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Idaho, Utility Agree to Settle Swan Falls Lawsuit by John Miller and Todd Dvorak, Associated Press Idaho Statesman, March 26, 2009

BOISE, Idaho - Idaho and the state's largest utility said Thursday they have agreed to settle a 2007 lawsuit filed by Idaho Power Co. that challenged a water rights deal governing how much Snake River water the utility is allowed to use at its Swan Falls dam south of here.

The parties said the out-of-court deal resolves years of political and legal wrangling and key differences in a 1984 pact known as the Swan Falls Agreement. Terms of that pact allocated Idaho Power a right to 5,600 cubic feet per second minimum flow during winter months, and 3,900 cfs in summer at the dam to generate hydropower.

Idaho Power challenged the Swan Falls pact in 5th District Court in May 2007. The utility claimed it was being shorted on the amount of water the agreement promised to deliver to the Swan Falls dam. Utility lawyers argued that drought and a significant drawdown of the Eastern Snake Plain Aquifer from groundwater pumping had reduced flows in the river and impinged on the utility's ability to generate power.

Idaho Power also sought to clarify its rights to water above the seasonal minimum flows. Rights to those flows, as set forth in the Swan Falls agreement, have been held in trust by the state and used for irrigating crops and recharging the depleted aquifer upstream of the dam.

The proposed settlement, which includes three bills to be introduced Friday in a state Senate committee, clarifies that water rights held in trust by the state of Idaho can be subordinated for uses such as aquifer recharge.

In return, the state has agreed to back Idaho Power if it seeks to raise consumer rates to recoup any lost revenue directly related to the state's decision to use trust water to recharge the aquifer.

"The state, though the Governor ... will in good faith cooperate with and support Idaho Power Company in any regulatory proceeding ... to address any rate, or other impacts directly attributable to the implementation of managed recharge," according to the settlement.

Gov. C.L. "Butch" Otter praised the deal and said it lays the foundation for future talks over important management issues of Snake River water tied to the Swan Falls agreement.

Attorney General Lawrence Wasden said the deal makes clear the state's sovereignty over its water.

"Today's settlement provides the certainty needed by all water users," Wasden said in a statement. "It makes it possible for agricultural users and Idaho Power Company to focus on their business plans rather than on protracted litigation in which there are always risks of an adverse outcome to all parties."

If approved by the Legislature, the settlement would resolve a key dispute over Snake River flows and managing the aquifer, an underground reservoir that covers a 10,800-square-mile area in southern Idaho.

The state has also been dealing with thousands of farmers, businesses and cities that have drawn down the aquifer enough to reduce flows spilling from natural springs. Trout farms near Hagerman have senior rights to those cool spring waters, but say flows have diminished in recent years due to excessive groundwater pumping.

This month, state water managers introduced a multimillion-dollar plan to manage the aquifer, one of the state's most critical resources that annually irrigates more than 2.1 million acres.

When it filed its lawsuit in 2007, Idaho Power, which has about 460,000 customers, argued that the Swan Falls agreement was flawed because it was based on faulty data about the amount of water available. Utility attorneys also claimed the state had appropriated too much water from the river.

LaMont Keen, utility CEO, praised Otter for setting a tone that made resolution possible. In the deal, the state and power company acknowledge that enhancing the aquifer and springs and river flows through recharge can be a benefit for all water users.

The proposed settlement is similar to legislation that was defeated in the Idaho Senate in 2006. Sponsored by then-House Speaker Bruce Newcomb, the bill would have allowed Idaho to take water from the Snake River to recharge the aquifer that is down from high levels measured in the 1940s.

Idaho Power vigorously fought the bill, waging a public campaign that included mailings to customers and television ads.

Newcomb praised the settlement Thursday. But he said the provision that obligates the state to support Idaho Power if it seeks to raise rates puts the onus on state leaders to carefully weigh the value of using trust water for recharge purposes.

"It's actually better than the 2006 legislation," Newcomb told The Associated Press. "It defines a lot more issues, including who controls the water.

"I also think it's reasonable in that if you're going to use the water for recharge, then you have to think about the cost that could be passed on to power consumers," said Newcomb, who is no longer in the Legislature.