CAP System Use Agreement A New Instrument for the Orchestra CRWUA 2017 There has been a lot of talk today about the need for flexibility when it comes to management of the Colorado river. My talk focuses on a recent agreement that does that for the Central Arizona Project Ken Seasholes Manager, Resource Planning & Analysis Central Arizona Project

Central Arizona Project Diverts ~1.6 MAF of Arizona’s Colorado River entitlement 336 mile aqueduct system 15 pumping plants 8 siphons, 3 tunnels Up to 2,900’ of lift 2.8 million MWH/yr The CAP is a magnificent piece of infrastructure, and since 1985 it has delivered almost 36 million acre-feet of Colorado River, uphill, over long distances, to cities, tribes, irrigation districts, and others in central and southern Arizona. To date, all of the water delivered by CAP has been so-called “Project Water,” diverted pursuant to CAP’s unquantified Section 5 Colorado River contract.

CAP System Use Agreement The CAP System Use Agreement (SUA) was signed by Reclamation and the Central Arizona Water Conservation District (CAWCD, a.k.a., CAP) in February 2017 But at the beginning of this year, CAWCD and Reclamation signed an agreement that, among other things, opens the opportunity for non-Project supplies to be wheeled via the CAP system.

Wheeling Efforts 1983 Position Statement “…[CAWCD Board] endorses the concept of transporting water surplus to outlying areas of the state into the District for use within its boundaries.” Initiated by request to wheel from Planet Ranch “Reclamation tells me that transportation of non-project water in federal facilities is being done in other areas and should pose no particular problems here.” Tom Clark, General Manager, CAWCD. 1983 Planet Ranch request & Position Statement To understand why this is a big deal, you have to go back at least 35 years, to the very first request to wheel non-Project Water. At that point we hadn’t even made our first CAP delivery, but folks recognized the fact that there was physical capacity to transport additional supplies, including imported groundwater, surface water, banked CAP water and additional Colorado River water. Our elected Board supported the concept, but perhaps unsurprisingly, viewed the request as premature. …and in a bit of wild optimism, the then General Manager implied that wheeling would be an easy process!

Wheeling Efforts There have been successive initiatives that have addressed aspects of wheeling non-Project Water Contract & Discussion Master Repayment Document Planet Ranch request & Position Statement Scottsdale Project & Water Availability Status Standard Form Contract Informal Municipal Discussions Wheeling Process Project Wheel System Use Agreement ADD Water What followed in the intervening decades were a series of efforts; some narrow; some broad. I won’t detail what went into each of these processes, but suffice to say there has been a massive investment of person-hours, with almost all of these involving heavy stakeholder participation. Important steps were made in each, but an agreement on wheeling was elusive. [Lots of other things going on (including suing the U.S. over repayment)]

Why So Long & Hard? In addition to the challenges of reaching agreement among diverse parties, the CAP is a federal project, so any new system flexibility requires consideration of both Arizona and Reclamation law, plus a number of key agreements Basin Project Act (1968) Master Repayment Contract (1988) Operating Agreement (2000) Arizona Water Settlements Act (2004) Repayment Stipulation (2007) Tribal contracts and M&I subcontracts (various) Reaching agreement required navigating many different agreements that were developed at different times with provisions that are not always as clear or consistent as one might hope…

Why So Long & Hard? In addition to the challenges of reaching agreement among diverse parties, the CAP is a federal project, so any new system flexibility requires consideration of both Arizona and Reclamation law, plus a number of key agreements Basin Project Act (1968) Master Repayment Contract (1988) Operating Agreement (2000) Arizona Water Settlements Act (2004) Repayment Stipulation (2007) Tribal contracts and M&I subcontracts (various) Maximum capacity of CAP system Wheeling non-Project Water Shortage Sharing Modifications to “Transferred Works” These are just some of the applicable provisions. In many cases these present challenges to overcome, but they are also the key building blocks of something more comprehensive. Fixed OM&R Exchanges and delivery priorities

What Does the SUA Do? The SUA is a framework that respects and harmonizes previous agreements and authorities Looks at CAP system as a whole Adopts priorities for operational delivery capacity Addresses wheeling, firming, and exchanges So one way to view the System Use Agreement is that it is the steady note of the oboe; bringing the orchestra into tune. And with any luck, great music will follow.

Wheeling For wheeling, the challenges centered on two articles in the Master Repayment Contract 8.17 – “Rights Reserved to the United States to Have Water Carried by Project Facilities” 8.18 – “Wheeling Non- Project Water” Allow long-term reliable delivery of non-Project Water Protect Reclamation’s Article 8.17 rights Prevent interference with Project Water deliveries Create additional delivery capability […note that wheeling for muni is relatively rare (compared to Ag), and permanent wheeling (and permanent agreement) is rarer still.] This is another reason why it was so hard—reaching agreement had the potential to adversely affect hard-won contract rights. Of course there is some perversity in talking about expanding a system’s delivery capability when the CAP is facing shortage, but there are ancillary

Wheeling Two kinds of wheeling: Reclamation wheeling is based on existing capacity, on year-to-year, as-available basis Tribes and federal agencies have priority CAWCD wheeling is based on increased operational capability, developed over time High reliability, suitable for long-term purposes Contract issued pursuant to an identified supply Based on System Improvement Projects approved by Reclamation

Operational Capability To understand the role of System Improvement Projects, it Many of the early discussions on wheeling and system capacity relied on a rather simplistic notion of capacity that didn’t fully account for geography and timing….

System Improvement Projects CAP identified several potential projects, including pump modifications and raising canal lining Large range in capacity per project Narrower range of cost per AF of capacity For initial planning purposes, $1,500 per acre foot of capacity has been used as an estimate

Operational Capability To help analyze future scenarios, a wheeling model was created that helped demonstrate how system improvement projects could allow wheeling and project water to co-exist

Annual Operating Plan CAP system capacity is determined during the AOP process. Once the initial Water Delivery Requests are received, the AOP is developed based on range of factors: Requested location and timing of deliveries Planned maintenance outages Lake Pleasant operations Energy resources and programs Recharge capacity and scheduling

Priorities Conflicts over monthly delivery capacity, if any, are resolved through a priority system, implemented in the development of the Annual Operating Plan Eight priorities, based on contract type, whether delivery is upstream or downstream of the service area/reservation, and whether system improvement projects have been completed Almost all deliveries are 1st Priority

Firming & Exchanges “Firming”—the use of one supply to increase the reliability of another—is a key strategy for reducing the impact of Colorado River shortages Includes water stored by the Arizona Water Banking Authority and others There are multiple methods for recovering banked water, but many rely on use of the CAP system, either directly or through exchange Exchanges can leverage investments in supplies and infrastructure Includes ‘inter-AMA firming’ arrangement between Phoenix and Tucson In addition to wheeling, the System Use Agreement addresses firming and exchanges, both of which offer flexibly, but also have implications for canal capacity and contract rights.

SUA Implementation Activities Establishment of “Uniform Water Quality Standards” for supplies introduced into the CAP system CAWCD Board Task Force established Extensive stakeholder involvement Does not apply to Colorado River supplies Supplemental Agreements Exchange Implementation Agreement Firming Agreement System Improvement Projects Refined technical work Cost and contracting issues Colorado River water is not “introduced into the CAP System,” so not subject to the uniform water quality standards called for in the SUA However, the standards will likely influence the relative cost/benefit of Colorado River supplies compared to other non-Project supplies

The CAP System Use Agreement Protects the rights of existing users Establishes a framework for wheeling Facilitates the expanded use of exchanges Clarifies methods for recovery of stored water Defines priorities for delivery capacity Leverages existing infrastructure investments Benefits all CAP customers