Preliminary Report to IID Board December 20, 2011 1 LAW & RESOURCE PLANNING ASSOCIATES
Outline 2 Will the on-farm and system conservation measures being developed by IID be sufficient to ensure implementation of the QSA without causing injury to the IID or the Imperial Valley? (Conservation) Could the environmental costs to the district and the larger community be greater than the revenues and other benefits generated by the QSA? (Environmental) Are the proceeds of the water transfer being utilized to ensure the long-term viability of the agreement and, if not, can they be redirected to meet this objective? (Financial) Does QSA as written fully protect the Imperial Valley s water rights and the IID from other legal risks? (Water Rights / Legal)
Conservation Do we know whether the proposed water conservation programs will work? How do varied values of crops, absentee ownership of land and lease arrangements, and uncertainty of overall demand impact agricultural markets? Does the Definite Plan rely on sufficiently reliable hydrologic and agricultural assumptions? 3
Do we know whether the proposed water conservation programs will work? 4 The majority of the programs for water conservation are untested both as a matter of economics and hydrology on the scale being proposed by the QSA. Most of the low hanging fruit of system improvements have been implemented, and on-farm improvements are very difficult to implement without massive economic incentives. As agriculture prices go up, there will be a requirement of more $ to induce irrigators to accept the risks associated with untested conservation measures. If the conservation program does not work at the anticipated cost, the result will be a) more revenue going out of IID for conservation or b) less water for all users because water was sent to urban users and the conservation measures did not produce the water anticipated.
How do varied values of crops, absentee ownership of land and lease arrangements, and uncertainty of overall demand impact agricultural markets? 5 Even in a fallowing program, the higher the price of product, the more money required to fallow land. When crop values are high, the marginal value of water increases and the farmer will accept less risk to crop yields to implement conservation. This will require higher incentive payments to induce participation. From a technical, agricultural and engineering perspective, it is not clear whether the untested on-farm improvements, even if accepted at a price that could be afforded over time, would produce sufficient wet water to produce the quantities of water demanded by the QSA. All of the above uncertainties must be incorporated into a more refined QSA that relieves IID from any of its obligations if these technologies fail or increase the amount of money available to adjust for the risk.
Does the Definite Plan rely on sufficiently reliable hydrologic and agricultural assumptions? Was there sufficient review of, and citation to, existing and current literature regarding irrigation water conservation? To what extent have improved on-farm efficiency measures been implemented since the Definite Plan and QSA? Was there sufficient outside peer-review of the Definite Plan before it was finalized in 2007. Have yield responses to on-farm efficiency measures been studied since the Definite Plan? Have cost data for implementation and operation of improved on-farm efficiency measures been collected since the Definite Plan? 6
Does the Definite Plan rely on sufficiently reliable hydrologic and agricultural assumptions? 7 Since the publication of the 2007 Definite Plan, have there been any studies to determine: Whether the Consumptive Use Fraction estimates are reflective of the actual hydrology for improved efficiency measures? Whether the Tail Water and Tile Water estimates are consistent with actual system behavior in areas where improved efficiency measures have been implemented? Whether there has been a change in groundwater recharge or storage based on improved efficiency measures?
Conservation Preliminary Conclusions Preliminary expert evaluation raises serious technical and financial questions whether conservation can be implemented at costs anticipated in the QSA. It must be made clear to our QSA partners that if the conservation technologies fail, then IID is not obligated to reduce its diversions and deliver the water to the urban users. A failed conservation program, without financial support from QSA partners, could contribute to the destruction of the economic base of the valley. 8
Environmental What are the potential environmental damages to Imperial Valley from the decline of the Salton Sea? What are the possible actual costs for all mitigation and restoration, compared with QSA estimate? Are the QSA caps on liability adequate to protect the IID and Imperial Valley? What are the environmental and social costs to the Valley of implementation of the QSA? How much could IID be in the hole, if the worst situation materializes? 9
What are the potential environmental damages to Imperial Valley from decline of the Salton Sea? Air Quality PM10 from windblown dust could increase from 180 tons/day (2004) to nearly 400 tons/day by 2036 Loss of Fish and Wildlife Salinity above 60 ppt could decimate tilapia reproduction Loss of breeding and roosting habitat for thousands of resident and migratory birds Withdrawal of shoreline impacts Sonny Bono NWR and other wildlife areas Exposure / Concentration of Hazardous Chemicals 10 Salt, Selenium and trace contaminants
What are the possible actual costs for all mitigation and restoration, compared with QSA estimate? California s Preferred Alternative for Restoration: $8.9 billion in construction costs $100-200 million in annual O&M costs California s No-Action Alternative $800 million only for mitigation focused on air quality, dust suppression Salton Sea Authority Revitalization and Restoration Plan: $2.2 billion in construction costs QSA Estimate: In 2003, QSA parties estimated environmental mitigation costs at $178 million 11
Are the QSA caps on liability adequate to protect the IID and Imperial Valley? 12 Court of Appeals decision and QSA caps do not address special relationship between IID and Salton Sea: Even though QSA JPA provided [t]he State obligation is an unconditional contractual obligation and not conditioned upon an appropriation, the Court held there is no enforceable mandate for State to undertake Salton Sea mitigation and restoration. Even though Court found QSA constitutional, it did not allocate enforceable obligations among QSA parties to mitigate and restore the Salton Sea. QSA caps provide no protection against suits seeking injunctive relief. QSA caps are effective only for transfer impacts; landowner liability for impacts attributed to other factors could amount to nearly half of total.
Are the QSA caps on liability adequate to protect the IID and Imperial Valley? 13 IID and other Imperial Valley residents are the persons damaged unlike other QSA parties, you live and work here, projected impacts will affect your communities and quality of life. QSA Decision was not a victory for the Imperial Valley; it shifted to the IID, Imperial Valley and the Salton Sea ecosystem the risk of the State s default on its mitigation and restoration commitments.
What are the environmental and social costs to the Valley of implementation of the QSA? If, notwithstanding the QSA, more fallowing becomes necessary to support the Sea, loss of agricultural income in community, loss of jobs IID human resources and business model concentrated on conservation rather than other farm services Decline in air quality leads to higher respiratory illness rates, increase in local health care costs Loss of tourism, recreational revenues due to decline of fish and wildlife Lower property values Reduced tax base 14
How much could IID be in the hole, if the worst situation materializes? 15 If: (1) mitigation costs exceed $133 million (or $387.6 million in nominal dollars over life of the project), (2) State fails to approve and fund restoration, and (3) Sea declines as projected: IID forced to mitigate urgent air quality and toxicity problems Cost: $???? IID forced to litigate against State for breach of contract Cost: $???? IID mitigation water has not bought time for restoration, represents lost opportunity for IID revenues Cost: $???? Total Cost: $????
One Alternative Path Early Mitigation Habitat 16 IID Petition for Change of SWRCB 2002 Order proposes using revenue from additional water transfers to fund durable mitigation habitat projects. Change would be effective only if State fails to adopt and fund a Salton Sea restoration project by 2014. Represents a practical step toward Salton Sea conservation, rather than the theoretical QSA approach premised on an unenforceable State restoration obligation. Projects can have secondary community mitigation benefits, such as emissions control. Allows transfer beneficiaries to support more realistic mitigation costs, unlike QSA Conservation Transfer model.
Environmental Preliminary Conclusions 17 Preliminary expert evaluation raises serious questions whether mitigation and restoration can be implemented without causing severe hardship to IID and the Imperial Valley. It must be made clear to our QSA partners that, if the State fails to cover the environmental and social costs to the Imperial Valley as a result of the decline in the Salton Sea, the QSA partners, not IID or residents of the valley alone, must shoulder that additional burden. Failure to properly address the Salton Sea issues could contribute to the destruction of the health, quality of life and economic base of the valley.
Financial 18 Are the funds of the QSA currently subsidizing other IID operations, rather than being held in a separate account? Are the assumptions built in the 40- year financial model reasonable?
Are the funds of the QSA currently subsidizing other IID operations, rather than being held in a separate account? 19 The 2002 2010 Water Department Audited Financial Statements show a net loss before capital contribution for the period of ($12,006,930). However, the 2004 2010 QSA Annual Statements show a net savings of $20,904,589.
20 Are all the costs of the QSA being properly allocated? 140,000,000 120,000,000 100,000,000 Total and QSA Annual Revenue & Expense 2004-2010 If so, why are the costs of the IID Water Department going up and QSA expenses going down? Cost 80,000,000 60,000,000 40,000,000 20,000,000 Total Revenue QSA Revenue Total Expenses QSA Expenses - 2004 2005 2006 2007 2008 2009 2010
21 QSA revenue is shown in 2005 as Water Transfer Revenue. Is the Water Transfer Revenue going into a restricted fund? $60,000,000.00 $50,000,000.00 $40,000,000.00 $30,000,000.00 $20,000,000.00 $10,000,000.00 IID Water Annual Revenue 2002-2010 $- 2002 2003 2004 2005 2006 2007 2008 2009 2010 Water Sales MWD Revenue Water Transfer Revenue Water Availability charges Western Farm Land Proceeds Other
22 The QSA expenses are included in O&M Systems and Dams, but why are the costs increasing faster than QSA expenses? 90,000,000 80,000,000 70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 IID Water Irrigation System & Dams O&M Compared to QSA Total Expenses 2004-2010 - 2004 2005 2006 2007 2008 2009 2010 O&M of Irrigation System and Dams - Minus QSA Expenses QSA Total Expenses TL - O&M of Irrigation System and Dams
Are the assumptions built in the 40 Year model reasonable? 23 Are the revenues of the QSA sufficient to meet the cost obligations? What is the major financial factor affecting the viability of the QSA? Are the replacement costs of the entire Water Department forecasted in the QSA forecasted costs?
24 The projections shows very little margin for surplus. This makes the reasonableness of the assumptions very important. QSA Forecasted Transfer Revenue and Conservation O&M and Capital 2011-2047 Total Expenses 35% Capital Net 11% Revenue 54%
25 87% of the projected QSA cost is some form of conservation. Administration,Le gal, Local Entity, & Lost Water Sales 2% QSA Forecasted Transfer Revenue and Expenses 2011-2047 Debt Service 4% The pilot project in the Definite Plan showed a 50% cost overrun. Conservation, Fallowing, & Capital Net 29% Enviromental Obligation O&M 11% Transfer Revenue 54%
26 The forecast estimate shows major percentage of capital expenses is capital replacement. Capital Replacement Capital Expenditures Conservation Data System Seepage (SCADA) Interceptor System Improvement Is this all for QSA or IID Water Department?
Financial Preliminary Conclusions 27 Preliminary expert evaluation raises serious questions whether QSA costs and revenues are properly allocated so as not to subsidize other water department operations. Because the margin for error in the 40-year financial model is minimal, it is essential that the cost assumptions be correct to make the project financially viable. Failure to properly allocate QSA costs and revenues, and failure of the assumptions in the 40- year financial model, could contribute to the destruction of the economic base of the valley.
Water Rights / Legal 28 How does the QSA conserved water transfer differ from the MWD conserved water transfer or a more traditional water transfer? What effect does the QSA have on water rights in the Imperial Valley? What are the legal consequences to IID if the proposed conservation measures fail to deliver the required water? What is the impact of the recent Court of Appeals decision on the IID s ability to force the state to fulfill its mitigation and/or restoration promises? The MWD raises similar concerns regarding the QSA.
Conserved Water Transfers in the Imperial Valley 29
How does the QSA conserved water transfer differ from the MWD conserved water transfer or a more traditional water transfer? Features of the MWD Transfer: System projects identified and funded by MWD; water conserved by those projects transferred. No risk to IID that cost of conservation would exceed price. No opportunity for gain; water transferred at cost. Features of the QSA Transfer: SDCWA pays a price per acre foot of water, and largely leaves it to IID to determine how to conserve that water. Risk to IID s ratepayers that cost to conserve would exceed price. (IID would have to raise water rates). Opportunity for gain if cost to conserve is less than price. 30
How does the QSA conserved water transfer differ from the MWD conserved water transfer or a more traditional water transfer? 31 Features of Transfers in Western Priority Systems: No de jure preference for types of water use, but agricultural rights are often the most senior and de facto most desirable. When M&I demands rise, two options: (1) appropriate water (if available) at a junior priority, or (2) more commonly, purchase and transfer senior agricultural water rights at market prices, unrelated to conservation. The cultural and economic effect is to retire agricultural uses and place the permanent water rights associated with that use to urban uses. The price for the water rights includes the lost agricultural opportunity and other external factors affecting the decision to sell.
How does the QSA conserved water transfer differ from the MWD conserved water transfer or a more traditional water transfer? The QSA Conservation Transfer model, unlike the priority system, tries to allow both agricultural and municipal uses of the water. However, in doing so, it forces the seller to assume the risk that conservation will work at the negotiated price. 32
What effect does the QSA have on water rights in the Imperial Valley? 33 Priority Water User Pre-QSA Apportionment PVID for beneficial use exclusively on a 1 gross area of 104,500 acres, such waters as may be required by said lands Yuma Project for beneficial use upon not 2 exceeding a gross area of 25,000 acres, such waters as may be required by said lands. PVID for use exclusively on 16,000 acres of 3,850,000 afy 3(b) land in that area known as the Lower Palo Verde Mesa IID and other lands under or that will be 3(a) served from the All-American Canal in Imperial and Coachella Valleys 4 MWD for beneficial consumptive use, by themselves and/or others, on the coastal plain of Southern California 550,000 afy Post-QSA Apportionment 420,000 afa CVWD: 330,000 afa IID: 3,100,000 afa 550,000 afa + (420,000 afa - actual 1,2,3(b) use) Subtotal (California s limit under BCPA): 4,400,000 afy 4,400,000 afy
What effect does the QSA have on water rights in the Imperial Valley? 34 Priority Water User Pre-QSA Apportionment MWD and/or City of Las Angeles for beneficial 5(a) consumptive use, by themselves and/or others, 550,000 afy on the coastal plain of Southern California City and/or County of San Diego for beneficial 5(b) consumptive use [Previously assigned to 112,000 afy MWD] PVID for use exclusively on 16,000 acres of 6(b) land in that area known as the Lower Palo Verde Mesa IID and other lands under or that will be 300,000 afy 6(a) served from the All-American Canal in Imperial and Coachella Valleys for agricultural use in the Colorado River Basin in California, as said basin is designated on map No. 23000 of the [BOR] 7 All remaining available water Post-QSA Apportionment 662,000 afa (MWD) Not specified. 1. 38,000 afa to MWD 2. 63,000 afa to IID, 3. 119,000 afa to CVWD 4. Any balance of Priority 6a and 7 water available in accordance with the priorities identified in IID, CVWD and MWD Section 5 contracts, as in effect on October 15, 1999. Total: 5,362,000+ afy 5,362,000+ afy
What effect does the QSA have on water rights in the Imperial Valley? 35 1979 Supplemental Decree in Arizona v. California: IID has present perfected right, with a 1901 priority, in annual quantities not to exceed (i) 2,600,000 acre-feet of diversions from the mainstem or (ii) the quantity of mainstream water necessary to supply the consumptive use required for irrigation of 424,145 acres and for the satisfaction of related uses, whichever of (i) or (ii) is less. 1984: SWRCB finds unreasonable use of water. 2002: BOR Part 417 proceedings
What effect does the QSA have on water rights in the Imperial Valley? 36 Irony: The SWRCB found waste (or an unreasonable use) in 1984 because IID was sending too much water to the Salton Sea and required IID to transfer water to MWD. In 2002, the SWRCB only allowed the transfer of water to SDCWA if, and on the condition that, IID send mitigation water to the Salton Sea (a reasonable use ).
What effect does the QSA have on water rights in the Imperial Valley? 37 Less Less Less Less Less 3,100,000 AFY 200,000 AFY 103,000 AFY 110,000 AFY 67,700 AFY 11,500 AFY IID s Quantified Priority 3(a) Consumptive Use Entitlement during term of Main QSA Agreement Total to SDCWA (on a ramp-up schedule) under 1998 IID/SDCWA Agreement Total to CVWD/MWD (on a ramp-up schedule) under the Acquisition Agreements (MWD assumes 50,000 afy obligation after year 46) Total amount to MWD (90,000) and CVWD (20,000) under the 1988/1989 Agreements Amount conserved by lining the All-American Canal; made available to others under the Acquisition Agreements Indian/Misc. PPR Rights; under Main QSA, IID must forbear to allow delivery of this amount, but can come from Priority 3(a), 6(a) or 7 2,607,800 AFY Priority 3(a) water available to IID during QSA, after ramp-up (during first 15 years, IID will also deliver a total of 1.6 MAF to DWR)
What effect does the QSA have on water rights in the Imperial Valley? 38 Are the permanent water rights in the valley diminished by the QSA s temporary transfer? Statute: If a party to the [QSA] engages in water efficiency conservation measures or land fallowing conservation measures to carry out a [QSA] transfer or to mitigate the environmental impacts of a [QSA] transfer, there may be no forfeiture, diminution, or impairment of the right of that party to use of the water conserved. Cal. Water Code 1013(d). Statute: Notwithstanding any other provision of law, upon the completion of the term of a water transfer agreement, or the right to the use of that water, that is available as a result of water conservation efforts described in subdivision (a), the right to the use of the water shall revert to the transferor as if the water transfer had not been undertaken. Cal. Water Code 1011(c).
What effect does the QSA have on water rights in the Imperial Valley? 39 Are the permanent water rights in the valley diminished by the QSA s temporary transfer? Section 14.1 of the SDCWA Transfer Agreement: The Parties agree that the Agreement does not in any way transfer, assign, encumber, or grant the Authority any ownership interest in or control over any of the IID Senior Water Rights. The Authority covenants and agrees not to assert any such interest in or control over any of the IID Senior Water Rights. Furthermore, upon the termination of the Agreement, neither the terms of the Agreement or the conduct of the Parties in performance of the Agreement shall be construed to enhance or diminish the rights of either Party as such rights existed at the Execution Date, including, without limitation rights arising from the application of principles of reliance, estoppel, intervening public use, domestic or municipal priority, domestic or municipal shortage or emergency, or equitable apportionment.
What effect does the QSA have on water rights in the Imperial Valley? 40 Are the permanent water rights in the valley diminished by the QSA s temporary transfer? Reality 1: Whenever municipal entities acquire a source of water they rarely, if ever, give it back. Reality 2: California law recognizes that there is no vested right in water if the use thereof is waste or unreasonable. (IID v. SDCWA (1990)). Can IID argue that the water previously conserved and transferred to urban use should be used again by IID after the QSA, if it has spent the previous 40 years demonstrating that it can reasonably use less while obtaining the same yields? Conversely, if after the QSA IID cannot conserve water without QSA revenues, it should not follow that its agricultural use is unreasonable.
What effect does the QSA have on water rights in the Imperial Valley? Are the permanent water rights in the valley diminished by the QSA s temporary transfer? 41 Reality 3: IID has now been pared down to near its present perfected water right of 2.6 MAFY. There will be additional pressure from urban entities and the USBOR to cut into the bone of this water right, and IID must start now to prepare its defense of its remaining water right. Reality 4: Given the nakedly political nature of prior SWRCB and USBOR decisions, IID needs to prepare now for this future risk, the statutes and agreements notwithstanding.
What are the legal consequences to IID if the proposed conservation measures fail to deliver the required water? 42 SDCWA will argue: Article 8 of the SDCWA Transfer Agreement identifies the conditions precedent to IID s obligations to undertake Water Conservation efforts and transfer Conserved Water as contemplated. Those conditions do not include that the proposed on-farm conservation measures will work. SDCWA will argue: Article 12 allocates risks of future events affecting IID s ability to deliver conserved water. IID largely bears the risk in the conditions identified. SDCWA will argue: Article 15.2(a): IID s failure to transfer Conserved in the quantities and on the schedule specified in this Agreement constitutes an event of default. SDCWA will argue: Article 16.1 confirms the ability of the nonbreaching party to obtain the remedy of specific performance.
What is the impact of the recent Court of Appeals decision on the IID s ability to force the state to fulfill its mitigation and/or restoration promises? Case does not hold that: 43 IID must perform under the QSA, if the very purposes of the contract is an impossibility because the conservation measures cannot produce water without destroying the viability of the IID. IID must perform under the QSA if the State fails to ever appropriate money to address the Salton Sea issues and if the net result is to destroy the ability of the IID to transfer water to San Diego and/or if visits so much cost on the IID that it is unable to function within the Imperial community. Any of the other challenges that have been remanded to the Superior Court should be decided in a particular way. Rather it simply holds that the QSA does not violate the particular constitutional provisions cited by Judge Candee a position taken by the IID.
What is the impact of the recent Court of Appeals decision on the IID s ability to force the state to fulfill its mitigation and/or restoration promises? 44 Under a proper understanding of the [JPA], if the conditions for the state s payment of excess mitigation costs were to arise but the state refused to appropriate money from the Treasury to pay those costs, then [IID, CVWD & SDCWA] would have a breach of contract claim against the state based on the state s breach of the [JPA], and the state would not be able to assert the lack of an appropriation as a defense to that claim. Nevertheless, even if the water agencies obtained a judgment against the state, they could not force the state to draw money from the Treasury to satisfy that judgment because the separation of powers doctrine precludes the courts from compelling the Legislature to enact an appropriation measure. Thus, in the face of legislative intransigence, it is possible the water agencies could be left with an unenforceable judgment for the unpaid excess mitigation costs, despite the state s unconditional contractual obligation to pay those costs.
What is the impact of the recent Court of Appeals decision on the IID s ability to force the state to fulfill its mitigation and/or restoration promises? 45 Of course, under our construction of the [JPA], the state potentially could avoid satisfying its obligation to pay the excess mitigation costs simply by having the Legislature refuse to appropriate money from the Treasury to pay those costs. [J]ust because the state might be able to avoid satisfying its payment obligations under the [JPA] by failing to appropriate funds to make the payment does not make the contract void as lacking mutuality.
What is the impact of the recent Court of Appeals decision on the IID s ability to force the state to fulfill its mitigation and/or restoration promises? 46 Thus, to the extent the Legislature had already appropriated money for purposes that could be deemed to encompass the payment of excess mitigation costs under the [JPA], and to the extent that money was still available for expenditure under such an appropriation, the three water agencies could seek a court order for that money to enforce the state s payment obligation under the agreement even in the absence of an appropriation made specifically to satisfy that obligation.
What is the impact of the recent Court of Appeals decision on the IID s ability to force the state to fulfill its mitigation and/or restoration promises? 47 What about restoration of the Salton Sea? (From the decision): We note that mitigation of the environmental effects of the Transfer Agreement and the Acquisition Agreement is not the same as restoration of the Salton Sea, as the concept of restoration encompasses addressing detrimental environmental impacts to the Salton Sea that stem from causes beyond simply the actions taken under the Transfer Agreement and the Acquisition Agreement. (Fish and Game Code 2931): (a) It is the intent of the Legislature that the State of California undertake the restoration of the Salton Sea ecosystem. (b) This restoration shall be based on the preferred alternative and using the funds made available in accordance with [ 2081.7] and other funds made available by the Legislature and the federal government.
What is the impact of the recent Court of Appeals decision on the IID s ability to force the state to fulfill its mitigation and/or restoration promises? What about restoration of the Salton Sea? 48 Facing same funding problems as QSA, as recognized in the recent SWRCB petition. QSA removes any restoration obligation from IID above a certain contribution but does not, in and of itself, contractually obligate the State to do that restoration.
The MWD raises similar concerns regarding the QSA. 49 The following slides come from a presentation at the Western Water Law Conference in Arizona, December 1-2 (before the decision of the Court of Appeals). The presenter was Bill Hasencamp, the manager of Colorado River Resources for Metropolitan Water District of Southern California
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Legal Preliminary Conclusions 57 The QSA does not provide permanent protection of the water rights of the Imperial Valley. QSA Agreements could be read to obligate IID to make conserved water available regardless of the cost effectiveness of the conservation programs. IID has not practical mechanism to force the State to live up to its mitigation and restoration promises. However, in either case, IID could argue that the State s failure or the impossibility of the conservation measures frustrates the purpose of the QSA and relieves IID of the obligation to perform.
Overall Preliminary Conclusions 58 The QSA is a highly theoretical document entered into as a result of tremendous political pressure; the goal of any Plan B will to propose a restructuring of the arrangements to meet the demands of actual experience.
Overall Preliminary Conclusions 59 1. A restructured agreement must ensure that it does not result in a perpetual loss of water rights without compensation. 2. A restructured agreement must ensure that the theoretical possibility of conservation does not become the basis for a reduction in the water right. 3. A restructured agreement must ensure that no federal or state actions can compel the loss of even more of the present perfected water rights dedicated to the Imperial Valley.
Overall Preliminary Conclusions 60 4. A restructured agreement must ensure that the proposed conservation measures work in fact both as a matter of economics and hydrology. If the proposed conservation is not economically or technically feasible, there can be no cost to IID and no nonconserved water transferred to urban users. 5. A restructured agreement must ensure that the costs of mitigation and, to the degree it is feasible, restoration of the Salton Sea are borne by all of the parties to the QSA and not just the Imperial Valley. 6. A restructured agreement must be utilized by the IID in a way that earmarks all of the funds from the QSA for conservation costs and environmental mitigation and does not use them for other purposes unless and until these costs are known.