CENTRAL ARIZONA PROJECT 

80-254 

OVERSIGHT HEARING 

BEFORE THE 

SUBCO?\-B1ITTEE ON 

OVERSIGHT At\TD Il'\TISTIGATIONS 

OF THE 

COl\1l\1ITTEE ON 

NATURAL RESOURCES 

I-IOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRD CONGRESS 

FIRST SESSION 

ON THE 

CENTRAL ARIZONA PROJECT 

HEARING HELD IN PHOENIX, AZ 

DECEMBER 10, 1993 

Serial No. 103-64 

Printed for the use of the Committee on Natural Resources 

U.S. GOVERNMENT PRINTING OFFICE 

WASHINGTON : 1994 

For sale by the U.S. Government Printing Office 

Superintendent of Documents, Congressional Sales Office, Washington, DC 20402 

ISBN 0-16-044496-9 
COMMI'ITEE ON NATURAL RESOURCES 

GEORGE MILLER, California, Chairman 

PHILIP R. SHARP, Indiana 

EDWARD J . MARKEY, Massachusetts 

AUSTIN J. MURPHY, Pennsylvania 

NICK JOE RAHALL II, West Virginia 

BRUCE F. VENTO, Minnesota 

PAT WILLIAMS, Montana 

RON DE LUGO, Virgin Islands 

SAM GEJDENSON, Connecticut 

RICHARD H. LEHMAN, California 

BILL RICHARDSON, New Mexico 

PETER A. DEFAZIO, Oregon 

ENI F.H. FALEOMAVAEGA, American 

Samoa 

TIM JOHNSON, South Dakota 

LARRY LAROCCO, Idaho 

NEIL ABERCROMBIE, Hawaii 

CALVIN M. DOOLEY, CalifoJ;Dia 

CARLOS ROMERO-BARCELO, Puerto Rico 

KARAN ENGLISH, Arizona 

KAREN SHEPHERD, Utah 

NATHAN DEAL, Georgia 

MAURICE D. HINCHEY, New York 

ROBERT A. UNDERWOOD, Guam 

SAM FARR, California 

LANE EVANS, Illinois 

PATSY T. MINK, Hawaii 

THOMAS J. BARLOW III, Kentucky 

THOMAS M. BARRETT, Wisconsin 

DON YOUNG, Alaska, 

Ranking Republican Member 

JAMES V. HANSEN, Utah 

BARBARA F. VUCANOVICH, Nevada 

ELTON GALLEGLY, California 

ROBERT F. (BOB) SMITH, Oregon 

GRAIG THOMAS, Wyoming 

JOHN J. DUNCAN, JR., Tennessee 

JOEL HEFLEY, Colorado 

JOHN T. DOOLITTLE, California 

WAYNE ALLARD, Colorado 

RICHARD H. BAKER, Louisiana 

KEN CALVERT, California 

SCOTT MciNNIS, Colorado 

RICHARD W. POMBO, California 

JAY DICKEY, Arkansas 

JOHN LAWRENCE, Staff Director 

RICHARD MELTZER, GeiU!rol Counsel 

DANIEl. VAL KlsH, Republican Staff Director 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS 

GEORGE MILLER, California, Chairman 

SAM GEJDENSON, Connecticut ROBERT F. (BOB) SMITH, Oregon, 

CALVIN M. DOOLEY, California Ranking Republican Member 

NATHAN DEAL, Georgia JAMES V. HANSEN, Utah 

PHILIP R. SHARP, Indiana BARBARA F. VUCANOVICH, Nevada 

BRUCE F. VENTO, Minnesota JOHN J. DUNCAN, JR., Tennessee 

RICHARD H. LEHMAN, California JOHN T. DOOLITTLE, California 

PETER A. DEFAZIO, Oregon WAYNE ALLARD, Colorado 

KARAN ENGLISH, Arizona KEN CALVERT, California 

KAREN SHEPHERD, Utah RICHARD W. POMBO, California 

MAURICE D. HINCHEY, New York JAY DICKEY, Arkansas 

NEIL ABERCROMBIE, Hawaii 

LANE EVANS, Illinois 

THOMAS M. BARRETT, Wisconsin 

,JOHN LAWRENCE, Staff Director 

J . STEVENS LANICH, Legislative Staff 

S. ELIZABETH BIRNBAUM, Counsel 

LINDA GoRDON STEVENS, Clerk 

(II) 
CONTENTS 

Hearing held: December 10, 1993 ......................................................................... . Member statements: 

Hon. George Miller .......................................................................................... . Hon. Karan English ......................................................................................... . Witness statements: 

Hon. Ed Pastor, a Representative in Congress from the State of Arizona .. Hon. Jon Kyl, a Representative in Congress from the State of Arizona ...... Hon. Sam Coppersmith, a Representative in Congress from the State 

of Arizona ..................................................................................................... . Hon. Bob Stump, a Representative in Congress from the State of Arizona 

Hon. Dennis DeConcini, a Senator in Congress from the State of Arizona . Panel consisting of: 

James Duffus III, director, Natural Resources Management Issues, 

Resources, Community and Economic Development Division, U.S. 

General Accounting Office, accompanied by Jim Hampton, evaluator-in-charge, U.S. General Accounting Office, and Leo Ganster, 

assistant director, Natural Resources Management Issues, U.S. 

General Accounting Office ................................................................... . Robert W. Johnson, assistant regional director, Lower Colorado Region, Bureau of Reclamation, U.S. Department of the Interior ......... Panel consisting of: 

Hon. George Miller, Mayor, City of Tucson, AZ .................................... . Mark DeMichele, president and chief executive officer, Arizona Public 

Service Company, and co-chairman, Governor's Central Arizona 

Project Advisory Committee ................................................................ . Rita P. Pearson, director, Department of Water Resources, State 

of Arizona .............................................................................................. . Samuel Goddard, president, board of directors, Central Arizona 

Water Conservation District ................................................................ . Panel consisting of: 

Rob Smith, Southwest representative, Sierra Club, Phoenix, AZ ......... C.L. "Bill" Scott, president, board of directors, Maricopa-Stanfield 

Irrigation and Drainage District, Stanfield, AZ ................................ .. Robert A. O'Leary, executive director, Water Utilities Association 

of Arizona, Phoenix, AZ ........................................................................ . Panel consisting of: 

Hon. Thomas R. White, Governor, Gila River Indian Community, 

Sacaton, AZ ........................................................................................... . Mary Ann Antone, representative, Water Resources Committee, 

Tohono O'Odham Legislative Council, Tohono O'Odham Nation, 

Sells, AZ, accompanied by David Frank, Esq ..................................... . Daniel Preston, vice chairman, San Xavier District Council, Tohono 

O'Odham Nation, Tucson, AZ, accompanied by Thomas Luebben, 

Esq ........... , ............................................................................................. . Panel consisting of: 

Dale Pontius, vice president for conservation programs, American 

Rivers, Washington, DC ....................................................................... . Hon. Mark Schnepf, Mayor, Town of Queen Creek, AZ ........................ . Roger S. Manning, executive director, Arizona Municipal Water 

Users Association, Phoenix, AZ .......................................................... .. 

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IV 

APPENDIX 

December 10, 1993 

Additional material submitted for the hearing record from: Page 

Hon. Bob Stump, a Representative in Congress from the State of Arizona: 

1. Letter to Rob Smith, Southwest representative, Sierra Club, dated 

December 10, 199:! ............................................................................. 217 

2. Letter to Rep. Stump from Rob Smith dated April 5, 1994, in 

response to Rep. Stump's letter of December 10, 1993, including 

attachment dated October 20, 1993, and titled "Environmental 

Recommendations and Considerations for Water Allocations and an Environmental Trust Fund for Central Arizona Project" .......... 219 

Hon. Karan English: 

1. Letter from Thomas C. Clark, general manager, Central Arizona 

Water Conservation District to Rep. English dated January 24, 

1994, in response to her request for comments on the testimony 

of Messrs. Johnson and Duffus at the December 10 hearing ......... 230 

2. Prepared statement of Cyprus Miami Mining Corporation ............ .. 235 

Daniel Preston: vice chairman, San Xavier District, Tohono O'Odham 

Nation, Tucson, AZ: Position of the San Xavier Allottees Association, 

the San Xavier Cooperative Association and the San Xavier District 

Council regarding amendments to the Southern Arizona Water Rights 

Settlement Act of 1982, dated September 27, 1993 ................................... 237 

Mark DeMichele, co-chainnan, Governor's Central Arizona Project Advisory Committee: Final Report and Recommendations of the Advisory 

Committee dated October 1993 ... .... ............................................................. 242 

Dale Pontius, vice president for conservation programs, American Rivers: 

1. Arizona Rivers Lifeblood of the Desert, A Citizen's Proposal for 

the Protection of Rivers in Arizona, prepared by the Arizona 

Rivers Coalition [Introduction and Proposal Summary only. This 

document may be found in its entirety in the archival file.] ····~····· 283 

2. EnvirollJ)lental Recommendations and Considerations for Water 

Allocations and Environmental Trust Fund for ,Central Arizona 

Project, document dated October 20, 1993 ....................................... 296 

Rob Smith, Southwest representative, Sierra Club: Letter to Chairman 

Miller dated December 16, 1993, enclosing letter dated November 1, 

1993, to Daniel Beard, Commissioner, Bureau of Reclamation, from 

several environmental groups ........................ .............................................. 302 

Maricopa-Stanfield Irrigation & Drainage District, Central Arizona Irrigation and Drainage District and New Magma Irrigation & Drainage 

District: Letter to Chairman Miller from William D. Baker and Paul 

R. Orme, Ellis, Baker & Porter, Ltd., dated December 28, 1993 .............. 308 

Subcommittee on Oversight and Investigations, Committee on Natural 

Resources: 

1. Letter dated December 8, 1993, to The Arizona Republic from 

Ed Osann, Directcr of Policy and External Affairs, Bureau of 

Reclamation ........................................................................................ 314 

2. "CAP cost may grow $1 billion, U.S. says," The Arizona Republic, 

December 11, 1993 ............................................................................. 315 

3. Associated Press news clippings on the Central Arizona Project 

dated December 11, 12 and 13, 1993 ................................................ 317 
CENTRAL ARIZONA PROJECT 

FRIDAY, DECEMBER 10, 1993 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, 

COMMITTEE ON NATURAL RESOURCES, 

Washington, DC. 

The subcommittee met, pursuant to call, at 9:30 a.m. in the 

Phoenix Civic Plaza, Phoenix, Arizona, Hon. George Miller [chairman of the subcommittee] presiding. 

STATEMENT OF HON. GEORGE MILLER 

Mr. MILLER. The Committee on Natural Resources will come to 

order. The purpose of this hearing is to conduct an oversight hearing on the Central Arizona Project, and I would certainly like to 

welcome all of the members of the audience to the hearing. 

I am Congressman George Miller from California, chairman of 

the Committee on Natural Resources. I would like to welcome my 

colleagues to the hearing from the Arizona delegation. 

Just a quick word in starting out. First of all, as I think you can 

see, we have a considerable witness list, and for us to get through 

this hearing, people, to the extent they can in their testimony, 

must stay within the five-minute limit. Clearly there are questions 

that members of the panel seek to ask the witnesses. 

People will be allowed to extend or to revise their remarks. We 

will keep the record of this hearing open for the next two weeks 

so that people can make submissions based upon either additions 

to what they have said or what somebody else has said that they 

disagree with, or what we have said that they disagree with or 

agree with. For members of the audience, we were not able to accommodate everyone as a formal witness, but certainly members of 

the audience should feel free to make submissions to the committee 

during this time period if they believe there is information that will 

be helpful to the committee in conducting this oversight hearing of 

the CAP. 

We will try to hold to the time limits in a tight fashion. We are 

trying to meet a 3:00 p.m. deadline in terms of concluding this 

hearing because we have plane connections to make. I would appreciate everybody's cooperation with that. 

Finally, let me just say that it is a pleasure to be in Arizona. 

Yesterday I had the opportunity to tour many of the features of the 

Central Arizona Project. I saw more of Arizona than I knew existed, but it was a pleasure. Congressman Pastor accompanied me 

on that tour and gave me a running history of both the project and 

the various communities that we flew over. 

(1) 
2 

And yesterday I had a long meeting with Congresswoman English about the project and about this hearing. 

It has become evident to me that there is a great deal of speculation about what the purpose of this hearing is, or what the agenda 

is, or what the motives are. I think we ought to put this into perspective. 

And that perspective fits into the history of this committee. We 

have authorized some of the great water projects of this country 

that have delivered millions and billions of dollars in benefits to 

the country, to communities, to States, and to others. We have also 

been charged with the obligation to see that in fact the purposes 

for which we have authorized those projects are being carried out, 

and the agreements that were entered into are carried out. Those 

must be carried out both on behalf of the Federal Government, our 

rights and obligations, and on behalf of the beneficiaries or the perceived beneficiaries as to their rights and obligations. 

Our charge is really no more than that and no less than that. 

That doesn't mean that charge is without controversy. It doesn't 

mean that charge is without emotion. But as I look across this 

room and I see many familiar faces in this room who have been 

around the great water issues of the West for many, many, many 

years, I think it is also fair to say that we all understand that not 

only have these projects changed in terms of our perception and 

our intentions, and the purposes, but so has the West changed with 

regard to these projects. 

Arizona is a far different State today than people envisioned 

when they first started thinking and talking about the Central Arizona Project, as is my own State, when people first started to create and to build the Central Valley Project of California. 

Our economies are different, our residents are different, their 

sense of history is different, and clearly the cost of the project has 

exceeded all of our wildest imaginations. That in itself is not a bad 

thing. Everything has exceeded our wildest imaginations in terms 

of cost in this country, unfortunately. 

But I think that we have an obligation as a committee, and certainly as Members of Congress, to periodically review this. This 

project, like many in the West, has come to a point where people 

are questioning its original purposes, questioning whether or not 

they can participate as farmers or as cities or as other entities in 

the project. Because of all of the changes, they are asking whether 

they should participate, whether they are getting the deal that 

they perceived they had at the outset, and whether it can all be 

tucked into an affordable package. 

That again is nothing new to me as chairman of this committee 

or to the members of this committee. We have been going through 

this process now essentially over the last ten years with all of the 

great water projects in the West. 

I like to think that this committee has also been able to sort out 

all of the competing differences, and in fact has been able to put 

together proposals that have been acceptable to the citizens of California, to the citizens of Utah, to the citizens of North Dakota, and 

to other areas where the projects' purposes have had difficulty in 

being met. 
3 

A lot of people have speculated, what is my purpose? The chairman from California, a historical competitor for water with everybody else in the world, not just Arizona, and with great dreamers 

and designers of dramatic projects to bring water from the Arctic 

Circle or to bring water from the Colorado River. 

My agenda is very simple. This is the Central Arizona Project. 

It was designed to deliver benefits to the State, to the , citizens of 

Arizona, and I think we have an obligation to see that that in fact 

is carried out. 

We also have an obligation to see that that is carried out with 

the full protection of the American taxpayers who are not citizens 

of Arizona, who have made a very hefty investment in this and are 

relying on certain agreements. Those are the only two issues that 

really arise. 

We will see this morning that there are a whole series of proposals on how that should he done. This committee did not create the 

concern and some of the controversy that surrounds this project at 

this moment. This committee is simply responding to that. 

Clearly the Governor's office, with the creation of the advisory 

committee, and the districts, with the creation of their submissions 

this morning to the State and to the other principals about how 

this project should be conducted in the future, recognize there are 

some thresholds that are going to have to be met and changes that 

will have to be created if the project is in fact going to survive in 

tenns of its purposes and the benefits the people of this State seek. 

We are here to collect that infonnation and to match it against 

the facts, and our understanding of the future of this project, and 

of the Federal commitments and obligations. 

And we will do that. I think it is clear to see at the outset that 

it is very difficult. Although people from time to time have desired 

to do this, it is very difficult to bring about a comprehensive solution to the issues that are raised in major water projects at this 

stage in their completion, without the very serious involvement and 

cooperation of the Federal Government. So I think people should 

understand that. 

I hope that that helps to clarify the issues and the purposes of 

this hearing. I have listened to and read about, for many years, all 

of the speculation about my intents and the intent of this committee, most of which is usually in the interest of the person speaking, 

not terribly in the interest of resolving the issue. 

But the fact is I think you will find out that I am fairly candid, 

I do not play to hidden agendas, and I am very straightforward. We 

will conduct ourselves as a committee in that fashion. And I think 

we will do so clearly trying at every step of the way to recognize 

the interests of the people of the State of Arizona. 

I would ask the same courtesy and respect for the people of the 

State of California that I represent when we undergo these kinds 

of hearings. I have had the pleasure of working very closely with 

Congresswoman English on this issue over the last year. I don't 

know how many meetings I have spent discussing this, but she has 

been very helpful as a member of this committee to provide me 

some guidance as to all of the various pitfalls that can be set out 

there, as you meander through a community other than your own. 
4 

And at this point, I would like to recognize Congresswoman English for any statement that she has at this time. 

STATEMENT OF HON. KARAN ENGLISH 

Ms. ENGLISH. Thank you, very much. Thank you, Mr. Chairman, 

and welcome to the great State of Arizona. I do have some brief remarks that I would like to make before we turn our attention to 

today's witnesses. 

Mr. Chairman, let me be the first of many people today who will 

stress the overwhelming importance of the successful operation of 

the Central Arizona Project to the economic future of Arizona. 

As you are well aware, all economic activity in the arid West is 

directly linked to the availability of reliable water resources. In Arizona, the CAP is the linchpin of the State's strategy to secure a 

reliable--and renewable--water source to fuel our economic future. 

But a variety of difficult and complex problems stand in our way. 

Many people from across the State have lent their time and talents 

to searching for solutions to the CAP's problems. 

In short, Mr. Chairman, Arizona has not sat idly by in the face 

of these problems. There have been many good-faith efforts to seek 

creative solutions and to make sure the CAP returns to a healthy 

financial condition. And these efforts are continuing. 

We in Arizona take our CAP repayment obligations very seriously. We are determined to work with the Federal Government at 

every opportunity to make sure that our obligations are met. Now 

is the time to put aside old assumptions and discuss new and creative solutions, many of which have already been proposed by the 

Central Arizona Water Conservation District (hereafter CAWCD or 

the District), the Governor's CAP Advisory Committee, and others. 

This work must be continued and expanded as we gain a more 

complete understanding of the nature and extent of the problems 

that must be confronted if we are to reach our goal of providing a 

secure long-term water supply. 

This work must be carried out within the context of protecting 

and preserving Arizona's ability to hold onto its entitlement of Colorado River water to improve the quality of life for Arizonans. We 

will not surrender our economic future. And I am convinced that 

creative solutions can be found. I am eager to take part in this effort, to help in every way that I can to forge a consensus solution 

that ensures the long-term integrity of the project. 

Mr. Chairman, I look forward to hearing from today's witnesses. 

As we have discussed on many occasions, the future of the CAP is 

in many ways the future of Arizona. We appreciate your interest 

in this matter and look forward to working with you and the entire 

Natural Resources Committee to make sure that any congressional 

actions regarding the Central Arizona Project contribute to the 

project's ability to deliver a reliable and renewable water supply for 

our cities, towns, industries, and agricultural and Native American 

communities over the long term. 

I personally want to thank every one of you here today partidpating in this process and look forward to the discussions. 

Thank you, Mr. Chairman. 

Mr. MILLER. Thank you. Mr. Pastor. 
5 

STATEMENT OF BON. ED PASTOR, A PREPRESENTATIVE IN 

CONGRESS FROM THE STATE OF ARIZONA 

Mr. PASTOR. Mr. Chairman, I ask unanimous consent to revise 

and extend my remarks. In the interests of time, I will submit my 

statement for the record. 

First of all, let me welcome you to Arizona, in particular to the 

Second District. A13 you told the audience, we spent yesterday traveling throughout the CAP structures. I look forward to working 

with you in finding resolutions to the problems that we may have 

with the CAP. 

Over the years, as you look at this project, you will find that .1\rizonans, like Barry Goldwater, Mo Udall, John Rhodes, and Carl 

Hayden (of different political parties and different etiologies) all 

carne together to make sure that this great public works project 

was successful. 

And today you see the congressional delegation from both parties 

here at this hearing to show the continued determination that we 

have to solve any problems that the CAP may have. We want to ensure its future and make sure that Arizona has 

a sound economic base. But I have to tell you, Mr. Chairman, that 

you did bother me a couple of times on the flights we took together 

yesterday. We landed in various locations and had the honor of 

meeting with Mayor Miller and Governor White, we also visited the 

Roosevelt Darn. 

And several times after we landed in those other locations, Mr. 

Chairman, you did ask me how far, in terms of miles, it was from 

the site to the California border. 

But welcome again, Chairman Miller. I am glad you are having 

this hearing, and I thank all the witnesses for being here to give 

their views and insight into the future of the Central Arizona 

Project. 

[Prepared statement of Mr. Pastor follows:) 

Mr. Chainnan, I would like to both welcome you to Phoenix and thank you for 

allowing me to say a few, brief words today on behalf of Arizona's most important 

public works project. If there is one thought that I, and the people of Arizona, would like you to walk 

away with today, it is the determination of the people of this great State to success- fully work together to solve any problem that the Central Arizona Project faces. In a very real sense, the fact that we are having this hearing today, a hearing on a functioning and operating CAP, testifies to the long tradition of hard work, com- promise, and unity of detennination that has characterized the efforts of thousands 

to bring Colorado River water to Arizona's farmlands and cities. As you well know Mr. Chainnan, the efforts that made the CAP a reality crossed 

many boundaries. Rural fanners and urban officials have worked together with such 

diverse politicians as Mo Udall and Barry Goldwater to establish the CAP and over- come the problems it has faced. Governor Fife Symington is to be commended for continuing in this fine and important tradition of bringing together diverse interests on behalf of the CAP. The 

collective knowledge, talents, and experience of the members of the committee produced an excellent report, and, what I believe, are sound recommendations to en- sure that the CAP remains financially stable while fulfilling its many goals and purposes. 

In addition to fulfilling a nearly 75-year-old dream of supplying vast regions of 

Arizona with Colorado River water while reducing our State's reliance on ground 

water, the Central Arizona Project has the ability to play an important role in many 

pressing water-related problems in the State. Currently, the unresolved Indian 

water rights claims have created a great deal of uncertainty over the continued use of water by non-Indian users. As an active partner with financial obligations to 

these claims, the CAP presents Arizona and the Federal Government with a variety 
6 

of options to settle these long-standing disputes. The project is also authorized for 

environmental purposes, and the Governor's Advisory Committee has recommended 

that the State and the CAWCD aggressively study such a mission for the CAP. 

Today, the CAP is presented with some very real problems. While divergent interests with differences of opinions on how to solve these problems do exist within our community, we are all committed to seeing the Central Arizona Project used to its 

full potential in Arizona. The people of Arizona have successfully worked together 

to confront challenges to the CAP in the past, and I have complete faith that they 

will continue to do so now, and in the future. 

Thank you again, Mr. Chairman. 

Mr. MILLER. That is how it starts. Next thing you know we will 

be turning the valves on the pipes. It is a great honor to be chairman. You know, I sit here being a swing vote on my committee on 

most issues, then I have to go hat in hand to the Appropriations 

Committee and see if I can find any money to carry out my dreams. 

It is a wonderful honor. 

Mr. Kyl, welcome to the committee this morning. 

STATEMENT OF HON. JON KYL, A REPRESENTATIVE IN 

CONGRESS FROM THE STATE OF ARIZONA 

Mr. KYL. Thank you, Mr. Chairman. I associate myself with the 

remarks of my colleagues in welcoming you to this hearing. I associate myself with Bob Stump's comments as well. 

First of all, I think it never hurts to remind ourselves--! know 

you are fully aware of this, Mr. Chairman-that the Central Arizona Project is not a typical Reclamation project. Its purpose is to 

realize Arizona's legal share of the Colorado River. I think that has 

always counted for something, both in the deliberations in Washington with your support, and certainly for those of us in Arizona. 

And as one of the participants in the 1980 Groundwater Act deliberations with then-Governor Bruce Babbitt who led those nego- tiations, as a condition to continued support from the Federal Government, we here in Arizona had to come together with all of the 

diverse interests always represented in water disputes. Through 

the Governor's leadership and a lot of goodwill and compromise on 

the part of a lot of people, we did that because the purpose of ensuring our future by guaranteeing any supply of groundwater for 

the future was far too important. It was an interest that overrode 

any of the individual interests of the parties involved. 

It is that spirit that, as Ed just pointed out, has characterized 

the willingness of Arizonans, each time a problem has arisen with 

the Arizona project, to get together and resolve it even in the face 

of great difficulty. I think you have seen that with the Governor's 

task force, the work of the CAWCD, and I think I can commit that 

same effort on the part of Arizonans to resolve problems that may 

arise in the future as well as questions that you have raised, and 

appropriately so. 

It is a spirit that simply reflects our need to preserve our future. 

We recognize that as representatives of government, too, that not 

only do we have an interest in representing-a need to represent 

the interests of Arizonans--but also to ensure the United States' 

interests are represented, because of course it is a United States 

project. 

We have an obligation to ensure that the project proceeds in accordance with its original intent, mindful of changes and the evolution of the project. Today, Indian water settlements, environ-
7 

mental opportunities, agricultural interests, municipal requirements, all of these will be represented and heard today. 

But the bottom line is, Arizonans remain committed to making 

this work, and you can be assured of our continued willingness to 

work with you in the months and years to come to deal with all 

of these issues to ensure the success of the project both for Arizona 

and for the United States of America. 

Thank you again, Mr. Chairman. 

Mr. MILLER. Thank you. 

Mr. Coppersmith. 

STATEMENT OF HON. SAM COPPERSMim, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ARIZONA 

Mr. COPPERSMITH. Thank you, Mr. Chairman. I don't want it to 

be my opening statement that causes you to miss your plane. I will 

ask unanimous consent that my statement be entered into the 

record. 

I just wish to note that this is another step in a long process. In 

this State we have a strong sense of history and we honor those 

that had the wisdom, persistence, and strength to see the need for, 

and helped to create, the Central Arizona Project. We now have the opportunity to see if we can match our predecessors' records of achievement, because we need to transform this 

project into one that is suitable for the twenty-first century. If this 

were an easy task, we would have done it sooner. 

Mr. Miller, thank you for coming. It is important that you see it 

and get this additional information. I would also like to thank my 

friend and colleague, Karan English, who has been a moving force 

for getting you here so you can see firsthand what has been accomplished and what needs to be done. 

Thank you. [Prepared statement of Mr. Coppersmith follows:] 

Chairman Miller, fellow Members of Congress, and distinguished guests: 

The Central Arizona Project, designed to fuel and support Arizona's growth, has 

become a magnet for contentious debate. Since this project was begun, Arizona has 

changed dramatically, as has the public's attitude toward massive public works 

projects. Under those circumstances, it is no real surprise, as Arizonans face paying for both the project and that water it delivers, that we find ourselves awash in con- troversy. 

Today's hearing will provide a forum for an honest and open discussion of Arizona's obligation and ability to repay its share of CAP costs and of the use of the 

water delivered by the CAP. We should not use today's session to lay blame, to point 

fingers, or to cast aspersions. Instead, we should gather facts and information to 

help us craft a repayment plan that will allow Arizona to meet its obligations. We all know that solving the problems that lie ahead will not be easy or quick. 

We must balance and weigh myriad interests. We need to recognize the concerns and needs of our present and future urban and rural population, both in their ca- pacity as water consumers and as taxpayers. We also much r. ecognize and deal with a number of legitimate environmental issues. The needs and rights of tribal water 

claims are also at stake. 

A great deal of work by many people has gone into trying to solve these problems, 

and I'm sure even more work lies ahead. At this point, I think we need to be guided 

by Mo Udall's example. Mo taught us that patience, humor and a willingness to 

compromise, when applied by people of good will, could find solutions where none seemed possible. 

I want to thank my colleague and friend, Congresswoman Karan English, for 

causing this hearing to occur and for allowing me this chance to participate. I also 

want to thank Chairman Miller for taking the time to travel to Arizona and to make 

this important hearing possible. 
8 

The CAP was built to provide our farmers and cities with an inexpensive and environmentally sound alternative to pumped groundwater. Because the project cost 

four times more than the initial estimates, the cost of delivering Colorado River 

water to Arizona fields has become almost prohibitively high, driving many farmers 

to other sources of water or, occasionally, into bankruptcy. Although agriculture no 

longer plays a dominant role in our state's economy, low CAP water use for field 

irrigation threatens Arizona's ability to utilize its Colorado River entitlement, open- ing the way to suggestions that Arizona give up a portion of its unused allocation. 

Acting on suggestions from the Governor's CAP Advisory Committee, the Central 

Arizona Water Conservation District (CAWCD), which operates the CAP, renegoti- ated the farmers' payment schedule, significantly reducing the water rate charged 

per acre/foot. Unfortunately, the subsidized price is almost guaranteed to raise the 

rates municipal users pay for water, and still does not guarantee that Arizona will 

use its full allocation of Colorado River water or that groundwater use will decline. 

Finally, as deliberations over the future of the CAP and Arizona's long-term water 

supply continue, I would like to see some greater consideration given to the Advisory Committee's suggestions concerning improving the environmental aspects of 

the CAP. I am pleased that CA WCD adopted an Environmental Enhancement Plan, but we have considerably more work to do. The CA WCD and the Department of 

Water Resources need to address the many environmental questions raised by the 

CAP as part of this process. In this state, we often celebrate the wisdom, persistence, and strength of the leaders who saw the need for and who helped to create the Central Arizona Project. We 

now have our chance to equal their record of achievement through the transformation of the CAP into a project suitable for the twenty-first century. 

Mr. MILLER. Mr. Stump. 

STATEMENT OF HON. BOB STUMP, A REPRESENTATIVE IN 

CONGRESS FROM THE STATE OF ARIZONA 

Mr. STUMP. Thank you, Mr. Chairman. Let me also welcome you 

to Arizona. I appreciate the time you have given to be with us here. 

Unfortunately, all of our delegation couldn't be here today. Senators McCain and DeConcini and Congressman Kolbe are out of the 

country on official business, but they asked that I extend their appreciation to you for being at the hearing. 

The partnership between Arizona and the Federal Government 

and the Central Arizona Project spans decades of authorization, 

planning, engineering, construction, and finally, the beginning of 

water delivery. 

Arizona has consistently recognized its responsibilities in addressing water use among competing interests, as well as its obligations as a partner in the Central Arizona Project. 

No project of the size or importance of the Central Arizona 

Project is immune from problems and questions along the path to 

completion. However, having been involved in water issues in this 

State for almost four decades, I am proud that Arizona's diverse interests have historically worked together to respond to our problems, and needless to say, this cooperation is not always an easy 

task. 

Today I am confident that you will hear firsthand how the diverse water interests in Arizona-subcontractors, including the 

State, agriculture, municipal, industrial, and private water companies-have once again come together to confirm that Arizona is 

prepared to meet its financial obligations to the Federal Government as well as continue its responsibilities in meeting the water 

needs of a growing State. 

That cooperation is evidenced by the support that each of those 

interests has given to the financial restructuring plan recently 

adopted by the CA WCD Board of Directors. 
9 

I would like to commend the Governor and all of those on his Advisory Committee for their work in addressing some very complex 

and critical issues. Also to be highly commended is the Central Arizona Water Conservation District for their continued diligence to 

ensure the completion of the CAP and the fulfillment of our obligations to the Federal Governmenf. 

Mr. Chairman, once again we appreciate very much your coming 

out and giving us your time. Thank you. 

Mr. MILLER. Thank you, very much. Our first panel will be made up of Mr. James Duffus, the Director of Natural Resources Management Issues for the U.S. General 

Accounting Office. He will be accompanied by Mr. Jim Hampton 

and Mr. Leo Ganster, Acting Director of Natural Resources Management Issues. Mr. Hampton is Evaluator-In-Charge of the General Accounting Office. And Mr. Robert W. Johnson is Assistant Regional Director, Lower Colorado Region, Bureau of Reclamation . . Mr. STUMP. Mr. Chairman, my apologies for interrupting; Senator DeConcini asked I give you a statement to be included in the 

record. 

Mr. MILLER. We would be happy to do that. We talked with Senator DeConcini's office and would be happy to include his statement. 

[Prepared statement of Senator DeConcini follows:] 
10 

~~ f -- ·~{...1\')\ 

STATEMENT 

HEARING ON THE CENTRAL ARIZONA PROJECT 

HOUSE COMMITTEE ON NATURAL RESOURCES 

DECEMBER 10, 1993 

Good morning. I want to begin by thanking Chairman Miller 

for his graciousness in allowing me to enter a statement into the 

record for this hearing. I am sorry I could not be here in 

person to deliver it and have the opportunity to hear today•s 

testimony first-hand, but, as Chairman of the Senate Intelligence 

Committee, I have a long-standing commitment to travel to the 

Middle East. I want there to be no mistake, however, about how 

important I feel the Central Arizona Project (CAP) is to Arizona. 

The CAP is the product of many years of hard work by a great many 

individuals in both the Republican and Democratic parties, and it 

is an extremely critical resource for the future of the State of 

Arizona. 

I know Chairman Miller has always had a great deal of 

interest in the CAP and has requested the General Accounting 

Office (GAO) to look into its future financial solvency. I 

welcome this chance for Arizona to voice its support and need for 

the CAP. In the seventeen years I have spent working on CAP 

issues, I have never seen. Arizona water users more unified in 

their support of the CAP. There are a few dissenting opinions, 

but those represent a minority in the state. Such unity has 

given me great confidence that the difficulties faced by the CAP are surmountable and will be settled to the great benefit of the 

State of Arizona . 

I would like to give special recognition and credit to 

Governor Fife Symington. His leadership on this issue has been 

outstanding and the remarkable unity of Arizona water users is 

due in large part to his efforts. The Governor's CAP Advisory 

Committee, which he appointed and co-chaired with Mark DeMichele, 

has presented a balanced proposal as to the future of the CAP . Anyone who has dealt with the CAP for any length of time knows 

that the Project has been studied and restudied with no concrete 

conclusions for many years. But the report issued by the 

Governor's Advisory Committee is a perceptive analysis of the 

CAP's present situation which at once recommends solutions for some of the CAP's immediate problems and also provides sound 

long-term answers to the Project's financial difficulties. It is 

important to point out that the proposal does so without adding a burden to the taxpayer--which I know is a great concern to my 

friend from California--and at the same time it is 

environmentally responsive . I know Chairman Miller is familiar 

with the report--the Governor and Rita Pearson, Director of Water 

Resources, presented the Advisory Committee findings and 

recommendations to the delegation, the House Natural Resources 

Committee and the Department of the Interior when the report was finalized . 
11 

I understand that the GAO is still engaged in a preliminary 

.investigation in response to Chairman Miller's questions. At the 

time of the Chairman's letter, I also sent a request that the 

agency look into some of the beneficial aspects of the CAP . I 

believe there are many--not just for Arizona, but for the Federal 

government as well. I think it important that any consideration 

of the CAP include the positive aspects of the project, such as 

the potential for the Federal government to settle outstanding 

Indian water rights claims and to fulfill the mandates of 

Arizona's precedent-setting groundwater management code. I 

understand that the preliminary investigation of my request has 

not yet been completed. Nonetheless, I still think that any fair 

assessment of the CAP cannot be quantified in terms of financial 

expenditures, and I hope that the GAO has taken that into 

account. 

Mr. Chairman, it is important to point out that the major 

goal of the CAP is an environmental one: reducing Arizona's 

reliance on nonrenawble groundwater supplies by using renewable 

Colorado River water. If we fail to work together to ensure the 

viability of the project, this overriding environmental objective 

will not be met. 

I think I speak for the majority of Arizonan's when I thank 

Chairman Miller for having this hearing to define the problems 

faced by the CAP. However, I must point out that we in Arizona 

a.re determined to resolve these issues. The amount of work and 

hard decisions made by the Governor's Advisory Committee 

demonstrate that we have not only identified those problems but 

are ready to make the tough choices necessary in order to 

maintain the viability of the CAP. We know that to maintain the 

future financial viability of the CAP and meet the criticism of 

its detractors, Arizona must pull together and agree on a 

restructuring of the CAP debt that includes all water users. I 

believe we have taken great steps toward accomplishing this task. 

Secretary Babbitt declared the Project substantially 

complete on October 1, 1993, thereby triggering repayment of the 

CAP to the Federal government in January 1994. The Central 

Arizona Water Conservation District (CAWCD) is committed to 

meeting its repayment obligation. If Chairman Miller is 

concerned about Arizona's commitment to making the CAP work, 

without any additional burden to the taxpayers, I hope he comes away from this hearing assured that Arizona is well on its way to 

doing whatever it takes to maintain the future security of the 

CAP. 
12 

Mr. MILLER. Welcome. We look forward to your testimony. And 

obviously we will include your full testimony in the record. You 

may proceed in the manner in which you are most comfortable. 

Jim, we will begin with you. 

PANEL CONSISTING OF JAMES DUFFUS III, DIRECTOR, NATURAL RESOURCES MANAGEMENT ISSUES, RESOURCES, COMMUNITY AND ECONOMIC DEVELOPMENT DIVISION, U.S. GENERAL ACCOUNTING OFFICE, ACCOMPANIED BY JIM HAMPTON, EVALUATOR-IN-CHARGE, U.S. GENERAL ACCOUNTING 

OFFICE, AND LEO GANSTER, ASSISTANT DIRECTOR, NATURAL RESOURCES MANAGEMENT ISSUES, U.S. GENERAL ACCOUNTING OFFICE; AND ROBERT W. JOHNSON, ASSISTANT 

REGIONAL DIRECTOR, LOWER COLORADO REGION, BUREAU 

OF RECLAMATION, U.S. DEPARTMENT OF THE INTERIOR 

STATEMENT OF JAMES DUFFUS III 

Mr. DUFFUS. Thank you, Mr. Chairman. We are pleased to be 

here today to discuss our preliminary observations on some of the 

issues you asked us to review concerning the Department of the Interior's Central Arizona Project or the CAP. 

My testimony focuses on the Federal Government's share to construct CAP and the Central Arizona Water Conservation District's 

abilities to repay its share of construction costs. 

Concerning the government's share of construction costs, the 

Federal share of CAP's estimated $4.7 billion construction costs 

could increase from $1.7 billion to over $2.8 billion, depending on 

how three matters now under review by the Bureau are resolved. 

Concerning the District's ability to repay its share of construction 

costs, it appears in the short term, the District will be able to repay 

these costs and pay its annual operation and maintenance expenses. However, in doing so, the District will substantially reduce 

its financial reserve fund. 

In the long term, several uncertainties could substantially affect 

both the District's ability to repay construction costs as well as its 

ability to pay annual O&M expenses. 

The Federal share of CAP's costs could increase to over $2.8 billion for three reasons. 

The first involves a contract repayment dispute that could add 

$400 million to federal costs. According to the Bureau, the District's reimbursable cost eeiling in the December 1988 master repayment contract is $2 billion. However, the District believes that 

an exhibit to the contract pertaining to the delivery of CAP water 

to the Gila Indian tribe reduces the District's repayment obligation 

to $1.8 billion, or $200 million less. 

The other $200 million relates to the Bureau's estimate that the 

District's repayment obligation will be $2.2 billion by the time CAP 

is completed in 1999, or $200 million more than the ceiling in the 

current master repayment contract. The Bureau contends that the 

repayment ceiling can be raised with the District's agreement, but 

the District has suggested that it may not agree to a ceiling increase. 

The second reason the Federal cost could i:lcrease is that water 

allocated for future Indian water rights and environmental uses 
13 

could add another $585 million to Federal costs. To date nearly 

one-third of CAP's anticipated capacity as well as $980 million in 

nonreimbursable CAP construction costs have been allocated to settle Indian tribes' water-rights claims. 

The Secretary of the Interior has reserved 200,000 additional 

acre-feet of CAP water for future Federal use, including Indian 

water-rights claims, and is now in the process of negotiating settlements. If these six settlements follow the pattern of past settlements, the Federal Government could assume an additional $435 

million of CAP construction costs. 

In addition, 50,000 to 150,000 acre-feet of water may be allocated 

for fish and wildlife enhancement. Construction costs associated 

with this allocation would range from $50 million to $150 million. 

These costs would be borne by the Federal Government. 

The third reason Federal costs could increase relates to possible 

defaults on water distribution system loans that could add another 

$157 million to Federal costs for CAP. These loans are between the 

Federal Government and the individual irrigation districts. 

Turning now to the District's ability to repay its share of CAP 

costs, both the Bureau and the District are confident that the District can repay its share. However, our analysis of the District's financial plan showed that, for the 1994 to 1999 period, projected 

revenues from power and water sales and interest income from investments of the reserve fund will not provide sufficient funding for 

the District to repay its debt and to pay for annual O&M expenses. 

As a result, the District may have to use some of its reserve 

funds to meet expenses, which could reduce the fund from $160 

million to about $58 to $75 million by 1999. 

Over the long term, several uncertainties could substantially affect the District's ability to repay. For example, the District has not 

analyzed its ability to repay the $2 billion to $2.2 billion the Bureau believes the District should pay. Another uncertainty relates to future revenues the District exJ?ects to generate from power sales. The Diatrict plans to use about 

$40 million in revenues from three contracts for the sale of power 

from the Navajo Generating Station as a major source of funds for 

repayment. The contracts, two of which exist, and one of which is 

being negotiated, would expire in 2011. It is not certain the same 

amount of revenues can be generated after the contracts expire. In 

2011, the land lease and coal contract for the Navajo Generating 

Station will also expire. Whether the lease and contract can be extended and the power contracts renewed at terms equally favorable 

are unknown. The District's financial plan assumes that power revenues will stay the same throughout the 50-year repayment period. 

In addition, the Navajo Generating Station could be inoperable 

or inefficient to operate in 25 years, according to Interior's Inspector General, unless it is rehabilitated or replaced. However, the 

District's financial projections do not address the issue of power 

plant rehabilitation or replacement. 

A third uncertainty relates to recovery of the District's fixed 

O&M expenses, estimated to be $30 million for 1994. M&I and Indian water users scheduled to buy CAP water in 1994 will pay $8 

million, but who will pay the remaining $22 million in O&M expenses is uncertain. 
14 

A major factor contributing to the uncertainty is the "take-orpay" provision of CAP contracts with non-Indian irrigation districts. These contracts require the districts to pay the fixed O&M 

expenses allocated to all water not delivered to M&I and Indian 

customers, whether or not the districts use the water. However, the 

irrigation districts have scheduled only minimal deliveries for CAP 

water in 1994, and several districts have suggested they will be 

forced into bankruptcy if take-or-pay is enforced. 

If the District does not recover its annual O&M expenses through 

water sales and other sources, then the difference must be covered 

through payment from its financial reserve fund. The long-term 

payment of O&M expenses from the reserve fund will eventually 

deplete the fund and could adversely affect the District's ability to 

repay its Federal obligation. 

The final uncertainty that could impact the District's ability to 

pay its CAP costs relates to water sales to non-Indian agriculture 

users. Having non-Indian irrigation districts buy CAP water is advantageous to the District because construction costs allocated to 

agricultural water supply are repaid to the Federal Government 

without interest. Therefore, the more agricultural water delivered, 

the less interest the District has to pay. 

In order to increase the use of CAP water by non-Indian irrigation districts, the District has proposed lowering the price by as 

much as $44 per acre-foot to increase non-Indian agriculture water 

use. The District believes it can change water pricing unilaterally, 

but the Bureau believes its approval is necessary. 

That concludes my summary, Mr. Chairman, and I would be 

happy to respond to any questions you or other Members may 

have. 

Mr. MILLER. Thank you. 

[Prepared statement of Mr. Duffus follows:] 
GAO 

For Release on Delivery 

Expecredal 

9:30a.m .• MST 

Friday 

December 10. 1993 

GAO!f -RCED-94-92 

15 

United Slates General Accounting Otr~ee 

Testimony 

Before the Subcommittee on Oversight and Investigations, 

Committee on Natural Resources, House of Representatives 

BUREAU OF 

RECLAMATION 

Information on the Federal 

Fmancial Commitment and 

Repayment Status of the 

Central Arizona Project 

James Duffus m. Director, 

Natural Resources Management Issues, 

Resources, Community, and Economic 

Development Division 
16 

Mr. Chairman and Members of the Subcommittee: 

We are pleased tc> be here today to discuss our ongoing review 

of the Department of the Interior's Central Arizona Project (CAP). 

My comments today, Mr. Chairman, reflect our preliminary 

observations on some of the issues you asked us to examine. 

Earlier this year, you requested that we review various issues 

relating to CAP, including: (1) the total financial commitment of 

the federal government. to construct CAP and ( 2) the Central Arizona 

Water Conservation District's (the District) ability to fulfill its 

obligation to repay allocated project costs.' In addition, Senator 

Dennis DeConcini asked us to look into the benefits of CAP as well 

as other issues. 

In summary, we have found the following: 

CAP's total construction cost is expected to be $4.7 

billion by the time CAP is completed, currently estimated 

to be in 1999. According to Interior's Bureau of 

Reclamation, t.he estimated federal share of these costs is 

$1.7 billion. 

The federal sl'.are could increase, however, to over $2.8 

billion, depending primarily on three matters now under 

review by the Bureau: (1) how a dispute over the maximum 

amount that the District is expected to repay is resolved; 

(2) how future increases in water allocations for Indian 

water-rights settlements and environmental purposes are 

'The Central Arizona Water Conservation District is a multicounty water conservat.ion and public improvement district of the state of Arizona. It is the single entity responsible for 

repaying reimbursable CAP costs to the federal government. It 

collects revenue through a local tax and through water and power 

sales. Tl)e District i.s authorized to operate CAP. 

1 
17 

determined; and (3) whether non-Indian farmers default on 

water-distribution system loans. 

On the basis of information provided by the Bureau and the 

District, it appears that the District will be able to 

repay its allocated construction cost obligation and cover 

its annual operation and maintenance (O&M) expenses for the 

1994-99 period. However, in doing so, the District will 

substantially reduce its financia~reserve fund. 

In the long term, several uncertainties could substantially 

affect the District's ability to meet its repayment 

obligation and O&M expenses, namely, whether (1) the 

District has underestimated its reimbursable construction 

costs, (2) anticipated revenues from power sales 

materialize, (3) annual fixed O&M expenses can be 

recovered, and (4) water sales to non-Indian farmers meet 

exp:ctations. 

BACKGROUND 

CAP was authorized under provisions of the Colorado River 

Basin Project Act of 1968. The Bureau started construction in 

1972, and estimates are that the project will be completed in 1999. 

CAP includes construction of a 336-mile aqueduct/pumping system and 

the New Waddell Dam and modification of the Roosevelt Dam. Power 

for CAP's 14 pumping plants is provided by the Navajo Generating 

Station, a coal-fired power plant that is partially owned by the 

federal government. 

CAP is designed to pump as much as 2.2 million acre-feet of 

wa.ter annually from the Colorado River on Arizona's western border 

2 
18 

and transport it as far south and east as Tucson.• According to 

the Bureau, the expected annual capacity is 1.5 million acre-feet. 

CAP provides the residents of Arizona with various benefits, 

including: flood control, fish and wildlife enhanc .. ent, 

recreation, commercial power, groundwater conservation, and water 

supply. The water supply is used for both Indian and non-Indian 

agricultural irrigation and for municipal and induatrial (M,I) 

purposes. The District esti.ates that the project will have pumped 

about 635,000 acre-feet of water in 1993 and will pump about 

750,000 acre-feet in 1994. 

The federal government has financed most of CAP's construction 

and has spent over $3 billion as of December 1993. As each 

construction phase is substantially completed, it is turned over to 

the District, which operates CAP and repays reimbursable costs to 

the federal government . Some reimbursable costs such as M•I water 

supply and commercial power are interest bearing. Reimbursable 

costs for water supply for non-Indian irrigation are noninterest 

bearing . construction costs allocated to such purposes as fish and 

wildlife enhancement and flood control are not reimbursable. 

The District's repayment responsibilities are included in a 

master repayment contract with the Secretary of the Interior. The 

original contract, whi<:h was signed in December 1972 aa well as a 

new contract signed in December 1988 requires the District to repay 

the costs associated with each construction phase within a 50-year 

period. On September 30, 1993, the Secretary declared the first 

phase of CAP--the aqueduct and power system--to be substantially 

complete. Repayment will begin in January 1994. 

In the late 1960s, the Bureau estimated that the project would 

be completed in about 7 years and would cost about $932 million, 

'An acre-foot is the volume of water necessary to cover 1 acre to a depth of 1 foot--about 326,000 gallons. 

3 
19 

including costs for interest during construction and water 

distribution systems for Indian and non-Indian farmers. The Bureau 

currently estimates that CAP's construction will be completed in 

1999 and that the project will cost about $4.7 billion. According 

to Bureau officials, CAP's cost increase is largely due to design 

changes brought about by a variety of reasons, including cultural 

and environmental concerns, and to interest and inflation during 

the extended construction period. 

The federal government, as the truste~ for the Indian tribes, 

has an obligation to ensure that Indian water-rights claims are 

settled in the tribes' best interest. While it is not a stated 

goal or purpose in CAP's authorizing legislation, CAP has become a 

major source of water in the settlement of these claims. These 

settlements, achieved in part through reallocations of CAP water, 

decrease the reimbursable costs that the District must pay to the 

federal government. The settlements are negotiated by Interior and 

confirmed by federal legislation. 

The District has about $160 million in a financial reserve 

fund, financed mainly from property tax assessments and interest on 

investments. The District expects to use the fund to pay 

reimbursable construction costs and O&M expenses. 

THE FEDERAL SHARE OF CAP'S COSTS 

COULD INCREASE SUBSTANTIALLY 

The federal share of CAP's costs could increase from the 

current $1.7 billion to over $2.8 billion depending on how three 

matters now under review by the Bureau are resolved. 

4 
20 

~ontract Bepayment Dispute Could 

Add $400 Million to Federal costs 

The first matter under review involves a contract repayment 

dispute that could add $400 million to federal costs. According to 

the Bureau, the District's reimbursable cost ceiling in the 

December 1988 master repayment contract is $2 billion. However, 

the District believes th.at an exhibit to the contract pertaining to 

delivery of CAP water to the Gila Indian Tribe reduces the 

District's .repayment obligation to $1.8 billion--or $200 million 

less. If the ceiling is $1.8 billion, the federal government has 

already spent about $150 million more in reimbursable costs than it 

can legally recover. It the ceiling is $2 billion, it could be 

reached in 1994, on the basis of current construction plans. 

The other $200 million relates to the payment of future 

construction costs. According to the Bureau's September 1993 cost 

allocation, the District.' s repayment obligation will be $2.2 

b i llion by the time CAP is completed in 1999, or $200 million more 

t.han the ceiling in the December 1988 master repayment contract. 

'l'he Bureau contends that. the repayment ceiling can be raised with 

the District's agreement, but the District has suggested that it 

may not agree to a ceiling increase. 

The Bureau and the District had not resolved the matter as of 

December 1, 1993. If they cannot reach agreement to increase the 

District's ceiling to $:!.2 billion, the Bureau could (1) halt 

construction prior to CAP's completion; (2) lower the District's 

reimbursable obligation by reallocating CAP's costs to 

nonreimbursable purposes, such as settling of Indian water-rights 

claims; or (3) seek conqressional approval to grant relief to the 

District for some reimbursable costs. 

5 
21 

water Allocations for Future Indian 

Water-Righta and Environmental Settlements 

Could Add $585 Million to Federal Costs 

The second_matter under review involves water allocated for 

future Indian water-rights and environmental settlements that could 

add another $585 million to federal costs. In 1983, the Secretary 

of the Interior allocated 310,000 acre-feet of CAP water to 12 

Indian tribes in order to settle some Indian water-rights claims. 

Between 1978 and 1992, an additional 140,000 acre-feet of CAP water 

was allocated to six tribes. Thus, nearly one-third of CAP's 

anticipated maximum annual water capacity as well as $980 million 

in nonreimbursable CAP construction costs has been allocated to 

settle Indian Tribes' water-rights claims. The faderal government 

also assumed responsibility for substantial O&M expenses in one of 

these settlements. 

Six additional Indian water-rights claims could be settled 

with CAP water. The Secretary has reserved 200,000 acre-feet of 

CAP water for future federal use, including Indian water-rights 

claims, and is now in the process of negotiating settlements. If 

these six settlements follow the pattern of past settlements, the 

federal government could assume an additional $435 million of CAP 

construction costs. 

In addition, CAP legislation included fish and wildlife 

enhancement as an authorized project purpose. A committee 

commissioned by the governor of Arizona recommended allocating 

between 50,000 acre-feet and 150,000 acre feet of CAP water for 

environmental enhancement. We estimate that construction costs 

associated with this allocation would range between $50 million to 

$150 million. These costs will be categorized as nonreimbursable 

and will be borne by the federdl gove~nment. 

6 
Defaults on Water Distribution 

System Loans Could Add 

$157 Million to Federal Costs 

22 

The third matter under review involves possible defaults o n 

wa ter distribution system loans that could add $157 million t.o 

federal costs. The federal government made loans to non-Indian 

irrigation districts for CAP irrigation distribution systems for 

about $200 million . These loans are between the federal government 

and the individual irrigation districts--they do not involve the 

Central Arizona Water Conservation District: Some irrigation 

dis tricts have 1ndicated that repayment of the l oans is jeopardi zed 

because farm incomes are too low and CAP water is too expensive. 

As of November 1993 , one irrigatio n district had defaulted o n its 

loan of $17.4 million, and two other irrigation districts we re in 

danger of defaulting e n loans totalling $140 million . 

THE DISTRICT'S ABILITY TO MEET ITS 

LONG-TERM REPAYMENT OBLIGATION IS UNCERTAIN 

Both the Bureau and the District are confident that the 

District can meet its repayment obligation. However, we ana l yze"1 

the District's financial plan for CAP and found that, for the 1994-

99 period, projected revenue from power and water sales and 

interest income from investments of the reserve fund will not 

provide sufficient funding for the District to meet its federal 

repayment obligation and to pay for annual O&M expenses. As a 

result, the District may have to use some of i ts reserve funds to 

meet expenses. The reserve fund could be reduced from about $160 

millio n to about $58 million to $75 million by 1999, depending on 

the leve l of the District's investment income . 

Our work to date also has shown that, over the long term, 

several uncertainties could substantially affect the District 's 

ability to repay. 
The District's Repayment Obligation 

May Be Underttated 

As we mentioned earlier, the District contends that its 

repayment obligation is $1.8 billion and has based its repayment 

projections on this amount. The Bureau, however, contends that the 

District owes $2 billion and that the repayment ceiling can be 

raised to $2.2 billion with the District's agreement. According to 

District officials, the District has not analyzed its ability to 

repay either of these amounts. 

Proiected Power Revenues 

May Not Materialize 

Another uncertainty relates to future revenues the District 

expects to generate from power sales. The District plans to use 

revenues from three contracts for the sale of power from the Navajo 

Generating Station as a major source of revenue to meet its 

repayment obligation. TWo of the contracts are between the 

District and the Salt River Project Agricultural Improvement and 

Power District (Salt River Project). The contracts provide revenue 

of about $20 million a year, which will be used solely to retire 

debt for bonds used to finance the District's share to construct 

the New Waddell Dam. The contracts will expire in 2011. 

The District and Salt River Project are currently negotiating 

a third contract for the District's remaining Navajo power that 

exceeds CAP's operating needs. The Bureau is withholding approval 

of this contract, pending resolution of several repayment matters. 

If approved, this contract is expected to provide another $20 

million each year to help the District meet its repayment 

obligation. The contract, as proposed, will also expire in 2011. 

Although the contracts for the sale of Navajo power provide 

significant revenues, it is not certain that the same amount of 

8 
24 

revenues can be generated after the contracts expire in 2011. In 

2011, the land lease and coal contract for the Navajo Generating 

Station will also expire. It is unknown whether the land lease and 

coal contract with the Navajo Tribe can be extended and the power 

contracts renewed with the Salt River Project at terms equally 

favorable. The District's financial plan assumes that power 

revenues will continue at the same level throughout the 50-year 

repayment period. 

Finally, the Department of the Interior's Office of Inspector 

General reported that the Navajo Generating Station could be 

inoperable or inefficient to operate in about 25 years unless it is 

rehabilitated or repl aced.' However, the District has not 

addressed the issue of its share of power plant rehabilitation or 

replacement costs in its financial projections. 

Uncertainty Over Recq_vering Fixed O&M Expenses 

A third uncerta:lnty relates to recovery of the District's 

fixed O&M expenses e s timated to be $30 million for 1994.' 

According to the Bureau, M&I and Indian water users scheduled to 

buy CAP water in 1994 will pay about $8 million, but who will pay 

the remaining $22 million is uncertain. 

A major factor contributing to the uncertainty is the "takeor··pay" provision of CAP contracts with non-Indian irrigation 

districts. These contracts require the districts to pay the fixed 

O&M expense allocated to all water not delivered to M&I and Indian 

customers, whether ·or not the districts use the water. However, 

~ Allocation and Repayment. Central Arizona Pro1ect, Bureau ~lamation; U. S. Department of the Interior Office of 

Inspector General, Report No. 92-I-1151, August 1992. 

'Fixed O&M expenses lire those incurred regardless of whether 

water is delivered. 

9 
25 

because of declining farm incomes and the high price of CAP water 

compared with groundwater, the irrigation districts have not 

scheduled deliveries for any CAP water during 1994, and several 

districts have suggested they will be forced into bankruptcy if 

"take-or-pay" is enforced. 

Another uncertainty is the amount of fixed O&M expenses to be 

paid by the federal government. The District billed the Bureau 

$12 . 6 million for fixed O&M expenses for a 15-month period in 1993 

and 1994. These costs were associated wit~ an Indian water-rights 

claim settlement (Fort McDowell Indian Community) and water held 

for future Indian water-rights claims. However, the Bureau has not 

accepted these costs. The matter is still unresolved. 

If the District does not recover its annual O&M expenses 

through water sales and other revenue sources, then the difference 

must be covered through payment from its financial reserve fund. 

Since the fund is to be used to both repay construction costs and 

pay annual O&M expenses, the long-term payment of O&M expenses from 

the reserve fund will eventually deplete the fund and could 

adversely affect the District's ability to repay its federal 

obligation. 

Water Sales to Non-Indian Irrigation 

Districts Are Uncertain 

The final uncertainty relates to water sales to non-Indian 

irrigation districts. Since the non-Indian irrigation districts 

have not scheduled deliveries of CAP water for 1994, the District's 

ability to repay its construction costs could be adversely 

affected. Having non-Indian irrigation districts buy CAP water is 

advantageous to the District because construction costs allocated 

to agricultural water supply are repaid to the federal government 

without interest . Therefore, the more agricultural water that is 

delivered, the less interest the District has to pay. 

10 
26 

In order to increase the use of CAP water by non-Indian 

irrigation districts, the District proposed in October 1993 to 

lower the price of CAP water from about $61 per acre-foot to as low 

as $17 per acre-foot. The District's goal is to stimulate nonIndian agriculture's use to about 400,000 acre-feet of water per ~ 

year. Under this proposal, the District would save about $13 

million annually in interest expenses, aost of which would be used 

to offset the reduced revenues from the non-Indian agriculture 

water sales. While the District believes it can change water 

pricing unilaterally, the Bureau has indicated that its approval is 

necessary if the change in pricing affects repayment. 

In summary, Mr. Chairman, CAP is almost complete and 

substantial federal funds have already been spent. The significant 

uncertainties to be resolved are how the costs will ultimately be 

allocated between the federal government and the District, and 

whether the District will be able to repay its allocated costs. 

This concludes my statement. We will be happy to answer any 

questions that you or other Members of the Subcommittee may have. 

(140882) 

11 
27 

STATEMENT OF ROBERT W. JOHNSON 

Mr. MILLER. Mr. Johnson, welcome to the committee. 

Mr. JOHNSON. Thank you, it is a pleasure to be here. I will also 

submit my testimony for the record, and I will try to summarize 

it as quickly as I can. 

As I am sure you are aware, the financial difficulties of the 

central Arizona irrigation water users have created a unique set of 

problems for the Central Arizona Project, and we appreciate those 

problems that have been created, and appreciate the difficulty of 

resolving those issues, and we are especially appreciative of the efforts of Governor Symington's Advisory Committee as well as 

CA WCD in developing proposals to resolve those issues. 

Having had some firsthand experience with CAWCD about a 

year ago in developing a restructuring proposal, we appreciate the 

difficulty of finding an equitable resolution and appreciate the efforts of the State and CA WCD in sorting out a proposal which we 

are interested in working with, and working with CAWCD on further. 

We are also appreciative of CAWCD's support over the last year 

in our efforts to initiate repayment. While we have had many complex and contentious issues associated with this effort, CA WCD 

was willing to work diligently with us to help resolve those issues. 

This effort did result in our declaring the aqueduct system substantially complete and initiating repayment in January of 1994. 

I believe our working relationship with CA WCD continues to be 

a good working relationship. We would also like to commend the 

State and CA WCD in their proposal for reemphasizing their commitment to Indian water rights settlements in Arizona. 

The Department and the Bureau are also committed to prompt 

resolution of those issues and support the recommendation that 

that be a priority. We estimate that there could be a need for as 

much as 200,000 acre-feet of additional CAP water that could be 

used for this purpose. 

The recommendation of the Advisory Committee that Arizona 

participate in groundwater recharge programs with the other lower 

basin states of Nevada and California will also help provide a partial resolution of CAP financial issues. 

In addition, such a program will provide another mechanism to 

help meet the water supply needs of the lower basin. We are committed to working with Arizona and the other two basin States to 

facilitate implementation of that recommendation. 

Another helpful area in the Governor's Advisory Committee recommendation is in the environmental area where they recommended that 50,0000 to 150,000 acre-feet of CAP water be evaluated for possible allocation to fish and wildlife enhancement purposes. . In addition, the committee recommended a State environmental 

trust fund be established for the maintenance, enhancement, and 

restoration of aquatic, wetland, and riparian habitats. We are currently working with the environmental groups represented on the 

Advisory Committee to better define the amount of water needed 

for these purposes. 
28 

We see this recommendation as providing a framework for addressing environmental needs and ways that the Central Arizona 

Project can help address those needs. 

Notwithstanding those areas where we agree with the Arizona 

proposals, there are a number of areas where we believe the pro- posals fall short or are silent on important points that must be addressed in any complete resolution of issues. 

In this regard, our overriding concern is in protecting the finan- cial interests of the United States. We believe that the United 

States has lived up to its end of the bargain on CAP. By and large, 

the project is complete and capable of delivering Arizona's remaining Colorado River apportionment for use in central and southern 

Arizona, a dream of several generations of Arizonans. 

That dream, however, has been achieved largely at the Federal 

taxpayers' expense. Based on current estimates, the project will 

have a total Federal construction cost of approximately $4 billion. Under Reclamation law and the contractual framework governing 

the assignment of costs and repayment of the project, our current 

estimates indicate that approximately $1.5 billion will be 

nonreimbursable, $2.3 billion will be repaid by CAWCD, and in the 

case of distribution system loans, approximately $100 million reimbursed by individual water user entities. 

While I will not go into detail, some of the terms for repayment 

have been questioned by the Inspector General and other auditors. Several key issues remain to be addressed if we are to find a 

comprehensive solution. In this regard there are four areas of primary concern. 

The first relates to the payment of operation and maintenance 

costs. The existing financial arrangements provide that non-Indian 

irrigation users will take the take-or-pay charges. This was a sys- tem that was put in place at the beginning to encourage irrigation 

to use more water and to provide a consistent water rate for M&I 

and Indian users over a period of time. It is now apparent that the 

take-or-pay obligation of non-Indian agriculture will not be met. 

We think it is important that the failure of non-Indian agriculture to pay that O&M expense should not be pushed off on ei- ther the United States or the other Federal users of the project, 

particularly the Indian users of the project. 

The second issue relates to the repayment obligations of the 

CAWCD and the magnitudes of that obligation. CAWCD maintains 

that the obligation is limited to $1.8 billion under the master repayment contract, while the United States maintains the ceiling is 

$2 billion. Further, current estimates indicate the total obligation, 

under the existing water supply and allocation assumptions, will 

ultimately be $2.3 billion. 

Unfortunately, absent agreement on this issue soon, Reclamation 

will be forced to curtail construction activities. 

In addition to the adjustment to the District's repayment con- tract, there is also an issue that relates to the authorized appropriations ceiling. The cost of compliance with Federal laws such as 

the National Environmental Policy Act, Endangered Species Act, and others, has increased the cost of the project. If all authorized future projects were to be built, we anticipate 

the Federal obligation will exceed the authorized appropriation 
29 

ceiling by more than 5 percent. Therefore, an adjustment in the authorized appropriations ceiling would be necessary. 

The third area of concern relates to the repayment of the CAP 

irrigation distribution system loans. Nine loans totaling $230 million have been made. These interest-free loans have repayment periods extending from 25 to 30 years with a present value, discounted to reflect the interest-free repayment provisions, of approximately $80 million. 

The financial difficulties faced by the CAP non-Indian agricultural districts have thrown the long-term repayment of the three 

largest loans, totaling $157 million, into question. 

The Governor's Advisory Committee recommended that the United States grant the irrigation district deferment requests and extend the repayment of the loans over a 50-year period. We appreciate the fact that the irrigation loans are held solely by the United 

States and there is no legal obligation for other Arizona entities to 

pay. However, these distribution system loans are a repayment 

issue, in addition to the issues we have with CAWCD, and the Federal Government needs to see these repayment issues resolved. 

In general we think we need to take creative solutions to finding 

answers to these concerns. One such area where a creative opportunity exists is in the area of commercial power sales. The financial 

difficulties of CAP agriculture have resulted in a significant reduction in the amount of water to be delivered. As a result, project 

power resources that would have been used to pump irrigation 

water can now be made available for commercial sale. 

Based on recent power contract negotiation, such power resources will generate in excess of $20 million in additional power 

revenues annually. It seems only appropriate that the revenues be 

applied to help resolve the same issues that have been created by 

the failure of agriculture. 

We believe there are other creative areas where we can work 

with Arizona to resolve these financial issues. We are willing to 

work with the proposals that have been forwarded by the Governor's Advisory Committee and by CAWCD, and we are anxious 

to negotiate and resolve these issues. 

We have invited CAWCD and the State to begin negotiations as 

soon as possible. We are planning to do that early in January. 

Mr. Chairman, that concludes my remarks. I would be glad to respond to questions. 

[Prepared statement of Mr. Johnson follows:] 

80-254 - 94 - 2 
30 

TESTIMONY OF 

ROBERT W. JOHNSON 

ASSISTANT REGIONAL DIRECTOR, 

LOWER COLORADO REGION, BUREAU OF RECLAMATION 

ON THB CENTRAL ARIZONA PROJECT 

BEFORE THB OVERSIGHT AND INVESTIGATIONS SUBCOMMITTEE 

OF THE BOUSB COMMITTEE ON NATURAL RESOURCES 

Iutrod.uctiOA 

PHOENIX, ARIZONA 

DBCBMBBR 10, 1993 

Chairman Miller, my name is Robert Johnson, and I am the 

Assistant Regional Director for the Bureau of Reclamation's Lower 

Colorado Region. It is a pleasure to be here today and offer 

testimony on behalf of the Bureau of Reclamation and the 

Department of the Interior regarding the current status of our efforts to resolve outstanding issues related to the Central 

Arizona Project {CAP). As I am sure you are aware, the financial 

difficulties of the CAP irrigation water users have created a unique set of problems which must soon be resolved if we are to 

have a smooth transition of the project from construction by the 

United States to operation and maintenance by the Central Arizona 

Water Conservation District (CAWCD) . 

After developing a draft restructuring proposal with CAWCD last 

year, which was rejected by most CAP water users, we are encouraged by the efforts of Governor Symington's CAP Advisory Committee and CAWCD to develop a new set of recommendations to 

address the issues. Having a first-hand understanding of the 

issues, we appreciate the difficulty of finding an equitable resolution and appreciate the efforts of the State and CAWCD in 

sorting out a proposal . 

The CAP Adviso~ ec-itt" u4 the C:UCD are to be com~ended for 

their proposals. 

Reclamation is eapecially appreciative of the support of CAWCD in our efforts to initiate repayment over the past year. While 

there were many complex and contentious issues associated with 

this effort, CAWCD was willing to work diligently to resolve 

those issues prior to issuance of the notice of substantial 

completion for the CAP aqueduct on October 1, 1993. The working relationship between CAWCD and the Bureau continues to be strong. 

- 1 -
31 

Further, we would like to commend the State and CAWCD for their 

recent efforts and believe that the proposals before us provide a basis for further discussions with the United States. In 

particular, we believe the existing proposals are especially 

helpful in several areas. 

We were pleased to see the Advisory Committee reaffirm the State 

of Arizona·s commitment, and CAWCD reaffirm its commitment, to 

resolution of outstanding Indian water right claims. Both 

Reclamation and the Department of the Interior concur that 

resolution of these claims should be a priority. We see the CAP 

water supply as being an important element in resolving the 

claims. Previous estimates suggest that an additional annual 

allocation of about 200,000 acre-feet of CAP water may be needed 

for this purpose. 

The recommendation of the Advisory Committee that Arizona 

participate in groundwater recharge programs with the other lower 

basin states of Nevada and California will also help provide a partial resolution of CAP financial issues. In addition, such a program will provide another mechanism to help meet the water 

supply needs of the lower basin. We are committed to working 

with all three lower basin states to facilitate the 

implementation of this recommendation. 

Another helpful area is the Governor·s Advisory Committee 

recommendation that 50,000 to 150,000 acre -feet of CAP water be 

evaluated for possible allocation to fish and wildlife 

enhancement purposes. In addition, the Committee recommended that a state environmental trust fund be established for the 

maintenance, enhancement and restoration of aquatic, wetland and 

riparian habitats. We are currently working with the 

environmental groups represented on the Advisory Committee and 

others to define better the amount of water needed for these 

purposes. We see this recommendation as providing a framework to 

address environmental needs. 

The overriding concern of the Department is protecting the 

financial interests of the United States. 

Notwithstanding those areas where we agree with the Arizona 

proposals, there are a number of areas where the proposals fall 

short or are silent on important points that must be addressed in 

any complete resolution of issues. In this regard, our overriding concern is in protecting the financial interests of 

the United States. We believe that the United States has lived 

up to its end of the bargain on CAP. By and large, the proj ect 

is complete and capable of delivering Arizona·s remaining Colorado River apportionment for use in central and southern 

Arizona, a dream of several generations of Arizonans. 

That dream, however, has been achieved largely at the Federal 

- 2 -
32 

taxpayers' expense. Based on current estimates, the project 

would have a total construction cost of approximately $4.0 

billion. Under Reclamation Law and the contractual framework 

governing the assignment of costs and repayment of the project, our current estimates indicate that approximately $1.5 billion 

would be nonreimbursable, $2·.3 billion would be repaid by CAWCD, 

and, in the case of distribution system loans, approximately $200 

million reimbursed by individual water user entities. While I 

will not go into detail, the terms for repayment have been 

questioned by the Inspector General. (See Attachment 1 - listing of Inspector General Audit Reports and Findings.) 

There are four areaa with significant financial implications for 

the t7Dited States. 

Several key issues remain to be addressed if a comprehensive 

resolution of CAP financial issues acceptable to the Department 

is to be achieved. In this regard there are four areas of 

primary concern. 

1. Federal and Indian payment of Or.M costs. 

The first relates to the payment of operation and maintenance 

(O&M) costs. The existing financial arrangements provide that 

the non-Indian irrigation users of the CAP pay the fixed 

component of O&M costs based on the proportionate amount of water 

available for their use, whether or not such water is actually 

ordered and delivered. This provision, referred to as •take or pay,• was intended to encourage irrigation users to utilize CAP 

water in lieu of overdrafted and potentially cheaper groundwater, 

and to provide a uniform water rate to Indian and M&I water users as their utilization of the project increased over time. With 

the financial difficulties currently faced by the non-Indian 

irrigation users, the •take or pay• obligations of the irrigation users will not be met. This has led to recommendations by the 

Advisory Committee and CAWCD that Federal uses (i.e., Indian and 

environmental) of the project pay a larger share of the fixed O&M 

costs than originally contemplated. While this issue is more complicated than I have time to describe here today, we will 

continue to encourage Arizona to find mechanisms to fund the O&M 

costs that do not place additional burdens on the United States or the Indian users of the project. In short, the failure of CAP 

agriculture should not place additional financial burdens on the 

United States or the Indian CAP water users. 

- 3 -
33 

2. Contractual repayment and authorizations ceilings of CAWCD. 

The second issue relates to the repayment obligation of CAWCD and 

the magnitude of that obligation. CAWCD maintains the obligation 

is limited to $1.8 billion under the Master Repayment Contract, 

while the United States maintains the ceiling is $2.0 billion. 

Further, current estimates indicate the total obliqation, under 

the existing water supply and allocation assumptions, will 

ultimately be $2.3 billion. Unfortunately, absent such agreement on this issue soon, Reclamation will be forced to curtail 

construction activities. 

In addition to the adjustment to the District's repayment 

contract, there is an issue that relates ~o the authorized 

appropriations ceiling. The cost of compliance with Federal laws 

such as the National Environmental Policy Act, the Endangered 

Species Act, and others, has increased the cost of the Central 

Arizona Project. If all authorized features of the Project were to be built, we anticipate the Federal obligation will exceed the 

authorized appropriation ceiling by more than five percent. 

Therefore an adjustment to the authorized appropriations ceiling 

would be necessary. 

3. Payment of CAP distribution system loans. 

The third area of concern relates to repayment of the CAP 

irrigation distribution system loans. Nine loans totaling $230 

million have been made. These interest free loans have repayment 

periods extending from 25 to 30 years with a present value, 

discounted to reflect the interest free repayment provisions, of 

approximately $80 million. The financial difficulties faced by 

CAP non-Indian agriculture have thrown the long-term repayment of 

the three largest loans, totaling approximately $157 million, 

into question. 

The Governor's Advisory Committee recommended that the United 

States grant the irrigation district deferment requests by 

extending the repayment of loans over a 50 year period. We 

appreciate the fact that the irrigation loans are held solely by 

the United States and there is no legal obligation for other 

Arizona entities to pay. However, these distribution loans are another repayment issue, in addition to those with the CAWCD, 

that the Federal Government needs to resolve. 

- 4 -
34 

4. Utilization of windfall power revenues. 

One area where such creative opportunities exist is in the area of commercial power sales. The financial difficulties of CAP 

agriculture have resulted in a significant reduction of the 

amount of water to be delivered. As a result, project power resources that would have been used to pump irrigation water can now be made available for commercial sale. Based on recent power 

contract negotiations, such power resources will generate in excess of $20 million in additional net power revenues annually. 

It seems only appropriate that the revenues be applied to help resolve those same issues. 

The Bureau ia ready to begi:a. :a.esrotiatio:a.a. 

We believe that there are other creative areas where we can work 

with Arizona to resolve these financial issues. We are anxious 

to see them resolved and have extended an invitation to CAWCD to 

begin negotiations. While we have significant differences, we are still hopeful that a fair and equitable resolution of issues can be achieved. 

Chairman Miller, this concludes my initial statement. I will be 

glad to respond to questions. 

- 5 -
35 

Attachment I 1 

AUDITS OF THE CENTRAL ARIZONA PROJECT BY OFFICE OF INSPECTOR GENERAL 

1. September 1980, Review of Central Arizona Project. 

2. April 1986, Audit W-WS-BOR-08-85, Review of the Status of the CAP. 

3. October 1988, Audit 89-03, Timely Recovery of Irrigation Investment Cost. 

4. August 1992, Audit 92-I-1151, CAP Cost Allocation. 

5. February 1993, Audit 93-I-577, Deferral of Notice of Project Completion. 

6. July 1993, Audit 93-I-1271, Distribution System Audit. 
36 

Mr. MILLER. Thank you very much. Thank you to both of you. 

Mr. Duffus, let me see if I might begin with you. On page 4 of 

your statement, at the bottom there, you talk about essentially almost $1 billion in cost-I don't know what the proper term here, 

if it is cost shifting or just additional cost that is open for anticipation by the Federal Government. I don't know how you want to 

refer to that amount. What do you call that? 

Mr. DUFFUS. That would be the Federal share of the cost, going 

from $1.7 billion to $2.8 billion. It is that portion that the Federal 

Government will not obtain reimbursement for. Mr. MILLER. Is that a foregone conclusion, or is that based upon 

some contingencies? 

Mr. DUFFUS. Our numbers differ somewhat from the Bureau's 

and I don't have a breakdown of the differences. But as far as the 

$1.7 billion is concerned, there is no contentiousness over it. 

About 60 percent of this amount relates to the Indian water 

rights settlements that have already taken place, about $980 million. The rest are costs that relate to repair of siphons and scrubbers at the Navajo Generating Plant, flood control and recreation. 

Mr. MILLER. But what you are saying is that at this point in your 

review, to see the project to completion, that the Federal Government can anticipate that it is going to absorb-some of which we 

have already agreed to, the siphons and others-it is going to absorb another $1 billion? 

Mr. DUFFUS. Right. That was based on the things I laid out in 

my statement. If the contract dispute is not resolved, or depending 

on how it is resolved, that could add $200 million to the Federal 

costs. 

Another $200 million we estimate, based on the Bureau's numbers, would be future construction costs between now and when the 

project is completed in 1999. 

There is an estimated $435 million for pending Indian waterrights settlements, $150 million for fish and wildlife enhancement, 

and $157 million in possible defaults on water distribution loads. 

If all those things come true, then in our view, the Federal share 

of cap would increase to $2.8 billion. 

I want to point out, Mr. Chairman, that this is the worst case 

situation. 

Mr. MILLER. I understand that. Is there an answer as to whether 

these issues would be resolved on behalf of the Federal Government's point of view or on behalf of the project's point of view? 

Is there a distinction as to those two amounts, or are most of 

these, in your mind, still to be borne by the Federal Government? 

Mr. DUFFUS. The contract dispute has not been settled. They are 

currently in the process of trying to resolve it. With respect to the 

Indian rights water settlements, if you look at what has happened 

in the past, there probably will be future Indian water rights settlements. Whether or not it will be in the amount that we have discussed is unknown. 

Mr. MILLER. Do your figures include the issue that was raised by 

Mr. Johnson as to whether or not there would be default on the 

distribution loans? 

Mr. DUFFUS. Yes, $157 million. 

Mr. MILLER. But that is still an open issue? 
37 

Mr. DUFFUS. It is an open issue. One of the water irrigation districts has already defaulted on a loan of about $17 million and two 

others ... re in danger of defaulting with loans totaling $140 million. 

That is the makeup of the $157 millir.n 

Mr. MILLER. Should the worst case happen there and all three 

remain in default, that is included in your $1 billion cost shift? 

Mr. DUFFUS. That is correct. 

Mr. MILLER. What happens, Mr. Johnson, in the event that we 

see default on behalf of all three districts? 

Mr. JOHNSON. That is a good question. 

Mr. MILLER. Thank you. 

Mr. JOHNSON. You would likely get into bankruptcy proceedings. 

The United States would likely be treated as a creditor, along with 

other creditors. The districts have a significant amount of private 

debt that is outstanding as well. 

I think ultimately the United States might recover some portion 

of the debt, but just how much the United States would recover, 

I think is uncertain. It is a guess. 

Mr. MILLER. You mentioned the suggestion as to the stretch-out 

restructuring of these loans-to extend them over a 50-year period. 

Has the Bureau taken that under consideration, are you looking at 

that, rejecting that? 

Mr. JOHNSON. We have looked at that, and we have had three 

districts that have requested extending those loans over a longer 

period of time. The problem that we have had is we don't see how 

restructuring the Federal debt will solve the problem. 

The take-or-pay obligation that the districts have in their private 

debt were much more onerous obligations than repayment of the 

Federal debt. 

And without a comprehensive resolution, we couldn't see how our 

loan, restructuring the Federal debt, would solve the problem. So 

we have consistently told the districts that absent a comprehensive 

resolution that addresses the private debt and the take-or-pay 

issue, we would consider restructuring our loans. 

I think that now that we have this new proposal on the table 

with CA WCD in essence agreeing not to pursue the take-or-pay obligation and reduce the O&M debts that the districts have, we need 

to take a fresh look at that, and we are doing that. 

Mr. MILLER. Can you explain that a little bit? Pull that apart a 

little bit. 

Mr. JOHNSON. One of the biggest obligations that the district had 

was this take-or-pay obligation for O&M that says that the districts 

have to pay for the water that is available for their use. 

Mr. MILLER. That is a three-way agreement? 

Mr. JOHNSON. Well, yes, it is. It is a three-way agreement between CAWCD, the United States, and Reclamation. And CAWCD 

has proposed that they would be willing to sell the water to the districts at a reduced price for the O&M deliveries, not require the 

districts to take or pay charges as originally contemplated. That is 

part of the CA WCD proposal. 

And with that obligation removed and the significant reduction 

in the price of water that the districts will now be paying, that puts 

them in a better financial position, and there may be a chance that 
38 

changes in the payment schedule could in fact help make the districts niote viable. 

Now, there is still a big iuestion related to the private debt, because the private debt, at east in the early years, over the next 

five- to ten-year period, is still rych more onerous than the Federal debt. 

So I think we still have a big question whether or not that restructuring will solve the problem. 

Mr. MILLER. On the CAWCD's proposal, when they shift to this 

new arrangement from the take-or-pay provisions, there are still 

dollars to be made in that arrangement? 

Mr. JOHNSON. That is correct, yes. 

Mr. MILLER. So the suggestion is there that the District will 

stand in the place of the irrigation districts? 

Mr. JOHNSON. That is our assumption. Now, that gets into the 

first issue that we talked about and that is who pays the O&M. If 

the irrigators aren't paying the O&M, this $30 million fixed O&M 

cost, who does pay that O&M? 

Now, CAWCD and the Bureau have had different interpretations 

on that. Their interpretation has been that all of the remaining 

users will equally share in paying that O&M. And that results in 

dividing that $30 million fixed O&M cost over significantly reduced 

number of acre-feet of water, and we get O&M costs in $70, $80, 

$90, $100, depending on how much water is delivered, maybe even 

as much as $100 per acre-foot cost using that formula. 

Reclamation's position has been that the default of the irrigation 

districts should not pla~that is, a relationship between CAWCD 

and the irrigation districts, the payment of O&M, and the default 

of those irrigation districts should not place additional O&M burdens on the United States or the Indian users of the project. 

And the United States' obligation is to pay O&M as though the 

take-or-pay charges are being paid. 

Mr. MILLER. Are there other parties or would those be the two 

parties--

Mr. JOHNSON. The M&I users are the other group that would end 

up bearing the burden of that O&M cost. 

Mr. MILLER. M&I is the city contractors? 

Mr. JOHNSON. Yes. 

Mr. MILLER. Do you have individual company contractors-mining? 

Mr. JOHNSON. There are some mines that would be M&I contractors. All the remaining users under CAWCD's formula would end 

up absorbing the O&M cost, that is some districts--

Mr. MILLER. So the mining contracts directly with CAWCD? 

Mr. JOHNSON. They are the same three-party contracts that the 

M&I users have, yes. 

Mr. MILLER. So what you are suggesting is that the default on 

the distribution systems and/or the potential default by the remaining two districts, that is simply one level of debt, and if if you were 

at this moment to consent to stretching those out over 50 years, 

and these are interest free; is that correct? 

Mr. JOHNSON. That is correct. 

Mr. MILLER. I don't want to put words in your mouth. What I 

hear you saying is you are putting the Federal Treasury, in this 
39 

case, we have taken a hit on the stretch-out over the lost opportunity on that money. 

Mr. JOHNSON. Right. 

Mr. MILLER. But there are other debtors that may even threaten 

this agreement. 

Mr. JOHNSON. That is correct. I think we need to look at that 

carefully. The private debt holders are still a very significant portion, and again, it may not do any good for us to stretch that debt 

out over a longer period of time, if it looks like the irrigation districts aren't going to get relief from the private debt holders as 

well. 

Mr. MILLER. Do you have any ability to bring private debt holders into that arrangement? 

Mr. JOHNSON. I don't know if we have any ability. I think that 

needs to be explored. 

Mr. MILLER. Legal ability. If you went into formal bankruptcy, 

you would all stand in the line. 

Mr. JOHNSON. Right. I don't think we have any legal ability to 

bring them into that, no. 

Mr. MILLER. The question is whether they would join those discussions. 

Mr. JOHNSON. The question is whether or not you could get them 

to join you. The reports I have got is that that might be difficult. 

Mr. MILLER. If the District under one of these additional arrangements is to stand in the place of the individual irrigation districts, you seem to raise questions-! am trying to match your testimonies up here-maybe you should be talking to one another 

more. In any case, you seem to suggest that that raises some questions about the overall economic soundness of the District. 

Mr. DUFFUS. I don't believe it is just this situation alone. I think 

what we talked about in terms of O&M is that the District would 

have to use its reserve fund to pay O&M costs as well as its share 

of construction costs. It could affect its abilities to pay its share 

over the long term. 

Mr. MILLER. You say, if the district were to pay the O&M. Is that 

in anticipation of what, of them being able to lay it off on the nonagricultural users, or not? 

Mr. DUFFUS. If the non-Indian water irrigation districts default, 

then the District would end up having to pay the O&M expenses. 

Mr. MILLER. If I hear Mr. Johnson correctly-we will hear from 

the District in a little bit-they want to divide that among the 

other users; is that correct, Mr. Johnson? 

Mr. JOHNSON. That is correct, yes. That is part of CAWCD's 

interpretation--

Mr. MILLER. What is the response to that increased price by the 

other users? 

Mr. JOHNSON. Well, I think that CAWCD has addressed that by 

target pricing the M&I water, and in essence for the M&I users, 

CA WCD proposes picking that cost up out of ad valorem taxes and 

not actually paying all of that O&M through water pricing. 

Mr. MILLER. What do they have to do to bring about that arrangement? 

Mr. JOHNSON. I think that is just a matter of CA WCD making 

their own internal decision about how they are going about pricing 
40 

the water when they sell it to their users. They have taxing authority. 

Mr. MILLER. In order to make that up? 

Mr. JOHNSON. Yes. Under their proposal, I think that is their 

plan, in essence, to target price the M&I water at reasonable rates, 

allowing it to build up over time, so that the M&I users don't have 

this huge increase in water costs to face immediately. 

Mr. MILLER. Have you taken that into account that they could 

raise revenues? 

Mr. DUFFUS. No, I can't believe we looked at that in the work 

we have done so far. I am sorry. Mr. Hampton--

Mr. MILLER. Mr. Hampton. 

Mr. HAMPTON. Mr. Chairman, we have some information on raising the ad valorem taxes, but it is one of several proposals that was 

out there. If the District implements target pricing for M&I, they 

are not target pricing the water going to the Federal Government, 

namely, the Indians. For the Indians the Federal Government 

would be picking up some or all of the O&M costs. For example, 

under Ak-Chin settlement, all the O&M costs are being paid by the 

Federal Government. 

The cost to the Federal Government would be significantly higher under this target pricing proposal than the O&M costs charged 

to M&I customers. We are talking in the range of $60, $70, $80 per 

foot, fixed O&M only, for the Federal Government. 

Mr. MILLER. When you talk about the redistribution of the O&M 

as a result of the default, one of the parties is in fact the Federal 

Government, because we stand in the same place as the tribes? 

Mr. JOHNSON. That is correct. 

Mr. MILLER. Would the ability to raise revenues, Mr. Duffus, 

would that change your view of the long-term viability of the District given the contingencies you mentioned in your report of the 

Navajo plant and the diminishment of reserves? 

Mr. DUFFUS. Yes, I think it would. 

Mr. MILLER. So they could put this on a pay-as-you-go basis conceivably. I am not asking people to make recommendations. I am 

just trying to pull this apart as to the options that are really in 

fact on the table here. 

Mr. DUFFUS. Yes, to the extent they could raise revenues, it 

would change their financial picture. 

Mr. MILLER. So theoretically, I don't know about politically, but 

theoretically there is a potential to provide a means by which you 

would not have to diminish those reserves, the reserves could remain in place for the Navajo contingency, turn of the century. 

So there is another option laid out in your report, but obviously 

it is dependent upon whether the District can cross that threshold. 

Mr. DUFFUS. That is correct. 

Mr. MILLER. When we talk about them raising revenues to absorb that O&M, obviously how you split that cost, the more you can 

lay off on the tribes the better off you are, from the District's 

standpoint. I am not passing judgment on this, I am just--

Mr. JOHNSON. That is correct. 

Mr. MILLER. I want to get back to the target pricing. I don't want 

to take up all the time, but I want to make sure the committee for 

the formal record has some of this down. 
41 

Before we get to that, Mr. Johnson, in your statement-! am 

looking on page 4, under section 2, the last sentence in the first 

paragraph-"Unfortunately, absent such agreement on this issue 

soon, Reclamation will be forced to curtail construction activities." 

Can you tell the committee exactly what you are saying there? 

Mr. JOHNSON. We have a repayment ceiling in the contract that 

limits the amount that CAWCD is obligated to repay, the total 

amount they are obligated to repay. Our interpretation of that contract is that they are limited to $2 billion. 

They read the contract differently and they say they are only obligated to pay $1.8 billion. What I meant by that statement there 

is, we are currently on a spending path where their obligation, 

based on our current cost allocation, will in fact-reimbursable obligation will be exceeding $2 billion in fiscal year 1995. 

So if we aren't able to resolve these issues and amend the contract to increase the repayment ceiling to accommodate that, then 

we would be forced into a position of spending dollars that we don't 

have a repayment contract to pay the reimbursable costs on. 

So in order to avoid that, we would have to curtail construction 

on some of the reimbursable facilities under construction. That is 

a remedy that is provided for in the master repayment contract. Mr. MILLER. The remedy--

Mr. JOHNSON. If we can't get agreement to increase the ceiling 

to ensure that we are going to get repaid, then the master repayment contract gives the United States the option of curtailing construction. 

Mr. MILLER. I appreciate there is the dispute between the $1.8 

billion and the $2 billion, as the obligation, but even if you accept 

the $1.8 billion, you are over the ceiling, you say. You say you are 

over the $2 billion. 

Mr. JOHNSON. We will be over the $2 billion in fiscal year 1995. 

We are over the $2 billion right now. 

Mr. MILLER. But you are over the $1.8 billion? 

Mr. JOHNSON. That is correct. 

Mr. MILLER. If that is the figure that the District wants to adhere to for the moment, the amount of dollars that are exposed 

without repayment are even greater than you had suggested as $2 

billion. You would argue in a court of law that you have a right 

under the master contract to recover $2 billion. 

Mr. JoHNSON. That is correct. 

Mr. MILLER. They would argue you have $1.8 billion. You have 

already blown by the $1.8 billion and you are arguing for secured 

interest for the $2 billion, but under their interpretation, you don't 

have a secured interest for anything over $1.8 billion. So we are 

already--

Mr. JOHNSON. We are about $100 million over. 

Mr. MILLER. $150 million will be--

Mr. JOHNSON. This year. We are at about $1.9 billion right now, 

is what our estimates indicate in reimbursable costs. 

Mr. MILLER. You basically argue you don't have a secured interest for that repayment? 

Mr. JOHNSON. Yes. We feel confident that our interpretation of 

the contract is correct on the $2 billion. We have had that reviewed 

by our Solicitor's office and they support that view. 
42 

Mr. MILLER. The next paragraph down, the last two sentences, 

again, I guess, "If all authorized features of the project were to be 

built, we anticipate the Federal obligation will exceed the authorized appropriation ceiling by more than 5 percent," which was acknowledged in the last budget submission, was that not so? 

Mr. JOHNSON. I would have to check that. I am not sure in the 

last--

Mr. MILLER. I think actually it was less than 5 percent, therefore 

it was okay. Back to your statement, "Therefore the adjustment to 

the authorized appropriations ceiling would be necessary." 

Do you want to tell us what you are saying there? 

Mr. JOHNSON. That is correct. If we build all of the features of 

the project that we are planning on building over the long period 

of time, we will in fact exceed the appropriations ceiling. If we are 

to complete the project, all of the features will have to be legislated 

to increase the appropriations ceiling. 

Mr. MILLER. Do we know when that would occur? 

Mr. JOHNSON. We haven't made a formal decision on when we 

would request an increase in the ceiling. Our obligations to construct the project would exceed the ceiling in fiscal year 1995. 

So we are approaching a time when we will need to approach 

Congress and ask for an increase. 

Mr. MILLER. Would that include this next submission for appropriations? 

Mr. JOHNSON. Yes. There will be laid out in the 1995 budget request. 

Mr. MILLER. Again, it may go to one of the issues in terms of how 

we have to construct this. In the past, within the context of legislation, and in the context of these projects, this is something that 

was not always viewed as being important. From time to time you 

were able to go to the appropriations process-and various projects 

throughout the West have done that-and simply moved past that 

ceiling and gotten the appropriations with the full recognition that 

you were exceeding the authorization. 

If in fact your calculations are correct, I would just throw out, 

because I think it is a statement of fact, that that is no longer true 

in the legislative atmosphere in the Congress. 

Mr. Pastor sits on the Appropriations Committee, anj:l he knows 

and we all know on a bipartisan basis the battles that took place 

in this last session of Congress over authorized and unauthorized 

projects in the transportation budget, the Water and Power Subcommittee budget and others. The chairman of the Appropriations 

Committee essentially was put in the position of having to strip 

those projects from the bill to seek their passage. 

And that is a bipartisan effort. That is led by people on both 

sides of the aisle to make sure that we stay within those caps, and 

that we have those reviews. I don't know how many times, when 

the Appropriations Committee, at the behest of the leadership or 

the Administration or others, tried to put in unauthorized projects, 

successful amendments were overwhelmingly adopted to strike 

those projects from those bills. Then when attempts were made to 

insert those projects in the Senate and bring them back to the 

House, they were struck on points of order, because the rules of the 

House have changed in the last two years. 
43 

This raises great matters of contention, even with my own delegation in California on transportation monies. But those rules have 

changed rather substantially. So this isn't a situation that you can 

simply ignore if you think you have got the ear of one Member or 

the other. 

That determination will have a resulting impact here on that legislative process. And it is just one of these situations that has evolved over the 

years in the House of Representatives. By now it is almost impossible to get unauthorized projects or projects exceeding authority 

past that process, in most instances with the concurrence of the 

chairman of the Appropriations Committee. It doesn't matter if 

they are transportation or water projects or what-have-you. In his 

own bill, HHS, he will not appropriate any money for any project 

that is unauthorized. 

So that is the direction we are moving in. So I think that everybody ought to read Mr. Johnson's statement as one of creating a 

very serious result certainly within the House and I think in the 

Congress overall. 

Let me yield now to Congresswoman English for questions that 

she might have, then I have a couple of follow-ups, then we will 

go to the other members of the delegation sitting here. 

Ms. ENGLISH. Thank you, Chairman Miller. You have asked several questions which I was very interested in but I do have a couple of follow-ups. 

Mr. Johnson, I am concerned about a couple of things with the 

$100 million over the project that you were referring to. One of 

them is, is there concurrence that that is the figure from CA WCD? 

Is there agreement? 

Mr. JOHNSON. There is not agreement on what the ceiling is. They interpret the contract, you know, as I have said, their repayment ceiling is limited to $1.8 billion, and our reading of the contiact is it is limited to $2 billion. That is just a ceiling. The actual determination of the amount 

that is reimbursable is really a technical analysis. We know what 

costs have been expended. There are certain rules and procedures 

related to how you then assign those costs between what is reimbursable and what is nonreimbursable. It is a technical cost allocation analysis. 

And that is the basis for our saying that ultimately the obligation is going to be $2.2 billion. 

That analysis has been provided to CAWCD. We have an obligation to consult with CAWCD on the preparation of that analysis. 

During the last year, as we were initiating repayment, we did in 

fact consult with CAWCD on that analysis in putting all of that together. 

They have a chance to input to us on technical issues related to 

how that allocation is done, and where they have comments that 

have merit, we will incorporate them into the analysis. 

Ultimately determining that amount is not a negotiation. We 

consult with CAWCD, but ultimately the United States has theresponsibility to ensure that we assign those costs in a technical way 

consistent with the law and the procedures that we have. 
44 

Ms. ENGLISH. Can you tell me briefly some of the projects that 

you think are increasing the costs over what was agreed to? 

Mr. JOHNSON. There are a number of things that have increased 

the costs since we put the ceiling in the contract. And I don't have 

a comprehensive list of all the things. Certainly the siphons and 

the need to repair the siphons is $150 million additional cost, some 

of which is nonreimbursable in accordance with 575. 

There has been inflation in the project that has caused cost increases. There are some other areas where we have deficiencies in 

the project that we are making repairs that have caused the costs 

to increase also. 

Ms. ENGLISH. Could the increase, the inflation, the cost of the siphons, be projects that, if the project had gone in a timeframe or 

there had not been problems like the siphons, that those costs 

would not have been incurred, wouldn't the costs be right at the 

ceiling that was set? 

Are we talking about some gray areas here that might in fact be 

partially the responsibility of the Bureau? 

Mr. JOHNSON. Our authority for making costs reimbursable and 

nonreimbursable is pretty clear. Flood control, Indian use of facilities, basically Reclamation law and the authorizing Act in essence 

define what costs can be reimbursable. 

We really don't have latitude when we have a problem like the 

siphons to make those costs nonreimbursable. There is no choice. 

If the dollars are spent, we have to allocate those costs and assign 

them in accordance with the laws and the authority we have. 

So I guess from our perspective, no, there is not a gray area. If 

the costs are incurred, we have to allocate them to those reimbursable functions consistent with the authorities and the laws that we 

have. 

I appreciate that there are issues associated with the siphons. 

CAWCD's concerns on particularly the siphons were partially addressed, I think, in the legislation that was provided, that made 

half of those costs nonreimbursable. But we had to have authority 

to do that. We couldn't do that administratively. 

Ms. ENGLISH. Thank you. 

Mr. MILLER. Let me ask you one question and then go to the 

other Members. Well, actually two questions. The issue of target 

pricing, as I understand the discussion I have seen in this, where 

you would make water available to non-Indian irrigators at a target price, and then I guess CAWCD has to make up that cost obligation to the Federal Government, but internally they make that, 

that theoretically allows non-Indian irrigators to stay in business 

or lowers their cost so hopefully they can stay in business. 

That also diminishes the obligation to the Federal Government, 

does it not, because there is less cost associated with the repayment of that water because it is agriculture water, and that is the 

way it is set up under the arrangements for the CAP? 

Mr. JOHNSON. That is correct. 

Mr. MILLER. So there is an accounting procedure by which you 

end up owing the Federal Government, if you can keep this water 

in a characterization of non-Indian agricultural water? 

Mr. JOHNSON. That is right. 

Mr. MILLER. What happens on the Indian side of that equation? 
45 

Mr. JOHNSON. That is an area where we have a difference, I 

think, on O&M costs with CAWCD. 

Mr. MILLER. They would be paying market rates? 

Mr. JOHNSON. Under CAWCD's interpretation of the contract, 

they would assign the O&M cost based on proportionate deliveries. 

We would be setting water rates based on, say, delivery of 300,000 

or 400,000 or 500,000 acre-feet, rather than the 1.5 million acrefeet that was intended, and that will drive up the cost of water if 

it was not subsidized from some source, significantly, and result in 

a charge for Indian use under the CA WCD proposal, in the early 

years of $80 to $120 an acre-foot, depending on how much water 

is delivered. 

Mr. MILLER. That would be adjusted on a yearly basis based 

upon O&M? 

Mr. JOHNSON. It would depend on the O&M costs on an annual 

basis, but more importantly it varies based on how much water is 

delivered. See, we are not delivering as much water, and the agriculture users are not paying-they had an obligation to pay for the 

water whether they took it or not, and we are not delivering as 

much water. 

So CAWCD says, well, now it is our discretion to assign these 

O&M costs based on the actual deliveries. And with the high fixed 

O&M costs of $30 million, we get a very high acre-foot on O&M 

cost that ends up being assigned to Indian tribes. 

Our view is that the non-Indian agriculture users were responsible for paying that cost. Now that they have defaulted, there is 

no basis for CAWCD to assign those costs, you know, in this manner. If the non-Indian agriculture folks have defaulted in their 

O&M payments, then that is a relationship between CAWCD and 

non-Indian agriculture, and it is up to CAWCD to come up with the 

money to pay that cost that non-Indian agriculture is not paying. 

Mr. MILLER. What is the target price under discussion? 

Mr. JOHNSON. For non-Indian agriculture, it is $17 to $27 an 

acre-foot, depending on which pool it is in. 

Mr. MILLER. That would cover what? 

Mr. JOHNSON. That would cover the cost of delivering the water 

to the irrigators. Actually it would not cover the full cost. The variable cost of delivery is approximately $39 an acre-foot. That is just 

a variable cost. The full cost if we delivered the 1.5 million acrefeet, paid the full $30 million fixed O&M and the variable cost, the 

full cost that was intended to be charged originally if the project 

would have worked the way it was intended, would be about $60 

an acre-foot. 

Mr. MILLER. Yesterday we visited Gila River and flew over fairly 

extensive agricultural investment in terms of, I think, olives and 

citrus. I don't know this, but let me just speculate, under this scenario we would then be, after, if you have arranged a target price 

for non-Indian irrigation, you would be hard pressed to do the same 

for Indian irrigation. 

And absent that, if those prices are what you suggest they are, 

I don't know, you know, where you break even in citrus and that 

sort of thing, but absent serious Federal subsidy to Indian irrigation, they are not going to be in business. 
46 

Mr. JOHNSON. They are not going to be using CAP water, not at 

that price. 

Mr. MILLER. There is always another choice in the State. That 

is why we have the CAP project, right? Or there is a choice for a 

while, I guess. But that would be the arrangement, and the theory, 

the unspoken theory here is that, well, we will meet our trust obligations, the Federal Government will have to meet its trust obligations to the Indians. They have made this investment, somehow we 

will bail them out. 

So it is sort of an indirect three cushion shot here where the 

unspoken is that we are going to reach into our pocket, the Federal 

Treasury, because we are not going to let that happen to the Indian 

nations in this area. You don't have to agree to that. 

Mr. JOHNSON. We don't have to. We think we are obligated to 

pay O&M costs. 

Mr. MILLER. We are still under $3 billion, right? I don't want to 

have a cost overrun right in this hearing room. 

Mr. Duffus, have you looked at going to this question of the 

stretchout of the loans to 50 years, have you looked at the financial 

integrity of the individual districts? You didn't cover that in this. 

Mr. DUFFUS. We did not look at that. 

Mr. MILLER. Thank you. Ed, do you have questions? 

Mr. PASTOR. I will submit some written questions. 

Mr. MILLER. We will have written questions, both from the committee and I assume from Members that are sitting here. We will 

transmit those to you. 

Mr. PASTOR. I just want to make a comment, and it shows how 

sometimes reasonable men will differ. In one testimony from GAO 

on page 8, which concerns projected power revenues that may not 

materialize, you say that you have a contract, it will expire in 

2011, and we don't know what. the situation will be. 

It is interesting that Mr. Vuffus sees this as a liability. If you 

turn to Mr. Johnson, on page 5, he sees utilization of windfall 

power revenues as an asset. Somehow we are going to have to get 

some agreement on issues like this. 

I think it is very important as we make a determination of the 

financial future of CAP, that at least we get some agreement of 

how we are going to treat circumstances like this, because it can't 

be both a liability and an asset. In part I believe this is a function 

of looking at the CAP from a best-case or worst-case scenario. I 

would just like you to comment on that. 

Mr. JOHNSON. I think the GAO comment, and gentlemen, correct 

me if I am wrong, is probably related to what happens after 2011 

in terms of the Navajo power plant, and is there still going to be 

a viable power plant to provide power resources to pump the water. 

Mr. PASTOR. Yesterday we were talking about 2032. 

Mr. JOHNSON. Our comment about being an asset was really 

talking about the period between now and 2011, when we are going 

to generate significant revenues from the sale of excess power. 

So we are really talking about two time periods. 

Mr. PASTOR. 2011 and 2023? 

Mr. DUFFUS. We are talking about 2011 and what happens beyond 2011. That is when the contracts expire. The two that the 
47 

District has expire in 2011. The one it is negotiating is to expire 

in 2011 as well. 

So we are saying that the District is assuming over the 50-year 

tenn that they were going to have that money. And we are raising 

an uncertainty that when the contracts expire in 2011, it is not 

known whether they can be renewed at the same favorable rates. 

I think that is the difference. 

Mr. PASTOR. Thank you, Mr. Chainnan. 

Mr. MILLER. Mr. Kyl. 

Mr. KYL. Mr. Chainnan, I just have one question for Mr. Johnson. On page 4 of your testimony you say the Reclamation would 

be forced to curtail construction activities and the second contingent, you actually testified that was just an option. The Reclamation has not made a decision as to---

Mr. JOHNSON. No, we have not. As a matter of fact, we are hopeful that our negotiations with CAWCD will be fruitful and that not 

have to occur. 

Mr. KYL. But if it did, that is not a certainty it would be curtailed, that is an option that you have? 

Mr. JOHNSON. That is an option that we have, yes. 

Mr. KYL. Thank you. 

Mr. MILLER. Sam. 

Mr. COPPERSMITH. Let me submit most of these for the record. 

But I'd like to ask Mr. Johnson about the Bureau's contention that 

you need to be brought into discussions of the agreement that the 

CAWCD has made, and you need to approve any agreement. 

I don't want to take time now to discuss the procedural framework, but substantively, what are the sorts of things that the Bureau would like to see in that contract that aren't there now? What 

sort of things would the Bureau's approval depend on, or what issues would the Bureau like to see addressed that have not been? 

Mr. JOHNSON. I think simply our only concern is to protect the 

financial interests of the United States and ensure that the United 

States is fully repaid. And I think that if we can resolve the O&M 

issue and the repayment ceiling issue, and distribution system 

loans, and ensure that in fact the United States is going to receive 

full repayment consistent with the tenns that have been established, then I think that is what we are looking for. 

We are looking for those conditions to be incorporated into the 

proposal that CAWCD has put forward. 

Mr. COPPERSMITH. Thank you. 

Mr. MILLER. Mr. Stump. 

Mr. STUMP. No thank you, Mr. Chainnan. 

Mr. MILLER. Thank you very much for your cooperation. Mr. 

Duffus, would you mind properly characterizing, this is not a formal GAO report, correct? 

Mr. DUFFUS. That is correct, Mr. Chainnan. We are here testifying today on our ongoing work. We have not got to the reporting 

stage. It is our intention after this hearing to sit down with committee staff and decide where we go from here in tenns of reporting. 

So this is testimony and not a formal GAO report. 
48 

Mr. MILLER. Thank you. Thank you, very much for your cooperation. As you know, we will be sitting down after this hearing with 

both of these parties. Thank you. 

The next panel will be made up of the Honorable George Miller, 

the Mayor of the city of Tucson, Arizona, and Mr. Mark DeMichele 

is the President and CEO of Arizona Public Service and co-chairman of the Governor's Advisory Committee on the CAP. Ms. Rita 

Pearson, Director of the Department of Water Resources, State of 

Arizona, and Mr. Sam Goddard, President, Board of Directors, 

Central Arizona Water Conservation District. 

Welcome to the committee. Your formal statements and the supporting documents will be made part of the record of this committee. You can see the number of questions that we have, so to the 

extent you can please summarize. Mayor Miller, we are going to 

begin with you. That is a great name in the Btate of Arizona. 

PANEL CONSISTING OF HON. GEORGE MILLER, MAYOR, CITY 

OF TUCSON, AZ; MARK DeMICHELE, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, ARIZONA PUBLIC SERVICE CO., AND 

CO-CHAIRMAN, GOVERNOR'S CENTRAL ARIZONA PROJECT 

ADVISORY COMMITTEE; RITA P. PEARSON, DIRECTOR, DEPARTMENT OF WATER RESOURCES, STATE OF ARIZON~ 

AND SAMUEL GODDARD, PRESIDENT, BOARD OF DIRECTORS, CENTRAL ARIZONA WATER CONSERVATION DISTRICT 

STATEMENT OF MAYOR GEORGE MILLER 

Mayor MILLER. Chairman Miller, thank you very much for coming here, and also I want to say hello to the committee members 

here. I am glad to see the congressional group from Arizona here. I 

know that my own experience, every one of the Members of the Arizona congressional delegation have been south of the Gila, and we 

appreciate that too. 

I certainly appreciate the opportunity to present testimony on behalf of the city of Tucson concerning Tucson's water situation and 

its firm commitment to the Central Arizona Project. I want to start off by emphasizing Tucson's historic role in bringing the Central Arizona Project to Arizona. Until CAP water delivery began, Tucson was totally dependent on groundwater. As a 

matter of fact, the largest city in the United States totally dependent on groundwater, mine water. Tucson committed early to 

groundwater conservation and to taking its full CAP allocation as 

rapidly as possible before Arizona law demanded it. But taking delivery of CAP water has turned out to be a difficult process for us. 

Economic factors underlying original cost assumptions have collapsed. Original estimates for operation and maintenance as well 

as capital charges have skyrocketed. As this subcommittee is 

aware, the most critical change is the agricultural community's severely reduced economic ability to take CAP water. As a result, 

many of the costs that were to have been paid by agriculture will 

shift to municipal users. What is more, new technical problems have arisen that make difficult and expensive Tucson's immediate conversion to full reliance 

on CAP. I will speak to each one of these issues. Before I do, I want 
49 

to say the most important thing I can tell this subcommittee today, 

and I want to emphasize that, the most important thing I can say 

today is that despite the enormous complexity of the issues and 

number of conflicting interests involved, Tucson is satisfied with efforts taken by the Central Arizona Water Conservation District to 

realize the city's financial obligation to support the Central Arizona 

Project. 

The current approved structure of charges is one that Tucson can 

live with. The process has been one of cooperation, open debate, 

statewide public involvement, and has recognized and reconciled 

many conflicting interests across the State. Tucson applauds the 

CAWCD and reports to this subcommittee the city's belief that the 

CAWCD has made a strenuous effort to meet its obligations to the 

United States of America while addressing the needs of the water 

user constituencies. 

Tucson now serves 590,000 area residents. We serve not only the 

city limits, but outside. That number will grow to 1.5 million by 

2025, and estimated at 2.5 million 100 years from now. We used 

105,372 feet of water in 1992 and will need 430,000 acre-feet in the 

year 2100, no matter how successful our conservation efforts are. 

Tucson has been a major supporter of the Central Arizona 

Project. We recognize that CAP water will be the most viable longterm water source to sustain Tucson's economic and population 

growth, meet Arizona groundwater code requirements, and conserve and preserve the city's groundwater resources for the future. 

In 1989, Tucson made a policy decision of rapid transition from 

mine water, mine groundwater to surface water. To prepare for 

CAP, Tucson has been shifting its economic resources from drilling 

new wells and maintaining the well fields to reorienting the water 

delivery system and to construction of a large treatment plant capable of delivering treated CAP water to substitute renewable 

water for groundwater use. 

Nearly $250 million has been invested in these facilities. The pu- rification plant alone is $70 million. The city's allocation of CAP water is 148,420 acre-feet with an 

additional 25,000 acre-feet allocated to private water companies 

and State land in the area. 

This area's current CAP allocation will be totally utilized by the 

year 2025. The city needs to acquire as much additional CAP water 

as possible. 

Tucson is and must be committed to the Central Arizona Project 

to support the city's future growth and environmental needs. The 

riparian areas in our basin have been adversely affected as the 

mining of water reduces the depth of the water table by 22.5 feet 

every year. For instance in the Tanka Verde area, those who are 

familiar with Tucson, over the northeast area, we, the City of Tucson Water Department, a year ago last summer was actually bringing water in water tank trucks to resupply that particular area because the trees were dying for the simple reason that we had 

pumped so much water out of the underground that the roots 

couldn't get down far enough to replenish the vital water they require. 

Also, I think one of the most important components when you 

talk about the environment is the obvious, and that is the people 
50 

who are going to live in the area of Tucson in the future. For the 

Tucson basin to be able to provide water to its citizens, the CAP 

is a necessity. There is no alternative actually to CAP water. And 

our next source of clear water, drinking water, is going to be reclaimed water. 

And if I was a very, very young man, much younger than I am 

now, I think I would be buying up a perfume franchise for the year 

2030. 

Tucson's long-term commitment to the CAP remains intact despite financial changes and problems experienced by the city at the 

inception of the CAP water delivery. Conversion of Tucson's 90,000 

water users from groundwater to surface water has been a significant challenge to the city. When the first 84,000 connections were 

transferred from groundwater to CAP water, early this year, 7 percent of those customers experienced problems on a scale that had 

not been anticipated. 

The surface water caused encrusted materials and old galvanized 

steel pipes to break loose and resulted in delivery of brown water 

to approximately 6,000 of the connections. 

The city established a special office to deal with consumer complaints and employed nationally recognized experts to help solve 

the problem. However, a quick solution could not be achieved. We 

have already spent above and beyond what we even considered 

spending on this, $350,000 to meet the needs of individual people 

who have been connected with CAP water. 

Tucson has returned a percentage of its customers to groundwater while solutions are being sought. Unavoidably we will not be 

able to take delivery of our full CAP entitlement as quickly as anticipated. Tucson, however, will resolve its problems and take its 

allotment as rapidly as possible. 

I would like to address two other subjects, one concerning the Arizona Water Rights Settlement Act, as well as terminal storage. 

Tucson is committed to implementing the settlement claims to the 

Tohono Nation embodied in the Water Rights Settlements Act of 

1982. The city and local parties timely performed all their obligations under the Act. 

However, unresolved disputes between the Nation and the 

allottees have to date prevented dismissal of litigation. I want to 

emphasize, we, the city of Tucson have made an agreement, but it 

is being held up from being resolved because of the difference between the Nation and the allottees. 

Last year, the Arizona congressional delegation introduced a 

comprehensive amendments package which has been negotiated 

among the Nation, the State, the local parties, and the city of Tucson. And while the allottees participated in negotiations, they and 

the Nation were unable to resolve their differences at this point. 

This year, staff for the Senate Committee on Indian Affairs has 

been working with the Nation, the allottees, and the Departments 

of the Interior and Justice to develop a new comprehensive amendments package for introduction next year. We hope to have your assistance in resolving this difficult problem. 

Meanwhile. to assist the Nation and the allottees, Tucson has 

been buying 'its CAP water through the Nation so the Nation can 
51 

start to get financial benefits from the settlement. We are paying 

the same price to them as we would to the CAWCD. Terminal storage is critical to Tucson's plan to rely on CAP for 

its water future. The problems Tucson has switching from groundwater to CAP water highlight the need for a storage facility near 

the terminal of the aqueduct. Terminal storage is the final element 

of the Central Arizona Project in southern Arizona. 

Tucson plans to rely entirely on Central Arizona Project water as 

soon as the switch from groundwater to CAP water can be made. 

The Bureau is currently doing detailed planning, and beginning 

EPA processes on the terminal storage proposal has been approved 

by the city and the CAWCD board. The principal elements of the 

proposals are a 15,000 acre-foot storage area reservoir, recharge facilities, and well fields with pipelines to the storage reservoir, so 

that recharged water can be recovered and used to replenish the 

reservoir supply. 

The estimated cost of this project is $50 million for the storage 

facility and $50 million for existing new well fields and pipelines. 

We are counting on the Bureau to expedite its work on the crucial portion of the Central Arizona Project so Tucson can plan for 

full reliance on CAP water and stop pumping groundwater. We 

were disappointed to learn earlier this week that the draft environmental impact statement which was to be completed as we thought 

January 1994, will be delayed until September 1994 because of the 

physical problems at the proposed site. 

I want to thank you for giving me this opportunity to brief you 

on Tucson's important long-term water issues, and certainly I 

would be happy to answer any questions you may have. Mr. MILLER. Thank you, very much. 

[Prepared statement of Mayor Miller follows:] 
52 

GEORGE MILLER 

MAYOR, CITY OF TUCSON 

December 10, 1993 

REVISED 

STATEMENT TO THE SUBCOMMITTEE ON 

OVERSIGHT AND INVESTIGATIONS 

OF THE 

HOUSE NATURAL RESOURCES COMMITTEE 

Chairman Miller, Members of the Subcommittee: 

I appreciate the opportunity to present testimony on behalf of the City of Tucson concerning Tucson's water situation 

and its firm commitment to the Central Arizona Project. 

Tucson lies within the Upper Santa Cruz sub-basin; Tucson 

Water serves approximately 90 percent of the area's population 

of approximately 650,000. Since the early 1900s, when the Santa 

Cruz River flows diminished, groundwater has been Tucson's sole 

water source. As a result, Tucson has been forced to mine 

groundwater withdraw more groundwater than is naturally 

replenished to the basin - to provide water to its growing 

population. Tucson, recognizing the finite nature of the 

groundwater resource, committed to a conservation ethic in the 

1970s. 

Since the 1970s, Tucson has been a major supporter of the 

Central Arizona Project to import Colorado River to the 

metropolitan areas of the state. Tucson recognizes that CAP 

water will be the most viable long-term water source to sustain 

Tucson's economic and population growth, meet the Arizona 

groundwater code requirements, and conserve and preserve the 

City's groundwater resource for the future. 

In 1989, after a lengthy process of study and public input, 

Tucson adopted a long range Water Resources Plan. As part of 

that Plan, Tucson made a policy decision of rapid transition 

from mined groundwater to surface water. Tucson's long range 

Plan called for transition to CAP water earlier than required by 

Arizona's Groundwater Management Code. For the past twelve 

years, Tucson has been shifting its economic resources from 

drilling new wells and maintaining the well fields, to 

reorienting the water delivery system, and to the construction 

of a large treatment plant capable of delivering treated CAP 

water to substitute renewable water for groundwater use. Tucson 

has invested nearly $250 million in the facilities required for 

reliance on CAP water. In addition, the City is currently 

recharging CAP water and plans to expand such recharge. This 

water will be stored underground for future use. 

Growth projections put the Tucson area's population at 1.5 

million by 2025, and at 2.5 million 100 years from now. The 

City of Tucson used 105,372 acre-feet of water in 1992, and is 

projected to need 240,000 acre-feet in 2025, and 430,000 acre- feet in the year 2100. Tucson has a potential service area 
53 

which includes most of eastern Pima County, north of the San 

Xavier Indian Reservation. Additionally, along with its own 

residents, Tucson serves other municipal and industrial 

providers in the area. The City's allocation of CAP water is 

148,420 acre feet, with an additional 25,000 acre feet allocated 

to private water companies and state land in the area. Tucson's 

long range plan indicates that this area's current CAP 

allocations will be totally utilized by the year 2025. The plan 

calls for the City to acquire as much additional CAP water as possible. 

Tucson is and must be committed to the Central Arizona 

Project to support the City's future growth. At this time, I 

would like to assure this Committee that Tucson's long-term 

commitment to the CAP remains intact, despite problems 

experienced by the City at the inception of CAP water delivery. 

In the past few months, new problems have arisen concerning 

Tucson's conversion to full reliance on CAP. Cost assumptions 

underlying the utilization of CAP water have changed markedly 

from initial projections, and technical problems were 

encountered when CAP surface water entered the City's pipelines. 

I will speak to each of these issues in turn. 

CAWCD Structure of Charges 

As this Committee is aware, the most critical change is the 

agricultural community's severely reduced economic ability to 

take CAP water. As a result, many of the costs that were to 

have been paid by agriculture will shift to municipal users. Operation, maintenance and replacement (OM&R) rates were originally estimated to be within a range of $55 to $60, then 

escalating on the basis of inflation. Today, it is clear that 

these rates will not be high enough to cover fixed OM&R costs. 

Capital charges were initially to be in the $5 to $10 per acre 

foot range, escalating slowly to $48 over the 50 year repayment 

period. With CAWeD's new financial situation, these rates will 

escalate much more quickly and to a somewhat higher level. 

Nevertheless, Tucson is satisfied with efforts taken by the 

Central Arizona Water Conservation District to realign the 

City's financial obligation to support the Central Arizona 

Project. The current approved structure of charges is one that 

Tucson can live with. The process has been one of cooperation, 

open debate, state-wide public involvement, and has recognized 

and reconciled many conflicting interests across the State. The 

resulting plan makes it possible for Tucson to meet its 

obligations to CAWCD, and for CAWCD to meet its obligations to 

the federal government. Tucson applauds CAWCD, and reports to 

this Committee the City's belief that CAWCD has made a strenuous 

effort to meet the needs of its water-user constituencies, as 

well as its obligations to the United States of America. 

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Tucson also wishes to bring to the attention of this 

subcommittee the thorough review of the issues pertaining to CAP 

utilization and financing achieved by Mark DeMichele and 

Governor Symington's CAP advisory committee. Many ideas which 

became part of a successful rate restructure were the direct 

result of the serious analysis completed through the cooperation 

of all interests working together on this committee. 

Technical Implementation Problems in Tucson 

Conversion of Tucson Water's 170,000 customers (590,000 

people) from groundwater to surface water has been a significant 

challenge for the City. In order to comply with anticipated new 

stringent EPA requirements, Tucson constructed a state of the 

art water treatment plant utilizing ozone and chloramine rather 

than chlorine. We operated a pilot plant in Phoenix to identify 

and deal with the problems that could be encountered when CAP 

water was introduced in Tucson. A major public relations 

campaign · was implemented to prepare our customers for the 

changes they might encounter when CAP water arrived. When the 

first 84,000 customers were transferred from groundwater to CAP 

water early this year, 7% of those customers experienced 

problems on a scale that had not been anticipated. The surface 

water caused encrusted materials in old galvanized steel pipe to 

break loose and resulted in the delivery of brown water to 

approximately 6,000 customers. The City established a special 

office to deal with customer complaints and employedenationally 

recognized experts to help solve the problem. However, a quick 

solution could not be achieved. 

At one point, the Tucson City Council voted to stop taking 

delivery of CAP water until this problem could be resolved. The 

Council was clear and united, however, in continuing its 

commitment to solve the "brown water" problem and return to CAP. 

In fact, the Council reversed its vote after our technical 

people discovered a means of segregating the affected customers 

and returning them to groundwater. Tucson must deal with the 

quality issues which have arisen because of the flow of CAP 

water through the City's older pipe system. Economic 

consequences will include pipeline repair and accelerated 

replacement,. costs for homeowner damages, and the possible need 

for a new demineralization plant. However, we will preserve our basic conservation ethic, and our long-term need for CAP 

water to meet the needs of Tucson's growing population will 

continue. To this end, Tucson has convened a committee of 

citizens and experts to study and explore the options and costs 

associated with a return to full CAP utilization. Additionally, 

Tucson continues to explore alternative means of utilizing CAP 

water other than direct use and delivery. Unavoidably, Tucson 

will not be able to take delivery of its full CAP entitlement as 

quickly as anticipated. But Tucson will certainly resolve its 

problems and take its allotment as rapidly as possible. 

3 
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To assure that the Committee is fully informed with regard 

to Tucson's major water issues, I will address three more subjects in this testimony: environmental concerns in the Tucson 

region, the Southern Arizona Water Rights Settlement Act 

(SAWRSA), and Tucson Terminal storage. 

Environmental Concerns 

The riparian areas in our basin have been adversely 

affected by qroundwater mining, as the water table depth has 

diminished by two to two-and-a-half feet per year. For example, 

the City of Tucson has had to truck in water to preserve 

vegetation in the Tanque Verde riparian area. As well, 

subsidence is suspected in our area, which could result in 

damage to both the natural landscape and the human 

infrastructure. Tucson is committed to conserving the 

groundwater table, and the natural resources of our desert 

environment. Without our full allotment of Central Arizona 

Project water, we risk further deqradation of our natural 

environment. 

Southern Arizona Water Rights Settlement Act 

Tucson is committed to implementing the settlement of the 

water claims of the Tohono O'odham Nation which was embodied in 

the Southern Arizona Water Rights Settlement Act of 1982. The 

water claim dispute had its origins in 1975 litigation initiated 

by the Nation against Tucson and other parties to establish 

water rights and recover damages for perceived injuries to those 

rights. As a result of protracted negotiations, SAWRSA was passed in 1982. The Act called for the city and other local 

entities to contribute money within a year to a cooperative 

fund, and for the City to contribute 28,200 acre feet of 

effluent to the Secretary within a year. In addition, the 

Nation and the Secretary were to enter into a settlement 

agreement within a year. The City and local parties timely 

performed all of their obligations, and the settlement agreement 

between the Nation and the Secretary was timely executed. 

However, unresolved disputes between the Nation and 

allottees have to date prevented dismissal of the litigation. 

Tucson has been working with the Tohono O'odham Nation, and has 

attempted to work with the allottees to develop proposed 

amendments to the Settlement Act that will resolve the remaining 

issues. Last year the Arizona conqressional delegation 

introduced a comprehensive amendments package which had been 

negotiated among the Nation, the State, local parties and the 

City of Tucson. While the allottees participated in the 

negotiations, they were unable to resolve their differences with 

the Nation. 

This year, staff of the Senate Committee on Indian Affairs 

has been working with the Nation, the allottees, and the 

4 
56 

Departments of the Interior and Justice to develop a new comprehensive amendment package for introduction next year. We 

hope to have your assistance in resolving this difficult 

problem. Meanwhile, to assist the Nation and allottees, Tucson 

has been buying its CAP water through the Nation so that the 

Nation can start to get financial benefits from the settlement. 

Finally, terminal storage is critical to Tucson's plans to 

rely on CAP for its water future. 

Terminal Storage 

The problems Tucson has had switching from groundwater to 

CAP water highlight the need for a storage facility near the 

terminus of the aqueduct - terminal storage, as the final 

element of the Central Arizona Project in Southern Arizona. As 

I explained earlier, Tucson plans to rely entirely on Central 

Arizona Project water as soon as the switch from groundwater to 

CAP water can be made. 

As early as 1978, the Commissioner of the Bureau of 

Reclamation notified the Chairman of the House Committee on Interior and Insular Affairs that the San Pedro Aqueduct had 

been eliminated from the CAP and, instead, the Bureau proposed 

to extend the Tucson aqueduct from Pinal County "to the south, 

and to add terminal storage which will facilitate improved 

operation of the Tucson aqueduct and its integration with the 

Tucson water system." 

In 1981, the Secretary of the Interior assured Governor 

Bruce Babbitt "that the Tucson aqueduct and any required storage 

will be sized to meet the future needs of Pima County within 

cost and water allocation limits." 

When the Plan Six Agreement was executed in 1986, the 

United States, CAWCD and the City of Tucson agreed that Terminal 

Storage, if approved by the Secretary, was to "provide as reasonably reliable a supply of municipal and industrial (M&I) 

water for the water users in the Tucson area as is provided for 

other major Central Arizona Project M&I water subcontractors." 

When the Bureau designed the CAP aqueduct from the Phoenix area to Tucson, it assumed that terminal storage would be part 

of the Project. The pumping plants for that stretch of the 

aqueduct were built with single discharge lines while the 

pumping plants between the Colorado River and the Phoenix area 

contain dual discharge lines. This fact, the increased risk of 

emergency outages south of the Phoenix area, and the presence of 

regulatory storage at New Waddell Dam all combine to make the 

CAP to Phoenix area subcontractors significantly more reliable 

than the supply to the Tucson area. 

5 
57 

The Bureau is currently doing detailed planning and 

beginning NEPA processes on a terainal storage proposal that has 

been approved by the City and the CAWCD board. The principle elements of the proposal are as follows : 

1. A 15,000 acre foot surface storage reservoir with 350 

cfs gravity flow to the TUcson Water Treatment plant; 

2. Joint surface recharge facilities at the Pima Mines 

Road location, with a CAWCD share of approximately 15,000 acre feet per year; 

3. Recovery of recharged water from two of Tucson Water's 

existing exterior wellfields. Avra Valley and santa cruz wellfields would be expanded slightly with the flexibility to 

introduce flows either at the treatllent plant or into the 

surface reservoir; 

4. Recovery of recharged water from a new Central Avra 

Valley wellfield, located on City-owned property; the pumped supply would be introduced directly into the CAP canal on the 

discharge side of the Brawley Pumping Plant. 

The estimated cost of this project is $50 million for the 

storage facility and $50 million for existing and new wellfields 

and pipelines. We were disappointed to learn earlier this week 

that the draft Environmental Impact Statement which was to be 

completed in January 1994 will be delayed until September 1994 

because of physical problems at the proposed site. We are counting on the Bureau to expedite its work on this crucial 

portion of the Central Arizona Project so that Tucson can plan 

for full reliance on CAP water and stop pumping groundwater. 

Thank you for giving Tucson this opportunity to brief your 

Subcommittee on our important long term water issues. I will be 

happy to address any questions you may have. 

6 
58 

Mr. MILLER. Again, thank you for your hospitality and for the 

chance to talk to you and your city staff about specifically the terminal storage facility. We were properly admonished and we did fly 

over that area. They told me that area was a reservoir down there 

even though it didn't look like it. In California we put reservoirs 

in steep canyons. I have never seen a reservoir on flat land. Apparently it is doable. 

It is a matter of serious negotiations with the Bureau. We will 

stay involved in that. 

Mark, welcome to the committee. I told you many months ago, 

Mark, you didn't want to do this. 

Mr. DEMICHELE. Some advice I take and some I don't. 

Mr. MILLER. I think along with others, I know certainly with the 

Members of your congressional delegation, we should thank you for 

the time and the effort that you put on behalf of starting to delineate these issues, and then going forward and making recommendations. Whether or not those recommendations are all accepted or partially accepted or negotiated into something else is 

really almost immaterial. 

I think the fact that you were willing and your committee was 

willing to pull this apart and to start to deal with some of the basic 

underlying facts and situations, we should all thank you for. I 

think you probably have reduced the time to get to the end of this 

story rather dramatically by that effort. 

But if you ask me again today I would still advise you not to get 

into it. I am sure it has taken an awful lot of time away from your 

other concerns and interests. But welcome to the committee. 

STATEMENT OF MARK DEMICHELE 

Mr. DEMICHELE. Thank you, Chairman Miller. And welcome to 

Arizona. Nice to see you in our territory. And a special welcome 

home to the Members of our delegation here this morning. I think 

it is more than that you all are together this morning. 

I want to thank you for the opportunity to present testimony on 

behalf of the Governor's CAP Advisory Committee. You have got a 

full agenda, so I am going to ask that my written statement be submitted for the record and I be permitted to summarize key points 

of that statement in the interests of time. 

First and foremost, Mr. Chairman, I want to thank you for your 

willingness to take time from your busy schedule to meet with Rita 

Pearson and other members of our Advisory Committee and me 

during the course of the examination of the pertinent issues surrounding CAP's future. I appreciate the courtesies you have extended to me as well and your willingness to provide us consultation as we have embarked on the process of addressing the many 

issues affecting CAP. 

As you know, the advisory Committee's recommendations represent, I believe, an extraordinary effort by a diverse group of people who worked long and hard during the past 12 months to identify and examine all major issues impacting the CAP. 

I can assure you no stone was unturned. It was an exhaustive 

process. 

I think you will agree many people felt this process had very little chance of success at the outset. I am confident these thoughtful 
59 

recommendations will be useful and important to Governor Symington, the Department of Water Resources, the CAWCD, the Bureau of Reclamation, and your committee as it exercises its jurisdiction and responsibilities associated with oversight and investigation. 

I am rather proud of the work that we have done in spite of all 

the effort that it took. I am very pleased to present those recommendations for the record at this time. Mr. Chairman, as you are well aware, the advisory Committee 

was composed of representatives of all parties affected by CAP. At 

your urging, which I greatly appreciated, the advisory Committee 

recruited several environmental leaders to be part of the process. 

A special subcommittee on environmental issues was set up, and 

the working group charged with identifying and reviewing all environmental issues related to the CAP. 

And again, sir, I must emphasize it was an inclusive and open 

dialogue to reach as much consensus as possible on these important environmental issues. Although the final recommendation 

does not contain agreement on all environmental issues examined 

by the committee, I am heartened that several innovative recommendations have been put forth and agreed to by all the interested parties which comprised the advisory Committee. 

They include recommendations for using CAP water to benefit 

the environment, to benefit natural habitats, and to enhance our 

State's natural resources. We also concluded that the State and 

CAWCD should aggressively study the potential benefits from environmental, fish and wildlife use, not only to produce benefits in the 

form of natural resource enhancement, but also because such uses 

may potentially reduce repayment obligations on the project. 

To complete the historical package, we concluded the State environmental trust fund should be established, and on Tuesday, December 21, the week after next, the Department of Water Resources and CAWCD will hold hearings on the establishment of the 

environmental trust fund and review revenue sources to be used. 

Now, I recognize that some environmental leaders have communicated in written form to Commissioner Beard addressing several 

concerns which did not make it into our committee's final recommendations. And quite frankly, no interests represented on our 

committee got everything they wanted, not the cities, not agriculture, not the business interests. We intended to balance all the 

interests as best as we could accomplish. 

The State focused on goals to produce a solid, defensible set of 

recommendations. 

Although I believe it is within your purview, Mr. Chairman, to 

review these additional environmental issues, I would hope the 

Natural Resources Committee would give credit where credit is due 

and support the findings of the CAP Advisory Committee as it relates to environmental reforms as I have proposed. Based on the results of our work in Arizona, we do have consensus on work in several issues and plan to translate those issues 

into an Arizona legislative package designed to quickly implement 

several recommendations. We believe the aggressive legislative 

package will strengthen the CAP and help reach two of the three 

goals, which I set forth in my own mind as of paramount concern. 
60 

First, these changes are designed to assure realistic long-term 

water supply for Arizona well into the next century by utilizing 

CAP in an efficient and cost-effective manner. Second, a goal which 

I know is of enormous concern to your committee, is that of doing 

everything possible to protect the interests of the Federal taxpayer 

to ensure long-term financial viability of the project. The financial legal subcommittee that authored our financial 

plan was comprised of some of the best financial minds and legal 

minds in this area. They created a financial model on their own 

and completed the comprehensive analysis that will assure the 

State of Arizona through its designee CAWCD, will be able to meet 

its obligations to repay the Federal Government. 

And lastly, Mr. Chairman, if I may be so bold, I will identify a 

third goal, which I know is of high priority to you and other members of the committee. 

The reason I say ''bold" is that this issue is probably the most 

vexing of all those associated with the long-term prospects of putting CAP in a realistic financial condition. I speak of outstanding 

Indian water rights claims, which in my opinion are causing enormous uncertainty, ambiguity, and questions about the long-term 

O&M costs associated with the project. 

Now, I have discussed this issue with Secretary Babbitt, Assistant Secretary Rieke, and have strongly suggested we need attention to this issue in order to rationally approach solutions to allocation, utilization, and costs associated with the CAP resource. 

We plan to do our part by including in our aggressive legislative 

package a plan to create an Office of Indian Settlement Facilitation. I implore you, Mr. Chairman, on behalf of all interested parties in Arizona, to use your influence and apply whatever pressure 

necessary to bring the issue of Indian water rights settlements to 

the forefront as you address issues that impact CAP. 

In closing, your leadership has played an impressive role in restructuring the water projects in California, Utah, and North Dakota in the last several years. It is not lost on members of the Arizona business communities that you will undoubtedly be focusing 

your attention and that of other members of your committee as we 

go about enactment of the recommendations set forth in the Governor's CAP Advisory Committee. 

Again, I want to thank you for your support and interest in our 

committee's work. I would be pleased to answer any questions at 

the appropriate time. 

[EDITOR's NOTE.-See appendix for additional material for the 

record submitted by Mr. DeMichele.] 

Mr. MILLER. Thank you. 

[Prepared statement of Mr. DeMichele follows:] 
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61 

TESTIMONY OF MARK DEMICHELE . CO-CHAIRMAN OF 1HE 

GOVERNOR'S CENTRAL ARIZONA PROJECT ADVISORY COMMilTEE 

FOR 1HE U.S. HOUSE OF REPRESENTATIVES COMMilTEE ON 

NATURAL RESOURCES, SUBCOMMilTEE ON OVERSIGHT AND INVESTIGATIONS 

GEORGE MILLER. CHAIRMAN 

FRIDAY, DECEMBER 10, 1993 

CHAIRMAN MILLER AND DISTINGUISHED MEMBERS OF 1HE SUBCOMMITIEE, 

WELCOME TO ARIZONA. 

I AM PLEASE TO HAVE 1HE OPPORTUNITY TO OFFICIALLY PRESENT 1HE REPORT OF 

OUR RECENTLY COMPLETED GOVERNOR'S CENTRAL ARIZONA PROJECT ADVISORY 

COMMilTEE AND TO DESCRIBE 1HE PROGRESS OF OUR STATE'S EFFORTS TO CRAFT 

A PLAN FOR 1HE OPERATION OF 1HE CENTRAL ARIZONA PROJECT THAT WILL 

ASSURE AN ADEQUATE WATERSUPPLYIN AluzoNAINTOTHE21STCENTURY AND 

BEYOND. MR CHAIRMAN, I REQUEST 1HE GOVERNORS CENTRAL ARIZONA PROJECT 

ADVISORY REPORT BE SUBMITTED INTO 1HE RECORD. 

FOR ARIZONA, SECURING OUR WATER SUPPLY IS OF UTMOST IMPORTANCE. 

QUESTIONS ABOUT 1HE AVAILABILITY OF WATER IN ARIZONA STILL ARISE. 1HESE 

QUESTIONS UNDERMINE OUR EFFORTS TO BRING NEW JOBS TO 1HE STATE. AS 

CHAIRMAN OF 1HE GREATER PHOENIX ECONOMIC COUNCIL. I HAVE HAD 1HE 

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OPPORTUNITY TO PARTICIPATE IN OUT-OF-STATE RECRumNG MEETiNGS. 

INEVITABLY, THE FIRST QUESTION RELATES TO THE AVAILABLE SUPPLY OF WATER 

IN OUR STATE. AS CO-OIAIRMAN OF THE GOVERNOR'S CENTRAL ARIZONA PROJECI' 

ADVISORY COMMITI'EE, I AM COMMITTED TO CREATE STRATEGIES AND 

RECOMMENDATIONS THAT WILL FINALLY ANSWER THOSE OUTSTANDING WATER 

QUESTIONS. 

THE GOVERNOR, THE CAP ADVISORY COMMlTIEE, i.EADERS OF OUR ARIZONA 

LEGISLATURE, THE ARIZONA DEPARTMENT OF WATERRESOl'R.CES AND THE 

CAWCD BOARD MEMBERS, WITH WHOM I HAVE REVIEWED.OUR 

RECOMMENDATIONS, ALL ARE DEDICATED TO THE EFFICIENT AND COST EFFECI'IVE 

OPERATION OF THE CENTRAL ARIZONA PROJECI' AND WE ARE PREPARED TO 

FULFILL OUR OBLIGATION TO R.EPA Y THE UNITED STATES GOVERNMENT. 

IN ORDER TO ACCOMPLISH OUR MISSION TO DEVELOP THE MOST USEFUL REPORT 

AND REALISTIC SET OF RECOMMENDATIONS, MR. OIAIRMAN, YOU WR.L RECALL 

REPRESENTATIVE KARAN ENGLISH. YOU AND I MET TO DISCUSS THE GOALS OF OUR 

COMMJ.TI'EE AND AMBmOUS WORK PLAN WE HAD DESIGNED. 111ROUGH THIS 

TESTIMONY, I WR.L REVIEW OUR COMMI'ITEI! GOALS, AS I DID AT THAT MEETING, 

DESCRJBE THE POLICY ISSUES WE CONSIDERED AND CONCLUDE MY TESTIMONY 

wri1I OUR "ACTION RECOMMENDATIONS." 

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GOVERNOR'S CAJ> ADVISORY COMMITI'J:E PLANNING GOALS: 

OUR CAP ADVISORY COMMITI'EE ADOPTED A SET OF FIVE PLANNING GOALS AND 

OBJECTIVES TO BE USED AS A FRAMEWORK OF DISCUSSION wrnDN OUR 1HREE 

WORKING GROOPS (FINANO;Jl.EGAL, ENVIRONMENT AND INDIAN AFFAIRS) AND TO 

BE USED AS GUIDANCE FOR Tim FUU. CAP ADVISORY COMMITil!E. Tim 

COMMI'I"reE Pl.ANNING GOALS AND OBJECTIV""cS WERE TO: 

(I) 

(2) 

(3) 

(4) 

(S) 

(6) 

PROTECT ARIZONA'S ENTl'n.EMENTOFCOLORADOR.IVER WATER TO 

PROVIDE A SECURE LONG TERM WATER SUPPLY FOR GROWIH AND 

MAINTENANCE, AND TO ENHANCE Tim STATE'S QUALITY OF LIFE. 

ENSURE Tim FINANCIAL !NTEGRITY OF Tim CAP IN A COST· EFFECTIVE WAY. 

IDENTIFY HOW AND TO WHAT EXTENT Tim CAP MAY BE trm..IZED TO 

ENHANCE Tim STATE'S ENVIRONMENT, 

trm..IZING CAP WATER TO Tim EXTENT PRACTICABLE, TO ACHIEVE lHIS 

OBJECTIVE. 

trm..IZE CAP AS A WATER SUPPLY SOURCE TO COMPLETE AND IMPLEMENT 

WATER RIGHTS SETTLEMENTS wmiiNDIAN TRIBES IN ARIZONA. 

trm..IZE CAP WATER TO ACHIEVE WATER MANAGEMENT GOALS IN Tim 

URBAN AND RURAL AREAS OF Tim STATE. WE PLACED PARTICULAR 

EMPHASIS ON PRESERVING Tim STATE'S GROUND WATER MANAGEMENT 

CODE. 

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MR. CHAIRMAN, I RECALL TIIAT YOU AND REPRESENTATIVE ENGLISH MADE IT 

VERY OJ!AR AT THE MEETING, TIIAT IN ORDER TO PRODUCE A CREDIBLE REPORT, 

IT WOULD NEED TO BE, IN FACT IT MUST BE. REFLECTIVE OF THE DIVERSE 

CONSTITIJENCIES INTERESTED IN OUR "WATER FUTURE" IN ARIZONA. 

CONGRESSMAN MILLER, MEMBERS OF THE COMMrrrEE, I AM PLEASED TO REPORT 

TIIAT OUR COMMfiTEE MEMBERSHIP IS CONSISTENT wrrn TIIAT SUGGESTION. 

OUR COMMITI'EE REPORT IS REFLECTIVE OF THE Tf:!OUGHTS OF A DELIBERATELY 

DIVERSE MEMBERSHIP, SOME 34 MEMBERS REPRESENTING ARIZONA AGRICULTURE, 

BUSINESS, LOCAL AND NATIONAL ENVIRONMENTAL INTERESTS, MUNICIPAL 

OFFICIALS PLUS INDIAN AND LEGISLATIVE INTERESTS. MEMBERSHIP ON THE 

COMMITI'EE WAS ALSO GEOGRAPIDCALL Y DIVERSE REPRESENTING THE FAR FLUNG 

ARIZONA COUNTIES OF MARICOPA, PIMA, PINAL, Y A V AP Al AND COCONINO. 

ORIGINALLY, SOME MAY RECALL, THE COMMfiTEE WAS MADE UP OF 29 MEMBERS 

BUT WAS EXPAND ED TO 34 MEMBERS TO INSURE EVEN GREATER REPRESENTATION 

BY INTERESTED PARTIES. IN THE EARLY DECADES OF CAP DEVELOPMENT, URBAN 

AND AGRICUL TIJRAL INTERESTS DOMINA TED THE DEBATE. IN RECENT YEARS 

OTHER CONSTITIJENCIES ARE PLAYING A ROLE IN SHAPING CAP POLICY. IN 

RECOGNTI10N OF TinS CHANGE, GOVERNOR SYMINGTON INCLUDED SEVERAL 

MEMBERS OF THE ENVIRONMENTAL COMMUNITY ON THE ADVISORY COMMITI'EE. 

STRUCTURED THE COMMITI'EE PROCESS TO INCLUDE A SEPARATE ENVIRONMENTAL 

WORKING GROUP. 

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1HROUGHOUT OUR POLICY AND RECOMMENDATION PROCESS WE RECOGNIZED. 

TIIAT USING CAP WATER FOR ENVIRONMENTAL ENHANCEMENT IS A WISE AND 

APPROPRIATE USE OF 1HE RESOURCE. 

COMMITI'EE MEMBERSHIP IS LISTED ON PAGE 32 TO 3~ OF Tim REPORT. SOME 

MEMBERS OF Tim COMMITI'EE HAD SIGNIFICANT EXPERTISE REGARDING 1HE 

PROJECT, WHll.E 01HERS WERE WELL VERSED IN MLIC POLICY ISSUES AND 

BUSINESS MANAGEMENT STRATEGIES WlflCH PROVED TO BE OF GREAT 

ASSISTANCE. I BELIEVE 1HEIR EXPERTISE IS REFLECTED IN 1HE THOUGHT AND 

DETAIL CONTAINED IN 1HE FINAL 'ACTION RECOMMENDATIONS". 

AS IT RELATES TO 1HE SPECIFIC 'ACTION RECOMMENDATIONS,' IT SHOULD BE 

NOTED THAT 1HEY ALL WERE SUPPORTED BY A MAJORITY OF Tim MEMBERS WITH 

MOST 'ACTION RECOMMENDATIONS" BEING APPROVED UNANIMOUSLY. 

Tim WELL ATTENDED PUBLIC AND OPEN COMMITI'EE MEETINGS, Tim STATEWIDE 

PUBLIC INVOLVEMENT PROCESS TIIAT PARALLELED MEETINGS OF Tim FULL 

ADVISORY COMMITI'EE AND 11iREE ACI1VE WORKING GROUPS; FINANCIAULEGAL, 

ENVIRONMENTAL AND 1HE INDIAN ISSUES WORKING GROUP, WERE Tim FORUMS TO 

IDENTIFY OUR COMMON INTERESTS AND SET ASIDE, WHENEVER POSSIBLE, 1HE 

NARROW SELF INTERESTS TIIA T CAN DIVIDE A PROCESS OF TinS MAGNITUDE. 

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ADVISORY COMMITrEE POLICY FORMULATION AND "ACTION 

RECOMMENDATIONS": 

NOW TO TIIE DETAILS OF TIIE SPECIF1C POLICIES FORMULATED AND TIIE 'ACTION 

RECOMMENDATIONS' OF TIIE ADVISORY COMMITICE. 

OUR GOVERNOR'S CAP COMMITIEE EVALUATED A WIDE RANGE OF ISSUES RELATED 

TO STATE AND FEDERAL WATER MANAGEMENT POLICIES AND OBJECTIVES PLUS 

TIIE OPERATION OF TIIE CAP. WE TIIEN ADOPTED "POLICY ISSUES" WinCH FORMED 

TIIE BASIS UPON WinCH WE DEVELOPED AND ADOPTED COMMITIEE ACTION 

RECOMMENDATIONS. THOSE POLICY ISSUES CAN BE FOUND ON PAGES 20-26 OF TIIE 

FINAL REPORT. 

REVIEW OF THE ADVISORY COMMITIEES POLICY ISSUES: 

WE CONCLUDED THAT STATE POLICY SHOULD STRIVE TO PROTECT ARIZONA'S FULL 

COLORADO RIVER ENTITLEMENT TO ASSURE AN ADEQUATE SUPPLY FOR FUTURE 

ECONOMIC GROWTH. 

WE CONCLUDED THAT IN ANYREFORMULATINGOFTIIE CAP, WATER MANAGEMENT 

GOALS OF TIIE ARIZONA GROUND WATER MANAGEMENT ACT SHOULD BE 

INTEGRATED INTO TIIE SOLliTION. 
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OUR NEXT POLICY ISSUE ADDRESSED 1HE ORIGINAL PURPOSE OF 1HE CAP AS A 

REPLACEMENT SUPPLY FOR ARIZONA IRRIGATION. IRRIGATED AGRICULTURE IS THE 

LARGEST USER OF GROUND WATER IN 1HE CENTRAL ARIZONA PROJECT SERVICE 

AREA. ONE OF THE PRO JEerS PRIMARY PURPOSES WAS TO SUPPLY WATER TO THE 

AGRICULTURAL SECTOR. SINCE NO NEW LAND IS ALLOWED TO BE PUT INTO 

AGRICULTURAL PRODUCTION, USING EI1HER GROUND WATER OR CAP WATER. OUR 

ALLOTMENT OF CAP WATER IS INTENDED TO BE A SUBSTITUTE OR A "RESCUE" 

SUPPLY FOR AGRICULTURE, WHICH WILL ALLOW IT TO BE A SUSTAINABLE 

INDUSTRY IN OUR STATE. IF AGRICULTURE CANNOT UTILIZE CAP WATER BECAUSE 

THE COST IS TO IDGH. IT WILL REMAIN ON GROUND WATER. TIDS WILL 

EVEN1UALL Y DEPLETE THE STATE'S GROUND WATER SUPPLY WITIDN CENTRAL 

AND SOUTHERN ARIZONA. FOR POLICY PURPOSES, WE CONCLUDED THAT 

FINANCIAL ASSISTANCE TO IRRIGATION DISTRICTS, THROUGH LOWER CAP COSTS 

AND RESTRUCTURED DISTRIBUTION DEBT SHOULD BE PROVIDED, BUT ONLY TO THE 

EXTENT THERE ARE BENEFITS TO 1HE STATE, INCLUDING THE STATE'S 

ENVIRONMENT AND CAWCD'S OTHER WATER CUSTOMERS. 

THE ADVISORY COMMI1TEE CONCLUDED THAT A REFORMATTED CAP SHOULD USE 

CAP WATER FOR ENVIRONMENTAL ENHANCEMENT PURPOSES. 

OUR POLICY REVIEW CONTINUED BY REEMPHASIZING 1HE IMPORTANCE OF 

RESERVING CAP WATER SUPPLIES FOR FUl1JRE MUNICIPAL AND INDUSTRIAL USE IN 

1HESTATE. 

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TilE POLICY FORMULATION PROCESS PLACED A VERY HIGH LEVEL OF IMPORTANCE 

ON TilE RESOLUTION OF INDIAN WATER RIGHTS CLAlMS WHERE THOSE CLAIMS 

INCLUDE CAP WATER AS A CRITICAL COMPONENT OF TilEIR RESOLUTION. 

TilE FINAL POLICY ISSUE WE REVIEWED RELATED TO USING REVENUE SOURCES, 

OTHER THAN WATER CHARGES, TO LOWER TilE COST OF CAP WATER WE 

CONCLUDED THAT INCREASED POWER REVENUES, CONTINUATION OF CERTAIN 

TIME LIMITED AD V ALORUM TAXES, GROUND WATER wmiDRAW AL FEES, AND 

GENERAL FUND APPROPRIATIONS SHOULD BE REVIEWED. 

CAP ADVISORY COMMITI'EE "ACTION RECOMMENDATIONS" 

NOW TO TilE "ACTION RECOMMENDATIONS" FOUND ON PAGE 27 TO 31 OF TilE 

REPORT I HAVE SUBMITI'ED. TilE FINANCE/ LEGAL COMMITIEE THAT DIVISED OUR 

RECOMMENDED PLAN WAS COMPRISED OF SOME OF TilE BEST FINANCIAL AND 

LEGAL EXPERTS IN OUR REGION. TilEY CREATED A FINANCIAL MODEL AND 

COMPREHENSIVE ANALYSIS THAT WAS INSTRUMENTAL IN PRODUCING TilE FINAL 

RECOMMENDATIONS. THOSE RECOMMENDATIONS, IN SUM, Wll.L ASSURE THAT 

THE STATE OF ARIZONA, THROUGH ITS DESIGNEE, TilE CENTRAL ARIZONA WATER 

CONSERVATION DISTRICT, Wll.L BE ABLE TO MEET ITS FINANCIAL OBLIGATIONS TO 

REPAY THE UNITED STATES GOVERNMENT. TilESE FINANCIAL RECOMMENDATIONS 

ARE FAR REACHING, RANGING FROM A "TARGET PRICING" MECHANISM TO AN 

INCREASED USE OF PRICING INCENTIVES TO CAUSE AN INCREASE IN THE USE OF 

CENTRAL ARIZONA PROJECT WATER 

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THE REPORT CONTAINS A STRONG RECOMMENDATION TIIAT CAWCD AND 1liE 

ARIZONA DEPARTMENT OF WATER. RESOURCES JOINTLY DEVELOP A PROGRAM FOR 

INTRASTATE MARKETING OF CAP WATER AND STUDY TilE FEASIBll..ITY OF 

ARRANGEMENTS IN WHICH CALIFORNIA AND NEVADA TAKE ADVANTAGE OF 

UNUSED ENTITLEMENT AND CANAL CAPACITY TO STORE WATER IN ARIZONA IN 

~CHANGE FOR TilE RIGIIT TO INCREASE COLORADO WATER DIVERSIONS IN TilE 

FTJI'URE. TinS TYP.E OF PROGRAM SHOULD BE BENEFICIAL TO ARIZONA AND TO TilE 

REGION BECAUSE IT WOULD PROVIDE A LONG-TERM SOURCE OF WATER TO A 

NEIGHBORING STATE WITHOUT REDUCING ARIZONA'S COLORADO RIVER 

ENTITLEMENT. THIS STRATEGY WOULD PROVIDE ADDmONAL UTILIZATION OF TilE 

PROJECT, THEREBY REDUCING COSTS FOR ARIZONA CONTRACTORS AND 

SUBCONTRACTORS. 

OTIIER • ACTION RECOMMENDATIONS" RECOGNIZED TIIA T OUTSTANDING INDIAN 

WA 1ER RIGHI'S CLAIMS ARE AN INI'EGRAL PART OF BOTH TilE CAP PROBLEM AND 

ITS SOUJ110N. IT IS IN TilE BEST INTEREST OF TilE INDIAN COMMUNITIES. TilE 

FEDERAL GOVERNMENT AND TilE STATE, TIIAT WE RECOMMEND TilE FEDERAL 

GOVERNMENT MAKE SETTI.EMENT OF OTJI'ST ANDING WATER RIGHI' CI.AlMS IN 

ARIZONA. A TOP PRIORITY. CURRENTI.. Y, WE ARE PREPARING AN AGGRESSIVE 

ARIZONA LEGISLATIVE PACKAGE. TinS PACKAGE IS DESIGNED TO QUICKLY 

IMPU:MENT SEVERAL OF OUR RECOMMENDATIONS. ONE IMPORTANT ELEMENT OF 

THE LEGISLATIVE PACKAGE Will ENABLE ARIZONA TO DO ITS PART IN RESOLVING 

OUTSTANDING INDIAN WATER RIGHI'S CLAIMS BY CREATING AN OFFICE OF INDIAN 

SETil.EMENT FACILITATION. I HAVE ASKED SECRETARY OF tNTERJOR BRUCE 

BABBm AND BETSY RIEKE OF 1liE IN'IEUOR DEPARTMENT TO HaP IN 1liE 
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EFFORT TO RESOLVE OUTSTANDING INDIAN WATER RIGHT CLAIMS. I APPEAL TO 

YOU, CONGRESSMAN MILLER, AND YOUR COLLEAGUES TO HELP RESOLVE THE 

SEVERAL OUJ'STANDING INDIAN CLAIMS THAT STILL REMAIN. 

THE COMMITIEE ADDRESSED ENVIRONMENTAL lSSUES IN THIS STATE AND MADE 

RECOMMENDATIONS THAT, I BEUEVE, PUT OUR STATE IN THE FOREFRONT OF USING 

CAP WATERS TO BENJ;FIT THE ENVIRONMENT, TO BENEFIT NATIJRAL HABITATS AND 

TO ENHANCE OUR STATE'S NATIJRAL RESOURCES." WE CONCLUDED THAT WATER 

ALLOCATIONS OF BETWEEN SO,OOO AND ISO,OOO ACRE FEET BE STUDIED AND 

SERIOUSLY CONSIDERED FOR ENVIRONMENTAL ENHANCEMENT PROJECTS. A 

LARGE AMOUNT OF WATER RESERVED FOR ENVIRONMENTAL ENHANCEMENT 

COULD BE DEDICATED TO THE COLORADO MAINSTEM. A TASK FORCE SHOULD BE 

NAMED TO DISCUSS THE ECONOMIC, ENVIRONMENTAL AND POLmCAL 

CONSEQUENCES OF THE ALLOCATION OF CAP WATER FOR ENVIRONMENTAL 

ENHANCEMENTS WITH APPROPRIATE REPRESENTATIVES OF THE FEDERAL 

GOVERNMENT AND THE COLORADO RIVER BASIN STATES. 

IN 01liER ENVIRONMENTAL RECOMMENDATIONS, WE CONCLUDED THE STATE AND 

CA WCD SHOULD AGGRESSIVELY STUDY THE POTENTIAL BENEFITS FROM 

ENVIRONMENTAL, FISH AND WILDLIFE USE, NOf ONLY TO PRODUCE BENEFITS IN 

TilE FORM OF NATIJRAL RESOURCE ENHANCEMENT BUT ALSO BECAUSE SUCH USES 

MA YPOTENTIALL Y REDUCE REPAYMENT OBUGATIONS ON THE PROJECT. 

TO COMPLETE THE HISTORIC ENVIRONMENTAL PACKAGE, WE CONCLUDED THAT AN 

I 25 ENVIRONMENTAL TRUST FIDID SHOULD BE ESTABLISHED IN ARIZONA. WITH AN 

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AIUZONA ADVISORY BOARD MADE UP OF A CROSS SECOON OF OUll CITIZENS. 

FINAIL Y, AL 11!RNATIVE FUNDING SOURCES SHOULD BE EXPLORED,INCl.UDING, 

AMONG O'IHERS, A SUR· CHARGE ON UNDERGROUND STORAGE AND RECOVERY 

PROJECTS USING CAP WA1Clt 

TaAT. MR.. CHAIRMAN AND MEMBERS OF 1HE COMMITI1!E, IS AN OVERVIEW OF 1HE 

FINAL REPORT AND "ACTION RECOMMENDATIONS" OF 1HE GOVERNOR'S CENTRAL 

ARIZONA PROJECT ADVISORY COMMl'ITEE. WE INfEND TO MOVE FORWARD, IN 1HE 

UPCOMING ARIZONA LEGISLATIVE SESSION IN JANUARY, WI1lf A COMPREHENSIVE 

LEGISLATIVE PACKAGE TIIAT WILL POSmON ARIZONA TO DO OUR. PART TO DEAL 

WI1lf 1HE CHAU.ENGES FACING 1HE CENTRAL ARIZONA PROJECT. I TRUST TIIAT 

AFTER YOUll REVIEW OF TillS MATTER YOU WILL JOIN WI1lf ARIZONA INTERESTS 

TO ASSURE 1HE LONG TERM VIABn.ITY OF 1HE CENTRAL ARIZONA PROJECT. 

1HANK YOU FOR TillS OPPOR.1UNITY. 

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72 

Mr. MILLER. Rita, welcome to the committee, and also publicly, 

thank you for your time and effort that you have spent on this in 

meeting with the committee and committee staff on this issue. 

Ms. PEARSON. Thank you, Mr. Chairman. It has been my pleasure. 

STATEMENT OF RITA P. PEARSON 

Ms. PEARSON. Mr. Chairman, distinguished Members of Arizona's 

congressional delegation, thank you for the opportunity to speak 

here today on behalf of the State of Arizona. My name is Rita Pearson, and I serve as Director of the Department of Water Resources. 

My comments today represent the views of the State and have 

been endorsed by Governor Symington. 

Mr. Chairman, you are going to hear testimony from a number 

of witnesses, and I appreciate the time constraints, so I would like 

to request that my written comments be submitted for the record, 

and I will briefly summarize the key points of my testimony. 

I would like to focus on the overall view of groundwater management policies in the State, because the CAP is an integral part of 

the success in achieving the goals of groundwater managements. 

First, I would like to briefly summarize Arizona's water supply 

situation. Then I would like to talk about the steps the State has 

taken to conserve our precious groundwater supplies. Finally, I 

would like to talk about the crucial role that the water supplies, 

particularly those brought by the CAP into southern Arizona, play 

in our water management goals. 

As you very well know, I am sure after your tour yesterday, Mr. 

Chairman, Arizona is an arid State. We live in a desert. In average 

years, water usage in Arizona is three times the available surface 

water supply. The shortfall is made up by pumping groundwater. 

Arizona's total water demand is in the neighborhood of more than 

6 million acre-feet. 

As a result of the significant overdrafting in certain parts of the 

State, we experienced some dramatic negative environmental consequences. In some places the water tables have been lowered by 

as much as 600 feet. Additional negative consequences include 

earth fissures, migration of contamination, and of course most importantly, reduction in surface water flows as a result of groundwater pumping which impact our riparian habitats across the 

State. 

Because our surface water supplies are limited, it is extremely 

important that we ensure we have adequate supplies for droughts 

and that we ensure the preservation of groundwater for future generations. It is impossible to base a sound economy and a good quality of life on nonrenewable resources. 

To a great extent, Arizona's economy and life-style was established on nonrenewable groundwater supplies, but as early as the 

1940s when we first began talking about the CAP, Arizonans began 

to recognize the need to supplement the supply with surface water. 

We have secured our Colorado River entitlement through United 

States Supreme Court decisions, Federal acts and interstate agreements. We have, of course, 2.8 million acre-feet of Colorado River 

water, of which 1.5 million acre-feet is brought into the central and 

southern parts of our State annually through the CAP. 
73 

In 1980, under the direction of then Governor Bruce Babbitt, Arizona adopted the groundwater management code. The recognition 

then was that the CAP water would be replacing the pumping of 

groundwater. We have done much to ensure that groundwater is 

preserved through conservation policies that are now managed 

through the Department of Water Resources. 

Arizona's ground water management code has been recognized as 

one of the most creative and innovative and comprehensive management codes in the country. It has two primary goals. Again, to 

control the severe overdraft of groundwater in our State, and it 

provides a means to reallocate the water as the changing demands 

for water in Arizona change with growth and development. 

The law focuses on two primary areas of regulation. First, it creates active management areas (AMAs). We are sitting in one right 

now, the Phoenix active management area. There are four in the 

State. Three of them are serviced by the CAP and three of them 

are subject to extensive regulation and they are home to 70 percent 

of the State's population and 80 percent of the State's water usage. 

The AMAs are required to achieve safe yield by the year 2025. 

That means that we have to use no more groundwater than we are 

able to recharge annually to natural and artificial means. In the 

Pinal AMA, the local goal is to extend the life of the economy as 

long as feasible, consistent with the need to preserve future water 

supplies for nonagricultural uses. 

Active management areas are subject to a wide range of regulatory and incentive programs which will result in reduced reliance 

on overdraft groundwater. The foundation of these programs is a 

series of five decade-long management plans which ratchet down 

the available supply of groundwater for all our water users. 

The focus on the management plan is water conservation. But 

another significant component of the code prohibits new farmland 

from coming into production to replace urbanized or retired land. 

And since 1980, between 3,000 and 5,000 acres of farmland has 

been retired annually in Arizona. _Water conservation programs are included for agricultural, municipal and industrial users, and there are many new and very innovative conservation programs being implemented across the 

State and not just in the AMAs. There has been a very high voluntary public acceptance of conservation methods. 

While conservation is a critical management tool, we also have 

to rely on the availability of CAP water. CAP is intending to serve 

as the principal alternative renewable water supply in the AMAs. 

To facilitate the use of CAP water for municipal purposes, the 

State has adopted a promise to promote recharge of groundwater 

that permits the storage of CAP water underground for later recovery. 

The State has also passed laws that establish augmentation authorities which are responsible for recharging CAP and other water 

supplies to offset any groundwater mined by its members. 

The code's success clearly envisions that agriculture will voluntarily convert from groundwater to CAP water and for this reason 

alone the under-utilization of CAP water by the agricultural community is an issue of significant State concern. 
74 

The Central Arizona Project will play a crucial role in achieving 

the goal of preserving the State's groundwater. And while the provisions of that code take us a long way towards safe yield, it would 

be impossible to meet those goals without bringing CAP water into 

the State. 

To place the importance of CAP water in perspective, keep in 

mind that Arizona's CAP water is the biggest renewable water 

source in the State and will provide more water to central Arizona 

than the Salt and Gila Rivers combined. 

The CAP plays a number of vital water management roles. It 

provides a non-groundwater source of supply to meet existing agricultural uses and future development of M&I. It provides new 

sources for settling water claims for the State's Indian communities. It has become recognized as a need to provide water for environmental enhancement purposes. 

Mr. DeMichele has talked about the Advisory Committee's recommendations. I would like to focus on two of them which the 

State has a very direct interest in. The first is a recommendation 

by the committee to expand the recharge demonstration project 

that will be spearheaded by the State, CAWCD, Metropolitan 

Water District, and Nevada. 

Over the last year, 100,000 acre-feet of CAP water has been 

stored in Arizona's aquifers. This program has been recommended 

to be expanded to help assist California and Nevada meet the immediate needs for water. 

While excess Colorado River supplies are available, the groundwater recharge permits Colorado River water to be stored in Arizona for future use by California and Nevada. Recharging excess 

CAP water in Arizona will provide us an ability to rely on stored 

water to improve our Colorado River water entitlement. 

Any solution would have to take into account Arizona's priority 

on the river in times of shortage. By statute, shortages in the three 

lower division States must first be applied to CAP. We are concerned about the reliability of Arizona's future supplies, and sharing the shortages must be addressed in developing a solution in 

California and Nevada's water needs. 

In addition to the recommendations for expanded water banking 

program, the Advisory Committee also recommended the creation 

of an environmental trust fund utilizing water across the State. 

The CAP is, of course, an integral part of any environmental trust 

fund water commitment. 

The State's commitment to environmental enhancement projects 

is well recognized. In 1990 through a citizen initiative there was 

the creation of the Heritage Fund. In 1992, $20 million was committed from State lottery funds for environmental enhancement 

programs that were spent through the Arizona State Parks Department and through the Arizona Game and Fish Commission. The 

Governor's CAP Advisory Committee recommended the creation of 

a trust fund for the maintenance, enhancement, and restoration of 

aquatic wetlands and riparian habitat. 

We have been meeting with environmental groups, water users 

and the public to develop the guts of a proposal which would be introduced in our State legislature next session. 
75 

In closing I would like to say we are optimistic about the future 

of this State to manage its groundwater, to make sure we have a 

secure supply of surface water supplies for generations to come. We 

believe that solutions can be developed within the existing legal 

and institutional framework, and we would like to thank you for 

the opportunity to express the State's position and your support of 

the CAP. 

Thank you, Mr. Chairman. 

Mr. MILLER. Thank you. 

[Prepared statement of Ms. Pearson follows:] 
76 

Testlmoay of 

STATE OF ARIZONA 

DEPARTMENT OF WATER RESOURCFS 

before the 

UNITED STATFS HOUSE COMMI'ITEE ON NAroRAL RESOURCFS · 

SUBCOMMI'ITEE ON OVERSIGHT AND .INVESTIGATIONS 

Honorable Geor&e Miller, Chairman 

Presented by Rita P. Pearson, Director 

DEPARTMENT OF WATER RESOURCFS 

Phoenix, Arizona 

December 10, 1993 

Chainnan Miller, mem~ of the Subcommittee on Oversight and Investigations and 

distinguished memben; of Arizona's Congressional Delegation, thank you forthe opportunity to 

testify on behalf of the State of Arizona. My name is Rita Pearson and I serve as Director of 

the Arizona Department of Water Resources. My comments today represent the views of the 

state and have been endorsed by Governor Symington. 

Mr. Chairman, recognizing the limited amount of time you have today and the number of 

witnesses yet to testify, I would like to request that my written remarks be submitted for the 
77 

record and that I make brief oral remarks touching on the key points of my written testimony. 

It is my pleasure to speak today on behalf of the State of Arizona, a state that bas distinguished 

itself as a leader in the area of water management policies. 

The pu1p0se of my testimony today is twofold. First, I would like to outline for you the sreps 

the state bas taken to conserve our non-renewable groundwater supplies. And second, I would 

like to describe the crucial role renewable surface water supplies carried by the Central Arizona 

Project will play in achieving the goal of preserving the state's groundwater. 

As early as 1980, under the direction of then Governor Bruce Babbitt, Arizona enacted 

innovative and comprehensive legislation designed to preserve the state's limited groundwater 

supplies. This legislation, known as the Groundwater Management Code (Code), has two 

principal goals. First, it strives to control the severe overdraft of groundwater in our state which 

is estimated to be as high as two million acre feet annually. Second, it provides a means to 

allocate the state's limited groundwater resources to most effectively meet the cbanging needs 

of a state that is moving away from agricultural water use towards increased municipal water 

demands. 

To make the case for a stringent groundwater code, one doesn't need to look far. In average 

years, water usage in Arizona is three times the available surface water supply and that rate 

increases dramatically in dry years. The shortfall is made up by pumping groundwater which 

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is not an annually renewable supply. Over-reliance on groundwater is risky. Droughts are a 

fact of life in the desert which is where over 70% of Arizona's population resides. Despite 

times of excessive rain, tree ring studies have shown us that we can count on prolonged periods 

of drought in our state. From an environmental perspective, reliance on groundwater supplies 

has lowered water tables in some areas of the state by as much as 600 feet, causing a number 

of negative consequences including land subsidence and earth fissures, water quality problems, 

and in some areas, a reduction in stream flows with corresponding impacts on riparian habitats. 

Preserving our groundwater supplies to insure that they are available for use in times of drought 

has both economic and environmental benefits. 

The first step towards reducing groundwater withdrawals under the Code was the creation of 

three urban Active Management Areas (AMAs) in the Phoenix, Tucson and Prescott 

metropolitan areas. The management goal for the AMAs is to achieve "safe yield" by the year 

2025, that is, annual groundwater withdrawals may not exceed natural and artificial recharge in 

the AMA. In the Pinal AMA, where a primarily agricultural economy exists, the goal is to 

extend the life of that economy as long as feasible, consistent with the need to preserve future 

water supplies for non-agricultural uses. 

Active Management Areas are subject to a wide range of regulatory and incentive programs 

which will result in reduced reliance on overdrafted groundwater. The foundation of these 

programs is a series of five decade-long management plans which ratchet down the available 

supply of groundwater for all water users. 

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The focus of the management plan in each AMA is water conservation. Conservation programs 

are included for agricultural, municipal and industrial users. Agriculture is currently the largest 

user of groundwater in the AMAs. These management plans establish a water duty for each 

farm which is the per-.acre amount of water it is reasonable to apply in order to grow the crops 

historically grown, assuming the farmer implements conservation practices. Using this standard, 

the second management plan calls for a reduction in water duties of between 15 to 20 percent 

over the next decade. 

If any groundwater is used on a farm in an AMA the Code's conservation limits apply to all the 

water sources used on that farm, including CAP water. This provision guarantees that all water 

resources in the AMAs will be used efficiently. Another significant provision of the 

Groundwater Management Code prohibits new farm land from coming into production to replace 

farm land that has been urbanized or retired. Since 1980, agricultural land in the AMAs has 

been retired at a rate of between three thousand to five thousand acres per year. It is clear that 

this provision will result in reduced groundwater use in the AMAs. 

The Code's management plans also require mandatory conservation from the municipal and 

industrial water use sectors. For municipal providers, gallons per capita per day target lev~ls 

are established. For industrial uses, including golf courses, power plants, mines, feedlots and 

dairies, the plans require the use of the latest commercially available conservation technology. 

Progress in municipal and industrial conservation has been impressive. Many new, innovative 

conservation programs are being implemented and voluntary acceptance by the public has been 

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higb. It is noteworthy tbat tbc conservation message is a permanent one; not simply a response 

to emergency drougbt conditions. Conservation is a way of life in Arizona, this was empbasized 

wben tbe legislature adopted a statewide low volume plumbing fixture code whicb becomes 

effective next month. 

The management plans also include water quality studies, supply augmentation and reuse, and 

conservation assistance. To implement the augmentation anticonservation assistance programs, 

the Department of Water Resources administers a grant program funded by a fee levied on all 

groundwater withdrawals within tbe AMAs. 

Conservation is a critical water management tool but achievement of tbe goal of "safe yield" in 

the Phoenix, Tucson and Prescott AMAs and a reduction in groundwater overdraft in the Pinal 

AMA is directly dependent on the availability of CAP water. It is intended to serve as the 

principal alternative renewable water supply in the AMAs. CAP water will be used in the 

municipal sector for assured water supply purposes to insure that water is of sufficient quality 

and quantity to sustain proposed development for 100 years. 

In order to facilitate the use of CAP water for municipal purposes, the state has adopted a 

program to promote the recharge of groundwater. This program permits the storage of CAP 

water underground for later recovery. Another series of laws establishes augmentation 

authorities responsible for recharging CAP and other water supplies to offset any groundwater 

mined by its members. Agricultural use of CAP water is a key component to achieving the 

5 
81 

state's groundwater management goals. While coDSCrvation and retirement of agricultural land 

will reduce overall water consumption, groundwater withdrawals by agriculture will continue 

to greatly exceed the safe yield of the AMAs. The Code's success clearly envisions agriculture's 

voluntary conversion. from groundwater to CAP water. For this reason alone, the 

underutilization of CAP water Arizona is currently experiencing in the agricultural sector is an 

issue of sigliificant state concern. 

The provisions of the Groundwater Code will take Arizona a long way towards meeting the 

water management goals of the state. However, it would be impossible to meet these goals 

without the fuU utilization of the Central Arizona Project. The CAP plays a number of vital 

water management roles: it provides a non-groundwater source of supply to meet existing 

agricultural uses and future municipal and industrial development; it provides a new source of 

supply for settling the water claims of the state's Indian communities; and, it has become 

recognized as a means to provide water for environmental enhancement purposes. 

One issue before you today is the need for assurance that Arizona can meet the fmancial 

obligations incurred during the development of the Project. In January of this year, Governor 

Symington called together the Governor's Central Arizona Project Advisory Committee to 

address this issue and develop a long·term plan to manage the CAP and protect Arizona's water 

resources in an economically and environmentally sound manner. The Committee's 

comprehensive series of recommendations describe the opportunities afforded to Arizona as we 

tackle the future use and funding of the CAP. Mark DeMichele has described the conclusions 

6 
82 

of tbis Committee iD previous tatimolly. We, u 1 Slate, are DOW wortma with tbe CeDttal 

Arizoaa Wllel" CoalavalioD District (CA WCD) llld tbe Slate JeciJ111we to develop 1lqialatiw 

proposal wbicb iDcJudes tbe rec:om!!!C!IIdatioos oftbe Committee requiriDa lqialatM eaacbDellt. 

A DDmber of tbe Committee's m:om!!!C!IIdariom wCR iDcorpolatcd iDto CAWCD's "tupt 

pricing" plan for CAP water, 1 plan wholly eodorsed by tbe Slate. 

I would like to focus on two particular rec:ommeudation &If tbe Governor's CAP Advisory 

Committee: tbe recommeDdation reprding bankin& of water to assist California llld Nevada iD 

meeting their immediate Deeds for additional water llld tbe recommendation to create an 

Environmental Trost Fund. 

For several years now, Arizona has actively participated iD discussions with California and 

Nevada as well as other Colorado River Basin states on matters related to the allocation and use 

of Colorado River supplies. We are not unlike Nevada in that our demand for water will grow 

into our full Colorado River entitlement. Our projections sbow that future municipal and 

industrial demand, combined with Indian water settlements, will fully utilize our CAP 

entitlement within the Project's repayment period. Nevertheless, we are willing to work with 

our sister states to fmd a mutually beneficial solution to California's and Nevada's immediate 

water needs, keeping in mind that any solution would have to take into account Arizona's 

priority on the River in times of shortage. By statute, sbon.ages in the ~ lower division 

states must fU"st be applied to the CAP. We are concerned about the reliability of Arizona's 

future supplies. Sharing of shortages must be addressed in developing any solution to Nevada's 

7 
83 

and California's needs. 

One solution being discussed is modeled after the curreat demonstration m:barge project jointly 

developed by Arizona, Nevada, the Metropolitan Water District of Southern California and 

CA WCD. When excess Colorado River supplies are available, this grouodwater m:barge 

project permits Colorado River water to be stored in Arizona for future use by Nevada and 

California. 1be Governor's CAP Advisory Committee bas proposed that this concept be 

expanded further. By m:batging excess CAP water in Arizona, we will be able to rely on this 

stored water to improve the reliability of our Colorado River entitlement in shortage periods. 

The State of Arizona is committed to protecting and enhancing our environment. In 1990, the 

state, through a citizen's initiative, established the state Heritage Puod. This fuod is financed 

through a share of the proceeds raised by the state's lottery revenues. In 1992, the Heritage 

Fund provided $20 million for environmental enhancement programs through the Arizona State 

Parks Department and the Arizona Game and Fish Commission. Additional state programs 

dedicated to the protection, preservation and enhancement of the State's natural resources include 

the State Lakes Improvement Fund and the Arizona Statewide Comprehensive Outdoor 

Recreation Plan. 

To complement the Heritage Fund efforts, the Governor's CAP Advisory Committee 

m:ommended the creation of an Environmental Trust Fund for the maintenance, enhancement 

and restoration of aquatic, wetland and riparian habitats. The Department, on behalf of the 

8 
84 

Advisory Committee, bas begun meeting with representatives of the environmental community, 

the water community aod the public to develop a proposal to be introduced in the upcoming 

legislative sessioo. 

The State of Arizona aod the Department of Water Resources are committed to cootinue to lead 

the nation in implementing innovative water management strategies, to strive to use water 

efficiently to maximize the beneficial use of this limited resource, and to enhance and protect 

the environment so important to our Arizona culture. 

In closing let me say that we in Arizona are optimistic. Optimistic about the future of our state 

and optimistic that we are on a course to solve issues related to the Central Arizona Project. 

Solutions can be developed within the existing legal and institutional foundations. 

Mr. Chairman, thank you for the opportunity to express the state's view on the CAP and your 

continuing support of this Project which is so vital to Arizona's future. I would Like to repeat 

the state's commitment to work with Congress, the Bureau of Reclamation and CAWCD to 

ensure the success of the Central Arizona Project. 

9 
85 

Mr. MILLER. Mr. Goddard, welcome to the committee. 

STATEMENT OF SAMUEL GODDARD 

Mr. GoDDARD. Thank you, Mr. Chairman. You have been welcomed by experts before, but I would like to add the welcome of the 

CA WCD to the land of kitty litter and cactus, which as you noted 

yesterday is considerably dry. 

Arizona and CAP in particular have enjoyed a long and mutually 

beneficial working relationship with this congressional committee. 

As a matter of fact, I testified before Wayne Aspinall 26 years ago 

on the same subject. I think the only ancient-as a very young 

man, Congressman Stump was involved in State government then. 

I do thank you for coming here to Arizona so that you can hear 

firsthand about the importance of the Central Arizona Project to 

Arizona, and the support that Central Arizona Project enjoys from 

the State and the constituency, and all the wonderful volunteers 

that have come together to offer their expertise. It's very, very important to you. I am celebrated for the brevity of my statements. 

I am only going to read this so that I can say enough. 

However, I would appreciate your indulgence in accepting it in 

written form from us. 

The most important message I have to relay to you is, and without cluttering it up with all the infinite details that you are forced 

to contend with, but our important message is the Central Arizona 

Water Conservation District can and will meet its obligations 

under its master repayment contract with the United States. 

The first payment, due on January 15, 1994, has already been 

made through an advanced payment credit. As a matter of fact, it 

went over into the second year also. 

We have more than $160 million in unencumbered reserves. 

With the expectation of tax payments, power revenues, and water 

revenues, we believe we can continue to meet our obligations, even 

if we experience more adverse circumstances than one would reasonably expect to occur, which have been delineated carefully before. 

The CAP is an integral part of the State's groundwater conservation and management plan. You will hear more about this issue, 

much more, from other speakers. 

The CAP is not a traditional Reclamation project, as has been 

said, it does not develop new irrigated lands. CAP water can only 

be used to put water on historically irrigated lands. It provides 

only a replacement or substitute supply of water, not an additional 

or supplemental supply. 

Each acre-foot of CAP water that is delivered for agricultural use 

results in an acre-foot reduction of groundwater use. The agricultural CAP allocation is of a lower priority than the municipal, industrial, or Indian allocation. 

The agricultural allocation is for a dwindling amount of water 

that is reduced as M&I and Indian needs grow. The agricultural 

allocation must be for less. These conditions are part of the CAP 

authorization. 

The water supply allocation and the contractual relationship are 

included and are further embodied in the State's Groundwater 

Management Act. There has been much discussion regarding the 
86 

CAP agricultural subcontractors' inability to use and pay for all of 

the CAP water that has been allocated to them. The provision of 

their subcontracts, commonly referred to as the take-or-pay provision, provides they must take the fixed operation and maintenance 

cost associated with all available water, even if the water is not delivered. 

It has been erroneously assumed that the difficulties experienced 

by your agricultural subcontractors mean that the CAP in general, 

and CAWCD in particular, is not financially stable. Nothing could 

be farther from the truth. 

We are in the process of implementing a plan which addresses 

this take-or-pay issue. The plan will relieve irrigation districts of 

the crushing burden and make a partial water supply available at 

costs competitive with groundwater. 

As a result, more CAP water and less groundwater will be used 

by agriculture. 

The overall increase in CAP water use will provide a broader 

base for spreading O&M costs. This results in a lower base cost for 

each class of CAP water use, M&I, agriculture, and Indian, and allows CA WCD to establish five-year target prices for its M&I and 

Indian contractors to assist them in their budget planning process. 

As a further aspect of the plan, CA WCD will use its existing reserves to cushion rate shock to its M&I contractors who are the 

major contributors of tax revenues. While this plan won't solve all 

of the irrigation districts' financial problems, it gives them the 

most certainty of being able to meet their other financial obligations. 

Our intent is to implement this plan by early January and hopefully forestall the financial collapse of the irrigation districts while 

further long-term solutions are developed. In addition, the plan requires the agricultural subcontractors to agree to waive their rights 

to their long-term CAP entitlements, and release that water supply 

to be potentially available for Indian settlements, further M&I use, 

and possibly environmental uses. 

As part of the written record, we have provided additional detail 

regarding our plan. Our plan does not purport to resolve all of the 

issues, but provides immediate relief from critical problems and a 

sound basis for moving forward for all CAP subcontractors. 

The Bureau of Reclamation has just this week responded to 

CAWCD by expressing their desire to move ahead with resolution 

of outstanding issues using the CAWCD plan as a starting point. 

You have heard from GAO here today. While we might put a 

slightly different spin on the report, we have long acknowledged 

the major issues. 

The project cost is unclear, and our repayment obligation is in 

dispute. 

We have been trying for two years to obtain a sound report from 

Reclamation identifying what has been spent and what we are obligated to repay. The United States has indicated a need for substantial amounts of CAP water for Indian settlements, and has been 

unable or unwilling to identify a precise amount. 

Neither are they willing to identify how they intend to pay 

CAWCD, the project operator, while they hold and use that CAP 
87 

water. The GAO report suggests there is uncertainty associated 

with CAP's financial future. The future is uncertain for everybody. 

But a major part of CAP's uncertain future stems from the United States' failure to define project costs and to define the United 

States' role as a customer, beneficiary of the CAP. Our analysis of 

CAWCD's financial health is somewhat different from GAO. We 

have made assumptions that represent a realistic worst case and 

have also evaluated a more realistic, likely scenario. We believe that in either case we will be able to meet our repayment obligations, operate the project, and remain financially sound. 

The plan we have developed has the support of our subcontractors. 

The concerns about Federal expenditures exceeding the repayment obligation or the authorized project ceiling-project cost ceiling are important financial issues for the United States. CAWCD 

does not expect nor want the Bureau of Reclamation to exceed 

these spending limits. We support their efforts to properly identify 

these limits and encourage them to stop incurring construction obligations if necessary. 

If significant activities remain uncompleted, then new arrangements mutually agreeable to all parties can be made to complete 

any necessary activities. You are well aware of the Governor's Advisory Committee on 

CAP issues. They have reported separately to you today. Several 

members of the CAW CD board were committee members. However, 

the board has been entrusted by the voters with the responsibility 

of administering the project, and we take this responsibility very 

seriously. 

The committee made several thoroughly considered recommendations. We are working closely with the Department of Water Resources to develop State legislation as needed to implement these 

recommendations, including the development of an environmental 

trust fund. 

Regarding commitment of some CAP water for environmental 

purposes, the CA WCD has adopted a policy recommending that 

50,000 acre-feet of CAP water be reserved for environmental purposes. In short, the current plans of CA WCD are consistent with 

the committee recommendations. 

Finally, the CAWCD is the entity responsible for repayment and 

for operation and maintenance of the Central Arizona Project. We 

are financially stable, and have sound plans to remain that way as 

the CAP grows into a fully developed project. 

We intend to meet our contractual obligations to the United 

States. We do not intend to seek any congressional legislation to 

relieve us of these obligations. 

Mr. Chairman, I am very proud of the fact that our board is here, 

all of them, even from the far parts of the earth they have come. 

I am very proud to be here with the mayor of my former town who 

made a very eloquent presentation. However, he didn't even mention that magnificent legislation you just passed called NAFTA, which is going to change the dynamics of southern Arizona considerably, and reflect on our water use. 

Thank you very much. 

[Prepared statement of Mr. Goddard follows:] 
88 

CENTRAL ARIZONA PROJECf OVERSIGHT HEARINGS 

DECEMBER 10, 1993 

U.S. HOUSE OF REPRESENTATIVES COMMITIEE ON NATURAL RESOURCES 

STATEMENT BY SAMUEL GODDARD 

PRESIDENT, BOARD OF DIRECfORS 

CENTRAL ARIZONA WATER CONSERVATION DISTRICT 

Let me first take this opportunity to welcome you, Congressman Miller, as Chairman of the 

House Committee on Natural Resources, to our state of Arizm~a. Arizona, and CAP in particular, 

has enjoyed a long and mutually beneficial worlcing relationship with this congressional 

committee, beginning when Wayne Aspinall and later Mo Udall served as chairman of the 

Interior and Insular Affairs Committee. I thank you for coming here to Arizona to hear first hand 

about the importance of CAP to Arizona and the support that the Central Arizona Project enjoys 

in this state. 

The most imp<.:rtant message I have to relay to you is: the Central Arizona Watrc Conservarjon 

District can and will meet its obligations under its Master Repayment Contract with the United 

States. The first payment, due on January !5, 1994, has already been made through an advance 

payment credit. We have more than $160 million in unencumbered reserves. With the 

expectation of tax payments, power revenues, and water revenues, we believe we can continue 

to meet our obligations even if we experience more adverse circumstances than one would 

reasonably expect to occur. 

The CAP is an i!ltegral part of the state's groundwater conservation and management plan. You 

will hear more about this issue from other speakers. 
89 

The CAP is not a traditional Reclamation project. It does not develop new irrigated lands. CAP 

water can only be used to put water on historically irrigated lands. It provides only a 

replacement or substitute supply of water, not an additional or supplemental supply. Each acrefoot of CAP water that is delivered for agricultural use results in an acre-foot reduction of 

groundwater use. The agricultural CAP allocation is of a lower priority than the municipal and 

industrial or.Indian allocation. The agricultural allocation is for a dwindling amount of water that 

is reduced as M&I and Indian needs grow. These conditions-are part of the CAP authorization, 

the water supply allocation, and the contractual relationships, and are further embodied in the 

state's Groundwater Management Act. 

There has been much discussion regarding the CAP agricultural subcontractors' inability to use 

and pay for all of the CAP water that has been allocated to them. A provision of their 

subcontracts commonly referred to as the ''take or pay" provision provides that they must pay the 

fix<:j operation and maintenance cost associated with all available wat,,r even if the water is not 

delivered. It has been erroneously assumed that the difficulties experienced by our agricultural 

subcontractors mean that the CAP in general, and CA WCD in particular, is not fmancially stable. 

Nothing could be further from the truth. We are in the process of implementing a plan which 

addresses this "take or pay" issue. The plan will relieve the irrigation districts of this crushing 

burden and make a partial water supply available at costs competitive with groundwater. As a 

result, more CAP water and less groundwater will be used by agriculture. The overall increase 

in CAP water use will provide a broader base for spreading O&M costs. This results in a lower 

base cost for each class of CAP water use, M&I, agriculture, and Indian, and allows CA WCD 

2 
90 

to establish S-year target prices for its M&l and Indian contractors to assist them in their budget 

planning process. As a further aspect of the plan, CA WCD will use its existing reserves to 

cushion rate shock to its M&l subcontractors who are the major conttibutors of tax revenues. 

While this plan won't solve all of the irrigation distticts' financial problems, it gives them more 

certainty of being able to meet their other financial obligations. Our intent is to implement this 

plan by early January and, hopefully, forestall the financial collapse of the irrigation distticts 

while further long-term solutions are developed. In addition. the plan requires the agricultural 

subcontractors to agree to waive their rights to their long term CAP entitlements and release that 

water supply to be potentially available for Indian settlements, further M&l use and, possibly, 

environmental uses. 

As part of the written record, we have provided additional detail regarding our plan. Our plan 

does not purpon to resolve all of the issues but provides immediate relief from critical problems 

and a sound basis for moving forward for all CAP subcontractors. The Bureau of Reclamation 

has, just this week, responded to CA WCD by expressing their desire to move ahead with 

resolution of outstanding issues using the CA WCD plan as the starting poinL 

You have heard from GAO here today. While we might put a slightly different spin on the 

repon, we have long acknowledged the major issues. The project cost is unclear and our 

repayment obligation is in dispute. We have been trYing for two years to obtain a sound repon 

from Reclamation identifying what has been spent and what we are obligated to repay. The 

United States has indicated a need for substantial amounts of CAP water for Indian settlements 

3 
91 

but has been unable or unwilling to identify a precise amount. Neither are they willing to 

identify how they intend to pay CA WCD, the project operator, while they hold and use that CAP 

water. The GAO report suggests there is uncertainty associated with CAP's financial future. The 

future is uncertain for all of us. Bot a major part of CAP's uncertain future stems from the 

United States' failure to define project costs and to defme the United States' role as a 

customer/beneficiary of the CAP. 

Our analysis of CA WCD's fmancial health is somewhat different from GAO. We have made 

assumptions that represent a realistic "worst case" and have also evaluated a more realistic "likely 

scenario". We believe that in either case we will be able to meet our repayment obligations, 

operate the project, and remain fmancially sound. The plan we have developed has the 

unanimous support of our subcontractors. 

The concerns about federal expenditures exceeding the repayment obligation or the authori7.ed 

project cost ceiling are important fmancial issues for the United States. CA WCD does not expect 

nor want the Bureau of Reclamation to exceed these spending limits. We support their efforts 

to properly identify these limits and encourage them to stop incurring construction obligations 

if necessary. If significant activities remain uncompleted, then new arrangements, mutually 

agreeable to all parties, can be made to complete any necessary activities. 

You are well aware of the Governors Advisory Committee on CAP issues. They have reported 

separately to you today. Several members of the CA WCD Board were committee members. 

4 
92 

However, the Board has been entrusted by the voters with the responsibility of administering the 

project and we take this responsibility very seriously. The committee made several thoroughly 

considered recommendations. We are working closely with the Department of Water Resources 

to develop state legislation as needed to implement these recommendations, including the 

development of an Environmental Trust Fund. Regarding commitment of some CAP water for 

environmental purposes. the CA WCD Board has adopted a policy recommending that 50,000 

acre-feet of CAP water be reserved for environmental purpo;es. In short, the current plans of 

CA WCD are consistent with the committee recommendations. 

Finally, the CAWCD is the entity responsible for repayment and for operation and maintenance 

of the Central Arizona Project. We are financially stable and have sound plans to remain that 

way as the CAP grows into a fully developed project. We fully intend to meet our contractual 

obligations to the United States. We do not intend to seek any congressional legislation to 

relieve us of these obligations. 

GOOOARD.STM 

s 
93 

CENTRAL ARIZONA WATER CONSERVATION DISTRICT 

CENTRAL ARIZONA PROJECT RESTRUCTURING PROGRAM 

The Central Arizona Water Conservation District's 

("CAWCD") central Arizona Project ("CAP") repayment adjustment 

program was described in a memorandum to the Board of Directors 

from its General Manager dated October 7, 1993. ~ Exhibit 1. It 

was approved by the Board that same day. However, it took many 

months of public study and discussion to develop, and was preceded 

by similar studies and discussions undertaken by the Governor's 

Central Arizona Project Advisory Committee. That Committee reached 

essentially the same conclusions and made essentially the same 

recommendations as CAWCD. Representatives of the United States 

Bureau of Reclamation have been included in these discussions from 

the beginning. 

CAWCD's restructuring program deals first with the 

inability of the CAP agricultural irrigation districts to pay the 

operation, maintenance and replacement ("OM&R") charges due to 

CAWCD under their existing CAP subcontracts. (As of November 1, 

1993, these districts were about $1.7 million in arrears in the 

payment of these charges. only one district had paid the charges 

due and ordered any CAP water from CAWCD.) CAWCD has offered the 

defaulting districts the opportunity to avoid these OM&R charges 

if, but only if, they waive their rights to receive delivery of CAP 

water under their long-term CAP subcontracts. CAWCD would then 

agree to sell such districts excess CAP water on a short-term basis 

at rates to be determined by the Board, subject to the availability 
94 

of excess CAP water in each year after first providinq for the 

d~iv..ry of CAP water to Indian contractq,rs ~nd municipal and 

industrial ("M&I") subcontractors of lonq•term CAP water service 

and those aqricu.ltural subcontractors who retain a riqht to receive 

delivery of CAP water under their lonq-term subcontracts. CAWCO 

does not .view this as an amendment of the CAP subcontracts, but as 

a mutual waiver of certain riqhts under those subcontracts by the 

real parties in interest. The practical effect of this action 

should be to increase aqricultural use of CAP water and thereby 

reduce costs for all CAP water users while conservinq Arizona's 

qroundwater supplies. We have asked the aqricultural irriqation 

districts to state their intentions with respect to their existinq 

subcontracts by January 1, 1994. 

As a practical matter, CAWCO was faced with virtually no 

alternative to the action it chose to take. The Bureau of 

Reclamation declared the CAP water supply system complete on 

.October 1, 1993. This initiates CAWCO's obliqation to repay the 

construction costs of the system and requires CAWCO to spend 

current revenues to meet the non-enerqy OM&R costs of the system 

(the "fixed OM&R costs") • Non-Indian aqricultural subcontractors 

of CAP water service (and the United States with respect to 

aqricultural water reserved by the Secretary of the Interior for 

federal purposes) are obliqated to pay the fixed OM&R costs 

associated with approximately 1.125 million acre-feet of CAP water 

annually. These obliqations also beqan on october 1, 1993, with 

- 2 -
95 

issuance by Reclamation of notice of completion of the water supply 

system. As of November 1, 1993, only one agricultural 

subcontractor, Hohokam Irrigation District, had scheduled CAP water 

tor delivery and paid CAWCD's OM&R bills. (The United States is 

over $1.4 million in arrears in the payment of such bills.) 

Testimony before the CAWCD Board and elsewhere indicated 

that it would be futile for CAWCD to attempt to recover the fixed 

OM&R charges due from its defaulting agricultural subcontractors by 

filing lawsuits or other enforcement proceedings. It became clear 

that the most likely effect of such efforts would be to drive our 

subcontracting irrigation districts or their constituent farmers 

into bankruptcy without CAWCD's recovering any significant OM&R 

revenues. 

The Board of Directors of CAWCD was compelled to find a 

solution to the immediate need to fund CAP OM&R costs, restructure 

the obligations of its agricultural subcontractors and encourage 

CAP water use. The Board's action does these things, and it does 

them in a way which dramatically reduces OM&R costs for the 

remaining Indian and MU: users of CAP water supplies. CAW CD 

intends to sell excess CAP water to its agricultural subcontractors 

on a short-term basis at rates which are competitive with their 

alternative costs of pumping groundwater. These rates are 

described in the attached (~ Exhibits 1 and 2) ~nd are designed 

to encourage CAP water use. In 1994, the rates will be $17 per 

- 3 -
96 

acre-foot for the first 200,000 acre-feet of aqricultural water 

sold and $27 per acre-foot for the next 200,000 acre-feat of water 

sold. Any water sold in amounts above 400,000 acre-feet will be 

sold at rates which equal at least the pumpinq enerqy costs. The 

reduced rates for aqricultural CAP water service will be made 

available only to CAP aqricultural irriqation districts who made a 

substantial investment in a CAP distribution system or made an 

early contractual commitment to CAP. 

The difference between the costs of aqricultural CAP 

water service and the rates to be charqed by CAWCD for such water 

service will be funded out of CAWCD's existinq reserves. However, 

this difference will be recovered from the interest savinqs 

realized on CAWCD's construction cost repayment obliqation. Under 

lonq-standinq Federal Reclamation law and CAWCD's Repayment 

Contract with the United states, project capital costs allocated to 

the delivery of aqricultural water supplies are repaid without 

interest. In contrast, project capital costs associated with the 

delivery of water for M'I purposes bear interest at the rate of 

3. 342 percent per annum. The more aqricultural water that is 

delivered, the lass interest that is due. If water deliveries to 

aqriculture were to reach the levels oriqinally anticipated (about 

650,000 acre-feat par year over the 55-year repayment period for 

project facilities), CAWCD's annual payment to the United states 

would have averaqad about $48 million per year on a $1.84 billion 

repayment obliqation. If no aqricultural water were delivered, the 

- 4 -
97 

annual payment due from CAWCD would average about $67 million per 

year. Under CAWCD's program for marketing agricultural water, 

deliveries to agriculture are anticipated to average about 240,000 

acre-feet annually, and the annual payment due from CAWCD is 

anticipated to average about $56 million. If agricultural were to 

go out of the business of using CAP water altogether, the United 

States would receive additional revenues from CAWCD in the form of 

increased interest payments, but if agriculture had used as much 

CAP water as was originally anticipated, the total revenues to the 

United states would have been far less than what is anticipated 

under CAWCD's restructuring program. 

In addition, by encouraging agricultural water use, the 

program should have the effect of conserving Arizona's groundwater 

supplies. This has been a central goal of the CAWCD Board and the 

Governor's CAP Advisory Committee. It is also one of the principal 

purposes of the Central Arizona Project as revealed in the Colorado 

River Basin Project Act of 1968 and its legislative history. 

CAWCO's program will also have the effect of reducing OM&R costs to 

the remaining Indian and M&I users of CAP water supplies. The 

reason is that, as more water is delivered to more users, the total 

CAP OM&R costs are spread more broadly and the OM&R charges to 

individual users are reduced. This is illustrated in the attached 

example calculation of CAP water costs which uses projections for 

the year 1995 as an example. ~ Exhibit 3. The example shows 

that, without the delivery of agricultural water, the fixed OM&R 

- 5 -
98 

costa of deliverinq CAP water to the remaininq Indian and M&I users 

would be about $85 per acre-foot of water delivered. If we deliver 

400,000 acre-feet of CAP water to agricultural water users, which 

is the qoal of CAWCD's proqram, the fixed OM&R costa or delivarinq 

CAP water to the remaininq Indian and M&I users are reduced to 

about $40 per acre-foot of water delivered. 

At the request of our M&I subeon~ractors, CAWCD has also 

chosen to use its existinq financial reserves to further reduce the 

costs of water delivery to its M&I subcontractors by buyinq those 

costs down even more for some period of time. The purpose of this 

was aqain to encouraqe CAP water use and also to reduce rate shock 

to M&I users while providinq some deqree of rate certainty to both 

M&I and Indian water users for purposes of future planning. CAWCD 

did not feel that it was appropriate to devote its existing tax 

reserves to reducing the costs of water service to Indian 

communities below what was otherwise achieved as a result of 

CAWCD's facilitatinq increased agricultural water use. We believe 

that, if such reductions are necessary, they are properly the 

responsibility of the United States. 

The above is an effort to summarize some of the elements 

of CAWCD's proqram. The proqram is simple in concept, but somewhat 

complex in its details. We would be happy to answer questions or 

to provide additional information. 

prapoul. pro12!7 /93 

- 6 -
99 

Central Arizona Water Conservation District 

MEMO 

DATE: October 7, 1993 

TO: Board of Directors 

FROM: Tom Clark 

SUBJECT: Proposed Program for Repayment Adjustment 

A month ago staff provided a preliminary proposal regarding 

initiation of altered arrangements for the repayment of CAWCD's CAP 

debt and establishment of water rates,to assist in payment of 

operation and maintenance costs. Ten days ago we offered a revised 

version of the initial proposal, and with this memorandum offer a 

third version reflecting further evolution of the original 

proposal. This version reflects our consideration of the comments 

offered at the public meetings of the Board and is presented with 

the recommendation that the Board of Directors adopt .this proposal as the foundation of the CAWCD repayment program and the basis for 

establishing O'M charges. 

The program contains two major elements: l) it protects the 

interest-free designation of a major portion of the CAP cos::s allocated to water supply by encouraging agricultural use of CAP 

water by making such water available to agricultural users at prices which are less than cost, and 2) it minimizes rate shock and 

uncertainty for M&I users by establishing a forward pricing policy 

predicated on utilizing interest savings and CAWCD reserves toward 

these ends. 

The above elements are the same as those presented to you in the 

previous two proposals. As in the last proposal, the plan does not 

utilize additional taxing authority, it avoids direct assumption of 

irrigation district debt by CAWCD, and it is consistent with Board 

indications about the levels of reserves deemed desirable. 

Implicit in this proposal as with the previous proposals is the 

necessity to maintain the pricing program as it would initially be 

structured. 

Primary differences are in the forward pricing schedules and in the 

priorities in the agricultural program. The supported prices in 

the agricultural water are somewhat higher, and the M&I prices have 

been altered to provide additional sho::-t-term control on rate 

shock. Additionally, priorities have been rearranged so that 

within the group of agricultural users who are not taking water 

under the terms of now existing subcontracts, the lower-priced 

water will have a second priority rather than a first priority. 
100 

Staff recommends that the CA~CD Board of Directors formally adopt 

the following outline as the conceptual basis for restructuring 

the CAP repayment process. 

1. Each .agricultural subcontractor would be given the 

opportunity to terminate or amend its CAP subcontract to 

reduce its percentage ,ntitlement to CAP agricultural water. 

The reduced entitlement would apply to both annual 

agricultural deliveries and conversions to M&I use. No other 

variances would be offered. A cutoff date of' January 1, 1994, 

would be established for subcontractors to request a change in 

their contract provisions or status. • 

2. The Arizona Department of Water Resources would be asked 

to finalize prior to December 1, 1993, recommendations for 

reallocation or utilization of all CAP water for which no contract or subcontract has been signed. 

3. The Secretary of the Interior would be asked to finalize 

CAP allocations including identification of the amount of CAP 

water which the United States wishes to reserve. The 

Secretary will be expected to commit to participating in all 

costs of using or reserving that amount of CAP water. If the 

Secretary elects not to expedite final allocation, CAWCD will assume than any water which is not under contract has been 

reserved by the Secretary in accordance with his previous 

declarations. CAWCD will expect the CAP cost allocation to 

reflect capital cost assignments to appropriate non- reimbursable tunctio~s associated with the Se~retary•s 

declarations and will establish OM&R charges on the basis of 

the Secretary retaining effective control of the water. CAWCD 

will, in effect, proceed under the provisions of the master 

repayment contract. 

4. All entitlements to CAP agricultural water supplies 

retained by CAP subcontractors or the Secretary of the 

Interior will be subject to a take-or-pay obligation for fixed 

OM&R costs. 

s. CAWCD will create and maintain a new sales process, or market, for CAP agricultural water. Pricing in this market 

will be controlled in a manner to produce the water use, revenue streams and cost savings required by the plan. A 

major assumption is that CAWCD currently has the authority and 

the contractual right to take control of and manage an agricultural pool as suggested. The validity of that 

assumption will be proved or disproved early in the process 

should the proposal be adopted. 

pesignetions and Conditions. The overall agricultural pool 

2 
101 

will be divided into two major categories: 

Category A. This will be agricultural water delivered 

pursuant to existing contracts or s1occontracts which have been 

modified onl~· in respect to the percentage entitlement ot the 

subcontractor. Subcontractors will be required to pay fixed 

OM&R charges on all water available for delivery under their 

subcontracts based on a deliverable water supply ot 1,425,000 

acre-teet minus, in each year, any shortages declared by the 

Secr.etary of the Interior and the amount ot M&I and Indian 

water scheduled for delivery. 

Category B. This will be agricultural water sold and 

delivered without benefit ot a long-term agricultural water 

service subcontract. This category will consist ot three 

pools. 

Pool 1. Pool 1 will consist of 200,000 acre-feet with a lesser priority than Category A water. It will be 

available through calendar year 1999 at established 

prices reflected in Table I ($27 to $32 per acre-foot). 

The schedule ot prices shown in Table I for the years 

2000 through 2011 are estimates only. The CAWCD Board of 

Directors will review forward prices annually and set a tirm schedule tor the succeeding five years. Scheduled 

prices will not be guaranteed but will reflect the 

considered goals and the intent ot the; Board. The 

information available about the CAP water supply suggests 

that Pool 1 water will be available tor most ot the 

repayment period in the full amount designated for the 

pool. Any c :.tity which executed a CAP subcontract and 

returned that executed contract to the United States 

prior to October 1, 1993, and which is otherwise eligible 

to receive agricultural water service will be eligible to 

purchase Pool 1 water. In case ot oversubscription, 

entities will be prorated a portion ot the 200,000 acre- teet based on eligible acres associated with original CAP 

subcontracts. 

Pool 2. Pool 2 will consist ot 200,000 acre-feet with a lesser priority than Pool l. It will be available 

through year 1999 at established prices reflected in 

Table 1 ($17 to $22 per acre-toot). The CAWCD Board of 

Directors will review forward pricing annually and set a firm schedule for the succeeding five years. Scheduled 

prices and water amounts will not be guaranteed but will 

reflect the considered goals and the intent ot the Board. 

The information available about the CAP water supply 

suggests that the availability of Pool 2 water will 

diminish significantly with time. This condition and the 

intent to curtail the life of this emergency program are reflected in the termination ot the pool at the end of 

3 
102 

the year 2003. Participation in this pool will be limited 

to those CAP subcontractors who relinquish all or a part 

ot their validated water service subcontracts between 

October 7, 1993, and January 1, 1994. In case ot 

oversubscription, entities will be prorated a portion of 

the 200,000 acre-teet based on eligible acres associated 

with the original CAP subcontracts. Any portion of the 

pool which is not sold to those eligible to purchase Pool 

2 water in any year shall be made available first to Pool 

1 until exhausted and then t~ Pool 3. 

Pool 3. Pool 3 will consist of any agricultural water 

remaining after sales from Pool$ 1 and 2. It will be 

available as the project water supply permits through the 

year 2010 unless the Board of Directors determines that 

this agricultural incentive program is no longer beneficial to the District. Pool 3 water will be priced no less than pumping energy costs plus a capital charge 

to be determined each year. Entities otherwise eligible 

to receive CAP water service (without reference to a validated ·CAP water service subcontract) will be eligible 

to buy pool 3 water. 

6. In order to facilitate M&I water supply planning, the combined water rate charged the' M&I subcontractors 

will be established by the CAWCD Board ot Directors 

through the year 1999. 'l'he CAWCD Board of Directors will 

review forward prices annually and set a schedule for the 

succeeding five years. 'l'o the extent that annual charges did not cover annual payments required, the shortfall wou!~ ~e made up from CAWCD reserve funds. 

7. All water not covered by contract, subcontract, or reservation by the United states will accrue to CAWCD to sell 

through a market facilitated by CAWCD, to utilize in meeting 

its groundwater replenishment district responsibilities, or to 

otherwise sell or manage in consultation with ADWR. 

8. Spot market sales to Arizona users other than non-Indian 

agricultural users will be on the same cost basis as CAWCD 

will identify for use in pricing CAP water used for 

replenishment district purposes. Specific prices tor 

individual users could vary as determined on a case-by-case 

basis by the Board of Directors. 

9. CAWCD will not directly assume or be a principal in the 

restructuring of the private or public debt of the 

subcontractors. 

IOARD.UTMTADJ 

4 
103 

t 

< 

a: 

c 
Year 

1994 

,ggs 

1996 

1987 

lt9B 

-!!!L 

2000 

2001 

2002 

2003 

2004 

2005 

2006 

2007 

2008 

_]E£.9. 

2010 

2011 

2046 

NPV· 

1994·201, 

NPV· 

1994·2046 

~ 

104 

Alternative 9 

CAWCD Repayment Obligation and Savings 

With 3-Tier Ag Pricing 

Potenlial Proposal ResuiLS 

CAWCO COSIIO CoSIIO Meal 

Repayment CAWCO Aepaymonl O.liverlo Con1r1e1 

Obfivation A9 Aepaymonl Sovi"9S Over A9 11 Lo-r Obligolions 

wilh NoAg Deliveries Ol>ligolion Zero A9 Price lo Indians 

($1000) (KAF) ($1000) ($1000) ($1000) ($1000) 

0 dO goo !900! 5,500 1,725 

46,133 ~00 32,684 13,449 5,488 3.375 

54,211 400 " .279 10,009 5.382 2.300 

63.n9 400 52.805 10,974 5.281 3,450 

76.893 400 62,970 13,922 ·5,187 3.450 

~.!_ 400 G2.395 13.896 5"Di9 4,200 

75,690 400 61 .821 13,669 5.017 4,050 

78.868 400 65,026 13,642 4,941 uoo 

78.266 400 64,451 13,815 4,872 3,675 

n .SJt 400 63,750 13,78t 4,80t 3,600 

78,431 200 64.669 13.762 1,377 2.250 

77,703 200 6U68 13,735 1,352 3,7t7 

7U21 200 63,199 13,722 1,:!31 3,849 

76,139 200 62,430 13,70t 1,314 3,847 

7V,137 200 65,412 13,6t5 1,300 3.973 

78,355 200 84.673 13.662 1.290 4,072 

77,446 200 63,778 13,668 1,284 4,145 

78,158 200 64.503 13.655 1.282 4,411 

15.555 200 14.UO 575 575 . 7,601 

686.633 560.629 126.004 42.011 35.878 

1.C23.560 !38.471 185.083 4t.459 61,132 

Remaining 

Repaymonl 

Savings 

($1000) 

!8.125! 

4,586 

1.328 

2.243 

5,285 

4.597 

4,602 

5,001 

5,269 

5,379 

10,135 

8,585 

8,542 

8,547 

• 8,422 

8.319 

8,239 

7,962 

17.601 

47.115 

74,492 

200 KA.Ff'frwil be delivered 10 eg from year 2012 tvou;h C"'e end of the re;a~yrnent period under this ahemat!ve. 

Tolal ,..,~, ... * pro;.a cost il $1.1 bilion. 

DRAFT 

21 perc;.et'll or the 101.1! reimWube. P"'jecl c:osr is aloclaed ao ..,.,.,.. 

Net ptesent velue calcullle'Cf wi1h M iru11111t ,.. of &.35%. 

CAWCO will c:omp&t11 repiymenl of 1M proftCI ir. 2041. 

Pool t wa1er pri;ed at $271~. Pool Zit St7JAF, and PooJ 3 al S.C11AF in 18$.C, escalated $1/yearthrou;h 201 t and 

~~ytar after 2011. 

CAWCO • 1011 /93 
105 

Ex hibit 2 

WORKING PAPER 

USE OF AG WATER IN POOLS ESTABLISHED UNDER 

CAWCD'S PROGRAM FOR REPAYMENT ADJUSTMENT 

(Adopted by the Board o! Director• at ita 

October 7, 1993 meeting) 

The percent of participation by each agricultural irrigation 

district in pools 1 and 2 is arrived at by identifying the original 

CAP eligible a.cres for each district as d~clared by the Bureau of 

Reclamation, minus the amcunt that would have been delivered to 

eligible acres in the district • s service area that have been 

converted to M&I use or have otherwise been removed from irrigation 

as determined by the Bureau. Each district • s eligible acres is 

then divided by the sum of all districts' acres participating in 

each pool, and it is that percentage when multiplied by the amount 

of water in each pool (200,000 acre-feet) that gives the maximum 

amount of water that is available to each district from each pool 

(see Table 1). 

Each district that relinquishes all or a part of its original 

O::'!titlement between October 7, 1993 and Januar.:r' 1, 1994, may 

participate in pool 2, and each district that executed a CAP 

subcontract prior to October 1, 1993, may participate in pool l up 

to its full percentage per each pool as identified in Table 1. 

There are 10 districts that qualify for participation in pool l and 

seven districts that qualify for participation in pool 2. It is 

expected that those districts which may draw from both pool 1 and 

pool 2 will draw first from pool 2. If a district in pool 2 does 

not take its full supply, then any remaining amount will be made 

available to the remaining districts in pool 2 based on the 

percent~ge of their eligible acres to the sum of the remaining 

districts' acres . 

If· a district in pool 1 does not take all of its percentage 

allocated to it, then that amount will be made available to the 
106 

remaining districts in pool 1 based on the percentage of their 

eligible acres to the sum of the remaining districts' acres. 

If all water of pool 2 is not allocated to pool 2 participants, it 

will be made available to pool 1 participants at pool 1 prices. 

If, after all requests are met for pool 1 participants, water is 

still available under pool 1, then that water will be made 

available to agricultural nonsubcontractors at a price to be set by 

the Board in that calendar yesr. If the commitment is to sell 

400,000 acre-feet of aq water and if the~articipants in pools 1 

and 2 took only 350,000 acre-feet of water in any year, the Board 

may want to consider selling the remaining 50,000 acre-feet at pool 

1 prices or, if demand would be sufficient, to sell the 50,000 

acre-feet at pool 3 prices. 
I 

I 

Original CAP 

Subcontracl Eligible 

Entity Percentage Acreage' 

San Tan o.n•t. 2,942 

Queen Creek 4.83% 20,640 

CHCIO 0.28% 1,204 

Tonopah 1.98% 3,490 

CAIOO 18.01% 87,889 

NMIDD 4.34"/o 27,322 

MSIDD 20.48% 86,089 

RWCO 5.98% 23,933 

HVIDD 7.67% 33,102 

HoHoKam 6.36% 28,191 

Total 70.70% 314,802 

Table 1 

CAP Agricultural Water Supply Av

Under Restructured Plan 

Pool1 ($27/AF) 

Acreage Supply from A

Eligible for Percentage This Pool E

This Pool Of Pool (AF) T

2,942 0.93% t,869 

20,640 6.56% 13,1t3 

1,204 0.38% 765 

3,490 1.11% 2,217 

87,889 27.92% 55,838 

27,322 8.68% 17,358 

86,089 27.35% 54,694 

23,933 7.60% 15,205 

33,102 10.52% 21,030 

28,191 8.96% 17,910 

314,802 100.00% 200,000 

• Based on records from the U.S. Bureau of Recfamalion 
108 

Exh ibit 3 

Ex:amplc of C:llcul:at ion of CAP W:otcr Cosl~ 

Usin: 1995 from Alltrll21i•·•' 

Z rru A" Ut;li'·n;jrs 

Totol Fixed OMkR CO<U $33,696,000 A 

ToL>I Avail<lblc W;ucr Supply (AF) 1,41S,CXlO B 

Fixed OM&R. Cost pet Available AF IA+B} S23.SI c 

M&l Deli-its (AF) 289.437 0 

lndi:ln Dc:livmcs <AFJ 75,(100 E 

Available Ac Supply (AF) IB- CO+ Ell 1,050.563 F 

NIA Allocatians on Which Take-or-Pay 

Chorges ate Paid (AF) (II-. • F) 115.562 0 

Takc-<>r-Pay OM&R. P•ymc:nu on 

on Undelivered W>Jer (0 •CJ $2,751,926 H 

Romoinin& Fixed OM&:R Cosu to be: 

Di<uibuted Arnone Delivered Water (A - HJ $30,944,074 

Fixed OM&R a..rcc pet Delivered AF (l+(D+E)) $84.91 

A<.<unlcd FJlCfCY 0wEC pet Delivered AF $36.72 K 

To~l Cost pet Delivered A? [J +KJ Sl21.63 L 

A(sumtd IDRDSII Ba11b:s 

To1a! Fixed OM&R Casu $33,696,000 M 

Toul Available Water Supply (AF) l ,·US,():JO N 

Fixed OM&R. Cost pct Available AF [M+N) $23.81 0 

M&:l Deliveries (AF) 289,437 p 

Indian Delivaies (AF) 75,000 Q 

Available Ac Supply (AF) [N- (P +Qll 1.050.563 ·R 

Non-Indian Ac Delivaies (AF) 400,000 s 

NIA Allocations on Which Toke-or-Pay 

Charces arc Paid (AF) [11-. • R) 115,562 T 

Talce-<>r-Pay OM&R. Paymcn&S on 

on Unddival:d Wa&er rr•oJ $2,751 .926 u 

Re.moini"' Fixed OM&R Com to be 

Disuibutcd Amonc Delivered WIIICf [M-UJ $30,944,074 v 

Fixed OM&R. C1w;c pet Delivered AF [V+(P+Q+S)) $40.48 w 

As<umed Enercy Chatlc pct Delivered AF S36.72 X 

Toto! CoSt per Delivered AP [W+X) sn.2o y 

DRAFT CAWCO- 1 Ol&og3 
109 

Mr. MILLER. You probably recognized how I voted on it. We will 

give credit to the delegation here who worked very hard on it. 

Thank you very much for your testimony, all of you. I will yield 

to Congressman Pastor. 

Mr. PASTOR. Mr. Chairman, I made a commitment long before I 

knew about the hearing. A number of you talked about legislation 

to be introduced in the State legislature. Is that legislation going 

to deal with potential revenue sources for the CA WCD? Is that legislation going to help out with the problem of future revenues? 

Mr. DEMICHELE. If I may, Congressman Pastor, there are four 

components of that legislative package, one of which deals with the 

extension of an ad valorem tax, which is due to expire in 1995. 

That current tax is for demonstration projects on the ground, recharge demonstration projects. 

The recommendation of our committee is that that tax be extended and be made permanent, number one; second, be extended 

to Pinal County, and third, go into the general coffers of CAWCD 

to be used for repayment of this obligation to the Federal Government. 

The other three components of that legislative package are the 

environmental trust fund, which I referred to a moment ago, the 

Office of Indian Settlements, and also funding for habitat studies. 

There are other resolutions, but those are the major action items 

that are a part of that legislative package. 

Mr. PASTOR. Thank you. 

Thank you, Mr. Chairman, for yielding. 

Mr. GoDDARD. Mr. Pastor, it is important, my remarks about our 

financial sufficiency are not affected by our request to extend the 

tax. 

Mr. PASTOR. Okay. 

Thank you, Mr. Chairman. 

Mr. MILLER. Thank you. 

Let me, if I might, Mr. Goddard, in your statement on the first 

page you say, ''The most important message I have to relay to you 

is this: The Central Arizona Water Conservation District can and 

will meet its obligations under the Master Repayment Contract 

with the United States. The first payment, due on January 15, 

1994, has already been made through an advance payment credit. 

We have more than $160 million in unencumbered reserves. With 

the expectation of tax payments, power revenues, and water revenues, we believe we can continue to meet our obligations even if 

we experience more adverse circumstances than one might reasonably expect to occur." 

Let me ask you: In anticipation of the Water Conservation District being able to meet its obligations-which, as you point out, is 

their intent and their ability-what assumptions are made with respect to how these costs that we discussed on the first panel might 

or might not be shifted to the Federal Government? 

Mr. GoDDARD. There are some ways that our proposal affects the 

Federal Government in that interest is not paid on that principal, 

which is applied to agriculture. That is a substantial amount. 

We also feel that the Federal Government will be protected in 

the development of as much water as we can move through the 

canal, because as the water goes through in more volume, it affects 
110 

all the costs of the canal; and the O&M goes down for the other 

users. 

We feel that if the project cannot be finished-that is, if the terminal storage, which, as the Mayor said, is very final, the scrubbers, the reworking of the siphons, the completion of the damsif that cannot be accomplished, I think then there must be an application to the Federal Government under the cost ceiling that we 

have now. 

Mr. MILLER. Do that again. 

Mr. GoDDARD. Not the whole thing. 

Mr. MILLER. No. Just the last part. Working backwards from 

Federal Government. 

Mr. GoDDARD. All right. The situation is that, as you knowwhich probably you were witnessing yesterday-there are certain 

things that are not completed; and under the cost ceilings that we 

have right now, if they cannot be completed-as you know we have 

a difference with the Department relative to what is necessary to 

be repaid. But if those things cannot be completed, obviously we 

are going to have to apply to the Federal Government if they are 

to be completed. 

And I was quite serious in my testimony that, if they can't be 

completed, we accept that. 

Mr. MILLER. Mr. DeMichele, Ms. Pearson, do you concur with 

that statement? 

Ms. PEARSON. Mr. Chairman, I think I would like to defer and 

expand upon that at a later date. That sounds like a very complex 

question and one that would probably include a lot of detail with 

respect to our financial obligation on the project. [The information follows:] 

Upon review of the question it 'lppears that the matter was covered in Mr. 

Goddard's written testimony. Specifically on page 4 where Mr. Goddard states "If 

significant activities remain uncompleted, then new arrangements mutually agreeable to all parties, can be made to complete any necessary activities." 

Mr. DEMICHELE. You are right, assumptions are an important 

part of any conclusion, and you have to weigh the assumptions to 

come up with an answer to that. I would like to take a look at it 

further, as Rita has said. 

Mayor MILLER. We have heard a lot of figures from the panel before us. And I think a lot of those figures are in dispute or certainly 

are being questioned. So I don't know how else to answer the question of yours other than we are going to have to look at all this 

some more and put it all together, because there is a basic difference in some of these areas. 

Mr. MILLER. But if, in fact, the premise is that if you are against 

a cost ceiling or a contract ceiling, that the Federal Government 

ought to forego those facilities-yours is aptly named "the terminal"-do you still believe that is a Federal obligation, as part of 

this project? 

Mayor MILLER. For instance, our understanding of the statute is 

that the terminal storage was to be paid for by the Federal Government above and beyond the cost of the CAP aqueduct so that is not 

a part of the ceiling. 
111 

So whatever the figure is, what it comes down to, about $3.8 billion at this point, whatever that figure is, and this terminal storage 

figure is not a part--

Mr. MILLER. I understand that. But my point being, I assume 

should we be up against the authorized ceiling, is the city of Tucson willing to go on its own to build the facility? 

Mayor MILLER. At this point, I don't see how I could answer the 

question in the affirmative. 

Mr. MILLER. I understand. 

Mayor MILLER. As far as CAP is concerned, from the very beginning, the city of Tucson there, the whole area there, was promised 

as much security of water as there is in Maricopa County. That has 

been a given from the beginning. To my knowledge that has never 

changed. 

As I mentioned in the statement-and I am sure you knew this 

before-we are the only city with only groundwater. We don't have 

any surface water; and if we are cut off because of whatever conditions occurred during a year, the time of presenting CAP water to 

the Tucson area, we know there is going to be times of not getting 

that water, whatever the reason. We need to have the terminal 

storage. There is no other way we can operate. 

We have taken very seriously the whole question of safe yield in 

our community and are aware how much we are depleting the 

aquifer and want to stop it. If conditions had been different in 

terms of our delivering the CAP water, we would have been more 

than 5 percent off groundwater by 1995. 

So, I mean, our approach is one that is very strong in this area 

and to get away from the groundwater and get into the CAP water. 

And the terminal storage is an integral part of our ability to do 

that. It is an integral part of it. 

Mr. MILLER. Mr. Goddard, the underlying suggestion that I see1 don't want to mischaracterize the statement-but the underlying 

suggestion in your statement is that you have got a plan to sort 

this out; you have got a proposal that you want to take to the legislature. In the event that you are up against the constraints of Federal law, either with respect to contracting authority and/or authorized project ceilings, then the CA WCD is prepared to finish out the 

project and go on about its merry way. 

Mayor MILLER. Mr. Chairman, I believe that we are content that 

we can operate the project as we have described in my statement, 

as we speak now. That is not to undervalue or underestimate terminal storage in Tucson. The actual siphons, these huge things 

that are even now sitting out there on the edges of our various rivers, are going to have to be put in the ground. That has got to be 

done because the existing siphons are inadequate. They are going 

to break down. That has to be done. 

The various other things that I referred to, there are some matters in contention with reference to the Federal Government's responsibility relative to the Indians in that their trust obligation is 

quite clear. The Indians will benefit by additional water moved into 

the non-Indian agricultural segment. But it strikes me that the 

Federal Government is responsible for moving the Indian water 

through the canal and paying the costs of moving. 
112 

We also have had mentioned today another obligation, and that 

is of the various districts who have caused to be made various distribution facilities; and their obligation, it has been suggested, 

should be the CAWCD obligation. But we do not believe that to be 

the case. 

In other words, they cause the various distribution systems to be 

built and their bonds and their requirements; and as has been so 

wisely said before today, with the advent of the problems in agriculture, bankruptcy is very, very close and a pertinent possibility. 

I believe that CA WCD is now operating and will continue to operate in a fashion that will keep us fiscally sound. 

Can you elaborate a little more as to what you wanted me to talk 

about? 

Mr. MILLER. Let me yield to my colleagues first, because I want 

to make sure they have an opportunity in this round. I will come 

back. 

Ms. English. 

Ms. ENGLISH. Thank you, Mr. Chairman. 

Also I would like to thank Mr. DeMichele for an outstanding job. 

When we first started discussing how this would work this year 

and how it would be accomplished, I didn't think we would get this 

far along. I appreciate your efforts, what we have both gone 

through to get to this point. I believe it shows not only a tremendous good-faith effort on behalf of Arizona but the cooperation of 

a variety of people and interests that really understand how serious this is to Arizona. And I thank you for spearheading it and putting all your time into it. I think you have done a fine job for the 

State. I am also quite pleased about a number of the projects that have 

been discussed by the panel, and I would like a little more detail, 

if possible. 

First of all, I know I won't be able to get detailed information 

right now because I know you have just heard the reports from the 

preceding panel, and I would be very interested in your response 

or CA WCD's response to some of the revenue figures that they 

talked about and even some dispute among themselves about those 

figures and some of the disputed areas on project negotiations that 

are taking place. 

There was some reference to a variety of issues. And I would like 

to ask if I might get a report or a statement back in response to 

the first panel's comments, if I could get that from CA WCD at 

some point. It will prompt further questions on our behalf. 

Mr. GoDDARD. To take your questions first, about revenue--

Ms. ENGLISH. About revenue and then about some of the 

projects. You mentioned siphons. I think that is a concern, when 

I was in the nature that I was dealing with, and I am not sure it 

has gone the direction that everybody thought it would. So I would 

like some written, tangible material that I can further question 

both GAO and Mr. Johnson with. 

Mr. GoDDARD. We would be delighted to furnish it. 

Would you like some answer now? Or would you like to have it 

submitted in writing? 
113 

Ms. ENGLISH. If you have an answer now, very briefly, that is 

great; but I would really like some written submittal so that I have 

reference, so I can sit down with those folks. 

Mr. GoDDARD. We will certainly give it to you. 

[EDITOR'S NOTE.-The information maybe found in the appendix.] 

Mr. GoDDARD. Since you mentioned the siphons, I would JUSt like 

to say a very brief word about the siphons. These were, of course, 

part of the project. The contracts were let, the specs were drawn, 

the siphons were brought out and put in. Many technical problems, 

of course. But the brute fact is that they failed. CAWCD had nothing to do with any of that process whatever. Now we are saddled 

with the requirement of paying for at least half of it. I can't, for 

the life of me, understand exactly why. They are being replaced at the present time. It is a huge project. 

And as Mayor Miller knows, we are going to have to stop the water 

when they are being put in. So Tucson is either going to have to 

go back on its pumps, and if they possibly can, put the egg back 

into the shell, do something about providing Tucson with water for 

a considerable piece of time. This is a big problem. 

Our revenues are, as we speak, very complicated. It would be difficult to give you right off the bat--

Ms. ENGLISH. I understand that. 

Mr. GoDDARD [continuing]. A very detailed idea of how they are. 

But they are changing. And do not be misled by the fact that we 

are offering agriculture prices that they can pay. They are giving 

us in exchange their entitlements. We have four contracts that are 

already finished, signed and in hand, with four of the big districts. 

It is important for them, important for us, beCause the more water 

we can move, the lower the O&M costs to the Indians and to the 

cities. 

This is a fact that is difficult to understand, but it is true. Our 

revenues with respect to power have been brought into question. What happens after 2011 is something that I doubt if anybody 

around can tell at the moment. But there is a prospect in the immediate future of developing stronger power revenues. And we are 

setting about to do it. 

Ms. ENGLISH. Thank you, Sam. I look forward to the responseMr. GoDDARD. I am sorry to elaborate even that much. But we 

will respond to you in writing. 

Ms. ENGLISH. I appreciate that a lot. 

Rita, I have a question about the Recharge Demonstration 

Projects and the extension and making permanent the ad valorem 

tax. 

Do lou have a sense of the amount of revenue that will be generate by that extension? And do you know whether those figures 

were reflected in the GAO report? 

Ms. PEARSON. Representative English, I do not know. In fact, I 

would guess it was not reflected in the GAO report simply because 

the Governor's Advisory Committee made its recommendations at 

the close of September to extend it; and it was a recommendation 

that, of course, needed more with respect to dealing with CAWCD's 

board and the general public. 

So we are in the process of developing a legislative package that 

would, as Mr. DeMichele indicated, extend the tax to 1995, and ex-
114 

tend it to Pinal County and give the CA WCD the ability to apply 

it to not only the demonstration tax but to repay obligations on the 

CAP. 

As to the tax, I could not tell you what the calculation is for the 

three counties yet. 

Ms. ENGLISH. Perhaps if I could get that in a written report, that 

would be great. I would appreciate that. 

[The information follows:] 

The taxes collected by CA WCD for the three counties in 1993 and what could 

have been collected in Pinal County if the 4 cent tax was collected in that county are as follows: 

Ten cent ad valorem tax: 

~~~cCf'o~~t~u~.~:: .. :::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: $1~;~~;~~~ Pinal County ................................................................................... ___ 613,312 

Total ............................................................................................. 18,134,685 

Four cent demonstration recharge tax: 

~cdo~~~~:: .. :::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: Ui~ ~gg Four cent tax if collected in Pinal County: 

Pinal County ................................................................................... 245,325 

These amounts are based on 1993 property values and would be expected to in- crease over time due to increased development and inflation. 

Ms. PEARSON. With respect to the recharge legislation, the recommendation was to do an expanded recharge program, keeping in 

mind that California and Nevada were very actively interested in 

doing some sort of recharge of CAP water in Arizona. We are continuing discussions with the State of Arizona with representatives 

of Nevada and California to determine the hydrological feasibility of conducting expanded recharge programs, what the costs may be, and what the ramifications may be. As far as legislation goes what 

we are doing this session is introducing a streamlined package for 

recharge programs in Arizona. 

Right now it is a somewhat convoluted process. There are eight 

different statutory programs. So the Department is attempting to 

simplify it to encourage use by out-of-state users if they are so inclined. 

Ms. ENGLISH. Thank you. 

One other area. And, Mark, you might be able to answer this the 

best right now. And it has to do with the Office of Indian Settlements. One of the things I have run into, the first year in Congress, is how many incomplete Indian settlements are just hanging 

out there. And as we have gone through this process, it really is 

a big unknown with CAP. I am pleased that this is a recommendation that will be part of that legislative package. Can you elaborate a little on that? 

Mr. DEMICHELE. I would be happy to Congresswoman. 

The idea is to establish an office that will serve as a facilitator 

to do whatever we can in the State of Arizona to push these Indian 

settlements forward. I want to underscore what I said in my testimony, which is that 

we can't do it alone. We need whatever pressure can be brought to 

bear by your committee at the Federal level to get on with this and 

get those settlements made. We are willing to go more than our 

halfway, if you will to do what is necessary to get those settle-
115 

ments. But that office will be charged with facilitating those settlements as best we can. 

Ms. ENGLISH. Rita, did you want to respond to that too? 

Ms. PEARSON. If I might, the Department, on behalf of the Advisory Committee, met with a number of representatives of the tribes 

just a couple of days ago. The message we conveyed to them was 

that our intention was to hopefully acquire an appropriation from 

the State legislature to set up a neutral office that would be one 

that would be housed at a place acceptable to the tribes whose 

function would be to coordinate meeting dates, information, help 

emlhasize key points to get the deliberations off the dime, if you 

wil. 

Ms. ENGLISH. I guess my final question probably can be answered by you, Rita; and that is: Having been in the legislatureand a couple of us up here have been-what do you think the possibility of success will be? And will it happen this next legislative 

session? 

Ms. PEARSON. Representative English, my initial response is, if 

I could tell you that, I would be in Las Vegas right now. But I do 

think we have a good chance. We have very sound support from the 

business community. We have had a very public process. The water 

user community is. very supportive of the recommendations. 

And we have been briermg key legislators throughout the process. Mr. DeMichele and I have done briefings of the leadership in 

both the House and Senate, and they have been very appreciate of 

the efforts and we think very supportive. 

Ms. ENGLISH. I believe this will go a long way in bringing such 

diverse interests together in Arizona and will be a great step in the 

right direction from Congress' perspective. So anything I can do to 

facilitate that in the legislature or anything I can do to help, please 

let me know. 

Ms. PEARSON. I appreciate that. 

Ms. ENGLISH. Thank you. 

Mr. MILLER. Mr. Kyl. 

Mr. KYL. Thank you, Mr. Chairman. In the interest of time, I am 

simply going to thank all the members of this. panel, each in their 

own way has contributed significantly to this effort. 

I want to add one other thing, Chairman Goddard indicated his 

pride in having all of the members of his board here. There are a 

couple of people here who have a very long and active association 

with the Central Arizona Project who are here; and I think we 

might do well to acknowledge their presence. 

Jay Rhodes, our former colleague who has worked on the CAP 

not only as a Member of Congress but in other capacities, Webb 

Todd, chairman of the Central Arizona Project Association, and 

Jack Williams, former Governor. He has probably done as much as 

anybody in this room. I think they all deserve to be mentioned for 

their long and active support of the CAP. 

Mr. MILLER. Mr. Stump. 

Mr. STUMP. Thank you, Mr. Chairman. 

Let me thank all of you for your testimony. 

Rita, you stated in your testimony, and quite correctly, we will 

go through our full use in Indian water settlements and increased 

industrial use. 
116 

You also said, at the same time, we are going to be willing to 

work with our sister States to solve their problems. 

Let me ask you whether that commitment would ever involve the 

Governor's office in agreeing to any change in Arizona's CAP allocation? 

Ms. PEARSON. No, Mr. Stump. I thank you for the opportunity to 

respond. We would absolutely not consider any change in our entitlement to Colorado River supplies. 

Mr. STUMP. Thank you. 

Thank you, Mr. Chairman. 

Mr. MILLER. Let me, if I might, just make a couple of other 

points and perhaps get you to respond to them. 

Mr. DeMichele, I notice in your testimony that you recall the admonishments, I guess suggestions, of Congresswoman English and 

myself about, in order to produce a credible report, that the entire 

Arizona community had to be involved in your operations; and you 

did that. And I think the results speak for themselves in terms of 

that effort. And I think most people are pleased with that. 

I get a sense that there are sort of two channels running here. 

One is a suggestion that perhaps was made forcefully by Governor 

Goddard's statement that this can really be basically resolved inhouse. If necessary, the State could conceivably go it alone to a 

number of other arrangements to deal with the fact that there 

could quite possibly be legal restraints on additional participation 

by the Federal Government without authorization or without a renegotiation of the contract or, in fact, maybe both. 

But as I look at the two recommendations from your commission 

and from CA WCD, there are some assumptions about an increased 

Federal role here. That is what I think the GAO alerted us to. And 

those may go to $1 billion. There are some decisions that CAWCD 

might want to make or not make that could shift additional burdens to the Federal Government relying on precedent or relying on 

obligations, what have you, with respect to Indian water settlements. 

And while that is one thing here, it also seems apparent there 

is some suggestion that somehow this can be done without the direct involvement of the Federal Government. And I just don't see 

how those two things are consistent. My experience in the water 

community of the West is that controversy and delay sometimes 

are very good for various parties. And we can continue to challenge 

whether it is $1.8 billion or $2.0 billion, whether we are over or 

under, but that can all be resolved rather quickly from the legislative side of this, and that is that. 

Mr. Duffus and GAO and others will quickly tell us-or we can 

ask OMB-whether they are or they aren't. They may be reluctant 

to tell us; but at some point, they will have to tell us before the 

next appropriations round. It seems to me at that point the music 

sort of stops. 

I go back to your statement and the suggestions of Congresswoman English and myself earlier on. It seems to me, given the 

host of representations you have put on the table-and some of 

them seem very workable and others seem to me subject to further 

polishing and negotiations-that there is this tendency to try and 

avoid the Bureau and/or even our committee. First and foremost 
117 

let's leave our committee out of this, but the Bureau is going to be 

terribly time-consuming of resources, and you are not going to get 

to the point you want to go. 

Most of the suggestions have impact on the Federal taxpayer one 

way or another. It seems to me that, given Arizona's unified delegation in the Congress, between the House and the Senate, on a 

bipartisan basis, and the commitment you have in the State-as diverse as the interests are-everybody agrees there is an interest in 

seeing this project brought to completion. They agree these issues 

are best resolved in direct negotiations, and not by continuing to 

skirt around the edges. 

If that includes bad news that the cost ceiling is there, this committee has historically dealt with cost ceilings. We have dealt with 

them in a way that, as I say again, I think certainly-! have to 

speak for my State-all but a tiny minority were happy with the 

way that was resolved, including a complete cross section of the 

business community in that State. 

And that was true in these other projects. But the suggestion 

that we are at the point where we can patch and re-work it on the 

cheap or indirectly, I don't think is going to work here. This is a 

big project. This is a big chunk of dough. If everything goes right, 

there is a considerable Federal interest in this. 

Governor Goddard noted that he testified in, what was it, 1968. 

I figured the next hearing would probably be 2011, and we would 

be right on schedule because of the historic skill of this delegation. 

So 1968 may have been the last hearing, not only the last one he 

did, but the last hearing on this subject. But I think, given the 

changes in the Congress and the rules and the attitude, the deficit, 

and all the things that we confront, that we should have looked at 

this as a joint venture when we started out--when Chairman Udall 

and others in this community presented this to the Congress and 

the Congress agreed to it. Now that we have hit some bumps in 

the road, I think we need to decide whether this is a joint venture. 

Most of the contracts are third-party contracts. I don't think any 

of us sitting in the Federal legislature can suggest we are not going 

to be a party to the renegotiations or to the changes and modifications of those contracts. 

No business entity would do that to one of your clients. None of 

you would do it in your private practices. We cannot expect that 

the taxpayer simply wanders off into the horizon while these are 

renegotiated. That requires a very candid approach to laying this 

out. And I think you have done that for starters, along with the 

Bureau of Reclamation and whatever Federal entities, BIA, others 

that may be involved in these negotiations. 

But I am really worried, the more conversations that I pick up, 

that there is a suggestion that somehow we don't have to go in and 

admit that we are up against the ceiling. I don't think that that 

is the catastrophe that some people suggest it is. And, as I said, 

the energy to avoid that is not terribly productive. 

So I would just hope that, given, I think, a rather remarkable 

start that this combined panel represents, that that would not now 

be lost in the sort of diversionary efforts to seek an indirect way 

for me to be--l don't know if you want to respond or what have 

you. 
118 

Mr. DEMICHELE. I would defer to the Governor. 

Mr. GODDARD. Somehow everybody wants to at this stage of the 

game. 

Mr. MILLER. It is a tribute to your very forthright statement. 

The question is: How does that play itself out? 

Mr. GoDDARD. Naturally, we are concerned about the terminal 

storage in Tucson. We are concerned about the siphons. We are 

concerned about the various elements of the dams. We are responsible for the Roosevelt Dam, although it is not part of our project. 

It is part of Plan 6. We are very concerned that these things be finished. But we are also very positive in that our current financing 

is able to let us function as we should function. 

In working with the agriculture sector, we have simply been giving up some of our rights in the contract, and they have been giving up some of their rights, without even approaching the principal 

contracts. In other words, we are simply willing to allow agriculture to survive with as much help as we can make, and try to 

benefit the other users. And, of course, we consider ourselves partners, and we have to be. 

After all, the Federal Government has produced us a life raft for 

the State. And how could we provide for those wonderful Californians that are coming over here now and living in various parts 

of the State? We are going to have to---

Mr. MILLER. We have an alternative which would include their 

staying there. 

Mr. GoDDARD. It is fascinating. Most of our older people are moving to California. Now, the situation is this. Our input into the 

State is a push from other places. And there is very little that we 

can do to control it. And the projections that we have now would 

indicate that the water, although we have a surplus at the moment, that it will fast disappear. 

And a very important assumption is that the role of agriculture 

is diminishing and will continue to diminish, and we are planning 

on that. 

However, as you say, the bumps we can handle right now. And 

we certainly intend to handle them in concert with our big brother 

of the Federal Government and with all of the entities in the State 

who, at the current time, are as one. I mean, we can fight among 

ourselves privately, but we are as one at the moment in the fact 

that we would like to make this thing viable. 

Mr. MILLER. I hope I have spoken clearly. And I want to again 

thank you, because you have all individually and on behalf of your 

organizations invested a very, very substantial amount of time and 

effort on behalf of the State and of the project. And I look forward 

to our continued involvement with you and hope, as I say, that we 

can address these in the most direct manner possible so that we 

can just get on with it and get it resolved to the best interests of 

this State and everyone else. Thank you very much for your time 

and your testimony. 

It is the intent of the committee that we will go straight through 

to the end of this hearing without a break. I know that my colleagues who are not on the committee have joined us, and they also 

have other commitments. And so I just wanted to tell them about 

that so they can make whatever adjustments they need to do so. 
119 

And we appreciate their interest and their involvement with this 

issue. 

Mr. MILLER. The next panel will be made up of Mr. Rob Smith, 

the Southwest Representative, the Sierra Club, Phoenix, Arizona; 

Mr. Bill Scott, President, Board of Directors, Maricopa-Stanfield Irrigation and Drainage District; and Mr. Robert O'Leary, Executive 

Director, Water Utilities Association of Arizona. 

Gentlemen, if you would please come forward. We have a little 

over two hours, and we have three panels. So I would really hope 

you could summarize so we can allow time for questions, but also 

make sure the other panels are not shortchanged in this discussion. 

Rob, we will begin with you. 

PANEL CONSISTING OF ROB SMITH, SOUTHWEST REPRESENTATIVE, SIERRA CLUB, PHOENIX, AZ; C.L. "BILL" SCOTT, 

PRESIDENT, BOARD OF DIRECI'ORS, MARICOPA-STANFIELD 

IRRIGATION AND DRAINAGE DISTRICT, STANFIELD, AZ; AND 

ROBERT A. O'LEARY, EXECUTIVE DIRECTOR, WATER UTILITIES ASSOCIATION OF ARIZONA, PHOENIX, AZ 

STATEMENT OF ROB SMITH 

Mr. SMITH. Mr. Chairman, members of the committee, my name 

is Rob Smith. I represent the Sierra Club. I am their Southwest 

Representative based here in Phoenix. We are a national environmental organization with 9,000 members in this State. 

Thanks for bringing the committee here today, providing us the 

opportunity to talk about the Central Arizona Project and the environmental issues associated with it. 

One of the CAP project purposes is the enhancement of fish and 

wildlife resources. And with the committee's permission, I will 

summarize my written statement in the interests of time. 

The CAP was-and still is--being promoted using the rhetoric of 

scarcity. Images are conjured up of stark deserts baking in the sun 

and of an economy and way of life standing at the brink of disaster 

save for that thin blue line which winds its way through the 

parched desert, getting its life's flow from the Colorado River. 

It has been deeply ironic for some of us to hear many of them 

characterizing the current problem of the CAP as one of underutilization. It is as if they are both saying "we need more water but 

we aren't using enough." 

We think the real issue is not how much or how little we are 

using of the CAP but rather how good a steward is Arizona being 

of the water available to it. 

To us the wise stewardship means two things. It means protecting and restoring important stream habitats, especially along the 

Colorado River. It also means encourage conservation through 

phasing out water use subsidies in favor of market pricing for 

scarce water resources. 

We aren't using water as wisely as we should in Arizona. Nearly 

80 percent of Arizona's total water supply goes to agriculture; yet 

that sector provides less than 3 percent to the State's economic 

base. Cotton and alfalfa are the largest single agricultural water 

users, and both are the most water-intensive crops we grow. Furthermore, cotton is in surplus. In 1991, for instance, the Federal 
120 

Government paid Arizona cotton fanners more than $26 million in 

price supports. 

Probably the greatest environmental impact of the CAP is the potential to remove 1.5 million acre-feet of stream flow every year 

from the Colorado River. On the Lower Colorado, along the border 

with California and also in New Mexico, the river already fluctuates, salinates, and eventually dissipates to the detriment of 

recreation and endangered native birds and fish. 

These and other issues are ones that we and other environmental 

groups have brought to the Governor's CAP Advisory Committee, 

of which several of us were members. As part of that body, we proposed a solution which we felt helped the environment, promoted 

water conservation, and addressed the CAP repayment obligation. 

Key elements of our proposal were allocating up to 175,000 acrefeet from the CAP's yearly 1.5 million acre-feet for fish and wildlife 

purposes, mostly to remain in the Colorado River. We expect that 

this would become a non-reimbursable use and thus could lower 

the overall CAP repayment amount. 

We also proposed establishing an environmental trust fund for 

establishing protection and restoration and to support water conservation projects. We suggested a $15 million yearly fund level to 

be raised from a wide variety of potential sources, including from 

revenues generated through marketing CAP water to Nevada and 

California users. 

We also represented promoting water conservation and water 

marketing and phasing out subsidies and below market pricing for 

water and the power to pump it. 

Thanks to the leadership of Governor Symington and Mr. 

DeMichele, the Governor's committee ultimately developed a set of 

recommendations which included endorsements of the concepts of 

an environmental trust fund up to $8 million yearly and for up to 

150,000 acre-feet to be set aside for environmental purposes. 

We are now engaged with the Department of Water Resources 

and others working on the details of that which have not been finalized and, therefore, have not been ultimately approved by the 

State or the CAWCD. 

The Governor's committee largely rejected water marketing and 

did not urge significant new water conservation measures. In contrast, they developed a target pricing plan which lowered agricultural water rates for CAP to $17 per acre-foot while phasing in rate 

increases to urban dwellers to charge them more than $100 per 

acre-foot. 

The Sierra Club and six other environmental groups opposed this 

plan because it encouraged greater water use and taxpayer subsidy, this at a time when Congress and the Administration have 

been emphasizing resource conservation and greater cost recovery. 

Proponents of the target pricing plan the committee recommended say it reduces reliance on groundwater. We would rather do that through conversion to lower-water-use crops, raising the 

groundwater pump tax to a point where the CAP water is more 

economically attractive, or simply decreasing agricultural use. 

Proponents of the committee plan fear loss of Arizona's Colorado 

River entitlement unless Arizona starts diverting more of its water. 

Some also fear that marketing CAP water to other States will 
121 

weaken our State's claim to water in the future. We don't see the 

risks that way. We recognize that Arizona's entitlement is a product of a Supreme Court decision, an interstate compact with several States, and a congressional law; therefore, not easily undone. 

We view water marketing as a means to solidify Arizona's claim to 

its water by putting its resources to use in that manner and also 

to raise revenue for repayment obligations and to fund environmental enhancements. 

In closing, we welcome the subcommittee's review of the CAP. 

We hope you will take a close look at how we could work together 

to make this a more environmentally and taxpayer friendly project 

to meet both Federal and Arizona needs. 

Thank you. 

Mr. MILLER. Thank you. 

[Prepared statement of Mr. Smith follows:] 
122 

516 E. Portland Street 

Phoenix, Arizona 85004 

602•254•9330 

602•258•6533 FAX 

SIERRA CL U 0 S 0 U T H WEST 0 F F ICE 

TESTIMONY OF ROB SMITK 

SIERRA CLUB SOUTHWEST REPRESENTATIVE 

BEFORE TKE ROUSE NATURAL RESOURCE COMMITTEE 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS 

REGARDING TKE CENTRAL ARIZONA PROJECT 

ON DECEMBER 10, 1993 

IN PHOENIX, ARIZdNA 

Mr. Chairman, Members of the Committee and Members of the 

Arizona Congressional Delegation, my name is Rob Smith, and I· am the Southwest Representative of the Sierra Club, a national environmental organization with 9000 members in Arizona. 

Thank you for this opportunity to speak today concerning the Central Arizona Project and environmental issues associated with 

it. 

The CAP was -- and still is -- being promoted using the rhetoric of scarcity. Images are conjured up of stark deserts baking in the 

sun, and of an economy and way of life standing at the brink of 

disaster save for that thin blue line winding through the parched 

landscape bringing us a life giving flow from the Colorado River. 

It's then deeply ironic that many who come before you now have 

characterized the current problem with the CAP as being one of 

"underutilizatiOn". It's as if they're saying both "we need more water, but we aren't using enough." 

We think the real issue is not how much or little we are using 

the CAP, but rather how good a steward is Arizona of the water available to it. 

Wise stewardship means two things to us: 

1) Encouraging conservation through phasing out water use 

subsidies in favor of market pricing for scarce water resources, 

and 

2) Protecting and restoring important stream habitats. especially 

along the Colorado River. 

we aren't using water the way we should in central Arizona. 

Nearly 80% of our state's water supply goes to agriculture, yet 
123 

that sector provides less than 3% to the state's economic base. 

Cotton and alfalfa are the largest single agricultural water users, and both are the most water intensive crops we grow. Furthermore, cotton is in surplus; in 1991 the federal government paid Arizona cotton farmers more than $26 million in price supports. 

It's estimated that up to 90% of our desert stream habitats have 

been lost or seriously degraded due to depleted groundwater tables, 

diversions and channelizations. In many places, the groundwater supplies have been so severely drawn down that the land surface is 

literally cracked and collapsing. Despite the much-touted 

Groundwater Management Act, the Pinal County area, a potential big agricultural customer for CAP, is an area designated for "planned 

depletion" of groundwater -- that is, they are exempt from the 

requirement other areas face for bringing groundwater use into 

balance with natural recharge rates by the year 2025. 

The greatest environmental impact of the CAP is the potential to remove 1.5 million acre feet of stream flow every year from the 

river course. On the Lower Colorado River, the river already 

fluctuates, salinates and eventually dissipates to the detriment of 

recreation and endangered native wildlife. Most of the time, the 

Colorado is so heavily used that its flow never reaches ita 

historic delta on the Sea of Cortez in Mexico. The last remnant of 

that once vast and biologically rich area is the Cienega de Santa 

Clara, kept alive temporarily by the outflow from the WelltonMohawk Irrigation District. 

There are demands elsewhere in the Lower Colorado Basin for water to serve the thirst of southern California and the Las Vegas area, which have eyed San Francisco Bay and the Virgin River 

respectively for new supplies if the Colorado River is not available. 

All of these issues are ones we and other environmental groups 

raised as members of the Governor's CAP Advisory Committee, which 

completed its work this past September. As part of that body, we proposed solutions which we felt helped the environment, promoted water conservation and addressed the CAP repayment obligation. 

We proposed: 

1) allocating up to 175,000 acre feet from the CAP's yearly 1.5 

million acre feet for fish and wildlife purposes, mostly to remain 

in the Colorado River. We expected that this would become a non- reimbursable use, and thus could lower the overall CAP repayment 

amount. 

2) establishing an environmental trust fund for stream protection and restoration, and to support water conservation projects. We 

suggested a $15 million yearly funding level, to be raised from a wide variety of potential sources, including from revenues gel)erated through marketing CAP water to Nevada and California users. 
124 

3) promoting water conservation and water marketing, and phasing out subsidies and below-market pricing for water and the power to 

pump it. 

The Governor's Committee ultimately developed a set of recommendations which included endorsements of the concepts of an 

environmental trust fund up.to $8 million yearly, and for up to 

150,000 acre feet to be set aside for environmental purposes. 

However, the details have yet to be finalized and approved by the 

State or the Central Arizona Water Conservation District. 

The Governor's Committee largely rejected water marketing and 

did not urge significant new water conservation measures. In 

contrast, they developed a "target pricj.ng" plan which lowered 

agricultural water rates for CAP to $17 per acre foot while phasing in rate increases to urban dwellers to charge them more than $100 

per acre foot. Assuming these low ag rates entice more farm 

customers, then the total yearly repayment obligation to the 

federal government could be lowered by up to $12 million dollars due to excused interest payments for agriculture. 

The Sierra Club and six other environmental groups opposed this 

plan because it encouraged greater water use and taxpayer subsidy. 

Congress and the Administration, too, have been emphasizing resource conservation and greater cost recovery. 

Proponents of the Committee plan say it decreases reliance on groundwater. We would rather do that through conversion to lower water use crops, raising the groundwater pump tax to a point where 

CAP water is more economically attractive or simply decreasing 

agricultural use. 

Proponents of the Committee plan fear loss of Arizona's Colorado 

River entitlement unless Arizona starts diverting its water. Some 

also fear that marketing CAP water to other states will weaken our state's claim to the water in the future. We don't see the risks 

that way. We recognize that Arizona's entitlement is a product of a Supreme Court decision, a Congressional law and an interstate 

compact, and therefore not easily undone. We view water marketing as a means to solidify Arizona's claim to its water by putting its 

resource to use in that manner. 

Proponents of the Committee plan see increasing use within 

Arizona as firming up our state's control of the water; we think 

it's placing our future in greater jeopardy by hastening the day 

when these new supplies reach their limit, and by increasing the 

pressure on the already overallocated Colorado River. 

Proponents of the Committee plan claim that it solves the 

financial concerns regarding repayment, but we think that assertion 

bears a closer look. The calculations could be significantly off 

if the federal government prevails in establishing the repayment amount as $2.1 billion rather than the $1.8 billion claimed by the 

CAWCD. Also, it is hardly a certainty that agricultural use of 
125 

200,000 acre teet of CAP water will be sustained for 50 years given 

the recent history of over-optimistic projections of project use. 

In closing, we welcome this Subcommittee's review o! the CAP, 

and we hope you will take a close look at how we can work together to make this a more environmentally and taxpayer friendly project. 

Thank you. 
126 

Mr. MILLER. Mr. Scott. 

STATEMENT OF C.L. "BILL" SCOTI' 

Mr. SCO'I"f. Thank you, Mr. Chairman. 

I am Bill Scott, a long-time farmer in Arizona. I appreciate the 

opportunity to appear before this committee to make this statement. 

I have been farming in the Maricopa-Stanfield Irrigation & 

Drainage District area, where I am currently serving as president 

of the board of directors. I farm with my two adult sons. Our three 

families are totally dependent on agriculture and the availability of 

CAP water. My district to date has been one of the largest users 

of Central Arizona Project water. 

I would also like to express appreciation to you for holding this 

hearing in Arizona to hear these firsthand reports of the importance of the Central Arizona Project system to our State. Your committee has been essential to our progress. 

Mr. Chairman, I would like to acknowledge members of the delegation present, especially Representative English, who not only 

represents my district but also serves on this committee and has 

been a very important representative to us, to our progress to this 

point. Her interest and enthusiastic support is very gratifying. We 

enjoy it very much, and we certainly appreciate it. I had the pleasure of having her tour my farm to ensure some of the conservation 

measures we instituted down there to utilize water in the most efficient manner possible. 

I am disappointed we didn't get to follow up and have our second 

meeting this fall to see the harvest. I also appreciate the representatives from our rural communities here today, also from Congressman English's district. These folks joined in a united front to develop a State solution to under-utilization in cooperation with the 

Governor's Advisory Committee. It was a gratifying experience to 

see the rural communities speaking with one voice in support of 

the CAP system's project usage. 

My statement will be brief. I want to cover four points. I have 

submitted a written statement, and I will try to summarize this 

way. 

I want first of all to convey a strong sense of commitment to the 

use of CAP water for agriculture. I want to also impress upon you 

the importance of the intended use of CAP water in the most efficient manner we know of, conservation practices. I want to show 

you the strong support we have in agriculture for CAWCD's water 

pricing policy. I want to give assurance that the pricing policy provides us with a better opportunity to make payments on the Federal and private bond debts. 

Our commitment to the use of Central Arizona Project, I have 

lived 20 years in anticipation of using that water and never having 

to pump another drop. Water is like gold; it is where you find it. 

We have a diminishing supply. It was never intended that we revert back to pumps at this stage in our life. It is an unfortunate 

situation, one we have very little control over. 

The State adopted a groundwater code which mandated reduced 

groundwater withdrawal. You have already heard the comment 

made it is a substitute supply, it is not a supplemental. There is 
127 

no new expansion. We leave in the ground one acre-foot of water 

for one acre-foot of CAP water. 

Landowners have contributed significant financial obligation to 

the usage of CAP water. We have state-of-the art concrete system 

that loses little over 4 percent. This was very expensive. In addition, the Federal Government has loaned us the balance of the 80 

percent. This amounts to the irrigation district having a $1,100 per 

acre debt on this land. 

The first project, to my knowledge, was financed in this way for 

a self-help project. Our district operates all the pumps. We do this 

for two reasons. One is efficiency, where we can serve about 25 percent of the energy that is normally used throughout the district. 

The second reason is that we only operate if the water is 

unaffordable or unavailable. 

Mr. Chairman, from the beginning, not only agriculture but 

many segments of our economy and our districts were totally committed to using CAP water. The commitment to water conservation, 

in addition to the $1,100 an acre we spent in bond obligations, we 

have redesigned our irrigation systems to a certain extent by 

spending about $300 an acre in my own case to put in new ditches, 

larger ditches. We have leveled and redesigned hills at a cost of 

$600 an acre. We have got $1,100 plus $300 plus $600 which is 

about a $2,000 debt against the land which is now currently valued 

at $1,000 an acre, some of it less than that. 

This demonstrates our commitment to use and the dedication to 

conservation. The resulting water usage consciousness is that we 

measure now in acre-inches rather than acre-feet. 

CAWCD's water pricing policies have our support. The negotiation has been in effect for about two years, and we are very happy 

to see these negotiations concluded. It does improve our survival 

possibilities. It lowers the cost equally, and it assures usage of CAP 

water. It puts new life back into the rural policies. Without the policy, fanners would return to pumps and would not repay debts; it 

would probably defeat the goals of the Groundwater Management 

Act-not probably, but very definitely would. 

It is a very positive first step toward achieving the goals of the 

CAP. It puts the district in the position of now negotiating debt repayment, which we didn't have any chance of doing before. My district happens to be one of the first to sign the agreement with 

CAWCD. 

Mr. Chainnan, your committee is to be complimented for the 

strong support they have shown for this project over many years. 

It has been a cooperative effort and shall continue to be. There are 

still some outstanding issues that need to be resolved. You have 

our pledge to work cooperatively with CAWCD and the Bureau of 

Reclamation toward that end. We want to be a part of the solution. 

We hope your committee will see the wisdom of this plan and not 

oppose its successful implementation. 

Thank you for hearing my statements. 

Mr. MILLER. Thank you very much. 

[Prepared statement of Mr. Scott follows:) 
128 

STATEMENT OF 

C.L. "BILL" SCOTT 

PRESIDENT OF THE MARICOPA-STANFIELD 

IRRIGATION & DRAINAGE DISTRICT 

BEFORE THE 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS 

COMMITTEE ON NATURAL RESOURCES 

DECEMBER 10, 1993 

PABT 01fB -- XIITROQUCTXON 

Mr. Chairman, Congresswoman English, other members of the 

Committee and distinguished guests, my nam9 is Bill Scott and I am 

happy to appear before you today as a long-time Central Arizona 

farmer. I have been farming in the Maricopa-Stanfield Irrigation 

& Drainage District area for 36 years and my current farming 

operation consists of myself and my -two adult sons. Our three 

families are entir~!Y~~»~ndent upon our family farming operation 

and the availability of CAP agricultural water. I also am 

privileged to serve as the President of the Board of Directors of 

the Maricopa-Stanfield Irrigation District which to date has been 

the largest user of Central Arizona Project water. In 1990 

Governor Symington appointed me as the first chairman of the 

Advisory Council to the newly formed Arizona Department of 

Agriculture. 

Pl\RT TWO -- COMMXTME!IT TO THB CElfTRAL ARIZQNA PROJECT .1Um 

WATER CQNSERJATIOH 

The State of Arizona and its citizens are committed to 

utilizing CAP water in lieu of high levels of groundwater. This 

commitment has been made on many levels in the State of Arizona 

beginning with the State's adoption of the 1980 Groundwater 

Management Act and the understanding that CAP water will be a 

substitute supply of irrigation water and not a supplemental or new 
129 

supply which would encourage expansion of irrigation. This 

commitment is evidenced on the district level by the assumption of 

significant financial obligations for the construction of our CAP 

distribution facilities as well as our commitment to providing the 

irrigation district with the total operational control of our 

irrigation district wells so that such wells are only utilized when 

CAP water is unavailable or unaffordable. This district-wide 

commitment to reduced groundwater pumping goes far beyond the 

mandates of Arizona's Groundwater Management Act although it is 

certainly consistent with both the State and Federal policy which 

resulted in the passage of that Act as well as the passage of the 

Central Arizona Project enabling legislation. 

Like most farmers in my irrigation district and many 

farmers throughout th~ ~~ntral Arizona Project service area, my 

family has ~ade substantial financial commitments to the efficient 

use of CAP water. This commitment not only requires us to share in 

the financial obligation of the irrigation district for repaying 

the cost of the construction of the CAP distribution system, an 

effective investment of $1,100 per acre, but it was also necessary 

to make substantial on-farm improvements and modifications to our 

internal water distribution system. These costs include: 

1. Reconstruction of the larger concrete-lined canals at 

a cost of $300 per acre. 

2. Redesign of farm field layout and land leveling to 

maximize the efficient delivery of water, at $600 per acre. 

Altogether it could be said that we have invested a total 

of $2,000 per acre fer the efficient utilization of CAP water and 

reduced the overdrafting of groundwater, all on land that has been 

reduced in value to approximately $1,000 per acre. 

- 2 -
130 

Obviously, if central Arizona Project agricultural water 

were so expensive as to make its use impossible, not only would 

these substantial on-farm investments be largely wasted, but the 

purposes for our irrigation district's construction of a $100 

million dollar CAP water distribution system would also go largely 

unrealized. We would have no choice but to return to substantial 

groundwater pumping despite negative environmental and social 

consequences as well as the lost opportunity to utilize our 

individual, district-wide and state-wide economic investments in 

the Central Arizona Project. 

The Maricopa-stanfield Irrigation & Drainage District has 

invested substantial time, effort and funds in the promotion of 

water conservation goals as part of its CAP participation. The 

District's CAP wate~ di§t~ibution system represents the state-ofthe-art with-'respect to avoidance of seepage loss. Recent studies 

have shown that through seepage and evaporation loss our district 

canal system loses less than 5% of the water it transports. As 

part of its repayment contract with the United States, the District 

has had to comply with a stringent water conservation plan. Also 

the requirements of the National Environmental Policy Act were met 

with the construction of these water distribution systems. 

It should also be noted that, unlike many other 

~rrigation projects west-wide, the United States did not put up all 

the money for constructing these water distribution systems. My 

District, like the other Central Arizona Project districts, was 

required to put up 20% of the cost of the construction of its 

system and did so mostly through the issuance of private general 

obligation bonds. The debt service on these bonds constitute a 

substantial financial obligation on the part of the landowners in 

the District and once again reflect our considerable commitment to 

- 3 -
131 

the success and the long-term availability of Central Arizona 

Project water. 

PART THREE - WATER PRICING POLICY OF THE CENTRAL ARIZONA 

WATER CONSERVATION DISTRICT 

The recent water pricing policy established by the 

Central Arizona Water Conservation District appears to be the best 

opportunity for continued survivability of my family farm, my 

irrigation district and even the rural community in which my farm 

and irrigation district exists. This policy recognizes the 

substantial economic commitments made by farmers in my irrigation 

district and in the other CAP irrigation districts to the Central 

Arizona Project and seeks to ensure that the purposes of these 

financial commitments are achieved. By pricing the water at 

levels which make "lt competitive with groundwater pumping, our 

preference for utilizing CAP water over groundwater will be assured 

and the groundwater conservation goals of the State of Arizona will 

be furthered. 

The continued viability of farms within the Central 

Arizona Project play an important role in rural economic 

development. In Pinal Counc.y this fact was recognized by an 

extensive group of municipal, business, and political leaders who 

worked closely with the Governor's Advisory Committee to develop a 

plan and recommendation which would allow for continued use of CAP 

agricultural water by Pinal County farmers, both Indian and nonIndian. The proposal also encouraged use of CAP municipal and 

industrial water by Pinal County municipalities and water 

companies. The CAWCD CAP water pricing plan certainly is a 

positive step towards achieving these objectives. 

- 4 -
132 

With the announcement of CAWCD's pricing plan the longterm viability of all farmers in the Maricopa-Stanfield Irrigation 

& Drainage District has been improved and the prospect for 

repayment of our Federal obligation has been enhanced 

significantly. Nevertheless, it is certain that without the CAWCD 

pricing plan, Central Arizona farmers could not utilize CAP water 

and clearly would be in a much more difficult position for repaying 

the United States and bondholders for the cost of constructing CAP 

distribution systems which would largely gp unused. Additionally, 

without this policy, farmers throughout the Central Arizona Project 

would have to return ·to high utilization of groundwater pumping 

which is directly contradictory to the groundwater management goals 

of the State of Arizona and presumably the United States as well. 

PART POUR -- CONCLUSION 

The State of Arizona in general, and the Central Arizona 

Water Conservation District in particular, are dealing with the 

problem of under-utilization of Arizona's Central Arizona Project 

entitlement. The State's repayment capability to the United States 

is secure as evidenced by testimony provided by the Central Arizona 

Water Conservation District and the Arizona Department of Water 

Resources. The environmental benefits of encouraging uses of 

Central Arizona Project water in lieu of groundwater are obvious 

and should need no further emphasis. The CAWCD proposal provides 

the best opportunity for achieving these goals and for this reason 

Maricopa-Stanfield Irrigation & Drainage District was the first 

district to sign the agreements with CAWCD to implement the 

proposed plan. 

- 5 -
133 

Mr. Chairman, we hope that your Committee in particular, 

and the United States in general, will see the wisdom of this plan 

and not oppose its successful implementation within the state of 

Arizona. 

Thank you for the opportunity to present this testimony. 
134 

Mr. MILLER. Mr. O'Leary. 

STATEMENT OF ROBERT A. O'LEARY 

Mr. O'LEARY. Mr. Chainnan, I am the executive director of the 

Water Utilities Association of Arizona, which is a nonprofit corporation supported by approximately 150 water companies. Member companies operate systems ranging in size from 1 to 48,000 

customers, serving a total of approximately 800,000 Arizonans. Our 

primary purpose is to protect the interests of member companies 

by assisting and/or representing them before a multitude of forums, 

including appearances before committees such as this one, so that 

their views may be heard. 

I want to thank you for giving us this opportunity to express our 

views relative, first, to the Central Arizona Project in general; and, 

second, to the restructuring of the CAP repayment plan which was 

currently adopted by the Central Arizona Water Conservation District through a very brief statement as follows. One, the investor-owned segment of the water industry in the 

State strongly supports the Central Arizona Project. Of the 66 subcontracts signed by non-Indian CAP subcontractors for municipal 

and industrial water as reported in the CAWCD CAP Subcontract- ing Status Report this past September, 31, or 47 percent, were with 

investor-owned water companies, representing an allocation of 

73,000 acre-feet, or 13 percent, of the 560,000 acre-feet currently 

under subcontract. 

We are not only involved in the utilization of the municipal and 

industrial water currently under contract, but we will be in the future. By their nature, municipalities cannot leapfrog out into the 

rural areas where development takes place. It will be the investorowned water companies which have helped develop Arizona's rural 

element in the past. They are doing it now, and they will do it in 

the future; and they will do it by either using converted CAP agricultural water rights or groundwater which will still be available 

if we allow agriculture to continue using CAP water. Two, the investor-owned segment also strongly supports the restructuring of the CAP repayment plan which was recently adopted 

by the CAWCD. This plan was not some willy-nilly effort which 

was pushed through without thorough consideration by all parties 

involved. As a matter of fact, this plan is the result of long months 

of extremely hard, difficult negotiations between all parties who 

were so far apart at times that we felt like we might never reach 

some sort of a consensus. 

But reach a consensus we did, and what a rare consensus it is. 

That consensus resulted in the final report and recommendation of 

the Governor's Central Arizona Project Advisory Committee. Rare, 

because the agricultural and the municipal and the investor-owned 

interests are truly best served by this report, which resulted in the 

CA WCD's target pricing program. Our interests are served for a 

number of reasons. 

Unlike municipalities, investor-owned water companies cannot 

unilaterally increase their water rates without the approval of the 

Arizona Corporation Commission, our equivalent of a public service 

commission. Therefore, water pricing is extremely important. 
135 

This plan provides for a more affordable price than would be the 

case otherwise. Agricultural usage must be kept in the plan to stabilize the price of water through the interest credits received. 

However, these interest credits are not the most important reason for supporting agricultural usage under this plan. The most important reason, from our view, is the reduction of groundwater 

pumping. 

Let me say that once again: The most important reason for allowing agricultural usage of CAP water is the reduction of groundwater usage. No additional new demands are being created by such 

usage. 

In addition to price, availability of water is extremely important. 

With agriculture having to give up its long-term water rights in 

order to receive this lower priced water, the plan will have the effect of assuring the availability of water for our customers in the 

future. 

The plan also provides for another goal which the State of Arizona has and which should be a U.S. policy goal, that being an orderly transition from the use of water for agricultural uses to municipal and industrial uses. 

Three, the investor-owned segment recognizes that, to the extent 

the plan may have to be modified in the future, a strong base of 

cooperation has definitely been established to accomplish this process. 

Four, we also strongly believe that the CAWCD will pay its obligations; and until it does not, we can see no real reason for Federal 

intervention in the internal State process which has adopted a plan 

to make sure that the financial obligations will be met. 

Five, we also strongly believe that the State of Arizona needs 

every drop of water for its future development. We find it very difficult to believe that any water which finds its way out of the State 

will ever become the "prodigal son" and return home. 

That concludes my statement. And I want to thank you once 

again for this opportunity to allow us to express investor-owned 

water views. 

Thank you, Mr. Chairman. [Prepared statement of Mr. O'Leary follows:] 
136 

STATEMENT 

BY 

ROBERT A O'LEARY, EXECUTIVE DIRECTOR 

WATER UfD.JTIES ASSOCIATION OF ARIZONA 

BEFORE THE 

U.S. HOUSE OF REPRESENTATIVES 

COMMITTEE ON NATURAL RESOURCES 

SUBCOMMITTEE ON OVERSIGIIT AND INVESTIGATIONS 

CENTRAL ARIZONA PROJECT 

GIVEN AT 

PHOENIX, ARIZONA 

DECEMBER 10, 1993 
137 

December I 0, 1993 

Chairman Miller, members of this subcommittee, my name is Robert A O'Leary. I am the 

Executive Director of the Water Utilities Association of Arizona (WUAA), which is a 

non-profit corporation supported by approximately 150 investor-owned water companies 

in the State. Member companies operate systems ranging in size from I to 48,000 

customers, serving a total of approximately 800,000 individuals. Our primary purpose is 

to protect the interests of member companies by assisting and/or representing them before 

a multitude of forums, including appearances before subcommittees, such as this one, so 

that their views may be heard. 

Thank you for giving us this opportunity to express our views relative, first, to the Central 

Arizona Project (CAP) in general, and second, to the restructuring of the CAP repayment 

plan recently adopted by the Central Arizona Water Conservation District (CAWCD) thru 

the following brief statement:. 

l. The investor-owned segment of the water industry in the State stronaly supports 

the Central Arizona Project. Of the 66 subcontracts signed by non-Indian CAP subcontractors for municipal and industrial water as reported in the CA WCD CAP Subcontracting Status Report this past September, 31 (47"/o) were with investor-owned 

companies, representing an allocation of73,000 acre-feet (13%) ofthe 560,000 acre-feet 

currently under subcontract. We are not only involved in the utilization of the municipal 

and industrial water currently under contract, but we will be involved when agricultural 

water is converted for M&I uses in the future. By their nature, municipalities cannot leap 

frog out to where rural development takes place. Investor-owned water companies have 

helped develop rural Arizona in the past, they are doing it now, and they will do it in the 

future! And they will do it by using either converted CAP agricultural water rights, or 

groundwater, which will still be available if we allow agriculture the continued use of CAP 

waters. 

2. The investor-owned segment also strongly supports the restructuring of the CAP 

repayment plan which was recently adopted by the CAWCD. This plan was not some 

"willy-nilly" effort, which was pushed through without thorough consideration by all 

parties involved. As a matter of fact, this plan is the result of long months of extremely 

hard, difficult negotiations between parties who were so far apart, that at times, we all felt 

as if we would never, in three life times, reach a consensus. But reach a consensus we did, 

and what a rare consensus it is. That consensus resulted in the final report and 

recommendations of the Governor's Central Arizona Project Advisory Committee. Rare, 

because the agricultural and the municipal and the investor-owned interests are truly best 

served by this report which resulted in the CA WCD target pricing plan. Our interests are 

served for a number of reasons: 

A Unlike municipalities, investor-owned water companies cannot unilaterally 

increase their water rates without the approval of the Arizona Corporation Com-
Page2 

138 

mission, (our equivalent of a public service conunission). Therefore, water pricing 

is extremely important. This plan provides for a more affordable price than would 

not be the case otherwise. Agricultural usage must be kept in the plan to stabilize 

the price of Water thru the interest ccedits derived. However, these interest credits 

are not the most important reason for supporting agricultural usage under the plan. 

The most important reason, from our view, is the reduction of groundwater pumping. Let me say it aaain the most important reason for allowing agricultural 

usage of CAP water is the reduction of groundwater pumping! NO ADDITIONAL NEW DEMANDS ARE BEING CREATED BX SUCH USAGE! 

B. In addition to price, availabiliey of water is extremely important. With agriculture having to give up their long-term water rights in order to receive the lower 

priced water, the plan will have the effect of assuring the availability of water for 

our customers. 

C. The plan also provides for another goal which the State of Arizona has and 

which should be a U.S. policy goal, that being an orderly transition from the use of 

water for agricultural to municipal and industrial uses. 

3. The investor-owned segment recognizes, that, to the extent the plan may have to 

be modified in the future, a strong base of cooperation has been established to accomplish 

this process. 

4. We also strongly believe that the CAWCD will pay its obligations, and until it does 

not, we can see no real reason for federal intervention in the internal State process which 

has adopted a plan to make sure that the financial obligations will be met. 

5. We also strongly believe that the State of Arizona needs every drop of water it has 

for future development. We find it very difficuh to believe that any water which finds it's 

way out of the State will ever become the "prodigal son", and return home. 

That concludes my statement, and I want to once again tluink you for this opportunity to 

present the investor-owned water companies views. 
139 

Mr. MILLER. Thank you for your testimony. 

Mr. Scott, thank you for your testimony, and thank you for your 

remarks about Congresswoman English. 

I have, since I have become the chairman of this committee recognized the emotions with which the committee deals. We deal 

with assets. We diminish or increase those assets, or we move the 

boundary north, south, east or west in one fashion or another. And 

recognizing that role, I have tried as chairperson to use the members of my committee as guides through that thicket in the States 

in which they represent. 

And I don't know that she especially asked for this, but we arrived very early on, about the second day she was in Congress, that 

that was going to be her role on our committee, because this is, as 

we have already heard this morning, a monumental undertaking; 

and I appreciate you helping us in that process by bringing her to 

the irrigation district. 

Let me, if I might, ask you: Mention was made this morning 

about the concerns that the Federal Government, the Bureau of 

Reclamation, would have with the restructuring of the distribution 

debt given their concerns about the private debt of the districts. 

Can you address that? Should they be concerned? Or is that an ongoing problem? 

Mr. SCOTT. Mr. Chairman, I am sure they should be concerned. 

We have three phases we have to go through to make ourselves totally viable again. The first thing is the cost of water, which the 

CAWCD pricing policy has taken care of now. The Bureau has the 

discretion to restructure loans or not. We have had meetings with 

them as to whether or not we should restructure that loan. 

At the same time we have discussions with the bondholders, for 

the same purpose, to restructure those bonds. We fully intend to 

pay our total debts off. We don't have any intention of doing anything otherwise. But the first important step has been made with 

the CAWCD pricing policy. And I think that sets the stage now for 

the follow-up discussions that we need to have, starting with the 

other groups. 

Mr. MILLER. When you refer to the pricing policy, you are referring to the desire to have a target price? 

Mr. ScoTT. Water cost that they just established. We have signed 

the agreement with the CAWCD. That is the cost of water for the 

districts. 

Mr. MILLER. That target pricing obviously raises some issues 

down the road, if not immediately, about the assumptions of some 

of those costs. Especially with respect to Indian irrigation water in 

the future. 

Can you comment on that? 

Mr. ScoTT. The target pricing has steps built into it for the increase over time. I really can't expand on it much more than that. 

I am not really familiar enough with the objectives on the Indian 

water pricing policies. I haven't been in all the discussions in that 

area, so I don't know what the--

Mr. MILLER. Mr. O'Leary, do you have any comment on what implications the pricing policy, which you have endorsed in your 

statement, might have? 
140 

Mr. O'LEARY. It goes back to my initial comment relative to our 

being unable, unilaterally, to increase our rates as our costs increase by the virtue of water pricing. 

There is a term just now finding its way into use in this area, 

price shock, or rate shock. We in the water industry in Arizona 

have had to live with that for some time. The bottom line, without 

going into a great deal of detail, is that in the event that there was 

not an orderly escalation of those costs, we conceivably could be unable to recover a significant cost increase by going through our 

public utility commission for additional rate relief. 

Therefore, the stability I think that I mentioned is one of the 

areas we are extremely interested in. 

Should agriculture be excluded from the formula? We not only 

see that as a basic problem in the increase of the water pricing but 

we see a potential mechanism as we ratchet up for other elements, 

including some of our own investor water companies, A, having to 

reconsider whether that water price now is at such a level, and B, 

their inability to recover those costs to the Arizona Corporation 

Commission that, C, might lead to having to bring their contract 

back to CA WCD. 

Mr. MILLER. If that pricing policy had the potential to load significant additional costs on the part of the investor-owned community down the road, would you be endorsing it? 

Mr. O'LEARY. Let me say this: For a long while I followed Metropolitan Water District in Southern California, and I am aware of 

the water pricing mechanisms in Southern California and the levels that they have reached, which are astronomical when we compare them to the water pricing that we are looking at in the State 

of Arizona. 

But those pricing mechanisms didn't establish themselves overnight. They were a long process since the late 1930s in raising 

those water prices to where they are now. 

Arizona is in a relative position that California districts and metropolitan areas were 50-55 years ago in that we have a base of our 

water pricing that we are accustomed or used to. Any substantial 

increases that might come, and to get to your status quo, over a 

long period of time, where substantial annual increases were not 

involved, I would feel freer to say, yes, we could accept that, because we would more than likely be able to pass those costs 

through to our ratepayers. 

Mr. MILLER. In the case of this policy, if I properly understand 

it, it obviously sets in motion here a political dynamic among an 

important political constituency within the State-and that is the 

Indian irrigators-as to whether or not they are going to have or 

not have a target price for them. 

That obviously raises the issue of how deep are Uncle Sam's 

pockets, because that is the only way you could arrive at that situation. 

And if they don't have that, they are confronted with the notion 

that they cannot sustain their investment in the lands that they 

have made or they have expected to make or they relied upon making in the face of those settlements. 

And so I appreciate target pricing appears to provide a bridge for 

a period of time, but nobody has decided who is going to pay for 
141 

the bridge yet. We have the potential to inherit-not a long way 

down the road, because there seems to be a universal demand in 

this room, certainly among my colleagues, that we get on with 

these Indian settlements as soon as we possibly can. And in some 

cases that means water could flow, based upon what happens in 

nature, almost immediately. 

Mr. O'LEARY. I think we are predicating some of our conclusions 

on the fact that all of these monies must be raised through the 

water pricing mechanism. And speaking not just personally, I think 

there are other avenues available. While the political climate is not 

such today for tax increases, we in the State of Arizona have available to us ad valorem taxes through the Central Arizona Water 

Conservation District that could help offset those price increases in 

the future when the political climate does change relative to tax in- creases. 

Mr. MILLER. I am encouraged by that statement. But I think it 

makes my case that we have got to make sure we are including all 

of the parties to these negotiations. I think we should not just decide not to attend to the subject matter at hand here-how does 

this rebound into the Indian water settlements and the Federal 

Treasury-that it will take care of itself, if in fact there are other 

mechanisms that go to the question of how the debt will be apportioned out in an orderly fashion over the coming years should the 

State decide it wants to embrace target pricing. Mr. O'LEARY. I think the recommendation by the Governor's Advisory Committee to continue the ad valorem tax that is currently 

being collected but should stop in 1995, that that be collected into 

the future, indicates a desire on the part of the State to utilize that 

vehicle. It is no surprise, nor is it unknown, that the CA WCD has 

the ability to tax and that, in fact, the tax rate currently being leveled is not the maximum that State statute currently allowed for. 

So it is a definite vehicle, and it would keep the pricing away 

from the water element. When ad valorem taxes are utilized within 

the three counties as a minimum, or we could say the entire State, 

based on some weighted measure, the individuals involved with the 

use of that water, particularly in the three-county area, have a part 

of the price collected through ad valorem taxes. Municipalities 

would be relieved of eternally having to go to their councils to say, 

"we need to increase our rates." 

Water companies, in like kind, would be relieved of the obligation 

of attempting-and I have to use the word "attempting," for full recovery of their costs. 

Furthermore, the full cost would not be borne by those water 

companies when it relates to the specific charges for their particu- lar areas of service. Their consumers would be paying through ad 

valorem taxes but never have to contend with the pricing mechanism as a part of their monthly water bill. 

Mr. MILLER. That is a great scenario. Just include the Federal 

Government in the deliberations. So far I haven't heard them mentioned in how we benefit. 

Mr. Smith, maybe the CAP c.ame at a different time, but in the 

Central Valley Project, one of our major debates was over whether 

or not we could get, as a project purpose, fish and wildlife and environmental concerns. And that is in the CAP legislation in the au-
142 

thorized features, the conservation and development of fish and 

wildlife resources. 

What has been the history of that with respect to this project? 

Mr. SMITH. This project has spent a great deal of money on mitigation; that is, making up for damage done in the process of constructing the project. But it is generally agreed it has spent nothing in terms of enhancements, that is, to actually create something 

beneficial beyond making up for something that was negatively impacted. 

So in our view that is part of the agenda that is unfulfilled. I 

think it justifies looking, certainly at this point, as we look at the 

whole project, additional investment or at least set-asides for water 

for environmental purposes. 

In our view, there are some opportunities in the interior of Ari- zona, and there are certainly large opportunities in terms of the 

amount of water along the main stem of the Colorado, including all 

the way down into Mexico. If you look at the remnant of the Colo- rado River Delta, the Seneca to Santa Clara, which lives off of a 

temporary activity, as there are increasing pressures on the river 

from urban use or agricultural use, or as the CAP comes on line 

more fully, there will be times of drought. Even if everyone was 

taking only what they were due, the river has been more obligated 

than there is water to meet those obligations in many years. 

So we see this as an opportunity not to place perhaps the entire 

burden on Arizona certainly for restoration where we can in the 

Colorado River ecosystem, but there is an opportunity to take a significant step. And we think that is something the Federal Government ought to take a close look at. There is extra water to take 

a look at that, and that would be consistent with project purposes. Mr. MILLER. Not to make you say it again, but having been 

through this debate once, you view the obligation in that case to 

be both money and water? 

Mr. SMITH. Money can be raised with various mechanisms, especially one we have advocated. You're looking for new money from 

places it doesn't come from now, in marketing water temporarily at 

least to places that demand it right away such as Southern Nevada 

and Southern California; and there are those opportunities that go 

well into the future, the next century, at the very least. The Federal Government can allocate some water certainly to remain in 

the Colorado River. You don't pay the pumping costs at that point, 

the cheapest way to achieve some real environmental benefit. 

In our view, it would be consistent with how it has been handled 

in other projects for that to be seen as a Federal purpose, non-reimbursable; and, therefore, I think attractive certainly to the Governor's committee when it was discussed as one way of lowering 

the overall repayment obligation. 

Mr. MILLER. Thank you. 

Karan. 

Ms. ENGLISH. I don't have any specific questions. I did want to 

thank Mr. Scott for his comments. 

And I also, Mr. Chairman, would ask unanimous consent to submit comments of Cyprus Miami Mining Corporation for the record. 

[EDITOR'S NOTE.-See appendix.] 

Mr. MILLER. Without objection. 
143 

Mr. Stump. 

Mr. STUMP. Mr. Chairman, I would just like to thank the members. With your permission, I would like to submit a couple of questions later on for the record to Mr. Smith. (EDITOR'S NOTE.-See appendix.] 

Mr. MILLER. That would be fine. 

Thank you very much for your testimony and for your help with 

this hearing. 

The next panel will be made up of the Honorable Thomas R. 

White, Governor of the Gila River Indian Community and Ms. Mary Ann Antone, the Representative of the Water Resources Committee, the Tohono O'odham Nation, Sells, Arizona; Daniel Preston, 

who is the Vice Chairman of the San Xavier District of the Tohono 

O'odham Nation. 

Welcome to the committee. As with the previous panels, your entire statement and documents in support of those statements will 

be made a part of the formal record. To the extent to which you 

can summarize, we would appreciate it so we can have time for 

questions. 

Governor White, we will begin with you. 

PANEL CONSISTING OF HON. THOMAS R. WHITE, GOVERNOR, 

GILA RIVER INDIAN COMMUNITY, SACATON; MARY ANN 

ANTONE, REPRESENTATIVE, WATER RESOURCES COMMITTEE, TOHONO O'ODHAM LEGISLATIVE COUNCIL, SELLS, AZ, 

ACCOMPANIED BY DAVID FRANK, ESQ.; AND DANIEL PRESTON, VICE CHAIRMAN, SAN XAVIER DISTRICT COUNCIL, 

TOHONO O'ODHAM NATION, TUCSON, AZ, ACCOMPANIED BY 

THOMAS LUEBBEN, ESQ. 

STATEMENT OF HON. THOMAS R. WHITE 

Mr. WHITE. Thank you, Mr. Chairman. I appreciate the opportunity to testify before the Committee on Natural Resources. 

As you can see from yesterday's visit to the Gila River Indian 

Community, we presented to you at that time a composite of a conceptual plan that diverted our water from our needs from time immemorial. Our land, we have about 100,000 acres there into the allotted lands and about 275,000 that are tribal lands. 

Out of that we have been given the fact by a Federal case that 

we were entitled to 1.5 million acre-feet of water at one time. We 

went through a series of land meetings throughout our community 

and came up with a rationale of justified use for water. And in 

1979 we came out with an acre-feet amount of 791,000 acre-feet 

that were going to be suggested to use for the Gila River Indian 

Community. 

Under those terms and agreements we looked at it, and we went 

into the area with Jack Feester, who was the executive manager 

at the Salt River Project, to come together the components of water 

district cities and towns and begin the negotiations for water settlement, which CAP is a part of. 

In 1924, I think, Congress authorized construction for irrigation 

projects. Under those terms in those years, these same constructions are deplorable and are dilapidated at this time. We just seem 
144 

to have a lot of bottlenecks; we can't get the water into the area 

so far where we need it most. 

We are continuing to pursue the litigation of the 1.5 million acrefeet, and we are also looking at additional CAP water as a means 

of water right settlements, and also to be provided on what is an 

available and affordable cost. 

In October 22 of 1992, we signed our CAP agreement for 173,000 

acre-feet. And it was directly with the Secretary of Interior and no 

contractual relationship with CAWCD. 

We feel that Reclamation does not protect the interests of the 

community or other Indians. We have provided Congress a "Comprehensive Funding Proposal and Appropriation Request, November 1993," which demonstrates the need for affordable CAP water 

through the numerous planning processes of those supporting documents. I would like to get into the area of the positions of the community which are listed in my testimony. 

One: Secretary should exercise his trust responsibility and allocate to the community and other Indian tribes affordable CAP waters in his control to satisfy the Indian water budgets. CAP water 

is needed by the community and is an accepted component in our 

agreed-upon water budget with the negotiating parties. The Arizona Department of Water Resources, ADWR, and CAWCD 

reallocation plans must be junior to those of the Secretary to satisfy Indian needs. Two: The misconception of local entities in Arizona that the United States will pay for or provide a means for Indians to pay for 

CAP water must be discarded. The community has witnessed 60 

years of the United States Congress and the Administration's failure to adequately fund the San Carlos Indian Irrigation Project. 

Mr. Miller, we know that your committee would not like to prolong this chronic lack of funding of water supplies intended for the 

Community's use. A positive, up-front funding mechanism should 

be provided. Indian agriculture water prices must be no greater 

than and competitive with non-Indian agricultural, NIA, water 

prices. 

Three: CA WCD has determined the affordable price of CAP 

water for Arizona non-Indian agricultural use at a maximum of $17 

per acre-foot. The remaining issue is how the State of Arizona and 

the United States will pay for CAP OM&R while delivering Indians 

$17 per-acre-foot agricultural water. A "postage stamp" rate for 

CAP municipal and industrial, M&I, and agricultural water use 

will not work. 

Four: The key to the success of CAP is to get water delivered. 

For agriculture to use water, it must be priced at $17 per acre-foot. 

The community needs the CAP water to satisfy the agreed-upon 

water budget. The United States and Arizona need CAP water delivered to the Community at affordable prices and quantity to 

achieve a water settlement. Full use of Indian CAP water reduces 

the per-acre-foot cost of fixed OM&R. 

Five: CAP was intended to provide an alternative water supply 

so that the State of Arizona would reduce its groundwater pumping. The major solution to the Community's water settlement is to 

ensure that the off-reservation mining of groundwater from under-
145 

neath the reservation is reduced and mitigated. CAP must be kept 

alive to provide an alternative water source. Pinal Active Management Area, Pinal AMA, has a planned depletion, not safe yield, 

groundwater use goal. Any concession to groundwater pumpers in 

the Pinal AMA must be tied to the adoption of a safe yield goal. 

The planned depletion of groundwater for Pinal AMA will allow 

continued mining of water from underneath the Reservation, will 

not provide a long-term solution to the conservation of the State's 

groundwater resource and will continue to place the United States 

at risk due to the mining of the Community's and allottees' groundwater. 

Six: Arizona must provide appropriate local contribution to Indian water settlements that provides for affordable water supplies. 

Seven: A take-or-pay provision that would require the community 

to pay for water allocated but not ordered or used would be intolerable. CAP restructuring must be based on the payment for water 

ordered and delivered. Take-or-pay does not work for NIA, so why 

is CAWCD proposing to saddle Indians and United States with the 

same take-or-pay provision? The effect of a take-or-pay provision 

for Indians is to price water to Indians at a rate that Indians will 

not be able to use the water and be forced to sell it to non-Indians 

and M&I. 

Eight: Indian contractors for CAP water must have equal access 

to water markets controlled by CAWCD and ADWR. 

Nine: An Indian Water Users Board is being established to represent the common interests of the tribal participants' in decisions 

concerning CAP OM&R. The goal of the board is to assure that 

CAP water will be available to each tribal participant at an affordable price. We request congressional and administrative support of 

our board. We appreciate your concern for Indian representation. 

Ten: Until 1868, our ancestors maintained a balanced, riparian 

Gila River ecosystem, even when they diverted the entire river flow 

into the "Little Gila." We want to restore some of the riparian 

areas. Current actions of the United States Fish and Wildlife Service, under the Endangered Species Act, threaten to limit the ability 

of our Community to utilize existing Gila River water supplies and 

have impacted our use of CAP. Our use of Community resources, 

including agriculture, municipal, and industrial use of water as 

well as riparian reforestation and habitat uses, must be adequately 

protected. Deliberations on the impact of CAP water deliveries to 

our Community are being carried out without our knowledge or 

representation. Any use by the Secretary of CAP water for environmental purposes must be considered only after satisfaction of the 

water budgets for Indian water use. 

Eleven: Starting in 1991, the Community requested that Reclamation contract with the Community for all of the work to be 

done on and off the reservation in connection with CAP Indian Distribution Division facilities for the reservation. 

The Community members are mature, capable, adult human 

beings and are the only ones that can decide what they want. The 

Community is the common link for the reservation's multiple 

sources of water and funding from two Federal projects. The Community must be given control of the projects. Reclamation has not 

yet agreed or proposed a contract with the Community in two 
146 

years. The Community has hired engineering consultants who 

should be paid with CAPIDD funds. 

The Community requests a full accounting and justification from 

Reclamation for the work completed and planned for the reservation by Reclamation. Reclamation has not provided to the Community such a justification. 

That concludes my testimony. 

Mr. MILLER. Thank you. [Prepared statement of Mr. White follows:] 
147 

TESTIMONY OF 

TIIOMAS R. WHITE 

GOVERNOR 

GILA RIVER INDIAN COMMUNITY 

TO 

UNITED STATES HOUSE OF REPRESENTATIVES 

COMMITI'EE ON NATURAL RESOURCES 

December 1993 
148 

Mr. Chairman and members of the Committee, I thank you for the opportunity to testify before 

you. I am Thomas R. White, Governor of the Gila River Indian Community. 

The Gila River Indian Community ("Community") is composed of Pima and Maricopa Indians 

whose ancestors prospered from irrigated farming in the Salt and middle Gila River valleys. 

After the Civil War, upstream non-Indian settlers diverted Pima-Maricopa water, reducing the 

Pimas and Maricopas to poverty. 

The Community is the governing authority for the Gila River Indian Reservation 

("Reservation"), originally authorized by Act of 1859. The Reservation contains approximately 

100,000 acres of allotted and 274,000 acres of Tribal land on the southern borders of Phoenix 

and Chandler, Arizona. 

The United States has not followed through with its promises to provide adequate water for the 

Reservation. In 1879, the President, at the urging of General McDowell, extended the 

Reservation to the Salt River to assure the Reservation's right to Salt River water. In 1897, 

Congress authorized a right-of-way for a canal from the Salt River through the Reservation on 

the condition that the Reservation be served with Salt River water. In 1907, Congress 

authorized the expenditure of $300,000 to pay for the Reservation's proportionate part of the Salt 

River Project. Except for minor drain water and water from a salty well, the Reservation does 

not receive water from the Salt River Project. 

1 
149 

In 1924, Congress authorized construction of an irrigation project for the Reservation. Titat 

irrigation project has not yet been completed and provides less than 100,000 acre-feet average 

annual surface water supply to the Reservation. The 100,000 acre-feet is insufficient for 

allotted, let alone allotted plus Tribal, acres. The irrigation works that were constructed have 

never adequately served the Reservation land in the project and have not been properly 

maintained. Although it was judicially determined that the Community cannot be charged with 

the operation and maintenance of the project works, the Community borrowed money for the 

rehabilitation of the project's Southside Canal on the Reservation. 

In 1964, the Community provided evidence that the Central Arizona Project ("CAP") water was 

needed to serve Reservation lands. The Community has a CAP water delivery contract for 

173,100 acre-feet annually. 

In 1985, the Community conducted more than 53 local consensus planning meetings to determine 

Reservation land and water use goals. As a result, the Community adopted 791,100 acre-feet 

as a Reservation water budget to achieve land use goals. The Reservation water budget includes 

water for each of the approximately 100,000 acres of individual allotments and a reasonable 

amount for Tribal land. 

With a proper delivery system, CAP can serve any pan of the Reservation planned land uses. 

Tbe Community is continuing to pursue litigation of its water rights claims which total over 1.5 

million acre-feet annually. The Community would prefer to settle, and has been willing to 

2 
150 

accept, additional CAP water for the Reservation water rights settlement, provided the supply 

is reasonably available at an affordable cost. 

The Community has the largest single CAP water allocation and water delivery contract. 

However, the Community has been excluded from meaningful input into the decisions regarding 

CAP. The Community's contract is directly with the Secretary of Interior (Secretary}. The 

Community has no contractual relationship with CA WCD. CA WCD ignores or vigorously 

opposes positions helpful to Indians. The CA WCD position proposes that Indians pay almost 

four times the non-Indian agricultural. operation, maintenance and replacement (OM&R) water 

prices. Reclamation has transferred CAP to CAWCD without addressing the Secretary's 

relationship to Indians. Reclamation often does not protect the interests of the Community or 

other Indians. 

Our Community has demonstrated a need for affordable CAP water in numerous planning 

processes and supporting documents. If we achieve a water settlement, CAP could be a source 

of affordable water. If we are unable to achieve a water settlement, our CAP allocation and 

CAP water reserved by the Secretary for our use will be a vital supplemental water supply to 

augment our existing available Gila River water, groundwater and Salt River water sources. The 

Community is submitting to Congress a "Comprehensive Funding Proposal and Appropriation 

Request. November 1993" requesting that programmatic funding be appropriated to construct 

irrigation delivery , distribution and on-farm facilities to utilize our existing available water 

resources. We need CAP water today even without a water settlement. Our Community is 

committed to pursue all avenueo to develop tl'>.P. existing and potential water sources for our 

3 
151 

agricultural, municipal, industrial and recreational development and environmental preservation. 

Our comments concerning a comprehensive water settlement also apply to our existing available 

supplies. 

The Community urges the following CAP positions be adopted. 

1. Secretary should exercise his trust responsibility anci allocate to the Community and other 

Indian tribes affordable CAP waters in his control to satisfy the Indian water budgets. 

CAP water is needed by the Community and is an accepted component in our agreed 

upon water budget with the negotiating parties. The Arizona Department of Water 

Resources (ADWR) and CA WCD reallocation plans must be junior to those of the 

Secretary to satisfy Indian needs. 

2. The misconception of local entities in Arizona that the United States will pay for or 

provide a means for Indians to pay for CAP water must be discarded. The Community 

has witnessed 60 years of the United States Congress and the Administration's failure to 

adequately fund the San Carlos Indian Irrigation Project. Mr. Miller, we know that your 

Committee would not like to prolong this chronic lack of funding of water supplies 

intended for the Community's use. A positive, up front funding mechanism should be 

provided. Indian agriculture water prices must be no greater than and competitive with 

non-Indian agricultural (NIA) water prices. 

4 
152 

3. CAWCD has detennined the affordable price of CAP water for Arizona non-Indian 

agricultural use at a maximum of $17 per acre-foot. The remaining issue is how the 

State of Arizona and the United States will pay for CAP OM&R while delivering Indians 

$17 per-acrecfoot agricultural water. A "postage stamp" rate for CAP municipal and 

industrial (M&I) and agricultural water use will not work. 

4. The key to the success of CAP is to get water delivered. For agriculture to use water, 

it must be priced at $17 per acre-foot. The Community needs the CAP water to satisfy 

the agreed upon water budget. The United States and Arizona need CAP water delivered 

to the Community at affordable prices and quantity to achieve a water settlement. Full 

use of Indian CAP water reduces the per acre-foot cost of ftxed OM&R. 

5. CAP was intended to provide an alternative water supply so that the State of Arizona 

would reduce its groundwater pumping. The major solution to the Community's water 

settlement is to ensure that the off-Reservation mining of groundwater from underneath 

the Reservation is reduced and mitigated. CAP must be kept alive to provide an 

alternative water source. Pinal Active Management Area (Pinal AMA) has a planned 

depletion not safe yield groundwater use goal. Any concession to groundwater pumpers 

in the Pinal AMA must be tied to the adoption of a safe yield goal. The planned 

depletion of groundwater for Pinal AMA will allow continued mining of water from 

underneath the Reservation, will not provide a long tenn solution to the conservation of 

the State's groundwater resource and will continue to place the United States at risk due 

to the mining of the Community's and allottee's groundwater. 

5 
153 

6. Arizona must provide appropriate local contribution to Indian water settlements that 

provides for affordable water supplies. 

7. A "Take or pay" provision that would require the Community to pay for water allocated 

but not ordered or used would be intolerable. CAP restructuring must be based on the 

payment for water ordered and delivered. "Take or pay" does not work for NIA, so why 

is CAWCD proposing to saddle Indians and United. States with the same "take or pay" 

provision? The effect of a "take or pay" provision for Indians is to price water to 

Indians at a rate that Indians will not be able to use the water and be forced to sell it to 

non-Indians and M&l. 

8. Indian contractors for CAP water must have equal access to water markets controlled by 

CAWCD and ADWR. 

9. An Indian Water Users Board is being established to represent the common interests of 

the tribal panicipants' in decisions concerning CAP OM&R. The goal of the board is 

to assure that CAP water will be available to each tribal participant at an affordable 

price. We request Congressional and administrative support of our board. We 

appreciate your concern for Indian representation. 

10. Until 1868, our ancestors maintained a balanced, riparian Gila River eco-system, even 

when they diverted the entire river flow into the "Little Gila" . We want to restore some 

of the riparian areas. Current actions of the United States Fish and Wildlife Service 

6 
154 

under the Endangered Species Act threaten to limit the ability of our Community to 

utilize existing Gila River water supplies and have impacted our use of CAP. Our use 

of Community resources, including agriculture, municipal and industrial use of water as 

well as riparian reforestation and habitat uses, must be adequately protected. 

Deliberations on the impact of CAP water deliveries to our Community are being carried 

out without our lcnowledge or representation. Any use by the Secretary of CAP water 

for environmental purposes must be considered only after satisfaction of the water 

budgets for Indian water use. 

11. Starting in 1991 , the Community requested that Reclamation contract with the 

Community for all of the work to be done on and off the Reservation in connection with 

CAP Indian Distribution Division facilities for the Reservation. 'The Community 

members are mature, capable, adult human beings and are the only ones that can decide 

what they want. The Community is the common link for the Reservation's multiple 

sources of water and funding from two Federal projects. The Community must be given 

control of the projects. Reclamation has not yet agreed or proposed a contract with the 

Community in two years. The Community has hired engineering consultants who should 

be paid with CAPIDD funds. The Community requests a full accounting and justification 

from Reclamation for the work completed and planned for the Reservation by 

Reclamation. Reclamation has not provided to the Community such a justification. 

7 
155 

Mr. MILLER. Ms. Antone. 

STATEMENT OF MARY ANN ANTONE 

Ms. ANTONE. Good afternoon. My name is Mary Ann Antone. I 

am a member of the Water Resources Committee of the Tohono 

O'odham Legislative Council. I am also a Council Delegate representing the Tohono O'odham Nation. 

I would like to recognize Councilmen Frances Francisc.o and 

Alberto Lopez, also here attending this hearing. I would like to introduce David Frank, the Nation's Attorney General, on whom I 

may be able . to call to address any questions of a legal nature. Mr. 

Frank is sitting to my right. 

On behalf of the Nation, I would wish to express our appreciation 

for the opportunity to present this testimony as part of the subcommittee's oversight inquiry regarding the Central Arizona 

Project. Significant quantities of CAP water will be required to settle the Nation's water claims. More than one year after congressional confirmation of the settlement, there has been no identification of the 28,200 acre-feet of water delivered to the Nation under 

the settlement legislation, nor has there been a quantification of 

the Nation's share of CAP water in the terminal storage facility 

now under consideration. 

Likewise, we have received no assurance regarding the availability of sufficient CAP supplies to satisfy our water claims in the 

central and northern portion of the reservation. 

From the Nation's perspective, there are three issues before the 

subcommittee: First, can there be reliable assurances regarding the 

financial integrity of the Central Arizona Project without resolving 

the water claims of the Nation and other Arizona tribes looking to 

CAP as a source of settlement water? 

Assuming, as we do, that the answer to that question is, no, the 

second inquiry is regarding the quantity, reliability and cost of allocation of CAP water required to settle the Indian claims and the 

related consideration against depletion of our groundwater. 

Finally, a process must be established to resolve the CAP component of the Indian water claims. 

A written statement has been submitted for the subcommittee's 

consideration which outlines the Nation's water claims and sets 

forth our assessment and position on each of these issues. In the 

brief time available, I would like to highlight certain key points. 

One, millions of acre-feet of the Nation's surface water and 

groundwater have been misappropriated. 

Two, settlement of the Nation's claims include substantial quantities of substitute water to satisfy our rights to develop and to survive as an Indian community in perpetuity. 

Three, CAP is a prime source of wet water for this purpose. 

Four, to be acceptable as a substitute water source, the CAP 

water must, to the maximum extent possible, approximate the delivery and reliability of the water rights which were historically accessible. 

Five, the capital and operation cost associated with the CAP 

water should not be imposed on the Nation. The Nation should not 

be placed in an ironic position of funding its own settlement. That 

responsibility lies on those legally accountable for the damages. 
156 

Six, there has been a failure to reach a common goal of the Arizona Groundwater Management Act and the Central Arizona 

Project to reverse overdrafting the groundwater by substituting imported Colorado River water to meet users' demands. Groundwater 

continues unabated, and the Pinal AMA controls it for the foreseeable future. As a consequence, one of our basins in the district 

which historically stored nearly 1 million acre-feet of groundwater 

has been virtually depleted. 

Connected basins will suffer the same fate if these practices are 

allowed to continue. 

Seven, depletion of groundwater must be ceased, whether by restrained withdrawals, or CAP legislation. We urge both steps be 

taken. The efforts to protect Indian groundwater will increase our 

damage claims. More fundamentally, the uncertainty regarding the 

magnitude of future losses negatively affects the prospects of any 

settlement whatsoever. 

Eight, the Nation and other affected tribes have been foreclosed 

from direct participation and discussion on a range of issues involving the Central Arizona Project which impact our water claims. If 

frequently stated imperatives of resolving these claims are insincere, the settlement process must include a direct role for tribes as 

major parties throughout negotiations. 

Mere consultation with tribes or involvement in an advisory content will not result in a fair and final settlement of our claims. 

Again, I appreciate the opportunity to present our views to the 

subcommittee and would welcome any questions the Members may 

have. 

Thank you. 

Mr. MILLER. Thank you. 

[Prepared statement of Ms. Antone follows:] 
157 

STATEMENT OF MARY ANN ANTONE, MEMBER 

OF THE WATER RESOURCES COMMITTEE OF 

THE TOHONO O'ODHAM LEGISLATIVE COUNCIL, 

BEFORE THE SUBCOMMITTEE ON OVERSIGHT 

AND INVESTIGATIONS OF THE UNITED STATES 

HOUSE COMMITTEE ON NATURAL RESOURCES 

ON 

THE CENTRAL ARIZONA PROJECT 

Phoenix, Arizona 

December 10, 1993 
158 

Chairman Miller and members of the Subcommittee on Oversight 

and Investigations of the House Committee on Natural Resources, my 

name is Mary Ann Antone. I am a member of the Water Resources 

Committee of the Tohono O'odham Legislative Council and a Council 

delegate representing the Sif Oidak District of the Tohono O'odham 

Nation. I would like to recognize my colleagues on the Water 

Resources Committee who are attending this hearing. Also, I would 

like to introduce David Frank, the Nation's Attorney General, on whom I may call to address any questions of a legal nature. On 

behalf of the Nation, I wish to express our appreciation for the 

opportunity to present this statement as a part of the 

Subcommittee's oversight inquiry regarding the central Arizona 

Project ("CAP"). My remarks will focus on the critical role of CAP 

water in settlement of the Nation's water claims in the State of 

Arizona. 

I. OVERVIEW OF NATION'S WATER CLAIMS 

CAP water is the most likely source to settle the Nation's 

water claims pending in the Gila River Adjudication1--( 1) the 

Nation's claims in the San Xavier and Eastern Schuk Toak Districts 

situated within the Tucson Active Management Area ( "AMA"), the 

settlement of which was legislatively confirmed by Congress in the 

Southern Arizona Water Rights Settlement Act of 1982 ("SAWRSA") and 

( 2) the Nation's claims in the Sif Oidak District and those 

portions of the Gu Achi, Sells, Schuk Toak and Hickiwan Districts 

located in the Pinal AMA (commonly referred to as the "Chuichu" 

claims). The latter claims have not been settled, but formal 

settlement discussions are expected to be initiated in the near 

future. 

I am unable at this point to precisely quantify the number of 

acre-feet of CAP water which will be necessary to fairly and 

finally implement SAWRSA and settle the Chuichu claims. Under 

SAWRSA, the Nation is entitled to receive 66, ooo acre-feet of 

surface water, 37,800 acre-feet of which was granted to the Nation 

prior to enactment of SAWRSA as part of the Interior Secretary's 

allocation of "tribal homelands" water to Arizona Indian Tribes. 2 

CAP is the prime source for the remaining 28,200 acre-feet of 

surface water which is deliverable to the Nation under Section 305 

1 In Re the General Adjudication of All Rights to the Water in 

the Gila River system and Source, CC04 33390, No. W-1, W-2, W-3, w4 (Maricopa County Super. ct.). 

2 ~ allocation notice published at 45 Fed. Reg. 81,265 

(1980), as reaffirmed in notice appearing at 48 Fed. Regis. 12,446 

(1983). This water is identified in Section 303 of SAWRSA as the 

irrigation supply for the farms required to be developed under that 

section. 
159 

of SAWRSA but not yet identified. 3 Finally with regard to SAWRSA, 

an unquantified number of acre-feet of CAP water will be required 

to assure deli very of the Nation's 66, 000 acre-feet of surface 

entitlements during outages in the CAP system or other delivery 

interruptions. 4 Ongoing discussions among the Bureau of 

Reclamation, the City of Tucson, the Nation and other water users 

in the Tucson basin are focused on storage of CAP water in a surface reservoir for use during periods when outages occur in the 

system. Agreement has not been reached on the size of the terminal 

storage facility, number of acre-feet of CAP water to be stored for 

the Nation's use and other measures necessary to assure uninterrupted water deliveries to the Nation. Determining the cost 

of the project is tied to resolving these issues. 

Until formal negotiations commence, I am not at liberty to 

publicly disclose the Nation's damage and water quantification 

assessment with respect to the Chuichu claims. I can only say that 

the number of acre-feet of CAP water required to settle these 

claims will be considerably beyond the 8, 000 acre-feet of CAP 

Indian a~ricultural water previously allocated by the Secretary for 

Chuichu. The damages associated with the Chuichu claims are 

likewise substantial, and increase daily as a result of continued 

mining of the Nation's groundwater by non-Indians. 6 

II. SETTLEMENT OF INDIAN WATER CLAIMS 

Fundamental to resolving the water claims of the Nation and 

other desert Tribes is the identification of sufficient quantities 

of water, with assured reliability in delivery and quality, which 

will enable the Tribal community to develop and sustain itself. 

3 Several other key settlement terms have not been satisfied. 

See joint statement of the Nation submitted on August 6, 1992 to 

the United States Senate Select Committee on Indian Affairs and the 

House committee on Interior and Insular Affairs on s. 3125 and H.R. 

5735 amending SAWRSA. 

4 On October 11, 1983, the United States and the Nation 

entered into an agreement implementing the SAWRSA settlement. 

Section 10.1 of that agreement provides that the United States 

(acting through the Secretary of Interior) "shall construct any 

necessary facilities, such as those for storage or re-regulation, 

to enable the Secretary to meet ... delivery requirements" for the 

66,000 acre-feet of surface water. Sections 304(c) and 305(d) of 

SAWRSA impose damage liability on the United States in the event 

these water supplies are not delivered. 

5 ~allocation notice and reaffirmation cited in footnote 2. 

6 See discussion at subsections II (C) and (D) below. 

2 
160 

Access to water resources in the arid southwest is obviously critical to survival. 

Fair and final settlement of major Indian water claims in 

central and southern Arizona is an essential component of any plan 

to place CAP on a sound financial foundation. CAP will inevitably 

be a primary source of settlement water. The amount of CAP water 

required to resolve Indian claims, and the terms for payment of 

related capital and operational costs, are the key unknown factors 

in the equation. What is known is that sufficient and reliable 

supplies of 'wet water must be made available to assure the 

continued viability of Indian communities in the future; paper rights and monetary payments are not adequate substitutes. 

The frequently-expressed imperative of settling Indian water 

claims, however sincere as an aspirational statement, has not been 

translated into development of an effective and comprehensive plan 

to accomplish that objective. Moving the settlements to an equitable conclusion must proceed in the context of and parallel to 

other aspects of whatever long-term restructuring is necessary to 

maintain the financial integrity of the Central Arizona Project. 

Attention to the Indian issues often appears to be an afterthought when systemic problems arise. The system is perceived as insensitive to Indian concerns and responsive to the demands of 

non-Indian users which serve to move CAP water supplies away from 

the resource pool needed for Indian water settlements. Among the 

examples which might be cited are reallocations of non-Indian 

agricultural water, extension of deadlines for subcontracting 

municipal and industrial supplies, and deferral of the declaration 

of project completion. Recently, there has been intensified 

attention to deficiencies in CAP triggered by the financial dilemma 

confronting the non-Indian agricultural sector, including the 

reported renegotiation of subcontracts for delivery of non-Indian 

agricultural water at a subsidized price in the range of $17 per 

acre-foot (apparently with little or no regard to the impacts on Indian interests). In short, the evolving framework for CAP 

restructuring has placed the Indian implications in a seemingly 

subsidiary and certainly ambiguous position. 

Now is the time to recast the criteria for CAP restructuring 

by changing the current focus on non-Indian concerns to an equitable settlement of the Indian claims as a priority step and 

premise for dealing with the problems affecting non-Indian 

agriculture and other issues. A substantial block of CAP water 

must be reserved for these settlements given the dimensions of the 

Indian claims and the absence of sufficient alternative sources. Reaching conclusive settlements will necessarily entail 

determinations regarding payment of the related costs of water 

delivery. Until those costs are quantified and apportioned, 

development of a comprehensive financial plan for future operation 

of the CAP system is guesswork. 

3 
161 

The inquiry begins with an understanding of the nature of 

Indian water rights, the legal accountability of the United States 

and local interests for the claims, and the consequences of 

deferring affirmative action to accurately identify the parameters 

of the Indian claims and reserve the CAP water reasonably necessary 

for settlement. 

A. Nature of Winters Right 

Indian water rights are unique and markedly superior to 

rights held by non-Indians under State law. Indian rights 

basically derive from the Wint~ doctrine announced by the United 

States supreme Court in 1908. The Court determined there was 

impliedly reserved for Indian Tribes sufficient. water to satisfy 

the purposes for which their Reservations were established. While 

there were certain d i fferences in purpose, the common reason for 

creating Reservations was to provide a homeland for Indian people. 

Broadly put, the Wint~ right attaches to that quantity of surface 

water and groundwater reasonably required to preserve viable Indian 

communities in perpetuity. 8 The range of permissible uses is 

necessarily expansive to accommodate whatever needs are associated 

with maintaining the homeland . 9 Non-use of the right does not cause an abandonment or diminishment in the quantity of reserved 

water or scope of its use. Finally, the Winters right has a 

priority at least as of the date the Reservation was established 

which generally means the right is senior to whatever water rights 

7 Winters v. United States, 207 U.S. 564 (1908). 

8 Winters and its progeny largely focused on the application 

of the reserved right to surface water. While there is arguably no 

definitive ruling on whether the right attaches to groundwater, 

later cases and the rationale of Winters are compelling support for 

the conclusion that the right extends to groundwater supplies. 

survival of Indian Nations is the predicate of the right, not the 

physical location of the water. 

9 Quantification of the Winters right using the "practicably 

irrigable acreage" standard does not operate to limit use of the 

water for agricultural purposes, nor is the exercise of the right 

tied to the lands for which the quantification was performed. 

There are also notions that the right cannot be permanently 

alienated or transferred for use outside the Reservation which, for 

example, raise questions about leasing the water right. The issue 

of when a lease would contravene these restrictions is often 

clarified in legislatively-confirmed settlements by provisions 

defining tribal leasing authority . 

4 
162 

are held by non-Indians. 10 

The seniority of Winters rights is, of course, 

particularly significant in arid regions like Arizona where demand 

for water exceeds the lawfully available resource. All water 

withdrawn or diverted by non-Indians is clouded by claims of 

interference with senior Winters rights, with clear negative 

implications for State population growth and economic development. 

Short of pursuing an adjudicated result, typically after decades of 

litigation, the encumbering effect of the Winters right can only be 

removed through settlement of the Indian claims. 

B. Liability for Damage to Winters Right 

Legal accountability for Winters claims is shared by the 

United States, State and local governments, and private water users. Indian water resources are trust assets which the United 

States bears a trust responsibility to preserve and protect. The 

United States breached the fiduciary duty owed to Indian Tribes 

through a long-standing failure to prevent misappropriation of the 

Winters right by non-Indian diversions and groundwater withdrawals. 

Non-federal parties are also subject to liability, whether through 

adoption of water management practices which interfere with Indian 

rights or actual appropriation of Indian water resources. 

c. CAP as Source of Settlement Water 

Overdrafting groundwater and surface water diversion by 

non-Indian users have caused a severance (in some cases probably 

irreparable) of the mutual self-sustaining relationship between 

surface water and groundwater within the Nation. As a consequence, 

intermittent or perennial stream flows, available for Nation's use at or prior to the date when the Reservation was established, have 

long since disappeared, and many groundwater tables have dropped to 

points where the water resource is effectively depleted or only accessible at excessive lift costs. Remediation of the injuries to 

the water rights under these circumstances must focus on providing 

substitute water supplies, as well as taking necessary steps to 

preserve the Nation's remaining groundwater resource by limiting 

non-Indian withdrawals. 11 

Considering the legal obligations owed to the Nation and 

the nature of our water rights, at minimum the substitute water 

10 An earlier date of time immemorial, commonly called 

aboriginal priority, is based on the legal principle that Indians 

reserved all water and other rights historically held which were not expressly ceded to the federal government in the treaty or executive order establishing the Reservation. 

11 See discussion in following subsection II (D) . 

5 
163 

should carry those rights which are the fair equivalent to the 

Winters rights appurtenant to the misappropriated water.l2 

Further, the substitute supply should be delivered to a point on the Reservation where it is as reasonably accessible for use as the 

water it serves to replace. "Take-or-pay" obligations should 

neither be imposed on Indian priority water nor retained if nonIndian CAP water is used in settlements; the financial burdens of 

take-or-pay operate to force an effective abandonment of the water 

right which is incompatible with the Winters doctrine. Whatever 

capital, operational or other costs are associated with the 

delivery must be borne by those accountable for the damaged Winters 

right; the Tribe should not bear the burden of paying for its own 

settlement. 

In the context of CAP water as ~substitute source, the 

critical factor is fair equivalency in delivery reliability. CAP 

water originally allocated to Tribes, although within the highest 

priority designation shared by municipal and industrial ("M&I") 

water users, is a significant reduction from the clear seniority of 

the Winters right relative to M&I and all other water users. In 

times of shortage, non-Indian agricultural water has an even more 

junior call on available supplies. To avoid exhausting the pool of 

Indian settlement water, steps need to be taken to foreclose 

further reallocations, exchanges or other transfers to non-Indian 

end users; to supplement reliability of available supplies; and to 

adopt a framework for acquiring water now under contract. While 

recognizing that this temporarily implicates non-Indian water 

interests, the paramount water rights of Indian Tribes must be 

nonetheless protected by preserving an inventory of wet water for 

settlements. 

D. Non-Indian Groundwater Mining 

The prospects for concluding Indian water settlements are made even more problematic because of State water practices 

which condone the continued depletion of Indian groundwater. As a necessary condition to federal financing of the Central Arizona 

Project, the State of Arizona adopted a Groundwater Management Act 

which was intended to reverse historical overdrafting of 

groundwater by limiting withdrawals to levels compatible with safeyield. Water imported from the Colorado River through the central 

Arizona Project was to serve as the substitute source to meet user needs. 

The reality is that mining groundwater, and in 

particular Indian groundwater, continues unabated. For example, 

12 Failure to satisfy fair equivalency criteria raises 

credible claims for violation of the Fifth Amendment "takings" 

clause and breach of fiduciary duty. See United States v. Sioux 

Nation of Indians, 448 U.S. 371 (1980). 

6 
164 

the State has designated the Pinal AMA as a "managed" depletion zone which permits non-Indian pumpers to continue groundwater 

withdrawals at least to a depth of 1,200 feet. Unlike the Phoenix 

and Tucson AHA's, there is no requirement that Pinal reach safeyield. 

This water policy has a devastating effect on the 

Nation. The Chuichu area of the Sif Oidak District is adjacent to 

major off-Reservation irrigation projects. For decades, the nonIndian farmers have mined the Nation's groundwater. As a 

consequence the Chuichu sub-basin of the Nation's Santa Rosa basin, 

which hi'storically stored nearly one million acre-feet of 

groundwater, has now been virtually depleted. The groundwater 

levels in other portions of the Santa Rosa basin and the connected 

Aguirre basin within the Nation are drop~ing as well and risk 

suffering the fate of Chuichu if the non-Indian pumping is not 

restrained. 

As our water tables continue to drop, there is a 

commensurate increase in both our damage claims and the quantities 

of CAP water required to reach settlement. If depletion practices 

continue, we are faced with uncertainty regarding the extent of our 

groundwater loss in the future. This very uncertainty does not 

bode well for concluding a settlement in the near term. 

There is a current opportunity to restrict groundwater 

withdrawals in whatever renegotiated delivery subcontracts are 

entered in to for purposes of granting subsidized CAP rates to nonIndian agriculture. In addition, the Nation encourages the 

Subcommittee to consider federal legislation which mandates safeyield practices for all non-Indian users of CAP water. 

III. CONCLUSION AND RECOMMENDATIONS 

In the more than 11 years since SAWRSA was enacted, the 

United States has failed to identify a major portion of the water resources called for by the settlement. The dimensions of the 

Nation's Chuichu water claims have not been assessed by the federal 

government, and the quantities and terms of CAP water required to 

be reserved for settlement have not been identified. Policies and 

positions are being adopted or formulated, and delivery 

subcontracts renegotiated, which directly and significantly impact 

the Nation's water claims, all without direct participation by the 

Nation. The Nation is unalterably opposed to a continuation of a 

process which constrains us in protecting our legal interests 

except through occasional consultations or participation in 

advisory organizations. 

Significant issues affecting our water rights have been 

addressed and will be negotiated in the future under the guise of 

CAP restructuring. We have the legal right to be present at the 

7 
165 

tabl~ as a party to assure our interests are protected. 

Representation of our interests solely through the Bureau of 

Reclamation, the Bureau of Indian Af :-~ rs or other federal agencies 

is unacceptable. Our direct participation as a party is also 

compelled by the federal policies supporting Indian self-government 

and the government-to-government relationship between the United 

States and Indian Nations. 

With these considerations in mind, we recommend: 

1. Establishment of a federal team by the Secretary of 

Interior ·to develop the principles on which negotiations will 

proceed on CAP issues. The Nation and other affected Indian Tribes 

would be members of this team and direct participants in any 

ensuing negotiations, whether those negotiations are conducted with 

the State of Arizona, CAWCD or others. A primary task of the group 

would be to accurately identify the quantity of CAP water required 

to be reserved for Indian claims. 

2. Until an adequate reserve of CAP water is identified and 

set aside for Indian settlements, declaration of a moratorium by 

the Secretary on approval of all reallocations, exchanges or 

transfers of CAP water, as well as approval of CAP pricing 

adjustments or other modifications in non-Indian delivery 

subcontracts. 

We hope these proposals are received in the cooperative spirit 

intended and with an understanding of our objective to secure adoption of a constructive approach to CAP restructuring which 

gives substance to the stated importance of reaching settlement of 

Indian water claims. This concludes my statement. I would be 

pleased to answer any questions members of the Subcommittee might 

have. 
166 

Mr. MILLER. Mr. Preston. 

STATEMENT OF DANIEL PRESTON 

Mr. PRESTON. Thank you, Chainnan Miller, and the Arizona delegation, for many here today in Arizona. I am surprised that you 

were here to tour the lands, and I would hope that you would have 

had the opportunity to come to San Xavier to see our lands and, 

I guess, the concerns that we have dealing with the property in 

San Xavier. 

My name is Daniel Preston. I am the vice chainnan of the San 

Xavier District. The San Xavier District is one of the districts that 

make up the Tohono O'odham Nation. San Xavier is 72,000 acres, 

and we are broken up in tribal lands and allotted lands. There are 

60 percent of allotted in San Xavier and 40 percent of tribal lands. 

As you can see by my testimony, I am here representing my .district. Our community is about 1,300 plus individuals that live within our district. And I am also representing the San Xavier Fann 

Cooperative. We have 1,000 acres of fannland that are leased by 

individual allottees that own property in the San Xavier District. 

And also I am an allottee that is in the fann cooperative. I am 

also a member of the San Xavier District Allottee Association 

which is made up of the group of the 60 percent of landownership 

within San Xavier. And as you know, the Allotment Act was one 

of the things that has caused some concern between tribal governments and allottees dealing with water rights. 

As you know, there was a lawsuit that was filed in 1975, U.S. 

v. Tucson, which I guess was filed merely on lands that were irrigated by the allottees. To date, we have also filed a new lawsuit, 

which is Alvarez v. Tucson. The San Xavier water rights are still 

in active litigation as of today. And we have intensified our efforts 

to negotiate a final settlement before any judgment is issued on 

U.S. v. Tucson or Alvarez v. Tucson. 

The Southern Arizona Water Rights Settlement was passed in 

1982, and the allottees feel that we were not accurately represented at that point in time. The Southern Arizona Water Rights 

provides for delivery of 27,000 acre-feet of CAP water to San Xavier. Under section 305 of SAWRSA, it also states that 23,000 acrefeet of CAP or sewage water, effiuent water, is also to be given to 

the San Xavier area, totaling 50,000 acre-feet. 

Tucson, as far as we understand, needs to accept their CAP 

water as far as our district is concerned, because Tucson and 

ASARCO must stop depleting our groundwater. Otherwise, the objectives of the Arizona Groundwater Management Act cannot be 

met. As far as I understand, these laws and regulation are put on 

people we feel should be abided by, because we respect those laws 

and understand these laws to help protect the health and safety of 

human beings. 

We have, I guess, existed in this area which the O'odham people 

call Schuk Shon, which people now call Tucson. My community is 

called Wok, which translates into "the point of the water." And we 

as a people have lived side by side with our non-Indian neighbors. 

The defendants in our water litigation have proffered that, economically, since their relatively recent arrival in our area, by unlawfully taking our water supply, non-Indian use of our water has 
167 

changed the once flowing San Xavier River into a dead, dry arroyo 

because of the groundwater depletion. Green riparian zones are 

now completely gone, as is our mesquite forest, not to mention the 

wildlife, and also our culture and our traditions of the use of growing traditional crops for our people to feed ourselves. 

While Tucson lawns and golf courses are growing greener, our 

reservation becomes barren and polluted as the direct result of 

non-Indian development. We once irrigated and grew crops on more 

than 2,200 acres of our reservation. We now irrigate only 9.5 acres 

because of lack of water. Moreover, more than 200 fonnerly irrigated acres have been lost to erosion by the Santa Cruz River, and 

more than 600 acres of our fanns have been ruined by sink holes 

caused by groundwater overdrafting. 

We have major concerns over the Central Arizona Project water. 

One of them is, Will CAP deliveries be a pennanent water supply 

for us to use for the groundwater and the other waters that have 

been taken from us as O'odham people? Will CAP water decline in 

the future? Also, San Xavier must receive water for recreational 

and agricultural and other uses. And some of those other uses we 

are looking at seeing that we can bring back our riparian area that 

once grew a healthy mesquite forest within San Xavier. 

Also, in section 313 of SA WRSA, which is called the "Cooperative 

Fund," we feel that there isn't enough funding to pay back the 

OM&R for delivery of our water. We feel that this cooperative must 

be increased. The OM&R costs for Indian waters, we feel, should 

be kept at a minimum because of the damage to our lands as well 

as to us as a people. 

The SA WRSA section 305 water that provides for delivery of 

23,000 acre-feet of CAP or Tucson's sewage effiuent to San Xavier, 

we would like for Congress and/or the Secretary of the Interior to 

make a commitment now to deliver CAP rather than sewage. 

We feel that providing additional CAP to meet the demands of 

our Tohono O'odham Nation would help break the deadlock in our 

negotiations as we feel today. 

So I will go ahead at this time and ask the chainnan or committee members if I can answer any questions. 

Thank you. 

[Prepared statement of Mr. Preston follows:] 
168 

TESTIMONY OF DANIEL PRFSI'ON, REPRESENTING TilE SAN XAVIER 

RESP.RVA'I10N COMMUNITY, ON TilE CENTRAL ARIZONA PROJECI' 

Before the United States House of Representatives 

Committee on Natural Resources 

December 10, 1993 

My name is Daniel Preston. I was raised on the San Xavier Indian Reservation, where 

I now live. I am the Vice Chairman of the San Xavier District Council. The San Xavier 

District Council is the governin& body of the San Xavier Reaervation. I am also a member of 

the Board of Directors of the San Xavier Cooperative Association, which oversees the operation 

of the San Xavier Cooperative Farm. The Cooperative Farm is localcd on individually allotted 

Indian trust lands on the Reaervation. I am also an alloUee, a member of the San Xavier 

Allottees Association, and a plaintiff in both US y Iucsgn and Alyarez y Tucson. The San 

Xavier Allottees Association represents the 1300 individual Indian trust allotment owners on the 

San Xavier Reservation. 

I am here representing the Wa:k Vil1age community of the San Xavier Reservation, the 

San Xavier District Council, the San Xavier Cooperative Association and the San Xavier 

Allottees Association. Wa:k is the name of our ancient Tohono O'odham ViJ.la&e on the San 

Xavier Reaervation. 

I appreciate the opportunity to testify to this Committee and stall! our concerns about the 

CAP. 

The Eastern portion of the San Xavier Reservation was allotted to individual Indians in 

1891. In 1974 the United States filed suit against the City of Tucson and other groundwater 

users for damages and an injunction to protect the San Xavier Reservation allotment water 

supply. We are entitled to a large proportion of the average annual recharge to the Tucson 

Basin under the Winters Doctrine of reserved Indian water rights. 

98% of the irrigable land involved in US. y, 'Dicson is allotted. 

In 1982 Congress enacted the Southern Arizona Water Rights Settlement Act. SA WRSA 

offers a settlement in U.S, y Tucson which can only be fully implemented when U.S, y. Tucson 

is dismissed. 

U S y Tucson has not been dismissed, and is still in litigation, along with a recently 

filed companion case called Alvarez y Iucsgn. The San Xavier District and the San Xavier 

Allottees have opposed the dismissal of U,S, y D!GIIQQ, and we recently filed Alvarez y 

Iuggn, because SA WRSA does not offer a settlement that is acceptable to us. 

While we are confident that we will ultimately prevail in U S y Tucson and AJvarez y 

Iuggn, we recently intensified our efforts to negotiate a settlement of these cases. The San 
169 

Xavier Community believes that a workable settlement must be fashioned by all parties 

concerned and that our proposed amendments should be incorporated into any amendments to 

SA WRSA pasxd by Congress. We are hopeful that negotiations can be completed before any 

judgment is issued in U S y Tucson or Alvarez y Tucson. 

Under SAWRSA, the San Xavier Reservation is to receive either 27,000 acre-feet or 

50,000 acre-feet of CAP water annually. SAWRSA §303 provides for the delivery of 27,000 

acre-feet of CAP water. SA WRSA §305 provides for the delivery of an additional 23,000 

acre-feet of CAP water or Tucson sewage effluent. The Secretary of the Interior has the 

discretion to decide whether to deliver CAP water or sewage under SAWRSA §305. 

It should be noted that other entities in the Tucson Basin are supposed to use CAP water, 

not just San Xavier. This includes the City of. Tucson and 1he ASARCO Mining Company, both 

of whom are defendants in U S y Tucson and Alvarez v Thcsoo. It is essential that the City 

and ASARCO stop pumping and depleting our groundwater, and use their allocations of CAP 

water instead. Otherwise we will continue to seek a judicial remedy to prevent further mining 

of groundwater from beneath our Reservation. The Arizona Groundwater Management Act was 

intended to stabilize the groundwater table by reducing groundwater pumping to • safe yield. • 

This objective obviously cannot be met if the City, ASARCO, and the other major groundwater 

users do not switch to CAP water. 

Our non-Indian neighbors, the defendants in our water litigation, have profited 

economically since their relatively recent arrival in our area, by unlawfully taking our water 

supply. (We, the O'odham, have known this area since time immemorial. as Schuk Shon, which 

translates ·as Black Bottom Basin. Non-Indians now call it Tucson.) Non-Indian use of our 

water has changed the once flowing Santa Cruz river into a dead, dry arroyo because of 

groundwater overdrafting. Once green riparian zones are now completely gone, as is our 

mesquite forest. While Tucson lawns and golf courses grow greener, our Reservation becomes 

more barren and polluted as the direct result of non-Indian development. We once irrigated and 

grew crops on more than 2200 acres of our Reservation. We now irrigate only 9.5 acres 

because of lack of water. Moreover, more than 200 formerly irrigated acres have been lost to 

erosion by the Santa Cruz River, and more than 600 acres of our farms have been ruined by 

sinkholes caused by groundwater overdrafting. 

We han several IDIUor concerns about the CAP and Its impact on the San Xavier 

Reservation. 

Our first and greatest concern is about the ability of the CAP to continue delivering water 

to our Reservation over the long-term. The CAP water which SA WRSA is intended to provide 

to the San Xavier Reservation is a substitute water supply for our natural water supply, which 

has been unlawfully appropriated by the City of Tucson and other defendants in U S y Tucson 

and Alvarez y. Tucson. 

Our priorities are to restore our ancient agricultural economy, to expand our agricultural 

2 
170 

production if possible, to ensure an adequate water IUpply for our future, and to restore the 

riparian babitat in the Santa Cruz River .that groundwater overdrafts have destroyed. 

We must have the CAP water IUpply guuanteed on a permane11t basis. The very 

existalee of our community and our unique culture depends upon our water IUpply. If for any 

reason this water supply is not available at any point in the future, our community and our 

culture will die. 

We are aware that the CAP's priority for divenions from the Colorado River is very late 

- 1968, although Indian water holds a top priority within the CAP. We are also aware that as 

development proceeds in the Upper Basin states of the Colorado River drainage, the supply of 

water available to the CAP will decrease. Our very giQt concem is that as Upper Basin water 

use increases, and if climate change occurs, possibly brought on by global warming, there will 

not be enoup water to satisfy the CAP Indian water delivery requirement. There is also danger 

that a warmer climate in the Colorado River Basin and Arizona will seriously increase the 

salinity of water delivered to us down at the end of the CAP delivery system. We already 

anticipate some problems with using CAP water to restore our Reservation qricultural economy. 

Greater salinity may make it impossible for us to use CAP water for agriculture at all. The 

Tucson Daily Star reported last week that a possible IS to 20 percent decrease in Colorado River 

flows will cause a similar percentage increase in the salinity of CAP water. The salinity 

inCR"aSe will be even greater at the end of the delivery system, where we are located. For these 

reasons, we frequently ask ourselves if it is wise for us to agree to take CAP water at all to 

replace our natural water supply. 

We want specific assurances that the CAP will provide a permanent substitute water 

supply to the San Xavier Reservation. We also want accurate data to support any such 

assurances. Similarly, if the quality of CAP water delivered to San Xavier is likely to be any 

worse than we have been told thus far, we want to know that now, rather than later. 

Our second concern is that we have enough good quality water for domestic, recreational, 

and other uses requiring good quality water, including production of salt sensitive crops. CAP 

water is not good quality water, unless it is treated. 

Our third concern is that OM & R costs for the delivery of Indian water be kept as low 

as possible. Because CAP water is a substitute water supply for us, as part of the Southern 

Arizona Water Rights Settlement, it is to be delivered to our farms free of charge. However, 

the OM & Risto be paid out of the §313 Cooperative Fund under SA WRSA. The Cooperative 

Fund is not big enoup to pay the OM & R to deliver our full allocation of water for more than 

a few years, even at the present rate of $36 per acre-foot. If the OM & R cost for our water 

goes to $130 per acre-foot, as presently anticipated, the Cooperative Fund will only be able to 

pay for water deliveries for two or three years. The alternative is to increase the Cooperative 

Fund from its present $22 million to the $70 to $100 million range. This would require a 

minimum appropriation from Congress of SSO million. 

3 
171 

SAWRSA §303 provides for the delivery of 27,000 acre-feet of CAP water to San 

Xavier. SAWRSA §305 provides for the delivery to San Xavier of an additional 23,000 

acre-feet of 1'11caon's sewage effluent. SA WRSA allows the Interior Department to deliver CAP 

water instead of sewage effluent for the §305 water. In fact, we believe the parties who 

negotiated SA WRSA contemplated that an additional 23,000 acre-feet of CAP water actually 

would be delivered to San Xavier under §305, rather than the sewage effluent. This is in part 

because there is no provision for a system to delivery the effluent. Our fourth concern is that 

the Secretary of the Interior make a binding commitment at the earliest possible date to deliver 

CAP water rather than effluent under §305. 

We believe the BOR has an obligation to provide terminal storage for our allocation of 

CAP water under SA WRSA. No agreement has yet been reached with the BOR for terminal 

storage. Our fifth concern is that the BOR's terminal sto12ge obligation be fulfilled. 

Lastly, we believe that an additional allocation of CAP water could break the impasse 

in U.S. y, Tucson and Alvarez y, Tucson and lead to an agreement that would allow the full 

implementation of SA WRSA. SA WRSA has not been implemented - in part because the Tohono 

O'odham Nation claims to own all of the water to be delivered to San Xavier under SA WRSA. 

The organizations that I represent contend that most, if not all, of this water belongs to the 

individual Indian allottees on the San Xavier Reservation, and to the San Xavier community. 

San Xavier's SA WRSA water is intended to substitute for the natural water supply that the 

non-Indians have taken from us, and which is the subject of the litigation in U.S, y, Tucson and 

Alvarez y, Tucson. Our present deadlock with the Nation might be broken if more CAP water 

can be added to SAWRSA to satisfy the Tohono O'odham Nation's needs. I am asking this 

Committee to explore that possibility. 

Please consider our concerns carefully in any future legislation affecting the CAP and the 

San Xavier Reservation. 

4 
172 

ATTACHMENT A 

. Global warming threatens 

CAP wat~r, researchers say 

By Enrlc Volante 

1'11 AlizDna Oail)' StM 

. . 

Global w:uming could reduce tlowli 

1n the Colorado R1~-er, maldng less water and more salt now through the 

Central .6JizonA Project to ~ cities 

Ukc Tucson, a new study ays. 

Researchers found that the Colorado 

River basin is "extremely sensitive .. to 

changes in cllmate that could occur over the next few decades from the socalled greenhouse etf!(;t. 

The river Is the main water source ill a win that co~·ers 243.000 square 

:niles 1n the western United Swes and 

northern Me:dco. Parts of Tucson began gettil'lg Colorado Ri'l;er water via 

the CAP late last year. . 

The new study shows that riSing 

global temperatures would ha\·e dra· 

matic Impacts on hydroelectricity production, water salillity and reservoir 

levels, sai.d i>@cer Gleick, a senior research. as:;oclale onlie Pa<:ific lnsrttutt 

for Swd1es 1n De'lelopment. Environ· 

ment and.S4!curlty. based in Oakland. 

:Cai.it. 

' The non-profit instit".lte conduct~?d 

the Sl30,000 study over 2'0: years for 

:the U.S. Environmental Protection 

-Agency. 

: . Rl!.'lftl'C:!ter! found that e\·en thou~· )"ain and snow may -illcrea.se under glo-

-bal~ ~taneous increase ~ ~~~l!!.d :in water use by 

opWU.S wQuld·causc. a. net ctecrease or' 8 ~rcent-~ in sud2ce water 

runoff. 

··u flow d~crea.ses, the Central Ari· 

zona Project is one of the most \'Uinerable point3, ·· because other states ha\' .. 

higher·Prl?rl17 rights to Colorado Rive; 

\\-ater In timP.S ot shonage, Gleic:k saic 1n a telephone interview yesterdav. 

. And. unlike ~es in the upper ba· 

sm, the water IS already high in salts 

by the time It reaches lo"~~o-er·ba.sin 

states lib .-\rizona. 

If global warming reduces Colorad•) 

flows by 20 percent. sallitity would go 

up 15 pe::cent to 20 percent. Gleic!.< 

$aid. 

Lam· Dozier, assi$tant general !TWI· 

ager of the Cent%a.l Arizona \\"ater Conte!'\-s:ion Ol.st .''ict. wh.ic:h operates the 

CAP, said yesterday that the stud-. 

"doesn't tell us anything new or srar- tllng." ~ 

He s:ud 50.}-ear futl!casts by tho! 

federal Baeau of Reclamation. the .-\.1\. zona O>!pa:·trnent ot Water Resourc:-:~ 

and t.~e wate:- district .show tila: ti': ' 

C.l.l' will be able to pro\'ide a~ !c~·' 7~ 

perce:u of rhe :'IOrmal '1'\"ater supply-to 

cme:S and :r.t:es nearly all the ti..-n<!. 

r~ose ~dies do not consid~!' 1f\e 

pQlllllCillty of global warrnil'll! he ac;. knowle'!ged. _, 

But durll\g drought periods las:in~ • 

fe'l'\' :.re:us, Cities like Tucson can +iraporarily rerum to pumping ground wa- ter. he SOlid .• \nd If the water gets salfi- er. as predicted in the EPA study, p~

plo? ca."l still· drink It or cart elec:c to re· move the :talts, he said • 

. ·-- --.---=· - ·. ------ --·-·· .. . "'' _.. i .. 

{11};~ Jailu ~ Tueson,tsatUrday, December 4, 1993 
173 

Mr. MILLER. Thank you. Thank you all for your testimony. If I might ask you a questioncan you all comment on it-and that is: I have raised a number of 

times this morning this issue of the target pricing and how various 

panels thought that would play itself out over the long term. I just 

wondered if you have any thoughts on that. 

Ms. ANTONE. I guess I have to respond to that because one of the 

things I mentioned is that we haven't been a party at the table 

with other entities discussing this issue, and I think we should be 

afforded the opportunity. But that is something that we have to do 

a lot of studying on to see if it is feasible for our tribe. 

Mr. MILLER. What is the range of water prices, cost of delivery, 

that the reservations experience now? 

Mr. WHITE. The impact we have with the CAP delivery, three or 

four years ago, when we did the inter-connect during our drought 

season, raised up to about $38. 

Mr. MILLER. That is the price of water to the reservation? 

Mr. WHITE. That was the price charged. 

Mr. MILLER. What about in the case of the Tohono O'odham? 

Mr. PRESTON. We are not receiving the benefits of CAP water. 

Under SAWRSA, it was mandated that the United States deliver 

the Central Arizona Project water by October 12 of 1992. 

That date has since come and passed. As far as I know, there 

were technical amendments in Congress, I guess, to allow the deadline to be extended. 

And also there was agreement to go ahead and allow the Tohono 

O'odham Nation to lease the water that was supposed to arrive in 

San Xavier to the city of Tucson. 

As far as I understand, the farm cooperative and the San Xavier 

District do not approve of it. But as far as we understand, we are 

still waiting to receive the amount of water that was supposedly 

given to the district for, I guess, the groundwater and surface 

water that has since depleted. And we are still waiting since 1982, 

since the SA WRSA was passed. 

Ms. ANTONE. Our pricing is the same as the Cooperative Fund 

would pay for that on behalf of the Federal Government. But we 

haven't had any delivery of CAP water. So there is no delivery at 

this point. 

Mr. MILLER. Mark DeMichele, on behalf of the Governor's Advisory Committee, in his testimony, urged the expedited settlement, 

if you will, of the various water settlements outstanding. And one 

of my concerns today is, when I listen to the testimony, that Federal actions, whether they are unilateral actions or what have you, 

are anticipated or sought on behalf of both the plan of CAWCD, 

and to some extent the Governor's Advisory Committee but more 

importantly with the district, down the road. Either reallocating 

defaults, if they should take place, into O&M or target pricing 

could make Indian water settlements much more expensive for the 

Federal Government, if you look at the historical role of the Federal Government in those terms. 

And I say that in the context of two points. One is that politically 

when this committee brings to the House Floor Indian settlements 

of any kind-land settlements, water settlements what have youvery often they are not without controversy. Not everybody shares 
174 

the same concern or sense of obligation about Indian settlements, 

and very often Federal costs are raised that might not be raised on 

a similar action in a non-Indian situation. 

And that being the case, I guess the point I am trying to get to 

here is: It seems to me that the resolution of the issues surrounding the future of the Central Arizona Project and Indian water settlements have to be one and the same. 

Historically, these water projects have gone forward. This is a 

strange panel to be saying "first in time" to, but if you were first 

in time politically, if you will, and you had enough gall, you could 

take care of features that you wanted to take care of and other people just waited. In California that would mean that the environmental interests waited because there wasn't the political structure 

to force that issue. In North Dakota it became the Indian water 

features that were so prominently displayed at the outset to get the 

Congress to buy the Garrison Project. They were never dealt with, 

and it happened many years later where we said, "Wait a minute. 

You promised these things." 

Here again we are down to kind of the last of the Indian water 

settlements, and my opinion is-and I would like you to commentif we don't address all these issues together, it can be more difficult 

for Indian water settlements that come after this to get through 

the Congress than they would be if joined as a comprehensive solution. 

I don't know whether you agree with that or not. That is just my 

opinion after listening to several days of comments and this morning's testimony. 

You are free to comment or not. 

Mr. WHITE. From the onset of our negotiation when we started 

talking about Indian water f3ettlements, we felt at that time that 

we needed to separate the Indian water settlements issue apart 

from the CAP allocations for a long period of time, simply because 

we felt that our Indian water rights issue was the litigation, and 

it was composed of what the Federal Government foresees as a 1.5 

million acre-feet entitlement for our Community; and the other 

being a contracted position through the United States Government. 

Mter much negotiation, we arrived at a 253,500 acre-feet water 

budget, on the concept that we all agreed to it and came to some 

terms with our surrounding cities and towns. 

We felt that the CAP was part of the Gila River Indian Community. And if it is possible, we would preserve the rights of the cities 

and towns to use that CAP for that Indian water settlements, 

which would probably be acceptable. 

And also working on these bases, we were given the opportunity 

to market and to compete administratively in the affordable pricing 

as anyone else is. And as far as our contract with the United States 

Government, as far as farmers with the CAWCD, their entitlement 

is as much, and maybe ours is more, with the United States Government than the farmers of the State of Arizona. 

Mr. MILLER. So you would argue to continue to keep them separate? 

Mr. WHITE. Right. Now I think we will come to the terms that 

we would probably link them together and see what can be solved 

out of the whole solutions, you know. As we said in the Advisory 
175 

Committee for the State of Arizona, I think what we talked about, 

this water is in the State of Arizona, it belongs to us, we are all 

in it together. And I think that part of the thing is, you know, if 

you maintain reasonably to see that the State wants to see the 

water stay in Arizona, maybe they need to comply and swallow the 

whole hardship that nobody wants to touch it, they need to put it 

into Indian water settlements. 

Mr. MILLER. Ms. Antone. 

Ms. ANTONE. I think SAWRSA kind of addresses this problem already for us, both during the litigation and also the allocation of 

CAP water; and I think that, speaking on behalf of the Nation, 

even though we do have our internal problems, we have accepted 

SA WRSA. And I think that the implementation is the problem that 

we are having. How do you start implementation settlement? And 

especially in our allocation there are certain things that need to be 

done under SA WRSA. 

So the management plan for the main reservation, and one of the 

problems we have been having is funding for that. 

So it already addressed that issue. And I think the Nation is satisfied with that. 

Mr. MILLER. You will keep the cards you have been dealt so far? 

Okay. 

Mr. Preston. 

Mr. PRESTON. Chairman Miller, at this time I would like to introduce our attorney. His name is Mr. Thomas Luebben, and I don't 

know if he has any comments to that also. But I would just like 

to say that, as far as San Xavier is concerned, within SA WRSA, we 

feel that the CAP water that has been offered to us and also the 

effiuent is for payment for, as far as we can see, the loss of our 

groundwater and also the damage, I guess, what has happened 

with our surface water. 

I don't know if Mr. Luebben might want to add anything to that. 

Mr. LUEBBEN. Well, I think with respect to Chairman Miller's 

question, it appears that all of these problems are rather inextricably linked. Certainly what happens at San Xavier is dependent to 

a great extent on how the pricing arrangements were made. 

And we appreciate the committee's concern or the concern that 

has been expressed about the proposal that CA WCD has made 

which will allocate a greater proportion of the OM&R to the Indian 

water than would otherwise be the case under the original arrangements that were contemplated. 

That has a serious impact on San Xavier because the Cooperative 

Fund of section 313 of SAWRSA is inadequate. It is supposed to 

deliver the water free of charge to San Xavier as a substitute water 

supply for the water that was taken by the defendants in U.S. v. 

Tucson and Alvarez v. Tucson. 

But if the price for OM&R goes to the projections that CAWCD 

has provided and if the full 50,000 acre-feet allocated to San Xavier 

is delivered, the Cooperative Fund will be very quickly depleted in 

as little as three years. 

Some concern has been expressed by the Gila River representative which ties into what you, Mr. Chairman, have said about Congress' current financing problems. There is concern that Congress 
176 

won't necessarily fund the Cooperative Fund for the indefinite future to maintain the full delivery of the 50,000 acre-feet of water. 

That assumption is made that Congress will do that. But when 

you look at SAWRSA and you look at section 313, you see this is 

not an airtight deal, and it does not guarantee water to San Xavier 

as a substitute water supply for all future time or even very much 

beyond three years. 

Mr. MILLER. Thank you. 

Karan. 

Ms. ENGLISH. In your testimonies and your written testimony, 

there has been a continuing, perhaps lack of dialogue, between the 

CA WCD and your concerns; and all three of you have expressed 

that. I am hoping a corner has been turned with the Governor's report and some of the proposals that were made, especially with the 

Indian Settlements Office. And this probably won't give you enough time to respond to it 

today, but I would like to hear from each of you regarding other 

recommendations that might be made so that we can start to resolve some of the negotiations or even resolve the problem of sitting 

at the same table to negotiate, which I think was something you 

were alluding to. 

[EDITOR'S NOTE.-See Appendix.) 

This isn't a question. I apologize, Mr. Chairman. I am making a 

statement here. I think that it is key to getting CAP back on the 

right track, and us resolving some of our problems at home. And 

so I would be very interested in any follow-up that you might have 

that I might facilitate this process moving on. 

So I thank you for your comments today and look forward any 

additional comments you might have in helping us get over this 

hump. 

Thank you. 

Mr. WHITE. In reference to your questions on how we may better 

identify our relations with CAWCD, I think we used the term here 

in Central Arizona of the Five Tribes. Under that concept, these 

are Indian tribes that are, at one time, looking at contracting with 

the CAP water. 

We have initiated the implementation of an Indian board, which 

is in my statement as our position. And under those terms, we 

could be recognized under the terms of what we feel is the best, 

you know, to be heard and to be recognized and to be understood 

under the terms of what we need to negotiate under on these CAP 

conditions. 

And we are right now in the preliminary stages of organizing the 

board and having a charter and organization and memberships and 

all of that that goes with it. 

Ms. ENGLISH. Thank you. 

Mr. MILLER. Mr. Stump. 

Mr. STUMP. Thank you. I have one quick question of Ms. Antone. 

In your testimony, you advocate a moratorium on all allocations 

and exchanges and CAP pricing adjustments. 

Do you think this would limit the flexibility of CAWCD to address the repayment issues? 
177 

Ms. ANTONE. I guess our comment on that is that we are just trying to preserve the status quo until we do go to the negotiation tables. 

On this issue, like I said, we haven't been consulted as a Nation. 

I sit on the Tribal Council; and it is always important that we discuss these issues government-to-government, you know, whether it 

is the F~deral Government, the State Government. I think that is 

the role that I perceive, that we do come to the negotiating tables 

and sit down and discuss these issues, because a lot of the discussions that were held before, it was the first time hearing about 

these discussions, and a lot of it has to do with Indian water settlements or Indian allocations. Mr. STUMP. I would hope we could do these together, as you said, 

and work them out; but not just declaring a moratorium on all 

changes. I think that would slow down the whole process. 

Thank you. Mr. MILLER. Thank you very much for your testimony and your 

help with the hearing. 

Mr. PRESTON. Mr. Chairman, I would just like to, again, invite 

you to come to our district and tour our lands and also to the rest 

of the Arizona delegation. 

Thank you for having us. 

Mr. MILLER. Thank you. 

The next panel will be made up of Mr. Dale Pontius, who is the 

vice president and conservation director for American Rivers; Mr. 

Mark Schnepf, from Queen Creek, Arizona; and Mr. Roger S. Man- ning, executive director of the Arizona Municipal Water Users Association. 

Again, your full statements will be placed in the record. Proceed 

in the manner in which you are most comfortable. 

Dale, we will begin with you. 

PANEL CONSISTING OF DALE PONTIUS, VICE PRESIDENT FOR 

CONSERVATION PROGRAMS, AMERICAN RIVERS, WASHINGTON, DC; HON. MARK SCHNEPF, MAYOR, TOWN OF QUEEN 

CREEK, AZ; AND ROGERS. MANNING, EXECUTIVE DIRECTOR, 

ARIZONA MUNICIPAL WATER USERS ASSOCIATION, PHOENIX,AZ 

STATEMENT OF DALE PONTIUS 

Mr. PONTIUS. Thank you, Mr. Chairman. Thank you for allowing 

us to be with you today. We are pleased that members of the delegation could attend this hearing and that you personally have 

taken the time to come to Arizona to hold the hearing and view the 

project personally. 

I am Dale Pontius, vice president of conservation programs for 

American Rivers. We are a nonprofit organization dedicated to the 

restoration of America's rivers. From our southwestern regional office here in Phoenix we have been engaged in a number of initiatives to enhance America's streams and rivers which are worthy of 

protection and are very relevant to this discussion today. 

I would be remiss if I didn't mention to you today what we would 

suggest would be one of the Federal responses to the continuing 

degradation of Arizona's aquatic ecosystems, and that is a proposal 
178 

that has been developed by a broad coalition in Arizona, the Arizona Rivers Coalition. We have worked closely with Congresswoman English and other members of the delegation to develop 

this legislative proposal which we hope will be enacted in this Congress. I would love to have you take a copy of this home with you 

so you can see what has been going on here as well. I will provide 

that to your staff. 

[EDITOR'S NOTE.-See Appendix.] 

As I mentioned, there is strong interest in Arizona for rivers and 

streams and aquatic ecosystem protection; and public opinion polls 

have demonstrated in the last several years that there is strong 

public support for this. Earlier today the Heritage Act was mentioned. It was passed by initiative by the voters in 1960 with a very 

strong percentage of approval. And people are constantly being 

made aware that our aquatic resources are also increasingly important economic resources and dollars are developed in local revenues 

through recreation and tourism every year, in addition to providing 

critical habitat for our flora and fauna, some of which are globally 

rare in this State. 

I want to point out a couple of issues of concern to the conservation community to sort of focus on and accent the situation with 

the watersheds and aquatic resources of this State. I believe the 

factual history of the decline of our western and Arizona aquatic 

systems has been well documented in Federal and State reports. I 

want to give a couple of examples here for the committee to underline the fact that, in our opinion, Arizona still has serious environmental water management problems to deal with. 

First of all, scientists estimate that as much as 90 percent of Arizona's lower elevation riparian areas where cottonwoods, willows, 

and mesquite forests once grew have been damaged. You heard testimony from the last panel about this occurring in the San Xavier 

District near Tucson. A recent Game and Fish Department study 

well documents the fact that there is very little of this habitat left 

in the State. All of the known fresh water fish species in the Gila 

River basin, which includes most of the State and overlaps the 

project area, are either extinct, federally listed as threatened or endangered, or recommended as candidates for Federal listing. To our 

knowledge, no other river basin in the world has this dubious distinction, at least not in this country. 

The State of Arizona still does not legally acknowledge there is 

a hydrological connection between groundwater pumping and surface water; thus surface water rights, including in-stream flow 

rights based on State law, are vulnerable to continued and new 

groundwater pumping. The Arizona Supreme Court ruled recently 

that only the legislature can change this bizarre bifurcated system 

that does not recognize hydrologic reality. We believe this is probably unlikely to happen any time soon. 

Groundwater pumping is still regulated, as was mentioned earlier, in only four active management areas in the State; and in one, 

Pinal County, planned depletion is the management goal. Such 

withdrawals continue to threaten critical rivers and streams such 

as the upper San Pedro River, a nationally significant biological 

treasure designated as a National Conservation Area by Congress, 

and the upper Verde River, a portion of which is Arizona's only 
179 

designated Wild and Scenic River. The San Pedro is unquestionably threatened by development in the Sierra Vista-Fort Huachuca 

area, where hydrology studies show a growing cone of depression 

drawing down the river's flow. 

Finally, the Arizona Legislature has failed to enact needed legislation to protect and clarify the statutory basis for in-stream flow 

water rights and to protect riparian areas from further degradation, nor has it enacted a State rivers protection program, as have 

33 other States. 

I point these items out to you, Mr. Chairman, to point out that, 

in our opinion, time is running short for Arizona's remaining 

aquatic ecosystems and for the protection of the diversity of species 

so dependent on them. We in the conservation community have 

been urging action on riparian protection and restoration for many 

years. 

Some of us watched your bill, H.R. 429, last Congress very closely as you successfully were able to restructure the Central Valley 

Project in California and the Central Utah Project to require a portion of those funds from those projects to be dedicated to fish and 

wildlife enhancement and watershed restoration. These provisions 

of the Reclamation Authorization and Adjustment Act of 1992 were 

an historic achievement toward changing the way Federal water 

projects in the West are managed. 

When the Central Arizona Project was authorized in 1968, 25 

years ago, as a part of the Colorado River basin, few people were 

thinking of these kinds of programs. However, at that time, in the 

act, one of the project purposes set forth was the "conservation and 

development of fish and wildlife resources." 

Yet 25 years and over $4 billion later, there has been little, if 

any, money from the Central Arizona Project devoted to carry out 

that express purpose. AB has been indicated earlier, project funds 

have been used to mitigate for damages from the project facilities 

as it was built; and in some cases those have been substantial. But 

such mitigation is required and expected in any such project. 

The CAP, the Nation's most expensive water project, was designed to provide an alternative water supply for the central part 

of the State, to halt the overdraft of groundwater basins; but at the 

time, no thought was given nor money directed to actually redressing the impacts of prior development of the water resources of this 

State on the environment. And today this still stands as an unmet 

obligation. 

Given the fact that the project is virtually complete, it is difficult 

to redesign the project features to address the unmet environmental needs. It can be done in some cases. It is possible to address these needs through reallocation of some of the CAP water 

and by funding the watershed conservation trust fund, as has been 

referred to today by a number of witnesses, to carry out the fish 

and wildlife and watershed restoration programs that were in fact 

authorized by the law. 

As the debate has developed in recent months over how to restructure the project financially and assist in the agricultural problems, American Rivers and other conservation groups have begun 

to analyze ways that the project could be restructured so that 

water could be marketed not only to repay the Federal debt on the 
180 

project but also to provide a source of funds for the long neglected 

environmental needs and a source of water as well. 

I am going to try to summarize the rest of my statement. Rob 

Smith did include a lot of these comments about the debate in the 

Governor's Advis!Jry Committee. Let me just say we did support, in the committee and as was recommended, principles for providing for allocation of CAP water for 

the conservation and development of fish and wildlife resources. 

We had recommended 150,000 acre-feet approximately of CAP 

water to be set aside, a large part of that to be used on the main 

stem of the Colorado River, and some to be used in central Arizona. 

We think working with the Bureau and the District and the State 

water department, we could develop, within a reasonable time, projects where this water could be used. 

For example, the San Pedro River is an obvious candidate. There 

is water needed to replace the water supply by that area, if we are 

going to do something about the fact that that river is absolutely 

jeopardized by continued growth in that area. 

We also suggested that the trust fund be created to finance other 

measures, a number of measures which we recommended as examples in our report. Without elaborating on those I will, with your 

permission, Mr. Chairman, include in our written statement a copy 

of the report which elaborates some of these examples of how this 

money could be used. 

[EDITOR'S NOTE.-See Appendix.] 

We also suggested a number of possible funding sources in that 

report which include surcharges on interstate and intrastate leases, 

forbearance agreements, water recharge agreements involving the 

CAP entitlement, pump tax, surcharges on excess power sales, surcharges on intrastate transfers of CAP contracts like the recently 

discussed Payson transfer. 

There are many sources we believe where the District and State 

can look to for revenue sources to create and have available a reasonable level of funds for this purpose. That would, I think, include 

participation by the Federal Government, participation by the Bureau of Reclamation, by its appropriation process, given the fact 

that this is a valid program purpose under the Project Act. Ai; you know, we do believe a permanent trust fund is necessary 

as a component of any overall resolution of this issue. And we are 

hopeful that this can be done within the dialogue that has been 

discussed here today. But we would certainly like to hold out the 

possibility that that must be done at the Federal level if the State 

does not act in a manner that is acceptable to the public interest. 

Thank you. 

Mr. MILLER. Thank you. 

[Prepared statement of Mr. Pontius follows:] 
181 

American 'Rf!:!rs 

TESTIMONY OF DALE PONTIUS 

VICE PRESIDENT FOR CONSERVATION PROGRAMS 

AMERICAN RIVERS, INC. 

OVERSIGHT HEARINGS ON THE 

CENTRAL ARIZONA PROJECT 

BEFORE THE SUBCOMMITTEE ON 

OVERSIGHT AND INVESTIGATIONS 

HOUSE COMMITTEE ON NATURAL RESOURCES 

Phoenix, Arizona 

December 10, 1993 

80 I I'ENNsvl.VANIA AVE., S.E. 

sum400 

WASHINGTON. DC 20003 

(202) 547-6900 

(202) 543-6142 (FAX) 

~~·~·· 

, •. a member of Earth Share'" 
182 

Thank you, Mr. Chairman, for the opportunity to appear here today 

and provide American Rivers' views on the Central Arizona Project 

(CAP). We are extremely pleased that you took the time to come 

to Arizona .:md to hold this hearing on the s·tatus of the CAP. 

I am Dale Pontius, the Vice President for Conservation Programs 

for American Rivers. As you know, American Rivers is a national 

nonprofit conservation organization dedicated to the preservation 

and restoration of America's rivers. From our Southwestern 

regional office located here in Phoenix, we have been engaged in 

a number of initiatives to protect and enhance Arizona's 

remaining streams and rivers - and there are many still very 

worthy of protection - and the restoration of at least some of 

the State's aquatic and riparian heritage. 

To this end, we have worked with a statewide "rivers coalition" 

of citizens and groups to develop a proposal that has been 

forwarded to the Arizona Congressional delegation recommending 

the designation of some 40 rivers and streams in Arizona as Wild 

and Scenic Rivers by the Congress. We have worked closely with 

congresswoman Karan English, as well as other members of the 

delegation, to move this proposal to the legislative arena, and 

we remain confident that a comprehensive Arizona Wild and Scenic 

Rivers Act can be passed in this Congress. 

-- 1 --
183 

Indeed, public opinion polls demonstrate there is strong public 

support for efforts to protect the State's remaining free-flowing 

rivers and streams. These areas are an increasingly important 

economic resource to the State as well, developing millions of 

dollars in local revenues through increased recreation and 

tourism, in addition to providing critical habitat for a rich 

diversity of flora and fauna - some of which are globally rare. 

Most of the watersheds and aquifers of this State have been 

systematically developed and over-appropriated over the past 100 

years to support the State's economic growth. Arizona developed 

an economy based on irrigated agriculture, mining and grazing; 

the three C's - cotton, cattle, and copper - dominated the 

economy and politics in Arizona for decades. More recently, 

water has been needed to support rapidly growing urban areas, 

golf courses, and new industry. 

Indeed, the State's principal surface water resource, the SaltGila system, was developed as one of the earliest projects 

authorized under the Reclamation Act of 1902. The Salt River 

Project resulted in a string of dams, impoundments and diversion 

canals that I am sure you observed during your inspection tour in 

the State this week, along with those flooded lawns in urban 

areas of the valley that were once farms. The now dry Salt and 

Gila River beds are lasting monuments to the growth of Central 

Arizona - and reminders of what such development has meant for 

2 --
184 

similar natural river systems throughout the west in the last 

century. 

The factual history of the decline of Arizona's natural aquatic 

and riparian systems is well documented in a variety of state, 

federal and other published reports. A few facts should suffice 

to illustrate this, as well as to demonstrate that Arizona still 

has serious environmental and water management problems. 

• Scientists estimate that as much as 90% of Arizona's lower 

elevation riparian areas where cottonwoods, willows, and mesquite 

forests once grew have been damaged or destroyed due to 

development or dewatering. 

• All of the known native freshwater fish species in the Gila 

River basin, which includes most of the State and overlaps the 

project area, are either extinct, federally listed as threatened 

or endangered, or recommended as candidates for federal listing. 

To our knowledge, no other river basin in the world has this 

dubious distinction. 

• The State still does not legally acknowledge there is a 

hydrological connection between ground water pumping and surface 

water; thus surface water rights, including instream flow rights 

based on State law, are vulnerable to continued and new 

groundwater pumping. The Arizona Supreme Court ruled recently 

-- 3 
185 

that only the Legislature can change this bizarre bifurcated 

system that does not recoqnize hydroloqic reality. This is 

unlikely to happen anytime soon. 

• Groundwater pumping is still requlated in only the four 

active management areas in the State (and in one, Pinal County, 

planned depletion is the management goal). such withdrawals 

continue to threaten critical rivers and •treams such as the 

upper San Pedro River, a nationally siqnificant biological 

treasure designated as a National Conservation Area by congress, 

and the upper Verde River, a portion of which is Arizona's only 

designated Wild and Scenic River. The San Pedro is 

unquestionably threatened by development in the Sierra Vista -

Fort Huachuca area, where hydrology studies show a growing cone 

of depression drawing down the river's flow. 

• The Arizona Legislature has failed to enact needed 

legislation to protect and clarify the statutory basis for 

instream flow water rights and protect riparian areas from 

further degradation, nor has it enacted a state rivers protection 

law, as have 33 other states. 

Mr. Chairman, time is growing short for Arizona's remaining 

aquatic ecosystems and the diversity of species so dependent on 

them. It is past time that the political leaders in this State 

-- 4 --
186 

acknowledge that the protection of our remaining streams and 

rivers is indeed an important public policy and give it priority. 

As you know, in 1980 the Arizona Groundwater Management Act 

(GWMA) was enacted to bring groundwater pumping under control and 

to reduce the overdraft of that resource as a condition of 

continued federal funding to complete the CAP. 

Despite the hoopla surrounding this monumental legislative 

achievement (due in large part to the leadership of our thenGovernor Bruce Babbitt), the Act studiously avoided dealing with 

any impacts of groundwater pumping on the surface waters of t:he 

State. It left that issue for another day - which is yet to 

arrive. It also did not deal with water management or water 

conservation for other areas of the state outside the four 

legislatively created active management areas, which is where 

most of the remaining surface water is located. And there is no 

question - especially among hydrologists - that the continued 

pumping of groundwater threatens to dry up or seriously dewater 

some of these rivers and streams if nothing is done. 

The conservation community in this State has been urging action 

on riparian protection and restoration proposals for years. Many 

of us watched closely as Congress voted last year to restructure 

the Central Valley Project and the Central Utah Project and 

require that a portion of project water and funds be dedicated 

-- 5 
187 

for fish and wildlife purposes and watershed restoration. These 

provisions of the Reclamation Projects Authorization and 

Adjustment Act of 1992 were significant steps toward chanqinq the 

way federal water projects in the west are to be manaqed in the 

future. 

However, it is now 13 years since the GWMA was adopted and the 

CAP is all but completed; and Arizona still does not have its 

water manaqement house in order. 

Restructuring the CAP 

The CAP was authorized by conqress 25 years ago by the Colorado 

River Basin Project Act. One of the project purposes set forth 

in that law was the •conservation and development of fish and 

wildlife purposes.• Yet 25 years and S4 billion later, not a 

dime has been spent to carry out that express purpose. Project 

funds have been spent to mitigate the impacts of this vast 

project on wildlife habitat and the environment, but such 

mitigation is required by law to offset any future damaqe to such 

resources. 

While the nation's •ost expensive federal water project was 

designed to slow or halt the overdraft of qroundwater basins in 

central Arizona, no thought was given and no money directed to 

alleviating and redressing the impacts of past development on the 

- - 6 --
188 

State's depleted water resources, most notably the rivers and 

streams of central Arizona, the Santa Cruz, Gila, and Salt 

Rivers. Today, this still stands as an unmet obligation. 

Obviously, given the fact that the project is virtually complete, 

it is difficult to redesign project features to address the unmet 

environmental needs. But it 1§ possible to address these needs 

through some creative reallocations of c~ water for these 

purposes and by funding a Watershed Conservation Trust Fund to 

carry out other restoration and wildlife conservation programs. 

As it became more and more obvious that the CAP was in serious 

financial trouble because of low demand - especially among 

agriculture interests - for the CAP water, American Rivers and 

other conservation organizations and concerned citizens began to 

analyze ways that the project could be restructured and the water 

marketed not only to repay the federal debt on the project, but 

also to provide some of the surplus water ~ a source of funding 

to meet long-neglected environmental needs in the State's 

watersheds and to promote water conservation. 

When Governor Symington appointed the CAP Advisory Committee last 

January, we were chagrined to learn that there were no 

representatives of the conservation community on the committee 

and that environmental concerns did not appear to be part of the 

agenda. Later, at our request, four conservation group 

7 --
189 

representatives were added to the 33-member committee, and an 

environmental subcommittee was appointed to deal with these 

concerns. I do want to take this opportunity to thank the CAP 

Advisory Committee Chair, Mark DeMichele, and the Environmental 

Subcommittee Chairman, Jack ·Pfister, for their support of these 

concepts and their patience and efforts to see that these issues 

were considered by the Committee . 

A report with recommendations that was endorsed by a number of 

conservation groups, including American Rivers, the Arizona 

Chapter of The Nature Conservancy, the Sierra Club, was submitted 

to the Environmental Subcommittee. The principal recommendations 

submitted by the conservation community can be summarized as 

follows: 

CAP water should be reallocated for the conservation and 

development of fish and wildlife resources 

We recommended that approximately 150,000 acre-feet (AF) of CAP 

water be set aside to meet fish and wildlife needs on the 

mainstem of the Colorado River plus an additional 25,000 AF 

reserved for such needs in central Arizona. The report suggested 

a number of ways this water could be put to beneficial use, such 

as to maintain the viability of the Cienega de Santa Clara in the 

Colorado River delta and to enhance endangered fish and wildlife 

habitat in various wildlife refuges along the Colorado River. 

-- 8 --
190 

We believe that utilizing much of this water on the mainstem 

Colorado for federal purposes will also have a very positive 

impact as to repayment and could reduce the CAWCD's repayment 

obligation significantly. In turn, some of the costs to the 

federal government conceivably could be offset by savings from 

mothballing that white elephant known as the Yuma Desalting 

Plant. This could be a major "win-win" for the CAWCD and the 

federal taxpayers. 

We also suggested that CAP water should be put to beneficial use, 

either directly or through exchanges, in the central part of the 

State to protect, enhance or restore stream segments and riparian 

habitat. For example, a CAP allocation to the City of Sierra 

Vista could be used, through an exchange or transfer, to enable 

the city to develop an alternative water supply or recharge 

project to protect the San Pedro River from groundwater pumping. 

The Governor's Advisory Committee did recommend that three levels 

of CAP water for environmental purposes be evaluated: 50,000, 

100,000, and 150,000 AF, an.d acknowledged in its report that such 

uses could reduce the District's repayment obligation. The 

CAWCD, however, does not support any CAP water being used for 

projects on the mainstem Colorado. 

-- 9 --
191 

Bstablish a Watershed conservation Trust Pund 

A Watershed Conservation Trust Fund is needed to finance measures 

to conserve, protect and restore Arizona's aquatic and riparian 

resources, including paying any costs associated with the use of 

transporting CAP water for such purposes. We recommended an 

annual funding level of $15 million and suggested examples of 

potential projects that could use such funds. We also suggested 

possible funding sources, including: surcharges on interstate or 

interbasin leases or forbearance agreements and water recharge 

agreements involving Arizona's CAP entitlement; pump taxes; 

surcharges on excess power sales; and surcharges on intrastate 

transfers of CAP contracts. There are many other sources the 

District and/or the State can look to for revenue sources for 

this fund, including participation by the Bureau of Reclamation 

through annual appropriations for the CAP. 

The Governor's Committee made significant changes to the 

recommendations proposed by the conservation representatives of 

the Environmental Subcommittee, not the least of which is capping 

the fund at $8 million a year and limiting it to $500,000 at its 

inception. Indeed, initially the Committee voted against any 

such fund, rejecting the Environmental Subcommittee 

recommendation to evaluate three levels of funding - $5, 10 and 

15 million. Upon reconsideration, the Committee approved an 

-- 10 --
192 

initial fund of $500,000 with a cap of $8 million and added 

several restrictions. 

We continue to believe that $15 million a year is the level of 

funding that is ultimately necessary if we are to make a 

significant difference in enhancing our watersheds and that $8 

million a year should be funded within five years. While it may 

be necessary to gradually build to that l~vel, there does need to 

be sufficient funds available to carry out studies and planning 

in the first few years. The CAWCD is yet to endorse any type of 

trust fund for watershed conservation and enhancement. 

American Rivers believes that funding the protection and 

restoration of Arizona's rivers and streams is at least as 

important as subsidizing irrigation water users so the state can 

gain more "interest-free" water. American Rivers believes that 

establishing a permanent Watershed Conservation Trust Fund is an 

absolutely essential component of any overall resolution of the 

CAP issues. 

And, Hr. Chairman, we think the Congress should not hesitate to 

establish such a fund (as was done in Utah and in California last 

year when your bill, H.R. 429, was enacted), if the State of 

Arizona fails to establish an adequate fund. 

-- 11 --
193 

one of the more critical issues is what kind of board or 

committee will decide how the conservation fund is spent. Under 

Title III of H.R. 429, a state level board, called the 

"Reclamation, Mitigation and Conservation Commission," was 

created to administer a similar fund in Utah. The members are 

appointed by the President from lists submitted by the state, but 

must include people with specific expertise in fish, wildlife and 

environmental conservation matters. We do not oppose a state 

oriented entity to administer the fund, such as in Utah but we 

thir~ the key is that the entity created to administer this fund 

needs to have this expertise and not be set up to try to achieve 

balance between different water users groups. To comply with the 

federal interest that the watershed problems in Arizona be 

addressed as part of any comprehensive solution, this entity must 

be weighted heavily in favor of this professional (and nonadversarial) conservation expertise. 

We have no objection to creating a State rather than a federal 

fund and entity (such as the Fish & Wildlife Foundation) to 

administer the fund as long as that entity has a clear mandate to 

use the fund for the enhancement of Arizona's watersheds and has 

sufficient scientific and natural resources expertise. I wish I 

could tell you today that I am optimistic that all this can be 

accomplished soon through state legislation.. Realistically , 

however, unless t.he CAWCD, the Governor's CAP Advisory Committee, 

and the Governor fully support this effort and work with us to 

-- 12 --
194 

make it happen, it faces tough sledding in the Arizona 

Legislature. 

We believe all users, including municipal, industrial and 

agricultural users, should pay some portion of the cost of the 

Watershed conservation Fund. By way of example, in California, 

CVP agricultural users are assessed a minimum of $6.00 an acrefoot for restoration surcharges, and M & I users pay at least 

$12.00 an acre-foot. If you were to add a surcharge toM & I use 

in Arizona of only $5.00 an acre-foot, it would add less than 

$.50 a month to the average homeowner's water bill. However, it 

also seems likely that a significant percentage of this cost 

could be paid by power consumers and water users elsewhere if 

market forces are allowed to work. 

We regret the Governor's Advisory Committee chose not to endorse 

the opportunities that exist for marketing some of Arizona's 

unused CAP water to other thirsty cities in the lower basin to 

alleviate pressures for new water development from other sources, 

such as the Virgin River. Moreover, surcharges on such 

transactions could provide a substantial source of revenue for 

the fund. 

There is an additional issue that this Committee needs to be 

aware of and which we hope the State and the Bureau will add to 

their list of unresolved issues. currently, there are no 

-- 13 --
195 

guidelines or opportunity for public review of any proposed 

transfers of. CAP snb-contracts such as ·the proposed transfer of 

the Payson allocation to the City of Scottsdale. There are 

significant e-nvironmental impacts associated with these 

agreements, especially when the transferor (such as the Town of 

Payson) will receive money instead of water to develop an 

alternative water supply. We are concerned about how and what 

supply is to be acquired, whether there will be NEPA compliance, 

and wheU-.er we and other citizens will have the opportunity to 

comment before the deal is done. Also, we think it important 

that such transactions be subject to a surcharge for the 

Watershed Conservation Fund, as the Bureau proposed with the 

Payson transaction, although we are not prepared to say that 7.5% 

is the right percentage in each case. In short, we think the 

Bureau and the State should develop and publish for comment 

guidelines for such transfers that will protect the environment 

and the public interest before any such transfers are approved. 

American Rivers is concerned that the CAP meet its contractual 

obligations to repay the federal investment in this project 

without unduly burdening Arizona water rate payers. However, we 

do not believe that the natural environment of the State need be 

sacrificed any longer to accomplish this if the State ' s leaders 

acknowledge this responsibility and act responsibly. 

-- 14 --
196 

We were pleased to see that the Commissioner of the Bureau of 

Reclamation, in his letter of December 3 to the President of the 

CAWCD, stated that if a restructuring plan for the CAP is to be 

found acceptable by the Bureau, it must be a comprehensive plan 

that deals with a number of outstanding issues, including 

"mechanisms for enhancing or restoring environmental quality and 

fish and wildlife habitat in Arizona." We hope and fully expect 

to be included in any discussions between.the Bureau, the CAWCD 

and the State regarding these issues and such a comprehensive 

package of solutions. 

As Chairman of' the House Committee that oversees this project, 

you have already made it clear on previous occasions that current 

budgetary and political realities dictate that Arizona deal with 

its environmental and Indian water rights settlement issues as a 

part of any new or continued assistance from the federal 

government, as has occurred in projects in other western states. 

We urge you to continue to be engaged in these discussions and to 

exercise your oversight and legislative responsibilities as 

necessary to assure these goals are met. Thank you again t'or the 

opportunity to appear here today. 

-- 15 --
197 

Mr. MILLER. Mr. Schnepf. 

STATEMENT OF HON. MARK SCHNEPF 

Mr. SCHNEPF. Thank you. I appreciate your being here today. I 

have had the opportunity to work with Congresswoman English. 

She is my Representative, and we have several issues in our district that we are working on. I appreciate the opportunity to be here today and to speak on 

this particular issue. My father and I own a 700-acre farm in 

Queen Creek, which is a community of 5,000 people approximately 

40 miles southeast of Phoenix. We grow potatoes, mixed vegetables, 

grapes, grain, and nursery trees. I don't mention those to brag but 

simply to show that Arizona agriculture is quite diversified. My 

family has been Arizona farmers for 150 years. We employ about 

30 people full time and 50 people during the harvest season. I am the mayor of the town of Queen Creek and have served in 

that position for four years. Queen Creek is a rural community 

served by both the New Magma and Queen Creek Districts. Nearly 

all of our local businesses rely very heavily on the agriculture economy. There are two school districts with over 1,200 children that 

are supported by property taxes levied on agriculture land. It is 

critical to communities like mine that a solution to our water financing crisis be found, and I believe that that has been done. 

The Central Arizona Project and its water is critical to my community. Our domestic water is provided by groundwater delivered 

by individually-owned wells or by private water companies. Substituting Central Arizona Project water for groundwater, agriculture has been able to conserve groundwater. This is in keeping 

with both the State's Groundwater Management Act and the Federal legislation authorizing the CAP. 

Last year, New Magma and Queen Creek used a total of 89,500 

acre-feet of CAP water, directly substituting that for an equal 

amount of groundwater. By substituting CAP water for groundwater, we have been conserving our nonrenewable resource. We 

know that this conservation program is, indeed, working because 

we are seeing a gradual rise in our groundwater levels in our particular area. 

As a farmer, I strongly support the Central Arizona Water Conservation District's target pricing policy adopted in October of this 

year. This policy is a State solution to the problems that we have 

and is a first step in solving our overall problem. We have underutilization of CAP water. 

Implementation of the CA WCD's policy will begin to reduce this 

under-utilization as well as provide money to help cushion rate 

shock to domestic water users in the State. By following the plan, 

we will be able to continue to conserve our groundwater. If we 

didn't have such a plan, I know that my farm and my neighbors 

who farm would have to refuse to accept CAP water and return to 

the pumping of groundwater. 

As an elected official in this rapidly growing State, I am con- cerned about the future availability of water for the residents of my 

town. Because of that, I. believe Arizona should take all steps necessary to protect its entitlements to Colorado River water. I agree 

with the recommendations of the Governor's Advisory Committee 
198 

that Arizona should keep, protect, and utilize its share of the Colorado River water here in Arizona. I believe that the plan of 

CAWCD provides for an orderly transition of the water from agriculture to domestic use. Much of that will be used by my town and 

by the neighboring communities in my area. 

I believe that the CA WCD's pricing policy will enable agriculture 

to remain viable, thus contributing to State, county, and local area 

economies. If agriculture is not part of the mix, then the remaining 

water users will have to make up the loss. Municipal ratepayers in 

Arizona will then pay much more if agriculture is not part of the 

solution. 

If agriculture isn't part of the CAP, we are in new territory. Agriculture is going to be forced to go back to pumping groundwater 

until it would simply not be economical. 

The main point that I would like to make here today is the impact that CAP has on rural communities. I hope that when people 

speak of agriculture-and I hope the committee understands that 

when you speak of agriculture-you are not speaking only of farmers in the area, but you are also speaking of school districts, of 

town governments, of local businesses, and dozens if not hundreds 

or thousands of local jobs--these are very important to our community. The ripple effect is extremely strong. 

I don't believe that Arizona should jeopardize its rights to hundreds of thousand acre-feet of water. We as Arizonans have taken 

steps to solve these problems. I think by making water affordable 

to agriculture, we achieve four objectives. 

First, we benefit municipal ratepayers; second, we preserve our 

water allocations for future municipal use-which is important for 

every community including the town of Queen Creek; third, we protect our groundwater, the main objectivity of the Groundwater 

Management Act; and fourth, we help preserve and sustain businesses, school districts, town governments, and tens of thousands 

of people, all of which are in our rural communities. 

I support the CAWCD's efforts in this and look forward to further progress and sincerely appreciate the opportunity to be here 

today and express my views. 

Thank you, Mr. Chairman. 

Mr. MILLER. Thank you. 

[Prepared statement of Mr. Schnepf follows:] 
199 

CJDftRAL .U.l:ZOlllA :PROJBCT OVBJlBIGII'l BBAJI.IHOS 

DBCBKBBR 10, 1993 

COXIIITTBB Oil lllA'l'UllAL USOUllCBS 

UHI'l'BD S'l'A'l'BS BOUSB OP RBJIRBSENTATIVBS 

S'l'ATBKBHT BY HARK SCBIJB:PP 

MAYOR 

TOliN OJ' QUBBIJ CRBBJ:, .U.IZOlllA 

Mr. Chairman, Congresswoman English, other members of the 

Committee and distinguished quests, I am Mark Schnepf from Queen 

Creek, Arizona. I appreciate the opportunity to testify here 

today. 

My father and I own a 700 acre family farm in Queen 

creek, a community -of 5~000 people 40 miles southeast of Phoenix. --- We grow potatoes, mixed vegetables, tree fruit, grapes, grain and 

nursery trees. My family have been Arizona farmers for over 100 

years, 50 of those in Queen creek . We employ 30 people full time 

and about 50 people during the harvest season. 

Besides managing the farm I am the mayor of Queen creek 

and have served in that position for four years. Queen Creek is a 

rural community that is served by both the New Magma and Queen 

Creek Irrigation Districts. Agriculture is the primary industry in 

Queen Creek and nearly all of our local businesses rely heavily on 

the agriculture economy . There are 2 school distri cts with over 

1200 children that are supported by property taxes levied on 

agriculture land. It is critical to communities like mine that a 

solution to our water financing crisis be found and I believe that 

that has been done. 
200 

The Central Arizona Project and its water is critical to 

my community. our domestic water is provided by groundwater 

delivered by individually owned wells or by private water 

companies. Substituting Central Arizona Project water for 

groundwater, agriculture has been able to conserve groundwater. 

This is in keeping with both the State's Groundwater Management Act 

and the Federal legislation authorizing toe CAP. 

Last year New Magma and Queen creek used a total of 

89,500 acre feet of CAP water, directly substituting that for an 

equal amount of groundwater. This has been true even despite our 

record wet winter. 

By substituting CAP water for groundwater we have been 

conserving our non-renewable resource and have also conserved our 

use of electricity. We know this conservation program is 

successful because there has been a rise in the local groundwater 

table over the last several years. 

As a farmer, I strongly support the Central Arizona Water 

Conservation District's target pricing policy adopted by it on 

October 7, 1993. This policy is a state solution to a state 

problem, namely under-utilization of CAP water. Implementation of 

this policy will begin to reduce the under utilization as well as 

provide money to cushion rate shock to the domestic water users in 

the State. By following the plan we will continue to conserve our 

groundwater. If we did not have such a program my farm and my 

- 2 -
201 

neighbors would have to refuse to accept CAP water and return to 

the pumping of groundwater. 

As an elected official in this rapidly growing State, I 

am concerned about the future availability of water for the 

residents of my town. Because of that, I believe that Arizona 

should take all steps necessary to protect its entitlement to 

Colorado River water. Since 1922 the State has fought and fought 

to protect its rights to that valuable resource. It is not time to 

stop. I agree with the recommendations of the Governor's Advisory 

committee that Arizona should keep, protect and utilize its share 

of the Colorado River E-:;:e_ in Arizona. And I believe that the plan 

of CAWCD p:r:ovides for an orderly transition of the water from 

agriculture to domestic use by residents c:;f my town and other 

neighboring communities. 

I am informed that CAWCD has already made its first 

payment called for under its contract with the United States for 

repayment of t.he CAP. In fact, I understand that this was an 

overpayment and there is a credit on the next payment. From what 

CAWCD has published, I do not believe that the United States is at 

financial risk for payments due under that contract. I believe 

that CAWCD's policy will remove any uncertainty of CAWCD making 

its payments and will enable it to continue to make. its payments on 

time for the full amount called for under the repayment contract. 

- 3 -
202 

I further believe that CAWCD's pricing policy will enable 

agriculture to remain viable thus contributing to the state, county 

and local area economies. If aqriculture is not part of the mix, 

then the remaining water users will have to make up the loss. 

Municipal ratepayers in Arizona will then pay much more if 

agriculture is not included. 

If agriculture is not part of .the CAP, we are in new 

territory. Agriculture would go back to pumping the groundwater 

until it would not be economical. Then the farms would revert to 

desert and this would be an environmental disaster as well as an 

economic disaster. The rural communities' ability to bond for 

infrastructures and_on_s_£h9ol districts' ability to issue new debt, 

would be adyersely impacted. If the viability of the irrigation 

districts are endangered, it will effect not only farmers but 

entire communities. My town would be severely impacted . Businesses 

would shut down, unemployment would increase, tax delinquenc i es 

would increase making it harder for the town and the schools to 

provide necessary services. The ripple effect is strong. 

I don't believe Arizona should jeopardize its rights to 

hundreds of thousands of acre feet of water. We, as Arizonans, 

have taken steps to solve our problems and we do not believe the 

strong arm of Federal intervention is needed . 

By making water affordable we accomplish at least four 

objectives: 

- 4 -
203 

1. Benefi ts nlUnicipal ratepayers. 

2 . Preserve our water allocations for future municipal 

use -- which is important for e very community including the town of 

Queen Creek. 

3. To protect our groundwater-- the main obj ective of 

the Groundwater Management Act. 

4. Help preserve and sustain businesses, school 

districts, town governments and tens of thousands of people, all of 

which are in our rural communi ties. 

I strongly support CAWCD 1 s .. efforts to solve Ari zona 1 s 

problems in Arizona. ~~ Erogram approved and adopted by CAWCD in 

October wil~ benefit all Arizonans and because of that it should be 

supported by all Arizonans. 

Thank you for giving me this opportunity to submit my 

position, Mr. Chairman. 

WDB:smh 

- 5 -
204 

Mr. MILLER. Mr. Manning. 

STATEMENT OF ROGERS. MANNING 

Mr. MANNING. Mr. Chairman, members of the Arizona delegation, thank you all for being here. 

I see I started with the red light. Is that symbolic or what? 

My name is Roger Manning. I am the executive director of the 

Arizona Municipal Water Users Association, AMWUA. AMWUA is 

a voluntary, nonprofit corporation supported by the cities of Chandler, Glendale, Goodyear, Mesa, Peoria, Phoenix, Scottsdale, 

Tempe, and the town of Gilbert. 

Together, the population of those municipalities numbers approximately 2 m.illion individuals in the metropolitan Phoenix area. 

AMWUA members have contracted for nearly 98 percent of all CAP 

water that is available in Maricopa County and nearly one-third of 

the State's total CAP M&I allocation. 

AMWUA represents and assists its members in areas of water 

resource management that require a coordinated municipal effort. 

Some of these areas include the acquisition of Cliff Dam replacement water, State water legislation, water conservation, and a variety of environmental matters. 

AMWUA also participated in the development and implementation of the CAP/Plan 6 cost-sharing agreement, which you will recall this agreement provided for a little over $350 million in local 

contributions from Arizona entities to assist in the completion of 

this important project. 

AMWUA has also been actively involved in the very important 

efl'orts of the Gov~rnor's CAP Advisory Committee and the 

CA WCD's efforts to restructure the financial obligations of CAP 

subcontractors and to protect P...rizona's e:1titlement to waters of the 

Colorado River. 

On behalf of my board of directors, the mayors of our memb1e>r 

municipalities, I wanted to take this opportunity to express our appreciation to the subcommittee for its interest in the CAP and for 

offering us the opportunity to testify on the CAP, a project of irameasurable importance to the State of Arizona. As you are aware, CAP water is essential to Arizona's economir:: 

health, now and in the future. There is no long-term CAP surplus; 

all of it will eventually be used. No other water source exists that 

will enable us to m6et the goals and objectives of Arizona's Groundwater Management Act, recognized nationwide as a prime example 

of innovative watm· management. Members of the subcommittee, it is important to recognize that 

AMWUA fully supports the Central Arizona Water Conservati:m 

District's decision to proceed with implementation of its CAP financial restructuring program or plan. We have participated in the development of this plan, the genesis of which began over three years 

ago when it became apparent that CAP irrigation district(? might 

not be in a position to fulfill their financial obligations under their 

CAP subcontracts and, as a result, the financial obligations of 

CAWCD's other subcontractors, the M&I users, would necessarily 

and unavoidably increase. 

We support the CAWCD's plan on the basis of the following: 
205 

One: We believe that it should put to rest the concerns held by 

some that the CAP, or the CAWCD itself, is at risk of financial failure. It should be noted that AMWUA has always believed that this 

concern is both misplaced and insignificant. Even without the 

CA WCD's financial restructuring plan, Arizona's obligation to 

repay the Federal Government for the reimbursable costs of the 

CAP would have been met. Those obligations are specified in statute and in the CAP Master Repayment Contract. 

CAWCD's financial restructuring plan is not an attempt to 

change the law or renegotiate the terms of the Master Repayment 

Contract. It is a response to the probability that CAP irrigation districts would be unable to fulfill their financial obligations und.er 

their CAP subcontracts. If so, not only would the cost of CAP M&I 

water rise but the level of CAP use would nlummet to the detriment of Arizona's water management efforts: 

Two: The costs associated with maintaining Arizona's Colomdo 

River and CAP entitlements remain an Arizona obligation guaranteed by Arizona interests. CA WCD's financial restructul"ing plan is 

an Arizona solution. With all due respect, we see no necessity for 

any congressional action. We are confident that Arizona's CAP financial responsibilities will be met promptly and fully. 

Three: Benefits-and not just financial-are received for lowering 

the cost for irrigation districts of up to 400,000 acre-feet of CAP 

water to a cost near that of pumping groundwater. 

A. Agricultural CAP water use replaces agricultural groundwater 

use. The groundwater will then be available during times of shortage or for future non-agricultural uses. Sueh an outcome is consiatent with Arizona's Groundwater Management Act. Indeed, it has 

been argued that such is not only consistent with the Act, it is a 

necessary condition to the achievement of its goals and objectives. 

B. In order to be eligible for the lower water rates and be relieved of existing financial obligation3, CAP irrig~tjon distn•.:ts 

would have to waive many benefits identified in theii: CAP subcontracts, primarily those which would have given them a lcngterm lock on the water. In other words, the existing 50-year subcontracts for the delivery of irrigation water essentially evaporates 

with the water transferable, now and in the future, for other 

ases-M&I, Indian, and environmentaL 

C. The participation of non-Indian agricultural use saves us, the 

M&I user, money. The M&I ratepayers and taxpayers 9..::-e, throvgh 

the CA WCD, dtimately responsible for the CAP repaym.ent obliga 

ti-:m. To the extent there is a non-Indian agricultural component as· 

sociated with the CAP, its costs will be repaid without interest 

thereby reducing the amount of mon€y the CAWCD m.ust expend 

to meet its financial obligations. This circumstance results in the 

somewhat anomalous situation that if CAP agricultu ral water is 

subsidized, M&I water will cost less than it would have if CAP 

water was not subsidized. This outcome, however, is h il. artifact of 

Federal Reclamation law, not the CAWCD's financial restructuring 

plan. 

D. The important efforts of the Governor's CAP Ad visory Committee, the CAWCD's financial restructurir.g plan, and its recE:nt 

board policies speak directly to the issue of the e nvironment. 

AMWUA strongly supports an allocation of CAP water for environ-
206 

mental purposes in the State. AMWUA has also forcefully and consistently supported the establishment of an environmental trust 

fund. We, however, must stress that our support is for an "Arizona" 

environmental trust fund, one in which the residents of the State 

and their elected leaders determine the fund's purposes, funding 

sources, and expenditures. 

Finally, however, it is necessary to identify a critical omission in 

the CAWCD's financial restructuring plan, an exclusion the 

CAWCD fully recognizes but one about which it could do little. This 

omission, we believe, will not affect CAWCD's repayment capability; but it may impact upon the price the CAWCD will charge its 

subcontractors. The CA WCD simply does not know how much 

water the United States wishes to reserve for its purposes and 

whether the U.S. is willing to meet its contractual and legal obligations to pay for the water it reserves. We are confident that this 

question will be answered without further delay. 

Again, let me express AMWUA's appreciation for the interest 

shown by the subcommittee and for the opportunity to testify. In 

the future, if you or any of your staff have any questions, please 

do not hesitate in contacting the AMWUA office. 

Thank you. 

(Prepared statement of Mr. Manning follows:] 
207 

TESTIMONY 

OF 

ROGER S. MANNING, EXECUTIVE DIRECfOR 

ARIZONA MUNICIPAL WATER USERS ASSOCIATION 

BEFORE THE 

U.S. HOUSE OF REPRESENTATIVES 

COMMITTEE ON NATURAL RESOURCES 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS 

CONCERNING THE CENTRAL ARIZONA PROJECf 

PHOENIX, ARIZONA 

DECEMBER 10, 1993 
208 

My name is Roger S. Manning. I am Executive Director of the Arizona Municipal Water 

Users Association (AMWUA). AMWUA is a voluntary, non-profit corporation supported 

by the Cities of Chandler, Glendale, Goodyear, Mesa, Peoria, Phoenix, Scottsdale, Tempe 

and the Town of Gilbert. Together, the population of these municipalities numbers 

approximately 2,000,000 individuals. AMWUA members have contracted for nearly 98% 

of all Central Arizona Project (CAP) water allocated to cities and towns in Maricopa 

County or about one-third (218,307 acre-feet) of the state's total CAP M&I allocation. 

AMWUA represents and assists its members in areas of water resource manageme:Jt that 

require a coordinated municipal effort. Some of these areas include the acquisition of Cliff 

Dam replacement water, state water legislation, water conservation and environmental 

matters. AMWUA also participated in the development and implementation of the 

CAP /Plan 6 Cost Sharing Agreement. As you may recall, this agreement provided over 

$350 million in contributions from Arizona entities to assist in the completion of the CAP. 

Al'v1WUA has also been actively involved in the very important efforts of the Governor's 

CAP Advisory Committee and the CA WCD to restructure the financial obligations of CAP 

subcontractors and to protect Arizona's entitlement to waters of the Colorado River. 

On behalf of my Board of Directors, the Mayors of our member municipalities, I want to 

take this opportunity to express our appreciation to the subcommittee for its interest in the 

CAP and for offering us the opportunity to testify on the CAP, a project of immeasurable 

importance to the State of Arizona. As you are aware, CAP water is essential to Arizona's 

economic health, now and in the future. There is no long-term CAP surplus; all of it will 

eventually be used. No other water source exists that will enable us to meet the goals and 

objectives of Arizona's Groundwater Management Act, recognized nation-wide as a prime 

example of innovative water management. 

Members of the subcommittee, it is important to recognize that AMWUA fully supports the 

Central Arizona Water Conservation District's (CA WCD) decision to proceed \1tith 

implementation of its CAP financial restructuring program or plan. We have participated 

in the development of this plan, the genesis of which began over three years ago when it 

became apparent that CAP irrigation districts might not be in a position to fulfiil tbeir 

financial obligations under their CAP subcontracts and, as a result, the financial obligations 

of CA WCD's other subcontractors, the M&I users, would necessarily and unavoidably 

increase. 

We support the CAWCD's plan on the basis of the following: 

1. We believe that it should put to rest the concerns held by some that the CAP, 

or the CA WCD itself, is at risk of financial failure. It should be noted that 

AMWUA has always believed that this concern is both misplaced and 

insignificant. Even without the CA WCD's financial restructuring plan, 

Arizona's obligation to repay the federal government for the reimbursable 

costs of the CAP would ~.v e been met. Those obligations are specified in 

statute and in the CAP Master Repayment Contract. CA WCD's financial 

restructuring plan is not an attempt to change the law or renegotiate the 

terms of the Master Repayment Contract. It is a response to the probability 

:hat CAP irrigation districts would be unable to fulfill their financial 

obligations under their CAP subcontracts. If so, not only would the cost of 

CAP M&I water rise, hut the level of CAP use would plummet to the 

detriment of Arizona's water management efforts. 

2 
209 

2. The costs associated with maintaining Arizona's Colorado River and CAP 

entitlements remain an Arizona obligation guaranteed by Arizona interests. 

CA WCD's financial restructuring plan is an Arizona solution. With all due 

respect, we see no necessity for any congressional action. We are confident 

that Arizona's CAP financial responsibilities will be met promptly and fully. 

3. Benefits, and not just financial, are received for lowering the cost for irrigation 

districts of up to 400,000 acre-feet of CAP water to a cost near that of 

pumping groundwater. 

a. Agricultural CAP water use replaces agricuitural groundwater use. The 

groundwater will then be available during times of shortage or for 

future non-agricultural uses. Such an outcome is consistent with 

Arizona's Groundwater Management Act. Indeed, it has been argued 

that such is not only consistent with the Act, it is a neces:;ary condition 

to the achievement of its goals and objectives. 

b. In order to be eligible for the lower water rates and be relived of 

existing financial obligations, CAP irrigation districts would have to 

waive many benefits identified in their CAP subcontracts, primruily 

those which would have given them a long-term lock on the water. In 

other words, the existing 50 year subcontracts for the delivery of 

irrigation water essentially evaporate with the water transferable, now 

and in the future, for other uses---M&I, Indian and environmental. 

c. The participation of non-Indian agricultural use saves us, the M&I user, 

money. The M&I ratepayers and taxpayers are, through the CA WCD, 

ultimately responsible for the CAP repayment obligation. To the 

extent there is a non-Indian agricultural component associated with the 

CAP, its costs will be repaid without interest thereby reducing the 

amount of money the CA WCD must expend to meet its financial 

· obligations. This circumstance results in the somewhat anomalous 

situation that if CAP agricultural water is subsidized, M&I water will 

cost less than it would have if CAP water wa.~ not subsidized. This 

outcome, however, is an artifact of federal reclamation law, not the 

CA WCD's financial restructuring plan. 

d. The important efforts of the Governor's CAP Advisory Committee, the 

CA WCD's financial restructuring plan and its recent board policies 

speak directly to the issue of the environment. AMWUA strongly 

supports an allocation of CAP water for environmental purposes in the 

state. AMWUA has also forcefully and consistently supported the 

establishment of an environmental trust fund . We, however, must 

stress that our support is for an "Arizona" environmental trust fund--

·one in which the residents of the state and their elected leaders 

determine the fund's purposes, funding sources and expenditures. 

Finally, however, it is necessary to identify a critical omission in the CA WCD's financial 

restructuring plan, an exclusion theCA WCD fully recognizes, but one about which it could 

do little. This omission, we believe, will not affect CA WCD's repayment capability, but it 

may impact upon the price the CA WCD will charge its subcontractors. The CA WCD 

simply does not know how much water the United States wishes to reserve for its purposes 

3 
210 

and whether the U.S. is willing to meet its contractual and legal obligations to pay for the 

water it reserves. We are confident that this question will be answered without funher 

delay. 

Again, let me express AMWUA's appreciation for the interest shown by the subcommittee 

and for the opportunity to testify. In the future, if you or any of your staff have any 

questions, please do not hesitate in contacting the AMWUA office. Thank you. 
211 

Mr. MILLER. Thank you. 

Let me ask you, Mr. Schnepf or Mr. Manning, if CA WCD is going 

to provide a bridge loan to agriculture with the target pricing so 

that they can continue for some foreseeable future--1 don't know 

what period of time that would be. With that mechanism, that apparently is what is necessary to allow these districts to continue, 

why would they do the same with respect to their distribution obligations? Why should the Federal Government stand in line for 

money the districts are defaulting on? 

Mr. SCHNEPF. Mr. Chairman, if I may, it is certainly the District's intention to fully repay all of its obligations to the Federal 

Government. I know that at least one of the districts in my area 

is experiencing some difficulty and has had ongoing negotiations 

with the Bureau to see if there isn't some agreeable solution, not 

to default on those loans but simply to restructure them so that the 

loans are more affordable to the districts; and all of the dollars 

eventually will be repaid to the government. 

Mr. MILLER. It is a euphemism for "more expensive for the Federal taxpayer." You can't have one, I don't think, without the other. 

Mr. SCHNEPF. The other side of the coin is that it would also be 

very expensive for the Federal Government for those districts to default and not be able to repay the loans at all. 

Mr. MILLER. Mr. Manning said that everybody is going to meet 

their obligations, but there is one obligation that apparently 

CA WCD and others aren't prepared to accept, although they suggest that this should all be renegotiated. But "renegotiation" clearly means that the Government continues to forego the opportunity 

to use that money for whatever other purpose the Congress or others decide to put that to use in this country. 

Mr. SCHNEPF. The proposal set forth by CAWCD certainly is a 

first step in getting the situation taken care of, and we welcome 

it with open arms. In fact, we couldn't survive basically without it. 

And so that is why we are so supportive of the CAWCD's proposal 

and look forward to ongoing dialogue with them. 

Mr. MILLER. I understand that. This doesn't cast judgment on 

the merits of that. I am just saying, it's only one part of the inability to afford this project. CAWCD says, we will step in and pick up 

the difference between the target price and what the Federal Government is owed under the contract. Everybody agrees that is good. 

Then we are saddled with, I think, $147 million in potential defaults or, best case, potential renegotiations; but there is no suggestion that is an Arizona obligation too. 

Mr. SCHNEPF. I probably don't have the information necessary to 

really respond to that at this time. We would be happy to submit 

something in writing at a later date. 

Mr. MILLER. Mr. Manning. 

Mr. MANNING. Mr. Chairman, when we were involved in the deliberations which put this all together, the thesis behind the structuring of the package the way it was, was with the water pricing 

being reduced somewhat at our cost, it would allow those districts 

an opportunity to go out and have some potential for surviving economically, and thereby pay their debt. Obviously, it provides no 

guarantee. But the thesis behind creating--

Mr. MILLER. So we wouldn't need to restructure those loans? 
212 

Mr. MANNING. I think that is something the Bureau and those 

districts need to look at. We have not advocated that. What we 

have said is, we will go to the extent of agreeing to the pricing 

structure, let the districts take that, go find what they can in terms 

of other assistance. 

I think, as has been pointed out earlier, they have to deal with 

the private bond parties too. There is significant debt there. But as 

far as we can go and taking on part of their risk or liability was 

the reduced water price. 

And the thesis was they were going to be in a position to better 

afford to cover their debt. 

Mr. MILLER. So you are not prepared to accept the potential distribution debt as an Arizona obligation at this point? 

Mr. MANNING. That is correct, Mr. Chairman. The position of my 

board has been that they didn't participate in the taking on of that 

debt, and it is a debt of $200-and-some-odd million they are not 

willing to assume. 

Mr. MILLER. Thank you. 

Mr. Pontius, let me comment on your testimony. I think the Governor's Advisory Commission sort of broke through a major threshold here with the suggestion of the trust fund. Clearly that sounds 

like, from earlier testimony, that is going to be fleshed out here 

over the next few weeks, what have you. 

You have said, as Rob Smith mentioned, that this is both money 

and water. There are some portions of environmental restoration, 

enhancement, what have you, and money won't solve that problem; 

you need water, obviously, at a cost. As we found out today, there 

is a cost to every drop of water in this system. 

But I think, again, there is some precedent going on here. And 

in each and every one of these projects, the citizens of those States 

have decided they needed to accommodate some environmental restoration beyond the mitigation that we have had. All of these 

projects have long histories of mitigation, most of which were less 

successful than they were intended to be. So, in fact, the mitigation 

wasn't as extensive as we had intended. The citizens recognized 

that a multiple-use project such as this means exactly that; and 

part of that is the enhancement or the preservation of certain environmental assets within that project area or within the State. 

We did it in California with both the direct assessment of water 

and a direct assessment of money on both water rates and power 

rates within the State. It turned out the money was relatively easy. 

The water was worth fighting over, as is usually the case. I think 

there is agreement, even as we are beset with EPA rulings for the 

next two weeks in our State, that that account of water that we 

have set aside will help us meet those EPA demands but also help 

us meet the demands of the citizens that aren't part of EPA rulings. Various regions of our State seek to preserve the rivers for 

recreational, for tourism, for a whole series of, really, economic activities, but also the entertainment of their citizens beyond what 

the pioneers of the Central Valley Project in California originally 

envisioned. 

So I think people ought to recognize that that is pretty much the 

reason why these things start to unfold in this day and age, 1993. 

That is where you are in the political realities, I think. It doesn't 
213 

mean you get there overnight, but it is clearly part of the discussion. 

Karan. 

Ms. ENGLISH. Thank you, Mr. Chairman. I have one question. 

And, Roger, I would like to reread this one sentence and ask you 

to elaborate. It is on page 2, two sentences, actually. "We believe 

that it should put to rest the concerns held by some that the CAP 

or the CAWCD itself is at risk of financial failure. It should be 

noted that AMWUA has always believed that this concern is both 

misplaced and insignificant." 

I am struck by the word "insignificant." We are here today because of its significance. And could you just elaborate a little bit 

on how "insignificant" you think it is? 

Mr. MANNING. I don't think the issue of the CAP is insignificant. 

That is not what we intended to say. We do believe that, sort of 

like the Mark Twain quote, the announcements of my death are a 

little premature, that there has been much overplay of the financial 

risk or impending doom or failure of the project. And we think that 

it is misplaced, and that is not the real issue. 

The real issue is: How are we going to restn1.cture the arrangements among the subcontractors to guarantee our obligations to 

the United States, which, from the municipal sector I represent, we 

fully intend to meet? 

It is not to suggest that the project or the concern about the 

project is insignificant. We think it is overstated. Terribly overstated. It has been carried by the press and others as sort of theand it is probably what got us all here, was the rumors of our 

death. 

Ms. ENGLISH. This is going to be aq:,rumentative, and I don't even 

really want a response but I would hope that some of the concerns 

of Mr. Goddard's regarding the siphons are not overstated. I mean, 

those seem relatively significant to me. And I just throw that out, 

that perhaps that word is-understates the situation. 

Mr. MILLER. Mr. Stump. 

Mr. STUMP. Thank you, Mr. Chairman. 

Mr. Pontius, you outlined in your testimony the need for a watershed trust fund, as mentioned by vur chairman, funded by, I believe, a $15 million surcharge. 

Don't you think that a surcharge similar to that as was imposed 

on Califorr.ia last year could be counterproductive, as they are now 

struggling to repay those CVP costs? 

Mr. PONTIUS. As I understand the law in California that was 

passed last Congress, it proposed I think a minimum of $6 to $7 

an acre-foot on agricultural users and, like, $12 beginning on M&I 

users. 

I frankly don't think those kind of numbers probably are necessary, if you put together a fund ir. Arizona made up of different 

types of revenue sources. 

As I mentioned, I think the Bureau should contribute something 

to that fund. I think power sales-I do think that-and we strongly 

believe that $15 million, when you start looking at what needs to 

be done out there-and a pceliminary analysis is certainly is what 

is needed--the Governor's task force compromised sort of in the 

middle and suggested an $8 million fund. 
214 

I am just here to say that our position was and still is that $15 

million is more realistic. If what you really want to do is to make 

an impact on those areas, that is what we should be shooting for. 

And if you spread those costs out among different types of users 

and different purchasers of water and power, then it really is not 

that big a bite on any particular water user or ratepayer, in our 

opinion. Mr. STUMP. The chairman mentioned that the money wasn't hard 

in California; it was the water. I submit that $15 million additional 

in our costs here is going to be significant to a lot of people. 

Anyway, Mr. Chairman, I want to thank you again for allowing 

Mr. Kyl and myself to participate on this hearing today since we 

are not on this committee. We appreciate your coming out. Mr. MILLER. I appreciate your willingness to persevere with us, 

both you and Congresswoman English and the other members of 

the delegation. I was going to exercise the right of the chairman to always have 

the right word-the last word, excuse me, not the right word. Although, in the chairman's mind, it is always the right word. And 

I guess I will. 

But I do beg to differ whether or not this is significant or not. 

We started this hearing by being told that the Federal Government 

could expect to shoulder another $1 billion worth of costs with respect to this project, much of which we have already made that decision about. 

I don't know if you are all fans of C-SP AN or not, if you see the 

debates that go on in the Halls of Congress now for a billion dollars 

worth of money as we complete for various interests across this 

country. Between all of the interests in our society, a billion dollars 

is real money. There was a time, I guess, when we didn't think so. 

And that is how we got to the deficit we have. But it is real money. 

And for the Federal Government simply to be a passive partner 

in the shifting of those costs is simply going to be unacceptable to 

our colleagues. And around every one of these reforms, we have burnt a great 

deal of credibility with our colleagues, especially those in the environmental community, to get them to vote for these reforms. We 

have passed them by the narrowest of margins. 

That is just a comment on where the concern is in the country 

about expenditures of Federal dollars. So there will be a very substantial threshold that has to be met. And that is just sort of a fact 

of contemporary political life. 

Let me again thank this panel and thank all of the witnesses 

that helped to make this hearing, I think, comprehensive in nature. 

This obviously is not the last word. We hope that this committee 

can continue to be constructive with the entire Arizona community 

on this issue. 

And, again, let me thank my colleagues for sitting through this 

day's testimony. Those who have additional comments on what 

they have heard or not heard, what they like or dislike, again, the 
215 

record of this committee will remain open, and you are welcome to 

submit those to the Natural Resources Committee over the next 

couple of weeks. 

Mr. MILLER. With that, the committee stands adjourned. 

Thank you very much to everyone. 

[Whereupon, at 2:25p.m., the subcommittee adjourned.] 

APPENDIX 

DECEMBER 10, 1993 

ADDITIONAL MATERIAL SUBMITTED FOR THE HEARING RECORD 

BOEi STUMP 3D OtiTIUCT. AIII.ION .. 

211CAN-IIUIUIIOO!I 

WAI.MINGtolt, DC 2051&-0303 

(202)225~&78 

OIIUICTDl''<(: 

230 N. flfltT AYI-

:1:001 FtOl~Al 8UIUIII~G 

PHOINUI, AZ 110211 

{802) 3Jt-el23 

Con!JrtSS of tbt ~nittb iltates 

•oust of lttprtstntatibts 

IIUbington, 18£ 20515-0303 

December 10, 1993 

Mr. Rob Smith 

Southwest Representative 

Sierra Club 

516 E. Portland St. 

Phoenix, Arizona 85044 

Dear Mr. Smith: 

ARNEO SEFIVIC!S COMMJTT£E 

SU.COM ... ITT11 ONiillllA~CN 

ANOTICNMOI.OCY 

-~IJ«>MitiOII!TYMIMilll 

$VKOMWIIT£~ ~~~~fiiJTALlATIONS 

VfTEAANS' AffAILII$ COMMITTEE 

......... ING-T'I'Ioi(NMII 

5U.COMMITTII ON MOS~tlALS 

AN011tALTIIC411l 

5UICOMMITTHGPI(CXJ(ATION 

T~NINGANOUoii"\.OlMINT 

This letter is a follow-up to your testimony today before the House Natural Resources Committee field hearing on the 

Central Arizona Project. Time constraints during the 

hearing did not permit me to question the panels in the 

detail I would have preferred. With that in mind,I would 

appreciate your written response to the following questions. 

These questions and your responses will be made part of the official hearing record. 

1. You testified that 80% of the State's water supply is 

utilized for agricultural purposes. Were you referring to the utilization of groundwater or Central Arizona Project 

(CAP) water? The Bureau of Reclamation documents that of the 1.5 

million acre-foot CAP delivery, 640,000 acre feet have been 

allocated to municipal and industrial use (42%), 309,838 acre feet have been allocated to ten Indian communities 

(20%), and the remaining amount has been allocated to fifteen non -Indian agricultural entities (36%). Please 

provide the justification for your statement. 

2. In one section of your testimony, you state that the 

"grf;!atest environmental impact of the CAP is the potential to remove 1.5 million acre feet of stream flow every year 

from the river course." However, your testimony also notes that "there are demands elsewhere in the Lower Colorado 

Basin for water to serve the thirst of southern California 

and the Las Vegas area." I am perplexed by this argument. 

Is it environmentally acceptable to remove water for urban use outside Arizona, but unacceptable to remove the water from the Colorado River for the benefit of Arizona? 

3. The Sierra Club supports a $15 million environmental trust fund that is funded by "a wide variety of potential 

sources." I would appreciate more specifics on the funding 

for this program, the projects for which the funds will be 

(217) 
Mr. Rob smith 

December 10,1993 

Page 2 

218 

used and the method of selection for the projects. Should 

the funding include a per-acre surcharge on 1) CAP irrigated 

water; 2) municipal and industrial water? Have you analyzed 

the impact of such a surcharge on CAP customers? 

4. I would appreciate your clarifying a statement you made 

in your testimony. You estimated that 90\ of Arizona's 

desert stream habitats have been lost or degraded due to depleted groundwater tables. However, you also oppose a "target pricing" plan for agriculture that will lead to less 

consumption of groundwater. Your testimony appears 

contradictory with respect to groundwater management goals. 

Please explain this apparent contradiction. 

5. Do you concede that farmers in Arizona have made 

substantial financial co~itments to the efficient use of 

CAP water? For example, Mr. Bill Scott of the 

Maricopa-Stanfield Irrigation District testified that 

farmers in his area had invested a total of $2,000 per acre for the efficient utilization of CAP water. 

6. In your testimony, you argue for reduction in the 

federal water for agriculture because cotton is a program 

crop that receives price supports. Are you aware that a USDA study found cropping patterns on land irrigated using 

Bureau of Reclamation water are shifting to higher-value specialty crops and away from USDA-supported crops? 

7. Please provide me with the empirical data that led you to conclude that "it is hardly a certainty that agricultural use of 20,000 acre feet of CAP water will be sustained for 

50 years." 

Thank you for your consideration. I look forward to your response. 

Sincerely, 

BOB ~q STUMP 

Member of Congr s 
219 

516 E. Portland Street 

Phoenix. Arizona 85004 

602•254•9330 

602•258•6533 FAX 

SIEI\1\A CLUO SOUTHWEST OFFICE 

April 5, 1994 

Congressman Bob Stump House of Representatives 

Washington, DC 20515 

Dear Congressman stump, 

This letter will respond to your questions regarding my testimony 

before the House Natural Resources Committee field hearing on .the 

central Arizona Project. 

Question 1. "You testified that 80% of the State's water supply is 

utilized for agricultural purposes. Were you referring to the 

utilization of groundwater or Central Arizona Project (CAP) water? 

The Bureau of Reclamation documents that of the 1 . 5 million acre- foot CAP delivery, 640,000 acre feet have been allocated to municipal and industrial use (42%), 309,838 acre feet have been 

allocated to ten Indian communities (20%), and the remaining amount has been allocated to fifteen non-Indian agricultural entities 

(36%). Please provide the justification for your statement." 

Answer: I testified that "nearly 80\ of our state's water supply goes to agriculture". That figure refers to all water, not just 

CAP allocations. The source is 1990 statistics from the Arizona 

Department of Water Resources which report that agriculture uses 78% of the total water demand for Arizona, mining and power 4%, and 

municipal and industrial 18\. 

Question 2. 11 In one section of your testimony, you state that the 

'greatest environmental impact of the CAP is the potential to remove 1.5 million acre feet of stream flow every year from the 

river course.' However, your testimony also notes that 'there are 

demands elsewhere in the Lower Colorado Basin for water to serve 

the thirst of southern California and the Las Vegas area.' I am 

perplexed by this argument. Is it environmentally acceptable to remove water for urban use outside Arizona, but unacceptable to 
220 

remove the water from the Colorado River for the benefit of 

Arizona? .. 

Answer: These two statements were not made to suggest the 

perplexing tradeoff you ask about. our proposal was to leave a 

significant amount of water in the Colorado River for environmental 

purposes, which could be credited against the CAP repayment debt, 

and to encourage conservation through marketing water to the 

highest bidder among Lower Basin States. The current Soviet-style 

command and control allocation system for water encourages use regardless of e c onomic efficiency or the real needs of most people. 

Question 3. "The Sierra Club supports a $15 million environmental 

trust fund that is funded by 'a wide variety of potential sources.' 

I would appreciate more specifics on the funding for this program, 

the pro:jects for which the funds will be used and the method of 

selection for the projects. Should the funding include a per-acre 

surcharge on 1) CAP irrigated water; 2) municipal and industrial 

water? Have you analyzed the impact of such a surcharge on CAP 

customers? 11 

Answer: Attached is a list of potential funding sources and 

examples of projects that might be appropriate to support through 

such a fund. We supported Governor Symington's original 

legislation to establish such a fund and create a commission 

reflecting appropriate interests and e xpertise to decide how to spend the money; unfortunately, this particular legislative 

proposal failed in the State Legislature this year. A variety of 

funding sources c ould spread the burden lightly over all CAP users. 

Question 4. " I would appreciate your clarifying a statement you 

made in your testimony. You estimated that 90% of Arizona's desert 

stream habitats have been lost or degraded due to depleted 

groundwater tables. However, you also oppose a 'target pricing' 

plan for agriculture that will lead to less consumption of 

groundwater. Yom· testimony appears contradictory with respect to groundwater management goals. Please explain this apparent 

contradiction." 

Answer: I stated that " up to 90\ of our desert s treams habitats ha ve been lost or seriously degraded due to depleted groundwater 

tables, diversions or channelizations." There is more than one way 

to decrease groundwater pumping, and I suggested in my testimony 

tha-t our preference would be "conversion to lower water use crops, 

raising the groundwater pump tax to a point where CAP water is more 

economically attractive or simply decreasing agricultural use." 

Question $. "Do you concede that farmers in Arizona have mad; 

substantial financial commitments to efficient use of CAP water? 

For example, Mr. Bill Scott of the Maricopa-Stanfield Irrigation 

District testified that farmers in his area had invested a total of 
221 

$2,000 per acre for the efficient utilization of CAP water." 

Answer: Yes, many farmers have made big investments in water 

efficiency -- often over their objections. However, the larger 

point I attempted to make in my testimony was that much irrigated 

agriculture in Arizona, especially for high-water use crops like 

cotton, is a fundamentally bad idea because it costs more than its 

worth regardless of how efficiently it might be done . 

Question 6. "In your testimony, you argue for reduction in the 

federal water for agriculture because cotton is a program crop that 

receives price supports. Are you aware that a USDA study found 

cropping patterns on land irrigated using Bureau of Reclamation 

water are shifting to higher-value specialty crops and away from 

USDA-supported crops?" 

Answer: But not quickly enough. The top two crops in terms of 

acreage in Arizona are still c otton and its rotation partner 

alfalfa. Those two also use at least twice the water of other 

Arizona crops. Conversion to other crops is discouraged by the 

continued subsidy support of cotton farming, which totalled more 

than $26 million for Arizona alone in 1991. 

Question 7. "Please provide me with the empirical data that led you to conclude that 'it is hardly a certainty that agricultural 

use of 20,000 acre feet of CAP water will be sustained for 50 

years.' 11 

Answer: My testimony stated "it is hardly a certainty that 

agricultural use of 200,000 acre feet of CAP water will be 

sustained for 50 years g iven the recent history of over-optimistic 

projections of project use. " Aside from the order of magnitude 

difference in water amounts, it is completely speculative about 

condi~ions 50 years from now. Obviously the CAP wouldn't be the 

subject of discussion now if original projections about use and 

cost had held firm. 

Thank you for allowi ng me the opportunity to respond to your 

questions. I appreciate your offer to make my response a part of 

the hearing record. 

Sincerely, 

Southwest Representative 
222 

Environmental Recommendations and Considerations 

for Water Allocations and an Environmental Trust Fund for 

Central Arizona Project 

10/20/93 

I. Establish an allocation of CAP water for the protection and 

enhancement of threatened and endangered species, and for 

fish and wildlife purposes. 

Allocation recommendation: 150,000 AF (125,000 AF for mainstem 

needs and 25,000 AF for central Arizona needs). 15,000 AF of 

water reserved for central Arizona uses would be M&I priority 

water, the remainder would be non-Indian ag water that may be· 

available for re-allocation. 

Assumptions: 

1. An allocation of CAP water for the conservation and 

development of fish and wildlife resources would result in a 

reduction in capital repayment obligations of the District (see 

letter from Bureau to the Arizona Department of Water Resources, 

September 3, 1993). 

2. Water used on the mainstem Colorado and not delivered through 

the CAP system would not result in any additional OM&R charges to 

the District. 

3. Water delivered through the CAP system would require payment 

of OM&R costs. The federal government may pay these costs, 

depending upon the use of the water and th~ federal interests 

such uses would serve. 

4. The Secretary can re-allocate uncontracted CAP water for fish 

and wildlife purposes. 

Discussion: 

To develop precise estimates of water needs and costs will 

require more technical study . In addition, there are a number of 

issues that will require building a consensus and developing the 

fish and wildlife projects in greater detail, including 

quantification of water use and location. The key component to 

initiate project development in any of these areas is the 

requirement that CAP water be available for protection and 

enhancement of threatened and endangered species and the 

conservation and development of fish and wildlife resources; a 

firm water supply must be assured by a re-allocation of CAP water 

for these express purposes. In the event that adequate uses for 

this water cannot be identified after a reasonable period, this' 

water .could be re-allocated. During the period in which any of 

this water is not put to use for endangered species and fish and 

wildlife purposes, it could be made available to the District for 
223 

other uses in a similar manner to other CAP water which has been 

contracted for and not scheduled for delivery. 

Through the work of the Governor's Advisory Committee 

Environmental sub-committee and the Bureau's Arizona Project 

Office staff, several proposals are presented below for further 

study. 

A. Lower Colorado River mainstem fish and wildlife resource 

needs: 

1. Firming up water needed to support the continued 

existence of the Cienega de Santa Clara. 

Currently, 132,000 AF of water is available to the 

Bureau from the Coachella Valley Canal lining project. 

This "saved" water can be used by the U.S. to meet 

Mexico treaty obligations in lieu of the water that 

would have been supplied by the desalinization of 

Wellton- Mohawk return drainage. This water is 

available until a shortage is declared on the river at 

which point California has a call on this water. As 

long as this water is available, the Bureau's need to 

operate the Yuma desalter is reduced if not eliminated. 

2 . Reducing daily fluctuations in mainstem river flows. 

These fluctuations in river flows and reservoir pools 

have been identified as a factor in reducing the 

success of both bonytail chub and razorback sucker 

spawning, both of which are listed as endangered native 

fish species. 

3. Providing additional water to supply marsh and 

backwater areas, important habitats for a variety of 

fish and wildlife species. 

The USFWS has identified needs at Topock Marsh, on the 

Lake Havasu NWR, and at both Cibola and Imperial NWRs. 

A rough first estimate of those needs, and to expand 

riverine and lake backwater areas for rearing of 

endangered fish for reintroduction into the mainstem, 

would be 50,000 AF. 

4. Increasing stream flows in the Yuma and Limotrophe 

Divisions of the lower Colorado River to enhance 

aquatic, wetland and riparian habitats. 

5. Providing water for restoration of native riparian 

vegetation to replace exotic salt cedar and abandoned 

agriculture areas. 
224 

B. Central Arizona stream enhancement and restoration through 

recharge projects which utilize natural strearncourses. 

Several opportunities have been identified to restore 

riparian and aquatic ecosystems in conjunction with proposed 

M&I recharge projects involving natural watercourses. These 

sites tentatively include: the Agua Fria River, Santa Cruz 

River on the San Xavier District of the T'Ohono O'Odham 

Nation, Canada del Oro in Pima County, and the Salt River 

below Granite Reef Dam. These projects are not_ sufficiently 

well-developed technically to identify fish and- wildlife 

enhancement opportunities that enable us to quantify water 

requirements. In addition, issues regarding water quality 

and the protection of native fish species need to be 

adequately addressed. 

The overall justification for these projects should be 

driven by recharge needs. An opportunity exists to optimize 

the desi9n and construction of these projects to enhance or 

maximize the ability of these projects to restore or create 

aquatic, wetland and riparian habitats. The amount of water 

needed and the cost of that CAP water, coupled with any 

related design and construction costs which are necessary to 

optimize the project to also provide fish and wildlife 

benefits should be the focus of any technical feasibility 

analysis to avoid "subsidizing" M&I recharge projects 

through the use of fish and wildlife water. 

C. CAP water exchanges to enhance streamflows in functioning 

natural stream systems. These include: 

1. Optimizing flows below Stewart Mountain darn on the Salt 

River. 

This will require further consultation with the Salt 

Riv-.r Project and the Tonto National Forest. 

2. Optimizing flows on the East Verde River and East Clear 

Cre-.k through changes in Blue Ridge Reservoir 

operations. 

This will require further consultation with Salt River 

Project, Phelps Dodge Corporation, the Tonto and 

Coconino National Forests. 

3. Dedicating effluent to the upper Santa Cruz River via an exchange of City of Nogales and Rio Rico CAP 

allocations with the federal government. 

This will require further consultation with the City of 

Nogales, the Avatar Corporation, the International 

Boundary and Water Commission, and the country of 

Mexico. 
225 

4. San Pedro 

Another exchange of CAP allocation or other water 

supply enhancement plan for the Sierra Vista area (plus 

water conservation) will be required if the san Pedro--

a National Riparian Conservation Area--is to be 

protected from dewatering by groundwater pumping. 

II. Establish an Environmental Trust Fund 

Fund Amount: $ 15,000,000/year. The fund could begin at a 

smaller amount in the initial years increasing to $8Mjyear in 

five years and $15M/year in 10 years. 

Discussion: The 1968 Colorado River Basin Project Act states 

that one of the project purposes of the Central Arizona Project was the "conservation and development of fish and wildlife 

resources". Twenty-five years and $4 billion in federal 

appropriations later, not one dollar was spent, nor was any 

aspect of the project designed and constructed, for the express 

purposes of conservation and development of fish and wildlife 

resources. It is important to clarify that over the years there 

have been a number of changes in project design and construction 

to avoid or mitigate environmental impacts, but these mitigation 

efforts should not be construed as environmental project 

benefits. They are simply an attempt to prevent further loss or degradation of fish and wildlife resources. 

At this late date, The Central Arizona Project's ability to meet 

the needs of fish and wildlife resources is very constrained due 

to the fact that project design and construction is nearly 

complete. Because of the complete lack of attention towards the 

conservation of fish and wildlife resources in the original 

design and construction of the project, it is essential that any 

project re-structuring provide a mechanism whereby the project can develop a dedicated source of revenue to enhance statewide 

protection and enhancement of fish and wildlife resources in the 

future. 

It is equally important to recognize that in the event that the 

Bureau of Reclamation pursues future appropriations under 

existing CAP authority for fish and wildlife conservation and 

development projects, these projects may require a 25% local cost 

sharing component. This local cost share requirement further 

underscores the need for the project to generate financial 

resources for the conservation and development of fish and 

wildlife resources. 

In addition, the recent Arizona Supreme Court opinion in the Gila 

River adjudication puts federal interests in fish and wildlife 

and recreation resources associated with free flowing streams at 

risk from groundwater pumping. This decision by the Court places 

even more importance on developing financial resources to meet 

existing and future threats to endangered aquatic species and our 
226 

remaining riparian systems. 

The Fund should grow over time tc allow for adequate planning in 

the early years to better identify uses of the fund. Following 

models established recently in Central Utah Project and Central 

Valley Project legislation, a Central Arizona Project Trust Fund, 

as presented below, is the most appropriate mechanism to enable 

the project to provide for the conservation and development of 

fish and wildlife resources. 

Fund Purposes: 

The purposes of this fund are to establish an ongoing source of revenue for the conservation and development of fish and wildlife 

resources within the State of Arizona. The uses of the fund are 

intended to maintain, enhance, and restore aquatic, wetland and 

riparian habitats through the development and implementation of 

measures to protect water of sufficient quality and quantity 

needed to sustain these important habitats. 

Specific measures authorized under this fund include: 

1. Acquisition fee and other interests in lands or water needed 

to maintain, enhance and restore instream flows within 

stream systems to support significant aquatic, wetland and 

riparian habitat values. Priority attention will be given 

to streams which support or can support federally or statelisted threatened and endangered species or have been 

iqentified through a statewide biodiversity planning effort. 

2. Data gathering, compilation and analysis needed to assist 

local, state, federal and tribal governments in water 

resource management within the following high priority 

watersheds: upper santa Cruz river basin within Santa Cruz 

county, San Pedro river basin, Verde River basin, Salt River 

basin upstream of Roosevelt Lake, the Bill Williams river 

basin, Little Colorado River basin upstream of St. Johns, 

Arizona, and the Gila River above the Ashurst-Hayden dam. 

3. Grants to assist private and public water utilities in 

developing and promoting and implementing water conservation 

programs outside of Active Management Areas. 

4. Development and implementation of measures required to 

maintain or enhance water quality and water quantity within 

stream systems which support significant aquatic, wetland 

and riparian habitat values. Priority attention will be 

given to streams which support or can support federally or 

state-listed threatened and endangered wildlife or have been 

identified through a statewide biodiversity planning effor~. 
227 

Trust Fund Man~ mentc 

Managemen t of the t und, i ncluding the disbursement of revenues, 

to ensure that fu nd r evenues are expended in an appropriate manner requires the establishment of a dedicated source of 

revenue and an independent Board qualified to make decisions 

regarding funds disbun;ement in accord with the purposes of the 

fund. The following recommendations regarding such a Board are 

presented below: 

Recommendations: 

1. Funds will be plac ed in a segregated account established and 

administered by an appropriate entity. The National Fis~ & 

Wildlife Foundation may be an appropriate entity. 

2 . A Trust Fund Advisory Board will be established and 

authorized to review and select proposals for funding in 

accord with the purposes of the Trust Fund. 

J. The Board will include 14 members. 4 ex-officio members 

from the Arizona Department of Water Quality, Arizona 

Department of Wate.r Resources, Arizona Department of Game & 

Fish and the Central Arizona Water Control District. 10 

additional members from the public-at-large who meet 

criteria that ensures they are knowledgeable and 

representative of environmental interests are to be 

·appointed by the Secretary of Interior with recommendations 

from the Governor. 5 members are to reside in Maricopa 

County, 3 in Pima County, 1 Pinal County and one additional 

representative from outside the aforementioned three County 

area.Board members be nominated with input from Arizona 

environmental interests. 
2~ 

Potential Fund Projects: 

Immediate Funding Needs: 

1. $500,000 for the upper San Pedro River water supply 

management planning effort of the San Pedro Technical Committee. 

2. $500,000 for the Upper Verde River Watershed Association 

planning effort. 

J. $ 3,000,000 for Cibola National Wildlife Refuge additions. 

4. $ 5,000,000 for acquisition of sensitive riparian lands 

within the Upper Verde River system. 

Longer term funding needs : 

1. Acquisition of the Planet Ranch. $12-$17M. Results in a 

gain of upwards of 10,000 AF of additional water to the rnainstern 

based upon recent groundwater model developed by the Department 

of Hydrology and Water Resources at the U of Arizona under 

contract to the USFWS. 

2. Acquisition of sewage effluent to sustain effluent-dependent 

systems. 

J. Development of a statewide water conservation program. 

$l . OM. 

4. Implementation of water augmentation measures i n the upper 

San Pedro River (e.g. effluent recharge, stormwater recharge, 

well spacing) . $5-lOM. 

5. Delivery of CAP water for purposes of perfecting an exchange 

with SRP to optimize flows on Salt River below Stewart Mountain 

Darn. Up to $1 .0Mjyear 

6. Delivery of CAP water for purposes of perfecting an exchange 

with SRP and Phelps Dodge to optimize flows on East Verde River 

and East Clear Creek. Up to $2.0Mfyear. 

Maier Questions: 

1. Can the establishment and administration (including revenue collection and disbursement) be accomplished without additional 

legislative authority at the state andjor federal level? 
FUND REVENUES 

Revenue Target: $15M/year. The funding responsibility fo

obligations of the District. The District and the Bureau 

determine the most appropriate source of revenues. We hav

that the District and Bureau could cons ider from the range 

disposal. 

Source/Mechanism 

Surcharge:Forbearance Agreement CA/NV 

Surcharge: Forbearance Agreement (US) 

Surcharge: Recharge Projects 

Surcharge: Delivered M&I 

Surcharge: Contract M&I water 

not scheduled for delivery 

Transaction Levy: Intra-state 

transfers of M&I CAP allocations 

Transaction Levy: Intra-state 

transfers of non-Indian Ag 

Groundwater Withdrawal Fees 

Pump Fee: Recovery 

Power surcharge : HooverB & Navajo 

Federal contributions 

Fee 

20% of water cost 

20% of water cost 

20% of project cos

10% of capital 

component of water 

cost 

20% of capital 

component of water 

cost 

$100/af 

$20/af 

$1.00/af increase 

$5.00/af 

% of difference be

% of sale revenue 

long-term contract 

? 
Cennal \. ri~ on :ci 

23636 NORTH 7TI-i STREET 

PHOENIX. ARIZONA 8502• 3899 

(602) 870·2333 

January 24, 1994 

The Honorable Karan English 

U.S. Congresswoman, District 6 

1223 Longworth House Office Building 

Washington, D.C. 20515 

230 

. ...... . . ' ~ . .... .... · : \ ..: ~ . . ' . 

Re: CAWCD Response to "Testimony of Robert W. Johnson, Assistant Regional 

Director, Lower Colorado Region, Bureau of Reclamation on the Central Arizona 

Project, and James Duffus III, Director, Natural Resources Management Issue>. 

Resources, Community, and Economic Development Division of the General 

Accounting Office, before the Oversight and Investigations Subcommittee of the 

House Committee on Natural Resources." 

Dear Representative English: 

This letter is our response to your request for our comments on the testimony of Messrs. Johnson 

and Duffus at the Congressional hearings last month. We have taken the liberty of expanding 

the response to include some discussion of our own proposal as well. 

With regard to Mr. Duffus' testimony, we would point out that potential cost increases to the 

United States from resolution of the dispute between the United States and the CAWCD in 

CAWCD's favor and cost increases from increased water allocation for the Indian settlements 

and the environment are not additive. Any increase in the costs assigned to the United States 

as the result of the United States taking additional Indian or environmental water would lower 

the amount in dispute by an equal amount If, as Mr. Duffus suggests, the United States wants 

so much water that its share of the cost increases by $585 million, then the dispute between 

CA WCD and Reclamation is mute. 

The cooperative tone of the testimony of Mr. Johnson was encouraging. We will continue to 

cooperate with Interior to resolve the outstanding issues which are of concern to both agencies. 

Reclamation and CA WCD have a unique relationship set out in the Master Repayment Contract 

(MRC) and the Operating Agreement. Reclamation was responsible for planning, financing, and 

constructing the CAP. These responsibilities are rapidly phasing out as construction nears 

completion. With this phase out of major Reclamation responsibilities, CAWCD's repayment 

and operating roles became paramount. However, when Reclamation steps into its role as trustee 

for the Indians and potentially for the environment, the agency essentially becomes one customer 

among many. In our repayment and operation roles, we understand that Reclamation still has 

oversight responsibilities regarding operating issues and is the federal entity charged with creating 
The Honorable Karan English 

January 24, 1994 

Page 2 

231 

repayment arrangements which will return to the federal treasury all that is owed due to the 

construction of the project. By refusing to identify its needs and professing to be shocked by the 

cost of water, Reclamation is attempting to leverage its process of financial recovery for the 

United States through its role as a customer. CAP water is expensive for all its Arizona users. 

Everyone faces uncertainties about their future needs. Simple fairness demands that Reclamation 

identify the amount of water that is to be reserved for federal purposes and pay for what it takes, 

the same as all our other customers. 

Fortunately, this point seems to have been understood by the subcommittee. While CAWCD is 

prepared to negotiate in good faith, as a practical matter, we look for progress to be slow until 

the United States elects to identify its needs. 

Mr. Johnson stated that the overriding concern of the Department is protecting the financial 

interests of the United States. That should be of great concern to the Department. Likewise, the 

overriding concern of CA WCD is to protect the financial and resource interests of our rate payers 

and taxpayers while meeting our contractual obligations to the United States. We hope that 

preserving Arizona's dwindling supplies of groundwater remains a concern to Reclamation as it 

does to us. 

We were very concerned with Mr. Johnson's assertion that "the failure of CAP agriculture should 

not place additional financial burdens on the United States or the Indian CAP water users." As 

originally envisioned, the CAP's fixed OM&R cost was to be shared between the irrigation 

customers, the municipal cust.omers, and the United States on behalf of the Indians. This division 

of costs was crafted by Reclamation. Reclamation reviewed the crop budgets of the irrigation 

districts and prepared water supply projections, which showed that irrigation could take and pay 

for all available water. 

Now all parties acknowledge that the farmers cannot pay their share of the fixed OM&R of the 

project. After much discussion, the cities have essentially said "We didn't get the deal we were 

promised. Things don't always work out as people hope they will. The remaining parties will 

just have to share the costs that the farmers can't pay." 

Reclamation position seems to be speaking as a customer and saying, "We didn't get the deal we 

anticipated. The cities, through CA WCD, should insulate .!!5. from the losses associated with 

failing to realize our expectations." 

The problem with Reclamation's view, in addition to its obvious unfairness, is that neither the 

individual cities nor CA WCD ever agreed to assume the risk that the farmers would fail. The 

MRC calls for fixed OM&R costs to be paid each year in proportion to water deliveries. This 

is a fair way to divide the costs, but it probably is poor policy since it discourages CAP water 

use and rewards continued overdrafting. AMWUA, the Governor's Advisory Group and 
The Honorable Karan English 

January 24, 1994 

Page 3 

232 

CA WCD have also reviewed and considered allocating fixed OM&R in proportion to entitlement 

since this would be at least as fair as the current contract language and would encourage CAP 

water use. All we have heard to date suggests that Interior won't agree to this approach. Absent 

some alternative, we will have no choice but to press for compliance with the current contract. 

Interior and the other CAP water customers may be far apart in principle on this issue, but there 

may be little difference between their positions in d0llar terms. Again, as a practical matter, this 

issue cannot be resolved until the United States identifies how much water it wants. CAWCD's 

municipal customers have already demonstrated a willingness to pay the costs that the farmers 

were supposed to pay if they get the water that the farmers were supposed to receive. CAWCD's 

position is simply that the United States should pay for the water that the United States keeps. 

CA WCD believes that its cost allocation for the water supply system and Tucson Terminal 

Storage is $1.84 billion. We believe that there is substantial evidence for our position both in 

the contract itself and in the written record. CA WCD negotiated this number in good faith and 

believed that it contained generous allowances for inflation and contingencies. This ceiling was 

intended to protect CAWCD's customers against construction cost overruns. At the same time, 

it was intended to be a defense for CA WCD against a unilateral change in the methods and 

assumptions used by Reclamation in allocating costs. While the allocation method is specified 

in the concract, it is highly technical and CA WCD wanted a greater degree of protec tion than 

would have been offered merely by the opportunity to litigate the cost allocation assumptions and 

methodology. 

CA WCD believes that Reclamation has made errors in the application of the cost allocation 

procedures, but we do not believe that all of these errors were in the United States' favor. In 

fact, the District's share of the total cost has changed little since the 1988 agreement. We believe 

that the principal cause of Reclamation's proposed increase in our debt are simple cost overruns, 

additional costs that were not anticipated in 1988 such as scrubbers at Navajo and siphon repair, 

and additional interest due to unfunded OM&R to date. 

CA WCD intends to negotiate the repayment ceiling with Reclamation in good faith. However, 

we have no intention of abandoning our existing contract because we doubt that we could obtain 

terms as favorable today. 

CA WCD does not want Reclamation to continue spending money without a clear agreement as 

to how much is reimbursable by CA WCD. In the past, Reclamation has taken the position that 

project formulation and spending priorities were solely Reclamation's responsibility. Reclamation 

modified these positions during construction of the regulatory storage features when local 

interests contributed advance funding toward project construction. CA WCD views this notion, 

that local funds entitle the local interests to be partners in project decision making, as a model 

for completing the remainder of the project. 
The Honorable Karan English 

1 anuary 24, 1994 

Page 4 

233 

Mr. Johnson identified project power revenues as an area where potential solutions to the 

outstanding issues might be found. We see very little potential for the United States to present 

a compelling argument that power revenues are available for general use associated with the 

project. 

Mr. Johnson's final point dealt with the United States' exposure to default on the irrigation 

distribution system loans. Even though, as Mr. Johnson notes, CA WCD was not a party to those 

agreements, CA WCD worked hard to find a solution to this problem. We started working with 

Reclamation during the "White Paper" process and continued long after Reclamation stopped 

active participation. It was the Bureau's feeling that short of the "White Paper" su~ceeding, they 

could no longer be an active participant in the CAWCD's effort to find an alternative solution. 

We were simply unable to find a totally acceptable solution. We believe that the plan we have 

put forward is a step in the right direction. It didn't resolve ali areas the Bureau considered 

necessary to reach a "comprehensive" solution for the irrigation districts (i.e., "take or pay" 

obligations, water pricing, restructuring of 9(d) debt). However, the plan does resolve two of 

those areas and leaves only that area that is fully under the purview of the Bureau - the 

restructuring of the 9(d) debt. We regret that this is not the comprehensive solution that 

Reclamation wants. 

CA WCD's plan was limited to addressing the issues that .simply could not be deferred after the 

Secretary of Interior issued the. Notice of Completion. In essence, CA WCD agreed not to enforce 

the take-or-pay provisions in the irrigation subcontracts because the irrigation districts could not 

p~y in any case. In return the irrigation districts renounced any long run claim on the water 

allowing CA WCD and the United States to seek other users. Then CA WCD agreed to sell the 

water to the irrigators on a short term basis at a price competitive with ground water. We agreed 

to do this because it lowers the. price per acre foot for CAWCD 's municipal customers and for 

the United States. It also helps preserve Arizona's groundwater. CAWCD also agreed to use 

tax revenues, collected almost entirely from witlJin the service areas of our municipal customers, 

to mitigate the rate shock to those customers. 

CAWCD's plan was supported by all of our subcontractors, the Department of Water Resources, 

and most members of the Governor's Advisory Corrunittee. We do not believe that the plan 

solves all the problems. V./e do hope that we have avoided catastrophe and fostered a climate 

where the remaining issues can be resolved. 

Our hope is that we can convince Reclamation to revisit the cost allocation with a view towards 

allocating costs to all authorized functions in better accordance with their own guidelines. The 

reallocation must be based on the amount of water that they realisticaliy expect to keep for 

federal purposes. At this point, the United States must have $Cparated its remaining functions, 

it must have dealt with the overall costs of the project on one hand and assigned them 

appropriately under Reclamation law while keeping the process free and independent of their trust 
The Honor"blc Kar"n English 

hnu"ry 2~. I '!'!4 

Page 5 

234 

role regarding tile lndiarJS. This du"l role which Reclamation must fill consistently causes 

problems when third-party interests are involved. 

Thank you for your interest in the CAP. If you or your staff have any yuestions, please call 

Grant R. Ward at (602) 870-2338. 

Sincerely, 

Thomas C. Clark 

General Mano:ger 

/414 

E,-.;GLISII.LTX 
235 

COMMENTS OF 

CYPRUS MIAMI MINING CORPORATION 

TO THE SUBCOMMITIEE ON OVERSIGHT AND INVESTIGATIONS 

HOUSE COMMITIEE ON NATURAL RESOURCES 

CONCERNING THE CENTRAL ARIZONA PROJECT 

PHOENIX, ARIZONA 

DECEMBER 10, 1993 

Mr. Chairman and Members of the Committee: 

We appreciate the opportunity to provide comment regarding the importance 

of the Central Arizona Project ("CAP") to this State and to the various subcontractors 

of municipal and industrial ("M&I") CAP water. In particular, we appreciate your 

interest in learning about the use of CAP water by Cyprus Miami Mining Corporation 

("Cyprus Miami"), one of numerous M&l subcontractors for CAP water in Arizona. 

Cyprus Miami recognizes the need to obtain and maintain reliable water resources to 

further economic growth in this State. In particular, substantial and dependable water 

supplies are likewise critical to the mining process. 

The Cyprus Miami mining operation is located in Miami, Arizona near the City 

of Globe, in Gila County, Arizona. Employing approximately 1,000 people, Cyprus 

Miami paid annual salary and benefits of approximately $51 million in 1992. Cyprus 

Miami also paid approximately $75 million for supplies and services, and $6 million 

in state and local taxes. 

In 1992, Arizona's copper mines employed 12,100 people, paid salary and 

benefits of $450 million, and produced 60% of the nation's newly-mined copper. 

Arizona copper mines purchased goods and services amounting to $1 . 1 billion and 

generated approximately $117 million in state and local taxes. The total economic 

benefit to Arizona from copper mining activity in Arizona during 1992 was 

approximately $6.5 billion. While mining uses only about 3% of the state's total 

water demand, without adequate water supplies to operate the mines, these 

contributions to the State and local economy would not exist. 

Presently, Cyprus Miami depends mainly upon groundwater resources to supply 

the major water needs of the mining operation. However, CAP water is essential as 

a replacement water source for the long term viability of the Cyprus Miami mining 

oldoc\fo\cap2.d09 
236 

operation, as well as to residents of the Globe-Miami mining area, many of whom are 

financially dependent, directly or indirectly, upon the local mines. 

Until the 1980's, water resources in the Globe-Miami region were limited but 

sufficient to satisfy the demands of the local mines. Declining water tables in local 

basins, various lawsuits, and developments in the Gila River General Stream 

Adjudication, however, have required Cyprus Miami to critically evaluate its current 

and future water demand vis-a-vis current and potential water sources. For example, 

Cyprus Miami's existing water supply would be insufficient should Cyprus Miami elect 

to construct a new milling operation. Absent the possibilities offered by the CAP 

subcontract, Cyprus Miami would have little choice but to dramatically increase 

ground water pumping. Yet, ground water supplies are limited and subject to 

conflicting water rights claims of others, including municipalities, the United States, 

and Indian tribes. 

Cyprus Miami executed its subcontract with the Central Arizona Water 

Conservation District ("District") and the Bureau of Reclamation ("Bureau") earlier this 

year. Cyprus Miami currently has a CAP allocation for 4,647 acre feet per year, 

which declines to 2,906 acre feet per year when the M&l demand for CAP water is 

fully developed. In July of 1992, Cyprus Miami requested the Arizona Department of 

Water Resources to reallocate an additional 8,856 acre feet per year of uncontractedfor CAP water to the mine. Cyprus Miami seeks this additional allocation to meet its 

current and potential future water needs, which further indicates Cyprus Miami's 

commitment to the CAP. 

Because Cyprus Miami is located some 25 miles from the CAP, the mine must 

use its allocation by exchanging its CAP allocation with a downstream surface water 

user in order to indirectly utilize CAP water further upstream. Exchanges of water 

have been anticipated by the District and the Bureau as a means to deliver project 

water to subcontractors like Cyprus Miami whose location is such that direct delivery 

from the CAP is not feasible. We trust that by recognizing the importance of CAP 

water to the economic security, health and welfare of this State, and the critical need 

for CAP water both now and in the future to various subcontractors like Cyprus 

Miami, exchange agreements involving CAP water will be supported by the District 

and the Bureau. 

Thank you for allowing Cyprus Miami Mining Corporation to comment in favor 

of the Central Arizona Project on behalf of the Arizona copper mining industry. 
237 

SAWRSA AMENDMENTS 

Position of the san xavier Allottees Association, the san xavier 

Cooperative Association and the San Xavier District council 

september 27, 1993 

This memorandum responds to Mike Jackson's Memorandum of April 

13, 1993 {undated), and states the position of the SXAA, SXCA arod 

SXDC with respect to the major issues which must be addressed in 

any amendments to the southern Arizo~a Water Rights Settlement Act 

of 1982 {SAWRSA) . The format of Mr. Jackson's memorandum has been 

followed for convenience. 

(1) ISSUE: What is the extent of the United States' o~liqation 

under SAWRSA to expand the san Xavier Allottee's cooperative Farm? 

San Xavier agrees with Mr. Jackson's apparent conclusion tha~ 

SAWRSA § 303 obligates the federal government to improve and extend 

the existing irrigation system on the San Xavier Reservation as 

required to utilize the full§ 303 CAP allocation of 27,000 acre- feet annually for agriculture. 

SXAA, SXCA and SXDC POSITION: The SXDC or the SXCA should be 

authorized by the SAWRSA amendments to contract directly with the 

Bureau of Reclamation under P.L. 93-638 (Indian Self-Determination 

Act) to perform all of the functions of the Interior Department and 

the Bureau of Reclamation with respect to the rehabilitation and 

extension of the Cooperative Farm, including aakinq a determination 

of how large the Cooperative, Farm should ~e, up to a maximum size 

as limited by the SAWRSA f CAP water supply of 27,000 acre-feet 

annually. The size of the rehabilitated and extended Cooperative 

Farm should not be limited by the number of acres on the San Xavier 

Reservation historically irrigated by means of diversions from the 

Santa cruz River and irrigation wells. The P.L. 93-638 contract 

with San Xavier should include specific prov~s~cns for the 

rehabilitation of Cooperative Farm areas adversely affected by 

sinkholes. 

(2) ISSUE: To how much surface water will (San xavier and] the 

Cooperative Farm be entitled and how will deliveries of such water ~e assured? 

SXAA, SXCA •nd SXDC POSITION: An entity on the San Xavier 

Reservation representing the interests of the Tohono O'odham owners of allotted lands on the Reservation should have permanent control 

of and should receive all of the economic benefits of a total of 

40,000 acre-feet annually of water, including all of the 

Reservation's SAWRSA § 303 CAP water, all 10,000 acre-feet of the 

Reservation's groundwater allocation under SAWRSA, and an 

additional 3,000 acre-feet of SAWRSA S305 water. This amount is 
238 

approximately the rateable share of the entire San Xavier 

Reservation water supply that the Allottees would get under the 

Walton rule. This water should be available for any beneficial use 

as determined by the controlling San Xavier entity; including M & 

I, agricultural, groundwater recharge, riparian habitat 

restoration, and recreational uses. San Xavier's domestic water 

supply, as well as any water used by individual allottees for 

agricultural purposes in addition to the Coop Farm operations, 

would come out of this water allocation. "Exempt wells" pumping 35 

gpm or less would not be included in this allocation. 

(3) ISSUE: To how much groundwater will the cooperative Farm and 

the san Xavier District be entitled? 

SXAA, SXCA and SXDC POSITION: See ISSUE (2) above. The San 

Xavier District and the Allottees should have a permanent 

entitlement to the full 10,000 acre-feet of groundwater that SAWRSA 

would allow to be pumped on the San Xavier Reservation. ASARCO 

should be required to abandon its claim to san Xavier's groundwater 

allocation, and use its own allocation of CAP water instead. The 

P.L. 93-638 contract with san Xavier to rehabilitate and extend the 

Cooperative Farm should specifically provide for an evaluation of 

groundwater resources available on the San Xavier Reservation 

within the 1'ucson Active Management Area. 

(4) ISSUE: Quality of groundwater under san Xavier. 

SXAA, SXCA and SXDC POSITION: Require the installation of 

groundwater quality monitoring wells on the San Xavier Reservation 

by either ASARCO or the BIA. Amend SAWRSA as required to ensure 

that claims of the Nation and the allottee landowners at San Xavier 

for past, present and future damages for surface and surface water 

contamination, and groundwater contamination, are not foreclosed by 

SAWRSA or the dismissal of U. s. v. Tucson and Alvare~ v. Tucson. 

(5) ISSUE: control of rehabilitation and extension of Allottees' 

cooperative Farm. 

SXAA, SXCA and SXDC POSITION: See ISSUE (1) above. 

(6) ISSUE: Approval of 638 applications for work on the 

Cooperative Farm. 

SXAA, SXCA and SXDC POSITION: Amend SAWRSA to provide for 

direct negotiations and contracting between the San Xavier District 

and the Bureau of Reclamation for a P.L. 93-638 contract for the 

rehabilitation and extension of the Cooperative Farm. There is no 

need for approval or control by the Tohono O'Odham Nation. 

2 
239 

(7) J:SSUB: The source, .. ount, and tiainq of paJaent• for the 

costs of sUbjugating the san xavier Cooperative Para extension. 

SUA, SJ:CA and SJ:DC POSJ:TJ:Olf: Require that the amount 

necessary for the subjugation of the cooperative Farm as required 

for the rehabilitation of existing Farm lands, and the extension of 

the Farm, all as determined by the responsible entity at San Xavier 

under the P.L. 93-638 contract for the rehabilitation and 

extension, be paid from the SAWRSA S 309 Trust Fund to the entity 

responsible for the rehabilitation and extension of the Farm. 

Payment would become due when the Plan for the rehabilitation and 

extension, as developed under the P.L. 93-638 contract, is approved 

by the Secretary. 

(8) J:SSUB: The source and aaount of a capital working fund for the 

cooperative Para. 

SJ:AA, SJ:CA and SJ:DC POSJ:TJ:Olf: The District and the Allottees 

have opposed the leasing of SAWRSA 1 CAP water to the City of 

Tucson pending completion of the rehabilitation and extension of 

the Cooperative Farm. The SXAA, SXCA and SXDC propose the creation 

and funding of an Allottee Benefit Fund as provided in the 

Allot tees 1 proposed amendments to SAWRSA. The Allottees' are 

entitled to compensation for past damages as part of the settlement 

of U.S. y. Tucson. This Fund, or a portion of this Fund, can be 

used to provide working capital to the SXCA for the Cooperative 

Farm. The Allottee Benefit Fund should be funded by the "cash out" 

of the value of the Secretary's obligation to build "such 

additional canals, laterals, farm ditches, and irrigation works as 

are necessary for the efficient distribution for agricultural 

purposes of the water referred to in subparagraph {A) (of SAWRSAJ," on the San xavier Reservation, as are not required for the delivery 

of SAWRSA water to the Cooperative Farm. The "cash-out" value of 

the Nation's proposed "Option 9B Farm" {which has been determined 

to be uneconomic) has been said to be on the order of $25 million. 

(t) J:SSUB: Flood erosion of Allottee•' cooperative Para lands. 

SJ:AA, SJ:CA and SJ:DC POSJ:TJ:Olf: Provide expressly in SAWRSA 

amendments for Santa Cruz River bank stabilization at federal 

expense throughout the reach of the River on the San Xavier 

Reservation sufficient to withstand the 100 year flood. 

(10) J:SSUB: 

rights. 

Past daaaqes for trespass to the Allottee• water 

SJ:AA, SJ:CA and SXDC POSJ:TION: SAWRSA has no provision for 

payment of past damages to or for the benefit the Allottees for the 

taking of their water supply, interference with their water rights, 

3 
240 

and loss of production and income from farm operations that would 

otherwise have been conducted. Northwest Economic Associates has 

documented past damages for the loss of agricultural production and 

income to the Allottees through 1992 at $92 million. The 

Allottees' position is that all of the remaining, unrealized cash 

financial benefits in the proposed SAWRSA settlement, including any 

"cash out" of the federal obligation to build an irrigation system 

for the "Option 9B Farm," should go into an "Allottee Benefit Fund" 

to be used for social services programs and economic development on 

the San Xavier Reservation. As noted above, the Fund could also be 

used to provide working capital to the cooperative Farm. In the 

alternative, the Allottees' claims against the defendants for past 

damages should be preserved so that the Allottees can litigate them 

to judgment. 

(11) ISSUB: Continued applicability of 25 u.s.c. S 381 on the san 

%&vier Reservation; federal protection for the Allottee&' water 

rights. 

S%AA, S%CA and SltDC POSITION: SAWRSA amendments should 

expressly preserve the applicability of 25 u.s.c. S 381 on the san 

Xavier Reservation, as well as provide that the water supplies and 

other benefits provided to the Allottees or the San Xavier District 

in SAWRSA are enforceable as a matter of federal law., 

The City f Nation proposed amendments to SAWRSA would make the 

San Xavier Allottees an exception among Allottees on all other 

Indian Reservations by abrogating the applicability of 25 u.s.c. {381 on the San Xavier Reservation. The San Xavier Allottees would 

be subject to the Nation's exclusive control of the use and 

allocation of their water pursuant to the Nation's proposed water 

code without the possibility of Secretarial intervention to ensure 

a just and equitable allocation of water on the San Xavier 

Reservation. This would leave the Allot tees at the mercy cf a tribal government which: (a) insists that the Allottees have no 

vested water rights whatsoever; (b) has a conflict of interest with 

the Allottees, in that the Nation financially benefits by leasing 

"surplus" San Xavier water to non-Indian users; (c) has sponsored 

SAWRSA amendments which allow the Nation to lease San Xavier's 

water for off-Reservation use for terms as long as 200 years; and 

(d) is currently in the process of attempting to lease all of San 

Xavier's CAP water to the City of Tucson over the objections of the 

District and the Allottees. 

(12) ISSUB: Stabilisation of the San %avier groundwater table. 

S%AA, S%CA and SltDC POSITION: SAWRSA amendments should 

require that the qroundwater table beneath the San Xavier 

Reservation be permanently stabilized in order to protect the 

remaining San Xavier groundwater right. The SAWRSA amendments 

4 
241 

should also expressly preserve a cause of action by the Allottees 

against the defendants (or anyone trespassing on San Xavier's water 

rights) in the event the defendants continue to mine San Xavier's 

groundwater. This is a very important point. The CAP is not 

necessarily a reliable water supply; certainly not as reliable as 

the natural water supply in the area. This should not be a difficult point of agreement for the defendants in u.s. v. Iucson. 

The Arizona Groundwater Management Act requires that the 

groundwater table be stabilized. 

(13) ISSUE: Damaqe payments under S 304 (c) of SAWRSA for nondelivery of water. 

SXAA, SXCA and SXDC POSITION: Damages payable by the 

Secretary under SAWRSA S 304(c) out of the SAWRSA S 313 Cooperative 

Fund for the non-delivery of SAWRSA S 303(a) (1) (A) water should be 

payable directly to the San Xavier District entity holding the 

entitlement to the S 303(a)(l) (A) water (See Issue (2) above), or 

to the Allottee Benefit Fund (See Issue (10) above). Under SAWRSA 

and the Nation's 1992 proposed amendments to SAWRSA, the Secretary 

would pay such damages to the Nation, rather than to an entity or Fund obligated to utilize such monies for the direct benefit of the 

San Xavier Allottees. Since it is the San Xavier Reservation and 

the Allottees who would be damaged by non-delivery of the S 

303(a) (1) (A) water, damages should be paid to an entity or Fund on 

behalf of the San Xavier Allottees. 

(14) ISSUE: Additional CAP water for the SAWRSA settlement. 

SXAA, SXCA and SXDC POSITION: If the Tohono O'odham Nation 

believes that more water is required in SAWRSA after allocating a 

40,000 acre-feet entitlement to San Xavier- more than the present 

SAWRSA total of 76,000 acre-feet of SAWRSA S 303 water, S305 water 

and groundwater in order to provide the Nation's tribal 

government with an adequate entitlement, the possibility of 

obtaining more CAP water for SAWRSA should be explored by all 

parties to the negotiation. 

It appears that a large quantity of CAP water is (and will 

remain for the foreseeable future) uncontracted and could be 

allocated to the Nation. Presumably, the City of Tucson, Pima 

County, and southern Arizona Congressmen would strongly support an 

increased allocation of CAP water to the Nation. The Nation 

desires to lease CAP water to the City, and the "Tucson Water 

Resources Plan - 1990 to 2100" expressly assumes that approximately 

50,000 acre-feet of the City's future water supply will be leased 

from the Nation. 

5 
242 

October 1993 
243 

GOVERNOR'S CENTRAL ARIZONA 

PROJECT ADVISORY COMMITTEE 

FINAL REPORT AND 

RECOMMENDATIONS 

Prepared by Arizona Department of Water Resources 

October, 1993 
244 

GOVERNOR'S CENTRAL ARIZONA PROJECT 

ADVISORY COMMITTEE 

Governor Fife Symington -- Co-Chairman 

Mark DeMichele -- Co-Chairman 

George Britton 

Frank Brooks 

Supervisor Jim Bruner 

Mayor Herb Drinkwater 

Katie Dusenberry 

Jim Feltham 

Don Gaffney 

Paul Gardner 

Senator John Greene 

Representative Art Hamilton 

Jim Henness 

Tom Jensen 

Supervisor Jimmie Kerr 

Representative Mark Killian 

Andy Laurenzi 

Frank McAllister 

President Ivan Makil 

Mayor George Miller 

John Olsen 

C. M. Perkins 

Gail Peters 

A. J. Pfister 

Karl Polen 

Ron Rayner 

George Renner 

Senator Cindy Resnick 

Priscilla Robinson 

Russ Schlittenhart 

Rob Smith 

Leo Valdez 

Richard Walden 

Governor Thomas White 
245 

S T AT E OF ARIZONA 

EXECUTIVE OFFICE 

r' lf:E S YMINGTO N 

Go vernor 

To the Arizona State Legislature; 

September 27, 1993 

To the Members of the Board of the Central Arizona Water Conservation District; 

To the Citizens of the State of Arizona; 

On behalf of the members of the Governor's Advisory Committee on the Central Arizona 

Project, it is our pleasure to present the report of the Committee. When the Committee was 

appointed, ~ts task was to craft a plan for the operation of the CAP which would assure an 

adequate water supply in Arizona into the 21st century and beyond . The Committee was 

charged with developing a solution to the underutilization of the CAP and, because demand is 

a direct function of price, a key focus of the Committee was development of a pricing structure 

which would maximize the demand for CAP water. 

While many of the questions surrounding the CAP were fmancial in nature, other issues 

went well beyond the fmancial condition of the Project. They include the long-term water 

management policies of the state including the interrelationship of the CAP to the state's 

Groundwater Management Act, enhancement of environmental conditions in the state and 

completion of Indian water rights seitlements in Ariwna. As the linchpin of the state's water 

plans and policies, the CAP is a vital part of Arizona's future growth, economic development 

and environmental protection strategies. 

The make up of the Committee was deliberately diverse because of the magnitude of the 

impact of the CAP in Arizona. Its 34 members represented agricultural, business, 

environmental, municipal, Indian and legislative interests. Some members of the Board had 

significant expertise regarding the Project, while others were well versed in public policy issues 

and business management strategies which proved to be of great assistance to the Committee. 

Working together, the Committee identified the common interests among them, setting aside 

whenever possible the narrow self-interests that can divide. Each of the recommendations 

transmitted in this report is supported by a majority of the members of this Committee. This 

report sets forth a plan for the operation of the CAP which will ensure the efficient operation 

of the CAP, guarantee adequate water supplies across the state and promote an enhanced quality 

of life in Arizona. 

;;_""~ Governor Fife Symington, Co-Chainnan ~ Governor's CAP Advisory Committee Governor's 

o~!Jffi~ CAP Advisory Committee 

1700 W E:\T W ASHI NGTON. PHOEN IX. ARIZON A 85007 • (602} 5 4 2 -4 ?13 1 
246 

ACKNO~EDGEMENTS 

Countless individuals participated in making the final report of the Governor's 

Central Arizona Project Advisory Committee a reality. It would be impossible to list 

each person individually. but their contribution to this process is greatly appreciated, 

especially since so many of the assignments were extremely technical in nature and 

were completed under very tight time constraints. 

However, a few individuals and organizations must be mentioned for the 

expertise, energy and commitment they provided in this effort: 

• The members of the Governor's Central Arizona Project Advisory Committee 

• Jim Feltham, Coordinator -- Financial/Legal Working Group 

Jack Pfister, Coordinator -- Environmental Working Group 

• Supervisor Jim Bruner, Coordinator-- Indian Issues Working Group 

• Arizona Department of Water Resources staff 

• Arizona Public Service Company staff 

• Central Arizona Water Conservation District staff 

United States Bureau of Reclamation staff 
247 

TABLE OF CONTENTS 

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 

THE GOVERNOR'S CENTRAL ARIZONA PROJECT ADVISORY COMMITTEE . . . . . 2 

PURPOSE OF THE ADVISORY COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . 2 

COMMITTEE PLANNING OBJECTIVES . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 

THE ADVISORY COMMITTEE PROCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 

ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 

INVESTIGATION PROCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • . . 8 

SCHEDULE AND MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 

SUPPORTING DOCUMENTS AND STUDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 

POLICY FORMULATION AND ACTION RECOMMENDATIONS OF THE ADVISORY 

COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 

POLICY ISSUES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 

ACTION RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . • . . . . . . . . . 27 

APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 
248 

GOVERNOR'S CENTRAL ARIZONA PROJECT ADVISQRY COMMITTEE 

INTRODUCTION 

The activities, studies, and recommendations of the Governor's Central Arizona 

Project (CAP) Advisory Committee are summarized in this report. The CAP Advisory 

Committee was formed by Governor Fife Symington in December, 1992 and concluded its 

deliberations in September, 1993. During the course of the investigation process, the 

Committee developed extensive information regarding issues associated with the 

underutilization of water delivered through the CAP. As the studies progressed, interim 

reports were prepared for the Advisory Committee by the staff of the Arizona Department 

of Water Resources (ADWR) with assistance from the Central Arizona Water Conservation 

District (CAWCD) and the U.S. Bureau of Reclamation (USBR). In addition, three Working 

Groups of the Committee were created to address specific issues in the following areas: 

finance /legal, environment, and Indian settlements. Each issued a report containing 

findings and recommendations . The full Committee used this ;nformation to develop and 

adopt twenty-two action recommendations. 

FINAL REPORT AND RECOMMENDATIONS 
249 

GOVERNOR'S CENTRAL ARIZONA PROJECT ADVISORY COMMITTEE 

THE GOVERNOR'S CENTRAL ARIZONA PROJECT ADVISORY COMMITTEE 

PURPOSE OF THE ADVISORY COMMITTEE 

Governor Fife Symington formed the Central Arizona Project Advisory Committee 

in mid-December, 1992. The Advisory Committee was charged with developing 

recommendations to assure the long-term viability of the Central Arizona Project. The 

Committee was originally made up of 29 members, but was expanded to 34 members to 

insure even greater representation by interested parties. The Committee was co-chaired 

by Governor Symington and Mark DeMichele, President and CEO of Arizona Public Service 

Company. The full roster of the Committee's members, including who they represented, 

is listed in the Appendix. 

In forming the Advisory Committee, Governor Symington stated, 

"The Central Arizona Project is Arizona's lifeline. It is our water supply for 

future growth and the underpinning of our progressive water management 

policies. It is critical for Arizona to pull together and develop a solution to 

make the project work." 

At the Committee's inaugural meeting in early January, 1993 the Governor 

explained the purpose of the Committee: 

"The problem facing CAP is the significant underutilization of the resource. 

The project was designed on the assumption agriculture would use most of 

the water in the early years. Due to bad market conditions, low yields and 

tightening credit restrictions, agricultural use has declined in recent years. 

Underutilization has major potential consequences. First. it could result in 

a substantial shift of CAP costs to the municipal and industrial sector. 

Second, Arizona is leaving thousands of acre feet of Arizona's CAP water in 

the Colorado River at a time when our neighbors, California and Nevada, are 

seeking additional water off the river. That situation creates a potential 

threat to Arizona's ability to hold onto its CAP entitlement. Finally, the 

underutilization and the prospect of irrigation district default on federal loans 

FINAL REPORT AND RECOMMENDATIONS 

2 
250 

GOVERNOR'S CENTRAL ARIZONA PRQJECT ADVISQRY COMMITTEE 

brings the potential for congressional intervention to restructure the CAP. 

It is the Committee's charge to come up with an Arizona solution to the 

underutilization problem. At the end of the process, we must be able to say: 

this is Arizona's proposal, agreed to by Arizona's interests. • 

Governor Symington called the Committee together with the support of the state's 

water leaders. An earlier effort, the Governor's Task Force on CAP Issues, had been 

unable to reach a definitive solution regarding CAP problems, although they did propose 

a number of recommendations for further study. Following the Task Force effort, the 

Central Arizona Water Conservation District and the U.S. Bureau of Reclamation put forth 

a proposed conceptual solution to many of the issues in the form of a "White Paper. • 

After review and discussion of the concept with interested parties, the CAWCD and the 

USBR found that there was little acceptance of the concept as the basis of a long-term 

adjustment in the repayment structure of the CAP. The CAWCD, which is the multicounty agency created to repay CAP costs to the federal government, continued to work 

on restructuring plans while the Advisory Committee process was ongoing. 

Full utilization of the state's Colorado River entitlement has been the goal of 

Arizona's water management policy for decades. Central Arizona Project construction was 

supported by Arizona's political leadership through many battles, from gaining 

Congressional authorization to obtaining annual appropriations. The CAP is the linchpin 

of the state's plan for a &ecure future by providing a reliable renewable water source to 

replace and augment depleted groundwater sources. 

COMMITTEE PLANNING OBJECTIVES 

The Advisory Committee expanded on the charge given by Governor Symington by 

adopting a set of five planning objectives. The planning objectives provided a framework 

for discussions within the working groups and the full Committee meetings. 

FINAL REPORT AND RECOMMENDATIONS 

3 
251 

GOVERNOR'S CENTRAL ARIZQNA PROJECT ADVISORY COMMITTEE 

• Protect Arizona's entitlement of Colorado River water to provide a secure long-term 

water supply for growth and maintenance, and to enhance the state's quality of life. 

• Ensure the financial integrity of the CAP in a cost-effective way. 

• Identify how and to what extent the CAP may be utilized to enhance the state's 

environment. Utilize CAP water to the extent practicable to achieve this objective. 

• Utilize CAP as a water supply source to complete and implement water rights 

settlements with Indian tribes within the state. 

• Utilize CAP water to achieve water management goals in urban and rural areas of 

the state. Particular emphasis should be placed on implementing the goals and 

policies of the Groundwater Management Code. 

FINAL REPORT AND RECOMMENDATIONS 

4 
252 

GOVERNOR'S CENTRAL ARIZQNA PROJECT ADYISQRY COMMlmE 

THE ADVISORY COMMITTEE PROCESS 

ORGANIZATION 

The Governor's CAP Advisory Committee adopted an organizational structure which 

facilitated a high level of public involvement and interaction. The study process was 

supported by staff from the Arizona Department of Water Resources, the Central Arizona 

Water Conservation District, and the U.S. Bureau of Reclamation. When special expertise 

was required, additional support was provided by interested parties and officials from other 

government agencies. 

Figure 1 is a graphical representation of the organization of the Advisory Committee. 

The Governor's CAP Advisory Committee 

The full committee was comprised of 34 members appointed by Governor Fife 

Symington. The broad-based committee represented all major water user groups and 

included members from governmental, business. and environmental sectors. The 

Committee was geographically diverse by including members from Maricopa, Pinal, Pima, 

Yavapai and Coconino Counties. 

Working Groups 

Three working groups were organized from the membership of the full Committee 

to focus on critical issues and then report their findings to the full Committee. The 

working groups were initiated in April, 1 993 after the background and educational phases 

of the studies were completed. The working groups topics were financial/legal issues. 

environmental issues, and Indian issues. Each working group met numerous times. All 

meetings were open to the public, and group discussion, which included participation by 

non-Committee members, was encouraged. 

FINAL REPORT AND RECOMMENDA T/ONS 

5 
253 

GOVERNOR'S CENTRAL ARIZONA PROJECT ADVISORY COMMITTEE 

FIGURE I 

ORGANIZATION 

GOVERNOR'S CAP 

ADVISORY COMMITTEE 

INTERAGENCY STUDY TEAM 

AND STEERING COMMITTEE 

FINAL REPORT AND RECOMMENDATIONS 

6 
254 

GQVERNQ8'S CENTRAL ARIZONA PRQJECTADVISQRY COMMITTEE 

Interagency Study Team and Steering Committee 

The Interagency Study Team was composed of staff from ADWR, CAWCD, and 

USBR. The team was composed of a variety of technical disciplines including engineers, 

lawyers, hydrologists, economists, planners, and data processing specialists. The Study 

Team prepared a number of reports and discussion papers which provided background 

information for the Advisory Committee. 

The Steering Committee, comprised of representatives from the three agencies, was 

responsible for the overall management of the study. The Steering Committee worked 

closely with Co-chairman Mark DeMichele in preparation of meeting agendas, 

presentations, and logistics. The Steering Committee was responsible for ensuring that 

public input was reflected in the information which was submitted to the Advisory 

Committee, and that the reports or other work products were produced on schedule. 

Public Involvement Group 

The Public Involvement Group was not a formal committee, but rather an ad hoc 

group of anyone who wished to participate. The meetings of this group were wei! 

attended and reflected participation by a wide range of potentially affected interests. The 

purpose of the Public Involvement Group was to review studies performed by the 

Interagency Study Team as they were being produced so input could be received 

concerning assumptions and technical information. The Public Involvement Group also 

was used to help in the identification of issues and in developing concepts for alternative 

solutions. After the Working Groups were organized, the Public Involvement Group 

participants were invited to attend and participate in those meetings. 

Indian Involvement Group 

A second public involvement effort involved meetings with representatives of 

interested Indian communities. Since the Indian communities hold major water service 

contracts with the federal government for CAP water supplies, it was critical to obtain 

FINAL REPORT AND RECOMMENDATIONS 

7 
255 

GOYERNQR'S CENTBAL ABIZQNA P8QJ£CTADV/SOBY CQMMimE 

their input on the issues and proposed solutions as the studies progressed. This effort was 

also folded into the Working Group effort after those groups were organized. 

INVESTIGATION PROCESS 

The CAP issues investigation process involved a series of steps which built upward 

from baseline conditions analysis through the recommendation of a series of preferred 

actions. Figure 2 is a diagram depicting the sequence of steps. 

Step 1 ·Describe the CAP as of 1993. 

This step involved the collection and organization of relevant information which 

defines the Central Arizona Project. The baseline conditions evaluation describes CAP 

features and capacities, projected water supplies, demand patterns, current subcontractors 

and allocations, project operational constraints, power sources and supplies, costs of 

facilities, costs of operation and maintenance, current sources of revenue, and legal and 

institutional constraints. 

Most of this information was available but had not been assembled into a single 

document. The report issued during this step provided a valuable information base for the 

remainder of the study. 

Step 2 -Describe the likely future conditions without alternative action. 

This step is often called the no-action alternative and was used for comparison with 

any action alternatives. Investigations projected the likely chain of events if the current 

contract and subcontracts were to remain in place and the projected underutilization of 

CAP would continue. 

Determining the most likely future requires subjective judgement since most experts 

involved in the CAP are very uncertain about what could happen, especially if bankruptcy 

were to be declared by some of the subcontractors. Also of major concern to the State 

FINAL REPORT AND RECOMMENDATIONS 

8 
256 

GDYEBNQR'S C£NT8AL ARIZONA PROJECTADIIISORY COMMITTfE 

INVESTIGATION PROCESS 

STEPS 

AECOIIIENDATIONS 

STEPS 

WORKING GROUPS 

STEP4 

SOLUTION ELEMENTS 

STEP3 

PROBLEMS, ISSUES, & CONCERNS 

STEP2 

FUTURE WITHOUT ALTERNATIVE ACTION 

STEP 1 

DESCRIBE THE CAP AS OF 1993 

FIGURE2 

FINAL REPORT AND RECOMMENDATIONS 

9 
257 

GQVERNOR'S CENTRAL ARIZONA PROJECT AQVISORY COMMITTEE 

of Arizona are the likely effects on water management programs and the economy if large 

volumes of CAP water go unused. 

Step 3 - Identification of problems, issues and concams. 

The purpose of this step was to list and describe the issues and concerns of the 

water users and the public . From previous work by the Task Force and the White Paper 

effort, it appeared that the primary concerns involve financial considerations and water 

supply allocation considerations. 

Because the concerns of different parties varied greatly. each subcontractor. 

interested party or individual with specific expertise was provided an opportunity to have 

input. The results of the issues and concerns assessment were arrayed and presented to 

the Governor's CAP Advisory Committee. 

Step 4 - Identification of solution elements. 

Based on the results of Step 3, a report was prepared which described a variety of 

alternative solutions which could address the problems and concerns. Each solution 

element was briefly described and analyzed for the actions required to lead to 

implementation. Some possible solutions were applicable to more than one problem area. 

Step 5 - Working group analysis. 

As mentioned previously, working groups were formed to provide a focused analysis 

on three primary issue areas: financial/legal issues, environmental issues, and Indian 

issues. The working groups were supported by additional staff studies that developed data 

and provided more information on certain solution elements. Each working group prepared 

a progress report and a final report for consideration by the full Advisory Committee. The 

working group final reports contained a series of findings and recommendations. 

FINAL REPORT AND RECOMMENDATIONS 

10 
258 

GOVERNQR'S CENTRAL ARIZONA PBQJECTADYISQRY COMMITTEE 

Step 8 - Advisory Committee Issues Fonnulatlon and Action Recommendations. 

The Governor's CAP Advisory Committee formulated a set of issues from which it 

developed a set of recommendations on the future operation of the CAP. The 

identification of key issues provided the backdrop for consideration and adoption of the 

Committee's final recommendations. In addition, the Committee's final recommendations 

were based on the working groups' recommendations. They dealt with specific action 

proposals in the areas of financial, water marketing, Indian and environmental issues. The 

adopted recommendations of the Committee are listed later in this report. 

SCHEDULE AND MEETINGS 

The Governor's CAP Advisory Committee began with an inaugural meeting on 

January 8, 1993 and completed its effort with its final meeting on September 27, 1993. 

The following table lists the many meetings of the Committee, Public and Indian 

Involvement Groups, and Working Groups. 

FINAL REPORT AND RECOMMENDA T10NS 

11 
259 

GOVERNOR'S CENT.'?AL ARIZONA PROJECT ADVISORY COMM/17EE 

DATE 

January 8 

January 28 

Januaf)· 29 

February 4 

February 18 

February 23 

February 24 

March 2 

March 16 

March 18 

March 24 

AprilS 

AprilS 

April16 

Apri129 

May 3 

May 7 

May 14 

May 21 

May 24 

May26 

May28 

May 28 

June! 

June 4 

June 4 

June 11 

June 17 

June 17 

June 25 

June 28 

July 9 

July 13 

July 16 

August 6 

August 10 

August 11 

August 16 

September 2 

September 22 

September 23 

September 23 

September 27 

,VI fETING 

Governor's CAP Advisory Committee 

Public Involvement Group (Phoenix) 

Public Involvement Group (Tucson) 

Indian Involvement Group 

Governor's CAP Advisory Committee 

Public Involvement Group 

Indian Involvement Group 

Governor's CAP Advisory Committee 

Indian Involvement Group 

Public Involvement Group 

Governor's CAP Advisory Committee 

Indian Involvement Group 

Public Involvement Group 

Governor's CAP Advisory Group 

Joint Public Involvement and Indian Groups 

Governor's CAP Advisory Committee 

Finance/Legal Work Group 

Finance/Legal Work Group 

Finance/Legal Work Group 

Environmental Work Group 

Finance/Legal Work Group 

Indian Work Group 

Environmental Work Group 

Environmental Work Group 

Indian Work Group 

Financial/Legal Work Group 

Financial/Legal Work Group 

Environmental Work Group 

Governor's CAP Advisory Committee 

Joint Financial/Legal Indian Work Groups 

Environmental Work Group 

Joint Financial/Legal Indian Work Groups 

Environmental Work Group 

Joint Financial/Legal Indian Work Groups 

Indian Work Group 

Joint Financial/Legal India;, Work Groups 

Environmental Work Group 

Governor's CAP Advisory Committee 

Governor's CAP Advisory Committee 

Public Comment Meeting (Phoenix) 

Public Convnent Meeting (Tucson) 

Public Comment Meeting (C8sa Grande) 

Governor's CAP Advisory Committee 

FINAL REPORT AND RECOMMENDATIONS 

12 
260 

GOVERNQR'S CENTRAL ARIZONA PRQJECTADYISQRY COMMITTEE 

SUPPORTING DOCUMENTS AND STUDIES 

During the course of the investigation process. a number of draft reports and 

discussion papers were prepared by the Interagency Study Team for use by the Governor's 

CAP Advisory Committee and the public. These reports provided background information 

on the CAP and described the issues and the potential solutions. At the request of the 

Committee, several special reports and papers were prepared. Reports provided to the 

Advisory Committee by the Study Team were discussed with the Public Involvement 

Group and Indian Involvement Group prior to their distribution. 

The three working groups met to discuss specific issues and solutions from May 

through August. In concluding their deliberations, each group issued a report of findings 

and recommendations. 

This section of the Final Report provides a brief synopsis of these supporting 

documents. Copies of the documents are available upon request from the Arizona 

Department of Water Resources. 15 S. 15th Ave .• Phoenix, Arizona 85007. phone 

602-542-1554. 

Description of the Central Arizona Project - Draft report dated February 18, 1993 and 

Final Report dated April 1993, prepared by ADWR 

This report summarizes the various aspects of the Central Arizona Project, and 

includes a discussion of the physical features, institutions. laws, water allocations. 

contracts. and financial arrangements as they exist in 1993. Also included is a discussion 

of the Central Arizona Project water supply and anticipated use of that supply in 1993. 

The report provides much of the basic information necessary to understand current issues 

of under utilization of CAP water. As a result of high public interest in this report, ADWR 

revised this document and re-issued it in final form. 

FINAL REPORT AND RECOMMENDATIONS 

13 
261 

GOVERNQR'S CENTRAL ARIZQNA PROJ£CTAQVJSQRY COMM(ITEE 

Likely Future Conditions Wrthout Alternative Action-- Draft report dated March 10, 1993, 

prepared by ADWR 

This report discusses the possible likely future conditions concerning CAP utilization 

and water pricing. The Notice of Substantial Completion for the CAP water delivery 

system will be issued by the USBR on or about October 1, 1993 triggering the repayment 

obligations of the CAP contracts and subcontracts. Due to the depressed agricultural 

economy, several CAP irrigation districts may be unable to make the required payments 

for the CAP distribution systems. Moreover, if the water is priced at its actual delivery 

cost, these irrigation districts will be unlikely to pay CAWCD for their CAP allocations. If 

CAP debts cannot be reformulated, it is probable that some irrigation districts wilr utilize 

Chapter 9 bankruptcy to reorganize their debts. Costs of operating and maintaining the 

CAP will shift to the remaining customers, primarily large municipalities and some Indian 

Tribes, greatly increasing water charges over previous expectations. Use of CAP water 

will remain at very low levels in the near term but will increase gradually reflecting growth 

induced demand for additional municipal supplies. 

CAP Irrigation District Default and Bankruptcy Issues -- Draft report, April 16, 1993, 

prepared by ADWR 

This report provides an overview of the issues and laws which may come into play 

if a CAP irrigation district were to default on contract or bond obligations or seek 

bankruptcy reorganization under Chapter 9 of the federal bankruptcy laws. The report 

describes the obligations of the irrigation districts relating to CAP, including water delivery 

contracts and subcontracts, federal 9(d) contracts associated with the construction of 

irrigation distribution systems, and private bonds issued by the irrigation districts to meet 

the 20% cost sharing requirements of the federal 9(d) contracts. Relevant state and 

federal laws are discussed and analyzed. Issues associated with both non-bankruptcy 

remedies and bankruptcy are posed. The report concludes that there will be a high degree 

of uncertainty associated with a bankruptcy proceeding. However, it is likely that irrigation 

districts could emerge from bankruptcy with a reorganization of their debts at a rate which 

would make it economically feasible for them to continue in operation. 

FINAL REPORT AND RECOMMENDA T/ONS 

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GOYERNQR'S CENTRAL ARIZQNA P80JECTADYISOBY COMMIUEE 

luues. Problems, and Concema ••• Solution Elements - Draft report, April 16, 1993, 

prepared by ADWR 

Part 1 of this report documents the results of information gained from interviews 

and questionnaires completed by over fifty-six agencies, subcontractors, Indian 

communities, and other interested parties. ADWR staff conducted these interviews in 

February and March of 1993. After the responses were analyzed, the issues. problems, 

and concerns were grouped into five issue areas. The issue areas are: 

1. What measures are necessary to ensure that Arizona's entitlement to Colorado 

River Water is adequate7 

2. What issues affect CAP water utilization? 

3. How will the allocations to individual subcontractors affect Indian water rights 

settlements? 

4. How can the cost of CAP water be fairly distributed? 

5. What are the opportunities to use the CAP for environmental, recreational, or fish 

and wildlife benefits7 

The responses within each issue area often differed depending on the type of 

subcontractor or interested party that was interviewed. Generally, those responding fell 

into one of the following categories: 111arge municipalities; 21 smaller cities, private water 

companies and industries; 31 irrigation districts; 41 Indian Tribes and communities; 51 

agencies responsible for water supply planning; and, 61 citizens concerned about 

environmental issues. 

Part 2 of this report provides information regarding various solution elements to 

problem areas associated with the Central Arizona Project. Eleven problem areas are 

described. 

Solution elements are building blocks that lead to the development of alternative 

plans. This section of the report identifies and provides a brief concept description of 

those elements and identifies necessary implementation actions. Some elements provide 

FINAL REPORT AND RECOMMENDA nONS 

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GOVERNOR'S CENTRAL ARIZONA PROJECT ADVISORY COMMITTEE 

a complete solution to problems while others are limited and provide only partial solutions. 

Solution elements may also be compatible or in conflict with each other. 

Marketing Colorado River Water to California or Nevada Users •· Discussion Paper, 

April 21, 1993 

This discussion paper examines the legal authorities which make up the "Law of the 

River" (statutes, court cases, compacts. contracts) that might have an impact on Arizona's 

attempts to market Colorado River water to California or Nevada. The paper also examines 

the risks Arizona faces should it choose to pursue marketing of its Colorado River water. 

past and current efforts to market Colorado River water, and water needs in California and 

Nevada. 

The report provides the following conclusions about interstate marketing of 

Colorado River Water. The "Law of the River" does not expressly prohibit interstate 

marketing of Colorado River water. There are, however, a number of restrictions to such 

agreements which must be considered in fashioning a marketing agreement. Whether this 

agreement is in the form of a "forbearance" agreement or a straight-forward lease or sale, 

Arizona faces considerable risks by pursuing a marketing agreement. If Arizona attempts 

to market a share of its low priority CAP water, other parties will likely demand the right 

to market their water, including currently unused water. Arizona may find that once this 

currently unused water is marketed, its low priority supply is diminished and it no longer 

has any water to market. If Arizona seeks to negotiate a change in the "Law of the River" 

that allows a direct marketing of water, it may find, after the negotiations, that the state 

has lost more than it is willing and can afford to give up. These very real and serious risks 

must be carefully considered before any action is taken toward marketing any of Arizona's 

entitlement to another state. 

Attached as appendices to the paper are recent issue papers prepared by the 

Colorado River Board of California and the Colorado River Commission of Nevada. 

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GOVERNQR'S CENTRAL ARIZQNA PRQJECTADVISQRY COMMITTEE 

Marketing of CAP Water Within Arizona- Discussion Paper, May 26, 1993, prepared by 

ADWR 

This discussion paper was prepared to expand the concepts regarding a series of 

solution elements associated with marketing of CAP water and CAP allocations within the 

state of Arizona. The paper describes the limitations on marketing contained in existing 

M&l and Agricultural subcontracts. However, several sales of water have been sanctioned 

by Congress through Indian water rights settlement legislation. Interest in purchasing or 

leasing CAP allocations may exist 1 I for municipal water providers, 21 for additional Indian 

water rights settlements. 31 for Yuma, La Paz, and Mohave County water users. 41 for 

environmental uses, or 51 for make up water associated with the Yuma Desalinization 

Plant. Supplies available for marketing could include uncontracted water subject to 

reallocation, existing M&l subcontracts, Indian contracts, non-Indian agricultural 

subcontracts, and a spot market for surplus water. 

Distributed with this paper was a discussion paper titled "Enhancing Central Arizona 

Project Repayment and Utilization Through Market Incentives" dated April 12, 1993, by 

Dr. Bonnie Colby, Department of Agriculture and Resources Economics, The University of 

Arizona. 

Findings and Recommendations of the Indian Issues Working Group -- August 6, 1993 

The Indian Issues Working Group met a total of seven times either separately or 

jointly with the Financial/legal Issues Working Group. This paper documents their findings 

and recommendations. Significant findings include the concern that existing and future 

Indian water rights settlements which include a CAP component are threatened by issues 

related to the cost of the water. If costs for energy and OM&R are high, the Indians will 

not be able to afford to profitably use CAP water for irrigation purposes and will not accept 

CAP water into the water budget of Indian settlements. The Indian Issues Working Group 

made seven recommendations related to Indian utilization of CAP and water rights 

settlements. 

FINAL REPORT AND RECOMMENDA nONS 

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GOVERNQR'S CENTRAL ARIZQNA PRQJECTADVISORY COMMfiTEE 

Environmemalluues Working Group Report- August 16, 1993 

The Environmental Issues Working Group met seven times from May through 

August. The Group studied a variety of issues during that time. A subcommittee of the 

Environmental Group prepared a paper which discussed establishment of a water allocation 

for the conservation and development of fish and wildlife resources; establishment of an 

environmental trust fund; funding sources for such a fund; establishment of a CAP 

mitigation advisory board; interstate water marketing; and a series of other related issues. 

The Working Group adopted three recommendations for consideration by the full Advisory 

Committee. 

Report of the Financial Issues Working Group -Draft, August 16, 1993; Final, September 

1993 

The Financialllegallssues Working Group met ten times from May through August. 

The report documents a wide range of issues and solution elements discussed by the 

Working Group. The Working Group attempted to develop a financial projection model that 

identifies the assets and liabilities of CAWCD, its revenue sources, and projected cash 

outflows. In order to compare the effects of various elements, the Working Group 

developed a reference case model which was based upon the current operating projections 

of the CAP including 1 l $1.8 billion repayment ceiling, 2) CAWCD pays for siphon repairs 

and Navajo scrubbers from its reserve accounts, 3) water pricing for Indian use equals M&l 

pricing, 4) CAWCD reserve accounts are reduced to $52 million, and 5) DWR projections 

for water use are assumed for model revenue projections. The report discusses the 

financial implications associated with power, water and other resources of CAWCD: 

development of cash flow projections; operations and power marketing optimization; 

repayment reduction alternatives; incentives for CAP use; and new revenue sources. 

Obtaining increased revenue from marketing of surplus power from the Navajo Generating 

Station was endorsed. The report discusses the potential financial benefits of lowering 

federal repayment obligations by including sales of water for agriculture and for 

environmental, fish and wildlife uses. Within the area of incentives for CAP use, the 

FINAL REPORT AND RECOMMENDATIONS 

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GOVERNOR'S CfN7]3AL ARIZONA PROJECT ADVISORY COMMITTEE 

Working Group discussed target pricing, M&l "take or pay" for fixed OM&R costs, a 

groundwater pump tax, and ADWR assured water supply rules. New revenue sources 

included ad valorem taxes, intrastate marketing, and interstate marketing. The report 

concludes with nine specific recommendations for consideration by the full Advisory 

Committee. 

FINAL REPORT AND RECOMMENDATIONS 

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GOVERNQR'S CfNZRAL ARIZONA fflQJECTAQYTSQRY COMMITTEE 

POLICY FORMULA nON AND AcnON RECOMMENDAnONS 

OF THE ADVISORY COMMITTEE 

The Governor's Central Arizona Project Advisory Committee evaluated a wide range 

of issues related to state and federal water management policies and objectives and the 

operations of the CAP. The Committee recognizes that its recommendations are of an 

advisory nature only. However, the Committee believes that the make up of the 

Committee and the statewide impact of the issue make the recommendations of this 

Committee particularly valuable to those entities charged with the oversight and operations 

of the CAP. It is particularly important that those elected officials and other decision 

makers who are ultimately responsible for implementation of either statutes or policies 

affecting the CAP should give careful consideration to the Committee's recommendations. 

The Committee adopted a set of Policy Issues which formed the basis upon which 

it developed and adopted the CQmmittee's Action Recommendations. The Committee's 

Policy Issues were adopted at its August 12, 1993 meeting. The Committee's "Action 

Recommendations• were preliminarily adopted at its September 2, 1993 meeting. They 

recommend specific action proposslsconcerning the financial, water marketing,lndian, and 

environmental issues of the CAP. The recommendations were modified to reflect 

comments received at public meetings and adopted in final form at the Committee' s 

September 27, 1993 meeting. 

POLICY ISSUES 

Polley Issue: Should state policy strive to protect Arizona's full Colorado River entitlement 

to assure an adequate supply for future economic growth and development? 

The CAP was envisioned as the primary .water management tool for the 

Stl1te to reduce its dependence on mined groundwater snd to provide a renewable water supply for municipal, industrial and Indian related economic 

growth. The premise that the CAP would be a substitute for existing 

groundwater use in the agricultural sector was one of the fundamental 

justifictJtions for the tJuthoriztJtion and construction of the Project. ArizontJ 

FINAL REPORT AND RECOMMENDA TlONS 

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GOVERNOR'S CENTRAL ARIZONA PROJECT ADVISORY COMMITTEE 

continues to have a need for the full amount of CAP water but the current 

price of the water makes the agricultural sector's conversion from 

groundwater to CAP water cost prohibitive. Without the agricultural 

component of CAP demand, it is likely the state will not fully utilize its 

entitlement in the near term. 

Key Considerations: 

• Arizona's full entitlementto Colorado River water delivered by the CAP (1.5 maflyr) 

must be preserved and protected to assure that the state's economic development 

and growth needs can be met in the future. 

• To the extent Arizona does not fully utilize its CAP supplies in the short-term, 

negotiations with California, Nevada or the federal government must be prefaced 

with a demand that Arizona's low priority position on the River be improved. 

• Negotiations for the acquisition of available CAP water should be considered with 

the following entities for the following uses: (not in priority order) 

-Federal government for fish, wildlife, and for uncommitted water for environmental 

purposes within Arizona. 

-Federal government for the Cienega de Santa Clara. 

-California for M&l use. 

-Nevada for M&l use. 

-Clearinghouse for available water supplies. 

-Indian water rights settlements in Arizona. 

Policy Issue: In any reformulation of the CAP, how should the water management goals 

of the state's Groundwater Management Code be integrated into the solution? 

The goals of the 1980 Groundwater Management Code, especially the safe 

yield goals for the Phoenix and Tucson Active Management Areas, were 

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GOYERNQR'S CENTRAL ARIZONA fflQJECTADYISQRY CQMMfTTEE 

predicBted, in PBrt, on the opportunity the CAP provided to reduce 

dependence on mined groundwBter. Assuming thBt wBter users would 

voluntBrl/y convert to CAP supplies, the Code provided few, if Bny, tools or 

incentives to cBuse B reduction in the continued use of groundwBter. Now 

thBt it BPPeBrs thBt the orlginBI CAP pricing Bssumptions Wt71 be chBnged 

reducing the likelihood of voluntery use, the underlying Bssumptions of the 

GroundwBter Code mBy be cJWienged. 

Key Considerations: 

• The State Legislature should consider statutOfY changes which provide inCentives 

and reduce roadblocks to the l.e of CAP water. Statutory provisions under DWR, 

DEQ, DHS, the Arizona Corporation Commission and CAWCD should be reviewed 

to determine whether changes can be made which will encourage greater utilization 

of CAP water without violating water conservation rules and goals. 

• While major changes in the Groundwater Code are probably not feasible, 

institutional tools such as the Assured Water Supply Rules and groundwater 

recharge programs provide the opportunity to increase utilization of CAP water. 

• In developing the Assured Water Supply Rules, DWR should proceed with 

implementation of conceptS proposed in its draft Assured Water Supply Rules which 

provide for an accelerated phase-out of groundwater as a source of supply which 

can be used to demonstrate an assured water supply. Also, the state should 

consider moving the date CAP subcontractors are no longer "deemed" to have an 

assured water supply forward to 1996 from 2001 . 

• The state, CAWCD, and other entities should pursue the expansion of artificial 

recharge projects to store more CAP water for the future and increase its utilization 

during the next ten to fifteen years. 

FINAL REPORT AND RECOMMENDATIONS 

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GOVERNOR'S CENTRAL ARIZONA PROJECT ADVISORY COMMITTEE 

Po!jcy Issue: To what extent is the original purpose of the CAP as a replacement supply 

for irrigation still justified? 

Irrigated agriculture is the largest user of groundwater in the Central Arizona 

Project service area. One of the Project's primary purposes was to supply 

water to the agricultural sector. Since no new land is allowed to be put into 

agricultural production using either groundwater or CAP water, CAP water 

is intended to be a substitute or a "rescue· supply for agriculture, which will 

allow it to be a sustainable industry in our state. If agriculture cannot utilize 

CAP water because the cost is too high, it will remain on groundwater. This 

will eventually deplete the state's groundwater supplies within central and 

southern Arizona. 

Key Considerations: 

• Financial assistance to agricultural irrigation districts through lower CAP costs and 

restructured distribution system debt should be provided but only to the extent 

there are benefits to the state, including the state's environment, and CAWCD's 

other customers. 

Policy Issue: In considering a reformatted CAP, should proposals to allocate and use CAP 

water for environmental enhancement (not mitigation! purposes be considered? 

Fish tmd wildlife and recreational benefits are authorized purposes of the 

CAP. However, no specific enhancement features were constructed nor 

were any specific water allocations made for these purposes. Mitigation of 

environmental impacts from both construction and project operation is 

required and is funded as a part of the Project. Additional opportunities may 

exist to use CAP water to create enhancement features if water allocations 

are made available. 

Key Considerations: 

• Consideration should be given to allocating some amount of CAP water for 

environmental purposes and to establishing an environmental trust fund dedicated 

FINAL REPORT AND RECOMMENDATIONS 

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GOVERNQB~CEN~LAfflZQNAPRQJECTADWSQRYCQMMOJFE 

to environmental enhancement purposes. The amount of water to be allocated and 

the size of the trust fund should be studied further. 

• Any costs associated with Project features dedicated to environmental purposes 

should be nonreimbursable to the federal government. 

Policy Issue: How Important Is the reservation of CAP water supplies for future municipal 

and Industrial usa In the state? 

Municipsl snd industri11/ w11ter use hss 11lw11ys been B critic11/ purpose of the 

CAP. Its importsnce grows 11s m11jor urbtln development occurs in the· 

Phoenix 11nd Tucson metropolit11n 11re11s. lnitillllllloclltions of CAP w11ter 

were b11sed on requests to purch11se w11ter 11nd on projected future demsnd 

for wster. The 11lloc11tion w11s c11pped 11t sbout 640,000 sere feet to reflect 

whllt w11s thought to be the limit of the relillble CAP supply. Some of the 

w11ter providers who believed thst sdditionsl w11ter supplies would be needed 

for their service sress in the future h11ve msde srrsngements with Indian 

Tribes to /esse CAP wster from them. 

Key Considerations: 

• Consideration should be given to the reallocation of additional CAP water for 

municipal and ind.ustrial use even though an amount in excess of 640,000 acre feet 

is less reliable than the original allocations. 

• In order to foster the economic development and growth of our communities. CAP 

water provided to M & I users should be subsidized initially to increase utilization. 

Ultimately, CAP water must be priced at its actual cost but such pricing should 

occur gradually to reduce the impact of "rate shock. • 

• The current command and control method of distributing water allocations should 

be changed to incorporate free market principles into the CAP allocation process. 

FINAL REPORT AND RECOMMENDATIONS 

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GOYERNOR'S CENTRAL ARIZONA PROJfCTADVISORY COMMITTEE 

Policy Issue: In reformulating the CAP. what level of importance should the state place 

on using the CAP as a water supply for Indian water rights settlements? 

The uncertainty of Indian water rights claims has created B cloud over the 

continued use of water by non-Indian water users in Arizona. In order to 

resolve these issues the state policy has been to encourage negotiated 

settlements of Indian claims. CAP water has been B critical component of 

the settlements executed to date. Additional large settlements, including 

settlement of the Gila River Reservation claims, remain on the horizon. 

Current projected costs of CAP water raise questions about its use in future 

Indian settlements. 

Key Considerations: 

• Because it is in the best interests of the Indian communities, the federal government 

and the state, the federal government should make settlement of outstanding Indian 

water rights claims in Arizona a priority. 

• The "state should express its continued willingness to participate in the completion 

of negotiations between the tribes and federal government. 

Policy Issue: Should revenue sources other than water charges be utilized to lower the 

cost of CAP water? 

Because of the reduced demand for CAP water by agriculture, it appears that 

its cost will be considerably higher than was predicted. Several proposals 

have been made to lower the impact of the price increase on water users by 

using other revenue sources. Subsidizing the cost will avoid "rate shock • 

but it also masks the true cost of water. 

Key Considerations: 

• The following sources of revenue should be considered: 

-Increased power revenues. 

FINAL REPORT AND RECOMMENDATIONS 

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GQVERNQB'S CENTRAL ARIZONA P8QJECTAQV!SQBY COMM/l1EE 

-Continue $0.04/per assessed $100.00 valuation ad valorem tax through CAWCD. 

Possibly expand to Pinal County. 

-Groundwater withdrawal fees. 

-Increased use of property taxes in the CAWCD service area, or statewide. 

-General fund appropriation. 

• Create a state water bank, possibly under the direction of ADWR, to promote the 

utilization of CAP water consistent with the public policies of this state. 

FINAL REPORT AND RECOMMENDATIONS 

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GOVERNQR'S CENTRAL ARIZONA PROJ£CTADVISQRY COMMimE 

ACTION RECOMMENDATIONS 

Financial Issues 

• CAWCD and the Bureau of Reclamation should carefully review their operations. 

searching for all opportunities for cost reduction. 

• CAWCD should assess its power assets in light of the most current water use 

projections. and should optimize its power marketing opportunities to maximize 

interim revenues to assist in lowering water costs which directly effect the demand 

for CAP water. 

• CAWCD should consider adopting a policy of target pricing to increase incentives 

for CAP use, ensure fair pricing for those who buy water, and to develop 

appropriate expectations concerning future water prices. A policy of target pricing 

should be developed for both M&l and agricultural subcontractors. Ultimately, the 

goal of a water pricing policy should be to achieve full recovery of operation, 

maintenance and replacement costs. 

In order to fund projected deficits caused by target pricing. CAWCD should obtain 

additional financial authority to issue bonds in its enabling statute. 

CAWCD should adopt a policy that prices water to agricultural users at or below 

current groundwater costs to the extent that it benefits all CAP users. This 

recommendation is based on studies that conclude that savings under the Master 

Repayment Contract would exceed the cost of agricultural deliveries even though 

the water is priced below the cost to deliver it. This recommendation assumes that 

agricultural use would continue annually for the 50 year period or. in the alternative, 

the cost allocation process would not impose retroactive interest liability if 

agricultural use declines in later years. 

FINAL REPORT AND RECOMMENDATIONS 

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GDVERNQR'S CENTRAL ARIZONA FBQ.JECTAQVISQRY CQMMfTTEE 

• The Legislature should consider retaining the existing four cent temporary ad 

valorem tax beyond its expiration date, the expansion of its purposes for use by 

CAWCD and its applicability to Pinal County. 

• The state, CAWCD and M&l subcontractors should explore ways in which, within 

the existing legal framework of the subcontracts, M&l subcontractors would be 

required to pay their share of OM&R costs whether or not they take delivery of 

water. The Advisory Committee recognizes that this interpretation would almost 

certainly result in a financial hardship on small water subcontractors, so "take or 

pay• for M&l subcontractors should be combined with a policy that allows a 

subcontractor to join a replenishment district in lieu of "take or pay" obligations. 

The Advisory Committee recommends that any costs associated with any CAP 

"take or pay" provisions be considered a tax when applied to private water 

companies whose rates are regulated by the Arizona Corporation Commission. 

• The state should consider accelerated phase-in of a&&ured water supply rules and 

move the date when cities and towns with CAP subcontracts are no longer 

"deemed" to have an asaured water supply forward from 2001 to 1996. 

• The federal government should pay the fixed operation, maintenance and 

replacement (OM&RI costs asaociated with all CAP allocations for federal purposes. 

When CAP water is asaigned a federal purpose, such water should also carry a 

"take or pay" obligation for fixed OM&R costs. 

• The federal government should restructure the agricultural irrigation districts' 

distribution system debt by recognizing the reduced payment capacity of those 

districts and offering deferment contracts for the full fifty year period of repayment 

commencing January 1, 1994. 

FINAL REPORT AND RECOMMENDA TTONS 

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GOVERNOR'S CENTRAL ARIZONA PROJECT ADVISORY COMMITTEE 

Water Marketing Issues 

• CAWCD and DWR should develop a program for intrastate marketing of CAP water. 

The program should enable the operation of the CAP to benefit financially from such 

arrangements by implementing a fee structure for such transfers. Additional 

benefits could also be realized by increased utilization if parties not using CAP water 

transferred their contracts to those who will. 

• DWR should study the feasibility of arrangements in which California and Nevada 

take advantage of unused entitlement and canal capacity to store water in Arizona 

in exchange for the right to increased Colorado River diversions in the future. The 

cost for such water banking should be borne in full by the contracting state. This 

type of program could be beneficial to Arizona because it would provide a long-term 

source of water to a neighboring state without reducing Arizona's Colorado River 

entitlement and would provide additional utilization of the Project thereby reducing 

costs for Arizona contractors and subcontractors. 

lndjan Issues 

• Because it is in the best interest of the Indian communities, the federal government 

and the state, the state should request that the federal government make 

settlement of outstanding Indian water rights claims in Arizona a priority. 

• The state should offer its assistance in any way that is appropriate to encourage 

completion of water rights settlement negotiations among the Indians, federal and 

local governments and other entities. In particular, the state should encourage the 

federal government to make Indian settlements a priority, especially those 

settlements which have been completed between the Indians and local entities. 

FINAL REPORT AND RECOMMENDATIONS 

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GOVERNQR'S CENTRAL ARIZONA PROJECT ADVISORY COMMITTEE 

• CAWCD and DWR should support the Indian communities' effort to negotiate with 

the federal government to assume OM&R and other appropriate costs for CAP 

water provided through Indian settlements and water contracts. 

• The state should continue to participate financially, where appropriate, in Indian 

water rights settlements. 

• In order to encourage the use of non-Indian agricultural water as a water source for 

Indian settlements, the unquantified nature of the allocation, its low priority and the 

"take or pay" provisions for fixed OM&R should be evaluated. 

• Once a settlement has been completed, the Indians should be allowed to lease CAP 

water first within the CAP service area and then, within the state. This will provide 

a revenue source for the Indians. 

• Under past settlements, non-Indians have been required to pay OM&R charges on 

the leased water, but capital costs have been non-reimbursable. The state should 

request that the federal government continue this policy. 

Environmental Issues 

• Three levels of water allocated for environmental enhancement, i.e. 50,000, 

100,000, and 150,000 acre feet, should be evaluated. For each of these 

assumptions an evaluation of which costs, if any, will become a federal 

responsibility and what the impact would be on CAP water users should be 

identified. A large amount of the water reserved for environmental enhancement 

would be required on the Colorado mainstem and a task force should be named to 

discuss the economic, environmental and political consequences of an allocation of 

CAP water for environmental enhancement with appropriate representatives of the 

federal government and Colorado River Basin states. 

FINAL REPORT AND RECOMMENDATIONS 

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GOVERNQR'S CENTRAL ARIZONA PRQJECTADVISQBY COMMITTEE 

• The state and CAWCD should aggressively study the potential benefits from 

environmental, fish and wildlife use not only to produce benefits in the form of 

natural resource enhancement, but also because such uses potentially reduce 

repayment obligations on the Project. The acceptance of the $1.8 billion repayment 

obligation may preclude allocation of these costs to non-reimbursable categories; 

however, the cost11f natural resources and environmental enhancements could be 

used as offsets or credits against the repayment obligation under the Master 

Repayment Contract. 

• An Environmental Trust Fund should be established as part of the Committee's 

recommendations on CAP restructuring. Alternative funding sources should be 

explored including among others, a surcharge on underground storage and recovery 

projects using CAP water. The Fund should be administered by the Department of 

Water Resources for the maintenance, enhancement and restoration of aquatic, 

wetland and riparian habitats. It is recommended that initially not less than 

$500,000 per year be generated to start the Fund and a plan should be developed 

to increase the Fund to a level of not to exceed $8 million per year. 

The Governor should appoint an advisory committee with appropriate representation 

from environmental, busineaa and water users organizations to advise the 

Department of Water Resources on the management of the ~nd. 

In no event would existing revenue sources currently available to the CAWCD for 

repayment and OM&R be used to fund the Trust Fund. 

FINAL REPORT AND RECOMMENDATIONS 

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GOVE8NQR'S CENTRAL ARIZONA PRQJfCTADYISQBY COMMimE 

APPENDIX 

GOVERNOR'S CAP ADVISORY COMMITTEE 

Governor Fife Symington 

Co-Chair: Mark DeMichele (President and CEO. Arizona Public Service Co.) 

P. 0 . Box 53999. Phoenix, Arizona 85072-3999 

George W. Britton 

Frank Brooks 

Jim Bruner 

Herb Drinkwater 

Katie Dusenberry 

Jim Feltham 

Don Gaffney 

Deputy City Manager. City of Phoenix 

251 W. Washington 

Phoenix. Arizona 85003 

Member. CAWCD Board 

5631 E. Camino del Celador 

Tucson, Arizona 85715 

Supervisor. Maricopa County 

301 West Jefferson 

Phoenix, Arizona 85003 

Mayor, City of Scottsdale 

3939 Civic Center Blvd. 

Scottsdale. Arizona 85251 

Horizon Moving Systems 

3600 E. 36th Street 

Tucson. Arizona 85713 

Senior Vice President 

Rauscher. Pierce. Refsnes. Inc. 

40 N. Central Avenue. Suite 2300 

Phoenix, Arizona 85004 

Snell & Wilmer 

One Arizona Center 

400 East Van Buren 

Phoenix. Arizona 85004 

FINAL REPORT AND RECOMMENDATIONS 

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GOVERNQR'S CENTRAL ARIZONA PBDJECTADVISQRY COMMITTEE 

Paul T. Gardner 

Sen. John Greene 

Rep. Art Hamilton 

Jim Henness 

Tom Jensen 

Jimmie Kerr 

Rep. Mark Killian 

Andy Laurenzi 

Frank McAllister 

Ivan Makil 

Vice President, Water Utilities Assoc. of Arizona 

P. 0. Box 366 

Queen Creek, Arizona 85242 

Arizona State Senate 

1 700 W. Washington Street 

Phoenix, Arizona 85007 

Arizona House of Representatives 

1 700 West Washington Street 

Phoenix, Arizona 85007 

President, Agri-Business Council 

5738 W. Highway 287 

Casa Grande, Arizona 85222 

Vice President&. Exec. Director 

Grand Canyon Trust 

Rt. 4, Box 718 

Flagstaff, Arizona 86001 

Pinal County Supervisor - Chairman 

1 1 25 N. Gilbert Avenue 

Casa Grande, Arizona 85222 

Arizona House of Representatives 

House Wing - Room 223 

1 700 W. Washington St. 

Phoenix, Arizona 85007 

Director of Protection 

Nature Conservancy 

300 E. University Blvd., Suite 230 

Tucson, Arizona 85705 

Executive Vice President 

ASARCO Incorporated 

P. 0. Box 5747 

Tucson, Arizona 85703 

President of the Salt River 

Pima-Maricopa Indian Community 

Rt. 1. Box 216 

Scottsdale, Arizona 85256 

FINAL REPORT AND RECOMMENDATIONS 

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GOVERNOR'S CENTRAL ARIZONA PROJECTADVISQRY COMMITTEE 

George Miller 

John Olsen 

C. M. Perkins 

Gail Peters 

A. J. Pfister 

Karl Polen 

Ron Rayner 

George Renner 

Sen. Cindy Resnick 

Priscilla Robinson 

Mayor, City of Tucson 

Box 27210 

Tucson, Arizona 85726-7210 

Co-Chairman 

Prescott Regional Water Steering Committee 

14 Brookside Blvd. 

Prescott, Arizona 86301 

General Manager, Salt River Project 

1 521 Project Drive 

P. 0. Box 52025 

Phoenix, Arizona 85072-4350 

State Director 

American Rivers 

3601 N. 7th Av~nue, Suite D 

Phoenix, Arizona 85013 

Arizona State University 

School of Public Affairs 

Tempe, Arizona 85287-0603 

Vice President of Finance, Robson Communities 

25612 E.J . Robson Blvd. 

Sun Lakes, Arizona 85248 

Member, CAWCD Board 

P. 0 . Box 1509 

Goodyear, Arizona 85338 

Member, CAWCD Board 

P. 0. Box 103 

Glendale, Arizona 8531 1 

Arizona State Senate 

1700 W . Washington Street 

Phoenix, Arizona 85007 

Consultant 

P. 0. Box 5591 

Tucson, Arizona 85703 

FINAL REPORT AND RECOMMENDATIONS 

34 
282 

GOVERNQR'S CENTRAL ARIZONA PROJ£CTAQVISQBY CQMM(mE 

Russ Schlittenhart 

Rob Smith 

Leo V. Valdez 

Richard S. Walden 

Thomas R. White 

President, Cotton City Enterprises 

Box 698 

Eloy, Arizona 85231 

Sierra Club 

516 East Portland Street 

Phoenix, Arizona 85004 

Sr. Vice President, Alden Capital Markets, Inc. 

1 702 East Highland 

Suite 301 

Phoenix, Arizona 85016 

President, Farmers Investment Co. 

P. 0. Box 7 

Sahuarita, Arizona 85629 

Governor 

Gila River Indian Community 

Administrative Offices 

P. 0. Box 97 

Sacaton, Arizona 85247 

FINAL REPORT AND RECOMMENDATIONS 

35 
283 

ARIZONA RivERS 

Lifeblood of the Desert 

PROPOSAL FOR TilE PROTECTION OF 

RivERs IN ARIZONA 

ARIZONA RIVERS COALITION 
284 

Arizona is laced with ribbons of life-giving streams and rivers which provide tbe moisture and habitat 

for wildlife and recreation in otherwise forbidding country. I would like to sound a 

call-to-action to all of us wbo care about preserving Arizona :S natural heritage to move vigorously 

ahead with WiLD AND ScENIC RIYEr legislation right now. Protecting our natural flowing streams makes 

good economic sense ... and is simply the right thing to do. 

- BRUCE IIABBm, March 11, 1991 

TilE VIRGIN RIVER 

The Virgin River is the last river to flow from a subalpine to desert ecosystem without 

a major dam-yet Designating the VIrgin as a Wn.n AND ScliNic RivER is needed to protect this 

fascinating and fragile ecosystem. 
285 

ARIZONA RIVERS 

Lifeblood of the Desert 

A CrnzEN's PRoPOSAL FOR 1'81! PROTIICTION or Rm!Rs IN AalzoNA 

SECOND PltnmNG (RmsiD) 

ARIZONA RIVERS 

COALITION 

The Aalzolo<A Rma Ccw.moN gndlefuiJy llclmowledges doe peroaa . ...,..n ol 

11ecra11ooa1 Bqlllpeeat, 111c. (Rill -' ne Man~W~Fad o1 ~ 
286 

Table of Contents 

PROPOSAL SUMMARY AID 1111'RDDUCTIDII 5 

lnaoduction ................... 6 Proposal Summary ...•.•••.. 9 

SALT RIVER lAIII 13 

Bbck River ..••....•.....•.... 14 Cherty er.d< ............•.. 22 C=paign Cndt. ......... .27 

Tontoer.d< ..•............. 17 Cooner.d< ................. .24 Salome er.d< ................ 28 

Salt River Canyon ........ 20 Pinto er.d< ................... 26 Lowu Salt River ...•.•.•••. 30 

UTTU COUIIWID RIVER lAIII 

Little Colo..do ............. 34 O>.vdon Canyon ......... 36 Em Ocar er.d< ........... 38 

II"PEII BIU RIVER lAIII 

Blue River .......••........... 42 l'ig<on er.d< ............•. ..47 Ash er.d< .................... .51 

San Ftanciooo River ...... 44 Gila River (Box) .......... ..48 CaY< er.d< .................. 53 

EagJc/OUtty Creek. ..... 46 Gila River (middle) ..•••.. 50 

W PEDRO RIVER lAIII 

San Pedro River •••.•...... .56 Rcdlidd!Swamp Sprs. ... 59 Atavaipa Creek. ...•••..•.... 62 

Bast/Hot Sprs. Cyn. ..... 58 Buchman er.d< ............ 61 

WTA CRUZ RMR lAIII 

Gcncp er.d< .............. 66 

LOWER BAA RIVER IASIIi 

Hassayampa River ........ 70 

A8UA FRIA RIVER lAIII 

Agua Fria Rivtt ............. 74 

VEIIIIE RIVER BAlli 

Vetdc River (lower) ....... 78 West Ocar er.d< .......... 81 Oak Czttk .................... 85 

E.st Vcttlc River •......••.. 79 Wet Beaver er.d< ......... 83 Verde R/Syamon: Ck. 87 

1111 WIWAMS RIVER lAIII 

BWTO er.d< .....•............ 90 Sanca Maria River ...••.... 93 Bill Williams River ....... 95 

VIRBII RIVER BASil 

Vugin River .................. 98 

COLORADO RMR BASIN 

Kanab er.d< .............. 100 Little Cotor.do Rivtt •. I03 Grand Canyon .. -........ 106 

Paria Rivtt/Budcskin .. I02 Glen Canyon .............. 104 

APPEIIIIX 

Tctt ofWddAndSccnic Rivets Act ........••................•• 110 

Question andAnsw.ts on the Wdd Scenic Prognm ... 117 

33 

41 

55 

15 

Ill 

73 

89 

99 

109 
287 

DEDICATION 

MORRIS K. UDALL 

AriuM ~ orriy tlaipi~M/ WJJ 111111 Semi& Riwr. t1 40 

..uJe nmch of tiN Vmie Ri-. is ,-uJ for~ 

~-""P1 tlw ~tiN pmistnta""" vili4ll of-per-

,., · fomur AriuM a,,.,.._,.., M,.U K. UJ../J. It 

""" Mo ~ IHipe tiNa prr>t«tillf tltis irtititll riwr upurrt 

-"' iiUpirr .fot-riwr ~ U. his""--· 

To tiNu visUm 111111 ~ ""'- Mo~ ~ Wtienbip 

"""tltJicmtm lttWtlnls ~--' ,_u for 

tM """fo of IIi/, tM ARizoNA R/vE1ts CoMmoN tleJi. 

Ql#l this prvpoul 111111 tnll' """* U. -frUrt ,_.,;m, for 

.0 tkmvi"f,;,.,;, tnll' stt11e ~ M,.U K. CftltJJ. 
288 

March 11, 1991 

Dear fellow Arizonan, 

To those not f.uniliar with our state, Arizona ronj~ up images of cactus, deserts, canyons and 

mountains largely barren of vegetation. We o~ use the rhetoric of dryness and scarcity when 

it romes to allocating water between cities, industry and agriculture. Let me suggest that we take a 

closer view. 

In fact, Arizona is laced with ribbons of lire-giving streams and rivers if we but look in the right 

places. Between those dty canyon walls and stark mountain ranges flow streams which provide the 

moisture and habitat for wildlife and recreation in otherwise forbidding rountry. The water we 

drink and use for eronomic pursuits IIDWll down to us through this. precious network of waterways. The fact that Arizona can sustain a vibrant society as well as a remarkable variety of wildlife 

species undersrotes the significance of our narural water fiOW!l. 

It is also desperately important that we understand that we rould lose the last of these streams if 

we do not act now to protect them in their narural state. Even in our brief histoty as a territory 

and then as a state we have lost nearly 90 percent of our free. flowing streams to dams, diversions 

and other developed uses. Our remaining waters rould go the same way - never to return to -heir 

original rondition - if we don't step forward to save them while we still have the chance. 

While Governor, I established a Task Force on Recreation on Federal Lands, chaired by Scottsdale 

Mayor Herb Drinkwater, to make terommendations on maintaining the health of our narural 

resources for the enjoyment and use of Arizonans into the furure. Among the programs advocated 

by the Task Force was suppon for federal Wdd and Scenic river designation for deserving stretches 

of many of our remaining free-flowing streams. I'm personally delighted that proposals ate now 

beginning to rome forward, including this one, to do just thar through Congressional action. 

I would like to sound a call-to-action to all of us who care about preserving Arizona's narural heritage to move vigorously ahead with Wdd and Scenic river legislation right now. The argument is 

rompelling that protecting our narural flowing streams makes good eronomic sense for tourism, 

for water quality, for water management and for outdoor teeteation. Also, from my perspective 

and I hope from yo= as well, protecting these special places fur our children is simply the right 

thing to do. 

Please join me in roundly endorsing river protection for Arizona and working towards that goal 

with our elected officials while the opponunites ate before us. 

Sincerely, 

~~ BRUCE BABBIIT 

ARIZONA RIVIRS 
289 

INTRODUCTION & PROPOSAL StMMARY 

Lrrn.E COWRADO 

River Basins Map 
290 

Introduction 

Wtld & Scenic Rivers Act of 1968 was a far~sighted 

ression by Congress of national policy to protect, "for 

di.t and enjoyment of present and future generations," selected "rivers ... and their immediate environmenrs (that] possess outstandingly remarkable scenic, recreational, geologic, fish and wildlife, historic, cultural, or other 

similar v>lues." (16 U.S.C. 1271) 

Over the last rwency-chree years, Congress has implemented 

this policy by d~ignating over one hundred-fifty river segmcnr.s 

and 1 0, 'SOO river miles as pan of the 

cially in recent years. 

In Arizona, as in other paru of the country, human .>ettlc:-

ments and activities have concentrated along wateiWOI.ys. As a 

result, many of the state's most significant archeologlcal and historic sites are located along watetways. 

For much of the state's history, the values offered by these 

riparian aiQ5 were either taken for grmted or, sadly, ignored and 

destroyed in ilie rush to settle and devdop the state. 

The last few years have, however, witnessed a remarkable 

upsurge of interest on the pan of the 

national Wtld & Scmic Riven: svstem. 

This activity has, however, l~rgd y 

bypassed the Southwest, and particularly Arizona. Only one portion of one 

Arizona river, the Verde, has been 

included, designated as part of 

statewide wilderness legislation enacted in 1984. As the= supporting material 

in this volume demonstrates, many 

other Ariwna rivers and streams qualify for national Wild & Sanic River 

designation. 

Over75%of 

Arizonas native wildlife 

species depend upon 

public in protecti ng the dwindling 

number of outsunding streams and 

riparian areas in the state. Appreciation 

has spma.d of the vital role these areas 

play in maintaining biological diversity 

- providing wildlife habitat and migration routes, supporting diverse fishcries, and furnishing the transitional 

corridors bccween different life zonl.'..'i. 

Arizona is one of the most arid states 

in the Union. Irs streams and wedands 

h.ave never, since the dawn of man, 

cccupied mo~ than a tiny fraction of 

the State's land area. lkcawe of their 

comparative rarity and their comr.ut 

wirh surrounding lands, Arizona's ~ittflowing streams and their riparian 

riparian zones, 

including more than 

half of the 

threatened and 

The escalating economic significance 

of these areas as recreational sites is also 

becoming widely recognized. Riv r~ 

related recreation is an imponant component of what has become Arizona's 

second most dominant industry -

tourism. 

endangered species. Finally, a growing body of Mdence 

dcmonstnces the importance of freeflowing streams and h ealthy !'iparian 

environments are a treasure, ribbons of warc:r and greenery laid 

across c::anlHoned landsc1pc:s. Depictions of Arizona's natural 

heritage, as conveyed to the world through photographs such as 

appear in ~ ~oQ:I• frcquc:ndy portray the state's surprisingly sylvan streams and rivers. 

These riparian zones have outstanding ecological significance, 

disproportionate to rhat of other states. Over 75% of Ariz.ona's 

native wildlife species depend upon them. including more dun 

half of the: threatened and en<Lutgercd species. Cottonwood-willow riparian communities in the southwest are home ro mon:: 

bird species than any other ecosystem in rhc: counrry, and 

Arizona is famed wodd-wide for the divc:rsity of its bird populations. 

Many of these' streams also offer outstanding rccreuional 

opporrunitic:s. A half-million Arizonans fish, and the number of 

people: engaged in hiking, birdwatching, river-runn ing, and 

other activities dependent upon these ;mas has grown c:xponen6 ARI!O~A RIVERS 

ecosystems in capturing water-borne 

sediments and reducing the rate of siltation in reservo irs, 

improving water quality, facilitating groundwater recharge. and 

reducing peak flood flows, thus pro\'iding flood. protection to 

downstream areas. 

Conet:m with protecting Ariwna'.s free-flowing streams cUtes 

back to the 1960's. The state's firsr comprehensive outdoor 

recreation plan, prepared in 1965 by the Arizona Outdoor 

~creation Coordinaring Commission (created by the state legislaruce), recommended a river conservation policy. 

In the last few yeus, public attention and conam have come 

into sharper fOcus. A series of reportS by blue-ribbon comrr.is-

!oions, whose membas represent a wide variety of interests, have 

witholl[ exccpcion rccognizrd ~ need for strong and immediate action to protcet these streamS and riparian areas. Most of 

these ceporu have specifically called for serious congress•o!1al 

consideration of including Arizona rivers in the: nationaJ Wild 

& Scc:nic Rivers System. 
291 

For example, in its 1986 report, the Governor's Task Force on 

R.cr.ation on Fed...! Lands (chairal by Soomdale Mayor Herb 

Drinkw.ucr) called narural riparian ar= a "fi.gile and threatened recreational resource" in the stare. It recommended, among 

other things, p=ing "vigorously fur congll"Sional designation 

of all ... qualifying Arizona rivers into the National Wtld and 

Scenic River System." (p. 46) 

The Commiss.ion on the Arizona Environment in 1987 identified stream and riparian area protection as the top environmental action priority for the state. 

In June 1989, Governor Moffi>rd Issued an =ucive order 

{No. 89-16} calling for a series of steps to improve protection of 

riparian areas, including creating a Riparian Habitat Task Fotce. 

Its Ocrobcr 1990 tepon called fur, among other things, suppon 

for "efforts to designate qualified 

of the state's smallest of Arizona's fifteen counties, at a time 

when most other ballot propositions, cspccially those dealing 

with fiscal manm, ..... gning down to cm:rwhclming dtf.at. 

.& in the rat of the arid west, more than a century of dambuilding and devdopment projects have taken their toll on 

Arizona's sueams. The recent SCORP report estimated that 

only 5-10% of the state's original riparian areas in thelowor devotions ..mains today. (p. ES-3) Arizona rivets an: doned with 

impoundments, constructed with federal, state, local government and private funds. Most of these developments were built 

at a time when no policy existed to mitigate their adverse c::fttcts 

on streamS and riparian ecosystems, and a nwnber of them have 

entirely dewatered signific1nt stmehes of funnedy &eo-flowing 

Stttams. 

In the WUd 8c Scenic Rivers Act, 

rivc=rs and stttams in Arizona to the 

National Wild & Scc=nic Rivers 

System." (Final Report, p. 19). 

Govemot MoflOrd <esponded by issuing an executive= order (No. 91-6) on 

February 14, 1991, that directed state 

agencies to "assist in the idcnci6.cation 

and evaluation of rivc=rs and streams 

that might be designated as National 

Wud & Scenic Rivets." 

An interag<ncy team headed by the 

Arizona State Parks Board in 1989 

published a milestone "Arizona 

Rivets, Streams & Wedands Study" as 

part of the Statewide Comprehensive 

Outdoor R.cr.ation Plan (SCORP). 

It contained a wealth of information 

about the ecological and economic 

importance of streams and riparian 

arras, documented ~hreats to these 

resources, and identified strategies for 

their protection, one of which was 

A May 1992poll 

reported that 

'~here is near-consensus 

that the state's 

free-flowing rivers 

and stream-side 

habitats should be 

designated as 

wild and scenic. " 

Cong.... "'!'licitly recogni=l the need 

to redress this historic one-sidedness. 

The Act was intended to correct the 

imbalance with a new "policy that 

would preserve ... selected. rivers ..• in 

their free-flowing condition to proteCt 

the[ir] watct quality ... and to fulfill 

other vital national conservation purposes." (16 U.S.C. 1271) 

A variety of activities - proposed new 

dams, indiscriminate off-road vehicle 

usc, mining activities, and others -

threaten a number of Arizona,'s river 

corridors that remain in relatively 

unspoiled condition. The most immediate need for Wild & Scenic River 

designation, then, is to provide a management tool to ensure that tbcsc rivers 

arc available to ful£ill national conservation objectives. 

adding Arizona rivers to the national Wild & Scenic Rivers 

System. (p. 216) 

A poll in May, 1992 by the Morrison Institute for Public 

Policy, a research arm of Arizona State University, tepotted that 

"there is near-consensw that the stare's remaining &ec-Aowing 

rivers and stream-side wildlife habitats should be designated as 

wild and SU!nic". Eighty percent of Ariwna residents polled 

favored such designation. 

Perhaps the strongest, albeit indirect, indicator of public sentiment for more protection can be foWid in rhe ovcrwhdming 

statewide support for the so-called "Heritage Fund" initiative at 

the November 1990 general election. This proposal to direct 

$20 million of state lottery funds annually for natural area protection, outd<.>or recreation, .tn.d related projects, passed by a 

matgin of benet than 60-40. Significancly, it carried all but two 

This is not to say that the Wdd & 

Scenic Rivers Aa "locks up" these rivet 

corridors &om all non-recreational activities. Other than dambuilding, most existing uses will be allowed to ooncinue on designated Wdd & Scenic Rivers. But the designation d~ operate 

to emure that the overriding management principle for these 

designated rivets is to protect those values that qualify them fur 

inclwion in the national system. 1bat management objcctivc is 

precisely what is lacking on a number of Arizona rivers, and its 

absence threatens thdr fururc. 

In one important·respect, including qualifying Arizona 

stmuns in the national Wtld & Scenic River System is not as 

complicated or contentious as it would be in some other parts of 

the: country. The vast majority of the river segments proposed 

for protection are found on federal lands; specifically, on nation· 

al forest or public lands managed by the Forest Service and 

Bureau of Land Management, respectively. The complexities of 

ARIZONA RIVERS 
292 

mixed private-public or state-kdenJ ownenhips are for the most 

part absent on qualifying Ariwna rivers. 

The expcrie:na: with federal agency management to d2~ has 

shown, however, that existing management tools have not 

proved sufficient to adequately protect these sHcams. 

Consideration of Wild & Scenic River designation has been 

given comparatively little attention in the Forest Service and 

BLM plans that are now in effect. Parr of the problem is that 

many of the agencies' plans were prepared befOre the emergence 

of a consensw on the importance of protecting these a.rea.s. 

There are, hmvever, wdcome signs that agency att:irudes and 

policies are beginning to change. Both agencies have elevated 

ripuian area protection among thOr managemem goals. Actw..l 

implementacion of th~ d..irecti~s on 

the ground has, however, not moved 

So f2r we have addr=d mostly tho con=ving and prortttive 

virtues of Wdd & ScaUc River designation in Arizona. But it 

would be a mistake tO conc.cive of these d.esignaciom soldy in 

those tenns. Experience in many otM:r pans of the country 

shawl that designations can provide a signilicant boost to land 

values and to increasingly tecreation-dependent rural 

economies. Mort' broadly, new designations in Arizona would 

be a highly visible symbol of Arizona's growing recognition of 

the: economic value of sensibly managing the state's marvelow 

natural heritage. 

In short, the ultimate vaJue of Wild & Sc.rnic River designation is not only in the protection it alfords, though chis may be 

critical in the nearer term. Additionally, it is in the positive statc:-

ment designation makes - that good 

resource management makes economic 

very fast. Moreover, the process of 

amending existing plans or preparing 

new ones has m~ so slowly that it 

may be many years before the agencies 

give fUll attention w Wild & Scenic 

River designation as a management 

alternative. In the meantime, unfortunately, important values on a number 

of these rivers may be lost. 

Additionally, and cultural sense. It promotes rhc: 

kind of economy and helps sustain the 

quality of life that have together made: 

it is in the positive 

statement designation 

makes - that good 

Arizona such a d~irabl e place to live. 

In n:ccnt ~ the state's congressional delegation has ""= scvetal impoctam steps to advance th.ac progressive 

vision of Arizona's future. Ic has 

reached. a bipani.san consensus on sueD. 

important natural resource managemc:nt issues as protecting significant 

tracts of federal l:rnd as wilderness in 

1984 and 1990 . safeguarding the 

Gtand Canyon from inuusive airplane 

ovaflights, finding suitable altematin::s 

to Orme and Cliff Dams in the 

Wild & Scenic River designation 

would aJso make improved management coordination between these rwo 

federal agencil!$ possible. Jurisdiction 

over a number of rivtt corridors proposed fOr designation is now divided 

between the Forest Serv1ce and the 

BLM. While these two agencies have 

resource management 

makes economic 

and cultural sense. 

broadly similar management mandates, their approaches on the ground in particular river corridors may not be wholly consistent, and inconsistencies can 

adversely impact on river and riparian management. 

Another impon:rnt feature of qualifying rivers in Arizona 

hdps facilitate congressional consideration. Mo~t of the ive ~ 

proposed for designation in the state are in the upper reaches of 

the watersheds in which they are found, and are thw upst:ream 

&om the vast bulk of present or projected water uses in the state, 

:rnd &om nearly all present or projected dams and diversion 

works. A basic protection the Act provides is to preserve and 

conserve the river water (subject, of course, to valid existing 

water rights) through the: designated reach. This operates, in 

effect, to ensure that water as it emerges from the designated. 

reach is not diminished in quanrity, and is protected. in quality, 

so that it remains available to support the r.mgt= of conventional 

uses of water. The happy circumswtct of the location of most 

of the: Arizona rivers proposed for designation means that scri ~ 

ous conflicu over water, like conflicts over land usc:, are mini~ 

mizal. 

8 ARIZONA RIVER5 

Salt/Verde watershed, establishing the 

nation's first National Riparian 

Conservation Area in the upper San Pedro River, and safeguarding Gr:md Canyon natural and cultural resources near the: riYer 

with the: passage of the Grand Canyon Protection Act. 

Adding q ualifying Arizona rivers lo the national Wild & 

Scenic River Sysrem is a logic.a1 next step, fully consistent with 

the vision that has sustained thest' other iriiriatives. It is a mis.~­

ing piece in our continuing quest ro show the nation and the 

world that we possess, and recognize the value of, a priceless na:-

uraJ heritage. It is, in short, an idea whose rime has come. 
293 

Proposal Summary Since publication ofthc March, 1991 ·Arizona Rivers · Ukblood of lhc 

0rsen·. the Bureau of Land Manap;emmt (Bl.M) and Forest Servioe (FS) 

have both ~ publ.iarions rcpzding the ditibility of pownial wild and 

scenic riva'l on their rapcctive lands in Arizon:a. 

The BLM's document, "Porcntial Wild lllld Scel'\ic ruvcrs" was fint 

rdeaJed io Jamwy, 1992 at. the Stale Bl.M office in a mcering with Ariu:ma 

Congrcssion.J ddevtion rqnacntative~ . BLM looked at 24 riven in cbe 

report, finding 32 ri~r qmena on 17 riven and crccb eligible for inclwion 

into the National Wdd and Scenic Rivers System. BLM abo committed 10 

evaluate fivt: rivers recommended by hRC which they have DOl: yet reviewed. 

BLM lndudcd a wrinc:n com(Wison of !he ARC proposal 10 BLM's 6rwlinp 

ofdigibiliry. 

The FS ~ their "PrclimUwy Aru.l~is of E.Lg.ibiliry and Cassifica.tion 

for Wald/~tioruJ RMt Designation" in January, 1993 ar pub& 

meftings held ar the rcquesr of. md attended by, the Arizona oongreWonal 

ddcption. Tbt FS rniewcd wdl over 150 ~ on their lands. They found 

S6 of <hoc 00 b< "p.dlminarily" d;g;bk....!""" .,.;gn.d podiminuy d.wfiarions to the dipDk segments. Both of tboe reports are av:illablt: from me 

~-The Arizona Rivers Coalition agrees with the eligibiliry finding!: by the 

agencicl of rivets that :me nor in our proposal. We will support designation 

of many of theK rMn, such as Aranipa Credl. omd Leonard Canyon. 

H~. Wtcc we have hem w:1ablc to rcxarch all of tht additional rivers 

found eligible, we cannot to make recommc:ndarions on many of them wuil 

tht acencies have rdc:ased their n:sour..::r ana.IYJis on the Rtt.amS, .cheduled for 

Sep«mba, 1993. 

The fOllowing matri::x shows the: recommended dusiftc.ations by rhe 

Arizona Rivas Coalition on the riven included in th4 proposal alon.g with 

the agencies 6ndi.ng of eligibility and their n:wmmcnded cl.usificacion. 

Comparison ofARC Proposal to Agency Eligibility Findings. 

RIVER NAME ARC PROPOSAL BUREAU OF LAND MCMT FOREST SERVICE 

IALT IUYER lAIII 

Bear W.tlawCreek 

Bbclc. River (main nero) 

WotFork·Black 

.EasrFork· Blade. 

FUhC=k 

H<>m<C=k 

Canyun Credt 

O>enyC=k 

l..owa-Sait Riwr 

P><kuG-«k 

PintoC1eek 

Salome Creek 

SpringCndc: 

TonwC'.rcrk 

Upper Salt River 

Worlunan G-cr.k 

Dnlpaigr"oCn:dc. 

Cc.lon<:rt:d. 

UPPDI GU IIIVER -~ 

BlueRivu 

OtinyC=k 

~,C,«k 

KPUeck 

hgcon Crttk 

Soo.nf~Rivq 

~S:mh:lt~ciKD 

GilaR.ivu(Bo'll:) 

Bonia Creek 

SardineUttk 

A.hC=k 

pe.,ding 

19.SmilcsW 

14milesS,W.R 

i8 mile.~ S,W.R 

12milc:sW 

reudir•g 

pending 

~;. milcs W S.R. W 

11 S milesR 

pmding 

? mileiW 

20rnilnW 

p<nding 

:)) rribR.\\',W 

n m:ksS,W 

.. ~!l.ci;ng 

li m.!le.>W-' 

~-w::.bW.S 

milesS,R,W,S,W 

/ mi!aW 

26 milesR 

r.-.r:d!i::g 

i: 6milesW,R 

38w..i.laW.S,R 

Sw.dc:JR.W 

26rnilesW.S 

15 milnS,R 

pcnoh:~ 

\lnlibW 

South Fork G.-.e Gedl; 6 rrUl~ W 

Gma&I...owuCa...eCrcdw 6.15S.W 

hiaziildol Crttk 1-'t'oding 

Amcttffd~h Crr:c:b pmd.ing 

Gila ru.,.cr (middle) 27 5 miles R, W,R 

• TIN Nl#io1Wi PIIT'it Snvia has fourult!Ns~ liJ ~ __ d_,;g._·w-_. _ _ _ 

8m.iiesRW 

26 miloS,W.S 

15 milcrR 

34 miJ:'>R.W.R 

4milesW 

l<J.S miles, WS,S 

14 miles S,W,R 

18 milo S.R 

IOrnilcs S 

9 . 5cik.S 

SmilesR 

25 rnilcW.S 

11.3miles k. R 

8.5mik<S 

9milc.sS 

19milcsW 

l8.5milesR.W 

3C rui.lo.-,W,S 

47rniiaS.W,W,S 

9milaR.W 

l ! milr.s not digibk 

9.5 miles ncK digibk. 

)3rn.ilesS,S.R 

7 milesW 

26milesR 

ll milaW 

16mik<R.W 

22rnilesW,R 

9 m.ilc:sS 

6milesR 

7.5 milesW,S 

2.50milesW.R 

7-R 

2.511 S,S 

ARIZONA RIVIRS 9 
294 

Proposal Summary cconunuet!J 

RIVER NAME ARC PROPOSAL BUREAU OF LAND MGMT. FOREST SERVICE 

liT1U! CIILDIIAIIG RIVER lAIII 

O!cvdon Canyon 

War Fork- LCR 

East Fork- LCR 

South Fork- LCR 

Willow Creek 

WillowSpringsC'..anyon 

Woods Canyon 

Barbershop Canyon 

EastOearCro:k 

Leonard Canyon 

SAl PEDRO RIVER lAIII 

Grant~ 

P<mC=k 

AravaipaCrcck 

TwkqC=k 

Rcdfield/SwampSpri~ 

BodmunC=k 

Ba.u/HotSprings 

San Pedro River 

lAilTA CIIUZ IIIYER lAIII 

Ckn<gaC=k 

Canada dd Oro 

Romero Canyon 

Sabino Creek 

LOWER GILA RIVER lAIII 

HassayampaRivc:r 

AIIIIA FRIA RIVER BASIN 

AguaFriaRi~ 

VERDE IIVBIIIASII 

O.XC=k 

West Fork of Oak Creek 

Syomoff!C~ 

WestOcarCreek 

Wer BeaverCreek 

Upper Verde River 

V crde River - extension 

East Verde River 

Fossil Creek 

IIU WIWAMI BASil 

WrigluC=k 

Burro/Franci~ Creeks 

Big Sandy River 

Santa Maria River 

Bill Williams River 

26milcsW.S 

lOmilc:sW 

pmding 

p<nding 

Listed w/Ww. Oear 

pmding 

p<nding 

14milcsW 

6SmilesW,S,R 

l7milcR 

pmding 

pmding 

llmilcsW 

1.5 mil<> R 

I7milesW 

SmilesW,R 

8milesW 

34 m.ilesS,S 

10 miles S 

pending 

pmding 

pmding 

60 miles S,W,S,R,S 

llmilesS,W 

13milesS 

12mllesW 

4milesS,W 

4lmiles,W,R 

33miles W, R 

33milesR 

IOmilesW 

56milesR.S,W 

pmding 

pmding 

62/7W,S 

pmding 

80milesW 

22rnileS 

I 0 ARIZONA RIVERS 

IlmilesW 

l.5milcsR 

-12.5-IW 

3.5/nor6/W 

46 miles R 

I 0 miles pending 

15 mil" pmding 

2ImilesS,W 

13milesS 

53/14 W, R. W, S/R 

28milesS,W 

35mi!QW,S 

16/5 W, Sl pmding 

16mik>W.S 

IOmilesW,R,W 

11 miles$ 

9mik>S 

14mik>W 

3mik>W 

4milesW 

IOmilesW 

15 mik>S 

I7milesR 

5 milesR 

2 miles S 

9rnilesS 

5 miles not eligible: 

3/not 

9milesW,R 

8milesW,R 

II milesW,R 

16 miles not eligible 

14/8 Rlnot eligible 

8milesW 

4milesW 

36/5 W,S/not eligible 

18/15 W, Rlnot eligible 

33 miles R 

IOmilesW 

22132 R.S/not eligible 

13miles R. W 
295 

Proposal Summary rcontinued) 

RIVER NAME . ""ARC PROPOSAL "" BUREAU OF LAND MGMT. FOREST SERVICE 

VIIIIIIIYPIIAIII 

CII.OUliO IUVEIIIASI'II 

JUn.hC-""" 

Paria River/Buckslun 

Colorado River · Glc:n Unyon• 

Colorado River · G,-and Canyon* 

IOIIIIIAIMIIIAIII 

RuW:rUnyon 

Syamou: Canyon 

JS ,niles W,S.R.S 

80rn.i!csW 

35/tOW,W 

I6milcs S 

237miltsW 

:W miles W .S,R.R 

22milcsn:~w.tt: 

33/12 WJpcnding 

lOmi.lesW 

6 mik:sW 

5 rnilesS 

ARilONA RI"ERS I 1 
for 

Environmental Recommendations and considerations Wate~ Allocations and an Environmental Trust Fund 

Central Arizona Project 

10/20/93 

for 

I. Establish an allocation of CAP water for the protection and 

enhancement of' threatened and endangered species, and for 

fish and wildlife purposes. 

Allocation recommendation; 150,000 AF (125,000 AF for mainstern 

needs and 25,000 AF for central Arieona needs). 15,000 AF of 

water reserved fo~ central Arizona uses would be M&I priority 

water, the remainder would be non-Indian aq water that may be 

available for re-allocation. 

Assumptions; 

1. An allocatic>n of CAP water for the conservation and 

development of fish and wildlife resources would result in a reduction in capital repayment obligations of the District (see 

letter from Bureau to the Arizona Department of water Resources, 

September 3, 1993). 

2. Water used on the mainstern Colorado and not delivered through the CAP system would not result in any additional OM&R charges to 

the District. 

3. Water delivered through the CAP system would require payment 

of OM&R costs. The federal government may pay ·these costs, 

depending upon t;he use of the water and the federal interests 

auch uses would serve. 

4. The secretary can re-allocate uncontracted CAP water for fish 

and wildlife purposes. 

Discussion: 

To develop precise estimates of water needs and costs will 

require more tec:hnical study. In addition, there are a number of 

issues that will require building a consensus and developing the 

fish and wildlife projects in greater detail, including quantification of water use and location. The key component to 

initiate project development in any of these areas is the 

requirement that CAP water be available for protection and 

enhancement of threatened and endangered species and the 

conservation and development of fish and wildlife resources; a firm water supply must be assured by a re-allocation of CAP water 

l 
297 

for these express pllrposes. In the event that adequate uses for 

this water cannot be identified after a reasonable period, this 

water could be re-allocated. Ourin9 the period in which any of 

this water is not put to use for endangered species and fish and 

wildlife purposes, it could be made available to the District for 

other uses in a similar manner to other CAP water which has been 

contracted for and not scheduled !or delivery. 

Through the work of the Governor's Advisory Committee 

Environmental sub-committee and the Bureau's Arizona Project Office staff, several proposals are presented below for further 

study. 

A. Lower Colorado Riyer mainstem fish and wildlife resourca 

11iJ.!k.L 

1. Firming up water needed to support the continued 

existence of the Cienega de santa Clara. 

currently, 132,000 AF of water is &vailable to the 

Bureau from the Coachella Valley Canal lining project. This "saved" water can be used .by the u.s. to meet 

Mexico treaty obligations in lieu of the water that 

would have been supplied by the d~salinization of 

Wellton-Mohawk return drainage. This water is 

available until a shortaqe is declared on the river at 

which point California has a call on this water. As 

long as this water is available, the Bureau's need to 

operata the Yuma desalter is reduced if not eliminated. 

2. Reducing daily fluctuations in main&tem river flows. 

These fluctuations in river flows and reservoir pools have been identified as a factor in reducing the 

Guccess of both bonytail chub and razorback sucker 

spawning, both of which ere listed as endangered native 

fish species. 

3. Providing additional water to supply marsh and 

backwater areas, important habitats for a variety of 

fish end wildlife species. 

The USFWS has identified needs at Topock Marsh, on the 

Lake Havasu NWR, and at both Cibola and Imperial NWRs. 

A rouqh first estimate of those needs, and to expand riverine and lake backwater areas for rearing of 

endangered fish for reintroduction into the mainstem, 

would be so,ooo AF. 

4, Increasing stream flows in the Yuma and Limotrophe 

Divisions of the lower Colorado River to enhance 

aquatic, wetland and riparian habitats. 

2 
298 

5. Providing water for restoration of native riparian vegetation to replace exotic salt cedar and abandoned 

agriculture areas. 

B. Central Ari2ona stream enhancement and restoration through recharge project:; which utilize natural stuarncourses. 

several opportunitie& have been identified to restore 

riparian and aquatic ecosystems in conjunction with proposed M&I recharge projects involving natural watercourse&. These 

sites tentatively include: the Aqua Fria River, Santa Cruz 

River on the San Xavier District of the T'Ohono O'Odham 

Nation, Canada del oro in Pima county, and the Salt River 

below Granite Reef Darn. These projects are not sufficiently well-developed technically to identify fish and wildlife 

enhancement opportunities that en~hle. us to quantify water 

requirements. In addition, issues regarding water quality and the protection o! native fish :;pecies need to be 

adequately addressed. 

The overall justification tor these projects should be 

driven by recharge needs . An opportunity exists to optimize the design and construction of these projects to enhance or maximize the ability of these projects to restore or create 

aquatic, wetland and riparian habitats. The amount of wa~er 

needed and the cost of that CAP water, coupled with any related design and construction costs which are necessary to 

optimize the project to also provide fish and wildlife 

benefits should be the focus of any technical feasibility analysis to avoid "subsidizing" M&I recharge projects through the use of fish and wildlife water. 

c. CAP water exchanges to enhance streamflows in fungtioning 

natural stream systems. These include; 

1. Optimizing flows below Stewart Mountain dam on the Salt 

River. 

This will require further consultation with the Salt 

River Project and the Tonto National Fore&t. 

2. Optimizing flows on the East Verde River and East Clear 

Creek through changes in Blue Ridge Reservoir 

operations. 

This will require further consultation with Salt River 

Project, Phelps Dodge corporation, the Tonto and 

coconino National Forests. 

3. Dedicating effluent to the upper Santa Cruz River via an exchange of City of Nogale& and Rio Rico CAP 

allocations with the federal government. 

3 
299 

This will require further consultation with the City of 

Noqales, the Avatar corporation, the International 

Boundary and Water commission, and the country of 

Mexico. 

4. San Pedro 

Another exchange of CAP allocation or other water 

supply enhancement plan for the Sierra Vista area (plus 

water conservation) will be required if the San Pedro-- a National Riparian Conservation Area--is to be 

protected from dewaterin; by qroundwater pumpinq. 

II. Establish an Environmental Trust Fund 

Fund Amount: $ 15,0001 000/year. The fund could beqin at a smaller amount in the initial years increasinq to $8Mfyear in 

five years and $15M/year in 10 years. 

piscussion: The 1968 Colorado River Basin Project Act states 

that one of the project purposes of the Central Arizona Project was the "conservation and development of fish and wildlife 

resources". Twenty-five years and $4 billion in federal 

appropriations later, not one dollar was spent, nor was any 

aspect of the project desiqned and constructed, tor the express 

purposes of conservation and development of fish and Wildlife resources. It is important to clarity that over the years there 

have been a number of chanqes in project design and construction 

to avoid or miti;ate environmental impacts, but these miti~ation 

efforts should not be construed as environmental project benefits. They are simply an attempt to prevent further less or deqradation of fish and wildlife resources. 

At this late date, The Central Arizona Project's ability to meet 

the needs of fish and wildlife resources is very constrained due 

to the !act that project desiqn and construction is nearly complete. Because of the complete lack of attention towards the 

conservation of fish and wildlife resources in the original desiqn and construction of the project, it is essential that any project re-structurinq provide a mechanism whereby the project can develop a dedicated source of revenue to enhance statewide 

protection and enhancement of fish and wildlife resources in the 

future. 

It is equally important to recoqnize that in the event that the 

Bureau ot Reclamation pur$ues future appropriations under 

existinq CAP authority for fish end wildlife conservation and 

development projects, these projects may require a 25% local cost 

sharinq component. This local cost share requirement further 

underscores the need tor the project to qenerate financial resources for the conservation and development of fish and 

wildlife resources. 

4 
300 

In addition, the recent Arizona Supreme Court opinion in the Gila 

River adjudication puts federal interests in fish and wildlife 

and recreation resources associated with free flowing streams at 

risk from groundwater pumping. This decision by the Court places even more importance on developing financial resources to meet 

existinq' and future threats to endangered aquatic species and our remaining riparian systems. 

The Fund should grow over time to allow for adequate plannin~ in 

the early years to better identify uses of the fund. Follow1ng models established recently in Central Utah Project and Central 

Valley Project legislation, a Central Arizona Project Trust Fund, as presented below, is the most appropriate mechanism to enable 

the project to provide tor the conservation and development of 

fish and wildlife resources. 

Fund Purposes; 

The purposes of this fund are to establish an ongoing source of revenue for the conservation and development of fish and wildlife resources within the State of Arizona. The uses of the fund are intended to maintain, enhance, and restore aquatic, wetland and 

riparian habitats through the development and implementation of measures to protect water of sufficient quality and quantity needed to sustain these important habitats. 

Specific measures authorized under this fund include: 

l. Acquisition fee and other interests in lands or water needed 

to maintain, enhance and restore instream flows within 

stream systems to support 5iqnificant aquatic, wetland and 

riparian habitat values. Priority attention will be given 

to streams which support or can support f.ederally or statelisted threatened and endangered species or have been 

identified through a statewide biodiversity planning effort. 

2. Data gathering, compilation and analysis needed to assist 

local, state, federal and tribal qovernments in water resource management within the following high priority 

watersheds: upper Santa cruz river basin within Santa cruz county, San Pedro river basin, Verde River basin, Salt River 

basin upstream of Roosevelt Lake, the Bill Williams river 

basin, Little Colorado River basin upstream of st. Johns, 

Arizona, and the Gila River above the Ashurst-Hayden dam. 

3, Grants to assist private and public water utilities in 

developing and promoting and implementing water conservation 

programs outside of Active Management Areas. 

4. Development and implementation of measures required to 

maintain or enhance water quality and water quantity within 

stream systems which support significant aquatic, wetland 

5 
301 

and riparian habitat values. Priority attention will be 

qiven to streams which support or can support federally or state-listed threatened and endangered wildlife or havo been 

identified through a statewide biodiversity planning effort. 

Trust Fund Management: 

Management of the fund, including the disbursement of revenues, 

to ensure that fund revenues are expended in an appropriate manner requires the establishment of a dedicated source of revenue and an independent Board qualified to make decisions 

regarding funds disbursement in accord with the purposes of the 

fund. The following recommendations regarding such a Board are presented below: 

Recommendations: 

l. Funds will be placed in a segregated account established and 

administered by an appropriate entity. The National Fish & 

Wildlife Foundation may be an appropriate entity. 

2. A Trust Fund Advisory Board will be established and 

authorized to review and select proposals for funding in 

accord with the purposes of the Trust Fund. 

3. The Board will include 14 members. 4 ex-officio members 

from the Arizona Department ot water Quality; Arizona 

Department of water Resources, Arizona Department of Game & 

Fish and the Central Arizona Water Control District. 10 

additional membe:·s from the public-at-large who meet 

criteria that ensures they are knowledgeable and 

r•presentative of environmental interests are to be 

appointed by the Secretary ot Interior with recommendations 

!rom the Governor. 5 members are to reside in Maricopa 

county, 3 in Pima County, 1 Pinal county and one additional 

representative !rom outside the aforementioned three county area.Board members be nominated with input trom Arizona 

environmental interests. 

6 
302 

516 E. Portland Street 

Phoenix. Arizona 85004 

602•254•9330 

602•258•6533 FAX 

SIEfl.fl.A CLUO SOUTHWEST OFFICE 

George Miller, Chairman 

Committee on Natural Resources 

u.s. House of Representatives 

Washington, .DC 20515 

Dear Mr. Chairman, 

December 16, 1993 

Please accept the enclosed letter from several environmental 

groups to Reclamation Commissioner Beard for the hearing record on oversight of the Central Arizona Project. This should supplement 

the remarks of the environmental representatives who testified at the CAP oversight hearing in Phoenix on December 10, 1993. 

Thank you f or your consideration. 

Sincerely, 

l)jj, I !'-':., 3 ;:V 

Rob Smith 

Southwest Representative 
303 

AMERICAN RIVERS * ARIZONA WILDLIFE FEDERATION 

GRAND CANYON TRUST * MARICOPA AUDUBON SOCIETY 

NATIONAL WILDLIFE FEDERATION 

NORTHERN ARIZONA AUDUBON SOCIETY * SIERRA CLUB 

Dani e l Beard, Commissione r 

Bure au of Reclamation 

1849 C Street, NW 

Washington, DC 20240 

Dea r Commissioner Bea rd, 

No v ember 1, 1993 

We understand that you ma y soon be conside ring a pro posal from 

the Central Arizona Wa t e r Conservation Dis tri c t to modify their 

r e p a yment and water market i ng f or the Centra l Ari zona Project. 

This proposal is generally cons i s tent with recommendati ons from the 

f i na l report of Governor Symington's CAP Adv isory Commi ttee. 

A key element of the c ,\WCD proposal and the Adv i sory Committee 

recommendations is reducing the cost of CAP water to non-Indian 

agriculture to encourage d emand. The net effect of having nonIndian agriculture u s e large quantities of CAP water is to reduce 

CAWCD's repayment obligation to the federal government, perhaps up 

to $12 million per year, since the cost of providing water for 

farms is interest-free . 

Governor Symington and his Ad visory Committee co-cha ir Mark De 

Michele deserve credit for providing a forum for consideration of 

environmental issues and for s upporting the two environmental 

recommendations approved by the Advisory Committee. 

However, the overall p r oposal is fundamentally flawed because it 

attempts to drive up wate r us e in the desert rather than promote 

conservation of this e s sent i al resource. This is counter to trends 

l 
304 

in water management in the Colorado Basin and elsewhere in the 

nation as water managers and users are coming to embrace the need 

(or water conservation and efficient water use. 

We strongly urge you to reject the CAWCD proposal for several reasons: 

* The federal taxpayer already stands to recover less than half of 

total CAP costs under the existing master r 0payment contract, and 

this would reduce the amount of repayment even more. 

* This approach encoura~es more water use rather than encouraging 

conservation, especially if CAP water is sold to the farms for as little as $17 per acre foot -- less than the existing cost of 

pumping groundwater. Already, agriculture uses close to 30% of 

Arizona's water. 

* This a pproach reduces the amount of water potentially available 

to meet other competing demand s along the overallocated Colorado 

Rive r , including urban and environmental needs . · 

* This approach is completely the opposite direction from the 

Administration's initiatives to reduce subsidies for natural 

resource use, including water from federal reclamation projects. 

Non-Indian agriculture a lready receives below-market power, price 

supports for surplus crops such as cotton, and many tax deductions . 

* The level of acceptance of the CAWCD plan locally is unclear, 

and the General Accounting Office is now auditi ng the CAWCD to 

assess its ability to meet its repayment obligations; we think it 

would be wise to await the outcome of this audit before approving 

a new repayment strategy. 

* The CAWCD argues that its repayment obl.igation is $ 1.8 billion, 

while the Bureau maintains that the amount is now at l east $300 

million more than that. 

* Rather than sh i'·ft from grounnwat e r to CAP f or water, agriculture 

may choose to expa nd water use back to historic levels since the 

CAP water is so cheap and existing state limitations on groundwater use a re based on much greater farm acreage tha n now exists. 

In addition to protecting the federal taxpayer, the Bureau of 

Reclamation has an obligation ':.o protect the environment. CAP 

authorizing legisl ation specifically identifies fish a nd wildlife 

enhancement as an authorized project purpose, yet none has ever 

been done. 

our organizations also continue ~0 emphasize the following set 

2 
305 

of priorities: 

1) water allocations for fish and wildlife -- Conservationists 

recommended 175,000 acre feet for the mainstem Colorado River for 

native fish, national wildlife refuge, and stream restoration 

purposes and to help assure a continuing flow of water to the 

cienega de Santa Clara in Mexico; an additional 25,000 acre feet 

would be allocated to native fish and stream restoration purposes 

in central Arizona. These flows are critically needed to restore 

badly damaged fish and wildlife habitat and other resources. 

The Governor's CAP Advisory Committee recommended studying the 

allocation of water for environmental enhancements in amount.s 

between 50,000 and 150,000 acre feet, with the understanding that 

most of the water would be for Colorado mainstem purposes. 

We seek the higher range of water allocation, and also urge that 

water committed to environmental values will be protected in times 

of drought. 

2) Environmental Trust Fund -- Conservationists recommended an 

annual target of $15 million for stream restoration, endanger~d 

native fish, water and habitat acquisition, and water conservation 

programs. The fund would be administered by a board reflecting 

conservation interests and expertise. 

The Governor's CAP Advisory Committee recommended the creaticn 

of an environmental trust fund in principle, with funding starting 

at $500,000 per year to possibly increase up to $8 million per 

year. This fund would be administered by the Arizona Department of 

Water Resources and would have an advisory committee appointed by 

the Governor which would included a wide range of conservation, 

business and water user organizations. The Governor's CAP Advisory 

Committee also recommended that the environmental t.r~st fund be 

funded from sources not available to CAwc·o for raising money fur 

project repayment. 

We urge that ·our recommended target amount for the fund b'~ 

established, that a full range of funding sources be considered, 

and that administ.ration and oversight of the fund be done by 

conservation interests and experts. 

3) Improvements in state water policy conservationis~s 

recommended that Arizona change its water law to allow the 

conjunctive management of surface and groundwater to protect 

surface streams from groundwater overpumpihg, to allow t~e purchcs~ 

and conversion of water rights for instream environmental purposes, 

and to stop continued ground\vater overdraft outside of active 

groundwater management areas. 

The Governor's CAP Advisory Committee made no recommendatio~s 

for significant reform of Arlzcna'i water code. 

3 
306 

4) Water conservation Cons ervationists u r ged that water 

conservation be encouraged through CAP reform, including converting 

farming to less water-intensive crops and us ing pricing and other 

me c hanisms to encourage municipal water cons ervation. 

The Governor's CAP Advisory Committee did not recommend 

significant progress in this area . In fact, their recommendations 

are based on the goal o f increa s ing water use, especially for 

agriculture. 

5) Water marketing Conserva t i onists e ncoura g e d interstate 

marketing o:f CAP water to Cal i fo r nia and Nevada to meet their 

demands and to provide a new source of funding for CAP repa yment 

and environmental progr<~m . Us ing CAP water ma y preclud e the 

development of new environme ntally d estructi ve wat e r developments, 

such as a dam a nd diversion along the Virgin Rive r for Las Vegas 

water demand. 

The Governor's CAP Advis ory committee r e j e cted i nterstate water 

ma rketing. 

6) Market pricing for water and power -- Conserva tionists urged 

that CAP water and power resources r e fl e ct market price s to 

encourage conservation and to rais e revenues for r e payment. 

The Governor's CAP Advis ory Committee left inta ct , and i n fac t 

enhanced, the below-market pricing of both water and power, 

especially for agricultura l users. 

7) Project features not yet built -- Conservationists have urged 

that authorizations to build Buttes, Hooker , Cliff/Orme and 

Charleston dams be removed so that efforts to p r otect stream and 

native fish values in thos e areas would not be impeded. 

The Governor's CAP Advisory Committee rema ined silent in this 

area. 

8) Institutionai reforms of CAWCD -- Cons e rvationists recomme nded 

reviewing CAWCD operations to identify opportunities to reduce 

costs and to assure that timely and f ull r e p a yment of reimbursable 

CAP costs would occ ur . 

The Governor's CAP Advisory Comm i tte e rec ommend e d that both CAI-lCD 

and the Bureau of Reclama tion r e view their CAP operations to 

identify opportunities to save money. Currently, the Ge neral 

Accounting Office is conducting an a ud i t o f CAWCD's ability to meet 

master repayment contract obligat i o ns. 

9) Navajo Generating Station -- Conservationists urged that CAWCD 

drop its challenge to the negoti a ted EPA rule requiring new 

pollution control equipment on this power plant, which is a project 

feature of the CAP. Recently the Un i ted States Supreme Court 

4 
307 

refused to consider the CAWCD appeal of the EPA rule, so hopefully 

this issue is resolved. However, NGS operators are now planning to use limestone mined from scenic and environmentally sensitive lands near Flagstaff for the new scrubbers on the power plant. 

The Governor's CAP Advisory Committee had no recommendations in 

this area. 

We hope this helps the Bureau'to identify critical basic issues 

which need to be addressed as you consider any proposed changes in 

the CAP repayment contracts or water allocations. 

Sincerely, 

Rob Smith 

Sierra Club 

516 E. Portland st. 

Phoenix, AZ 85004 

602-254-9330 

and also on behalf of: 

Gail Peters 

American Rivers 

Tom Jensen 

Grand Canyon Trust 

David conrad 

National Wildlife Federation 

5 

Lee Kohlhase 

Arizona Wildlife Federation 

Charles Babbitt 

Maricopa Audubon Society 

Keith Oswald 

Northern Arizona Audubon 

Society 
WILLIAM D. SAKER 

308 

ELLIS, BAKER & PORTER, LTD. ATTORNEYS AT LAW 

SUITE 200 

......_. NORTH 32NO STREET 

PHOENIX. ARIZONA 8&)18-3995 

(602)956-S878 

December 28, 1993 

M~ING ~OOAfSS 

PO. BOX 1a.50 

PHOENIX. ARIZONA 85011-6450 

Via Facsimile (202)225-1931 

The Honorable George Miller 

Chairman 

Subcommittee on Oversight and Investigations 

Committee on Natural Resources 

United States House of Representatives 

1324 Longworth House Office Building 

Washington, D.C. 20515-6204 

Re: Central Ariaona Project-supplemental Statement of 

Marioopa-stantield Irrigation & Drainage District, 

central Ariaona Irrigation and Drainage District and Hew 

Magma Irrigation & Drainage District 

Dear Chairman Miller and Committee Members: 

This office represents the Maricopa-Stanfield Irrigation & 

Drainage District, Central Arizona Irrigation and Drainage District 

and New Magma Irrigation & Drainage District ("Districts"). These 

Districts are located in the central Arizona Project. Pursuant to 

your statement at the December 10, 1993 Oversight Hearing on the 

Central Arizona Project in Phoenix, Arizona, to the effect that the 

record on this matter would remain open for a few weeks, the 

purpose of this letter is to provide responses to var.ious testimony 

and statements presented at the December 10 hearing . 

1. United StatP.s General Accountina Off~ 

The testimony of the GAO emphasi zed that potential 

federal CAP costs could increase from 1. 7 billion dolla<s to over 2.8 billion depending on the outcome of three 

major issues. These issues were the negotiations between 

the United States and CAWCD on the repayment ceiling; 

additional CAP allocations for Indian water rights settlements and fish and wildlife enhancement purposes; 

and, potential responsibility for irrigation distribution 

system loan obligations which are unable to be paid by 

the responsible irrigation districts. The GAO 

representatives left the impression that this potential 

exposure of an additional one billion dollars for the 

United states was somehow unanticipated and not 

contemplated by existing contract and law. To the 

contrary, negotiation of the final repayment ceiling is 
309 

The Honorable George Miller 

December 28, 1993 

Page 2 

clearly based on interpretations of the existing master repayment contract. Additionally, additional costs 

incurred by the United States for increased Indian and 

fish and wildlife enhancement allocations are also a federal responsibility under existing contract and law 

and should be because they serve important federal 

purposes. 

The federal government's assumption of some or all 

o! the costs of ~he remaining 9(0) distribution system 

loans is probably not an anticipated federal cost but is 

one which could result from application of existing 

federal reclamation and{or municipal bankruptcy laws. 

The concern of the GAO regarding CAWCD's potential 

inability to meet its fixed OM&R obligations for an extended period of time is largely unfounded principally 

due to the admission by the GAO representatives that they 

did not consider CAWCD's taxing authority wher. 

identifying this alleged problem. The GAO Representative 

also suggested that the CAWCD Restructuring Plan 

increases Indian water costs. As pointed out below, this 

is clearly not the case. 

2. United State Bureau of Reclamation 

First, it should be pointed out that, contrary to 

the testimony of Mr. Johnson, these Districts did not 

"reject" the White Paper Proposal for restructuring the 

CAP. In fact, for the most part, these Districts 

accepted the proposal and, for those parts which were not 

accepted, the Districts were responding to a direct 

invitation from former Commissioner Underwood to make any 

counter proposal the Districts deemed necessary. 

Reclamation's statement also contends that Indian 

CAP water users should not be saddled with higher OM&R 

costs as a result of agriculture's inability to pay for 

CAP water as originally intended. Mr. Johnson suggested 

that Indian users will have to pay between $80.00 and 

$120.00 per acre foot for CAP water but this is clearly 

not the case under the restructuring and water pricing 

plan being implemented by CAWCD. Table 1 of the 

supplemental materials presented on the CAWCD 

Restructuring Program clearly indicates that Indian water rates will be between $66.00 and $115.00 per acre foot 

for the years 1994 through 2011 with non-Indian 

agricultural uses a major component of the Project. On 
310 

The Honorable George Miller 

December 28, 1993 

Page 3 

the other hand, without non-Indian agricultural use, the 

Indian water costs would be between $89.00 and $135.00 

per acre foot. Obviously, Indian users are benefitting 

from the CAWCD proposal as well as M&I and non-Indian 

agricultural users. 

Finally, the statement was made that M&I target 

pricing was subsidized by ~ tax revenues. Rather, 

such target pricing is subsidized by existing CAWCD reoerves to which the United State,; and the Indians have 

made no contributions. No tax increase is contemplated as part of the CAWCD Restructuring Plan. 

3. Tohono O'Odham Nation and Gila River Indian Community 

Representatives of these Tribes espoused legally 

unsupportable theories that non-Indian agricultural 

groundwater pumpers have deprived these Tribes of their 

surface and groundwater rights. These contentions are unfounded under Arizona water law and adamantly denied by the Districts. With respect to the surface water 

contention, the Tribes testimony assumes a connection 

between surface water and groundwater that has been 

rejected by the Arizona Supreme court as recently as July, 1993. 

The allegation that the non-Indian agricultural 

groundwater users have "used up" the Tribes groundwater 

supply is also unfounded. Groundwater use by non-Indian 

agriculture users has been done in accordance with 

Arizona law. This complaint is also often accompanied with a contention that the Pinal Active Management Area 

should become a "safe yield" active management area as opposed to its current status of "planned depletion". 

Significant public policy concerns on this difference were addressed in the passage of the 1980 Arizona 

Groundwater Management Act which established the Pinal 

AMA as a "planned depletion" AMA and these public policy concerns should not be pushed aside on the basis of some unfounded legal contentions which have no basis in 

Arizona law. Additionally, the recommendation that the 

federal government should establish the Pinal AMA as a "safe yield" AMA made in the Tohono O'Odham statement 

invites federal intervention into a state issue which is 

unwarranted and is against the rulings of federal courts 

that the United States must comply with state water laws. 
311 

The Honorable George Miller 

December 28, 1993 

Page 4 

The Tribes contend that CAWCD' s water pricing policy 

discriminates against them even though, as indicated 

above, it actually reduces their water costs in 

comparison to what these costs would be if there was no non-Indian agricultural use. The Gila River Indian 

Community statement on page 5 suggests that the maximum 

amount that non-Indian agriculture can pay for CAP water 

is $17.00 per acre foot and this rate should also be made 

available to Indian irrigators. In fact, the $17.00 per acre foot rate (wnicil is scheduled 1:0 increase annually) 

is only available to those irrigation districts which 

have substantial financial burdens remaining resulting 

from the construction of their CAP water distribution 

systems (some of which serve Indian lands) and the rate 

for the other non-Indian agricultural users is $27.00 per acre foot which also increases annually. The Tribes have 

incurred no debt for constructing distribution systems 

and, therefore, should not be entitled to the $17.00 per acre foot rate. one possibility would be for the Tribes 

to pay the $27.00 per acre foot rate with the United 

States being responsible to pay the incremental 

difference of the rates established by the CAWCD. 

4. Sierra Club/American Rivers 

The testimony of the Sierra Club representative and, 

to a lesser extent the American Rivers' representative, was particularly troublesome. The Sierra Club statement 

suggests that the Arizona agricultural sector "provides 

less than 3% of the states economic base". This 

statement is erroneous and ignores the fact that between 

1988 and 1990 farming, ranching and associated agribusiness accounted for nearly 10% of the State's economic 

activity according to a recent study published jointly by 

the University of Arizona and Arizona State University'. 

The Sierra Club testimony also suggested that CAP 

water should not be made affordable to non-Indian 

agricultural users and that any resulting reliance on groundwater should be curbed by raising the groundwater 

pump tax and decreasing agricultural use in general. 

This is a poorly disguised effort to terminate irrigated 

agriculture in much of central Arizona and, in so doing, 

deny meaningful economic opportunity to a large portion 

of rural Arizona. Of course, these attacks on rural 

Agriculture in the Arizona Economy, by Julie P. Leone• and Neilson c. Konklin, March, 1993. 
312 

The Honorable George Miller 

December 28, 1993 

Page 5 

economic development are throughout the political 

environmental movement. 

a common agenda of 

theme 

the 

running 

national 

The Districts also. disagree witt• the recommendation 

of American Rivers that all users of CAP water should pay 

into a Watershed Conservation Fund. In general, CAP use in itself mitigates negative environmental consequences 

since it is often used in place of other sources of water 

which may or may not have some form of negative 

environmental consequence. Mere use of CAP water in lieu 

of groundwater should not trigger environmental related 

surcharges. Any environmental fund should be a statewide 

responsibility and CAP users should not bear the burden 

of such a fund. 

The concept of the environmental groups to take 

water away from Arizona agriculture and let the land go back to desert so that it can be used by huge Nevada 

gambling casinos with their fountains and golf courses has a built-in conceptual flaw which is unexplainable. 

5. Central Arizona Water Conservation District 

For the most part the Districts are entirely in 

agreement with the statements made in the CAWCD 

testimony. 'l'he CAWCD restructuring and water pricing 

plan provides a substantial benefit to these Districts 

and gives the Districts a meaningful opportunity to 

restructure their remaining financial obligations. 

However, the Districts are concerned about the suggestion that their "waiver" of their long term CAP agricultural 

water rights will allow for the immedia~e reallocat1on of 

such water to Indian, M&I or even environmental uses. As a legal matter, such a reallocation would seem to require a termination of the water service subcontracts rather 

than a mutual waiver of certain rights between two 

parties under those contracts. The Districts recognize 

that the waiver prohibits them from exercising their long 

term agricultural water rights and M&I conversion rights as long as CAWCD continues to waive its right to collect 

full OM&R charges against the Districts An2 continues to 

provide affordable excess water to the Districts. As 

pointed out in the CAWCD written testimony, their plan 

provides for an average non-Indian agricultural CAP water 

delivery of 240,000 acre feet per year over a fifty year 

period so the Districts anticipate the availability of 

such water for a long period of time and not just for the 
The Honorable George Miller 

December 28, 1993 

Page 6 

313 

ten years under the existing excess water delivery 

contracts. The Districts atJpreciate the efforts of CAWCD 

to come forward with a reasonable and significant 

restructuring plan that benefits all users of CAP water, 

in particular, the State of Arizona in general. 

Thank you for the opportunity to provide these supplemental 

comments. 

PRO:WDB:smh 

cc: O.L. "Van" Tenney 

Jim sweeney 

Roger Shirley 

Rita Pearson 

Tom Clark 

Very ly yours, 

. ~ 

d/~~ illiam o. Balcer 

For the Firm 

Paul R. Orme 

For :.:he Firm 
314 

United States Department of the Interior 

BUREAU OF RECLAMATION 

IN REPLY Jl.EFER TO: 

W-1500 

The Arizona Republic 

Letters to the Editor 

P.O. Box 1950 

Phoenix AZ 85001 

Gentlemen: 

WASHINGTON, D.C. 20240 

DEC 8 1993 

J appreciate the coverage of the Central Arizona Project by the Arizona Republic over the last few months, but would like to set the record straight regarding the December 7, 1993, page one article entitled "Plan to pay for CAP rejected." 

The article's opening sentence said, "The federal government has rejected a financial-restructuring plan for the Central Arizona Project canal, questioning why farmers' water prices should be subsidized by taxpayers." To the contrary, 

the Federal Government has nQ1 rejected the plan put forward by the Central 

Arizona Water Conservation District (CAWCD). Bureau of Reclamation Commissioner 

Dan Beard's December 3, 1993, letter to CAWCD Board Chairman Sam Goddard makes 

it clear that the Federal Government has not rejected the plan, but rather that 

Federal approval is necessary to put the plan into effect. 

The Commissioner goes on to inform CAWCD of our desire to begin negotiating to 

expand the plan to address the remaining financial issues of Federal concern. Specifically, those remaining issues include: 1. Payment of operations and 

maintenance costs by Federal users of CAP water; 2. Increasing the repayment 

ceiling contained in CAWCD's contract, to allow for the timely completion of the 

project; 3. Repayment of Federal investment in CAP irrigation distribution 

systems; and, 4. Utilization of additional CAP power revenues. 

In short, we are interested in ensuring that the Federal investment in CAP is 

repaid, without further burdening the Federal taxpayer with additional costs. 

Thanks for the opportunity to set the record straight. 

Sincerely, 

Ed Osann 

Director of Policy and External Affairs 

Bureau of Reclamation 

CAP cost 

may rise by 

$1 billion - - CAP from page A 1 

con~truction. 

Among the CAP-related projects 

till to be completed are: water-stor- age facilities for Tuaon, elpansion of Roosevelt Dam, replacement of CAP Canal siphons under major rivers, and scrubbers to reduct air pollution in the Grand Canyon from the Navajo 

Generating Station. a 0011-ftred dec· 

rrical plant neaJ Page. · State officials were warned by the 

commit!et's rhr.irman, Rep. Otor;;-e 

Miller, D-Calif., that Congress will be 

reluctant to approve additional spend· 

iug for the CAP unless the fcd~ral 

government gets more c:oopcrah<>n 

from the state. "This is a big chunk of dough," 

Miller told ah01.:t 100 people during a five-hour hl'aring at the Phoenix Civic Plaza. ''1 think we should continue to 

see !his as a joint (fedcnl-state) 

\'CI\ t~re ." 

Rut on\)' miniJies later, forme r 

Gov. Sam Godda rd , ;1i m~ n of h~ 

Cl\ l' diMric-t. walked out of the 

hearing and intc a h<lllway, where he 

sign1.-d con trads with three irrigation districts, allowing them to recei\'t 

CAP water for . as little u S 17 an :tcre-root. 1\n :1crc·faut is. cnougl, water f(lr an 

orhau f:unily •Jf rhe r 3 ycal". 

CAP district cfficials plan to sigr. a 

total of 10 such contracts ~irh 

irriglHion tricts by the c:;~1 of the 

month. Gt>ddard maintain«! th31 the)' 

arc onl}' side agreemenl!i betwren the CAP district and the irrigation districts, and c.Jo not need the approval of the federal governme nt. 

But Bureau of Reclamation offidals 

have maintained that they also mu~t 

(lpprove the contracts. Miller said any refinancing of the CAP should ~ 

es~n ted to the fcdeml goverr.ment as a comprehensive package. 

Arter learning of G(xtdard'~ ac· lions, Miller told re,orters th at the 

CAP district's reluctance to invol\·e the federal government could <J:11y hurt the state in the Jong run. 

''l''ie seen this all before," he said. "This is a recipe for failure. I'm o,ure a 

lot of people were playing the tru:npd 

btforl! the lusitania went down." 

Miller said Congress in the future will not tolerate the CAP d!sulct returning fo r bailuuts. 

OodC:ard in'iiMeo during testimony 

that the CAP district is solvent antj 

will be able to pay its biOs. However, even the amount the $late owes the federal · government is In disrmce. District officials maintaiu they owe the federal go,·ernmcnt S1.8 billion, while federal offlci31s no\\· 

say :he st01te ow,~ the federal 

government $2.3 billion as its share of the $4.7 billion projec:t. 

316 

·Goddard said e;idence of the CAP district's solvency is the fact that it 

already ~ made the first of SO annual payments to repay the federal govemment, and the district has mort 

than Sl60 million in reserve funds. 

However, congressional auditors said tbe district's revenues from the 

sale of water and electrical po~ er - the district owns a quarter of the 

Navajo Generating Station - "will noC provide sufficient funding for the 

district to meet its federal repayment obligation. ·• The GAO said district 

reserves could be severely depleted by 

the end of this decade. Jn contrast to the defaance shown by CAP district officials, advisers to 

Gov. Fire Syminston held Out olive 

branches to federal officials, present· 

ing plans to have the Legislature approve several CAP-related moves, 

including: 

• Additional CAP-distrirt t.a~ing 

authority. Tho plan calls for a 

property Ia~ of 4 cents per SIOO of 

as~essc:d v~lvation currently le,·ied in Ma~icopa and Pima counties for groundwater rcc:harge to be e,;tended indefinitely beyond 1994. The plan 

would add the tax to Pinal County 

and alloW the CAP district to use it for any oblig11tion. 

• Establishment of a state Envi· ronmentaJ Trust Fund that would pay 

for restoratio.ll! and expansion of 

wetlands, both for wildlife habitat and 

recreation. Up to $8 million annually could be rctised from a surtax on water 

banking, in which California or 

Nevada would pay Arizona so those states could use some of Ariz.on2's 

Colorado River water in emergencies. 

• Establi::;hment of a state office to help facilitate senlemcnt of lnd.!an water-rights claims. 

Rita Pcarso\1, director of the state Department of Water Resources, and 

Mark De Michele. c:o-chairmil.n of the governor's C'AP Advisory Committee, both said thty are hoperul or legisht· tive 3pproval. 

De Michele, who also ear;~ Ari· zona Publk. Senice Co., said the C/\P district would not necessarily h.lve to levy the Ia:,, but it would be available in the future if needed. 

There are signs the CAP district is willing e\·entu:t!Jy to compromise with state and rederal officials. 

Goddard said the district is sup- portive of a state Environmen:al Trust 

Fund, although the distri::t and state officials ha\·e opposed Bureau of Redamaticn plans to siphon so:ne of 

the proceeds from a Scottsdalc·Paysun CAP water sale to create such a trust. 

A meeting about how to cs bli h 

such a fund is scheduled Dec. 2 t 

- s ... u , page A/6 

U.S. may Iieed 

· $1 billion·more 

·to finish CAP .- U., frompsgeAJ5 

between the CAP district and Pear· son's state water agency. Goddard also said the CAP district, after previously saying that it 

does not need more taxing a\.lthority, 

~ is likely to bllck an extension and · expansion of the 4·cent tax. 

"We'll probably go along with 

' them," Goddard said of the legislative • proposals. ''That's what we need are 

'cptions (for the future)." . And, in an interview in Washington 

i before the friday hearing, Interior 1 Secrelary Bruce Babbiu also hinted 

: that the federal government is willing 

; to compromise on CAP issut!O. 

f The former Arizona governor said 

· he believes the CAP district should bt · given broad Joeway in structuring its 

repayment. 

' "We're son ofth~ mortgage holder. 

: and 1 think the tole of the mortgage 

·.holder is to say, 'Look, as long as tiJt 

' check is in the mail every month anci . you're complying with the general 

provisions of federal law, we're not : going to show up e'•ery week to tell you how to mow the lawn.· " Babbitt said sut h issues as a i water-rrice break for f!llrmers are "& 

matter of ~te policy." "As long a,o; we';e complyi11g with 

· en<~ironmental laws and all the other · uff, how you arrange the :.nte.rnal 

. economics of the project i-s not principally a federal roncern," he id. 

. ~~~~b~:~~~. ~,,:!,~ ~~~~ic~as Jeff 
317 

AP NEWSWIRE -- December 12, 1993 

Long Excluded, Environmentalists Win Role in Water Project 

An AP Analysis 

By GEORGE GARTIES 

Associated Press Writer 

PHOENIX (AP) Environmentalists have come in from the cold to 

help set western water policy, and they will have a say in 

reorganizing the Central Arizona Project canal. 

Anyone in Arizona who hadn't realized that when President 

Clinton made environmentalist and former Arizona Gov. Bruce Babbitt 

his interior secretary probably got the message last week. 

When a Bureau of Reclamation official arrived to warn Arizonans 

they needed federal approval to release struggling farmers from 

their obligation to buy CAP water, that official was Ed Osann, 

formerly of the National Wildlife Federation. 

Osann's boss, Reclamation Commissioner Dan Beard, comes from the 

staff of Rep. George Miller., D-Calif., who forced reformulation of 

water projects in California and Utah to empha.size the environment. 

And when Miller, whose Natural Resources Cor.mti ·ttee has 

life-and-death say over the $4.7 billion cross··state canal, came to 

investigate the project's problems Friday, he saved his kindest 

comments for those who would direct some CAP water to restore 

dried-up streambed habitats. 

"I think the light is dawning," said Gail Peters, who heads 

the Arizona branch of the environmental group American Rivers. "I 

think the water community in Arizona is beginning to recognize that 

the state does have an obligation not only to support agriculture 

but also to support a healthy envirc;1ment and healthy river 

systems. " 

The 336-mile aqueduct from the Colorado River to Tucson was 

conceived when environmentalists were largely considered a fringe 

element. It was planned and built under the direction of 

traditional western water interests: farmers, developers, 

business-oriented elected officials. 

But something inconceivable has happened. The project stands 

ready to deliver 1.5 million acre-feet of watPr to desert farms and 

cities enough to supply 7.5 million people and is finding few 

takers. 

Environmental groups led by American Rivers want to set aside up 

to 10 percent of the CAP's water to restore habitat. They want to 

finance the restoration with a surcharge on CAP water that's 

"banked" underground in Arizona for sale to California and 

Nevada. 

At an oversight hearing here, Miller praised the advisory group 

that came up with the plan, saying it "broke through a significant 

threshold" in recognizing the significance of the environment to 

the CAP. 

Though the plan would boost federal taxpayers' bill for the CAP 

an estimated $150 million, Reclamation's osann said that would be 
318 

acceptable "If we embarked on that course with our eyes open, 

knowing that a certain amount of environmental benefit was worth a certain amount of money." 

The plan almost never saw the light of day. 

It was first floated before Gov. Fife Symington's blue-ribbon 

panel on the CAP. But when he named the panel a year ago, Symington 

didn't appoint any environmentalists. 

Only after testing the political waters in Washington and 

getting an unmistakable message from Miller did Symington add four 

environmentalists to the 33-member panel. Co-chairman Mark 

DeMichele, chairman of Arizona Public Service, acknowledged the 

late addition to Miller at Friday's hearing. 

The environmental water allotment was rejected by the advisory 

group the first time it came up for a vote. It was resurrected only 

after leaders warned that some environmental element would be 

necessary to sell the CAP refinancing in Washington. 

The Central Arizona Water Conservation District, the independent 

government body that must pay for and run the canal, has yet to 

include the idea in its plans. Sam Goddard, the former Arizona 

governor who heads the elected CAWCD board, suggested in testimony 

before Miller that the board might dedicate some water to the 

environment. 

But in an interview earlier in the week, he sounded less than 

pleased to find environmentalists' hands on the spigot of federal 

funds. 

Reacting to comments by Reclamation's osann, Goddard said: "He was the head of one of the ecological groups in Washington. They're 

accustomed to making demands." 

Editors: George Garties is the AP's news editor for Arizona. 

* * * * ** * * * * 

December 13, 1993 

How GAO Analyzes Central Arizona Project Costs 

By The Associated Press 

Breakdown of a General Accounting Office analysis of how the 

federal share of the cost of the Central Arizona Project could 

increase by $1.1 billion: 

$400 million from contract disputes between the Central 

Arizona water Conservation District, which runs the canal, and the 

Bureau of Reclamation, which built it. CAWCD contends the ceiling on Arizona's share is $1.8 billion while Reclamation says it is $2 

billion. Also in dispute is $200 million in future construction 

costs that Reclamation says is the responsibility of CAWCD. 

$435 million in construction costs associated with 200,000 

acre-feet of water per year that the federal government has 

reserved to cover Indian water-rights claims. The federal 

government assumes such costs as the trustee for Indian tribes. 
319 

$50 million to $150 million in construction costs associated 

with setting aside up to 150,000 acre-feet per year that may be 

used for fish and wildlife enhancement. As with Indian water, the 

federal government assumes the construction costs associated with 

environmental enhancement. 

$157 million in no-interest federal loans to farmers that the 

GAO says could go into default. Farm irrigation districts borrowed 

$200 million from the federal government, plus tens of millions 

more on the bond market, to build distribution systems to bring 

water from the main CAP canal to their fields. 

**** *** ***** December 11, 1993 

Auditors: Taxpayers Could Pay $1.1 Billion More for Canal 

By GEORGE GARTIES 

Associated Press Writer 

'HOENIX (AP) An auditors' warning that the Central Arizona 

Project may cost federal taxpayers $1.1 billion more than planned 

could prompt Congress to force changes in the cross-state canal, a 

key congressman says. 

The atmosphere in Washington is distinctly chilly when it comes 

to big spending and big water projects, says u.s. Rep. George 

Miller, D-Calif., who heads the House Natural Resources Committee. 

If Congress is to put up more money for the CAP, it will demand 

more say in such matters as proposed price breaks for farmers and 

setting aside water for the environment, he said. 

"If you see the battles that go on in Congress now ... a 

billion dollars is real money," Miller said here Friday. "We 

cannot expect that the taxpayer simply wanders off onto the horizon 

while these things are renegotiated." 

The cost estimate was presented by the General Accounting Office 

at a hearing here of the Natural Resources Committee's subco~~ittee 

on oversight and investigations. 

The total price of the 336-mile canal from the Colorado River to 

a point south of Tucson previously had been put at $4 billion. 

The GAO said that likely would climb to $4.7 billion by the time 

the project is completed in 1999. Arizona water users and taxpayers 

must repay about $2 billion of that over 50 years beginning in 

1994. 

The payments come from the Central Arizona Water Conservation 

District, run by an independently elected board and financed by 

property t .axes and water and power sales. 

The GAO said several factors could boost the federal share by 

$1.1 billion. 

One factor is a $400 million contract dispute between the CAWCD 

and the u.s. Bureau of Reclamation, which built the canal. 

Another is the GAO's prediction that farm irrigation districts 

could default on $157 million in no-interest federal loans taken 
320 

out to pay for ditches to bring water from the main CAP canal to 

their farms . 

Finally, more water is being allocated to Indian water-rights 

settlements and the environment than planned, and the federal 

government assumes construction costs connected with such water 

allocations. That reallocation could add $585 million to the 

federal share, the GAO said. 

Sitting with Miller were all the members of Arizona's House 

delegation except Republican Jim Kolbe. 

Sam Goddard, the former Arizona governor who heads the CAWCD 

board, told Miller the CAWCD is prepared to repay the government, 

has $160 mil lion in reserves, and already has made the 1994 payment 

of $30.6 million. 

Goddard insisted the CAWCD could work out financial problems 

brought by the collapse of cotton prices that have left farmers 

unable to pay rising prices for CAP water. And he called the GAO 

report unfairly pessimistic about the district's ability to repay 

the federal government. 

Arizona water interests fear going before Miller's committee to 

seek more money or authority to reorganize the project because of 

his reputati on as a foe of water projects. He has orchestrated 

changes in projects in California and Utah to put more emphasis on 

restoring the environment. 

Farmers, CAWCD managers and officeholders frequently worry 

publicly that going to the committee could open the door to 

reallocation of Colorado River water, giving some of Arizona's 

share to Nevada or to Miller's home state of California. 

Miller took pains Friday to deny he planned a water grab. 

"That's Chinatown," he said , referring to the movie about 

water wars in Los Angeies in the 1920s. "That's not American 

government in 1993." 

In an interview from Washington before the hearing, Interior 

Secretary Bruce Babbitt told The Arizona Republic that he felt the 

district should be given broad leeway in restructuring and that 

such facets as a price break for farmers are "a matter of state 

policy . " 

"We're sort of the mortgage holder, and I think the role of the 

mortgage holder is to say, 'Look, as long as the check is in the 

mail every month and you're complying with the general provisions 

of federal law, we're not going to show up every week to tell you 

how to mow the lawn,"' the former Arizona governor said. 

0 

80-254 (324) 

ISBN 0-16-044496-9 

90000