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CWCB Loan Narrative Overview 7 <br />SURFACE WATER In 2005, Lytle Water Solutions (Lytle) was contracted by HCIC to conduct basin yield studies based HCIC surface water rights. Lytle was only able to use the limited historic flow records and water rights call data to project the potential future yield of Cucharas Reservoir presented in a report titled “Evaluation of Yield from Cucharas Reservoir No. 5” and dated December 2005. A supplement to this report was completed in November of 2006 and is titled “Yield / Exchange Evaluation of Cucharas Reservoir and Huerfano Valley Ditch”. Based on the results of their hydrologic analyses and the reservoir operation model study, Lytle concluded: 1. The average annual inflow to Cucharas Reservoir is estimated at 8, 460 ac-ft/yr with a range from 160 ac-ft/yr to 35, 500 ac-ft/yr for the period of record 1980 to 2003. 2. In priority flows from strict administration of the main stem of the Arkansas River is estimated to average 2, 565 ac-ft/yr and range from 25 ac-ft/yr to 27,300 ac-ft/yr for the period of record 1980-2003. WATER QUALITY ISSUES Storage and periodic releases from Cucharas Reservoir improves the water and stream quality in the Cucharas River Canyon below the dam. If HCIC was unable to continue with its plans to repair and rebuild the Cucharas Reservoir and a zero storage restriction were imposed by the SEO and the two operational 30-inch diameter gates were left fully open, allowing all tributary inflow to pass through them, large quantities of silt would be eroded by stream flow through the reservoir basin and be deposited in the pristine river canyon below. The quality of Aquatic habitat, wildlife and esthetic values would be significantly impacted. New water supplies that are being investigated from CBM produced waters will likely have water quality issues that need to be addressed. Wright Water Engineers is currently investigating the potential issues and solutions that might be feasible. The HCIC system has numerous other reservoirs that may allow for a natural treatment of produced water that can then be stored and used as a part of the HCIC supplies. This study is a key component in determining the economic feasibility of using these potential sources of supply. NEW WATER & RENEWED FARMING ACTIVITY The number of irrigated acres under the HCIC System declined from a high of around 15,000 in the early part of the last century to an estimated 3,000 acres today. The combination of the loss of Produced Water from the coal mines, a twenty year old reservoir storage restriction and the sporadic basin yield from HCIC’s junior water rights contributed to decades of decay to the HCIC System and its ability to deliver a reliable source of water for farm irrigation. With the change in majority ownership and management of HCIC, Two Rivers, the largest shareholder of HCIC and the farmers who stayed on during the decades of decay began to reintroduce water back onto the irrigated acreage once served by the HCIC system.