Springs, feds reach water deal key to pipeline

PUEBLO WEST • Colorado Springs Utilities and the U.S. Bureau of Reclamation reached a tentative agreement Wednesday over long-term water contracts that will be needed for the Southern Delivery System pipeline.

After a 12-hour session Tuesday, the two sides returned to the bargaining table Wednesday morning and agreed on a price of $36 dollar per acre foot to store, convey and exchange water through the federally owned Pueblo Reservoir.

That means that SDS and its partners, which include Pueblo West, Fountain and Security, will pay about $70 million over a 38-year period, or approximately one-fifth of the bureau’s opening offer of roughly $350 million.

“The contracts are another significant milestone for the project,” said John Fredell, SDS project director and chief negotiator. “This ensures a reliable supply of water for our community well into the century.”

Utilities is scheduled to begin laying the first pieces of the 62-mile SDS pipeline Sept. 7 on a portion of Marksheffel Road that is being widened. Fredell said the utility is determining what sections will be built next.

Mike Collins, the bureau’s area manager and chief negotiator, also was satisfied. “It’s a fair rate,” he said. “The process requires give and take on the part of both parties.”

Once the terms of the contracts have been finalized, the public will have 60 days to comment, Collins said.

The price of the water contracts negotiated by Utilities was within its projected budget and won't affect already projected water rates, said Janet Rummel, a Utilities spokewoman. If Reclamation had held out for the higher number, it “definitely” would have affected rates, Rummel said.

To help pay for the SDS pipeline, the Utilities plans to increase rates by 12 percent a year through 2016.

In a major concession, the bureau offered to give Utilities a $5 million credit for construction of an outlet in the dam for the pipeline. That’s nearly 20 times more than an earlier offer of $287,500.

The North Outlet Works, as it’s called, will cost Utilities $31 million to construct and will be available to other water users.

The bureau owns the reservoir, which is part of the federal government’s Fryingpan-Arkansas Project that brings water from the West Slope to the Front Range.

The bureau’s role, Collins said, was to represent all the interests in the Fry-Ark Project, including rafters, fishermen, municipalities, farmers, ranchers, and other water users.

The SDS partners have been seeking contracts to store, convey and transport roughly 42,000 acre feet of water through Pueblo Reservoir. An acre foot is about 326,000 gallons, or enough water to cover an acre of land with a foot of water.

Three types of contracts are involved. One will allow the SDS partners to store nonproject water in the reservoir if and when space is available. A second will enable pipeline participants to convey water through the reservoir. A third will allow Utilities to move water, through paper transfers, to other reservoirs in the Fry-Ark system.

The bureau initially wanted $50 per acre foot for each of those contracts, as well as an annual escalator of 3.08 percent.

Utilities succeeded in whittling down the cost of the storage and exchange contracts to $36 per acre foot, eliminated the cost of the conveyance contracts, and reduced the annual escalator to 1.79 percent.

“We set out to obtain reasonable contracts for our customers and that’s what we ended up with,” Fredell said.

“We’re pleased to have this momentum as we begin construction on this critical project,” he added.