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1. The Program will purchase 5,000 acre-feet o(permanent storage from Elkhead at $1750/acre- feet ($8.75M). (This cost estimate excludes the cost of a fish screen, which may be needed at Elkhead.) The participants acknowledge that there is some uncertainty in the current cost estimate. However, if the cost estimate for th~ expansion increases, the participants reserve the right to revisit the Program commitment for this purchase. (The Nature Conservancy is concemed about any escalation beyond the cjUTent estimate plus a 5% contingency.) The District also retains the right to withdraw frojn this proj ect. 2. The Program will lease 2,000 acre-feet from ,Elkhead, on an as-needed basis, for $50/acre- feet/yr. This wil1 be a 20 year lease. At the end of the term, the District and Program will enter into good-faith negotiations for an appropriate lease renewal (if the water is needed for recovery). Tenus and conditions for lease re~ewal will be subject to negotiation and mutual approval. The Program will agree that the retlewal price will be not less than $50/acre-feet/yr. Parties acknowledge the lease rate of $50/acre-feet/year is a negotiated value for the water but does not represent an amount that amortizes!project cost. Parties also acknowledge the intent of the River District ultimately to recoup proj ect costs. The participants agree that the Program will notify the District of its annual need for leased water by a date certain and that the District reserves the right to lease the wllter in any year that the Program does not lease the . water; the Program agrees to investigate a J,me 1 date for notification to the District regarding . the annual need for this leased water. This ~ate will become a lease condition prior to final approval of the lease. I allegations. The results of this investigation are curren,t1y in a confidential draft report. On Jan. 10 a . hearing was held in Colorado District Court before Iudge Daniel. Judge Daniel was very active in questioning the Plaintiffs about the issues of jurisdiction and standing. The Court took the matter under advisement and indicated a ruling would be issued soon. White River Flow Recommendations: The draft recommendations received Aug. 5,2002 were extensively criticized during the peer review process and the Service sent the recommendations back to the principle investigators for revision. A revised draft is expected at the end of February and wil1 undergo a second peer review process prior to present~tion to the Biology Committee. Elkhead Reservoir Enlargement: Overall, progress toward enlarging Elkhead Reservoir is progressing well. Preliminary engineering is about half complete and should be done by April. The Colorado River Water Conservation District is revieWing its 404 permit application and should have an application submitted to the Corps by early February. Progress is also being made on the numerous institutional agreements that need to put in place, including agreements with the CWCB, Recovery ProgramlUSFWS, Yampa Participants (power companies), City of Craig; State Land Board, Division of Wildlife, and private property interests. Construction is still expected to begin in early 2004 and the reservoir should be substantial1y cpmplete and ready to fill in early 2006. The District Board has stated that it intends to reviewithe project in April. If it is not satisfied adequate progress in being made with the institutional arrangements, it may decide to hold-off on final engineering. Any such delay would cause at least a year's delay in commencing construction. The District wants to take advantage of a very competitive bidding environment. As you wil1 see below, the Management Committee of the Upper Colorado Endangered Fish Recovery Program is . very concemed about budget and may elect to opt OUt if we exceed our very early budget estimates. Hence the push to complete agreements as soon as possible. Following is the conceptual agreement with the Manjlgement Committee: 20