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<br />environment or the water supplies of Northern California. Our conclusions are principally based <br />on the following: <br /> <br />The Political and Economic Complexity of the OSA <br /> <br />~-:t.D [$1> 1. <br />er'l\..J. <br />~ J~.) <br /> <br />.('"~J~~ <br />..().b... <br /> <br />"./J~ <br />~~ <br />../. <br />~~ <br />l~[J <br /> <br />The basic water transfer agreement between lID and the San Diego County Water <br />Authority (Authority) was predicated on each party's bottom-line position that the <br />~xternal environmenE-I mitigation costs each should bear would not exceed stipJJ.lated <br />al1l9.!!Dts. lID's ca~ was $10 million and the Au!hority's was $2 million. At the time, <br />both agencies did not and could not know the full extent of the actual costs. The full <br />environmental impact analysis came well after the business deal. It was a~ed <br />s~o1!e else would bear the extra c~s or the transfer would not proceed. <br /> <br />2. <br /> <br />Subsequently, when the Key Terms of the QSA were fIrst negotiated under the <br />supervision of former Interior Deputy Secretary David Hayes and California's <br />Department of Water Resources Director Tom Hannigan, a~arties assul!J.e~ <br />~nviro~ntaIl1liti~tion cQ,sts related to the Salton Sea would be manageable. This <br />was partially based on representations by the Interior Department that the necessary <br />federal permits for the transfer could be administratively issued, and that pursuant to <br />the federal 1998 Salton Sea Recla~ation Act. ~qld he no requiremeuttbaUhe <br />transfer bear the co~t;d ~lion ~P::l rel'brnMion. Then, as is the case now, there was <br />no definitive plan avail Ie s to 0 t . ed, at what cost, and <br />who woul pay for reclamation. Indeed, no federal or state decision had been made <br />to reclaim the Sea. That critical decision has still not been made. The parties also <br />failed to account for how requirements under CalifQwia'~ fulJ.y DJJ1tected species laws <br />would be met. <br /> <br />3. <br /> <br />There is an unresolved conflict ~~tween two est~hli~hf",d.p.!:Wlic policjes that has <br />transformed the simple water transfer deal originally envisioned by lID and the <br />Authority into a much more complex and tentative proposition. The public policy <br />conflict is between the state constitutional mandate that water llsers. including lID, <br />~ay. oply use such amol.!nt&of~ater as they can..u}lt tOIeagw~Qle and beneficial ~e <br />(ghlieatj.mJ to COTlserve) and the state's statutory endangeren ::Inn fullv protected <br />szcie~ laws. This conflict is clearly evident in the debate over who should bear the <br />costs of mitigating environmental impacts related to the Salton Sea habitat caused by <br />the transfer. These are not reclamatioIl.C~ts, but drawing the line between mitigajion <br />and reclamation is complicl!ted by the fact that there is no reclamation plan. Because <br />of this, when lID proposed to conserve water for the Authority's transfer, it thought it <br />was in the admirable position of selling water while it received credit toward meeting <br />their conservation obligation. But, the transfer, as agreed to, would reduce <br />wastewater flows to the Sea and create potential adverse impact on fully protected <br />and endangered species. We believe that after lID and the Authority recognized the <br />conflict, they agreed to the ~vironmental cost caps in their transfer deal. <br /> <br />- <br /> <br />4. There are other facts and policy issues that have contributed to the complexity. For <br />example, lID and the Authority continue to struggle with the question of how lID <br />,res.id.eBts ~houl<! be compensatecLfQr...Qirec.!....and indirect negative fin~nci(ll imJ2a,Cts <br /> <br />-2- <br />