To: Honorable Mayor and Members of Town Council
From: Mark Marlowe, Utilities Director
Matt Benak, Water Resources Manager
Title
Resolution Approving the Execution of the Purchase and Sale for Water Line Capacity from Pioneer Metropolitan District No. 3
Body
________________________________________________________________________________
Executive Summary
The purpose of this memo is to provide Council with a resolution (Attachment A) for consideration for the purchase of a 67 percent stake in the Keenesburg pipeline. The Keenesburg pipeline has been identified as a potential key piece of existing infrastructure that can be used to make Box Elder project work. The purchase of the PV, LLC water rights for the Box Elder project is contingent on the concurrent purchase of the Keenesburg pipeline. The location of the PV, LLC water rights and trhe pipeline make the package purchase of both assets very advantageous to the success of the Box Elder project. An important part of our alternative source of water supply project, also referred to as the Box Elder Project, is the ability to provide water for augmentation purposes in the proper time and place, so as not to injure other, more senior water rights holders. In the future, when the Town pumps the wells located on the Box Elder property, most of the time, we will need to put water back into the surface stream. One way to achieve this will be to put augmentation water into a pipeline and deliver this water into Box Elder Creek, downstream of the Box Elder property (see Attachment B). Recently, the Town has been presented an opportunity to purchase capacity in an existing water pipeline that is owned by Pioneer Metropolitan District No. 3 and the Town of Keenesburg, Colorado. Castle Rock would be purchasing a 67 percent stake in this pipeline (800 gallons per minute (gpm) capacity out of 1,200 gpm) for $2.23 million plus annual payments of $63,099 over the next 16 years.
This pipeline will give us the ability to move water that we will have rights to in Weld County (the PV, LLC water) and will be an additional asset that can be leased to other entities during times when we may not be using it. An additional benefit of this pipeline is that it provides the ability to deliver augmentation water close to into Box Elder Creek at a reasonable price. The Town has been including $30 million in its long term Water Resources capital plan (spread out between 2025 and 2029) for the construction of a 30-mile pipeline from the South Platte River back to the Box Elder property. The Keenesburg pipeline will replace the need for this 30-mile pipe from the South Platte River. Not having to construct infrastructure from the South Platte will have a positive impact to our rate payers.
On July 29, 2016, Castle Rock Water staff met with the Mayor oF Keenesburg (Danny Kipp) to inform him of our interest in purchasing Pioneer Metropolitan District No. 3 stake in the pipeline. Mayor Kipp did not indicate any issues with our potential purchase, but noted that any water that is transferred within the pipeline cannot degrade the water quality that Keenesburg is adding to the pipeline. This should not be an issue as the PV, LLC water that the Town is considering purchasing is from the same source (Lost Creek Aquifer) as the Keenesburg Town well. Keenesburg’s written agreement to Castle Rock purchasing an interest in the pipe is a condition of the agreement.
History of Past Town Council, Boards & Commissions, or Other Discussions
In 2011, staff was directed by Town Council to evaluate other potential water supply projects (Alternate Source of Water Supply Projects) to ensure that Castle Rock fully understood the options available in addition to WISE. The Town developed a Request for Proposals (RFP) process that could accomplish that in a public, transparent process.
Through various public meetings in 2012, Town Council considered the risks, benefits, and costs of all of the proposals submitted including a hybrid option that couples the WISE project with one of the other proposals. As a result of these meetings, Town Council directed staff to focus efforts on a scaled back (hybrid) renewable water project (2,000 - 4,000 acre-foot solution) and explore in more detail, the hybrid option. Staff has been providing Town Council regular updates to the progress of the hybrid water supply option.
On April 1, 2014, Town Council approved the 5-1/2 year option agreement for the Box Elder Creek Well Field and Farm. The Town has paid $350,000 to date to extend the option to October 1, 2016.
On May 25, 2016, the Utilities Commission unanimously recommended that Town Council enter into a Purchase and Sale Agreement with PV, LLC for 1,000 AF of renewable water rights.
On July 27, 2016, the Utilities Commission unanimously recommended that Council enter into concurrent Purchase and Sale Agreements with PV, LLC and Pioneer Metropolitan District No. 3 for the purchase of water rights and pipeline capacity. Both agreements are contractually connected.
Discussion
A more detailed discussion of the Box Elder project and the PV, LLC water rights and the relationship of this pipeline to the overall Box Elder provided in memos to Council on those items, see Attachment C.
Budget Impact
The purchase of the Keenesburg pipeline will impact the Alternate Source of Supply budget for 2016. The Town budgeted $4 million for water rights acquisitions in 2016. A 2016 third quarter budget amendment of $2,395,599 will be required to complete the purchase of the Keenesburg pipeline, and $63,099 has been included in the Water Resources budget from 2017 to 2032. The appropriation account to be used to fund the purchase of this pipeline would be 211-4375-443.77-30 WR KP. The Water Resources budget has adequate capital reserves to accomplish a budget amendment and to complete the purchase of this pipeline.
Staff Recommendation
Staff and Utilities Commission recommend that Town Council approve the Contract for Purchase and Sale of Water Line Capacity in the Keenesburg Well Water Transmission Line.
Proposed Motion
“I move to approve the Resolution as introduced by title.“
Attachments
Attachment A: Resolution
Exhibit 1: Agreement
Attachment B: Keenesburg Pipeline Location Map
Attachment C: Detailed discussion of Box Elder project