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Q. What is a reverse auction?
A. A reverse auction is an auction that announces a buyer’s interest in acquiring an item or class of items. In a conventional auction a seller announces its intention to dispose of an item or class of items. Ecology conducted a single-round reverse auction in March 2005 to acquire water rights for instream flow improvement during the drought. Reverse auctions in water rights have also been conducted in Oregon’s Deschutes River basin in 2003 and 2004.
Q. Why is Ecology doing this reverse auction?
A. The purpose of this auction is to acquire water rights to improve instream flow conditions for resident and anadromous fish in Yakima basin tributary streams that possess significant fisheries habitat. A secondary purpose of the auction is to develop a better understanding of the pricing and the tools for market-based flow enhancement that haven’t been commonly used within the Yakima basin.
Q. Who is funding the auction?
A. Funding is provided by the Department of Ecology and the Bonneville Power Administration through the Columbia Basin Water Transactions Program.
Q. How will this auction work?
A. Bidders may submit bids in each category of the auction. Ecology has budgeted up to $625,000 for the purchase or lease of water rights. Three auctions (split-lease lease, dry-year option, and purchase) will be run simultaneously. The auction process will continue until either Ecology’s budget is exhausted or it appears unlikely to Ecology that additional bids that would meet Ecology’s criteria for purchase or lease can be expected. Bids that do not meet Ecology’s criteria would be rejected. Unsuccessful bidders may modify and resubmit their bids in any subsequent rounds of the auction that may be held. Bids that offer to sell or lease a water right at a price less than our reserve price will be accepted. If the total value of the bids in any round exceeds the available budget, Ecology would employ tie-breaking criteria to select the best bids among the excepted bids. At that point the auction would end as the budget would be exhausted.
Q. How will Ecology decide which bids to accept?
A. Ecology is asking each bidder to identify how many acres of its water right it wishes to sell or lease and the price for the sale or lease. Ecology will review each bid using a model to assess the fisheries and environmental value of the water right offered for sale or lease. If the calculated value of the sale or lease exceeds the offer price, the bid would be an acceptable bid and would be ranked among other acceptable bids. Ecology will select bids that represent the highest ratio of value to cost among the acceptable bids. If a water user submits more than one acceptable bid on the same right, Ecology will select the one (lease, option, or purchase) it prefers.
Q. Can I submit a bid to sell or lease my surface water right and continue to irrigate with my supplemental well or a different water right?
A. No. The terms of the auction require that the land to which the sold or leased water right was appurtenant not be irrigated.
Q. What is the Dry-year option retainer and how is it calculated?
A. The option retainer is a one-time payment Ecology will pay after securing an agreement. It is calculated by multiplying the consumptive volume of the water right offered for lease, the duration of the lease (in years), and $10/ac-ft.
Q. Does a bidder have only one chance to submit their bid?
A. If any subsequent rounds of the auction are announced by Ecology, unsuccessful first round bidders may again submit bids. Only one round of the auction is certain. Ecology will post the results of first round bidding on the website so that A second round of the auction may occur if the first round of the auction does not exhaust Ecology’s auction budget for either purchases or leases.
Q. Will Ecology be the only agency to review the bids?
A. No. The Washington Department of Fish and Wildlife, Washington Water Trust, and Washington Rivers Conservancy will all assist Ecology with the evaluation of bids.
Q. How will I know if my bid is accepted?
A. The review process can involve up to three tiers of review to identify which bids represent the best value to the state. At each tier, some bids will be rejected and bidders will be notified by letter if their bid is not accepted. Ecology will maintain an auction calendar so bidders can follow the bid evaluation process.
Q. How soon will bidders know if their bids are accepted?
A. The number of bids we receive will be an important factor. The bid evaluation procedure requires WDFW to perform a site assessment for bids that are close to our acceptance criteria. The site evaluation can affect the “score” by up to 33%. Bids that are more than 33% above our price threshold will be notified without a site evaluation and therefore would be notified in as little as two (2) weeks. Based on the initial auction calendar, Ecology expects to send Letters of Intent to successful bidders in early August 2007.
Q. How soon would funds be dispersed?
A. Funds are disbursed upon completion of a signed contract and approval of the Report of Examination.
Q. With the dry-year options, at what point in the year would I know if Ecology was to exercise the option and how will payments be disbursed?
A. Ecology will make a payment equal of $10 per acre-foot of consumptive use (the consumptive use varies by location and the availability of water under each water right in a drought year) multiplied by the term of the option agreement. This payment will be made immediately after signing the agreement. In a drought year, Ecology will notify water users of its decision to exercise its option by March 15. Payment for exercising the dry-year option at the accepted bid price will be disbursed immediately after the water right is then made available to Ecology. Q. Will funding for split-season leases be disbursed annually or in one lump sum? A. Payments will be disbursed in one payment.
Q. My water right is a groundwater right; can I submit a bid?
A. No. This auction is limited to surface water rights confirmed in the Acquavella adjudication.
Q. Can I sell or lease my supplemental water?
A. No. The bid terms require that the land offered for lease or sale not be irrigated.
Q. Can I sell or lease water from my exempt well?
A. No. This auction is limited to surface water rights confirmed in the Acquavella adjudication.
Q. I am part of an irrigation district; can I submit my shares for the reverse auction?
A. Yes; however, you must have the written permission from the irrigation district manager or board of directors of the district. An approval letter or resolution must accompany the bid form.
Q. What happens to a bidders’ water right after the lease period is over?
A. Upon completion of the lease term, the water right associated with the lease will be returned to the landowner. Water rights held for instream flow in the Trust Water Rights Program are exempt from relinquishment.
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