PROJ02011

• Contract/PO #: 04000000048
• Contractor Name: Lake Canal Reservoir Company
• Contract Type: Grant
• Water District: 0
• County: Larimer
• County: Weld
• Loan Projects - Doc Type: Feasibility Study

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for rapid urbanization of Lake Canal and to further the study objectives, we have taken
the approach of fast forwarding to a complete secondary supply build-out scenario.
Consideration is given to the whole of the Lake Canal service area and a forecast of the
mix of landscape treatments and changing irrigated areas associated with new housing.

This study reports on the important elements of a pressurized secondary system for
Lake Canal including:

· Analysis of the water rights.
· A conceptual layout of the secondary supply infrastructure.
· Probable costs of infrastructure design and construction.
· Consideration to a suitable organizational approach for the dual system.
· Potential system hookup and annual water fees.
· Funding sources.

As the work reported here proceeded, meetings were held with city staff people, rural
domestic boards, and developers. As the secondary supply was explored, three
essential questions came to the forefront. These questions are:

1. Is there enough water?
2. How much does secondary supply cost?
3. Who will manage the secondary supply system?

This report attempts to provide satisfactory answers to all of these questions in sufficient
detail to allow the continuance of the discussions and hopefully, the ultimate and
satisfactory playing out of the full opportunity. This presents a positive opportunity for
Lake Canal shareholders, for the potable water purveyors, and in the end, for the
homeowners under the Lake Canal service area who will be the ultimate and long term
beneficiaries of secondary water for landscape irrigation.

Water Ri~

Some perceived and real water right issues apply to water that was historically used for
agricultural irrigation and is proposed for landscape irrigation. Most often a mutual
irrigation company's decree is worded such that the water right is associated with
"irrigation" and irrigation is irrigation, whether used for crops or landscapes.

Some urban projects are built on land that may not have been irrigated or that was only
partially irrigated previously. Bringing new ground under irrigation is most likely an issue
and, in all likelihood a Colorado Water Court issue, that can result in a lengthy and costly
legal process. A water court action of this type almost always results in a reduction of, or
a court-imposed limitation on the water right in question.

An analysis of the water rights under the Lake Canal system was completed with the
presumption that there is neither change in use nor a change in place of use because a
pressurization of the system would occur entirely within the Lake Canal service area and
water use would continue to be strictly irrigation.

Shareholders under the Lake Canal system currently and historically own water rights
from five sources:

Aqua Engineering, Inc.
June 7, 2004

Canal Modernization Feasibility Study
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