May Revision Trailer Bill Proposals on the Delta Conveyance Project and Water Quality Control Plans

LAO Bottom Line: We recommend deferring action on both proposals, without prejudice. These policy issues do not have budget implications. Deferring action would allow the Legislature more time and capacity for sufficient consideration of the potential benefits, implications, and trade-offs. Below, we describe the proposals and note some key issues for the Legislature to keep in mind when it considers these proposals.

Delta Conveyance Project

Background

The Delta Conveyance Project (DCP) is the latest proposal to bypass the central Sacramento-San Joaquin Delta (Delta) to convey water from the northern Delta to pumps south of the Delta as part of the State Water Project (SWP). (Both the state-managed SWP and the federally managed Central Valley Project export water from the Delta and deliver it via a system of aqueducts and canals to Southern California cities and Central Valley farms.) The DCP would consist of two new intakes on the Sacramento River in the North Delta, a single underground tunnel about 45 miles long, and a new pumping facility south of the Delta. Previous bypass concepts—the Peripheral Canal (1982), Bay Delta Conservation Plan (2009) twin tunnels, and California WaterFix twin tunnels (2017)—were controversial, heavily debated, and ultimately abandoned. DCP proponents argue it would improve the reliability of the state’s water supply given the risks of climate change, salinity intrusion, sea-level rise, and earthquakes in the Delta. Opponents contend the project would jeopardize the Delta’s ecosystem (and native fish that rely on it) and regional economy—and argue instead for strengthening Delta levees and increasing water conservation and recycling. In 2024, the Department of Water Resources (DWR) estimated the cost of the project at $20.1 billion in undiscounted 2023 dollars. Water agencies and their ratepayers that receive water from the SWP would be required to pay for the project costs.

Proposal

The Governor’s May Revision proposes trailer bill language to streamline processes associated with the DCP in an attempt to accelerate the project. Statutory changes would include:

Making it easier for DWR to acquire land and real property (proposed trailer bill, Sections 1 and 2).
Requiring (rather than allowing) the State Water Resources Control Board (SWRCB) to cancel protests against water rights permit applications or change petitions when the party protesting fails to follow certain requirements. This presumably would reduce the number of protests (Sections 3 and 4).
Making some changes to requirements around how DWR must repay other state agencies that do work on the SWP (Section 5).
Explicitly including the DCP as part of the SWP. This would allow DWR to pay for the project in the same way that it has paid for other SWP facilities, that is, by issuing revenue bonds which then would be required to be repaid by contracting SWP water agencies. (This responds to a court ruling that DWR exceeded its authority in seeking to issue revenue bonds for a broader “Delta Program,” which the court ruled was more than a modification of the SWP) (Section 6).
Exempting DWR’s water rights permits for the SWP from construction and beneficial use time lines and preventing revocation of these permits (which essentially would make the permits permanent) (Section 7).
Implementing certain rules to streamline legal challenges to agency actions related to the DCP, including preventing the court from stopping construction, imposing time lines for both filing and resolving challenges, and limiting what information can be reviewed by the court to DWR’s certified administrative record (Section 8).
Allowing DWR to advance funding to utilities for electrical work associated with the SWP and CVP (Section 9).

Issues for Legislative Consideration

The proposed statutory changes raise important issues we recommend the Legislature consider carefully and deliberately before taking action. In effect, approving this proposal would signal the Legislature’s support for the DCP—something the Legislature might not be prepared to do—because it would remove many of the obstacles to move forward on the project. Moreover, even if the Legislature were inclined to support the project, some of the particular details of this proposal merit closer scrutiny. The proposal may offer benefits—namely, potentially expediting (and thereby also reducing costs for) this large infrastructure project intended to improve the reliability of the water supply delivered to Southern California. However, some aspects of the proposal could result in unintended consequences. Understanding the impact of each individual change, how they interact, and the range of possible outcomes will be important. Our recommendation to defer action on this proposal reflects our view that the Legislature should have sufficient time to fully consider both the broader project and the proposal’s specific provisions. This is especially true given that this proposal is not directly related to passing or implementing the state budget.

Below, we raise some issues for the Legislature to consider at a future time when it can more fully evaluate the Governor’s proposal. (We are still reviewing the proposed language, however, and may refine our assessment as we learn more.)

Proposal Treats SWP Water Rights Permits Differently From Other Water Rights Permits. Currently, permit holders must initiate and complete construction within a certain time frame stipulated in the permit and must put water to the beneficial use specified in the permit within a defined period. These requirements are intended to prevent speculation or stockpiling of water rights that could otherwise be used by others. SWRCB currently has the authority to revoke a permit if the permit holder fails to comply with permit conditions. Under the proposal, DWR’s water rights permits for the SWP would no longer be subject to construction and beneficial use time lines, nor would they be subject to potential revocation by SWRCB for nonuse or noncompliance. By exempting DWR from these provisions, the proposal appears to reduce independent regulatory oversight. This raises questions about whether it might conflict with the spirit of the public trust doctrine, which requires the state to safeguard water resources for the public benefit. Although the SWP serves a vital public purpose—providing water used by 27 million Californians—whether it should be exempt from key water rights law is a significant policy question.

Proposal Changes Certain SWRCB Authorities. Currently, a party may submit a written protest to SWRCB against the approval of a water right application or water right change petition. The protesting party and the water right applicant/petitioner then have to make a good faith effort to resolve the protest within a certain time frame. The proposed trailer bill language would require SWRCB to cancel protests submitted against permit applications/change petitions if the protesting party fails to follow certain rules. Currently, SWRCB has the option to cancel such protests, but may use its discretion. This change could expedite review of applications/change petitions and thereby help avoid delays. However, it also could reduce SWRCB’s ability to consider important issues that might be raised in protests.

Proposal Raises Important Equity Questions. The proposed changes to the protest rules (noted just above) and judicial process raise some questions about the ability of less-resourced groups to register opposition. For example, while requiring SWRCB to cancel certain protests could reduce the time that SWRCB (and DWR as the applicant being protested) spend on frivolous protests that did not follow requirements, it also could result in the protests of less-resourced community members being cancelled, given they might be more likely to make a mistake when submitting a protest than a more-resourced party employing an attorney. We also note that SWRCB already has the ability to cancel certain protests under current law—just not a requirement to do so. Therefore, the proposal would remove SWRCB’s discretion to potentially accept protests from parties that have a legitimate reason to protest but made an error in the process. The proposed changes that would shorten the time line for legal challenges also could have a similar effect—weeding out frivolous lawsuits, but also disqualifying legitimate challenges from less well-resourced parties who could not meet the tightened deadline.

Effects of Proposed Changes to Property Acquisition Requirements Unclear. The language removes the requirements that DWR (1) obtain an appraisal before trying to first negotiate with the owner and (2) provide a written statement to the property owner about the basis for what it considers just compensation when taking land by eminent domain. These changes seemingly reduce the transparency of transactions, which could potentially disadvantage the property owner in negotiations. DWR maintains that these changes actually could advantage the owner and potentially avoid the need to resort to eminent domain because the department would have more flexibility to consider appraisals from the owner and offer higher compensation than it could under the current rules. The Legislature would benefit from additional information to fully understand the potential ramifications of these proposed changes.

Some Components of Proposed Language Are More Expansive Than Just DCP-Related Processes. As noted just above, the proposal would simplify the process for acquiring property. However, these changes would apply to any SWP project and would not be limited to only the DCP. In addition, the language would remove the requirement that DWR obtain approval from the Director of the Department of General Services for a property acquisition—this would apply to any DWR acquisition, not just those related to the SWP. Moreover, the proposed change discussed above requiring SWRCB to cancel protests would apply to every water right permit application or change petition, not just those associated with DWR for the SWP and DCP. The Legislature will need to consider whether it is comfortable with how the reach of these changes extend beyond the DCP.

Courts Would Have Less Time and Potentially Less Information to Review DCP-Related Challenges. If the state proceeds with the DCP, the proposed changes could speed up litigation over the project, which could in turn expedite construction and reduce costs (given that delays lead to inflationary cost increases). However, they also would limit the court’s review to the information DWR includes in the certified administrative record and limit its time to review the case, both of which could compromise the court’s ability to fully analyze the complex issues associated with this project.

Building in California Is Hard and Some State Laws Might Warrant Updating, but Relaxing Laws for Individual Projects Should Be Done Carefully. Some of California’s laws and regulations make building infrastructure projects—particularly big and complex projects like the DCP—difficult, often delaying the project and/or making it costlier. However, the laws this proposal would change were originally codified by the Legislature for specific reasons, such as to increase transparency, fairness, and public participation, and to ensure that the state’s public trust resources are protected for the benefit of all of the people. To the extent these laws are outmoded and make building important infrastructure projects in our current times more difficult, the Legislature might wish to review and update them more comprehensively. In the meantime, the state’s policies ultimately have to balance the trade-offs for a wide range of water infrastructure projects. In our view, exemptions for particular projects should be considered carefully and with an eye toward evaluating whether there a strong justification for treating the exempted projects differently from other projects.

Water Quality Control Plans CEQA Exemptions

Background

Per state and federal law, the SWRCB—together with its nine regional water quality control boards—develop water quality control plans (WQCPs) to regulate and protect water quality in the state’s major water basins, including in the San Francisco Bay and Sacramento-San Joaquin Delta (Bay-Delta) watershed. WQCPs include three key elements: (1) identification of the beneficial uses of water that should be protected, such as for municipal, agricultural, and fish and wildlife purposes; (2) water quality objectives to provide reasonable protection of those beneficial uses; and (3) a program of implementation for achieving those objectives, including a monitoring plan. The water boards must comply with the California Environmental Quality Act (CEQA) when developing or amending WQCPs. However, the water boards’ water quality control planning program, which includes WQCPs and other policies and plans, is a certified regulatory program under CEQA. This means that under certain conditions, the water boards do not have to prepare environmental impact reports, negative declarations, or initial studies. State regulations require them to prepare substitute environmental documents consistent with CEQA goals and standards, rather than an environmental impact report.

Bay-Delta Plan Update Is Long Overdue. The last meaningful and comprehensive update of the Bay-Delta WQCP (Bay-Delta Plan) plan occurred in 1995, despite acknowledgments by SWRCB that the current plan is not adequately protecting beneficial uses and the fact that native fish populations have dropped precipitously. SWRCB began the process to amend the plan more than 15 years ago in 2009. Although SWRCB adopted amendments concerning one portion of the Bay-Delta watershed (Lower San Joaquin River and Southern Delta salinity standards) in 2018, those new requirements have not yet been implemented. SWRCB currently is considering updates for the other portion of the watershed—the Sacramento River and its tributaries, Delta eastside tributaries, Delta outflows, and interior Delta flows. As it deliberates these regulatory updates, the board also is considering a voluntary agreement (VA) proposed by state and federal agencies and water agencies whose particular exports and diversions represent most of the water use in the watershed. The eight-year VA program would provide an alternative compliance pathway for participants in lieu of having to meet SWRCB regulatory instream flow standards. It is designed to increase flows to recover and protect salmon and other native fishes, while also restoring habitat and providing funding for water purchases. If approved by SWRCB, a water agency participating in the VA program would be allowed to divert more water than it otherwise would under the regulatory pathway in exchange for completing—or helping to fund—habitat restoration projects. VA program implementation is estimated to have direct costs totaling $2.9 billion. These costs would be shared across the state and federal governments and water agencies. The draft update to the Bay-Delta Plan that SWRCB currently is considering incorporates a VA pathway for VA parties and an unimpaired flows regulatory pathway for non-VA water agencies.

The Bay-Delta Plan and VA Program Have Major Implications for Different Beneficial Uses. The Delta supplies at least some of the water for 27 million Californians and agricultural water for several million acres of farmland. Consequently, any regulatory requirements that would reduce river diversions and Delta exports—such as SWRCB staff’s current regulatory pathway proposal to require 55 percent of unimpaired flows in the Sacramento River and its tributaries—could have adverse effects on the water agencies responsible for supplying water to customers. For example, these agencies argue that the proposed unimpaired flows approach would seriously challenge their ability to meet demand for both residential and agricultural water needs. At the same time, hundreds of species of birds and fish rely on the Bay-Delta watershed. As more water is diverted and exported, less is available in rivers and streams to support these species and their habitats. In addition, the economies of many of the communities in and around the Delta depend on a functioning Delta. Their residents also can be subject to the public health impacts of harmful algal blooms when flows are too low and temperatures too high or when fish caught for subsistence are not healthy to consume. The proposed VA program also comes with significant trade-offs. The VAs likely would benefit water agencies and their customers because the agencies would not have to limit their water use to the same extent they would under the regulatory unimpaired flows approach. However, environmentalists, commercial fishing interests, native tribes, and community groups are concerned that the resulting instream flows under the VA pathway would be inadequate for protecting native fish and maintaining healthy conditions in the Delta.

Several Factors Have Contributed to Lengthy Delays in Revising the Bay-Delta Plan. Given the controversial nature of the plan, lawsuits often are filed at many points throughout the process of developing or revising a WQCP. Litigation has been one source of delay. For example, after the board adopted the 2018 Bay-Delta Plan amendments but before implementation, SWRCB was sued by 12 petitioners—water agencies objecting to the more stringent unimpaired flow standards; environmental groups claiming flow standards were not protective enough of fish and wildlife; and the federal government, which operates the Central Valley Project. In March 2024, the superior court denied the petitioners’ combined 116 claims, ruling that SWRCB had complied with CEQA, the public trust doctrine, and other legal obligations. Another source of delay has been consideration of VAs. Starting in about 2016, Governor Brown—and, subsequently, Governor Newsom—encouraged SWRCB to consider VAs as an alternative to the regulatory approach. However, VA parties did not submit an initial VA memorandum of understanding to SWRCB until March 2022, and they continue to refine the proposal’s details to this day. SWRCB also has indicated that the severe multiyear droughts that occurred in recent years strained its staff capacity to work on the Bay-Delta Plan updates.

Proposal

Proposed Statutory Changes. The Governor proposes trailer bill language to exempt WQCPs from CEQA provisions, including preparation of environmental documents. It would so by making WQCPs “Class 8” actions. Current regulations exempt certain classes of projects from CEQA because they “have been determined not to have a significant effect on the environment.” Class 8 includes actions “to assure the maintenance, restoration, enhancement, or protection of the environment where the regulatory process involves procedures for protection of the environment.”

Administration’s Reasons for the Proposal. The administration has provided several reasons for proposing the statutory changes. First, it suggests that the CEQA exemption would allow the water boards to more effectively and regularly revise WQCPs to respond to changing conditions, science, and federal law. (It notes that CEQA compliance is a significant obstacle to timely updates and adoption of WQCPs.) It also postulates that the water boards’ CEQA work (and its attempts to shield its decisions from CEQA challenges) do not necessarily result in environmental benefits, especially because these plans already are intended to protect the environment. Finally, it notes that years-long delays can result from the current requirements—highlighting the Bay-Delta Plan as an example—which can prevent projects to protect the environment from occurring.

Key Questions for Legislative Consideration

The proposed statutory changes raise important issues we recommend the Legislature consider carefully and deliberately before taking action. While certain aspects of this proposal may offer benefits, they also could result in unintended consequences. Our recommendation to defer action on this proposal reflects our view that the Legislature should have sufficient time to fully consider the potential impacts of this proposal, particularly given that it is not directly related to passing or implementing the state budget.

Based on our current understanding, below we raise some initial issues for the Legislature to consider when it is ready to deliberate upon this proposal. We are still reviewing the proposed language and may refine our assessment as we learn more.

What Are the Benefits and Drawbacks of CEQA Reviews? The Legislature might wish to consider the specific benefits—and potential drawbacks—of the CEQA requirements that currently apply to WQCPs. To comply with CEQA, water boards’ substitute environmental documents provide an environmental analysis, identify mitigation measures, and consider alternatives. In addition, water boards must offer a public comment period and provide responses to those public comments. In concept, this process can lead the board to make more informed decisions about water quality standards, compliance measures, and implementation plans, and it offers the public the opportunity to weigh in. At the same time, the CEQA process is labor intensive for SWRCB staff and leads to many legal challenges. For example, a party might argue that the board did not consider a reasonable range of alternatives. CEQA litigation can contribute to delays, sometimes significant, in adoption of WQCPs. SWRCB also notes that because CEQA does not require analysis of potential benefits—only consideration of adverse environmental impacts—even projects that result in many positive environmental benefits can face delays if they also have minor adverse side effects.

If the Proposal Were Approved, Would Remaining Analyses Offer Sufficient Detail to Understand Environmental Impacts? SWRCB indicates that under its proposal, WQCPs and the processes to implement them still would continue to undergo environmental review and analysis. Additionally, SWRCB argues that the full CEQA analysis does not add a significant additional benefit beyond the extensive data collection, environmental analysis, and public participation already required by the Porter-Cologne Water Quality Control Act. As demonstrated by the controversy around the unimpaired flows approach versus the VA approach for the Bay-Delta Plan, however, significant disagreement exists around the degree to which different WQCP approaches might protect the environment. A key question is whether all of the potential environmental impacts of different approaches would be identified or fully understood, considered, compared, and adequately addressed without the analysis the board currently undertakes to prepare substitute environmental documents. The administration also notes that the CEQA exemption only would apply to the adoption of WQCPs (and any updates), but not to the implementation of the plan. In other words, CEQA would continue to apply to any regulations or orders issued by water boards—as well as any changes to water rights—to carry out the WQCP. In our view, the Legislature would benefit from additional information, such as a detailed side-by-side comparison, about how various statutory and regulatory requirements differ and overlap. Such an analysis could help the Legislature determine if the environmental analyses undertaken in the absence of CEQA reviews would be sufficient to ensure informed decision-making.

Would the Efficiencies Gained by the Exemption Outweigh the Benefits Offered by CEQA Requirements? The administration’s stated reasons for exempting WQCPs from CEQA include reducing SWRCB workload and reducing the amount of litigation so that WQCPs could be updated more efficiently and quickly. This could mean that actions required by the WQCPs could be carried out sooner by regulated entities. For example, if the Bay-Delta Plan were adopted sooner, this hypothetically could mean that requirements to reduce diversions could begin sooner. In addition, if subsequent updates to the plan are needed in the coming years (for example, if conditions change), those could potentially occur more quickly. Still, those efficiencies would come at the loss of the CEQA analysis and its potential benefits. The costs and benefits associated with these trade-offs are complicated to assess, particularly without time to solicit input and feedback from a range of interested and affected parties.

Is Making the Bay-Delta Plan Exempt From CEQA the Best Way to Expedite the Process? And Should the Exemption Apply to All WQCPs? Whether making all WQCPs exempt from CEQA is the best way to get the Bay-Delta Plan revised and adopted—without risk of CEQA-related lawsuits holding it up—is not clear. Other WQCPs, including regional WQCPs, presumably are less likely to face the prolonged delays that have plagued the Bay-Delta Plan. Might other, alternative changes help meet the goal of expediting updates to the Bay-Delta Plan? Are the same arguments as applicable and compelling for the WQCPs the regional water boards consider, or might CEQA analyses offer more benefits than drawbacks in other cases?

Would the Exemption Lead to Adoption of the VA Program and Is the Legislature Prepared to Weigh In? The Legislature is neither required to approve WQCPs nor participate in the process of updating them, and historically has not done so. Updates to the Bay-Delta Plan have largely been handled by the administration. Currently, SWRCB is considering a draft version of the Bay-Delta Plan that incorporates many elements from the VA proposal into the program of implementation. By doing so, this draft plan provides two compliance pathways—one for VA parties based on their proposed VA instream flow and habitat restoration targets, and one for non-VA parties based on the unimpaired flows approach developed by SWRCB staff. The trailer bill language proposed by the Governor likely would expedite adoption of the Bay-Delta Plan. Assuming the plan continues to incorporate elements of the VA proposals (which appears likely given that the draft plan does so), if the Legislature approves the CEQA exemption for WQCPs it also would indirectly be helping to expedite adoption of the VA proposal. The Legislature has not been part of the conversation to develop the VA program nor the workshops SWRCB has held to review it. Given the important implications of these VA proposals, the Legislature would benefit from additional time to consider the plan before taking action that would likely expedite its approval.