20 ‎(8)‎

• Board Meeting Date: 7/22/2009
• Description: WSP Section - Animas La Plata
• Board Meetings - Doc Type: Memo

Agenda Item 20, Ju1v 21-22, 2009 Board Meeting
Animas-La Plata Project
Page 2 of 4
The State has four maj or issues to address with respect to the ALP:
• Adininistration of the project water rights that are held by the Southwestern Water
Conservation District (see attached letter), under both state water right administration and
coinpact adininistration (Upper Colorado River Coinpact and Aniinas-La Plata Coinpact);
• 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 newly established Animas-La Plata Operation, Maintenance and
Replacement Association (Association) if it purchases all or a portion of its allocation of
proj ect water; and
• Development of recreational facilities around the reservoir (Boat ramp for the facility is
being constructed by the U. S. Bureau of Reclaination).
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 Association.
Potential State Purchase
The State has the option of entering into a repayinent contract with the U.S. Bureau of
Reclaination (Reclaination) to purchase all or a portion of its proj ect 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 repayinent contract because there has
not been an iininediately identifiable inarket for the water. However, since the Board's last
update, staff has received a letter from the newly formed La Plata Archuleta Water District
expressing an interest in purchasing between 500 and 1,000 acre-feet of the State's allocation
and a letter from the La Plata West Water Authority indicating an interest in acquiring additional
water (letters attached). Staff is also being strongly encouraged to acquire its share of ALP water
by the Southwestern Water Conservation District.
The Ute Tribes' allocated water supply appears sufficient to meet their present and
anticipated future M&I needs with a significant portion left that they would be willing to lease to
others on a long-terin or perhaps perinanent basis. The Tribes are willing to discuss leases and
various terms and conditions to help assure non-tribal interests access to any of Colorado's water
that reverts at a fair cost, but to date they have shown little interest in selling it. The State, if it
elects to buy its allocation or any portion thereof, would prefer to sell its allocation and assign
the proportionate share of the OM&R costs to the buyer.
The total cost of the ALP is currently estimated to be $571 million (October 2008
dollars). The cost of water to non-tribal water users was capped at $43,000,000 in P.L 108-447
(the 2005 Consolidated Appropriations Act, section 207) in addition to already sunk costs. P.L
108-447 forgave $163 million in proj ect costs, which helped keep the cost of water to the non-
tribal entities reasonable. However, the capped cost is indexed for the effects of inflation.
Currently this indexing and other adjustinents result in a capped ainount of approxiinately
$48,700,000 (October 2008 dollars). If the State elects to buy all the water allocated to it today
the capital cost is currently about $27,600,000 in October 2008 dollars (10,420 AF' of supply for
$2649\AF' or 5,230 AF' of depletion for $5277\AF'). The cost, while high for M&I water in
southwest Colorado, isn't unreasonable for M&I water in other parts of the state.
In addition to the capital costs there will be annual OM&R costs and pumping costs
associated with the replenishinent of water used froin storage in Ridges Basin Reservoir.
Depending on how the State would use its storage, puinping costs at build out could be as high as
$250,000 annually, maybe more if the fuel costs continue to rise. Annual Fixed OM&R costs are
estiinated to be around $1,200,000, of which Colorado would pay $126,000 (10.5 percent) if it
buys its full allocation; this includes an annual contribution to an emergency and replacement