Agenda Number 10.

CONTACT: David Johnson 623.869.2375 djohnson@cap-az.com MEETING DATE: August 3, 2017 AGENDA ITEM: Report and Consideration of Action on 2017 Forbearance of CAP

Water by the Gila River Indian Community RECOMMENDATION: Staff recommends that the Board authorize the General Manager to execute the system conservation forbearance letter agreement with Reclamation for system conservation by the GRIC in 2017.

FINANCIAL IMPLICATIONS: Impact on Budget: None Impact on Reserves: None Impact on Rates: Potential increase of up to $2/af due to forgoing collection of fixed OM&R for 40,000 af of system conservation by GRIC in 2017

LINKAGE TO STRATEGIC PLAN, POLICY, STATUTE OR GUIDING PRINCIPLE CAWCD 2016 Board of Directors Strategic Plan

Water Supply: Reduce risk associated with CAP’s junior priority Water Supply: Optimize reliability and sustainability of CAP water supply

PREVIOUS BOARD ACTION/ACTIVITY: At the February 2, 2017, meeting the CAWCD Board of Directors authorized the General Manager to execute a letter agreement in which CAWCD agreed to forbear delivery of 40,000 acre-feet of CAP water that the Gila River Indian Community agreed to leave in Lake Mead as system conservation. ISSUE SUMMARY/DESCRIPTION: On January 18, 2017, the United States Department of the Interior through the Bureau of Reclamation (“Reclamation”) and the Gila River Indian Community (GRIC) entered into a System Conservation Implementation Agreement (SCIA). Pursuant to the SCIA, Reclamation agreed to pay $6,000,000 to the GRIC in exchange for the GRIC’s agreement to conserve 40,000 acre-feet of CAP water with a recent history of use in

2017. Any water conserved by the GRIC and forborne by CAWCD would be left in Lake Mead as system conservation. In order for the GRIC conservation of CAP water to provide increased storage in Lake Mead, CAWCD was required to forego its rights to divert, deliver, or remarket the conserved CAP water under our authorities to manage Excess CAP water. On February 2, 2017, the CAWCD Board of Directors did so by authorizing the General Manager to execute a system conservation forbearance letter agreement with Reclamation in which CAWCD agreed not to order the water conserved by the GRIC under the SCIA. The SCIA also contained an option that would allow Reclamation and the GRIC to conserve an additional 40,000 acre-feet of CAP water with a recent history of use in 2017 provided that Reclamation and the GRIC exercised the option on or before May 15, 2017. While the option was not exercised by that date, GRIC and Reclamation worked with the Arizona Department of Water Resources, the City of Phoenix, and the Walton Family Foundation to develop an additional program that would substitute for the unexercised option. This program was memorialized in a July 14, 2017 Agreement in which those parties agreed to pay $6,000,000 to the GRIC in exchange for an additional 40,000 acre-feet of system conservation. That Agreement is attached to this brief. Like the SCIA before it, the July 14 Agreement does not include funding to reimburse CAWCD for its loss of fixed OM&R rates. CAWCD previously anticipated that the loss of collection of fixed OM&R for the SCIA would result in an increase of up to $2/af for the remaining OM&R rate payers in 2017. The loss of collection of fixed OM&R for the July 14 Agreement will result in an additional increase of up to $2/af. Any conservation pursuant to the July 14 Agreement will require CAWCD to agree to forego its rights to divert, deliver, or remarket the conserved CAP water under our authorities to manage Excess CAP water. This conservation activity is in addition to CAWCD’s plans to conserve 185,000 acre-feet in 2017 to avoid shortages in 2018. Attached to this brief is a letter agreement in which CAWCD is being asked to agree to the forbearance of its right to divert, deliver, or remarket this water. SUGGESTED MOTION: I move that the Board authorize the General Manager to execute the system conservation forbearance letter agreement with Reclamation for system conservation by the GRIC in 2017. Attachments.

Agreement No. 17-XX-30-W0623

AGREEMENT AMONG THE UNITED STATES OF AMERICA, THROUGH THE DEPARTMENT OF THE

INTERIOR, BUREAU OF RECLAMATION, THE STATE OF ARIZONA, THROUGH THE ARIZONA DEPARTMENT OF WATER RESOURCES, THE GILA RIVER INDIAN

COMMUNITY, THE CITY OF PHOENIX, AND THE WALTON FAMILY FOUNDATION, INC., TO FUND THE CREATION OF COLORADO RIVER SYSTEM

WATER THROUGH VOLUNTARY WATER CONSERVATION AND REDUCTIONS IN USE DURING 2017

1. PREAMBLE: THIS AGREEMENT ("Agreement") is entered into this 141h day of July,

2017 ("Effective Date"), by and between the UNITED STA TES OF AMERICA ("United

States"), represented by the Secretary of the Interior ("Secretary") acting through the Regional

Director of the Bureau of Reclamation, Lower Colorado Region ("Reclamation"), executing

this Agreement; the State of Arizona, acting through the Arizona Department of Water

Resources ("ADWR"); the Gila River Indian Community ("Community"); the City of Phoenix

("Phoenix"); and the Walton Family Foundation, Inc. ("Walton"), each being referred to

individually as "Party" and collectively as the "Parties", and pursuant to the Act of Congress

approved June 17, 1902 (32 Stat. 388), designated the Reclamation Act, and acts amendatory

thereof or supplementary thereto, the Act of January 12, 1927 ( 44 Stat. 957, 43 U.S.C. § 397a),

the Act of December 21, 1928 ( 45 Stat. 1057), designated the Boulder Canyon Project Act, the

Act of September 30, 1968 (82 Stat. 885), designated the Colorado River Basin Project Act, the

Act of June 24, 1974 (88 Stat. 266), designated the Colorado River Basin Salinity Control Act,

as amended, and consistent with the Consolidated and Further Continuing Appropriations Act,

2015, Public Law No. 113-235 § 206 (128 Stat. 2312) (2014).

2. EXPLANATORY RECITALS:

2.1 WHEREAS, on December 10, 2014, Reclamation, the Central Arizona Water

Conservation District ("CA WCD"), The Metropolitan Water District of Southern California,

the Southern Nevada Water Authority ("Municipal Water Agencies"), ADWR, the Colorado

River Board of California, and the Colorado River Commission of Nevada entered into a

Memorandum of Understanding for Pilot Drought Response Actions ("MOU") that will remain

in effect unti l December 31, 2019;

Agenda Number 10. Attachment 1.

2.2 WHEREAS, under the MOU, Reclamation and the Municipal Water Agencies

desire to take initial steps between 2014 and 2017 towards generating additional water to be

retained in Lake Mead to reduce the risk of reaching critical reservoir elevations in a manner

consistent with the Law of the River including, but not limited to, the Consolidated Decree in

Arizona v. California, 547 U.S. 150 (2006) and the 2007 Record of Decision, Colorado River

1 nterim Guidelines/or Lower Basin Shortages and the Coordinated Operations for Lake Powell

and Lake Mead ("2007 Guidelines");

2.3 WHEREAS, a fundamental component of Lower Basin drought contingency

planning is voluntary development of additional quantities of water to be retained in Lake Mead

in order to reduce the risk of Lake Mead reaching critical reservoir elevations ("Protection

Volume(s)");

2.4 WHEREAS, the MOU, among other things, provides that Reclamation will use

its best efforts to create 50,000 acre-feet of Protection Volume between 2014 and 2017 that will

be dedicated as Colorado River System water, thereby increasing the volume of water

remaining in Lake Mead, (Reclamation is anticipated to use a combination of the following

activities to create Protection Volumes: efficiency improvements, operational improvements,

and creation of system water);

2.5 WHEREAS, in 2016, various representatives of Arizona's Colorado River water

users began discussing a program for implementation of the proposed Lower Basin Drought

Contingency Plan ("DCP") within and among the various Arizona users of Colorado River

water (an "Arizona Implementation Plan"), which will aid in the adoption of the DCP, including

certain proposed measures intended to reduce the probability of a Lower Basin shortage

declaration in the near future. These measures incJuded payment of compensation to Arizona

Colorado River Contractors and users on the Central Arizona Project ("CAP") as compensation

for voluntary reductions in consumptive use of Colorado River water, generally known as

"system conservation" activities (as further defined herein);

2.6 WHEREAS, recognizing the severity of the ongoing historic drought and in

anticipation of the eventual adoption of DCP and an Arizona Implementation Plan, the

Community entered into agreement with the United States through Reclamation making some

of its CAP water entitlement under its Contract No. 3-07-30-W0284 dated October 22, 1992,

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as amended, ("Community CAP Contract") available in calendar year 201 7 as Colorado River

System water with the intent to help mitigate the impacts of the current drought;

2.7 WHEREAS, Reclamation and the Community entered into System

Conservation Implementation Agreement No. I 7-XX-30-W0620 on January 18, 2017, for

which Reclamation paid the Community $6,000,000 for 40,000 acre-feet of System

Conservation Water during 2017 (the "January Agreement") in anticipation of a DCP and an

Arizona Implementation Plan;

2.8 WHEREAS, the January Agreement provided for an option that Reclamation

can exercise in which the Community is willing to provide Reclamation with additional water

not to exceed 40,000 acre-feet in calendar year 2017, which water has a recent history of use;

2.9 WHEREAS, Reclamation and the Community desire, through this Agreement,

to amend the January Agreement and for Reclamation to exercise the option for the additional

water in the amount of 40,000 acre-feet, to be conserved and remain in Lake Mead as System

Conservation water;

2.10 WHEREAS, recognizing that the representatives of various Colorado River

water users in Arizona will continue efforts to define an Arizona Implementation Plan during

2017, the Parties intend that this Agreement will:

2.10.1 Define a set of interim activities that, to the extent feasible, will be

undertaken by the Parties to fund and implement additional System Conservation activities

during 20 l 7 which are intended to be complementary to the DCP and an Arizona

Implementation Plan, and the roles and responsibilities of the Parties in funding and

implementing such activities;

2.1 0.2 Reflect the Parties' agreement to continue to work with each other and

with other stakeholders to define an Arizona Implementation Plan that will aid the adoption of

the DCP; and

2.10.3 Reflect the Parties' agreement to work with each other and with other

stakeholders to develop and implement a long-term Arizona System Conservation program that

includes several key elements, including:

(a) A structure for s~akeholder participation in the governance of future

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System Conservation activities, including representatives or designees of those parties funding

System Conservation activities;

(b) Provisions for developing ongoing funding for System Conservation

activities over time;

(c) Criteria identifying the types of water conservation projects that

would be eligible for funding as System Conservation activities, as well as mechanisms to fund

innovative projects that could provide a basis for future System Conservation activities; and

(d) Criteria defining the shortage risk reduction objectives of System

Conservation activities and the hydrological conditions under which System Conservation

activities would be undertaken, and the supportive policies that should be adopted to facilitate

future investment in System Conservation activities and the achievement of related objectives;

2. 11 WHEREAS, the Community submitted a proposal to Reclamation dated July 7,

2017, which is attached hereto as Exhibit A, to conserve the additional water in the amount of

40,000 acre-feet in 2017, at a cost of $150 per acre-foot for a total of $6,000,000;

2. 12 WHEREAS, the Community's proposal includes certification letters from the

appropriate ground water savings facility entities certifying that such entities are physically

capable of accepting delivery of the additional water in the amount of 40,000 acre-feet that the

Community is forgoing storage of in calendar year 2017 under this Agreement, and that the

Community intended, absent the system conservation, to utilize the available capacity for

storage in 2017;

2.13 WHEREAS, a purpose of this Agreement is for ADWR, Phoenix, Walton and

the United States to fund the Community's System Conservation project as described in its

proposal dated July 7, 201 7, attached hereto as Exhibit A, which shall be considered a part of

the future contemplated DCP and an Arizona Implementation Plan;

2. 14 WHEREAS, the Parties desire to enter into this Agreement to provide for (1) the

funding of the Community's proposal by the Funding Parties (2) the implementation of the

Community's proposal by Reclamation and the Community, and (3) the amendment of the

January Agreement for Reclamation to exercise the option for the additional water in the

amount of 40,000 acre-feet, to remain in Lake Mead as System Conservation water.

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NOW, THEREFORE, in consideration of the mutual covenants herein contained, the

Parties agree as follows:

3. APPLICABILITY: The Parties intend and anticipate that System Conservation

activities after 2017 will include the participation of additional Arizona stakeholders. During

2017, the Parties anticipate that this Agreement shall be limited to the participation of the

Parties.

4. DEFINITIONS: For the purpose of this Agreement, the following definitions shall

apply:

4.1 Authorized Representative means any person or entity, identified by a Funding

Party in a letter to the other Funding Parties from the date the letters are received, which person

or entity shall be responsible for carrying out prescribed obligations of the Funding Party under

this Agreement.

4.2 Colorado River Compact means the document signed on November 24, 1922, at

Santa Fe, New Mexico, pursuant to an act of Congress approved August 19, 1921 (42 Stat. 171).

The Colorado River Compact was approved in Section 13(a) of the Boulder Canyon Project

Act.

4.3 Colorado River System shall have the meaning ascribed to such term in the

Colorado River Compact.

4.4 Consolidated Decree means the decree entered by the United States Supreme

Court in the matter of Arizona v. California on March 27, 2006 (547 U.S. 150).

4.5 Consumptive Use means diversions from the Colorado River System, less any

return flow to the river that is available for consumptive use in the United States or in

satisfaction of the Mexican Treaty Obligation. Consumptive use from the Colorado River

includes the consumptive use of water drawn from the Colorado River System by underground

pumping. The Mexican Treaty Obligation is set forth in the February 3, 1944 Water Treaty

between Mexico and the United States, including supplements and associated Minutes of the

International Boundary and Water Commission.

4.6 Exhibit A is a copy of the Community's proposal dated July 7, 2017.

4.7 Funding Parties means Reclamation, ADWR, Phoenix, and Walton. 5

4.8 System Conservation means a voluntary, measurable reduction of Consumptive

Use of Colorado River water, including the elimination of system losses or reduction in

demands through increased efficiency. All water conserved as a result of this Agreement shall

be used for the sole purpose of increasing storage levels in Lakes Mead as a benefit to the

Colorado River System, and shall not accrue to the benefit or use of any individual user.

5. FUNDING:

5.1 Funding Parties.

5. 1.1 ADWR. ADWR shall contribute $2,000,000 for the Community's

System Conservation project under this Agreement for 2017.

5.1.2 Phoenix. Phoenix shall contribute $2,000,000 for the Community' s

System Conservation project under this Agreement for 2017.

5.1.3 Walton. Walton shall contribute $1,000,000 for the Community's

System Conservation project under this Agreement for 2017.

5.1.4 United States. The United States shall contribute $1 ,000,000 for the

Community's System Conservation project under this Agreement for 2017.

6. INVOICING:

6.1 Reclamation will invoice the Funding Parties for their contributions upon the

conditions being met in Section 7 of this Agreement, as determined by Reclamation. The

Funding Parties agree to pay the invoice within 90 days of the date of the invoice.

6.1.1 The Funding Parties will submit their payments to Reclamation using the

payment options listed on the invoice.

6.1.2 Payment from Reclamation to the Community will be made m

accordance with Section 14 herein.

6.2 Effect of Contributions Provided Under a Future Arizona Implementation Plan.

It is the intent of the Parties that contributions made by a Funding Party for System Conservation

pursuant to this Agreement and the January Agreement shall be credited to that Funding Party

for purposes of calculating the Funding Parties' total contributions under any future Arizona

Implementation Plan.

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6.3 Failure to Contribute Funds. The United States shall not be liable for any

Funding Party's failure to contribute funds as required in Section 5 herein.

7. CONDITIONS PRECEDENT TO INVOICING THE FUND.ING PARTIES:

7.1 Each of the actions listed in 7.1.1 through 7.1.3 below must be completed on or

before September I, 2017, or such an extended date as agreed to by the Parties, or this

Agreement shall automatically terminate:

7.1 .1 A letter agreement between Reclamation and CA WCD to ensure that the

volume of water intended to be conserved via the System Conservation activities contemplated

in this Agreement will not be diverted from the Colorado River by CA WCD in calendar year

2017 and that the water so conserved will result in the accrual of a similar volume of water in

Lake Mead storage. Reclamation shall provide a copy of such executed letter agreement to the

Parties.

7.1.2 Amendment of the Community's CAP water order placed with CA WCD

for calendar year 20 17 to reflect the amount of System Conservation water pursuant to this

Agreement. A copy of the amended water order will be provided to the Parties by Reclamation.

7.1.3 Amendment of CAWCD's approved 2017 water order to reflect the

amount of System Conservation water pursuant to this Agreement.

8. RECLAMATION CONTRACTING ENTITY RESPONSIBILITIES: Reclamation

shall administer this Agreement, and verify and document Consumptive Use reductions for the

Community's System Conservation project described in Exhibit A, consistent with this

Agreement and the 2007 Guidelines.

9. 2017 FUNDING OBLIGATION: All Parties agree that the Community's proposal for

additional System Conservation in 2017, attached hereto as Exhibit A, shall be accepted and

funded as a System Conservation project for 201 7 subject to the fulfillment of the additional

conditions described in this Agreement and subject to the availability of funds.

10. PAYMENTS FOR SYSTEM CONSERVATION ACTIVITIES: In addition to the

funding provided by Reclamation to the Community under the January Agreement, further

compensation for System Conservation undertaken pursuant to this Agreement shall be paid by

Reclamation from the amounts contributed by the Funding Parties.

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11. ACCOUNTING FOR SYSTEM CONSERVATION WATER:

11.1 Conserved Water. The System Conservation water created pursuant to this

Agreement shall accrue to the benefit of the overall Colorado River System, and shall not be

accrued for the benefit of any of the Parties, or any third party.

11.2 Monitoring. Reclamation will use its existing water order approval process and

other authorities to ensure that the Community's CAP water under this Agreement is not

ordered or used by other Colorado River water entitlement holders during calendar year 2017.

11.3 Accounting. Reclamation will provide information regarding the amount of any

System Conservation water created pursuant to this Agreement in its annual Colorado River

Accounting and Water Use Report; Arizona, California, and Nevada prepared under Article V

of the Consolidated Decree.

11.4 Effect of Conservation Provided Under a Future Arizona Implementation Plan.

The Parties intend that, to the extent feasible, the amount of System Conservation water created

pursuant to this Agreement and the January Agreement shall be credited to the Community for

purposes of calculating the Community's total compensated System Conservation water under

any future Arizona Implementation Plan.

12. AMENDMENT OF THE JANUARY AGREEMENT AND IMPLEMENTATION BY

THE UNITED STATES AND THE COMMUNITY OF THE COMMUNITY'S PROPOSAL:

12.1 The terms and conditions of Sections 12 through 14 of this Agreement only

apply to the United States and the Community, and such terms and conditions may not be

amended without the approval of all Parties.

12. l.1 Amendment of January Agreement. Section. 5.4 of the January

Agreement is hereby superseded and replaced in its entirety by the following:

"5.4 Option for Additional Water. The Community hereby provides

Reclamation an option for additional water in calendar year 2017 in the

amount of 40,000 acre-feet of the Community's CAP water entitlement,

which water has a recent history of use. Reclamation is hereby

exercising such option for the additional water in the amount of 40,000

acre-feet, to be conserved in Lake Mead as System Conservation water

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at a price of $150 per acre-foot."

12. l .2 Section 8.2 of the January Agreement is hereby deleted in its entirety.

12.1.3 Other Provisions Unaffected. Except as expressly amended by this

Agreement, all other provisions of the January Agreement shall remain in full force and effect.

12.1.4 Inconsistencies. In the event of any inconsistencies among the terms and

conditions of the January Agreement and this Agreement regarding the additional water in the

amount of 40,000 acre-feet, the terms and conditions of this Agreement shall control.

12.2 Purpose. The purpose of implementation of the Community's proposal is for

Reclamation to compensate the Community a total of $6,000,000 for agreeing to modify its

operations for calendar year 2017 by reducing its delivery of its CAP water entitlement by an

additional volume of 40,000 acre-feet and allow such volume to remain in Lake Mead as

Colorado River System water with the intent of creating Protection Volume(s).

12.3 Water Conserved. The 40,000 acre-feet of additional water that will be

conserved under this Agreement was initially ordered by the Community for delivery to the

Gila River Indian Irrigation and Drainage District to irrigate Community lands, and the

Community intended to amend its delivery schedule to have this additional water in the amount

of 40,000 acre-feet, delivered to groundwater savings facilities for the accrual of underground

storage credits. The Community is foregoing the storage of such additional water in the amount

of 40,000 acre-feet.

13. IMPLEMENTATION:

13.l Implementation begins upon execution of this Agreement and continues through

December 31, 201 7.

13.2 The Community.agrees to modify its operations and reduce its delivery of CAP

water entitlement under the Community CAP Contract by the additional amount of 40,000 acre­

feet for calendar year 201 7, in accordance with this Agreement.

13.3 Upon this Agreement becoming effective as provided in Section 16 herein, the

Community will provide Reclamation with a copy of the amended CAP water order placed with

CAWCD for calendar year 2017 to reflect implementation of this Agreement.

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13.4 The Community will forego delivery of the additional water in the amount of

40,000 acre-feet for calendar year 2017, thereby increasing the volume of water remaining in

Lake Mead. This volume of water will apply toward the Parties' commitment to create System

Conservation.

13.5 The water left in Lake Mead under this Agreement will not be charged against

the Community's use of Colorado River water or charged to Arizona's Colorado River

apportionment. The quantity of water created by the Community under this Agreement shall

be deemed to have been delivered pursuant to the Community's CAP water delivery contract

when determining the amount of CAP Indian Priority Water available to the Community during

a time of shortage, and participation by the Community in this Agreement and in providing that

a portion of its CAP water entitlement will remain in Lake Mead, shall not constitute nor shall

it be construed as a direct or indirect use of a portion of its CAP water entitlement outside the

State which is prohibited under subsection 309(b)(2)(E) of the Arizona Water Settlements Act

(Public Law No. 108-451 ).

13.6 Nothing in this Agreement shall be construed as an express or implied waiver of

the sovereign immunity of either the United States or the Community.

13.7 The Community agrees to remain in compliance with applicable Federal, State,

and local environmental, cultural, and paleontological resource protection laws and regulations

throughout the term of this Agreement.

14. COMPENSATION:

14.1 A payment in the amount of $6,000,000 for the additional water in, the amount

of 40,000 acre-feet will be made by Reclamation to the Community no later than 30 days after

receipt by Reclamation of the contributed funds from all of the Funding Parties.

14.2 In the unforeseen event that the Community is not paid for any portion of the

additional water in the amount of 40,000 acre-feet covered by this Agreement, the Community

shall have the right to put to beneficial use in 2017 the water for which payment has not been

received.

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15. GENERAL TERMS:

15.1 Non-waiver. No Party to this Agreement shall be considered to have waived

any right hereunder except when such waiver of the right is given in writing. The failure of a

Party to insist in any one or more instances upon strict performance of any provisions of this

Agreement or to take advantage of any of its rights hereunder shall not be construed as a waiver

of any such provisions or a relinquishment of any such rights for the future, but such provisions

and rights shall continue and remain in full force and effect.

15.2 Uncontrollable Forces. No Party shall be considered to be in default in the

performance of any of its obligations under this Agreement when a failure ofpe1formance shall

be due to any cause beyond the control of the Party affected, including but not limited to,

facilities failure, flood, earthquake, storm, lightning, fire, epidemic, war, riot, civil disturbance,

labor disturbance, sabotage, and restraint by court or public authority which by exercise of due

diligence and foresight such Party could not have reasonably expected to avoid. A Party

rendered unable to fulfill any of its obligations under this Agreement by reason of an

Uncontrollable Force shall give prompt written notice of such act to the other Parties and shall

exercise due diligence to remove such inability with all reasonable dispatch.

15 .3 Representations and Warranties.

15 .3 .1 Each Party has all legal power and authority to enter into this

Agreement and to perform its obligations hereunder on the terms set forth in this Agreement,

and the execution and delivery hereof by each Party and the performance by each Party of its

obligations hereunder shall not violate or constitute an event of default under the terms or

provisions of any agreement, document, or instrument to which each of the Parties is a party or

by which each Party is bound.

15.3.2 Each Party warrants and represents that the individual executing this

Agreement on behalf of the Party has the full power and authority to bind the Party he or she

represents to the terms of this Agreement.

15.3.3 This Agreement constitutes a valid and binding agreement of each

Party, enforceable against each Party in accordance with its terms.

15.3.4 Each Pa1ty: (i) warrants and represents that such Party is authorized

I 1

by, and has undertaken all prerequisite actions required by, applicable Federal and State laws

and regulations to perform the obligations and exercise the rights contemplated herein, (ii)

acknowledges that such warranty and representation is a material inducement to, and has been

relied upon by, the other Parties in entering into this· Agreement and performing their respective

obligations hereinafter; and (iii) with respect to System Conservation funded by this Agreement,

the Parties will cooperate to use reasonable best efforts in the support, preservation and defense

thereof, including any lawsuit or administrative proceeding challenging the legality, validity or

enforceability related to such System Conservation, and will to the extent appropriate enter into

such agreements, including joint defense or common interest agreements, as are necessary

therefor; provided that each Party shall bear its own costs of participation and representation in

any such matter.

15.3.5 Governing Law. This Agreement shall be interpreted, governed by,

and construed under applicable Federal law and any relevant provisions of Arizona state law.

In case of conflict between Federal law and Arizona state law, Federal law controls. To the

extent permissible under the Federal Rules of Civil Procedure and other applicable Federal

authority, venue for adjudication of any disputes under this Agreement shall be in an appropriate

Federal cou1t.

15.3.6 Binding Effect and Limited Assignment. The provisions of this

Agreement shall apply to and bind the successors and assigns of the Parties upon receipt of

written agreement to the terms of this Agreement, but no assignment or transfer of this

Agreement or any right or interest therein shall be valid until approved in writing by all Parties;

provided, however, that a Funding Party may appoint an Authorized Representative, as defined

herein, to carry out its obligations under this Agreement without the further approval of the

Parties. Subject to Section 15 .3 .1 herein, an Authorized Representative shall be empowered to

act for that Funding Party under this Agreement and shall be entitled to the same rights and

subject to the same obligations under this Agreement as that Funding Party. This Agreement

is and shall be binding upon and shall inure to the benefit of the Parties and, upon dissolution,

the legal successors and assigns of their assets and liabilities.

15.3.7 Amendment, Modification, and/or Supplement. This Agreement may

be amended, modified, or supplemented only by the written agreement of the Parties. No

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amendment, modification, or supplement shall be binding unless it is in writing and signed by

all Parties.

15.3.8 Drafting Considerations. Each Party and its counsel have participated

fully in the drafting, review, and revision of this Agreement, each of whom is sophisticated in

the matters to which this Agreement pertains, and no one Party shall be considered to have

drafted this Agreement.

15.3.9 Notices. All notices and requests required or allowed under the terms

of this Agreement shall be in writing and shall be mailed first class postage paid to the

following entities at the following addresses:

Regional Director Lower Colorado Region Bureau of Reclamation Attention: LC-I 000 500 Date Street Boulder City, NV 89005

State of Arizona Arizona Department of Water Resources P.O. Box 36020 Phoenix, AZ 85067 Attn: Director

Gila River Indian Community Governor 525 West Gu u Ki Sacaton, AZ 85147

City of Phoenix Water Services Director 200 W. Washington Street, 9•h Floor Phoenix, AZ 85003

The Walton Family Foundation, Inc. P.O. Box 2030 Bentonville, AR 727 12

A Party may change its address by giving the other Parties notice of the change in writing.

15.3.10 Judicial Remedies Not Foreclosed. Nothing in this Agreement shall

be construed: (i) as in any manner abridging, limiting, or depriving any Party of any means of

enforcing any remedy either at law or in equity for the breach of any of the provisions hereof,

13

or of any other remedy which it would otherwise have; or (ii) as depriving any Party of any

defense thereto which would otherwise be available. In the event that any dispute arises

regarding this Agreement, the Parties agree to meet and attempt to resolve the dispute before

seeking remedy.

15.3.11 Availability oflnformation. Subject to applicable Federal laws and

regulations, each Party to this Agreement shall have the right during office hours to examine

and make copies of the other Party's books and records relating to matters covered by this

Agreement. All information and data obtained or developed with the performance of duties

mentioned in this Agreement shall be available upon request to a Party, subject to the provisions

of the Freedom of Information Act or other applicable law. However, use of said reports, data

and information shall appropriately reference the source for the respective documents.

15.3.12 Contingent on Appropriation or Allotment of Funds. The expenditure

or advance of any money as provided in Section 5 herein, or the performance of any obligation

of the Funding Parties under this Agreement shall be contingent upon the respective

appropriation or allotment of funds. Nothing in this Agreement shall bind the Funding Parties

to expenditures in excess of funds respectively appropriated and allotted for the purposes

outlined in this Agreement.

15.3.13 Cancellation of State Contracts. The Parties to this Agreement are

hereby notified of A.R.S. § 38-511.

15.3.14 Equal Opportunity/Non-Discrimination. The Parties to this

Agreement agree to comply with all applicabl<? federal or state laws relating to equal

opportunity and non-discrimination.

15.3.15 Officials Not to Benefit. No Member of or Delegate to the Congress,

or Resident Commissioner, or official of ADWR, the Community, Phoenix, and Walton, or any

Elector or Electors shall benefit from this Agreement other than as a water user or landowner

in the same manner as other water users or landowners.

15.3.16 No Third-Party Beneficiaries. This Agreement is not intended nor

shall it be construed to create any third-party beneficiary rights to enforce the terms of this

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Agreement on any person or entity that is not a Party.

15.3.17 Counterparts. This Agreement may be executed in counterparts, each

of which shall be an original and all of which, together, shall constitute only one Agreement.

15.3.18 Authority of the Secretary. Nothing in this Agreement diminishes or

abrogates the authority of the Secretary under applicable Federal law, regulation, or the

Consolidated Decree, as it may be further modified.

16. EFFECTIVE DA TE: This Agreement shall become effective upon the date set forth in

Section 1 of this Agreement ("the Effective Date") and subject to Section 7.1 herein, shall

remain in effect through December 31, 2017, or such an extended date as agreed to by the

Parties; provided, however, that the Parties' efforts to define DCP and an Arizona

Implementation Plan as described in Section 2.10 herein will survive termination of this

Agreement.

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement No. l 7-

XX-30-W0623 on the day and year first written above.

Signatures continued on next page.

THE UNITED STATES OF AMERICA

By:~~

15

Regional Director Bureau of Reclamation Lower Colorado Region

APPROVED AS TO FORM:

By gJim~~-Deputy Counsel

ARIZONA DEPARTMENT OF WATER RESOURCES ·

By~LK Director

16

APPROVED AS TO FORM: GILA RIVER INDIAN COMMUNITY

17

CITY OF PHOENIX Ed Zuercher, City Manager

By: ~5~ Kathr;srn;en Director, Water Services Department

ATTEST:

City Clerk

APPROVED AS TO FORM:

Acting City Attorney

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APPROVED AS TO FORM: THE WALTON FAMILY FOUNDATION, INC.

By Kbtr~ - Qk Executive Director

19

EXHIBIT A

20

GILA RIVER INDIAN COMMUNITY 'Executive Office of tfie (iovernor & Lieutenant (iovernor

" Pulling Our People First"

Slepfien 'Roe Ll!'\111s Cm1·1·1111r

July 7, 2017

Terry Fulp Regional Director, Lower Colorado Region U.S. Bureau of Reclamation P.O. Box 61470 Boulder City, NV 98006

Regional Director Fulp:

:tvtomca L\11rn .J\ntone I . ic·ltlt•u;il11 ( :m ('1'11111·

The Gi la River Indian Community (Community) and Reclamation entered into a January 18, 2017 System Conservation Implementation Agreement (SCIA I) for the conservation of 40,000 acre­feet of its Colorado River water entitlement that is delivered through Central Arizona Project (CAP Water). Under this SCIA the Community granted Reclamation an option to make an additional 40,000 acre-feet of its CAP Water available provided certain conditions were met by May 15, 2017.

As you are aware, the Community, Arizona Department of Water Resources, City of Phoenix,

Walton Family Foundation, and Reclamation have been in discussions to secure funding to

conserve the additional 40,000 acre-feet of Community CAP Water that was made available

under the option set forth in SCIA I. The Community still has an additional 40,000 acre-feet of

CAP Water available for system conservation in calendar year 2017 and the Community agrees

to have Reclamation exercise the option for the additional water under the same terms of the

SCIA I (i.e., 40,000 acre-feet of additional CAP Water to be conserved in Lake Mead as system

conservation water at a price of $150 per acre-foot). In addition the Community, Arizona

Department of Water Resources, City of Phoenix, Walton Family Foundation, and Reclamation

intend to execute an agreement to fund the creation of additional Colorado River system water

through voluntary water conservation and reductions in use during 2017 (SCIA II).

As part of this proposal the Community is willing to modify its operations for calendar year 2017 by reducing its delivery of its CAP Water entitlement by an additional 40,000 acre-feet, which would bring the total volume of Community CAP Water available for system conservation in 2017 to 80,000 acre-feet. This 80,000 acre-feet of CAP Water was initially ordered by t he Community for delivery to the Gila River Indian Irrigation and Drainage District to irrigate Community lands, and the Community intended to amend its delivery schedule to have this

52 5 West Gu u Ki · P.O. Box 97 · Sacaton, Arizona 8514 7 Telephone: 520-562-984 l · Fax: 520-5 62-9849 · Email: executivemail@gric.nsn.us

water delivered to the Maricopa Stanfield Irrigation & Drainage Dist rict, Centra l Arizona Irrigation and Drainage District , and Hohokam Irrigation & Drainage District groundwater savings facilities (collectively "Pinal GSFs") for the accrual of underground storage credits. In the attached letters the Pinal GSFs informed the Community's legal counsel that t hey have additional storage capacity totaling 208,400 acre-feet at t heir groundwater savings facilities in ca lendar year 2017, and are willing and able to schedule at least 95,000 acre-feet of additional Community CAP water in calendar year 2017.

This letter certifies (i) that t he Pinal GSFs are physically capable of accepting delivery of the 80,000 acre-feet of Community CAP Water in calendar year 2017, (ii) that the Community will forgo storage of 80,000 acre-feet of Community CAP Water it cou ld have stored at the GSFs in ca lendar year 2017 and (iii) that t he Community intended, absent SCIA I and SCIA 11, to utilize the avai lable capacit y at the Pinal GSFs for additional storage In calendar year 2017.

I appreciate your consideration of this proposal, and look forward to working with you to advance a mutually beneficially partnership. If you should need any additional information please do not hesitate to contact Jason Hauter at 202-887-4153 or jhauter@akingump.com.

Stephen R. Lewis Governor

Cc: Steve Hvinden Lisa Lance Linus Everling Don Pongrace Jason Hauter

MARICOPA-STANFIELD IRRIGATION & DRAINAGE DISTRICT

OFFICERS BRYAN M. HARTMAN, President

DANIEL W. THELANDER, Vice-President KELLY ANDERSON, Secretary

GENERAL MANJ,l.GER I ASSISTANT SECRETARY BRIAN M. BETCHER

GENERAL COUNSEL PAUL R. ORME

July 5, 2017

AKIN GUMP STRAUSS HAUER & FELD LLP Attn: Jason T. Hauter 1333 New Hampshire Ave, N.W. Washington, DC 20036-1564

DIRECTORS

First Division KELLY ANDERSON CRAIG SCOTT BRYAN M. HARTMAN

Second Division SIEBE HAMSTRA JAMES P. WHITEHURST DAVID STUEVE

Third Division DANIEL W. THELANDER LINDA CHENEY TONY DUGAN

RE: Available Capacity at Maricopa-Stanfield Irrigation & Drainage District's Groundwater Savings Facility

Dear Mr. Hauter:

The Maricopa-Stanfield Irrigation & Drainage District Groundwater Savings Facility (MSIDD GSF) has a permitted capacity of 240,000 acre-feet per year. As of July 1, 2017 the projected demand for the balance of the calendar year, combined with revised schedules for surface water supplies, indicates the MSIDD GSF would still use a total of 177,000 acre-feet of its annual permitted capacity for ca lendar year 2017. This leaves a tota l available capacity of 63,000 acre-feet remaining in calendar year 2017. Having already accepted an additional 13,000 AF of Gi la River Indian Community Central · Arizona Project water this year, the MSIDD GSF is willing and able to schedule up to an additional 25,000 acre-feet of said water.

Please feel free to contact me if you need additional information at 602-253-8905 or brian@msidd.com.

Cc: Paul Orme, General Counsel (Via electronic mail)

Sincerely,

/~7((~ Brian M. Betcher General Manager

41630 W. LOUIS JOHNSON DR. , MARICOPA, ARIZONA 85138 • (520) 424-3344 •FAX: (520) 424-3281

DIRECTORS JOHN DONLEY DON ENGLAND JONATHAN HOUSEHOLDER THOMAS W. ISOM NATHAN KILLIAN TIMOTHY J. MAHER PENNY MALONE DANIEL F. SHEDD ROONEY SHEDD

July 7, 2017

CENTRAL ARIZONA

IRRIGATION AND DRAINAGE DISTRICT 231 SOUTH SUNSHINE BL VD.

ELOY, ARIZONA 85131 (520) 466-7336 or (602) 258-3756

AKIN GUMP STRAUSS HAUER & FELD LLP Attn: Jason T. Hauter l333 New Hampshire Ave, N.W. Washington, DC 20036-1564

OFFICERS DANIEL f'. SHEDD, President

NATHAN KILLIAN, Vice Presidcnl RODNEY SHEDD, Socrelary

RON lllcEACHERN, C.M, Ass'I Sccretury PAUL R. ORME, General Counsol

RE: Available capacity at Central Arizona Irrigation and Drainage District's Groundwater Savings Facility ·

Dear Mr. Hauter:

The Central Arizona Irrigation and Drainage District Groundwater Savings Facility (CAIDD GSF) has a permitted capacity of 110,000 acre-feet per year. Prior to the Gila River Indian Community's request for additional storage capacity, the CAIDD GSF is scheduled to take a total of 20,500 acre-feet for calendar year 2017. This leaves a total available capacity of 89,500 acre-feet remaining in calendar year 2017. The CAIDD GSF is willing and able to schedule 50,000 acre-feet of additional Gila River Indian Community Central Arizona Project water this year.

Please feel free to contact me if you need additional information at ron@caidd.com or 602-258-3756.

Sincerely,

Ron McEachern General Manager

H 0 H .O KAM

July 6, 20 17

AKIN GUMP STRAUSS I lAUTER & Fl ·:LD, I.LP Attn: Jason T. Hauter 1333 New Hampshire Ave. N.W. Washington, DC 20036-1564

RE: Available capacity at Hohokam Irrigation and Drainage District's Groundwater Savings Facility

Dear Mr. Hauter:

The Hohokam Irrigation and Drainage District Groundwater Savings racility (I ll DD GSF) has a permitted in lieu capacity or 82,000 ac;:rn feel per yelir. with an annual usage limit of 120,000 A.F. of in-lieu and groundwater combined. As or.July 5. 2017. the district will be storing 24, 100 A.F. or in lieu water and an estimated pumping of approximately 60,000 /\.F. due to the reduction of water available to the district from Central Arizona Project at the start of 2017.

The district would be able to utilize 20.000 to 30.000 A.F. during the balance of2017 dependent on when water was made avai lable to the district.

Please feel free to contact· me should you require addi tional information at 520. 723.775 1 or email me at 111amu!cment1a 1)()\\ crh hk .com.

Sincerely,

HOHOKAM IRRIGATION & DRAINAGE DISTRICT -t-/ r ~

H 12 South Arizona Blvd., Cool idge, AZ 85128-4725 PHONE: [520] 723-7751 • FAX: [5201723-11939 E·MAIL: management@powerhhk.co111

Final Draft Dated July 19, 2017

LC-4405 WTR-4.03 VIA OVERNIGHT MAIL

Letter Agreement No. 17-XX-30-W0624

Mr. Theodore C. Cooke General Manager Central Arizona Water Conservation District 23636 North 7th Street Phoenix, AZ 85024 Subject: Agreement No. 17-XX-30-W0623 Among the United States of America, Through the

Department of the Interior, Bureau of Reclamation, the State of Arizona, Through the Arizona Department of Water Resources (ADWR), the Gila River Indian Community (Community), the City of Phoenix (City), and the Walton Family Foundation, Inc. (Walton), to Fund the Creation of Colorado River System Water Through Voluntary Water Conservation and Reduction in Use During 2017 (Agreement)

Dear Mr. Cooke: As you know, on March 15, 2019 [sic], the Community, ADWR, Walton, and the City (Parties) entered into an agreement entitled, “Agreement in Principle to Continue to Cooperate and Coordinate to Conserve Additional Water in Lake Mead” for the purpose of conserving additional system water in Lake Mead in 2017 and beyond. The Parties began developing an agreement which provides for funding and implementation of a system conservation project to conserve 40,000 acre-feet of the Community’s Central Arizona Project (CAP) water entitlement in Lake Mead in 2017. The Parties requested that Reclamation join them in funding the conservation of the 40,000 acre-feet of water, which Reclamation agreed to do. Reclamation will apply the water conserved under the Agreement toward its protection volume under the Memorandum of Understanding for Pilot Drought Response Actions, dated December 10, 2014. The Parties and Reclamation entered into the subject Agreement on July 14, 2017 (copy enclosed). As provided in the Agreement, the Community and Reclamation amended System Conservation Implementation Agreement No. 17-XX-30-W0620 dated January 18, 2017, to allow Reclamation to renew and exercise an option for the Community to conserve an additional 40,000 acre-feet of CAP water in Lake Mead beyond the original 40,000 acre-feet covered by the January agreement. As you are aware, conservation of an additional 40,000 acre-feet in 2017 by the Community has been under consideration and the subject of discussions since early 2017 and was contemplated under Letter Agreement No. 17-XX-30-W0621, dated February 2, 2017, between Reclamation and CAWCD. As provided in the Agreement, the Community will make an additional 40,000 acre-feet of its CAP water entitlement under its Contract No. 3-07-30-W0284 dated October 22, 1992, as amended, available in 2017 as Colorado River System water. The Community’s CAP water was initially ordered by the Community for delivery to the Gila River Indian Irrigation and Drainage District to irrigate Community lands, and the Community intended to amend its delivery schedule to have this 40,000 acre-feet of water delivered to groundwater savings facilities for the accrual of underground storage credits. Pursuant to the Agreement, the Community is foregoing storage of such water.

Agenda Number 10. Attachment 2.

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The Agreement recognizes the critical and essential role that CAWCD plays in ensuring that the conserved water remains in Lake Mead. Consistent with our past procedures for implementing system conservation for projects within Arizona, this Letter Agreement No. 17-XX-30-W0624 (Letter Agreement) serves as documentation of agreement by Reclamation and CAWCD, as the junior Colorado River water entitlement holder in the state of Arizona and pursuant to CAWCD’s authorities under the Repayment Stipulation, to the following: 1. Only programs that reduce actual and quantifiable consumptive use, and not unused entitlement,

are eligible for system conservation. 2. Under the Agreement, the Community has submitted a proposal including letters to Reclamation

(Certification Letters) in which (1) the Community certifies that, absent the system conservation, the Community intended to utilize the available capacity for storage in 2017 and (2) the groundwater savings facilities identified in the Community’s 2017 water order certify that the facilities were physically capable of accepting delivery of the volume of CAP water for which the Community is forgoing storage in calendar year 2017. The proposal and certification letters are attached as Exhibit A to the Agreement.

3. Upon receipt of the Community’s 2017 amended water order reducing the Community’s water

order by 40,000 acre-feet to reflect the Community’s implementation of the Agreement, CAWCD agrees to forbear from remarketing the 40,000 acre-feet within the CAP service area for delivery in 2017.

4. Within 2 weeks receipt of the Community’s amended water order, CAWCD agrees to amend its approved 2017 Colorado River water order with Reclamation and not request delivery of the 40,000 acre-feet.

5. CAWCD agrees to meet with the Community and Reclamation to properly account for the system

conservation water in Reclamation’s annual water accounting report.

In the event the pre-requisite conditions have been met and CAWCD fails to submit the water order amendment referred to in paragraph 4 above, CAWCD understands that Reclamation would, for purposes of water accounting and administration of the Inadvertent Overrun and Payback Policy, deduct the 40,000 acre-feet from the amount of water available to CAWCD in 2017 thereby ensuring that the conserved water remains in Lake Mead. This Letter Agreement is effective upon execution by CAWCD and continues through December 31, 2017. If CAWCD agrees to the terms of this Letter Agreement, please sign below as indicated and return an original Letter Agreement to Reclamation. The duplicate original of the Letter Agreement is for CAWCD’s files. We appreciate CAWCD’s cooperation to assist in the creation of the first 40,000 acre-feet of system conservation by the Community in 2017 and look forward to CAWCD’s cooperation in assisting in the creation of the additional 40,000 acre-feet by the Community this year. Together, Reclamation, CAWCD, and other water users in the Lower Basin have been successful in conserving several feet of water in Lake Mead, thereby averting a shortage in the Lower Basin to date. We value our partnership with CAWCD and look forward to continuing to work with CAWCD and others in helping to protect Lake Mead from declining to critical elevations.

3

If you have questions about this Letter Agreement, please call Mr. Steven C. Hvinden, Chief, Boulder Canyon Operations Office, at 702-293-8414. Sincerely, Terrance J. Fulp, Ph.D. Regional Director In Duplicate Enclosure Accepted and agreed to by CAWCD this ________ day of ___________ 2017. Approved as to form: By:_____________________________ By:_________________________ Theodore C. Cooke Jay Johnson Its: General Manager Its: General Counsel cc: Honorable Stephen Roe Lewis Governor Gila River Indian Community 525 West Gu u Ki Sacaton, AZ 85147 Mr. Thomas Buschatzke Director Arizona Department of Water Resources 1110 West Washington Street, Suite 310 Phoenix, AZ 85007 Ms. Kathryn Sorensen Director, Water Services Department City of Phoenix 200 West Washington Street, 9th Floor Phoenix, AZ 85003 Ms. Morgan Snyder Program Officer The Walton Family Foundation, Inc. P.O. Box 2030 Bentonville, AR 72712 (w/o encl to each)