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ON THE COLORADO RIVER The year began with a federal action affecting all the basin states, the signing of a Record of Decision for the Interim Surplus Guidelines by the Secretary of the Interior. These reservoir operation criteria were designed and agreed to by all seven states which share the river and are a critical element to the California 4.4 Plan. The criteria provide California, Nevada and Arizona with a measure of certainty regarding the availability of surplus water. In the Upper Basin, the most important issues facing all four states, Colorado, New Mexico, Utah and Wyoming, was the drought. There was below normal snow pack and dramatically low inflows to reservoirs in all the states. In Colorado, federally mandated releases below lake Granby, the state's second largest reservoir, were reduced in accordance with the 1961 minimum streamflow agreement. This was the first of its kind in the United States below a federal facility Additionally, Congress passed the 2001 Amendments to the Colorado Ute Water Rights Settlement Act, which, along with a companion $16 million appropriation, means the Iong- delayed Animas-LaPlata Project is finally under construction, In Wyoming, construction began of the High Savory Dam and a feasibility study for the expansion of Viva Naughton reservoir was funded by the state's Development Commission, New Mexico celebrated the completion of the San Juan Basin Regional Water Plan and the state also settled its Native American water rights claims and adjudicated water rights throughout the basin, In the lower Basin, the states were experiencing drought but areas with access to Colorado River water were somewhat insulated from its affects by the results of the Interim Surplus Criteria, The most significant events included the signing of the Arizona Water Banking Agreement and the progress California was making to meet the goals set forth in the 4.4 Plan, The Arizona Water Banking Agreement was signed by water officials from Arizona and Nevada and the Department of the Interior. It provides the ability for Arizona to store Colorado River water in its recharge projects on behalf of Nevada during the next few years. In the future, Nevada may then draw more water off the river and Arizona will take less, drawing on its supply stored underground on behalf of Nevada. In California, the respective boards of directors for the Metropolitan Water District of Southern California and Palo Verde Irrigation D'lstrict approved principles for a 35-year program that would pay Palo Verde Valley farmers to annually set aside a portion of their land, rotate their crops, and transfer saved water to urban Southern California, Under the approved principles of the Land Management, Crop Rotation and Water Supply Program, Palo Verde Valley farmers would stop irrigating from 7 to 29 percent of their land in any year at the request of MWD, making 25,000 to 1ll,000 acre-feet of water available for urban consumers, The land taken out of production would be maintained and rotated once everyone to three years, The maximum amount of farmland taken out of production in any year would be 26,500 acres. On the environmental front, efforts to develop strategic programs continued on the Upper Basins' Upper Colorado River Recovery Program and the Lower Basin's Multi Species Conservation Program, The states also iointly discussed how to manage the riparian needs of the Colorado River Delta and the Salton Sea, as well as how to address water quality at the Colorado River Basin Salinity Control Forum. Colorado River Water Users Association 3