WSP00209

• File Number: 8460.500
• Description: Platte River Recovery Plan
• Basin: South Platte
• Date: 5/30/2000
• Author: CWCB
• Title: Draft Water Action Plan
• Water Supply Pro - Doc Type: Publication

o Expected Project Life:

The expected project life is dependent on the length of the leasing contracts, Proposed
legislation provides for 5-year leases with an option to renew for another 5-year period at
the conclusion of the lease, A leasing program could extend through the first increment
of the Program and beyond if multiple lease renewals are allowed and farmers come in
and out of the program,

o Capital And Operational Costs:

The Final Report was relied on for leasing cost estimates, The annual costs of a
representative water leasing program were estimated based on the following components:

. Annual economic value of irrigation on lands in Reaches 10, and 14 through 19,
The annual value of irrigation supplies was estimated at between $45 and $55 per
ac-ft of consumptive use based on farm net income and land rental differentials
between irrigated and non-irrigated lands, Farm net income estimates were based
on average cropping patterns, yields, prices, and costs for the years 1992, 1994, and
1996 provided in an agricultural database compiled by Natural Resources
Consulting Engineers, Inc. (NRCE). Information on land rental differentials was
based on the information from the United States Department of Agriculture, Nation
Agricultural Statistics Services (NASS) published in July 1999.

. An incentive premium of 25 percent to induce participation in the program.

. Transaction and administrative costs representing approximately 30 percent of total
program costs.

On an annual basis, a leasing program was estimated to cost an average of about $80 per
acre-foot of consumptive use saved on-farm. This cost includes an incentive premium
and administrative costs. A separate leasing cost analysis was completed by Vernon
Nelson, co-chairman of the Land Committee. Vernon Nelson estimated that leasing
water in South Central Nebraska would cost about $123 per acre per year not including
an incentive premium or administrative costs. More information is needed on the
assumptions used by Vernon Nelson's study group to fully assess the reasons for the
difference in costs. One potential difference could be the source of data used to
determine yields, prices and costs, Vernon Nelson's estimate also assumed that taxes paid
would be for irrigated land even if land involved in a lease was converted to dryland,
whereas Boyle's estimate considered land rental differentials between irrigated and non-
irrigated lands, Per CNPPID, (fax from Don Kraus, May 16,2000) Mr. Nelson's
approach reflects the provisions of proposed leasing bills, For comparison purposes a
similar incentive premium of 25 percent and administration cost of 30 percent were
added to Vernon Nelson's estimate, for a total of about $190 per acre. It was assumed
that the administration cost includes CNPPID's lost irrigation delivery fee of $24,49 per
contract acre, Both cost estimates have been provided in the table below to provide a
range of potential costs associated with leasing. The total annual cost of a leasing
program could range from about $660,000 to $1.5 million.

C:\Oroft Water A~tion Plan {May 30. 2000)\wapc report (Version 6 BND2)-.<.loc

21