wlittranscript272.txt 1 NO. 105, ORIGINAL 2 IN THE SUPREME COURT OF THE UNITED STATES 3 OCTOBER TERM 2005

Transcription

1 1 NO. 105, ORIGINAL 1 2 IN THE SUPREME COURT OF THE UNITED STATES 3 OCTOBER TERM STATE OF KANSAS, ) ) 6 PLAINTIFF, ) ) 7 VS. ) VOLUME NO. 272 ) 8 STATE OF COLORADO, ) STATUS CONFERENCE ) 9 DEFENDANT, ) ) 10 UNITED STATES OF AMERICA, ) ) 11 INTERVENOR. ) ) PROCEEDINGS HELD BEFORE 14 ARTHUR L. LITTLEWORTH, SPECIAL MASTER LOCATION: OFFICE OF THE SPECIAL MASTER UNIVERSITY AVENUE RIVERSIDE, CALIFORNIA DATE AND TIME: FRIDAY, SEPTEMBER 30, :35 A.M REPORTED BY: STEPHANIE SLONE, RPR (CCR NO. 42, CSR NO ) HUNTINGTON DRIVE, SUITE 107 SOUTH PASADENA, CALIFORNIA (626) Page 1

2 1 APPEARANCES FOR STATE OF KANSAS: MONTGOMERY & ANDREWS BY: JOHN B. DRAPER Paseo de Peralta Santa Fe, New Mexico (505) FOR STATE OF COLORADO: HILL & ROBBINS, P.C. 8 BY: DAVID W. ROBBINS DENNIS M. MONTGOMERY Blake Street Building 1441 Eighteenth Street 10 Denver, Colorado (303) ALSO PRESENT: DONNA ORMEROD DAVID POPE 14 HAL SIMPSON Page 2

3 1 RIVERSIDE, CALIFORNIA; FRIDAY, SEPTEMBER 30, :35 A.M. 3 * * * 4 SPECIAL MASTER: This is a status 5 conference which follows up on the one that we 6 had in Santa Fe on February the 4th, and that in 7 turn was the one which we held following the 8 supreme court's opinion on my fourth report, and 9 later we then identified a number of issues in 10 the March 11 letter that still needed to be 11 resolved in order to enter a judgment and 12 decree. 13 Counsel have been faithful in submitting 14 monthly reports, resolution of these various 15 issues, and then the latest report which I 16 received was dated September 27, and it reflects 17 the agreements that were reached between the 18 chief engineer of Kansas and the state engineer 19 of Colorado, all-day meetings which they held 20 apparently on September 22 and So today I've got an agenda of things 22 that I want to discuss and want to get through 23 on my list. If there are other things that you 24 think we need to be talking about, well, we can 25 add them, and these are not necessarily in the 26 order that we maybe should discuss them. I'm 27 not sure, but they were the order in which I 28 thought of them as we went through, anyway. Page 3

4 1 I want to go over it just so that I'm 4 2 clear on the status of each of the issues that 3 were originally outlined in that March 11 4 letter. I've got a little bit of confusion in 5 what I saw in some of the earlier reports and 6 the later ones. I want to clarify that. I want 7 to have some discussion of the four issues which 8 are still listed as outstanding. 9 I see you've got some documentation 10 which is appearing here this morning, but I want 11 to talk about the documentation of those issues 12 and not just when it will be done, although we 13 need to do that, but I'm not sure how that fits 14 in our proceedings, whether part of that or all 15 of that is going to end up in some of these 16 appendices to the judgment or what. So we need 17 to discuss that issue. 18 We'll talk a little bit about the 19 arbitration schedule and just some general 20 discussion of the arbitration issues; also 21 whether, as you see it now, it's going to be one 22 arbitrator on all of the issues, whether they're 23 separate matters. I see that your arbitration 24 schedule actually had a couple of events 25 happening two or three days ago. So we need to 26 get the report on that. 27 Apparently the issue was raised about 28 what we do with that original record. We need Page 4

5 1 to talk about that. 5 2 And we can get to these issues later, 3 but I didn't know whether some of those issues 4 that are listed of the four that are listed are 5 not really so technical, and maybe they're 6 matters which I can't or shouldn't decide. The 7 accumulation of credits, it seems to me, is not 8 likely to be a technical issue, and then 9 apparently we've got a question about changing 10 the records, diversion records. So we need to 11 talk about that. I'm not sure whether that's 12 just a technical or more of a legal policy kind 13 of issue. 14 I see that you have been exchanging 15 compromise proposals on the issue of costs. I 16 don't want to get into that, the compromise 17 nature, but I do want to find out more about the 18 cost issue and how we're going to take care of 19 that. 20 I want to find out about the final 21 coding and calibration of the model, whether 22 that's apt to cause any difficulties or not 23 after we've reached these final technical 24 agreements. 25 I also want to know, although not 26 necessarily in the judgment, but I want to get 27 the present status of compliance at least as 28 Colorado sees it. I know you basically keep Page 5

6 1 this up to date, at least in your view, and I 6 2 want to see where we stand on that, keeping in 3 mind that, I guess, our ten-year accounting 4 period of record will expire at the end of next 5 year. 6 I think we'll have to spend quite a bit 7 of time on the draft decree. I want to go 8 through -- my thought is that probably get 9 through today. Kansas will take another shot at 10 the draft, but I want to discuss some of the 11 issues. I have some thoughts, and so we can 12 talk about that. 13 Justice Hobbs, through the dividing of 14 water, sent me out two big opinions on the 15 Fort Lyon transfers. I just want to know 16 whether that -- I see major -- it looks like 17 major acquisitions of agricultural water there, 18 and I want to talk about that and see if that 19 has any long-term implications for what we're 20 doing. 21 Let's see where we are on the status of 22 the model documentation. 23 You know, we have not talked at all 24 about the United States' involvement, but they 25 still are a party, and I want to see whether 26 there's anything we should be doing with respect 27 to the U.S. 28 So those were the issues that I had as I Page 6

7 1 went through all of my notes. I don't know 7 2 whether you want to add anything at this point, 3 but as we go through, we may find there are 4 other things to be talking about. 5 MR. DRAPER: Your Honor, the only 6 specific thing that I don't think you enumerated 7 was the arbitration rules, which we forwarded to 8 you. That would be part of the arbitration 9 discussion. 10 SPECIAL MASTER: Yeah. 11 MR. DRAPER: But we did agree on 12 those pretty much. 13 SPECIAL MASTER: I saw those, and 14 the rules looked just fine to me. 15 MR. DRAPER: Okay. 16 SPECIAL MASTER: Let's just talk for 17 a minute about logistics. Do you have plane 18 schedules this afternoon? Should I be ordering 19 lunch in? What do you want to do? 20 MR. DRAPER: We have a flight out at 21 5:50 from Ontario. 22 SPECIAL MASTER: Out of Ontario. 23 MR. ROBBINS: Ours is 4:50 out of 24 Ontario. So we need to leave about 3: SPECIAL MASTER: I don't know how 26 long this is going to take, but to be on the 27 safe side, why don't we have lunch brought in, 28 and that will, I think, then make sure you will Page 7

8 1 get your planes. 8 2 MR. ROBBINS: Great. 3 SPECIAL MASTER: Let's take a break 4 a minute. 5 (Recess.) 6 SPECIAL MASTER: Okay. Let's begin, 7 then, with the issues that were on the March 11 8 letter and go through those. 9 Your last report indicates that items 5 10 through 9 on that March 11 list have been 11 removed and will not be resolved before the 12 decree is entered. 13 MR. DRAPER: That's correct. And 14 also Issue 13-B. 15 SPECIAL MASTER: Yeah. Haven't got 16 through my list yet. 17 MR. DRAPER: Okay. 18 SPECIAL MASTER: Right. And I see 19 that 13-B also is one of those. 20 I had three other items that I have 21 marked as not being resolved at this time, which 22 I picked up from earlier reports, and the first 23 of those was No. 11, which relates to 24 Mr. Schroeder's proposed model change in the 25 calculation of demand. I thought from the 26 May 20 report that that had been removed from 27 the list of issues, but I see it's now listed 28 for arbitration. So I need to get that Page 8

9 1 straight. 9 2 MR. DRAPER: Well, that issue has 3 had somewhat of a convoluted history. It did 4 start out as a proposal for a change in the 5 model that Mr. Schroeder was supporting. It's 6 since, I would say, transmuted into a somewhat 7 different proposal, but we have continued to 8 entertain the Colorado changed proposal. As I 9 understand it from our engineers, there have 10 been a series of drafts on that proposal, but it 11 is not final yet. 12 SPECIAL MASTER: But it at least is 13 not one of the things that was removed from 14 consideration? That was my first thought. 15 MR. DRAPER: It has MR. MONTGOMERY: That's right. 17 MR. DRAPER: -- not been removed so 18 far. 19 SPECIAL MASTER: Okay. 20 MR. DRAPER: But I would say, as I 21 reviewed it for this hearing, I decided that I 22 would make the suggestion that it be put in that 23 category because we have not received a final 24 proposal from Colorado SPECIAL MASTER: That is put in the 26 arbitration category. 27 MR. DRAPER: That is sitting in the 28 arbitration category right now, but I'm Page 9

10 1 suggesting that it be pushed off and not 10 2 submitted to arbitration -- 3 SPECIAL MASTER: Oh, I see. 4 MR. DRAPER: -- because in that case 5 the Colorado proposal has not been finalized, 6 and certainly you need time in these discussions 7 to even review one, but we have never received 8 the final proposal, and I think this is an issue 9 that Colorado has struggled with. It just isn't 10 ready yet, and to throw it into arbitration at 11 this time I think is premature. 12 SPECIAL MASTER: Mr. Robbins. 13 MR. ROBBINS: Mr. Montgomery, why 14 don't you explain SPECIAL MASTER: You're the expert 16 in this? 17 MR. MONTGOMERY: I am. 18 I believe Mr. Tyner and Mr. Book have 19 been working, trying to come to agreement on the 20 changes for calibration of the model, and this 21 relates to the groundwater acreage that would be 22 used during the calibration period. 23 Colorado has provided its latest 24 proposal, and I think that was provided over the 25 weekend or last Friday. And Mr. Book has been 26 out in Oregon, and so we don't know whether he's 27 had a chance to review it and respond yet. 28 SPECIAL MASTER: I'll tell you what. Page 10

11 1 I want to have everything on a schedule of one 11 2 kind or another. The last letter which I 3 received, September 27, lists it for 4 arbitration. So I want to leave it there, then, 5 and if, in fact, it gets resolved or if, in 6 fact, it's taken off, we'll just totally -- you 7 can let me know, but we'll leave it at 8 arbitration. 9 MR. ROBBINS: We made the last 10 proposal attempting to respond to the Kansas 11 concerns on Sunday, September 25, from Bill 12 Tyner to Dale Book. 13 MR. MONTGOMERY: And we're hopeful 14 it will be resolved, but that was our 15 assumption, too, is it would still remain on the 16 list of issues for arbitration. 17 MR. DRAPER: Well, my suggestion as 18 we've gotten to this point -- it's been put off 19 successively, and this is something that 20 Colorado has proposed and, although we did 21 receive some files of some suggested acreages, 22 the coding changes that are necessary to 23 implement this and which are critical to whether 24 there would be any agreement or to the merits of 25 the proposal have not been submitted. 26 SPECIAL MASTER: Well, Mr. Book may 27 say that, but it seems to me that if you were in 28 agreement that this is not an issue that should Page 11

12 1 be decided now, fine. I mean, we've got all 12 2 these other ones that are simply removed. If 3 you get to an agreement on what it should be, 4 equally fine. But if there's an issue out there 5 that either side feels should be arbitrated, 6 then I think we have to go with that. So I'm 7 going to leave it on the arbitration schedule 8 now, and then you can let me know later whether 9 that gets changed or not. 10 Now, I have two other items that I 11 picked up as being matters which were not to be 12 resolved now. I picked this up from a May report. They were 12-C, which is the revision 14 of the unit response function for the Fort Lyon 15 Canal, and 12-E, which related to canal 16 capacities. I didn't see those items listed on 17 your last report as being matters that were 18 removed. 19 MR. DRAPER: No, that's correct, 20 Your Honor. We have that first item, the 12-C 21 item. I'm looking at the table that's the 22 status as of September 27, 2005, which we sent 23 with our letter of that date. 24 SPECIAL MASTER: Let me just get my 25 documents straight here. Yeah, I have that in 26 front of me. 27 MR. DRAPER: And that first issue 28 that you mentioned, 12-C, appears in the second Page 12

13 1 category SPECIAL MASTER: Oh, I see it. 3 Right. 4 MR. DRAPER: -- "Agreed with 5 agreement documented." 6 SPECIAL MASTER: Okay. So that was 7 one which was originally to be removed but now 8 has been agreed to. 9 MR. DRAPER: I don't believe we ever 10 meant to suggest that it would be removed. 11 SPECIAL MASTER: Anyway, it's 12 agreed? 13 MR. DRAPER: It was resolved fairly 14 early. 15 SPECIAL MASTER: It's agreed to now, 16 and that's just fine. 17 MR. DRAPER: Good. The other issue, E, was a question at the beginning of our 19 schedule as to whether Colorado had a concern 20 about the canal capacities that the Kansas 21 experts were supporting, and at some point we 22 agreed that they did not have a problem. 23 SPECIAL MASTER: So that's MR. MONTGOMERY: Yeah. 25 SPECIAL MASTER: -- Probably one not 26 to be considered, then. 27 MR. ROBBINS: We resolved that. 28 MR. DRAPER: That has been resolved. Page 13

14 1 SPECIAL MASTER: It's resolved? 14 2 MR. DRAPER: It's resolved. 3 MR. MONTGOMERY: I would put it in 4 the category of the ones that they agreed would 5 not be addressed prior to the entry of the final 6 decree. There were no changes that Colorado was 7 proposing at this time. 8 MR. DRAPER: Right. 9 SPECIAL MASTER: It doesn't really 10 make any difference. I think all I want to know 11 is finally what we've got left on the table. 12 MR. ROBBINS: I think what we want 13 to be clear is that these are all issues that 14 are involved in model calibration, and as time 15 goes by, we don't want to have the final decree 16 written in such a way that we would be precluded 17 from addressing them in the future in light of 18 new information. 19 SPECIAL MASTER: All right. Let's 20 go, then, to the issues that have been agreed 21 upon. 22 Damages. That number has been agreed 23 upon and the damages paid. The Measurement 24 Rules, as I understood from one of the earlier 25 reports, the substance of the change is that the 26 PCC would be tested every two years instead of 27 four years. 28 MR. ROBBINS: That's correct. Page 14

15 1 SPECIAL MASTER: And there would be 15 2 no variances from this Rule 3.6. Otherwise, the 3 lowest of the two PCC measurements might have 4 been used on complex wells. That's been 5 removed. 6 MR. ROBBINS: That's correct. 7 SPECIAL MASTER: There may be 8 others. I'm not sure. But I want to get to a 9 larger question later on as to how we treat the 10 Measurement Rules in the judgment since it's a 11 Colorado law as well, but at least we've got the 12 substance of that approved. 13 Let's see. Then I guess in terms of 14 just going in order, the irrigated acreage that's the irrigated acreage for is agreed although apparently not 17 documented yet. 18 MR. DRAPER: Well, we have made good 19 progress on documentation. We have signed one 20 agreement since we submitted this letter. 21 SPECIAL MASTER: Okay. We'll come 22 back to documentation. I don't want to 23 necessarily take every one of these now, but I 24 want to come back to the general question of how 25 long it's going to take and where you are and 26 what we're going to do with them. 27 MR. DRAPER: Very good. 28 SPECIAL MASTER: 10 was the Page 15

16 1 representation of various replacement plan 16 2 sources, and those appear to be all agreed to A, which was Lamar, Holly stations, 4 with regard to PET apparently now are agreed to 5 under your September 27 letter? 6 MR. DRAPER: Yes. 7 SPECIAL MASTER: 12-B correcting the 8 irrigated acreage for the Lamar, Manvel, 9 XY Ditches is on the agreed stage. 10 MR. DRAPER: Yes. 11 SPECIAL MASTER: 12-C, unit response 12 functions for Fort Lyon and some of the other 13 canals, agreed to. 14 MR. DRAPER: Yes. 15 SPECIAL MASTER: 12-D is one of 16 the -- that's the change in the observed 17 diversion records, and that's listed in the 18 arbitration column right now. 19 MR. DRAPER: Yes. 20 SPECIAL MASTER: 12-E, I guess I 21 have it down here on the agreed list. In the 22 initial description there were some specific 23 things, and then other calibration factors were 24 listed generically. 12-E is not on MR. ROBBINS: 12-E's a mixed bag. 26 SPECIAL MASTER: Yeah. 27 MR. MONTGOMERY: But it's resolved 28 except as covered -- Page 16

17 1 SPECIAL MASTER: It's resolved 17 2 except for what? 3 MR. MONTGOMERY: The XY-Graham. 4 MR. ROBBINS: Except for the 5 XY-Graham. 6 SPECIAL MASTER: Resolved except for 7 that one. Okay was the conversion of Rocky Ford 9 shares. That's been agreed to C-1. Here earlier reports indicated 11 that most issues had been resolved and any 12 remaining issues would be arbitrated. Have they 13 now all been resolved? 14 MR. DRAPER: Yes, they have. 15 SPECIAL MASTER: Okay. Same thing 16 on 13-C-2. Again, the earlier reports indicated 17 most of the questions have been resolved and any 18 remaining ones would be arbitrated, but the 9/27 19 letter indicates they're all done now? 20 MR. DRAPER: That's correct. 21 SPECIAL MASTER: Okay. And 13-C-3, 22 which is the dry-up documentation and 23 monitoring, that's now all agreed to? 24 MR. DRAPER: Yes. 25 SPECIAL MASTER: 13-D was the 26 Sisson-Stubbs issues, and that's now agreed to? 27 MR. ROBBINS: Yes, sir. 28 MR. DRAPER: Yes. Yes. Page 17

18 18 1 SPECIAL MASTER: 13-E was the winter 2 water bookovers. That's agreed to, isn't it? 3 MR. ROBBINS: Yes, sir. 4 SPECIAL MASTER: 14 was the credits 5 for the offset accounts and evaporation losses 6 and so forth. That's all agreed to? 7 MR. DRAPER: That is agreed to. 8 SPECIAL MASTER: Good. 15 was the 9 accounting for MR. ROBBINS: Both of the engineers 11 are short a tooth because it involved 12 significant tooth extraction in the process, but 13 they have managed. 14 SPECIAL MASTER: They got that one. 15 MR. POPE: Six days' worth or 16 something. 17 MR. ROBBINS: They both still have 18 lumps on their heads, but they've made it. 19 MR. DRAPER: A lot of work. 20 MR. ROBBINS: We're proud of them. 21 SPECIAL MASTER: 15, then, was 22 accounting for return flows associated with the 23 LAWMA accounts. And that's an agreed item, too, 24 isn't it? 25 MR. DRAPER: Yes. 26 MR. ROBBINS: Yes. 27 SPECIAL MASTER: So I think that 28 takes us, then, to the issues that still are out Page 18

19 1 there. And No. 11, which was Mr. Schroeder's 19 2 changes, we've talked about that, and so we'll 3 list it for the time being. 4 The change in observed diversion 5 records, what I saw on that on your various 6 records was basically not a question of whether 7 there maybe was more accurate data but whether 8 it could be changed in the light of the 9 proceedings we've had so far. 10 Is that the issue? 11 MR. DRAPER: From our point of view, 12 that's a lot of the issue. Since these have 13 been SPECIAL MASTER: Or do people have 15 disagreement on -- if the change were going to 16 occur, do they disagree on what the change 17 should be? 18 MR. DRAPER: There's probably also 19 some of that. 20 SPECIAL MASTER: Some of that. 21 MR. DRAPER: But our primary thought 22 on it is that we should provide perhaps or 23 submit a letter to you on that and provide 24 Colorado to respond to that. We think there are 25 several legal grounds that would argue against 26 going forward with that. 27 Mr. Montgomery and I have talked about 28 this off and on. I would propose that maybe Page 19

20 1 within two or three business days we submit a 20 2 letter and that Colorado be allowed to respond 3 to that and ask you to determine whether that 4 should go forward to arbitration. 5 SPECIAL MASTER: If I decide the 6 issue of whether or not they can be changed, is 7 there still going to be an issue on what the 8 change should be? 9 MR. DRAPER: Then there would be 10 some arbitration on the facts. 11 SPECIAL MASTER: So you would then 12 arbitrate that factual issue? 13 MR. DRAPER: Yes. 14 MR. ROBBINS: Although from my 15 perspective, this is one of those issues that 16 once we get the legal structure in place is 17 probably amenable to some further discussions 18 between the experts. It's not SPECIAL MASTER: Okay. 20 MR. ROBBINS: You know, I really do 21 think that the question of whether there are 22 legal reasons that you can't correct records 23 when you're trying to model accurately and you 24 find inaccuracies in the published data, if you 25 simply model against the inaccurate published 26 data or if you model against the corrected data, 27 and if we get that legal issue out of the way, 28 then it seems to me we've set it up so that our Page 20

21 1 two conciliators can get at it SPECIAL MASTER: And I think the 3 idea of having a little letter briefing is fine, 4 but I want you in your briefing to tell me this. 5 I mean, we have made changes, haven't we, in 6 irrigated acreage and things like that 7 throughout these proceedings? I'm not sure how 8 this is different. Anyway, you can address that 9 point. 10 MR. DRAPER: I think it is 11 different. 12 SPECIAL MASTER: Okay. Then you do 13 that. Let's set a schedule right now. Say, a 14 week? Whatever. I mean, what's your schedule 15 like? There's a lot going on here, and so this 16 isn't the most urgent thing but MR. DRAPER: Well, that would be 18 fine, one week. 19 SPECIAL MASTER: Okay. And you can 20 maybe respond a few days after that? 21 MR. ROBBINS: Yes, sir. 22 So you will get us something by Friday? 23 MR. DRAPER: Yes, a week from today. 24 MR. ROBBINS: Okay. 25 MR. DRAPER: Yep. And then you'll 26 respond MR. ROBBINS: No later than a week 28 but as soon thereafter as we can. Page 21

22 1 We understand your position. So we can 22 2 begin drafting our response now. So maybe we 3 can do it in a couple days less than a week. 4 SPECIAL MASTER: All right. 5 MR. DRAPER: Okay. 6 MR. ROBBINS: At least unless you 7 have another additional position hidden up 8 there. 9 SPECIAL MASTER: Well, that's sort 10 of a hybrid, then, right now -- part legal, part 11 factual -- and we'll see whether the factual 12 part has to go to arbitration or not. 13 MR. ROBBINS: Yes, sir. 14 SPECIAL MASTER: Then 13-F, which is 15 the Graham alternate points of diversion, I take 16 it that is technical and that is ready for 17 arbitration. 18 MR. DRAPER: Yes. 19 SPECIAL MASTER: Okay. 17 was the 20 accumulation of credits. Do you see that as 21 being a technical issue or one more that is sort 22 of policy oriented? 23 MR. DRAPER: From my point of view, 24 it has both. There's a strong policy part to it 25 in the context of the decisions that you and the 26 Court have made and following up on your 27 suggestion in the fourth report that this may be 28 an appropriate issue to consider. So either by Page 22

23 1 you or through arbitration, this matter, I 23 2 think, could be decided. 3 SPECIAL MASTER: We have a system 4 now which is set up to arbitrate disputes, but I 5 think we were all having in mind that they would 6 be technical kinds of issues. It seems to me 7 that whether or not you can accumulate credits 8 and, if so, how much or how long and so forth 9 are not the typical kind of issues we'd be 10 sending to arbitrators. I don't object to that, 11 but I'm trying to find a way to speed some of 12 this along. 13 MR. ROBBINS: In your fourth report 14 you suggested that this was one of the issues of 15 a very limited number that you felt you might be 16 appropriate to resolve, and I continue to think 17 that's probably the most efficient way in part 18 because it is so tied into sort of the fabric of 19 how you have tried to fashion remedies. And to 20 get an arbiter up to speed to make a 21 sophisticated decision on the policy aspect of 22 it seems to me to complicate things. So my 23 preference would be to figure out some way to 24 submit it to you and let you at least decide the 25 policy legal issue. 26 SPECIAL MASTER: Well, if I 27 decide -- if that is submitted and I decide a 28 legal issue, I presume the issue is should there Page 23

24 1 be a limit on -- a cap of some kind on how many 24 2 credits and how long they would last -- 3 MR. ROBBINS: Yes. 4 SPECIAL MASTER: -- something in 5 that order. 6 MR. ROBBINS: Kansas is very 7 concerned that Colorado would build up a huge 8 amount of credit in a wet year -- 9 SPECIAL MASTER: Right. 10 MR. ROBBINS: -- that would not 11 provide appropriate benefit in a dry year. 12 SPECIAL MASTER: Right. 13 MR. ROBBINS: And that's a perfectly 14 understandable position. The question just 15 becomes what mechanism do you use to address it. 16 MR. DRAPER: Now, I should mention 17 that it may not be totally devoid of technical 18 issues like statistical analysis. 19 SPECIAL MASTER: So you'd prefer to 20 have it arbitrated? 21 MR. DRAPER: I think we're open to 22 either way. 23 SPECIAL MASTER: See, I may not 24 appreciate all of the difficulties in doing it. 25 When I put that into my fourth report, I could 26 understand that there's a problem if you 27 accumulate some massive amount of credits and 28 then you just draw on those credits for a long Page 24

25 25 1 period of time. That can cause problems. So it 2 seemed to me there it needed to be some kind of 3 a limit. 4 But I'm thinking in my -- I was at that 5 time and at least at this moment -- I'm thinking 6 it's a much more simpler thing about how large 7 can credits get and how long can they last. And 8 you could each give me your arguments on that 9 and your proposals and whatever your specific 10 proposals are. But if you think that there is 11 more statistics and that kind of thing, more 12 technical issues involved, then we ought to send 13 it to the arbitration. 14 MR. DRAPER: Well, perhaps there can 15 be some kind of a hybrid process there. Perhaps 16 we should submit it, and you determine whether 17 there are aspects that should be included under 18 the SPECIAL MASTER: Arbitration? 20 MR. DRAPER: -- under some kind of 21 an arbitration by a technical expert, or you 22 could do it the other way around. You could let 23 it go to arbitration but subject to your review 24 afterwards. 25 MR. ROBBINS: I don't see why you 26 couldn't have Dale or whomever put his idea of 27 how it should work into a several-page report, 28 and we could put our response and our idea of Page 25

26 26 1 how to solve that problem, protect you from that 2 problem, in a several-page report and provide 3 them to the master. 4 And if he looks at them and says this is 5 too -- there is a lot more technical here than I 6 thought, then he can call us and say, "I'd like 7 to have an arbiter give me a recommendation on 8 this." And if he understands the two positions 9 from the report, he can decide what he wants to 10 do. That would save us a bunch of time if we 11 could do it that way. 12 MR. DRAPER: That's a first 13 alternative, and it sounds like a workable 14 approach to me. 15 SPECIAL MASTER: All right. Let's 16 do that, then. In this case it's not so much of 17 legal arguments. 18 You're going to give me a proposal on 19 the way you think it ought to work. 20 MR. DRAPER: All right. 21 SPECIAL MASTER: And you'll give me 22 your response. 23 MR. ROBBINS: Yes, sir. 24 SPECIAL MASTER: So let's set a 25 schedule on that, then. 26 MR. ROBBINS: Okay. We probably 27 will provide each of us a sort of a letter 28 giving you -- Page 26

27 1 SPECIAL MASTER: Yeah MR. ROBBINS: -- the lawyer's view 3 of why it ought to go -- 4 MR. DRAPER: Right. 5 SPECIAL MASTER: Give me whatever 6 material you want. 7 MR. DRAPER: It will be in general 8 the proposal with the rationale. 9 SPECIAL MASTER: Sure. So let's get 10 a timing on that. Do you each know what your 11 proposals are so they can be simultaneous to 12 start with? And then if you either -- if you 13 want to comment on it, you can do that. 14 MR. ROBBINS: That would be fine. 15 We know what ours is. 16 MR. DRAPER: That would be fine. 17 Maybe simultaneous submittals and then 18 responses. 19 SPECIAL MASTER: Okay. 20 MR. ROBBINS: These are now issues 21 where we're not particularly confused about what 22 the other guy's anxious to achieve. I think we 23 know what their position is. They know what 24 ours is. 25 SPECIAL MASTER: Is this going to be 26 like a baseball arbitration? I get one or the 27 other? 28 MR. ROBBINS: No. Your Honor, this Page 27

28 1 is just like it always is. You get to do what 28 2 you want. 3 SPECIAL MASTER: Okay. What's your 4 time schedule on this, then? 5 MR. ROBBINS: What do you think? 6 MR. DRAPER: Well, maybe -- 7 SPECIAL MASTER: Bear in mind that 8 we're probably going to have some other things 9 that you're going to have to be submitting. 10 MR. DRAPER: Maybe something in the 11 nature of two weeks from now for an initial and 12 two weeks later for a response? 13 MR. ROBBINS: A week later for the 14 response? 15 MR. MONTGOMERY: Ten days. 16 MR. DRAPER: I'm not sure how that 17 works out on the schedule. 18 SPECIAL MASTER: Well, that gets 19 about to the end of October -- something like 20 that -- maybe a little short of the end of 21 October. 22 MR. ROBBINS: Yeah. Two weeks -- I 23 just don't want to take too long on the 24 response. It seems to me we ought to lay out a 25 proposal. Two weeks would be fine, and then 26 maybe a week later we'd give whatever comment MR. DRAPER: We are finalizing our 28 responsive exhibits under the arbitration in Page 28

29 1 that last week of October, on the 26th I think 29 2 we specified. So maybe we should give ourselves 3 a couple of days after that for the response. 4 So maybe the two weeks and two weeks might be -- 5 MR. ROBBINS: Okay. That's okay. 6 MR. DRAPER: -- the best fit. 7 MR. ROBBINS: That's fine. So the 8 14th and the 28th. 9 SPECIAL MASTER: So those are 10 October 14 and 20, are they? 11 MR. ROBBINS: 28th. 12 SPECIAL MASTER: 28th? 13 MR. ROBBINS: Yes, sir. 14 SPECIAL MASTER: Okay. Now, I think 15 that clarifies all of the issues that we had on 16 the initial March 11 list. Does that take care 17 of everything? 18 MR. DRAPER: I might just point out 19 one thing about the schedule we were just 20 setting. If there is some need to go to 21 arbitration, we would have to do something 22 separate, I guess SPECIAL MASTER: Yeah, we'd have to 24 modify that last schedule somewhat. 25 You know, when I see what you've 26 submitted, I may find that this is more 27 difficult, but right now it seems to me this is 28 more of a judge's role to say what's fair here. Page 29

30 1 MR. ROBBINS: This is one of those 30 2 where both states are not far apart on the idea 3 that there needs to be a way to ensure that 4 Kansas' fears are not realized. It's just a 5 mechanism issue and how we view what would be 6 fair to our water users while still constraining 7 them and what Kansas would prefer to see. So I 8 don't think you'll find it -- 9 SPECIAL MASTER: But anyway, if it 10 turns out that we still need arbitration, we'll 11 just have to do it as fast as we can and modify 12 that last schedule. 13 MR. DRAPER: Okay. 14 SPECIAL MASTER: All right. We'll 15 move on to other issues, then. 16 I want to go back just for a minute to 17 the issues we've got for arbitration. One of 18 them is Mr. Schroeder's matter, which may 19 disappear. We'll see about that. 20 The Graham matter has been consistently 21 on the list. How big a deal is that? Are we 22 talking 100 acre-feet or 10,000 acre-feet in 23 terms of results, or what, or do we know? 24 MR. ROBBINS: It's a big deal to 25 LAWMA. That's why it remains very important to 26 Colorado, because they had certain expectations 27 when they bought the XY, and so we really do 28 need to get it resolved. Page 30

31 1 SPECIAL MASTER: Okay MR. ROBBINS: Because even if it's 3 only a few hundred acre-feet, that's very 4 expensive water for them. 5 SPECIAL MASTER: Okay. 6 MR. DRAPER: I guess on our side 7 it's a big deal to us. It's down relatively 8 near the stateline, and it, I think, will set 9 the rule as to whether that's an expansion of a 10 previous use or not. 11 SPECIAL MASTER: All right. 12 MR. ROBBINS: I think that's one 13 that we really SPECIAL MASTER: Do need an answer. 15 MR. ROBBINS: Yeah. From our 16 position, we really can't move too much because 17 LAWMA paid for a certain amount of water, and so 18 we're not in a position to sort of SPECIAL MASTER: Right. 20 MR. ROBBINS: -- to compromise it 21 out of them. And John correctly states it. 22 It's important from the Kansas perspective as 23 well. 24 SPECIAL MASTER: Let's talk a little 25 bit about the documentation, then, of the 26 various issues where you've agreed in principle. 27 Do we need to put a schedule when all of 28 that will be completed by? I don't think we Page 31

32 1 want to go necessarily item by item, but do we 32 2 want to put a completion date on that for all of 3 those? That's one question. 4 And the other one is I don't know now 5 how that gets used. Some of this, I take it, 6 would affect the documentation, the appendices, 7 the matters that would go into the model, but 8 these other documentations -- are these sort of 9 private agreements, or are we going to put them 10 into the record, or what happens to them? 11 MR. DRAPER: Well, I think the two 12 states can agree to how that should be done in 13 each instance. My sense is it depends on the 14 type of issue. Some of these are coding issues, 15 and if the model is documented, including the 16 code, then it SPECIAL MASTER: Takes care of it. 18 MR. DRAPER: -- ultimately is in 19 there. I think we agree that, at least in the 20 interim, we need to understand what our interim 21 documentation is, when we believe we've settled 22 an issue, that we know which s or which 23 tables indicate that the agreement was reached 24 on what values. 25 In terms of long-term documentation, 26 again, my sense is it depends on the issue. If 27 it is a model coding or data issue, then it will 28 be part of that documentation, and that may take Page 32

33 1 care of quite a few of these. If it's the 33 2 agreement on crediting of releases from the 3 offset account, it's our suggestion that that be 4 included as an appendix to the decree. 5 SPECIAL MASTER: To the offset 6 agreement? 7 MR. DRAPER: Yes. 8 SPECIAL MASTER: What about that, 9 Mr. Robbins? 10 MR. ROBBINS: I think that's -- we 11 proceeded in our discussions with them that that 12 would be something that would be included within 13 the decree. 14 SPECIAL MASTER: Okay. Are there 15 other agreements that you're documenting that 16 will not be in the model documentation that we 17 need to preserve someplace? 18 MR. SIMPSON: We have here eight 19 signed agreements, numerous parts of the 20 schedule that -- how we use them, I guess is 21 what you're asking. 22 SPECIAL MASTER: Yeah. 23 MR. SIMPSON: Should we include them 24 in some attachment to the decree? It's up to 25 our attorneys, but we have here a number of 26 written, signed agreements. 27 SPECIAL MASTER: Well, why don't you 28 think about this because I think some way or Page 33

34 1 another we need to deal with these various MR. ROBBINS: Sure. 3 SPECIAL MASTER: Now, if it's in the 4 modeling code and it's then in the model 5 documentation that's written up, that's easy. 6 And it may also be simple if you've amended an 7 agreement like the offset agreement. But if 8 there's some other matters that you're 9 documenting in how to be moving forward in the 10 future, then let me know how you think that 11 should be handled, whether it goes into this 12 decree, whether it's an appendix -- whatever MR. ROBBINS: Okay. 14 SPECIAL MASTER: -- or not. 15 Whatever you think. 16 MR. DRAPER: Yes. I think, 17 Your Honor, there are going to be some of those 18 items that are outside the model. I can think, 19 for instance, of the monitoring and 20 documentation of dry-up acreage, for instance. 21 And that may be another candidate for an 22 appendix, but it's something that I think we can 23 usefully discuss with Colorado and make a 24 recommendation. 25 MR. ROBBINS: I agree. 26 SPECIAL MASTER: Some of those 27 things might be in other appendices to the 28 judgment. So you can think about that and let Page 34

35 1 me know MR. ROBBINS: That would be fine. 3 SPECIAL MASTER: Let's move on to 4 arbitration. 5 Initially I had this question, and 6 that's whether we need to involve in any way the 7 compact administration. I suppose in practical 8 terms, that's only the United States 9 representative, but this does involve the 10 administration, and I don't know how you think 11 we should be handling that. 12 MR. DRAPER: Well, I think to the 13 extent that we reach any agreements or any 14 determinations that would require some action by 15 the Arkansas River Compact Administration to 16 implement, that we would need to arrange to have 17 the compact administration formerly agree to 18 perform that role. 19 SPECIAL MASTER: I'm thinking right 20 at this point where we've got an arbitration 21 approach that -- well, I guess we've got two 22 things that really involves. We've got an 23 arbitration procedure which we're using right 24 now which we don't need to involve them. We've 25 got the broader arbitration approach, which is 26 part of the judgment. 27 MR. MONTGOMERY: Yeah. 28 SPECIAL MASTER: And I'm wondering Page 35

36 1 whether, you know, we should be submitting let's just assume for a second that we're in 3 agreement here on that draft. Colorado 4 expressed some concerns about the fast track 5 approach. Just assume for a moment that we are 6 in agreement here. Should we be submitting that 7 to the administration now? Should we be sending 8 this off to the United States Attorney, whoever 9 represents the chairman of that group? 10 MR. DRAPER: My view on it -- and 11 Colorado made the suggestion, and I agreed with 12 it -- that to the extent we proposed to involve 13 ARCA, I'll call it, that we do need to have 14 ARCA's agreement now. ARCA does have a federal 15 chairman, but he's a nonvoting -- that person is 16 nonvoting, and it simply requires the unanimous 17 agreement of the two states. 18 I think with Mr. Simpson and Mr. Pope 19 involved in consulting with the other members of 20 the administration, we can be confident that 21 we're moving along in a way that the 22 administration would ultimately be comfortable 23 with. But I think as a formal matter at some 24 point, and perhaps at the annual meeting that's 25 coming up in December -- I think it's 26 December if we were in a position at that 27 time and had determined that we wanted to ask 28 for ARCA's cooperation, that kind of thing could Page 36

37 1 be submitted either then or at a special 37 2 meeting. 3 MR. ROBBINS: If, in fact, we were 4 to reach an agreement today, as the master 5 suggested, doesn't it make sense to have it sent 6 to ARCA and to the six representatives and to 7 the U.S. representative now with a request that 8 they consider it promptly? 9 My thinking is that David has two others 10 on his team, and our representatives are three 11 different people, and I would hate to have it 12 get to the annual meeting on the 13th of 13 December and have somebody say, "Well, I have 14 questions. Let's postpone it a bit" because I 15 think the master needs to have that approval in 16 hand at the time he enters his final 17 recommendation, don't you? 18 MR. DRAPER: I agree with that, 19 Your Honor. 20 SPECIAL MASTER: Okay. 21 MR. DRAPER: I think it can either 22 be informal or formal, but we should be talking 23 to our respective states' delegations. We have 24 proposed a first draft on that procedure. 25 SPECIAL MASTER: Right. 26 MR. DRAPER: I think we have not had 27 a chance to sit down together and talk about 28 rationalizing that and getting it in a form that Page 37

38 38 1 we're both comfortable with. And it would be -- 2 at that point I think it would be appropriate to 3 be then conferring with our delegations either 4 formally or informally. 5 SPECIAL MASTER: Clearly, we don't 6 want to send something off unless you two are in 7 agreement. 8 MR. ROBBINS: Sure. 9 SPECIAL MASTER: I have to go 10 through my notes and see whether I have 11 particular questions, but in a general sense, 12 you know, I didn't have -- I better look before 13 I say that. Maybe I do have some specific 14 comments. I don't remember them right at this 15 moment, anyway. 16 I thought the schedule that you 17 submitted looked about as tight as one can have, 18 and I see that you already have three things on 19 the schedule -- four things which have passed. 20 So maybe you can tell me what's happened on 21 those. 22 MR. DRAPER: Yes. We have been 23 trying to observe that schedule, and we have 24 already been in contact with a person that we 25 have agreed would be our first choice as 26 arbitrator on all of the issues. 27 SPECIAL MASTER: Okay. Great. 28 MR. DRAPER: One person on all the Page 38

39 1 issues. Mr. Montgomery and I and Mr. Rolfs 39 2 talked yesterday with Roger Patterson. He is 3 the former -- 4 SPECIAL MASTER: I know who he is, 5 yeah. 6 MR. DRAPER: Okay. I would say that 7 he gave us a favorable indication. We talked 8 with him about the schedule, and as long as the 9 schedule doesn't change significantly, he, I 10 think, thought in general he could work with it. 11 He had one conflict during our hearing period 12 specified, but we agreed we'd work on that. 13 I think the other caveat that he had was 14 that he felt he needed some legal assistance, 15 and he was going to get back with Mr. Montgomery 16 and Mr. Rolfs and me about his proposal. He 17 mentioned that his assistant director in 18 Nebraska at one time was a lawyer and was 19 somebody he would recommend. 20 So that's the stage we're at. I would 21 say it looks propitious. We were concerned with 22 this tight of a schedule that -- especially the 23 people of the caliber that we're considering 24 wouldn't have time to do this job, but he seemed 25 to believe he could do it. 26 SPECIAL MASTER: Well, I think 27 that's fine. Having one person on all of the 28 issues, I think, really would move things along. Page 39

40 1 So we're sure he's got -- or whoever it 40 2 is -- has the Graham issue and then maybe these 3 other two? 4 MR. ROBBINS: Yeah. 5 SPECIAL MASTER: All right. That's 6 great. 7 MR. ROBBINS: The nice thing about 8 Mr. Patterson is that he knows David and Hal 9 extremely well and was deeply involved in the 10 Republican River work. So he has good 11 familiarity with how all of these things work 12 and what needs to happen. So I think we're all 13 very comfortable with Roger. 14 SPECIAL MASTER: I think the 15 arbitration schedule's fine. 16 MR. ROBBINS: Okay. 17 SPECIAL MASTER: So we can go with 18 that. 19 MR. DRAPER: Very good. 20 SPECIAL MASTER: There was a 21 question raised earlier about what we should do 22 with the original record of any arbitration 23 proceedings, Kansas saying that they thought 24 they should be filed with me, Colorado saying, 25 "I think it's okay but maybe not necessary." 26 MR. ROBBINS: Yes, sir. 27 SPECIAL MASTER: If it gets filed 28 with me, I guess it becomes part of the supreme Page 40

41 1 court proceedings, and, for instance, the 41 2 original -- all original documents before my 3 fourth report were submitted -- or after my 4 fourth report, at the same time, were submitted 5 to the supreme court. 6 So at this point they have --the Court 7 has all of the original transcripts and exhibits 8 and arguments and correspondence and everything 9 that's ever been filed. And presumably I will 10 some day make one more deposit with them, and I 11 assume that if the arbitration proceedings get 12 filed with me, that would then also go back to 13 the Court. 14 Is that the way you would see it if it 15 gets filed with me? 16 MR. ROBBINS: If it gets filed with 17 you, I believe that's correct. 18 SPECIAL MASTER: Yeah. 19 MR. DRAPER: Yes. 20 SPECIAL MASTER: Okay. I'm inclined 21 to think, Mr. Robbins, that we probably at this 22 point should keep the record whole. But if you 23 think strongly otherwise, you tell me now. 24 MR. ROBBINS: No. As we indicated 25 in the letter SPECIAL MASTER: Right. 27 MR. ROBBINS: -- we didn't see that 28 it was particularly necessary, that the Page 41

42 1 arbiter's award was all that really mattered SPECIAL MASTER: Let's have it 3 filed, and then the record is complete. 4 MR. ROBBINS: That's fine. 5 SPECIAL MASTER: This probably -- 6 since you already have tentative agreement and 7 the arbitrator doesn't make any difference, I 8 have one question about the disclosures and the 9 disqualification. I didn't see the disclosure 10 was a specific ground for disqualification, but 11 that may all be pretty academic considering 12 where you are now. 13 MR. ROBBINS: I agree. I think 14 we're -- unless Roger were to say that he can no 15 longer perform the services that we've asked him 16 to perform, it seems to me we're over that hump 17 because he was going to be looking at whatever 18 we had left. 19 MR. DRAPER: I'm not sure I 20 understand what you're referring to, Your Honor. 21 SPECIAL MASTER: Well, there was a 22 list of things on which you could disqualify 23 him, and I didn't see that the disclosure of 24 interest was one of them. It's a pretty 25 technical issue. 26 MR. DRAPER: Oh. 27 SPECIAL MASTER: But it's academic 28 at this point. If you're not -- I mean, you're Page 42

43 1 really not concerned about disclosures at this 43 2 point. And so this is not a major point. 3 MR. DRAPER: I think that's correct. 4 SPECIAL MASTER: Yeah. 5 MR. ROBBINS: It's hard to 6 disqualify the guy that we both listed as one of 7 our three preferred arbiters. 8 MR. DRAPER: Yes. It would be quite 9 a surprise for one of us. 10 SPECIAL MASTER: Now, in the 11 arbitration rules, you list some things that are 12 nonbinding. Let me see which they were. You 13 have Sisson and Stubbs credit, but, in fact, 14 that's now been agreed to. And the offset 15 account credits was listed, but that's been 16 agreed to. So the only thing that's listed as 17 nonbinding is Graham, and that may be the only 18 thing that gets adjudicated here. 19 Did you mean that? Let's take a look at 20 the -- where is that? That's on -- I can't find 21 it now, but that's what my notes show. 22 MR. MONTGOMERY: That's correct. 23 SPECIAL MASTER: Are you finding 24 that, Mr. Montgomery? There's a funny little 25 line just tucked in at the end someplace. 26 MR. MONTGOMERY: Yes. 27 MR. DRAPER: It's in the 28 September 12, 2005 letter to you. Page 43

44 44 1 MR. MONTGOMERY: I believe it's also 2 in the Rules of Arbitration, John, which is on 3 the bottom of page 8, Rule R SPECIAL MASTER: Right. 5 MR. MONTGOMERY: -- B. 6 SPECIAL MASTER: It's under B, isn't 7 it? Yeah. 8 "The parties to the arbitration under 9 these rules shall be deemed to have consented 10 that the decision of the arbitrator is binding 11 on all issues except Sisson-Stubbs," which is 12 now agreed to, "Graham alternate points of 13 diversion," which is going to go to arbitration, 14 "and then the offset account credit," which has 15 now been agreed to. 16 So what we are saying is the one sure 17 thing which is going to arbitration is not 18 binding. Do we really mean that? 19 MR. ROBBINS: It's okay with us if 20 it's binding, just so we're clear. 21 MR. DRAPER: Let me give that a 22 little thought. If we could come back to that 23 today. Let me give that some consideration. I 24 need to think about where that came from and 25 whether SPECIAL MASTER: Why don't you see 27 if you can discuss this sometime today and think 28 about it and then let me know before the end of Page 44

45 1 the day because my thought now is that this 45 2 arbitration proceeding should be binding. 3 MR. DRAPER: Okay. 4 SPECIAL MASTER: I don't think I had 5 any other real comments on the rules. They look 6 fine to me. That finishes arbitration, I think. 7 Are we okay, or do we want to take a 8 little break? 9 THE REPORTER: I'm okay. 10 SPECIAL MASTER: Let's go over a 11 couple other items, then. 12 Tell me a little bit about, without 13 getting into the compromised proposals, where we 14 stand on costs. Is it an issue of what elements 15 should go into costs, or is it an issue simply 16 on amounts, or how are we finally going to 17 decide costs if you don't reach agreement? 18 MR. DRAPER: Well, there have been 19 intermittent letters between the Attorneys 20 General that addressed that. 21 SPECIAL MASTER: I don't want to get 22 into the compromised proposals. I'm just trying 23 to get some idea of where we're going to be 24 going on costs and maybe what the general kind 25 of issues are. 26 MR. DRAPER: Well, it strikes me 27 that it might be useful to set a schedule that 28 if the parties are going to raise anything about Page 45

46 1 costs, they do it by a certain date that's 46 2 consistent with the schedule you want to observe 3 in finalizing your proposed decree. 4 SPECIAL MASTER: Well, let me ask 5 this question first: Do you think you will 6 reach agreement on costs? 7 MR. DRAPER: I guess I'd have to say 8 I'm not sure. 9 SPECIAL MASTER: Are you in the "not 10 sure" category or something else? 11 MR. ROBBINS: I'm in the "not sure" 12 category. 13 SPECIAL MASTER: Yeah. Then I think 14 we MR. ROBBINS: Without discussing 16 amounts or anything SPECIAL MASTER: Right. 18 MR. ROBBINS: -- and recognizing in 19 the written product Colorado has contested the 20 fact that costs would be owed anyway, given the 21 course of this proceeding SPECIAL MASTER: So there's a legal 23 issue there, yeah. 24 MR. ROBBINS: That we would want to 25 have resolved our view is that if there's value to 27 getting certain things finally resolved, and in 28 light of the agreements that have occurred in Page 46