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<br />the Authority, subject to certain ceilings as to lID's responsibility. The right of first refusal and <br />any lID financial obligation would terminate with the end of the shortage. <br /> <br />II. Environmental compliance <br /> <br />a) In a transaction such as this it is very difficult to forecast what might be required of the <br />parties as a result of compliance with laws such as the California Environmental Quality Act <br />(CEQA) and the National Environmental Policy Act (NEPA). Sometimes with both CEQA and <br />NEP A compliance processes the parties proposing an action may have to cover certain costs <br />designed to mitigate the impacts of the transaction on the environment. <br /> <br />b) lID and the Authority agree that the implementation of the agreement will be contingent <br />on compliance with CEQA and NEP A. The agreement delineates where lID has environmental <br />responsibility and where the Authority has environmental responsibility. lID's responsibility <br />extends to the Imperial Valley and the Salton Sea, and the Authority's responsibility extends to <br />San Diego County, movement of the conserved water through the MWD system, and any <br />consequences on the Colorado River stemming from changing the diversion point from Imperial <br />Dam to Lake Havasu. <br /> <br />c) The agreement also divides the environmental compliance components into pre-effective <br />date and post-effective date responsibilities. For both parties the agreement provides exit <br />provisions which allow either lID or the Authority to walk away from the agreement if the <br />environmental mitigation costs exceed the maximum amounts allowed. For example, the <br />agreement provides that the maximum amount that lID will spend on pre-effective date mitigation <br />is $15 million, and the maximum amount lID will spend on post-effective date unexpected <br />environmental consequences will be $15 million, for a total exposure of $30 million. <br /> <br />Comment: It is not expected that environmental compliance costs will reach or exceed the <br />limits provided for in the agreement. However, for a transaction of this magnitude, and given the <br />linkage between this transaction and the Salton Sea, it was determined that the prudent course <br />would be to provide for considerable flexibility prior to being compelled to terminate the <br />agreement. Also, even though the agreement provides that lID's area of responsibility covers the <br />Salton Sea, it was determined that the overall benefits of the transfer, including factors such as <br />base price and shortage premium, justified the assumption of that responsibility. <br /> <br />12. Approvals <br /> <br />a) One of the conditions imposed in the agreement is that the transfer will be approved by the <br />State Water Resources Control Board (SWRCB) within five years of when the agreement <br />is executed. Approval by the SWRCB will cover such matters as: this transfer is <br />consistent with California Water Code Section lOll, oversight by the SWRCB, state <br />constitutional requirements that water be used reasonably and beneficially, and verification <br />of water conserVation. <br /> <br />b) In addition to approval of the SWRCB, it is also a condition to obtain, within six years of <br />the execution date, the approval of the Bureau of Reclamation (BOR). BOR's approval will <br /> <br />1492 <br /> <br />-7- <br />