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{:~f~) , effects of inflation. Based on the Bureau's normal cost allocation procedures and the current cost indexed to completion, the municipal and industrial water allocation is estimated to be as much as double the ceiling in the repayment contract. About a year ago, when it became evident that the cost ceiling would be exceeded, the Bureau of Reclamation advised the District of this fact. The Bureau estimated that the award of the contract for the Great Cut Dike pumping plan~ would bring allocated costs over $20,000,000 and therefore took the position that the contract could not be awarded until the problem was resolved. Discussions have been under way since then among the District, Bureau, and, at the District's request, me. A favorable change in cost allocation procedures has been agreed to by the Bureau, which change can be effected only if the construction and financing of two single purpose M&I features of the project--the pipeline from McPhee Reservoir to Cortez and the small terminal storage reservoir at Dove Creek--are taken over by the District. The District has indicated its willingness to assume this obli9ation, subject to the availability of financing from the ewCB construction fund (see enclosed resolution). I am advised that the Commissioner of Reclamation is desirous of having the Board act and forward its recommendation to the General Assembly during this session in light of the scheduled award date for the Great Cut Dike pumping plant contract. This would resolve the problem to the Commissioner's satisfaction and permit construction to proceed on schedule and within the $20,000,000 ceiling in the repayment contract. Proposed Facilities It has not been necessary to prepare an independent feasibility study of the two features under consideration. Rather, we have utilized the preliminary plans already developed by the Bureau. The pipeline to Cortez presents no significant technical questions. It should be, based upon the Bureau data, a straight- forward construction project. The cost is estimated at $2,525,000 (see enclosed table). The terminal storage reservoir at Dove Creek, known as the Monument Creek Reservoir, is presently planned by the Bureau with a capacity of about 600 acre-feet. It would provide neither fish and wildlife nor recreation benefits. During the District's deliberations concerning this problem, interests from the Dove Creek area asked that consideration be given to relocating and enlarging Monument Creek Reservoir. MEMORANDUM -2- 3/1/83