Water Supply and Demand Study 1/13/11

Animas -La Plata Water Marketing Supply and Demand Study Section 2
requi a additional funds to cover their variable OM &R costs at some point in the future as the Project
appr aches full operation unless further accommodations are made to cover or share those costs.
Addr ssing this issue needs to be a key consideration during the development of future Association
polici s and operating principles.
Pay ent Default
If an ssociation member's payments are in default, as described in Section 4.2 of the IGA, the
Asso ation will withhold delivery of the member's project water until the default is cured by payment of
all a ounts past due and any out -of- pocket expenses incurred by the Association.
2.4 Repayment Alternatives
Given he funding required to purchase A -LP Project water, Brown and Caldwell developed alternatives
for re aying Reclamation for the State's portion of A -LP Project water and for paying annual OM &R costs.
This s ction describes those alternatives.
Capit I Cost Repayment Alternatives
Costs or the A -LP Project were presented in "Animas -La Plata Water Supply and Demand Study," (Brown
and C dwell, February 24, 2010). To the extent possible these costs have been updated as described
in Sec 'on 2.2 and used in the repayment alternatives discussed in this section.
• Ca ital Costs: The latest available estimate of Colorado's share of the capital costs is $27,914,902
(pei 3onal communication, Patrick Page, October 7, 2010).
• IDC IDC on capital costs is updated quarterly and will continue to accrue until the State enters into a
rep yment contract or otherwise provides the required funding. The State could enter into a
rep yment contract with Reclamation immediately; however, because the State did not enter into a
rep yment contract with Reclamation providing for upfront cost sharing in the project, IDC on
con truction costs continues to accrue.
• To d to (October 2010), Colorado's share of the IDC is $8,437,263 (personal communication, Patrick
Pa g , U.S. Bureau of Reclamation, October 7, 2010). Entering into a repayment contract now as
opp sed to the time of "final cost allocation" may stop the clock on IDC charges but such would have
to be negotiated during development of the repayment contract. If the State is committed to
purc iasing all or a portion of Project water it is in the State's best interest to stop the further
aCCL mulation of IDC.
• For p anning purposes in this report, the total repayment to the federal government for Colorado's
10,4 50 acre-feet is estimated to be $36.4 million, which is composed of $27.9 million in capital
cost ,c, plus approximately $8.5 million in IDC costs. This estimate is based on presently available cost
data 3nd needs to be updated as new capital cost and IDC data become available from Reclamation.
The i ext update of capital costs and IDC will occur on December 31, 2010.
Colorado House Bill (H.B.) 10 -1250 authorized the expenditure of up to $36 million from the Perpetual
Base Account of the Severance Tax Trust Fund towards the purchase of the State's 10,460 acre -feet of
A -LP Pro ect water. The Bill authorized three separate $12 million installments from the Perpetual Base
Account and and appropriated the first $12 million installment. Therefore, if the State should choose
to enter nto a repayment contract with Reclamation, this $12 million could be transferred to the Federal
Governry ent as a down payment towards the purchase of all or a portion of the State's allocation.
The first W million installment appropriated in HB 10 -1250 will become available June 30, 2011. The
remainin 1, $24 million will require future legislative appropriation, which could become available as
follows:
• 15t inE tallment $12 million (appropriated) - available June 30, 2011;
Brown m-Caldwelin 2 -10
FINAL ALP Rep rt_1_13_11_LL.Docx