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0 Expected Project Life: <br />The expected project life is dependent on the length of the leasing contracts. Proposed <br />legislation provides for 5 -year leases with an option to renew for another 5 -year period at <br />the conclusion of the lease. A leasing program could extend through the first increment <br />of the Program and beyond if multiple lease renewals are allowed and farmers come in <br />and out of the program. <br />0 Capital And Operational Costs: <br />The Final Report was relied on for leasing cost estimates. The annual costs of a <br />representative water leasing program were estimated based on the following components: <br />Annual economic value of irrigation on lands in Reaches 10, and 14 through 19. <br />The annual value of irrigation supplies was estimated at between $45 and $55.per <br />ac -ft of consumptive use based on farm net income and land rental differentials <br />between irrigated and non - irrigated lands. Farm net income, estimates were based <br />on average cropping patterns, yields, prices, and costs for the years 1992, 1994, and <br />1996 provided in an agricultural database compiled by Natural Resources <br />Consulting Engineers, Inc. (NRCE). Information on land rental differentials was <br />based on the information from the United States Department of Agriculture, Nation <br />Agricultural Statistics Services (MASS) published in July 1999. <br />An incentive premium of 25 percent to induce participation in the program. <br />Transaction and administrative costs representing approximately 30 percent of total <br />program costs. <br />On an annual basis, a leasing program was estimated to cost an average of about $80 per <br />acre -foot of consumptive use saved on -farm. This cost includes an incentive premium <br />and administrative costs. A separate leasing cost analysis was completed by Vernon <br />Nelson, co- chairman of the Land Committee. Vernon Nelson estimated that leasing <br />water in South Central Nebraska would cost about $123 per acre per year not including <br />an incentive premium or administrative costs. More information is needed on the <br />assumptions used by Vernon Nelson's study group to fully assess the reasons for the <br />difference in costs. One potential difference could be the source of data used to <br />determine yields, prices and costs. Vernon Nelson's estimate also assumed that taxes paid <br />would be for irrigated land even if land involved in a lease was converted to dryland, <br />whereas Boyle's estimate considered land rental differentials between irrigated and non- <br />irrigated lands. Per CNPPID, (fax from Don Kraus, May 16, 2000) Mr. Nelson's <br />approach reflects the provisions of proposed leasing bills. For comparison purposes a <br />similar incentive premium of 25 percent and administration cost of 30 percent were <br />added to Vernon Nelson's estimate, for a total of about $190 per acre. It was assumed <br />that the administration cost includes CNPPID's lost irrigation delivery fee of $24.49 per <br />contract acre. Both cost estimates have been provided in the table below to provide a <br />range of potential costs associated with leasing. The total annual cost of a leasing <br />program could range from about $660,000 to $1.5 million. <br />\\DN00\E- DRIVE\PROJECTS\Platte \Work Products \Task 9 \wapc report (Version 7).doc 20 <br />