Arizona Water Settlements Act Work Plan FY2016 Executive Summary On November 24, 2014, the New Mexico Interstate Stream Commission (“ISC” or “Commission”) informed the Secretary of the Interior of New Mexico’s intent to pursue a New Mexico Unit of the Central Arizona Project (“New Mexico Unit”) pursuant to the 2004 Arizona Water Settlements Act (“AWSA”). On February 27, 2015, the Commission requested that the Secretary of the Interior designate the ISC as joint lead agency with the U.S. Bureau of Reclamation for environmental compliance under the National Environmental Policy Act (“NEPA”). In FY2016, the ISC and the Bureau of Reclamation will 1) enter into an agreement as to each agency’s NEPA responsibilities, 2) hire a NEPA contractor, and 3) initiate the NEPA process for the New Mexico Unit. In order to develop project alternatives for NEPA, the engineering design of the New Mexico Unit must continue to progress beyond the current level of design. Staff’s FY2016 work plan includes the following goals: 1) advance the design of the New Mexico Unit to at least a level sufficient to support NEPA; 2) initiate NEPA for the New Mexico Unit; 3) invest a portion of the New Mexico Unit Fund as a strategy for funding the New Mexico Unit and continue to investigate other funding sources; 4) continue to inform and involve stakeholders; 5) implement other non-NM Unit projects; 6) respond to litigation, and 7) perform other studies as needed. In order to ensure sufficient funding to accomplish all potential work tasks, staff requests a total FY2016 budget of $7,700,000. All work described in this Work Plan will be funded from the New Mexico Unit Fund. Background On November 24, 2014, the ISC informed the Secretary of the Interior of New Mexico’s intent to construct a New Mexico Unit pursuant to the AWSA. The New Mexico Unit is expected to be constructed in phases and will provide water for various uses in the southwestern water planning region of New Mexico. The process is underway to form the New Mexico CAP Entity, which is the entity that will enter into the New Mexico Unit Agreement with the Secretary of the Interior. The New Mexico CAP Entity will own the New Mexico Unit, and may request that the Secretary of the Interior transfer to it any combination of the responsibilities to design, build, operate, and maintain the New Mexico Unit. NEPA will begin once the New Mexico Unit Agreement has been executed. Earlier this year, the Commission gave notice to the Secretary of the Interior of its request to be joint lead agency with the Bureau of Reclamation. The Secretary cannot deny this request. The NEPA analysis and other environmental mandates must be completed prior to construction of a New Mexico 1 Arizona Water Settlements Act Work Plan FY2016 Unit. The Secretary of the Interior must issue a record of decision (“ROD”) at the conclusion of NEPA no later than the end of 2019, unless delayed through no fault of New Mexico’s. In addition, the Commission has approved $9.1 million from the NM Unit Fund for other water projects in the Southwest New Mexico Planning Region. Staff has provided notice of award to the individual project proponents. Description Staff’s FY2016 work plan includes the following goals: 1) advance the design of the New Mexico Unit to at least a level sufficient to support NEPA; 2) initiate NEPA for the New Mexico Unit; 3) invest a portion of the New Mexico Unit Fund as a strategy for funding the New Mexico Unit; 4) continue to inform and involve stakeholders; 5) implement other AWSA projects; 6) respond to litigation and 7) perform other studies as needed. In FY2016, the staff will work with the New Mexico CAP Entity to progress to the next level of design for the New Mexico Unit. Some level of design beyond the existing engineering is necessary for the development of NEPA alternatives. Staff anticipates a 30% design or near 30% design of portions of the complete project will be needed prior to completion of the NEPA process. The staff will also work with the U.S. Bureau of Reclamation to develop a Memorandum of Understanding (“MOU”) that outlines both agencies’ duties as NEPA joint lead agencies. After the MOU is signed, staff will work with the Bureau of Reclamation to develop a scope of work in order for a Request for Proposals (“RFP”) for a NEPA contractor to be advertised. It has not yet been determined which agency will hold the contract for the NEPA contractor. Staff anticipates initiation of NEPA in FY2016, but progress is dependent upon the length of time needed to procure NEPA services. In addition to work related to the New Mexico Unit, staff will continue to implement the Commission’s decisions for other non-NM Unit projects. Some draft contracts have already been provided to grantees for review, and others are being written. Applications for municipal water conservation projects have been recently received, and staff reviews are underway. In order to accomplish the goals discussed above, staff requests the Commission’s approval of the following: 1) engineering services, 2) NEPA, environmental, ecologic, and related services, 3) financial advisory services, 4) public outreach services, 5) project implementation services and 6) legal services. 1. Engineering. The Commission previously directed staff to begin a 30-percent design for the New Mexico Unit. Staff has drafted a request for proposals (“RFP”) for engineering services that staff expects to advertise in June 2015. On February 3, staff provided a draft RFP to the Chairman of the Gila San Francisco Water Commission and solicited feedback from him 2 Arizona Water Settlements Act Work Plan FY2016 and the others on the commission. The Chairman replied on March 18th, with no edits or comments on the draft. Staff anticipates that a contract with an engineering firm will be final around November 2016. The budget will cover the costs of engineering, including desktop and field work, in FY2016. 2. NEPA, environmental impact analyses, and related services. After the ISC and the Bureau of Reclamation enter into the MOU that outlines each agency’s responsibilities with respect to NEPA compliance and the drafting of the Environmental Impact Statement (“EIS”) for the New Mexico Unit, the ISC staff and Reclamation staff will draft an RFP for a NEPA contractor to prepare the EIS. The requested budget will cover costs reimbursable to Reclamation, costs related to the RFP, and the costs for any NEPA work in FY2016. Related services include, but are not limited to, expert support in biological resources, cultural resources, socioeconomics, modeling, and any other field, or other work efforts necessary. 3. Financial advisory services. In March, the Commission approved staff’s budget request for a financial consultant with the direction that the person or firm be a certified financial adviser and investment banker. The financial adviser would complete a cash-flow analysis for the New Mexico Unit Fund and recommend an asset allocation to the Commission for investment of a portion of the New Mexico Unit Fund through the State Investment Council. Staff interviewed/solicited information from three companies. However, after considering the responses to questions by the three companies, staff determined that there was insufficient time remaining, and insufficient information to conduct the cash flow analysis, in FY2015. Therefore, staff requests that this work be completed in FY2016. 4. Public outreach services. Staff posts AWSA-related documents on the AWSA website, nmawsa.org, in order to provide easy public access to information. Costs associated with the website include server fees and a web designer who makes changes to the site as necessary. Staff envisions that the site will be used as the online portal for New Mexico Unit NEPA information. Public outreach includes not only website maintenance but also any moderator, facilitator, or publishing needs that may arise. 5. Approved non-NM Unit projects implementation services. The Commission approved $9.1 million from the NM Unit Fund for non-Unit water projects. Staff has begun providing draft contracts to grantees for review. Applications for the municipal water conservation program have been received. Some, not all, of the projects may be started this fiscal year. Thus, staff anticipates that only $2.7 million to $4.8 million of the total $9.1 million of nonNM Unit funding will be reimbursed to project participants in FY2016. The status of each project follows. 3 Arizona Water Settlements Act Work Plan FY2016 PROJECT Municipal conservation AWARD $3,000,000 PROJECTED FY16 BUDGET $3,000,000 STATUS Deadline to submit an application was June 1. Applications under review by staff. $100,000 Discussed by GBIC at regular meeting held on May13. Staff in process of following up. Contract must be entered into with GBIC’s fiscal agent. Catron County ditch $500,000 diversions $100,000 Staff initiated contact with County Manager and a County No return Commissioner. messages. Deming effluent re- $1,750,000 use project $1,000,000 Contract has been drafted and will be sent to Deming for review before June 15, 2015. Pleasanton East-side $200,000 Ditch project $200,000 Draft contract sent to Pleasanton; will be reviewed at June Commission meeting. Multiple discussions with ditch secretary re: procurement. Sunset Canal/ New $200,000 Model Canal ditch rehabilitation $200,000 Staff initiated contact with Sunset Canal president. Awaiting response from ditch associations. Grant County Water $2,100,000 Commission (“GCWC”) Well Field and Pipeline $100,000 The ISC tentatively approved award provided that GCWC provides a detailed plan by December 2016. No additional communication from GCWC has been received. 1892 Luna Irrigation $100,000 Ditch diversion $100,000 Luna Ditch pursuing NEPA, permits, and engineering. Draft contract is being prepared by staff. GBIC structure diversion $1,250,000 4 Arizona Water Settlements Act Work Plan FY2016 6. Legal Services. Litigation over alleged violations of the Open Meetings Act in connection to the Commission’s AWSA-related decisions is proceeding. Discovery is on-going, courtordered mediation is scheduled for July 13 and 14, 2015 and trial is scheduled for a trailing docket beginning on August 17th. In addition, specialized legal advice will be needed for NEPA. Work Plan Budget, Funding Source & Time Frame The total budget requested for this work plan is $ 7,700,000 from the New Mexico Unit Fund for work in FY2016. Work Plan Impact & Risks The budget for engineering services is necessary to implement the Commission’s decision to pursue a New Mexico Unit. The risk of not performing needed engineering evaluations would be the inability to properly complete the NEPA process in a timely manner. NEPA, environmental impact analyses and related services are also necessary to implement the Commission’s decision to pursue a New Mexico Unit. An investment adviser is needed to recommend asset allocation for investment of a portion of the New Mexico Unit Fund. Investment has the potential to earn additional money to construct the New Mexico Unit. Risk assessment and tolerance will be part of the evaluation and recommendation of the investment adviser. Implementation of non-NM Unit projects will proceed as directed by the Commission. The specific decisions of the Commission and the contractual agreements between the ISC and grantees greatly minimize the risk of stranded assets. Without the budget for legal services to promptly respond to litigation, or for legal advice on NEPA processes, the ability of the ISC to complete NEPA in a timely manner is at great risk. Work Plan Managers The Work Plan Managers are Craig Roepke (Bureau Chief), David Anderson, Ali Effati, and Helen Sobien. Amy Haas is the work plan manager for the legal services requested in this work plan. 5