Manager's Report

8 February. 2011

2011 weather is starting out very strange with above normal precipitation and cold weather early and now with yo-yo temperatures from 0 to 60 degrees and very dry. The snowpack is reduced by a couple of feet but moisture content is hanging in there so far. The positive side is very high flows in the Deschutes River into Bend creating very good hydroelectric production at the Siphon Power Plant. The reservoirs look to fill by irrigation season but it would be very nice to see some more snow soon otherwise there will be reduced natural flows available for irrigation in the basin. Stock water runs are on schedule at this time, pending weather, with the PBC on Feb 7-11 and the COC Feb 14-17.

There have been over 1,500 bills introduced so far in Salem with the Oregon Legislature and likely many more to come. COID is actively participating with the Oregon Water Resource Congress (OWRC) and our local delegation along with Deschutes Water Alliance partners in tracking any bills that may have positive or negative impact to the District’s interest. Currently there is one bill attracting some attention and that is HB 2867 which proposes some changes to the Deschutes Basin Mitigation Program. COID will likely be involved with this bill as the legislative schedule develops.

COID and the Oregon Department of Energy (ODOE) have been actively discussing ramifications and impact of new administrative rules placed on the Juniper Ridge BETC funds. There is a challenge with the Oregon Department of Revenue and the interpretation of statute whether or not federal grant funds could possibly lower the amount of the original BETC amounts forthcoming to COID. This would be counter to ODOE practice existing since 1999. COID along with Swalley Irrigation District and Three Sisters Irrigation District have been working with Senator Chris Telfer’s office on these issues and will be actively engaged together on this issue which may require legislation to remedy.

In Washington, D.C. things are quite active on the regulatory front with proposals developing to address non-point source pollution, dam/levee safety and inspections, and herbicide applications. Funding for programs involving COID are under a continuing resolution until March 4^th and the outlook is unfocused on exactly how the rest of the federal fiscal year will take shape. This will impact availability of grant funds for system upgrades and water conservation projects along with possibly the timing and eligibility of the HCP grant application funding for next year. COID and OWRC are actively engaged on a regional and national level following these issues.

Congressman Greg Walden has announced his intentions to introduce a bill in the US House of Representatives that would involve several items relating to the Crooked River, including a water supply of 5,100 acre feet for the City of Prineville out of the currently uncontracted for water behind Bowman Dam, assurances of security for existing contract holders for water including Ochoco ID, and a one-quarter mile downstream movement of the wild and scenic river boundary. The DBBC along with Prineville, Ochoco and Crook County are actively participating in discussions for the bill with Congressman Walden in addition to discussions with the staffs of Senators Wyden and Merkley.

Opportunities

COID’s BETC application for a pass-through BETC for Juniper Ridge Phase II did not rank high enough for the Tier II selection. It is unknown what options there may be in the future for BETC funds as the program is currently scheduled to sunset in 2012 and no further application periods exist before then.
COID received an Oregon Department of Energy Community Renewable Energy Feasibility Fund (CREFF) program grant of $36,000 to facilitate the feasibility of several hydro sites within the District. COID will contribute $12,000 in match for this evaluation.
COID, NUID and Swalley conducted physical inspections of the North Canal Dam in Bend. This is a follow up inspection to accurately assess any erosion of key components of the downstream face and toe along with more detailed evaluation of the site for design of a fish ladder for upstream passage.

o COID, NUID, Swalley and ODFW have applied with the assistance of the Upper Deschutes Watershed Council to the Oregon Watershed Enhancement Board (OWEB) for funding of the fish ladder design. The OWEB Review Team has this project ranked first in the basin. Funding amounts are pending for this effort to proceed.

COID and BLM are proceeding with land appraisals and environmental inspections on the parcels included in the land swap authorized by Congress in the public lands bill passed this year in the Badlands area east of Bend.
FERC accepted COID’s preliminary permit application for Cline Falls. A competing permit application was filed by KC Hydro Company in August so FERC will decide which application takes first position in a few months. As COID is a municipal entity it should take first position under federal rules for permit applications. If COID is successful in receiving first position it will have three years to develop an official project application for license.
COID filed for certification of the Siphon Power Project (SPP) to the Low Impact Hydro Institute (LIHI) last fall and anticipates having full certification by February. This enables COID to have fully certified Renewable Energy Credits (RECs) within Oregon’s Renewable Portfolio Standard (RPS) for both SPP and Juniper Ridge hydroelectric production. The RECs have a market value that can be sold to utilities and other generators of carbon based energy in order for these entities to come into compliance with the RPS. There is also a strong possibility that COID may be able to sell RECs into the State of California as the market value of RECS is considerably higher in that market. At this point COID has both hydro facilities registered with WREGIS, the electronic clearing house utilized for REC markets. COID has also filed for certification of its hydro facilities with the California Energy Commission to facilitate the possibility to sell its RECs into California. COID will continue to maximize the value of its hydroelectric assets beyond just selling the electricity going forward as these markets develop.
The DBBC has been a member of a group of stakeholders formed to evaluate options for dealing with the building sedimentation in Mirror Pond located in Bend. A smaller group of these stakeholders including Bend Parks, City of Bend and PacifiCorp has hired a project manager to assist in the effort of developing a community based plan to develop options and gather funding for this Mirror Pond issue. This effort will take place during 2011 and likely beyond. The DBBC is active and regularly participates in these discussions.

Challenges

The Deschutes Basin Board of Control (DBBC) and the US Forest Service (USFS) have been in continued discussion regarding the Ryan Ranch project. The Oregon Water Resource Department has issued an official opinion that a water right is needing to be secured by the USFS before it may proceed with inundating the land with water. Ryan Ranch is an area above Bend below Benham Falls that the USFS wishes to establish as a wetland area. It is uncertain how or when the USFS would be able to secure a permanent surface water right although a temporary permit for water withdrawal prior to irrigation season is a possibility for going forward.
Pacific Rim Energy, a company based in Yakima, WA has filed preliminary permit applications with FERC to develop kinetic hydroelectric projects in the irrigation canals in almost every irrigation district in the western United States, including all the districts in Central Oregon. It is unknown how FERC will actually evaluate and move forward on such a massive amount of filings. COID is working with the OWRC and other organizations on this matter and will closely monitor how it proceeds. If FERC accepts such a filing then COID may have to actively resist and file objections with FERC.
Issues continue to arise with patrons and the delivery of water to parcels past the District’s Point of Delivery. The District is evaluating its existing statutory authorities and reviewing policies to assist in resolving these issues.
Persistence of patrons failing to beneficially use their water either due to economics, absentee ownership, or mismanagement resulting in potential confiscation by the District as the only viable option to prevent forfeiture.

STATUS REPORT

Juniper Ridge Piping & Hydroelectric Project

Final contractor payment pending punch list fixes and contractor lien releases
Received final approval of $1.5MM of additional funds from the Oregon Department of Environmental Quality. $450K will be in the form of an outright grant and the remainder on a 20 year 2.25% loan.

Real Estate

One 20 acre parcel near Deschutes Market Road and Hwy 97 was listed for sale through Steve Scott Realtors. Listing, as per District policies, was at the recently updated appraised value. No offers have been received to date. The remaining 20 acre parcel was not listed.

Status – No Change

COID and the Redmond School District filed and received approval of a partition plat to the City of Redmond. Traffic issues in Redmond are affecting the timing of the zoning change possibility and therefore any potential sale to an interested buyer.

Status – Paused. ODOT and the City of Bend have executed an agreement this past month that may facilitate movement of a similar agreement for Redmond.

Development

The COID Board along with the boards of Swalley and Tumalo have approved executing the Memorandum of Agreement for Coordination with the City of Bend. There were some non-substantive language changes made by the Arnold board after the COID Board approval. The COID Board will be asked to affirm those changes and execute the MOU.

Status – Ongoing.

ON THE RADAR SCREEN

The Oregon Legislature will begin its new session in January 2011
Federal legislation and regulation of renewable energy projects