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water demand, and evaluated operating, maintenance, and replacement (OM &R) costs, final cost
allocz tions, effects of potential federal statute revisions, and financing options. The A -LP Phase II
Stud was .presented to the Board in draft form in November of 2010 and was completed in
Febru ary of 2011.
The General Assembly passed Colorado House Bill 10 -1250, authorizing the expenditure of
up to 336 million (in three $12 million installments) from the Severance Tax Perpetual Base
Accoi int towards the purchase of all or portion of the State's 10,460 acre -feet of
AL -P project water. The bill appropriated the first $12 million installment, which will become
available on June 30, 2011. At the November 2010 Board Meeting, the CWCB authorized staff to
inclu a the second $12 million installment in the CWCB 2011 Projects Bill for consideration for
appr nation by the General Assembly under House Bill 11 -1274, which was passed and signed by
Gove nor Hickenlooper.
In September of 2010, the CWCB formally requested to enter into negotiations with the
BureE u of Reclamation (Bureau) to purchase all or a portion of the State's project water. Those
negot.ations commenced in February and continued in April. The CWCB negotiating team
(Tear. ) consists of Tim Feehan, Ted Kowalski, Vaughn McWilliams, and Susan Schneider. On
both 4 iccasions, technical meetings occurred one day with the Team and the Bureau, and public
meeti -igs were held the next day to receive public input. Representatives of the Tribes, the
Soutt western Water Conservation District (SWCD), and San Juan Water Commission attended
the pi blic negotiation sessions. The Team and the Bureau made substantial progress in
negot I ating terms and identifying where additional work is necessary. The next technical
meeti g is set for June 16, 2011, followed by a public meeting on June 17, 2011 in Durango,
Two key issues that surfaced in the negotiation between the Team and the Bureau were
the ar iount of water that the State will be purchasing and whether the State has to pay Interest
Durir g Construction (IDC) at the calculated rate of approximately 8.5% of project costs, as set
by federal statute. The Bureau has estimated that IDC, to date, for purchasing the entire State
water allocation would be approximately $7.3 million on the $24 million purchase price and
appro Kimately $8.6 million on the $36 million purchase price. The Bureau indicated that that the
Regic nal Director is willing to consider a written proposal for reduced IDC because of special
circw astances (e.g., by taking credit for it in the money the CWCB has already contributed to
the A -P project, including funding of the boat ramp, intake tower and recreational master plan).
Since the Bureau suggested a written proposal to reduce IDC, the CWCB should try to
negot ate IDC based upon previously - contributed funds, the State's budgetary situation, the
exces ive 8.5% interest rate relative to current market rates, and the possibility of the water
reverl ing to the Tribes if it is not purchased by the State. It should be noted that the State's
abilit to negotiate the elimination or reduction of IDC is directly related to the amount of water
that i agrees to purchase.