UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION OFFER OF SETTLEMENT

Transcription

1 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION Public Service Company of Colorado ) FERC Project No. 400 d/b/a Xcel Energy OFFER OF SETTLEMENT Pursuant to Rule 602 of the Federal Energy Regulatory Commission s ( FERC or Commission ), 18 C.F.R (2009), the Public Service Company of Colorado d/b/a Xcel Energy ( PSCo ) respectfully submits this Offer of Settlement, which resolves all aquatic habitat and fishery related issues in conjunction with the United States Forest Service s ( Forest Service or USFS ) proposed Section 4(e) of the Federal Power Act ( FPA ) conditions for the Ames Hydroelectric Project, FERC Project No. 400 ( Project ). The USFS and CDNR, as signatory parties with PSCo to the Final Settlement Agreement ( Agreement ), have authorized PSCo to state that they join in submitting this Offer of Settlement for approval. I. Background PSCo s original license to operate the Project expires on June 30, The Ames Project area includes the South Fork San Miguel River ( SFSM ) and its headwater tributaries (the Lake Fork and Howards Fork). The SFSM is formed by the confluence of the Lake Fork and the Howards Fork, and flows into the San Miguel River. The upper head waters of both forks begin above 12,000 feet. The length of the SFSM is approximately 6 miles from the Ames powerhouse to the mainstem San Miguel River. The Lake Fork begins near Hope Lake (elevation 11,865 feet) and flows down to Trout Lake. Trout Lake is the primary storage 1

2 reservoir for the Ames Hydroelectric Project with a normal maximum elevation of approximately 9,713 feet. Project flows to the Ames powerhouse exit Trout Lake via a 1.9 mile long penstock. In this relicensing proceeding, PSCo filed an application for a new license for the continued operation of the Project on June 26, The Commission issued a Notice of Application Ready for Environmental Analysis on November 6, On December 24, 2008, USFS submitted its preliminary Section 4(e) conditions. 3 On February 4, 2009, PSCo submitted its Proposed Alternative Conditions for the USFS proposed Conditions 17 and 19 under Section 241 of the Energy Policy Act of On August 14, 2009, the Forest Service submitted final modified Section 4(e) conditions where the Forest Service determined that PSCo s alternative Condition 17 and alternative Condition 19, as proposed, are not adequate for the protection and utilization of the reservation, and did not accept PSCo s alternative conditions. 5 1 Public Service Company of Colorado, Application for License, FERC Docket No (June 26, 2008), 2 Public Service Company of Colorado, Notice of Application Accepted for Filing, Soliciting Motions to Intervene and Protests, Ready for Environmental Analysis, and Soliciting Comments, Recommendations, Preliminary Terms and Conditions, and Preliminary Fishway Prescriptions, FERC Docket No (Nov. 6, 2008), 3 USDA Forest Service, Comments, Preliminary Terms, Conditions, Recommendations, and Summary of Evidence by the USDA Forest Service, Rocky Mountain Region, FERC Docket No (Dec. 24, 2008), 4 Public Service Company of Colorado, Proposed Alternative Conditions, FERC Docket No. 400 (Feb. 4, 2009), 5 USDA Forest Service, Modified Terms, Comments, and Recommendations, FERC Docket No (Aug ), 2

3 II. Offer of Settlement Throughout the relicensing process, PSCo, USFS, the State of Colorado (by its agencies, the Colorado Department of Natural Resources ( CDNR ) and the Colorado Division of Wildlife ( CDOW )), and interested groups 6 have been diligently pursuing a settlement agreement to determine those terms and conditions necessary to protect the Grand Mesa, Uncompahgre, and Gunnison National Forest ( GMUG ) from the ongoing impacts of continued Project operations; resolve issues regarding the appropriate protection, mitigation, and enhancement measures for the Project during the next license term; allow PSCo to obtain a FERC order issuing a license for the project consistent with this Agreement; and allow the Project to continue to operate while also achieving the management goals of USFS, CDOW and the Bureau of Land Management ( BLM ) for the lands and resources under their respective jurisdictions. These consultations were initiated in March The topics of consultation involved discussion of all water related issues, specifically icing, minimum flows in the SFSM, steady flows for spawning, ramping rates, bypass flows, and eventually alternative options to imposed bypass flows. The Offer of Settlement consists of an executed Agreement, by PSCo, the USFS, and CDNR. The Agreement (attached as Appendix A) contains two parts: 1) the Agreement, which establishes the general terms and conditions governing the relationship among the parties and aids in the implementation of the Agreement s obligations on all the parties; and 2) Proposed License Conditions, which contain the obligations of PSCo, USFS, and the other parties to the agreement that they request the Commission to incorporate into the new license. PSCo is also 6 The initial consultation and negotiation for the settlement also involved the San Juan Citizens Alliance, Southwestern Water Conservations District, and the Colorado Water Conservation Board who, although not signatories to the agreement, concur with the settlement. 3

4 including an Explanatory Statement as required by 18 C.F.R (c)(iii), attached as Appendix B to this filing. The Proposed License Conditions include changes to the proposed preliminary license conditions submitted by the USFS (and contested by PSCo in its alternative conditions request), as finalized in the USFS Final License conditions filed August 14, The USFS is expected to file modified final conditions consistent with the settlement agreement conditions 17, 18, 19, 20, 21, 22, and 23. A summary of the Proposed License Conditions (which are detailed in full in Attachment 1 to the Agreement) follows: Condition No. 17 details the optional election of reconstruction of Priest Lake Dam by PSCo in lieu of a minimum Lake Fork bypass flow and would impose the lesser of a 3 cfs or natural inflow to Trout Lake if there is a termination of Priest Lake Dam Construction; Condition 18 details a requirement for PSCo to submit a plan for construction and operation of a guaranteed priority bypass device and a streamflow measurement device with continuous recording capability immediately downstream of Trout Lake dam in the event the Lake Fork bypass flow is required; Condition 19 details the instream flow and ramping rate requirements for stream flows in the SFSM for specific times during the year and flow exceptions; Condition 20 includes a requirement to implement, install, maintain and operate a streamflow measuring device to measure compliance with the instream flow requirement of Condition No. 19; 4

5 Condition 21 details the requirement that PSCo install, operate, and maintain a subsurface propeller, or group of propellers that operate as Thermal Mixing devices in Trout Lake; Condition 22 requires that PSCo provide 2 acre feet per year of water released to the SFSM from Trout Lake; and Condition 23 requires that PSCo submit a drought contingency plan to the USFS, CWCB, and CDOW for review and approval. PSCo, USFS, and CDNR fully support and believe that the Agreement and the Proposed License Conditions provide more adequate and reasonable mitigation and enhancement measures for the benefit of the affected resources of the SFSM and the Grand Mesa, Uncompahgre, and Gunnison National Forest lands. The Commission, in its 2006 Policy Statement on Settlements, said: In order to determine whether proposed settlement provisions or license conditions meet this standard, it is necessary for the Commission to determine to what extent these proposals relate to project effects or project purposes. This is easier to do if the provisions in question call for specific measures (rather than a general expenditure of funds), if the measures call for actions in the project vicinity, and if the settling parties document how the measures are tied to project effects or purposes. 7 With the inclusion of the specific measures included in the Agreement and Proposed License Conditions that are tied to effects of the Project, the Agreement meets the general requirements of the Commission to approve, administer, and implement this Agreement. The Agreement and Proposed License Conditions do not simply require a monetary compensation paid to the USFS in lieu of mitigation measures connected to the Project. The Agreement includes the off-site 7 FERC Policy Statement on Hydropower Licensing Settlements, FERC Docket No. PL (Sept. 21, 2006), 5

6 mitigation requirement to reconstruct Priest Lake Dam (with optional instream flow requirements), which is in the vicinity of the Project and addresses the fishery resources and related recreational opportunities in the Lake Fork sub-basin affected by the Project. Moreover, this off-site mitigation and enhancement comports with the Commission s settlement policy which condones off-site mitigation when substantially increased overall project benefits can be realized from adopting off-site measures. 8 III. Conclusion WHEREFORE, PSCo, with the concurrence of all other parties, respectfully requests that the Commission approve this Offer of Settlement as discussed above and incorporate the Proposed License Conditions into the new license for the continued operation of the Ames Hydroelectric Project. Concurrent with Commission action on this Agreement, the USFS will submit revised Section 4(e) conditions that mirror the Proposed License Conditions in the Agreement. Respectfully Submitted, Washington, D.C. Donald H. Clarke Law Offices of GKRSE 1500 K Street NW, Suite 330 Washington DC, Tel (202) Fax (202) Counsel to Public Service Company of Colorado d/b/a Xcel Energy 8 See Virginia Electric Power Co., 110 FERC 61,241 at P 11 (2005). 6

7 December 23, 2009 Enclosures: Appendix A: Explanatory Statement Appendix B: Final Settlement Agreement including Proposed License Conditions 7

8 CERTIFICATE OF SERVICE I hereby certify that I have on this day served the foregoing document by or first class mail postage prepaid upon each person designated on the official service list compiled by the Secretary of the Commission in this proceeding. Dated at Washington, DC this 23 rd day of December Manuel Sandoval Legal Assistant Law Offices of GKRSE 1500 K Street, NW, Suite 330 Washington, DC 20005

9 Appendix A: Explanatory Statement

10 Public Service Company of Colorado, Ames Hydroelectric Project, FERC Project No. 400 Final Settlement Agreement Explanatory Statement 1.0 Background The attached Final Settlement Agreement ( Agreement ) is made pursuant to the Federal Energy Regulatory Commission ( FERC or Commission ) Rule 602, 18 C.F.R , by and among the following Parties: Public Service Company of Colorado d/b/a Xcel Energy ( PSCo ); United States Department of Agriculture, Forest Service ( USFS or Forest Service ); United States Department of Interior, and the Colorado Department of Natural Resources ( CDNR ) and its agency, the Colorado Division of Wildlife ( CDOW ), collectively referred to as the Parties for the Ames Hydroelectric Project, FERC Project No. 400 ( Project ). The Parties have entered into this Agreement for the following purposes: to determine those terms and conditions necessary to mitigate ongoing impacts to the Grand Mesa, Uncompahgre, and Gunnison National Forest ( GMUG ) from continued Project operations; to resolve issues regarding the appropriate protection, mitigation, and enhancement measures for the Project during the next license term; to allow PSCo to obtain a FERC order issuing a license for the project consistent with this Agreement; and to allow the Project to continue to operate while also achieving the management goals of USFS, CDOW and the Bureau of Land Management ( BLM ) for the lands and resources under their respective jurisdictions. 2.0 Project Setting and Existing Environment The South Fork San Miguel River ( SFSM ) is formed by the confluence of the Lake Fork and the Howards Fork. These two alpine headwater streams flow north and west off of the Sheep Mountain, Vermillion Peak complex and the Yellow Mountain, Lookout Peak complex. The SFSM flows into the San Miguel River. The upper head waters of both forks begin at elevations above 12,000 feet. The Lake Fork begins near Hope Lake (elevation 11,865 feet) and flows down to Trout Lake. Trout Lake is the primary storage reservoir for the Project with a normal maximum elevation of approximately 9,713 feet. The Project flows to the Ames powerhouse exit Trout Lake via a 1.9 mile long penstock. Project diversions result in substantially reduced flows in the bypass reach on National Forest System (NFS) lands with a concomitant reduction in aquatic habitat quantity and quality. Residual stream flows in the Lake Fork, below Trout Lake, are made up of combined leakage, springs, seeps and side channel tributaries, all of which contribute to accretion flows in the Lake Fork channel. Flows are also influenced by occasional and intermittent operation of Trout Lake siphons. PSCo has documented consistent bypass stream flows from accretions during two separate summer occasions in 2006 and 2008 and during low flow winter conditions in Table 1 details measured discharge at each site for the reference years. Site 1 was the farthest upstream site located approximately 1000 ft below the Project s lower valve house in 2006 and 1

11 2008 and at the lower valve house in Site 2 was located immediately upstream of the HWY 145 crossing and below Minnie Gulch for the 2006 and 2008 measurements and relocated to approximately 1500 ft upstream (directly behind the USFS Matterhorn Work Center) for the 2009 measurement. PSCO submitted to FERC in January 2009 its final summary report covering 4 years of in-depth ice and water temperature monitoring in the South Fork watershed (San Miguel River Ice Study: Summary of Results, ). The final report of the 4 years of study of icing in the SFSM watershed shows that the Lake Fork above HWY 145 had consistent winter water temperatures of 3 to 4 degrees Celsius indicating that the accretion flows in the Lake Fork are continuous, significant and emanate primarily from groundwater sources during the winter period. The final icing report also shows that, contrary to the finding in the final EA, these accretion flows in the Lake Fork are not derived from the surface water source of Minnie Gulch. Table 1. Discharge measurements taken at selected times in the Lake Fork bypass reach. Lake Fork Site August 2006 Q July 2008 Q February 2009 Q Site cfs 0.4 cfs 0.4 cfs Site cfs 6.7 cfs 2.5 cfs Total Accretions 2.7 cfs 6.3 cfs 2.1 cfs Flows in the Lake Fork, below Trout Lake Dam, travel through moderate-to-steep gradients and porous channel substrates above State Highway 145. Below State Highway145, the Lake Fork flows through a narrow steep gradient canyon before reaching the confluence with the Howards Fork immediately below the Ames Project tailrace (elevation 8,690 feet). Several large waterfalls (40-70 feet) are present in this section of the Lake Fork. One important tributary, Wilson Creek, contributes substantially to the seasonal flow in the Lake Fork downstream of HWY 145. Accretion rates alone are not sufficient to meet the aquatic needs of fish in the Lake Fork throughout its length. However, all parties to the Settlement Agreement and those entities who support the Agreement have concluded that accretions when coupled with an additional 3 cfs release from Trout Lake are sufficient to support resident trout in this reach. The 3 cfs bypass flow provides suitable habitat to improve trout movement and dispersion in the reach from current levels and improves summer and winter rearing habitat by increasing stream area and depth. Stream area and depth are the attributes of prime concern for sustaining cold water fish in this reach of the Lake Fork. Information contained in the Final EA (pg 42) indicates that there would not be a significant difference in either stream width or riffle depth at flows of 5 cfs vs. 3 cfs. Below Minnie Gulch, accretion of flows from groundwater and small tributaries when combined with the 3 cfs release from Trout Lake would result in stream flows approaching 5 cfs a majority of the time. This would achieve the intention of the 5 cfs State of Colorado instream flow water right, which has an upper terminus at the confluence of Minnie Gulch and the Lake Fork. 2

12 The Howards Fork begins near Lookout Peak and flows down a moderate-to-steep canyon through historic mining areas above and below the town of Ophir. It flows through a steep box canyon below State Highway 145 and past a recently capped mine tailings pile before reaching the confluence with the Lake Fork immediately below the tailrace of the Ames powerhouse. The upper headwaters and the SFSM drop over 3,800 feet in approximately 10 miles to the confluence with the mainstem San Miguel River (elevation 8,041 feet). With its high elevation, heavy overhead canopy, narrow box canyons and northern exposure, the SFSM receives little winter sun. These factors contribute to the development and maintenance of heavy ice accumulation in many channel areas for much of the winter, as documented throughout four years of ice study conducted by PSCo. The length of the SFSM is approximately 6 miles from the Ames powerhouse to the mainstem San Miguel River. Heading downstream, headwater river gradients moderate near the Ames powerhouse and remain so through the entire reach before joining the upper mainstem San Miguel. The San Miguel River below the SFSM confluence is also dominated by moderate gradients along its entire reach downstream to the vicinity of the Placerville gage (elevation 7,014 feet). Habitat in the SFSM subbasin consists of high gradient riffles or cascades with small plunge pools, lower gradient riffle, run and pool habitat. Substrates are primarily boulder, bedrock, and cobble, with smaller amounts of gravel and sand generally found in isolated depositional pockets. Existing winter conditions have been a major limiting factor regarding the SFSM trout fishery. Historically, the salmonid fishery of the Lake Fork and the SFSM likely consisted of only Colorado River cutthroat trout, the only native trout known to this region. 1 The species is well adapted to isolated high elevation mountain headwater streams, and is a spring spawner that avoids overwinter and early run off habitat limitations on eggs and fry. The species evolved in isolation from rainbow and other trout, but this evolutionary history leaves the species vulnerable to hybridization with rainbow trout and to replacement by brook and brown trout. 2 The present day fishery in the Project vicinity is currently enhanced by stocking brown, and rainbow trout. CDOW s ultimate management goal is for this reach to be managed as a category 302 Wild Trout Stream 3. CDOW stocking records show an active and variable stocking program for the SFSM and San Miguel Rivers from 1980 through Brown trout and rainbow trout were the primary species planted in the San Miguel River, while in the SFSM rainbow trout were the most common species stocked through Records indicate brown trout have been stocked on three occasions, 1980, 1987, and 2007 in the SFSM. Various cutthroat trout subspecies as well as cutthroat-rainbow hybrids have also been stocked sporadically throughout this period, mostly in the main stem San Miguel River. 4 Upstream, in the Lake Fork, rainbow trout have been stocked in Trout Lake. Brown trout have been stocked 1 Behnke, R. J Native trout of western North America. American Fisheries Society Monograph 6. 2 Behnke, R. J Native trout of western North America. American Fisheries Society Monograph 6. 3 CDOW San Miguel and South Fork San Miguel River Fish Sampling Report. September CDOW Fish Distribution Tickets

13 in Trout Lake seven times in the last 29 years (less than five percent of all fish stocked), most recently in 2000 and Brook trout were stocked only once in this system in 1975 when 5,000 brook trout fingerlings were planted in Trout Lake Priest Lake Dam Rebuild in Lieu of Lake Fork San Miguel River Flows The Agreement executed by the Parties stipulates that the rebuilding of Priest Lake Dam on Minnie Gulch stream is an acceptable and alternative option to the requirement of providing a bypass flow at Trout Lake. This agreement was reached in recognition that the resident fishery benefits associated with the reconstruction of Priest Lake would meet or likely exceed the fishery benefits provided by the 3-cfs bypass flow. From an overall resource balancing perspective, the Parties agreed that the rebuilding of Priest Lake Dam would provide at least equivalent benefits to the fishery of the Lake Fork subbasin while allowing greater production of renewable energy at the Ames Project as compared to the bypass flow. Priest Lake is located on Minnie Gulch, a tributary to the Lake Fork subbasin. By the terms of the Agreement, PSCo is provided a specific time period in which it must complete the reconstruction of Priest Lake Dam or an Agreement-specified bypass flow will be enacted at the Project. The rebuilding of Priest Lake Dam will directly and significantly benefit the fishery and recreation resources of the Lake Fork subbasin. The United States of America, on behalf of the Forest Service, owns water rights for the Priest Lake Dam, which is decreed principally for nonconsumptive purposes. The reservoir will be managed to maintain a year round full pool. The Commission s final Environmental Assessment ( EA ) takes a narrow view of PM&E options worthy of detailed consideration. 6 The Agreement contains an option to proceed with the rebuilding of Priest Lake Dam as an acceptable option with commensurate benefits to address impacts to the Lake Fork for the following reasons: Establishment of a native Colorado cutthroat trout fishery in the Lake Fork subbasin. Providing a reliable source of overwintering habitat which is far more likely to achieve the Lake Fork subbasin habitat improvements sought by the final EA. Providing a public recreational fishery that is more accessible than that on the Lake Fork where much of the stream is either relatively inaccessible or bordered by private property. The rebuild option conserves water for power production from a renewable resource, while the Lake Fork bypass flow would permanently eliminate a portion of the plant s energy production. 5 CDOW Fish Distribution Tickets The final EA dismissed consideration of the option of rebuilding Priest Lake Dam in lieu of providing a bypass flow to the Lake Fork below Trout Lake Dam because Priest Lake Dam lacks a clear relationship to the Project or Project effects and would not fulfill a Project purpose Public Service Company of Colorado d/b/a Xcel Energy, Final Environmental Assessment, p. 43, FERC Docket No (Oct. 22, 2009), [hereinafter, FERC Final EA]. Further, FERC acknowledges that CDOW found the rebuilding of Priest Lake Dam as a desirable option to a bypass flow, but that CDOW is not clear as to exactly what the[sec] benefits would be or how rebuilding the dam would offset the effects of low flows in the Lake Fork. 4

14 3.1 Benefits to Fish Resources The final EA issued by FERC on October 22, 2009 notes that both the USFWS and CDOW recommended the rebuilding of Priest Lake as an alternative mitigation option to the prescribed bypass flow releases from Trout Lake. However, the final EA states that the rebuilding of Priest Lake Dam lacks a clear relationship to the project or project effects and therefore the rebuilding of priest Lake Dam would not fulfill a project purpose. 7 At the same time, the final EA acknowledges that the primary adverse impact of the current Project operations on the Lake Fork subbasin is to fish and recreation due to a lack of suitable yearround instream flow which results in a lack of sufficient year-round habitat in the Lake Fork. The sole purpose of the final EA recommended bypass flow is to attempt to create year-round habitat for fishery and recreation purposes. On this basis alone, the rebuilding of Priest Lake Dam is a reasonable and potentially preferable option to a bypass flow for protecting fish resources as explained below. FERC s primary reluctance to considering this option appears to be one of limited ability to consider an option outside its direct project jurisdiction as Priest Lake would be located on USFS lands outside the current FERC Project Boundary. According to estimates made by the Forest Service project biologist, reconstruction of Priest lake would assure 2 to 3 times the lentic year-round fish habitat as compared to the lotic habitat that would be provided by the final EA s recommended bypass flow. In addition to more overwintering habitat, the biological basis for the Priest Lake Dam rebuild in lieu of Lake Fork bypass flows is also founded on the understanding that the Priest Lake Dam rebuild will support the efforts of regional fisheries resource agencies to restore the native Colorado River cutthroat trout ( CRCT ) within its historic range, which includes the Lake Fork of the SFSM. The presence of non-native trout in the Lake Fork and likelihood of continuing escapement from Trout Lake of non-native trout makes reintroduction of CRCT into the Lake Fork stream not a viable option. CRCT restoration activities are guided by the multiagency Colorado River cutthroat trout conservation agreement executed in 2006 and the Western Native Trout Initiative ( WNTI ), a strategic plan for the protection and enhancement of 15 native trout species (13 of which are cutthroat trout subspecies including CRCT) involving 12 western states and five federal agencies (WAFWA 2008). The CRCT portion of the WNTI includes CDOW, FWS, USFS, and BLM as cooperating partners, all signatories to an operational Memorandum-of-Understanding ( MOU ) which states: Partners will encourage management agencies and stakeholders to seek solutions to issues such as regional environmental and ecological threats... Partners also will develop support for implementation of programs that perpetuate and restore western native trout throughout their historic ranges. Under the species specific plan for the CRCT a number of priority initiatives are listed including the establishment of broodstock sources for CRCT and barrier projects to protect CRCT populations from non-native trout re-colonization and competition. These priority initiatives are fully consistent with the Priest Lake Dam Rebuild. Under the terms of the Agreement, the reconstruction of Priest Lake Dam would result in the restoration of a small lake 7 Supra note 6, FERC Final EA, p

15 approximately 11 surface acres in size and 110 acre-foot volume that would provide aquatic habitat for CRCT, form a barrier to non-native trout, and provide multiple-use recreation benefits. This small impoundment is located within the Lake Fork subbasin, the subbasin affected by the Project, and is within one-half mile of both Trout Lake and the Lake Fork bypass reach The USFS and CDOW believe there is the potential for CRCT from Priest Lake to serve as a reliable genetic source of progeny available for reintroduction in targeted areas within this subbasin and surrounding areas targeting the recovery of CRCT. The isolation of the CRCT population in Priest Lake will insure the continued genetic integrity of these fish as broodstock. 3.2 Recreation Benefits One of the environmental benefits the final EA tries to accomplish is an enhancement to recreation (fishing) in the Lake Fork sub-basin by the provision of a bypass flow. The rebuilding of Priest Lake Dam would provide a better and more certain recreational resource. The habitat provided by Priest Lake would provide greater assurance of favorable overwintering habitat and 2 to 3 times the quantity. Also, much of the Lake Fork is bordered by private property and is inaccessible to the public. In contrast, Priest Lake is located on public land and is accessible by a road on public land, and consequently would also provide camping and picnicking benefits. As such, significant additional project benefits can be realized from adopting this off-site measure. 3.3 Energy Benefits As the final EA points out, the Lake Fork bypass flow would significantly impact plant generation, reducing average annual plant output by about 1,900,000 kwh, or 15%. 8 The option of rebuilding Priest Lake Dam preserves this renewable energy resource. The Ames Plant provides not only renewable energy, but renewable energy on demand, which can only be replaced by fossil fuels. The final EA not only results in greater production of CO 2, but also SO x and NO x pollutants as well and with no clear assurance that the bypass flows will actually provide benefits to fishery. The Priest Lake rebuild option preserves energy while ensuring an improved fishery and for-certain recreation benefits. 3.4 Summary of Priest Lake Dam Reconstruction Benefits Therefore, more specifically, the benefits of the Priest Lake Dam Reconstruction include: Priest Lake would provide the equivalent stream habitat of nearly 500,000 square feet, approximately 2-3 times the fish habitat area of the Lake Fork at base flows, and increase suitable fish habitat in the Lake Fork of the San Miguel River sub-watershed. By agreement with the CDOW, Priest Lake would be stocked with native CRCT. This action would increase the distribution of native cutthroat trout and increase the available habitat for native cutthroat trout in the San Miguel River basin. Furthermore, CDOW may be able to develop Priest Lake into a local broodstock for further native CRCT expansion in and around the Ames Project area. Reconstruction of Priest Lake Dam and 8 Supra note 6, FERC Final EA, p

16 subsequent stocking of native CRCT in Priest Lake would be consistent with CRCT recovery goals as outlined in the Colorado River cutthroat trout conservation agreement (2006) and the Western Native Trout Initiative (WAFWA 2008). Priest Lake would provide a unique recreational fishery for native cutthroat trout that the Lake Fork cannot offer due to the presence of non-native trout currently inhabiting the Lake Fork. A new Priest Lake would provide easier and safer access to a more diverse recreational angling group (disabilities, children, etc) than currently can access most sections of the Lake Fork bypass reach. Priest Lake would enhance day-use, outfitter guide, and other recreational activities in and around the current Project boundary. Priest Lake would provide a source of augmentation water, previously decreed and held by the Forest Service, allowing the Forest Service the continued operation of the Matterhorn Campground and Matterhorn Guard Station with local water sources for recreational use and FS administrative use in and around the Ames Project boundary. The licensee has agreed to the requirement to release storage water to satisfy USFS augmentation requirements until such time as Priest Lake is reconstructed. Priest Lake allows the continued generation of energy from renewable sources. FERC has stated there is no direct connection between project effects and the proposed Priest Lake mitigation and Project effects. This is not the case. The Project affects Lake Fork subbasin fishery and recreation, and a Priest Lake rebuild would significantly improve both of these resources in the Lake Fork subbasin. The benefits to be enjoyed by the public and the opportunity to achieve regional multi-agency native trout resource management objectives make this highly desirable and commensurate mitigation. This solution represents a product of consensus building with the licensee and a number of stakeholders. Approving the Agreement and the Proposed License Conditions would also be consistent with the explicit intent of the renewed June 30, 2009 MOU between the State of Colorado, the USFS, and the BLM whereby the parties have agreed to explore and adopt alternatives to new bypass flows. 9 PSCo understands that the Commission s ultimate resource management goal is to improve the trout fishery in the subbasin of the San Miguel River where the Project is located. The Commission, in its basis for decision, has reasoned that this benefit can only be derived from increased instream flows which potentially could improve Lake Fork trout populations. PSCo, along with other Parties of the Agreement, believe that the reconstruction of Priest Lake can and will provide substantial benefit to the subbasin trout fishery by increasing the native trout population and increasing the overall access to this resource. 4.0 South Fork San Miguel River Instream Flows 9 See Memorandum of Understanding (MOU) between the Rocky Mountain Region and the State of Colorado, RE: The Management of Water Resources on the National Forest System Lands (July 16, 2009), available at 7

17 There are two primary differences between the Agreement and FERC s final EA staff alternative for the SFSM minimum instream flow requirements. The first difference is where the minimum flow requirement to the SFSM is measured for compliance purposes. The second difference is in the resulting minimum flow discharge to the SFSM that actually occurs from all sources, including accretion flows to the bypassed reaches. Other aspects of the Agreement and FERC s SFSM flow requirements, including ramping, flat flows, and restricted peak flows are essentially equal. In the Agreement, the point of compliance for measuring instream flow conditions in the South Fork is below the Howard s Fork and Lake Fork confluence. This is a change from earlier flow quantification points that focused on the powerhouse tailrace. The shift in location was agreed to by the Parties in order to provide PSCo some flexibility in how they meet the required flow to the SFSM. Under the terms of the Agreement, flows to the point of compliance can be met through any combination of flow delivery through the powerhouse generation units, accretion flows in the Howard s Fork, accretion flows in the Lake Fork, or if necessary, releases directly from the Trout Lake Dam through the Lake Fork when the Lake Fork power generator is out of service. FERC dismisses this option in the final EA, based on economic reasons, and instead recommends that minimum flows be released and monitored for compliance at the powerhouse from the Lake Fork penstock/generator discharging into the Howards Fork, above the confluence with the Lake Fork. PSCo and Parties to the Settlement prefer the Agreement s minimum flow and point of compliance plan, noting that FERC s economic and hydrologic analyses are flawed and that the FERC option would result in excess flows being released to the SFSM, beyond any flow requested by the resource agencies, during periods of the year when bypass reach accretion flows are moderate to high. There are three significant problems with the analysis contained in the final EA relative to the minimum flow provisions of the FERC staff recommendation: The total volume of water available at Trout Lake through the winter is not sufficient to meet even the base flow requirements recommended in the final EA in low and moderate flow years; The habitat values being met by the FERC recommendation are compared to maximum WUA values, which values are achieved at flows not often even available in the watershed; and FERC appears to neglect the volume of water being lost to a bypass flow in its calculations of flows in the South Fork. The result of these three sources of error is that during many years, the Ames Project will run out of water during the winter months and not be able to meet even minimum flows in most years. Overall, the minimum releases recommended by the FERC staff at the powerhouse will have the effect of severely limiting peaking operations in most winters, and result in decreasing the Project s on-peak generation by about 40% in an average year, from the current average annual on-peak generation of about 9,300 MWh to about 5,900 MWh. FERC appears to adopt the CDOW recommendation of 17 cfs base flow from the powerhouse in January and February. At least 14 cfs of this flow amount would come from 8

18 Trout Lake. Because there is always some leakage at the Howards Fork diversion dam, it is more likely that during January and February a flow of 15 to 16 cfs would need to be discharged continuously from the Lake Fork unit. In December and March, the FERC staff recommends a base flow from the powerhouse of 14 cfs, again requiring the Lake Fork unit to be continuously discharging 11 to 12 cfs of this flow. To these amounts must be added the EA-recommended Lake Fork bypass flow of 3 cfs and the toe drain flow of 0.5 cfs, yielding a minimum flow requirement from Trout Lake of 15 cfs in December and March and 19 cfs in January and February. Comparing this to unimpaired median flow from the Lake Fork of 4 cfs in January and February and 5 cfs to 6 cfs in December and March, respectively, shows the degree to which the Project would be required to supplement flows naturally available in the Lake Fork. The release gates at Hope Lake are opened each year circa November 1. The maximum storage available in Hope Lake is 2,300 acre-feet, assuming the lake is full which is often not the case. Based on operations modeling, the long-term average annual storage available is about 1,100 ac-ft. The average release from Lake Hope storage from November through March is therefore about 4 cfs. Median Lake Fork natural runoff into Trout Lake, without augmentation from Hope Lake storage, is 3 to 4 cfs from December through March, and is 2 to 3 cfs about 25% of the time. Therefore, median Trout Lake inflows during December through March are about 8 cfs and 25% of the time about 6 to 7 cfs. Therefore, the final EA would require that PSCo release from Trout Lake storage approximately 2,160 acre-feet of water just to satisfy the base flow requirements from December through March (that is, the difference between the median inflow of 8 cfs and the required outflow of 17 cfs). This represents over 90% of the total storage available in Trout Lake if the lake is full on December 1. Based on operations modeling for the period 1962 to 2004 performed by PSCo using the FERC staff recommended minimum flows (Lake Fork bypass plus powerhouse release), the Project would not be able to meet the FERC-recommended minimum flows for an average of 66 days each year, or slightly over two months each year. In dry years, Trout Lake would be out of storage well before the end of March and would be in violation of the final EA s recommended minimum flows without having done any peaking operations all winter. Moreover, the final EA clearly identifies the primary limiting factor on the SFSM fishery as ice flow events, not peaking, which results in only a 0.2 to 0.4 feet increase in water levels downstream. According to accepted Habitat Suitability Curves for brown trout, the minimum depth for trout spawning is about 0.5 ft. Therefore, no eggs will be dewatered due to a change in water elevation of 0.2 to 0.4 ft as a result of peaking operations. The effect of the FERC staff s recommended base flows for the South Fork on Project on-peak generation would actually far exceed the estimate provided in the final EA. This is not justified due to the severe loss in onpeak generation and the lack of any measurable benefit to the fishery of the South Fork. The Agreement identifies the flow amounts and flow measurement point at the confluence of Lake Fork and Howards Fork in light of the proper consideration of both flows needed to protect the fishery and the flows actually available in the watershed. 9

19 5.0 Conclusion The Parties agree that the alternatives presented in the signed Agreement agreed to by all the signatories of the Agreement present viable, ecologically sound and superior alternatives to the Commission s final EA and agree that the Agreement should be adopted by the Commission. 6.0 References Cited Annear, T.C., W. Hubert, D Simpkins, and L. Hebdon Behavioral and physiological response of trout to winter tailwaters in Wyoming, USA. Hydrological Processes. 16: Behnke, R. J Native trout of western North America. American Fisheries Society Monograph 6. CDOW San Miguel and South Fork San Miguel River Fish Sampling Report. September Hubert, W.A., C.A. Pru, T.A. Wesche, and T.J. Bray Evaluation of flow duration analysis to establish winter instream flow standards for Wyoming streams. Final Report, 1997, WWRC Prepared for Wyoming Water Resources Center, University of Wyoming. Western Association of Fish and Wildlife Agencies (WAFWA) Western Native Trout Initiative A Plan for Strategic Action. URL Accessed November 2009: Action%20Jan% pdf. 10

20 Appendix B: Final Settlement Agreement including Proposed License Conditions

21 AMES HYDROELECTRIC PROJECT FERC PROJECT NO. 400 Final Settlement Agreement November 16, 2009

22 ACRONYM LIST BLM CDNR CDOW CDNR FERC FPA Agreement GMUG MW PSCo SJCA SJNF SFSM USFS Bureau of Land Management Colorado Department of Natural Resources Colorado Division of Wildlife Colorado Department of Natural Resources Federal Energy Regulatory Commission Federal Power Act Final Settlement Agreement Grand Mesa, Uncompahgre, and Gunnison National Forest Megawat~ Public Service Company of Colorado San Juan Citizens Alliance San Juan National Forest South Fork San Miguel River U.S. Forest Service

23 Final Draft November 16, 2009 SETTLEMENT AGREEMENT Ames Hydroelectric Project- FERC Proiect No. 400 This final settlement Agreement ("Agreement") is made pursuant to the Federal Energy Regulatory Comanission ("FERC" or "the Commission") Rule 602, 18 C.F.R , by and among the following Parties: Public Service Company of Colorado d/b/a Xcel Energy ("PSCo ); United States Department of Agriculture, Forest Service ("USFS"); United States Department of Interior, and the Colorado Department of Natural Resources ("CDNR") mad its agency, the Colorado Division of Wildlife ("CDOW"). Collectively referred to as "the Parties." This Agreement is effective as of the date that the last party identified in this paragraph executes the Agreement (the "Effective Date"). ARTICLE I: RECITALS Section 1.1. PSCo is in the process of obtaining a new license ("License") from FERC for the continued operation of its 3.5-MW Ames Hydroelectric Project ("Project") originally built in The Project is located in the San Miguel River watershed in southwestern Colorado partly on lands within the Uncompahgre National Forest, a component of the Grand Mesa, Uncompalagre, and Gmmison National Forest lands ("GMUG ). The Project diverts water at a diversion dam at Trout Lake on Lake Fork and at a diversion dam on Howards Fork for generation of electricity at the Project powerhouse on Howards Fork. Section 1.2. Project diversions and operations adversely impact USFS managed lands and aquatic resources located within the GMUG, as well as aquatic resources managed by CDOW and the Bureau of Land Management ("BLM"). PSCo is obligated to undertake measures to, mitigate the adverse impacts of the project on the GMUG and the aquatic resources of the GMUG and other downstream lands. The Parties agree that this Agreement does that in a cooperative maaner which best meets the needs of the public. Section 1.3. On December 23, 2008, pursuant to Section 4(e) of the FPA, the USFS filed preliminary conditions for the Project. On January 5, 2009, pursuant to Section 10(j) of the FPA, CDOW filed proposed conditions. On August 14, 2009, the USFS filed modified 4(e) conditions. Section 1.4. This Settlement is intended to establish PSCo s obligations for the protection, mitigation, and enhancement of natural resources affected by the Project as well as the obligations of the other Parties to uphold the terms of this Settlement. It specifies procedures to be used by the Parties to ensure the implementation of those obligations consistent with this Settlement. The Parties agree that this Settlement is fair and reasonable and in the public interest. As part of this Settlement, the Parties request that the Commission accept and incorporate, without material modification, as license articles in the New License, all of the Proposed License Articles set out in Attachment 1. Section 1.5. Relevant Statutes. The Parties agree that the measures and actions contained herein are intended to address laws and statutes relevant to the relicensing process, including but not limited to:

24 t~1) Section 18 of the FPA, 16 U.S.C. 811 (2000); (2) Section 4(e) of the FPA, 16 U.S.C. 797(e); (3) Section lo(j) of the FPA, 16 U.S.C. 803(j); (4) Section 10(a) of the FPA, 16 U.S.C. 803(a); (5) National Forest Management Act, 16 U.S.C et. seq.; (6) Organic Achninistration Act of 1897, Pub. L. No. 2 (1897). Section 1.6. Purposes. The Parties have entered into this Agreement for the following purposes: to determine those terms and conditions necessary to protect the GMUG National Forest from the ongoing adverse impacts of continued Project operations; to resolve issues regarding the appropriate mitigation for the Project during the next license term; to allow PSCo to obtain a FERC order issuing a license for the project consistent with this Agreement; and to allow the Project to continue while also achieving the management goals of USFS, CDOW and BLM for the lands and resources under their respective jurisdictions. ARTICLE II: AGREEMENT OF THE PARTIES AND EFFECT OF THE AGREEMENT PSCo, CDNR mad its agency, CDOW, and USFS hereby agree to the following provisions which will be incorporated where appropriate, as conditions in their new license for the Project: Section 2.1. Operatin~ Conditions. All of the plant operating conditions provided for in Sections 2.1.1, 2.1.2, and of the Agreement are for the purpose of protecting, mitigating, and enhancing the aquatic resources of the Lake Fork, South Furk San Miguel River and!or the main stem San Miguel River. The Parties agree to document compliance with operating conditions as part of the compliance reporting submitted to USFS under Section below. All plans developed pursuant to this agreement shall be filed with the Commission following USFS review and comment on the plans. The USFS reserves the right to require changes to the plans prior to the licensee submitting the plans with the Commission. Section Effects on Aquatic Resources (1) General Operating Conditions. PSCo shall operate the Project to reduce the effects of its operations on aquatic resources downstream of the powerhouse in the following manner: a. Install four to five pump-mixers into Trout Lake on or before October 25 of each year, and continuously operate these mixers, subject to normal maintenance upsets, until the first week in March, in order to reduce the heat content of reservoir releases made to the SFSM, mad 2

25 b. PSCo shall maintain a year-round minimmn flow in the SFSM of at least 13 cfs, measured as described below in item 2.1.1(1)g, and except as provided in item 2.1.2(1)h below; c. PSCo shall not allow the maximmn on-peak flow from the Lake Fork unit to exceed 30 cfs during the month of December; d. From January I to March 1, PSCo shall limit the maximum on-peak flow from the Lake Fork unit to no more thma 45 cfs when Trout Lake temperatures exceed 1.3 C (+/- 0.1 C) and to no more than 55 cfs when Trout Lake temperatures are less thma 1.3 C (+/- 0.1C). Lake water temperatures shall be measured at the penstock intake in Trout Lake within approximately 10 ft of the lake bottom and as near to the intake opening as practicable; e. PSCo shall maintain a continuous release to the powerhouse tailrace for four weeks during the fall trout spawning period to enhance brook and brown trout spawning. The four-week period will occur within the time period September 22 to November 1 each year. The four - week period will be selected by CDOW in its sole discretion. If CDOW does not provide a specific start date to PSCo by September 15t~of each year, then the four-week period shall start on October 1. The four week period shall be continuous once it begins and shall not be interrupted. The Parties understand that the desirable amount of flow release is within the range of 11 cfs to 15 cfs, and PSCo will use its best efl[brts to keep the flow release within this amount. However, PSCo may set the flow at any increment up to 28 cfs without consultation with USFS and CDOW in order to effectively manage reservoir levels in Trout Lake. Once a flow release is initiated, the flow release to the tailrace must remain at the initiated release level for the four week period. Peaking operations shall not occur during this four-week period. IfPSCo believes that the hydrologic conditions occurring at the outset or during the four-week spawning period will not allow a continuous release to the tailrace in the range of 11 to 28 cfs, then PSCo must contact the USFS and CDOW to request a change. PSCo must obtain concurrence from the USFS and CDOW prior to deviating from the continuous flow release required by this section. f. PSCo shall institute up-ramping and down-ramping rates during the Lake Fork unit peaking operations from minimum off-peak load to maximum on-peak load and on-peak to off-peak that provide relatively equal changes in discharge spread out over a time period of at least 60 minutes. These ramping rates apply during Lake Fork unit peaking operations. Emergency unit shutdowns (e.g. unit trips) shall not be subject to these ramping rate requirements. g. PSCo shall continuously measure all streamfiows provided for under Section 2.1.1(1), with the exception of those flows identified in Items (1)c, (1)d, or any flows related only to the Lake Fork unit or flows in the powerhouse tailrace identified in Item (1)e. The streamflow measurement device will be located immediately below the confluence of the Lake Fork mad Howard s Forks. The method, type of equipment, specific location mad reporting requirements for the streamflow monitoring will be determined jointly by USFS, CDOW, and PSCo. In the event these parties are unable to jointly agree, the USFS shall make the final

26 determination. All plans and specifications will be filed with the Commission. Monitoring of streamflows below the confluence of the Lake Fork and Howard s Fork will be operational no later than 180 days following issuance of a final project license. PSCO shall fund the cost of all stremnflow measuring devices as well as all annual operation and maintenance. This Agreement allows, but does not require, other interested entities to contribute to the cost of continuous streamflow monitoring. h. During plant outage periods, the 13 cfs minimmn flow requirement in the South Fork San Miguel, beginning at the confluence of the Lake Fork and Howard s Fork will still be in effect. In lieu of releases from the plant to the tailrace, PSCo will release sufficient water from Trout Lake through the lower valve house and down the natural channel of the Lake Fork to meet the flow requirement as measured per Section (1)g. PSCo shall notify USFS and CDOW of an outage within 48 hours of its occurrence. In the event circumstances, not addressed under exceptions (3), arise that may temporarily affect the ability to satisfy the 13 cfs minimum flow, then PSCo, USFS and CDOW will agree in writing what deviations will be permitted and for what length of period. This agreement must be in writing prior to any deviation from agreed operations. In the event the Parties cannot jointly agree, deviations will not be permitted. (2) Instream Flow Requirements - Lake Fork San Miguel River a. Within 30 days of the date of license issuance, the Licensee shall release 3 cfs or natural inflow, whichever is less, from the lower valve house at Trout Lake to the Lake Fork of the San Miguel River. This is an interim measure until a final guaranteed bypass flow device can be designed, approved and constructed ( (2)b). PSCo will include in the compliance and reporting plan (Section 2.1.3(1)) the details for how compliance will be verified and recorded. b. License issuance; USFS termination of the Priest Lake Dana reconstruction option under 2.1.2; or FERC action as defined in , items (1) and (2) are events or actions that would trigger the release of the 3 cfs bypass flow within 30 days, hereinafter referred to as "trigger date." c. In order to guarantee that the required instream flows are released for the duration of the license, the Licensee shall submit to the USFS, within 90 days of any trigger date, a guaranteed bypass flow plan. This plan will include the design, construction schedule, operation and maintenance details of the guaranteed priority bypass device, or its equivalent, from Trout Lake to the Lake Fork. The plan, including functional design drawings and an implementation schedule for the guaranteed priority bypass device, must be approved by the USFS. The Licensee and the USFS shall work cooperatively to agree on the design drawings and an implementation schedule, but in the event they cannot agree, the USFS retains final authority to determine the design drawings and implementation schedule. Following approval by the USFS, the plan shall be filed with the Commission. Within 180 days of any trigger date the guaranteed bypass flow device will be functional and operating. 4

27 d. Within 90 days following the trigger date, the Licensee, after consulting with the CDOW, the USFS and the United States Geological Survey, shall develop a plan, including an implementation schedule, to install, maintain and operate a streamflow measurement device, or an acceptable alternative, with continuous recording capability at a suitable site immediately downstream of the Trout Lake guaranteed priority bypass device. In the event these parties cannot agree on the plan and implementation schedule, the USFS shall make the final decision. The Licensee shall file with the Commission, the Trout Lake flow measurement plan mad implementation schedule approved by the USFS for the streamfiow measurement device. Within 60 days of request, the Licensee shall provide the USFS with updated stage-discharge charts, rating curves, calibration data, and!or with a report of streamflow information collected at the water measurement control section and any other applicable stream gage records. The water measurement control section and gage shall be shown on the as-built drawings filed with the Commission. e. The minimum streamflow may be temporarily modified, for a period not to exceed 24 hours, if required by equipment malfunction or operating emergencies reasonably beyond the control of the Licensee. If the streamflow is so modified, the Licensee shall notify the Commission and the USFS no later than 10 days after such incident describing the reasons and duration for the modification. (3) Ex_E_~9_e~tions. The plant operating conditions provided above in section 2.1.l(1)a-h are intended to be put in practice by the Project during normal operations. It is understood that PSCo may temporarily operate outside the conditions specified by this Section of the Agreement under the following circumstances: a. Public, employee or plant safety. PSCo may operate outside the operating conditions specified above if it reasonably deems necessary to do so to protect public or employee safety and/or the safety of the plant facilities. IfPSCo determines it is necessary to operate the plant outside of the conditions established in this Section for such safety reasons, it shall notify the USFS and CDOW within 48 hours of doing so and provide a description of the nature of the cause for the deviation from normal operating conditions, the temporary operating conditions put into practice, and the anticipated duration of the deviation~ b. Flood flows. The management of flood flows may require plant operations that do not follow the terms in 2.1.1(1) above. For example, a flood flow occurring in December may require that the Lake Fork unit operate at full load; however, it is also acknowledged that peaking operations would not be occurring under flood flows. If PSCo reasonably determines it is necessary to operate outside of the general conditions established above, it shall notify the USFS and CDOW within 48 hours of doing so mad provide a description of the nature of the flood flow, the temporary operating conditions put into practice and the anticipated duration of the deviation.

28 c. Droug~ht. (i). The management of drought conditions may require that plant operations differ from the general operating conditions described above. Deviation from general operating conditions because of drought shall not occur unless consistent with the Drought Contingency Plan described in (ii) below, and the Parties have first reached agreement concerning applicable changes to plant operations. Such agreement of the Parties shall be confirmed in writing prior to implementing any temporary flow adjustment for the management of drought conditions and shall be reported to the Commissiun. (ii). Drought Contingency Plan. Within six months of license issuance, the Licensee shall submit a Drought Contingency Plan to the Parties for review mad approval. Once USFS approval has been obtained, Licensee shall file the plan with the Commission. The Drought Contingency Plan shall include documentation of consultation with USFS, CDOW mad Colorado Water Conservation Board (CWCB). Proposed drought triggers will be based on drought indicators provided by the State of Colorado and shall be used for the purpose of determining the occurrence and degree of drought conditions; and potential consequences to resulting operations and flow releases. (iii) If drought conditions become apparent after the annual meeting of the Parties, PSCo may call a meeting of the Parties to propose any needed changes to plant operations. However, the Parties must concur that such changes are warranted before PSCo can operate outside the conditions set forth in this Agreement. Section Priest Lake Dam (1) In lieu of the Lake Fork San Miguel minimum flow bypass (Section (2(a)) and associated requirements), PSCo can elect to reconstruct Priest Lake Dam by providing written notice to the Paff~es and the Commission within 30 days of license issuance. Reconstruction and acceptance of the Priest Lake Dam must occur within 6 years of the signing of the Agreement, unless the 6 year period is waived or extended by the USFS and a new schedule is approved by the Commission. (2) Upon approval of dam reconstruction by the USFS and the Commission, PSCo shall immediately transfer any ownership of Priest Lake Dmn and its facilities to the United States of America in accordance with the requirements of State and Federal law. (3) Dam Reconstruction Plan. No later than one year from the date of license issuance, PSCo shall prepare a Dam Reconstruction Plan ("Plan") for approval by the USFS. Within 30 days of approval by the USFS, PSCo shall file the Plan with the Commission. The Plan will identify critical benchinarks that must be met to ensure completion of the reconstruction project within the specified six-year schedule. The Plan shall be prepared in consultation with the CDOW, the Colorado Division of Water Resources, Office of the State Engineer, and 6

29 (4) (5) USFS. The Plan shall include docmnentation of consultation with the resource agencies, proposed design, schedule for filing applications for permits with applicable permitting agencies, construction schedule, materials somce, staging areas, disposal areas mad projected completion date. Good Faith Effort: PSCo shall make a good faith effort to reconstruct Priest Lake as soon as possible following issuance of the project license. On an annual basis, PSCo shall report to the USFS and the Commission the steps it has taken to complete the reconstruction of Priest Lake Reservoir. In the event the USFS determines that PSCo is not making a good faith effort to reconstruct Priest Lake, or is not making sufficient progress to complete the reconstruction within six years, as determined by meeting the Reconstruction Plan benchmarks, the USFS can elect to terminate this measure and PSCo will implement, within 30 days of termination of this Item, the Lake Fork San Miguel 3 cfs flow release for the remaining term of the license. Trout Lake Water: Until such time that Priest Lake dam is reconstructed, PSCo shall provide without charge, water not to exceed 2 AF/year to be released at Trout Lake through either the Ames powerhouse or the bypass pipe at the Trout Lake Lower ValVe House to the South Fork San Miguel River. The quantity of water to be released each year will be determined by the Colorado Division of Water Resources in the amount necessary to replace out-of-priority uses by the USFS at its Matterhorn campground!work center. Section Compliance_, Reporting and Coordination (1) A Compliance Plan and reporting schedule, not to include the Dam Reconstruction Plan cited in Section 2.1.2(3) above, will be prepared by PSCo within 90 days of the license issuance to implement the provisions of this Settlement Agreement in force. The compliance plan will address all aspects of data collection, analysis and reporting needed to verify that all operational aspects of this Settlement Agreement are being met. The Compliance Plan wilt be subject to review and approval by the USFS, CDNR, BLM, and the Commission. The Parties will have 45 days to comment on the Compliance Plan prior to submittal to the Commission. Appropriate revisions to the Compliance Plan ~vill be prepared in the event of any alternative compliance that may be triggered under the provisions of this Settlement Agreement. (2) The Parties to the Agreement shall meet annually in March to review expected flow conditions in the coming season mad to review those cases during the previous year where PSCo felt it necessary to operate outside the conditions set forth in this Agreement, 2.1.1(3). Exceptions. (3) All notices of outage and operational exceptions will be directed to the Forest Supervisor, GMUG. The communication specifics will be addressed in the compliance plan, Section 2.1.3(1).

30 (4) Each of the Parties will identify a designated representative within 30 days ofexecntion of this Settlement Agreement. That individual or position will be a point of contact and represent the Party in matters related to this Agreement. Any changes to Party representatives will be noticed to other members within 30 days of the change. Section 2.2. EFFECT OF THE AGREEMENT Section Limitations. This Agreement establishes no principle or precedent with regard to any issue addressed in this Agreement or with regard to any Party s participation in any other pending or future licensing proceeding. Further, no Party to this Agreement shall be deemed to have approved, accepted, agreed to, or otherwise consented to any operation, management, valuation, or other principle underlying any of the matters covered by this Agreement, except as expressly provided in this Agreement. By entering into this Agreement, no Party shall be deemed to have made any admission or waived any contention of fact or law that it did make or could have made in the subsequent/future licensing of the Project. This Section 2.2 shall survive any termination of this Agreement. Section Representation Regarding Consistency and Compliance with Statutory Obligations. By entering into this Agreement, the Parties represent that they believe their statutory and other legal obligations as identified in ARTICLE I are, or can be, met through implementation of this Agreement in addition to those conditions and recommendations submitted by the USFS or any other Party not affected by this Agreement. Nothing in this Agreement shall be construed to limit any govermnent agency with jurisdiction from complying with its obligations under applicable laws and regulations or from considering public comments received in any environmental review or regulatory process related to the Project in accordance with this Agreement. Nothing in this Agreement shall be deemed to constitute a waiver by the Parties of any right, obligation, or cause of action, including claims for injunctive relief or civil penalties, to enforce any laws or regulations not specifically addressed by this Agreement, provided however, that the Parties shall exercise any such right, obligation, or cause of action in a maimer consistent with this Agreement. The Parties shall not be precluded from taking appropriate action to abate an irmninent endangerment to human health or the environment should such a situation arise at or in the vicinity of the Project. Section Nothing in this agreement shall be construed to limit the USFS s right to modify License conditions, if necessary, to incorporate changes necessitated by new laws and regulations directing changes in management of the area, additional information provided by studies which have not been completed to date, by findings within the Project of new noxious terrestrial or aquatic biota, and to address new listings of threatened, endangered, and other special status species in the Project. Section Nothing in this Agreement or any other document filed with the Commission in

31 relation to the Project will, or is intended to amend, waive, forfeit or in any manner modified the authorities of the USFA or CDOW under Sections 4(e) and 10(j) of the FPA. Section The Parties agree that this Agreement is fair and reasonable and in the public interest within the meaning of FERC Rule 602 governing offers of settlement. 18 C.F.R. 602(g)(3). ARTICLE III: ACTIONS UPON EXECUTION OF THIS AGREEMENT Section 3.1. FERC Filings. Within 30 days of the effective date of this Agreement, PSCo will file with the Commission a fully executed copy of this Agreement in accordance with FERC regulations at 18 C.F.R Within 30 days of the effective date of this Agreement, USFS will conform its mandatory conditions consistent with this Agreement mad wil! file with the Commission the revised 4(e) conditions in Attachinent 1 Section 3.2. Communications with FERC and Other Government Agencies. To the extent consistent with applicable law, the Parties shall actively support this Agreement and incorporation of consistent terms into the License mad any other required permits or certifications. The Parties agree not to propose or otherwise communicate to the Commission or to any other federal, state, or local agency whose approval may be necessary to put this Agreement into effect, may comments, filings, statements, or License conditions not consistent with the terms of this Agreement. ARTICLE IV: IMPLEMENTATION OF AGREEMENT Section 4.1. Parties Bound. The Parties shall be bound by this Agreement begiiming on the Effective Date and for the term of the License unless precluded from doing so by an order of the Commission or a court of competent jurisdiction. Section 4.2. Orders of FERC or Court. The following provisions address orders issued by the Commission or a court with respect to this Agreement. Section Any Party may petition the Commission for rehearing of the portion of any FERC order that rejects or modifies may portion of this Agreement (including by amending the License at any time during the term of the License in a mamaer inconsistent with this Agreement), and seek judicial review with respect thereto. Consistent with Section 3.2, in any such rehearing or review proceeding, whether initiated by a Party or not, no Party shall take a position that is inconsistent with this Agreement. Section IfFERC: 1) does not accept the Priest Lake Dam terms and conditions set forth in Section and compliance reporting set forth in Section 2.1.3(1) of this Agreement as part of the License for the Project; or 2) accepts the Priest Lake Dam terms and conditions set forth in Section but for whatever reason, chooses not to administer and enforce compliance with those conditions, then the 3 cfs flow bypass requirement in the Lake Fork will be implemented

32 within 30 days in accordance with Section 2.1.1(2) and as stated in Modified Condition No. 17 (Attachment 1). Additionally, if FERC materially modifies or requires any measure inconsistent with this Agreement, or if, during the term of the License, FERC or a court modifies the License to require operation of the Project in a maturer that is inconsistent with the Agreement, then the Parties shall meet to discuss whether such inconsistency can be resolved by agreement of the Parties. Section 4.3. Review of Other ACenc7 Actions. To the extent provided by applicable law, any Party may seek administrative rehearing and judicial review of any action by any other governmental authority inconsistent with this Agreement. Section 4.4. Availability of Funds. Implementation of this Agreement for a Party that is a federal agency is subject to the requirements of the Anti-Deficiency Act, 31 U.S.C , and the availability of appropriated funds. Nothing in this Agreement is intended or shall be construed to require the obligation, appropriation, or expenditure of any money from the U.S. Treasury, or the Treasury of the State of Colorado. Implementation of the Agreement by the Governmental Parties is subject to the availability of appropriated funds. The Parties acknowledge that USFS and the State of Colorado are federal and state agencies respectively, and shall not be required under this Agreement to expend may Government Agency appropriated funds unless and until appropriately authorized. ARTICLE V: FORCE MAJEURE Section 5.1. An event of"force Majeure" as used herein means any event beyond the reasonable control of and which occurs without the fault or negligence of the Party, including its contractors and subcontractors (to the extent said contractor was acting under their control or direction), which events may include but are not limited to: acts of God or sudden actions of the elements; acts of win, terrorism, or civil disturbance; and labor stoppages. If a Force Majeure event renders a Party unable to perform any obligation hereunder, that Party shall promptly notify the other Parties, and use best efforts to resume its obligation as soon as possible. For so long as a Force Majeure event renders the performance of any obligation impossible, that obligation is excused. ARTICLE VI: GENERAL PROVISIONS Section 6.1. No Third-Party Beneficiaries. Without limiting the applicability of rights granted to the public pursuant to applicable law, this Agreement shall not create any right or interest in the public, or any member of the public, as a third-party beneficiary of this Agreement mad shall not authorize any non- Party to maintain a suit at law or equity pursuant to this Agreement. The duties, obligations and responsibilities of the Parties with respect to third Parties shall remain as imposed under applicable law. Section 6.2. Successors and Assigns. This Agreement shall apply to and be binding on the Parties and their successors and assigns. Section 6.3. Modification of the Settlement Agreement. Any modification to the provisions of this Agreement shall be effective only when made in writing and signed by the Parties. 10

33 Section 6.4. Elected Officials Not to Benefit. No member of or delegate to Congress shall be entitled to any share or part of tbas Agreement or to any benefit that may arise from it. Section 6.5. No Partnership. Except as otherwise expressly set forth herein, this Agreement does not, mad shall not be deemed to, make any Party the agent for or partner of any other Party. Section 6.6. Reference to Statutes or Regulations. Any reference in this Agreement to any federal or state statute or regulation shall be deemed to be a reference to such statute or regulation or successor statute or regulation in existence as of the date of the action. Section 6.7..Notice. Any notice required by this Agreement shall be in writing. It shall be sent by first class mall or comparable method of distribution to the other Party and shall be filed with the Commission. For the purpose of notice, the authorized representatives of the Parties as of the Effective Date are: PSCo: Public Service Company of Colorado Attn: Supervisor, Ames Hydroelectric Project 240 Electra Lake East Durango, CO USFS: Department of Agriculture, Forest Service Attn: Forest Supervisor - Grand Mesa, Uncompahgre and Gunnison NFs 2250 Hwy 50, Delta, SO CDNR: Colorado Department of Natural Resources Attn: Executive Director - Jim Martin 1313 Sherman St. Room 718 Denver, CO

34 ARTICLE VII: EXECUTION OF AGREEMENT Section 7.1. Signatory Authority. Each signatory to this Agreement certifies that he or she is authorized to execute this Agreement and to legally bind the Party he or she represents, mad that such Party shall be fully bound by the terms hereof upon such signature without any further ayt, approval, or authorization by such Party. Section 7.2. Signing in Counterparts. This Agreement may be executed in any number of counterparts, and each executed counterpart shall have the same force and effect as an original instrument as if all the signatory Parties to all of the counterparts had signed the same instrument. Any signature page of this Agreement may be detached from any counterpart of this Agreement without impairing the legal effect of any signatures, and may be attached to another counterpart of this Agreement identical in form having attached it to one or more signature pages. Rick Cables Regional Forester, Rocky Mountain Region United States Forest Service Date Jim Martin Executive Director Colorado Department of Natural Resources Date Mark D. Freeman Vice President, Technical Services Public Service Company of Colorado d!b/a Xcel Energy //-~o Date 12

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