A Fluid Situation, Part One

Water is wonderfully fluid.  Maybe that’s why water data, and water policy, and water rights law, and water planning, all seem to also have a similar kind of ‘fluid’ nature.

The Pagosa Area Water and Sanitation District (PAWSD) board of directors has scheduled a meeting for this morning, Wednesday September 10 at 10am at the PAWSD offices to discuss an agreement that might lead, someday, to the construction of the fabled Dry Gulch Reservoir.  The discussion will focus on a “Letter of Intent” approved on Monday evening by San Juan Water Conservancy District (SJWCD).

The letter begins like this:

The Pagosa Area Water & Sanitation District (“PAWSD”) and the San Juan Water Conservancy District (“San Juan”) enter into this Letter of Intent in order to structure discussions with the Colorado Water Conservation Board (“the CWCB”) to finalize a satisfactory agreement that both relieves PAWSD of its financial obligations to the Dry Gulch Water Facility Project (the “Dry Gulch Project”), and acknowledges efforts by San Juan to develop the Dry Gulch Project on a more practicable basis with a broader group of interested partners.

By letter, dated September 24, 2013, PAWSD gave San Juan notice of termination of the Amended and Restated Inter-Governmental Agreement (“IGA”), which defined their respective obligations concerning the Dry Gulch Project. The IGA was terminated  on or about March 23, 2014.  Significant issues surviving that termination include co-ownership of the 660-acre Running Iron Ranch (“the Ranch”), shared water rights directly and indirectly related to the Dry Gulch Project, and long-term debt obligations to the CWCB incurred in the purchase of the Ranch.

You can click here to download the 3-page letter.

As some of our readers may remember, at one point in the recent past, PAWSD (the largest public water district in Archuleta County) and the SJWCD (essentially a bureaucratic club with judge-appointed board members) shared a sizable number of staff and directors between them.  During that period of intense collaboration, the two very congruent boards purchased a ranch in Dry Gulch, northeast of downtown Pagosa Springs, for $10 million with plans to build a $357 million reservoir project — at some point in the next 25 years or so.

The voters apparently disliked the idea, and began electing Dry Gulch opponents to the PAWSD board of directors. Within a few months, PAWSD had dissolved most of its shared relationships with SJWCD; it was a messy divorce.  A few PAWSD staff members resigned; SJWCD was forced to rent its own office, and purchase furniture.

But SJWCD and PAWSD still own that damned $10 million ranch together.  (Current market value?  $4 million?) According to the loan documents that funded the purchase, PAWSD customers are responsible for paying back $9 million of the purchase price, even though their current board has expressed no desire to actually build a reservoir there.  SJWCD may have to repay the remaining $1 million (with interest) if the reservoir is never built.

For the past couple of years, SJWCD president Rod Proffitt has been trying to find someone to buy the ranch and get PAWSD and SJWCD out from under this financial obligation.  Not too many people are interested in an overvalued reservoir site… but maybe the state of Colorado is interested?  Our state government, like our federal government,  has often shown a refreshing willingness to fund outrageously expensive projects that produce no discernible benefits for the public.

Mr. Proffitt has been in negotiations with the Colorado Water Conservation Board (CWCB) — the folks who originally loaned PAWSD the money back in 2007 and got this mess started.  The question Mr. Proffitt has been posing to our state government is, would CWCB like to BUY the Dry Gulch property at a bargain price, and build its own little reservoir there?

Possibly so, from what I hear through the grapevine.

There are a couple of questions that need to be addressed, in that regard.  The water rights connected to this particular reservoir were approved based on a claim that PAWSD desperately needed an 11,000 acre-foot reservoir to meet its future water needs.

CWCB does not have any current need for 11,000 acre-feet of reservoir storage in Archuleta County.  The water rights belong to PAWSD.  So, as I understand the Letter of Intent, Mr. Proffitt is suggesting that, in order to satisfy CWCB, the PAWSD board will have to agree to buy some of the Dry Gulch Reservoir water at some point in the not-too-distant future, if CWCB and SJWCD ever do build the reservoir.

From the “Letter of Agreement”:

5.  The Parties agree it is in their mutual interest to protect the conditional water rights for the Dry Gulch Project, and pledge cooperation with each other to accomplish this goal.  The Parties cooperation  includes but is not limited to:

(i) PAWSD agrees to make long-term planning commitments acknowledging the Dry Gulch Project and its attendant conditional water rights as an option; it being understood that such planning commitments do not obligate PAWSD to any future financial commitments to the Dry Gulch Project;

(ii) PAWSD agrees to include the Dry Gulch Project in its planning documents as a principal storage option for future water demand growth which cannot be met by existing reservoirs; and

(iii) PAWSD commits to an ongoing evaluation of future water purchases from the Dry Gulch Project based on long-term demand projections, evaluation of cost, viable alternative sources of water, and consideration of the prospective likelihood the Dry Gulch Project will actually be built and able to provide water to PAWSD.

If CWCB likes this arrangement, PAWSD could possibly negotiate a sizable reduction in its $9 million debt to CWCB — maybe up to half the debt? — while also getting a lower interest rate.  Possibly.  Such an agreement could save PAWSD customers maybe $300,000 a year in principal and interest payments.

Adding a new 11,000 acre-foot reservoir would provide enough water for an Archuleta County population of about 192,000 residents, based on current water demand. (Not including evaporation, leakage, and the three or four new golf courses we will have by that time.)  According to my pocket calculator, 192,000 people is 16 times our present county population.

But water is fluid.  Maybe that’s why I’m having a devil of a time grasping the actual facts of the situation.

Read Part Two…

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Bill Hudson

Bill Hudson founded the Pagosa Daily Post in 2004 in hopes of making a decent living writing about local politics. The hope remains.