BOARD01632

• Board Meeting Date: 9/13/2004
• Description: ISF Section - Proposed Water Right Acquisition - Elkhead Reservoir Enlargement
• Board Meetings - Doc Type: Memo

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sublease and all responsibilities and obligations identified in paragraph II.B herein shall
be terminated.

IV. OPERATION, MAINTENANCE AND REPAIR OBLIGATIONS (OM & R)

A. The OM & R obligations associated with the Elkhead Reservoir Enlargement are more
fully described in (1) the Reservoir Enlargement Agreement and (2) the Amended and
Restated Agreement between the River District, the City of Craig, and the Yampa
Participants which provisions are incorporated herein by reference. The Recovery
Program, through Reclamation, shall be responsible for payment of its Pro-Rata share of
the River District's OM & R costs associated with the storage space easement described
in paragraph II.A.2 herein. The CWCB shall have the right, but not the obligation, to
fund annual OM & R costs for the Elkhead Reservoir Enlargement.

B. In the event the Service, Reclamation and the Recovery Program determine that the
Permanent Water Supply is no longer needed to maintain occupied habitat for endangered
fish species in the Critical Habitat Reach pursuant to paragraph XII herein, Reclamation
may choose not to pay the pro-rata share of the River District's OM&R costs allocated to
the Permanent Water Supply storage space easement In the event Reclamation chooses
not to pay the pro-rata share of the River District's OM&R costs, the forfeiture provisions
in paragraph N.E. in the Reservoir Enlargement Agreement shall apply. Any disposition
and use of the Permanent Water Supply and storage space easement shall be addressed
pursuant to paragraph XII herein.

V. RELEASE SCHEDULE AND CONTACT PROCEDURES

A. On account of drought, errors in operation, operational constraints imposed by the State
of Colorado or otherwise, or other causes, there may occur at times a shortage during any
year in the quantity of water available to be stored within the Reservoir Enlargement, and
in no event shall any liability accrue against the parties hereto for any damage direct or
indirect, arising therefrom. In any year in which there may occur such a shortage in the
Reservoir Enlargement water supply, the River District and the CWCB shall share such
shortage using the Pro-Rata Formula. The Pro-Rata Formula is the allocation of the
storage space created by the construction of the Reservoir Enlargement, estimated to be
11,750 acre-feet, as follows: 27/47th interest (6,750 acre-feet) to the River District and
20/4ih interest (5,000 acre-feet) to the CWCB. The Pro-Rata allocation is based on the
percentage contributions ofthe parties to fund the total costs related to the construction of
the Reservoir Enlargement as well as the long term costs of the Reservoir's operation,
maintenance and repair allocated to the Reservoir Enlargement. In the event that the
actual percentage contributions of the parties to fund the total costs related to the
construction of the Reservoir Enlargement differ from the 27/47th and 20/47th
relationship described herein, then the Pro-Rata Formula shall be adjusted in accordance
with the terms of paragraph II.B. of the Reservoir Enlargement Agreement.

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