Ownership Limitations Base Water Supply Limitations on Ownership of Allotment Contracts for Domestic or Municipal Purposes

Inclusion District and Subdistrict Inclusion Inclusion Fees Northern Colorado Water Conservancy District Northern Water Projects and Administration Workshop March 18, 2015 Index to Policies Allotment Contract Administration Notice of Claim of Lien and Change or Removal of Allotment Contracts Name Change Transfer Fees Section 131 Contracts Definition of Irrigation Use Allocation of Water to Non-Profit Corporations Transfer of Allotment Contracts to Special Districts for Municipal Supply Deliveries and Quota Fixed Quota Drought and Emergency Seasonal transfers and Rule 11 Ownership Limitations Base Water Supply Limitations on Ownership of Allotment Contracts for Domestic or Municipal Purposes Flexibility Annual Carryover Program Carryover Capacity Transferability Program Inactive Allotment Contract Account Regional Pool Program Restrictions on Use Use of C-BT Project Water in SWSP s and Augmentation Plans Storage and Parking Agreements Use of C-BT and Windy Gap Water for Development of Oil and Gas Wells C-BT Water Use on Lands Affected by Dry-Up Agreements Windy Gap Criteria for Integrated Operations 2014 Windy Gap Carriage Contract Appendix Senate Document 80 1938 Repayment Contract Water Conservancy Act

Policy/Rule: Subdistrict and District Inclusion and U.S. Consent (1995) Purpose(s): Allows Northern Water to charge an inclusion processing fee and to require that Subdistrict inclusions must also require the same lands to be included within Northern Colorado Water Conservancy District. Key Elements: Costs for complying with the inclusion process shall be paid by the applicant Consent of the Board of Directors to inclusion shall be conditioned upon payment of costs and consent by the U.S. It is the policy of the District and the Subdistrict that new lands to be included into the Subdistrict shall also be included into the District, if the new lands are totally within the seven counties of the District area If the U.S. denies consent, The Subdistrict Board may complete the inclusion of lands into the Subdistrict Inclusion of lands into the District shall be made only if the lands will be served by a water system that holds and utilizes an independent water supply other than C-BT Project water, including available Subdistrict water Reference: Northern Colorado Water Conservancy District Resolution D-961-02-95 Subdistrict and District Inclusion and United States Consent Resolution, February 10, 1995. Document ID #157026. 3/18/2015 Page 1

Policy/Rule: Colorado-Big Thompson Facilities Inclusion Fee (2003) Purpose(s): Ensures that newly included lands will have contributed equally to the support of the C- BT Project Key Elements: Northern Water will compute and make available a ratio, when multiplied by the current assessed valuation, will establish the inclusion fee for the lands to be included. An alternative method is to determine the total amount of annual ad valorem taxes that would have been collected by Northern Water under its annual historic mill levy since 1937 Reference: Northern Colorado Water Conservancy District Resolution D-1079-02-03 Colorado-Big Thompson Facilities Inclusion Fee, February 14, 2003. Document ID #157131. 3/18/2015 Page 2

POLICY/RULE: Notice of Claim of Lien and Change or Removal of Allotment Contracts (2010) Describes the procedures and notice provisions associated with changes to allotment contracts. It also outlines the procedures associated with the removal (termination) of allotment contracts. Special procedures apply to Class D contracts due to their association with real property. Northern Water accepts Change Applications for the purpose of transferring C-BT units to another Allottee. Applications are considered as a routine matter during each regular Board meeting. The application will be noticed in the agenda for the meeting, which will serve as the public notice for the application. For Class D contracts, an ownership report is required to confirm that the owner of the real property associated with the contract is also the Allottee of record. The ownership report must be submitted within 30 days of the Board meeting at which the transfer will be considered. If the Board approves the transfer, a second ownership report will confirm that the property ownership has not changed since the date of the first report. The Board of Directors may remove (terminate) allotment contracts at a hearing that has been properly noticed on its meeting agenda, to the allottee of record, and lien claimants that have properly filed with Northern Water. For Class D contracts, the Board will solicit an ownership and encumbrance report to confirm the ownership of the real property associated with the contract. Lenders and other third parties may assert a security interest in an allotment contract by submitting a Notice of Claim of Lien form along with required documentation. The notice form will entitle third parties to receive notice of any action related to changes or removal of allotment contracts. Northern Water has no obligation to undertake any other actions to independently confirm or identify lien holders. Northern Water requires that documents relied upon by lien claimants as evidence of consent specifically refer to Colorado-Big Thompson or C-BT units, acre-foot units, allotments or allotment contracts, or have broad language referring to all water or water rights appurtenances. Northern Water reserves the right to approve Change Applications or to remove contracts without the consent of lien holders. Reference: Northern Colorado Water Conservancy District, Rule Regarding Notice of Claim of Lien and Change or Removal of Allotment Contracts Issued by Northern Water, April 9, 2010. Document ID #137496 3/18/2015 Page 3

POLICY/RULE: Name Change Transfer Fees (2008) Allows Northern Water to recover reasonable expenses associated with transfer of Allotment Contracts $200 fee to transfer ownership of all or part of an Allotment Contract. In cases of probate and estate planning, the fee for transfer of ownership (simple name change) will be $70. Fees include Northern Water sending the approved application to the appropriate County Clerk for recording after approval by the Board. Reference: Northern Colorado Water Conservancy District, Policy Regarding Name Change Transfer Fees, November 6, 2008. Document ID #141019. 3/18/2015 Page 4

POLICY/RULE: Conversion of Temporary Use Permits to Section 131 Contracts (2003) A change in the Colorado constitution (TABOR, 1992) required the District to offer an alternative to the Class B water allotment contract. If a municipality elects to use the alternative form of contract ( Section 131 ) for purchase of C-BT units, the municipality will first secure the additional units under a Temporary Use Permit. Temporary Use Permits are then converted annually, in bulk by Board action, to Section 131 contracts. Section 131 contracts are annually renewable perpetual contracts for the right to use C-BT Project water. Such contracts are authorized by Section 37-45-131 of the Water Conservancy Act. Section 131 contracts allow municipalities to acquire units of C-BT project water without entering into multi-year financial obligations and the associated requirement for public vote and approval as required by TABOR. Municipalities may enter into Section 131 contracts by ordinance or by resolution. To minimize paperwork, municipalities initially secure C-BT units under the provisions of Temporary Use Permits. All Temporary Use Permits held on December 31 each year are set to expire on the following March 1 and must be converted by Board action to Section 131 contracts. Current-year assessments for the Temporary Use Permits are invoiced after Board action in March. Annual assessments for Section 131 contract are paid in advance of the water year. Statements requesting payment of annual assessments for Section 131 contracts are sent in August each year, payable by October 1. Reference: Northern Colorado Water Conservancy District Policy Regarding Conversion of Temporary Use Permits to Section 131 Contracts, January 10, 2003. Document ID #19900. 3/18/2015 Page 5

POLICY/RULE: Definition of Irrigation Use (1995) Ensures that uses of water for other than agricultural irrigation are not eligible for the irrigation rate classification Irrigation shall mean and include the application of water for beneficial use for the primary purpose of growing and producing agricultural crops that are harvested or consumed by humans or livestock Therefore, other types of irrigation (for example, irrigation of golf courses or parks) are not eligible for the irrigation rate classification. Reference: Northern Colorado Water Conservancy District Resolution D-963-02-95 Definition of Irrigation Use for Purposes of Colorado-Big Thompson Allotment Contracts, February 10, 1995. Document ID #156916. 3/18/2015 Page 6

POLICY/RULE: Allocation of Water to Non-Profit Corporations (2005) Ensures that non-profit corporations organized as a financing vehicle for purchasing and holding C-BT allotment contracts for a municipality or water district follow the same policies and procedures as municipalities and special districts. In order to finance water supply development, some municipalities and special districts acquire C-BT allotment contracts through non-profit corporations. This policy was specifically crafted in response to an instance in which C-BT units were acquired through a lease-purchase arrangement involving Certificates of Participation. In these cases, the non-profit corporation is subject to the same rules and policies that are applied to the municipality or special district that formed the non-profit corporation All water delivery and accounting procedures that apply to the municipality or special district using the non-profit corporation will also be binding on the non-profit corporation, including ownership limitations, carryover and carryover capacity C-BT Project water must be delivered to and used by the underlying municipality or water district, unless temporarily leased or rented Reference: Northern Colorado Water Conservancy District, Resolution D-1115-10-05 Allocation of Water To Colorado Non-Profit Corporations Formed as a Financing Vehicle for a Governmental Water Provider, August 14, 2005. Document ID #156919. 3/18/2015 Page 7

POLICY/RULE: Transfer of Allotment Contracts to Special Districts for Municipal Supply (2009) Provides a mechanism to allow transfer of allotment contracts to special districts that do not have a current need for water, but have a demonstrated future need The policy identifies minimum criteria for demonstrating future needs: o Approved zoning, subdivision, and platting by land use regulatory entities or municipality o Reasonable projection of types and quantities of water to be used o Identification of facilities owned or used by contract to provide water service o The special district has issued a commitment to serve the lands All transfers are subject to Northern Water s rules and policies The Board reserves its right to deny or condition any transfer The Board reserves the right to dispose of any allotment contract water in excess of the district s needs Reference: Northern Colorado Water Conservancy District Resolution D-1154-02-09 Policy Regarding Transfer of Colorado-Big Thompson Project Water Allotment Contracts to Special Districts for Municipal Water Supply Purposes, February 13, 2009. Document ID #156917. 3/18/2015 Page 8

POLICY/RULE: Election to Receive Delivery Under a Fixed Quota (1993) Provides a mechanism for allottees to receive a stable 70% quota allocation in all years, except under drought emergency conditions Requires execution of a contract supplement to receive an allocation of 0.7 AF of water per C-BT Unit regardless of the declared quota, except under drought and emergency conditions. The contract supplement remains in effect for 10 years. The Contract Allottee will not receive supplemental quota allocations. The contract supplement is binding on the successor if the contract is sold or transferred. Allotment contract is subject to reduction in allocation in the event of drought or emergency. See the Drought and Emergency policy for details. Additional administrative fees may be charged. Currently, the fee is $3.25 per C-BT Unit, subject to a minimum fee of $375 Contract assessment rates otherwise payable will remain unchanged Reference: Northern Colorado Water Conservancy District Resolution D-1154-02-09 Policy Regarding Transfer of Colorado-Big Thompson Project Water Allotment Contracts to Special Districts for Municipal Water Supply Purposes, February 13, 2009. Document ID #156917. 3/18/2015 Page 9

POLICY/RULE: Drought and Emergency (1993, amended 2014) Describes the reduction in allocations to fixed quota contracts in the event when C-BT water supply availability is insufficient to allow the board to declare the desired quota The Board of Directors will identify its Desired Quota as the allocation the Board would declare as sufficient for variable quota contracts to meet the water supply needs of the District. The Board will then consider whether there is adequate C-BT Project water available to meet the Desired Quota allocation. o If water supply is adequate, the Declared Quota is equal to the Desired Quota, and fixed quota contracts shall receive the normal 70% fixed quota allocation. o If water supply is not adequate, the Board will declare a Declared Quota based on water supply availability. Fixed quota contracts will then be subject to reductions below the normal 70% fixed quota allocation as described below. For each 1% difference between the Desired Quota and Declared Quota, the contract units enrolled in the fixed quota program will be reduced by 4%. In circumstances when the declared quota is less than 50%, the declared quota and fixed quota shall be equal. Should the board declare supplemental quota allocations after the April meeting, fixed quotas shall be adjusted upwards, not to exceed 70%, using the same criteria. Fixed quota contracts are not subject to any further reductions subsequent to the April allocation. Since the policy was adopted, there has only been one year in which the Fixed Quota contracts received a quota allocation less than 70%. Reference: Northern Colorado Water Conservancy District Amended Resolution D-1240-09-14 Drought and Emergency Policy, October 2, 2014. Document ID #156491. 3/18/2015 Page 10

POLICY/RULE: Seasonal Transfer Assessments - Rule 11 (2014) Align assessment charges for transferred C-BT water with the end beneficial use of the transferred C-BT water A water user that receives a seasonal transfer of C-BT water (Transferee) shall pay Northern Water a Rule 11 charge if the Transferee s end beneficial use of the water has a higher openrate assessment charge than the weighted assessment charge of the water user that it is transferred from (Transferor). On November 1 of each year, Northern Water will calculate the weighted average assessment of all contracts held by each Allottee. The weighted average assessment is weighted by the number C-BT units and assessment charge for fixed rate units, open rate units and units levied a special assessment. When seasonal transfers are requested, Northern Water will compare the open-rate assessment associated with the Transferee s end use of the water to the weighted assessment of the Transferor as calculated on the prior November 1. If the Transferee s end use open-rate assessment is higher than the Transferor s weighted assessment, Northern Water will invoice the Transferee s Account Entity for the differential cost. Transferee Account Entities reserve the right to refuse such transfers. Rule 11 Assessments can be waived in certain limited circumstances in which it can be demonstrated that the Seasonal Transfer is part of a contractually obligated trade arrangement that has been executed historically. Reference: Northern Colorado Water Conservancy District Resolution D-1244-10-14 Rule 11, October 2014. Document ID #156549. 3/18/2015 Page 11

POLICY/RULE: Base Water Supply Ensure that C-BT Project water is a supplemental water supply, as required by Senate Document 80. Applications to change or modify existing contracts or to issue a new contract will NOT be approved if any one of the following conditions exists: The C-BT water is intended to be used for irrigation and there is no base water supply or history of irrigation of irrigation with a base water supply o Exception if the only change to an existing contract is a change in ownership o Exception if the modification results in a net reduction of acreage More than 50% of the base water has been sold or transferred for use on other lands for other purposes Any or all portion of the base water supply has been sold or permanently transferred for use outside the boundaries of the District Reference: Northern Colorado Water Conservancy District Interim Base Water Supply Policy, February 14, 1997. Document ID #478. 3/18/2015 Page 12

POLICY/RULE: Limitations on Ownership of Allotment Contracts for Domestic or Municipal Purposes Provides guidelines to limit the number of C-BT units owned by a municipal or domestic water provider based on current demands and commitments to serve. The policy also takes into account non-cbt water supplies. C-BT Acre-Foot Unit (C-BT Unit) Ownership is limited to the lesser of the following: o Maximum C-BT Units = 2 times Average Annual Demand minus Average Annual Yield of Other Supplies OR o Maximum C-BT Units = (Average Annual Demand minus Firm Annual Yield of Other Supplies) divided by 0.5 Specifics o Firm Annual Yield of the base supply is based on a 1 in 50 year drought o Average Annual Yield to be calculated using typical procedures used by water provider o Average Annual Demand is based on most recent 10-year average annual per tap usage for each tap category served times total number of existing and committed to-serve taps C-BT units transferred in fulfillment of annexation requirements may result in an allowable exceedance of the ownership limitations and may be approved The outright cash purchase of C-BT units will not be approved if the transfer will result in exceedance of ownership limitations Native water acquired as part of an annexation process, but not yet a part of an change of water rights case, will be considered part of the native water supply, unless encumbered by lease-back agreements that last more than 5 years Other supplies include native water, Windy Gap water and other non-cbt supplies. The average and firm annual yield of Windy Gap water is 50% of the number of Windy Gap units times 100 AF per unit Reference: Northern Colorado Water Conservancy District Resolution D-962-02-95 Interim Guidelines on Limitations on Ownership of Colorado-Big Thompson Allotment Contracts for Domestic or Municipal Purposes, February 10, 1995. Document ID #26653. 3/18/2015 Page 13

POLICY/RULE: Annual Carryover Program - ACP (2004) Allows Account Entities the ability to retain a limited quantity of unused quota water in their accounts from the current year for use in the following year An Account Entity is eligible for the Annual Carryover Program if it has certified C-BT units and an active quota account. The maximum amount of carryover (in acre-feet) is the number of C-BT Units certified to the Account Entity on November 1, multiplied by 0.20 (i.e. if an Account Entity has 100 C-BT Units, the carryover capacity is 20 acre-feet). Year-end C-BT account balances are assessed a 10% shrink, with the balance eligible for the ACP. If the balance exceeds the maximum amount eligible for carryover, this surplus, plus any amount the Account Entity does not transfer to the ACP, will transfer to the Regional Pool. Carryover water is assessed on an acre-foot basis, and is calculated as follows: o Volume carried over in the Account Entities base carryover capacity: based on the open rate charge (on an acre-foot unit basis) for which the Account Entity places the water to beneficial use. For instance if 10 acre-feet is carried over, and the open-rate charge is $30.50 per acre-foot unit, then the carryover charge for this water is $305.00. o Volume carried over in transferred carryover capacity: based on the open rate charge (on an acre-foot unit basis) for an agricultural allotment contract. o No Unit 2 charges are assessed. Carryover water cannot be used until assessments are paid. Assessments are due by April 30. Any Carryover water not claimed by April 30 will cancel to the Regional Pool. Any Carryover water remaining in an AE s account at the end of the water year will be canceled Carryover water is protected from spill in the same manner as quota water. Carryover water is generally non-transferable; exceptions allowed if needed to gain access to an alternate delivery point. Reference: Northern Colorado Water Conservancy District Annual Carryover Program (ACP) Rule and Procedure, August, 2004. Document ID #29275. 3/18/2015 Page 14

POLICY/RULE: Carryover Capacity Transferability Program (2004) Allows Account Entities to increase their participation in the Annual Carryover Program (ACP) by seasonally acquiring Carryover capacity from another eligible Account Entity s unused Carryover capacity. An Account Entity (AE) may acquire Carryover capacity from other Account Entities for use in the next Water Year. Signed CCTP Transfer Cards must be submitted to the District on or before October 20 to be effective for the Water Year starting on the next November 1. On November 1, the District computes each AE s base carryover capacity (in acre-feet), computed as the number of certified C-BT units multiplied by 0.20. Year-end quota balances are assessed a 10% shrink with the balance eligible for the AE s Carryover account, as may have been modified through the CCTP program. If the balance exceeds the AE s total carryover capacity, the surplus cancels to the Regional Pool. Participation in the CCTP program only provides increased Carryover capacity. Participating AE s are expressly allowed to acquire additional C-BT water through seasonal transfers to fill their Carryover account. Carryover water in the CCTP supplement portion of the Carryover account is assessed at the agricultural irrigation rate (the lowest rate classification). There are no additional fees or assessments associated with acquiring CCTP capacity. All supplemental carryover capacities expire on October 31 of each year The District will not be party to any agreements, contracts, or understandings between AE s or allottees involving transfers of carryover capacity Reference: Northern Colorado Water Conservancy District Carryover Capacity Transferability Program (CCTP) Rule and Procedure, August, 2004. Document ID #29274. 3/18/2015 Page 15

POLICY/RULE: Inactive Allotment Contract Account Rule (2008) The Inactive Account provides a mechanism for the transfer of C-BT allotment contracts, particularly during real estate transactions when the allotment contract is not transferred with the property, without violating terms of the contract. Allottees then have a 12-month period to sell or transfer the contract to another water user. Allotment contracts associated with unauthorized parking and storage agreements will be automatically assigned to the Inactive Account. This policy describes situations in which Allottees may voluntarily assign their contracts to the Inactive Account. For example, an Allottee may be selling the land associated with an allotment contract but the buyer does not wish to acquire the C-BT units as part of the transaction. To avoid violating the terms of the Allotment Contract, the Allottee petitions Northern Water to assign the contract to the Inactive Account pending the marketing and sale of the C-BT units to a third party. If quota water associated with the contract has already been certified for delivery, it remains eligible for delivery. If delivery has not been certified, however, the water can only be used through a seasonal transfer to an eligible user. Inactive Allotment Contracts are not eligible to participate in the Carryover Program The Inactive Allotment Contractee continues to be responsible for payment of all assessments in a timely manner. Inactive Contracts will be held in the Inactive Account until transfers are approved by the Board or for 12 months, whichever occurs first. Inactive Allotment Contracts remaining in the Inactive Account longer than 12 months will be forfeited to Northern Water and sold through a bid process as described in the Storage and Parking Agreement Procedures At its sole discretion, the Board may extend the 12-month time limitation for good cause or if the allotment contract is the subject of an involuntary process (probate, divorce, foreclosure, bankruptcy, etc.) A reasonable cost-based administrative fee shall be charged Reference: Northern Colorado Water Conservancy District Inactive Allotment Contract Account Rule, August 8, 2008. Document ID #137492. 3/18/2015 Page 16

POLICY/RULE: Regional Pool Program (2005) Authorizes Northern Water s Board to allocate surplus C-BT Project water by means of a sealed bid auction The amount of water in the Regional Pool will be determined at the beginning of the water year based on the criteria in the rules and procedures, as summarized below. The Board will determine the amount of water in the Regional Pool to be available for one or more sealed bid auctions, typically in the spring. o Project Reserves must be at or above 200,000 acre-feet on November 15 to activate the program o No more than 62,000 acre-feet may be allocated o Water in the Regional Pool is derived as surplus from the previous year s unused quota water not transferred into the Annual Carryover Program. Account Entities whose surplus water contributed to the Regional Pool are not allowed to participate in the sealed bid auction. A bid pre-authorization process will ensure that proposed uses of Regional Pool water are for recognized beneficial uses within the District boundaries. Northern Water s Board may specify criteria for use, including delivery deadlines Regional Pool allocations do not factor into the Board s Annual Quota Determination Regional Pool allocations are protected from spill. Regional Pool allocations are not eligible for seasonal transfer Auction revenues, less a Northern Water administrative fee, revert back to the Account Entities whose surplus water contributed to the Pool. Reference: Northern Colorado Water Conservancy District Regional Pool Program Rule, October 2005 and Regional Pool Program Procedures, February, 2015. Document IDs #128829 and #128828. 3/18/2015 Page 17

POLICY/RULE: Use of C-BT Project Water in SWSP s and Plans for Augmentation (2005) Establish conditions under which C-BT water can be used in SWSP s and Plans for Augmentation Currently, Northern Water does not recognize augmentation as an authorized beneficial use of C-BT water. o Water Court applicants may identify C-BT water in final decrees as one possible source of augmentation water but must include specific language describing Northern Water s requirements for written approval. Such approval is not currently allowed and there is no guarantee that any such use will be allowed in the future. While allotment contracts will not be issued on the basis of augmentation use, current policy does allow for seasonal use by non-allottees in State-approved Substitute Water Supply Plans (SWSP s). Temporary use of C-BT water in SWSP s facilitates efficient use of water and encourages innovation in water management. o C-BT water may only be used to offset depletions. o C-BT allottees may not use Project water as a replacement supply to their own SWSP, or to a SWSP in which an allottee is a beneficiary. o Northern Water must review and approve all SWSP uses of C-BT water prior to taking delivery. o See policy document for complete list of applicable terms and conditions. Reference: Northern Colorado Water Conservancy District Use of Colorado-Big Thompson Project Water in Substitute Water Supply Plans and Plans for Augmentation, May 2005. Document ID #95536. 3/18/2015 Page 18

POLICY/RULE: Storage and Parking Agreement (2008) To prohibit unauthorized side agreements that result in undisclosed violations of Northern Water s Base Water Supply or other policies. A storage and parking agreement occurs when a land or parcel owner who owns an allotment contract ( allottee of record ) grants control and beneficial ownership of the allotment contract to a third party ( unauthorized allottee ). Typically, the allottee of record agrees to act as directed by the unauthorized allottee in seeking any transfers or actions taken by Northern Water related to the allotment contract. A storage and parking agreement is an unauthorized mechanism for holding C-BT units. These agreements are in direct conflict with the allotment contract, the Water Conservancy Act, and the rules, regulations and policies of Northern Water, as they result in the beneficial ownership interest in Class D Allotment Contracts being held by an entity or entities that do not own the land to which the Class D Allotment Contracts are attached. All parking or storage agreements are prohibited irrespective of the date of this rule. An initial grace period (August 8, 2008 to February 13, 2009) was granted in order for allottees to disengage from storage and parking agreements then in effect. C-BT units found to be associated with parking in agreements after February 13, 2009 are subject to forfeiture. Northern Water will assign the units to its Inactive Account and will advertise the units for sale. Upon sale, the allottee of record will receive the actual sales price (less administrative fees) or $9,500 per unit, whichever is less. Reference: Northern Colorado Water Conservancy District Storage and Parking Agreement Rule, August 8, 2008. Document ID #132021. 3/18/2015 Page 19

POLICY/RULE: Use of C-BT and Windy Gap Water for Development of Oil and Gas Wells (2012) Ensures that the use of C-BT and Windy Gap water for oil and gas well development conforms to the Conservancy Act, the Repayment Contract, and other Northern Water rules and policies. Uses of C-BT and Windy Gap water must at all times be conducted within the boundaries of the District and Subdistrict, respectively. The beneficial use of oil and gas well development water occurs at the location of the well associated with that use. Water providers are required to submit annual affidavits describing their involvement in supplying water for oil and gas well development. If a Water Provider delivers C-BT or Windy Gap water to a water hauler who transports water for use outside the District or Subdistrict boundaries, the Water Provider is required to keep and submit accounting records that demonstrate that no C-BT or Windy Gap water was used outside of District or Subdistrict boundaries. Northern Water provides an online tool for determining District and Subdistrict boundary locations. Reporting requirements vary depending on the provider s involvement with supplying water to oil and gas well development and the provider s own water use policies and base water supplies. A monthly reporting template is available. These rules apply to the use of C-BT Project water and first use of Windy Gap Project water. These rules do not apply to the reuse of Windy Gap Project water, which is allowed outside of Subdistrict boundaries within Colorado. Violation of the rules may result in the application of various corrective actions described in the policy. Repeated or egregious violations may result in termination of the allotment contract. Reference: Northern Colorado Water Conservancy District, Rules Governing the Use of Colorado-Big Thompson Project Water and Windy Gap Project Water for the Development of Oil and Gas Wells, August 14, 2005. Document ID #143511. 3/18/2015 Page 20

POLICY/RULE: Use of C-BT Project Water On Lands Affected by Dry-up Requirements (2004) Ensure that C-BT water is used as a supplemental water supply The Water Court often makes dry-up a condition of a water rights decree. Dry-up provisions ensure that there is no expanded use of an existing water right that is changed to another use. If C-BT water were to be used on lands subject to a decreed dry-up provision, it would not only be a possible violation of the terms of the Water Court decree but would also subvert the C-BT Project s purpose of supplying supplemental water. If a parcel of land is subject to a total dry-up requirement, C-BT Project water will not be delivered to such parcel under a Class D contract attached to that parcel, unless the water has already been certified for delivery in the then-current water year. If a parcel of land is subject to a partial dry-up requirement, C-BT Project water can be delivered to such parcel, however such parcel will not be eligible for any prospective transfer of a Class D contract. C-BT Project water may be delivered to a parcel subject to a partial or total dry-up requirement if the parcel is located within the service area of, and served by, a municipal or domestic water provider. These delivery prohibitions also apply to C-BT Project rental water that is certified for delivery to a ditch and/or reservoir company. Reference: Northern Colorado Water Conservancy District Interim Policy Regarding Use of Colorado-Big Thompson (C-BT) Project Water on Lands Affected by Dry-up Requirements, January 1, 2004. Document ID #20168. 3/18/2015 Page 21

Rule/Policy: Criteria for Integrated Operations (1991) Purpose(s): Maximize the benefits of both the C-BT and Windy Gap Projects by allowing C-BT Project water to be delivered in lieu of Subdistrict water and charged against the Subdistrict s account Key Elements: The annual quota setting process and determination shall remain independent from integrated operation of both projects Windy Gap Participants may borrow water from C-BT Project Reserves and use it as Windy Gap water provided that a back-up supply (Collateral Water) is set aside to pay back any outstanding in-lieu debts If water becomes deliverable to the Windy Gap water rights and space exists in Lake Granby and/or Willow Creek Reservoir, the Subdistrict is obligated to pump Windy Gap water to repay any outstanding balance of water borrowed from Project Reserves. If the C-BT Project s West Slope facilities are full to capacity and no space exists for the introduction of Windy Gap water, then the project is considered whole and any outstanding in-lieu debts are cancelled. Specific accounting procedures established. The criteria may be amended with the concurrence of the Subdistrict, District, and the U.S. Reference: Northern Colorado Water Conservancy District Criteria for Integrated Operations of the Colorado-Big Thompson and Windy Gap Projects, December 13, 1991. Document ID #30857. 3/18/2015 Page 22

Policy/Rule: Purpose(s): 2014 Windy Gap Carriage Contract Allows the Municipal Sudistrict (MS) to utilize the C-BT Project facilities to convey, store, and deliver Windy Gap Project water Key Elements: Term of 40 years beginning December 2014 (previous contract expired in 2025) MS will propose use of C-BT Project facilities annually Total storage limitation of 465,568 AF (Granby Reservoir active capacity) Charge of $34/AF for use of C-BT Project capacity, increasing by 1.79% per year ($34.00 to $62.15/AF in 2054) plus $84,525 per year for first five years, or until first water is stored Charges for OM&R and pumping based on pro-rata share of actual costs C-BT Project water can be released from Chimney Hollow Reservoir In lieu water and Integrated Operations Criteria remain Allows for the pre-positioning of C-BT water in Chimney Hollow Requires 5% shrink for water stored on the west slope and 5% more shrink for water conveyed to the east slope, and 5% shrink for water re-introduced to C-BT Project facilities on the east slope Requires compliance with 1981 Windy Gap Final Environmental Statement and with 2014 Windy Gap Firming Project Final Environmental Impact Statement, Record of Decision Requires $1.5 million to be used for Colorado River improvements between Granby Dam and Windy Gap Reservoir All permits shall be obtained and annually confirmed that all are in effect Annually confirm that all other agreements are in existence and there is now litigation affecting them (West Slope IGA, LBD, WG Bypass Funding, CPW IGA) There shall be no effect on the 1938 Contract The U.S. will be indemnified via an insurance policy Reference: Northern Colorado Water Conservancy District and Municipal Subdistrict, 2014 Contract for the Introduction, Storage, Conveyance, Exchange, Substitution, and Delivery of Water for Municipal Subdistrict, Northern Colorado Water Conservancy District, Colorado-Big Thompson Project, Colorado, December 2014. Document ID #157286. 3/18/2015 Page 23