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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E. Augmentation Use

The permanent rnght to consumptive use water to be used for augmentation purposes should be
more valuable than water rights decreed for agricultural irrigation because of the "multiplier effect" achieved
with augmentation water. Under the Amended Rules, wells that only supplement surface diversions are
presumed to deplete the $'eam by thirty percent (30%) of the amount diverted. Therefore, each acre-foot
of augmentation water makes it possible for a supplemental well to divert three and one-third (3 1/3) acre-
feet of irrigation water. Likewise, under the Amended Rules, the stream depletions caused by wells that
are used as the sole source of supply for flood or furrow irrigation are presumed to be fIfty percent (50%)
of the amount diverted. Accordingly, one acre-foot of augmentation water makes it possible to divert two
acre-feet of irrigation water from a sole-source irrigation well. Stream depletions caused by sole source
wells using sprinklers are presumed to deplete seventy-five percent (75%) of the amount pumped, and
therefore 3.0 acre-feet of augmentation water supplies 4.0 acre-feet of pumping. F or wells located in the
Big Sandy Creek drainage, the 'multiplier effect" is even greater. Moreover, without the augmentation
water, no post-Compact pumping is permitted. Thus, not only does augmentation water have a "multiplier
effect," it also is the oriIy way post-Compact pumping can continue. The continued use of wells
demonstrates the need for and value of that water supply to farmers and other users. The use of post-
Compact wells can mean the difference between a good crop and no crop in many years. Therefore, a
permanent supply of augmentation water should be expected to be worth more than surface water under
most ditch systems in the Arkansas River Basin, and particularly in Water District No. 67.

F. Highest I and Best Use

Present market conditions, the location, the priority of the Keesee Ditch, and its Article II Storage
Account make its water rnghts most valuable for augmentation use. There is no currently-strong demand
for additional municipal 'water supplies in Water District No. 67, and there is little or no opportunity to
move the Keesee Ditch Water Rights upstream to the large municipal users or for other upstream uses.
Based on past, current, and foreseeable future market conditions, the heavy reliance on wells as a source
of irrigation supply, and the lack of strong municipal or industrial use demands in the Lower Arkansas River
Basin, we conclude that the highest and best use of the Keesee Ditch Water Rights is for augmentation of
agricultural, municipal, and industrial post-Compact ground water pumping.

VIII. VALUATION PROCESS

There are three principal methods of market analysis that are typically considered in arriving at an
estimate of value of real estate that can be applied to give an indication of the fair market value of a water
right. These are: (1) the Market Data Approach; (2) the Cost Approach; and (3) the Income Approach.

A. Market nata Approach

The Market Data Approach, or the Comparative Sales Approach as it is sometimes called, is
based onthe principle of substitution, that assumes that an informed buyer will not pay more to purchase

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