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Mr. Mike Gibson December 14, 2006 Page 4 Comparable Sales—Water Division No. 3 There are three sales of water rights involving SLVWCD, two of which relate to SLVWCD's existing interests in the Pine River Weminuche Pass Ditch. The other transaction is a contract with a fixed payment per acre-foot of historical consumptive use if certain water rights do not yield a fixed amount after change by the Water Court. Descriptions of these transactions follow. SLVWCD/Pine River Weminuche Pass Ditch. SLVWCD acquired 25 percent of the water rights for the Pine River Weminuche Pass Ditch in 1984 (first transaction) and another 25 percent in 1994(second transaction)for$353,000 and $393,000, respectively.This ditch is a transmountain water diversion with its source on the Pine River in the San Juan River basin and delivery to the Rio Grande. The terms of both transactions allowed payment of the full price without interest over several years to the sellers, Billie and Betty Buttman. If the first transaction in 1994 dollars is equivalent to the second transaction, the combined value in 1994 was $786,000. In terms of the average annual diversions from 1983 through 2005, 259 acre-feet (518 acre-feet x 50 percent), the value was$3,035 per acre-foot in 1994. SLVWCD/South Fork Ranches. In 2003, South Fork Ranches, :LLC (SFR) contracted with SLVWCD for an augmentation supply to cover depletions caused by SFR's water uses. SFR committed water rights and in return SLVWCD included SFR in its Augmentation Program. The water rights were diverted from Bear Creek, a tributary of the Rio Grande at South Fork. If the water rights per a Water Court change of use decree does not yield 74.4 acre-feet of"transferable historical consumptive use on an average annual basis", SFR will pay SLVWCD$2,750 per acre- foot of shortfall. This value is believed to be the value agreed upon by SLVWCD and SFR as the value for the water rights. We understand that the change of use case is pending in the Water Court. Discussion.There are some basic differences between the Anaconda Ditch water rights and the irrigation water rights described above that affect their relative value. 1. The transmountain water from the Pine River Weminuche Pass Ditch is foreign to the Rio Grande and can be considered fully consumable. This means that historical return flows do not have to be considered when changing the use or place of use of the water rights. For changes of in-basin water rights, the timing and amount of historical return flows must be maintained after the change. In most cases, this requires reservoir regulation of some of the water for delivery back to the river to make up historical winter return flows. 2. The Pine River Weminuche Pass Ditch diversions are delivered via Weminuche Creek directly to Rio Grande Reservoir for regulation. The water supplies available to in-basin water rights, such as the SFR water rights described above and the Anaconda Ditch water rights, can be stored by exchange in Rio Grande Reservoir, but the exchange would take a priority date behind the CWCB`instream flow water rights on the Rio Grande, decreed • exchanges and direct storage uses of Rio Grande Reservoir,and the storage rights for Rio Grande Reservoir. At times, these competing uses of inflows to Rio Grande Reservoir would limit or negate the exchange capacity. These factors reduce the utility and value of the in-basin water rights in comparison to the transmountain water delivered directly to Rio Grande Reservoir. Weminuche Pass Ditch/CDOW. In 1980, the Colorado Division of Wildlife purchased the Weminuche Pass Ditch water rights for$575,000. The average annual yield was estimated to be