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remaining irrigation water (16,000 acre feet) would be sold after
another 10 years.
We use a base price of $450 per acre foot for the potential
water, as we did for the unused water, taking into account
inflation. The base price for the potential water should be
discounted by a higher rate than that used for the unused water.
It is only by speculation that we assume any of this water will
become available. The regulatory, economic, and legislative
uncertainty surrounding a future sale of the unused water is
matched, and possibly exceeded, by the speculative nature of the
potential water supply. Therefore, we conclude that a 20-percent
discount is appropriate in valuing this water. This scenario
would result in a payment 10 years after the valuation date of
$11,742,959, and a payment 20 years after the valuation date of
$12,625,244. Applying a discount rate of 20 percent, the value
of the potential water on the valuation date was $2,225,871.
V. Conclusion
We conclude that on January 1, 1997, the fair market values
of the components of petitioner’s water right were as follows:
Irrigation Corpus Unused Potential Total
Christi
$3,742,062 $9,853,428 $2,225,871 $22,532,519
$6,711,157
While this value is significantly less than the amount paid by
the LCRA after the political climate settled favorably to
petitioner’s position as seller, such result simply was not
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