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TABERNASH, Colo.—The state’s largest water utility has agreed to limit its service area and contribute $25 million to western Colorado projects in an unprecedented deal that seeks to balance the Denver-area’s growing demands for water with the needs of the mountain communities that supply it, Denver Water said Thursday.

In return, western Colorado interests will withdraw opposition to a proposal by Denver’s city-chartered utility to expand its Gross Reservoir to hold more mountain water. Colorado wildlife officials and the U.S. Army Corps of Engineers are reviewing that project.

Denver Water and 33 Western Slope water users, including irrigation districts, ski resorts, towns and counties, spent five years in confidential mediated negotiations reaching the proposed Colorado River Cooperative Agreement. The parties have to ratify the deal and work with the state to implement it.

Colorado River District general manager Eric Kuhn said it would bolster Denver Water’s ability to supply its 1.3 million customers while preserving rivers and ecosystems that make Colorado unique.

“This is a day I think a lot of us thought would take place far in the future,” said Gov. John Hickenlooper, who was Denver’s mayor when he suggested in 2006 that a mediator help the parties negotiate and avoid lawsuits.

Mediator John Bickerman said Colorado’s complicated water laws, water delivery systems, politics and history of distrust between eastern and western Colorado interests made the negotiations among the most difficult he has seen.

“I’m amazed I’m standing here today with these guys telling you we have the basis of a deal,” Summit County Commissioner Thomas Davidson said.

Under the agreement, the utility’s future water development projects would need approval from the Colorado River District and counties hosting the projects. It encourages conservation and allows for sharing with other Front Range communities, easing the need for more water to be diverted from western Colorado.

Denver Water agreed to contribute $11 million for projects in Grand County and the Williams Fork and Upper Colorado River Basins to mitigate effects of its diversions of mountain water.

In Summit County, home of the utility’s largest reservoir, Denver Water agreed to pay $11 million for projects including improvements to a wastewater treatment plant and to provide 250 acre-feet of water to districts and towns for free. Denver Water would try to keep Dillon Reservoir full enough to support summer boating and fishing, which are critical to the county’s economy, Davidson said.

It also would pay a total of $3 million for water projects in the Grand Valley, to offset costs at water treatment plants in Garfield County and to help protect wild and scenic areas.

The Northern Colorado Water Conservancy District, which serves northeast Colorado, is working on a similar agreement with Western Slope parties. Bickerman, who also mediating those talks, said he is optimistic a deal is close.

Drew Peternell, of the sportsmen’s conservation group Trout Unlimited, called Denver Water’s agreement a “game-changer” in that it recognizes the value of stream flows for more than supplying drinking or irrigation water.

“For 150 years, people have developed water by diverting water out of rivers in the state with no thought to what it does to fish, the environment and recreation values,” he said. “This agreement in a big way recognizes it’s important we maintain those nonconsumptive values.”

Still, he said the agreement would be stronger if it required the utility to put more water into the Colorado River system if its pending Moffat project has negative impacts, and if it better protected stream flows to keep rivers healthy for fish.

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