Senate Budget and Fiscal Review Subcommittee No. 2 on Resources, Environmental Protection and Energy

Give me a second. Testing, testing, test, test, testing.

We're going to convene this hearing in one minute.

We'll see.

All right. Let's call this hearing of Subcommitee two to order. We're going to start with issue number 21. Let's first establish the quorum.

Allen.

Here.

Blakespear.

Present.

Troy McNerney here.

All right. We're going to start with issue 21. This is Department of Water Resources. And we've got Carla Nemeth, the Director there, to come up and give a presentation. And I know that we've got Andrew Hull from Finance and Sonja Pettek from Leo. Just available for questions if folks want to ask questions. Director Nemeth, you're. Yes.

Get reoriented. And now I know it's a very fancy, very fancy place. We'll let you get settled and you're ready to start whenever you.

Okay. Well, good morning. Thank you, Senator Allen and Members of this Subcommitee. My name is Karla Nemeth. I'm the Director of the California Department of Water Resources. The mission of the Department is to manage and protect California's water resources and we employ about 3,800 people to do so.

We're headquartered here in Sacramento, but we do have regional offices in Red Bluff, West Sacramento, Fresno and Glendale. Additionally, our State Water Project manages and maintains reservoirs, canals, hydroelectric plants and pumping facilities throughout the state. The department's responsibilities involve very quickly ensuring public safety through our dam safety and our flood management programs.

We also guide and promote statewide water management efforts through the production of what's called the California Water Plan and our regional water management efforts. We do operate the State Water Project, which is one of the biggest water infrastructure facilities of its kind, and it provides drinking water and water for irrigated agriculture.

The economic footprint of the State Water Project in and of itself. So not California, but just the service area of the State Water project is the 8th largest economy in the world. So you get a sense of its importance and it does supply water to about 27 million Californians.

We also assist in water use efficiency efforts through our conservation programs and through our role implementing groundwater sustainability.

And then we work in close coordination with our sister agencies, both at the state and federal level, and that much of that work revolves around ensuring the long term viability of California's Bay Delta through continued environmental restoration efforts, improving our scientific understanding of that system and helping to manage that Resource.

So separate from that, and maybe a less known fact is the Department has been assisting the management of the state's wildfire Fund since 2019, and it has been involved in securing energy supplies through the Electricity Supply and Strategic Reliability Reserve program since 2022.

I think this is a legacy of being the only state agency that runs a big utility. So we have a particular kind of expertise, but we have certainly broadened that to include our responsibilities supporting the electrical grid. So we have a number of actions of statewide importance that's reflected in all of our budget requests.

I was asked by the Subcommitee to provide you all with an update related to what's called the Delta Conveyance Project.

Before I do that, I did want to give you a real time update of where we are this water year, because it actually also speaks to one of the sort of key importance of completing the Delta Conveyance Project to adapt California to a changing climate. We have just passed April 1st. This is our traditional point in California.

When we take a look at the snowpack, it generally heats. It hits its peak accumulation April 1st. So we take a look at that and that enables us to make water management decisions for the duration of the spring and summer, which is traditionally very warm and dry.

Of course, right now our snowpack totals currently sit at 96% of the statewide average. But there is a real split between the part of the Sierra north of Sacramento, which is at about 117% of average, and then south of Sacramento in the southern Sierras, we're looking at about 84% of average. This water year has been.

I don't know, they're getting more usual where we experience real whiplash conditions within the context of a single water year. The water year starts on October 1st and runs through September 30th. It really is December, January, February and March is our traditional wet season. The real traditional wet season is January, February, March.

But it really matters what happens before then. And that was the big lesson of 2021 and 2022. We had a really big heat wave in the summer of 2020.

And we've started to understand with better information, much of which was prompted by the California Legislature and through your funding, we've been able to bring additional information to the table that helps role of warming temperatures and our management challenges with California's water supply. So this past year we had a bone dry October.

We had a double average November. We had an okay December, and then we had one of the driest Januarys on record. Then we had a February, which was good. And we've had some real cold storms this March. So all of this to say, when we move through such extreme conditions, everybody starts to kind of experience.

Experience the risk. And I would say probably as little as a month ago, we were starting to worry that February 1st was our peak snowpack, because it can happen, and it has happened in the most recent past. So our ability to move water when we have it is becoming increasingly important.

And the reality that our snowpack itself is changing, it's shrinking. We're starting to experience more of a series of warm storms.

And I think earlier last month and in parts of February, we had this scenario where we had inflow coming into the reservoirs, and we were releasing, importantly for flood control purposes from our reservoirs, you know, at 60,000 cubic feet per second.

And the water that we were moving out of the southern part of the Delta was about 6,000 cubic feet per second. And so our ability to adjust these. This infrastructure. There's lots of things we're doing independent from the delta conveyance project to help this infrastructure work better.

But fundamentally, and it's something we've known for a very long time in California, that where the pumps are in the southern delta really aren't good for fish. There is a natural physical conflict between how fish migrate through the system and what happens when we turn those pumps on.

There's also challenges with the central part of the delta and an aging levee system. We do still Fund important work in the delta, but generally, over time, with sea level rise and with the increasing intensity of storms that we see, I think back to 2023, we had 16 atmospheric rivers hit the State of California.

If they had done what we thought they were going to do originally, which is swing through the golden gate, and then what happens is they spin up the system into the Sacramento valley and dump a lot of rain.

In that kind of a scenario, we do have pretty grave concerns about a big storm event knocking out a levee. So all of this to say, you know, we are on year three of a pretty decent water year. So my spidey senses are all about dry conditions returning. It's really been the pattern we've been experiencing.

And so it is in years like this where we need to be moving that water, we need to be storing that water, and we need to be getting it underground. So one quick fact I'd like to just put on the table, because I think it's helpful.

There's just lots of, I think, traditional and genuine and sincere concerns about how such a facility would operate. And I'll say a Little bit more about that. But this year has been. We had a moment in the beginning of February again. We're coming off of that very dry January and we had a three day storm event.

And we realized if we had had the delta conveyance project in place for our state water project system, we would have already filled by that February storm. We would have already filled San Luis Reservoir south of the delta. We had zero demands south of the delta.

And it meant that the additional 75,000 acre feet that the project could have moved in that three day period would have been available to recharge groundwater basins.

And so starting to get our heads around how the system gets connected and what it means to have this kind of flexibility when we have big storms moving through the system, how it can help California I think becomes really important. So as you know, this is a project that has been around a long time.

Was originally conceived back when the state water project itself was conceived. We've had the past three governors really take a look at it. They all generally come to the same conclusion, that the risk in the delta is more than we could or should bear in California. And therefore we need to pursue some kind of infrastructure fix.

In the Schwarzenegger era, it started as a 15,000 cubic foot per second above ground canal. In the tail end of the Schwarzenegger years, it became an underground project. So a two tunnel project. And then Governor Brown came in and shrunk the capacity from 15,000 cubic feet per second to 9,000 cubic feet per second in two tunnels.

And then Governor Newsom, when he took office, he shrunk the project further to a single tunnel. 6,000 cubic foot per second tunnel. What's also important about Governor Newsom's proposal is he challenged the Department to go really take a look at the constructability of the previous iteration of the project. We had been moving.

The plan had been to tunnel under the central part of the delta. And taking another look, we ended up moving that alignment more eastward to get it out of the central part of the delta.

That required us to extend the length of the tunnel by five miles, but it also enabled us to no longer need a four bay. So all of that was really done around trying to do some up front design work and to do that in the context of interacting with a stakeholder group.

And that work began in 2018 and significantly reshaped the project. I did want to mention that because I, I know it's something in just the human brain. So many people still refer to it as the tunnels or the twin tunnels. It is in fact, a single tunnel.

And I know, I do want to acknowledge that for folks who live in the delta, that's a distinction without a difference in their mind. I think given the anxiety about not just long duration construction impact, but also long duration impact of adding a point of diversion to the delta.

So as of December 23, we've hit a lot of milestones. We completed our CEQA document in late January this year. We completed our permit under the California Endangered Species Act. All of that brought us to the Water Resources Control Board for water rights permit to add this point of diversion. So within our existing state water project.

Water right. But to at a point of diversion, we continue to work with the local water agencies. This is a project that is funded by the folks who receive that benefit. Those are our state water contractors south of the delta.

They recently finished a round of voting for the next two years to accelerate some of the design work so we can sort of answer more questions. Those designs questions can also answer an updated benefit cost analysis. We did release a benefit cost analysis that demonstrated the ratio is about 2 to 1.

So there's $2 of benefit for every dollar spent. The project itself is $20 billion. That is an increase from the previous estimate, which was $16 billion. The totality of that increase is inflation. And so in many respects, from a management cost perspective, time is not on our side. Things will just become more challenging and more expensive.

But I think that data point is important because it speaks to the care that the department has been doing to determine the costs of the project. We can't, we can't, you know, affect the cost of money, but we can affect the cost of the project.

And it's very important, especially given affordability across the board that water districts are facing, to make sure that we are coming in as accurately as possible. We have been working to do our outreach that's associated with the project.

This project was actually the first one that implemented what was AB52, which was requiring a much deeper landscape scale consultation with our tribal nations in California. So we have been doing that level of outreach to seek input and comment on the project. We have also developed a community benefits Fund.

It's a $200 million Fund that would be designed to, that is designed to work with local commun to determine the things that we can do that are needed for the project, but could also be long term leave behind, leave behind benefits for the community.

So some of these projects, you know, involve recreation, water quality, other sorts of things. And so that work is ongoing and really part of the next two years. And maybe I'll close by saying, with this project, we are looking at completing all of our state permits by the end of the governor's term.

And then when all of that work is done and the additional design work is done, and we have a new cost estimate and benefit cost analysis and a financial plan, because that's the next step.

And that's what we heard really loud and clear from all of our contractors, that we need more detailed information to make sure that no contractor is sort of over buying into the project and that those who are paying into the project will get the benefit of the project.

So a little finer point on that coming in the next two years, and maybe I'll stop there because I imagine you all have some really good questions for me about, about all of this. So thank you.

All right. Yeah. Thank you so much, Director. I know Senator McNerney has some questions.

Thank you, Chairman. And I thank the Director for your presentation this morning. I was at the meeting last week, I think it was, and it's clear that you're doing a lot of work to minimize the cost and impact and do provide the water resources as needed.

But I do co chair the Delta Caucus and I do represent the Delta, and my constituents are rightly concerned about what this impact is going to be on our community and on the quality of the Delta thereafter. So I have some questions and concerns.

You know, there's going to be a massive and unavoidable impact on the Delta communities with this project as it's conceived. If it moves forward. The construction is going to take about 15 years, which is quite a while to be dealing with disruptions.

It's going to be about 100 to 130ft underground, and it's going to be 45 miles long. This is a. This is a massive project. And it'll also impact Highway 12, which is also already known as Blood highway because of the fatalities on that. So we've got some serious concerns there.

And the price tag, I mean, you mentioned that $20 billion, it went up from $16 billion. And I'm wondering what that's going to look like two years from now. What's that going to look like five years from now? You've acknowledged already, I understand, that inflation is a problem, but there's going to be lawsuits.

There's going to be unavoidable environmental impacts that are going to have to be mitigated. So this is going to be, in my opinion, quite a bit more expensive than $20 billion. We see the Met has raised Their water rates by 20% and doubled property taxes on the customers. And those are before the additional cost of this project.

So it's not going to be something that people don't notice in their builds. And I don't think it's not going to deliver the kind of water resource that a project of this magnitude would be expected to deliver. It's only going to be 15% new water, which is, it's water.

But it's not something that a $20 billion,15 year project would be expected to do. So I think there are significant alternatives that would be considered. For example, and I know you're considering them, but I think there should be more emphasis delta levee restoration for earthquake resistance.

And I want to talk a little bit about the lower San Joaquin River. We've spent a lot of money. I've been working with SUJASCA for years, that's the San Joaquin area Flood Control Agency, to strengthen those levees. We put in a veterans facility there, a veterans care facility there.

They had to spend a lot of money to raise up. I mean we're doing a lot to prepare for a changing sea level. It's already happening. We can use emphasize a lot more in groundwater storage. Estimates are that San Joaquin county, which is part of my district, has a million acre feet groundwater storage capacity.

So you don't need to ship a lot of water to do that. We can do that right there where the water is, and then recycle water and water efficiency. I mean these things, if you do them together, will do a lot.

Other area parts of the world like Israel and Australia have taken these measures and they've been very effective in managing scarce water resources for the, for the community. So I think California can do the same thing.

So do you have any way to provide comfort that the price tag is not going to go from 20 billion to 50 billion? I mean, how are you going to in the next few years estimate what this thing is going to cost with some computer?

Yeah, that's, that's a good question. So I am not an economist, so I'm not going to speak to inflationary conditions. Definitely not my lane.

But what I can say is that between now and our next cost estimate, one, there is a healthy contingency that is built into the existing cost estimate, which is relatively common for a project of this size.

Originally we had about a 37% cost contingency, but I think we've adjusted that slightly downward because we did a lot more engineering work in the last two months.

But just to give you kind of a General flavor, I don't think it's that high and I don't want to misspeak, but, but we do have a healthy cost contingency and we're also anticipating with improvements to design actually that there's some real innovation that can enable additional cost savings.

So we are looking at just right now actually about 1,000,000,002 cost savings with some promising updated design work. So you know, in terms of, you know, inflation and cost of materials, I don't know.

But I think where we are for a project of this scale and the care that we're taking and the work that the design construction authority is doing to really innovate, I think is going to be what enables us to deliver a project that is, that is timely and is on budget.

That said, it is not a silver bullet for water supplies, but it does have to fit with needs that we have in California to make sure the groundwater supplies are replenished and clean. We do need to think about how it pairs with recycled water projects.

Desalination is a, is a good thing for parts of California, but not all parts of California and continues to be pretty expensive in the, in the scheme of things.

No, I didn't mention D cell.

Yeah, yeah. So you know, how, how we take a look at the state water project and connect it, integrate it to investments in local supplies is going to be key I think and that a lot of that Senator, is going to get picked up in how we're thinking about a more precise financial plan.

When I said we don't want our contractors to, you know, sort of over buy into this project, we really don't, you know, we don't want them to be doing things that dampen their need and desire to invest in other local supplies.

So how they put those pieces together is going to be really important over the next, over the next two years. As a General matter, this project, so there's, there's a lot of sort of discussion around does this project produce new water or not? And projects of this, you know, the state water project is 60 years old.

And when we think about this kind of an infrastructure investment, we think about, you know, this is a hundred year project and we're thinking about, you know, how this is going to perform in 2070.

And we do know that with the impacts of climate, the drying conditions, that warming temperatures themselves are actually a new demand on water supplies through evaporation and everything around us will be thirstier. Even our drought tolerant landscapes will be thirstier when temperatures get warmer.

That is California's precept is always highly variable, but the temperature warming in the background and the effect that it has on how water shows up in our system and what we need to do to manage it is really only going in one direction. So we know that with climate, we're looking at the state Water Project.

The State Water Project itself has a broader climate adaptation strategy which includes certain things in the delta, things like operable gates, things that help us help our current system work better with these changing patterns. But we do know that over time, the reduction in water supplies if we don't build the delta conveyance project will be about 23%.

We think when, with this project, the way that we're looking at it now, we think that that will restore about 16% of that lost supply.

But as a General matter, just because of the hydrology and the way that surface water behaves and the way that temperatures are headed, as a General matter, we are going to need as a state to continue to invest in local supplies because of that kind of ongoing, ongoing deficit.

So you have straight a little bit for my question.

Yeah.

So I hope you don't mind if I interrupt you.

Yeah, no, go for it.

So how is the project? How would you finance the project? I mean, if you issue bonds to pay for those, how would the bond be repaid? So. And that's going to add additional cost.

Yeah. So the bonds would be those issued by the state water project and they would be the sole obligation of the state water project. So it is that. This is why it's important that our public water agencies take votes on this.

It's important that they have all the information in a couple years because that's where they need to decide if they're in on the $20 billion project that then enables the Department to release those bonds.

So. But you're finding, I mean, you're appealing the, the, the court decision.

Zero, on the validation action.

Yeah, BR's ability to use bonds.

Right. So this is something called validation action. So the Department believes that we, under existing law, that enabled the state water project, we have authority to design and construct this part of the state water project. We are seeking validation of that point of view in the court. And we did get a recent judgment.

I think it was in Superior Court. And it didn't say that the Department did not have that authority. What it did say, we submitted that in 2020. And what it did say is that the submission was too broad. We didn't have a proposed project at that time.

We needed to work through the CEQA process to identify the specific project. And so we didn't want to do that at that time. And what the court came back and said is the validation that you're seeking for this authorization without a more specific project, too broad. So we are.

Not only have we appealed that decision, but we have also resubmitted, I believe it was either earlier this year or late last year. A description of the project probably would have been early this year because we completed our CEQA document.

So we've submitted something new to the courts that we believe is responsive to the concerns the judge raised.

Well, I mean, the judge still may refuse, in which case you're going to have to find another way to finance this.

Sure. Yeah. The judge can. Can do things that. I'm not prescient to know exactly what that is, but we think we're being responsive to the issues raised in that initial decision.

So, I mean, this project has always been billed as a user pay, and there's some concern that that may not be the case entirely as well. So, for example, you mentioned engineering work that's being done. How is that being paid for?

That's all by the state water contractors. So that is that those are the users of the system.

So even though the Delta conveyance project we still rely on the Delta for over 50% of the water. So even if you put in those tunnels, we're still going to get 50% of the water through the levees. Why aren't the levy improvements being focused on for investment rather than tunnels?

Well, we do, we are focusing on levy improvements. We've invested about $1.1 billion in levy improvements over the years recently. You know, this is a little bit afield, but we have not really passed a good flood bond since 2006 in California. So I do think California needs investment broad scale, Senator, in our flood system.

And that would include the Delta. And it's really the, the totality of the Central Valley flood plan does, does need a next generation public investment.

Okay, only a couple more questions.

Yeah.

The Delta Reform Act sets the state policy, the goal of reducing reliance on the Delta to meet California's future water supplies. How is that going? I mean, how is that proceeding?

Yeah. So this project is also required to comply with the Delta Reform Act and the Stewardship Council's Delta plan. And the way that that works is the Department would self certify that, you know, we believe this project has satisfied the Delta plan and then it goes into the council essentially reviews that information.

They hear appeals and we enter into a six-month process to public process for the council to hear the evidence and respond to any folks who may appeal. I'm just assuming this project will be appealed. In that context, we have to demonstrate reduced reliance on the Delta per the Delta Reform Act.

And that's the way, that's Water Supply Policy 1. And so we have been working really for the past eight years to in pre consultation with the Stewardship Council to make sure that we're providing enough detailed information not only from our state water project contractors, but you know, Metropolitan has their own member units.

Santa Clara Valley Water District has its own member units. So down, down to the member agency level, what is their overall mix of water supplies and what is their plan for future water supplies so that we can demonstrate with data that this project complies with that Delta Reform Act policy requirement to reduce reliance on the Delta.

So there is data showing that there's.

Yes, and it will be part of our permit process.

That's something I'm going to be really interested in.

Yeah.

Last question. The Federal Government is not going to be a reliable partner. It's seems we saw actions where the new Administration opened up water to presumably help put out fires in Southern California and Los Angeles. The water was just went into fields and wasted.

And I've seen the Congress vote to bypass the rules that were supposedly protecting the delta in times of drought. So I mean, my question is pretty basic, Right. If we built this thing, it's going to cost a lot of money. Agencies have invested quite a bit of money in it. What's going to keep that from happening again?

I mean, we're going to put in these nice rules and they're going to protect the delta, supposedly, but there's going to be droughts in the future. And you've mentioned that. Yeah.

So what's going to happen when a lot of votes come in and say we're going to just bypass those rules and turn on as much water as we can? I mean, that's going to happen, in my opinion. What's going to protect us from that?

How are we going to get some confidence that that's not going to happen again?

Yeah. So one, we do need to comply with laws, California laws. And while we are waiting to understand what the Federal Government will do to implement this President's Executive Order from late January, we have not seen that yet. California and our operation of the state water project, we will continue to follow state and federal law.

And you know, obviously in places where our state law is more protective of species, more protective of other interests, we have a water right permit that has conditions on it as well that prevents harm to, or injury to other water users. So this project will have to comply with all of that into the future.

We have an Administration right now and a very compliant Congress.

Yeah.

And if the administrator, if the President says, well, geez, let's just turn on those pumps and get it going, what's to stop that from happening?

Well, the state water project has to comply with state law. And actually both the state and federal water projects have to comply with their water right conditions. And water rights are conferred by the Water Resources Control Board. So the state has a lot of authority. We cannot affect necessarily how this Administration implements the federal endangered species law.

But my point is the state water project has to not only comply with that law, but the state companion law. And that's what we're doing. And we have, you know, it's not just a track record of doing that. But I can't break the. Just simply put, I can't break the law.

As the DWR Director, I'm the permit holder and I would not only be taken to court, I'd be penalized personally. So there's a lot of. I can't believe we have to say this in this day and age, but I feel like we do.

You know, the laws matter, and our compliance with those laws matter, and we have a strong legal framework here in the State of California.

And so federal preemption can't overrule what you're describing.

No, it cannot.

Okay, I'd like to believe that.

Yeah.

Thank you. I yield back.

Yeah. You know, since we're talking about the conveyance, I've got a couple questions. I mean, I, you know, on this federal question, you know, the. The eir, I believe, has indicated that there's a pretty significant benefit to the water project associated with this proposal. Let's see.

A water supply benefit of 46,333 acre feet annually on average under the proposed action. So that's $135 million benefit of the Central Valley Water Project. So given that benefit, you know. Well, first of all, let me ask, is it the intent for the project to be an element of the state water project?

Yes.

Okay. Even though it's not being funded by all state water contractors.

Correct. So there are parties north of the delta that don't benefit from the delta conveyance project. So they would not pay into that.

So. So given that $135 million benefit, you know, why isn't the Federal Government proposed to pay for.

Yes. So that is a good question. I personally believe the Central Valley Project needs this project, but they are not participating. And so that benefit, as identified, would not accrue to them unless they paid into the project. But because of the way the projects, kind of. The projects are very much intertwined.

We share a lot of pumping responsibilities, et cetera, through something what's called a coordinated operating agreement. So it's in the natural course of action that when we model this kind of project, we would. We have to demonstrate one, does it harm the Central Valley Project? And what that modeling shows is not only does it.

It not harm them, it actually generates a modest benefit. So we have shown that information to them. They will not realize that benefit unless they. Unless they pay into that. Pay into this project. And right now they're not.

And that was. They've been consistent in their position from the Biden Administration to.

Yes.

To the new one.

Yes.

They just don't want to pay.

They just don't want to pay. And, you know, some of that is due to their. That project being predominantly agriculture. And the business case for agriculture is different than the state water project, which is predominantly urban.

And the way the urban water agencies interact with the agricultural agencies, I think is going to be a big sort of theme, if you will, of our upcoming financial plan to make sure that we've got a project that is one, fundable by the ratepayers and two, again, sort of going back to this notion of, you know, we're not forcing people to over buy into a system.

What we want to do is make sure we understand across all the contractors that would benefit from this, you know, what volume and in what water year types they need the benefit so that we can put together that financial plan before folks make a decision with real dollars to invest in the construction of the project.

Okay. All right. Yeah, yeah, please. Yeah, yeah. I don't want to ask about watersheds, but yeah, yeah.

Thank you. So, yeah, I think I had a little bit of a bigger, higher level question.

So is approval for this project year over year over year, as time continues to go on, is that based on whether the water agencies that benefit from it south of the delta continue to want to invest in it, or is it a state approval or legislative or. Governor, can you just describe to me that part?

Yeah. So this is the state water project. And again, so we believe we have the authority to build this piece of the state water project. So that wouldn't require the Legislature. You know, we're in court validating that authority.

And so, you know, if the state water contractors decided they didn't want to Fund this project, the Department could insist that they do. Do I think that would be very difficult. But generally speaking, they need to approve of the project for it to go forward.

Okay. And so what's happening now is we're in this environmental stage of doing, like you said, the eir, the species reports and that. So, and, and, and so there's not any General Fund money. That's correct. That's going to this or, or potentially threatening the project. Correct. Okay. Yeah.

Because I, in my mind, this project is one of these massive infrastructure projects that's been talked about for years. And I recognize the expertise of Senator McNerney and others who have worked on this for a long time. In my mind, I put it in the category of like high speed rail, which is big and ambitious and contentious.

And I urge us not to get into the problems that we have with high speed rail, which is essentially, I think, over promising and under delivering, so not being able to do it in time, it being enormously more expensive than projected.

And so, you know, I noticed that the LAO analysis points out that your budget, the DWR budget, is down a net 4.3 billion, which is a reduction of 57% from the estimated levels from the 2324 budget.

And I understand that's due to the expiration of one time funds and carryover from previous years, but that still sounds like a lot. And I was, I'd like to ask you about that.

But also just that was one of the reasons I was curious about our current budget problems in the state and whether that affects decision making around the delta project, the tunnel.

So it does not. Because the state water project itself is off budget, we need to get authority from the Legislature to add positions and those sorts of things. But those positions and all of that work is entirely funded by the water users. So that's how that piece works.

I have the same kind of sensitivity about these mega projects and public perception of can we do things. To me, what's really different about this than high speed rail is we have an existing asset that is now in obvious ways starting to really underperform.

And Californians who receive water from the state water project have been investing in that asset for decades. And that's the thing that, you know, really motivates me is that, you know, we are heading into, you know, much deeper droughts and bigger, flashier storm systems.

And when we have a big system and we see just, you know, 200,000 cubic feet per second, real big systems coming through and we're not really able to capture that water, it becomes really difficult to talk to the public that has been paying into this system for a long time. So I'm very anxious about stranding this asset.

The other thing that I would say really keeps me up at night is the specter of, you know, a deep drought like the one that we just had that was, we just had the total buster of all years in 2023 if it.

And we had been tracking many of those atmospheric rivers to again hit the Golden Gate and sort of spin up, drop that rain event and then the whole system drains to the south. It didn't happen. Really slammed that central Sierra. So it. And that's why like Monterey and everybody else got really hit by that.

But if that changes geographic course and we're at the end of a brutal three year drought and we see this kind of rain and we lose a levee in the delta, then we've got saltwater intrusion in the delta, we've got all this rain, like you can feel the relief on the streets, right?

People are tired of the drought and then it starts to rain and rain repeatedly and with enormous precipitation in that moment. For our system to fail is a Real failure of government in my mind. And so that is one of the things. There are a few things that keep me up at night.

That scenario is a very real scenario, and that keeps me up at night.

I think you're right. That is a very real scenario. I'm glad that it keeps you up as the Director so you can get us on a path, have that not be our. And so can you just address. When I envision a Delta tunnel, I envision a tunnel that takes water somewhere. Yeah. And I don't envision groundwater recharge.

So can you just link those two together?

Sure, sure. So what the tunnel essentially does is there's two. Two proposed intakes right around Hood, so just south of here.

And it would intake water that State Water Project water that the State Water Project has a right to, and it would put it underground, and then it would come up out at our existing pumping facilities and go into the California Aqueduct. The connection to groundwater recharge is the connection of the State Water Project to right now.

You know, it goes all the way to Southern California and it goes into the metropolitan service area and Metropolitan works with LA DWP. And that's what helps them take this State Water Project water and put it into their groundwater basins to make sure those basins are clean, make sure they're usable.

In the Central Valley, one of the big groundwater areas is the Kern County Water Bank. We believe that there's lots of groundwater potential throughout the Central Valley. It's actually about 10 times the amount of our surface reservoir capacity is available underground.

And Senator McNerney just mentioned that in San Joaquin county, they have a million acre feet of available groundwater storage. The proximity of our canal systems, to then be able to move that water, it requires infrastructure to get it underground.

But that's the way our ability to move this water and get it sort of past the delta, if you will, into these areas enables us to. To really do some significant groundwater recharge. It's also really important for Santa Clara and Silicon Valley. In fact, pre.

State Water Project Santa Clara has these pretty interesting maps that show the groundwater depletion. And one of the things that they accomplished with the State Water Project was they arrested that. And today they don't have the real challenging conditions we see in the Central Valley. So how all these systems work together would continue into the future.

Okay. I had thought that one of the main barriers around our groundwater replenishment efforts was around ownership and figuring out, you know, who gets the right to that, depending on who puts it in, who gets it out, and that. That essentially is in a State of flux or somehow.

So this. The state water project. The state water project already has a right to it. And so how we state water contractors would enter into arrangements with groundwater sustainability agencies to, in a transaction, use their storage, and they would pay for that storage. Sometimes they can pay through like a water exchange.

So the state water project contractor would put sort of X amount in, and then when it came time to take it out, they would take out less than what they put in. And all of that is through an agreement between the state water project contractor and the groundwater sustainability agency.

So it's a little bit separate from some of these issues, these other issues where you have multiple water rights. Sort. Of in question, if you will, or sort of unused water rights in question, if you will.

And that is work that needs to be done for our overall water rights system is not just flood flows, but how do we think about sort of broad scale groundwater recharge?

But what I hear you saying is that that's actually not a barrier to doing groundwater recharge. It's actually infrastructure.

Infrastructure is certainly a primary barrier. Yes.

Okay. And then when you were using the term we need to quote, invest in local supplies, I think, you know, one of the things that I think we could do so much better is to focus efforts.

When I was in local government, I was on waterboard and wastewater boards, is to focus efforts on making sure that when we treat water after it's used and it's recycled, that it's used because we're putting millions of gallons out into the ocean every day that is essentially nearly potable.

And so creating either all the way to potable or to have recycled water have more uses, both of which seem quite feasible to me. It seems like we should really be focusing on that, especially given what you said about the new demand on supplies from rising temperatures leading to a 23% reduction in water.

I think that's basically what you said over time. So can you just address why we are not focusing a lot in our water policy on getting recycled water to be every drop to be reused as much as possible again and again and again.

And I think there is a recent headline about this that was basically saying that those water agencies that want water from the Delta Tunnel are not reusing water at their capacity in their local. With their local system.

Right. So my colleagues at the Water Resources Control Board did adopt regulations to allow for what's called direct potable reuse, which was, sorry for the pun, a bit of a watershed moment in our regulatory environment that will greatly enhance our ability to achieve these recycled water goals.

And so I think a lot of those water agencies are taking another look at their math and their recycled water projects because this, the ability to now do it with a known set of rules and that predictability enables them to adjust how they design their projects, enables them to, to develop I think even greater beneficiaries for it given the work that the Water Board did.

I'm happy to hear that. I mean water rates are going up for rates. They are all, all throughout the state and particularly in my area in Southern California. And it's project predicted to continue going up and nearly double digit amounts per year, which is really a massive increase.

So I'm happy to hear that you think that there might be a reevaluation of certain projects. Of course, every project takes an enormous amount of money to get off the ground, but. Okay, and then my last question share before I yield back. Thank you so much for the indulgence here. Just getting back to your budget.

So a reduction of 57%. Can you just address that? How are you going to be able to compensate that or handle that reduction?

Yeah, so we, I'm just going to say I'm not familiar with that 57% number. Do you want to take that piece of it?

Yeah. Hi, Andrew Hall with Department of Finance. I think you'll see this fairly regularly for the departments in our area. For as we get towards the end of the climate packages, what the Leo cites is a budget display. And so in the three year window we show all the past year expenditures from the General Fund appropriations.

Anything that still has availability gets carried over into the current year. And so you will show balances that then carry forward. There might still be availability in budget year. And so next year when we get to this time, that money rolls forward again. So it's, it's sort of a point in time.

It doesn't mean that they're going to drop off a cliff. It's basically the one times.

Okay, okay, thank you.

Thank you. And in the last exchange, Director Nemeth, you mentioned a fear of levee failure in these big storm events, especially after a drought. And I mean that points to the need to strengthen those levees. And I've seen in the lower San Joaquin, in the Lathrop area, we've made those levees very durable and sustainable. They're high.

I think they can withstand a lot that needs to be done throughout the delta, especially where we have those weaknesses. And if a failure of the levee would bring in salt water and waste, fresh water, etc.

So that's my comment, is that we need to think a lot more about how we can protect the existing system because even with the tunnels, or, excuse me, even with the tunnel, it's a habit. We're still going to have to do that.

Yeah.

Yes, you can answer or not.

Zero, I agree. And there's sort of two vehicles for that. One is the Delta Stewardship Council has what's called Delta Adapts. I think, you know, water supply is only one element of the vulnerability of the delta around climate change. And so that Delta Adapts document is really important, specific to levies.

There's something called the Delta Levy investment strategy that helps folks prioritize which levies need the most work and when the Department is a part of that or not the whole picture of that, but we expect so. The last time the Department did a significant levy study in the Delta was called Dreams, and that was in 2005.

I can't remember what the acronym stands for, but. But I do think with the ongoing pressures of climate taking another look at that information and adding additional data to that information, we're starting some of that work now because we saw some seepage, I think it was over the summer, last summer around Victoria island that wasn't particularly predicted.

So we know that like it is. I think with our weather whiplash, things are moving faster than we anticipated. So we do need to get on that topic. And I think working off of the Stewardship Council's Delta Adapts kind of framework is a place we need to roll up our sleeves together.

Not just the Department, but lots of other folks there. Yeah.

Thank you very much for your presentation. This is overwhelming information for me. Over the years, I know coming from Southern California, water issue has been raised. As you know, Southern California is lacking water resources, whereas Northern California has abundance of water. And how we're going to convey that water to South.

That is the over 100 years the water aqueduct water channel has been established and then I think that was a very wise thing for the state to water manage not only from Northern California, from also Colorado river, which I had the pleasure of taking the water channel, how it was built and how it's working.

And very simply, water is essential resources for human life and agriculture. And the question is how we have, I think plenty water in Northern California. How are we going to share that by good management. So that's the reason I think water has been supplied from north to south.

And California Delta Reconveyance project has been also initiated to Improve the water supply and new water, more water. But it is so surprising. Out of more water transmission plan from twin tunnels to single tunnels. And even after that has been delayed and delayed. It has been over what, 15 years.

And then as a result we experience the cost of project. As you know, everything goes up. So by delaying we don't gain anything. But I know there's a lot of battle because of environmental protection agencies. Environmentalists always fight. And the challenging. Does it take that 15 years to solve this problem?

And then even now it's so frustrating to hear that you said that even the tunnel location is re reviewed for different locations. Is that what I heard?

We completed that already. Yeah. Just with the route of the actual tunnel. Yeah, that work is done.

So the original plan has been already moved. And then the $20 $1.0 billion figure was based upon the new location or new location? New location. But even then the price has gone up from. What did you say originally it was.

16 billion our previous. But the totality of that increase was inflation.

Yeah. So always I was curious where the project is. How long will it take, you know, in the future? Will it take another 15 years? Yeah, yeah.

To construct it is about. I think it's about a 10 year construction period and then they're sort of onboarding and testing before it really becomes fully operational.

Construction period. I cannot control. Nobody can control it. It does take time to construct such a massive, you know, construction project.

But only thing I and interested in knowing is that do we have the State Administration and also Department of Water Resources have such an understanding and desire for transmitting the water as quickly as possible so that we can get over the hurdle as soon as possible? Legal matters, whatever.

But as I hear Senator McNally's comments a while ago, still more environmentalist challenges are expected. I thought that those stages were all over. Where are we still standing? What more hurdles do we have to get over before actual groundbreaking?

Yeah. So we have CEQA litigation on this project. We are in the process of obtaining a. An adjustment to our water right that allows us to divert at a different location. I think we anticipate litigation litigation with that. And I don't have a good answer for litigation. You know it.

So CEQA didn't challenge legally on this issue 15 years ago.

Zero, certainly it was challenged the previous. The previous projects were also litigated. They never came to fruition, but they were also litigated. So we do anticipate litigation on this project. And I'm not in a position to. For those same topics.

They keep on initiating another legal battle to delay the project and the causing and eventually just to kill it. What is the desire of this state, the government?

Well, my desire and the governor's desire is to see this project completed and constructed as quickly as possible. It costs the project $1.0 million a day.

I know this is. We all lose. And in the meantime, you know, Central Valley, all the agricultural, whatever. Now I heard was that the farmers couldn't do farming and they left in close town. And that's all loss to our state income wise and the production of valuable agricultural products.

And when we talk about delta smers fish, how endangered species, I love nature. But what comes more important, more priority, human life, human economy. This is not affecting any air quality. This is protecting little species. I can guarantee for pumping new water, more water to south that doesn't eliminate that species of fish.

I can guarantee that in my lifetime. So how we can get over that? Is there a defender of that fighter to stop that continuous litigation by ceqa? Is there any suggestion or method?

Well, I mean, I think this body has taken on those issues fairly recently. And so I would sort of defer to this body to, you know, the appetite to do so. I have to follow the law.

I would say though that I think there's real value in articulating more broadly the benefits of this project, which is why I raised that groundwater issue and getting more specific. I think some of our challenge with this project, as I think you all now have a real inherent understanding, is water.

Most of the water in California is managed at the local level. Then we've got this big backbone sort of infrastructure project that has grown the California economy over the last 60 years. And now it's time to make sure that it's going to work for the next 60 years or the next hundred years.

But our communities have grown up around that and they've all made different kinds of investments. And so when I take off my state water project hat you know, so that's one part of the Department and we're also planners. And when I take off my state water project hat I say to myself, does California need this water?

And I say absolutely, 1000% we need the benefits of this project. So how do we articulate those benefits so that they sort of reach more people and more people who will pay into this system to move it?

And I think there's the potential for some, you know, ways in which this project can help solve drinking water problems in the state. You know, we're very. Water is complicated because we're so fractured. And I think the interdependency has never been greater.

And this is a moment to decide whether or not we have the frankly the courage to reinvest in infrastructure that has, we've benefited from for the last 50 plus years that has, you know, developed the eighth largest economy in the world. And we're going to have to reckon with our ability to do that or not.

And you know, we're going to keep working on it.

I recognize that the importance of sharing the resources, water especially resources is important. That's the recent California water project and the Delta conveyance project had begun. But in the course of that execution is hurdles just delaying this long and unreasonably.

And so I think local governments in Southern California especially we will have to come up with our own measures of survival. That's the survival measure and I did serve on the Orange County Sanitation District and that all the sanitation water is being recycled.

That's the world's largest, largest recycling center has been developed and millions of gallons of fresh water is produced and restocked underground water reservoir. So glad to hear that the reliance on the imported water has gone down every year. Right now is the used to be about several years ago 23% but now it's about 16%.

What I'm hearing is that. But in the meantime other areas will continue to feel the desperate need of more water as the temperature goes up and drought years sometimes occur. So I think we need to complete this project as soon as possible for well being of human beings. Thank you.

Your watershed moment comment just made me wonder. I just couldn't help but notice that pretty significant decrease in watershed climate resilience line items from the 2324 budget. Whereas at 151, I think this year you're looking at 35. Can you just give me a sense of that and what DWR is doing to protect and fortify watersheds?

Yeah. So maybe I will start with some of the work that we're doing and then Andrew, I'm going to turn it over to you to talk more specifically about how it's presented in the budget. But as part of climate packages in recent budgets, DWR received about $35 million for watershed assessment assessments on five major tributaries.

And this really looks at. So think Merced, Tuolumne, Calaveras, these kind of big systems. And then we also provided grants to other folks who are real local leaders here in the Sacramento regional area. They've done, they're doing some work on a climate assessment of their watershed.

Sonoma County I believe we also gave A grant in Ventura to do that. But really, two major work streams at the Department. One are these bigger systems really coming out of the Sierra south of here, and then one where we've got some really strong local partners who are anxious to do this work also.

So what that is doing is it's looking at upper watershed conditions, then all the way down to the floodplains and thinking about how that system will change over time with changing climate patterns, more extremes, and then what to do to. It's really connecting the whole hydrologic cycle. So it's connecting flood protection with surface water with groundwater management.

And then two other components in there include how we manage all of that and how that supports the environment in doing that. And then certainly in places where we have real drinking water and water quality challenges, how can you sort of remanage the system to meet more needs?

And so some really interesting things are coming out of that. One is, and Sonoma county is a great sort of test area where they've really been working with the Army Corps of Engineers. And we're going to need it on our big reservoirs that provide flood control, because the core, the Federal Corps, controls that. And.

And the Corps traditionally takes decades. We have manuals to operate those systems that have been around since almost when I was born and I'm now old. So they're not, you know, they're not all that useful. I mean, they're extremely useful in protecting the public.

But when we think about future conditions and we think about how to manage our systems, both for public safety and for water supply management, that's going to be key. And so that's something called forecast informed reservoir operations.

So all the work that the Department has been doing to accelerate our understanding of forecasts, getting it now into actually how we manage our systems in response to that is essential. And so that's happening with these five watershed studies, and it's happening with local partnerships. It's mostly pilot projects.

And then I would say our new California Water Plan has. We really look at things at the watershed scale so that we can push on our local partners to also start thinking about that watershed scale. And then. And traditionally, the Legislature funds a program called Integrated Regional Water Management.

And now what we can do in the context of the California Water Plan and those funding dollars is work with the locals to make sure that the money that they receive from the state is thinking more holistically at the watershed scale with climate that then starts to incorporate surface water management for flood protection, for groundwater recharge and.

And use. And that's Those are the General work streams that we've been putting together, and they are starting to show real results. And if I could, Senator, the forecasting. Forecasting work is crucial. So in 2023, we had 16 atmospheric rivers hit California. And our partner in that effort is the Scripps Institute, the Center for Western Water Extremes.

And this amazing data point they gave us, because during those storms, you know, they were flying out over the Pacific Ocean, C130s, dropping these sensors into these storms to help us understand the magnitude and the geographic location.

And what they told me, which really stuck in my mind, is because we were ready for that series of 16 storms, we accelerated our understanding by about a decade. And so, because when you have more data and you get them into the model, things get, you know, things get more reliable as it goes.

So the first atmospheric river, we had a sort of an air band that was, you know, this big. By the 16th atmospheric river, we knew exactly where it was heading and we were totally on point with the rainfall. And that happened to be San Diego getting about 2 to 3 inches of rain from an atmospheric river event.

When we have that information, that's what enables us to really look practically and operationalize these studies that we're doing, which how do we reinvest in our system at a watershed scale so that we're ready when these storms come in to protect public safety, to make sure we're capturing that water and moving it to where it needs to go and getting it underground to help with our groundwater management issues.

Choose.

Yeah. All right. Well, I. Yeah, wonderful answer. Comprehensive. I hope that. Yeah. This budget. Yeah. You know, cut. Won't you dramatically impact all this comprehensive work you've just described?

Yeah, we're working on that.

So. Okay. All right, well, thank you. Thank you very much. Let's go on to issue number 22. This is actually something involving your Department, but I'm Delphine, who I think is going to be speaking on behalf of the Department from Statewide Energy. So if you want to come up, Delphine. And do you have any.

You have a brief presentation. Okay. Then we'll get into some questions. Thank you.

There we go. Thank you very much. Chair, Good morning, Chair and Senators, my name is Delphine Hou.

I'm the Deputy Director for Statewide Energy at the Department of Water Resources and I have a brief presentation on the trailer Bill Language we're proposing which will, if successful, will add two words and one comma to water code 80710 with regard to the electricity supply Strategic Reliability Reserve Program to provide some background here.

So as Director Nemeth mentioned, AB205 was enacted in 2022, and DWR very quickly executed several agreements in particular for three new generators which DWR constructed and owns. So all three assets are ultra Low emissions natural gas generators.

A similar model from the same company that we're working with has a emission reduction technology that achieved CARB's distributed generation program certification. What that certification does is that it certifies that the GHG emissions from this electric generator is actually Low enough to be exempt from Air District permit requirements.

So we're very proud that in that very short time span we were able to engage with this technology.

So even though DWR constructed and owns these resources, the most critical part that we needed to be successful in installing these resources and having them available to the grid are really valuable aspects like grid interconnection and having a site that could host these resources.

As such, we signed agreements with Modesto Irrigation District, Turlock Irrigation District and the City of Lodi for a five year agreement with them to have these resources starting in 2022 through 2027 and to site the resources on their land.

And so that in this partnership we're able to have the resources ready and available to respond to any sort of grid emergencies.

So while the sale of these assets are still subject to continued discussions with our counterparties, generally DWR expects these discussions will take place sometime in 2627, and then that any potential sale will occur in 2028 at the earliest.

So all of our counterparties at these sites, they've expressed an interest in having an option to purchase these assets and that would help them bolster their own electric reliability, including but not limited to addressing extreme events.

So the modification that's proposed in water code 80710C is, is to allow DWR to add and owned into the code so that if we were to sell these assets, that the restrictions that the reliability Reserve has today, which is to only operate these generations units during extreme events, doesn't carry over if DWR no longer actually owns the units.

So right now it just says per constructed DWR, but it doesn't also specify that it would be under DWR ownership. So by having this proposed language change, we believe that this would help DWR recuperate up to $40.5 million in aggregate across all three contracts.

If we were to successfully sell the assets, but without the language modifications, these facilities obviously have continuing value, but the state would forfeit that value, resulting in having to go back to our counterparties to decommission the units, remove it from their site, and to spend more money, probably up to $20 million across the three sites and potential continued ownership costs with storing the assets or finding new locations for these assets.

So how much did we buy them for?

So across the three year contract, I do want to specify. I don't have the breakdown in front of me, but I do want to specify for three resources, and across all three contracts, it's about $330 million budgeted is the committed amount. But that doesn't.

That's not only the actual resources, but it includes payment for the site lease, for construction, for operations and maintenance. So it's a total costing of building the resources, siting them, and continuing to maintain and operate them.

And that was just a couple years ago, right?

Correct.

And now you're looking to. So we spent 330 million. We've only used them modestly. Right. And then we're looking to get 40.5. So we're losing $300 million off of this. Is that the proposal?

What's also embedded in the cost of the resources is, is the ability to have those generators on as quickly as we had them on. So for example, the interconnection value, the interconnection ability was extremely valuable at the time to have resources on as soon as possible.

So we're looking at the sale of the resources, the depreciated value of the resources, but also the ability to have them maintained and continue to operate for these entities within the state.

Okay. But the way it was sold to us originally was we were. This was a. This was sort of a fail safe, I guess. They were being built by this company anyway. Right. What's it called again? The developer. The developer.

The developers. Enchanted Rock.

Enchanted Rock. Right. Okay. And we were just going to. We were going to buy them almost as like an insurance policy that we would fire them up only when there was a serious threat of brownouts. I guess maybe I'm missing. Was this always the plan?

Is the idea here that we did this big outlay of funding so as to just make sure we have this additional infrastructure online that could then be Used as an insurance in the future. But I guess was that the plan there was a sale in the future.

Let me answer that in two aspects. First of all, per the legislation, this is a temporary emergency program. And the legislation itself does contemplate sale of assets at the closure of the program.

So that's why currently our agreement during the five year agreement up through 2027 and a potential sale as early as, but could be later in 2028. So about the time when this program would begin to sunset.

But, but did they anticipate? I mean if the plan would be to sell it for 330, then okay, but it's such a loss. I mean, am I missing something here?

So to my second aspect. Typically for generators, regardless of the cost, but newer generators that are placed into the system, what would offset those costs are the revenues from providing that energy into the energy market.

And so for newer units like this, we would have expected them to be running fairly frequently. But the intent of the Reserve was a, to have emergency resources on backup.

Right.

So not to actually participate in the market from the day to day, but also as generating gas fire generating resources even though they are ultra Low emissions, it actually does limit the overall emissions profile and impact in having them held back until there is an actual extreme event.

So unfortunately because of that there are no market revenues that would offset the original investment cost.

But I understand your point chairallan, because I think in the maybe pure private sector investment model it would be you would spend X amount of money on the actual capital investment, but you want to recuperate as much of that from, for example, resource adequacy contracts, market revenues from the caiso, for example.

But unfortunately we are just not a program that is able to participate in the market in that way.

Should we be looking into that as a possibility instead of this? I mean.

So again, I go back to our legislation. We are prohibited from having these resources participate actively. They're only to participate during an extreme event. So that does limit their participation. And there was a, there was an opener and a revision to the legislation that would allow battery resources to participate more actively day to day.

But that is not so for the thermal resources.

So what? So when you're talking to these three, you know, the folks in Modesta, Turlock and Lodi, what's their intended use for the generators? I mean, if they purchase from the state, do they want to, is it about addressing peak demand or do they want to have it be more of a baseline resource?

I can't speak for them, but it would be part of their portfolio. But what we're seeking through the trailer Bill Language is to provide an opener so that they are not similarly restricted because.

Exactly, as you've noted, if the resource is purchased but it is not allowed to participate more broadly in the market, then yeah, it's a very large sunk cost. Without a revenue stream to balance that, why can't we.

So if we're. So we spent 330 with all these restrictions and without the ability to generate revenue, we're lowering the restrictions here and they are allowed to generate revenue. So why is. Why, I mean, why the delta between those two numbers? Why can't we get more for this purchase?

Understood.

And again, I'm not fully aware of all that's baked into the 330. So that may be where the answer is agree.

Such a delta here I agree with you.

Different kind of delta. Don't worry.

I do want to explain that a little bit because again, the 330 cost is not simply for the physical assets. It's for the use of their interconnection, which they own. And if not for us, they could have cited some other resource using that interconnection.

And that has been over the last couple years, an extremely valuable asset to have because without that interconnection, without the ability to connect and actually push the energy out, then it's pretty useless.

So it's not a coincidence that two of the three counterparties that we worked with is not in the California ISO footprint because they tend to have, you know, less of a queue on their interconnection side. So that was really critically important. Plus other facilities that were able to interconnect the facility.

So it was, for DWR, it was a very, very high bar and a challenge to even find appropriate sites and willing counterparties to even be able to site these generators. So we were pressed in a couple of different ways.

We had maybe, you know, access to technology, but very limited sites, very limited counterparties willing to work with us and having that capability and availability. So I want to stress, again, the 330 million, it's not purely the cost of the asset, it's for all of the other things embedded in that.

And that committed amount also is a site fee payment for usage of the site as well as those are all.

I mean, those can't be massive amounts, right? Or are they?

I don't have the breakdown in front of me, but I, I think you're right. They're not the major. Thank you. We'll provide that.

I'm just Getting my head around this, it just doesn't make sense to me. But I. But, you know, I'd love. Maybe we can sit down and have more of a. Of a. Love to get the breakdown. Yeah. And what's the plan for what you're going to do with the money that you get for the sale?

Per legislation, the sale of these assets, any of these asset revenue would go back into the Fund. Into the. The electricity supply Fund.

Yeah. It just. It seems like, you know, first of all, I don't understand why DWR is even in this space and you're so limited in your ability to do work in the space, which then makes it. Your hands are tied when you're asked to work on things that you have within your asset portfolio that were very expensive.

So now we're having to take a loss. How was it that this even ended up in DWR in the first place? These facilities versus somewhere else in the energy management system?

Unfortunately, I'm not able to opine on that. But per AB205, that was one of the aspects and authorizations that was provided to DWR and specifically my office to carry out that mandate.

But you don't know the logic behind putting it there?

No, I'm not aware. I wasn't available. Enlist.

All right. One other question. I'll yield to my colleague. There's a. You guys are required to submit regular reports, I think three times a year, May 1, August 1, December 1, about the electricity supply Reliability Reserve Fund. And there's a report due on December 1st that hasn't come in yet.

So I'm just trying to get a sense of what the timeline is on that.

Absolutely. We are diligently working on it. Apologize for the delay and we should be. We're looking forward to having the report out in a few weeks. We just did have our last report come out, and so we're hoping that the December report will come out shortly and we'll provide that as soon as that's available.

Do you have any sense in the timeline we.

We hoping for the next couple of weeks?

Okay. All right. Any questions?

Senator McNerney, I do have one question. So if the. If the sale is going to, you know, the perceived sale is going to bring in so much less than the cost, why not just keep that resource in state hands and that way it'll be available for emergencies in the future?

That's a fair point. Our concern is that a GWR's authorization is temporary. It's meant to be. Specifically, it's addressed as a temporary emergency. Based program. So there is a sunset to it.

If we wanted to quote, unquote, keep the resource, we would still need the agreement of our counterparties and they have expressed an interest in purchasing the assets. So if, for example, let's say hypothetically, DWR would want to keep the resources, the counterparty disagrees. We could be asked to be removed from the site.

So we would then have to spend more money to decommission the units off their site. We don't have a storage facility for any of the units, so we would have to find that or try to negotiate another site that we could move to quickly. And that would again create more work.

But also it would also engender more costs to support that.

Thank you. You mentioned. I couldn't. My ears perked up. You mentioned Lodi and you looked at me notice in my district. How does that facility differ from the other two you mentioned? Modesto and a third.

Yes. And Interlock Irrigation District. They're actually all very, very similar. So they're very similar from the same developer. So similar assets, similar setup. And the megawatts are almost exactly the same.

And there's a water nexus on all three of these.

Well, interestingly enough, one of the reasons why we thought this technology could be fairly successful is not only are they ultra Low emissions, it doesn't use any water. So we didn't need a water hookup for any of the sites.

That's interesting. Water nexus is that there's no water, correct?

I guess, yeah. It's a conservation. I mean, look, I appreciate the fact that it seems a much cleaner burning facility. So maybe we were going overboard with this whole idea that it could. Could only act under extreme circumstances. But nevertheless, I do appreciate your providing us with the breakdown because again, this.

I certainly don't want to have situations where the state is, during times of plenty, overpaying for things and then turning around a couple years later and selling at a loss. I don't know if the LAO has any thoughts on this. Am I misreading the situation here?

Sonja Petek from the Legislative Analyst Office. No, I think this is one of those issues that is sort of a lesson learned potentially for. Yeah. How we make decisions in future emergencies.

I think one of the issues, and please correct me if I'm wrong, the fact that the generators are on land that's not owned by the state and is loaned by these three by Turlock, Modesto and Lodi, it also means it's you. You can't put it out to sale on the market.

It's like you have one buyer, so you pro. Does that affect. Well, perhaps you'd like to ask the Department if that affects the state's negotiating position in terms of the sale of. The assets through the chair. Absolutely.

So I want to rewind again, that probably one of the most valuable aspects is having the interconnection and the available equipment. So we couldn't say, for example, have purchased these assets and just put it in a, you know, DWR yard or, you know, a work yard.

It would still need to have all of the interconnection transmission equipment to get the energy to the grid. And that's what we. We don't have. So it's not simply. Simply the land, it's literally the interconnection.

And again, in the last couple of years, the Caiso Q has been very backed up because of generators seeking the interconnection where there is either limited or lack of facility that has to be built by the utility, for example.

So again, I think we've got strong partnerships with a lot of the municipal utilities because they have their own process, they can fast track it if their board approves, etc.

So it was for us, because it was an emergency program, we looked at various options, and for these ones that we specifically owned and constructed, we thought that was the most successful pathway because it was more or less plug and play at those sites.

Otherwise we'd be looking at multiple years of waiting, multiple years of trying to get large infrastructure like transformers and grid connection. And so I think it's all possible, but it would have further delayed the success of this program.

So basically, the emergency requirement has diminished that you'll be able to sell these. You don't have the emergency need any longer. Battery storage or something has taken over that. I mean, I doubt it.

Well, I would defer to my energy agency colleagues on that, between the California Energy Commission, Public Utilities Commission, and then the California Independent System Operator as an energy entity, for them to make the determination. We've worked with them before where they have done an assessment of the energy sector.

Again, DWR, we're in the water lane, but we rely on them and their assessment. And they do an annual assessment, especially of the summer, for them to articulate what the potential needs are. But what we've seen is that for traditional planning, yes, the batteries have been great. They've definitely been coming in.

But where the state is still vulnerable are for those really large overlapping contingencies where you suddenly are looking at a wildfire that took out a transmission line in the middle of a drought. And so we continue to see those instances. Even last summer is very touch and go.

Even the state water project was impacted by fires near our facilities and required us to evacuate facilities for our personnel. So that continues to happen in the state. So that's what the Reserve is for, is for those large scale energy emergencies.

All right. Well, I look forward to getting more information. I'd love to get a briefing on the logic behind the inclusion of this purchase within a.

DB 205 into DWR. It helped me understand the vision for DWR, quite frankly, which has a somewhat sprawling jurisdiction. And you know, many people who don't pay close attention to this Sub-commitee might think that DWR does the similar work to, you know, that the DWR does similar work to the Water Board.

And that's who the next issue is that we're going to hear from. So thank you, thank you for some further conversation. And let's bring up Joaquin Esquivel, who's here to present another one of the state's great water agencies, our State Water Resources Control Board.

Thank you, Chair Allen, Members of the Committee, it's an honor to be joining you here this morning. I am Joaquin Esquivel, Chair of the State Water Resources Control Board. Quickly, The State Water Resources Control Board is actually a five Member board.

We were created over 50 years ago by the Porter Cologne Water Quality act signed by then Governor Reagan. The board is a five Member board. We, along with our nine regional water quality control boards, oversee water quality regulation within the State of California. Each of those nine regional boards are semi-autonomous.

They have their own chairs, their own Executive officers. But we all, and the State Board, we set statewide policies and any disagreements or petitions that come up from the regional boards we manage. Porter Cologne was an innovation at the time. It was actually the model for the Clean Water Act federally.

But here in California, it united what were pollution control boards that were created in the 1940s through the Dickey act and a water rights office that was created in 1914. The major innovation being the ability to regulate water resources, both quantity and quality in the same institution, knowing that those two things are intricately intertwined.

when we look at our state. At the time of the passage of Porter cologne, we were 15 million Californians then. And the real concern was, given the degradation of so many of the watersheds, the water quality within the state, that it was limiting our ability to grow ultimately.

And when you think about the 50 year history of Porter Cologne and importantly water quality regulation and Water Rights Administration, it's easy to take for granted the successes that the agency and our institutions have been able to see when it comes to the improvement of water quality and the protection of it as a fundamental basis for our economic growth and our well being.

About 10 years ago, the Division of Water, Division of Drinking Water rather, was transferred over from the Department of Public Health to the State Water Resources Control Board. There we now oversee the 2,800 or so community water systems within the State of California.

That's Water systems that serve 15 permanent connections or above, There's a greater number of systems known as state smalls that are smaller than that. Those are managed at the local level.

In addition, we also set that maximum contaminant levels and protect and here really change the nature even of the state board being within people's homes, being wearing a stronger public health hat when it comes to ensuring that our drinking water supplies and the quality of our drinking water within the state are intertwined and understood as we protect at the watershed scale water quality.

And then ultimately the human right to water was passed actually in 2012 here within the state. Actually, the transfer of the division of drinking water to the state board was in part the Legislature's attempt to make real the promise of the human right to water.

And over these last years, we've had been very fortunate to have additional authorities around consolidation and a focus on ensuring that all Californians have access to clean water.

When Governor Newsom came into office, he made a priority finding us a source of funding to address the challenge of lack of access to clean water in many communities within the state.

And proud that over the last five years we've been able to take the yearly $130 million allocation, leverage it with federal dollars and other resources to be able to bring down the number of Californians without access to clean water from 1.6 million Californians in 2019 to about 700,800,000 today. It is an effort that is not over.

We continue to need to make sure we, and it is one of the top priorities at the State Board that all Californians have access to clean water. And importantly, the human right to water also has a sanitation component to it.

And so we're in the midst right now of doing a wastewater needs assessment, understanding the sanitation needs within the state and trying to do our best comprehensively across all of that to continue to maximize the beneficial use of water within the state and address what we know, as Director Namath mentioned, are climate change pressures on our water systems and shifts in our natural precipitation there.

It really calls to mind how critical the water rights system is in order to wet us, if you will, to what Mother Nature is naturally providing and have a way to, during times of drought, be able to manage the resource when there's times of scarcity.

But importantly, as we saw in 2023, in these last years, when there's water in the system, we need the water rights system to work as well, to be able to make decisions as to the ability to apply for permits for groundwater recharge or just make sure that we have the faith and trust ultimately of water right holders, but all Californians, that we're doing our best to again, maximize the beneficial use of water, as the mission of the board says, and ultimately protect these resources into the coming decades and generations.

So again, I'm proud of the work that the board does in protecting water quality, ensuring access to safe, clean drinking water, and administering water rights. Just want to note that actually our largest division by staffing is our division of financial assistance.

And there proudly within the last three years alone, we've been able to invest over $5 billion in the state's water infrastructure. That's drinking water, that's wastewater, importantly, that's water recycling as well, stormwater capture.

And those financial resources that the board has are really critical to keeping water affordable for many communities as well, where we loan at about a half the bond going bond rate and are a source of significant grants as well.

Okay, okay. Can I just ask you one quick question about something that just happened? You got hacked. I think the Water Conveyance Board. Sorry, the Delta Conveyance Project hearing, it was a pretty serious hack, totally unrelated to water policy, but certainly I appreciate.

You bringing that up. It was a very serious event. Our administrative hearings office was created just a few years ago by the Legislature, providing the board a resource to be able to work through water rights issues and proceedings.

Additionally, there's a statutory workload that they have usually around civil liabilities and other ongoing work in the water rights side. And then additionally, the state board can refer projects to the administrative hearings office. The Delta Conveyance project is one of those water rights proceedings that has been.

That had been referred to the AHO and regrettably last week there was an incident where there was an organized zoom bombing by a number of individuals with the explicit intent to disrupt the discussion. They did so with pornographic images and racist language.

And it was terrible for those individuals that had to be on the platform to experience that.

And it doesn't live up to the standard ultimately of the space that I have been very proud to make sure to create at the State Water Resources Control Board, where we deal with very difficult decisions, very emotionally charged decisions, and the ability to have a discussion, emotional and otherwise, that isn't disrupted is really important.

So we quickly did an assessment. I know there was concern that there was perhaps a compromised account or some sort of hacking, if you will, that went on.

What it turned out to be was just a bit of the permissiveness that the administrative hearings office had been conducting their hearings, allowing folks to unmute or share their camera without permission.

That's something that I know in our proceedings at the State Board, when we all went to our zoom platform, as we saw Zoom bombings happen, we quickly were one of the first agencies to be out there, had locked things down.

But because the Administrative Hearings office has conducted hearings and kind of had some of their own process, if you will, and was permissive here and without incident for the number of hearings, unfortunately, it was an oversight.

And so what we have now done and ensured is, you know, staff are retrained, the security protocols that are part of the State Board's proceedings are applied to the Administrative Hearings Office now.

And we did work with CDT and others to ensure that we understood the nature and scope of what happened, but importantly, how to ensure it doesn't happen again. And actually, just this morning, the hearing started back up with these protections in place.

You know, it's always, as you well know, this balance between allowing for ease of access and public participation in our decision making and preventing folks from being disruptive. And unfortunately, the ability for folks to unmute or share their camera is not a level of trust that we can have in our proceedings.

And so, again, it was an incredibly regrettable circumstance. We certainly own our part in allowing that permissiveness onto the platform and at this point, lockdown. And importantly, we're going to be doing yearly reviews of all of our security measures in place for our proceedings now.

Right, right, right. Okay. Are you getting law enforcement involved?

They, they have been notified. So there's a central system where these incidences are not. Are notified into. They have been involved in so far as understanding the situation, but because it was a, a disruption and wasn't a compromise of the system itself, I think at this point it's been determined that they would not be pursuing anything.

Gotcha. Okay. All right. Well, obviously we really important that you do this due diligence. And nobody thinks that it was the board's doing, obviously.

No, but I take, you know, incredible ownership, especially as, you know, each of the five board Members, we have a certain seat, if you will. You know, there's, engineers.

I hold the public seat and often contemplate what is my role here in the public seat and ensuring the public trust and importantly ensuring safe public access to our discussions. Openness and transparency are a key part of my, my tenure here as chair. So I take very personally the, the event and, and hear the need to.

Making sure we continue to keep the public trust. So I appreciate that.

Thank you. Yes, I appreciate hearing about that because, you know, we have town halls and I do a book club and we announce that. That if there are disruptions that people may be muted and removed.

And the idea, of course, is that that staff should be able to act quickly so that if things do go off the rails, you're not sitting there back on your heels.

Yeah. And what happened was folks were being removed, but they were using scripts in order to come in and out and ultimately kind of overwhelm, ultimately the response from staff and folks. So the meeting was simply shut down.

Zero, wow.

That is really coordinated attack. Yes. And that was an actual official meeting.

Yeah.

Yes, yes. This was a water rights hearing for the Delta Conveyance project before the administrative hearings office. And given the high profile nature of it, again, you know, folks took advantage of an opportunity to disrupt.

Right. Okay. I wanted to ask if there, you know, one of the biggest environmental catastrophes is the Tijuana River Valley, you know, ongoing sewage spill that is affecting our southern border. And I represent San Diego and parts of Orange County and, you know, we really need, of course, state, federal, international involvement here.

And I'm just wondering if you have any updates, thoughts you could share about what's happening.

Yeah, I know with a lot of work with the Biden and Harris Administration, there's been significant funding commitments that have started to be made to upgrade the International Boundary Water Commission wastewater treatment plant that is meant to capture those flows coming from Tijuana, clean them up before them entering the California side.

I know this has been a generational issue. This was a big challenge in the 80s. A lot of investment came in. The treatment plant was created. Folks thought that the issue was solved.

But as we've seen these last years, because of a dilapidation of the infrastructure on the Mexican side, dilapidation of the infrastructure on the International Boundary Water Commission treatment plant. We've been unable to ensure that these flows weren't coming over. The Regional Water Quality Control Board in San Diego actually sued the International Boundaries Water Commission.

That ended up settling a bit. And ultimately now there is a significant amount of investment that's being made. The recent bond has additional dollars as well for border water quality issues and is one of the top concerns for sure for the State Water Resources Control Board, Cal EPA, the governor's office, and importantly the regional board.

So the update is that there are funds and plans here to be able to ameliorate and solve this issue. And I think the important thing is that we really do our best to solve this into the future here. Again, this isn't the first time that we've had transboundary water quality issues in the Tijuana River Valley.

And, you know, folks thought that it was addressed, and here we are again. I think it's going to be important that we, you know, whatever fixes go into place now are ones that are lasting into the future as well.

Yeah, I mean, this is one of the rare positive bright spots that I've heard from the Trump Administration is that they are potentially leveraging Mexico to do more. I mean, it is coming from the Mexican side of the border. So it.

I mean, I fully support those efforts and think that we need to continue to see this as the crisis that it is.

And also the other thing that just strikes me repeatedly over the years as we've been dealing with this is that we know how to treat wastewater in this country and in this state, and we do it all over. So the fact that this has just been this ongoing public health disaster is just seems unconscionable to me.

So, you know, and I don't know how we elevate it for faster response that we just get on top of this problem, that we. We invest what's needed, which is a discrete amount. I mean, it's not, you know, an ongoing. I mean, it is a discrete amount and to make the changes that are needed.

So, you know, I urge attention to that as you're continuing to keep on top of it.

Thank you, Senator.

Yeah. Okay. Did. Senator McNerney.

I do thank you for the presentation. We've talked about groundwater recharge, and this kind of melds with issue 24. But it's mentioned that my district has significant groundwater storage potential. And you mentioned permitting. How onerous is it to get a permit for groundwater recharge? What's involved in that? Do you have to build infrastructure?

What about if your water that you're charging with has PFAs, or what if you're putting into a PFAS aquifer? I mean, how do all these things work out?

Yeah, it is. The water rights system is one that, you know, it takes a bit to work with, and that's why the State Water Resources Control Board actually created temporary groundwater recharge permits so that you didn't have to go through a full water rights program process in order to be able to receive permits in order to do groundwater recharge.

We're still doing a lot of learning as we try to make sure that those permits are. Are implementable and that folks are. Are able to take advantage of them. In 2003, in fact, the state board was able to authorize 1.3 million acre feet of recharge.

That was about 700, 600, 800,000 acre feet or so of, you know, direct water permits. And then about 700,000 acre feet of that was a change in the permit for the Central Valley project to pick up more flood water and provide it to their, their, their contractors.

And so the, each year we keep getting better at making sure that we're being timely in our processing of those groundwater recharge permits. The challenge is they often come in here later in the water year once things start to get wet and people are wanting to then take advantage of the opportunity.

And it does take time, a couple of months to be able to process those permits. So the earlier in the water year that we can get people thinking about, you know, the, the winter and their recharge opportunities, the easier it is for us to be able to work through the process of providing these temporary permits.

To your point on water quality, that is definitely a concern of the board. Where, you know, the, the how and where you recharge has real consequences ultimately on the quality of water that then you're recharging nitrates is a real issue, as we know in the San Joaquin and in many communities throughout the state.

So ensuring that these groundwater recharge projects aren't harming water quality are important.

That's where our regional water quality control boards come in and their expertise and their part of the permitting process to understand if the lands are dairy lands or, you know, importantly, ensuring that certain restrictions are placed like, you know, no application of pesticides or fertilizers within a certain amount of time before you recharge.

And when it comes to PFAs, that is a huge issue and concern certainly before the board and the state in general.

You know, we have groundwater basins that, and right now we're characterizing, doing our best to characterize where there is PFAS contamination, but there is concern about putting water down in the ground and then having to pull it up and treat it before even being able to use it again.

So that, that is something that we'd certainly have our eye on.

So is most recharge done just by putting water on foul land or is there actual pumping involved?

Sometimes both. You know, there are, there are dedicated groundwater recharge basins throughout many communities in the San Joaquin and within the state, I think of urbanized, even Southern California as well, where there's a lot of stormwater capture facilities that are Basins meant, you know, particularly for groundwater recharge.

And now with, you know, the recent Executive orders from the Governor and importantly legislation, legislation from the Legislature as well, there is the ability to pull flood flows off of a river if it's in flood stage in order to allow for recharge.

A lot of that is happening on ag land, existing land, and encouraging landowners to be able to take water, recharge it when it's there. So there's, there's, there's essentially two paths with groundwater recharge. You can go the water rights path where you have a direct right to the water that you're recharging thereafter. So those drops are yours.

You can pull them back out with these flood Executive order and legislation it accrues to the basin. Generally, it doesn't provide you an ownership right, if you will, when you conduct those activities. So they're important, two important tools, and we're using them to do our best to maximize these opportunities to recharge.

Thank you. I want to just ask a little about the drinking water revolving fund. You know. Well I guess if you just maybe give us a little bit of, of background as to how the revolving part of the fund's working, how the fund's working in general.

You know, do we have a sufficient amount of loans getting repaid back to make sure that there's enough fund to cover the new projects? So, yeah, yeah.

The state revolving funds are a workhorse, if you will, when it comes to financial assistance from the State Water Board. They were actually created in the 90s.

Important to remember when the Clean Water Act and the Safe Drinking Water Act were passed back in the 70s, they came with a lot of direct federal investment, tons of grants, a lot of money.

And then most recently with the infrastructure.

Exactly, yeah. And the bipartisan infrastructure law here recently was the first time actually that we saw kind of an uptick in the federal spending.

And, you know, what had happened was, you know, all those grants and all that funding from the 70s went away really during the 80s, and it was in the 90s then that this alternative kind of, you know, financial support was envisioned

the state revolving funds.So they're both for the drinking water side and the clean water side and since then have become really critical tools. They provide billions of dollars in Low interest loans and also grants and grant forgiveness.

And again with the recent bipartisan infrastructure law, and through successive bonds and investment, even from the state Legislature, we continue to use it as a central program to continue to get dollars out the door, and leverage again, the federal dollars coming to us. So bipartisan infrastructure law recently really gave us an uptick.

It's why we've been able to have, you know, a few years ago we had our largest year ever putting out $3 billion in grants from the SRFs. And when it comes to repayment, it's going well. I mean the program is working very well as intended.

We're able to go to the bond market and leverage the program to get more dollars in when as we have need and importantly we have a pool as we do that as we interact with the bond market of the projects that we at the local level, we have great confidence, we all have very high credit ratings and ultimately are able to take advantage of again the bond market because of the health of the State Revolving Fund.

So the fund is doing well. We haven't had an issue with repayments from communities and from existing projects and it allows us to continue leverage.

Obviously they're welcome, but we don't.

Well, we do actually there is concern. What we receive each year is a capitalization grant for the state revolving funds. Those have been somewhat rated for earmarks recently in D.C.

And so and with the bipartisan infrastructure law only being a five year investment and those starting to go away over the next years, we are concerned about capacity and at what level we can lend comfortably.

And if we don't see, if we continue to see these earmarks taken out of that yearly capitalization grant, it's really going to hurt in the long term and even in the shorter term at times here our ability to lend out at the levels that we have been and there's a lot of expectation and pressure for us to continue to get as much money out we can.

But we have to think of the fiscal health for the long term for the project program rather.

All right, all right, we'll be watching that space because, you know, I think no one's feeling particularly optimistic about the current.

Yeah. And that's something we continue to watch at this point. We're, you know, we're still receiving our dollars from the bipartisan infrastructure law and our capitalization grants. They haven't been held up yet and just are definitely concerned about any reduction in the funding there. Given the incredible need that we know that exists.

We have somewhere three or four times the number of applications versus the actual amount that we are able to provide.

Well, we have a real live former Member of Congress here who knows all about this process. All right, well, thank you. Let's have you move on to the. Next piece that Sounds great.

I'll welcome up our head of our Sustainable Groundwater Management Office, Natalie Stork, to just join.

But Jonathan Bishop, too is.

Jonathan Bishop is our Chief Deputy. He's not joining us today, but Natalie's here with us on this item. As we know, the Sustainable Groundwater Management act is a really critical piece of law here that's helping us to manage our groundwater resources. The state board acts as the state backstop.

So whenever a basin is not meeting the terms, if you will, or the goals of the law, both in the development of their groundwater sustainability plans, which is the kind of phase that we're in now or even ultimately later down the line, if a basin is failing, they come to the board.

We act as a backstop, very process heavy. So we have a lot of notice requirements and ultimately what the board determines is whether to bring a basin into probation.

We currently have seven basins that have been referred to the state board, six in a first tranche, one recently from Department of Water Resources, where they have found inadequate their groundwater sustainability plans. Two of those basins, Chowchilla and Cahuilla, are exiting, if you will, the board's oversight without going to a probationary hearing.

They were able to work on the groundwater sustainability plans, bring them to a level where folks are feeling comfortable that they can be put back into DWR oversight. And then we have one basin, two basins that we've voted to bring into probation, the Tulare Basin and the Tule Basin.

And we have one other Delta, Mendota, that is still pending out there. And so currently, what's happened because of a recent, well, a court case for the Tulare Basin, we are not able to collect fees from that basin. It was the first basin we brought into probation.

The law states the board has to recoup the cost of its program from those coming to probation.

So other basins that are not in, that are complying, that are meeting the goals and standards of the law, are not burdened by then, the activities that the board has to undertake for those that are in this moment of being before the board and the state backstop.

So the BCP request here is to be able to borrow from our underground storage tank fund here in order to be able to maintain our staffing while the court case resolves itself at the Tulare and we potentially start to collect fees for the Thule Basin, which was also brought into probation.

So this is a request to just fill the gap and allow us to continue to do the work that we are absent being able to collect the fees.

Okay, so important legislation. We've been reading quite a bit about it. Can you give us a sense of how many groundwater basins have been actually referred to the state board for state interventions?

Seven.

Yeah, seven have been. Their groundwater sustainability plans have been determined inadequate.

Seven?

Why? Why does that typically happen? What are some of the reasons why?

Yeah, there's, there's. So the state backstop kicks in whenever, you know, one of the basins either doesn't have the groundwater sustainability agency to manage, or in this case, their groundwater sustainability plans were found inadequate by the Department of Water Resources. In some future moment, it may very well be that a basin is referred to us because they're.

They're continuing to over pump or they're not. It's obvious they won't be able to meet their 2040 goals. So the reasons why they can come to the board kind of really depend on where we are in the process. And in this moment, it is around the inadequacy of those groundwater sustainability plans.

So that's really then the focus ultimately of how basins are able to exit probation or if there aren't, or even just board purview is, you know, coming up with an adequate groundwater sustainability plan so that we can get them back and focused on implementation and back into oversight at the Department of Water Resources.

I've said to folks, you know, that certainly the purview of the board and the work of the board is very broad. We have a lot of things going.

We're not looking to collect groundwater basins on top of it, but we are here to fulfill our role within the law and help folks continue to manage what is such a critical resource, as we well know.

So, okay, so the punishment is probation, right? So. Right.

Yeah. I mean, corrective action. Corrective, yeah. It's not meant to. We're not here to be punitive to. And that's where I think for a lot of folks at the local level, they view certainly at the board's actions as, you know, being punitive, especially the fees, which again, are in statute, we have to recoup and ultimately.

But yeah, it is meant to be a corrective action here to get folks back on track.

Yeah. Okay, and what does that corrective action typically look like? What does that entail for?

Yeah, it really depends on the deficiencies within the groundwater sustainability plan in that agency. But, you know, generally a lot of the themes have been around just inadequacy, sometimes of data and information to support the minimum thresholds or the goals within the plans.

You know, if we see continued subsidence you know, that is one of the significant concerns right now as well is the impact on infrastructure and then also the dewatering of wells for communities.

You know, you end up just being. Kind of an extra monitor sort of over there, but then there's. There's also a mechanism where you can take active management away.

Exactly. So the first step kind of toward a real board intervention is the probationary determination. Once a basin is brought into probation, there's a one year clock that starts before the board could potentially adopt what's known as an interim plan. So, you know, come up with our own plan.

You know, if the locals aren't able to pull it together and it looks like it's not going to be feasible or needed, then for the board to step in and adopt an interim plan and impose that down on the basin, I think that's what, you know, most folks, I know a lot of folks right now as we go through this probationary determination are concerned most about is the board coming in and telling folks that they have to do something that they're not ready or looking to do otherwise.

But again, you know, the process isn't a quick one. And that first whole step is even probation.

It's necessary. And then, and then. So is there a procedure by which you eventually find compliance and then hand it back to the local board? Yes, there's a system for this. Yeah, yeah. Factors.

Yeah. I don't know if, Natalie, you want to go into a little more detail, but it again, will has to do. It hinges ultimately upon the deficiencies that both DWR found and that our folks also see and a correction of those.

Is there sort of like another a post management probationary period where you're watching really closely to make sure that they're getting back on track?

Not really in so far as the Department of Water Resources carries on that role. So once we're determined that, you know, they are, you know, the groundwater sustainability plan at this moment at least is because we're not judging them, whether they've met their goals in 2040, it is just on their plans right now.

But once we've determined that they're adequate, we then start the process of handing them back to DWR. And then DWR has that ongoing oversight over the basin and the plan and to your point, are making sure that it's continued to be implemented in the way that they've dictated and we can see that they'll be successful.

All right. You know, obviously this is a really important power that you've been given and I just I hope that there's not a reluctance to exercise it when necessary, given the enormous. I mean, the enormous kind of problems that the Bill seeks to address, the law seeks to address, but also the inadequacy. There's the inadequacies of SGMA, which have been substantially written about in the LA Times and elsewhere.

Yeah.

So one question about your fee process. I know you were, you know, you were required in your SGMA to collect to recover the cost of our state intervention through fees, but, you know, basically, when do you think that we're going to get to a point where fee revenues will be sufficient to cover existing workload costs for this?

That's a good question, Natalie. I don't know if you maybe have a better grasp on kind of what our timelines are on funding.

Yeah, so, sorry, red means it's working. So there's a significant delay in fee collection that. So up to this point, we have not been able to collect fees. For example, with the Thule sub-basin, which was placed. Placed on probation in September of last year, the first fee collection will actually occur in February of 2026.

So there's a period of time before we can collect fees. The costs of our program are stable and known, but there is uncertainty about how many basins we'll have on probation or an interim plan phase and how many won't be there any further.

And of course, the goal of our program is to help basins get back on track, to intervene as necessary as needed, but to work with local agencies to fix their plans and hopefully return to DWR as soon as it's feasible.

When that happens, any fee revenue that would be collected from a basin that's on probation or in an interim plan situation, that revenue would end. So we do anticipate that we will be funded by the end of the period in which we're asking for the loan.

So that's why we're asking for the loan, to provide that funding until then. And we anticipate that, but there is a lack of full certainty because the goal is to not have to even collect those fees.

Yeah, sure. All right. Okay. Questions from the colleagues for this item? No. Yes. You don't have to. Yeah, sure.

You mentioned that you had an ask. It's basically to borrow from the underground. Could you go into that a little bit, what you're asking for and what the terms are, how you're going to repay it?

Yeah, so we would repay it ultimately when we're able to collect fees. So once we're collecting fees from the basins, we'll be able to pay off that loan when it comes to the amounts.

And I'll kind of look to either Andrew or Natalie or folks on just the breakdown ultimately, of the amounts that we're asking for there.

Yeah. Vid Dong Ling, Department of Finance. The ask is to request a loan of up to $16.4 million that would cover the cost of 22 positions for up to three years. And the goal is within that time frame, there will be sufficient fee revenue to cover those positions.

And this is coming about because the courts are holding up?

Yeah. And for one of the first basin that we brought into probation, the court has us on hold right now, so not able to collect fees. Not actually speaking with really, the basin as well, unfortunately. And so we're, you know, we're on pause, basically, from the courts on implementing any further on the Tulare sub basin.

Would the. Would the basin have the capability to pay those fees if it. If it was able to? I mean, if legally able to.

I would have to defer to the basin ultimately on that. I know there is a concern ultimately. About the economic impact and growers being able to pay what, you know, the increased fees were. Because, you know, and I'm very sympathetic and sensitive.

I know that, you know, many of these growers are already paying fees to their Groundwater Sustainability Agency. And so as the board comes in to then conduct its work and then add on top of it, there are concerns around, you know, economic impacts and affordability.

But, I mean, so it's a speculation that you'll get those, those repayments.

Yeah. As Naz said, there's some uncertainty ultimately as to, you know, what we'll be collecting here into the future. But I think we have some confidence at least currently given with the Tulare, the Thule sub Basin coming to the board that, you know, we'll begin to see that fee revenue.

Okay. All right. Well, thank you. Thank you very much. And let's get questions. Really do appreciate it.

Thank you as well, Chair.

Let's move on to the. Thanks for all your work. Let's go to issue 25, which is parks and Rec. We've got Armando Quintero here, who's the Director of our Parks Department. Hi there, Mr. Director. You may proceed when you're ready.

Thank you. Good afternoon. Here we go. Good afternoon, Chair and Members. It's good to be here with you. My name is Armando Quintero and I'm the Director of the California Department of Parks and Recreation. And thank you for this opportunity to provide a brief overview of the California Department of Parks and Rec.

The Department is responsible for protecting and preserving the state's most valuable natural, cultural and recreational resources for the benefit of current and future generations. With 280 park units spanning more than 1.6 million acres, California operates the largest and one of the most diverse state park systems in the country.

The system includes beaches, deserts, forests, lakes, historic homes, cultural landmarks, wilderness areas, all offering recreational opportunities to over 70 million visitors a year. The Department has been working to expand access to the outdoors and address the challenges of climate change.

Guided by the California Outdoors for All initiative, we have been working to create a healthier, more equitable California where every resident, regardless of income, background or zip code, can connect with nature and the benefits of the out of doors.

Investments were made to remove financial and logistical barriers that prevent children and families from accessing, excuse me, the State park system. With collaboration across departments and local partners, we've launched a suite of access programs, including multiple free pass programs like the State Parks Library Pass, the Adventure Pass for fourth graders, their families, among others.

One of the Department's cornerstone programs in expanding park and open space access across the state is the statewide Park Development and Community Revitalization Program. This grant program provides new parks and recreation opportunities in local communities where they are needed most.

And that Fund, what we really do is we look at communities that don't have any recreation facilities at all. They tend to be Low, they are Low income communities and we provide funding for them to create recreation centers, playing fields and things like that where before there was nothing.

Since 2008, roughly $1.2 billion in grants have been awarded to 313 projects. Funding has come from bond funds, propos, Proposition 40, Proposition 84, Proposition 68 and the General Fund. The historical difference between the applicant requests versus available funding shows a continuing need for this program in underserved communities.

The Administration's climate bond expenditure Plan is requesting $190 million for this program in 25, 26. The Department of Parks and Recreation manages over 1.65 million acres of land and this includes extensive acreages of every major forested ecosystem in the state as well as many other fire adapted ecosystems.

The Department has worked for decades to protect these lands and the Department's efforts have been supported by the Governor's Wildfire and Forest Resilience Action Plan and task force activities. Outcomes of the program to date include the treatment of over 13,500 acres of land emphasizing landscape scale benefits.

Roughly 30% of treatments have utilized prescribed and beneficial fire with significantly more scoped in the pipeline for planned treatments. The Climate Bond includes funding to support this landscape scale recreation.