Abstract

I. HCR 1066
In part to address the outstanding payment situation involving Sardis Reservoir and inquiries by north Texas entities to purchase water, the Oklahoma Legislature adopted HCR 1066 in 1999. The legislation directed the Oklahoma Water Resources Board (OWRB), in cooperation with representatives of Choctaw Nation and Chickasaw Nation, to prepare a Kiamichi River Basin Water Resources Development Plan, which was mandated to be consistent with cornerstone principles for water resources development set forth in HCR 1066. A Working Group was established and public hearings were held. After analyzing potential development in light of the cornerstone principles, the February 2000 Kiamichi River Basin plan made two recommendations: (1) the State of Oklahoma should continue to pursue formal development of a compact with the Choctaw and Chickasaw Nations, and (2) the State and the two Tribal Nations should invite comment from the public into any process that allows water to be transferred out of the Kiamichi River basin.

II. HCR 1109
Following up on HCR 1066, in May 2000, the Legislature adopted HCR 1109, which contained two major directives for the OWRB: (1) coordinate with the Corps of Engineers on a study of southeast Oklahoma's water resources, and (2) bring proposals for development of those waters to the State Legislature for consideration. HCR 1109 required all valid proposals to be consistent with the cornerstone principles set forth in HCR 1066 and all principles established in the February 2000 Kiamichi River Basin Water Resources Development Plan (including the recommendation to compact with the Tribal Nations).

III. Memorandum of Understanding (MOU) for Draft Compact and Draft Contract
Following the HCR 1109 directives, Governor Keating, Chief Pyle of the Choctaw Nation, and Governor Anoatubby of the Chickasaw Nation signed a Memorandum of Understanding in October 2000 that established a timeline for negotiating a draft compact among the three governments, and for soliciting and reviewing proposals for the development of water in southeast Oklahoma.

IV. Proposals to Develop Southeast Oklahoma Water
Pursuant to the October 2000 MOU, and as an initial step in soliciting water development proposals, OWRB staff and representatives of the Tribal Nations prepared and distributed Requests for Qualifications to interested entities. Three responses were received. The proposal submitted by Central Oklahoma Water Authority, apparently a proposed brokerage entity, was rejected. Further discussions and negotiations were conducted with representatives of the remaining entities, the North Texas Water Agency (NTWA) and Oklahoma City Water Utilities Trust (OCWUT).

V. Draft State/Tribal Water Compact

1. The draft State/Tribal Water Compact addresses three major subjects: (1) water rights administration, (2) water quality standards administration, and (3) economic development. The Tribal Nations claim ownership and sovereign authority to regulate all water (surface water and groundwater) within their original tribal boundaries (all or parts of 22 counties in southeast Oklahoma).
2. The Compact, as drafted, would have the Tribes agree to delegate whatever authority they may have over surface water and groundwater in southeast Oklahoma to the State. Also, current state law and water rights permitting would continue to control water use in the 22-county area. Citizens in the area would not notice any change in water rights administration and the Tribes would release claims to previously issued state water rights (such as those granted to Oklahoma City). Groundwater is included solely to remove the cloud on title. The Compact expressly states that groundwater, private property under state law, cannot be sold.
3. The Compact would also have the Tribes agree that the State's water quality standards apply in the 22-county area, and that if the Tribes adopted their own water quality standards, as allowed under federal law, their standards would be limited and could not affect water on non-tribal land.
4. Concerning economic development, the Compact, as drafted, would have the State and Tribal Nations agree to limitations and conditions on selling water from the Compact area out of state. Net revenues would be split 50/50 between the State and Tribal Nations. The Compact would also create a State-Tribal Intergovernmental Compact Commission (STICC) consisting of an equal number of State and Tribal members. The Compact Commission would only administer out of state water sale contracts. The Compact Commission would not administer water rights.
5. The draft Compact expressly provides that the full Oklahoma Legislature, not just the Legislature's Joint Committee on State-Tribal Relations, would have to approve the Compact before it would be presented to the United States government (Secretary of Interior or Congress) for final ratification.

VI. North Texas Water Agency (NTWA) Proposal

1. The North Texas Water Agency, consisting of five large public entities that supply water to more than five million customers in the north Texas area, proposes to use up to 320,000 acre-feet of water per year from two of the six major river basins in southeast Oklahoma. As more fully explained in the draft contract, the State-Tribal Compact Commission and NTWA would be parties to the contract whereby STICC would supply water to a point of delivery in Texas just across the south bank of the Red River (which forms the Oklahoma-Texas boundary). The system to supply water would be owned entirely by STICC and developed in three phases over a 20-year period. No Texas entity would own any property in Oklahoma. STICC would hold water rights authorized or granted by the Oklahoma Legislature. The NTWA would pay all costs associated with the water supply project (except for any minor separate costs for local entities to tie into pipelines and related projects). Absolutely no new reservoirs would be built to supply water to Texas. Texas would rely only on available run-of-the-river water and only under strict conditions for diversion. All of Oklahoma's present and future needs would be protected, including local uses and potential use by central Oklahoma. Drought protections for Oklahoma would be recognized and NTWA would expressly waive any and all claims to downstream dependency.
2. The first phase of the system would divert water from diversion works (not a reservoir) on the Kiamichi River between Hugo Reservoir and the Red River where up to 120,000 acre-feet of water per year would be available. Phase 2 of the system would allow STICC to deliver up to a total of 180,000 acre-feet of water per year, including the Kiamichi River amount plus water from another point of diversion on the Little River downstream from Pine Creek Reservoir. Finally, phase 3 of the system would have STICC divert a total of 320,000 acre-feet of water (120,000 acre-feet from the Kiamichi and 200,000 acre-feet from the Little River and Mountain Fork basins downstream from where the Mountain Fork flows into the Little River). The diversion works on the Little River would consist of a low water dam that would not impede natural flows or cause additional flooding outside the river banks or an off-stream diversion structure.
3. On average, more than six million acre-feet of water flows out of Oklahoma from the six major river basins located in the southeast region. The Kiamichi River Basin alone produces more than 1.4 million acre-feet of water in an average year while the Little/Mountain Fork River Basins collectively produce more than 2.4 million acre-feet. The NTWA proposal would use only about 7 percent of the average annual flows from these three basins.
4. The draft contract provides a three-year period within which STICC would have to complete environmental studies and obtain all necessary licenses and permits before it could begin to build the water transfer system. The NTWA would pay all costs of such studies. Endangered and threatened species would have to be protected. Low flow needs of the Kiamichi River, Red River, and Little River would have to be addressed. The EPA and U.S. Fish and Wildlife Service would be consulted.
5. The NTWA would pay for pipelines, easements, STICC overhead costs, and all environmental studies required for system development. The NTWA would also pay a "commodity charge" for the intrinsic value of the water; Oklahoma citizens and entities would not pay any commodity charge to use water. Differences in valuing the commodity charge caused negotiations with the NTWA to break down in January 2002. Oklahoma calculated the present value at $339 million (amortized over 100 years to produce more than $5 billion) while the NTWA estimated the present value at approximately $174 million (to produce about $1.4 billion over 100 years). A portion of the proceeds could be used to pay the Sardis Reservoir repayment contract, which has a current outstanding balance of approximately $38 million.
6. The draft contract could not become effective until the Water Compact becomes effective and the full Oklahoma Legislature approves the contract.

VII. Oklahoma City Water Utilities Trust (OCWUT) Proposal

1. The Oklahoma City Water Utilities Trust is interested in securing a long-term future supply from southeast Oklahoma. OCWUT currently relies on Atoka Lake and McGee Creek Reservoir for approximately one-half of its total supply. OCWUT pumps water from McGee Creek Reservoir to Atoka Lake and from Atoka Lake to Lake Stanley Draper, where it is treated and distributed throughout the Oklahoma City area. OCWUT has indicated that Kiamichi River water would be pumped approximately 20 miles to McGee Creek Reservoir. OCWUT's response to the RFQ contained two options for development, both of which anticipate a low water dam diversion point on the Kiamichi River, near Moyers, or from a point closer to the headwaters of Hugo Reservoir: (1) use of Sardis Lake storage as backup supply, amounting to approximately 150,000 acre-feet of water per year, and assumption of the Sardis Lake contract from the State, or (2) use of run-of-the-river flows of the Kiamichi River for about 50,000 acre-feet of water per year (leaving at least 10 cubic feet per second low flow protection and no impact on Hugo Reservoir yield). OCWUT discussed the possibility of a hybrid of these two options. Analysis of the NTWA proposal indicates no impact to water that may be used by OCWUT under either of OCWUT's options.
2. OCWUT's proposal would satisfy the cornerstone principle that waters from the Kiamichi River should be used for local and state uses before being considered for use out of state. OCWUT already possesses the necessary infrastructure to utilize waters of the Kiamichi River for the very long-term needs of central Oklahoma communities, including Norman, Edmond, El Reno, Yukon, Mustang, and others if those entities can reach intergovernmental agreements with OCWUT as to the cost of storing and pumping the water.
3. OCWUT's Option 1 (assumption of the Sardis Reservoir repayment contract with the Corps of Engineers) would relieve the state of the $38 million conditional obligation to the federal government.

VIII. Development In Southeast Oklahoma

1. The economic situation in southeast Oklahoma has generally lagged behind the rest of the state for a variety of reasons. Local citizens point out that there has been comparatively less oil and gas activity in the region. Some say that no water from the area should be sold to boost economic development; instead, industries will eventually come to the water in southeast Oklahoma. Two related viewpoints on this issue are that: (1) southeast Oklahoma possesses significant water resources, yet industries have not located there (unlike the north Texas area), and (2) many southeast Oklahoma residents do not want the air and water pollution, congestion and related environmental and social problems often associated with large metropolitan areas, but instead would prefer to develop less obtrusive recreation and tourism opportunities.
2. Water marketing could provide much-needed capitol for infrastructure improvements, to foster tourism, and perhaps attract light industry and other employment opportunities to southeast Oklahoma. There is a current need of more than $90 million for water and wastewater improvements in the southeast while much more is needed for roads and related projects key to future development. It is appropriate that areas producing marketed water should be appropriately compensated and have priority in obtaining funds for much-needed infrastructure.
3. Because a substantial majority of the Tribal Nation members reside in southeast Oklahoma, most of the Tribes' net water marketing proceeds (pursuant to the Compact, as drafted) would be utilized in southeast Oklahoma. In addition, the State could establish a public trust with membership from a cross-section of interests in southeast Oklahoma to set priorities for expenditure of the State's proceeds. Funds could be used for grants and as security and collateral to leverage bond issues for loans. The state public trust could use the existing experience of the OWRB and Oklahoma Department of Commerce to provide guidance in coordinating the extremely large amount of public infrastructure financing that could be possible from marketing available surface water resources.
   

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