Prop 1 Funding for storage projects: An overview of the Water Storage Investment Program

Paula Landis with the Water Commission discusses the details of the emerging program, including the goals and objectives, addresses common misconceptions

Paula Landis 1 — Paula Landis, Executive Officer of the California Water Commission

With the passage of Proposition 1 in November of 2014, voters approved $7.5 billion for a variety of water projects and programs, with $2.7 billion of that set aside to pay for public benefits of water storage projects. The California Water Commission is the state agency tasked with allocating the money among eligible projects, and over one year since passage of the bond, the Commission preparing to begin the official rulemaking process for the regulations that will govern how the money will be spent.

The Commission’s program to distribute funding is formally known the Water Storage Investment Program. At the fall conference of the Association of California Water Agencies, Paula Landis, Executive Officer of the California Water Commission, briefed attendees on the details of the program.

Statutory requirements of the program

Paula Landis began by acknowledging that the legislation sets a bar that is very high for applicants as well as for the Commission. “We can provide funding for the public benefits, so the projects have to provide public benefits: they have to improve operation of the state water system, be cost effective, provide net improvement to the ecosystem and water quality conditions, and measurable improvements to the Delta,” she said. “Those are given; they are not anything that we can change, so that is a very high bar.”

She then ran down the specifics that are in the statute itself:

The statute states that the funding is for public benefits, and clearly defines what the state can pay for: ecosystem, water quality, flood control, emergency response, and recreation.

The state can only fund 50% of a project, it can be only used to pay for the stated public benefits, and of the public benefits funded, 50% has to be for ecosystem. “So there are five public benefits that we will pay for, and one of them has a higher priority than the other four,” Ms. Landis noted.

Projects have to provide improvements to the Delta or the tributaries to help restore the ecological health and improve water management. “This is a challenge for some projects that aren’t directly connected to the Delta, but it’s not impossible,” Ms. Landis acknowledged.

The statute defines several types of eligible surface and groundwater projects that can be funded: those identified through CalFed with the exception of Shasta, regional storage projects, local storage projects, groundwater storage projects, groundwater contamination prevention or remediation projects, conjunctive use, and reservoir reoperation.

Ms. Landis emphasized that these are the requirements that are laid out in the statute. “We didn’t make this up to make it hard for you; it was what we were given,” she said.

Goals and objectives of the program

There are a number of things in the statute that the Commission chose to reemphasize in their goals and objectives document as well as a couple of additions that are not specifically called out in the legislation:

Maximize the return on public investment. “This is not a grant program, it’s an investment of public funds and we need to make sure we are making the best use of those funds and getting the best return for our investment.”

Support the coequal goals of the Delta.

Improve water supply reliability, increase local and regional water supply reliability.

Promote integration of projects. “That is something that is not in statute specifically, but it’s something that the Commission feels very strongly about. Integration is an opportunity for projects that might not meet that high bar on their own to come together and be a more competitive type of project.”

Maximize system resiliency. “This is a reference to climate change. We don’t want to be paying for benefits that 10 to 15 years down the road that we’re no longer getting, as that would not be a good return on investment, so the projects that we are going to be funding need to consider how they will address climate change to continue to provide those benefits.”

Assist disadvantaged communities. “This is not specifically in statute but it is a priority for the Commission to assist disadvantaged communities. There are many communities that have been struggling greatly during the recent drought. Some of these communities have been hit harder than elsewhere, and while the program cannot fund water supply, there are opportunities again for integration and ways we are looking for to assist the disadvantaged communities.”

Common Misconceptions

Ms. Landis then addressed common misconceptions of the program:

Misconception: The program was intended to address the current drought. “This is a forward thinking program; we are looking to provide supply to reduce the impacts of future droughts,” she said. “We get criticized for not doing it fast enough and we get criticized for going too fast, but there is a certain pace and certain things that have to be done, and it’s not going to be done in time to deal with this drought and that was never the intention.”

Misconception: The money is for CalFed projects only. “I mentioned that CalFed projects are eligible projects, but they are not the only projects. In CalFed there are five projects: there’s Sites Reservoir, Temperance Flat, in Delta storage, Los Vaqueros, and Shasta, which is not funded under this program because of restrictions on impacts to Wild & Scenic Rivers. So people still think Shasta is on the table, that only these projects are eligible. They are the big projects, but they are not the only projects.”

Misconception: The funding is for large projects. “That is not true. We really are looking for packages of projects that includes small projects. If you look at groundwater and conjunctive use, there’s going to be much more resilience if it’s tied into surface storage project, so you can have … that type of assisting between the two types of storage.”

Misconception: The bond can only pay for water supply. “That misconception we have heard from people at our public meetings quite vehemently, and troubles me that that is out there because it’s not only not true, it’s seriously wrong,” she said. “The bond specifically says we can pay for those five public benefits that I mentioned to you, and if you recall what they were, not one of them was water supply. So we have been told by some individuals they felt they were deceived when they voted for this proposition, but we didn’t write it, we’re just implementing it.”

Misconception: The bond money can cover up to 100% of a project. “We can only pay up to 50%. This is an investment program and it’s not the intent that public money should go to private benefits. So if a project is providing a private supply of water, those beneficiaries need to step up and pay for what they are getting a benefit from. However, it would be very difficult for many of those projects to come up with all of the money necessary to get their project built because the public benefits portion is the part that is hard to get funding for, it’s hard to have ecosystem and restoration, flood protection, emergency response. So if people could view this from the perspective that we’re not paying for 100% of a project, we’re not paying for water supply; however, what we are doing is enabling those projects to go forward by filling in the gaps where they are unable to get funding. We’re all presumably water wonks, and you know that you can’t get a project built these days without having multiple benefits. So if you take that perspective, we’re, while not paying directly for water supply, we’re certainly enabling construction of water supply projects.”

Misconception: The Commission is tasked with developing projects. “The Commission is tasked with evaluating projects and decided how and what will be funded. It’s up to the locals to develop the projects, bring them forward, and meet all of those obligations that are listed in the statute.”

Status of the development of the regulations

The Water Commission has been working on the regulations for nearly a year now with a great deal of input from the public as well as the stakeholder advisory committee. The regulations will be submitted officially go to the Office of Administrative Law that will start a process of finalizing the regulation that takes at most 12 months, although the Commission hopes they will become final before that.

“It is our intention to bring this last version of the regulations to the Commission in December and get their approval to go forward to Office of Administrative Law to begin the formal process in January,” Ms. Landis said. “What that means is not that we close the door on comments that we’ve been accepting up to this point; what it means is we start formally accepting comments. The very first thing that happens after we start the formal process is it opens a 45 day window for public input.”

Information not covered in the regulations themselves will be covered in other documents; those documents include the goals and objectives and principles of the Commission which is the foundation for the program; the initial statement of reason which explains what went into developing the regulations; the application instructions, and the methodologies and data that can be used. There will also be explanatory documents for applicants and a technical appendix that describes the methodologies for conducting the analysis as opposed to evaluating projects, she said.

Ms. Landis said that the Commission will be providing technical assistance. “We anticipate that every potential applicant in some point in the process will have somebody assigned to them to help them through the process and help them to be a successful as possible,” she said.

What interested applicants can do to get prepared

Interested applicants with eligible projects should be formulating their projects to achieve local and regional supply reliability, maximize public benefits, consider ecosystem and water quality priorities, consider how their project benefits the ecological health in the Delta, identify the beneficiaries and pull together the funding, Ms. Landis.

Applicants should be developing concept papers to be submitted to the Commission early next year. “The idea of the concept papers is that it’s going to help project proponents summarize the project and it’s benefits, identify partners and projects to integrate and maximize benefits,” she said. “When the concept papers are in front of them, the Commission can maybe see things that individual applicants have not seen, and they can say, if you two come together, you can be symbiotic and have greater benefits. The concept papers will help identify potential conflicts such as two projects have designs on the same water sources as well as identify eligibility issues early on. They will also help the Commission assess the number and scope of projects, and refine and adjust the application and review timeline.”

Timeline

In conclusion

Ms. Landis then gave her final conclusions. “Proposition 1 defines the responsibilities, not just of the Commission but of the project proponents as well, so I encourage you to read the statute. A lot of questions we get at meetings, it is clear that people have not actually read the statute,” she said. “Participation and preparation of local proponents is as important as the work of the Commission; the Commission cannot develop the project, it’s got to come from the locals. Keep in mind that while the application process is a year away, it’s not very far, and you should start thinking about it right now.”

Discussion period highlights: What other options are there if my project won’t qualify?

During the discussion period, a member of the audience pointed out that on the Central Coast, there are several districts who are not connected at all to the Delta but have serious storage issues and he expressed his concerns about these districts being able to provide a benefit to the Delta in order to get funding.

Ms. Landis said that the requirement to provide a benefit to the Delta is written in the statute. “That doesn’t mean projects that have no physical connection to the Delta are ineligible; it means it’s going to be more difficult for projects not connected to the Delta to prove the benefit, but that can be done through some creative thinking such as exchanges. If a coastal area develops new storage and they share that water supply with someone who takes water from the Delta and that agency foregoes there water from the Delta, it is a possibility that that type of creative water transfers and exchanges would make a connection to the Delta.”

ACWA’s Cindy Tuck noted that Chapter 8 was written this way because it was intended to provide storage for the coequal goals: storage for water supply reliability but also the ecosystem of the Delta.

It was also pointed out that there are other chapters in the bond where storage projects without physical connections to the Delta can go for funding, such as the chapter on Integrated Regional Water Management; there are other chapters provide money for drinking water, cleaning up wastewater, for cleaning up groundwater, and for water recycling.

“People voted for the bond, they didn’t vote for Chapter 8,” added Ms. Landis. “There’s a lot of stuff elsewhere in the bond that can help with projects like yours.”

Sampling of potential projects

The session included a panel of proponents of some of the potential projects that will be competing for the funding. Here’s a rundown:

Temperance Flat Project

The Upper San Joaquin Storage Investigation, more commonly known as Temperance Flat, is one of the Cal-Fed projects called out in the legislation. This project proposes to build a 1.3 MAF reservoir in the upper end of 520,000 acre-foot Millerton Lake, which is located on the San Joaquin River near Fresno. With an average inflow of 1.8 MAF, Millerton Lake is considered small for the watershed and must release on average 450,000 acre-feet for flood control purposes. The project is projected to yield approximately 96,000 AF of annual water supply and 121,000 AF in dry and critical years. Potential public benefits include enhancing cold water for the salmon below Friant Dam, additional water for flow management for fisheries, more reliability for river restoration program, and providing flood protection benefits. One downside is that the project would inundate two power plants and reduce power production at others. Friant contractors are still considering participation in the project. Local counties have formed a JPA to be the applicant under the Water Commission process.

Contra Costa Water District, Los Vaqueros Reservoir

Los Vaqueros Reservoir is owned and operated by the Contra Costa Water District (CCWD). It is not physically located in the Delta, but it located up the hill, close to the export pumps, Old River and Middle River. Los Vaqueros was built and is managed to improve water quality for CCWD customers; it also provides emergency water supplies. The reservoir was first constructed and completed in 1998, paid for by voter-approved bonds and was built only to serve CCWD customers initially. The reservoir was expanded to 160,000 acre-feet in 2012. The expansion of the Los Vaqueros Reservoir to 275,000 acre-feet is one of the Cal-Fed projects specifically named as eligible under the legislation. If built, the expanded reservoir would serve other Bay Area agencies in the vicinity.

Tulare Lake Project

The Tulare Lake project is being led by Semitropic Water District and is still in the conceptual stages. SWD is looking at building between 70,000-120,000 acre-feet of storage facilities in the historic Tulare Lake lake bottom; these would be primarily low berm levees and shallow facilities and are meant to be short-term facilities. They would primarily capture flood water off of the Kings or other tributaries to the Tulare Lake bed to use for local benefit. The concept is to reregulate the water back into groundwater storage projects that are currently operated within the Semitropic Water Storage District. The project would integrate with the state water system by being able to used stored water from the bank rather than pumping from the Delta when water is needed in Delta for environmental or ecosystem purposes. The project is just in the feasibility stage right now. Public benefits include flood management, additional flooded acres for habitat in Pacific Flyway, operational flexibility to capture water and store for use in later years when water is needed in the Delta, and integration with other state water systems.

Sites Reservoir

Sites Reservoir, one of the Cal-Fed projects, is a 1.3 to 1.8 MAF reservoir proposed for the west side of the Sacramento Valley. The reservoir would be off-stream; winter and spring runoff would be captured and conveyed through existing canals and pumped into the reservoir; it would be returned to the Sacramento River via a pipeline. The project is projected to produce between 450,000-500,000 acre-feet per year; half would be for public benefit and the other half for water users, both in the Sacramento Valley and San Joaquin Valley. With construction costs estimated at around $4 billion dollars, water costs would be about $600 per acre-foot. Primarily public benefits include cold water pool carryover in Shasta, Oroville, and Folsom, and salinity repulsion as emergency response in the Delta.