# Amicus Curiae Brief — Orff v. United States > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0002%3A13 ## Record - **Collection:** Supreme Court brief - **Document type:** Amicus Curiae Brief - **Published:** January 1, 2005 - **Citation:** 545 U.S. 596 ## Text No. 03-1566 In The Supreme Court of the United States ° FRANCIS A. ORFF, et ai., Petitiorers, V. UNITED STATES OF AMERICA, et al., Respondents. e On Writ Of Certiorari To The United States Court Of Appeals For The Ninth Circuit e BRIEF OF CENTRAL ARIZONA WATER CONSERVATION DISTRICT, MARICOPA-STANFIELD IRRIGATION & DRAINAGE DISTRICT, CENTRAL ARIZONA IRRIGATION AND DRAINAGE DISTRICT AND ARIZONA DEPARTMENT OF WATER RESOURCES AS AMICI CURIAE IN SUPPORT OF RESPONDENTS + MARVIN S. COHEN* SACKS TIERNEY PA. 4250 North Drinkwater Blvd., 4th Floor Scottsdale, AZ 85251-3647 (480) 425-2600 *Counsel of Record for Amici Curiae {Additional Counsel On Inside Cover] COCKLE LAW BRIEF PRINTING CO (800) 225-6964 OR CALL COLLECT (402) 342-2831 DOUGLAS K. MILLER General Counsel CENTRAL ARIZONA WATER CONSERVATION DISTRICT 23636 North Seventh Street Phoenix, AZ 85080-3020 (623) 869-2333 PavtL R. ORME General Counsel MARICOPA-STANFIELD IRRIGATION & DRAINAGE DISTRICT AND CENTRAL ARIZONA IRRIGATION AND DRAINAGE DISTRICT 1000 Orme Rd., HC 63, Box 3042 Maver, AZ 86333-3042 (623) 465-0445 W. PATRICK SCHIFFER Chief Counsel ARIZONA DEPARTMENT OF WATER RESOURCES 500 North Third Street Phoenix, AZ 85004 602) 417-2420 MARK A. MCGINNIS SALMON, LEWIS & WELDON, P.L.C. 2850 East Camelback Road, Suite 200 Phoenix, AZ 85016 (602) 801-9060 Attorneys for Central Arizona Irrigation and Drainage District DONALD M. PETERS MILLER, LASoTA & PETERS, PLC 5225 North Central, Suite 235 Phoenix, AZ 85012 (602) 248-2900 Attorneys for Maricopa-Stanfield Irrigation & Drainage District TABLE OF CONTENTS Page TABLE OF CONTENTS o.oo... cccccccccccccescecceceeseceecseceees, i TABLE OF AUTHORITIES .00.00.....cccccceccececcecceceececeeeen. iii IDENTITY AND INTEREST OF AMICI CURIAE ...... 1 Central Arizona Water Conservation District .......... 2 Maricopa-Stanfield Irrigation & Drainage District and Central Arizona Irrigation and Drainage Dis- SnINIniAiindithssathdbebenieabscetbensensounisernccsceeesoseseucoseeseeess I. SECTION 8 OF THE 1902 RECLAMATION ACT DOES NOT APPLY TO COLORADO RIVER WATER DELIVERED THROUGH THE CENTRAL ARIZONA PROJECT............... A. The Law of the River .......0....ccccccccccccecceseess The Colorado River Compact................ The 1928 Boulder Canyon Project Act.... Arizona v. California ...........ccccccccceccesees The 1968 Colorado River Basin Project i deiiiibiniiiiasindesiecebesesenenteeneeesmsnsieecsone. nes II. THE FACTS AND LAW APPLICABLE TO FARMERS IN THE CENTRAL VALLEY PRO- JECT ARE DIFFERENT FROM THOSE AP- PLICABLE TO FARMERS IN THE CENTRAL ARIZONA PROJECT..............cccccccsesescscesessesecsees i cseeumsorenemeuees e SF NS co on Ww il TABLE OF CONTENTS -— Continued Page The Orff Petitioners ............::::::seeeeeeeeees 19 Smiths in ArizOna...........ccccrccocccsesccesssees 22 California v. United States, Nevada v. United States, Nebraska v. Wyoming, and Tches Vv. FO ..........ccccccccsssseseessereseees 22 B. The Allen Orchards Case.........::::::sccseeeeeeees 26 C. Contractual Provisions ..............:::cceeeseeeeeees 28 TET. CONCLUSION .......ccccccscccsscccscscccccscessesssessseseeees 29 ill TABLE OF AUTHORITIES Page CASES Arizona v. California, 373 U.S. 546 (1963).........0...... passim Bryant v. Yellen, 447 U.S. 352, reh’g denied, 448 eae ee CETTE iciestasesssciidaliciiadidnnbonteiitaieiatindsditasisdsbeiebese 24, 25 California v. United States, 438 U.S. 645 SEP UTIE ocnsicaniehdecdeaniiasianiernitincinaiiamadiniiilie oabiendiied 21, 22, 23, 24, 25 City of Fresno v. California, 372 U.S. 627 (1963)....... 23, 24 Fox v. Ickes, 137 F.2d 30 (D.C. Cir. 1943)....0.... eee eee 27 H.F. Allen Orchards v. United States, 749 F.2d 1571 es NE Ma ictendihecibctnietihiaisarthiaidesdccinhianiiristiiiicisdau 11, 21, 26, 27 Ickes v. Fox, 300 U.S. 82 (1937).............ccccceeeeeeeees 21, 22, 26 Ivanhoe Irr. Dist. v. McCracken, 357 U.S. 275 (1958) .. 23, 24 John E. Smith, et al. v. Central Arizona Water I 3 Long v. Salt River Valley Water Users’ Ass’n, 820 Se Ce I II ITT i inciceecsiccintiserrsnictiaiieesmnsniieinntnienndntaaidiliees 25 Nebraska v. Wyoming, 325 U.S. 589 (1945).......... 21, 22, 26 Nevada v. United States, 463 U.S. 110, reh’g denied, Re es ED siciitittriinitiiiitnittiiccidiidaisiaiiininntans 19, 21, 22, 26 Wyoming v. Colorado, 259 U.S. 419 (1922), decree paceted, SES U.S. GES (1GB7).......ccccccccocccccsccoccccccscescssess 13 FEDERAL STATUTES AND RULES Sy I i ON I I a icincsesciensinilieitcsenciteiteiinpiinabaniliiintsiaiala 1 ee St iicstdiniesincniiinarineniensisuniiisainidinbiaisimaiiaitiei 9,10 ii acenicaineiisiisaiintiiiintitniascniniatiaiieiieeiatats 9, 10, 20 iV TABLE OF AUTHORITIES — Continued Page BE, Be i vnctttctctescscestsensccinsssccacnvsnsenssnnsinns 14, 23 GT, Be cctccseitccetccccnsscccccesincsesnnseerenenaneinannnsictnaions 14 I , Bi ct ecsccsntctcscccscinsecncnsecesseneseceensnsnanionsnnessassin 15 GTI AE, Be FE cccciccccecscctescccecscnsssccsesnccsenessanscnssane 19 TE, © isd ssncciceccescncsccessnscccessccnsccssinisarsetnanciavese 19 1902 Reclamation Act, 32 Stat. 388, § 8 ...........0....... passim Colorado River Compact reprinted in. Ariz. Rev. RI, Fitts, © Ge cccescccicdsescscecsceustscnssscssosacasevasesesneneses 14 1928 Boulder Canyon Project Act, 45 Stat. 1057, I I ccccasimncsiednencmnnicanansdbonemianiesnndinniuabiatentidasainiddicisianien passim 1968 Colorado River Basin Project Act, 88 Stat. 885....... 19 Arizona Water Settlements Act, P.L. 108-451.......0............ 1 I TID cscscseichivstetiiaiindsicencbinhiaciesoieiieadanationsinaiaeaeabiiaetiteiads 5 III, cali ia leaeiieiligeidadanniinsnmieiniansenembedubuniines 8 I BNI... a available to the Secretary for reallocation M &I B h ; y Saaper under subparagraph 9.2, all remaining NIA WAGE USEES TES EROS SO ers a teria established by ADWR shall be Priority water available under paragraph 5 dligihle to ressive Trust water. 9.3.4.3. App. 78 ADWR shall retain a sufficient amount of Trust water through 2030 to satisfy the rights of first re- fusal described in paragaphs 9.3.4.3 through 9.3.4.6. Through 2020, M&I water provid- ers serving the area shown on Ex- hibit 9.3.4.3 (the “CAIDD Area”) that meet ADWR’s eligibility crite- ria shall have a right of first refusal to 7.8% of the Trust water offered at each interval, up to an aggregate maximum of 7,500 acre-feet. Ex- hibit 9.3.4.3 shall be amended to exclude any lands for which NIA Priority water is being retained by CAIDD or its assignee(s) under an amended subcontract as provided in paragraph 6. 9.3.4.3.1. If, at the time ADWR makes Trust water available to non- Indian M&I water users, NIA Priority water is being re- tained by CAIDD or its as- signee(s) under an amended subcontract as provided in paragraph 6, the retained water shall count against the aggregate maximum of 7,500 acre-feet for the CAIDD Area, but shall not count against the 7.8% right of first refusal unless the 7.8% plus the re- tained water would exceed 7,500 acre-feet. App. 79 9.3.4.3.2. If M&I water providers serv- ing the CAIDD Area do not exercise their full right of first refusal, then the unex- ercised portion of that right shall carry forward to the next offering of Trust water. 9.3.4.4. Through 2020, M&I water provid- ers serving the area shown on Ex- hibit 9.3.4.4 (the “MSIDD Area”) that meet ADWR’s eligibility crite- ria shall have a right of first refusal to 7.8% of the Trust water offered at each interval, up to an aggregate maximum of 7,500 acre-feet. Ex- hibit 9.3.4.4 shall be amended to exclude any lands for which NIA Priority water is being retained by MSIDD or its assignee(s) under an amended subcontract as provided in paragraph 6 9.3.4.4.1. If, at the time ADWR makes Trust water available to non- Indian M&I water users, NIA Priority water is being re- tained by MSIDD or its as- signee(s) under an amended subcontract as provided in paragraph 6, the retained water shall count against the -aggregate maximum of 7,500 acre-feet for the MSIDD Area, but shall not count against the 7.8% right of first refusal unless the 7.8% plus the retained water would ex- ceed 7,500 acre-feet. App. 80 9.3.4.4.2. If M&I water providers serv- 9.3.4.5. 9.3.4.6. 9.3.4.7. ing the MSIDD Area do not exercise their full right of first refusal, then the unex- ercised portion of that right will carry forward to the next offering of Trust water. From 2021 through 2030, the rights of first refusal described in para- graphs 9.3.4.3 and 9.3.4.4 shall be combined and shall be available to M&I water providers that are serv- ing either the CAIDD Area or the MSIDD Area and that meet ADWR’'s eligibility criteria. Beginning in 2030, if M&I water providers serving the CAIDD Area of MSIDD Area have not exercised their right of first refusal as to all of the Trust water available under paragraphs 9.3.4.3 through 9.3.4.5, then the Pinal County Water Aug- mentation Authority (PCWAA) shall have a right of second refusal as to the remainder of that water. PCWAAA must meet the criteria established by ADWR to be eligible to receive Trust water. The rights of refusal described in paragraphs 9.3.4.3 through 9.3.4.6 do not limit the amount of Trust water that may be reassigned to M&I water providers in Pinal County. If M&1 water providers in Pinal County request additional Trust water over and above the App. 81 amount available to them under their right of first or second refusal, ADWR shall consider their request for additional water on the same basis as requests for Trust water from M&I water providers serving other areas. 9.4. All NIA Priority water reallocated under this paragraph shall retain its NIA priority. 9.5. All reallocations made under subparagraphs 9.2 and 9.3 and all contracts for NIA Priority water reallocated under subparagraphs 9.2 and 9.3 shall be contingent on satisfaction of all condi- tions in subparagraph 13.3 and all conditions in the voluntary relinquishment agreements by the dates specified therein. 10. Reallocation of Currently Uncontracted M&I Priority Water. 10.1. The provisions of this paragraph 10 shall be- come effective upon enactment of the Act. 10.2. The Secretary shall allocate the Currently Un- contracted M&I Priority water as shown in Ta- ble 10.2. Table 10.2 Applicant Amount Applicant Amount (acre feet) (acre feet) Town of Superior 285 AVRA Cooperative 808 Cave Creek 806 (CityofChandler | 4,986 Water Company Chaparral Water} 1,931 el Lago (Vail) 1,071 Company ater Company App. 82 ‘own of 508 City of Glendale 3,053 El Mirage City of Goodyear} 7,211 (Community 1,521 Water Company of Green Valley H20 Water 147 Metropolitan 4,602 Company Domestic Water Improvement District City of Mesa 7,115 (Town of Oro 3,557 Valley City of Peoria 5,527 (City of Phoenix 8,206 City of 2,981 (City of Surprise 2,876 Scottsdale Tucson Water 8,206 Valley Utilities 250 Water Company TOTAL 65,647 10.3. The Secretary and CAWCD shall offer M&I subcontracts to the above listed providers re- flecting the amount of water in this reallocation in addition to any water already under contract to that provider. The new subcontract or amendment to existing subcontract shall con- form to the requirements of subsections 104(d)(1) and (2) of the Act. 10.4. All contracts for Currently Uncontracted M&I Priority water allocated under this paragraph 10 shall be contingent on satisfaction of all con- ditions in subparagraph 13.3 by the date speci- fied therein. App. 83 11. Allocation of Mainstream Colorado River Water 11.1. This paragraph 11 shall become effective upon execution of this agreement and shall survive termination of this agreement. 11.2. Upon execution of this agreement, the Secre- tary shall, in cooperation with the Mohave County Water Authority, amend Bureau of Rec- lamation Contract No. 5-07-30-W0320, dated December 12, 1995, to accomplish the following: (i) allocate and contract to Mohave County Wa- ter Authority 3,500 acre-feet of Arizona fourth priority mainstream Colorado River water; (ii) delete the allocation and contract of 3,500 acre- feet of Arizona fifth and sixth priority main- stream Colorado River water; and (iii) delete the reference to allocation of future NIA Prior- ity water to Mohave County Water Authority. 11.3. The Secretary shall reserve 3,500 acre-feet of currently uncontracted Arizona fourth priority mainstream Colorado River water for use in a future Navajo-Hopi Indian water rights settle- ment. The water reserved under this subpara- graph shall not be allocated, nor shall any contract be issued under the Boulder Canyon Project Act for the use of this water, until a fi- nal Indian water rights settlement for the Na- vajo Nation has been approved by Congress, finalizing Navajo claims to the mainstream of the Colorado River within Arizona. 12. Miscellaneous Provisions 12.1. MSIDD and CAIDD are express third party beneficiaries as to the rights of first refusal set forth in subparagraphs 9.3.4.3 through 9.3.4.6. 12.2. 12.3. 12.4. App. 84 Nothing in this agreement is intended to affect any party’s obligations under applicable law. No party shall take any action that is inconsis- tent with the party’s ability to perform its obli- gations under this agreement, including obligations that arise upon passage of the Act and fulfillment of the conditions of subpara- graph 13.3 and the voluntary relinquishment agreements. Nothing in this agreement may be used against either CAWCD or the United States in Central Arizona Water Conservation District v. United States, Nos. CIV 95-625-TUC-WDB (EHC) and CIV 95-1720-PHX-EHC (Consolidated Action). This subparagraph shall survive termination of this agreement. 13. Effectiveness and Termination 13.1. 13.2. 13.3. Except as expressly provided in paragraphs 5.2, 7, 9 and 10, this agreement is effective upon execution by the parties. The United States may terminate this agree- ment if the total amount of water available for reallocation under paragraph 9 upon enactment of the Act is less than 197,500 acre-feet. This agreement shall terminate if all of the fol- lowing conditions have not been satisfied by December 31, 2007: 13.3.1. The Gila River Indian Community water rights settlement agreement has been executed by the parties thereto and has been authorized, ratified and confirmed by Congress. 13.4. 13.5. App. 85 13.3.2. This agreement has been authorized, ratified and confirmed by Congress. 13.3.3. Congress has passed legislation declaring the $73,561,337 in 9(d) debt identified in subparagraph 7.5 to be non-reimbursable and non-returnable to the United States. 13.3.4. Congress has passed legislation declaring land within the exterior boundaries of CAWCD or served by CAP water to be exempt from the Reclamation Reform Act and any other acreage limitation or full cost pricing provision of federal law. 13.3.5. Final judgment has been entered by the United States District Court for the Dis- trict of Arizona in Central Arizona Water Conservation District v. United States, et al., No. CIV-95-625-TUC-WDB (EHC), No. CIV-95-1720-PHX-EHC (Consoli- dated Action), in accordance with the CAP Repayment Stipulation. 13.3.6. Any other action or event as to which the Secretary is to publish a statement of findings under section 207(d) of the Act has occurred. Except as expressly provided in paragraph 11 and subparagraphs 8.1 2 and 12.4, no provi- sion of this agreement shall survive termina- tion. If the date by which the Secretary is required to publisa a statement of findings under sec- tion 207(d) of the Act is amended by subse- quent act of Congress, then the deadline for App. 86 satisfying the conditions in paragraph 13.3 will automatically be amended to conform. UNITED STATES OF AMERICA By: Secretary of the Interior CENTRAL ARIZONA WATER CONSERVATION DISTRICT Attest: [Illegible] By: /s/ George Renner Secretary President ARIZONA DEPARTMENT OF WATER RESOURCES By: /s/ Joseph C. Smith Director App. 87 J. Gordon Cook, #000586 Ronald I. Rubin, #001607 Denise J. Henslee, #011526 RENAUD, COOK & DRURY, P.A. Two Renaissance Square 40 North Central, Suite 1600 Phoenix, Arizona 85004-4449 (602) 307-9900 Attorneys for Plaintiffs Richard N. Morrison, #005269 M. Byron Lewis, #002047 Mark A. McGinnis, #013958 SALMON, LEWIS & WELDON, P.L.C. 2850 East Camelback Road, Suite 200 Phoenix, Arizona 85016 (602) 801-9060 Attorneys for Defendants [RELEVANT EXCERPTS] IN THE SUPERIOR COURT OF THE STATE OF ARIZONA IN AND FOR THE COUNTY OF PINAL JOHN E. SMITH and MARY LOU SMITH, husband and wife; | No. CV 2001-00924 JOHN E. SMITH, as Trustee of | JOINT STATEMENT the SMITH FAMILY TRUST; OF FACTS and PRETZER LAND AND CATTLE COMPANY, an Arizona (Assigned to the corporation, Honorable Kelly Marie Robertson, Plaintiffs, Div. 5) App. 88 MARICOPA-STANFIELD IRRIGATION & DRAINAGE DISTRICT, an Arizona munici- pal corporation, and CENTRAL ARIZONA IRRIGATION AND DRAINAGE DISTRICT, and Arizona municipal corporation, political subdivisions of the State of Arizona, Defendants. The parties submit this agreed-to JOINT STATEMENT OF FACTs in an effort to clarify and limit factual and legal issues before the Court. This Statement of Facts is not intended to be comprehensive, and the parties do not waive their right to allege and prove additional facts or argue additional law not contained herein. 1. Plaintiffs are farmers who own land in Pinal County, Arizona. Plaintiffs John and Mary Lou Smith and the Smith Family Trust own land within the boundaries of Defendant Maricopa-Stanfield Irrigation & Drainage District (“MSIDD”), and Plaintiff Pretzer Land and Cattle Company owns land within the boundaries of Defendant Central Arizona Irrigation and Drainage District (“CAIDD”). MSIDD and CAIDD are also referred to herein collectively as “the Districts.” * * * 9. On December 5, 1972, Contract No. 14-06-W-245 was entered into between the United States and CAWCD for delivery of water and repayment of costs of the CAP (hereafter “1972 Master Contract”). On December 1, 1988, the Master Contract was amended (hereinafter “1988 Master Contract”). Upon judicial confirmation of the App. 89 December 1, 1988 Amendment, the 1972 Master Con- tract was to be superseded and replaced by the 1988 Master Contract. A true and correct copy of the 1972 Master Contract is attached hereto as Exhibit 1, and a true and correct copy of the 1988 Master Contract is attached as Exhibit 2. * * * 17. Paragraph 8.8(b)(vi) of the 1972 Master Con- tract and of the 1988 Master Contract, further provided, in part, that the Secretary and the Contractor shall require in each subcontract that “ ... irrigation water made available thereunder may be made available by the Secretary for M&I purposes if and to the extent that such water is no longer required by the Subcontractor for irrigation purposes and shall be made available in all cases where lands receiving project water have been converted to municipal or industrial use; Provided however, That Subcontracts effectuating such transfers are subject to the approval of the Secretary and the Contractor, which approval shall not be withheld “un- reasonably.” 18. On November 21, 1983, each defendant irriga- tion district, as contemplated by the 1972 Master Con- tract, entered into a subcontract with the United States and the CAWCD. The terms of the District’s Subcon- tracts are identical, except for the Districts’ names and addresses, and amounts of water to be provided. A true and correct copy of CAIDD’s Subcontract is attached hereto at Exhibit 3, and a true and correct copy of MSIDD’s Subcontract is attached as Exhibit 4. * * * —_ - App. 90 20. Each Subcontract provides in Article 4.1 in part, that the United States, subject to the Repayment Contract (the 1972 Master Contract), “shall deliver Project Water for Agricultural Use by the Subcontrac- tor.” “Project Water” as used in the Subcontracts, refers to Central Arizona Project water. 21. Each Subcontract provides in Article 4.2, in part, that its term is “for a period of 50 years beginning with the January 1 of the Year following that in which the Secretary issues the Notice of Contemplation of the Water Supply System.” The Secretary issued the Notice of Completion of the Water Supply System during October of 1993. * * * 25. Articles 5.1 and 5.2 of the Subcontracts require the Districts to pay a 2.00 per acre-foot capital charge (subject to modification), as well as an Agricultural Water Service Charge to cover a portion of the costs of operating, maintaining, and replacing the CAP facilities. 26. Article 5.2(e) of the Subcontracts further pro- vides that the Districts’ obligation to pay the charges specified in Articles 5.1 and 5.2 “is a general obligation of the [district] notwithstanding the manner in which the obligation may be distributed among the [district’s] water users and notwithstanding the default of individual water users in their obligations to the [district].” App. 91 27. Article 5.2(f) of the Subcontracts further provides that payment of said charges is a condition precedent to delivery of water under the Subcontracts. * * * 31. In 1962, MSIDD was organized as an irrigation and drainage district which operates and has authority pursuant to A.R.S. § 48-2901 et seq. 32. In 1964, CAIDD was organized as an irrigation and drainage district which operates and has authority pursuant to A.R.S. § 48-2901 et seq. 33. Defendants MSIDD and CAIDD are political subdivisions of the State of Arizona which were organized in part to provide CAP water to their user landowners pursuant to contracts. Defendant Districts deliver water to hundreds of Pinal County farmers. CAIDD covers 87,349.25 acres and includes approximately 214 individual landowners. MSIDD covers 87,142.6 acres and includes approximately 263 individual landowners. 34. The MSIDD and CAIDD Subcontracts “... give MSIDD and CAIDD the contractual right to receive Colorado River water through the CAP” to be distrib- uted on behalf of the landowners pursuant to the terms of said Subcontracts, including payment of all costs set forth in Article 5 thereof. See Paragraph 25, supra. * * * 41. MSIDD constructed an irrigation system to dis- tribute within the district water from the CAP and ground- water from irrigation wells to be acquired from landowners in the district pursuant to water service contracts. . . . * * * App. 92 43. In April 1989, Plaintiffs John E. and Mary Lou Smith entered into one or more identical water service contracts with MSIDD (entitled “Agreement”), which generally allowed the District during the term of such agreement to use the Smith’s irrigation wells and irrigation grandfathered groundwater rights. Such water was to be used in conjunction with CAP water for irrigation as determined by the district. * * * 46. When used in the MOUs and _ individual agreements for project water service, the “Project” water referred to means any water delivered through the Districts’ entire water distribution systems but does not refer to any particular type of water. 47. MSIDD and CAIDD were organized for the benefit of their landowners. RESPECTFULLY SUBMITTED this 2nd day of January, 2002. RENAUD, COOK & DRURY, P.A. By: /s/ [Illegible] J. Gordon Cook Ronald I. Rubin Denise J. Henslee Two Renaissance Square 40 North Central, Suite 1600 Phoenix, AZ 85004-4449 Attorneys for Plaintiffs App. 93 SALMON, LEWIS & WELDON, P.L.C. By: /s/ Richard N. Morrison Richard N. Morrison M. Byron Lewis Mark A. McGinnis 2850 E. Camelback Road, Suite 200 Phoenix, AZ 85016 Attorneys for Defendants App. 94 DUPLICATE — ORIGINAL Contract No. 14-06-W-245 Amendment No. 1 B.C. Draft 11/28/88 UNITED STATES 7 DEPARTMENT OF THE INTERIOR BUREAU OF RECLAMATION CONTRACT BETWEEN THE UNITED STATES AND THE CENTRAL ARIZONA WATER CONSERVATION DISTRICT FOR DELIVERY OF WATER AND REPAYMENT OF COSTS OF THE CENTRAL ARIZONA PROJECT INDEX Article No. Title Page No. i RR nccinthnteesisicnicisetnrsinnsnieticntnnnisenisomitidielbnaniieliuniieimieinds 1 i iniiltstrnnhiesisinstteipninsinnninieiantenaiiniaboniiaiens 1 Be iacticcettesbincdnsatetinnsiciatampsnnniemeinttiiies 2 4. ARTICLES OF AGREEMENT .......................... 3 EEE ea Ee EEO 3 6. PROJECT CONSTRUCTION ............................ 10 .1 Agreement of the United States................. 10 Be re sititnctinteiintetaiiiiitininnnieisien 11 .3 Principal Works of the Project.................... 12 .4 Changes in Project Works........................0:. 13 .5 Construction Gonditions...................:.::cee 14 A TTD 14 .7 Inability of the United States to Complete Project on Basis of Cost Estimates............. 15 App. 95 7. PROJECT OPERATION, MAINTENANCE, TT 15 .1 Operation and Maintenance and Water Deliveries by the United States Prior to Completion of Construction.............0000...06. 15 .2 Operation and Maintenance and Water Deliveries after Completion of Construc- GUID citiiessntecnsutitehnnnsitsienisitnasibdcnninhinhieininasipinescedinndn 18 DUNES COU CO cciccccccnssccnccssesieccsecsccsons 16 .1 Obligation of United States.........000000000.... - /16 eT i tiistetercccstendceciiaciniidatibediaiiels, 17 .3 Conditions Relating to Delivery ................. 17 F _,_ EEE EU Oa ee ROMER 19 Be i iciictnciitniditetiptedintclindtconiiémanices 20 ‘6 Responsibility for Distribution of Water after Leaving Water Supply System .......... 21 .7 Quantity of Water to be Delivered.............. 21 5 SII siscestitichinpsediliiciadticersandiasicelpsiipdtidla ace 24 o> Sanne UTIIEIII dais deselcchestenceliciinpeieeeeippetecnenidsieinaehacictetietet 27 .10 Rate of Diversions of Colorado River Water... 28 .11 Priority in Case of Shortage ....................... 29 .12 No Guarantee of Availability of Water ....... 29 .13 Secretarial Control of Return Flow............ 30 .14 Water and Air Pollution Control................. 31 I ia iacciadaiiisnicticeiteieriataidatetemaaaianies 31 BN ae ee Te I 31 .17 Rights Reserved to the United States to Have Water Carried by Project Facilities... 32 App. 96 App. 97 .18 Wheeling Non-Project Water...................... 32 Sy SIENNA cechscsidenadeendtinatigdiahieiadnededoidinaideitibasdinatiecen 53 .19 Use of Project Power to Wheel Non-Project -9 Contingent on Appropriation or Allotment BRNO snesesasnsesesmieneneneniccorammnninnanemneiemapesens . 33 Ec et OT 54 9. PAYMENT OF PROJECT COSTS ALLOCATED .10 Changes in Contractor’s Organization....... 54 ee iiiinnnsiniitentinevecvenintesinicuniiabeuns 33 11 Assignment Limited ~ Successors and As- Allocation of Construction Costs ................ 33 gS A er ON 54 Repayment Concepts ................sscssssssesessees 34 .12 Judicial Remedies Not Foreclosed.............. 55 Contractor’s Construction Cost A I Cin oiciesnctcciidiciccinicaccscscuinns 55 Repayment Obligation... 36 14 Compliance with Civil Rights Laws and .4 Payment of Contractor’s Construction ( Cost SSRN aN ee 57 Pea yaRee CNN GIAIOR ---seeeeneeeeverrnrneoreren = 15 Officials Not to Benefit .......cccccscssssssssseee 58 .5 Commercial Power Rates........................005 44 11. STATUS OF DECEMBER 15, 1972 CON- 6 Other Costs Borne by the Contractor......... 44 ITT idlsidiinietiniciinianimaitenanie ei Ett al 58 .7 Repayment of Costs of Excess Capacity in rs Granite Reef Aqueduct ......................c.eeee0ee 47 UNITED STATES 8 Ad Valorem-Taxes, As ts, Tolls, and DEPARTMENT OF THE INTERIOR ——.. 47 BUREAU OF RECLAMATION © Continuati f P ts after Project CONTRACT BETWEEN THE UNITED STATES RI lial acacsarcricces see 47 AND THE CENTRAL ARIZONA WATER CONSERVATION DISTRICT FOR DELIVERY RIBERA Rn ce oer o~ ek ON 48 OF WATER AND REPAYMENT OF COSTS 10. GENERAL PROVISIONS .............. Siinidinndnestiee 48 OF THE CENTRAL ARIZONA PROJECT a 48 1. PARTIES BD FUER 00 FEOEE WECM oc cccccesevvccscescesessccssovess 48 The parties to this contract, executed as of this first S Sees Seeks 48 day of December, 1988, are the United States of America, haem ek REG aE ai: acting through the Department of the Interior, and the 4 Recreational Use of Water Facilities.......... 51 Central Arizona Water Conservation District, a multi- 5 Confirmation of Contract.......................0008 51 county water conservation district organized under the 6 Rules, Regulations, and Determinations... 52 laws of Arizona, with its principal place of business in ; Phoenix, Arizona. 7 Books, Records, and Reports........................ 53 App. 98 2. AUTHORITIES This contract is made pursuant to the: 2.1 Act of June 17, 1902, 32 Stat. 388, and acts amendatory thereof and supplementary thereto. 2.2 Boulder Canyon Project Act, approved December 21, 1928, 45 Stat. 1057, a supplement to the Federal Reclamation Laws. 2.3 Reclamation Project Act of 1939, approved August 4, 1939, 53 Stat. 1187, as amended. 2.4 Colorado River Basin Project Act, approved September 30, 1968, 82 Stat. 885, as amended, a supple- ment to the Federal Reclamation Laws. 2.5 Arizona Revised Statutes, Section 48-3701 et seq. 3. RECITALS 3.1 The Colorado River Basin Project Act pro- vides, among other things, that for the purposes of fur- nishing irrigation water and municipal and industrial water supplies to water-deficient areas in Arizona and western New Mexico through direct diversion or exchange of water, control of floods, conservation and development of fish and wildlife resources, enhancement of recreation opportunities, and for other purposes, the Secretary of the Interior shall construct, operate, and maintain the Central Arizona Project, consisting of the principal works hereinaf- ter described in Article 6.3. 3.2 Pursuant to the provisions of Arizona Revised Statutes, Section 48-3701 et seq., the Central Arizona Water App. 99 Conservation District has been organized with the power to enter into a contract or contracts with the Secretary of the Interior to accomplish the purposes of Arizona Revised Statutes, Section 48-3701 et seq. 3.3 On December 15, 1972, the United States and the Contractor entered into a contract entitled “Con- tract Between the United States and the Central Arizona Water Conservation District for Delivery of Water and Repayment of Costs of the Central Arizona “roject” (Con- tract No. 14-06-W-245), whereby, among other things, the United States agreed to construct the Central Arizona Project and the Contractor agreed to repay the costs of the project properly allocable to the Contractor. 3.4 Subarticle 9.3(b) of said contract provides that the Contractor’s repayment obligation shall not exceed $1.2 billion. 3.5 Subarticle 9.3(b) of said contract also pro- vides that if the Contractor’s repayment obligation will exceed $1.2 billion, the Contracting Officer shall consult with the Contractor and continuation of construction will be contingent upon the execution of an amendatory con- tract to cover the increased repayment obligation. 3.6 Both parties acknowledge that the Contrac- tor’s repayment obligation will exceed $1.2 billion, and have agreed to increase the Contractor’s repayment ceiling to a level sufficient to facilitate completion of the project. 4. ARTICLES OF AGREEMENT NOW, THEREFORE, in consideration of the mutual and dependent stipulations and covenants herein contained, it is agreed by and between the parties hereto as follows: App. 100 5. DEFINITIONS When used herein, unless otherwise distinctly ex- pressed, or manifestly incompatible with the intent hereof, the terms: 5.1 “Federal Reclamation Laws” or “Reclamation Laws” shall mean the Act of June 17, 1902, 32 Stat. 388, and all acts amendatory thereof or supplementary thereto. 5.2 “Basin Project Act” shall mean the Colorado River Basin Project Act, 82 Stat. 885, dated September 30, 1968, as amended, which is a supplement to the Federal Reclamation Laws. 5.3 “Secretary” shall mean the Secretary of the Interior of the United States or his duly authorized repre- sentative. 5.4 “Contracting Officer” shall mean the Secre- tary or his authorized designee acting in his behalf. 5.5 “Contractor” shall mean the Central Arizona Water Conservation District, organized pursuant to Arizona Revised Statutes, Section 48-3701 et seq. 5.6 “Service area” shall mean the area now included within the Central Arizona Water Conservation District, consisting of Maricopa, Pinal, and Pima Counties of Arizona and such other counties as may hereafter become part of the District, exclusive of any Indian reser- vation land lying wholly or partly within said Counties. 5.7 “Subcontractor” shall mean any irrigation district, municipality, individual, or any entity which enters into a water service subcontract with the United States and the Contractor in furtherance of the provisions of the Basin Project Act. App. 101 5.8 “Central Arizona Project” or “project” shall mean the project and works authorized by Section 301(a) of the Basin Project Act and constructed by the United States pursuant to the provisions of said Act and this contract. 5.9 “Project works” shall mean the principal works described in Section 301(a) of the Basin Project Act, and appurtenances thereto, or as modified pursuant to Article 6.4 hereof, together with lands, interests in lands, and rights-of-way for such works and appurtenances. 5.10 “Water supply system” shall mean the Navajo Project, Havasu Pumping Plant, the Granite Reef, Salt Gila and Tucson aqueducts and associated pumping plants and appurtenant works, but not including Tucson Terminal Storage or any distribution works. 5.11 “Distribution works” shall mean those facilities constructed or financed by the United States under the authorization in Section 309(b) of the Basin Project Act for the primary purpose of distributing the project water supply within the service area after said project water supply has been transported or delivered through the water supply system. 5.12 “Agricultural water” or “irrigation water” shall mean project water used primarily in the commercial production of agricultural crops or livestock, including domestic use incidental thereto, on tracts of land operated in units of more than 5 acres. 5.13 “Miscellaneous water” shall mean water delivered from the project, or by exchange for project water, for recreational and fish and wildlife purposes at App. 102 other than project facilities and shall have a lesser priority of use than agricultural water. 5.14 “Municipal and industrial water,” herein referred to as “M&I water,” shall mean project water other than agricultural or miscellaneous water delivered by means of the project works. 5.15 “Lands not having a recent irrigation history” shall mean, except where otherwise determined by the Secretary for efficiency of subcontractor’s operation, lands which the Secretary determines were not irrigated during the period September 30, 1958, to September 30, 1968. 5.16 “OM&R” shall mean the care, operation, maintenance, and replacement of project works. 5.17 “Exchange water” shall mean Colorado River water made available in exchange for or in replace- ment of existing supplies from surface sources other than the mainstream of the Colorado River. 5.18 “Transferred works” shall mean_ such facilities of the water supply system or of other construc- tion stages as to which OM&R responsibility is transferred from the United States to the Operating Agency. 5.19 “Operating Agency” shall mean the entity or entities authorized to assume OM&R responsibility of transferred works and approved for that purpose by the Contracting Officer. 5.20 “Transfer notice” shall mean a written notice or notices, numbered consecutively, which the Contracting Officer transmits to the Operating Agency and which shall designate: App. 103 (a) the transferred works; (b) items of equipment and supplies trans- ferred to the Operating Agency; and (c) the date upon which such transfer will be effected. 5.21 “Gila River system waters” shall mean waters of the Gila River and tributaries thereof east of the Yuma-Maricopa County line. 5.22 “Notice of completion” shall mean the notice which the Contracting Officer issues to Contractor to announce the substantial completion of a construction stage. Each such notice of completion shall include the estimated amount of the repayment obligation for the construction stage to which the notice pertains, the date of initiation of repayment for the construction stage and indicate the amount and due date for the first pavment for the construction stage. 5.23 “Development Fund” shall mean the sepa- rate fund, known as the Lower Colorado River Basin Development Fund, established in the Treasury of the United States pursuant to Section 403(a) of the Basin Project Act. 5.24 “Year” -shall mean the period January 1 through the next succeeding December 31. 5.25 “Contractor’s Construction Cost Repayment Obligation,” hereinafter referred to as “repayment obliga- tion,” shall mean the total amount of all construction costs including related construction claims and interest thereon, OM&R costs during construction, and interest on costs allocated to the M&I water and power functions during App. 104 construction, of the Central Arizona Project, incurred therefor and as determined by the United States and further described in Article 6.2 hereof, excluding reim- bursable costs allocated to fish and wildlife and recreation, and costs associated with the delivery of water to entities other than the Contractor or subcontractors, and which is determined by the Secretary, after consultation with the Contractor, to be allocable to and repayable by the Con- tractor in accordance with the provisions of the Basin Project Act and this contract. 5.26 “Return flow” shall mean all agricultural, M&I, and miscellaneous waste water, seepage, and ground water which originates or results from water contracted for from the Central Arizona Project, but shall not include any water delivered through the project works for ground water recharge purposes. 5.27 “Project water” shall mean (a) all water allocated by the Secretary for project purposes by Federal Register notice dated March 24, 1983, and any subsequent reallocation by the Secretary as contemplated in para- graph 6 of said Federal Register notice, which water is available pursuant to contracts with the Secretary from: (1) the Colorado River; (2) Central Arizona Project dams and reservoirs; and (3) return flows captured by the Secretary for project use; (b) any water delivered to enti- ties in Arizona, through the project works, as a replace- ment supply for Cliff Dam; (c) water delivered to water users in Arizona, through the project works, in exchange for water delivered to users in New Mexico from or by means of the project works; and (d) any additional water not included in (a) above, that is required to be delivered by the Secretary through the project, pursuant to the Ak- Chin Water Rights Settlement Act of 1978 (Public Law App. 105 95-328), as amended on October 19, 1984 (Public Law 98- 530); the Southern Arizona Water Rights Settlement Act of October 12, 1982 (Title III of Public Law 97-293); and, subject to the execution of a settlement agreement by the Contractor providing for the settlement of the water rights claims of the Salt River Pima-Maricopa Indian Commu- nity and to the Salt River Pima-Maricopa Indian Commu- nity Water Rights Settlement Act of 1988 (Public Law 100- 512), up to 22,000 acre-feet annually of Colorado River water to be delivered through the project works in accor- dance with said settlement agreement and legislation. 5.28 “Indian lands” shall mean the lands within any Indian reservation for which an allocation of project water has or will be made by the Secretary for delivery through project works. 5.29 “Navajo Project” shall mean the interests of the United States in the Navajo Generating Station and the Transmission System, or any replacement thereof, as authorized by Section 303 of the Basin Project Act and as described in contracts entered into pursuant to that Act. 5.30 “Construction stage” shall mean any one of the following: (1) the water supply system; (2) New Waddell and Modified Roosevelt Dams; (3) replacement features or programs for Cliff Dam; (4) Tucson terminal storage; (5) Hooker Dam or suitable alternative; and (6) Buttes Dam. 5.31 “Plan 6” shall mean Plan 6 for the Regula- tory Storage Division of the Central Arizona Project as approved by Record of Decision of the Secretary dated April 3, 1984 as amended and supplemented by Records of Decision of the Secretary dated May 20, 1986 (Supplement One) and June 17, 1988 (Supplement Two). App. 106 5.32 “Allocable cost” shall mean (a) with respect to the project, the total project cost less (1) the cost of non- Indian distribution works, (2) the cost of the safety of dams component of Plan 6, (3) the cost of Indian distribu- tion systems, (4) the cost of the Colorado River Division and the New Mexico fish hatchery, (5) the cost of cultural resources studies, (6) the contributions provided by the States of Arizona and New Mexico prior to execution of the Plan 6 Funding Agreement, (7) the costs of Charleston Dam and San Pedro Aqueduct, (8) the cost of 500 cubic feet per second of incremental capacity in the Granite Reef Aqueduct and related costs in the Navajo Project, and (9) such other costs as determined appropriate by the Con- tracting Officer; and (b) with respect to each construction stage, the total cost of such stage less that portion of the following costs associated with such stage: (1) the cost of the safety of dams component of Plan 6, (2) the cost of cultural resources studies, (3) the contributions provided by the States of Arizona and New Mexico prior to execu- tion of the Plan 6 Funding Agreement, (4) the cost of 500 cubic feet per second of incremental capacity in the Gran- ite Reef Aqueduct and related costs in the Navajo Project, and (5) such other costs as determined appropriate by the Contracting Officer. 5.33 “OM&R Transfer Contract” shall mean the August 5, 1987, contract entitled “Contract Between the United States of America and the Central Arizona Water Conservation District for the Transfer of Operation and Maintenance of Facilities” (Contract No. 7-07-30-W0167), and any amendment or revision thereof. 5.34 “Overall repayment period” shall mean the period of time beginning with initiation of repayment of f _— App. 107 the first construction stage and ending with final payment of the last construction stage. 5.35 “Plan 6 Funding Agreement” shall mean the April 15, 1986, agreement entitled “Agreement Among the United States, the Central Arizona Water Conserva- tion District, the Flood Control District of Maricopa County, the Salt River Agricultural Improvement and Power District and Salt River Valley Water Users’ Associa- tion, the Arizona Cities of Chandler, Glendale, Mesa, Phoenix, Scottsdale, and Tempe, the State of Arizona, and the City of Tucson for Funding of Plan Six Facilities of the Central Arizona Project, Arizona, and for other Purposes,” as it may be supplemented or amended. 5.36 “Permanent service” shall mean that water supply service commencing in the year following substan- tial completion of the water supply system and continuing in perpetuity. ae 5.37 “Ground water recharge” shall mean the recharge of water pursuant to title 45, chapter 2, article 13, Arizona Revised Statutes, or the underground storage and recovery of water pursuant to title 45, chapter 3, Arizona Revised Statutes, or as said statutes may hereaf- ter be amended or revised. 5.38 “Project power” shall mean the United States’ entitlement to capacity and energy from the Navajo Project. 6. PROJECT CONSTRUCTION " 6.1 Agreement of the United States. Subject to the terms-and-conditions of this contract and within the limits of the funds made available therefor by Congress, the United States will expend toward the construction of the project, exclusive of interest costs during construction, $832,180,000 based on 1967 cost estimates, plus or minus App. 108 such amounts, if any, as may be justified by reason of ordinary fluctuations in construction costs as indicated by engineering cost indices applicable to the types of con- struction involved therein, or so much of such amount, as in the opinion of the Secretary, is necessary to construct said project, whichever amount is the lesser. The afore- mentioned amount includes the United States’ costs of participation in the Navajo Project. 6.2 Costs of Protect. (a) The estimated construction cost of $832,180,000 for the project, based upon 1967 prices, has been determined as follows: Main System $ 1,000’s Granite Reef Division 407,740 Orme Division 42,340 Salt-Gila Division 47,170 Tucson Aqueduct (Colorado River source) 46,300 Buttes Dam 35,240 Navajo Project 106,000 Subtotal 684,790 Other Separate Features Hooker Dam or suitable alternative 31,730 Charlesten Dam and San Pedro Aqueduct (San Pedro River source) 36,420 Subtotal 68,150 Miscellaneous Features *Gila River Division 5,250 Indian Distribution System 19,970 Colorado River Division 42,450 Drainage System 11,570 Subtotal 79,240 Total Project $832,180 *Note: Fish hatchery costs, some of which may be located on the Colorado River. App. 109 Provided, however, That (i) the adjustment provisions of Article 6.1 apply to the total construction costs of the project and not to the costs of the individual line items set out in this Subarticle 6.2(a), and (ii) in accordance with provisions of Article 6.4 herein, the references to the individual line items set out in this Subarticle 6.2(a) are not to be deemed a determination that each of the features referred to in the individual line items will be constructed or that costs will be incurred for each of said individual line items based upon a percentage which the estimated costs for each individual line item bears to the project’s total estimated construction costs. (b) The Central Arizona Project costs in- curred by the United States which are to be repaid by Contractor shall include the share allocated to the Con- tractor of (i) construction costs of the project, (ii) all ex- penses of whatsoever kind or naiure heretofore or hereafter incurred by the United States in connection with, growing out of, or resulting from the construction, and (iii) the OM&R during construction of project works. The aforementioned share of allocated costs shall also include, but shall not be limited to, interest during con- struction on costs allocated to the M&I water and power functions, the cost of labor, materials, equipment, engi- neering, legal services, surveys, investigations, property, superintendence, administration, overhead, general expenses, special services, damages of all kinds and character, inspection, repair, and protection of project works and water supply, and the costs of all lands, inter- ests in lands, and rights-of-way acquired by the United States for the project, all as determined by the Secretary. App. 110 6.3 Principal Works of the Project. The works and facilities to be constructed under this contract shall consist of the following principal works: (a) A system of main conduits and canals, including the Havasu Pumping Plant and a main canal and pumping plants (Granite Reef Aqueduct and pumping plants), for diverting and carrying water from Lake Havasu to the confluence of the Salt and Verde Rivers, which system will have a capacity of 3,000 cubic feet per second; (b) Salt-Gila Aqueduct and pumping plant; (c) Tucson Aqueduct and pumping plants; (d) New Waddell and Modified Roosevelt Dams; (e) replacement features or programs for Cliff Dam; (f) Tucson Terminal Storage (if approved by the Secretary); (g) Buttes Dam and Reservoir; (h) Hooker Dam and Reservoir or suitable alternative which shall be constructed in such manner as to give effect to the provisions of Section 304(f) of the Basin Project Act; (i) Charleston Dam and Reservoir and the San Pedro Aqueduct; (j) related canals, regulating facilities, and electric transmission facilities required for the operation of said principal works; App. 111 (k) related water distribution and drainage works; and (1) appurtenant works. No works or facilities for the treatment of water are included in the project works to be constructed by the United States. Nothing contained herein shall be con- strued to indicate the order in which the aforedescribed works will be constructed. 6.4 Changes in Project Works. Should the Secretary, either before or during construction, determine it to be in the best interests of the project, he may, upon the completion of the studies currently being made or to be made, including land classifications, hydrological, engi- neering, geological, sedimentation, water supply, and repayment ability, and after consultation with the Con- tractor, change the location, size, or capacity of any of the project works, or may eliminate works, or add works to those described above, and the Secretary’s decision on such changes, eliminations, and additions shall be conclusive. 6.5 Construction Conditions. The United States shall be under no obligation to commence or, having commenced, to continue construction of project works until transfer from the State of Arizona of such State-owned lands or interests therein, in a form acceptable to the Attorney General of the United States, as the Secretary determines is necessary in the construction, operation, or maintenance of the project. 6.6 Annual Work Program. During construction of the project works the Contracting Officer will consult with the Contractor and/or with any subcontractor through or within whose service area project works are to App. 112 be constructed to achieve maximum coordination between such construction program and the annual programs of any affected subcontractor. Within 30 days following the enactment by Congress and Presidential approval of annual or supplementary appropriation acts and the allotment of funds thereunder for continued construction of the project, the United States will furnish the Contrac- tor with a notice and statement showing the proposed construction program for the balance of the current fiscal year and for the following fiscal year or years. If so re- quested in writing by the Contractor within 30 days of its receipt of such notice, the Secretary will consult with the Contractor and/or the affected subcontractor with respect to the proposed program. The action of the Contracting Officer concerning the program after such consultation shall be final. 6.7 Inability of the United States to Complete Project on Basis of Cost Estimates. If construction of the project works shall have been commenced but, prior to completion, the Secretary determines that the cost of constructing the project will exceed the maximum amount to be expended therefor by the United States as provided for in Article 6.1 hereof, the Secretary may after consulta- tion with the Contractor terminate construction and declare the obligations of the United States hereunder with regard to completion of construction of the project to have been fulfilled. If appropriations for the continuance and/or completion of construction in amounts sufficient in the opinion of the Secretary to complete said construction are authorized by Congress and are available, the Secre- tary shall consult with the Contractor and shall make continuation of construction contingent upon the execution of an amendatory contract with the Contractor wherein App. 113 the Contractor’s maximum repayment obligation is in- creased so as to cover the increased reimbursable costs as determined by the Secretary; Provided, however, That the Contractor shall not utilize any part of the completed or unfinished project facilities in the absence of written agreement with the Secretary for reimbursement therefor. 7. PROJECT OPERATION, MAINTENANCE, AND REPLACEMENT — 7.1 Operation and Maintenance and Water Deliveries by the United States Prior to Completion of Construction. Except as provided in the OM&R Transfer Contract, prior to completion of project works by the United States, as determined and announced to the Contractor in writing by the Secretary, the United States will operate and maintain said project facilities. The cost of said OM&R allocated to the Contractor shall be in- cluded in the Contractor’s repayment obligation; Provided, however, That said OM&R cost shall not be included with the project cost ceiling set out in Article 6.1 hereof. During the aforesaid period, project water, if available, may be disposed of by the Secretary at charges which the Secre- tary determines to be appropriate; Provided, however, That to the extent deemed feasible by the Secretary, preference will be given to subcontractors and Indian lands. Payment for water shall be made in advance by the water user. The places of measurement and delivery of said water shall be established by the Secretary after consultation with the Contractor. Except as provided in the OM&R Transfer Contract, the proceeds accruing from the disposal of such water shall be credited to the Development Fund and applied toward the costs of the project as determined by the Secretary. App. 114 7.2 Operation and Maintenance and Water Deliv- eries after Completion of Construction. Except as provided in the OM&R Transfer Contract and any future agreements for the transfer of OM&R of the project works or portions thereof, upon completion of construction of a construction stage or upon completion of construction of the project, the United States shall operate and maintain such construc- tion stage or the project and shall make project water available to project water users. 8. DELIVERY OF WATER 8.1 Obligation of United States. Subject to the terms, conditions, and provisions set forth herein, the United States will deliver project water to Contractor and, during such periods as it operates and maintains the water supply system, the United States will also transport and deliver said water to the subcontractors. After trans- fer of OM&R the United States will awake deliveries of Colorado River water to the Operating Agency; deliveries of other project waters will be made pursuant to determi- nations made by the Secretary. 82 Term of Contract. Subject to the terms, conditions, and provisions set forth herein, this contract is for permanent service. 8.3 Conditions Relating to Delivery. (a) The obligation of the United States to deliver water under this contract is subject to: (i) The availability of such water for use in Arizona under the provi- sions of the Colorado River Com- pact, executed November 24, 1922; (ii) (iii) App. 115 the Boulder Canyon Project Act, 45 Stat. 1057, dated December 21, 1928; the Colorado River Basin Project Act, dated September 30, 1968, 82 Stat. 885; the contract be- tween the United States and the State of Arizona, dated February 9, 1944; the Opinion of the Su- preme Court of the United States in the case of Arizona v. California et el., 373 U.S. 546, rendered June 3, 1963; and the March 9, 1964, Decree of that Court in said case, 376 U.S. 340, as amended on Feb- ruary 28, 1966, at 383 U.S. 268, and supplemented on January 9, 1979, at 439 U.S. 419, as now is- sued or hereafter modified. Executive A, Seventy-eighth Con- gress, Second Session, a treaty be- tween the United States of America and the United Mexican States, signed at Washington on February 3, 1944, relating to the utilization of the water of the Colorado River and Tijuana River and of the Rio Grande from Fort Quitman, Texas, to the Gulf of Mexico, and Executive H, Seventy- eighth Congress, Second Session, a protocol signed at Washington on November 14, 1944, supplemen- tary to the Treaty. The express understanding and agreement by the Contractor that this contract is subject to the con- dition that Hoover Dam and Lake Nee ELK (iv) App. 116 Mead shall be used: first, for river regulation, improvement of navi- gation, and flood control; second, for irrigation and domestic uses and satisfaction of present per- fected rights in pursuance of Arti- cle VIII of the Colorado River Compact approved by Section 13(a) of the Boulder Canyon Project Act; and third, for power; and further- more, that this contract is made upon the express condition and with the express covenant that all rights hereunder shall be subject to and controlled by the Colorado River Compact and that the United States and the Contractor shall observe and be subject to and controlled by said Colorado River Compact and Boulder Canyon Pro- ject Act in the construction, man- agement, and operation of Hoover Dam, Lake Mead, canals and other works, and the storage, diversion, delivery, and use of water to be de- livered to Contractor hereunder. The right of the United States temporarily to discontinue or re- duce the amount of water to be de- livered hereunder whenever such discontinuance or reduction is made necessary for purposes of in- vestigations, inspections, replace- ments, maintenance, or repairs to any works whatsoever affecting, utilized or, in the opinion of the Secretary, necessary for delivery of App. 117 water hereunder, it being under- stood that so far as feasible the United States will (1) do so during periods of low water demands and (2) give reasonable notice in ad- vance of such temporary discon- tinuance or reduction. (b) Delivery of Colorado River water by the United States under this contract shall be charged to the State of Arizona’s apportionment under the aforemen- tioned Supreme Court Decree of March 9, 1964, in Arizona v. California and will discharge to that extent the obliga- tion of the United States to deliver water under the aforementioned contract between the United States and the State of Arizona, dated February 9, 1944. 8.4 Delivery Points. Colorado River water to be furnished to the Contractor pursuant to this contract will be delivered by the United States in the Colorado River at the point of diversion from Lake Havasu where the intake structures of the Havasu Pumping Plant are constructed. Aqua Fria and Upper Gila River system waters will be delivered to the Contractor at New Waddell and Buttes Dams, respectively. Delivery points for other project water supplies and for return flows will be determined by the Contracting Officer after consultation with the Contractor and/or the affected subcontractor therefor. 8.5 Measurement. (a) The quantity of Colorado River water pumped from Lake Havasu for the project shall be meas- ured by means of measuring devices to be installed as part of the project works. If, for any reason, in the opinion of the Secretary, said measuring devices shall fail to operate App. 118 satisfactorily, the Secretary will, from the best information available, estimate the amount of water delivered to the Contractor. (b) Deliveries of project water to the various subcontractors shall be measured by means of measuring devices to be installed as part of the project works at the points along the various aqueducts at which such water may be diverted for each of said subcontractors, and/or at the points in the various reservoirs formed by the dams constructed as part of the project works at which such water may be diverted for subcontractors and/or at the points where return flow may be delivered. These points of measurement will be established by the Secretary after consultation with Contractor and the affected subcontrac- tor. If, for any reason, in the opinion of the Secretary, said measuring devices shall fail to operate satisfactorily, the Secretary will, from the best information available and after consultation with the Contractor and the affected subcontractor, estimate the amount of water delivered to each such subcontractor. The Secretary shall at all times have access over any lands and rights-of-way of a subcon- tractor for the purpose of inspecting and checking said measuring devices. 8.6 Responsibility for Distribution of Water after Leaving Water Supply System. Whether or not the United States operates and maintains the project facilities, the United States shall not be responsible for the control, carriage, handling, use, disposal, or distribution of water after said water has been diverted from the water supply system. At such time as the Operating Agency assumes responsibility for the OM&R of project works, the respon- sibility for diversion, carriage, and transportation of the water through the water supply system shall be the sole App. 119 responsibility of the Operating Agency. Responsibility for distribution of water beyond the water supply system shall be that of the subcontractors to whom said water is deliv- ered from the water supply system. The United States, its officers, agents, and employees, shall not be liable for damage or claim of damage of any nature whatsoever for which there is legal responsibility arising out of or con- nected with the control, carriage, handling, use, disposal, or distribution of such water, and each subcontractor shall hold the United States, its officers, agents, and employees, harmless from any and all such claims. 8.7 Quantity of Water to be Delivered. (a) The Secretary reserves the right to determine that quantity of Colorado River water to be released each year from Lake Mead for use by the Central Arizona project pursuant to applicable law, which shall include the quantity of water which may be allocated by the Secretary for use on Indian lands. (b) The quantity of Colorado River water available under this contract for project purposes shall not exceed the quantity of water available to Arizona under the aforementioned Supreme Court Decree in Arizona v. California and in Arizona’s water delivery contract with the United States after first providing for satisfaction of: (i) present perfected rights and per- fected rights described in Article II(D) of the Decree and the rights of other Federal reservations estab- lished prior to September 30, 1968; Provided, however, That the quanti- ties of Colorado River water re- served to satisfy the aforesaid rights shall not, except as provided App. 120 in said Decree, be reduced under any circumstances or for any reason whatsoever including, without limi- tation, a temporary use permitted by the Secretary by other water us- ers in Arizona, California, or Ne- vada, of water reserved pursuant to the foregoing but not needed during any calendar year; And provided further, That no rights to the recur- rent use of such water shall accrue by reason of said temporary use; and (ii) the quantities of water provided for in all water delivery contracts be- tween the United States and water users in Arizona as of September 30, 1968. (c) The quantity of Colorado River water available under this contract for project purposes, includ- ing water for use on Indian lands shall have the same priority as to delivery as the quantities of Colorado River water delivered pursuant to water delivery contracts, Federal reservations of water, and other arrangements between the United States and water users in Arizona entered into subsequent to September 30, 1968, for use of Colorado River water on Federal, State or privately owned lands in Arizona in total quantities not to exceed 164,652 acre-feet of diversions per year; Provided, however, That the Contractor shall hold the United States, its officers, agents, employees, and successors or assigns, harmless as to any and all claims for damages to persons or to property direct or indirect and of whatever nature, arising out of or which may in any manner be connected with the operation and/or effect of this Subarticle. a are App. 121 (d) The limitation on contracting in Subarti- cle 8.7(c) above shall not apply to contracts with holders of present perfected rights to Colorado River water in Ari- zona or to the Secretary’s order of November 24, 1982, reserving Colorado River water for the Cibola National Wildlife Refuge. Nothing in Subarticle 8.7(c) shall restrict the right of the Secretary under water service contracts referred to in said Subarticle to terminate and/or reduce any entity’s entitlement to Colorado River water and to make that entitlement available to other water users in Arizona. (e) During any year when the subcontrac- tors cannot use any portion of their entitlement to project water, and such water cannot be resold or exchanged in accordance with the terms and conditions of the water service subcontracts, the Contractor shall have the right in its discretion to resell any or all of such water or to use any or all of such water for ground water recharge pur- poses, including the subsequent recovery and resale of such water, subject to Federal law, including but not limited to the Reclamation Reform Act of 1982, State of Arizona law, and such rules and regulations as the Secre- tary may deem appropriate. Subject to the terms and conditions of water service subcontracts, the water orders of all subcontractors shall be met before any project water is made available to the Contractor under this provision. 8.8 Subcontracts. (a) The United States shall be a party to subcontracts. (b) The Secretary and the Contractor shall require in each subcontract that: (i) (ii) (111) (iv) App. 122 unless and until otherwise pro- vided by Congress, water from the Central Arizona Project shall not be made available directly or indirectly for the irrigation of lands not having a recent irriga- tion history, as determined by the Secretary, except in the case of Indian lands, national wildlife refuges, and, with the approval of the Secretary, State-administered wildlife management areas; there be in effect measures, ade- quate in the judgment of the Sec- retary and the Contractor, to control expansion of irrigation from aquifers affected by irriga- tion in the Contractor’s service area and to reduce pumping of ground water in the agricultural subcontractors’ service areas by the amount of project water re- ceived by said agricultural sub- contractors; the canals and distribution sys- tems through which water is con- veyed after its delivery to the subcontractors shall be provided and maintained with linings ade- quate in the Secretary’s judgment to prevent excessive conveyance losses; neither the Secretary, the Con- tractor nor any subcontractor shall pump or permit others to pump ground water from within (v) (vi) App. 123 the exterior boundaries of the service area of a subcontractor receiving water from the Central Arizona Project for any use out- side of said subcontractor’s ser- vice area unless the Secretary, the Contractor, and such subcon- tractor shall agree, or shall have previously agreed, that a surplus of ground water exists and that drainage is or was required; except as otherwise agreed by the Contracting Officer, neither the Contractor nor any subcontractor shall sell or otherwise dispose of or permit the sale or other dispo- sition of any project water, includ- ing return flows, for use outside the Contractor’s service area; irrigation water made available thereunder may be made avail- able by the Secretary for M&I purposes if and to the extent that such water is no longer required by the subcontractor for irrigation purposes and shall be made available in all cases where lands receiving project water have been converted to municipal and in- dustrial use; Provided, however, That subcontracts effectuating such transfers are subject to the approval of the Secretary and the Contractor, which approval shall not be withheld unreasonably; And provided further, That it shall be deemed unreasonable for (vii) (viii) App. 124 the Secretary or the Contractor to withhold such approval on the basis that the right to convert from irrigation to M&I use for a specific development could better be exercised in some other sub- contractor’s service area. The wa- ter so converted from irrigation to M&I purposes will be delivered with the same priority and at the same rate per acre-foot as other M&I water. Likewise, subcon- tracts for furnishing water for M&I purposes, including, but not limited to, ground water recharge to the extent ground water re- charge is consistent with Arizona law, shall provide that, if water to be delivered thereunder is not presently required for such pur- poses, such water may be made available by the Secretary to other users; Provided, further, That the subcontractor shall be relieved of its payment obligation under its subcontract only to the extent of the amount paid by such other users; the acreage limitation provisions of Reclamation Laws shall apply solely to agricultural water service; except as specifically provided therein, it shall be the provisions of this contract which shall be controlling in the event of any in- consistency between this contract and any subcontract; — App. 125 (ix) the subcontractor shall levy all necessary assessments, tolls, and other charges and shall use all of the authority and _ resources available to the subcontractor to collect the same in order that the subcontractor may meet its obli- gations thereunder to make in full all payments required under said subcontract on or before the date such payments become due and to meet other obligations un- der the subcontracts; (x) the subcontractor _ establish, maintain, and provide the United States and the Contractor with land, water use, and crop census records. 8.9 Shortages. As provided in Section 301(b) of the Basin Project Act, Article II(B)(3) of the Decree of the Supreme Court of the United States in Arizona v. Cali- fornia, 376 U.S. 340, dated March 9, 1964, shall be so administered that in any year in which, as determined by the Secretary, there is insufficient mainstream Colorado River water available for release to satisfy the annual consumptive use of 7,500,000 acre-feet in Arizona, Cali- fornia, and Nevada, diversions from the mainstream of the Colorado River for the Central Arizona Project and for other uses in Arizona under contracts or other agree- ments with the United States executed subsequent to September 30, 1968, shall be so limited as to assure the availability of water in quantities sufficient to provide for the aggregate annual consumptive use by holders of present perfected rights, by other users in the State of App. 126 California served under contracts existing as of Septem- ber 30, 1968, with the United States by diversion works heretofore constructed, and by other Federal reservations in California of 4,400,000 acre-feet of Colorado River water, and by users of the same character in Arizona and Nevada. Water users in the State of Nevada shall not be required to bear shortages in any proportion greater than would have been imposed in the absence of said Section 301(b), nor shall said Section affect the relative priorities, among themselves, of water users in Arizona, California, and Nevada which are senior to diversions for the Central Arizona Project, or amend any provisions of said Decree. The aforesaid limitation stated in Section 301(b) shall not apply so long as the Secretary shall determine and pro- claim that means are available and in operation which augment the water supply of the Colorado River system in such quantity as to make sufficient Colorado River main- stream water available for release to satisfy annual consumptive use of 7,500,000 acre-feet in Arizona, Califor- nia, and Nevada. 8.10 Rate of Diversions of Colorado River Water. Subject to (a) the first proviso in Section 301(a) of the Basin Project Act, (b) the provisions of Subarticle 10.6(b) hereof, and (c) the provisions of Subarticle 8.7(a) hereof, any capacity in the Granite Reef Aqueduct in excess of 2,500 cubic feet per second may be utilized in the opera- tions of the project so as to maximize project benefits; Provided, however, That the use of such capacity shall not result in the annual diversion of a quantity of water in excess of the project’s legal entitlement under the Basin Project Act. App. 127 8.11 Priority in Case of Shortage. (a) Subject to the provisions of Section 304(e) of the Basin Project Act and the Secretary’s alloca- tion decisions published in the Federal Register on Decem- ber 10, 1980, and March 24, 1983, any project water as defined in Subarticle 5.27(a) hereof, furnished through project facilities shall, in the event of shortages thereof, be reduced pro rata until exhausted, first for miscellaneous uses and next for agricultural uses, before such project water furnished for M&I uses is reduced. Thereafter, such project water for M&I uses will be reduced pro rata among all M&I water users. Each subcontract or other water delivery arrangement entered into pursuant to this con- tract shall so provide. This article shall not apply to Indian uses; Provided, however, That the relative priorities between Indian and non-Indian uses shall be as deter- mined by the Secretary. Notwithstanding the provisions of this Subarticle, project water made available as a result of construction and operation of modifications to Roosevelt Dam as part of Plan 6 shall be distributed as provided in the Plan 6 Funding Agreement, and shall not be subject to reduction in the event of shortages of other project water supplies. (b) Any project water, is defined in Subarti- cles 5.27(b), (c) and (d) hereof, shall retain its priority relative to project water as defined in Subarticle 5.27(a) hereof. 8.12 No Guarantee of Availability of Water. The United States assumes no responsibility with respect to the quantity of water available for delivery pursuant to this contract. In no event shall the United States, its officers, agents, or employees, be liable for any damages, App. 128 direct or indirect, of whatsoever nature, arising out of or in any way connected with any suspension or reduction in the delivery of water pursuant to this contract or with any shortage in the quantity of water available for delivery hereunder or to any subcontractor for any cause whatso- ever including, but not limited to, drought, delay in the construction of the Navajo Project, the failure of the Navajo Project to be completed, or the lack of power for pumping. 8.13 Secretarial Control of Return Flow. (a) The Secretary reserves the right to capture all return flow flowing from the exterior bounda- ries of the Contractor as a source of supply and for distri- bution to and use of the Central Arizona Project to the fullest extent practicable. The Secretary also reserves the right to capture for project use return flows within the boundaries of Contractor if in his judgment such return flow is not being put to a beneficial use. Any subcontractor may sell its return flow; Provided, however, That except as otherwise agreed by the Contracting Officer, such return flow may not be sold for use outside the Contractor’s exterior boundaries; And provided further, That if the price received for such return flow is higher than the price paid for such project water, the amount of the excess price shall be paid by such subcontractor to the Contractor for application against the Contractor’s repayment obligation to the United States. (b) Any return flow captured by the United States and determined by the Secretary to be suitable and available for use on lands within the service area and/or by any subcontractor therein may be delivered by the United States to a subcontractor as a part of the water App. 129 supply for which the subcontractor contracts hereunder and such water shall be accounted and paid for pursuant to the provisions hereof. 8.14 Water and Air Pollution Control. The Con- tractor, in carrying out this contract, shall comply with all applicable water and air pollution laws and regulations of the United States and the State of Arizona, and shall obtain all required permits or licenses from the appropri- ate Federal, State, or local authorities. 8.15 Quality of Water. The operation and main- tenance of project facilities shall be performed in such manner as is practicable to maintain the quality of project water made available through such facilities at the highest level reasonably attainable as determined by the Contract- ing Officer or the Operating Agency. Neither the United States nor the Operating Agency warrants the quality of water and are under no obligation to construct or furnish water treatment facilities to maintain or better the quality of water. 8.16 Exchange Water. Where the Secretary deter- mines that a subcontractor is physically able to receive Colorado River mainstream water in exchange for or in replacement of existing supplies of surface water from sources other than the Colorado River to provide water supplies for users upstream from New Waddell, Modified Roosevelt and Buttes Dams, the Secretary may require that said subcontractor agree to accept said mainstream water in exchange for or in replacement of said existing supplies pursuant to the provisions of Section 304(d) of the Basin Project Act. 8.17 Rights Reserved to the United States to Have Water Carried by Project Facilities. As a condition to App. 130 the construction of project facilities and the delivery of water hereunder, the Contractor agrees that all project facilities will be available for the diversion, transportation, and carriage of water for Indian and non-Indian uses pursuant to arrangements or contracts therefor entered into on their behalf with the Secretary. In the event the responsibility for the OM&R of project facilities is trans- ferred to and assumed by the Operating Agency, such transfer shall be subject to the condition that the Operat- ing-Agency shall divert, transport, and carry such water for such uses pursuant to the provisions of the aforesaid arrangements or contracts; Provided, however, That the aforesaid arrangements or contracts will include provi- sions for the payment of applicable construction costs and OM&R costs in accordance with Articles 9.3 and 9.6 of this contract. 8.18 Wheeling Non-Project Water. After taking into consideration the water delivery requirements of contracts for project water service and subject to availabil- ity of project capacity, non-project water may be wheeled through project facilities pursuant to wheeling agreements between the Contracter and the entity desiring to use project facilities for wheeling purposes. All such agree- ments shall be subject to the approval of the Contracting Officer who shall consider, among other things, the impact that the wheeling of such non-project water will have on the quality of project water. The Contractor and the Contracting Officer shall jointly develop a standard form of wheeling agreement including the rate structure for wheeling non-project water. All wheeling charges shall be paid to the Contractor by the entity contracting for the wheeling of non-project water. The Contractor shall be App. 131 entitled to retain revenues from wheeling charges suffi- cient to cover all OM&R costs associated with wheeling such non-project water, plus an administrative charge to be jointly determined by the Contractor and the Contract- ing Officer. All revenues from wheeling charges in excess of the OM&R costs and administrative charges shall be remitted by the Contractor to the Contracting Officer and deposited into the Development Fund. 8.19 Use of Project Power to Wheel Non-Project Water. If the energy requirements necessary for the pump- ing of project water are met and subject to the require- - ments of the Navajo Power Marketing Plan published in the Federal Register on December 21, 1987, project power may be used to wheel non-project water through project facilities under such conditions of use, including amounts, times of use, losses, costs, and other conditions as are established by the Contractor and approved by the Con- tracting Officer. 9. PAYMENT OF PROJECT COSTS ALLOCATED TO CONTRACTOR 9.1 Allocation of Construction Costs. (a) Upon completion of each construction stage, the Contracting Officer will allocate costs to the various project purposes using the separable costs- remaining benefits procedure. (b) For repayment purposes the reimburs- able cost allocated to irrigation and M&I water by the separable costs-remaining benefits procedure will be combined and will hereinafter be termed the “water supply allocation.” Upon completion of each construction stage, App. 132 and at the periodic intervals specified in Subarticle 9.3(d), suballocation of the water supply allocation will be made to the irrigation and M&I water functions proportional to the water estimated to be used for each purpose during the repayment period of each construction stage. The cost thus suballocated to the irrigation function will hereinafter be termed the “interest-free allocation.” The cost thus subal- located to the M&I water function shall be added to the cost allocated to the commercial power function, plus interest during construction for both, and the sum will hereinafter be termed the “interest-bearing allocation.” (c) During construction, simple interest at the rate of 3.342 percent per annum shall be charged on costs allo- cated to the interest-bearing function as adjusted by the Secretary (i.e., net disbursements reduced by contract holdbacks, revenues applied to construction cost, and nonre- imbursable expenses financed from construction funds). The total amount of all interest thus accumulated through the construction period prior to the date of completion of each construction stage shall be added to and become part of the actual construction cost of each construction stage. Interest during construction shall not accrue during any period in which construction is deferred or postponed by the United States as a result of a national emergency, as determined by the Secretary, if authority to forego such interest exists or is made available to the Secretary. 9.2 Repayment Concepts. (a) Costs suballocated to non-Indian irriga- tion water will be paid by the subcontractors to the Con- tractor on the basis of their ability to pay as determined by the Secretary. App. 133 (b) Costs allocated to commercial power and costs suballocated to M&I water use shall be combined and repaid with interest at a rate of 3.342 percent per annum on the unpaid balance. (c) Reimbursable costs allocated to recrea- tion and fish and wildlife are anticipated to be covered by a separate contract and repaid by the beneficiaries thereof. (d) Repayment of costs allocated to irriga- tion of Indian lands shall be governed by the provisions of Section 402 of the Basin Project Act. (e) Repayment of the project will occur by construction stages, with each stage having a separate 50- year repayment schedule. Upon completion of each cost allocation study referred to in Subarticle 9.1(a), subse- quent to the initial study associated with the first con- struction stage, the Contractor’s repayment obligation and the obligation allocated to each construction stage will be adjusted based on the latest cost allocation study, and the Contractor will be provided with a revised repayment schedule for the project and each construction stage. The Contracting Officer will adjust previous principal and interest payments made by the Contractor to reflect the new repayment schedule. For each year where an adjust- ment in payments is necessary, there will be an over or underpayment which will accrue with interest at the rate of 3.342 percent per annum (compounded annually) to the adjustment date. If the adjustment indicates that the Contractor overpaid principal and interest, the Contractor shall be entitled to a credit against its next payments to the United States. Conversely, if the Contractor owes additional principal and interest to the United States, such amount shall be paid to the United States by the App. 134 Contractor within 12 months of receipt of a statement therefor from the Contracting Officer. The Contractor may use the repayment reserve fund under Subarticle 10.3(b) -hereof for any payment to the United States required as a result of the above adjustment. 9.3 Contractor’s Construction Cost Repayment Obligation. (a) The Contractor’s repayment obligation shall consist of the total cost allocated to the water supply and power functions plus OM&R during construction and interest during construction on costs allocated to the M&I water and power functions, but shall not include costs allocated to fish and wildlife and recreation, and costs associated with the delivery of water to entities other than the Contractor or subcontractors. Such entities shall include but not be limited to Indian tribes and councils in central Arizona receiving project water and the New Mexico recipients of water service from Hooker Dam or suitable alternative. The costs to be excluded shall be calculated as follows: (i) Costs excluded from the Contrac- tor’s repayment obligation for New Mexico water service shall be de- termined by multiplying the project costs allocated to the water supply function by the ratio developed by dividing the quantity of project wa- ter projected to be delivered throughout the overall repayment period to water users in Arizona in exchange for water delivered to us- ers in New Mexico from or by means of project works, by the total quantity of Colorado River water App. 135 projected to be delivered by the pro- ject throughout the overall repay- ment period. (ii) The amount of other project costs which shall be excluded from the Contractor’s repayment obligation shall be determined by multiplying the project costs allocated to the water supply function by a ratio de- veloped by dividing the quantity of project water projected to be deliv- ered throughout the overall repay- ment period to entities other than the Contractor, the subcontractors, and those users in New Mexico to whom water has been made avail- able through the construction of Hooker Dam or suitable alternative by the total quantity of project water projected to be delivered throughout the overall repayment period; Pro- vided, That project water projected to be delivered to such users will be computed based on an assumption of full development not later than the year 2005. (b) The costs determined under Subarticles 9.3(a)(i) and (ii) above shall be subtracted from the water supply costs obtained from the separable costs-remaining benefits procedure to determine the Contractor’s water supply costs. The Contracting Officer shall suballocate the Contractor’s water supply costs to each of tue construction stages based on the ratios obtained by dividing the alloc- able cost of the construction stage by the allocable cost of the project (see Operation 1, Exhibit “A”). The water App. 136 supply costs assigned to each construction stage are then further suballocated between irrigation and M&I water use in proportion to projected total water deliveries to each function over the 50-year repayment period of each con- struction stage (Operation 2, Exhibit “A”). The summari- zation of the suballezai:ons to each construction stage determines the total water supply cost to be assigned to irrigation and M&I water use (Operation 3, Exhibit “MA”). To determine the Contractor’s repayment obligation, the Contractor’s water supply suballocation to irrigation and M&I water uses, and the power allocation from the sepa- rable costs-remaining benefits procedure, shall each be adjusted for any revenues received by the United States prior to the notice(s) of completion and for any contribu- tions received by the United States under the Plan 6 Funding Agreement for the features constructed in that stage, and for the 500 cubic feet per second of incremental capacity in the Granite Reef Aqueduct and pumping plants (see Article 9.7) to determine the net amount of each function assigned to the Contractor (Operation 4, Exhibit “A”). The Contractor’s repayment obligation shall be the summation of the net amount for each function. (c) Once the Contractor’s estimated or final repayment obligation has been determined by the Con- tracting Officer, the obligation shall be allocated to each construction stage based on the ratio obtained by dividing the allocable cost of each construction stage by the alloc- able cost of the project. Each construction stage will have a separate 50-year repayment period. The repayment obligation for each stage will be divided into interest- bearing and interest-free components. The interest-free component shall be the amount allocable to irrigation purposes for the stage. The interest-bearing component App. 137 will be the amount obtained by subtracting the irrigation allocation for the stage from the obligation for the stage. The principal payments for each stage shall be determined by applying the percentages in Subarticle 9.3(f) to the repayment obligation for each stage. The total payment for each stage for any year shall be equal to the principal payment plus interest at the rate of 3.342 percent per annum on the unpaid interest-bearing component of the repayment obligation for each stage. For the water supply system, the portion of each principal payment which it made by the Contractor from irrigation revenues received by the Contractor each year will be used by the United States to reduce the interest-free obligation. The remain- ing portion of the principal payments made by the Con- tractor each year for the water supply system will be used by the United States to reduce the interest-bearing obliga- tion, and once the interest-bearing obligation has been retired, the entire principal payment made by the Con- tractor will be applied by the United States toward the interest-free obligation. For the other construction stages, the entire principal payment made by the Contractor each year for such stages will be applied by the United States to reduce the interest-bearing obligation first, and once such obligation has been retired, to reduce the interest-free obligation. (d) At 7-year intervals following the deter- mination of the Contractor’s repayment obligation for the water supply system, or at more frequent intervals if it becomes apparent to the Contracting Officer that a signifi- cant change in water use has or will occur, until such time as the interest-bearing obligation for each construction stage has been repaid, the Contracting Officer wil) re- estimate the proportions of total water deliveries to App. 138 irrigation and M&I water use over the 50-year repayment period for each stage. At such intervals, the Contracting Officer will adjust the original interest-bearing and interest-free allocation for each stage based on the new estimates and recalculate all preceding interest payments. Differences between amounts owed and amounts paid by the Contractor shall be adjusted by the Contracting Officer, who shall apply a credit against the Contractor’s next payment due or notify the Contractor of the addi- tional amount due, as the case may be. All such adjust- ments shall include interest at the rate of 3.342 percent per annum (compounded annually). Any additional pay- ments required from the Contractor shall be made within 12 months of the Contractor’s receipt of a statement from the Contracting Officer therefor. The Contractor may use the repayment reserve fund under Subarticle 10.3(b) hereof for any payment to the United States required as a result of the above adjustment. (e) The Contracting Officer will notify the Contractor of (i) its estimated repayment obligation when construction of the first construction stage is substantially complete and upon completion of each subsequent con- struction stage, and (ii) the actual repayment obligation when the final construction stage has been completed, as determined by the Contracting Officer. In the event that the project ultimately consists only of the water supply system, New Waddell Dam, and Modified Roosevelt Dam, the Contractor’s actual repayment obligation shall be limited to $2.0 billion. If prior to completion of construc- tion of such features the Contracting Officer determines that the Contractor’s repayment obligation for such features will exceed $2.0 billion, the Contracting Officer shall consult with the Contractor and continuation of App. 139 construction will be contingent upon the execution of an amendatory contract to cover the increased repayment obligation. If construction of any other construction stage will result in an increase in the Contractor’s repayment obligation by an amount equal to or less than the respec- tive amount identified in Exhibit “B,” which is attached hereto and made part of this contract, the Contractor’s repayment ceiling may, after consultation with the Con- tractor, be increased by the Contracting Officer by an amount equal to or less than the respective amount identified in Exhibit “B” by written notice thereof from the Contracting Officer to the Contractor. If construction of such other construction stage will result in an increase in the Contractor’s repayment obligation by an amount greater than the respective amount identified in Exhibit “B,” the Contracting Officer shall consult with the Con- tractor and the Contractor and the Contracting Officer shall agree upon one of the following courses of action prior to initiation of construction of such construction stage: (1) that additional repayment ceiling be made available from other construction stages, in which event the Contractor’s repayment ceiling will be increased to the agreed-to amount by written notice from the Contracting Officer to the Contractor; or (2) that this contract be renegotiated to increase the Contractor’s repayment ceiling; Provided, That these courses of action shall also apply in the event that, prior to completion of construction of such stage, the Contracting Officer determines that the construction of such stage will result in arn increase in the Contractor’s repayment obligation by an amount greater than the respective amount identified in Exhibit “B.” (f) Annual percentages of the repayment obligation for each construction stage shall be those set App. 140 out in the following schedule or any revision thereof mutually agreed upon: Percent of Repayment Repayment Year Obligation (Annual) 1-7 1.0 8-14 1.3 15-21 1.6 22-28 2.0 29-35 2.6 36-42 2.7 43-49 2.7 50 2.7 (g) In the event that the Secretary contracts for delivery of non-project water under the provisions of Article 10.1, capital charges associated with such delivery shall be calculated, charged, and utilized in the same manner as capital charges deposited in the Development Fund pursuant to Article 8.18. 9.4 Payment of Contractor’s Construction Cost Repayment. (a) The Contractor shall make annual payments to the United States, to be credited to the Development Fund, which shall be sufficient, when com- bined with accruals from the other sources described in Section 403(f) of the Basin Project Act, the Hoover Power — Plant Act of 1984, and other miscellaneous revenues, including but not limited to net wheeling charges, to effect repayment of the repayment obligation for each construc- tion stage within a period of not more than 50 years beginning with the year following substantial completion of each construction stage. The Contractor’s first payment shall be due on or before January 15 of the year following the year in which the Secretary announces the substantial App. 141 completion of each construction stage. Annual payments thereafter shall be due on or before January 15 of each following year. (b) The Contractor agrees to make annual payments calculated by the Secretary as follows: (i) Calculate the annual principal pay- ments required by the schedule in Subarticle 9.3(f) or any revision thereof for each construction stage. (ii) “Add to (i) the annual interest, at 3.342 percent, on the unpaid bal- ance of the interest-bearing alloca- tion for each construction stage. (iii) Determine the total amount of all interest and principal payments due for all construction stages. (iv) Subtract therefrom the revenues estimated to be available from the Development Fund enticipating a zero balance at the end of each year in the Development Fund. (v) Make adjustments for differences between estimated and actual reve- nues for the preceding year. (c) On or before each December 15, begin- ning with December 15 of the year in which the Secretary notifies the Contractor of the substantial completion of the first construction stage, the Secretary will notify the Contractor of the amount of the annual payment due on the following January 15, which has been determined by the Secretary on the basis of the aforesaid calculation. App. 142 (d) The Contractor may make additional payments on the repayment obligation at any time subject to such terms and conditions as may be agreed upon by the Contractor and the Contracting Officer; Provided, however, That all interest due is paid at the same time, whereupon appropriate adjustments in the schedule of future payments will be made by the Secretary, who shall as promptly as possible give the Contractor written notice of the adjusted repayment schedule. (e) It is understood and agreed that the Contractor shall be obligated for the payments set forth in Subarticle 9.4(a) hereof and that regardless of the delin- quency or default in payment of any charges due to the Contractor from any subcontractor, or a diminution in the water supply available to the Contractor, or regardless of any other reason, the Contractor shall complete repay- ment of each construction stage within a 50-year period beginning in the year following the announcement by the Secretary of substantial completion of such construction stage. 9.5 Commercial Power Rates. The Secretary will, consistent with applicable law, periodically review and provide for appropriate adjustments in the rates estab- lished for the sales of power and energy, revenues from which contribute to the Development Fund. 9.6 Other Costs Borne by the Contractor. (a) In addition to the payments provided for in Article 9.4 hereof, and subject to the provisions of Subarticle 9.6(d) hereof, during such periods as the United States operates and maintains completed construction stages, the Contractor shall make advance payments for App. 143 OM&R costs incurred by the United States. The United States will furnish the Contractor with an estimate in writing at least-6 months prior to substantial completion of construction of the water supply system, of the OM&R cost due from the Contractor to the end of the then current year, together with an estimate of such cost for the calen- dar year immediately following. Within a reasonable time of the receipt of said estimates, as determined by the Contracting Officer, the Contractor shall advance to the United States the payments for the estimated OM&R cost to the end of the then current year and without further notice or demand shall on December 15 of the then current year and on June 15 of the following year advance to the United States in equal semiannual installments the Contractor’s share of the estimated cost, including super- vision and administrative expense for the OM&R of the water supply system. Advance payments shall be made in subsequent years by the Contractor to the United States on the basis of estimates to be furnished by the United States on or before November 15 preceding said subse- quent year and the advances of said payments shall be due and payable in equal semiannual payments on the follow- ing December 15 and June 15. Said OM&R costs are the total annual OM&R costs of completed construction stages which are allocated to the irrigation and M&I water supply functions less (i) the costs described in Subarticle 9.6(c) hereof, and (ii) an amount determined by multiply- ing the tots’ of said annual costs by the ratio obtained by dividing the estimated amount of project water projected to be delivered in the subsequent year to entities other than the Contractor, the subcontractors, and those entities in New Mexico to which project water will be made avail- able from Hooker Dam or suitable alternative, by the total App. 144 amount of project water estimated to be delivered for use in that year. (b) Differences between actual OM&R costs and the estimated costs shall be determined by the Con- tracting Officer and shall be adjusted in next succeeding estimates; Provided, however, That if in the opinion of the Contracting Officer the amounts advanced by the Contrac- tor for any yea: are likely to be insufficient to pay the above-mentione:: ODM&R costs during such year, additional and sufficient sums of money shall be paid forthwith by the Contractor to the United States upon notice thereof and demand therefor by the Contracting Officer; Provided, further, That the United States will give Contractor reasonable notice in advance of any such deficiency. (c) The Contractor’s obligation to pay said OM&R costs of completed construction stages will be reduced to the extent that project water is made available for use in New Mexico following completion of Hooker Dam or suitable alternative. Said reduction will be in the proportion which the quantity of project water projected to be delivered to water users in Arizona, in exchange for Gila River system waters delivered to water users in New Mexico from or by means of project works, bears to the total quantity of Colorado River water projected to be delivered to the project that year. (d) In the event that responsibility for OM&R of project facilities is transferred to and assumed by the Contractor, the Contractor shall be relieved of the obligation to make OM&R payments associated with such facilities under Subarticle 9.6(a) of this contract. In that event, the United States shall pay or provide for payment App. 145 of OM&R costs associated with delivery of water to enti- ties other than the Contractor and the subcontractors. Such costs shall be computed in accordance with Subarti- cle 9.6(a) of this contract. If the Contractor does not receive payment in advance for such costs, the Contractor shall have no obligation to deliver such water. (e) During the Hoover Dam cost-repayment period, the Contractor shall pay to the United States the sum of $0.25 for each acre-foot of water pumped from Lake Havasu for miscellaneous and M&I water purposes as determined by the Contracting Officer. The quantity of water pumped for such purposes will be determined by the Contracting Officer at the end of each calendar year and the Contractor notified of the amount due by March 1 of each subsequent year. Payment shall be due on May 1 following notification. Said payment shall be credited to the Colorado River Dam Fund established by Section 2 of the Boulder Canyon Project Act. 9.7 Repayment of Costs of Excess Capacity in Granite Reef Aqueduct. The costs of providing any capac- ity in the Granite Reef Aqueduct and pumping plants in excess of 2,500 cubic feet per second shall be repaid by Contractor from funds available to Arizona pursuant to the provisions of Section 403(f) of the Basin Project Act, or by funds from sources other than the Development Fund. 9.8 Ad Valorem Taxes, Assessments, Tolls, and Other Charges. Within the legal limits available to it, the Contractor shall levy ad valorem taxes upon the taxable property within the service area of the Contractor at rates determined necessary by the Contractor to raise funds which, together with the revenues from the sale of water and such financial assistance from the Development Fund App. 146 as the Secretary determines is available therefor, are sufficient to meet the obligations of the Contractor to make in full all payments to the United States on or before the date such payments become due and to meet its other obligations under this contract. 9.9 Continuation of Payments After Project Pay- out. Following payment to the United States of the Con- tractor’s final payment for the last construction stage, the Contractor shall continue to make annual payments to the United States to be credited to the Development Fund in amounts equal to the average annual principal payment for the project during the overall repayment period. In the event that no augmentation project, as contemplated in the Basin Project Act, has been authorized or is under active consideration by the Congress at the time project construction costs have been repaid in full, payments under this formula will be not required; Provided, however, That payments will commence after repayment of the project costs pursuant to the formula, or any adjustment thereof agreed to by the parties, at such time as an aug- mentation project is authorized by Congress and the costs thereof allocated to the Contractor are determined by the Secretary. 9.10 Defaults. (a) The Contractor shall pay a penalty on payments, installments or charges which become delin- quent, computed at the rate of 1 percent per month on the amount of such delinquent payments, installments, or charges from and after the date when the same become due until paid. (b) No water shall be furnished to the Contractor during any period in which the Contractor may App. 147 be in arrears more than 12 months in the payments to the United States required by Article 9.4 hereof. (c) All rights of action for breach of this contract are reserved to the United States as provided by Federal law. 10. GENERAL PROVISIONS 10.1 Other Contracts. The Secretary reserves the right to contract directly with other water using entities concerning water supply through project facilities. In the event this occurs, the provisions of Article 8.17 hereof shall be applicable. 10.2 Title to Project Works. Title to all water supply system works and all project facilities constructed pursuant to the Basin Project Act and this contract shall be and remain in the United States until otherwise pro- vided by Congress. 10.3. Reserve Funds. (a) (i) Commencing with notice of transfer of OM&R for the Granite Reef Aqueduct, including the Havasu Pumping Plant, the Contractor shall accumulate and maintain an emergency OM&R reserve fund, which the Contractor shall keep available to meet costs incurred during periods of interruption of water service. (ii) The Contractor shall accumulate the reserve fund with annual deposits, including interest and dividends accruing to fund balances or holdings, of not less than $400,000 in any year in which the fund balance is less than $4,000,000. The fund shall be invested in a Federally insured interest- or dividend-bearing account, or App. 148 in securities guaranteed by the Federal Government; Provided, That money in the reserve fund shall be avail- able within a reasonable time to meet expenses for such purposes as those identified in Subarticle 10.3(a)(iv) hereof. Such annual deposits and the accumulation of Interest and dividends to the reserve fund shall continue until $4,000,000 is accumulated. Interest and dividends accruing to fund balances shall be added to the fund in any year when the fund balance is greater than $4,000,000; Provided, That in no event shall the fund be increased to an amount greater than the actual amount of fixed OM&R costs for the preceding year as mutually determined by the Contractor and the Contracting Officer. Any balance in the fund in excess of the amount of fixed OM&R costs for the previous year shall be considered to be the general funds of the Contractor and available for use as such. (iii) Upon mutual agreement between the Contractor and the Contracting Officer, the amount to be accumulated and maintained in the reserve fund provided for in this Subarticle may be adjusted in consid- eration of the risk and uncertainty stemming from the size and complexity of the project, the size of the annual OM&R budget, additions to, deletions from, or changes in project works, or OM&R costs not contemplated when this contract was executed. (iv) The Contractor may make expendi- tures from such reserve fund only for meeting unforeseen and extraordinary operation and maintenance costs, unusual or extraordinary repair or replacement costs, and betterment costs (in situations where recurrence of severe “operation and maintenance problems can be avoided or eliminated). Proposed expenditures from the fund shall be App. 149 submitted to the Contracting Officer in writing for review and written approval prior to disbursement. (v) During any period in which any of the project works are operated and maintained by the United States, the reserve fund shall be available for like use by the United States. (vi) On or before February 1 of each year, the Contractor shall provide to the Contracting Officer an annual statement indicating the principal and accumulated interest in the emergency OM&R reserve fund as of December 31 of the preceding year. (b) Gi) No later than 1 year following the Contractor’s last construction advance under the Plan 6 Funding Agreement, the Contractor shall accumulate and maintain a repayment reserve fund to help assure pay- ments to the United States under this contract. (ii) The Contractor shall accumulate such reserve fund with annual deposits, including interest and dividends accruing to fund balances or holdings, of not less than $4,000,000 in any year in which the fund balance is less than $40,000,000. The fund shall be invested in a Federally insured interest- or dividend-bearing account, or in securities guaranteed by the Federal Government; Provided, That money in the reserve fund shall be avail- able within a reasonable time to meet expenses for the purpose for which it was established. Such annual depos- its and the accumulation of interest to the reserve fund shall continue until $40,000,000 is accumulated. Any balance in the fund in excess of $40,000,000 shall be considered to be the general funds of the Contractor and available for use as such. App. 150 (iii) Upon mutual agreement between the Contractor and the Contracting Officer, the amount to be accumulated and maintained in the reserve fund provided for in this Subarticle may be adjusted. (iv) Proposed expenditures from the fund shall be submitted to the Contracting Officer in writing for review and written approval prior to disburse- ment. (v) On or before February 1 of each year, the Contractor shall provide to the Contracting Officer an annual statement of the principal and accumu- lated interest in the repayment reserve fund as of Decem- ber 31 of the preceding year. 10.4 Recreational Use of Water Facilities. (a) The enhancement of recreational oppor- tunities in connection with the project works authorized pursuant to Title III of the Basin Project Act shall be in accordance with the provisions of the federal Water Project Recreation Act, 79 Stat. 213, dated July 9, 1965, except as provided in Subarticle 10.4(b) hereof. (b) Recreational development at Orme Dam and Reservoir shall be governed by the provisions of Section 302(d) of the Basin Project Act. 10.5 Confirmation of Contract. (a) The Contractor, after the execution of this contract, shall promptly seek to secure a decree of a court of competent jurisdiction of the State of Arizona confirming the execution of this contract. The Contractor shall furnish the United States a certified copy of the final decree, the validation proceedings, and all pertinent App. 151 supporting records of the court approving and confirming this contract, and decreeing and adjudging it to be lawful, valid, and binding on the Contractor. This contract shall not be binding on the United States or the Contractor until such final decree has been entered. (b) This contract shall be indivisible for purposes of validation and shall not be binding on the United States or the Contractor unless validated pursuant to the provisions of Subarticle 10.5(a) hereof in each and all of its terms and conditions. 10.6 Rules, Regulations, and Determinations. (a) The parties agree that the delivery of water or the use of Federal facilities pursuant to this contract is subject to Reclamation Law, as amended and supplemented, and the rules and regulations promulgated by the Secretary of the Interior under Reclamation Law. (b) The Contracting Officer, after an oppor- tunity has been offered to the Contractor for consultation, shall have the right to make rules, regulations, and determinations consistent with the provisions of this contract, the laws of the United States and the State of Arizona, including, without limitation, rules, regulations, and determinations relative to maximizing project benefits from pumping from Lake Havasu, the rate and schedule of pumping therefrom and the rate and schedule of pumping at the Granite Reef pumping plants, to add to or modify said rules, regulations, and determinations as may be deemed proper and necessary to carry out this contract, and to supply necessary details of its administration which are not covered by express provisions of this contract. The Contractor and each subcontractor shall observe such App. 152 rules, regulations, and determinations and each subcon- tract shall so provide. (c) Where the terms of this contract provide for action to be based upon the opinion or determination of either party to this contract, whether or not stated to be conclusive, said terms shall not be construed as permitting such action to be predicated upon arbitrary, capricious, or unreasonable opinions or determinations. In the event that the Contractor questions any factual determination made by the Contracting Officer, the findings as to the facts shall be made by the Secretary only after consulta- tion with the Contractor and shall be conclusive upon the parties. 10.7 Books, Records, and Reports. The Contrac- tor shall establish and maintain accounts and other books and records pertaining to administration of the terms and conditions of this contract, including: the Contractor’s financial transactions, water supply data, project opera- tion, maintenance and replacement logs, project land and right-of-way use agreements, and other matters specifi- cally relating to this contract that the Contracting Officer may require. Reports thereon shall be furnished to the Contracting Officer in such form and on such date or dates as the Contracting Officer may require. Subject to applica- ble Federal laws and regulations, each party to this contract shall have the right during office hours to exam- ine and make copies of the other party’s books and records relating to matters covered by this contract. 10.8 Notices. Any notice, demand, or request authorized or required by this contract shall be deemed to have been given, on behalf of the Contractor, when mailed, postage prepaid, or delivered to the Regional Director, App. 153 Lower Colorado Region, Bureau of Reclamation, PO. Box 61470, Boulder City, Nevada 89006, and on behalf of the United States, when mailed, postage prepaid, or delivered to the General Manager of the Contractor, 23636 North 7th Street, Phoenix, Arizona 85024. The designation of the addressee or the address may be changed by notice given in the same manner as provided in this article for other notices. 10.9 Contingent on Appropriation or Allotment of Funds. The expenditure or advance of any money or the performance of any obligation by the United States under this contract shall be contingent upon appropriation or allotment of funds. Absence of appropriation or allotment of funds shall not relieve the Contractor from any obliga- tions under this contract. No liability shall accrue to the United States in case funds are not appropriated or allotted. 10.10 Changes _in Contractor’s Organization. While this contract is in effect, no change shall be made in the Contractor’s organization, by exclusion of lands, by dissolution, consolidation, merger or otherwise, except upon the Contracting Officer’s written consent; Provided, however, That approval is hereby given to the inclusion of other counties as part of Contractor’s service area, except, however, that the United States shall not be required, under this contract, to construct project facilities to serve lands within said additional counties. 10.11 Assignment Limited-Successors and Assigns Obligated. The provisions of this contract shall apply to and bind the successors and assigns of the parties hereto, but no assignment or transfer of this contract or any part App. 154 or interest therein shall be valid until approved in writing by the Contracting Officer. 10.12 Judicial Remedies Not Foreclosed. Noth- ing herein shall be construed (a) as depriving either party from pursuing and prosecuting any remedy in any appro- priate court of the United States or the State of Arizona which would otherwise be available to such parties even though provisions herein may declare that determinations or decisions of the Secretary or other persons are conclu- sive or (b) as depriving either party of any defense thereto which would otherwise be available. 10.13 Equal Opportunity. During the perform- ance of this contract, the Contractor agrees as follows: (a) The Contractor will not discriminate against any employee or applicant for employment be- cause of race, color, religion, sex, or national origin. The Contractor will take affirmative action to ensure that applicants are employed, and that employees are treated during employment, without regard to their race, color, religion, sex, or national origin. Such action shall include, but not be limited to, the following: Empivyment, upgrad- ing, demotion, or transfer, recruitment or recruitment advertising; layoff or termination; rates of pay or other forms of compensation; and selection for training, includ- ing apprenticeship. The Contractor agrees to post in conspicuous places, available to employees and applicants for employment, notices to be provided by the Contracting Officer setting forth the provisions of this Equal Opportu- nity clause. (b) The Contractor will, in all solicitations or advertisements for employees placed by or on behalf of the Contractor, state that all qualified applicants will App. 155 receive consideration for employment without regard to race, color, religion, sex, or national origin. (c) The Contractor will send to each labor union or representative of workers with which it has a coliective bargaining agreement or other contract or understanding, a notice, to be provided by the Contracting Officer, advising the labor union or workers’ representative of the Contractor’s commitments under this Equal Oppor- tunity clause, and shall post copies of the notice in con- spicuous places available to employees and applicants for employment. (d) The Contractor will comply with all provisions of Executive Order No. 11246 of September 24, 1965, as amended, and of the rules, regulations, and relevant orders of the Secretary of Labor. (e) The Contractor shall furnish all informa- tion and reports required by said amended Executive Order and by the rules, regulations, and orders of the Secretary of Labor, or pursuant thereto, and will permit access to its books, records, and accounts by the Contract- ing Officer and the Secretary of Labor for purposes of investigation to ascertain compliance with such rules, regulations, and orders. (f) In the event of the Contractor’s noncom- pliance with the Equal Opportunity clause of this contract or with any of the said rules, regulations, or orders, this contract may be canceled, terminated, or suspended, in whole or in part, and the Contractor may be declared ineligible for further Government contract [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0002%3A13. Public record. Not legal advice.