By Alan Pryor
Readers following the intricacies of the Woodland-Davis Clean Water Agency’s (WDCWA) Sacramento River water project (the “water project”) know that there was one major regulatory stumbling block to overcome before final regulatory approval is given for the agency to obtain the summer water rights for 10,000 acre feet of water.
These water rights were granted to the WDCWA through negotiations with Conaway Preservation Group (“Conaway”) as the current holder of the rights. In this case, the transfer of water rights involves “splitting” two existing licenses now held by Conaway which must be approved by the State Water Resources Control Board (“Water Board”).
However, as reported by this author in the past (A Silver Lining in a Cloud Possibly Looming over the Woodland-Davis Clean Water Agency Water Project), numerous protests were filed by interested public agencies and environmental groups opposing these proposed license splits.
Background
Before discussing the current status of this split license application and the resolution of the filed protests, the following background information is offered.
The water project involves the acquisition of two different types of Sacramento River water rights allowing for the use of the river water by the water project. One set of licenses covers junior water rights for the use of up to 45,000 acre-feet per year by the water project which is the bulk of the water expected to be drawn from the Sacramento River. This water is free to the water project and the only costs are for pumping and treatment of the water itself. The permit for the rights to this water has already been approved by the Water Board.
However, these are “junior” water rights meaning there is a limitation on their use during normal years when summer water flow is low and water is released from Federal dams to allow for required inflows into the Delta and other senior water rights uses. These limitations are known as Term 91 restrictions. Term 91 withdrawal restrictions are typically imposed during the dryer 5-6 months of the year from late spring through early fall.
The 45,000 acre-feet of water obtained under the junior water rights would normally be expected to supply more than 100% of the water needs of Woodland and Davis in normal water years if the use of such water could be spread over the entire year. Because of Term 91 restrictions, however, that cannot be done unless that withdrawn water could be stored after pumping and treatment during non-summer months for later use. Without otherwise obtaining other summer water rights, Woodland and Davis would be forced to rely solely on well water separately pumped by each city’s existing wells during the summer.
To partially cover this summer shortage, the WDCWA also signed an agreement with Conaway granting the water project “senior” water rights allowing use of up to 10,000 additional acre-feet of water per year which can be pumped from the river during summer months even when Term 91 restrictions are otherwise imposed. The term of this agreement was for 24 years after which the water project would hold the senior water rights in perpetuity. The price paid by the water project to Conaway for acquisition of these senior water rights was $2,600,000 per year starting in 2016 and increasing 2% per year – or totaling about $80,000,000 during the 24 year period. That works out to a price of $260/acre-foot in the first year.
As mentioned above, however, to implement such a summer water rights transfer, the Water Board must approve “splitting” the licenses now held solely by Conaway and such an application was made to the Water Board in June of last year.
Nature of Protests
Such water transfer or license change applications are routinely subject to protests filed by other interested parties. During the allowable protest period 5 protests were submitted last fall by the US Bureau of Reclamation (“Reclamation”), the California Department of Water Resources (“DWR”), the California Department of Fish and Game (“Fish & Game”), the Natural Resources Defense Council (NRDC) jointly with Defenders of Wildlife (DW), and a private individual.
Fish and Game filed a protest based on impacts on protected species and habitat considerations. These concerns were echoed by the protest filed by the NRDC-DW coalition. The protest letters filed by Reclamation and DWR were based on complaints that the proposed license splits are actually nothing more than groundwater substitutions by Conaway Ranch to replace the water rights sold to the WDCWA. That is, Conaway is planning on drilling 18 new groundwater wells adjacent to Willow Slough which runs through the Conaway Ranch. The water from these wells would be used to continue farming on Conaway Ranch and replace the surface water otherwise diverted to the WDCWA. The problem is that Willow Slough is tributary to the Sacramento River so the argument was made by the protesters that this is like sticking another straw into the Sacramento River since they are hydrogeologically connected.
Note that Conaway cannot just split the licenses without otherwise substituting groundwater for their use because Conaway still has to engage in actively farming the Conaway Ranch property according to the agreement Conaway signed with Yolo County when the complex series of agreements surrounding the water project were initially negotiated.
Conaway had 180 days from the date of the filing of the protest letters to settle these protests and have them dismissed through negotiations with the protesters or the protests must be considered and evaluated by the Water Board when considering the license split application later this year.
Resolution of Protests
As of early February, all of the protests were resolved except that filed by the single individual. The dismissal of the protests generally involve Conaway agreeing to specific conditions designed to ensure that by drawing on well water as planned, Conaway is not adversely affecting Sacramento River water flow. Following are the general stipulations to which Conaway agreed:
1) Conaway shall annually identify the wells that it will use for the purpose of substituting all or a portion of the 10,000 acre feet of surface water assigned to WDCWA The wells shall be metered and the quantity of groundwater pumped to replace the surface water diversions must be adjusted and limited by a to-be-determined “streamflow depletion factor”.
2) This streamflow depletion factor is to be based on the results of an engineering analysis done using an integrated groundwater/surface water model that can estimate the impacts of groundwater pumping on streamflow. The model must be agreed upon by Conaway, Reclamation, and DWR prior to undertaking the analysis. Conaway will also make all information from their past, current, and future well construction and geologic exploration activities available to Reclamation, DWR and the Water Board to assist in the evaluation of the model’s suitability for this analysis.
3) Prior to diversion of water by WDCWA, Conaway must develop an acceptable monitoring program approved by Reclamation and DWR to report any effects on ground water levels as a result of their new groundwater pumping. Conaway must also develop a mitigation plan that addresses potential adverse impacts on groundwater levels or Sacramento River water flow rates resulting from additional groundwater pumping by Conaway. This plan shall continue to monitor and collect data from the wells in years when water is not diverted by WDCW A to provide baseline data for assessing impacts of the additional pumping.
4) In the event the results of the modeling or the ongoing monitoring program results in a determination that the groundwater pumping has a depletion factor equal to or greater than the value previously agreed upon by Conaway, Reclamation and DWR, then Conaway shall mitigate for those impacts or reduce ground water pumping.
Conaway has now formally accepted these terms for resolution of the protest letters and they have been dismissed. Thus there is a high likelihood that the Water Board will grant the application for the license split and the WDCWA will be acquiring the rights to the 10,000 acre-feet per year beginning in 2016.
If so approved by the Water Board, however, the license split will have significant implications for the WDCWA in terms of the financial responsibilities and obligations incurred by the WDCWA and, indirectly as a member of the WDCWA, by the City of Davis itself.
Financial and Legal Liability Implications
If the split license is approved by the Water Board and the WDCWA is authorized to begin drawing the 10,000 acre-feet of water per year as stipulated in the WDCWA-Conaway agreements, the WDCWA must begin paying the agreed upon amounts to Conaway. In 2016, this starts at $2.6 million increasing 2% per year for 24 years. These monies are due Conaway by the WDCWA whether the agency ever even uses a drop of Sacramento River water because the payments are based on the transfer of the rights to the water and not the amount of water actually used.
Because the City of Davis is obligated to pay it’s fair share (currently negotiated to be about 48% +/-) of the WDCWA’s costs of plant construction as well as operating costs, this means that the City of Davis must pay to the WDCWA 48% of the annual $2.6 million due to Conaway beginning in 2016 and increasing each year thereafter. This initially equals about $1.25 million which the City must pay out annually even if it chooses to delay the project by some years or elects not to proceed with the water project at all. This is a pretty stiff annual price to pay for delaying the project and it becomes exorbitant if the project is cancelled altogether.
Further, there does not appear to be any wiggle room or escape clauses in the either the Davis-WDCWA or the WDCWA-Conaway agreements that would allow the City of Davis to shirk this financial responsibility. This leads us to a discussion of the quiet 800 lb. gorilla in the room. What will the City of Woodland do if Davis delays this project further or abandons it altogether?
Many locals, including Bill Kopper and Bob Dunning, took public exception at the scathing editorials in the Sacramento Bee and Woodland Democrat which severely chastised the City of Davis for appearing to be on the verge of reneging on its legal and financial obligations to the WDCWA. The general sense of Kopper’s and Dunning’s criticism was that these outsiders had no business inserting themselves in the internal affairs of Davis.
The reality, though, is that this project has gone far beyond Davis’ internal affairs because the City has executed a legally binding contract with the WDCWA and, as with any legal contract, there are legal and financial ramifications if one party or the other does not honor their contractual obligations.
It is abundantly clear that Woodland would be financially harmed if the City of Davis left them at the altar and abandoned the project or even significantly delayed it. According to the Woodland Democrat, “Woodland City Council members say the picture is even grimmer if a ballot stops Davis’ funding. In that case, they say Woodland may be forced to shoulder all the project costs themselves, which would mean taking on Davis’ share of the cost as well as potentially losing more grant funding, taking on more delays and otherwise seeing the project cost balloon.”
One can only speculate what the City of Woodland would do if they take such a financial hit because Davis did not honor its legal obligations by choosing to delay or abandon the project completely. But I think it is safe to say that the Woodland City Council members are not shrinking violets or faint of heart. If the City of Davis chooses to not honor its commitments to the WDCWA, I believe it is a foregone conclusion that the City of Davis will be sued by the City of Woodland for tens of millions of dollars if not hundreds of millions of dollars in damages.
When the Woodland City Council appeared en masse before the Davis City Council last year, they plead their case with Davis leaders to honor their commitments. At that meeting they were told in no uncertain terms by Mayor Pro Tem Swanson that while she was sympathetic to the predicament into which delays by Davis forced Woodland, she was nevertheless determined to do first what is in Davis’ best interests.
While I am not a lawyer and cannot speculate on the nuances of municipal law in this matter, it would seem that the City of Woodland could certainly prove substantial damages due to the failure of the City of Davis to honor their legal commitments. If that turned out to be the case and the City of Davis has to fork over millions and millions of dollars in damages because they unilaterally breached their contract obligations, it is hard under any circumstances to see how this would be in the best interest of Davis ratepayers.
My reading of the situation is that because the City of Davis has executed the contracts with the WDCWA, the City is on the hook to fully participate in the project as contractually obligated or we will be declared in default. In such circumstances, the City of Woodland would be well within their rights to sue Davis for the massive damages they would undoubtedly incur as the offended party.
If my reading is correct, the current situation seems to be a classic case of the City of Davis paying now and at least deriving the benefits of the surface water project, albeit it at a stiff price, or potentially pay enormous damages later for breach of contract with nothing to show for it.
Alan. Thanks for this and I’ll be interesting to get others’ take on it, especially Mike Harrington.
This is beginning to look a little lie DACHA with more info coming out, or more correctly, not discussed upfront. It would appear it is not to anyone’s advantage for us to pay millions and not see any water. This deal was te ‘hurry up, end of Dec deal’ that seemed spurious at the time.
“…or potentially pay enormous damages later for breach of contract with nothing to show for it.”
Contracts are not sacrosanct and are “breached” every day because of many reasons which are deemed legitimate by the courts. The facts as well as, in this case, political(generic meaning) implications, in this case in much the same manner that renters appear to be given greater leeway in contract suits with their landlords, would tend to favor Davis.
“….substantial damages due to the failure of the City of Davis to honor their legal commitments.”
What substantial damages? Woodland has said that they will build their own surface water project which they evidently have the means to do, to solve their own problems with State water quality standards. No contracts have been signed to build the project, no bonds sold and Davis, I assume, would continue to pay its share of already incurred expenses so where are the substantial damages that Davis would be inflicting on Woodland?
“What substantial damages?”
Per the Woodland Democrat…”Woodland City Council members say the picture is even grimmer if a ballot stops Davis’ funding. In that case, they say Woodland may be forced to shoulder all the project costs themselves, which would mean taking on Davis’ share of the cost as well as potentially losing more grant funding, taking on more delays and otherwise seeing the project cost balloon.”
The damages are these increased costs the City of Woodland would incur if Davis bails on the project.
Thanks Alan
I will say that I think the JPA is going going gone let Woodland CC go berate electeds and the voters in some other jurisdiction our water will be supplied by our employed personnel
On what basis do you say that Mike – I don’t believe that to be true in part because I think the water project will happen and a partnership is the cheapest way to do that.
[quote]Contracts are not sacrosanct and are “breached” every day because of many reasons which are deemed legitimate by the courts. The facts as well as, in this case, political(generic meaning) implications, in this case in much the same manner that renters appear to be given greater leeway in contract suits with their landlords, would tend to favor Davis.[/quote]
When contracts are breached, there are usually repercussions to that breach. It depends on what the terms of the contract are…
Alan: Nice piece on this topic. You’ve layed-out the situation quite clearly and rationally. I agree it will be interesting to see what others might have to say – particularly rational comments, although I’m sure there will further comments which lack any basis, as well…
[quote]While I am not a lawyer and cannot speculate on the nuances of municipal law in this matter –[b] Alan Pryor[/b][/quote]
This contract was probably signed prematurely, but the costs are manageable.
As I calculate it, the Davis share comes to about $50 a year per household.
That is a very small fraction of the total cost of our share of the project and its additional O&M.
We could probably sell our share in long-term contract. I’ll try to check tonight to see how difficult that would be with someone who actually knows, and report back.
Elaine
Has the WAC seen the contract? Would think the terms etc would come into play for your deliberations?
David: off topic but why am I asked to “log in” about every other day. When I go to tat screen I am always already logged in but then have to go all the way out then back in to comment……grrrr!
Sue: So, do you still believe that the water shouldn’t have been purchased by the cities? If you believe that the surface water project is more a question of when, rather than if it should happen, do you think that there will and would have been other good opportunities to buy this summer water for a similar if not better price? How long had the cities been trying to acquire summer water rights? Sometimes timing and circumstances have to be just right for such opportunities to present themselves.
I believe the purchase of the permanent senior water rights was an historical and extraordinary accomplishment of the current council. Selling those water rights would be unbelievably irresponsible.
Alan’s coverage of the water rights was very cogent and extremely informative up to the point it fell into speculation about legal matters beyond his — or my — expertise.
Consider for example the criticism I’ve heard from informed sources per the apparent violation of the Brown Act that took place this fall, when the Davis City Council invited the Woodland City Council en masse to attend our city’s council meeting on the JPA plan, which so far as is known was not noticed by the Woodland CC for Woodland residents, and the presence at that same meeting, then, of a JPA member quorum discussing the JPA and related matters without notice to the public. Some local sources have suggested this possible violation of the Brown Act makes the legal standing of all actions involving that meeting seem extremely suspect and potentially invalid.
Ditto that, apparently, some principals in West Yost Associates, through another of the same firm’s entities, have been involved with the sale of the Conway water, yet West Yost Assoc. contracted to vend the City its services free of conflicts of interest as a consultant on water matters including elements of the JPA, purchasing water from Tskapoulas, etc.; thus some have suggested all subsequent City and JPA actions vis-a-vis Conway water rights involving West Yost Associates advice may perhaps be tainted by a conflict of interest not disclosed to the client.
Note that I am NOT saying that the case is clear on any or all of the above, only that the various legal issues are sufficiently complex on their own, such that spinning them into the text of any article ostensibly outlining only the provable facts of adjudication of the purchase of the winter water rights (junior & senior versions) muddies the message.
Blessedly, it appears the Water Advisory Committee is moving forward without falling into political wrangles, and has been scrupulous about abiding by appropriate protocols. Probably to the extent the WAC can be kept clear of the dead hand of past mistakes it will prosper. So to me, at least, the first part of Alan’s article seems to fit the model of a positive, neutral flow of information that is very much in keeping with the spirit of the WAC’s work thus far, but the latter portion of his piece is exactly the opposite. Although Alan is not a member of the WAC, in his own words he is “a self-appointed public gadfly” who speaks so regularly to many commissions and the City Council as to have been labeled by Mayor Krovoza as the Council’s “6th member”. Hopefully, he will post that first portion of the article to the attention of the WAC, as it is a nice summary that may be handy for the WAC members.
Again, many thanks to Alan for the informative coverage of the cost, use parameters, and assignment of the rights per the purchase of the junior and senior water rights for surface water from the Sacramento River.
[b]@newshoundpm:[/b]I think it was premature for a number of reasons, but mostly because I think the project should be reexamined. I think their are probably more cost-efficient configurations than the current one, and I would also consider postponement while we pay off our at least part of our wastewater treatment plant and the economy stabilizes if we can’t find more cost-efficient options. And I am concerned that we are shifting money from our wastewater treatment plant fund to pay for the water project.
I think the water project needs to be rethought, and the wastewater treatment plant expedited.
[b]@newshoundpm:[/b]Rereading your question, I can answer more directly. From what I have been able to gather, this was not a once in a lifetime opportunity, to say the least.
[quote]I believe the purchase of the permanent senior water rights was an historical and extraordinary accomplishment of the current council. Selling those water rights would be unbelievably irresponsible.–[b]Don Shor[/b][/quote]We could retain the rights, but sell the water for a long-term contract, i.e., five or ten years. I will check on the difficulty or expense of doing so.
I think the wastewater project needs to be rethought, and the surface water project needs to be expedited. But I guess we won’t know until sometime this year what the status of our next wastewater discharge permit will be with respect to the various constituents that are (or will be) subject to stricter compliance regulations. It would be really useful to have that permit in hand soon.
[quote]Consider for example the criticism I’ve heard from informed sources per the apparent violation of the Brown Act that took place this fall, when the Davis City Council invited the Woodland City Council en masse to attend our city’s council meeting on the JPA plan, which so far as is known was not noticed by the Woodland CC for Woodland residents, and the presence at that same meeting, then, of a JPA member quorum discussing the JPA and related matters without notice to the public. Some local sources have suggested this possible violation of the Brown Act makes the legal standing of all actions involving that meeting seem extremely suspect and potentially invalid. [/quote]
pravihrvat – It seems that you really lack expertise in legal matters and maybe should not try. This issue was resolved on this blog when Mike Harrington (a lawyer and former CC member who should know better) brought this up. I will repeat the rule for your benefit:
“C. Meetings of Other Legislative Bodies
When a majority of the legislative body attends an open and noticed meeting of another legislative body of the same or a different local agency, the legislative body is not deemed to be conducting a meeting, so long as the members in attendance do not discuss, among themselves, other than as part of the scheduled meeting, issues of a specific nature related to the subject matter jurisdiction of the body. (§ 54952.2(c)(4).)” Ref. http://caag.state.ca.us/publications/2003_Main_BrownAct.pdf , page 10
I didn’t read the rest of your post, because you first berated Alan for “speculation about legal matters beyond his — or my — expertise” and then went ahead and did a little speculating on your own.
[quote]I think the wastewater project needs to be rethought, and the surface water project needs to be expedited.–[b]Don Shor[/b][/quote]We’ve been over this before. Unfortunately, we cannot rethink our wastewater treatment plant. The regulatory requirements that mandate it are absolutely not negotiable. I wish it were otherwise but we have no choice.
On the other hand, we can meet our regulatory requirements without the surface water project. That’s just the way it is, sadly.
Sue: [i]”we can meet our regulatory requirements without the surface water project.”[/i]
For the record, I disagree with this statement. But I’ve decided to let the WAC review the capacity issues in public at this point, rather than continue to debate them here. I did post the data on the Vanguard’s bulletin board a while back. So interested readers can find it there.
SG said: “@newshoundpm:Rereading your question, I can answer more directly. From what I have been able to gather, this was not a once in a lifetime opportunity, to say the least.”
Could you share with us what you have been able to gather on this? You seem to be indicating that Davis will have many opportunities to acquire permanent summer water rights in the future, but this is contrary to what I thought was said by the water consultants/attorneys at the Davis CC public hearing when the decision was made to go forward with the acquisition of the water rights and the rights to use the Conaway intake facility. I thought that they said that permanent water rights were almost never available. Was this not true, or has the water landscape changed since then? Or, is there another alternative that I’m missing all together?
Sue Greenwald: “[i]From what I have been able to gather, this was not a once in a lifetime opportunity, to say the least.[/i]”
Sue if you have any evidence to support this statement I think you should provide it. Otherwise, this is just another example of what I call your ‘wishful thinking’ approach to this subject.
[quote]Elaine
Has the WAC seen the contract? Would think the terms etc would come into play for your deliberations? [/quote]
Yes, I think the contract will be very much a part of WAC deliberations…