ADDENDUM No. 1 July 10, 2012 to Garrison Dam/Lake Sakakawea Project, North Dakota Final Surplus Water Report and Environmental Assessment March 2011 1. This Addendum No. 1 modifies the Final Garrison Dam/Lake Sakakawea Surplus Water Report and Environmental Assessment (EA) (Volumes I and II), dated March 2011, to reflect the policy direction regarding surplus water provided in the Assistant Secretary of the Army for Civil Works (ASA(CW)) memorandum, dated May 8, 2012, subject: Lake Sakakawea Surplus Water Report (copy attached). 2. As described in the paragraphs that follow, this Addendum No. 1 replaces aspects of the surplus water pricing and agreement/easement/license process described in the March 2011 Report and EA, and the recommended pricing suggested by Headquarters, U.S. Army Corps of Engineers in the transmittal memorandum, dated April 19, 2011, with the interim direction provided in the ASA(CW) memorandum for implementing surplus water agreements for municipal and industrial (M&I) water supply under Section 6 of the Flood Control Act of 1944 (Public Law 78-534) at Lake Sakakawea until a national policy for surplus water pricing is developed through rulemaking. This Addendum does not change the report finding that 100,000 acre-feet/year of surplus water is available at Lake Sakakawea to meet M&I water supply needs for the period of the next ten years, and does not affect the environmental conditions or impacts evaluated in the EA. This Addendum also reflects the ASA (CW)’s acknowledgement of the report‘s conclusion regarding the availability of surplus water. 3. As directed in the ASA(CW) memorandum, the Corps of Engineers is initiating actions to establish a nationwide policy with input from all interested parties for uses and pricing of surplus water for M&I water supply under Section 6 of the Flood Control Act of 1944. This nationwide policy will be developed as expeditiously as possible through notice and comment rulemaking in accordance with the Administrative Procedure Act, 5 U.S.C. 553. 4. In the interim, until the rulemaking to develop the new nationwide surplus water policy is complete, the following pricing directives and agreement/easement/license process will be implemented at Lake Sakakawea for surplus water for M&I water supply purposes: a. For new M&I users, defined as those requesting withdrawal of surplus water for M&I purposes for the first time, or those seeking a new, modified, or renewed easement or license in order to increase their current use or change from irrigation to M&I use: i. The new users will be required to enter into surplus water agreements as part of the application process for obtaining, renewing, or modifying easements or licenses. The terms of such agreements will be no longer than five years, although provision may be made for extension by mutual agreement of the parties for another five-year period. The agreements will not contain any charges for withdrawals during the notice and comment rulemaking period. ii. Upon completion of the notice and comment rulemaking, a modified or new surplus water agreement will be required for continued M&I surplus water withdrawals, on terms for use and pricing consistent with the new final rule. 1 iii. The consideration or fees associated with entering into a real estate easement or license will still apply. b. For existing M&I users, who do not seek any changes in their continuing water withdrawals: i. During a transitional period until the completion of the rulemaking process, existing M&I users with current easements or licenses may continue to make withdrawals without an agreement or charge for the use of surplus water, but will be on notice that surplus water agreements will be required for continued M&I surplus water use once rulemaking is completed, on terms for use and pricing consistent with the new final rule. ii. Any easements or licenses expiring before the final rule is published may be extended for a period not to exceed five years, with the condition that surplus water agreements will be required for continued M&I surplus water use once rulemaking is completed, on terms for use and pricing consistent with the new final rule. The consideration or fees associated with extending the real estate easement or license will still apply. 5. Upon completion of rulemaking, all users of surplus water for M&I purposes will be required to have in effect a surplus water agreement and associated easement or license that reflect the new use and pricing policy established via the rulemaking process. 2 DEPARTMENT OF THE ARMY OFFICE OF THE ASSISTANT SECRETARY CIVIL WORKS 108 ARMY PENTAGON WASHINGTON DC 20310-0108 MEMORANDUM FOR DIRECTOR OF CIVIL WORKS SUBJECT: Lake Sakakawea Surplus Water Report 1. References: a. ASA(CW) memorandum dated 17 February 2012, subject: Lake Sakakawea Surplus Water Report and Pending Irrigation Use Applications. b. CECW-P memorandum dated 3 February 2012, subject: Audit of Water Withdrawals from the Missouri River Main Stem Reservoirs. c. ASA(CW) memorandum dated 1 December 2011, subject: Lake Sakakawea Surplus Water Report. d. CECW-NWD memorandum dated 19 April 2011 , subject: Garrison Dam/Lake Sakakawea, North Dakota, Surplus Water Report. e. ASA(CW) memorandum dated 24 March 1987, subject: Sale of Surplus Water. 2. Reference 1.d. transmitted the Surplus Water Report for Garrison Dam/Lake Sakakawea, North Dakota, ("Report") prepared by the Omaha District, along with two specific recommendations. In particular, you recommend that I: (1) accept the conclusion in the report that 100,000 acre-feet of surplus water is available for annual withdrawal over the next 10 years, and (2) approve on an interim basis a pricing methodology based on recovering operation and maintenance costs rather than cost-of­ storage as presently contemplated in 'Engineer Regulation 1105-2-100. Although I acknowledge the Report's findings regarding the availability of surplus water, I decline to establish a nationwide pricing policy without more input from all interested stakeholders. Accordingly, in the near-term, I do not oppose the Corps entering into new agreements for the use of surplus water1 at Lake Sakakawea as identified in the Report, with one important exception - that no charge shall be made for surplus water uses pending the outcome of the notice and comment rulemaking as directed below. Additionally, as discussed in reference 1.c., the surplus water reports for the other Missouri River main stem reservoirs shall be finalized as soon as possible and forwarded to me for review, although all pricing policy issues raised therein will be deferred pending completion of the rulemaking process. 1 Pursuant to Section 6 of the Flood Control Act of 1944. Printed on G) Recycled Paper 3. I agree that long-term contracts for municipal and industrial water supply storage should be executed under the authority of the Water Supply Act of 1958. Such long­ term water supply storage agreements envision recovering the cost-of-storage, which generally includes amortized costs of construction, operation and maintenance. Short­ term municipal and industrial uses of surplus water, in contrast, are accommodated under the authority provided in Section 6 of the Flood Control Act of 1944. Because the use of surplus water under Section 6 does not confer long-term or permanent rights to storage, you recommended a different pricing structure. Establishing a definitive policy that reflects the distinction between these two authorities would add significant and necessary clarity to the Corps' water supply practice for Lake Sakakawea and nationwide. The application of these statutory authorities to the withdrawals of water at Lake Sakakawea and other Missouri River main stem reservoirs has remained unsettled far too long. I am committed to resolving this uncertainty by establishing a nationwide policy for Section 6 surplus water uses through formal rulemaking. 4. Accordingly, I direct the following: a. Confirm the source of authority for all water withdrawals in the Missouri River main stem within 30 days from the date of this memorandum or as expeditiously as possible. Reference 1.b., Table 1, does not identify with certainty the authority the Corps considers applicable to a number of withdrawals of water. Your audit report suggests a Bureau of Reclamation authority may be applicable. b. Initiate action immediately to pursue notice and comment rulemaking in accordance with the Administrative Procedure Act to establish a nationwide policy for surplus water uses under Section 6. Rulemaking will allow all stakeholders to express their views and recommendations. It is imperative that this rulemaking process conclude at the earliest date possible. Provide me within the next two weeks a timeline with key milestones dates for concluding the rulemaking process within 18 months or as expeditiously as possible. c. For all new municipal and industrial uses of surplus water at Lake Sakakawea (i.e. , those requesting to use surplus water for the first time) proceed as proposed in your memorandum to enter into surplus water agreements which contain terms that provide appropriate notice to the user that use of the water will be at no cost pending completion of the rulemaking. The term of these agreements and any supporting easements or licenses shall be for a period not to exceed the time needed to conclude the rulemaking process. Surplus water agreements executed after the final rule is published shall be in accordance with the newly-established policies. d. Provide appropriate notice that all users of surplus water at Lake Sakakawea will be required to enter into new or revised surplus water agreements once the nationwide rule becomes effective. Any agreements and supporting easements or licenses expiring before the final rule is published may be extended consistent with paragraph 4.c.