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<br />.,'\': 'l.,', <br /> <br />n~~,.HI? <br />,,~; ,~.' v' ~ '_J __; <br /> <br />agreement. Payment under such a contract should be adequate to compensate for crops <br />foregone, including all associated costs and the profit that would have been earned. <br /> <br />Conversely, some commenters felt that these contracts could be seen as an <br />"alternate crop", a view that recognizes that a farmer should be in at least as good a <br />financial position through receiving payment pursuant to the contract as through farming <br />in that year. Some respondents even considered payments under interruptible supply <br />contracts a possible "windfall" to farmers. In this connection, it should be noted that <br />many farmers would not actually need to fallow fields in order to make C-BT water <br />available as interruptible supply. Of twenty-two farmers responding to this question in <br />the survey, only five stated that they would fallow land to make water available for <br />transfer under an interruptible supply contract. The remainder would continue farming <br />using alternate sources of water or dry-land farming. This reflects the status of C-BT <br />water as supplemental supply for many users in the district's service area. <br /> <br />Payment structure <br /> <br />The payment made to the seller under an interruptible supply agreement reflects <br />two separate elements obtained by the buyer through the contract: the value of holding <br />a right to receive water in stated circumstances, and the value of the water itself when it <br />is actually transferred. Payment structure may be in either of two basic forms: 1) a two- <br />tiered reimbursement that includes an option payment when the contract is entered into <br />(or paid out in annual installments) and an exercise payment when water is actually <br />transferred, or 2) a single payment that reflects both elements of value, and which may <br />be paid in a single lump sum when the contract is entered into or in annual <br />installments.4 <br /> <br />A clear majority of those who commented on this issue during the public <br />involvement process preferred a two-tiered structure with separate option and exercise <br />payments. A smaller number preferred a single payment to be made at the beginning of <br />the contract term. There appeared to be little or no support for payment in annual <br />installments rather than through an up-front payment. <br /> <br />Contract duration <br /> <br />As expected, this proved to be an issue on which potential buyers and potential <br />sellers have widely disparate positions. Only a small number of potential sellers indicated <br />a willingness to enter into contracts longer than five years, a term that Windy Gap <br />participants have expressly stated is unacceptably short. However, it is clear that there <br />exists a small core of sellers who are willing to enter into agreements lasting ten to <br /> <br />4 As discussed in the August 1994 Phase I report, the first of these arrangements <br />has the advantage of eliminating the risk inherent in having to predetermine the number <br />of times the water actually will be transferred during the contract term. In specific <br />instances, this consideration may be outweighed by others which lead the parties to <br />prefer a combined payment. <br /> <br />11 <br />