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Republican River Water Conservation District Agenda Item 26e November 10, 2008 (UPDATED NOVEMBER 19, 2008) Page 3 of 7 The three states agreed to settle the litigation on December 15, 2002 and the United States Supreme Court adopted the final stipulation in 2003. As part of the settlement stipulation the states agreed to use a commonly developed basin-wide groundwater model to quantify groundwater depletions to river flows so groundwater use could be reflected in Compact Accounting. Once the groundwater depletions were considered in the accounting, Colorado's over all water use appeared to exceed its compact entitlements. Ground water impacts from wells in Colorado included in the Compact Accounting averaged approximately 25,000 AF/yr over the period 2002-2006. These impacts are primarily due to ground water diversions that occurred decades ago. Starting in 2003, Colorado has exceeded its compact allocations by an average of 11,000 AF/yr. Some reduction in the amount that Colorado has exceeded its compact allocations is expected in the future as the result of irrigated acreage retirement programs. However, it is projected that the deficit will increase gradually to 15,000 AF in 2039. In January 2008, the Republican District received approval of a $60 million loan from the CWCB to finance part of the proposed $71 million Compact Compliance Pipeline Project to help address the situation. The expected yield of the Pipeline is 15,000 AF/yr, which should be adequate to ensure compact compliance for the 20-year period of repayment of the Compact Compliance Pipeline loan. Pioneer/Laird Ditch Litigation As early as the 1970's North Fork of the Republican River surface water users believed that the designated NHP Basin wells were causing injury to their senior surface rights, however they were unsuccessful in their early legal efforts to remedy their perceived injury. Based on the 2003 Compact settlement, the North Fork surface users asked the State Engineer to curtail NHP Basin well pumping in order to protect their surface water rights. The State Engineer forwarded the request to the Colorado Groundwater Commission and the Commission dismissed the case. On July 1, 2005, the North Fork surface users filed a Petition for Hearing and Appeal of State Engineer Action (Case No. OS-GW-14). The petition sought among other things to re-draw the boundaries of the NHP Basin. If the settlement is not concluded and the surface owners prevail, the litigation could result in the curtailment of 1,338 irrigation wells (plus commercial and municipal wells) in Yuma County. The area impacted by the lawsuits new designated basin boundary is approximately 190,000 acres of highly productive agriculture and several municipal wells. The curtailment of wells would have a severe impact on the local economy as identified in an Economic Development Report prepared by James Pritchett, Department of Agricultural and Resource Economics at Colorado State University. The study indicates an economic impact of $170 million in the first year of well curtailment. This will also impact the Republican District's ability to collect enough well use fees to repay the CWCB loan for the Compact Compliance Pipeline, which was approved by the CWCB in January 2008 (HB 1346). Just prior to the June 2008 Petition Hearing, the Yuma County Water Authority and the surface right owners agreed to a settlement by which the Republican District's Enterprise would lease the