To: Honorable Mayor and Members of Town Council
From: Mark Marlowe, P.E., Utilities Director
Matt Benak, P.E., Water Resources Manager
Sheri Scott, P.E., Water Resources Program Analyst
Title
Update: Agreement for the Purchase and Sale of Capacity in Facilities Owned by United Water and Sanitation Agreement
Body
________________________________________________________________________________
Executive Summary
One of the key pieces of the Town's long-term water plan is to maximize the use of our local renewable supplies. For this reason, a diversion on Plum Creek has been a part of the long-term water plan since the Plum Creek Water Purification Facility (PCWPF) was first envisioned. With that, the Utilities Department is currently in negotiations with United Water and Sanitation District (United) on the development of an agreement for the purchase and sale of capacity in their existing surface water diversion structure and operational reservoir. These assets are located near Sedalia, Colorado just north of the confluence of East and West Plum Creeks and are shown on Attachment A. A study of options for a diversion on Plum Creek has identified this option as one of the most cost effective and timely. This agreement will also allow the Town to construct new infrastructure on their site for the pumping and transmission of raw water that the Town has rights to back to PCWPF for treatment.
The key terms of the agreement are as follows:
· The diversion structure has the capacity to draw 40 cubic-feet-per-second (cfs) of water flow from Plum Creek. United will retain the first 2 cfs of diversion capacity, and the Town will have ownership of the next 15 cfs of capacity.
· The Town will purchase 40 acre-feet (AF) of storage capacity in United's existing 250 acre-foot (AF) Sedalia Reservoir No. 1. The Town will use this storage capacity to ensure smooth delivery of raw water to PCWPF.
· The cost for this infrastructure and the related easements is $805,000.
· The Town will have permanent easements on the property for access to our planned infrastructure that will include a pumping station, water pipelines, telemetry and appurtenances.
· Once the agreement is executed, the Town will have a 120 day due diligence period before closing.
Along with the purchase and sale agreement, the Town will execute a diversion, delivery, and storage agreement. The key terms of this agreement are:
· United will retain the first 2 cfs of capacity and the Town will have ownership of the next 15 cfs of capacity.
· The Town will own 40 acre-feet (AF) of capacity in United's Sedalia Reservoir No. 1 and no other parties will be allowed to store in the Town's storage space.
· The Town will operate its own infrastructure and will be responsible for operation, maintenance, repair, replacement and capital costs.
· The Town will be required to pay into a working capital fund that will be used to cover unforeseen expenditures or revenue shortfalls. This fund will not be used for any projects that increase system capacity.
The benefits to the Town are:
· The diversion will give the Town the ability to capture both East and West Plum Creek water rights, our treated effluent flows and our lawn irrigation return flows. This will account for up to 50% (7,635 AF out of 15,400 AF of demand) of our projected water demand at build-out.
· Of the options analyzed in the Alternatives Analysis and Conceptual Design report by CDM Smith, this alternative scored the highest in geographic location; ability to capture and deliver wet water; constructability; time to implement and cost. Benefits include:
Ø The ability to capture and transmit our West Plum Creek water rights at a single point. These water rights will account for between 25 and 330 AF annually depending on the stream conditions (drought versus average year). If the Town were to develop a separate, new alluvial well field and pipeline to transmit this water, this would need to be a separate project costing the Town on the order of $4.8 million (based on six new alluvial wells and an 8-inch, 4 mile pipeline).
Ø The ability to store our water temporarily within United's Sedalia Reservoir No. 1 helps from an operational standpoint by providing the ability to pump on-demand and giving time for sand particles to drop out before we pump into the transmission pipeline to PCWPF. This saves on equipment and pipeline wear. If we had to build new a new 40 AF storage reservoir along Plum Creek, this would have to be a separate project costing on the order of $640,000. United is offering capacity in their existing reservoir for around half that price.
· Also, given the United diversion location on Plum Creek, and its ability to divert water that is of interest to several local water providers, there are opportunities for partnerships and cost sharing in this project. We have had discussions with at least two local providers who have expressed interest in the project.
It is important to note that the purchase of this diversion capacity is just the first part of the project. A pump station, pipeline, and potential upgrades to our PCWPF will also be required. Current cost estimates for this additional infrastructure is $25.4 million.
Discussion
One of the major goals of the Town's Water Resources Strategic Master Plan (WRSMP) that was adopted in 2006 was to establish a renewable, sustainable water supply that accounts for 75 percent of the Town's annual demand by the year 2050. In order to achieve this goal, the Town must have a portfolio of renewable water sources that include Plum Creek alluvial wells, surface water using existing water rights, and imported surface water from outside of the Plum Creek Basin. In 2011, the Town retained CDM Smith to conduct a surface water diversion analysis and in 2014, the Town again retained them to revise the alternatives analysis and develop a conceptual design. The main purpose of the updated study was to present alternatives to maximize the capture of existing, and known future water rights while minimizing economic and environmental impacts and to provide a timely solution for implementation.
The consultant initially developed twelve alternatives, seven of which were eliminated using a coarse screening method, while five were retained for deeper consideration. The five alternatives that were analyzed included:
A. Divert at the Town's Old Wastewater Treatment Plant site and use the United Water Diversion
B. Divert at the Town's Old Wastewater Treatment Plant site and pump directly from the Plum Creek Water Reclamation Authority outfall (Direct Potable Reuse)
C. Use the United Diversion Structure Only
D. Construction a New Diversion along Plum Creek
E. Construct a New Diversion at the 100 acre parcel owned by Plum Creek Water Reclamation Authority
The five alternatives were evaluated and ranked, with input from the Town, on several criteria: Geographic Location; Technical Feasibility; Cost; Constructability; Implementation Schedule; and Environmental Impact. Among all categories, Using the United Diversion Only ranked highest. The next best alternative without using United's infrastructure was using the Town's old wastewater treatment plant site and implementing a direct potable reuse system. Additionally, constructing a new diversion at the 100-acre parcel owned by Plum Creek Water Reclamation Authority could be another very good option if schedule is viewed as a driving constraint. Permitting a direct potable reuse system could be a lengthy process since no entity has permitted a direct potable reuse system in Colorado.
The capital cost estimates of the various alternatives were as follows:
Alternative |
Capital Cost ($M) |
Divert at the Town's Old Wastewater Treatment Plant site and use the United Water Diversion |
$19.2 |
Divert at the Town's Old Wastewater Treatment Plant site and pump directly from the Plum Creek Water Reclamation Authority outfall (Direct Potable Reuse) |
$21.4 |
Use the United Diversion Structure Only |
$18.2 |
Construction a New Diversion along Plum Creek |
$20.5 |
Construct a New Diversion at the 100 acre parcel owned by Plum Creek Water Reclamation Authority |
$20.0 |
The major advantages of using the United Diversion are:
· It is located in a place that gives us the ability to capture treated effluent (from Denver Basin groundwater, WISE water and other future imported sources), and native Plum Creek water rights.
· Since the diversion structure is built and operating, construction and permitting of a new diversion for the Town is avoided.
· Also, since the diversion structure is built and has been permitted, the schedule to have a facility that delivers water back to Town is greatly reduced.
· Additional benefits include:
Ø The ability to capture and transmit our West Plum Creek water rights at a single point. These water rights will account for between 25 and 330 AF annually depending on the stream conditions (drought versus average year). If the Town were to develop a separate, new alluvial well field and pipeline to transmit this water, this would need to be a separate project costing the Town on the order of $4.8 million (based on six new alluvial wells and an 8-inch, 4 mile pipeline).
Ø The ability to store our water temporarily within United's Sedalia Reservoir No. 1 helps from an operational standpoint by providing the ability to pump on-demand and giving time for sand particles to drop out before we pump into the transmission pipeline to PCWPF. This saves on equipment and pipeline wear. If we had to build new a new 40 AF storage reservoir along Plum Creek, this would have to be a separate project costing on the order of $640,000. United is offering capacity in their existing reservoir for around half that price.
Also, given the United diversion location on Plum Creek, and its ability to divert water that is of interest to several local water providers, there are opportunities for partnerships and cost sharing in this project. We have had discussions with at least two local providers who have expressed interest in the project.
Budget Impact
· The cost to the Town to purchase the capacity in the diversion structure is $425,000 with an additional $340,000 for reserved operational storage capacity ($8,500 per AF).
· It is anticipated permanent and construction easements on the property will cost approximately $40,000.
· The Utilities Department has budgeted $13,237,467 towards the project from 2015 through 2017. This amount was intended to cover the purchase of a share of the diversion structure, operational storage, easements and the design and construction of the pump station and pipeline to deliver raw water back to PCWPF. Based upon the recent information from our engineering consultant, we will need to budget an additional $4,973,000 towards the project for the 2016-2017 budget period.
· The appropriation account that will be used to fund this project is 211-4375-443.77-54 (Plum Creek Diversion Project).
Staff Recommendation
Staff recommends completing the development of the agreement with United and bringing back a final agreement and resolution for Town Council consideration by June 16, 2015. If Council is in agreement with this approach, staff will enter into a Non-Disclosure Agreement and Due Diligence License Agreement with United. Draft copies of these two agreements have been attached to this memorandum.
Attachments
Attachment A: Location Map
Attachment B: Nondisclosure Agreement
Attachment C: Due Diligence Agreement