To: Honorable Mayor and Members of Town Council
From: Mark Marlowe, P.E., Director of Castle Rock Water
Matt Benak, P.E., Water Resources Manager
Angie Brown, Water Resources Program Analyst
Title
Resolution Approving the Purchase of Additional Capacity in East Cherry Creek Valley Water and Sanitation District’s Barr Lake Northern Pipeline
Body
________________________________________________________________________________
Executive Summary
The purpose of this memorandum is to seek Town Council approval of the attached resolution (Attachment A) to purchase an additional 1.428 million gallons per day (MGD) of additional capacity in East Cherry Creek Valley Water and Sanitation District’s (ECCV) Barr Lake Northern Pipeline for up to $1,184,673. The Town currently owns 0.9 MGD and the purchase of this additional capacity would bring the Town’s ownership to 2.328 MGD. Long-term, the Town of Castle Rock plans to convey 3 MGD of water from our northern water resources (the Box Elder project) located in close proximity to ECCV’s Northern Pipeline and the opportunity to purchase this additional available capacity at a discounted rate provides a cost-effective solution to the Town’s northern supply conveyance needs.
History of Past Town Council, Boards & Commissions, or Other Discussions
On May 10, 2005 Town Council unanimously approved Resolution 2005-048 approving the Town of Castle Rock’s participation with the South Metro Water Supply Authority in the upsizing of the East Cherry Creek Valley Water and Sanitation District Barr Lake Northern Pipeline.
In 2011, staff was directed by Town Council to evaluate other potential water supply projects (Alternative 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.
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 paid $350,000 to extend the option to October 1, 2016.
On August 19, 2014, Town Council approved the Rothe Water Rights Purchase for up to 770 AF of water rights to be used as augmentation water for the Box Elder Creek Well Field. This purchase closed on September 17, 2014 for a total cost of $5,460,000.
On October 1, 2014, the Town paid its second option payment for the Box Elder Well Field of
$100,000. This payment extended the due diligence period to October 1, 2015.
On October 22, 2014, staff provided the Utilities Commission with an update of the Alternate Source of Supply Projects.
On December 16, 2014, staff provided an update to Town Council on the Alternate Source of Water Supply Projects.
On April 21, 2015, staff provided an update to Town Council on the Alternate Source of Water Supply Projects.
On June 24, 2015, staff provided the Utilities Commission with the details of the surface use lease agreement for the Rothe Property. Utilities Commission recommended moving forward and finalizing the lease agreement with the adjacent landowner, Sublette, Inc.
On August 18, 2015, Town Council approved a Surface Use Agreement with Sublette, Inc. to use the Rothe Property for recreation activities, while managing the property on the Town’s behalf.
On December 9, 2015, staff updated the Utilities Commission on the status of the WISE and Box Elder projects, including the 1041 Permit process being considered by Weld County and associated with the Box Elder project.
On January 5, 2016, staff provided an update to Town Council on the Alternate Source of Supply Projects.
On May 25, 2016, the Utilities Commission unanimously recommended that Town Council enter into a Purchase and Sale Agreement with PV, LLC.
On July 27, 2016, the Utilities Commission unanimously recommended that Council enter into a Purchase and Sale Agreement with PV, LLC and Pioneer Metropolitan District No. 3/Town of Keenesburg for the purchase of water rights and pipeline capacity as both agreements were contractually connected.
On August 16, 2016, Town Council approved the Purchase and Sale Agreement with PV, LLC for the purchase of up to 1,100 AF of Lost Creek water and also approved the Contract for Purchase and Sale of Water Line Capacity in the Keenesburg Well Water Transmission Line.
On September 6, 2016, Town Council approved an amendment to the Box Elder Option Agreement extending the closing option date from October 1 to December 1.
On October 18, 2016 Town Council approved the $300,000 payment, the next installment of the option on the Box Elder well field.
On October 26, 2016 the Utilities Commission recommended Town Council approve the closing on the Box Elder well field prior to December 1, 2016.
On November 15, 2016 Town Council approved the closing on the Box Elder well field property.
On March 31, 2017, the Town closed on 1,035.8 AF of Lost Creek water from PV, LLC.
Castle Rock Water staff presented an agreement to purchase an additional 455.7 AF of water from PV,LLC, Inc. to the Castle Rock Water Commission at their meeting held on January 22, 2020, and the Castle Rock Water Commission voted unanimously to recommend approval of the agreement by Town Council.
On February 4, 2020, Town Council approved the Contract for Purchase and Sale of Water Assets and Water Line Capacity. The contract sold the Town of Castle Rock’s capacity ownership in the Keenesburg Pipeline, thereby releasing the Town from debt obligation payments after 2020, and secured for the Town an additional 455.7 acre-feet of renewable water and fully exportable water in the Lost Creek basin.
On February 26, 2020, Castle Rock Water Commission voted unanimously to recommend Town Council approval of the purchase of additional pipeline capacity in the ECCV Barr Lake Northern Pipeline.
Discussion
An important part of the Town’s long-term water planning is imported water supplies. Over the last ten years, Castle Rock Water (CRW) has been developing the Box Elder Project, located north of Denver, to one day convey at least 2,500 acre-feet (AF) of fully renewable and reusable water supplies back to the Town. The Town has purchased nearly 1,800 AF of water rights between our Rothe water and Lost Creek basin water. Furthermore, the Town is in process of purchasing an additional 455 AF of water in Lost Creek which, in total, would secure approximately 2,261 AF of renewable northern water supplies, 90% of our 2,500 AF goal. A map showing CRW’s current assets in relation to infrastructure that will be utilized to convey the water to Town is provided in Attachment B.
Eventually, the Town intends to use these water rights directly or as an augmentation source. However, until the Town secures the infrastructure needed to convey this water to the CRW service area, the Town currently leases this water to other users for agricultural purposes, which helps to generate revenue for CRW.
In 2004, the Town of Castle Rock joined the South Metro Water Supply Authority (SMWSA) and subsequently, members of SMWSA began investigating opportunities for regional projects and partnerships which ultimately resulted in the development of the Water Infrastructure and Supply Efficiency (WISE) Project. In the early days of the WISE Project- which sought to make efficient use of existing water rights and infrastructure- several alignments for the conveyance of WISE water were considered as viable options. One of these alignments utilized East Cherry Creek Valley Water and Sanitation District’s (ECCV) Barr Lake Northern Pipeline (NPL). Subsequently through the ECCV-SMWSA Barr Lake Pipeline Enlargement Agreement (Agreement), several members of SMWSA purchased capacity in ECCV’s NPL, including the Town of Castle Rock. The Town paid ECCV $1,464,000.00 for 1.4 MGD of capacity in the NPL and agreed to pay ECCV additional costs for construction and upon first use of the NPL.
However, as the WISE Project progressed, it became clear that the project should instead utilize Aurora’s Prairie Waters Pipeline and treat WISE water at Aurora’s Binney Water Treatment Plant (WTP), rather than treating the water at ECCV’s Northern WTP and then conveying through their NPL. Thus, SMWSA partners never utilized the NPL and therefore did not pay the additional costs due upon first use. Subsequently, ECCV reduced each member’s capacity in the NPL, and the Town’s owned capacity was decreased 0.9 MGD until additional payment could be made.
In November 2018, ECCV proposed a settlement to SMWSA for the remaining capacity at a unit cost less than each member initially paid in 2005. The cost for all SMWSA remaining capacity (1.428 MGD) was proposed as $1,314,589.41, and CRW’s share for 0.5 MGD was proposed as $462,650.87.
However, in February 2020, ECCV then proposed a further reduced cost of $1,184,673.22 for SMWSA’s remaining capacity (Attachment C), roughly $130,000 less than their previous offer, though it was not made clear in the letter what CRW’s individual share of this cost would be.
In the First Amendment to the ECCV-SMWSA Barr Lake Pipeline Enlargement Agreement (Attachment D), SMWSA agreed to pay ECCV a total cost of up to $1,184,673 by March 31, 2020 for the remaining 1.428 MGD of capacity in the NPL or forfeit their rights to it. Thus far only CRW is interested in this offer; all other participating SMWSA members plan on forfeiting their capacity.
If CRW only purchases our share of the remaining capacity (0.5 MGD), our total ownership in the NPL would be 1.4 MGD which would leave an additional 1.6 MGD that would need to be purchased in the next 10 years in order to convey the Town’s northern supplies to the CRW service area. However, with the lack of interest in NPL capacity from other SMWSA Members, the Town has the opportunity to purchase an additional 1.428 MGD in total, for a total cost up to $1,184,673, bringing the Town’s ownership in the NPL to 2.33 MGD, nearly 80% of the capacity needed to convey our future northern water supplies. Alternatively, if the Town chooses to let other members’ remaining capacity lapse and only take down our share of 0.5 MGD for a total ownership of 1.4 MGD, there is no guarantee of what the Town will pay in the future to secure an additional 1.6 MGD in the NPL.
While additional capacity would still need to be purchased in both the NPL and eventually in ECCV’s WTP for conveyance of 3 MGD of northern water supplies, the opportunity to purchase 1.428 MGD in the NPL is a cost-effective and strategic solution for the Town’s future conveyance needs.
Budget Impact
If approved, the Town would pay up to $1,184,673 for the purchase of 1.428 MGD of capacity ownership in ECCV’s NPL. This would be paid from the ECCV N-S Pipeline Capacity account <211-4375-443.75-46> WRCRDI, which currently has a balance of $0.00. A Budget Transfer is in process from the Alternative Source of Supply account <211-4375-443.77-30> into the ECCV N-S Pipeline Capacity account for the purchase.
Castle Rock Water originally budgeted $2,880,000 in 2029 to firm remaining capacity in the NPL. However, with the opportunity to purchase additional capacity at a discounted rate, CRW must act quickly prior to the deadline at the end of March 2020.
Recommendation
Staff recommends that Town Council approve the purchase of 1.428 MGD capacity in East Cherry Creek Valley Water and Sanitation District’s Barr Lake Northern Pipeline.
Proposed Motion
“I move to approve the Resolution as introduced by title.”
Attachments
Attachment A: Resolution
Attachment B: Location Map
Attachment C: ECCV Letter to South Metro Water Supply Authority
Attachment D: First Amendment to ECCV-SMWSA Barr Lake Pipeline Enlargement Agreement