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Cucharas River Reservoir rehab to receive $10 million loan

by Bill Knowles

WALSENBURG– A loan of nearly $10 million has been recommended for approval by the finance section of the Colorado Water Conservation Board that will allow Two Rivers Water Company to start phase one of the repair of the Cucharas River Reservoir dam.  Currently the dam is under a storage restriction order as well as a pending breach order from the State Engineer’s Office (SEO).

    Phase one of the $26,983,000 project calls for a spillway modification that will allow for a temporary reduced level of storage in the reservoir.  Phase two calls for either the construction of a new roller compacted concrete dam downstream of the existing dam or the rehabilitation of the existing dam in order to restore the full capacity of the reservoir.

    The loan request is for 37% of the estimated project cost.  However according to John McKowen, Chairman of the Board and CEO of Two Rivers Water Company, a reduction in the cost of the project may be feasible.  “We may be able to save around $5 million to $6 million on costs with GEI, an engineering and consulting firm with offices in Denver.  If so, the project can be done for around $21 million to $22 million.  The remaining balance of the project will be paid for by Two Rivers.  “However we are excited to get approval of the loan from the CWCB.”

    The spillway modification phase will cost $218,160.  Those costs cover the engineering and construction related to the spillway.  An agricultural interest rate of 2.5 percent per annum will be associated with phase one of the project.  The CWCB will not disburse funds until the SEO has approved phase one of the project.

    Phase two will cost $9,780,840 for dam engineering and construction costs.  The board recommends that the CWCB not enter into a contract for Phase two until an acceptable loan feasibility study is submitted to the CWCB, no later then November 2011.

    The 145 foot high dam supplies irrigation water to farm lands in southeast Pueblo County north of the Huerfano River.  The dam is a rock fill dam that has undergone several enlargements since the original construction in 1914.  The reservoir, without the SEO restriction, has a capacity of 35,395 acre-feet to the spillway crest elevation of 5766.0 feet, gauge height 120.5 feet.  

     Portions of the concrete facing were repaired in 1987 and 1988; however, during initial filling, the reservoir dam again began to seep and the reservoir was drained to its present restricted gauge height of 100 feet or 7,500 acre-feet of storage. The storage restriction has remained in effect since 1988. 

    Despite the SEO restriction, the Huerfano Cucharas Irrigation Company did not repair the dam.  Faced with a pending breach order, company shareholders sought out a purchaser to buy company shares and repair the dam and aging canal system. 

     In February 2010, Two Rivers purchased a controlling interest in the company and changed the makeup of the five-member board. Two Rivers installed three board members, and two existing board members were retained. The new board immediately adopted resolutions for special assessments and set about developing plans for repairing and rebuilding of the dam. 

    The company had also entered into a non-binding memorandum of understanding with Petroglyph in October, to study the feasibility of treating discharged Vermejo Formation water and storing it in the reservoir.  “We still have the memorandum with Petroglyph, but we are no longer talking with them about a joint development.  We have seen differences based on how the discharged water will be treated,”  McKowen told the Huerfano World Journal.

    The project will be using secured funds for the phase one that will come from the company’s pledge of assessment revenues backed by a rate covenant, annual financial reporting and a first lien on the company’s water rights valued at $9.3 million.  Phase two collateral will be addressed at the follow-up presentation to the board in November 2011.

    Both phases of the project are scheduled for completion by August 2013.