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Tangled Waters, Part Two |
Bill Hudson | 7/8/08
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Read Part One
Let’s say, just for the sake of argument, that you had recently purchased a lovely resort in a funky little Colorado town — a town with really only a handful of attractive features. Let’s say that those attractive features include a funky small town atmosphere, some of the most glorious scenery in the world, and an historic, well-known geothermal mineral spring reputed to heal various aliments.
Let’s say that your little resort has water rights access to some of that healing water spring, maybe 100 gallons per minute (gpm), and also has the cooperation of your local town government, who has been willing to lease you another 200gpm from their own geothermal wells, originally drilled to provide low-cost geothermal winter heating to downtown businesses and schools.
 Let’s also say that your multi-million-dollar resort is very attractive and quite successful, and has access to the land and probably the potential to expand to, say, ten times its current size — given the right kind of economic climate. You might even want to spend up to $250 million on such an expansion project.
If only you could get your hands on enough of that precious healing water.
Again, just for the sake of argument, let’s say that your only competition in the ‘healing waters spa’ game were a couple of under-capitalized local families who were happy to get by with modest business success.
To make things more interesting, let’s also say that you were a former race car driver, who had pleaded guilty in 1986 to drug smuggling, tax evasion and money laundering, and had been sentenced to fifteen years in prison by United States District Judge Jose A. Gonzalez. Let’s also say that you had been ordered to turn over $7 million in property, race cars, boats and planes allegedly purchased with your drug-smuggling profits.
Read the New York Times, January 6, 1987
In such a situation, the ownership of a small town Colorado ‘healing waters’ resort might be your chance to turn over a new leaf, and do something beneficial for your community — even if the legal ownership of the resort were in your daughters’ names.
If only you could get your hands on enough of that precious healing water.
Two months ago, the Town of Pagosa Springs sent out a request for proposals, looking for local businesses who might like to lease geothermal water from the currently unused Rumbaugh Well near the CenturyTel offices on Lewis Street. Local businessman Jeff Greer — owner of Summit Ski and Sports and a currently-vacant storefront on Main Street — had already filed for water rights on another downtown ‘healing waters’ well. When Greer submitted his response to the Town’s request by the legal deadline, his was the only submission.
Two days after the submission deadline, the Springs Resort — a successful small town resort with plans for a $250 million expansion, and a thirst for geothermal mineral water — asked the Town to allow them to submit a proposal after the legal deadline. The Town Council voted to deny that request.
It looked like the Town would grant Greer 35gpm of geothermal mineral water from the Rumbaugh Well as indicated in Greer’s proposal, in exchange for an annual payment of $4,500.
At last week’s Town Council meeting, the approval of Greer’s lease was on the agenda. That approval never happened, but was instead tabled for a future meeting. Mayor Ross Aragon did not give a complete explanation for the delay, but hinted that the Springs Resort might have questions about the legality of Greer’s lease.
The Springs Resort has an interesting lease with the Town of Pagosa Springs, dating from 1997. I am not a lawyer, so I cannot claim to understand the full implications of the existing lease. One obvious point, however, is made in the ‘Whereas’ section that comes at the beginning of most Town ordinances:
“WHEREAS, the Town believes that a new lease of geothermal water with the [Pagosa Springs Resort Company] will provide a positive benefit to the Town’s economy.”
The “new lease” replaced an earlier 1995 lease, which had expired. The current lease expires in January 2012.
Click here for a PDF File of the current lease.
It appears that the Springs Resort is paying the Town “One Thousand Dollars ($1,000) per each 100 gpm of the 200gpm supplied during one heating season by August 31 of each year." The lease also stipulates, "The Company has the right to determine how much water it will take each year but the Company shall pay the Town not less than Two Thousand Dollars ($2,000) per heating season for the 200gpm.” The Springs Resort agreed to pay double that amount for water delivered by the Town during the non-heating season — should such water become available. The Town did agree to deliver water to the resort during the non-heating season, though I am not clear when or how that decision was made.
At any rate, it appears that the lease started off in 1997 costing the Springs Resort about $6,000 a year, assuming that they used the full allotment of 200gpm year-round. The lease specifies a minimum payment of $2,000 a year.
It is somewhat curious to compare the apparent price the Springs Resort is paying for its ‘healing water’ with the amount Clarissa and I pay for our drinking water from Pagosa Area Water and Sanitation District. When our last water bill arrived, we were charged $2.70 per 1,000 gallons for the first 8,000 gallons, and $5.10 per 1,000 gallons for any water over 8,000 gallons.
In other words, for using 10,000 gallons of drinking water, we pay about $30. We use this water only for our home. If we were a commercial business making a profit from our water use, we would be paying considerably more than $3.00 per 1,000 gallons, I would assume.
What is the Springs Resort paying for its precious mineral water? I’m not a lawyer or an accountant, but my common sense suggests the following:
The Town lease specifies, not “gallons” but “gallons per minute.” So in one minute, the Springs Resort can use — according to the current lease — 200 gallons. In one minute. That means, in one hour, the resort can use 12,000 gallons of the Town’s precious mineral water.
That comes to 288,000 gallons per day. If the Springs Resort chooses to use its full allowance of leased water through the heating and non-heating seasons, it could conceivably use over 105 million gallons of precious healing water per year — at a leased cost of about $6,000, for a commercial use.
That comes to a price of… let’s see what my calculator says:
Less than 6 cents per 1,000 gallons.
The current lease also states, “The Company shall maintain records and furnish to the Town annually records of the Company’s geothermal water supply and the disposition thereof in a form agree upon by the Company and the Town.”
As far as I can gather, the only geothermal operation in Pagosa Springs with a functioning water meter, for accurately measuring water use, is the Town geothermal heating plant. I have been told that the Springs Resort has no water meters on its incoming pipeline from the Town’s wells. I have not yet looked at the records which the resort is maintaining on the Town’s behalf.
In Part Three, we’ll look at the Town’s current negotiations with the Springs Resort and with Jeff Greer, in light of the Springs Resort’s plans to build a $250 million expansion — and their resultant need for a reliable, cheap, very-long-term supply of geothermal water for heating, sidewalk de-icing, and of course, additional ‘healing water’ baths.
We’ll also look at the whole idea of putting all of your egg-smelling water in one basket.
Read Part Three |
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