CONTACT: Suzanne Ticknor Jay Johnson Navajo-Hopi Little Colorado River Water Rights Settlement Agreement

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1 Agenda Number 14.a. CONTACT: Suzanne Ticknor Jay Johnson MEETING DATE: April 5, 2012 AGENDA ITEM: Navajo-Hopi Little Colorado River Water Rights Settlement Agreement LINKAGE TO STRATEGIC PLAN, POLICY, STATUTE OR GUIDING PRINCIPLE CAWCD Board of Directors 2010 Strategic Plan o Project Reliability: Effectively Operate and Maintain CAP Assets PREVIOUS BOARD ACTION/ACTIVITY: Numerous briefings at executive session since 2008 ISSUE SUMMARY/DESCRIPTION: The Navajo Nation, the Hopi Tribe, the United States, the State of Arizona and dozens of other state parties have been negotiating for many years to resolve the water rights claims of the Navajo Nation and the Hopi Tribe. It now appears that settlement of the Tribes' claims to water from the Little Colorado River may be in sight. On February 14, 2012, Senators Kyl and McCain introduced the Navajo-Hopi Little Colorado River Settlement Act of 2012, SB Representative Quayle introduced a companion bill in the House, H.R The long-awaited Settlement provides a much needed source of drinking water supply for portions of the Navajo Nation and the Hopi Tribe. It authorizes the funding and construction of three groundwater delivery projects (one for the Hopi Tribe, two for the Navajo Nation) to enable the Tribes to access and utilize existing groundwater supplies. In addition, under the settlement, the Navajo Nation could be allocated 6,411 acre-feet of the CAP NIA priority water previously set aside for future Indian water settlements in the Arizona Water Settlements Act of 2004, if certain agreements related to the continued operation of the Navajo Generating Station are negotiated and executed by October 31, This CAP water would be diverted from the San Juan River and delivered through the Navajo-Gallup Pipeline to Window

2 Rock and other Navajo communities in eastern Arizona. Although diverted from the San Juan River, the water would be accounted for as deliveries of CAP water. The settlement also sets the table for a future settlement of the water rights claims of the Navajo Nation and the Hopi Tribe to the Lower Colorado River. The settlement retains 22,589 acre-feet of CAP NIA Priority water for future settlement of the Navajo Nation's claims to the Lower Colorado River. The settlement also retains 1,000 acre-feet of CAP NIA Priority water for future settlement of the Hopi Tribe's claims to the Lower Colorado River. This retained water comes from the 67,300 acre-feet of CAP NIA Priority water set aside for future Indian settlements under the Arizona Water Rights Settlements Act. The attached presentation provides a comprehensive summary of the key elements of the Navajo-Hopi Little Colorado River Water Rights Settlement Agreement. Senator Kyl has expressed his strong desire to get the settlement legislation approved by Congress this year before he retires. The next step in the process is for the Navajo Nation and the Hopi Tribe to formally approve the Settlement Agreement. Thereafter, the other settling parties will need to take the Settlement Agreement to their governing boards, councils and clients for approval. SCHEDULED FOR BOARD ACTION: If the Navajo Nation and the Hopi Tribe approve the Settlement Agreement before May 1, 2012, the Board will be asked to formally approve the Navajo-Hopi Little Colorado River Water Rights Settlement Agreement at the May 3, 2012 Board meeting. Attachment.

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4 The Navajo and Hopi Reservations are located in the high desert of Northeastern Arizona. The Navajo Reservation extends into Utah and New Mexico and is the largest American Indian Reservation. The Hopi Reservation is completely surrounded by the Navajo Reservation. Both Reservations have very little surface water supplies and very little water infrastructure. Simply put, for many living on these two Reservations, water is scarce and inaccessible. 2

5 Senators Kyl and McCain introduced the Navajo Hopi Little Colorado River Water Rights Settlement Act of 2012 on February 14, 2012, the day of Arizona s 100 th birthday. In introducing the Act, Senator Kyl stated, Introduction of this settlement act marks the next step in a two decades long process to resolve the water rights claims of the Navajo Nation and the Hopi Tribe. It brings us one step closer to addressing the significant water needs of impoverished areas on the Navajo and Hopi Reservations, while also providing certainty for non Indian communities trying to plan for their water future. To watch Senator Kyl s floor speech introducing the bill, visit CAP s website. Rep. Quayle introduced a companion bill in the House on Feb. 16,

6 The Settlement Act mirrors the provisions of the Navajo Hopi Little Colorado River Water Rights Settlement Agreement. The settling parties have been negotiating for years to achieve water rights settlement. There are over 20 parties to the Settlement Agreement. They include: Navajo Nation, Hopi Tribe, United States, Arizona, SRP, Flagstaff, Winslow, Holbrook, Taylor, Snowflake, Show Low, Eager, Springerville, Catalyst Paper, Arizona Public Service, and a number of ranches, irrigation districts/companies, and water improvement districts in northeastern Arizona. 4

7 The 3 key elements of the Settlement are: (1) The Settlement provides a much needed source of drinking water supply for portions of the Navajo Nation and the Hopi Tribe; (2) The Settlement Agreement and Act authorize the construction of three groundwater delivery projects; and (3) The Settlement resolves the water rights claims of both Tribes in the Little Colorado River adjudication and provides certainty to non Indian water users in Northern Arizona about their future water supplies. 5

8 The Settlement Agreement is a scaled back version of an earlier settlement proposal that included, as its center piece, the Western Navajo Pipeline. A proposed pipeline from Lake Powell which would have delivered CAP and other Colorado River supplies to the Navajo and Hopi Reservations. In March of last year, Senator Kyl announced that he could not support a settlement that included a Western Navajo Pipeline because of its cost The cost of the earlier version of the settlement was estimated to exceed $700 million. Senator Kyl did not believe such a costly settlement would have a chance of getting through Congress. He encouraged the settling parties to explore other alternatives. With the Western Navajo Pipeline off the settlement table, it became impossible to settle the water rights claims of the Navajo Nation and the Hopi Tribe to the Lower Colorado River. 6

9 Since Senator Kyl s announcement last March that he could not support a settlement that included a Western Navajo Pipeline, the settling parties worked hard to find other alternatives. They identified 3 groundwater projects that would enable to Tribes to use existing groundwater supplies. This settlement looks much different from previous Indian water rights settlements, where CAP water has been allocated to the settling Tribes, along with funding for infrastructure in exchange for waiver of claims to local water supplies and Colorado River supplies. This settlement provides funding to build infrastructure to use existing groundwater. The total cost of the 3 groundwater projects is around $312 million (in 2011 dollars). 7

10 The Act authorizes the Secretary of the Interior to plan, design and construct two Navajo groundwater projects: the Leupp Dilkon Project and the Ganado Project. The annual delivery capacity of the Leupp Dilkon Groundwater Project is 4,778 AF and the annual delivery capacity of the Ganado Groundwater Project is 5,555 AF. The Act appropriates $199 million dollars (in 2011 dollars) for the planning, design and construction of the two Navajo Groundwater projects. 8

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13 The Act authorizes the Secretary of the Interior to plan, design and construct the Hopi Villages Groundwater project. The annual delivery capacity of the Hopi Groundwater Project is 1,500 AF. The Act appropriates $113 million dollars (in 2011 dollars) for the planning, design and construction of the Hopi Groundwater Project. 11

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15 The Settlement also authorizes the creation and funding of an OM&R Trust Account for each Tribe to assist the Tribes in paying the operation and maintenance costs of their groundwater projects in the early years of operation. The amount that would be appropriated for the Navajo OM&R Trust Account is $23 million; the amount that would be appropriated for the Hopi OM&R Trust Account is $5 million. The total for both OM&R Trust Accounts is thus $28 million. 13

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19 The Settlement also provides for the reallocation of 6,411 AF of CAP NIA priority water to the Navajo Nation for use in Window Rock and other Navajo communities in eastern Arizona. This 6,411 AF of CAP NIA water was initially set aside for the Navajo Nation for use in the future settlement of its claims to the Lower Colorado River. This water will now be available to the Navajo Nation without the settlement of its claims to the Lower Colorado River, but only if the Navajo Nation and the United States approve the necessary life extension agreements allowing the continued operation of the Navajo Generating Station. (These agreements include the land lease for the NGS site, coal leases, renewal of necessary rights of way, extension of water delivery contract and renewal of the surface coal mining permit.) The other condition related to the allocation of this water to the Navajo Nation is that the Settlement must become enforceable. All these conditions must be satisfied by October 31, Favorable resolution of the federal regulatory air quality issues is not a condition attached to this water. Thus, it is possible that the agreements for NGS could be renewed. but that air quality regulations could force closure of the Plant. That risk is not addressed in the Settlement. 17

20 If the conditions for reallocation of this water to the Navajo Nation are met, the water will be diverted from the San Juan River and delivered through the Navajo Gallup Water Supply Project. The deliveries of this CAP water will be effected by diversion of water from the San Juan, but will be accounted for as deliveries of CAP water. The Navajo Gallup Water Supply Project was authorized by Congress pursuant to the New Mexico Navajo water rights settlement of It was one of 14 projects chosen by the President in October of last year, for expedited environmental review and permitting. 18

21 The 6,411 af of CAP NIA Priority water to be allocated to the Navajo Nation on the satisfaction of the conditions, is required to be firmed to the equivalent of CAP M&I Priority for a period of 100 years, which period commences on January 1, Arizona and the United States share equally the firming obligation, each having the responsibility to firm 3,205 AF of water. This firming obligation is within the firming obligation imposed on Arizona and the U.S. for firm CAP NIA settlement water for future Indian water rights settlements under the Arizona Water Settlements Act of

22 The Settlement also provides significant benefits to non Indian communities in Arizona and in California and Nevada. First, both Tribes will waive their claims to water in the Little Colorado River adjudication and the Navajo Nation will also waive its claims to water in the Gila River adjudication. Without the settlement, resolution of these water rights claims would take years, involve extensive litigation, cost of lot of money and create continued uncertainty regarding water supplies. With the settlement, municipalities, farmers, ranchers and industrial water users in Northern Arizona will be able to better plan for their water future without the uncertainty and expenses of continuing costly litigation against the Tribes. Additionally, the Navajo Nation will dismiss the lawsuit it filed against the Secretary of the Interior in 2003 challenging the validity of certain regulations and programs related to the Secretary s administration of the Lower Colorado River. CAWCD was granted intervention in this case in the fall of The Settlement resolves the uncertainty created by this pending litigation for Colorado River water users in Arizona, Nevada and California. 20

23 The Settlement also sets the table for future negotiations regarding the Tribe s claims to the Lower Colorado River by retaining CAP NIA Water for use in such a settlement. As I mentioned earlier, fiscal realities made it impossible to achieve a settlement of the Tribe s Lower Colorado River claims at this time, because the infrastructure for delivering CAP water to the Tribes, i.e., the Western Navajo Pipeline, was too costly. The settlement sets aside, until the year 2030, a combination of CAP NIA water and other Arizona Priority 4 Colorado River water for both Tribes to ensure settlement water will be available if and when economic conditions improve and it appears possible that Congress would approve a Lower Colorado River settlement which includes something like a Western Navajo Pipeline. (These are the same water supplies that would have been allocated to the Tribes under the earlier proposed settlement that included the Western Navajo Pipeline and resolution of Lower Colorado River claims. The CAP NIA water was from the pool of 67,300 af of CAP NIA water set aside under the AWSA for future Indian water rights settlements, and the Colorado River water was set aside for the Tribes pursuant to the Arizona Water Settlement Agreement.) Specifically, the Settlement retains 22,589 af of CAP NIA priority water and 2,000 af of Arizona P4 Colorado River water, also known as the Kingman water for the Navajo Nation. It also retains 1,000 af of CAP NIA priority water and 1,500 af of Kingman water for the Hopi Tribe. The retained water cannot be reallocated unless there is a Congressionally approved settlement of the Tribe s claims to the Lower Colorado River. The retention expires on January 1, 2031, at which time the water will become available to the Secretary to assist in resolving Arizona Indian water rights claims. 21

24 Senator Kyl has expressed his desire to get the Settlement Legislation through Congress this year before he retires. The next steps in the process will be for the Navajo Nation and the Hopi Tribe to approve the settlement. Thereafter, the other settling parties will need to take the settlement to their governing boards, councils and clients for approval. It must be noted that things are still in flux and certain details still need to be worked out between the Tribes and others. We are hopeful that the Tribes will approve the settlement before May so that we can bring the Settlement Agreement to the Board for approval at the May Board meeting. 22