ALP 13

In 2000, the U.S. Congress amended the Ute Settlement Act and authorized the final configuration
and cost sharing and financing of the A -LP Project. Funding of the A -LP Project was provided by
the United States Department of the Interior through the Bureau of Reclamation. The 2000
amendment to the 1986 Agreement discusses non -Tribal municipal and industrial water capital
repayment obligations for the A -LP Project.
The final congressionally approved A -LP Project includes the construction of a 280 cubic feet per
second pumping plant on the Animas River, just south of downtown Durango, Colorado; an
underground pipeline to carry project water from the pumping plant to the reservoir location, and an
off - stream reservoir at Ridges Basin, southwest of Durango. Ridge Basin Reservoir (Lake
Nighthorse), will store 120,000 acre feet of water for M &I purposes only and may not exceed
57,100 AF annual depletions. The seven A -LP Project beneficiaries and their statutory project
water allocations are as follows:
• Southern Ute — 33,050 AF (16,525 AF Depletions)
• Ute Mountain Ute — 33,050 AF (16,525 AF Depletions)
• Animas -La Plata Water Conservancy District — 5,200 AF (2,600 AF Depletions)
• State of Colorado — 10,460 AF (5,230 AF Depletions)
• Navajo Nation (NM) — 4,680 AF (2,340 AF Depletions)
• San Juan Water Commission (NM) - 20,800 AF (10,400 AF Depletions)
• La Plata Water Conservancy District (NM) —1,560 AF (780 AF Depletions)
The A -LP Project commenced construction in 2001 and is essentially complete. The reservoir is
currently filling and is anticipated to be at full capacity by the spring of 2011. Final accounting by
the Bureau and project substantial completion is tentatively scheduled for late 2011 early 2012.
Discussion
The State has the option of entering into a repayment contract with the US Bureau of Reclamation
(Bureau) to purchase all or part of its project water allocation of 10,460 AF. If the State should choose
not to purchase any of its water that water will revert equally back to the two Tribes. The Tribes
current allocation must be used on the reservations or within the Southwestern Water Conservation
District boundaries, per the water rights decree. The State's water is not restricted for use on the
reservations or district boundaries; therefore if the State's water were to revert to the Tribes, it could be
leased or sold to other water users outside of the reservations or district boundaries. In addition, any
water that may revert to the Tribes may be at greater risk to a possible inter -basin transfer.
The cost to the State to purchase its full pool allocation of 10,460 AF is estimated at $28M.
Additionally, since the State did not enter into a purchase agreement for the water with the Bureau
prior to construction, the State is subject to interest charges during the construction period. The
interest charges are currently estimated at $6.7M, based on a federal set interest rate of 8.135 %, which
would bring the total water purchase price to approximately $34.7M or $3,320 per AF. Operating,
maintenance, and replacement costs (OM &R) have been estimated to be between $313,000 to
$376,000 per year or $30 -$36 per AF. However, the variable costs associated with the OM &R