Southern Delivery System: Colorado Springs Utilities presents Reclamation with a counter-proposal in the ongoing negotiations for a an excess capacity storage contract

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From The Pueblo Chieftain (Chris Woodka):

Colorado Springs backed into a proposed figure of $25.31 per acre-foot annually beginning in 2011. Eventually, the SDS partners would like to store 42,000 acre-feet of water in Lake Pueblo in excess-capacity space — capacity in Lake Pueblo that is not needed for storing Fryingpan-Arkansas Project water. The move came after Michael Collins, Reclamation’s area manager, asked Colorado Springs for a counter-proposal based on a market approach in a Thursday negotiating session at the Fountain Valley School.

His request had come at the end of a day of heated discussions where Reclamation would not respond to a proposal by Colorado Springs based strictly on cost of service. Collins and the rest of Reclamation’s team — federal attorney Chuck Cahoy and contract officer Lynette Smith — faced pointed questioning from SDS Project Director John Fredell and attorney David Robbins. Reclamation had dropped the rate from $50 per acre-foot to $41.56 per acre-foot annually at the end of Thursday’s session…

The proposal would resolve a dispute over control of excess-capacity in the first few hundred feet of pipeline, allowing Colorado Springs to recoup some of the cost, but making it part of the Fryingpan-Arkansas Project managed by Reclamation. Reclamation would apply the same rate to an exchange — really, a paper trade of water stored in Lake Pueblo for project water in upper reservoirs — of up to 10,000 acre-feet annually that Colorado Springs alone is requesting. Colorado Springs would pay for 1,000 acre-feet annually, but there is still disagreement about whether the city would be reimbursed if it did not use the exchange in any given year. “We appreciate receiving the proposal,” Collins said. “We’ll not give it consideration today, but withhold our decision until the next session.”

Here’s where things stood after Friday’s session according to a report from Daniel Chaćon writing for the The Colorado Springs Gazette. From the article:

…representatives from both sides said they were optimistic they could reach a deal. “It’s hard to predict how close we are, really, but I’m very encouraged by the negotiation process,” said Michael Collins, manager of the federal agency’s Eastern Colorado Area Office in Loveland. “We’ve had good sessions all the way along.”[…]

Before the end of today’s negotiation session – the fourth since May – Utilities proposed paying $25.31 per acre-foot, plus a 1.79 percent annual inflation fee. Collins said the federal agency would give the proposal “serious consideration” and provide a response at the next negotiation session, which has not yet been scheduled.

More coverage from Chris Woodka writing for The Pueblo Chieftain. From the article:

On Friday, Colorado Springs proposed building a 90-inch pipeline from the North Outlet Works to the point where the SDS pipeline would turn out to provide Pueblo West water, several hundred feet from the dam. SDS would use a maximum of 150 cubic feet per second in the pipeline, which would have a capacity of roughly four times that. “The SDS partners would use 25 percent,” John Fredell, SDS project director told Reclamation’s negotiating team. “The excess-capacity, you would control.”[…]

Reclamation Area Manager Michael Collins offered Colorado Springs a payment of $287,500 — Colorado Springs estimated $500,000; Reclamation, $75,000 — over three years to oversize the line to 90 inches to the point where SDS becomes a single-purpose project. “Future generations would say we were short-sighted if we did not do this,” Collins said. David Robbins, Colorado Springs attorney, argued that while the cost of using larger pipe is minimal, SDS participants should not bear the costs of building the $30 million North Outlet Works alone if others hook on in the future. “If third parties want to use it, they should be asked to pay the cost,” Robbins said. Friday’s proposal backed off that position. Under Colorado Springs’ calculations, the oversized portion of the pipeline would cost $23 million, but in negotiations reimbursement for only $5 million was requested…

Colorado Springs and Reclamation made progress toward a conveyance contract Friday that would be separate from the excess-capacity storage and exchange contracts that are being negotiated. Robbins suggested numerous changes in the contract language that did not substantially alter the substance of the deal. Reclamation backed off its original stance of charging for conveyance from Pueblo Dam, instead letting the SDS participants use the North Outlet Works they build at no additional charge.

More Southern Delivery System coverage here and here.

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