COLORADO NATURAL RESOURCES, ENERGY & ENVIRONMENTAL LAW REVIEW When the Navajo Generating Station Closes, Where Does the Water Go? Gregor Allen MacGregor* INTRODUCTION ..................................................................................... 291 I. HISTORICAL SETTING OF THE CURRENT CONFLICT .......................... 292 A. “Discovery” of the Colorado River; Spanish Colonization Sets the Stage for European Expansion into the Southwest ....... 292 B. American Indian Law: Sovereignty, Trust Responsibility, and Treaty Interpretation ........................................................... 293 C. Navajo Conflict and Resettlement on their Historic Homelands ............................................................................................ 295 D. Navajo Generating Station in the Context of the American Southwest’s “Big Buildup” ................................................. 297 II. OF MILLET AND MINERS: WATER LAW IN THE WEST, ON THE RESERVATIONS, AND ON THE COLORADO.................................. 301 A. Prior Appropriation: First in Time, First in Right ................ 302 B. The Winters Doctrine and the McCarran Amendment ......... 303 D. River, the Law of ................................................................. 305 1. Introduction.................................................................... 305 2. The Colorado River Compact ........................................ 306 3. Conflict in the Lower Basin Clarifies Winters .............. 307 * Mr. MacGregor is a retired US Army Cavalry Officer. This Article is adapted from the author’s capstone J.D. work as part of the Army’s Funded Legal Education Program. This Article represents only the views of the author and should not be construed as representing the official position of any federal agency. Mr. MacGregor currently practices water law in Boulder, Colorado at Moses, Wittemyer, Harrison and Woodruff P.C. This Article is dedicated to my family, who patiently endure my endless water-talk. I would like to thank Professors Sarah Krakoff and Charles Wilkinson at the University of Colorado Law School for their inspirational work in water issues and building a more just an equitable society. I would also like to thank Professors Sharon Jacobs and Mark Safty for their guidance in the worlds of electricity regulation and renewable energy project finance. COLORADO NATURAL RESOURCES, ENERGY & ENVIRONMENTAL LAW REVIEW 290 Colo. Nat. Resources, Energy & Envtl. L. Rev. [Vol. 31:2 4. Harmony and Oversight in the Upper Basin Provides NGS Water ............................................................................. 311 E. Water, Steam, Turbines, and the Navajo .............................. 313 F. State and Federal Paths to Beneficial Use ............................ 315 G. Current Status of the Colorado River Basin ......................... 315 III. REASONS TO SETTLE NAVAJO CLAIMS TO NGS WATER ............... 319 A. NGS Water Should be Available to the Navajo ................... 319 B. Water and Uncertainty in Winters Litigation ....................... 321 C. Settlement ............................................................................. 322 1. What Amount? ............................................................... 324 2. The Long Road to Water Service .................................. 325 IV. POSSIBLE USES OF NGS WATER .................................................... 326 A. Water Could Be Used for Solar Redevelopment of NGS .... 326 B. Navajo Municipal Needs ...................................................... 329 CONCLUSION ......................................................................................... 330 EPILOGUE NAVAJO GENERATING STATION: AN OPPORTUNITY FOR RENEWABLE ENERGY PROJECT FINANCE .............................. 331 I. BRIDGING THE GAP ........................................................................... 331 A. Navajo Culture and Energy Development ........................... 332 II. ELECTRICITY REGULATION OVERVIEW ........................................... 333 A. State Jurisdiction .................................................................. 333 B. Federal Jurisdiction .............................................................. 334 C. Requirements Particular to Indian Lands ............................. 336 D. Navajo Code ......................................................................... 338 III. PROJECT DEVELOPMENT THROUGH THE SAFTY MODEL: OVERVIEW ................................................................................................... 339 A. What is Project Finance? ...................................................... 340 B. Eleven-Document Framework ............................................. 341 IV. ADVANTAGES OF THE NGS SITE FOR PROJECT DEVELOPERS ....... 343 A. Joint Venture Agreement ..................................................... 344 B. Resource Density, Site Control, and Access ........................ 344 C. Permits .................................................................................. 345 D. PPA/Competitive Procurement ............................................ 347 E. Interconnection Agreement .................................................. 347 F. Construction Contracts ......................................................... 348 G. Equipment Supply Agreement ............................................. 348 H. Operation and Management Agreement .............................. 349 I. Warranties: Consultants and Advisory Agreements .............. 349 COLORADO NATURAL RESOURCES, ENERGY & ENVIRONMENTAL LAW REVIEW 2020] When the Navajo Generating Station Closes 291 J. Financing Agreements ........................................................... 349 V. RENEWABLE ENERGY, THE MORE IMMEDIATE OPPORTUNITY ....... 350 INTRODUCTION In December 2019, the Navajo Generating Station (“NGS”) outside of Page, Arizona closed after nearly fifty years of operation. Commentary has focused on whether a new utility interest, or the Navajo Tribe itself, would take over operation of the plant. This Article, however, will examine what will happen to the 34,100 acre-feet of water used by the plant once the steam turbines stop spinning. The complex history of the generating station, the law of the Colorado River concerning its water use, and the stressed drought conditions of the entire Colorado River Basin will create a contentious environment for reallocating the water. However, each of these factors indicate that the Navajo Nation has the superior claim to new uses of this water. Allowing the Navajo to use the NGS’s allocation of water will permit the Nation to develop alternative industries to replace the jobs and revenues lost after the NGS shuttered, and more importantly, increase domestic water service to the forty percent of households on the reservation which lack running water. To support the Navajo Nation’s claim to the NGS water, this Article will first examine the historical setting of the current conflict. The history of European and American expansion into the Southwest explains how the Navajo came to stand in the middle of major conflicts over water resources and industrial expansion of the surrounding region. Second, an examination of water law in the West, concerning Indian Reservations, and the particularly complex administration of the Colorado River will be necessary to understand why resolution of Indian water claims are so difficult to resolve. Third, this Article will argue that a settlement agreement between the Navajo, federal, and Arizona state governments will be beneficial for each party. The Navajo will need to seek funding to put a right to the water to use as part of a settlement agreement while the federal and state governments will each be interested in maintaining the status quo on the Colorado River. Finally, this Article will suggest that a water settlement could lead to the redevelopment of the NGS site for solar power production and to increase domestic water services on the Navajo Nation reservation. Though the circumstances are complex, both the law and equity suggest the simple solution of allocating all or a portion of NGS’s 34,100 acre-feet for Navajo use. COLORADO NATURAL RESOURCES, ENERGY & ENVIRONMENTAL LAW REVIEW 292 Colo. Nat. Resources, Energy & Envtl. L. Rev. [Vol. 31:2 I. HISTORICAL SETTING OF THE CURRENT CONFLICT A. “Discovery” of the Colorado River; Spanish Colonization Sets the Stage for European Expansion into the Southwest Nearly one hundred years before the English established the Jamestown Colony, Don Francisco de Coronado mounted his horse and led the first European expedition into the American Southwest.1 Departing Mexico in 1539, his expedition was seeking Cibola, the seven fabled cities of gold north of Spain’s holdings in the New World. Coronado failed to secure the illusory treasure, but made contact with various Hohokam- descended people, including the Hopi, and traveled the landscapes from present-day Arizona to Texas before returning south.2 While with the Hopi, Coronado dispatched Lopez de Cardenas to inspect a large canyon and river to the north.3 Led to the precipice by Hopi guides, Cardenas and his men camped on the south rim of the Grand Canyon for several days, attempting to find a route to the water below. The lightest and most agile men of Cardenas’s group failed to descend more than a third of the depth of the canyon.4 The scouting party returned to the expedition as the first Europeans to discover the Colorado River in 1540.5 Hundreds of years passed before European-American