EXHIBIT 4-A

 
SUMMARY PAPER – April 2010

Funding of Carmel River Habitat Improvements from

2009 Settlement Agreement between California American Water, NOAA Fisheries, and the California Department of Fish and Game

 

Summary:  Beginning July 1, 2009, California American Water (CAW) paid $3.5 million to the California Department of Fish and Game to establish a fund for projects to improve habitat along the Carmel River for threatened steelhead.  CAW ratepayers on the Monterey Peninsula and in Carmel Valley will pay $1.1 million each July 1 up to $11.2 million (or until CAW stops illegal Carmel River diversions).  CDFG is charged with managing and monitoring the funds.  In early 2010, CDFG announced that funds will be disbursed through its annual Fisheries Restoration Grant Program (FRGP).

 

For the 2010 FRGP, CDFG consulted with the National Marine Fisheries Service (NMFS) office in Santa Rosa, California concerning the Carmel River focus.  Within the special focus category for the Carmel River Settlement Agreement funds, only project designs to improve fish passage at stream crossings and instream barriers in the mainstem of the Carmel River downstream of the Los Padres Dam and water conservation measures in the Carmel River Lagoon were eligible for funds.  Local project sponsors and Carmel River watershed stakeholders were not involved in identifying the 2010-11 FRGP focus. It should be noted that several local agencies and non-profit organizations have been working for more than 25 years to restore and protect the Carmel River largely with their own funds or donated labor and materials.  Whereas, CDFG has focused on being a regulator of activities along the river under its Lake and Streambed Alteration program. 

 

As a result of the limited focus for the 2010-11 FRGP, several  projects previously identified as having a high priority were not eligible to apply for Settlement Agreement funds.


 

Advantages of disbursing funds through the FRGP:

 

·   CDFG is the lead agency under CEQA and projects receive a Mitigated Negative Declaration.

 

·   CDFG authorizes projects under its Stream Alteration program as part of the FRGP review and approval process.

 

 

 

Disadvantages of disbursing funds through the FRGP:

 

·   The FRGP limits project types to those found in the CDFG California Salmonid Stream Habitat Restoration Manual (Flosi et al., 1998, 2003, 2006 and 2009).  In addition, restoration project priorities for the Carmel River appear to be guided by the Steelhead Restoration and Management Plan for California (DFG 1996).  The latter document does not reflect new information for the Carmel River concerning main stem dams, lagoon habitat and watershed priorities developed through collaborative stakeholder processes.

 

·   Funding and construction of complex projects through the FRGP can take four years to complete and requires two grant applications, two full review /approval processes, and two separate grant agreements.

 

·   FRGP grant applications are time-consuming and are designed for a statewide competitive process.  Whereas, Settlement Agreement funds are to be used exclusively for Carmel River projects. 

 


 

Projects that were not eligible for the 2010-11 FRGP special focus for the Carmel River

 

Sleepy Hollow Steelhead Rearing Facility (SHSRF) Upgrade:  MPWMD operates the SHSRF seasonally to raise steelhead in a simulated stream environment adjacent to the Carmel River after the steelhead are rescued from the drying portions of the Carmel River.  This upgrade project would improve intake facilities to deal with water quality degradation in the Carmel River in the summer due to the releases of fine sediment and suspended solids from San Clemente Reservoir.  The reservoir is virtually silted in and when the level is drawn down to comply with an order from the Division of Safety of Dams, fine material passes downstream that causes problems with the pumps at SHSRF and contributes to turbidity in the simulated stream.  Improvements to the SHSRF were identified in 2005 as the second-highest priority for steelhead in the Carmel River.  The estimated project cost ranges from about $700,000 to $1.3 million.

 

Installation of an ecosystem protective barrier at the Carmel River lagoon:  The County of Monterey, which is responsible for responding to flood emergencies, breaches the barrier beach across the Carmel River mouth when the lagoon level rises and threatens to flood low-lying structures.  Generally, this condition occurs at least once per year and can occur several times during the rainy season.  CDFG, NMFS, the Coastal Commission and non-profit groups concerned about the effects of mechanical breaching on steelhead have repeatedly protested the breaching activity.  There have been warnings from time to time from some of these organizations concerning the potential for legal actions to either stop the activity or require the County to obtain authorizations from regulatory agencies for its actions (the County operates under its emergency powers when flooding is imminent).  The Carmel River Watershed Conservancy has proposed a project to install vinyl sheet piling around the perimeter of the lagoon to prevent flooding of low-lying areas.  The project would involve a pump system to deal with local inflow when the lagoon is high.  If implemented, the project could significantly reduce the frequency of mechanical breaching of the beach.  The estimated cost of installation is  about $1.3 million.

 

Lower Carmel River Floodplain and Riparian Restoration Project:  The main focus of this project is to restore hydrologic connectivity between the floodplain on the east and the lagoon to the west of Highway 1 by raising a portion of Highway 1.  Up to 85 acres adjacent to the Carmel River would be restored to riparian and wetland habitat and use of a private well for agricultural operations would be reduced or potentially eliminated.  The Big Sur Land Trust (BSLT) is seeking $800,000 to continue design and engineering of this project.  The total cost of the project may range between $10 million and $11 million.  At present, about $3.5 million in grant funding has been committed.   The River Parkways/Urban Streams Restoration grant program may also commit an additional $3 million to the project (this is under review).  BSLT will donate the land, which is valued at about $1million to a public agency. 

 

Local Actions:  In response to concerns about delays and restrictions on project types, local project sponsors including MPWMD, the Carmel Area Wastewater District, the Big Sur Land Trust, the Carmel River Steelhead Association (CRSA), the Carmel River Watershed Conservancy, and the Resource Conservation District of Monterey County engaged in discussions with CDFG officials (specifically, the local FRGP coordinator, Margaret Paul and the Central Coast Region’s Regional Manager, Dr. Jeff Single) about alternative funding arrangements.    Dr. Single indicated a willingness to explore options such as individual agreements with project sponsors and making a block grant to a sister agency (such as the State Wildlife Conservation Board) for dispersal of funds to eligible project sponsors.

 

Background:  A Settlement Agreement was executed in early 2009 by California American Water (Cal-Am or CAW), the U.S. Department of Commerce/National Oceanic and Atmospheric Administration/National Marine Fisheries Service (NMFS), and the California Department of Fish and Game (CDFG) with regards to impacts resulting from water withdrawals by Cal-Am from the Carmel River system.  The agreement stemmed from negotiations between NMFS and CAW over a potential violation of the federal Endangered Species Act (ESA) as it applies to Carmel River steelhead, which are a part of the steelhead population of the Central Coast that is listed as a threatened species.  The first negotiated agreement over CAW Carmel River diversions was executed in 2001 after NMFS informed CAW that NOAA would impose fines as high as $330 million or more per year for claimed violations of the ESA caused by its Monterey District operations on the Carmel River.  In 2006, CAW and NMFS executed another agreement to further reduce impacts from water diversions.  However, this agreement was not implemented after the parties to the agreement learned that funds would go to the U.S Treasury general fund and not necessarily be spent on Carmel River projects.

 

In order to insure that funds would be directed to Carmel River projects, the California Department of Fish and Game (CDFG) was requested to be a party to a new Settlement Agreement to administrate the funds.  CDFG agreed, although local CDFG officials describe that there was some reluctance to be an administrator due to staffing concerns.  After execution of the agreement by all three parties in early 2009, CAW began making payments on July 1, 2009 with a $3.5 million deposit to CDFG and will continue making annual payments of $1.1 million until July 1, 2016, unless the agreement is terminated by complying with a State of California order to reduce Carmel River diversions or CAW obtains an incidental take statement from NMFS for its diversion.

 

CDFG, which is the administrator for the Settlement Agreement funds, is allowed to use up to 13% of each mitigation payment as adjusted for inflation, on an ongoing basis throughout the term of the Agreement for reimbursement of any costs it incurs to administer, manage, and monitor the funds and projects funded. In February 2010, CDFG announced that Settlement Agreement funds would be distributed through their annual Fisheries Restoration Grant Program. 

By utilizing the existing FRGP, the time and cost of permitting a limited set of projects should be reduced.  However, because the FRGP uses a lengthy process to review, approve, and fund proposed projects, it is clear that most projects will take several years to complete if this program is the only funding source for projects.  In addition, restrictions imposed by the FRGP on project types make it unclear whether several projects previously identified by MPWMD, CRSA and NMFS as having a high priority, including improvements to the MPWMD Sleepy Hollow Steelhead Rearing Facility, could be funded and permitted through the FRGP.

 

 

 

 

 

U:\staff\word\committees\AdHoc\Legislative\2010\20100506\04\item4_exh4a.doc