Animas-La Plata Project Water Supply Demand Study

ANIMAS - LA PLATA WATER SUPPLY AND DEMAND STUDY
EXECUTIVE SUMMARY
The State of Colorado (State) through the Colorado Water Conservation Board (CWCB) has an allotment of
10,460 acre -feet (AF) of water in the United States Bureau of Reclamation's (USBR) Animas -La Plata (A -LP)
Project in southwestern Colorado. In order to acquire this water, the State must either purchase this water
directly or identify municipal and industrial (M&I) water suppliers with a demand who are willing to purchase
the State's allotment. The cost of Colorado's A -LP Project water is approximately $3,315 per AF for
repayment of capital costs and interest during construction (IDC) plus an estimated $36 per acre -year
(AF /YR) for O&M costs. If the State does not purchase the A -LP Project water or find buyers for the full
10,460 AF, the remaining water from the State's allocation will reportedly revert to the two Ute Tribes.
The capital costs and IDC must be repaid to the federal government on terms and conditions yet to be
negotiated with the USBR. Alternatives for repayment of the capital and IDC appear to range from
immediate repayment of all or a portion of the allocation at $3,315 per AF to repayment over a 40 -year
period at an 8.135 percent discount rate. This $3,315 per AF price will probably be updated by the USBR in
late 2010.
A demand investigation was conducted to determine possible sales of the State's A -LP Project allocation to
M&I suppliers in southwestern Colorado. The results of this investigation indicate that approximately 500-
1,000 AF of the State's allotment can likely be sold under existing conditions, depending on final cost per AF
of water. Findings from the Colorado State Water Supply Initiative (SWSI) confirm this as a reasonable
estimate•. The SWSI estimates a gap between M&I demand and supply of 1,400 AF /YR by 2030.
Other results from the demand investigation include:
• Few of the water providers were aware of the Animas -La Plata Association. If the water provider was
aware of the A -LP Project Association and was interested in obtaining A -LP Project water from the
CWCB, there was some willingness expressed to participate in the A -LP Project Association.
• The water providers generally expressed a preference to purchase, rather than lease, water and to
purchase from the State.
Further results of the marketing investigation indicate that the major limiting factors to marketing the State's
allocation of A -LP Project water are:
• Limited demand for M&I water supply in southwestern Colorado.
• Inability, on behalf of municipal water suppliers, to fund construction of facilities to pump /divert A-
LP Project water from Lake Nighthorse and /or the Animas River, convey this water to providers'
service areas, and treat this water to municipal standards, and
• Limited capital resources available to repay the federal government for the A -LP Project water.
Within the time period available for marketing Colorado's allocation, not much can be done to increase M&I
demands in southwestern Colorado. In response to the second and third limiting factors, however, a follow -
up program is proposed to increase sales of Colorado's allocation by: (1) assisting water providers in
developing feasible means to divert, pump, convey and treat A -LP Project water and make it available in their
respective service areas and (2) designing a repayment program to the federal government which is feasible
for the water providers. This follow -up study, termed Phase II of the A -LP Project Water Marketing Study,
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