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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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