The San Juan Water Conservancy District (SJWCD) board discussed several aspects of its proposed Dry Gulch raw water storage project during its regular meeting Monday night, including loan nancing, a mill levy increase, contracts and new names for the project.
Among the decisions made at the meeting was approving a resolution allowing the district to apply for a $2 million loan to help acquire property needed for the project, as well as for preconstruc- tion expenses.
That loan, however, would be contingent upon the SJWCD successfully raising its mill levy to one mill during an upcoming election.
In introducing the topic to the board, chair Rod Profitt explained that he had already submitted the loan application to the Colo- rado Water Conservation Board (CWCB), but that the resolution would “essentially” formalize that application.
Profitt noted he would be appearing before the CWCB during that board’s meeting in May (to be held in Pagosa Springs) to see if the loan is approved, at which point the SJWCD would have to work on the mill levy increase being approved…
The resolution further states, “the costs to acquire the rest of the land needed for the reservoir basin and pre-construction expenses are expected to be $2,000,000.”
The 40-year loan, Proffitt explained during discussion, comes with a 2.75 percent interest rate, which mean debt-service pay- ments of about $96,129 per year.
One mill, he said in response to a question by board member Al Pfsiter, would raise about $213,000 per year, meaning the district would also have funding for other projects such as the stream management program…
The resolution passed 5-0, with board member Ray Finney absent from the meeting.
Last month, the Pagosa Area Water and Sanitation District (PAWSD) refinanced its 2006 enterprise revenue and improvement bonds through the issuance of series 2015 enterprise revenue refunding bonds. The refinancing is slated to save the district $528,000 in interest payments over the next nine years.
According to Assistant Manager Shellie Peterson, PAWSD took advantage of interest rates that have dipped to historic lows to refinance the bonds, which total $5.26 million. With the refinancing, PAWSD will be paying an average true interest cost of just under 1.94 percent.
In addition to the savings over the next nine years due to the refinancing, PAWSD will also shorten its outstanding debt service payments by two years.
According to Peterson, the savings from the refinancing are realized directly by the district’s ratepayers.
PAWSD is currently working to finalize its 2016 budget. The district began budget talks in October, holding a public hearing on Oct. 15.
The draft budget was published online prior to the hearing. Some changes were made during budget talks in October, and changes will continue to be made until the budget is adopted in December.
The calculations are made based on the anticipated 2015 revenues and expenditures as compared to the projected 2016 revenues and expenditures.
We’re lucky here in Colorado. When we grow weary of ordinary, everyday political controversies — federal immigration policy, perhaps, or governments collecting personal data on private citizens, or another federally mandated standardized test foisted on our children, or more locally, streets and roads slowly crumbling into asphalt dust — we always have one big controversy that can serve as a welcome diversion:
I attended a couple of diversionary discussions last month in Pagosa Springs, on the subject of Colorado water. The first discussion took place on November 17 at the Ross Aragon Community Center, in the South Conference Room, and was hosted by the Southwest Basin Roundtable.
The second meeting — related in a somewhat diversionary way — involved the elected board members of the Pagosa Area Water and Sanitation District (PAWSD) and resulted, after considerable discussion, in a closed-door executive session. More about that later… we’ll start with a summary of the Roundtable meeting .. which, interestingly enough, was attended by not a single member of the PAWSD board…
The November 17 meeting was sparsely attended — about 24 people, mostly members of various water boards or commissions — even though the subject matter may ultimately prove relatively momentous: namely, the impending Colorado Water Plan, and more specifically the portion of that plan known as the Southwest Basin Implementation Plan. We started the meeting by going around the room and introducing ourselves. I was struck by a comment from one of the non-governmental attendees.
“I’m Donna Formwalt, Pagosa Springs. We’re ranchers here. And I’m very interested in the water takeover by the Forest Service.”
The Colorado Water Plan is an initiative of Governor Hickenlooper’s office, begun as the result of an executive order issued in May 2013. A press release posted on the Governor’s website states:
Gov. John Hickenlooper today directed the Colorado Water Conservation Board (CWCB) to begin work on a draft Colorado Water Plan that will support agriculture in rural Colorado and align state policy to the state’s water values.
“Colorado deserves a plan for its water future use that aligns the state’s many and varied water efforts and streamlines the regulatory processes,” Hickenlooper said. “We started this effort more than two years ago and are pleased to see another major step forward. We look forward to continuing to tap Colorado’s collaborative and innovative spirit to address our water challenges.”
But as Ms. Formwalt hinted with her comment about the Forest Service, Colorado’s innovative and collaborative spirit will be challenged, in the coming months and years, by officials serving non-Colorado governments. The U.S. Forest Service, for one. And the governments of the “Lower Basin States” for another.
Are we preparing well enough for that conflict?
From the Colorado Water Plan website:
Colorado’s Water Plan will provide a path forward for providing Coloradans with the water we need while supporting healthy watersheds and the environment, robust recreation and tourism economies, vibrant and sustainable cities, and viable and productive agriculture.
Of course, no one — not even Governor Hickenlooper — can actually “provide Coloradans with the water we need.” Only Mother Nature can actually provide water, last I looked. But what the Governor and the Colorado Water Conservation Board mean to provide is a generally accepted plan for portioning out the limited water Mother Nature provides, in a state where supposedly conflicting interests want to preserve the status quo. History has taught us, you can preserve the status quo for only so long — and then people start fighting.
In the case of an ever-more-precious resource like water, the key battles might be between Rural Colorado and Urban Colorado, or they might be between this state where so many American rivers find their source — Colorado — and the several states where those rivers end up in water taps, a thousand miles away.
The Colorado Water Plan is, I assume, an attempt to keep both types of battles from getting too nasty.
The Southwest Basin — a geographic area defined by the Colorado Water Conservation Board — is located in the southwest corner of Colorado and covers an area of approximately 10,169 square miles. The largest cities are Durango (pop. 15,213) and Cortez (pop. 8,328). The region also includes three ski areas: Telluride, Wolf Creek, and Durango Mountain Resort.
A good deal of water flows through the Southwest Basin, and a good number of people want to get their hands on a share of it — including the people who will likely move into the region over the next 30 years or so. The Southwest Basin is projected to increase in municipal and industrial (M&I) water demand between 17,000 acre feet (AF) and 27,000 AF by 2050, according to Roundtable projections.
From the Roundtable web page:
Southwest Basin’s Major Projects and Programs
Dry Gulch Reservoir
Animas-La Plata Project
Long Hollow Reservoir
La Plata Archuleta Water District
It’s confounding, how that Dry Gulch Reservoir keeps showing up… like a bad penny.
More Colorado Water Plan coverage here. More Dry Gulch Reservoir coverage here.
According to 18th century Scots poet Robert Burns, “The best laid plans of mice and men often go awry.”
Pagosa Verde owner Jerry Smith must have this line of poetry running through his mind all the time when dealing with the federal, state and local government, and Monday night’s meeting of the Pagosa Area Geothermal Water and Power Authority was probably no exception.
The authority, which consists of three town councilors (David Schanzenbaker, John Egan and Mayor Don Volger), the three county commissioners (Michael Whiting, Steve Wadley and chairman Clifford Lucero) and one at-large seat held by Mike Alley, just barely had enough members show up at Town Hall to achieve a quorum for the meeting.
Town Manager Greg Schulte, along with County Administrator Bentley Henderson and County Attorney Todd Starr, acts as staff for the authority, began by giving some background information for the people in the audience who may not have attended the authority’s previous meetings.
The original intent of the authority, as spelled out in the agreement between the town and the county, was to enter into an agreement with Pagosa Verde to form a separate entity — Pagosa Waters LLC — as a public/private partnership.
Pagosa Waters would then consist of three people: one appointed by the authority, one appointed by Pagosa Verde and one at-large member. The point being, this arrangement would ensure joint ownership of the project between the two local governments and Pagosa Verde, while at the same time allowing the project to be managed by a full-time, working board instead of part-time government volunteers.
According to Schulte, a wrinkle in the plan occurred because of a recently awarded grant from the Colorado Department of Local Affairs worth nearly $2 million. Archuleta County was the official applicant for the grant because DOLA only deals with local government bodies, not private companies.
The $2 million grant from DOLA counts as matching funds for a $4 million grant from the U.S. Department of Energy, which was awarded earlier this year to Pagosa Verde. However, since Pagosa Verde is a privately owned, for-profit company and Pagosa Waters LLC would be a public/private partnership, DOLA had concerns about the legality of Archuleta County funneling its funds into the project.
Schulte then alluded to a meeting held last week involving himself, town attorney Bob Cole, Starr and another attorney, Russ Dykstra, who has some experience with similar situations.
Starr then took over the briefing, explaining, “He has been involved in some very large public/private partnerships … and his suggestion was that, from everybody’s stand-point, an LLC is probably not the form we want to take. Some sort of concession agreement is the best way to do it because we can take care of all of Jerry’s requirements and all of our requirements.”
Nobody doubts that the Colorado town of Pagosa Springs has hot water. It bubbles to the surface at around 140 degrees and in quantities sufficient to sustain a large commercial spa and several more public pools along the San Juan River.
As well, the hot water heats 13 businesses and 5 homes in downtown Pagosa Springs plus the Archuleta County courthouse, delivering this energy at a cost roughly 20 to 25 percent below the going rate for natural gas and 30 percent less than electricity.
But is there sufficient hot water available to produce electricity, warm 10 acres of greenhouses, and deliver heat to 600 homes?
Geologic modeling suggests there is, but until additional wells are drilled, as is expected later this summer, there’s no way of knowing for sure. If those exploratory wells confirm large volumes of hot water, then two large-bore wells will be required to extract the hot water and, after the heat is transferred from the water, return it underground.
Federal and state grants this year have given the project traction. The U.S. Department of Energy delivered $3.9 million, followed by $1.9 million from state sources. The town and county governments created a consortium called the Pagosa Area Geothermal Water and Power Authority to provide 30 percent in local funds, or $520,000, as required by the federal grant.
A private company, Pagosa Verde, which is pushing the project, came up with an equal amount in in-kind services. It owns 20 percent of the project and has the backing of a South Carolina-based investment firm called Natural Energy LLC.
Another milestone occurred in late May, when Colorado Gov. John Hickenlooper stopped in Pagosa to sign H.B. 14-1222 into law. The law, co-sponsored by Sen. Ellen Roberts, a Republican from Durango, and Sen. Gail Schwartz, a Democrat from Snowmass Village, lengthens the repayment period and otherwise provides great flexibility for private-activity bonds issued with the backing of the state government for geothermal and other renewable energy projects.
Michael McReynolds, policy advisor at the Colorado Energy Office, says the new law recognizes the large costs of proving the geothermal resource exists before development can occur.
However, other areas of the state are interested in replicating the business model of diverse revenue streams being assembled at Pagosa Springs. “It really depends upon the specific communities and what they want to pursue,” he said when asked if the new law will be used to finance other community renewable energy projects.
Jerry Smith, the chief executive at Pagosa Verde, says the new law was “huge” in allowing the project in Pagosa Springs to go forward.
In providing access up to $16.7 million available for as little as 2 percent interest, Smith’s project can now proceed. He estimates the need to spend $26 million before revenue can be gained.
“It’s a community-scale project, replicable throughout the Rocky Mountain states. I wanted town and county citizens to own it,” says Smith. “They only way they could participate was by forming an authority, similar to a housing authority. It’s a quasi-governmental authority.”
The public-private partnership is called Pagosa Waters LLC.
Because of the lower-cost money produced by the state and federal grants plus the clear bonding authority enabled by the new state law, he sees a financial path opening up.
Bonds will be just 2 percent. “That’s essentially free money,” he says. “We can borrow as much as we need to secure revenue for the project, “and it’s a way we go.”
Cheap borrowed money also relieves the onus of finding extremely hot water and arranging for sale of electricity, says Smith. If tests reveal merely hot water, such as bubbles up in the local springs, then that’s still hot enough for greenhouses and living rooms.
From the Romans forward
Hot water originating underground has long been put to practical uses. Romans at Pompei used hot water to heat buildings.
The Idaho Capitol Building has been heated with water drawn from 3,000 feet below ground, but 86 buildings with more than 5.5 million square feet of space are also heated by a separate geothermal heating district, according to Jon Gunnerson, geothermal coordinator for the City of Boise Public Works. It is the largest geothermal heating system in the United States, he says.
Commercial electrical production from geothermal sources began in 1911 in Larderello, Italy. The first commercial electrical production in the United States began in 1960 at The Geysers in California.
In 2013, according to the Geothermal Energy Association, the United States had 3,386 megawatts of installed geothermal capacity, or about three times as much as the trio of giant coal-fired power plants found in the Comanche complex near Pueblo, Colo.
Less prominent than photovoltaic panels, geothermal was nonetheless responsible for 0.41 percent of all electrical generation last year, ahead of solar at 0.23 percent. Biomass, wind, and hydro all produced more than geothermal.
California far and away has the most geothermal installed capacity, followed by Nevada, then trailed more distantly by Hawaii, Utah, and Idaho.
In Colorado, geothermal resources have been used to heat small greenhouses associated with the Mt. Princeton Hot Springs, near Buena Vista, as well as commercial springs. But no electrical production has been achieved because of concerns that new uses will rob existing users of their heat.
“Until very recently, Colorado’s geothermal potential for generating electricity has been assigned little promise,” notes the Colorado School of Mines at its geothermal website. “This appears to be based more on a lack of study, rather than on sound science.”
The website article goes on to note that a 2008 report from the Massachusetts Institute of Technology found that Colorado is the top state in the nation for potential commercial development of its heat, mostly if deep wells are drilled near Rico, Trinidad and other hot spots in a process called enhanced geothermal recovery.
Potential in Pagosa
Just how much electricity the Pagosa project could produce depends upon the heat of water. Colorado School of Mines studies concluded a strong likelihood of substantial hot water 2,000 to 5,000 feet under the land leased by Smith’s company about two miles south of downtown Pagosa Springs. Hot water for the downtown heating district is drawn from a depth of 300 feet.
Smith says it’s a cinch that the water found 2,000 to 5,000 deep will be at least 140 degrees Fahrenheit, the temperature of the water found closer to the surface. If so, it should be enough to produce four megawatts of round-the-clock electricity, what is called base-load generation.
If the water is 250 degrees, as the geological modeling suggests, it could generate 12 megawatts—and still have residual heat for the greenhouses and the homes.
Archuleta County altogether has baseload demand for 20 megawatts of generation. Another renewable source, a proposed biomass plant that would burn forest products to generate electricity, would generate 5 megawatts. Both biomass and geothermal generators probably need to get paid more for their electricity by the local electrical cooperative, La Plata Electric, than what the cooperative currently pays.
Biomass plant proponent J.R. Ford last winter said he needed 15 to 20 percent more than what the La Plata and other electrical cooperatives pay wholesale provider Tri-State Generation and Transmission. Tri-State’s power comes primarily from coal, natural gas, and hydroelectric.
Both the geothermal and biomass projects in Archuleta County are representative of small sources of electricity called distributed generation. In a famous 1976 essay published in Foreign Affairs, Aspen-area resident Amory Lovins advocated more localized generation as necessary to shift power production from giant but often distant coal-fired power plants. In that same essay, Lovins also stressed that more local sources of electricity would reduce the vulnerability of the grid to terrorism.
“Distributed energy is what the world needs to get to,” says Smith, who cites Lovins as one of his heroes.
Smith moved to Archuleta County in 1989 after a career in the entertainment industry in California. He describes himself as a “liberal arts guy who values things that most people find technical and dry.”
Geothermal is wet, of course, but whether it moves forward in Pagosa Springs depends upon the outcome of a review by the U.S. Fish and Wildlife Service. The 600 acres of land leased for the drilling between the San Juan River and Highway 84 has a plant species, the Pagosa skyrocket (Ipomopsis polyantha), which has been listed as endangered under the Endangered Species Act.
The plant grows one or two feet tall, often in the understory of Ponderosa pine, and has been found in only three places, all near Pagosa Springs.
The federal grant money triggered the need for a biological assessment, which will be the basis for a biological opinion. If adverse effects can be avoided, such as by using care in the placement of wells, the Fish and Wildlife Service can approve the drilling this summer.
Existing wells reach a maximum 1,200 feet, but Smith expects to need wells 2,500 to 5,000 feet deep. The working hypothesis is that the underground rocks at the site are fractured than those that provide the water for the commercial hot springs and downtown heating district.
How will anybody know if the new wells are tapping a new source of heat instead of robbing the existing geothermal resource? Smith says his company will inject heat and pressure gauges on all local hot-water wells, “so they know immediately whether we are tapping the resource.” Colorado law and new regulations in Archuleta County protect existing geothermal users in case of damage to their resource.
Chris Gallegos, who administers the town’s geothermal heating district, says it’s “an unknown” whether Smith’s project would impair the existing users. “Through the test wells we should be able to determine whether the extraction of that heat would affect us or not,” he says.
The Town of Pagosa Springs council met in executive session with town attorney Bob Cole last Thursday, Dec. 19, with the topic of conversation centering on matters involving funding for a possible geothermal electric utility. According to town manager David Mitchem, council gave Cole instruction during the executive session. Mitchem said that the executive session did, “move the process forward,” but that no decisions were made at the meeting. A decision, Mitchem indicated, is expected in the next three weeks to a month…
Mayor Ross Aragon said the geothermal utility discussed Dec. 19 was the same contract the county [Archuletta] earmarked money for, and said the town and county have been and are expected to continue to be on par with each other in contributing to the project.
In 2013, both the town and the county pledged $65,000 toward research on geothermal resources and the possibility of using a geothermal resource to create power. That exploration work is being done by Pagosa Verde, LLC, headed by Jerry Smith.
The Pagosa Springs Sanitation and General Improvement District board voted last week [week of November 25] to accept a bid from Hammerlund Construction Company for work on a pipeline and pumping stations needed to deliver wastewater from the town’s current lagoon site to the Pagosa Area Water and Sanitation District’s Vista treatment plant.
Art Dilione, special projects manager for Bartlett & West, the company tasked with handling the bidding process for the town, sent a letter to both town manager David Mitchem and Gregg Mayo, special projects director for PAWSD.
The letter, dated Nov. 19, explained how the project was originally bid on Oct. 2, but all of those bids came in well above the engineer’s estimate as well as the project’s budget, so those original bids were rejected and the project was rebid on Nov. 12.