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<br />OCC646 <br /> <br />I have scheduled a follow-up call (2-15) with Reclamation to discuss their <br />issues. Update: Lee Miller and I met with Reclamation and the State Engineer's <br />staff to discuss the NEPA process and timeline involved in authorizing the use of <br />the Fry-Ark Project and winter water in the water bank. .,t looks like <br />Reclamation's work-scoping and maybe an environmental assessment - will <br />take the remainder of this year and the early part of 2003 to complete. So, we <br />could have a fully operational water bank by February 2003. It appears that the <br />state will move forvvard with their rule making, which is scheduled to be complete <br />July 1, 2002. However, they may ask the legislature to extend the program <br />sunset date so that we can get a full five years of operation. <br /> <br />Attached for the board's consideration is the concept paper on Fry-Ark <br />Project/winter water participation in the water bank that I provided Reclamation <br />and the State Engineer. I had provided the board a copy of this paper back in <br />November of '01. Please consider the provision in the concept paper that would <br />not allow Project water to be allocated to lands that had banked their stored <br />water rights. This is an issue the board needs to consider. <br /> <br />If & When Contracting and Water Activity Fund Surcharges-We had asked <br />Reclamation to include in all If & When contracts language that would put the <br />contractor on notice that they had to pay the District/Enterprise's Water Activity <br />Fund Surcharge. This surcharge is designed to meet our SOD payment <br />obligation as well as establish a reserve fund for Project O&M. Reclamation <br />notified the District/Enterprise that they have concerns with the surcharges being <br />placed on their If & When storage contracts. Their main concern is that we have <br />expanded the scope of the surcharge to include an O&M Reserve Fund, <br />consistent with the recommendations in the PSOP, They believe that the SOD <br />repayment contract only allows for a SOD surcharge. They are also concerned <br />that our surcharge rates would collect more than the $60k needed to meet the <br />Ag portion of the SOD contract. They even suggested that any over collections <br />should be used to make advance payments on the SOD contract. We explained <br />to them that the funds have a broader purpose than just their $60k payment. The <br />funds are used to reimburse the District ($90k per year) for the upfront funding <br />of the M&I portion of the SOD contract, and again, to build an O&M Reserve <br />Fund. After a lot of discussion, we have asked Reclamation to not include any <br />surcharge language in the If & When contracts. We told them that we have side- <br />agreements among the parties that provide a basis for the surcharges (see our <br />letter of response). <br /> <br />3 <br />