3.25 "Substitute Water Contract" shall mean a contract between CAWCD or a Subcontractor and Contractor conforming to the terms of this contract and approved by the Secretary. The execution of a Substitute Water Contract and the approval of such a contract by the Secretary shall not be construed to constitute a determination by Contractor or the Secretary that the Substitute Water is water that the CAWCD or a Subcontractor is lawfully entitled to use and is lawfully entitled to deliver.

3.26 "Place of Need" is defined as the Contractor's Delivery Point(s) needed to integrate substitute water into the water delivery system on the Contractor's Reservation.

3.27 "Time of Need" is defined as the same delivery times and schedule for Substitute Water as is agreed to by the Contractor and CAWCD or the Subcontractor. Any necessary construction of facilities such as those for storage or reregulation to enable the CAWCD or Subcontractor to meet the delivery requirements shall be at the expense and risk of the Subcontractor.

3.28 "Delivery Facilities" shall mean all structures and facilities separate from the Main System and Distribution Works necessary to transport the proposed Substituted Water from the point where the CAWCD or Subcontractor's then existing facilities are located to the Place of Need. Delivery facilities shall be suitable for the intended purpose and shall be designed to appropriate engineering standards as determined by agreement between the Contractor and the CAWCD or Subcontractor or, in case of disagreement, by the Secretary.

3.29 "Time of Shortage" shall mean a calendar year for which the Secretary determines that a shortage exists pursuant to section 301 (b) of the Basin Project Act, such that there is not sufficient Project Water in that year to supply up to a limit of 309,828 acre feet of water for Indian uses, and up to a limit of 510,000 acre feet of water for non-Indian Municipal and Industrial uses.

4. Delivery of water:

4.1 Obligations of the United States. Subject to the terms, conditions, and provisions set forth in this contract during such periods as it operates and maintains the Project, the United States will deliver Project Water to the Contractor. The United States will use reasonable diligence to make available to the Contractor the quantities of water specified in the schedule submitted by Contractor and shall make deliveries of Project Water to Contractor to meet Contractor's water requirements within the constraints of and in accordance with Section 4.6. After transfer of O.M. & R. to Operating Agency the United States will make deliveries of Project Water to the Operating Agency for subsequent delivery to Contractor as provided herein.

4.2 Term of Contract. This Contract shall become effective upon its execution and shall remain in effect for a period of 50 years beginning with the following Substantial Completion of the Project; Provided, that this Contract may be renewed upon written request by Contractor upon terms and conditions of renewal to he agreed upon not later than one year prior to the expiration of this Contract. 4.3 Conditions Relating to Delivery. Contractor hereby agrees that:

(a) The obligation of the United States to deliver water under this contract is subject to:

(1) The availability of such water for use in Arizona under the provisions of the Colorado River Compact, executed November 24, 1922; the Boulder Canyon Project Act, 45 Stat. 1057, dated December 21, 1928; the Colorado River Basin Project Act, dated September 30, 1968, 82 Stat. 885; the contract between the United States and the State of Arizona dated February 9, 1944; the Opinion of the Supreme Court of the United States in the case of Arizona v. California et al., 373 U.S. 546, rendered June 3, 1963; and the March 9, 1964, Decree of that Court in said case, 376 U.S. 340, as now issued or hereafter modified.

(2) Executive A, Seventy-eighth Congress, Second Session, a treaty between the United States of America and the United Mexican States, signed at Washington, D.C., on February 3, 1944, relating to the utilization of the waters of the Colorado River and Tijuana River and of the Rio Grande from Fort Quitman, Texas, to the Gulf of Mexico, and Executive H, Seventy-eighth Congress, Second Session, a protocol signed at Washington, D.C., on November 14, 1944, supplementary to the Treaty, all hereinafter referred to as the Mexican Water Treaty.

(3) The express understanding and agreement by the Contractor that this contract is subject to the condition that Hooover Dam and Lake Mead shall be used: First, for river regulation, improvement of navigation, and flood control; second, for irrigation and domestic uses and satisfaction of present perfected rights in pursuance of Article VIII of the Colorado River Compact approved by Section

13(a) of the Boulder Canyon Project Act; and third, for power; and furthermore, that this contract is made upon the express condition and with the express covenant that all rights hereunder shall be subject to and controlled by the Colorado River Compact and that the United States and the Contractor shall observe and be subject to and controlled by said Colorado River Compact and Boulder Canyon Project Act in the construction management, and operation of Hoover Dam, Lake Mead, canals and other works and the storage, diversion, delivery, and use of water to be delivered to Contractor hereunder.

(4) The right of the United States temporarily to discontinue to reduce the amount of water to be delivered hereunder whenever such discontinuance or reduction is made necessary for purposes of investigations, inspections, replacements, maintenance, or repairs or any works whatsoever affecting, utilized or, in the opinion of the Secretary, necessary for delivery of water hereunder, its being understood that so far as feasible the United States will (1) do so during periods of low water demands and (2) give reasonable notice in advance of such temporary discontinuance or reduction.

(b) There be in effect measures, adequate in the judgment of the Secretary, to provide for the internally integrated management and control of surface and groundwaters within Contractor's Reservation to the end that groundwater withdrawals are managed on a responsible basis.

(c) The canals and Distribution Works through which Project Water is conveyed after its delivery to the Contractor shall be maintained with linings adequate in the Secretary's judgment to prevent excessive conveyance losses: Provided, the Contractor shall be relieved from this obligation if the United States does not make funds for this purpose available to Contractor following a timely request for such funds.

(d) The Contractor shall not pump nor permit others to pump groundwater from within the exterior boundaries of Contractor's Reservation for use outside said Reservation unless the Secretary and the Contractor agree, or shall have previously agreed, that a surplus of groundwater exists and drainage is required; Provided however, That where such pumping is presently permitted pursuant to contract, said pumping may continue throughout the life of said contract; Provided further, that such pumping may be permitted in other and additional cases subject to the appproval of the Secretary.

(e) The Contractor shall not sell or permit the sale or other disposition of any Project Water for use outside the Contractor's Reservation except:

(1) The Contractor may exchange Project Water and may change times and places of delivery of Project Water, subject to the approval of the Secretary; and (2) The Contractor may dispose of Project Water credited against finally determined Water Rights to the same extent that said Water Rights may then be subject to disposition by Contractor.

4.4 Delivery of Project Water Prior to Completion of Project. Prior to completion of the Project works, water may be temporarily available for delivery to Contractor. When such water is available, the Contracting Officer will so notify Contractor and the water will be delivered on a "when available" basis at such terms as agreed upon between the Contractor and the Contracting Officer.

4.5 Delivery Entitlements and Obligations. The United States or the Operating Agency will not be required to deliver to the Contractor under this contract in excess of the following amounts of Project Water yearly during the life of the Project: Chuichu-8,000 acre feet; San Xavier-27,000 acre feet; and Schuk Toak-10.800 acre feet.

4.6 Procedure for Ordering Water. Following notice of Substantial Completion of the Project, Contracting Officer will issue a Notice of Availability of Project Water to Contractor. The Contractor will, in accordance with the procedures hereinafter set out, submit written schedules to the Contracting Officer showing the quantities of water requested for delivery. If the Notice of Availability of Project Water is given by Contractor prior to July 1 of any year, the first schedule for the balance of the current year shall be submitted to the Contracting Officer within 30 days. If said Notice is given after July 1 of any year, the first schedule shall cover the balance of the then current year and the next succeeding full year. Thereafter, the amounts, times, and rates of delivery of Project Water to the Contractor during any year shall be in accordance with a water delivery schedule for that year, such schedule to be determined in the following manner :

(a) On or before October 1 of each year, the Contractor shall submit in writing to the Contracting Officer a water delivery schedule indicating the amounts of Project Water desired by the Contractor during each month of the following

year along with a preliminary schedule of water desired for the succeeding two years.

(b) Upon receipt of a schedule the Contracting Officer shall review it and, after consultation with the Operating Agency and the Contractor, shall make only such modifications in it as are necessary to insure that the amounts, times, and rates of delivery to the Contractor will be consistent with the provisions of section 4.3 (a). On or before December 1 of each year, the Contracting Office shall determine and furnish to the Contractor the water delivery schedule for the next succeeding year which shall show the amounts of water to be delivered to the Contractor each month of that year.

(c) A water delivery schedule may be amended by the Contracting Officer upon the Contractor's written request. Proposed amendments shall be submitted by the Contractor within a reasonable time before the desired change is to become effective, and shall be subject to review and modification by the Contracting Officer in like manner as the schedule itself.

4.7 Points of Delivery-Measurement and Responsibility for Distribution of Water.

(a) The Project Water to be furnished to the Contractor pursuant to this Contract will be delivered at the turnout (s) from the Main System to the Distribution Works to be constructed by the United States at such point(s) to be agreed upon in writing by the Contracting Officer and the Contractor, or in the event they are unable to agree, to be selected by the Secretary; Provided however, that in the event construction has reached that portion of the Project which will embrace such point(s) and their location has not been agreed upon, such points shall be established at locations determined by the Secretary.

(b) All water delivered to the Contractor shall be measured with equipment furnished and installed by the United States and operated and maintained by the United States or the Operating Agency. Upon request of the Contractor, the accuracy of such measurements will be investigated by the Contracting Officer or the Operating Agency and Contractor, and any errors appearing therein adjusted. (c) Neither the United States nor the Operating Agency shall be responsible for the control, carriage, handling, use, disposal, or distribution of water beyond the turn out point(s) from the Main System to the Distribution Works serving the Contractor, and the Contractor shall hold the United States and the Operating Agency harmless on account of damage or claim of damage of any nature whatsoever for which there is legal responsibility, including property damage, personal injury or death arising out of or connected with the Contractor's control, carriage, handling, use, disposal, or distribution of such water beyond said turnout point(s).

4.8 Water Acquired by Contractor Other than from the United States. The provision of this Contract shall not be applicable to or affect Non-project Water or water rights now owned or hereafter acquired by the Contractor.

4.9 Priority in Time of Shortages. In Time of Shortage, deliveries of Project Water to miscellaneous and non-Indian agricultural uses will have been terminated available Project Water shall be delivered to Indian contractors (including Contractor) and to non-Indian contractors for municipal and industrial uses according to the following formula:

IP=1/1+MI) where:

IP is the Indian Share of Project Water;

I is the Project Water used on Indian lands during the most recent calendar year which was not a Time of Shortage, up to a limit of 309,810 acre feet, less ten (10%) percent of the amount allocated to Indian Contractors for agricultural purposes; provided that, for the purposes of this formula, such ten (10%) percent reduction shall not operate to reduce the amount of Project Water used for Indian agricultural purposes to less than ninety (90%) percent of the Indian agricultural allocation. (Included in I is any water delivered under a Substitute Water Contract; Provided that, where substitutions occur at a ratio greater than one-to-one, the ratio shall be considered as if it were one-to-one for the purposes of this section.)

MI is the aggregate Project Water used by Subcontractors for municipal and industrial purposes during the most recent calendar year which was not a Time of Shortage up to a limit of 510.000 acre feet. (Excluded from MI is Project Water obtained under a Substitute Water Contract.

The non-Indian M&I water supply in Time of Shortage shall be the difference between Project Water and IP.

4.10 Secretarial Control of Return Flow. The Secretary reserves the right to capture all Return Flow flowing from the exterior boundaries of the Contractor's Reservation as a source of supply and for distribution to and use of the Central Arizona Projecct to the fullest extent practicable. Contractor may recapture and reuse or sell Return Flow within the exterior boundaries of Contractor's reservation; Provided however, that such Return Flow may not be sold for use outside the Contractor's Reservation unless the Secretary has given prior written approval.

4.11 Exchange Water. Where the Secretary determines that Contractor is able to receive Project water in exchange for or in replacement of existing supplies of water from surface sources other than the Colorado River to provide water supplies for water users upstream from the confluence of the Salt and Verde Rivers and Buttes Dam site, if such dam is then existent, the Secretary may require and Contractor agrees to accept said Project water in exchange for or in replacement of said existing supplies pursuant to the provisions of Section 304 (d) of the Basin Project Act.

5. Substitute water:

(a) CAP Water Allocations pursuant to this Contract may be exchanged for suitable nonproject Substitute Water on terms of Substitute Water Contracts between the Contractor and the CAWCO or a CAP Subcontractor approved by the Contractor and the Secretary or, in the alternative, by the Secretary in the event that the Secretary determines in accordance with Section 5(b) below that the Contractor is unreasonably withholding agreement to a proposed Substitute Water Contract. Water received by the Contractor pursuant to a Substitute Water Contract in amounts not in excess of Project Water exchanged for such Substitute Water shall be treated as Project Water for all purposes of this contract.

(b) A Substitute Water Contract may be approved by the Secretary with or without the joint approval of the Contractor if the Secretary first finds that:

(1) The Subcontractor is in compliance with the Arizona Groundwater code, and the water conservation requirements included in its subcontract with the CAWCD;

(2) The quality of the substitute water delivered under a Substitute Water Contract conforms with all applicable requirements of Federal and State law and is certified by appropriate quality tests prescribed by regulations of the Secretary to meet the standards for Substitute Water contained in Section 3.24 hereof;

(3) The delivery of Substitute Water is made at Time and Place of Need of the Contractor through Delivery Facilities, ali as herein defined;

(4) All costs of treatment of substitute water and delivery of substitute water to Places of Need (including all additional costs connected with the design, construction operation and maintenance of treatment and distribution facilities to integrate the delivery of substitute and Project water to the lands of the Contractor) are borne by CAWCD and/or the Subcontractor without cost or risk to the Contractor.

(5) The following Conditions are or will be met:

(a) Prior to December 31, 2005:

(i) The total of all Project water exchanged does not exceed twenty percent (20%) of that Contractor's CAP Allocation;

(ii) Not less than two acre feet of substitute water shall be delivered to the Contractor for each acre foot of Project water exchanged. The amount of substitute water delivered to the Contractor shall be determined at the Place of Need as defined in paragraph 3.26.

(iii) OM&R charges payable by the Contractor shall not be increased on account of substitute water received in exchange.

(b) After December 31, 2005 whenever CAWCD or any Subcontractor can establish to the satisfaction of the Secretary that no prudent and feasible alternative to use of Contractor's allocation is available for current or reasonably anticipated M&I use:

(i) Exchange may be made on the conditions stated in Sec. 5(b) 5(a) for not in excess of fifty percent (50%) of the Contractor's CAP Allocation; and

(ii) Substitute water may be exchanged on not less than an acre-foot foracre foot basis. The amount of substitute water delivered to the Contractor shall be determined at the Place of Need as defined in paragraph 3.26.

(6) Contracts for Substitute Water entered without Contractor approval shall provide:

(a) That Contractor is entitled to receive a fixed amount of Substitute Water during each year of the contract;

(b) That, in consideration of this, Contractor authorizes the Subcontractor to receive a fixed precentage of Project Water available to Contractor during each year of the contract which percentage shall be determined by dividing the fixed amount of Substitute Water to be delivered to the Contractor each year (unless said amount is at a ratio of more than one-to-one in which event the amount shall be the same as if the ratio were one-to-one) by the full amount of Contractor's CAP Allocation. The purpose of this provision is to encourage the Contractor to contract for Substitute Water in order to obtain a more firm water supply.

(c) Administration of Substitute Water Program.

Delivery of substitute water pursuant to a Substitute Water Contract shall be monitored at all times by the Operating Agency responsible for delivery of project Water and by the Secretary. In the event, for any reason, the Substitute Water is not available in the quantity and quality required herein and at the Time and Place of Need of the Contractor, the deficiency shall be satisfied from Project Water.

(d) Allocation Not to Release Rights.

Neither the allocation of Project Water to the Contractor nor the execution of this contract shall be construed to alter or release the right of any person or entity, including the Contractor, to assert rights to water all without limitation as to whether the water is surface or groundwater.

6. Other water:

Nothing in this contract shall prevent Contractor from agreeing with a water user to receive water from an off-reservation source where the water user does not condition delivery upon substitution for Project Water.

7. Payment of costs:

(a) Repayment of construction costs associated with Contractor's allocation of Project Water shall be subject to the provisions of 43 U.S.C. 1542 and 25 U.S.C. 386a.

(b) The Secretary shall fix OM&R charges payable by Contractor pursuant to 25 U.S.C. § 385 and regulations promugated pursuant thereto (25 C.F.R. Part 191). Project Water will not be delivered to Contractor unless the annual OM&R assessment is paid in advance, except where such payment is deferred, adjusted, or cancelled pursuant to 25 CFR 191.17.

(c) In the event the Contractor fails or refuses to accept delivery at the Deliveries Point(s) of the quantities of water available for delivery to and required to be accepted by it pursuant to this Contract, or in the event the Contractor in any year fails to submit a schedule for delivery as provided in Section 4.6 hereof, said failure or refusal shall not relieve the Contractor of its obligation to make the payments required in this Section. Contractor agrees to make payment therefor in the same manner as if said water had been delivered to and accepted by it in accordance with this Contract; Provided however, if Contractor fails or refuses to accept delivery of Project Water, Operating Agency is then able to sell that portion of Contractor's allotment of Project waters to another contractor that would not have otherwise received the additional increment of Project Water, then the Contractor's financial responsibility will be decreased by a like amount. The Secretary shall require Operating Agency to use due diligence to secure a reasonable price for said water. Provided further that Contractor shall be relieved from the obligation to pay for refusal to accept delivery if the United States does not make funds available to Contractor to construct Distribution Works and said Distribution Works are not in place to accept delivery.

(d) It is anticipated by both parties that a separate agreement will be entered into concerning the operation, maintenance, and replacement of the Distribution Works, the appointment of a Distribution Works Operating Agent and the setting and collection of appropriate charges for the care, operation, maintenance and replacement of the Distribution Works.

8. Distribution system-Environmental review:

Notwithstanding any other provision of this contract, the United States will not deliver Project Water through Distribution Works to the Contractor's Reservation until additional environmental analyses, as necessary, relating to the Distribution Works have been completed by the United States in accordance with