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1.0 INTRODUCTION 1.1. Purpose of the North Fork Lease In December 2002, the State of Colorado entered into a Final Settlement Stipulation with the States of Kansas and Nebraska to bring an end to the U.S. Supreme Court case of Kansas v. Nebraska and Colorado. In the Final Settlement Stipulation, the States agreed to the development of a ground water model (the RRCA Groundwater Model) to determine stream flow depletions caused by well pumping in the Republican River Basin and to a five-year running average to determine compliance with the Republican River Compact ("Compact"). The U.S. Supreme Court approved the Stipulation on May 19, 2003, and accepted the recommendations in the Final Report of the Special Master, including dismissal of the case with prejudice, which became effective when the Special Master certified the development of the RRCA Groundwater Model by the three States. The Republican River Water Conservation District ("RRWCD") was established by Colorado statute in 2004 to assist the State of Colorado to comply with the Compact. The RRWCD Board of Directors established a water activity enterprise and imposed use fees on the diversion of water within the District to provide revenues for programs to retire irrigated acreage in the basin to assist the State with compact compliance. Since December 2002, the State of Colorado has exceeded its annual allocations of beneficial consumptive use under the Compact by an average of 10,500 acre-feet per year. This was not the situation expected when the State of Colorado entered into the Final Settlement Stipulation. In fact, it was expected that hydrologic conditions would return to average orabove-average conditions after several years of drought in the basin and that limited retirement of irrigated acreage would bring Colorado into compact compliance. For that reason, the RRWCD Board of Directors focused its initial efforts on providing local cost-sharing for federal programs to voluntarily retire irrigated acreage in the basin. When the State of Colorado continued to exceed its Compact allocations in 2005 and 2006, the RRWCD Board of Directors shifted its focus to construction of the Compact Compliance Pipeline. While the stream depletions calculated by the RRCA Groundwater Model resulting from well pumping in Colorado are extremely small in comparison to the total well pumping in the basin, they are primarily the result of well pumping that occurred decades ago. As a result, shutting off well pumping in the basin in Colorado will not bring Colorado into compact compliance for decades under current conditions; indeed, curtailing all beneficial consumptive use of water in the basin in Colorado, including precompact surface water rights and draining Bonny Reservoir, would not bring Colorado into compact compliance for years under current conditions. Thus, the RRWCD Board of Directors concluded that the only feasible means to achieve compact compliance is to construct a pipeline to transport ground water from wells in the basin to the North Fork of the Republican River for credit to offset stream depletions. The Final Settlement Stipulation specifically allowed for wells that would be acquired or constructed for this purpose.