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<br />. <br /> <br />. <br /> <br />Agenda Item 15a. (Updated July 22, 1997) <br />July 21, 1997 <br /> <br />2 <br /> <br />DISCUSSION <br /> <br />The purpose of the water rights would be to provide augmentation water for Mr. Preisser's wells <br />in the Horse Creek Basin. Under new rules adopted for the Arkansas River Basin, the <br />consumptive use of all non-exempt wells must be fully augmented. The water rights purchase <br />would be to supply current water needs for Mr. Preisser. <br /> <br />The Preisser wells are the subject of several court decisions dating back 20 years, which <br />determined, among other things, that the previous Arkansas Rules do not apply to Mr. Preisser's <br />wells. Mr. Preisser filed a lawsuit in water court, Water Division 2, to determine the issue of <br />applicability of the revised Arkansas Rules to his wells, naming as defendants the State and <br />Division Engineers, HCWUA, Box Springs Canal and Reservoir Company, Smith Cattle, and <br />Reid Cattle. Mr. Preisser has reached settlement in principle with all parties. This loan is a <br />key component of the settlement, and will save State resources which would otherwise be <br />expended in litigation, and which ends decades of water rights disputes. The effect of issuance <br />of the loan for purchase of water rights for augmentation will be to bring the Preisser wells into <br />regulation under the new Arkansas Rules, to which Mr. Preisser agrees as a term of the <br />settlement. There are no other further settlement issues within the Horse Creek Basin. This <br />loan will exhaust the Horse Creek Account. <br /> <br />Under the settlement agreement, Mr. Preisser will be allowed to pump a maximum of 550 acre <br />feet per year in exchange for $260K in compensation paid to senior water rights holders in the <br />basin. Mr. Preisser is agreeing to abandon approximately 1300 acre-feet per year of his water <br />rights. He will buy 2 cfs in augmentation water from Box Springs ($ lOOK) , and compensate <br />Smith and Reid a total of $120K. Specifics of the settlement agreement are attached. <br /> <br />Settlement is in part contingent upon Mr. Preisser's sale of 200 acres and 200 acre-feet of <br />annual pumping rights to Bell Farms, a hog-raising operation. Bell farms is a Colorado <br />Corporation, with several existing operations. After the sale, the subject water rights may be <br />used for raising hogs, for domestic uses in employee housing, and for an associated gravel pit <br />operation. Mr. Preisser will continue to own 1560 acres and 350 acre-feet of water. It is <br />believed that a portion of this remaining property (and water) may be developed for up to 100 <br />units of housing, primarily for hog farm employees. <br /> <br />The CWCB loan would be used as follows: $45K would be to help purchase the senior surface <br />water rights of the Box Springs Canal and Reservoir Company, and $45K would be a portion <br />of the compensation for the Reid senior surface rights. <br /> <br />The settlement agreement calls for placement of the CWCB loan funds in escrow sometime <br />between August 15 and September 15,1997. There are currently 17 CWCB loans approved and <br />awaiting contracting with a deadline date for funding by 9/15/97. These loan contracts must be <br />completed to allow scheduled construction to proceed in summer-fall 1997 . It will probably be <br />necessary to make arrangements so that the CWCB funds for the Preisser loan can be entered <br />