MINUTES OF THE ASSEMBLY COMMITTEE ON GOVERNMENT AFFAIRS Sixty-eighth Session February 13, 1995 The Committee on Government Affairs was called to order at 9:00 a.m., on Monday, February 13, 1995, Chairman Douglas A. Bache presiding in Room 4412 of the Grant Sawyer State Office Building, Las Vegas, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Mr. Douglas A. Bache, Chairman Mrs. Joan A. Lambert, Chairman Mrs. Deanna Braunlin, Vice Chairman Mr. P.M. Roy Neighbors, Vice Chairman Mr. Max Bennett Mrs. Marcia de Braga Mr. Pete Ernaut Mr. William Z. (Bill) Harrington Ms. Saundra (Sandi) Krenzer Mr. Dennis Nolan Mrs. Gene Wines Segerblom Mrs. Patricia A. Tripple Mr. Wendell P. Williams COMMITTEE MEMBERS ABSENT: Mrs. Vivian L. Freeman - Excused GUEST LEGISLATORS PRESENT: Senator Mark James, District 8 STAFF MEMBERS PRESENT: Denice Miller, Senior Research Analyst OTHERS PRESENT: R. Michael Turnipseed, State Engineer Pat Mulroy, General Manager of SNWA Janet Rogers, Chairman of CRC Gerald Edwards, Chief Engineer for CRC David Latrell, Representative from Power Department Delmar Latham, Representative from Overton Power District Senator James began his presentation on S.B. 327 stating Nevada has a Prior Appropriation Doctrine, which governs both surface and subsurface water rights. A water right is acquired only by appropriation of the water and placing it to beneficial use. Once the water right is acquired, it can be lost through forfeiture or abandonment. It is a real property right that may be transferred between parties, whether it is an unperfected right or a perfected right. A perfected right means proof the water right has been placed to beneficial use and has been filed with the State Engineer. The Prior Appropriation Doctrine is based on private property rights with an overlay of Federal Regulation, which tries to look after the public interest. Water is a scarce resource in Nevada so this is an area that is particularly affected by the public interest. Private parties have transactions between one another that not only affect those specific parties but also the entire state, for example inter-basin water transfers or sales of water between parties for a new use. Senator James stated that during the 1993 session, he proposed S.B. 327, which was designed to address public interest in water. The law requires the State Engineer to consider, on every transaction that comes before him, what is and is not in the public interest before approving the transaction. Because the law in the statute did not give a definition of public interest, the bill was amended to create the legislator's subcommittee on the use, allocation and management of water. The committee consisted of six members, three from the Senate and three from the Assembly. They adopted approximately 14 pieces of proposed legislation for this session. He referred to the summary of recommendations of the study committee (Exhibit C). This summary deals with the issues of Water Rights Titling, Staffing and Funding, the definition of Subsisting Right, Speculation, "Mother-in-law Quarters," Technical Changes, The Groundwater Replenishment District, Water Planning, Conservation and Conservation Credit Systems, Public Interest Criteria, Water Transfer Issues, Federal Actions, Irrigation Laws, Safe Drinking Water Program and the Walker River Basin. Assemblyman Ernaut asked regarding the inter-basin water transfer if the policy statement would be included in a Resolution or a Bill Draft Request. Senator James responded it would be approved by the State Water Planners then go to the Legislature. Michael Turnipseed, State Engineer, stated there were three criteria on which to base a new appropriation of water: whether there is unappropriated water in the source, whether it will interfere with existing rights, and whether it is in the public interest. Mr. Ernaut declared he understood how it got through the system, his question was how is the policy statement created. Mr. Turnipseed replied there is a policy board who guides everything the State Water Plan does, but does not know who in the legislature would ratify or adopt it. There will be a draft of a water policy statement coming out soon before the end of the session, but the actual State Water Plan will not be done until the 1997 session. Pat Mulroy, General Manager of the Southern Nevada Water Authority (SNWA), came forward to state she sits on the Water Planning Advisory Board. The water planning staff conduct public meetings throughout the state to get as much input as possible. That information is brought back to the advisory board for guidance and then given to the Legislature for adoption. Mr. Ernaut asked who would draft the language. Ms. Mulroy replied the State Water Planning Staff. Mr. Ernaut proceeded to question the status of the Eco-Vision Project. Senator James responded there were people in the audience who could better answer that question. His committee did not focus or target specific inter-basin water transfers but come up with a fair policy that would deal with all transfers. Mr. Ernaut commended the Interim Committee for their effort and the recommendations they brought to the Government Affairs Committee. Assemblyman Lambert stated she enjoyed serving on the Interim Committee with Senator James, who did an outstanding job. Assemblyman Bennett questioned how much inter-basin water exists and does the committee need to include a study of the inter-basin waters to find out what they have to work with. Senator James agreed they need to know how much is available, what the rights are, and what is included in the recommendations. Mr. Bennett felt they should arrange to do a simple, less expensive draw down test on existing wells to determine recoverability. Senator James responded the State Engineer had the authority to do that if he felt it was necessary. Assemblyman Harrington questioned if they would get a change in the law to allow the extraction of the Virgin River water out of Lake Mead. Senator James noted that was not dealt with as it was an interstate issue. However, he felt personally there would be changes that would have great impact on southern Nevada water supplies which would in turn affect the rest of the state. Assemblyman Nolan voiced his concern about constituent's ability to obtain well rights for their property and if there would be new fees or taxes for existing wells. Senator James explained it would depend on which basin they were in and the status of that basin. In southern Nevada, many of the basins, particularly the Las Vegas artesian basin, are over appropriated and there is no way to acquire a new appropriative right, not even a revocable right. The Groundwater Replenishment District legislation will try to ease that by bringing the basin back into equilibrium so domestic wells and revocable water rights would become available again in the future by retiring old water rights or injecting new water into the basin. As to new fees, the Senator James could not recall specific fees other than the Groundwater Replenishment District Bill, which would be financed by the members of the district who would be paying membership fees dependent upon the actual water use. That money would be earmarked for acquiring old water rights to retire or new sources of water, so it would be creating a trust fund for management of the basin. Assemblyman Segerblom questioned if the members of the district meant well users. Senator James pointed out that had not been defined yet. They had recommended that existing domestic well users be grandfathered in or be minimally affected. What they are really dealing with is the municipal, industrial and commercial users. Chairman Bache thanked Senator James for his participation as he needed to be excused to attend a Senate meeting. The chairman then asked Mr. Turnipseed if he would respond to the questions concerning the Eco-Vision Project and the Virgin River issue posed earlier by Mr. Ernaut and Mr. Harrington, respectively. Mr. Turnipseed stated a letter had been sent to the proponents of the Eco-Vision project outlining eight items he wanted to see these items, access to the properties where their appropriation lies, contracts with municipalities, contracts with the power buyers and rights-of-way across federal lands if any are involved. If all items were supplied, they would then pay $1 million per year for the next five years to participate in a study of the overall impact of mine dewatering and mining on the Humboldt River. If any of the criteria were not met, the application was subject to denial. Regarding the Virgin River, Mr. Turnipseed said he had approved an appropriation for the SNWA for up to 190,000 acre feet out of the river. The water availability is as low as 40,000 acre feet and as high as 400,000 acre feet. The proposal was to divert the water out of the river and place it into a holding reservoir, then mix it with the Colorado River water and use it to artificially recharge this basin. As far as the interstate arrangement, he would defer to others more knowledgeable in that area. Mr. Harrington inquired if a pipeline would be used to transport the water to Las Vegas. Mr. Turnipseed answered yes. Mr. Harrington commented he had heard the pipeline expense could be up to $1 billion. Mr. Turnipseed declared he did not think the whole project would cost that much money. Chairman Bache asked Janet Rogers, Chairman of the Colorado River Commission (CRC), to come forward to begin her presentation. Ms. Rogers began by stating at the last Legislative Session the commission was reconstituted - changed from five members to seven - three members appointed by the Governor, the chairman and three members from the SNWA. Their responsibilities are three-fold: water, power and land. Ms. Rogers proceeded with a brief historical overview of the Colorado River . It is 1400 miles long, covers a watershed of 246,000 square miles, serves a population of 25 million people as far as municipal and industrial water, and irrigates 1.8 million acres. At the turn of the century when people were eyeing the arid west they realized the river was the lifeblood to its settlement. The federal government encouraged the seven states that surround the river to get together and divide it up amongst themselves. They ultimately divided the river in half : into an upper basin which included the states of Colorado, Wyoming, Utah and New Mexico, and a lower basin which is Arizona, Nevada and California, each containing 7.5 million acre feet of water with 1.5 million acre feet to Mexico. Each basin was then to decide how to divide their portion amongst themselves. The upper basin formed a commission and divided theirs by percentages. The lower basin continued to argue until about 1928 when they were pressed into a decision by the federal government due to the building of Boulder Dam - California taking 4.4 million acre feet, Arizona taking 2.8 million acre feet and Nevada getting 300,000 acre feet due to the low population at that time. In 1964 after continuous arguing in the lower basin, the United States Supreme Court decided Arizona vs California, which stated all uses within a state are to be attributed toward the state's entitlement. Those three documents, the compact of 1922, the Boulder Canyon Project Act of 1928 and the 1964 U.S. Supreme Court decree, are collectively referred to as the Law of the River. The Law of the River, though not written, says you cannot wheel water and there is an entitlement limitation on marketing. The CRC and the SNWA would like to change this law or at least allow a different interpretation of it to obviate some of the problems. The CRC and SNWA hosted the Nevada Water Summit and got 27 proposals for additional sources of water. They then formed a review team of 11 members to review the proposals. (See Exhibit D). Presently, they are in four forms looking for additional sources of water. The first is with the lower basin in a tri-state meeting with California and Arizona. The second is in the Seven Ten meeting with the Colorado Indian Tribes in the seven basin states, which would provide a regional solution. The third is in negotiations with Utah and Arizona on the Virgin River. The fourth is to talk with individual purveyors. Ms. Rogers deferred to Mr. Gerald Edwards, the Chief Engineer for CRC, to continue the presentation. Mr. Edwards referred the committee to his Progress Report of the Colorado River Lower Basin Technical Committee (Exhibit E). He explained the commission is working on a state to state basis, particularly with Utah, to seek any opportunities to wheel the Colorado River, to develop the waters of the Virgin River, or to possibly lease a portion of their Colorado River apportionment. Mr. Edwards indicated he was also working with the seven basin states, however, they have stressed to look at every other option first. Lastly, they have been in contact with the lower division states including representatives from the Lower Colorado River Indian Tribes. Also in attendance at the meetings are representatives from the Department of Interior, from major municipal industrial water districts and agricultural districts. Each of the basin states and the Lower Colorado River Indian Tribes has submitted a proposal defining what they believe is a means to a reasonable solution. Because there was a common thread through all the proposals, but no consensus on any one of them, they formed a technical committee in September 1994. The first objective was to create a forum for discussion to develop principles to maneuver through the complex issues. The next objective was to develop ideas and basic needs. Nevada's needs include: an additional supply of water, a mechanism to assure longevity, not a stop gap fix, and a mechanism to define the cost. They have researched the opportunities that might be available on the river today to resolve problems and developed a model of the Colorado River to test their ideas to see if they fit their needs. The committee is meeting weekly to meet the challenge to have something on the table in the next three or four months. Mr. Harrington asked which Indian tribes are we dealing with, how much water do they control, how much could we expect to get from them. He asked if they were talking about sales or leasing of their water rights and will that require approval from the state in which the tribe resides. Ms. Rogers explained the Indian tribes are all members of the Colorado River tribal partnership. The biggest problem with the Indian water entitlement is if their rights can be transferred. At the last meeting of the Seven Ten group, the tribes indicated they do support the regional solutions being discussed. However, the tribes' water rights are connected to the reservation and the amount is determined by how many practically irrigatible acre feet are in the reservation. Mr. Edwards interjected the Indians have indicated they may have between 100,000 and 200,000 acre feet to work with but we are still governed by the Law of the River. Mr. Bennett pointed out we must be aware of legalities of Indian contracts. To which Ms. Rogers responded we should be delighted the Indians are actively trying to become part of the answer, not part of the problem. Ms. Rogers proceeded with a discussion of hydroelectric power. This is the second major area of responsibility of the CRC. The commission deals with the power generated off the Hoover Dam, Parker Davis Dam and Glen Canyon Dam. The Hoover Dam alone generated 11.7 trillion kilowatt-hours. Ms. Rogers introduced David Latrell from the Power Department who continued the discussion. Mr. Latrell focused on the two most important functions of the CRC concerning power which are: hydroelectric power from the Colorado River and the planning and development of transmission facilities in Nevada for the benefit of the state. CRC is the state agency responsible to receive, distribute and protect our allocation of hydroelectric power and transmission service provided to the state under federal laws, contracts and regulations. They hold three contracts, the longest which extends through the year 2017. Nevada receives power from several small facilities in Colorado and Glen Canyon Dam in Arizona under one contract. The second contract is for Hoover Dam power. The third is Parker and Davis Dam power. These three contracts provide enough power to supply 120,000 homes each year from a relatively cheap and environmentally friendly resource. Glen Canyon Dam provides eight percent of our total resource, Hoover Dam provides 74 percent with Parker Davis Dam making up the difference. In the 1980's, the CRC was instrumental in getting the power output capability of Hoover Dam increased which almost doubled the output capacity to Nevada. Most recently, they have been focusing their efforts on cost containment. They have been negotiating with the federal government to establish processes whereby they will have a voice in how these plants are operated and how rates are set. Because the hydroelectric power plants are scattered throughout the southwestern states, the CRC contracts for transmission service over the federal interconnected system to get power to Nevada customers. The transmission lines are focused in the state of Arizona, so there is both a physical and electrical barrier between southern and northern Nevada. As a result, most of the power purchases are utilized in the south. The CRC has proposed the reconstruction of the basic substation near Henderson. They are also participating in southwest regional transmission and planning associations to enhance the power import capability into the state. Mr. Latrell concluded by saying in 1995, CRC will be focusing its power related efforts in five areas: Colorado River environmental issues, cost containment, planning and developing in-state transmission lines, planning out-of-state transmission lines and sale of federal transmission and generation facilities. Mrs. Segerblom asked if Boulder City is in the water basin as no one from there is on the CRC. Ms. Rogers responded yes, it is in the lower Colorado River basin, however, members of the CRC are chosen from the ranks of the SNWA. Mrs. Segerblom then questioned if the rate increase was due to the construction of the Visitor's Bureau. Mr. Latrell answered yes. Ms. Rogers pointed out that, historically, the contractors have never had any say about how money from increases was spent. Nevada became the thorn in the side of the Corps of Engineers by insisting upon the implementation agreement which provides for: a coordinating committee to act as a board of directors for the dam; an engineering and operations committee who will meet monthly to view operations and management of the dam; a financial and operational audit; and a 10 year plan for spending. Ms. Lambert inquired what is the cost per kilowatt-hour for electricity. Mr. Latrell responded the rates vary. Hoover is the lowest at approximately 1.5 cents per kilowatt-hour. Assemblyman Neighbors commended the CRC for a job well done but expressed concern because there was no rural representative on the commission. He questioned the status on the intercounty water transfers. Ms. Rogers commented that a new source of water needed to be found outside of Nevada so therefore the inter-county transfers do not make any sense to CRC at this point. Mr. Harrington suggested in a few years we are likely to have power wheeling, and asked how that will affect CRC and Nevada's customers. Mr. Latrell concluded it would clearly impact rates and the electric utility industry as a whole. The CRC hydroelectric projects are locked into long term contracts. The Glen Canyon contract is the shortest, expiring in the year 2004, Parker Davis expires 2007 and Hoover Dam expires 2017. Mr. Neighbors questioned if the overruns on the Visitors Bureau would be passed along to the rate payers. Mr. Latrell answered yes, by January 1996. The current cost of the center today is approximately $121 million but there are claims by contractors for $26 million so there is a possibility it will increase to $150 million. Mr. Neighbors asked what amount was the original budget. Mr. Latrell responded it was approximately $32 million. Ms. Rogers proceeded with the final responsibility of the CRC: land. She stated there are 107,000 acres in Boulder City currently being transferred for use as a state park and about 9,000 acres in Laughlin designated as a desert tortoise reserve. She then introduced Doug Beatty, Acting Deputy Director and Chief Accountant of CRC to present the new internal organization that fulfills the mandate from the committee from the last session. Mr. Beatty asked the committee to review two charts showing the old and new internal structure of the CRC (Exhibits F and G). Mr. Ernaut inquired as to how concerned was the CRC was with recent federal discussion about limiting growth in the Grand Canyon corridor. Ms. Rogers responded their mission is not to make policy on growth, but to find water for whatever growth is there. Their position is no matter who drinks the water it all comes from the Colorado River, which is why they believe the regional solution is best. Mrs. Segerblom questioned if a lease is made with the Indian tribes and with the Upper Colorado River states, what happens when it expires. Ms. Rogers explained their negotiations have insisted water for transfer be perpetual sources. Pat Mulroy, General Manager for SNWA, stated there was not enough time left to give her presentation so she would like to consolidate the presentation with the one scheduled on Thursday. She commented on Mr. Harrington's previous question regarding the Virgin River stating it was a matter of strategy. Had the SNWA filed for wheeling through the Colorado River, the State Engineer's hearings would have been inundated by all the other seven basin states. It would have become an interstate rather than instate right-of-way. She stated SNWA has made quantum leaps in securing over 120,000 acre feet of water to keep southern Nevada alive and thriving and in the area of conservation. They are now in the process of putting together an integrated resource plan to meet the future water demand in southern Nevada through the year 2050 in the least costly, most effective community acceptable way. Ms. Mulroy concluded with a brief preview of the forum for Thursday. Mr. Delmar Latham of the Overton Power District pointed out he had been in contact with Mr. Beard and the legislative delegation in Washington, D.C. to hold hearings on the Hoover Dam facility and press for non reimbursibility of anything over the $32 million. He, also expressed concern that there are no rural representatives on the commission, however, the commission has been willing to address their concerns. Chairman Bache asked if there was any further business to come before the committee. As there was not, the meeting was adjourned at 11:25 a.m. RESPECTFULLY SUBMITTED: Kelly Liston, Committee Secretary APPROVED BY: _____________________________________________ Assemblyman Douglas A. Bache, Chairman Assemblyman Joan A. Lambert, Chairman Assembly Committee on Government Affairs February 13, 1995 Page