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Pagosa Area Water & Sanitation Dishict 7anuaiy 14, 2007 Page 3 of 6 .Agenda Item l la The District and SJWCD have been working together to plan and construct the facilities necessary to meet growing demands within their boundaries. In recent years, they have combined resources to perform engineering studies and evaluations necessary for long-range water resources planning. The SJWCD will likely provide funding assistance for Reservoir construction by utilizing its taxing authority. Water Rights The District has a portfolio of absolute and conditional water rights including limited senior water rights such as 6.5 cfs (100 AF/yr limit) and 3 cfs in the Town Pipeline from the San Juan River. The Dry Gulch Project could utilize some of the District's senior and conditional rights for the 180 cfs diversion and 29,000 AF of storage that were obtained in Division 7 Water Court Case No. 04CW85; however, this ruling was remanded back to Water Court by the Supreme Court in October 2007. The Dry Gulch Reservoir has a 6,300 AF conditional storage right with a 1967 priority via the Park Ditch. With additional direct flow storage right it would increase the reservoir size to 35,000 AF. The 35,000 AF conditional storage right is included in the Water Court Case No. 04CW85. At a Status Conference held by Division 7 Water Court on December 14, 2007, the District and Trout Unlimited (opposing) have been asked to provide legal briefs in response to the Supreme Court's ruling by February 11, 2008. The new diversion rights from the San Juan River will be junior to the CWCB's instream flow water right on the San Juan River. Consequently, diversions to the reservoir may not reduce flows in the San Juan River below 50 cfs. (March 1 August 31) and 30 cfs (September 1 February 28). Project Description Until 2002, the water source for two thirds of the District service area was diversions from Fourmile Creek through the Dutton Ditch into the Stollsteimer Creek drainage to serge the Pagosa Lakes area. These diversions were used to fill several resefvoirs, primarily Hatcher and Stevens; however, the water rights were junior to irrigation rights in the Dutton Ditch and were normally out of priority by the end of May. In 2002, the District constructed a 4.6 cfs pump and pipeline from the San Juan River to a new treatment plant. These facilities now provide the majority of the water supply for the Pagosa Lakes area. In order to maximize the water supply from Fourmile Creek, the District has constructed the Dutton Ditch pipeline which replaces the old open ditch with a pressure pipe in order to minimize conveyance losses and improve the ability to divert during winter months. The District is also enlarging the Stevens Reservoir from about 600 to 1,700 AF which is underway. Beginning in the late 1980's, the District and SJWCD understood that additional storage capacity would be required to meet their long term demands. A 1989 Report evaluated several potential reservoir sites. The evaluation of these sites showed that the Hidden Valley Reservoir was the best site to store Fourmile Creek diversions and Dry Gulch Reservoir was the best site for San Juan River diversions. The Hidden `'alley Reservoir site was purchased and developed by a private entity and is no longer available to the District. The Dry Gulch Reservoir site is the best remaining site; a 4,000 AF reservoir was evaluated in the 1989 Report. A 2003 Report re-evaluated the reservoir options and again concluded that the Dry Gulch Reservoir was the best site. This report evaluated a 4,000 AF reservoir and a 12,500 AF reservoir, both of which had essentially the same cost per AF of yield ($4,100/AF). The total projected price of a 35,000 AF Reservoir is expected to be about $2,300/AF. Due to the 20 year lead time to construct a reservoir project, the reservoir would not be operational unti12030. If the reservoir was only constructed to meet the 2040 demand, plans for the enlargement to meet the post-