Water Code section 23225 is located within the chapter concerning cooperation with the United States, and the article titled “Approval of Federal Contracts”. It provides:
“An action to determine the validity of any contract and bonds may be brought pursuant to Chapter 9 (commencing with Section 860) of Title 10 of Part 2 of the Code of Civil Procedure.”
Basedon a literal reading of the statutes, this validation proceeding must determinethe validity of the subject contracts. This is largely consistent with IID’sSecond Amended Complaint, which, among other things, requests:
• “Thatthe Court examine and inquire into the adoption and the validity of theContracts”. (Second Amended Complaint, Prayer ¶ 4.)
• “Thatthe Court find that all conditions, things and acts required by law to exist,happen or be performed precedent to and including the execution of theContracts have existed, happened, and been performed in the time, form andmanner required by law”. (Second Amended Complaint, Prayer ¶ 5.)
• “Thatthe Court hold that the Contracts, and each and every portion of suchContracts, are valid, legal and binding and are and will be in conformity withall applicable provisions of law and that any and all legal or factual objectionsand challenges to the validity of the Contracts are expressly denied”. (SecondAmended Complaint, Prayer ¶ 6.)
A validationproceeding may also address an agency action relevant to a contract, usuallyfor the purpose of assessing validity of the contract (or other matter).
Caselaw is not uniform in identifying whether it is a public agency’s decision oraction, the subject of the decision or action (e.g., a contract), or perhapsboth, that are the proper subject or subjects of a direct or reverse validationaction.
Thepurpose of a validation proceeding has been described as follows:
“A validation action implements important policyconsiderations. ‘[A] central theme in the validating procedures is speedydetermination of the validity of the public agency's action.’ (MillbraeSchool Dist. v. Superior Court (1989) 209 Cal.App.3d 1494, 1497 [261Cal.Rptr. 409].) ‘The text of section 870 and cases which have interpreted thevalidation statutes have placed great importance on the need for a singledispositive final judgment.’ (Committee for Responsible Planning v. City ofIndian Wells (1990) 225 Cal.App.3d 191, 197-198 [275 Cal.Rptr. 57].) Thevalidating statutes should be construed so as to uphold their purpose, i.e.,‘the acting agency's need to settle promptly all questions about the validityof its action.’ (Millbrae School Dist v. Superior Court, supra, 209 Cal.App.3d at p. 1499.)
‘[I]n its most common and practical application, thevalidating proceeding is used to secure a judicial determination thatproceedings by a local government entity, such as the issuance of municipalbonds and the resolution or ordinance authorizing the bonds, are valid, legal,and binding. Assurance as to the legality of the proceedings surrounding theissuance of municipal bonds is essential before underwriters will purchasebonds for resale to the public.’ (Sen. Rules Com., Rep. on Sen. Bill No. 479(1985-1986 Reg. Sess.).)” (Friedland vs. City of Long Beach (1998) 62Cal.App.4th 835, 842.)
Certainly these coordinated validationproceedings have not met the theme of being a speedy determination. While amore expeditious process would have been preferable for all concerned, thereare reasons for the timing. The unique and complex issues presented (more than147 written rulings on contested matters), the number of parties and cases, thesheer volume of materials to be considered (in addition to the pleadings, sixadministrative records that, in electronic form, fill more than 350 CDs), themore than two years of having the proceedings stayed while certain rulings wereon appeal, and other complicating factors, have all contributed to the timenecessary to reach trial.
Avalidation action is a proceeding in rem. Pursuant to the primary validation statutes themselves,the matter, not simply the agency’s action thereon, is in issue. Asnoted above, this is consistent with IID’s complaint in validation. As the Friedlandcourt observed (“[I]n its most common and practical application ….”), theaction of the agency may be the only thing in issue, i.e., only it must beexamined to determine the validity of the matter. The Court does not rule out thepossibility that this may vary depending on what is sought to be validated andthe circumstances. The Court is mindful that, in marked contrast to a localagency’s issuance of bonds as described in the Friedland case, the QSAcontracts, and hence these coordinated cases, are very complex and involvemultiple public agencies. This differs significantly from the origins of thevalidation statutes, and much of the case law interpreting them.
Anumber of cases indicate that the determination of the validity of thecontracts here must be done in the context of evaluating the decision-makingprocess by which IID approved those contracts. This approach is consistentwith case law discussions of the standard of review in validation proceedings. The standard has been articulated as follows:
“Thescope of judicial review of a legislative type activity is limited to an examinationof the record before the authorized decision makers to test for sufficiencywith legal requirements. … A substantial evidence review is limited to therecord before the CRA and the city council; it is an examination of theproceedings before the entities to determine if their actions were arbitrary,capricious, or entirely lacking in evidentiary support. The trial court reviewsthe decision-making process of the administrative agency and does not conductits own evidentiary hearing; thus discovery is limited.” (Morgan vs.Community Redevelopment Agency (1991) 231 Cal.App.3d 243, 258 (citationomitted); see also Poway Royal Mobilehome Owners Assn vs. City of Poway(2007) 149 Cal.App.4th 1460, 1479 (relied on the foregoing quotationfrom Morgan in discussing the applicable standard of review in avalidation action).)
Caselaw recognizes validation by three methods: (1) a direct validation actionfiled under Code of Civil Procedure section 860 by the public agency seekingvalidation of its actions or the res of its actions, (2) a reverse validationaction filed under Code of Civil Procedure section 863 by persons or entitiesother than the public agency regarding the validity of that public agency’sactions or the res of its actions, and (3) the “do nothing” approach, where thematter is deemed validated by the passage of the sixty day limitations periodprovided in the validation statutes without the timely filing of a direct orreverse validation action. (Friedland, 62 Cal.App.4th 835,850-851.) Under the “do nothing” method of validation (also called “validationby operation of law”), “the agency’s action will become immune from attackwhether it is legally valid or not.” (Kaatz vs. City of Seaside (2006)143 Cal.App.4th 13, 30.)
The “donothing” approach is relevant to these proceedings because some of the partiessought to challenge agreements or approvals that were not one of the explicitsubjects of the validation complaint in Case ECU01649. In particular, we arehere concerned with matters, including those that are the subject of actions ofagencies other than IID, as to which no validation action has been brought andthe 60 day limitations period has run. As noted above, this consequence canapply only where an agency’s action is eligible for validation under thevalidation statutes. Not all actions are so eligible. The scope of theauthorizing statutes, including Water Code section 22762, must be applied tomake such a determination.
Forinstance, Cuatro del Mar sought to challenge before trial the validity of theAgreement Between the Imperial Irrigation District and the Department of WaterResources for the Transfer of Colorado River Water (“IID-DWR Agreement”). Although IID is a party to the IID-DWR Agreement, which was signed on October10, 2003, the same date as the QSA, and the IID-DWR Agreement is in the record(AR 3/1/10893), IID did not seek to validate that agreement in theseproceedings.
The IID-DWR Agreement may have been amatter challenged in Case ECU01643, Morgan et al. vs. IID, et al. Amongother things, that case sought to challenge the validity of the “QSA”. Thecomplaint defined the “QSA” as “a series of agreements, legislation, andcontracts between and among the IID, SDCWA, MWD, CVWD and California, a portionof which provides that water from plaintiffs’ land in the Imperial Valley willbe transferred outside of the Imperial Valley. … .” (Case 1643 Complaint, ¶18.)
Case1643 was filed shortly after Case 1649. Case 1643 is no longer pending, havingbeen dismissed by the Imperial County Court in December 2003. According to theImperial County Court order dismissing Case 1643, the case was dismissedbecause “(a) reverse validation action is barred by statute and case law when apublic entity files its own validation action prior to the filing of thereverse validation action.” Of course, Case 1649, IID’s direct validationaction, seeks validation of the QSA and only some of the QSA relatedagreements.
It doesnot appear to the Court that any of the parties appropriately assisted theImperial County Court prior to the December 2003 order dismissing Case 1643. It appears that IID represented a limited if not somewhat misleading scope ofthe direct validations action to the Imperial County Court. IID stated in its oppositionto the Case 1643 plaintiffs’ ex parte application for permission to publishsummons in their reverse validation action that it had “already brought avalidation action … pertaining to the same subject matter.” (IID Opposition to[Case ECU01643] Plaintiffs’ Ex Parte Application for Permission to PublishSummons on Complaint Challenging Validity and For Declaratory Relief, p.1:5-7.) In that same brief, IID stated:
“ThoughPlaintiffs’ Complaint is very vague, IID’s validation lawsuit clearly pertainsto the same matters challenged in the attempted action herein [fn omitted]– that is, the validity of the Quantification Settlement Agreement andrelated contracts to which IID is a party.”).) (Ibid, pp. 1: 25-2:3.)
TheCase 1649 complaint does not explicitly seek validation of the IID-DWRAgreement or any legislation related to the QSA. In contrast, Case 1643 soughtto challenge the validity of the “QSA”, which the Case 1643 complaint definedas “a series of agreements, legislation, and contracts between and among theIID, SDCWA, MWD, CVWD and California, a portion of which provides that waterfrom plaintiffs’ lands in the Imperial Valley will be transferred outside ofthe Imperial Valley. … .” (Case 1643 Complaint, p. 4:15-18.) The Case 1643 plaintiffs’response in support of their ex parte application did not highlight this distinction to theImperial County Court.
TheImperial County Court denied the Case 1643 plaintiffs’ ex parte application for an order for publicationof summons without prejudice, pending supplemental briefing on IID’sjurisdictional challenge (prior direct action (Case 1649) pending) to theaction. In its supplemental briefing, IID noted that the Case 1643 complaintdid not identify the particular agreements which the Case 1643 plaintiffssought to challenge. IID argued, inter alia, that “By failing to identifywhich of these various contracts they are seeking to validate plaintiffsrequire the world to guess as to which contracts they are seeking to validate.” (IID Supplemental Brief, p. 6:9-11.) The Case 1643 plaintiffs’ supplementalbrief failed to rebut or otherwise address this contention.
Thefailure of the Case 1643 parties to fairly focus the Imperial County Court onthe difference in potential scope between the then pending reverse validationcase (including all of the QSA related agreements) and the more limited scopeof the direct validation action in Case 1649 is unfortunate. Nevertheless, theImperial County Court order has long since been final.
Counsel have not identified any othercase in which the IID-DWR Agreement is the subject of a direct or reversevalidation proceeding. As far as the Court is aware, the IID-DWR Agreement isnot the subject of a pending direct or reverse validation action, and the timeto bring such an action has long passed.
Re-Opening. Does IID’s direct validation proceeding put the validity of other related matters back into issue, even if they were otherwise duly deemed to be valid by operation of law (the “do nothing” approach), or became final by virtue of the running of other statutes of limitation? This “re-opening” effect was advocated, before trial, by Cuatro del Mar, Imperial County and the Imperial Air District. For example, Imperial County and the Imperial Air District sought to challenge a variety of actions, including the SWRCB approval of the water transfer. Some of these matters and actions may not be the proper subject of a validation action. Furthermore, revisiting prior determinations would not be consistent with the goal of speedy resolution, or with fundamental tenets of judicial efficiency. Case law does recognize that certain acts associated with the matters to be validated may come within the scope of the validation proceeding, regardless whether such acts occur more than sixty days before the filing of the validation action complaint. (Meaney v. Sacramento Housing and Redevelopment Agency (1993), 13 Cal.App.4th 566, 583.) Meaney involved a reverse validation challenge to the validity of an October 1990 agreement between the County of Sacramento and the Sacramento Housing and Redevelopment Agency (“Agency”) for the construction of a new courthouse (the Courthouse Agreement). The action was filed within sixty days of the adoption of the Courthouse Agreement, but more than sixty days after two July 17, 1990 resolutions of the Agency and the City of Sacramento City Council (“City Council”) that made determinations under Health and Safety Code section 33445 relating to the benefit to the project area and the absence of other reasonable means of financing. In concluding that the trial court could consider the validity of the two July 17, 1990 resolutions, the appellate court stated:
“No doubt, a validating proceeding may not be used as a springboard to delve into the history of a public agency, but we have no hesitation concluding that, where the proceeding pertaining directly to a challenged action extends beyond the 60-day period of limitations, the court may review the entire record of proceeding in adjudicating the validity of the action.” (13 Cal.App.4th at 583.)
InMeaney, the validation action specifically named, among others, theAgency and the City Council, the two entities whose July 17, 1990 resolutionswere at issue in that portion of the decision. The July 1990 resolutions werefindings by those agencies which apparently supported or were prerequisites forthe Courthouse Agreement. The resolutions themselves may not have been proper“matters” for validation, in which case they would not have been subject to thevalidation statutes’ 60 day limitation period. The Meaney decision doesnot address this issue. The Court finds that the Meaney decision doesnot provide authority for “re-opening” other agencies’ decisions, where thoseagencies undertook their own decision-making processes and those decisions havebecome final due to the expiration of limitation periods, litigation, orotherwise. The Court does not view the validation proceedings as “re-opening”decisions which have become final due to the expiration of limitations periods,litigation, or otherwise. This includes the SWRCB action on the watertransfers.
TheCourt nonetheless has the authority to review the entire record or proceeding,as did the Meaney court, and the validity of the matters put in issue inthese validation proceedings, to the extent those matters have not already beendeemed validated.
AllegedConstitutional Violations and Matters Void Ab Initio. One of the issuesidentified in the Court’s Final Orders Following the May 29, 2008 StatusConference regarding the scope of a validation proceeding was whether acontract which is void ab initio,as contrasted to voidable, remains within the scope of one or more of thepending validation actions. For example, could a challenge that one or more ofcontracts sought to be validated, or a contract or action predicatethereto, that is shown to be void ab initio be within the scope of these validationproceedings? A related question is whether constitutional challenges, whichcould be a basis upon which a matter would be void ab initio, survive. The law is clear that timedoes not confirm a void act. (Civ. Code § 3539.) A contract that is contraryto an express statute is void, not merely voidable. (Reno vs. American Ice MachineCo. (1925) 72 Cal.App. 409, 413.) “Such a contract has no legal existencefor any purpose and neither action nor inaction of a party to it can validateit … .” (Ibid.) That is one of the distinctions between a void and a voidablecontract. (Ibid.) Further, a contract that violates the constitutional debtlimitation provisions in the California Constitution is generally void. (See, Deanvs. Kuchel (1950) 35 Cal.2d 444, 446-447, involving California ConstitutionArt. XVI, §1.)
TheCourt is concerned that at least the “do nothing” approach to validation (andpossibly others) may have unintended consequences. It may shield, for example,a contract or other matter that has not been the subject of anyconstitutionally required due process. For example, the “do nothing” approachdoes not itself require any public notice. The Court would normally assumethat notice would therefore be determined based upon other laws, such asconstitutional due process and the laws applicable to a public agency’s approvalof a contract. Furthermore, such validation may shield a contract that wouldbe abhorrent to public policy. During an oral argument at one point in theseproceedings, the Court gave as an example a contract requiring slavery. Whileextreme, it is illustrative of the problem. Such validation appears to ignorethe body of law regarding matters that cannot come into existence and, hence,cannot as a matter of law be validated.
However,the Court is bound to follow applicable precedent. The Friedland courtheld that:
“Wehold that as to matters which have been or which could have been adjudicated ina validation action, such matters – including constitutional challenges– must be raised within the statutory limitations period in section 860et seq. or they are waived.”
(62Cal.App.4th 835, 846- 847.)
Thedecision does not specifically discuss voidness. The constitutional issue in Friedlandwas whether a pledge of transit occupancy taxes and of amounts on deposit inthe Tidelands Operating Fund were unconstitutional gifts of public funds inviolation of Article XVI, section 6 of the California Constitution. While thisis not the same constitutional claim as those raised here, the Court does notsee any reason to distinguish based upon this difference.
TheFriedland court’s discussion of whether constitutional challenges aresubject to the validation statutes’ limitations period includes the followingquote from Miller vs. Board of Medical Quality Assurance (1987) 193Cal.App.3d 1371, 1377: “[T]he assertion of a constitutional right is subjectto a reasonable statute of limitations unless a constitutional provisionprovides to the contrary.” None of section 1, section 6, or section 7 (which is also in issue in thesecases) of Article XVI of the California Constitution contains any provisionthat bars application of an otherwise applicable statute of limitations.
Friedlandis binding precedent. To the extent that the validation statutes apply to theIID-DWR Agreement, and as the 60 day limitations period under the validationstatutes has expired and no direct or reverse validation action on thatagreement was brought, or if brought, remains pending, the Court finds thatthat agreement, as with other similarly situated “matters”, have been validatedby operation of law.
ThisCourt, accordingly, will not review the validity of a matter previouslydetermined to be valid by a separate validation proceeding, or by inaction. However, this does not limit the Court’s jurisdiction to review the thirteencontracts that are at issue in these validation proceedings. Validation isnecessarily limited to the validity of the matter as approved at the time ofthe agency action which causes the matter – here the contracts – tocome into existence. The determination of validity is limited to what was andcould have been determined at that time. Subsequent occurrences or the failurethereof can alter the status of a matter, such as the failure of a conditionsubsequent in a contract, but such subsequent occurrences would not affectwhether a contract under review was valid under a validation proceeding’sanalysis.
Tothe extent that the matters before the Court – i.e., the scope of thesevalidation actions – are limited, so will be the Court’s determinations ofvalidity. The two must be consonant. The Court, however, will not look tosome other contract, not one of the contracts for which validation is beingsought, which may have been validated by operation of law as necessarilydeterminative of the validity of terms of the contracts for which validation isbeing sought.
Remaining Answers in thisValidation Proceeding
As discussed above, IID’s Second Amended Complaint is a source that shapes, for the Court, the determination of the scope of these validation proceedings. The scope of these proceedings is also shaped by the issues properly raised in the remaining answers in Case 1649. Imperial County and the Imperial Air District argue that by timely answering and denying certain allegations in IID’s Second Amended Validation Complaint, a defendant properly puts such matters at issue even if such matters are not specifically pled. A defendant is deemed to have admitted a material allegation by failing to deny it. (Code Civ. Proc. § 431.20.) The denial must be sufficient, e.g., must not contain a negative pregnant. (Loop Building Co. vs. De Coo (1929) 97 Cal.App. 354, 363.) The Court concludes from the foregoing that the material allegations in IID’s Second Amended Complaint that have been properly denied by a defendant in this proceeding are matters properly within the scope of these proceedings. Affirmative defenses are usually required to be pled by reference to specific facts, not mere conclusory statements. (FPI Development, Inc. vs. Nakashima (1991) 231 Cal.App.3d 367, 384.) Affirmative defenses are the vehicle to allege new matters, not merely to deny an allegation in the complaint. (Code Civ. Proc. § 431.30, subs. (b)(1), (b)(2).) Based on the foregoing, affirmative defenses that consist of mere conclusory statements in a remaining answer are not sufficient to raise a new matter within the scope of these validation proceedings. Plaintiff Imperial Irrigation District’s Prima Facie Case The Court has not been successful in finding any case authority clearly setting out what would amount, in a contract validation action, to the presentation of a sufficient prima facie case by the plaintiff. The one case the Court is aware of which uses the terminology of “prima facie case” in a validation action really isn’t on point. That case, City of Sacramento vs. Drew, (1989) 207 Cal.App.3d 1287, was a case where a city brought an action to declare the validity of a special tax assessment district to be formed to raise the unfunded construction costs for three elementary schools. The trial court accepted one defendant’s argument that the assessment was not authorized by the legislation the city was relying on yet refused to award attorney fees. The denial of attorney fees was appealed. The appellate court’s discussion of “prima facie case” was not a recitation on the appellate court’s part of what a prima facie case should. It was a quotation from the trial court’s reasoning in denying fees. In this regard, the trial court stated, “presumably the court could not have entered a judgment in favor of the plaintiff even if no one appeared in this proceeding without the plaintiff presenting a prima facie case at some sort of default hearing forum satisfying the court that --- that --- that the City did have the statutory authority under the Street[s] and Highways Code to impose these assessments”. (City of Sacramento, 207 Cal.App.3d at 1300.) Reviewing generally what the legal requirements are and what the judicial review standard would be, as set out in Morgan vs. Community Redevelopment Agency, supra, the Court is satisfied that IID as plaintiff in these contract validation proceedings would have to prove, as a minimum, that (1) the plaintiff is a public agency with authority to approve the contracts in question, (2) the contracts are validatable, (3) the public agency’s approval complied with open meeting requirements, (4) the approval of the contracts was by the required vote (here, majority), and (5) the public agency acted in a manner that was not “arbitrary, capricious, or entirely lacking in evidentiary support”. Statement of Decision Issue Two: Is IID a public agency? Addressing item (1) of IID’s prima facie case, whether IID is a public agency is not in dispute. As set out in a statute reaffirming that irrigation districts are state agencies (California Water Code section 20570) and as acknowledged in a multitude of litigated cases such as Choudhry vs. Free, (1976) 17 Cal.3d 660, 662-663, IID is a local public agency, governed by a publicly elected Board of Directors. The administrative record supports that IID diverts, pursuant to IID’s state rights and federal contract, Colorado River water equating to a consumptive use of about 3.1 million acre feet per year. (AR 3/30/113593/113595.) IID is facially a party to each and every one of the 13 separate agreements which IID seeks to have validated. Those contracts will be herein referred to as Contracts A through M, as they are attached as Exhibits to IID’s Second Amended Validation Complaint, with titles and parties as set out in detail at IID’s Phase 1A Opening Trial Brief, pages 22-24. Statement of Decision Issue Three: Are the 13 contracts validatable matters? Addressing item (2) of IID’s prima facie case, Water Code section 22762 (set out above) was specifically enacted by the California legislature to allow parties to the Quantification Settlement Agreement (QSA) to seek court validation of any contract entered into that implements, or is referenced in, the QSA. IID Second Amended Validation Complaint, at paragraph 23, asserts that all thirteen contracts “are interrelated and interdependent” and that they “are all part of the overall quantification, settlement and transfers agreed to by the many parties to the QSA and related agreements”. The Court has reviewed all thirteen contracts. • Contract A is the Colorado River Water Delivery Agreement: Federal Quantification Settlement Agreement” between the United States (by and through the Secretary of the Interior), IID, MWD, CVWD, and SDCWA, clearly an integral part of the QSA and listed as a QSA related agreement in Contract E. • Contract B is the Allocation Agreement between the United States, MWD, CVWD, IID, SDCWA, the San Luis Rey Bands, the City of Escondido and others, facially references the QSA in multiple locations including having water delivered during the term of the QSA (paragraph 7.4), and is listed as a QSA related agreement in Contract E. • Contract C is the Conservation Agreement among the Bureau of Reclamation, IID, CVWD, and SDCWA, mentions the QSA in various recitals, and is listed as a QSA related agreement in Contract E. • Contract D is the IID-SDCWA Transfer Agreement’s Revised Fourth Amendment between IID and SDCWA. That Fourth Amendment is facially tied to the QSA, including the QSA JPA Creation and Funding Agreement, and is listed as a QSA related agreement in Contract E. • Contract E is the QSA between IID, MWD, and CVWD, facially calls itself the QSA (and is sometimes refered to herein as the “QSA”), contains an Exhibit A setting out QSA related agreements, and contains an Exhibit B listing related agreements that are executed but contingent on permits, approvals or consents, or to be signed after the QSA execution. • Contract F is the MWD Acquisition Agreement between IID and MWD, facially recites that it is executed pursuant to the QSA, mentions the QSA JPA Agreement in multiple locations, and is listed as a QSA related agreement in Contract E. • Contract G is the CVWD Acquisition Agreement between IID and CVWD, facially recites that it is executed pursuant to the QSA, mentions the QSA JPA Agreement in multiple locations, and is listed as a QSA related agreement in Contract E. • Contract H is a Groundwater Storage Agreement between IID and CVWD, expressly subject to the CVWD Acquisition Agreement (Contract G) becoming valid (see Article X), and terminates concurrently with the QSA. • Contract I is the QSA Joint Powers Authority Creation and Funding Agreement between the State of California (by and through the Department of Fish and Game), SDCWA, IID and CVWD, is listed in Contract E as a QSA related agreement, and facially recites that it is the QSA JPA Agreement referenced in the QSA and in the Environmental Cost Sharing Document, Contract J. The QSA JPA Agreement is not listed among the contracts in Contract E, Exhibit B that are contingent on further approvals or consent. It is included on the Contract E, Exhibit A list of related agreements. • Contract J is the Environmental Cost Sharing Agreement between SDCWA, IID and CVWD, and is listed as a QSA related agreement in Contract E. • Contract K is the Amendment to the 1988 IID/MWD Agreement, makes reference to the QSA in multiple locations, and specifically claims to be in furtherance of the QSA and related agreements. • Contract L is an Approval Agreement Amendment between IID, MWD, Palo Verde Irrigation District, and CVWD that facially recites that the parties desire to amend the Approval Agreement as contemplated by the QSA and related agreements. • Contract M is the Agreement to Resolve Salton Sea Flooding Damage Issues between IID and CVWD in which the Court could find no reference to the QSA. IID contended in its Second Amended Complaint that Contract M is included in this proceeding because it is one of the agreements that make up the “QSA and related agreements”. While the parties to Contract M are certainly parties to the QSA and the agreement was signed on the same day as the other QSA contracts, Contract M is not listed anywhere in Contract E. Contract M is not, in the Court’s review, addressed in Contract E or Exhibits A and B thereto. Contract E, Appendix 5.1 is a list of matters that IID identified as actions, suits, legal or administrative proceedings or governmental investigations that were then pending or threatened (to the extent known by IID) against or affecting IID relating to the performance of Contract E. The claims that are the subject of Contract M are not included in Contract E, Appendix 5.1. Contract M does not appear to fit within the cited authority of Water Code section 22762 such as to allow for this Court to entertain an action to validate Contract M, even though it is mentioned in passing in Contract G (clause 9.1(3)). After the Court issued the Phase 1A trial tentative ruling, IID changed its position. IID now contends that Contract M is not a QSA related agreement, but is nevertheless validatable on statutory grounds other than Water Code section 22762. IID relies in part on Water Code section 22670 as a statutory basis for judicial validation of Contract M. The pertinent portion of Water Code section 22670 refers to a “contract entered into for a period of more than three years”. Contract M has no explicit expiration date or termination provision. According to IID, the agreement contains continuing obligations and performance requirements that extend beyond three years. Does Contract M come within Water Code section 22670? The Court is aware of one reported decision that discusses whether Water Code section 22670 should be read literally as applying to “any contract” that comes within the language thereof. It is ambiguous on this issue. In one portion of Kaatz v. City of Seaside (2006) 143 Cal.App.4th 13, 42, the court concluded that the term “contract” for purposes of Water Code section 22670 should be read literally. This statement was made in the context of distinguishing Government Code section 53511 (discussed below) from Water Code section 22670 and other statutes which authorize validation of “any contract”. In another portion of the decision, Kaatz refers to Water Code section 22670 as one of the statutes which concerns “actions to test the validity of bonds or related matters”. This latter language suggests that a narrower reading of the term “contract” may be warranted for purposes of Water Code section 22670. The Court need not resolve this issue. Even if the Court were to conclude that Contract M is subject to Water Code section 22670, it does not appear to be validatable in this proceeding. IID acknowledges that its Board of Directors approved Contract M at its December 10, 2002 board meeting. (AR 3/3/31281/31286.) The record reflects that the motion on December 10, 2002 for the IID Board of Directors to approve and authorize execution of Contract M carried. The minutes of that board meeting do not include a roll call for that vote. (AR 3/3/31281/31286.) Although it appears that Contract M was executed on October 10, 2003, this is not necessarily the relevant date for determining when a validation action concerning Contract M should have been filed. Under Code of Civil Procedure section 860, a timely validation action seeking to validate Contract M should have been brought within sixty days of the existence of Contract M. Under Code of Civil Procedure section 864, a contract is deemed to be in existence upon its authorization. A contract is deemed to be authorized “as of the date of adoption by the governing body of the public agency of a resolution or ordinance approving the contract and authorizing its execution.” (Ibid.) The Court has not found, and IID has not cited to, any evidence in the record that indicates that the IID board re-authorized Contract M at or around the time it approved the QSA and other related agreements on October 2, 2003. IID’s validation action was not filed until November 5, 2003, which was significantly more than sixty days after the December 10, 2002 IID board meeting which approved Contract M. IID also relies on Government Code section 53511 as a statutory basis for judicial validation of Contract M. As noted above, Government Code section 53511 authorizes validation of a local agency’s “bonds, warrants, contracts, obligations, or other evidences of indebtedness”. Not all contracts that include a public entity financial obligation constitute a “contract” for purposes of Government Code section 53511. (Kaatz v. City of Seaside (2006) 143 Cal.App.4th 13, 42.) IID contends that because Contract M contains financial obligations such as apportionment of third party damages, settlement of past payments made to third parties in settlement of claims or litigation for damages allegedly caused by the Salton Sea, and apportionment of responsibility for future flood damage claims settlements and judgments, it comes within Government Code section 53511. However, the Kaatz court rejected the argument that “contracts” for purposes of Government Code section 53511 includes any contract constituting a financial obligation of a public agency. Instead, the Kaatz court concluded that “contracts” under Government Code section 53511 “are only those that are in the nature of, or directly relate to a public agency’s bonds, warrants or other evidences of indebtedness.” (143 Cal.App.4th at 42.) In Kaatz, the court concluded that an agreement calling for a public agency’s purchase and immediate resale of real property to a private party where the source of funds for the agency’s acquisition of the property is the third party purchaser bore no relationship to the issuance of bonds. No bonds were issued or contemplated in connection with these transactions. The agreement also did not relate to warrants. The Kaatz court concluded that the agreement did not constitute or relate to an evidence of indebtedness for purposes of Government Code section 53511. Contract M has provisions concerning costs reimbursement and future cost sharing. It does not mention issuance of bonds or warrants. Contract M does not appear to be in the nature of a financing agreement. It therefore does not appear to be the kind of contract that is subject to Government Code section 53511. However, even if the Court were to conclude to the contrary, for the reasons discussed above concerning the timeliness of the validation action as it pertains to Contract M, Contract M does not appear to be validatable in this proceeding. Accordingly, the Court hereby finds Contract M to not be properly subject to validation and declines plaintiff’s request to declare Contract M valid. The remaining twelve contracts (Contracts A through L) appear to be properly considered for validation by the Court under the authority of California Water Code section 22762. The Court notes that various parties who advocate the Court’s validation of the contracts (“Category 1 parties” ) claim that this Court lacks jurisdiction to invalidate contracts that involve sovereign Indian tribes or the United States. If it were true that the Court lacked any jurisdiction to invalidate the contracts, then the Court would view itself as lacking any jurisdiction to validate those same contracts. The Court views these as in rem matters which the Court can reach despite the filing of a claim of sovereign immunity by some Indian tribes and the late attempted special appearance in this matter by the United States. The Court rejects any implication that a party to an otherwise validatable contract can file an action and obligate a Court to validate that contract simply because some other party to the contract appears to have sovereign immunity. Statement of Decision Issue Four: Did IID’s approval of the 12 remaining contractscomply with open meeting requirements? Addressing item (3) of IID’s prima facie case, there are claims by various parties that IID failed to comply with open meeting requirements (sometimes refered to as the “Brown Act”). While the Court does not in this decision reach the open meeting issue, the facts associated with the IID Board approval process are relevant. On October 2, 2003, the IID Board of Directors purported to approve the QSA agreements to which IID would be signatory, including Contract I (the QSA JPA Creation and Funding Agreement (“QSA JPA” or “QSA JPA Agreement”)) and Contract J (the Environmental Cost Sharing, Funding, and Habitat Conservation Development Agreement (“ECSA”)). The former requires signature on behalf of the State, and the latter does not. At that time, the QSA JPA Agreement was still being negotiated and material substantive terms remained to be resolved (such as the second and the third sentences in clause 9.2, the last sentence of clause 10.1, and the obligations of the parties as set out in clause 14.2), as evidenced by the outline of some general concepts for this contract presented to the IID Board, the absence of any complete or incomplete drafts of Contract I in the administrative record (including the record of the October 2, 2003, IID Board meeting) and the October 6, 2003 e-mail from the Director of the State Department of Fish and Game to certain party representatives including IID (Exhibit 1 at trial, hereafter the “DFG Director E-Mail”). Contract I was ultimately completed and signed. There is no evidence in the record that either the IID Board or the public ever had any opportunity to see or comment on all of the substantive and material provisions of that contract. The Court notes that the subsequent legislative amendment of the Brown Act’s open meeting law may help avoid such a factual scenario in the future. Statement of Decision Issue Five: Did IID approve the contracts by the required vote? Addressing item (4) of IID’s prima facie case, the need for a majority vote approving the contracts, the Court notes that the administrative record shows a majority vote of the IID Board of Directors on October 2, 2003. (AR 3/3/30101/30105.) Statement of Decision Issue Six: What are the relevant facts on the issue of whether IID’s action was not arbitrary, capricious, or entirely lacking in evidentiary support? Addressing item (5) of IID’s prima facie case, whether there is substantial evidence in the record to show that the agency action was not arbitrary, capricious, or entirely lacking in evidentiary support, a review of what the record shows the facts to be is necessary. The Court finds the following facts supported by substantial evidence in the record. IID. IID is located between the Colorado River/Arizona border on the east, Mexico on the south, Riverside County and the Salton Sea on the north, and San Diego County on the west. (AR 3/30/113593/113595.) IID is the source of fresh water for the Imperial Valley, and IID’s sole source of fresh water is the Colorado River. (AR 3/30/113593/113595.) A $1+ billion agricultural-based economy dominates the Imperial Valley and is dependent on IID’s Colorado River water rights and IID’s delivery and drainage infrastructure. (AR 3/30/113593/113595.) Pursuant to its state rights and federal contract, IID diverts Colorado River water equating to a consumptive use of about 3.1 mafa. (AR 3/30/113593/113595.)IID requests water to be released from Lake Mead by submitting an order to the United States Bureau of Reclamation (the “BOR”) pursuant to a federal contract, and then diverts the water at the Imperial Dam into the All American Canal (“AAC”). (AR 3/5/53219.) IID’s distribution system is principally a gravity-flow system that includes the 82-mile AAC, almost 1,700 miles of other delivery canals going to about 6,300 headgates, numerous reservoirs, and over 1,400 miles of drainage ditches. (AR 3/30/113593/113596 to 113597.) An illustration showing the IID order and delivery process, timing, sequence and water flow path found at AR 3/15/502225/502276 is shown on the next page as Plate 1. Plate 1 is followed by Plate 2, which shows a diagram found at AR 3/10/101804/101804_0109 that illustrates in more detail how water flows from the Colorado River through IID’s irrigation system, to and through farms and into the drainage system with a terminus at the Salton Sea.
The Historical Water Supply Problems of California and Other QSA Parties. On August 18, 1931, a number of existing California Colorado River water users, including IID, and future users, including MWD, entered into the “Seven-Party Agreement” to resolve certain disputes over the use of California’s share of Colorado River water. (AR 3/5/53275.) By this agreement, IID and the other applicable California agencies, as well as the State, agreed on how California’s entitlement to Colorado River would be divided, and what priorities each party would receive. The signatories requested that California’s Division of Water Resources (a predecessor to what is now known as the California Department of Water Resources) recognize the contractual apportionments and priorities in all matters relating to State authority, and to recommend the allocation and priority provisions to the Secretary of the Interior (“Secretary”) for insertion in any and all contracts for water made pursuant to the terms of the Boulder Canyon Project Act. The California Division of Water Resources agreed to do so, as did the Secretary. The total volume of water divided among the seven California parties is 5.362 mafa.The SWRCB’s Revised Order WRO 2002-0013 (the “SWRCB Order”) includes a chart which shows the priorities and related amounts of water associated with California water users under the Seven-Party Agreement. (AR 3/18/526917/526936.) The chart is reproduced below:
Palo Verde Irrigation District gross area of 104,500 acres
Yuma Project not exceeding a gross area of 25,000 acres
IID and lands in Imperial and Coachella Valleys to be served by the All-American Canal
Palo Verde Irrigation District 16,000 acres of mesa lands
MWD and/or City of Los Angeles and/or others on the coastal plain
MWD and/or the City of Los Angeles and/or others on the coastal plain
City and/or County of San Diego
IID and lands in Imperial and Coachella Valleys
Palo Verde Irrigation District 16,000 of mesa lands
All remaining water
For purposes of this decision, the only meaningful changes to the information in the chart are as follows. CVWD later subordinated its priority 3(a) and priority 6(a) rights to IID. (See AR 3/5/53184.) Also, San Diego assigned its priority 5(b) right to MWD when SDCWA joined MWD. (AR 3/11/200732/200812 to 200814.)As with the QSA, some Imperial Valley landowners objected to IID’s settlement of disputes over the division of California’s share of the Colorado River through the Seven-Party Agreement and sued IID to enjoin IID’s execution of the agreement. It is noteworthy that the settlement in the Seven-Party Agreement was judicially approved. (Greeson vs. Imperial Irrigation District (S.D. Cal. 1931) 55 F.2d 321, 325 and Greeson vs. Imperial Irrigation District (9th Cir. 1932) 59 F.2d 529, 532-533.)IID’s 1932 contract with the Secretary for delivery of Colorado River water incorporated the terms of the Seven-Party Agreement, and the United States obligated itself to permanently deliver to IID “so much water as may be necessary to supply the District a total quantity . . . in the amounts and with priorities in accordance with [those stated in the Seven-Party Agreement].” (AR 3/5/53219/53233.) This contract was validated by an Imperial County Superior Court. (AR 3/30/114729.) That decision was appealed by CVWD. (AR 3/5/53184/53188; see also AR 3/30/114724.) In 1934, a Compromise Agreement subordinating CVWD’s right to Colorado River water to IID’s right was executed as part of a settlement of that appeal. (AR 3/5/53184.) Colorado River water is divided between the Upper and Lower Colorado Basin States, and among the states within the two Basins, primarily by the 1922 Colorado River Compact and the Bounder Canyon Project Act. (AR 3/33/AUGP4-01A-001-00001 and 43 U.S.C. § 617 et seq.) Historically, the Upper and Lower Basin States had not been growing in population or Colorado River use at the same rate, and tensions developed among the states, especially with rapidly growing California. (Arizona v. California (1963) 373 U.S. 546, 555.) The Compact sought to resolve that dispute, but more Colorado River water was actually allocated than was reliably available, especially after the rights of Mexico and Indian Tribes were accommodated. (AR 3/22/710788/710788_0107 to _0112.)In 1964, after interstate arguments had arisen over Colorado River water divisions and use, the U.S. Supreme Court decreed that California’s basic apportionment, when there was no surplus water on the River, was limited to 4.4 mafa. (Arizona v. California (1964) 376 U.S. 340, 342.) This means that the nonsurplus apportionment for California (4.4 mafa) does not satisfy the allocation listed in the Seven-Party Agreement (5.362 mafa). It is far less.The public agency with the largest potential shortfall when only 4.4 mafa is available is MWD. MWD brings Colorado River water to Southern California through the Colorado River Aqueduct (“CRA”) which MWD owns and operates. (AR 3/12/204885/204978 to 204979.) The CRA has an approximate capacity of a little more than 1.2 million acre-feet per year. (Ibid.) Yet, when California receives 4.4 mafa, MWD’s priority 4 right is only about 550,000 afa, leaving the CRA over half empty. MWD’s CRA was historically operated at full capacity because California historically used far more than 4.4 mafa. (Ibid.) California’s use of water above 4.4 mafa was enabled first by low Colorado River water use in Arizona and Nevada. As years passed, Nevada and Arizona began to use their limits, making it necessary for the Secretary to declare annual surpluses on the Colorado River so that California could exceed 4.4 mafa and MWD could keep the CRA full.California’s historical use of over 4.4 mafa concerned the other Basin States. (AR 3/15/505387/505390.) They complained about the surplus declarations to the Secretary, and began pressuring the Secretary and California to implement a plan to reduce California’s water use to 4.4 mafa. (Ibid.) As stated by the SWRCB, “Growing demand in Arizona and Nevada, however, has placed pressure on California to reduce its use to its 4,400,000 afa apportionment during years when no surplus is available.” (AR 3/18/526917/526936-526937. See also AR 3/22/710583; AR 3/22/710788/710788_0011.)Negotiations among the Basin States led to the Secretary’s issuance of the Interim Surplus Guidelines (the “ISG”) to assist California in gradually reducing its Colorado River use. The ISG specified rules for the declaration of surpluses and how special surpluses could be used only by the urban users. (AR 3/22/710583.) California’s Colorado River Board also adopted a draft Colorado River Water Use Plan (the “California Plan”) to reduce California’s use to 4.4 mafa. That Plan relied on agricultural water conservation and transfers to urban users and access to ISG water made available when agricultural transfers reached certain threshold levels. (AR 3/7/72184.) Decision 1600 And Order 88-20. The SWRCB adopted SWRCB Decision 1600 (AR 3/30/114645) on June 21, 1984, in response to a complaint regarding IID water use practices and consequent flooding of farmland by the Salton Sea. The Department of Water Resources conducted an investigation, found misuse of water by IID, IID failed to take curative measures, and DWR referred the matter to the SWRCB. At the conclusion of a six-day evidentiary hearing, the SWRCB found impacts to the Salton Sea due to that misuse, and that under the waste and unreasonable use laws, “the Imperial Irrigation District must take several actions to improve its water conservation program, as specified in this decision.” (AR 3/30/114645/114653.)In 1988, four years after SWRCB Decision 1600, the SWRCB conducted further hearings. The SWRCB thereafter issued Order WR 88-20 (Imperial Irrigation District Order to Submit Plan and Implementation Schedule for Conservation Measures, AR 3/30/114567). Again, the SWRCB’s focus was the unreasonable nature of IID water use practices and IID’s failure to cure. In that context, and in furtherance of water conservation within IID, the SWRCB observed that California would benefit from a conserved water transfer by IID:“The evidence presented clearly establishes that California water users have a need for substantial additional water supplies and that additional water conservation in IID presents a feasible means of meeting a portion of that demand. . ..” (AR 3/30/114567/114584.)One of the potential sources of funding for IID conservation measures identified by the SWRCB was urban areas in need of water. (AR 3/30/114567/114591.) The SWRCB found that the “need for substantial additional water supplies in California and the prospects for substantial water conservation in the IID have been well established.” (AR 3/30/114567/114614.) The SWRCB also found that “conservation of 367,900 acre-feet per annum . . . is a reasonable long-term goal which will assist in meeting future water demands.” (Id.)The SWRCB instructed IID to complete “an executed agreement with a separate entity willing to finance water conservation measures in Imperial Irrigation District,” or take other measures which would achieve equally beneficial results. (AR 3/30/114567/114615.) The SWRCB retained “jurisdiction to review implementation of the intial plan and future water conservation measures.” (AR 3/30/114567/114614.) Pursuant to this mandate, IID entered into a 1988 conserved water transfer agreement with MWD for approximately 100,000 afa. (AR 3/1/11426.)On January 25, 1999, MWD wrote a letter to the Secretary of the Interior asking for enforcement of reasonable and beneficial use restrictions, and to not deliver water without a “prior determination by the Department [of the Interior] that the water will be put to reasonable and beneficial use.” (AR 3/7/72700.) In this letter MWD also asked the Secretary to revisit “whether the public interest warrants continuing the 1931 allocations of Colorado River water . . . . [i.e., water deliveries per the priorities from the Seven-Party Agreement.]” The targets of this communication were IID and the proposed IID-SDCWA Transfer Agreement.The IID Board passed a resolution urging MWD to change its position and authorizing IID legal counsel to take necessary steps to protect IID’s water rights and water supply. (AR 3/3/33561.) MWD and CVWD then sued IID and SDCWA to stop the proposed conserved water transfer. This litigation (see AR3/5/52099 and AR 3/5/52165) claimed that IID was wasting water, and sought a determination that IID’s “wasted” water should not be transferred to SDCWA, but rather be allowed to flow to them as junior appropriators. (AR 3/5/52099/52132 to 52135.)Concurrently, IID, the Secretary, MWD and CVWD were trying to resolve their disputes. On October 15, 1999, IID, MWD, CVWD and the State of California issued “Key Terms” for a proposed Quantification Settlement Agreement. (AR 3/2/20611.) IID’s Board adopted a resolution authorizing the use of those Key Terms to negotiate a definitive QSA arrangement. (AR 3/3/33248.) Based upon this preliminary agreement, MWD and CVWD dismissed their lawsuits. (AR 3/5/52093 and AR 3/5/52096.)However, by the end of 2002, no QSA had been reached. The Secretary sent a letter to IID on December 27 that stated that if the QSA were signed by the end of the year, then IID’s 2003 water order would be honored; but that if the QSA were not signed by then, IID’s 2003 water order would be cut by 241,100 af. (AR 3/31/123915.) No QSA was approved by all parties by December 31, 2002 (IID and SDCWA approved a different version than was approved by MWD and CVWD). (AR 3/2/20260; AR 3/6/60684; AR 3/6/60673.) The Secretary cut IID’s water supply by the identified amount. IID sued the Secretary to stop the water reduction. The District Court granted IID a preliminary injunction. (AR 3/30/110591 and AR 3/30/110727.) The Secretary then reduced CVWD and MWD deliveries to offset the inability to reduce IID and keep California within 4.4 mafa. (AR 3/7/70555.)Notwithstanding the injunction, the District Court allowed the Secretary a “do-over.” The Secretary then commenced a Part 417 beneficial use review of IID’s water order. The District Court maintained the injunction and retained jurisdiction to eventually review the Part 417 conclusion. (AR 3/30/110137 and AR 3/30/110024.)The Regional Director issued an initial Part 417 Determinations and Recommendations in July 2003. (AR 3/31/120693.) The Regional Director recommended reducing IID’s water order, but increased the reduction by an additional 35,000 afa over the reduction that had been enjoined. (AR 3/31/120693/120739 to 120741.) IID objected, and submitted more evidence and argument. The Regional Director adhered to his position and issued his final decision in late August 2003. (AR 3/31/120019.) The QSA and certain related agreements were approved and executed in October 2003.Contracts A through L include several IID conserved water transfers. Conserved water transfers can, if done in a certain manner, enable a reduction in water use as a result of new conservation activities and structures, without reducing the amount of farming, by transferring only the newly conserved water. (AR 3/10/101804/101804_0053.) By increasing water use efficiency through conservation, the same farming could take place with less water diverted from the Colorado River. Two sources for efficiency improvements to create conserved water exist for IID: (a) delivery system conservation, by which delivery system improvements are made to reduce losses (such as lining canals to reduce seepage, or new structures to reduce spills), so that the same volume of water can be delivered, but with less water entering the delivery system; or (b) on-farm conservation, by which less water is used to irrigate crops by improving the irrigation method without reducing the crop yield, which occurs from improved irrigation methodology, such as drip irrigation (for certain crops), slower irrigation, and more level fields. (AR 3/10/101804/101804_0150 to _0160.) In addition to the above conservation methods where no loss of production occurs, the California Legislature amended Water Code section 1013 to allow IID to use fallowing for QSA-related transfers and have the fallowing be deemed efficiency conservation for purposes of any evaluation of IID’s reasonable use of water. The diagrams on the following two pages, Plates 3 and 4, from the administrative record (AR 3/12/204885/205141 and 205143) regard how crop evapotransporation (water used by crops) is not reduced by transferring conserved water.
A bar graph from the administrative record (AR 3/2/21362; Plate 5) which is duplicated on the next page purports to illustrate the recipients and volumes of conserved water transferred over time and the transfer ramp ups. This data is also reflected in table format (with additional information) in Exhibit “B” to the CRWDA (AR 3/1/10273/10285; Plate 6), a portion of which follows on the page thereafter.
Dealing with the Salton Sea appears to the Court to have been the single most significant environmental issue faced in the QSA process. The Salton Sea is California’s largest lake, located north of the Mexican border at the northern end of the IID service area and the southern end of CVWD’s service area. (AR 3/17/518477.) It is in a large depression about 230 feet below sea level. The modern Salton Sea was accidently created when the Colorado River breached a headgate and flowed unimpeded into the Salton Sink for almost two years, starting in 1905. (AR 3/18/526917/526928.) The Salton Sea has no significant natural inflow, relying almost entirely on agricultural drain flow from IID and CVWD service areas for its continued existence. (AR 3/18/526917/526928-526929.) Changes in that inflow, whether increases or decreases, affect the condition of the Salton Sea. As evaporation over the years left behind the salt from the drain water, the Salton Sea became more and more salty, and increasingly toxic to wildlife.The Audubon Society labeled the Salton Sea an “environmental Chernobyl” in 1999. (AR 3/16/513596/513597.) For example, in 1996 botulism at the Salton Sea killed about 10% of the population of western white pelicans. (AR 3/16/513596/513598.) The EIR/EIS prepared for the IID Transfer Project and other literature represented that the Salton Sea would continue to decline without a restoration project:“[With no restoration project] the salinity of the Salton Sea would exceed the level at which sargo, gulf croaker, and tilapia could complete their life cycles . . . in 2008, 2015, and 2023, respectively.” (AR 3/10/101804/101804_0524 and incorporated in AR 3/12/204885/204900.)“[A]t current rates of salt loading of 4 million tons of salts per year, the Salton Sea will be unsuitable for fish and other wildlife in 15 years.” (AR 3/16/513579/513580, written by Dr. Timothy Krantz in 1999 (see AR 3/18/522187/522362(14)-(22)).)Restoration of the Salton Sea was studied for years prior to the approval of the QSA and related agreements. (AR 3/7/70729/70742.) Studies addressed the increasing salinity and lowering elevation in an effort to stabilize a habitat for fish and wildlife. (AR 3/7/70729-70742 and AR 3/7/70729/70742.)Congress passed the Salton Sea Reclamation Act of 1998, which instructed the Secretary to perform certain “feasibility studies and cost analyses” for stabilizing the elevation and salinity of the Salton Sea. (AR 3/7/70729/70742.) The Secretary was to establish “options he deems economically feasible and cost effective,” based on a set of operating assumptions. (AR 3/7/70729/70768.) Among those assumptions was to “account for transfers of water out of the Salton Sea Basin . . . which could be 800,000 acre-feet or less per year.” (AR 3/7/70729/70768.)In 2003, the California Legislature established the Salton Sea Restoration Fund (the “Restoration Fund”) to be used for restoration purposes. (AR 3/14/400274/400277.) The primary transfer beneficiaries IID, SDCWA and CVWD provided an initial $30 million for the Restoration Fund. The State legislation insulated those agencies from any responsibility, obligation or liability for restoration, regardless of what the State ultimately decided to do. (AR 3/14/400286/400290.) The impacts of the water transfers are clearly a subject of the QSA (see, e.g., Exhibit E, Recital K, the SWRCB Orders, and extensive environmentally related material and claims in these coordinated cases). The Court notes that “restoration” may differ from “mitigation”, and that there are pending disputes regarding the QSA and QSA transfer impacts, and sufficiency of mitigation. The Court does not reach, nor make any finding, regarding these issues in this Statement of Decision.Negotiations for an IID-SDCWA Conserved Water Transfer Agreement. Initially, SDCWA and IID entered into a Memorandum of Understanding for a conserved water transfer in 1995. (AR 3/17/514477/514480.) The purpose was to see if a negotiated agreement could be reached. The conditional agreement was approved in 1998. (AR 3/1/11127.) The IID Board approved that agreement on a 4-1 vote. (AR 3/3/34098/34106.) SWRCB Water Rights Change Petition Process. In July 1998, IID and SDCWA jointly petitioned the SWRCB to approve the IID transfer to SDCWA. (AR 3/15/500001.) The Petition was later amended to seek approval of water transfers from IID to MWD and CVWD. The SWRCB provided public notices of the hearings on the petition. On October 15, 1998, the SWRCB issued a Notice of Hearing. (See, e.g., AR 3/15/501107; AR 3/15/501137; AR 3/15/501147; AR 3/15/501169; AR 3/15/501195; AR 3/15/501205; AR 3/15/501210; AR 3/15/501217; AR 3/15/501218; AR 3/15/501219; AR 3/15/501221; and AR 3/15/501222.)On April 22, 2002, the SWRCB held a public hearing in the Imperial Valley. In 2002, the SWRCB held 15 days of evidentiary hearings over a period of months, with witnesses and exhibits presented by many parties. (AR 3/18/526917/526932 to 526934.) Once the evidentiary proceeding was concluded, the SWRCB prepared a draft order and circulated it for review. (AR 3/18/526188.) Subsequent to post-evidentiary hearings, the SWRCB issued the SWRCB Order which approved the IID conserved water transfer to SDCWA, MWD and CVWD, subject to certain environmental mitigation conditions. (AR 3/18/526917.)The IID Contract Approval Process. While the SWRCB proceedings were underway, attempts to reach a final agreement on the QSA and related agreements by the end of 2002 continued. The “Key Terms” of a possible QSA had been agreed upon in 1999 (AR 3/2/20611); and IID, CVWD, and MWD had jointly issued proposed QSA documents for public review in 2000. (AR 3/3/32605.) Various draft agreements and public meetings and workshops occurred in 2000 and 2001, but the majority of intense QSA activity took place in late 2002, from November through December. In December 2002, MWD and CVWD approved one version of the QSA and related agreements, while IID and SDCWA approved a different version. (AR 3/39/AUGP4-06-441-29042; AR 3/41/AUGP4-08-954-34620; AR 3/41/AUGP4-08-960-34676; AR 3/39/AUGP4-06-453-29553; AR 3/39/AUGP4-06-450-29429; AR 3/39/AUGP4-06-453-29442; AR 3/39/AUGP4-06-453-29436; (AR 3/3/30842); AR 3/3/30877; AR 3/3/32096/32105-32107; AR 3/3/32096/32108-32110; AR 3/3/32096/32111-32113; AR 3/6/60682; and AR 3/2/20260.) MWD and CVWD rejected the IID/SDCWA version of the QSA and related agreements. (AR 3/6/60684; AR 3/6/60673.) At the end of 2002, there was no mutual agreement upon the proposed QSA contracts. Different views on cost issues, environmental mitigation funding, and termination events continued to separate the parties. (AR 3/6/60673/60674 to 60675; AR 3/6/60684/60684 to 60685; AR 3/6/60682/60682 to 60683.) Tremendous pressure existed to get this QSA deal done by October 12, 2003. This is reflected above and in the state legislative history of which the Court has taken judicial notice (RJN:000358) as requested by SDCWA, documenting that:“The history of the QSA has been that periodically, the affected parties announce that they had reached agreement on terms, the Legislature takes action to make the necessary changes in law, and then for one reason or another, the agreement falls apart at the last minute. While by all appearances, the outcome will be different this time, there are no guarantees. Consequently, the three QSA bills are contingent upon enactment of each of the others, so that none of the bills will become operative unless both the other bills become operative by January 1, 2004. More important, the principle benefits to the QSA parties of these three bills are contingent on execution of the QSA by October 12, 2003. October 12, 2003 is also the constitutional deadline for the Governor to sign or veto bills passed this year.” The legislation itself contains this October 12, 2003 deadline.