CALIFORNIA WATER FIX: Update on endangered species permits, cost allocation

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Coverage from the October meeting of the Metropolitan’s Special Committee on the Bay Delta

At the Metropolitan Water District’s meeting of the Special Committee on the Bay-Delta, committee members heard updates on the Endangered Species Act permits and the cost allocation for the California Water Fix, as well as an update on the Wallace Weir project,


Bay-Delta Initiatives Manager Steve Arakawa began the meeting with a discussion on the Endangered Species Act permitting for the California Water Fix, and the sequencing of decisions regarding those permits and the environmental documents.

3a_presentation_page_3Mr. Arakawa started by showing a slide of the upcoming key decisions, including the Environmental Impact Report required under state law and the Environmental Impact Statement required under federal law; the endangered species permits, both federal and state; the ongoing processes at the State Water Board; and the Army Corps Permits.

To start of the discussion, he went through the definitions of key terms used when discussing the Endangered Species Act, state or federal:

Take (federal):  The formal definition under the federal Endangered Species Act is ‘to harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect or to attempt to engage in any such conduct.’ “In addition to actually causing mortality, the federal act also describes other activities that would be short of that that would not be legal under the endangered species act, such as to harass or to harm,” he pointed out.

Take (state):  The state definition of take is ‘to hunt, pursue, catch, capture, or kill or attempt to hunt, pursue, catch, capture, or kill.’  “The differentiation there are mainly the terms harass and harm under the federal act which are not included in the state Endangered Species Act,” he said.

Incidental take:  “When you get an incidental take permit under the act, it means that you’re able to operate whatever you’re proposing, whether it’s a project or the operation of a project, and that the projected take of fish is incidental,” he said.  “That is, it’s an activity that is lawful under the Endangered Species Act, and in the process of conducting that lawful activity, there would be some kind of take and they are permitting that take.”

Jeopardy:  Jeopardy occurs when it looks like the action could be reasonably expected to reduce the ability of a species to live on, to survive or recover.  “The Endangered Species Act is looking to protect these species, and to avoid jeopardy, meaning to avoid the likelihood of the situation where the species is at risk of its survival or even being prevented from its recovery,” he said.

Section 2081(b):  Section 2081(b) under state law refers to a section of the Endangered Species Act that allows the California Department of Fish and Wildlife to issue an incidental take permit for state-listed species.  “So for example, on the Delta system, longfin smelt is a state-listed species, it’s not a federal-listed species, so in anything that deals with the Delta and the potential for affecting longfin smelt, the Department of Fish and Wildlife under its authority would need to deal with section 2081(b), which is how a proposed project or action would be allowed to occur with a take permit.”

Biological assessment:  A document that is prepared by the project proponents, in this case the Bureau of Reclamation and the Department of Water Resources; the biological assessment describes an action that has a connection with a federal nexus – that is in some way, the federal agencies need to approve it, and that it’s likely to adversely affect listed species or proposed species or designated critical habitat.  The biological assessment describes the project, its operations, and how it might affect listed species.

Biological opinion The biological opinion is the resulting action on the fishery agency side.  After the agencies submit their biological assessment and enter consultation, the product of that would be a biological opinion.  “We’ve been operating under biological opinions for a number of years now, the most recent being the 2008 and 2009 salmon and Delta smelt biological opinions,” he said.  “In the biological opinion, the agencies need to determine whether or not a proposed action is likely to jeopardize the continued existence of listed species, or result in the destruction or adverse modification of critical habitat.  So when they go through the consultation process, there will be likely the conditions in which a permit would be provided in order to avoid that jeopardy.”

Mr. Arakawa then turned to where the California Water Fix is in the process.

With the federal side, biological assessment has been prepared by the Bureau and the Department, and the focus is whether the proposed project is likely to adversely affect the species or the habitats,” he said.  “In this process they have prepared a working draft, and they submitted that to the fishery agencies.  They also received a peer review on the science on April 5th and April 6th.  The independent science peer review was looking at the methodologies and the basis of the approach that is used for analyzing the potential effects on the species, so it went through that peer review.”

On August 2nd, taking all of that into account, a revised biological assessment was submitted to the fishery agencies, the National Marine Fisheries Service and the US Fish and Wildlife Service,” he continued.  “After that, they have discussions with Fish and Wildlife on the information that was provided in the Biological Assessment to make sure that all of the information that the fish agencies need is sufficient.  They then initiate what’s called consultation, which is a formal process for the agencies to go through a determination of how biological opinion gets developed and issued for the permit.

The information was considered sufficient on September 6th, so they are now in the process of formal consultation with the fishery agencies.  “A biological opinion as a result of all of this will occur once they determine that the proposed action will avoid jeopardy.  And that would be the basis for the permit, for the take authorization,” he said.  “For the state 2081(b) permit, the Department of Water Resources prepares the application, which is focused on whether the potential effects on the species are minimized or fully mitigated.”

Up until now, I’ve talked about avoiding jeopardy on the federal side under the Endangered Species Act,” added Mr. Arakawa.  “In addition to avoiding jeopardy, it’s minimizing and fully mitigating for any impact of the project on the species.

The 2081(b) application was submitted on October the 5th; the processing of the application is proceeding.  The Department of Fish and Wildlife will determine when the application is complete, and a permit and findings issued as a result, he said.  “They would have to determine that take is incidental to an otherwise lawful activity, so we’re talking about a project that is a lawful activity; the impacts will be mitigated, that there’s adequate funding for the mitigation, and the issuance of the permit will not jeopardize the species, so those are the findings that they would need to reach for the state permit.”

3a_presentation_page_8Mr. Arakawa then presented a sequence diagram for how the endangered species permits and the environmental documents work together, noting that the top line represents the federal Endangered Species Act, the middle line represents the California Endangered Species Act, and the last line is the state and federal environmental impact report and impact statements.

In the end, the objective is to get to a biological opinion on the federal side, to get to a final 2081(b) permit on the state side, and to get to a Record of Decision and a Notice of Determination on the environmental impact efforts,” he said.

The endangered species processes will rely on a subsequent peer review.  The earlier peer review dealt with methodology; the second peer review will deal with the actual analysis of the biological assessment information that shows the effects analysis or the effects on the species.  The peer review panel is organized by the Delta Stewardship Council’s Delta Science Program.  The peer review panel would get the biological assessment information, they will have a two-day meeting to discuss it, take some time to develop their findings and conclusions, and then report that back to the agencies.

This peer review process is all for the purpose of feeding back in so that the biological opinion and the 2081(b) permit can take this information into account,” Mr. Arakawa said.

The state is looking to finalize the Environmental Impact Report and Environmental Impact Statement, but the key driving factor for coming to a decision point is really the biological opinion,” he said.  “So even though the state conceivably could complete the Environmental Impact Report and Environmental Impact Statement, it would still await the biological opinion.”

Mr. Arakawa noted that at the last Water Planning and Stewardship Committee meeting, Director Mark Cowin said that the completion of the biological opinion will likely slip past the end of the year, and likely past the term of the Obama Administration.  “So based on the sense of where he’s said, we’re probably in the time frame of somewhere about the first quarter, or maybe a tiny bit farther in terms of all of this aligning, and the state and federal agencies taking these actions that would complete the majority of the planning process for this California Water Fix project,” he said.  “There are no specific dates; this is still being worked out between the agencies, but I felt that this sequencing diagram would provide you further insight on how all of this works.”

And with that, Mr. Arakawa’s presentation was concluded.

Director Fern Steiner asked, “On the Section 2081, one of the things that has to happen for the permit and findings is adequate funding for the required mitigation is identified.  Does that mean there actually has to be a commitment by the parties to the funding, or that there has to be actually a funding source identified?

I will give you my understanding,” replied Mr. Arakawa.  “I believe that in the 2081(b) process, they will need to show what the sources of the funding are, and then obviously for those that are expected to fund the mitigation, we need to in parallel, work out the funding agreements.”

General Manager Jeffrey Kightlinger agreed.  “At the end, when we get a permit to go build the project, among the requirements is adequate funding to do the mitigation.”


Assistant General Manager Roger Patterson gave a brief presentation on the cost allocation discussions for the California Water Fix project.   “We are getting closer to having some draft proposals for the board and the committee to consider, so I thought I’d do a little bit of a review on where we’ve been and what we’ve done on this, so when we get detailed proposals, we’re back up ready to go with some of the information.”

3d_presentation_page_3Mr. Patterson presented a slide showing the costs for the California Water Fix project, noting that it’s the same chart from September 2015.  “Since 2013, we’ve had two independent cost estimates on the project and it has changed very little; it’s basically been $15 billion all the way through,” he said.  “So when we take these costs and in very rough terms, if you bond the capital costs for the conveyance and you bond the mitigation portion; … the interest rates that the projects used which is a little over 6%; you get a debt service for the entire project of about $1 billion per year … This hasn’t really moved.”

3d_presentation_page_4He then presented a diagram showing how the costs for California Water Fix would be allocated.  “The total cost estimate of the project is about $15 plus billion rough.  There will be an annualized rate to debt service that will be shared between the State Water Project and the Central Valley Project.  Then each of those projects will pass down to their customers a proportionate share of the costs to provide the debt service, so the Central Valley Project and the State Water Project independently will do that.”

There are three assumptions regarding the cost allocation that Mr. Patterson said to keep in mind, noting that not all have been agreed to, but they are the assumptions Metropolitan has held from the very start.  “The first one is ‘costs follow water,’ and what that basically means is if you get 10% of the water over a 50 year period, you should pay 10% of the costs.  The second one is that all users pay the same unit cost, and so whether you’re an ag, an urban, or the refuges, which use the system, our assumption has been that everybody should pay the same unit cost.  There should be no subsidy from one sector to another, so again that’s an assumption; not everybody has agreed to that.”

The last assumption is for all the cost estimates, we’ve always used a debt service of 6.135% as an interest rate, and we’ve carried that from the very beginning,” he continued.  “It’s on the high side now based on what the markets are and what you can finance projects at, but I think it’s smart to be more conservative.”

3d_presentation_page_5Mr. Patterson presented a list of State Water Project contractors, saying that this is to give an idea why it take a while to get people on the same page.  “This is only half of the puzzle.  The Central Valley Project has about the same number of entities involved.”

The chart shows the individual contractors and the percentage listed is the percent of the total supply that they have under contract.  Metropolitan’s share is 45.81%; Kern County is 23.55%.  “It’s not just those of us that have a large percentage; every one of these entities has a real interest in making sure they understand it because each of them will need to take the information, once we get the permits and the cost allocation, and then they have to make a decision on their participation.  Whether you’re a large stakeholder or have a large contract or a small contract, essentially the decision is the same.”

3d_presentation_page_6Lastly, Mr. Patterson presented a slide of costs for Metropolitan, noting that the information remains essentially unchanged over the three year period.  “The concluding punchline here on the rate increases was that we were targeting 3-6% per year over the next several years, even including financing the project.  I think that’s still pretty consistent with what we’re talking about; about 4½% is our assumption for that going forward.”

I don’t know if we’re going to be able to have a proposal in November,” admitted Mr. Patterson.  “We’re still pushing hard for that, and that would be something that the contractors, staff, and DWR Director and the Regional Director of the Bureau of Reclamation would be comfortable as putting out as a straw proposal, so to speak, to start getting feedback from various boards.  We have a couple of issues we’ve bumped into right now that we’ve got to work through, but we’re still moving along.”

The goal is to push this through and have this completed so we know where we stand on our share of the project at the time the permits are issued,” said Mr. Patterson.  “That’s the coming together of what we believe is necessary in order to make this decision.”

During the discussion period, Director Keith Lewinger asked what happens if a state or federal contractor decides they don’t want to participate.

There may be the possibility of orphan share, which happens in a lot of projects, but we don’t know that yet,” replied Mr. Kightlinger.  “There is no solution to it yet, because the problem hasn’t been presented yet, so when we get there, and if there are orphan shares of the project, then we’ll have to talk about what are the possible approaches to dealing with it.  But as it stands today, we don’t know.”

You have dual conveyance, so if you have someone who decides that they are not going to participate in the tunnels, they have a right to a certain percentage of the water, do they get that water even if they don’t participate in the tunnels?,” asks Director Steiner.

That’s one of the topics that’s being debated among contractors,” said Jeff Kightlinger.  “Can agencies sort of opt out and take a reduced reliance of only taking water that will be moved out of the southern portion versus the northern diversion.  There’s no decision on that yet either.  And one of the approaches that DWR has is the authority to just say it is part of the State Water Project and everyone is required to participate.  But if the approach is to allow people to have – a lesser amount of reliability, what would the consequences be, etc, how much water would they lose, all of that would have to be worked out.

The only thing I would add to that is that I think it’s important when the decision is made, for people to know exactly where they would stand relative to costs and water supply and obligations if they did not participate, they need to know that,” said Mr. Patterson.  “I said there were a couple of issues that we’re trying to get a handle on and this is one of them.”


The regular meeting of the committee includes a brief update on the costs of the Cal Water Fix project:


Program Manager Randall Neudeck updated the committee members on the Wallace Weir fish passage project, which recently broke ground in the Yolo Byapss.  Mr. Neudeck reported that several members of the Metropolitan Board of Directors attended the ceremony, as well as met with representatives from the Northern California Water Association, from the Reclamation District 108, Cal Trout and others to discuss opportunities up in the Yolo Bypass that could improve not only fish passage and habitat up there, as well as agricultural and urban water supply reliability.

3b_presentation_page_08The Yolo Bypass is a narrow strip of land 40 miles long and 3 miles wide, located between Sacramento and Davis. Capable of carrying four times the flow of the Sacramento River, the bypass is part of a larger flood control system that performs the critical function of protecting the city of Sacramento from catastrophic flooding and as such, the bypass has been integral in protecting the city from flooding at least seven or eight times.

Agencies are looking at how to improve the Yolo Bypass as part of the flood control system as well as how it can be used to enhance wildlife habitat.  There are several habitat projects planned or underway, such as the Lower Yolo Ranch project and the Knaggs Ranch project.

The Wallace Weir project will help prevent adult Sacramento River salmon from swimming into a drainage ditch that leads deep into farm fields where they become stranded; the improvements will also allow better control of farm drainage releases and will include a fish collection facility so that the Department of Fish and Wildlife can capture any stray salmon and return them to the river to spawn.


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