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HomeMy WebLinkAboutItem B: EWEB Water Rights ECC UGENE ITY OUNCIL AIS GENDA TEM UMMARY Work Session: Eugene Water & Electric Board Sale of Water to Veneta Meeting Date: June 28, 2010 Agenda Item Number: B Department: City Manager’s Office Staff Contact: Brenda Wilson www.eugene-or.gov Contact Telephone Number: 541-682-8441 ISSUE STATEMENT Eugene Water & Electric Board (EWEB) entered into a contract to sell water to the City of Veneta. EWEB has filed a lawsuit asking the court to declare that EWEB has independent authority to enter into that contract without City Council approval. The primary issue for the council to consider is how to respond to the proposed sale of water to Veneta. BACKGROUND Section 44(3) of the Charter provides that EWEB shall operate the water utility and electric utility of the City “subject to control by the council of extension of water service.” Section 2.212 of the Eugene Code provides, in part, that the “city, including EWEB, shall not provide water, water service or sewer service outside the city limits except as authorized pursuant to the city charter, this code, and adopted resolutions.” Late last year, EWEB informed the City Manager about EWEB’s interest to sell water to Veneta in order to certify part of EWEB’s third water right and to help ensure that the water in this water right would be available to Eugene residents in the future when needed. In mid-April, EWEB and the City of Veneta signed a water-sale contract. EWEB then submitted the contract to the Lane County Circuit Court for validation. On May 12, 2010, the council was presented with background information on the water sale and the court process. The council raised many questions about the sale and the certification/perfection of water rights in general. Accordingly, the council directed staff to schedule (1) a joint meeting with the EWEB Board of Directors before the council takes up this issue for decision; (2) a public forum, with EWEB’s involvement, in order to provide information to the public about the proposed sale of water; and (3) following that forum, a public hearing on EWEB’s proposed sale of water to Veneta. In order to provide more time for the process directed by the council, EWEB filed for a 30-day extension of time in which to file an appearance in the validation case. The deadline to do so is now June 30, 2010. The joint meeting with EWEB was held on June 7, 2010; the public information forum was held on June 8, 2010; and the public hearing was held on June 14, 2010. Staff has received three sets of public comment: one from Jan Wilson of the Western Environmental Law Center; one from Shawn Boles, Howie Bonnett, and Dave Funk, and one from EWEB. Those documents are attached as exhibits B, C, and D, respectively. Z:\CMO\2010 Council Agendas\M100628\S100628B.doc While the City Manager continues to believe that perfection of the third water right is in the City’s interest, the City Manager believes that the issue of Charter authority should be resolved first. Accordingly, the City Manager recommends the City intervene in the pending validation proceeding. RELATED CITY POLICIES Section 44 of the Eugene Charter sets out the Eugene Water & Electric Board functions. It states, in part: “(1) The power of the city to generate, collect, and distribute electricity, steam, and other kinds of physical energy is hereby vested in the Eugene Water & Electric Board (the Board). * * * “(3) The board shall maintain and operate the water utility and the electric utility of the city, subject to control by the council of extension of water service.” Section 2.212 of the Eugene Code, 1971, contains provisions for extraterritorial water and sewer service extensions. It states: “The city, including EWEB, shall not provide water, water service or sewer service outside the city limits except as authorized pursuant to the city charter, this code, and adopted resolutions. The city manager or the manager's designee is hereby authorized to receive on behalf of the city requests for the extra-territorial extensions of water service or sewer service from inside the city limits to serve property located outside the city limits or for the provision of water or sewer service to special service districts. Such requests shall be accompanied by the application fee established by the city manager as provided by section 2.020 of this code. Requests for the extra-territorial extension of water service or sewer service shall be processed and approved or denied as provided in section 9.8115 to 9.8121 of this code.” COUNCIL OPTIONS 1. Postpone a decision on whether the council supports the proposed sale of water to Veneta until after the “Charter authority” question is resolved by the court. If the council chooses this option, the City will intervene in the validation proceeding and argue that the City Charter grants to the council, rather than EWEB, the authority to decide to sell water outside the City’s limits. 2. Support not only this proposed sale of water, but agree that EWEB should have the authority to approve other sales to municipalities without needing the council review and approval. If the council chooses this option, staff will (a) present to the council a resolution authorizing this proposed sale to Veneta (since that can happen quickly), and (b) schedule a public hearing for the council on a proposed code amendment delegating to EWEB the authority to enter into wholesale water sale contracts. Z:\CMO\2010 Council Agendas\M100628\S100628B.doc 3. Support this particular proposed sale of water (i.e., to Veneta). If the council chooses this option, staff will present to the council a resolution authorizing the proposed sale, and then argue to the court that the contract is valid because the council approved the proposed sale. 4. Oppose the sale of water to Veneta. If the council chooses this option, the City will intervene in validation proceeding and argue that the City Charter grants to the council, rather than EWEB, the authority to decide to sell water outside the City’s limits. 5. Take no position on the sale of water or the Charter question. If the council chooses this option, the City will not participate in the validation proceeding, leaving it to the parties already part of the validation proceeding to litigate those issues. CITY MANAGER’S RECOMMENDATION The City Manager continues to believe that it is in the City’s interest for EWEB to perfect the third water right; however, the City Manager believes the Charter authority question should be answered first and therefore recommends Option 1. This would provide more certainty to both EWEB and the City of Eugene. SUGGESTED MOTION Move to direct the Manager to intervene in the validation proceeding and argue that the City Charter grants to the council, rather than EWEB, the authority to decide to sell water outside the City’s limits. ATTACHMENTS A.Responses to Questions from Council – Updated June 29, 2010. B.Testimony from Jan Wilson, WELC and copy of Notice of Appearance and Motion to Intervene C.Testimony from Shawn Boles, Howie Bonnett, and Dave Funk D.Testimony from EWEB FOR MORE INFORMATION Staff Contact: Brenda Wilson Telephone: 682-8441 Staff E-Mail: brenda.s.wilson@ci.eugene.or.us Z:\CMO\2010 Council Agendas\M100628\S100628B.doc ATTACHMENT A RESPONSE TO EUGENE CITY COUNCIL QUESTIONS ON EWEB’S WATER RIGHTS ISSUES ~ Updated June 21, 2010 ~ (Questions 9 through 13) _______________________________________ ____________________ 1. How much water does Veneta use per day now? The projections for Veneta’s 2010 usage outlined in their Water Master Plan are as follows:  Average Daily Demand is .90 million gallons a day  Peak season demand is 1.1 million gallons a day  Maximum Day Demand is 2.3 million gallons a day  Peak Hour Demand is 2.9 million gallons a day  Maximum daily use for Veneta during the hot summer months is 2.2 million gallons a day (mgd), while the city’s wells can produce just 1.69 mgd. Right now, Veneta can’t meet demand on its maximum use days without drawing down its storage reservoirs. Because those reservoirs are meant to respond to emergencies such as fire, Veneta needs to add capacity. Veneta estimates that by 2030, it will need 4.3 mgd. 2. If this deal didn't go through, what is Veneta's "Plan B"? Veneta’s adopted 2009 Water Master Plan projected that they would continue to rely upon groundwater sources (wells) to meet Veneta’s immediate needs through 2020, so they would go back to that plan if the pipeline project does not proceed. However, the plan noted that groundwater development alone was not likely sufficient to meet Veneta’s long term needs. Please see the attached Project Overview for more information. 3. Could Veneta draw water from Fern Ridge Reservoir or the Long Tom? Fern Ridge Reservoir is operated by the United States Army Corps of Engineers (CORP) as a flood control basin. Municipal waster supply is not an approved use for this body of water. Even if it was, the quality of this water is poor due to high summer water temperatures combined with nutrient rich influents from local feeder streams. This quality of water is very difficult to treat and the product water often contains undesirable taste or odor. Aside from having no available water for appropriation, the Long Tom River is a poor quality source of water. The Long Tom experiences low flows during the period of highest water demand for the City of Veneta. It was estimated in the Veneta Master Water Plan that during periods of low flows, the City of Veneta would need to appropriate approximately 65% of the water in the Long Tom to meet peak demand. That amount of water is not available in this water source even if Veneta could purchase a water right from another water right holder. 1 4. If the deal does go through, Veneta will maintain a secondary source of water. What is it? As outlined in the water purchase agreement with EWEB, Veneta will continue to operate and maintain their existing system as the secondary water source. 5. In EWEB's certification, what does "25% certification" mean referring to the third water right? EWEB’s third water right is not certificated. In other words, while the amount of water under that water right permit has been “set aside” for EWEB, the utility must move toward perfection (putting the water to beneficial use) of that water right or it will lose the right to use that water in the future. Failure to certify a water right permit or make reasonable progress toward certification can result in the loss of the permit – and the right to use any of the water under that permit in the future. In order to move toward certification, municipal water rights applicants are required to prepare a plan that identifies when they expect to be using the full quantity of water allowed under each permit, and must describe the methods and assumptions used in determining those date(s). This schedule must also include the expected schedule for certification of each water rights permit. The process of certification involves “proving up or perfecting” the water use allocated under a given permit, as defined by the rules governing beneficial use. Under Oregon law, a municipal water right permit may be partially perfected for not less than 25 percent of the permitted total allowed under the right, and a certificate can then be issued. This allows for a municipal water supplier to plan for increased capacity over time. Certification is the only way to obtain conclusive evidence of the priority and extent of the appropriation of a water right. 6. If EWEB does sell water to Veneta, do the water rights to that water also transfer to Veneta? No, EWEB is the permit holder and the water right would still belong to EWEB. 7. In EWEB's memo and in the "Key Messages" it says that selling surplus water can "reduce costs for EWEB customers". Does this mean a reduction in the monthly water bill if water is sold to Veneta? Not in itself. Treating and delivering water comes with high fixed overhead costs. Spreading those costs over a wider retail and wholesale base helps lower per capita costs and will help minimize the magnitude of future rate increases. 8. Eugene Code 9.8115 and 9.8121 seem to prohibit extensions of service out side of the Urban Growth Boundary. What would make the proposed sale to Veneta an exception? 2 EWEB's sale of water to Veneta is not an exception to Sections 9.8115 to 9.8121 as those Sections do not apply to EWEB's sale of water to Veneta. Rather, those Sections apply to extensions of water (or sewer) service to individual properties. One of the approval criteria, for example, is that the “applicant has entered into an annexation agreement on forms provided by the city pertaining the property proposed to be served or will enter into such an annexation agreement as a condition of approval.” Wholesale delivery of water to another municipality couldn’t qualify under this provision because those properties could not annex to Eugene. Other requirements in those sections also assume that the extension of water (or sewer) service is for individual properties – for example, by requiring notice of the application to be provided to owners of properties located within 750 feet of property to be served. Section 2.212 also specifically notes that “extension of water service or sewer service” shall be processed as provided in section 9.8115 to 9.8121 of the code, but does not state that those provisions govern the extension of “water” outside city limits. Instead, the city attorney believes that section 2.212 requires that such an extension of “water” outside city limits (for example, to a special district or municipality) be approved by Council resolution. 9. How many water rights on the McKenzie are junior to the 1961 EWEB water right permit? There are a total of 208 water rights on the McKenzie River which have been permitted and/or perfected on the river since 1961, with 2 new water right permit applications currently pending. These rights total 2,679 cubic feet per second (cfs). Six of these permits are in- stream water rights protecting 2,430 cfs. Two of these permits are municipal rights including 35.9 cfs for SUB who has not begun to use the water under the permit yet. This means that if EWEB got back in line to apply for another water right permit – assuming that is even possible – there would be 208 water right permits that would have seniority to EWEB. 10. When did EWEB apply for the latest extension? EWEB applied for an extension on the 1961 water right permit in 2003. The extension application is currently on hold to allow EWEB to update the application materials, since things have changed since 2003. One item EWEB is updating is the projection in order to justify the length of time requested in the extension application (EWEB expects to request an extension period beyond 70 years). It should be noted that as part of the extension process, EWEB will have to submit a new Water Management Conservation P which identifies “green light” water for needs out to 20 years. The rest of the water that sits between 20 years and the length of extension gets a “red light” status. This brings in another layer of risk and complexity to the discussion and requires a thorough understanding of OAR 690-86. 11. Will the sale of water to Veneta be used as part of EWEB’s justification for the extension? YES. EWEB would use the sale of water to Veneta to help justify the extension request since under the construction plan, water could be delivered to Veneta by 2014. That delivery of water could help show that EWEB is moving towards certification of the first 25% of the 1961 water right. 3 12. What is the rush? Aside from the permit extension request that is currently being updated by EWEB where we need to show reasonable progress towards certification, the City of Veneta needs to determine – by July 13, 2010 - what course of action it can take. Last week, Veneta received a draft “Intent to Award” letter from the U.S. Rural Development Service. Unfortunately, the award is for only $2.6 million in grant funds, which will require Veneta to take out a $13 million loan package from the agency. Rural Development has set a deadline of July 13, 2010 for Veneta to determine if they will accept the funding package. 13. On the graph EWEB created entitled "Securing EWEB Water Rights" it shows that we will not hit the ~105 mgd until sometime past 2050. As to amount of usage shown on the table - how were those amounts derived? The projection EWEB used is based on the following:  Water loss increase from the current 7% to 10% (the State goal under Water Management & Conservation Plans) because an increase in water loss from aging infrastructure.  Industrial growth of 5 mgd between now and year 2050.  Conservation reductions (5% reduction in per capita maximum daily demands) by 2040.  Population Projections for City of Eugene. Currently, EWEB serves approximately 180,500 people in and outside the city, with approximately 23,400 people outside the City limits (two water districts, Willamette Water Company, and customers of dissolved water districts that have boundaries outside city limits). The projection in the graph assumes that by 2030, population within the City of Eugene is to grow to approximately 197,500 and assumes the same 23,400 number for existing customers outside City Limits by 2030. Beyond 2030, EWEB assumed the same growth rate as in the previous years out to year 2050. EWEB acknowledges that while there are too many variables in the determination of water use to predict exactly when we will reach the ability to partially certificate the third water right, EWEB is trying to plan responsively around projected water needs and incorporate the future planning framework into their projections. The potential water sale to Veneta and other wholesale water customers represent one option to plan for future water needs and to show a need for water – and that we will put the water in the third water right to beneficial use within reasonable timeframes. 4 ATTACHMENT C To: Mayor and City Councilors Subject: Water Contracts outside the UGB From: Shawn Boles, Howie Bonnett, and Dave Funk Date: June 21, 2010 The intention of EWEB to gain perfection of water from the McKenzie River by becoming a regional water wholesaler will have adverse consequences for Eugene’s sustainability efforts. Acting as a water wholesaler will enable growth of “bedroom communities” which might otherwise be required to grow within the limits of their natural resource availability. In the case of Veneta, which projects a doubling of population growth and a similar increase in water demand in the next 20 years, enabling this growth by providing water could well result in a doubling of commuter traffic to Eugene via highways and arterials already heavily impacted with automobile traffic. Nine-tenths of all workers in Veneta commute to our urban area, mostly by car, contributing to air pollution, carbon dioxide release, and congestion of our streets. At the same time that Eugene’s citizens are developing one of the most insightful and comprehensive climate and energy action plans in the Northwest, with proposals such as 20- minute neighborhoods in which residence, shopping, and employment are close together, it is ironic that EWEB, owned by Eugene’s citizens, should be proposing a water wholesaling policy in opposition to the direction of the City Council to reduce energy consumption and carbon dioxide release. The sale of water to Veneta will have little impact on EWEB’s attempt to perfect an additional 29 million gallons per day. The Veneta sale would represent only a few percent of the total “beneficial” use Eugene needs to demonstrate. Through conservation and more efficient use of water, EWEB’s use of water has grown much more slowly than was predicted in the 1960’s. In fact, EWEB’s maximum demand in millions of gallons/day has not increased in the last 10 years. We recommend that you, members of the City Council, reaffirm our right to deny sale of water by EWEB outside the Urban Growth Boundary, and reject the proposal by EWEB to sell water to Veneta.