ALP 15

1.5 As contemplated by the Assignment Agreement, the ALPWCD and the
Authority entered into a cost sharing agreement with other ALP Project participants and
the United States Department of Interior through the Bureau of Reclamation
( "Reclamation ") regarding the ALP Project; the Authority entered into a revised escrow
agreement with Reclamation and others regarding the ALP Project; the Authority
entered into a funding agreement and repayment contract with Reclamation (the
"Funding Agreement ") for the ALPD Depletion Allocation; and the ALPWCD and the
Authority entered into a marketing agreement for the ALPD Depletion Allocation.
1.6 Pursuant to the Funding Agreement, the Authority has contracted to secure
the ALPD Depletion Allocation of 2,600 acre -feet of average annual depletion in
consideration of payment of the non - tribal water capital obligation attributable to such
ALPD Depletion Allocation.
1.7 The payment obligation of the Authority to Reclamation, under the terms
of the Funding Agreement, is based upon the cost of ALP Project construction. Because
the cost estimates set forth in the Funding Agreement have increased substantially, it is
anticipated that the Authority may be subject to an additional repayment obligation
pursuant to paragraph 8 of the Funding Agreement in order to secure the full ALPD
Depletion Allocation; subject, however, to the effect of P.L. 108 -497, the Consolidated
Appropriations Act of 2005, dated December 8, 2004.
1.8 The Funding Agreement also addresses ongoing operation, maintenance,
and replacement ( "OM &R ") costs for the ALPD Depletion Allocation. These costs
comprise: (1) the Authority's pro -rata share of OM &R costs actually incurred by the
Project Operator in connection with ALP Project facilities and/or operations that benefit
all users of ALP Project Water (General OM &R Costs), based on the amount of ALP
Project Storage Water actually purchased and paid for by the Authority in accordance
with Article 8 of the Funding Agreement; (2) the Authority's pro -rata share of OM &R
costs actually incurred by the Project Operator in connection with ALP Project facilities
and /or operations that benefit the Authority (and /or it subcontractors), but do not benefit
all other users of ALP Project Water (Specific OM &R Costs), based on the Authority's
pro -rata use of such facilities; and (3) the actual cost to refill ALP Project storage to
replace water released by request of the Authority.
1.9 The ALPD Depletion Allocation of 2,600 acre -feet of average annual
depletion corresponds to 5,200 acre -feet of annual water supply from municipal and
industrial purposes, which was delineated by Reclamation as 2,919 acre -feet of water
stored in Ridges Basin Reservoir and 2,281 acre -feet of water withdrawn directly from
the Animas River pursuant to the ALP Project, and those estimates of storage allocation
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