1992-0630_MUNICIPAL WATER DISTRICT OC_Agreementti
AGREEMENT FOR INTERIM LICENSE AND
LEASE OF CAPACITY IN ALLEN-MCCOLLOCE PIPELINE
THIS AGREEMENT FOR INTERIM LICENSE AND LEASE OF CAPACITY
("Agreement") is entered into this 30th day of June, 1992, by and
between MUNICIPAL WATER DISTRICT OF ORANGE COUNTY ("MWDOC") as
managing agent of the Allen-McColloch Pipeline ("AMP") on behalf of
the Participants under the "Agreement for Construction, Operation
and Maintenance of Pipeline and to Enter into Sublease Concerning
the Diemer Filtration Plant/Santiago Aqueduct Intertie" and all
amendments and agreements related thereto ("Diemer Agreements") and
CAPISTRANO VALLEY WATER DISTRICT ("Lessee").
RECITALS
WHEREAS, MWDOC has entered into an agreement with Municipal
Water District of Orange County Water Facilities Corporation
("MWDOCWFC") and the Participants in the Allen-McColloch Pipeline
("AMP"), consisting of Yorba Linda Water District, the City of
Anaheim, the City of Orange, East orange County Water District,
Irvine Ranch Water District, Santiago County Water District, Los
Alisos Water District, E1 Toro Water District, Moulton -Niguel Water
District, Santa Margarita Water District, Trabuco Canyon Water
District and The Irvine Company ("Participants"), to construct the
AMP Flow Augmentation Project which will increase the capacity of
the AMP; and
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WHEREAS, MWDOC, MWDOCWFC and the Participants have entered
into negotiations with Metropolitan Water District of Southern
California ("Metropolitan") for the sale of the AMP to Metropolitan
to be effective June 30, 1998 and, if an agreement is needed, upon
completion of that sale, Metropolitan would undertake to supply all
demands within its service area at all delivery points along the
AMP; and
WHEREAS, in contemplation of the sale of the AMP to
Metropolitan, the Participants are willing to lease a portion of
their capacity in the AMP pending transfer of title to
Metropolitan, and
WHEREAS, the Lessee is within the service area of Metropolitan
and desires to lease capacity in the AMP on an interim basis until
title to the AMP is transferred to Metropolitan;
NOW, THEREFORE, in consideration of the facts set forth in the
Recitals and the promises and covenants set forth herein, the
parties agree as follows:
1. METROPOLITAN PURCHASE OF AMP. The Lease of capacity in
the AMP hereunder is subject to execution of a formal and binding
agreement (the "Metropolitan Purchase Agreement") among MWDOC,
MWDOCWFC, the Participants and Metropolitan for the sale of the AMP
to, and the purchase of the AMP by, Metropolitan, on terms and
conditions determined in the sole discretion of MWDOC, MWDOCWFC,
the Participants and Metropolitan. Neither MWDOC, MWDOCWFC, the
Participants nor Metropolitan shall be obligated to agree to any
specific term or condition for the proposed sale of the AMP nor
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shall they be liable to Lessee if the negotiations fail to result
in an agreement. The Lease of Capacity under this Agreement shall
have no force or effect until the Metropolitan Purchase Agreement
for the sale of the AMP to Metropolitan is executed by all parties,
although an Interim License will be permitted during negotiations
on the terms and conditions set forth herein.
Lessee acknowledges that the AMP is a facility financed and
constructed by a consortium of public water agencies and a private
corporation and that MWDOC, as trustee and managing agent, has no
authority or discretion to operate or permit the use of the AMP to
serve non -Participants except as may be expressly permitted and
limited by agreement with MWDOCWFC and the Participants. The Lease
or Interim License of FAP Capacity under this Agreement shall in no
way be deemed, interpreted or construed as creating or evidencing
an obligation on the part of MWDOC, MWDOCWFC or the Participants to
serve or continue to serve Lessee or any person or entity through
the AMP except as expressly provided hereunder. Lessee represents
and covenants that Lessee will be ready and able to sustain a
reduction or termination of use and will not oppose reduction or
termination of use pursuant to the terms of this Agreement on the
grounds that such reduction or termination would result in hardship
or water shortage conditions within Lessee's service area. Lessee
expressly covenants that Lessee will communicate the terms of this
Agreement pertaining to the potential reduction or termination of
capacity hereunder ("Termination Provisions") to each of its
sublessees and will require the same covenant regarding the ability
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to sustain and not opposing reduction or termination from its
sublessees. Lessee further covenants that Lessee has in force or
will, within three months of execution of this Agreement, place in
force an ordinance or other formally approved plan by the water
purveying agency to deal with water shortage situations within its
service area. The ordinance or plan shall include specific
provisions addressing water shortages due to water transmission
capacity shortages which would occur under implementation of the
Termination Provisions of this Agreement. Any sublease which
Lessee enters into for all or any part of the capacity leased
hereunder shall require that the sublessee and all retail agencies
using such capacity shall comply with this requirement.
2. DEFINITIONS. For purposes of this Agreement, the
following terms are defined as follows:
a. "Gravity Float Capacity" shall mean that capacity of
the AMP which exists under gravity flow conditions, while
meeting all contractual HGL requirements, prior to completion
of the AMP Flow Augmentation Project. Gravity Flow Capacity
is not subject to reduction if demand on the AMP exceeds
available capacity.
b. 11FAP Caoacit3C shall mean that capacity in the AMP
which will be created by completion of the Diemer Pump Station
phase of the AMP Flow Augmentation Project. By agreement with
the Participants, MWDOC will monitor demands and construct the
Diemer Pump Station if demand is projected to reach maximum
Gravity Flow Capacity within a two-year period which is the
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time necessary to build the Pump Station. Until the AMP Flow
Augmentation Project is actually completed (with the Pump
Station), FAP Capacity is not guaranteed. By agreement among
the Participants, owners or lessees of FAP Capacity are
permitted to utilize unused Gravity Flow Capacity prior to
completion of the AMP Flow Augmentation Project up to the
maximum amount of their FAP Capacity, subject to reduction or
termination when the total demand exceeds available capacity.
C. "AMP Flop Augmentation Proiect" means all planned
phases of the Project authorized under the "Fifth Amendment to
Agreement for Construction, Operation and Maintenance of
Pipeline and to Enter into Sublease Concerning the Diemer
Filtration Plant/Santiago Aqueduct Intertie", dated June 7,
1989.
d. "Leasee shall mean the leasehold interest created
under this Agreement at such time as the Metropolitan Purchase
Agreement is executed as described in Section 1. The Interim
License does not constitute a Lease.
e. *$Interim Licensee shall mean a temporary operational
accommodation to the Prospective Lessee allowing the
Prospective Lessee to receive water deliveries from the AMP
prior to the commencement of the term of the Lease as provided
in Section 4. The Interim License period shall commence on
June 1, 1992 if the Metropolitan Purchase Agreement has not
been executed on that date and shall continue until the
Metropolitan Purchase Agreement has been executed or until the
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Interim License is terminated pursuant to Section 9 hereof.
The Interim License shall not create any leasehold rights or
other interest in the Prospective Lessee and shall not be
deemed a license coupled with an interest, notwithstanding the
payment of consideration. The Interim License shall be
revocable at all times, subject to the notice required in
Section 9.
f. $'Utility Uses' shall mean the sum of all FAP Capacity
in use at a given time by all Participants which are at that
time exceeding their Gravity Flow Capacity.
g. I'Prosoective Lesseell shall mean the Lessee under
this Agreement prior to commencement of the term of the Lease.
3. LEASED CAPACITY. Subject to the conditions set forth
herein, MWDOC hereby leases to Lessee and Lessee leases from MWDOC
5 cfs of FAP Capacity in the AMP. The leased capacity extends
through Reach S5 of the AMP for delivery at the ST -21 flow meter.
All water delivered through capacity leased hereunder shall be
deemed delivered at the point it passes through the ST -21 flow
meter. Transmission, distribution and storage of such water after
it passes through the ST -21 flow meter becomes the sole
responsibility of Lessee. Lessee shall be solely responsible for
compliance with all rules and regulations, and payment of all fees,
charges and assessments imposed by Santa Margarita Water District
for water delivered into the South County Pipeline Project at the
direction of Lessee.
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3.1 MWDOC hereby acknowledges and agrees that Lessee may
sublease the capacity leased hereunder, however, any such
sublease shall not affect or increase any obligation on the
part of MWDOC hereunder nor shall it relieve or reduce any
obligation of Lessee. MWDOC's obligations under this
Agreement shall run solely to Lessee and no person or entity
shall acquire the right to bring legal action to enforce this
Agreement with respect to obligations of MWDOC, except Lessee.
Lessee shall remain primarily liable for the performance of
all obligations to be performed by Lessee hereunder. As a
condition of any sublease, Lessee shall require that the
sublessee assume all covenants provided in this Agreement,
including, but not limited to, the covenants contained in
Sections 1 and 9.c.
4. TERM. The term of the Lease shall commence on the later
of June 1, 1992 or the date the Metropolitan Purchase Agreement has
been duly executed by Metropolitan, MWDOC, MWDOCWFC and the
Participants as provided in Section 1 of this Agreement
("Commencement Date"). The term of this Lease shall expire on the
earlier of May 31, 1998 or the date Metropolitan assumes ownership
of the AMP under the Metropolitan Purchase Agreement ("Termination
Date"), Nothing herein shall be deemed to limit or bind MWDOC,
MWDOCWFC or the Participants with respect to the date of transfer
of the AMP under the Metropolitan Purchase Agreement.
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5. PAYMENT.
a. As consideration for the Lease of capacity, Lessee
shall make annual payments in the sum of $25,000.00 per cfs,
which shall be due in advance on the Commencement Date and on
the anniversary of the Commencement Date each year thereafter
during the term of the Lease. If the Termination Date is
other than an anniversary of the Commencement Date, then the
payment for the final partial year shall be $25,000.00 per
cfs.
b. Lessee shall pay an AMP surcharge on each acre-foot
of water delivered to Lessee through the AMP and an ST -21
surcharge on water delivered through the ST -21 Pump Station
Facility in an amount established by MWDOC from time to time
in accordance with the provisions of the Diemer Agreements.
The AMP surcharge charged to Lessee shall be at the same rate
as that charged to Participants.
C. In addition to the payments specified in 5.a and
5.b, Lessee shall pay a proportionate share of all AMP
operation and maintenance charges on the same basis as said
costs are allocated among the Participants under the Diemer
Agreements. (Specifically, operation and maintenance costs
will be allocated on the CFS -Foot Weighting Method described
in Section 7 of the Fifth Amendment to Agreement for
Construction, Operation and Maintenance of Pipeline and to
Enter into Sublease Concerning the Diemer Filtration
Plant/Santiago Aqueduct Intertie ("Fifth Amendment"), unless
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amended.) Included in operation and maintenance costs charged
to users of FAP Capacity shall be the cost of operating the
DI -08 pump station as required under the Fifth Amendment. The
operation and maintenance costs will be assessed on an annual
basis and MWDOC will submit an invoice to Lessee in April of
each year during the term of the Lease showing both the annual
payment and the operation and maintenance charge to be paid
June 1 of that year.
d. The full amount of the payments and charges
specified herein shall be due and payable notwithstanding any
shutdowns, outages, emergencies or reductions in deliveries
from Metropolitan, and notwithstanding Lessee's failure to
utilize all or any portion of the leased capacity, or the
reduction of FAP Capacity due to demand exceeding the gravity
flow capacity of the AMP under Section 7.b.
6. PEAR CAPACITY. The capacity leased under this Agreement
by Lessee shall be the maximum capacity to which Lessee shall be
entitled under peak demand by Lessee throughout the term of the
Lease. Lessee shall not exceed the maximum capacity flow specified
herein whether or not there is unused capacity in the AMP. MWDOC
shall rely on reports from Santa Margarita Water District to
monitor flows from the AMP to the South County Pipeline to ensure
that Lessee has not exceeded the leased capacity. Upon
notification from Santa Margarita Water District that Lessee has
received flows in excess of the leased capacity, MWDOC shall direct
Santa Margarita Water District to manually limit flows to Lessee to
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the leased capacity amount. This Section shall not apply to excess
flows delivered at MWDOC's option under Section 8.
7. LIMITATIONS ON CAPACITY.
a. No Guaranty of Deliveries. This Agreement provides
for a lease of capacity only. No representation or warranty
is made concerning the supply or availability of water for
delivery through the leased capacity during the term of the
Lease. The delivery of water is subject to availability of
supplies from Metropolitan and neither MWDOC, MWDOCWFC nor the
Participants shall be obligated to augment, insure or increase
the Metropolitan supply or obtain other sources of supply. In
the event of a reduction of water supply by Metropolitan to
MWDOC, MWDOC shall have sole discretion with respect to
allocation of said supply within MWDOC's service area. If
Lessee is not within MWDOC's service area, then, in the event
of a reduction of water deliveries by Metropolitan to Lessee,
Lessee shall have sole discretion with respect to allocation
of said supply within Lessee's service area.
b. Limitations on FAP Capacity. Lessee acknowledges
that Lessee is aware that construction of certain phases of
the AMP Flow Augmentation Project has been delayed
indefinitely by agreement of the Participants, MWDOC and
MWDOCWFC with the expectation that construction of those
phases may be avoided entirely upon purchase of the AMP by
Metropolitan. The leased capacity hereunder has been
designated as FAP Capacity. MWDOC, MWDOCWFC and the
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Participants have agreed to allow use of FAP Capacity by the
owners and lessees thereof pending completion of the AMP Flow
Augmentation Project or sale to Metropolitan, subject to
reduction or termination if the available capacity in the AMP
is not sufficient to meet all demands, therefore, FAP Capacity
leased hereunder shall be subject to the following additional
limitations.
1) At such time as the total demand on the AMP
exceeds the available capacity, all owners and lessees
with Gravity Flow Capacity shall have priority rights to
use of capacity up to the amount of their full Gravity
Flow Capacity.
2) Any capacity which is available after all
gravity flow capacity priority demands have been
satisfied shall be allocated among owners and lessees of
FAP Capacity in proportion to their FAP Capacity rights
in such a way that all owners and lessees of FAP Capacity
whose demands are not satisfied have been cut-back in the
same proportion.
3) The availability of FAP Capacity in periods
where demand exceeds availability is also subject to the
physical ability of the AMP to deliver that capacity to
the desired delivery point after priority demands have
been met.
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C. Monitoring of Capacity Usaae. In order to fully
protect the rights of the Participants to priority use of
their Gravity Flow Capacity in the AMP, MWDOC shall monitor
flows and usage on the system and the total amount of capacity
being leased. In accordance with the agreement among the
Participants, MWDOC, and MWDOCWFC for deferring construction
of the pump station at Metropolitan's Diemer Filtration Plant,
MWDOC is required to proceed with construction of the pump
station at such time as peak flows on the AMP reach 366 cfs or
if future demand is at any time projected to reach 416 cfs
within two years. At no time shall the combination of Utility
Use and Lease capacity under all Leases exceed the sum of 140
cfs.
8. EXCESS BLOWS. From time to time, MWDOC may request that
Lessee take delivery of flows in excess of Lessee's requested
delivery and possibly in excess of Lessee's leased capacity, in
connection with special circumstances involving the operation of
the AMP, emergencies in other importation systems or other
extraordinary conditions which warrant a sharing of facilities to
meet health and safety needs within the County. Lessee will be
expected to comply with such requests to the extent possible under
Lessee's operating capabilities. Lessee will not be charged
additional Lease payments or the operation and maintenance charge
on water delivered in excess of Lessee's requested delivery.
Lessee will be responsible for payment for the water delivered,
including the AMP surcharge and ST -21 surcharge on water delivered
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pursuant to this Section.
9. INTERIM LICENSE. Commencing on June 1, 1992 and as long
as it appears to MWDOC, MWDOCWFC and the Participants, in their
sole opinion, that negotiations with Metropolitan are proceeding
well and that an agreement for sale of the AMP to Metropolitan is
imminent, MWDOC shall permit Prospective Lessee to have an Interim
License for use of capacity in the AMP and permit Prospective
Lessee to receive deliveries of water from the AMP pending
commencement of the Lease. The Interim License under this
provision does not constitute a Lease of capacity in the AMP and
creates no leasehold or other right or interest in the Prospective
Lessee. The Interim License shall not be deemed to be a license
coupled with an interest, notwithstanding the payment of
consideration and shall be revocable at all times, subject to 3
months' written notice. The Interim License is subject to all
restrictions, limitations, obligations and requirements which apply
to the Lease and is subject to the following additional
restrictions, limitations, obligations and requirements:
a. Notwithstanding the provisions of Section 5.a of
this Agreement, the consideration to be paid by Prospective
Lessee for the Interim License for use of capacity shall be
the sum of $50,000.00 per cfs of capacity annually which shall
be due in advance on June 1, 1992 and on the anniversary of
that date until the Commencement Date of the Lease or
termination of the Interim License, whichever occurs first.
If the Commencement Date of the Lease occurs on or before
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June 1, 1993, then the consideration paid by Prospective
Lessee for the Interim License shall be applied to the Lease
term such that the effective rate from the date the Interim
License was initiated June 1, 1992, shall be $25,000.00 per
cfs per year. If the Commencement Date occurs after June 1,
1993, then the consideration paid by Prospective Lessee for
the year in which the Lease commences shall be prorated on the
basis of twelve 30 -day months as of the Commencement Date such
that the effective rate is $50,000.00 per cfs per year during
the Interim License period and any balance shall be applied to
the consideration payable under the Lease. All amounts
payable under Sections 5.b and 5.c of this Agreement shall be
payable by Prospective Lessee for the Interim License and the
terms of Section 5.d of this Agreement shall apply equally to
the Interim License.
b. Notwithstanding subsection 9(a), supra, if, prior to
execution of a final agreement with Metropolitan, MWDOC,
MWDOCWFC and the Participants have received a letter from
Metropolitan in a form acceptable to MWDOC, MWDOCWFC, and the
Participants acknowledging Metropolitan's commitment to
purchase the AMP on agreed terms and conditions, subject only
to drafting and execution of the final agreement of purchase
and sale finalizing the agreement, then the consideration for
the Interim License from the date of receipt of such letter to
the Commencement Date shall be $25,000 per cfs per year and
shall be prorated for any partial year prior to the
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Commencement Date with the balance applied to the Lease term.
The Interim License may be terminated by MWDOC or Lessee at
any time without cause or warning upon three months' written
notice. In the event the Interim License is terminated by
MWDOC or Lessee pursuant to this Section 9.b, then the
consideration for any partial year preceding the termination
date shall be prorated on the basis of twelve 30 -day months
and the balance refunded to Lessee. The refund of
consideration for any partial year after termination shall be
the sole payment and remedy to which Lessee shall be entitled
as a result of termination of the Interim License pursuant to
this Section. Termination pursuant to this Section 9.b shall
be as to all capacity used under this Interim License; there
shall be no right to terminate as to a portion of the
capacity.
C. Prospective Lessee represents and covenants that
at all times during the Interim License, Prospective Lessee
shall be ready and able to sustain a termination of use under
the Interim License on three months' written notice.
Prospective Lessee shall be bound by all of the covenants and
representations contained in Section 1 of this Agreement with
respect to Prospective Lessee's use under the Interim License.
d. The Interim License shall be limited to the
identical amount of capacity to be leased by Prospective
Lessee during the term of the Lease. Subject to the
restrictions in Section 3.1 and all limitations and
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restrictions provided in this Section 9, Prospective Lessee
may assign all or some of Prospective Lessee's rights under
this Interim License to other agencies within its service
area.
10. CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) COMPLIANCE. The
environmental impacts of delivery of water from the AMP through the
South County Pipeline were addressed in the Environmental Impact
Report (EIR) prepared prior to approval of the South County
Pipeline Project. To the extent that the use contemplated by
Lessee under the Lease or the Interim License involves a
significant expansion of use beyond that addressed in the EIR for
the South County Pipeline, Lessee represents and covenants that it
has complied with all requirements of the regulations implementing
CEQA prior to approving and executing this Agreement.
11. JOINT USE OF CAPACITY IN WATER CONVEYANCE FACILITIES. By
executing this Agreement, Lessee/Prospective Lessee acknowledges
that the compensation provided herein for the Lease of capacity and
the Interim License is fair and reasonable, and that the other
terms and conditions are fair and reasonable all within the meaning
of Water Code §§1810 through 1814, inclusive, and specifically that
the provisions for termination of the right to use capacity
hereunder are fair and reasonable in view of the circumstances
surrounding this Agreement. As a part of the consideration for
this Agreement, Lessee/Prospective Lessee hereby waives any right
to bring a judicial action or any proceeding under Water Code §1813
to challenge the terms and conditions of this Agreement or to
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compel continuance of the use of capacity in the AMP after
termination of such use pursuant to the terms of this Agreement.
The waiver of rights by Lessee under Water Code §§1810 through 1814
shall survive the termination of this Agreement.
12. DEFAULT. In the event Lessee defaults in the payment of any
amount which Lessee is obligated to pay under this Agreement and
does not cure such default for a period of thirty days after
written notice of such default is given to Lessee, MWDOC shall have
the option to (1) suspend Lessee's use of capacity in the AMP until
such time as Lessee has paid all delinquent amounts with interest
at the rate of ten percent (10%) per annum from the date said
payment became due; or (2) terminate this Agreement and Lessee's
right to capacity in the AMP and make said capacity available for
lease to another agency. If MWDOC elects to terminate the Lease
because of non-payment, MWDOC shall be entitled to recover from
Lessee the difference between the payment which would have been due
under the Lease with Lessee and the payments, if any, which MWDOC
is able to obtain by leasing said capacity to another agency. If
Lessee breaches any representation, covenant or obligation other
than non-payment of any amount due hereunder and does not cure such
default for a period of sixty days after written notice specifying
the nature of the default is given to Lessee, then MWDOC shall have
the option to terminate the Lease immediately upon written notice
to Lessee. Upon termination for breach of any representation,
covenant or obligation hereunder other than non-payment, MWDOC
shall have the right to recover from Lessee all damages and costs
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incurred by MWDOC as a result of such breach, including the
payments which would have become due for the balance of the term
and reasonable attorneys' fees.
13. NOTICES. All notices to be given under this Agreement shall
be personally delivered or deposited in the U. S. Mail, postage
prepaid, addressed as follows:
To MWDOC: Municipal Water District of Orange County
10500 Ellis Avenue
P. O. Box 20895
Fountain Valley, CA 92728
ATTN: Karl Seckel
Asst. Mgr./Dist. Engineer
To Lessee: Coastal Municipal Water District
3 Monarch Bay Plaza, Suite 205
Dana Point, CA 92627
ATTN: Hunter Cook, General Manager
Notices will be deemed given on the date personally delivered or
three days after the date deposited in the mail.
14. INDEMNITY. Lessee shall indemnify and hold harmless MWDOC,
MWDOCWFC and the Participants from any and all claims, damages,
liabilities, obligations or legal actions, including court costs
and attorneys' fees, to or by third parties arising out of Lessee's
or its sublessees' use of capacity under this Agreement or out of
the termination or reduction of water deliveries hereunder. MWDOC
shall indemnify and hold harmless Lessee and any sublessees of
Lessee from any and all claims, damages, liabilities, obligations,
or legal actions, including court costs and attorneys' fees to or
by third parties arising out of MWDOC's operation and maintenance
of the AMP and AMPFAP, except such claims, damages, liabilities,
obligations or legal actions which arise out of the termination or
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reduction of water deliveries to Lessee or its sublessees in
accordance with the terms of this Agreement.
DATED: 12.2- If,
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MUNICIPAL WATER DISTRICT OF
ORANGE COUNTY
By01� -
"LESSEE"
CAPISTRANO VALI WATER DISTRICT
BY