultural lender involvement in water transferproposals. Interior hasresponded

to this issue to a limited degree in the administrativeproposal and substantially in

the response to comments ofthis administrative proposaL

AREA OF ORIGIN

Issue #20. Interpretation ofSection 3405 (A) (1) (in) - Area ofOrigin - ofCVPIA. The issue

raised in this administrativeprocess was what was Reclamation‘s interpretation of

the Area ofOrigin provisions ofCalifornia law. Reclamation hasreleased in draft

form, its interpretation ofareaoforiginprovisions ofCalifornia law and is now

evaluating the commentsreceived

31 April 16, 1998
CVPIA ADMINISTRATIVE WATER

• PROPOSAL TRANSFERS

OTHER

Issue # 7. Wheeling charges and losses charged to transferring parties. The scopeofthis issue

never reallydeveloped The issue raised concerns about the cost ofwheeling nonproject water through Federalfacilities. Reclamations CVPIrrigation rate-setting

policy discusses this issue. The secondpart ofthe issue regardedthe use of

Preference Use Power to convey non-projectwater through Federalfacilities. The

CVPIA policy on using project use andpreference usepower are being addressed

separately by the Central ValleyProject Operations Office.

Issue #21. Priority oftransfer water, characteristics ofirrigation wateras it is transferred to

M&I uses. Thisissue addressed the allocationpriority ofthe transferred water.

Resolution wasreachedin the water transferforum that water subject to a transfer

agreement would retain the shortage ofthe transferor. Therefore, water transferred

from an irrigation water user (the transferor) to a municipal and industrial

contractor would be subject to the irrigation water shortage provision ofthe

transferor. Thisissue is addressed in the Central ValleyProjectImprovementAct

Administrative Proposal on Urban Water Supply Reliability, datedJune 9, 1997.

32 April 16, 1998