CAP System Use Agreement A New Instrument for the Orchestra CRWUA 2017

1. CAP System Use AgreementA New Instrumentfor the OrchestraCRWUA 2017 Ken Seasholes Manager, Resource Planning & Analysis Central Arizona Project

2. 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

3. 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

4. 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

5. Wheeling Efforts • There have been successive initiatives that have addressed aspects of wheeling non-Project Water Master Repayment Contract & Discussion Document Planet Ranch request & Position Statement Scottsdale Project & Water Availability Status Standard Form Contract Informal Municipal Discussions Wheeling Process System Use Agreement Project Wheel ADD Water

6. 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)

7. 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” Fixed OM&R Exchanges and delivery priorities

8. 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

9. 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

10. Wheeling • Two kinds of wheeling: • Reclamationwheeling is based on existing capacity, on year-to-year, as-available basis • Tribes and federal agencies have priority • CAWCDwheeling 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

11. Operational Capability

12. 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

13. Operational Capability

14. 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

15. 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

16. 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

17. 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

18. 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