South Platte - FarmersRes&IrrCo_SP FRICO_Summary_July2008

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unused M&I supplies, FRICO shareholders would receive a portion of the credits. Moreover, both FRICO and other agricultural users will benefit in terms of having access to low cost augmentation credits that would otherwise not be available absent this arrangement. Additional environmental benefits, in terms of improved stream flow conditions due to lagged return flows and the creation of wetlands at the recharge and discharge sites, are also likely to result. Finally, water users outside the project area will benefit from the systematic study of the legal, financial, and institutional operations of a water bank. Such a case study, focused on a specific source of water and specific set of market participants, has not yet been done in Colorado. Moreover, such a project is necessary to move water banking forward in Colorado as it will provide valuable information on the transactions costs and third party impacts associated with water markets. There are significant pressures to permanently transfer FRICO shares in all of its divisions to M&I use. These pressures will continue and are now being acutely felt in FRICO's divisions east of the South Platte River -the Barr and Milton Divisions. Stricter, more rigid river administration and reservoir winter fill rules and recent legislation on well augmentation requirements are placing additional stresses on Barr and Milton shareholders. Many Barr and Milton shareholders have wells and are part of the Central Colorado Water Conservancy District. They have a significant and unfilled need for additional water supplies to augment well pumping. Many of FRICO's Barr and Milton shareholders desire to continue irrigated agriculture, but are having difficulty responding to the stresses from reduced yields and the prospect of realizing a higher return on their asset if selling their shares for M&I use. The overarching objective of this project is to evaluate and illustrate opportunities for FRICO Barr and Milton shareholders to realize economic value from their shares and associated water assets using methods other than a traditional agricultural transfer resulting in permanent dry-up and avoidance of direct and third-party impacts associated with permanent dry-up such as weed and soil management and impacts to the local economy. This objective will be realized through the identification and examination of the various alternative agricultural transfer techniques identified by the SWSI Alternative Agricultural Technical Roundtable and an innovative shared water bank concept that could benefit both agricultural and M&I users without requiring any loss of agricultural irrigated lands or associated economic output. The process will involve active outreach and discussion with both the suppliers -the FRICO Barr and Milton shareholders and the potential customers - the M&I users in the greater Denver metropolitan area of the South Platte Basin. The end result of this process will be a base of both informed customers and suppliers lead to potential agreements under the alternative processes developed in this project. In addition, the information developed should have broad transferability elsewhere in Colorado. FRICO is one of the largest irrigation companies in the state and is also the largest irrigation system closest to Denver metro area. The irrigated lands under the FRICO system have and continue to experience significant urbanization and continued acquisition of shares in all four divisions for transfer to M&I use. 2