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<br />Allen Matkins Leek Gamble & Mallory LLP <br />attorneys at law <br /> <br />Interested Persons <br />May 25, 2003 <br />Page 2 <br /> <br />Sections 7. 1 (b)(iii) and 8. 1 (b)(iii) of the lID/SDCW A Transfer Agreement permit either <br />SDCW A or lID, respectively, to terminate the lID/SDCW A Transfer Agreement if projected <br />required environmental mitigation expenses will exceed the authorized cap for each party's <br />respective responsibility, unless the excess cost will be paid by someone else; See Sections 7.3 <br />and 8.3 of both the lID/SDCW A Transfer Agreement and Fourth Amendment. Section 3.4(1)(ii) <br />of the QSA also allows state or federal legislation or administrative action to relieve SDCW A or <br />lID of responsibility for any excess mitigation cost and thus preclude termination. <br /> <br />Environmental Cost Sharing. Funding and Habitat Conservation Plan Development Agreement <br /> <br />Section 4.2 of the ECSA allows SDCW A, CVWD or MWD, but not lID, to determine <br />that there will be Remaining Unexpected Environmental Mitigation Costs (costs left after full <br />expenditure of the funds provided by the four agencies and the State of California) and send a <br />notice of non-responsibility for further mitigation costs which results in termination of the QSA <br />180 days thereafter unless the obligation of the noticing party is assumed by some other party(s). <br /> <br />Section 5.70f the ECSA allows lID to cease any activity if continuation would violate <br />the Endangered Species Act or other similar laws. "IID shall have the right, at any time during <br />the term of the QSA, to cease any activity under the QSA or Related Agreements if IID, acting in <br />goodfaith, determines that continuation of such activity will: (i) violate ESA, CESA, any <br />regulations or orders promulgated pursuant thereto, the terms and conditions of any ESA or <br />CESA permit, approval or agreement; or (ii) otherwise violate applicable state, federal or local <br />laws, ordinances or regulations, unless IID is immune from such liability pursuant to statute. <br />Prior to making such determination, if circumstances permit, IID shall consult with the other <br />Parties to this Agreement and with the Wildlife Agencies, and other. agency with the authority to <br />enforce the statute, regulation, permit, order or approval that is the subject of the proposed IID <br />determination. IID shall not cease the activity if the agency with jurisdiction to enforce the <br />applicable statute, regulation, permit, order or approval provides IID with adequate assurances, <br />in writing, that the continuation of the activity will not violate the applicable statute, regulation, <br />permit order or approval." Under the QSA, Section 1.1(63) and 62(iv), if the cessation of the <br />activity also stops a transfer or acquisition, and the cessation lasts for twelve months, the QSA <br />would terminate. <br /> <br />Quantification Settlement Agreement <br /> <br />The QSA provides for termination in the event of termination of the lID/SDCW A <br />Transfer Agreement, Sections 3.1 and 1.1(62)(i) and (48); expiration or termination of the <br />Inadvertent Overrun and Payback Program, Sections 3.1 and 1.1(62)(ii); an injunction <br />preventing a transfer or acquisition remains in effect for twelve months or an lID activity <br /> <br />579390.0IlSD <br />I4161-002lS-29-03/dloIjah <br />