Fryingpan-Arkansas Project update: Potential customers voice concerns over storage pricing at Reclamation ‘listening session’


From The Pueblo Chieftain (Chris Woodka):

“Are you trying to maximize return to the Bureau of Reclamation, or maximize benefits to the area?” asked Terry Book, deputy executive director for the Pueblo Board of Water Works. The water board has the lowest rate for storage at Lake Pueblo under a 25-year contract signed in 2000. “At the end of 25 years, if the price is too high, will we have to seek alternatives elsewhere? If the price we passed on were too high, would that keep others out and defeat the whole purpose?”

Reclamation plans to develop a pilot program in the Arkansas River basin that would determine how market pricing for storage contracts could be used throughout the western United States, explained Mike Collins, area manager for Reclamation. “We have no draft documents or analysis,” Collins said, adding that the listening session was to gain input from Arkansas River water users on how to determine market prices.

Collins offered no concrete responses about how the criteria for market pricing are being developed, and said a document would be available further into the process. “We’re gathering perspectives to get this process started,” Collins said.

Ed Harvey, an economist who represented the SDS group and Aurora, told Reclamation that it would be difficult to apply market rates in the Arkansas River basin across the western United States. Water markets are few in number and subject to local conditions. “It’s a difficult, but laudable goal that is fraught with difficulties,” Harvey said. He suggested developing a market simulation, looking at comparable situations in the Arkansas River basin. Harvey did that sort of analysis in 2006 for the Aurora contract hearings, and found storage rates varied from $3-$68 per acre-foot, depending on variables like location and the relationship between buyer and seller. Reclamation basically ignored Harvey’s work during those hearings. Reclamation’s current contracts at Lake Pueblo range from $17.25-$51.32 per acre-foot.

Meanwhile there are problems getting consensus on where to apply Fry-Ark revenues. Here’s a report from Chris Woodka writing for The Pueblo Chieftain. From the article:

The Southeastern Colorado Water Conservancy District last October proposed paying off the South Outlet Works first, the Fountain Valley Conduit second and Ruedi last until the Arkansas Valley Conduit is built. The [2009 law that uses excess-capacity revenues to fund parts of the Fryingpan-Arkansas Project] itself does not indicate priorities among the projects prior to completion of the new conduit. Reclamation suggests other alternatives, including paying the majority of the funds from Ruedi, paying equal shares to all three or adjusting payments to the total amount currently owned. It has not chosen an alternative.

“Our expectations are that the East Slope facilities and obligations will be paid off first, with consideration for Ruedi in the future,” Alan Hamel, executive director of the Pueblo Board of Water Works, told Reclamation officials at a meeting to discuss the law Wednesday. “It starts to appear that there will be additional mitigation for the West Slope.”[…]

Reclamation charges fees to store water in Lake Pueblo, primarily, under either long-term or short-term contracts. Previously, the revenues from that went to the general fund of the federal government. Under the new law, they are to be put toward Fry-Ark debt. This year, $2.2 million is available from short- and long-term excess-capacity contracts — enough to cover the South Outlet Works debt. In the next six years, the revenues drop to about half of that because of the structure of the Southern Delivery System contracts. By 2018, revenues are expected to resume at $2.4 million and begin climbing again. Revenues would be sufficient to pay off the Fountain Valley Conduit by 2020, under the Southeastern District plan, but the Ruedi debt would climb to more than $50 million.

More Fryingpan-Arkansas Project coverage here.

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