[Editor's Note: This is part 3 of a multi-part series on the two-day Interim Legislative Water and Natural Resources Committee, which concluded its meetings on Wednesday, Sept. 6, at a little after noon.]

By Mary Alice Murphy

The one presentation by multiple presenters to the Interim Legislative Water and Natural Resources Committee on Wednesday, Sept. 6, was titled: Arizona Water Settlements Act Implementation, Budget and issues; New Mexico Central Arizona Project (CAP) Entity Plans; Southwest Regional Water Project Alternatives.

Interstate Stream Commission Gila Basin Manager Ali Effati spoke first.

He explained the ISC's roles in the AWSA implementation. The commission acts as the joint lead in the National Environmental Policy Act (NEPA) process with U.S. Bureau of Reclamation.

Effati emphasized the ISC is not the project proponent. That is the role of the New Mexico CAP Entity.

The ISC continues to administer the New Mexico Unit Fund to manage the NM Unit engineering contract on behalf of the CAP Entity, advance funds to Reclamation for NEPA, administer non-NM Unit projects, also known as non-diversion projects, and processes the CAP Entity's budget in coordination with the city of Deming, which serves the CAP Entity as the second fiscal agent.

Kim Abeyta-Martinez, ISC program manager and non-voting member, representing the ISC on the CAP Entity, gave an overview of the financial aspects of the process.

She said the New Mexico Unit Fund in the AWSA had an allocation of $66 million, which with inflation has been adjusted to about $90 million.

The status of the New Mexico Unit fund as of June 20, 2017, shows that the total received since January 2012 is $54.24 million. Cumulative total expenditures for fiscal year 2012-17 is $12.64 million, with $2.5 million interest earned, leaving a current balance of $44.1 million.

A table broke down the expenditures to date. The ISC AWSA operating budget is $1.389,409. ISC contractual services are broken down into NM Unit engineering at $837,063; studies at $3,795,906; legal costs at $476,359; and facilitation, website and other at $106,304. The advance to Reclamation for NEPA is $4,413,000, with $103,407, about 2 percent, having been expended to date, and the NM CAP Entity budget for FY 2016-17 is at $552,997.

The budget approval process for the CAP Entity has Deming, as the second fiscal agent, preparing the budget for the entity and presenting it to the entity. Once approved by the entity, it goes to the ISC for approval, and, if approved, is included in the ISC appropriation request. The reimbursement process has Deming procuring and preparing the financial document required to request reimbursement for the CAP Entity and sending it to the ISC, the first fiscal agent, which reviews, approves and submits the reimbursement request to the Department of Finance and Administration for approval and reimbursement of allowable costs to Deming. In addition, Deming procures an auditor to audit the CAP Entity financial transactions managed by the city.

Abeyta-Martinez said the capital outlay request by ISC for fiscal year 2019 is $3.3 million and $350,000 for the FY 19 appropriation.

Effati said the ISC involvement has included three decisions. The first in November 2014 was notification by Dec. 31, 2014, to the U.S. Secretary of the Interior that New Mexico intends to pursue construction of a New Mexico Unit. The next decision was to become a joint lead with Reclamation in the NEPA process, which was done in February 2015, and, in July 2015, the NM CAP Entity was designated.

"The reason the ISC formed the CAP Entity, pursuant to the Act (AWSA) is so the entity shall own the unit," Effati continued. "The act also allowed the Entity to request authority to design, construct, operate and maintain the unit, which it has done. The CAP Entity requested that authority in April 2016."

He showed a graphic of the NEPA process. Moving forward, Reclamation will award a contract to a NEPA contractor; the CAP Entity will select and submit a project to reclamation; Reclamation will publish a notice of intent in the federal register to begin NEPA; the joint leads (Reclamation and ISC) will conduct scoping and complete the draft and final environmental impact statements and other requirements; and by Dec. 31, 2019, the Secretary of Interior will issue a record of decision or extend it until 2030, if delay is outside the control of New Mexico.

"For the purpose of NEPA, the contractor must have a plan for the project with up to 30 percent engineering," Effati said. "The ISC hired AECOM to produce that document. We are working with the CAP Entity on various concepts."

The ISC also made non-diversions decisions and allocated funding in the fiscal years 2014 and 2015.

He listed the 16 projects that the ISC had funded as non-diversion projects at a total of $9,100,000. "To date, $1.1 million has been expended."

NM CAP Entity Executive Director Anthony Gutierrez was the next to speak. He began by recognizing the CAP Entity board members who were present.

He said he wanted to incorporate corrections to myths about the project that continued to be put forth.

"There is no billion-dollar project," Gutierrez said. "There is no dam. It is not true that a unit will be a detriment to a free-flowing river. There are already at least 11 diversions along the rivers.

"We are looking at three diversion sites, which are currently push-up earth dams," Gutierrez continued. "We have had significant conversations with The Nature Conservancy about the affects of push-up dams. We took their concerns to the irrigators. Irrigators and their engineer have been able to give us input. We've tried to address all these item in a design."

He said that he, as executive director, is tasked with bringing in a more reasonable project than the original one estimated at $1 billion. "We had to remove the municipal component and concentrate on the agricultural needs."

He showed a map of where the potential diversion sites will be located, as well as the water conveyance. The discussions have also included off-farm storage for immediate use and for aquifer recharge, as well as on-farm storage ponds for the same uses.

"Taking water off the Gila River is a matter of timing," Gutierrez said. "Because it has been impacted by fires, the snowpack run-off period is now shorter. We needed a delay for agricultural uses and for the Virden area. We propose using Ranney Wells to store water to be able to put water in the river for Virden Valley users."

He announced the CAP Entity would hold a special meeting Sept. 25 to hear from AECOM engineers, in order for the members potentially to make a decision on Oct. 3, at the regular meeting of the entity.

"We also have the opportunity to store water in Winn Reservoir," Gutierrez said. "About 3,000 acre-feet of water."

With increased opportunities to utilize stored water for irrigation, the thought is it would bring sustainability for higher value crops.

He said two proposals have been put forth for the San Francisco River users to store up to their allocated 4,000 acre-feet of water.

"When we heard the option of a dam, we wanted and preferred to investigate options that offered minimal impacts on the river," Gutierrez said. "I am a lifelong resident along the Gila River, so I don't want to see major impacts. It is important to have something that everybody is agreeable to. The technology is there to divert water to improve the efficiencies of the system and to get away from a big structure (which he showed in a photo of the diversion that sends water to Bill Evans Lake)."

He noted diverting water from the Gila and San Francisco rivers has many constraints as set forth in the Consumptive Use and Forbearance Agreement, which is part of the AWSA documentation.

"I also want to talk about costs," Gutierrez said. "There are two pots of monies. One is the New Mexico Unit Fund, which you heard about. The second is from the Lower Colorado River Basin Fund, which is solely for construction. It is estimated at about $52 million for this project. We have shrunk the project down to try to get the unit done with the construction funding."

Using discounted net present value of net farm income by county and AWSA policy in the four counties that are part of the AWSA, it is estimated that the current economic base without AWSA water and with current agricultural development constraints is $1,930,966,356. With AWSA water and storage and with current ag development constraints the economic base could grow by $173,126,358. By removing current ag development constraints, the base could grow by $581,847,000.

"In Southwest New Mexico, we don't talk about money in the billions," Gutierrez said. "Any positive effect is positive."

He also addressed the Bill Evans infrastructure. "It is linked to infrastructure that crosses the Continental Divide. We have made an amendment to our joint powers agreement in order to investigate the potential of utilization. It would help municipalities by recharging the aquifer. Silver City has, in its long-term plan, the possibility of recharging the aquifer by using surface water."

Priscilla Lucero, Southwest New Mexico Council of Governments executive director, gave an overview of the issues the Grant County Water Commission has had to deal with, including the Grant County Regional Water Project, which will provide water to Hurley in the first phase and potentially provide supplemental water to Bayard, Santa Clara, Silver City and Tyrone.

"We are a year away from providing water to Hurley," Lucero said. "The Grant County Water Commission has been beneficial to this project. Early on, it had to deal with septic issues. As part of the Regional Water Plan, Silver City donated its water rights that are near Hurley and also received and gave discharge credits to the town to equal 943 acre-feet of water rights for Hurley."

She showed a map of all the areas the project would benefit, including mutual domestic water districts, such as Arenas Valley and Rosedale.

"We have Phase IA funded," Lucero said. "It actually will provide water to Hurley. Phase IB will provide a secondary well to the system. Another phase will provide solar to operate the system. The design is complete."

The $2.1 million received from the ISC out of the New Mexico Unit Fund and investment from other entities, such as capital outlay and Colonias fudning, is being used to match grants and loans. The most recent final funding is $2.7 million from the USDA to complete Phase IA. The portion between Arenas Valley and Santa Clara has already been completed with other funding. The total awarded funding for Phase IA is $9,513,988, which includes the donation of water rights at $1.8 million and total capital outlay of $355,000 in three different years. An amount of $16,986,071 has been awarded to the regionalization project, with awarded funds spent equaling $10,056,635. City funds from Hurley, North Hurley, Bayard, Hanover, Santa Clara, Arenas Valley, Tyrone and Silver City equals $910,000: with current debt among the entities at $1,370,501. Additional funding needed to complete the system to Silver City and Tyrone is $7.7 million.

"Capital dollars, municipal funding, private, state, USDA, Colonias and Water Trust Board funds came together for this project," Lucero said. "I thank all of the partners and you for your continued support. It's one of the fastest projects to come together that I've seen in my 30 years in the COG."

Grant County Commissioner Harry Browne was the last to speak before the questions began.

"I appreciate the work that Mr. Gutierrez has done, which has greatly improved the project and made it much less scary from my point of view," Browne said. "It goes to show that early criticisms were accurate. I believe the CAP Entity has agreed with us."

He made it clear that his presentation was from his personal perspective, not representing the County Commission. "I have some hope that we are moving toward general agreement on our priorities for the CAP Entity's work, but we are not there yet."

Browne commented that the proposal to divert water set off a great deal of opposition and a strong counter reaction from project supporters. He noted that many families go to the river to fish and recreate, while other families for generations have depended on the water for their livelihoods. "I totally get it when folks tell me they fear their way of life is under attack." He said Hispanics and Anglos are strongly united on the issue—on both sides.

Browne said a recent proposal from the ISC's engineering firm came in at around $225,000 million for about 3,000 acre-feet per year. He noted that was $75,000 per acre-foot, not counting operations and maintenance or the cost of replacement water, which he suggested should cost about $3,000 an acre-foot if used efficiently.

He said the $90 million in federal money available under the AWSA for any project, including non-diversion projects, if divided among the four counties would provide for Grant County projects costing $42 million. "And we have plenty of deserving projects in need of funding. Of particular interest to me as a commission are the regional water project, which would need another $10 million or so, and the Bayard wastewater treatment plant effluent project, which would create wetlands and perhaps a small recreational lake that would boost groundwater recharge and support economic development."

Browne then went on to say that about $11 million has already been spent, with only $1 million spent (to date) on non-diversion projects. "And we're spending more all the time as the ISC's engineers are working against the clock to come up with something even remotely feasible to give to the Bureau of Reclamation so the environmental impact studies can begin…. And as the CAP Entity's lawyer pursues highly billable concepts ranging from complex leasing agreement with various Arizona tribes and water users to getting Arizona to pay us for a commitment not to use AWSA water."

He also alleged the recent approval of an amended JPA would let Freeport and the Entity move water out of the Gila Valley. "I think this amended JPA reveals quite a lot about the CAP Entity and the diversion project itself…. "it is another indication that project proponents are facing up to the hard facts that building this thing within the requirements of the law is not going to be feasible at a reasonable price. It's hard to imagine why the entity would turn its attention away from an actual diversion project…if there was a realistic chance that a project might happen."

Browne questions the amount of water allocated to the valley, the need for it and the possibility of moving water out of the valley. "Annual reports…show we are using, on average less than half of the water we are allowed to use." He alleges the water is not being used efficiently, as most of it is used for pasture grass. His third point said the move to work with Freeport highlights the importance of the company in the process. Phelps Dodge, in the 1950s, bought up Gila Valley water rights in a "let's say less than transparent manner, so now the company owns fully 70 percent of those rights." He postulates on speculation of what Freeport plans to use the water for, including possibly resorts or selling it to Arizona or Texas.

"We have less than a month to get the CAP Entity to come to its senses, to abandon its wasteful pursuit of a diversion project and to use what is left of the AWSA's gift to fund proven water development conservation and distribution projects with much higher returns on investment." He suggested legislation directing the ISC not to pursue a diversion on the Gila "before we spend another $10 million on an environmental impact student and countless more dollars on further engineering and legal work."

The next article will cover the questions and answers between the legislators and panelists.

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