WSP05804

• File Number: 8407
• Description: Platte River Basin - River Basin General Publications
• State: CO
• Basin: South Platte
• Water Division: 1
• Date: 1/1/1996
• Author: Ellen Pinnes
• Title: Interruptible Supply Contracts for Water-Sharing Between the Colorado-Big Thompson and Windy Gap Projects
• Water Supply Pro - Doc Type: Report/Study

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twenty years, or longer. This number is likely to grow if interruptible supply contracts
are actually implemented within the district, demonstrating their feasibility and allowing
other parties to become more comfortable with the concept and operation of such
arrangements.

In addition, a larger pool of sellers is currently willing to enter into contracts of
shorter duration -- perhaps five to ten years -- which may be adequate to meet the needs
of some buyers, who need interim protection while they develop other sources of supply.
These sellers may be interested in longer-term agreements at the expiration of the initial,
shorter contract.

However, it should be recognized that there will always be limits on the number of
sellers willing or able to enter into long-term contracts. For example, many farmers and
ranchers in the district's service area are nearing retirement age. They have good reason
to be reluctant to tie up their assets over a long period, either because they will prefer
outright sale to provide for their retirement, or because they will be turning over their'
operations, including water rights, to sons or daughters whom they wish to leave free to
make their own decisions about use of these assets.

Another constraint on long-term contracts is that they will constitute an
encumbrance on ownership of the C-BT units. Units that have been used as collateral
for a financial loan may be unavailable for interruptible supply arrangements.
Conversely, some potential sellers may refrain from entering into these arrangements
because they are reluctant to encumber the rights in this way and thereby interfere with
their ability to use the rights as security for future borrowing.

From the standpoint of potential buyers, contract duration is a major issue. Some
buyers will be unwilling to enter into contracts unless they are made essentially perpetual
through use of an option to renew or provision for outright purchase of the water at the
end of the expiration of the interruptible arrangement. Concern was expressed that a
buyer relying on the existence of the interruptible contract would thereby place itself at
the mercy of the seller when the agreement expired.

Notice date

As expected, commenters varied in their perceptions of the date by which a buyer
would have to give notice of its intent to exercise the option and transfer the water in a
given year, with agricultural users preferring earlier notice and municipal users hoping to
wait until later in the year. However, there was considerable support for use of an April
notice date that is timed to coincide with the district board's declaration of the
C-BT quota for that year. Most agricultural users, though they might prefer earlier
notice, seemed to feel that this would provide adequate notice for them to modify their
operations as needed for that year. Some commenters promoted a sliding scale, pursuant
to which a buyer would pay less for earlier notice and more for later notice.

In the case of interruptible supply contracts used as back-up supply for in-lieu
delivery of C-BT water to Windy Gap, the option would have to be exercised no later

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