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Mr. Bruce Johnson <br />RE: Box Elder Ditch Estimation of Value <br />January 9, 2007 <br />Page 2 oft <br />fact, this ditch has only been called out during the late summer of the extreme drought years of <br />1954 and 2002. The seniority and firm yield of the Box Elder Ditch increase its market value. <br />Another factor, which increases the value of the Box Elder Ditch, is the completion of several <br />change of use applications that changed the use of Box Elder Ditch shares from irrigation to <br />augmentation. Each case completed a parcel by parcel historic consumptive use analysis for the <br />property where the individual shares were used. Consequently, each case has decreed slightly <br />different historic consumptive use credit values for a Box Elder Ditch share depending on the <br />site- specific use of the shares. The decrees provide a precedent and an accepted range of <br />consumptive use credit values. The existing decrees often reduce the opposition to future change <br />of use applications if future applicants follow the established precedents. <br />The price per acre -foot of historic consumptive use credit is approximately $4,800 and $5,200 <br />for the shares from the two properties. We discussed the price of this transaction with Mr. Kevin <br />McCarty of McCarty Land and Water, LLC. Mr. McCarty is a licensed appraiser who has <br />significant; experience with appraisals of water rights in the Poudre River basin. <br />According to Mr. McCarty, the value of senior water rights in the Poudre River basin ranges <br />from $4,000 to $6,500 per acre -foot of historic consumptive use credit. The higher end of the <br />range is for water rights which receive a municipal influence from demand by the City. of Fort <br />Collins. The transaction between LPAC and Flatiron for the 4.5 Box Elder Ditch shares falls <br />within the current range of market values in the Poudre River basin. <br />If you have any questions or need further information, please contact me at (303) -452 -6611 <br />ext. 222 or ienniferlee@ErpP gategrouD com. <br />Cordially, <br />Applegate Group, Inc. <br />e7 nnifer.Lee <br />Water Resource Engineer <br />