Status of the negotiations for the State Water Project contract amendment for Delta Conveyance also discussed
At the January meeting of Metropolitan’s Special Committee on the Bay-Delta, an update on the Delta conveyance was at the top of the agenda. But first, General Manager Jeff Kightlinger provided an update on the voluntary agreements.
Mr. Kightlinger began by noting that they were waiting for the State Board staff to work through the modeling of the proposal in the voluntary agreements; that modeling has now been completed.
“The modeling had some interesting results,” said Mr. Kightlinger. “It showed that the habitat on the tributaries performed extremely well, and so it’s very promising that it showed that the habitat performed much better for fisheries than anything that would have come out of an unimpaired flows approach that the State Board had been looking at.”
“However, in the Delta the habitat doesn’t perform as strongly as it does on the tributaries, and a lot of that makes sense, considering the Delta being such a manmade structure that including habitat around the edges is not likely to have the same biological response that you’re going to have on the upstream tributaries.”
The next issue is flow; with the unimpaired flow approach, it’s going to create much more Delta outflow, Mr. Kightlinger said. “The difference between the generation of flow and the biological response is where there’s significant debate among the parties about what the models mean. So there’s a hard look being taken at the determination of the State Board and the state on the adequacy of the proposal. They have not come out with specific numbers on what they would determine adequacy, but while there is going to be some continuing work on habitat, there seems to be pretty good agreement that habitat on the tributaries performs quite well. Now we’re looking at what are the main issues associated with unimpaired flow coming out of the Delta and is there more needed than is in the proposal that has been made.”
Mr. Kightlinger said he expects things to be worked through in relatively short order as there are some outside factors driving the need to get to agreement. One is that the biological opinion issued by the federal government has completed the 30-day notice and comment period, and the next step is the Department of the Interior to issue a Record of Decision. He reminded that the State of California has said they are not satisfied with the biological opinions as currently drafted and they are contemplating filing legal action challenging that, which the Record of Decision would trigger that possibility.
There is also the need to get a state permit from the Department of Fish and Wildlife for the State Project for its operations so that they can be in sync with the federal operations. The Department of Fish and Wildlife expects to have that by March 1st.
“That may trigger reactions by us if it’s as currently drafted because we’re not entirely in agreement with how that is structured,” Mr. Kightlinger said. “So the approach we’ve always had is hopefully the voluntary agreements would address those differences in opinion and make it all available to move forward, both on the state and federal, so our is need to complete those is now.”
Director Russell Lefevre (Torrance) asks about Westlands threat to leave the process if the Governor sues. Jeff Kightlinger said that all of the Central Valley Project contractors have said they would withdraw from the voluntary discussion if there is legal action on the biological permits and their permits to operate the CVP.
“They’ve all said that they’re not going to go forward with voluntary discussions while lawsuits are taking place,” he said. “Nothing has happened yet because no actions have been filed but that is likely to change in the next 30 days.”
NOTICE OF PREPARATION FOR THE DELTA CONVEYANCE PROJECT
Next, Steve Arakawa updated the committee on where things stand with Delta conveyance.
The Department of Water Resources released the Notice of Preparation for the Delta conveyance project on January the 15th; comments are due by March 20. 
A series of scoping meetings have been scheduled for February; many of them in the Delta area, as well as one in Los Angeles and another in San Jose.
The Notice of Preparation is proposing a single tunnel conveyance facility up to 6000 cfs; but a range of alternatives from 3000 cfs up to 7500 cfs will be evaluated. They are also considering whether there would potentially be participation from the federal Central Valley Project contractors.
“This analysis would accommodate for considering that outcome that maybe the Bureau of Reclamation and the Central Valley Project contractors might be involved in the conveyance project, and having an environmental document that provides that analysis,” Mr. Arakawa said.
A final choice on the alternative will be made after all of the scoping comments have been received. The purpose of the scoping is to receive public input on the proposed project and alternatives; that would in turn inform the approach for preparing a draft public environmental document which is expected in the next year or so, he said.
In terms of specifics, the proposal is for a single tunnel with two intakes at 3000 cfs. It’s expected that the five intake locations that were studied, reviewed, and analyzed for Cal Water Fix still make the most sense to consider, so they will select the two best intake locations from those. There are two potential tunnel alignments that are being considered.
The key facilities described in the notice include intake tunnels and an intermediate forebay that would lead to a main trunk tunnel; the tunnel will follow the selected alignment to the southern Delta where there would be a pumping plant and a forebay, as well as facilities to connect with the water projects.
Mr. Arakawa then presented a map showing the two proposed tunnel alignments, a central Delta alignment in gold and an eastern alignment in purple. The eastern alignment is further east of the alignment proposed for the California Water Fix; an eastern alignment could provide logistical advantages with staging, workforce, and managing the project. There are three possible intake locations proposed; they would select two of them. There would be pumping facilities and facilities to connect to the state and federal water projects located in the South Delta.
Metropolitan staff are preparing to participate in the public scoping meetings and to provide written comments before the March due date. They will keep the board updated on the process.
“The key things that goes to the environmental analysis is identifying the facilities and the footprint so that then the detailed environmental analysis can occur so that the public document can be prepared,” said Mr. Arakawa.
SWP CONTRACT NEGOTIATIONS
Next, Mr. Arakawa next focused on the contract negotiations between the State Water Project contractors and the Department of Water Resources on how the cost and benefits of the Delta conveyance project would be allocated. Since the last update in December, some things have changed, he said.
For background, there are 29 contractors that have contracts for water from the State Water Project, ranging from north of Delta in Butte, Plumas, Napa, and Solano counties, as well as the Bay Area, San Joaquin Valley, and Southern California. The purpose of the negotiations is to identify a way to amend the contract to allocate the costs and benefits of the project so that those who are paying for the Delta conveyance facility can be assured they will receive the benefits that are derived from the project.
There were a number of negotiation sessions that occurred the latter half of 2019, which culminated in an agreement in principle on November 15th that DWR and the contractors agreed was the approach for moving forward. At that time, there were 12 non-participating contractors that did not support the agreement in principle; combined, those contractors amounted for only about 8% of the contract amount, so 92% of the SWP contract amount was supporting the agreement in principle. Since that time, DWR has looked at how the contract and operations would work, and have come back with a different approach.
“Previously we were talking with you about the approach being an opt-in approach where individual contractors could opt-in to participate and you would opt-in based on your contract amount,” Mr. Arakawa said. “If you opted-in, you could opt-in for a greater share, but you couldn’t opt-in for something less than your contract amount. That’s what the approach was in the agreement in principle.”
“When DWR came back, they determined that having non-participants not signing a contract amendment because they didn’t support the agreement in principle was not workable, so they have come back with a sixth offer that focuses on an opt-out approach. That means that all contractors under their existing SWP contract are obligated to pay under their commitments and then they would identify and define a mechanism for opting out, so it’s different. Instead of making a decision to opt-in, you’re now in the project and you have to determine how you opt-out. Are there provisions for opting out, are there ways to transfer water? That type of thing.”
The water contractors have been reviewing this latest offer and determining how to respond to it. Mr. Arakawa said that in general, both the contractors who want to participate and those that do not want to participate have real issues in understanding how this latest offer from DWR would work.
“That’s mainly because in defining this approach, they really left out a good chunk of how the participants are going to be able to count on the benefits,” Mr. Arakawa said. “It’s not really outlined much in the offer and in contract language how those participating contractors know that they can count on the benefits. Similarly, the non-participants are feeling the same way that with the sixth offer, there’s not enough detail in terms of how they are going to be protected with their existing supply. So the sixth offer has raised some concerns and the water contractors are trying to work through how they want to respond to DWR in future public negotiations on that.”
Mr. Arakawa said he would keep the committee updated on how negotiations are going. “It’s important that we have an approach that is sufficient that we would be taking to the board for consideration where we could say as Metropolitan and a participant, we feel that the contract provisions will provide protections so that we know what we’re paying for.”
ACTIVITIES OF THE DELTA CONVEYANCE JPAs
Lastly, Mr. Arakawa discussed the activities of the two JPAs, the Delta Conveyance Design and Construction Authority (DCA) and the Delta Conveyance Finance Authority.
The Department of Water Resources environmental planning managers have been updating the JPA boards on the Department’s efforts on conveyance planning and leading up to the release of the Notice of Preparation.
There has been a lot going on with the stakeholder engagement committee, which was formed by the DCA and is comprised largely of interests in the Delta region and other stakeholders that could help identify ways to mitigate or reduce impacts from the facilities. They are an advisory committee formed to inform the DCA board and the analysis that’s underway. He noted that it is a different process than the CEQA process; any of the parties that are involved in the stakeholder engagement committee will still have the ability to comment on the project through the CEQA process.
In November, the Stakeholder Engagement Committee talked about the committee charter, responsibilities, Brown Act, what this committee is and is not. It’s advisory. They don’t take formal votes. They don’t deal with the environmental process, the CEQA process, so any of the parties that are involved in the stakeholder engagement committee still have the ability to comment on the project through the CEQA process which DWR manages. And so they’ve talked through the CEQA process, they’ve talked about what their role is and what are some of the key drivers in looking at facilities and how to minimize impacts. In January, the reviewed the Notice of Preparation and started talking about facilities and they will be talking further about the intake facilities.
In other updates, the Design and Construction Authority JPA has been utilizing office space in a state building, but they now have acquired office space and are in the process of preparing to move in February. They’ve also taken actions to support procurement of different services that are needed such as general counsel services.
The finance JPA’s activities have been mainly administrative. They did have an election of Board officers at the last meeting, and appointed an Executive Committee. Mr. Arakawa said that the parties that were involved in both of those are continuing to serve so there were really no changes there. There was a report in from Katherine Mallon to the Finance JPA, Katherine Mallon being the Executive Director of the JPA on that entity’s activities.
NEXT STEPS
Mr. Arakawa said they are coordinating with member agencies and other stakeholders and preparing their comments on the Notice of Preparation for the March 20 deadline. They will continue to work with the contractors to forge a solution to the latest offer from DWR on the contract amendments, so the negotiations can be completed, as that is key for moving the project forward. Staff will continue to keep the committee updated on the activities of the two Delta conveyance JPAs.
DISCUSSION HIGHLIGHTS
Director Michael Hogan (San Diego) notes that the change from opt-in to opt-out is quite significant. Is there a timeline for resolving that issue?
“Resolving the cost allocation issue and finding a way to move forward with an opt-out approach is front and center and is our key objective in the next couple months because that helps to move the project forward,” Mr. Arakawa said. “With the scoping process now, the environmental analysis starts, but when we get to the timeframe o f about the end of June, early July, there really is a need for a funding stream so we need to take to our boards this agreement in principle so that we can all say if we are going forward with things, and the Boards are making that decision.”
Director Russell Lefevre (Torrance) asked why the state is considering an eastern tunnel. Would an eastern alignment cross any Metropolitan islands?
“The reason for considering the eastern tunnel is that logistically it may allow for a means of reducing impacts,” said Mr. Arakawa. “The DCA is looking at ways to allow for transport of materials and people in and out of the Delta in a more effective way, and the eastern alignment is close to I-5, and closer to some of the industrial areas of Stockton which could be areas where materials are fabricated and can allow for an effective feed of those into the Delta.”
“The central alignment does run through Bouldin Island and Bacon Island which are two of Metrpolitan’s islands which could be used for access, for staging, that kind of thing,” continued Mr. Arakawa. “The eastern alignment is east of that, but certainly there’s still a need to deal with where the reusable tunnel material gets stored and how does it get used eventually, so there’s still a lot of need to look at how Metropolitan’s islands would be used to manage some of that. There’s also mitigation for the project itself, so what kind of mitigation for land use is needed and how the Delta islands that we have can actually contribute towards that.”
Director Larry McKenney (Orange County) notes that the State Water Project has capital projects going on all the time for repairs and improvements or major work that needs to be done on the aqueduct. Did we ever talk about opt-in or opt-out for any of those things?
“Those are all part of the SWP facilities that we have a contract for so that contract terms provide what we’ve all committed to pay for that, but certainly I have your point,” said Mr. Arakawa. “I think DWR in the sixth offer has asserted they have the contractual ability to bill for this project and move it forward.”
“There is an assumption that there’s a way to opt out of part of the project?” asked Director McKenney.
“For this particular facility, you certainly have north of Delta contractors that don’t get their water from the Delta conveyance, and there are going to be contractors south of the Delta that may not want to participate, so DWR has continued to provide that kind of mechanism. In the sixth offer, this is really an instance where they’ve said that the contract allows for them to bill all the contractors, so if we can agree on how the opt-out would work, that would help support that. If we can’t agree, we have to see how DWR would proceed.”
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