At the January meeting of the California Water Commission, commissioners discussed what discretion the Commission has if a project selected for the Water Storage Investment Program is making insufficient progress toward completing the program’s statutory requirements.
Proposition 1 of 2014 dedicated $2.7 billion for investments in water storage projects, which the California Water Commission administers through the Water Storage Investment Program (WSIP). Seven water storage projects were selected and must complete the remaining requirements, including final permits, environmental documents, contracts for the administration of public benefits, and commitments for the remaining project costs.
Holly Stout, legal counsel for the Commission, said there isn’t a process or procedure for taking action if a project is not making sufficient progress; the Commission has the latitude to do what it wants in collaboration with everyone on the Commission.
The maximum amount a project can be awarded if the statutory requirements have been met is the Maximum Conditional Eligibility Determination or MCED. This was determined through a comprehensive evaluation of each project’s application and its public benefits, defined in the legislation as ecosystem improvements, water quality improvements, flood control, emergency response, and recreation. The Commission cannot consider other benefits. The applicants must be construction-ready before the final funding hearing.
Ms. Stout noted that the Commission can reduce the final funding award if they so choose. The regulations also include Commission discretion if the projects are not progressing or aren’t responsive to the Commission.
California Code of Regulations, Title 23, section 6013(f)(1) states: “Funding for the capital costs of a project remain contingent until all items in section 6013(c) are complete and have been submitted to the Commission. The Commission may determine at a regularly scheduled meeting that the applicant has failed to make substantial progress toward completing these required documents and the project is no longer eligible for Program funding.”
Ms. Stout acknowledged that these projects are big, and timelines can slip. “The standard is failed to make substantial progress, and that is completely subjective and up to the commission, depending on the project,” she said.
Each project has its own timeline and will face different issues, so each must be evaluated independently when exercising discretion. The Commission can consider quarterly reports, project presentations, progress toward completing the regulatory requirements, news articles, public comments, Commissioner opinions, and staff recommendations. The process would occur during public meetings where commissioners discuss their concerns and interact with staff to obtain the information needed for commissioners to make the decision.
Each project was awarded 5% of its MCED to help with permitting processes. During the discussion period, Vice Chair Fern Steiner asked if the Commission decides there’s a failure to make substantial progress, would the project be obligated to return any early funding awards? Ms. Stout said there is no obligation to return it; those funds are spent. Executive Officer Joe Yun clarified that would assume everything was done according to the funding agreement.
Commissioner Alexandre Makler asked if the quarterly reports have information that commissioners can review to see if project proponents are in compliance with their funding agreements.
Executive Officer Joe Yun said that the funding agreement asks for progress reports and other deliverables to document the work completed to match the schedule and budget in the funding agreement. The quarterly reports relate to the progress toward the requirements for the final funding hearing.
“Logically, there’s probably a rough correlation between performance on an early funding agreement and progress towards those requirements for final funding hearing, but you wouldn’t be able to draw a direct correlation,” said Mr. Yun. “So, if you’re looking at the quarterly reports, you’re looking at the bigger picture regarding how the progress is going. If the quarterly reports are not satisfactory to you or not giving the information you’re interested in, then there’s a discussion with staff at a commission meeting around whether we can get that information or if we should globally be asking for different information in the quarterly reports so we can get the information the Commission needs.”
Commissioner Curtin expressed concerns about reconsidering things now, as it’s difficult at the Commission level to determine whether projects are on track or not.
“As I understand it, the state was going to pay for the environmental portion of this water because the storage used by stakeholders will be paid for by those stakeholders. But the fish don’t pay taxes … you can’t expect the environment to cough up the dough. And that was the premise; that’s still the premise. So, if they fail to show that they’re going to meet their environmental benefits, that would be one of our considerations. But it’s been a long time. And to be quite blunt, I feel if we fiddle around too much here, we’re going to fail as a commission.”
“I do think it’s disruptive to the process because these projects are complicated,” he continued. “People have been working half a decade, if not more, before they even came to us. So the idea that we’re going to look and possibly withdraw a major portion of the funding is definitely unsettling, not just to me, but certainly to anybody who’s on this project list.”
Commissioner Makler disagreed. “I think the role of the Commission is to provide at least direction to the staff to set criteria to analyze whether or not a project looks viable,” he said. “This Commission was assembled with expertise. We have representatives of labor, the agricultural community, the environmental community, and the business community. We provide a certain level of expertise, and I think it’s incumbent upon us to provide direction and leadership to the staff.”
He said that people should be allotted sufficient time to make the project happen, and he acknowledged the uncertainty and complexity of building projects. “But we’re talking about a set amount of money … to me, it would be a shame if an otherwise viable project could have gone forward, but for the fact that they didn’t have sufficient monies, that they were otherwise eligible for, and we could have reallocated monies from projects that were never going to be complete. That would be a failure of the Commission.”
Commissioner Sandi Matsumoto pointed out that because the projects are so different, there isn’t a set of rules to standardize how we evaluate the projects. “Are there certain categories of things that are common across the projects that we can at least use as a checklist to think through, like a red, yellow, green stoplight? … I’m very concerned that we get the funds spent and we invest them; those are public funds that need to be invested in projects that are storing water, which means we want to absolutely for these projects to succeed. And kind of like a proud parent, if one of them’s not doing as well as they should be, it’s on us to step in and do something about it. If we have to get to that uncomfortable moment, my goal would be that it is not a surprise to anybody; everybody should have seen it coming. And one way we might be able to do that would be to be clear about what criteria we are looking at to be clear about whether a project is on track or not.”
Executive Officer Joe Yun said he was hesitant about using red and green lights. “A lot of these applicants have boards they report to, and we are watching their meetings as well. So we have to be careful about the cross messages. You are a Commission in charge of a funding program, and if you accidentally signal a red light in the wrong circumstance, it could be disastrous for the progress that projects are making. I do think there’s some sensitivity that staff works in how we look at projects and how we message. And as we move forward, we’ll continue to do that. But I don’t think we should start using red and green lights because things are so much more nuanced in the real world than that.”
“It’s really not our job to get these projects over hurdles – it’s our job to understand if these projects are getting over them,” said Chair Swanson. “Vice Chair Steiner and I have the opportunity to speak with the staff on a more frequent basis. And we understand the work that’s being done by the team. And we have tremendous confidence in our staff and their ability to understand what’s going on with projects in real-time. I think this is a great conversation because it’s very reflective to the public that we have commissioners who care very much about being diligent in decision-making. And at the same time, we have commissioners who understand this has been a long, difficult road to get here. And I think we’re aligned. We’re just at different places along the roads.”
The agenda item concluded with Mr. Yun noting that the discussion will continue in March when the second part of this briefing is scheduled.
Willow Springs Water Bank update
One of the projects selected for the Water Storage Investment Program is the Willow Springs Water Bank, a conjunctive use and reservoir reoperation project at an existing facility in the Antelope Valley. The project would integrate the State Water Project reservoir and conveyance system with groundwater storage. The project would utilize 500,000 acre-feet of existing groundwater storage facilities and operate conjunctively with the State Water Project to provide ecosystem benefits north of the Delta. Project operations require agreements with a State Water Project contractor to forego SWP delivery in exchange for receiving water from the water bank.
John Perez, managing director at CIM, told commissioners that they had made considerable progress and worked towards an agreeable scale, a conceptual design, and a vision for ongoing operations. They are working with the Antelope Valley-East Kern Water Agency and will soon be in discussions with the entire board within a few months.
“We’ve come to a place where we feel very confident we have a joint plan that will not only deliver on the public benefits but also help AVEK with its long-term water reliability goals,” said Peter Thompson, Assistant GM.
Commissioner Makler asked about the key permitting milestones ahead for the project. “Some of the permitting will be a function of the outcome of the negotiations with the bank and the AVEK board,” he said. “But the scope of the public benefits remains the same. That’s the guiding principle of the negotiations. But some permitting impacts will result from what the ultimate negotiations.”
