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"VFMP "). Southeastern participates in the VFMP as holder of the decreed water rights for the <br />Frying.pan- Arkansas Project, including Twin Lakes and Turquoise Reservoirs, pursuant to <br />contract with Reclamation. Many of the Objectors have also voluntarily operated their water <br />rights and facilities in a manner consistent with the flow recommendations made by CDNR. <br />E, The Parties acknowledge, that the development and adoption into law of certain <br />recommendations of Southeastern's September 21, 2000 "Preferred Storage Captions Plan„ <br />( "PSOP ") Report relating to the Fryingpan- Ark.alisas Project are important to Southeastern, to <br />many municipalities and agricultural interests in the Arkansas River basin (including several of <br />the Parties). <br />F. Upper Arkansas has filed an application for appropriative rights of exchange <br />(Case No. 04CW096, Water Division 2) (the "Upper Arkansas !Exchange Case"). Some of the <br />exchanges described in the Upper Arkansas Exchange Case would exchange water on the <br />Arkansas River, including the same portions of the Arkansas River involved in the RICD Case. <br />Chaffee County, among other Parties, has filed a statement of opposition in the Upper Arkansas <br />Fxchange Case. <br />0. BWWP filed an application for a conditional storage right for enlargement of <br />Clear Creek Reservoir in December of 2004 (Case No. 04CW130, Water Division No. 2). <br />Chaffee County, among other Parties; tiled a statement of opposition in that case. <br />H. Pueblo West has filed an application in Case No. 0ICW152 (Water Division 2) <br />for changes to, and exchange of, decreed water rights associated with the Hill ranch in Chaffee <br />County. 'These water rights are decreed on tributaries entering the Arkansas River between the <br />Buena Vista and Salida Boating Parks. Chaffee County and Pueblo West executed a stipulation <br />in the RICD Case (the "Pueblo West Stipulation ") prior to the execution of this MOU. Pursuant <br />to the Pueblo West Stipulation, under specified circumstances Chaffee County may request <br />Pueblo West to exchange its Fill Ranch. water rights upstream, to use those water rights as a <br />direct flow source, or to store the water upstream or downstream. <br />1. Certain of the Objectom are suppliers of'ivater far municipal and bth& uses and <br />presently operate and /or contemplate operating exchanges on the Arkansas River. Said <br />Objectors reasonably anticipate they will have the need to operate and/or participate with others <br />in future exchanges on the Arkansas River, which exchanges are critical to the health, safety and <br />welfare of those who receive water service from said Objectors. <br />The Parties desire, by this .\IOU, to achieve the following ends: <br />1. To settle the Objectors' opposition in the RICD Case upon terms, <br />conditions and limitations that will (a) protect the Objectors' water rights (including water rights <br />souglit in applications pending as of December 31, 2004) against injury; (b) protect the future <br />operation of the Fryingpan- Arkansas Project for its authorized purposes, and of the VFMP for its <br />recreational and fishery purposes; and (c) provide an agreed level of protection for native <br />Arkansas River flows for a reasonable recreational experience at the Boating Parks in Buena <br />Vista and Salida, while preserving reasonable opportunities for future water development and <br />exchanges in the Arkansas River basin upstream from Buena Vista and Salida. <br />302341 2 <br />