1

TheWater-EnergyNexusDimensionoftheCentralArizonaProjectSystemUse

Agreement

BethKleiman

September14,2016

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TableofContents

Abstract……………………………………………………………………………………………………………………………….4

Introduction…........................................................................................................................5

CAPSystemUseAgreement...................................................................................................7

CauseforAgreement…………………………………………………………………………………………………………….7

ApplicationofAgreementforExchanges………………………………………………………………………………8

Water-EnergyNexus.............................................................................................................12

NavajoGeneratingStation………………………………………………………………………………………………….13

KayentaMine………………………………………………………………………………………………………………………15

Repayment…………………………………………………………………………………………………………………………18

AirQuality………………………………………………………………………………………………………………………….19

NitrogenOxideEmissions……………………………………………………………………………………………………19

CarbonDioxideEmissions……………………………………………………………………………………………………21

FutureEnergySources...........................................................................................................22

Water-EnergyNexusDimensionofCAPSystemUseAgreement............................................25

Conclusion.............................................................................................................................28

WorksCited...........................................................................................................................30

AppendixA:CAPBackground................................................................................................32

AppendixB:CAPSystemUseAgreementTerms...................................................................33

ProjectWater………………………………………………………………………………………………………………………33

Non-ProjectWater………………………………………………………………………………………………………………33

Wheeling……………………………………………………………………………………………………………………………..33

Exchanges…………………………………………………………………………………………………………………………….35

Firming…………………………………………………………………………………………………………………………………36

Recharge………………………………………………………………………………………………………………………………36

Recovery………………………………………………………………………………………………………………………………39

SchedulingPriority……………………………………………………………………………………………………………….44

AppendixC:ListofAcronyms.................................................................................................45

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FiguresandTables

Figure1 CAPSystemMap………………………………………………………………………….6

Figure2 WaterStorageinCAPRechargeProjects…………………………………….38

Figure3 TucsonAMAUndergroundStorageFacilities………………………………41

Figure4 PhoenixAMAUndergroundStorageFacilities…………………………….42

Figure5 PinalAMAUndergroundStorageFacilities…………………………………43

Figure6 NGSOwnershipPieChart…………………………………………………………..14

Figure7 NaturalGasPriceFluctuationsOverTime…………………………………..23

Figure8 BreakdownofEnergySourceforTucsonWaterUtility2015…………..28

Table1 RechargeProjects………………………………………………………………………39

Table2 TucsonWaterEnergyExpendituresatClearwaterRechargeFacilities…………………………………………………………………………………………………………………………………..27

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Abstract

WaterstorageandexchangesarekeycomponentsofwaterresourcesmanagementinArizona.

WaterutilitiesfromtwomajorArizonacities,PhoenixandTucson,haveestablishedInter-Governmental

AgreementstoallowforstorageofPhoenix’sCentralArizonaProject(CAP)allocationsinTucson.More

recently,multipleagencieshavebeencollaboratingtoimplementanewandunprecedentedagreement

toenablepoliciesallowingfortheexchangeofCAPwaterbetweentheActiveManagementAreaswithin

thestate(AMAs,asdefinedbythe1980GroundwaterManagementAct,asamended).Thesepolicies

wouldhelpmitigateimpactsonCAPcustomersintheeventoffuturewatershortages.Thispaper

examinesawater-energynexusdimensiontothisuniqueagreementandthemulti-agencylegal

frameworkfortheagreement,knownastheCAPSystemUseAgreement.

TheCentralArizonaProjecttransportsColoradoRiverwateracross336milesandmorethan

2,000feetuphilltosupplydrinkingwatertoitslargemetropolitancitiesindifferentAMAs,makingitthe

biggestenergyuserinArizona.Currently,therearenopoliciesinplacetofacilitatetheexchangeofCAP

allocationsbetweenAMAs.However,aformalagreementofthistypecouldenablestorageofhundreds

ofthousandsofacre-feetofCAPwater,whichcouldbeusedintheeventofafutureshortage.

TheframeworkfortheagreementisbeingdraftedbytheUnitedStatesBureauofReclamation,

ArizonaDepartmentofWaterResourcesandCentralArizonaProject.TheCAPSystemUseAgreement

willresolvelegal,financialandobligatoryissuesrelatedtowheeling,firmingandexchangesofCAP

waterallocations.Whenimplemented,thisagreementwillallowwaterutilitiesinTucsontostore

portionsofPhoenix’sunusedCAPallocationintheTucsonAMArechargefacilities,whichcanlaterbe

exchangedforCAPwaterorderedbyTucsonbutdirectedtoPhoenixintimesofshortage.Thenexus

approachwilladdresslimitsandopportunitiestofirming,wheeling,andexchanges,specificallythrough

energyuserequiredineachoftheseareas.

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Introduction

Arizona,locatedintheSouthwesternUnitedStates,isoneofthedrieststatesinthe

country.InSouthernArizona,Tucsonreceivesanaverageofonlyabout12inchesofrainfall

annually.Forward-thinkingwaterpolicyandmanagementlawsarethetoolsthathaveallowed

thestate’spopulationandeconomytoboom.Withouteffectivewatermanagement,there

wouldnotbesufficientwatersuppliesforthepopulationandthus,therewouldbeno

economicdevelopment.Yet,Arizona’scitiesarethrivingwithclosetosevenmillionresidents

whichincludea6.8percentriseinpopulationbetween2010and2015(QuickFacts:Arizona).

TucsonandPhoenixarethemostpopulatedcitiesinArizona.Withnosurfacewater

bodiesinthesouthandlimiteddistributionoftheSaltRiverProjectsysteminPhoenixsuburbs,

thesemunicipalitiesneededareliablesourceofdrinkingwater.Asthecommunities’

populationsgrew,groundwatersupplieswererapidlybeingdepleted.TheCentralArizona

Project(CAP)fillsthewaterresourcegapforArizona’sswiftlygrowingpopulation.

CAPhasbeenoperatingsince1993,ensuringthatArizonahasfullaccesstoitsColorado

Riverentitlement(SeeAppendixAformorebackgroundandhistoryofCAP).Bringing60%of

Arizona’sshareofColoradoRiverWatertothethirstycitiesofSouthernArizona,Municipal,

Industrial,AgriculturalandIndiancustomersallrelyheavilyonCAPfortheirwater(Cooke,

2016).Itisthesinglelargestsourceofrenewablewatersuppliesinthestate(CAP,2015).Figure

1showstheentiretyoftheCAPsystemalongwithallitscomponentsincludingpumpingplants,

rechargefacilities,anditsenergysource,theNavajoGeneratingStation(NGS).

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Figure1

CAPSystemMap

Source:Liberti,Michael.“CAPSystemMap.”TucsonWater.19May2016.

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CAPSystemUseAgreement

CauseforAgreement

ThemostcurrentdevelopmentwithregardtoCAPpolicyinvolvesthemovementof

wateronthecanal.Recentdiscussionshaveoccurredastowhetherornotcitiesandutilities

entitledtoCAPallocationsmayexchangeportionsoftheirallocationswithoneanother.For

example,waterutilitiesfromTucsonandPhoenixwouldliketocometosuchanarrangementin

thehopesofmaintainingflexibilityinsecuringwatersuppliesinthefaceofashortage.

Discussionssuchasthesebecomecomplex,primarilybecausetheownerandoperatorofthe

canalwhichdeliversthewaterisnottheentityentitledtothewater.Questionsarebeingraised

byvariouswaterinstitutionsastowhatispermittedandwhatisprohibitedregarding

movementofwaterontheCAPcanal.

Inresponsetothesequestions,anagreementisbeingdraftedbyCentralArizonaWater

ConservationDistrict(CAWCD)andUnitedStatesBureauofReclamation(USBOR)withinput

fromArizonaDepartmentofWaterResources(ADWR)andArizonaWaterBankingAuthority

(AWBA)(CAP,2015).ThisagreementwillformallybeknownastheCAPSystemUseAgreement

(Agreement).Asuiteofissuesexists,whichtheAgreementattemptstoaddress,including

firming,wheeling,andexchangesofwateronthecanal(SeeAppendixBfordefinitionsofthese

terms).ThecommonattributeoftheseissuesiswatermovingwithintheCAPsysteminanon-

traditionalway.TheAgreementwillserveasanoverallframeworkessentialtomaximizing

projectbenefits,fosteringflexibility,andreducingpotentialconflict(Seasholes,workshop).

Morespecifically,theAgreementwillactuallydefinethetermsfirming,wheeling,and

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exchanges.InaguestopinionarticleinArizonaCapitolTimes,TedCooke,GeneralManagerof

CAP,referredtodraftingtheagreementasa“processtoenhancetheflexibilityoftheCAP

systemandhelpensurethereliabilityofthewateronwhichwealldepend”(Cooke,2016).CAP

hopesthatthedraftAgreementwillbefinalizedbytheendof2016(Block,2016).

TheMasterRepaymentContract(MRC),originallywrittenin1972andrevisedmultiple

timessince,definesCAP’srepaymentobligationtothefederalgovernmentforitsconstruction.

TheMRCaddressesmanypotentialconflictsonthecanal,butaccordingtoKenSeasholesof

CAP,“Notallofthecontractuallanguageisperfectlyclearandsomethingswerenotfully

contemplated…inparticular,certainaspectsofArizona’srechargeandrecoveryprogram.There

isanurgentneedtoidentifyhowtousethesystemformaximumprojectbenefit;particularly,

aswethinkaboutthingslikeloomingshortageandreally,theneedtotakeadvantageofthe

investmentswe’vemadeinwaterbankingandtheneedfornewsuppliesultimatelytocome

intotheservicearea”(Seasholes,workshop).

ApplicationofAgreementforExchanges

ExchangesthatdonotinvolvewheelingareanimportantaspectoftheCAPSystemUse

Agreement.Currently,therearevarioustypesofexchanges,recognizedindifferentframeworks

includingtheMRC,theBasinProjectAct,individualdeliverycontracts,andinArizonaStatelaw.

TheexchangesproposedintheAgreementinvolveaMunicipalandIndustrial(M&I)

subcontractorexchangingwaterwithanothersubcontractorontheCAPsystem.Forexample,

TucsonwouldstoreaportionofPhoenix’sallocationinitsundergroundstoragefacilities.The

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water,intimesofshortage,wouldbeexchangedwithdirectdeliveriestoPhoenixoffofthe

canal.

Thisisanewvariationonexchangesbecauseitinvolvestwosubcontractors;ithasnever

beendonebefore.Thisnewconcept(alsoreferredtoasInter-AMAFirming)wasproposedby

CityofPhoenix,TucsonWater,andMetropolitanDomesticWaterImprovementDistrict

(District),locatedinMarana.ThesethreeutilitiescreatedtwoseparateInter-Governmental

Agreements(IGAs)thatallowedforthefirstphaseoftheexchangeprocess:storage.The

secondphaseoftheexchange(recoveryandtheexchangeitself)cannotbecompletedwithout

theimplementationoftheAgreement.TheseIGAshavesinceraisedquestionsaboutsystem

capacityissuesrelatedtodownstreamrecharge.

TheAgreementwillfacilitateInter-AMAFirming,duetothefactthatProjectWaterwill

beexchangedandfirmedacrossdifferentActiveManagementAreas(AMAs).TucsonWaterand

DistrictarepartoftheTucsonAMA(TAMA),whiletheCityofPhoenixisinthePhoenixAMA.

OthermunicipalitiesandutilitiesmaysignontotheAgreementinthefuture.TheInter-AMA

FirmingthattheCityofPhoenix,TucsonWaterandDistrictarelookingtoimplementwould

workasfollows:

PhoenixwouldhaveaportionofitsCAPallocationdeliveredtoDistrict’sandTucson

Water’sfacilities.TAMAutilitieswillrechargethatwaterintheirrespectiveunderground

storagefacilities.WhenPhoenixdecidesitwantsitswaterback,thecitywillreceiveitviathe

canal;notfromTucson,butupstreamofPhoenix.InsteadofhavingTucsonutilitiesrecoverthat

portionandpumpitbacktoPhoenix,theseutilitieswillsimplykeepthewatertorecoveras

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theydesire,whiledivertingtheequivalentvolumefromtheirCAPallocationstoPhoenix

instead.ThetwoCAPsubcontractors(eitherCityofPhoenixandTucsonWater,orCityof

PhoenixandDistrict)areexchangingwater,whilealsofirming.

CityofPhoenixwouldpayafeeforTAMAutilitiestostoreitswater.Thecurrent

discussionforTucsonWater’sfeeisbetween$35.00and$50.00peracre-foot.Districtand

TucsonWaterarenotrequiredtochargethesameamount.Inthefuture,ifmorerecharge

basinsareneededinTucsontostoreevenmoreofPhoenix’sallocation,Phoenixwouldalsopay

fortheirconstruction.PhoenixisnotlookingtorechargeitsallocationinitsownAMAdueto

thechallengesassociatedwithrechargingwaterinthatarea,suchashighsalinityandthe

inabilitytorecoverthewater.ThecostofinfrastructureforPhoenixtoimplementitsown

recoverysystemwouldbemuchhigherthansendingthewatertoTucsonforrecharge.

Thebackendofthewatertransactioniswheretheactualexchangetechnicallytakes

place;whenPhoenixdecidesitwantsthewaterback.Thisisoneparticularcircumstancethat

helpedspurthediscussionofcreatingtheAgreement.WithouttheAgreement,ifthereisan

outageonthecanalorareductionindeliveryduetoadeclaredshortageontheColoradoRiver,

Phoenixmightbeshorted,sinceitreliesonsurfacewater.Tucson,ontheotherhand,would

notbeindangerofanimmediatewatersupplyreductionbecauseitcouldsimplyrecover

storedCAPwaterfromitsrechargefacilities.

Todate,CityofPhoenix,TucsonWaterandDistricthavealreadybegunapilotproject,

or“proofofconcept,”totestthefeasibilityoftheProjectWaterexchanges.In2015,peran

IGA,TucsonWaterreceived850acre-feetofPhoenix’sallocationtorechargeinitsClearwater

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RenewableResourcesFacility(Clearwater).Clearwateractuallyconsistsoftwofacilities:Central

AvraValleyRechargeProject(CAVSARP)andSouthernAvraValleyRechargeProject(SAVSARP)

(SeeAppendixBformoreinformationonthesefacilities).In2016,TucsonWatertookanother

4,000acre-feettorecharge.PeraseparateIGA,Districttook150acre-feetofPhoenix’s

allocationin2015torechargeinitsAvraValleyRechargeProject(AVRP)andwilltakean

additional1,500acre-feetin2016(Block,2016).Theactualexchange,orphasetwo,hasnotyet

takenplace;thatis,the“return”ofPhoenixwatertoPhoenixviatheCAPcanal,andthe

recoveryoftheequivalentamountatTAMArechargefacilities.

Thereareplanstocompletephasetwoofthispilotprojectinthenearfuture,though

notuntiltheAgreementisactuallyimplemented.AccordingtoWaterResourcesManagerfor

District,MichaelBlock,averbalagreementwasmadebetweenDistrict,TucsonWater,andCity

ofPhoenixstatingthat“noexchangewilltakeplaceuntiltheCAPSystemUseAgreementand

otheragreementsarefinalizedandexecuted.”Blockcontinuedtostatethatitisnotlikelythat

thoseagreementswillbeexecutedintimeforplacing[CAP]ordersbyOctober1,2016for2017

deliveries(Block,2016)).

IftheAgreementisimplemented,TucsonWatercouldreceiveupto40,000acre-feet

peryearofPhoenix’sallocation,andDistrictcouldreceiveupto3,500acre-feetperyear.

Expansionsofcurrentrechargefacilitieswouldbenecessaryinordertomeetthisprojected

capacity,allofwhichwouldbepaidforbyCityofPhoenix.Theseexpansionswouldbenefit

TAMAgreatly.Withcontinualrecharge,thewatertablewillcontinuetorise,savingonpumping

costsforeachutility.TucsonWaterandDistrictwillhaveinfrastructuretomeetfuturerecharge

capacitydemandswithoutspendingthecapital.“Ifpossible,youalwayswantmorecapacity

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thanyouneed,”saysDickThompson,LeadHydrologistatTucsonWater.Withanexpansion,

therewouldbemorebasinsandequipmenttomaintain;thestoragefeespaidbyPhoenixwill

coverexpensesandhelpmaintainthesefacilities.Withouttheexpansion,only5,000to10,000

acre-feetofPhoenix’sallocationcouldbestoredatTucsonfacilities.

Water-EnergyNexus

Theconceptofawater-energynexusisgrowinginpopularityandusage.Itisnosecret

thattheenergysectorrequireslargeamountsofwaterandthatthewatersectorrequireslarge

amountsofenergy;hence,thenexus.Thisapproachisprovingusefulinwatermanagement

andpolicy.Itwouldbenearlyimpossibletosuccessfullymanageonesectorwithoutconsidering

theother.

TheCentralArizonaProjectisoftencitedasthelargestenergyuserinthestateof

Arizona,supplying80%ofthestate’spopulationwithwater.In2014,CAPused2.8million

megawatt-hoursofenergytodeliver1.6millionacre-feetofColoradoRiverwater(Basefsky,25

April2016).Theendelevationofthe336-mile-longcanalis2,800feethigherthanthestartof

thecanal,atLakeHavasu.Thewaterispumpeduphillforalmosttheentiretyofthecanal,using

14pumpingstations,withthebiggestliftof800feetatLakeHavasu(Seasholes,interview)“We

aretheenergy-waternexusbecauseofwhatwedo,”saysSeasholes,“Wehavedirect

responsibilitiestomanagetheportfoliofromNGS”(Seasholes,interview).

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NavajoGeneratingStation

Inordertounderstandthewater-energynexus,itisimportanttounderstandwhereCAP

receivesitsenergyfrom.Therearemanycomplexitiesassociatedwiththispower.Almostall

(90-95%)ofthepowerusedtopumpCAPwateruphillcomesfromtheNavajoGenerating

StationlocatedontheLeCheeChapteroftheNavajoNationinNortheasternArizona(Seefigure

1)(NGS,2011-2016).NGSwasconstructed,primarilytoprovidepowertoCAP,underspecial

permissionfromCongress(The1968ColoradoRiverBasinProjectAct),inordertoavoid

buildingmoredamsalongtheColoradoRiver,specificallyneartheGrandCanyon(Modeer,

2010).Theplantbeganproducingpowerin1974andhasa“ratedlife-span”of70years,putting

itsclosurein2044(Basefsky,2May2016).

NGSisacoal-firedplantwhichreceivesitscoalfromnearbyKayentaMine,located78

milestothesoutheast(seefigure1)(NGS,2011-2016).Themine,ownedbyPeabodyEnergy

Corp.,transportsthecoaltotheplantviaadedicatedelectrictrain.Thepowerplant’s

productioncapacityis2,250megawattsfromthree750megawattunits(NGS,2011-2016).NGS

employsnearly500people;theplantandminecombinedemployapproximately900people

(Randazzo,2015).SincebotharelocatedontheNavajoNation,morethan90%ofemployees

areNativeAmerican,makingthesefacilities“criticalsourcesofemployment”fortheNavajo

Nation,addinglaborandsocial-equitychallengestothiswater-energynexus(NGS,2011-2016).

TheownershipofNGSisrathercomplex.Energygeneratedthereisownedbyelectricity

providersinthreedifferentstates,withthelargestshareownedbyUSBOR(figure6).The

specificbreakdownofownersisasfollows:FromArizona,14%isownedbyArizonaPublic

ServiceCo.,7.5%isownedbyTucsonElectricPowerCo.(TEP),and21.7%isownedbySaltRiver

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Project(SRP).FromCalifornia,theLosAngelesDepartmentofWaterandPower(LADWP)owns

21.2%.FromNevada,NevadaEnergy(NVEnergy)owns11.3%.Theremaining24.3%isowned

byUSBOR(Randazzo,2015).ThoughtheplanthasmultipleownersitisoperatedbySRP,the

“largestproviderofelectricityandwaterintheGreaterPhoenixmetropolitanarea”(NGS,

2011-2016).

RecentdevelopmentshaveoccurredregardingtheownershipsharesofNGS.InMayof

2015,SRPofficialsapprovedthe$10millionpurchaseofLADWP’sshareofNGS.Anadditional

$2.88millionwillbeneededfromSRPtoprepayforcoalexpensesandtotransferLADWP

NVEnergy11.3%

LADWP21.2%

AZPublicServiceCo.

14.0%TEP7.5%

SRP21.7%

USBOR24.3%

OwnershipofNavajoGenera^ngSta^on

BethKleman2016

Figure6

NGSOwnershipPieChart

Source:GraphcreatedbyBethKleimanwithinformationcompiledfromMitchBasefskyandRandazzo,14May2015.

15

assets(Randazzo,2015).AccordingtoExternalCommunicationsRepresentativeforCAP,Mitch

Basefsky,LADWPwantsoutbecauseCaliforniahasastatelawthatprohibitspowerutilities

frominvestinginfossilfuels.TheimplicationsofthislawwouldmeanLADWPwouldbeunable

topayforanyupgradestoNGS,causingthemtobeindefaultwhichcouldcausealawsuit.In

addition,bydivestingfromNGS,theyautomaticallyimprovethepercentageofrenewable

powerintheirportfolio(Basefsky,2May2016).

NevadaEnergyalsoplanstoleavetheplantandwithdrawownership,thoughnot

necessarilyinthesamemannerasLADWP(saleofsharestoanothercurrentowner).According

toBasefsky,NVEnergymostlikelywantsoutoftheirownershipofNGSbecausetheywantto

buildnewnaturalgasplantsinNevada,butthestatelegislaturewillnotallowthatunlessthey

divestfromotherfossilfuelplants.NVEnergydeterminedthatNGS“wouldbeagoodtrade-off

forthem,giventhecostofcomingcoalplantregulationsbeyondCPP[CleanPowerPlan],”

(Basefsky,2May2016).

KayentaMine

PeabodyEnergy,ownerofKayentaMine,filedbankruptcyonApril13,2016.Themine

suppliesNGSwiththecoalneededtoruntheplant.PeabodyEnergyCorp.isthenation’s

largestcoalminer,withownershipstakesin26minesinAustraliaandtheU.S.(Randazzo,

2016).Despitethebankruptcyfiling,officialsarenotexpectingclosureofKayentaMine.

Theminehasa35-daysupplyofcoalonsite,whichcanbeused,andevenincreased,as

abufferinthecaseofacoalshortage.Inaddition,thecontractbetweenKayentaMineandNGS

ownersallowstheownerstostepinandoperatethemineintheeventthatPeabodycan’t

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meetthecontract(Randazzo,2016).Itisforthesereasonsthatofficialsaren’tpredictinga

closureofthemine.“SincetheKayentamineisamoney-makerforownerPeabodyEnergy,

theyareunlikelytoclosethatoperationinresponsetotheirrecentbankruptcyfiling,”says

Basefsky(Basefsky,25April2016).

ThePeabodybankruptcyfilingissignificantbecauseitexposesalargerissue.Peabody

makesmostofitsmoneybysellingitscoaltoutilitycompanieswhothenusethecoalto

generateelectricity.Manyutilitiesareshiftingawayfromusingcoal,andmovingtoward

naturalgas.Naturalgascostslessandproducesmuchlesspollution.Ifutilitiesstopusingcoal

forenergy,thecoalplantswilllikelybeforcedtoshutdown.InthecaseofNGS,thiswouldput

hundredsofworkersoutofthejob,cripplinganentirecommunity.Ifthereisnocoalto

generateinexpensivepowerforCAP,therewillbeimplicationsforallCAPcustomers.

Ifthemineweretoclose,BasefskysaysthatthemultipleownersofNGSwouldneedto

evaluatewhetheranalternativesourceofcoalwasavailableandatwhatcost.“Dependingon

theresultsofthatanalysis,eithertheoperatingcostofNGSwouldriseortheplantwouldshut

down”(Basefsky,25April2016).TheriseinoperatingcostforNGSwouldinevitablyleadtoa

riseincostforCAP,whichwouldthenleadtoariseincostofwatertoallCAPcustomers.

“Assumingthatrecentenergymarketpricefluctuationsreflectfuturemarketvariability,this

wouldrequirea50to300percentincreaseinCAPenergycharges”(Impact,2010).

CurrentlyCAPpaysNGSsolelyforthecostoftheenergyproduction.Accordingto

Basefsky,theCAPenergybudgetfor2016isintherangeof$30.00permegawatthour(MWh).

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CAPwillpayforabout4.2millionMWhinayear,totalingabout$120million(Basefsky,28June

2016).ThisisthelargestexpensecategoryforCAP.

IfNGSweretoclose,forcingCAPtofindanewenergysource,itwouldlikelyhavetopay

marketvalue.Itisimpossibletopredictwhatmarketvaluemightbeifandwhentheclosure

takesplace.Regardless,thecostwouldmostcertainlybehigherthanitiscurrently.Withthe

highercostofenergytorunCAP,waterpriceswouldrise;eitherintheformofincreased

servicecapitalchargesforM&Iusers,orincreasesinadvaloremtaxrates,orboth(Impact,

2010).Basefsky,states,“IfNGSweretoshutdown,itwouldsignificantlyimpactwhatCAPpays

forenergy.CAPwouldhavenochoicebuttopurchaseenergyontheopenmarket,atleast

initially”(Basefsky,25April2016).Thecostofpowerfluctuateswiththecostofnaturalgas,

whichhasahistoricallyvolatilemarket.Thepricefornaturalgashasbeenashighas$14per

millionBritishThermalUnits(MMBTU)inthelate2000stolessthan$2/MMBTUearlierthis

year.Itiscurrentlyintheupper$2/MMBTU(Basefsky,28June2016).

AhighercostforpowerwouldhaveeffectsonhowCAWCDisabletorepaythefederal

governmentfortheconstructionofCAP.TheclosureofNGSwouldcauseCAPtoloseatleast

$50millioninannualrevenuesfromthesaleofsurpluspower(Impact,2010).Thesurplus

energyissoldatmarketvalueforthatparticularday/hour.“Powerthatissoldcanvarywidely

fromthelow$20/MWhrangetoasmuchas$100/MWh”(Basefsky,28June2016).Inaddition,

theU.S.andIndiancommunitieswithwatersettlementswouldlosetensofmillionsofdollarsin

revenueseachyear(Impact,2010).

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Repayment

TheCentralArizonaProjectcostapproximately$4billiontoconstruct.Pursuanttothe

MasterRepaymentContract(MRC),$1.65billionmustberepaidtothefederalgovernment

(CAP,2015).AccordingtoKenSeasholesofCAP,theannualrepaymentofthatsumbyCAPis

$50millionwithfullrepaymentscheduledby2044.ThemeansbywhichCAPhasbeen

producingthefundstorepaythefederalgovernmentisthroughthesaleofexcesspower

generatedbyNGS.

CAP’sshareofpowergeneratedbyNGSisabout4.3millionmegawatt-hours,yetonly

2.8millionmegawatt-hoursareusedbyCAPtodeliverColoradoRiverwater.Thisexcess,

unusedpoweristhensoldbyWesternAreaPowerAuthority(WAPA)onCAP’sbehalf(Basefsky,

28June2016).Inadditiontorepayingthegovernment,thatmoneyisalsousedtohelpfundthe

ArizonaWaterSettlementsActwithvarioustribes(Basefsky,April252016).

WithoutNGS,thecostofCAPwaterwouldrisesignificantly,jeopardizingIndianwater

rightssettlementsandcausingincreasedgroundwaterpumping(NGS,2011-2016).“Weshape

ourpowersothatwecansellasmuchaspossibleatpeakseason,”saysSeasholes(Seasholes,

interview).SeasholesstatesthatCAPhasbeenontracktohavethefullamountofrepayment

paidbythesaleofexcesspower;however,recentlythat“doesn’tcoveranywherenearasmuch

ofthat$50millionasitusedto…[we]needtograduallyincreasecapitalchargetomakeup

someofthedifference”(Seasholes,interview).

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AirQuality

DuetothefactthatthegeneratingstationisinsuchcloseproximitytoGrandCanyon

NationalPark,airqualityconcernsplayaroleintheenergymattersrelatedtoCAPandNGS.In

1999,theEnvironmentalProtectionAgency(EPA,2016)issuedtheRegionalHazeRule,applied

to156nationalparksandwildernessareas,forthepurposeofimproving“visualairquality”and

visibility.Stateswereimposedwithdevelopinglong-termstrategiestoimprovevisibilityin

thesenationalparks,primarilybyreducingemissionsofairpollutants(EPA,2016).TheGrand

CanyonisoneoftheseparksandNGS,acoal-firedplant,islocatedinverycloseproximity.

NitrogenOxideEmissions

InFebruaryof2013,EPAproposedamethodforanypowerplantviolatingtheRegional

HazeRuletoreduceemissionsofnitrogenoxides(NOx).Thismethod(whateveritmaybe)is

referredtoasBART,BestAvailableRetrofitTechnology.InorderforNGStocomplywiththis

rule,itwouldneedtoinstallatechnologycalledSelectiveCatalyticReduction(SCR).This

technologywouldcostupwardsof$500million,andpossiblymuchmoreifadditionalairfilters

arealsorequiredtoremoveairborneparticulatescreatedbySCR.SCRwouldneedtobe

installedandoperationalatNGSby2023(CAP,2015).

CAP’sportionofthecostsforimplementingSCRwouldbebornebyitscustomers(CAP,

2015),adverselyaffectingCAP’staxpayers,M&IsubcontractorsandIndiancommunities.The

highcostcouldleadtoCAPwaterratestwoorthreetimeshigherthantheywouldbe

otherwise.Accordingtoa2010CAPdocument,theinstallationofSCRswouldrequire“an

increaseinCAPenergychargesofatleast$9.85peracre-foot,a20percentincreaseoverthe

2010energyrate”(Impact,2010).ThiswouldaffectanyonewhogetswaterfromCAP,butthe

20

“increaseinenergycostswouldbeespeciallyharmfultoCAP’sIndianandNon-Indian

Agriculturalwaterusers”(Impact,2010).Infact,thehigherenergycostswillhitalmost

everyoneinthestate(NGS,2011-2016).Inreality,installingSCRforallthreeunitswouldbefar

tooexpensiveforNGStobeabletoimplement,forcingtheclosureoftheentireplant.“This

wouldbeaneconomicdisasterfortheNavajoandHopipeople”(NGS,2011-2016).

TheEPAdidleavetheoptiontoconsideralternativeplans,shouldtherebeany,“in

recognitionoftheimportanceofNGStoArizona’swatersustainabilityandthemajorrolethe

plantandassociatedcoalmineplayintheeconomiesoftheNavajoNationandtheHopiTribe”

(CAP,2015).Inresponse,anewgroupwascreatedtofindthatalternative.TheTechnicalWork

Group(TWG)consistsofCAP,theGilaRiverIndianCommunity,theNavajoNation,SRP,the

EnvironmentalDefenseFund,theUSDepartmentofInteriorandWesternResourceAdvocates

(CAP,2015).TWGcalleditsplan“BetterthanBART,”andofferedtwoalternativestoSCRthat

wouldactuallyincurevengreaterreductionofNOxemissionsoverthelifespanoftheplant

thantheproposedEPAplan.

TheEPAacceptedTWG’sproposedalternative,makingittheBARTinthefinalRegional

HazeRuleforNGS.TheplanistoshutdownoneofthethreegeneratingunitsatNGSby2020

andimplementeitherSCRoranotherNOxreductiontechnologyontheothertwounitsby2030

(Basefsky,3May2016).Thiswillallowtheplanttoremainopen,tocontinuetosupplyCAP’s

energy,tocontinuetoemploytheNavajoNation,andtomeetallEPAguidelines.Despitethis

accomplishment,thereareanumberoflawsuitsfiledbyenvironmentalgroupswhowantthe

EPAtoreversetheirdecisioninordertoforceNGStoclose(Basefsky,2May2016).

21

Inadditiontothelawsuits,thereisanEnvironmentalImpactStatement(EIS)process

currentlytakingplaceovertheleaseofNGSonNavajolandsandtherightsofwayforwater

andelectrictransmissiononthereservation.Theseleasesexpirein2019ifnotrenewedbefore

then.AccordingtoMitchBasefskyofCAP,“EveryoneexpectstheNEIStopass,althoughthere

maybesomemitigationthattheNGSownerswillhavetofund”(Basefsky,2May2016).Once

theEISprocessiscomplete,itmustbeapprovedandsignedbytheSecretaryoftheInterior.If

theEISdoesnotpass,NGSwilllosetheleaseforthelandwhichtheplantsitson,aswellasthe

rightsofwayforthetrainthattransportscoalfromKayentaMinetotheplant.Inotherwords,

NGSwillloseitsrighttooperateonNavajoland(Basefsky,2May2016).Ifthishappens,there

wouldbenoneedtoimplementBARTbecausetheplantwouldnolongeroperate.“That’swhy

thesuccessorfailureoftheEISandthesubsequentleaseandrightofwayagreementscould

impactthefateofNGSandthetimingoftheRegionalHazeRuleimplementation,”says

Basefsky(Basefsky,3May2016).

CarbonDioxideEmissions

WhiletheRegionalHazeRuleaimstocurbNOxemissions,anotherofEPA’splansaims

tocurbcarbonemissions.TheCleanPowerPlan(CPP),finalizedonAugust3,2015,aimsto

reducethenation’scarbonemissionsby32%below2005carbonlevelsbytheyear2030.More

specifically,theCPPmandatescarbondioxideemissionguidelinesforexistingfossilfuel-fired

electricgeneratingunits(EGUs)(NGS,2011-2016).TheEPAissuedacarbonrulespecificallyfor

existingfossilfuel-firedEGUsontriballands;NGSfallsinthiscategory.ThetargetforEGUson

triballandsistoreducecarbonemissionsby38%(Basefsky,2May2016).UndertheCleanAir

22

Act,theCPPsetsacarbonemissionsreductiongoalforeachstateandgivesstatesflexibilityto

meettheirgoalsinthewaythatworksbestforthem.

Despiteeverything,duetoarequestby27statestoblocktheCPP,astaywasputonthe

planonFebruary9,2016.TheCPPregulationswillnotbeineffectwhilelegalproceedingsin

regardtothischallengearetakingplace(NGS,2011-2016).“ThefateoftheCPPisnowinthe

handsoftheDCCircuitCourt,”saysBasefsky,“Theywillruleonthemeritsofthestatesand

otherlawsuitsopposingtheCPP”(Basefsky,2May2016).Thecircuitcourtisscheduledto

reviewthesemeritsinSeptemberof2016.“SomeformofCO2limitswilllikelybeset

eventually,butwhatandwhenaredebatable,”Basefskyadds(Basefsky,2May2016).

Allofthesefederalguidelinestoimproveairqualityandslowclimatechange,whether

officiallyimplementedyetornot,willhaveeffectsonenergyproduction.Asdemonstratedby

theinformationabove,theseguidelineswillalsohaveeffectsonwater;specifically,oncostand

delivery.Moreprecisely,theseairqualityguidelineswilldeterminethefateoftheNavajo

GeneratingStation,whichwillhavegreatimpactsonCAPanditscustomers.

FutureEnergySources

TheentireU.S.ismakingitsmoveawayfromfossilfuels,asevidencedbytherecent

CPP.ClimateChangehastakenthemainstageinenvironmentaldiscussions.Fossilfuels

contributetoawarmingclimate,whichscientists,activists,andpoliticiansalikearetryingto

curb.Thenextdecisionswillbetochoosewhatwillreplacecoaltoproduceenergy.Naturalgas,

nuclearpower,andrenewableenergiessuchaswindandsolarareallalternativestocoal.As

statesdeveloptheirplanstoreducecarbonemissions,theywillneedtoevaluatetheseoptions

23

andmakekeydecisionsthatwillaffecttheirelectricitygenerationandcosts.“Statesmust

carefullyevaluatetherisksofsubstantiallyshiftingtowardnaturalgasagainstthebenefitsof

rampinguprenewableenergysourcesandenergyefficiency”(TheCleanPowerPlan).

Thepriceofnaturalgashasbeendecreasingrecently,makingitacosteffective

alternativetocoal.Naturalgasemitscarbon,thoughconsiderablylessthancoal.However,due

tothevolatilepricehistoryofnaturalgas,somewarnthatrelianceonthisresourceforenergy

couldbedangerous.“Over-relyingonitforelectricitycreatesseriouseconomicandpublic

healthrisksforconsumersandstatesandfailstoprovidealong-termsolutiontoclimate

change”(TheCleanPowerPlan).Figure7showsNaturalGaspricefluctuationssince1989.

Figure7

NaturalGasPriceFluctuationsoverTime

NOTE:Citygateisapointormeasuringstationatwhichadistributinggasutilityreceivesgasfromanaturalgaspipelinecompanyortransmissionsystem.TheCitygateisnotonespecific,physicallocation,butavirtualtradingpointonthe

system.(EIA,2015)

24

Theuseofrenewableenergyforpowerproductionwoulddecreasecarbonemissions

drastically.Onesourcenotesthatelectricitygeneratedfromrenewableenergysourceswould

providesteadyenergyprices(TheCleanPowerPlan).Thisisduetothefactthatonceafacility

isconstructed,theonlycostwouldbemaintenanceandoperation,notthewindorsunitself.

Evaluatingpotentialfutureenergysourcesiscomplex,particularlyfromautility’spoint

ofview,makingitextremelydifficulttocomparecostsofutilizingdifferentresourcesinorder

todeterminewhichwouldbemostfavorabletoimplement.Therearefixedcostsandvariable

coststoconsider,aswellasconstantmarketfluctuations.Autilitymustconsiderinitialcostof

implementation,ontopoftransmissionrequirementsandcostsassociatedwithdistribution,

operationandmaintenance.U.S.EnergyInformationAdministration’s‘AnnualEnergyOutlook

2016’explainsvariousfactorsinvolvedinprojectingcostsofdifferentsourcesofelectricity

generation.LevelizedCostofElectricity(LCOE),forexample,isusedtosummarizeoverall

competitivenessofdifferentgeneratingtechnologies(EIA,AnnualEnergyOutlook,2015).

AccordingtoCAPPowerProgramsManager,RonaldLunt,“IfCAWCDweretobuilda

naturalgasfiredcombinedcyclepowerplant,thecostsareestimatedtobeinthe$60/MWh

range”(Basefsky,28June2016).ThiscostestimateistwiceashighaswhatCAPiscurrently

payingforpower,mostlyduetothecapitalcostsassociatedwithbuildinganentirefacility.Of

course,themarketpriceofnaturalgasatthattimewouldalsobeafactor.Moreover,CAP

wouldstillhavetocontinuetopayitsshareofrepaymentcostsforNGS,ifitwerestillrunning

(Basefsky,28June2016).

25

Water-EnergyNexusDimensionofCAPSystemUseAgreement

HowwilltheproposedCAPSystemUseAgreementaffectenergyuseandcostsonthe

canal?Asmentionedabove,itisdifficulttoprojectwhatfutureenergycostsforCAPmightbe,

particularlyifNGSwereforcedtoshutdown.AsBasefskypointsout,therearetwobasic

variablesinvolvedintheAgreement’seffectonenergyuse:1)howmanypumpingplantslay

betweenthewatersourceandthedeliverypoint,and2)whetherthedeliveriesareinaddition

toorinlieuofregularCAPdeliveries.

Ifwater,pertheAgreement,isbeingtransportedonthecanalinadditiontotheregular

CAPProjectWaterdelivery,thenthevolumeoftotalwaterwillbegreater,requiringmore

energy.CAPsystemcapacityisapproximately1.8millionacre-feet;underpresentconditions,

1.6millionacre-feetisdelivered(Buschatzke,2015).Ifashortageisdeclared,therewillbea

reductioninregularCAPdeliveriesofProjectWater.IfAgreementwateriscarriedonthecanal

alongwithareducedregulardelivery,thenthetotalvolumeonthecanalmightnotbeany

greaterthanwhentherewerenoreductionsandnoagreement.Thiswould,inturn,requireno

additionalenergy.

TopographyplayedalargeroleinthedesignofCAP.Thecanalisnotperfectlystraight

becauseitfollowsgeographicfeaturestoallowfortheuseofgravitytocarrythewater,

whereverpossible.Thepumpingstationswereconstructedwherenecessitydictated;inother

words,whenthewatercouldnotbegravity-fed.Thepumpingstationsliftthewatertothe

higherelevationsalongthecanalandtheyarewhatrequiretheenergy.ThisiswhyBasefsky

believesthatthequantityofpumpingstationsbetweenthesourceofwaterandthedelivery

26

pointwillfactorintoeffectsonenergyusecausedbytheAgreement.Therearesevenpumping

plantsbetweenPhoenixandTucson.

Fromageneralperspective,theenergyusecouldremainfairlybalancedovertimewith

theAgreement’simplementation.Initially,moreenergymightberequiredtopumpahigher

volumeofwaterfromPhoenixAMAtoTucsonAMAforthefirstphaseoftheexchange.

Conversely,whenimplementingphasetwooftheexchange,alowervolumeofwaterwillflow

southofPhoenixdownthecanal,requiringequallylessenergy.Consideringthefactthatenergy

priceswillriseinthefuture,spendingtherequiredmoniesonmoreenergynowcouldendup

savingCAPmoneyinthelongrun.AsfarasCAPcustomersareconcerned,(particularlyTucson

WaterandDistrict)theywillnotpayforthisincreaseinenergyusesinceCAPchargesa

“postagestamprate”todeliverwater;regardlessofhowfarthewatertravelsonthecanal,or

atwhatelevationoflift,allCAPcustomerspaythesamerate.Ofcourse,thisrateissubjectto

changeinthefuture.

Recoveryoftherechargedwateralsorequiresenergy,andthus,money.In2015Tucson

Waterspentatotalof$7,205,883onenergyatCAVSARPandSAVSARP(table2).Acombination

ofNaturalGasandElectricpowerareusedtooperatethewellsandboostersatthesefacilities.

Figure8showstheratioofnaturalgastoelectricpowerpaidforbyTucsonWater.Thelower

thewatertableis,thehigheritmustbepumpedinordertorecoverit.Likewise,thelongerthe

distancethatthewatermustbepumped,themoreenergythatisrequired.IfTucsonWater

andDistrictarerechargingthousandsofacre-feetofPhoenix’sallocationperyear,thewater

tableinTAMAwilllikelyrise,requiringmuchlessenergytoeventuallypump.Rechargingthe

27

waterinthefirstplacedoesnotrequireanyenergy(oncethewaterisintherechargebasins).

ThistheoreticallyamountstoenergysavingsduringrecoveryforTucsonWaterandDistrict.

However,therearecostsassociatedwithre-equippingwellsinordertopumpfroma

higherwaterlevel.Everypumphasadifferentpumpcurvewhichindicatesatwhatwaterlevel

eachpumpwilloperatemostefficiently.Insomecases,ahigherwaterlevelmightreducethe

pump’sefficiency,necessitatingareplacementpumporraisingthecurrentpump.Bothofthese

solutionsincuradditionalcosts.

Table2

Electric Gas

CAVSARP $4,440,060 $1,114,194 TotalCAVSARPEnergyCosts:

$5,554,254

SAVSARP $1,442,704 $208,925TotalSAVSARPEnergyCosts

$1,651,629

TotalElectricCosts:

TotalGasCosts:

$5,882,764 $1,323,119

Source:CompiledbyBethKleimanJune2016withenergyexpenditurerecordsfromTucsonWater

TucsonWaterEnergyExpendituresatClearwaterRechargeFacilities

28

Conclusion

Undoubtedly,theuseofenergyiscriticaltothereliabledeliveryofCAPwatertoits

customers.CAPanditscustomersmustalwaysbeawareofnewdevelopmentsthatcouldaffect

CAP’senergysource(currentaswellaspotentialfuturesources).Changestotheseelectricity

producers,whetheritbeownershipof,managementof,orfederalregulations,willinevitably

haveaneffectonCAP.Since80%ofArizona’spopulationreliesonCAPwater,anoutageonthe

canalcouldhavetremendousconsequences.AreductioninCAPsupplydeliveryduetoa

declaredshortage,however,wouldnothavealarmingaffectsonwaterusersduetoproactive

watermanagementpolicies,suchastheAgreement.

TheCAPSystemUseAgreementdoesindeedhaveanexusdimensiontoit,mostsimply,

becauseitinvolvestheuseoftheCAPcanaltodeliverwater,whichusesavastamountof

Figure8

BreakdownofEnergySourceforTucsonWaterUtility2015

Source:EnergyCap

Note:Percentagesarebasedonenergyuseforeveryaspectofthewaterutility,notsolelyrechargeandrecovery.

29

energyderivedfrommultiplesources.Thesesourcesfaceuncertainfuturesduetoclimate

changeandairqualityregulations,inadditiontolocaljobsandeconomicdevelopmentfor

NativeNations.CAPwouldnotbeabletodeliverwateronthecanal’sinclinedelevation

withoutsomeformofenergy.TheAgreementmayincurtheuseoflessenergy;however,it

maynot.

Therearevariousfactorsinvolvedintotalenergyuse;mostofwhosefuturescannotbe

predicted.Naturalresourcepricefluctuation,unforeseengovernmentalregulationsand

changingtechnologywillallhaveimpactsonenergyuseandcost.ItwillbeimportantforCAP

andotherArizonawaterinstitutionstoattempttostrikesomesortofbalancebetweencurrent

andfutureenergyprices,theuseofcurrentandfutureenergysources,aswellasthequantity

ofacre-feetrechargedandrecoveredannuallysoastomaintainagroundwaterleveltoeffect

maximumpumpingefficiency.AccordingtoKenSeasholes,one“couldarguethatthereisan

energysavings”butitwouldbe“essentiallyenergyneutralovertime”(Seasholes,interview).

30

WorksCited

Basefsky,Mitch.“Re:CAPquestionsfortermpaper.”MessagetoBethKleiman.25April2016.E-mail.

Basefsky,Mitch.“Re:CAPenergyquestions.”MessagetoBethKleiman.2May2016.E-mail.

Basefsky,Mitch.“Re:CAPenergyquestions.”MessagetoBethKleiman.3May2016.E-mail.

Basefsky,Mitch.“Re:CAPenergyquestions.”MessagetoBethKleiman.28June2016.E-mail.

Block,Michael.“Re:CAPSystemUseAgreement.”MessagetoBethKleiman.23June2016.E-mail.

Buschatzke,Thomas.ArizonaWaterBankingAuthorityAnnualPlanofOperation.ArizonaWaterBanking

Authority.December2015.Print.28June2016.

CAP.CentralArizonaProject.2015.Web.30April2016.

CAP.“SummaryofDraftAgreement”.CentralArizonaProject.27Jan.2016.Workshop.

CAP.“ImpactofNavajoGeneratingStationRetrofitOptionsonCostofCentralArizonaProjectWater

andDevelopmentFundRevenues.”CentralArizonaProject.20Jan2010.Web.23June2016.

CAPH20.“CentralArizonaProject:RechargingWaterResourcesfortheFuture.”Onlinevideoclip.

YouTube.11Feb.2013.Web.26April2016.

CAPH20.“CAPSmartEnergy.”Onlinevideoclip.YouTube.21May2010.Web.26April2016.

Cooke,Ted.“Wheeling,RecoveringandExchangingWaterwillHelpSecureourFuture.”ArizonaCapitol

Times.24March2016.

EIA.ArizonaStateEnergyProfile.U.S.EnergyInformationAdministration.17Dec.2015.Web.21June

2016.

EIA.AnnualEnergyOutlook2016.“LevelizedCostandLevelizedAvoidedCostofNewGeneration

ResourcesintheAnnualEnergyOutlook2015.”U.S.EnergyInformationAdministration.3June

2015.Web.23June2016.

EPA.VisibilityandHaze.n.d.Web.1May2016.

Liberti,Michael.CAPMap.19May2016.

MasterRepaymentContract.CentralArizonaProject.web.9March2016.

Modeer,DavidV.“ConfrontingtheIntersectionofWater,Energy,andAirQualityattheCentralArizona

Project”.Journal(AmericanWaterWorksAssociation)102.6(2010):46–49.Web.11Feb.2016.

NGS.SRP.2011-2016.web.26April2016

“QuickFacts:Arizona.”UnitedStatesCensusBureau.USBureauofCommerce.n.d.Web.30April2016.

31

Randazzo,Ryan.“SRPagreesto$13Mdealtoshutcoalplant.”TheRepublic.14May2015.

Azcentral.com.13April2016.

Randazzo,Ryan.“NoDisruptionsExpectedatNavajoCoalPlantDespitePeabodyBankruptcy.”The

Republic.13April2016.Azcentral.com.13April2016.

Seasholes,Ken.“WorkshoponFirming,WheelingandExchanges.”CAP.CAPHeadquarters.1Feb.2016.

PowerPointpresentation.

Seasholes,Ken.PersonalInterview.28April2016.

Tenney,Warren.MetropolitanDomesticWaterImprovementDistrict.“ApprovalofRightofEntry

AgreementforWellMonitoringbytheCentralArizonaWaterConservationDistrictandthe

District.”BoardofDirectorsMeeting.13Jan2014.Web.23June2016.

“TheCleanPowerPlan:AClimateGameChanger.”UnionofConcernedScientists.UnionofConcerned

Scientists,n.d.Web.2May2016.

Thompson,Dick.PersonalInterview.1May2016.

32

AppendixA

CAPBackground

Itallbeganin1922whentheColoradoRiverCompactwascreatedbythesevenColorado

RiverBasinStates:Arizona,California,Colorado,NewMexico,Nevada,Utah,andWyoming.The

CompactdividedtheColoradoRiverBasinstatesintoanUpperBasinandaLowerBasin.The

UpperBasinincludedNewMexico,Colorado,UtahandWyoming,whiletheLowerBasin

consistedofArizona,CaliforniaandNevada.Eachbasinwasallotted7.5millionacre-feetof

ColoradoRiverwatertobedividedamongitsstates.IntheLowerBasin,Arizonawasgiven

rightsto2.8millionacre-feetofColoradoRiverwaterannuallyandCaliforniabecameentitled

to4.4millionacre-feet,leavingNevadawithrightstoonly300,000acre-feet(CAP,2015).

In1946,theCentralArizonaProjectAssociationwasformedforthepurposeofeducating

thecitizensofArizonaabouttheneedfortheCentralArizonaProject,aswellastolobby

Congresstoauthorizeitsconstruction(CAP,2015).Itwasn’tuntil1968thatabillwassignedby

PresidentLyndonB.Johnson,authorizingtheproject.TheColoradoRiverBasinProjectActof

1968becamethecatalystfortheUSBureauofReclamation(USBOR)tobuildtheCentral

ArizonaProject.In1971,theCentralArizonaWaterConservationDistrict(CAWCD)wascreated

toprovideameansforArizonatorepaythefederalgovernment(USBOR)fortheCAPsystem,in

additiontomanagingandoperatingtheCAPsystem.Constructionfinallybeganin1973,atLake

Havasuandfinished20yearslater,14milessouthofTucson.

33

AppendixB

CAPSystemUseAgreementTerms

InordertounderstandwhatisbeingproposedintheAgreement,itisessentialtodefine

thetermscontainedwithinit.ColoradoRiverwaterontheCAPcanalisotherwisereferredtoas

“ProjectWater.”ProjectWateralsoincludescertainAguaFriainflowsintoLakePleasant

(Figure1).Allothersourcesofwateronthecanalarereferredtoas“Non-ProjectWater;”the

Agreementwilldistinguishbetweenthetwotypes.SomeexamplesofNon-ProjectWater

includeimportedgroundwaterandColoradoRiverwaterthatwaspreviouslyunavailableto

CAP(SummaryofDraftAgreement,2016).

InadditiontoProjectWater,theAgreementwillauthorizeCAWCDtodeliverother,

evenmorespecifictypesofwater.RecoveryExchangeWateristhewaterCAWCDdelivers

pursuanttoaRecoveryExchangeAgreement.ReplenishmentExchangeWateristhewater

CAWCDdeliverswhenCentralArizonaGroundwaterReplenishmentDistrict’s(CAGRD)sub-

contractisexchangedforlong-termstoragecreditsusedforreplenishment.Non-ProjectWater

forFirmingandOn-RiverFirmingwillalsobeaddressedintheAgreement.OtherNon-Project

WaterdeliveriesrequireafederalCAWCDwheelingagreement.TheAgreementwillapprovea

standardformofCAWCDWheelingAgreement,whichistobeattachedasanexhibittothe

Agreement(SummaryofDraftAgreement,2016).Inshort,theAgreementwillallowCAPto

offercontracts“forlong-termreliabledeliveryofNon-ProjectWater,whileprotectingtherights

oftheUStohavewatertransportedundersection8.17ofMRC,andwithoutinterferingwith

ProjectWaterdeliveries”(CAP,2015).

34

Wheeling

WheelingprovidesreliabledeliveryofNon-ProjectWaterthroughtheCAPsystem.

Wheelingwasauthorizedbythe1988MasterRepaymentContractbetweenCAPandthe

USBOR.TheMRCincludesspecificprovisionsrelatedtothewheelingofNon-ProjectWater,

includingdevelopmentofastandardformofwheelingcontract(CAP,2015).Articles8.17and

8.18oftheMRCaddresstheWheelingofNon-ProjectWater,bothbythefederalgovernment

(USBOR)andbyCAP(CAWCD),respectively.WheelingisanimportantuseoftheCAPcanal.In

fact,thefirstrequestforwheelingwasmadein1983,longbeforethefirstCAPdeliveryin1985

(Seasholes,workshop).A1983CAWCDPositionStatementreads,“…[CAWCD]endorsesthe

conceptoftransportingwatersurplustooutlyingareasofthestateintotheDistrictforuse

withinitsboundaries.SuchtransportationshallbelimitedtootherwiseunusedcapacityofCAP

works…”(Seasholes,workshop).

Article8.17oftheMRCistitled,“RightsReservedtotheUnitedStatestoHaveWater

CarriedbyProjectFacilities;”Inotherwords,wheelingbytheU.S.BureauofReclamation.

Article8.18istitled,moresimply,“WheelingNon-ProjectWater.”Itstates,“Non-projectwater

maybewheeledthroughprojectfacilitiespursuanttowheelingagreementsbetweenthe

Contractorandtheentitydesiringtouseprojectfacilitiesforwheelingpurposes…The

ContractorandtheContractingOfficershalljointlydevelopastandardformofwheeling

agreementincludingtheratestructureforwheelingnon-projectwater”(MRC).

The“standardformofwheelingagreement”referredtointheMRCiswhattheCAPSystem

UseAgreementwilladdress.Inotherwords,theMRCsimplystatesthatthewheelingofNon-

35

ProjectWaterwouldbeallowed,providedthereisanotherformalagreement;theCAPSystem

UseAgreementwillbethatformalagreement.CAPistryingtomoveawayfromthe

terminologyof“Article8.17”and“Article8.18”andmoveinsteadtowards“wheelingbythe

federalgovernment,”and“wheelingbyCAWCD”respectively(Seasholes,workshop).

Asmentionedabove,wheelinghasbeenproposedsince1983,intheCAPPosition

Statement.Itwasn’tuntil2012thatCAPcameoutwithaStaffProposalforwheeling.This

proposalwouldactuallyimplementtheproposedStandardFormWheelingContractfromthe

MRC.Thecontractswouldbeissuedonthebasisofincreaseddeliveryandcapacity,andwould

beopentoallparties,includingtribes(Seasholes,workshop).

Exchanges

ExchangesthatdonotinvolvewheelingareanotherimportantaspectoftheCAPSystem

UseAgreement.Currently,therearevarioustypesofexchanges,recognizedindifferent

frameworksincludingtheMRC,theBasinProjectAct,individualdeliverycontractsandin

ArizonaStatelaw.TheexchangesproposedintheAgreementinvolveaMunicipalandIndustrial

(M&I)subcontractorexchangingwaterwithanothersubcontractorontheCAPsystem.For

example,TucsonwouldstoreaportionofPhoenix’sallocationinitsundergroundstorage

facilities.Thewater,intimesofshortage,wouldbeexchangedwithdirectdeliveriesfrom

TucsontoPhoenixoffofthecanal.Thisisanewvariationonexchangesbecauseitinvolvestwo

subcontractors;ithasneverbeendonebefore.Thisnewconcept(alsoreferredtoasInter-AMA

Firming)wasproposedbyCityofPhoenix,TucsonWater,andMetropolitanDomesticWater

36

ImprovementDistrict(District),locatedinMarana.Ithassinceraisedquestionsaboutsystem

capacityissuesrelatedtodownstreamrecharge.

FirmingandRecharge

RechargeisalargecomponentofArizona’swatermanagement.Largequantitiesofwater

canbestoredundergroundviarechargebasins.Firmingistheuseofonewatersupplyto

increasereliabilityofanothersupply,primarilythroughrecovery.InthecaseoftheAgreement,

TucsonwillincreasethereliabilityofitsgroundwatersupplybyrechargingPhoenix’sunused

CAPallocation.FirmingwillsatisfythereducedportionofaCAP(sub)contractintheeventofa

shortageoranunplannedoutageonthecanal.

Thebenefitstofirmingandrechargearenumerous;theyincluderaisingthewatertable,

naturallyimprovingthewaterqualitythroughSoilAquiferTreatment(SAT),diminishingimpacts

ofgroundwateroverdraftsuchassubsidence,andpreparingforshortage.SATisanatural

treatmentwhichallowsphysical,chemicalandbiologicalprocessestotakeplaceasthewater

percolatesintothegroundandmixeswithgroundwater,therebyimprovingwaterquality.In

somecases,itcancompletelyeliminatetheneedforcostlywatertreatmentplants.Inaddition,

storingwaterundergroundeliminatestheneedforlargereservoirsabovegroundwhichcanbe

verycostly,takeuplargelandareas,andfacewaterlossduetoevaporationandleakage.

Rechargealsoallowsforgreatersystemflexibility;TucsonWaterisnotdependentonwater

comingdownthecanalinordertodelivertoittocustomersonthesameday.Recharge

enhancesandreinforcesArizona’swatersupply,providingreservesincaseofshortageor

drought.“Rechargeisalong-establishedandeffectivewatermanagementtoolthatallows

37

renewablesurfacewatersupplies,suchastheColoradoRiver,tobestoredundergroundnow,

forrecoverylaterduringperiodsofreducedwatersupply,”(CAP,2015).

CAPoperatessixrechargeprojects:PimaMineRoad,LowerSantaCruz,AguaFria,

HieroglyphicMountains,TonopahDesertandSuperstitionMountains.Allbuttwoarelocatedin

PhoenixAMA;PimaMineRoadandLowerSantaCruzarelocatedinTucsonAMA.PimaMine

Roadrechargefacility,locatedintheSantaCruzRiverFloodPlain,wasbuiltin1999andis

capableofstoring30,000acre-feetperyear.TheLowerSantaCruzrechargefacilitywasbuilt

thefollowingyear,in2000.Thisfacilityiscapableofstoring50,000acre-feetperyear,spread

over3basinscoveringnearly30acres.AguaFriarechargeprojectwasbuiltthefollowingyear,

in2001,andiscapableofrechargingatotalof100,000acre-feetperyear.TheHieroglyphic

MountainsProjectalsoconsistsofsevenbasinsover38acres.Builtin2003,thisprojectis

permittedtorecharge35,000acre-feetperyear.TonopahDesertRechargeProjectwas

completedin2006andcovers207acresusing19basinstorechargeupto150,000acre-feet

peryear.SuperstitionMountainsRechargeprojectbeganoperationin2011andisdesignedto

store25,000acre-feetperyear(CAPH20,2013).Figure2showshowmuchwaterhasbeen

collectivelyrechargedatthesesites.

38

InAvraValley(WestofTucson),TucsonWateroperatestwomainrechargefacilities,

togetherreferredtoasClearwaterRenewableResourcesFacility.CentralAvraValleyStorage

andRecoveryProject(CAVSARP)wasbuiltasapilotstudyin1997andbecamefullyoperational

in2003(Thompson,2016).CAVSARPconsistsof11rechargebasinscovering317acres.The

currentpermittedannualstorageis75,000acre-feet.SouthernAvraValleyStorageand

RecoveryProject(SAVSARP)beganconstructionin2008andbecamefullyoperationalin2009.

Itconsistsof9basins,totaling226acres.Thefacilityiscurrentlypermittedtorecharge75,000

acre-feetperyear(Thompson,2016).

TheDistrictoperatesonerechargefacilityconsistingoffourbasins.TheAvraValley

RechargeProject(AVRP),originallyownedbyCAWCD,becameoperationalin2006andis

permittedtostoreupto11,000acre-feetannually.In2010,Districtassumedownershipand

Figure2v

CAPRechargeProjects

Source:http://www.cap-az.com/departments/recharge-program

Figure2

WaterStorageinCAPRechargeProjects

Source:http://www.cap-az.com/departments/recharge-program

39

operationofthefacility,whichislocatedjustonemilesouthwestofanotherofCAWCD’s

rechargeprojects,theLowerSantaCruzReplenishmentProject(Tenney,2014).

Table1

RechargeProjects

ProjectName AMA Year

completePermittedcapacity Permitee acreage #of

basinsWaterType

AvraValley Tucson 1996-97 11,000 District 11 4 CAP

SAVSARP Tucson 2008 75,000 CityofTucson 226 9 CAP

CAVSARP Tucson 2007 75,000 CityofTucson 317 11 CAP

PMR Tucson 1998-99 30,000 CAWCD 37 5 CAP

LowerSantaCruz

Tucson 2000 50,000 CAWCD 28 3 Effluent

AguaFria Phoenix 2001 100,000 CAWCD 102 7 CAP

HieroglyphicMountains

Phoenix 2002 35,000 CAWCD 38 7 CAP

TonopahDesert

Phoenix 2006 150,000 CAWCD 207 19 CAP

SuperstitionMountains

Phoenix 2011 25,000 CAWCD 39 2 CAP

Recovery

Ontheotherendofwaterrechargeisrecovery.Itisessentialtobeabletorecoverthe

rechargedwaterwhenandwhereitisneeded.CAPisalreadyresponsibleforrecoveringa

portionofstoredwaterinsupportofvarioussubcontractsandagreements.TheseincludeM&I

subcontractswhenthereisashortageinColoradoRiverwatersupplies,inadditiontothe

Source:TablecreatedbyBethKleiman,compiledwithinformationfromCAPwebsiteandDickThompson

40

SouthernNevadaWaterAuthorityAgreementandtheMohaveCountyWaterAuthority

Agreement(CAP,2015).

Asmentionedabove,therearemultiplestorageand/orrecoveryentitiesinArizona.

Figures3,4,and5showallundergroundstoragefacilitiesinTucson,PhoenixandPinalAMAs,

respectively.TheArizonaWaterBankingAuthority(AWBA),createdin1996,storesexcessCAP

waterinvariousGroundwaterSavingsFacilities(GSF)andUndergroundStorageFacilities(USF).

ThereisalsoanInteragencyRecoveryPlanningGroupconsistingofstafffromCAP,AWBA,and

ADWR.Thisgroup’sfocusisondraftingarecoveryplan(CAP,2015).Similarly,thereisanAd

HocRecoveryPlanningGroupconsistingofindividualsrepresentingCAP,AWBA,ADWR,Arizona

MunicipalWaterUsersAssociation(AMWUA),SouthernArizonaWaterUsersAssociation

(SAWUA),SaltRiverProject(SRP)andPinalwaterusers.Thisgrouphelpsserveasavenuefor

stakeholderfeedbackandguidance(CAP,2015).

OnMay1,2014,theCAPboardvotedtoimplementtheJointRecoveryPlan.Thisplan

advancesthejointobjectiveamongCAWCD,AWBAandADWRto“developacoordinatedand

cooperativeplanningprocessthatincludesdistributionandrecoveryofwaterstoredbyAWBA”

(CAP,2015).

41

Figure3

TucsonAMAUndergroundSavingsFacilities

Source:TucsonWater

42

Source:http://www.azwater.gov/azdwr/WaterManagement/Recharge/documents/Phx_AMA_USFs_2009.pdf

Figure4

PhoenixAMAUndergroundStorageFacilities

Source:TucsonWater

43

So urce:http://www.azwater.gov/azdwr/WaterManagement/Recharge/documents/Phx_AMA_USFs_2009.pdf

Source:TucsonWater

Figure5

PinalAMAUndergroundStorageFacilities

44

Schedulingpriority

Inordertoreconcileanyconflictsoverdeliverycapacityonthecanal,ascheduling

priorityisenacted.WiththeauthorizationoftheAgreement,potentialdeliverypriorityconflicts

couldarise.UndertheAgreement,theschedulingprioritywilldefinehowcompetitionfor

monthlydeliverycapacityisresolved.Duringshortage,FirmingWatercarriesthescheduling

priorityofthesupplyitreplaces(SummaryofDraft,2016).TheAnnualOperatingPlan(AOP)for

theAgreementwilluseCAWCD’sexistingAOPprocessastheimplementationmechanismfor

schedulingpriorities.

45

AppendixC

CommonlyUsedAcronyms

ADWR-ArizonaDepartmentofWaterResources

AMA-ActiveManagementArea

AMWUA-ArizonaMunicipalWaterUser’sAssociation

AVRP-AvraValleyRechargeProject

AWBA-ArizonaWaterBankingAuthority

BART-BestAvailableRetrofitTechnology

CAVSARP-CentralAvraValleyStorageandRecoveryProject

CAWCD-CentralArizonaWaterConservationDistrict

CAGRD-CentralArizonaGroundwaterReplenishmentDistrict

CAP-CentralArizonaProject

CPP-CleanPowerPlan

CWAC-Citizen’sWaterAdvisoryCommittee

EGU-ElectricGeneratingUnit

EIS-EnvironmentalImpactStatement

EPA-EnvironmentalProtectionAgency

GSF-GroundwaterSavingsFacility

IGA-Inter-GovernmentalAgreement

M&I-MunicipalandIndustrial

MRC-MasterRepaymentContract

NGS-NavajoGeneratingStation

NOx-NitrogenOxides

SAT-SoilAquiferTreatment

SAVSARP-SouthernAvraValleyStorageandRecoveryProject

SAWUA-SouthernArizonaWaterUser’sAssociation

SCR-SelectiveCatalyticReduction

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SRP-SaltRiverProject

USBOR-UnitedStatesBureauofReclamation

USF-UndergroundStorageFacility

WAPA-WesternAreaPowerAuthority