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• Board Meeting Date: 5/21/2008
• Description: WSP Section - Animas-La Plata Project - Water Purchase and O&M Agreement
• Board Meetings - Doc Type: Memo

• San Juan Water Commission (NM) - 20,800 AF of water and 10,400 AF of annual
depletion; and the
• La Plata WCD (NM) -1,560 AF of water with 780 AF of annual depletion.
Discussion
The State has four major issues to address with respect to the ALP:
• Administration of the proj ect water rights;
• Whether or not to purchase all or a portion of its allocation of proj ect water and if it elects
to purchase the water how to finance the purchase;
• Participation in the proj ect operating entity if it purchases all or a portion of its allocation
of proj ect water; and
• Development of recreational facilities around the reservoir.
This agenda item will focus on whether or not the state should purchase its allocation of proj ect
water and if it does, the terms of participation in the ALP operations Association.
Potential State Purchase
The State has the option of entering into a repayment contract with the U.S. Bureau of
Reclamation to purchase all or a portion of its project water allocation. If the State elects not to
purchase any of its water, that water will be reallocated equally to the two Ute Tribes. To date,
the State has elected not to enter into a repayment contract because there is not an immediately
identifiable market for the water. However, the Southwestern Water Conservation District has
been urging the State to purchase its allocation (letter attached).
The Ute Tribes' allocated water supply is sufficient to meet their present and anticipated
future M&I needs, leaving a significant portion that they would be willing to lease to others on a
long-term or permanent basis. The Tribes are willing to discuss leases and various terms and
conditions to help assure non-tribal interests access at a fair cost to any of the State water that
reverts, but to date they have not shown any interest in selling. The State, if it elected to buy its
allocation or any portion thereof, would likely prefer to sell its allocation and assign a
proportionate share of the O,M&R costs.
The total cost of the ALP is currently estimated to be $571 Million (indexed through
October 2008), the cost of water to non-tribal water users was capped at $43,000,000 plus
inflation in P.L 108-447 (the 2005 Consolidated Appropriations Act (section 207)) in addition to
already sunk costs. If the State elects to buy all the water allocated to them the capital cost is
currently about $27,600,000 in 2008 dollars (10,420 AF of supply for $26491AF or 5,230 AF of
depletion for $52771AF). The cost, while high for M&I water in southwest Colorado, isn't
unreasonable for M&I water else ware.
In addition to the capital costs, there will be annual O,M&R costs and pumping costs
associated with the replenishment of any water used from storage in Ridges Basin Reservoir.
Depending on how the State would use its storage, pumping costs at build out could be as high as
$260,000 annually, maybe more if the fuel costs continue to rise. Annual 0&M Costs are
estimated to be around $1,600,000, of which Colorado would pay $176,000 if it buys its full
allocation. In addition, there would be a reserve account for facility replacement. Therefore, in
addition to $27,600,000 capital cost, Colorado may need to come up with about $500,000
annually for O,M&R and pumping, assuming it buys the full allocation available to it. If the
proposed Operating Agreement attached hereto is approved, it is anticipated that the "Variable
Cost Fund" would offset all pumping costs for the foreseeable future.
Operating Entity
The US Bureau of Reclamation would like anon-federal operating entity in place by
completion of the project in 2012. It is recognized that the sooner such an entity can be
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