CAP SETTLES DISPUTE WITH UNITED STATES

03/03/2000

PHOENIX --- After years of litigation and settlement discussions, negotiators for the Central Arizona Water Conservation District (CAWCD) and the United States have agreed to settle a lawsuit over the reimbursable costs of building the 336-mile-long Central Arizona Project (CAP).

CAWCD Board President George Renner said the Board received a letter March 1 from the U.S. saying that negotiations are over.

"It has been a strong desire on the part of this Board to get a commitment from the U.S. that we are done with negotiations," Renner said.

The CAWCD Board voted 12-1 at its March 2 meeting to approve the settlement. The approval process for the United States will take 4 to 6 weeks.

Deputy General Manager Larry Dozier told the Board some of the key elements of the agreement are that it will fix CAWCD's repayment obligation at $1.65 billion and CAWCD retains the exclusive right to market excess water. Excess water is CAP water that is not under contract or under contract but not taken by a customer.

The agreement has some conditions, Dozier said. One key condition is that within three years the state and federal government must settle the Indian water rights disputes with the Gila River Indian Community and Tohono O'odham Nation. As part of that settlement, about 200,000 acre-feet of additional CAP water will be made available to the federal government to use to settle the claims.

If the CAP/U.S. agreement's conditions are not met within a three-year period, CAWCD or the U.S. has the right to go back to court and resume the lawsuit over the cost of the system, Dozier said.

The agreement has started going through the federal approval process and it is estimated that will take 4-6 weeks, said Stuart Somach, an attorney representing CAWCD. Since the agreement is designed to settle the lawsuit filed against the U.S. in 1995, it must also be approved by U.S. District Judge Earl Carroll.

"We have an April 11th court hearing date,'' Somach told the Board. If accepted by the court, that would mark the start of the three-year period for the state and U.S. to settle the Indian Water Rights claims.

CAWCD's financial settlement with the U.S. is the first step toward overall water settlements within Arizona, Renner said.

"Much work remains to be done to satisfy the conditions,'' Renner said. "The conditions in the stipulation must be made in a manner satisfactory to both the Secretary of the Interior and the Arizona Department of Water Resources. Within that context, the interests of the state and CAP water users must be addressed to their satisfaction.''

Some of the conditions in the overall water settlements will be that there can be no out-of-state marketing of CAP water and all M&I (municipal and industrial) water delivery subcontracts must be made "permanent service contracts" with initial delivery terms of not less than 100 years, Renner said.

The agreement settles a dispute that began in 1993 when the U.S. Bureau of Reclamation declared CAP to be substantially complete. CAP is a 336-mile-long system of aqueducts, tunnels and pumping plants that annually brings 1.5 million acre-feet of Colorado River water to Maricopa, Pinal and Pima counties. BOR claimed CAWCD's share of the construction cost was about $2.3 billion. CAWCD claimed it owed $1.781 billion. CAWCD's payment to the U.S. for CAP comes from sales of water, excess power and a property tax levied in the three counties. The property tax is 14-cents per $100 of assessed valuation, however, 4-cents of that is committed to the Arizona Water Banking Authority.

Both sides began negotiating in 1993 and had reached a tentative agreement in 1995 that fell apart at the last minute. After that, CAWCD filed suit in U.S. District court and the complex trial was divided up into six phases. Judge Carroll ruled after the first phase of the trial in November 1998 that CAWCD owed $1.781 billion.

The negotiated agreement, which will effectively end the lawsuit, settles all the financial disputes between the U.S. and CAWCD.

"There were times I never thought we'd get to where we are today,'' said Grady Gammage, Jr., a board member who has been one of CAWCD's chief negotiators throughout the process. "This was incredibly difficult to get done."