Garwood Irrigation Company - Page 34

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          irrigation water to municipal water in the Colorado River Basin,            
          the Rio Grande operated with a stable and predictable marketplace           
          and regulatory umbrella.  In addition, the market and regulatory            
          conditions in petitioner’s specific service area are key to the             
          valuation of petitioner’s water right.  Mr. Scheig admitted that            
          he did not examine the regulatory situation, transporting of                
          water, or infrastructure of water districts involved in the                 
          transactions that occurred in the other basins near the Colorado            
          River Basin.                                                                
               The most reasonable approach to establishing a base price              
          for the unused water is to examine comparable transactions.  The            
          only comparable transaction that occurred in petitioner’s service           
          area within the relevant time period was the Corpus Christi                 
          transaction.  The sale to Corpus Christi was an arm’s-length                
          transaction, and the price was established through negotiations.            
          When the price was agreed upon and when the option was exercised,           
          the parties were aware of the regulatory requirements that would            
          need to be fulfilled, as well as the legislative risks.                     
          Therefore, it is reasonable to use the price established by the             
          parties to the Corpus Christi transaction, $450 per acre foot, as           
          a base price for the unused water.  We must now decide the                  
          appropriate discount rate to apply.                                         
               Several negative factors affected the market for the unused            
          water.  A buyer had not been identified, so a sale was less                 






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Last modified: May 25, 2011