BOARD00152 ‎(2)‎

• Board Meeting Date: 3/13/2007
• Description: CF Section - Construction Fund and Severance Tax Trust Fund Perpetual Base Account New Loans - Lower Poudre Augmentation Company - Reservoir and Water Rights Purchase
• Board Meetings - Doc Type: Memo

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Lower Poudre Augmentation Company
March 12-13,2007

Agenda Item 16a

Lower Poudre AUQmenation Company

LPAC is a Colorado non-profit corporation registered in the State of Colorado, in good standing.
The Company was incorporated in June 2004, for the purpose of providing augmentation for
groundwater wells. LPAC is owned by the Irrigating Company (2/3 interest) and the Reservoir
Company (1/3 interest). The business and affairs of the corporation are managed by a 5-
member Board of Directors. Loans or other indebtedness must be authorized by a resolution of
the Board of Directors. The Fiscal Year established by the Board of Directors is December 1
through November 30. Well owners contract with LPAC for augmentation coverage through
"augmentation agreements", and LPAC revenue is derived from augmentation fees based on
the amount of depletions per well. For 2007, the well fee formula is: $75 per well, plus $0.75
per gallon of decreed capacity; plus $75 per AF of depletions. For the year 2006 the LPAC had
operating income of approximately $435,000 with expenses of approximately $380,000. Last
year's average annual cost was approximately $4,950 per well, although the range can be from
$500 to $70,000 per year, depending on the type of well.

Water RiQhts

In addition to the reservoir, the LPAC will purchase 4.5 shares of the Boxelder Ditch. The total
Historic Consumptive Use for 4.5 shares is 177.1 AF. The Boxelder Ditch has 64 outstanding
shares. The Boxelder Ditch is considered a senior right, and was decreed for irrigation in Civil
Action No. 320 on April 11, 1882 with appropriation dates of March 1, 1866 for 32.50 cfs, May
25, 1867 for 8.33 cfs, and July 1, 1868 for 11.93 cfs from the Cache La Poudre River. The right
is the number 15 priority on the Poudre River. The two later enlargements of 8.3 cfs and 11.9
cfs have priority numbers 23 and 30, respectively. The capacity of the ditch is approximately 53
cfs. The ditch has only been called out during the late summer in extreme drought years of
1954 and 2002.

The purchase price for the Boxelder Ditch shares is $200,000 per share, or $5,080 per AF of
historic consumptive use. This compares favorably with the value of senior water rights in the
Poudre River basin of $4,000 to $6,500 per historic consumptive use credit, as provided in the
opinion of value from the Applegate Group, Inc.

Proiect Description

LPAC looked at several options for augmenting their wells:
1. No-action alternative
2. Purchase Additional Water Rights
3. Purchase Timnath Flatiron Reservoir

Alternative 1, No-action alternative - This option is not desirable due to the uncertainty in
future availability and cost. Maintaining the status quo is seen as a loss of current well use in
the future. The "no-action" alternative is not an option if the wells are to continue operating.

Alternative 2, Purchase Additional Water Rights - The LPAC has the option to purchase
additional water rights and/or rental water, however, neither of these options gives the Company
the security in the system that a reservoir would provide. LPAC is currently renting water on an
annual basis, and this does not provide certainty.

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