BOARD AGENDA MEMORANDUM
Government Code § 84308 Applies: Yes ☐ No ☒
(If “YES” Complete Attachment A - Gov. Code § 84308)
SUBJECT:
Title
Consider the June 24, 2024, Water Supply and Demand Management Committee Recommendation to Receive an Update on the Los Vaqueros Reservoir Expansion Project, Authorize a Reduction of Valley Water’s Storage Participation Request From 50,000 Acre-Feet to 20,000 Acre-Feet, and Provide Policy Direction for Continued Negotiation of Project Agreements.
End
RECOMMENDATION:
Recommendation
Consider the June 24, 2024, Water Supply and Demand Management Committee Recommendation to:
A. Receive an Update on the Los Vaqueros Reservoir Expansion Project;
B. Reduce Santa Clara Valley Water District’s storage participation request from 50,000 acre-feet to 20,000 acre-feet;
C. Provide policy direction for continued negotiation of project agreements; and
D. Direct the CEO to inform Contra Costa Water District and Los Vaqueros Joint Powers Authority of actions taken and Board feedback, as appropriate.
Body
SUMMARY:
Los Vaqueros Reservoir (LVR) is a 160,000-acre-foot water supply reservoir in Contra Costa County owned and operated by Contract Costa Water District (CCWD). Los Vaqueros Reservoir Expansion Project (Project) is a regional partnership of water agencies to expand LVR by an additional 115,000 acre-feet (AF) and build associated conveyance infrastructure to move participant’s water into and out of LVR. Santa Clara Valley Water District’s (Valley Water) Water Supply Master Plan 2050 (WSMP) has identified the Project as a potential option to diversify its existing storage programs.
Over the past year, the Project Joint Powers Authority (JPA) has been working with CCWD and participants to develop agreements specifying costs, benefits, rights, and responsibilities. Project agreement negotiations have been ongoing as JPA members have differing views on several key topics, including allocation risk and degree of control, member access to CCWD facilities, CCWD facility usage fees, and benefits accrued to CCWD and members. CCWD has been firm on these topics. Participation terms proposed by CCWD in the current draft agreements include the following:
• CCWD owns all project facilities except for Transfer-Bethany Pipeline (TBPL).
• JPA has capacity interest in the expanded portion of LVR (115,000 AF).
• CCWD retains control over all decisions affecting design and construction on CCWD-owned facilities, including awarding construction contracts, use of contingencies, and executing change orders.
• Participants pay for design and construction costs for new facilities and modifications to existing facilities, including any cost overruns.
• Participants pay for CCWD’s use of EBMUD facilities and supplemental water supplies that CCWD determines are needed during construction.
• Access to CCWD facilities is not guaranteed. CCWD maintains priority use of CCWD facilities and participants have secondary access to excess conveyance capacity in CCWD facilities after CCWD usage.
• When surplus water is available to divert from the Sacramento-San Joaquin Delta (Delta), Grasslands Water District has priority access to 85% of diversion and conveyance capacity for refuge water, after CCWD’s usage.
• Participants pay fixed annual fee to reimburse CCWD for past construction and land purchases for the existing LVR as well as conveyance facility usage fees.
• CCWD maintains full control over all decisions on operations, maintenance, repair, and replacement of CCWD-owned facilities.
Staff identified several potential risks and areas of significant uncertainty in the draft terms, which should be considered in evaluating Valley Water’s project participation level. Key risks and areas of uncertainty which impact the business case analysis:
• Schedule: Construction on the Dam and TBPL is scheduled to begin five (5) years after final participation decision, greatly increasing cost uncertainty.
• Costs: CCWD maintains sole discretion over the Project design, construction, and ongoing operations and maintenance which could have material cost implications over the life of the Project to be funded by participants. Additional cost uncertainties include, but are not limited to:
o Costs for supplemental water purchases and backstop of CCWD water supply during construction are unknown.
o TBPL land acquisitions will not be completed until several years after final participation decision. TBPL alignment crosses over conservation easements, increasing uncertainty on land acquisition, costs, mitigation requirements, and TBPL project construction schedule.
• Operations: Put or take water capacity in LVR is uncertain due to CCWD and refuge supply priorities. Operational uncertainties include:
o Climate change, regulatory changes, or increases in CCWD demand above projections may reduce available conveyance capacity.
o Valley Water’s ability to store Central Valley Project (CVP) water in LVR is uncertain as discussions with U.S. Bureau of Reclamation are ongoing.
On June 11, 2024, CCWD sent a letter to Project participants identifying five unresolved issues from the contract negotiations and expressed its firm position. Furthermore, CCWD asked for clarity on participants’ policy positions on these issues. The CCWD letter is included as Attachment 1. Staff’s recommended policy position on each of these issues is as follows:
1. Beneficiary Pays Principle: While participants receiving more benefits should pay more costs and take on more of the risk, they should also have a larger voice in decisions affecting benefits, costs and risks. The flow of costs, risks, and decision-making ability amongst JPA members should reflect the flow of benefits to JPA members.
2. Facility Usage Agreement: Facility usage fees should reflect the lower priority access to Project facilities and uncertainty around Participants’ ability to realize project benefits. Participants should have reasonable assurance that they will receive the expected Project benefits over the life of the Project. Participants should have a share in decisions affecting their investment and CCWD facility usage fees should reflect the uncertainty around participant’s level of access to CCWD facilities.
3. Backstop Plan and Agreement: Valley Water recognizes the need for CCWD to have a reliable water supply. during construction. However, Staff does not have sufficient information to evaluate the potential costs associated with backstopping CCWD’s water supply. The role of Participants in ensuring the plan is cost-effective is also uncertain. Participants should have a share in decisions which affect the backstop costs that Participants are funding. If long-term benefit beyond the Project accrues to CCWD as part of the backstop plan, CCWD should share in the costs.
4. JPA Agreement Amendment: The existing agreement was developed collaboratively, and staff do not recommend that Valley Water support amending the JPA Agreement as proposed by CCWD. The JPA Agreement currently provides CCWD veto power over decisions which CCWD determines would negatively affect CCWD’s operations, costs, or ability to meet their water supply needs. The amendments proposed by CCWD would expand that veto power to allow CCWD to veto any JPA decision which they determine contradicts with their Board Principles.
Project Participation Levels
SFPUC and EBMUD have both recently reduced their storage participation level, with EBMUD no longer requesting any storage in LVR and the project is no longer oversubscribed. With these reductions, storage participation requests currently total 115,000 AF. The current participation requests from member agencies are shown in Attachment 2.
At the June 24, 2024, Water Supply and Demand Management Committee (Committee) meeting, the Committee recommended that the Board reduce Valley Water’s storage request from 50,000 AF to 20,000 AF to help address storage oversubscription (storage participation requests totaled 145,000 AF at the time of the Committee meeting) and reduce Valley Water’s exposure to the potential Project risks identified above. Given the numerous risks and uncertain benefits of the project, staff continue to recommend reducing Valley Water’s storage participation request.
Project Costs & Benefits
While Project modeling indicates there is sufficient excess capacity in CCWD intakes and conveyance facilities to convey Valley Water’s supplies into and out of LVR when requested, the modeling is based on 2035 hydrology which is shortly after Project construction is completed. The effects of climate change and salinity intrusion in the Delta after 2035, which could limit participant’s ability to divert water, have not been modeled.
The Water Supply Master Plan (WSMP) 2050 has developed project portfolios to evaluate how well different combinations of projects meet Valley Water’s water supply needs in the future. Several portfolios which include the Project at 30,000 TAF storage capacity could meet Valley Water’s future water supply reliability goals. However, many of the storage benefits provided by the Project could also be met through other storage options, such as groundwater banking or the B.F. Sisk Dam Raise Project.
The current capital cost estimate for the Project is $1.56 billion in 2023 dollars. A range of potential storage levels and corresponding costs are shown in Table 1. All capital cost estimates in Table 1 assume a 7% participation level in the TBPL and are based on the CCWD’s most recent facility usage fee proposal.
Table 1. Estimated Project Costs by Storage Level. Costs are in 2023 dollars.
|
|
Storage capacity in Los Vaqueros Reservoir |
|
|
10 TAF |
20 TAF |
30 TAF |
40 TAF |
50 TAF |
|
Capital Costs ($ Million) |
$126 |
$195 |
$264 |
$333 |
$402 |
|
Estimated Average Annual Variable Costs ($ Million/year) |
$1.0 |
$1.9 |
$3.2 |
$3.7 |
$4.6 |
Next Steps
Staff will continue to participate in the development of Project agreements and evaluate benefits and costs of the Project as part of the development of the WSMP. The Project schedule anticipates final participation decision in the first part of 2025.
ENVIRONMENTAL JUSTICE AND EQUITY IMPACT:
This agenda item is not subject to environmental justice analysis due to the lack of likely adverse impacts. Additionally, the agenda item consists of information and direction for staff only, and therefore, no equity opportunities exist.
FINANCIAL IMPACT:
Sufficient funding for this project is included in the FY25 adopted budget for Project 91251001 Los Vaqueros Reservoir Expansion (Fund 61). The ongoing annual financial commitments will be included in the annual budget development process. An estimate of the ongoing annual financial commitments is incorporated into the water charge projections reflected in the February 2024 Report on the Protection and Augmentation of Water Supplies.
CEQA:
The recommended action does not constitute a project under CEQA because it does not have a potential for resulting in direct or reasonably foreseeable indirect physical change in the environment.
ATTACHMENTS:
Attachment 1: June 11, 2024, CCWD Letter
Attachment 2: Member Participation Table
Attachment 3: PowerPoint
*Handout 3.4-A: SFPUC
*Handout 3.4-B: Public Comment
UNCLASSIFIED MANAGER:
Manager
Vincent Gin, 408-630-2633