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predicted that 20 percent (20,000 acre feet) of petitioner’s
irrigation water would become available over the next 25 years.
In addition to the cost of capital, he discounted the base price
by 10 percent for uncertainty of the availability of petitioner’s
run-of-the-river water, 10 percent for lack of marketability, and
30 percent for regulatory risks.
Mr. Lloyd’s report did not attribute any value to the
potential water right. Mr. Scheig’s report weighed the following
three scenarios: (1) A .4-percent annual decline in irrigation
use; (2) a 3-percent annual decline in irrigation use; and (3) a
100-percent decline in irrigation use and sale of all the
irrigation water right within 10 years. Mr. Scheig discounted
the base price by 15 percent.
We concluded above that 20 percent of the irrigation water
would become available over 10 years, potentially for other uses.
In valuing the potential water, however, it is unreasonable to
assume that a sale of 2 percent per year was likely. It is
unrealistic to predict that small increments would be sold as
they became available. A municipal, industrial, or water supply
purchaser would be unable to obtain funding (through a bond firm)
to develop a conveyance system for a purchase of small quantities
of water on an incremental basis. Our analysis therefore assumes
that 20 percent of the irrigation water (20,000 acre feet) would
be sold 10 years after the valuation date, and 20 percent of the
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