C150150 Market Report

• Contract/PO #: C150150
• Contractor Name: Lower Arkansas Water Management Association
• Contract Type: Loan
• Water District: 67
• County: Bent
• Loan Projects - Doc Type: Feasibility Study

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D. Financial Feasibility

Financial feasibility is a determination of whether anticipated revenues from a particular use exceed
anticipated expenses. If the revenues exceed the expenses, it is generally considered to be financially
feasible. There are situations where revenues may exceed expenses, but the use is not competitive with
other more productive uses of the water. In that instance, the particular use would not be maximally
productive.

Water use for agricultural purposes remains financially feasible in Bent and Prowers Counties as
shown by the comparable sales discussed below and the agricultural economy of the Arkansas Valley.
Financial feasibility of continued agricultural water use subject to the augmentation requirements of the
Amended Rules is also shown by the active market for augmentation water, including shares in LA WMA.
Likewise, use of water for augmentation of municipal diversions in Water District No. 67 is fmancially
feasible. as shown by the City ofLa,mar's acquisition ofland and stock in the Fort Bent Ditch Company to
be used for future augmentation purposes.

Currently, there does not appear to be any opportunity to use the Keesee Ditch water directly for
municipal purposes upstream of John Martin Dam. The growing municipalities near Colorado's Front
Range such as Colorado Springs and Pueblo are not generally interested in purchasing water rights with
points of diversion below John Martin Dam that have not been changed to allow upstream use. It is difficult
to obtain both the required Compact Administration approval and the required change of water rights to
move this water upstream to the municipality's point of use. Other impediments to upstream movement
of water from Water District No. 67 include the limited potential for upstream exchanges, the considerable
capital costs for diverting the water at its current location and piping it back upstream, and the relatively
high TDS of the available water supply.

The decision of the U.S. Supreme Court in Kansas v. Colorado, the issues now under
consideration by the Special Master, the State Engineer's Amended Rules, and the 2002 drought fIrmly
establish the continued need for augmentation water to replace post-Compact well flepletions in the
Arkansas River Basin. T4ere is, and so long as irrigated agriculture remains financially viable, there will
continue to be a substantial demand for reliable long-term sources of augmentation water to replace post-
Compact depletions caused by well pumping from aquifers tributary to the Arkansas River in Water District
No. 67. Prices for permanent augmentation water supplies in Water District No. 67 and the Arkansas
River Basin have increas~d steadily since 1995. The demand and need for augmentation water can make
the sale of the Keesee Ditch Water Rights a fInancially-feasible undertaking provided that the value of
agricultural crops or other augmented ground water use generates a return on investment that justifIes the
cost of the augmentation water. The active market in LA WMA shares indicates that agricultural crops and
other uses by LA WMA shareholders currently generate a sufficient return on investmentto justify the cost
of augmentation water.

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