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Background .
<br />The Company has operated five reservoirs (Bull Creek Reservoirs 1 through 5) for nearly 100
<br />years, with a service area of 800 acres and a current annual storage capacity of approximately
<br />780 acre-feet. In 2001 the Division of Water Resources, Division 5, filed a decennial
<br />abandonment list with the water court, claiming the abandonment of a portion of the storage right
<br />in Reservoir No. 4. The water right listed for abandonment was a result of a SEO filling
<br />restriction placed on the reservoir due to dam safety concerns in 1984. The abandonment list also
<br />included portions of the decreed storage rights in Reservoirs No. 1 and No. 2. This was due to
<br />the fact that both of these reservoirs did not provide the necessary volume for the decreed water
<br />storage right.
<br />In October 2003, the Company entered into an agreement with the SEO to restore the capacity of
<br />the three reservoirs. Several amendments to the agreement have occurred over the last 3 years
<br />and the Company has filed an additional amendment, requesting that the Company be allowed
<br />time to repair the Reservoir No. 4, returning it to at least its original capacity and removing it
<br />from the abandonment list. In addition, the Company has filed an application in Case No.
<br />06CW261, Division No. 5, for adjudication of an additional 115 ac-ft of storage in Reservoir No.
<br />4. The Company filed the application to accommodate the potential enlargement of Bull Creek
<br />Reservoir No. 4 from 313 ac-ft. to 428 ac-ft. This application was approved and a decree was
<br />granted by the Division 5 Water Court on September 28, 2008 for the additional 115 ac-ft.
<br />At the September 2004 board meeting, the CWCB approved a loan to the Company in the
<br />amount of $599,940 to enlarge Bull Creek Reservoirs 1 and 2 and to rehabilitate Bull Creek
<br />Reservoir No. 4. The intent of the project was to preserve the Company's decreed rights in Bull
<br />Creek Reservoir No. 1, 2, and 4, and to remove the SEO fill restriction on Bull Creek Reservoir
<br />No. 4. Prior to construction, however, and given the remote location of Bull Creek Reservoirs 1
<br />and 2, it became apparent to the Company that this alternative would be far too disruptive,
<br />difficult, and costly to construct. Therefore, based on the recommendation of the SEO, the
<br />Company began investigating the possibility of enlarging Bull Creek Reservoir No. 4 and
<br />transferring the decreed rights from Bull Creek Reservoir 1 and 2 into Bull Creek Res. No. 4.
<br />At the January 2007 board meeting, the CWCB approved a loan to the Company in the amount
<br />of $1,212,000, to solely enlarge Bull Creek Reservoir No. 4. This alternative eliminated the
<br />need to enlarge Bull Creek Reservoirs 1 and 2, removed the fill restriction on No. 4, and resolved
<br />the abandonment issue with SEO, therefore allowing the Company to utilize its full decree.
<br />With a revised project and approved funding in-place, the Company over the course of
<br />2007continued to utilize the services of its Consultant to complete the design plans, obtain SEO
<br />approval, and secure the necessary permits from the Farest Service and Army Corps of
<br />Engineers. In January 2008 a meeting was held between the Forest Service, CWCB, SEO,
<br />Consultant, and the Company to set hard deadlines on securing permits and obtaining SEO
<br />approval, for a construction commencement date of July l, 2008, weather permitting. Based on
<br />that meeting the Company solicited bids on a time and material basis and selected Gear Up
<br />Construction (Contractor), Loma, Colorado, to complete the work at a bid of $750,000. The
<br />Contractor was given a notice to proceed on July 7, 2008, but full SEO approved drawings did
<br />not occur until August 11, 2008. This resulted in a 5 week delay to the Contractor during
<br />optimal construction season on the Grand Mesa, which played a critical role in the project not
<br />being substantially completed in 2008.
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