ALP 13

• The State's allocation could potentially be used for other purposes. Though the water is
designated for M &I uses only, there may be potential to use of M &I water for compact
compliance by exchange under current federal statutes, which could benefit instream flows, or
provide for endangered species protection.
The total cost of the repayment is about $35 million, with an anticipated annual OM &R
charge between $313K and $375K per year, which translates into a cost of about $3,350 per
acre -foot. This cost is considered quite a deal for M &I water. On the Upper Blue River in
Summit County, domestic water is valued as high as $30,000 /acre -foot. A study funded by
the Northern Colorado Water Conservancy District looked at developing water within the
Yampa River basin for export to the Front Range at an estimated cost of $11,000 /acre -foot.
• Climate change or drought could affect the over al, M &I demand for the basin, which is not
accounted for in the SWSI gap projections for 2030. Having excess M &I water available in
the A -LP Project could accommodate for those v able climate conditions.
• Southwestern Colorado is an area that has expe 'ence significant oil and gas impacts (water
quality). Severance Tax money is being recommended towards the purchase of Animas -La
Plata Project Water, which was specifically created to offset the impacts of oil and gas
exploration and extraction. A reliable future source of M &I water could prove to be a very
valuable resource to address this issue.
The importance of preserving water resources in the State and in southwestern Colorado in particular,
is extremely important. If the State does not exercise its right to purchase its pool allocation that water
will revert to the two Tribes and an opportunity will be lost
Senator Bruce Whitehead is asking the Board to consider approving an amendment to this year's
Projects Bill (HB10- 1250). The draft legislation would appropriate $12M out of the CWCB Severance
Tax Perpetual Base Account over the next three years towards the purchase of State's ALP pool
allocation from the Bureau. The draft wording of this potential legislation is attached.
The Severance Tax Perpetual Base Account is projected to have a balance of $20 — 30 million for FY
2010 -11. This is the remaining balance after the $2 million transferred this fiscal year and the $11
million transferred next fiscal year to balance the budget. Therefore, there is enough money to make
the proposed transfer next year of $12 million and still allow for other loans.
The amendment allows the Board the flexibility to determine how much of the water should be
purchased. It also provides the Board the authority to purchase the water and then lease or assign its
water pursuant to state and federal law.
Recommendation
Staff recommends that the Board approve the proposed amendment.