The Dry Gulch Reservoir Project has been an albatross hanging around the necks of residents and businesses in the urban and suburban parts of Archuleta County for the past 17 years.
That’s not just my opinion. It’s also the opinion of other current Board members serving the Pagosa Area Water and Sanitation District (PAWSD).
Certain other people would prefer to have PAWSD customers continue wearing the albatross, if it can eventually result in a new reservoir.
PAWSD customers who live or own businesses within the District have been contributing $250,000 a year in loan payments, plus accruing an additional $300,000 annually in deferred interest, to be paid in the future.
These financial burdens are related to the 660-acre Running Iron Ranch, purchased in 2008 as the site for the proposed Dry Gulch Reservoir.
The proposed reservoir, priced in 2009 at $357 million, was to be paid for by PAWSD customers. Since 2013, no PAWSD board has indicated an interest in having its customers pay for the Dry Gulch Reservoir, but PAWSD customers are still paying off a $9 million loan used to purchase the Ranch.
As we are all aware, when a government borrows $9 million dollars, the total loan repayment, including interest, is typically twice that amount.
Disclosure: I currently serve as a volunteer member of the PAWSD board of directors, but this editorial series reflects only mu own opinions, and not necessarily the opinions of the full board or of the PAWSD staff.
On Thursday, May 29, a Texas businessman named Trey Fricke presented a proposal to the PAWSD board that would create an easement on the Running Iron Ranch for a 125-acre reservoir — twice the size of Lake Hatcher — while relieving PAWSD residential and business customers of approximately $13 million in future debt obligations, including principal and interest, and possible penalties.
The Zipper Valley Ranch LLC proposal would also relieve the San Juan Water Conservancy District (SJWCD) of all maintenance obligations related to proper care of the 660-acre Ranch, including weed control, fence repairs, upkeep of the Park Ditch that runs through the Ranch, and demolition and removal of existing dilapidated buildings.
Four members of the SJWCD board attended the Zipper Valley presentation, as did JR Ford, Archuleta County’s representative on the Southwestern Water Conservation Board, and a few members of the public and the media.
Mr. Fricke’s presentation began with a bit of background information. I suspect everyone at the meeting was already familiar with most of these facts.
For 18 years (2007), the Pagosa Area Water Supply and San Juan Water Conservancy District have been working to develop the Dry Gulch Reservoir under their 90%/10% ownership structure, funded entirely by a loan from the State of Colorado and a $1M grant.
Starting with a March 2003 “Harris Report” the Dry Gulch site was identified as a potential reservoir site “subject to geotechnical studies to verify that the dam site is adequate.” A 4,000-acre-foot scenario and a 12,500-acre-foot scenario were mentioned… to meet 2040 demand, allowing for up to 3,500 or 12,000 AF of “supply margin.”
After 18 years, Pagosa Area Water and Sanitation District has contributed millions in loan payments. SJWCD has struggled to advance the project through project management, engineering, planning, and grant/partnership procurement.
It’s actually been at least 21 years.
In 2004, the proposed reservoir was justified in District Court by claims that Archuleta County would have a population of 35,589 by 2040, with a projected municipal water demand of 11,732 acre-feet per year. The $357 million reservoir would be desperately needed by 2020, we were told, to supply drinking water.
The lake would also be a valuable recreational amenity, we were told.
SJWCD was decreed storage rights for a reservoir of up to 35,000 acre feet — about 19 times the size of Lake Hatcher. Those rights were challenged by fishing organization Trout Unlimited (TU) and were rejected by the Colorado Supreme Court as constituting “water speculation”. A second Supreme Court decision and more negotiations ultimately resulted in a stipulated agreement with TU, to allow for an 11,000-acre-foot reservoir. The agreement also required PAWSD and SJWCD to abandon other, unrelated water rights.
As the years have passed, it has become abundantly clear — to some of us — that population and water demand predictions made by Harris Engineering in 2003 were grossly exaggerated.
Mr. Fricke included an illustration of that gross exaggeration in his presentation on Thursday.
As we see from this chart, Harris Engineering had grossly miscalculated population growth and water demand, and had predicted a demand for PAWSD drinking water at 11,732 annual acre feet in 2040… more than seven times the current PAWSD estimate for 2040.
In 2015, an agreement was made between PAWSD and SJWCD, whereby SJWCD would find partners to construct the reservoir, and PAWSD would continue paying on the loan debt for up to 20 years, with the stipulation that PAWSD could — at any time, and at its sole discretion — sell the Ranch and pay off the loan, along with certain penalty fees.
Ten years later, SJWCD has not yet found a partner for the reservoir project.
Then Zipper Valley showed up, willing to become SJWCD’s partner, so long as Zipper Valley could own the land outside the reservoir footprint.
Zipper Valley made an initial offer to purchase the Ranch and partner on the reservoir in October 2024. The initial offer, which was unsolicited, surprised the PAWSD board because it not only would get PAWSD customers out of debt on the Ranch loan, but would also dedicate the central acreage of the Running Iron Ranch for a future reservoir to be designed and constructed by SJWCD, with financial and logistical assistance from Zipper Valley.
A subcommittee of the PAWSD board met with Mr. Fricke over the next several weeks to help revise the proposal and get it ready for presentation to the SJWCD board. Because the Ranch is jointly owned by PAWSD and SJWCD, the proposal obviously needed SJWCD approval, if the sale was to proceed in a friendly manner and avoid legal complications.
Mr. Fricke submitted the revised proposal to SJWCD and requested an opportunity to meet with the board and discuss the preliminary offer.
SJWCD voted unanimously to refuse a meeting with Mr. Fricke.