Running Iron Ranch – SETTLEMENT AGREEMENT
November 9, 2026 – SJWCD and PAWSD Reached a Settlement Agreement.
Pagosa Water and Sanitation District (PAWSD) initiated a lawsuit against San Juan Water Conservancy District (SJWCD) in December 2024. PAWSD’s intention was to sell the ~660-acre Running Iron Ranch which is a public property jointly owned by both water districts in agreement with the Colorado Water Conservation Board (CWCB).
After extensive negotiations, including a legally binding mediation, an agreement is finalized. SJWCD signed the agreement and issued the following statement after a November 6 Special Meeting. Both districts have scheduled Special Meetings for Monday, November 16. The Settlement Agreement follows SJWCD’s statement.
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“Approval of Settlement Agreement with Pagosa Area Water & Sanitation District
November 6, 2026
Today, the San Juan Water Conservancy District voted to enter into a settlement agreement with the Pagosa Area Water & Sanitation District. Finishing the settlement agreement is an important step toward a final resolution of litigation PAWSD started in December 2024.
Getting from terms outlined by the Districts in March to today’s vote has been a long process. The Conservancy District accepted a revision of the settlement agreement PAWSD proposed yesterday. We look forward to the PAWSD board acting at its November 16 meeting to formally approve the settlement agreement.
Failure to complete the settlement agreement would likely return the Districts to active litigation. That outcome is not in the best interest of either District or the community.”
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THIS SETTLEMENT AGREEMENT AND RELEASE ( “Agreement”) is entered into
by and between Pagosa Area Water and Sanitation District, a water and sanitation district
governed by Title 32 of the Colorado Revised Statutes acting through its Water Activity
Enterprise (“PAWSD”) and San Juan Water Conservancy District, a Colorado political
subdivision organized as a water conservancy district pursuant to C.R.S. §§ 37-45-101, et seq.
(“SJWCD,” and, collectively, “Districts”) for themselves and their successors and assigns.
RECITALS
A. SJWCD and PAWSD have long studied options for improving the firm yield of their
constituents’ water supply and partnered to plan for and develop a reservoir at Dry Gulch, which
came to be known as the San Juan River Headwaters Project (“Project”).
B. The Districts jointly-acquired water rights for the reservoir at Dry Gulch were originally
decreed in Case Nos. 73-308D and 04CW85, Water Division 7 (“Project Water Rights”). The
Districts filed an application for diligence for the Project Water Rights decreed in Case No.
04CW85 on August 31, 2026.
C. In 2008, PAWSD and SJWCD purchased from a private party most of the land required to
construct a reservoir in Dry Gulch and associated facilities, including approximately 666 acres of
land (“Running Iron Ranch” or the “Ranch”) and (ii) irrigation water rights represented by shares
of stock in the Park Ditch Company.
D. SJWCD and PAWSD own the Running Iron Ranch land as tenants in common, with
SJWCD owning an undivided 10.73 percent interest and PAWSD owning an undivided 89.27
percent interest. SJWCD owns 11 shares and PAWSD owns 89 shares in the Park Ditch
Company.
E. SJWCD and PAWSD obtained financing from the Colorado Water Conservation Board
(“CWCB”) to pay for the transaction costs and the purchase price for Running Iron Ranch,
including (a) a grant to SJWCD in the amount of $1,000,000 (“Grant”) and (b) a loan to PAWSD
in the original principal amount of $9,219,363 (“CWCB Loan”).
F. In 2015, SJWCD, PAWSD, and CWCB agreed to restructure the CWCB Loan, as
memorialized in that certain Agreement to Restructure Colorado Water Conservation Board Dry
Gulch Reservoir Loan Contract Number C150261, a Loan Contract Amendment effective
September 27, 2016, and certain ancillary agreements with CWCB referenced in the Agreement
to Restructure (collectively, “2015 Restructure Agreement”).
G. The 2015 Restructure Agreement divided the CWCB Loan into two tranches, Loan A,
which is to be fully paid in 20 annual installments on or before October, 2034, and Loan B which
is to be fully paid in 20 annual installments beginning in October, 2035. PAWSD has made the
first 12 installment payments on Loan A, including most recently the payment due October 1,
2026.
H. On December 13, 2024, PAWSD filed a lawsuit in Archuleta County District Court, Case
No. 24CV30069, against SJWCD seeking declaratory relief authorizing it to sell Running Iron
Ranch or, in the alternative, recognizing the right to partition the Property (“Lawsuit”). SJWCD
asserted counterclaims for declaratory relief, breach of contract, and injunctive relief. On
December 5, 2025, the Court granted in part and denied in part, a motion for summary judgment
filed by SJWCD.
I. Representatives of PAWSD and SJWCD participated in mediation concerning the
Lawsuit on March 13, 2026, and reached agreement on a settlement approach they memorialized
in a Confidential Term Sheet for Conveyance of Running Iron Ranch to the San Juan Water
Conservancy District (the “Settlement Framework”). The Settlement Framework includes terms
the Districts acknowledge will be subject to acceptance by CWCB. Once fully performed, with
adjustments that may be necessary and appropriate to obtain CWCB approval, the settlement
would resolve all claims in the Lawsuit. Each of the Districts’ respective boards of directors
approved the Settlement Framework effective March 16, 2026, and executed the Term Sheet.
J. Pursuant to the Settlement Framework, representatives from PAWSD and SJWCD have
met multiple times with representatives of CWCB to provide information and confirm the
CWCB would be amenable to changes contemplated by the Settlement Framework. On May 21,
2026, CWCB staff presented to the CWCB Board of Directors the outline of proposed changes to
the CWCB Loan, and the CWCB Board expressed no fundamental objection. However, the
CWCB Board did indicate a preference that proceeds from any sale of any portion of the
Running Iron Ranch should be immediately used to pay off Loan A, rather than be retained by
the Districts and used to fund future Loan A installment payments. Changes to the CWCB Loan
and Grant remain subject to documentation, review, and approval of CWCB.
K. The Districts have negotiated the terms of this comprehensive settlement agreement and
mutual release for the purpose of implementing the Settlement Framework and fully resolving
the claims in the Lawsuit.
NOW, THEREFORE, in consideration of their mutual undertakings as set forth below and for
good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged,
the Districts agree as follows:
Section 1 – Sale of a Portion of Running Iron Ranch and Application of Proceeds
a. The Districts agree that a portion of the Running Iron Ranch to be identified will be
offered for sale to raise funds to repay the outstanding balance of the Loan A tranche of the
CWCB Loan. The Districts acknowledge that CWCB has indicated that the Districts must not
sell portions of the Running Iron Ranch necessary for the Project.
b. SJWCD shall retain a real estate broker and other professionals as necessary to identify a
portion or portions of the Ranch (“Severed Property”) that can be marketed and sold with the net
proceeds equaling or exceeding the Floor Price defined below.
o The Floor Price shall be the amount required to fully pay off Loan A and
reimburse PAWSD the $219,104.95 principal portion of the 2026 Loan A payment
and reimburse PAWSD for any annual installment payments made between the
date of this Agreement and the date that Loan A is fully paid off.
o “net proceeds” shall mean proceeds from such sale(s) available to the Districts
after payment for reasonable direct out-of-pocket expenses associated with
marketing and making the parcel(s) legally available for sale, and closing such
sale, including surveyor fees, consultant fees, real estate broker commissions, title
insurance premiums, closing costs and any required County land use change fees.
(The Districts shall remain responsible for their respective staff time, overhead,
and attorney fees.) Any such expenses incurred prior to sale shall be paid
exclusively by SJWCD as they are incurred and such expenses shall be
reimbursed to SJWCD at the closing.
o The Severed Property shall (i) not be needed to plan, construct, operate, and
maintain the Project; or (ii) be marketed, sold, and conveyed subject to
reservation of any easements, deed restrictions, or other property interests
necessary to plan, construct, operate, and maintain the Project. If approval of a
subdivision or other government approval is required to sell and convey the
Severed Property, SJWCD will seek such approval with PAWSD providing any
requested reasonable assurances and cooperation.
c. The Districts shall enter a commercially reasonable listing agreement with the real estate
broker selected by SJWCD, subject to approval by PAWSD, which shall not be unreasonably
withheld, to market and sell the Severed Property. SJWCD will have responsibility to work with
and communicate with the broker in the marketing and sale process. All offers to purchase the
Severed Property received by either District shall be reported promptly to the listing agent and
the other District and will be reviewed by SJWCD. Any offer determined to be acceptable to
SJWCD, or any proposed counteroffer, shall be delivered to PAWSD after execution by SJWCD
and executed by PAWSD within 24 hours after receipt from SJWCD, unless PAWSD determines,
in its reasonable discretion, that the offer or counteroffer does not reflect the fair market value of
the subject parcel. However, PAWSD shall accept any purchase price provided that the CWCB
has made a binding commitment to release PAWSD from all obligations related to the CWCB
Loan, Grant, and 2015 Restructure Agreement (together, the “CWCB RIR Obligations”), and the
purchase price is greater than or equal to the Floor Price and sufficient to meet any conditions of
such binding CWCB commitment.
d. Sale of the Severed Property is contingent upon execution of a new or amended loan
agreement between CWCB and SJWCD as set forth in in Section 2 of this Agreement.
e. SJWCD agrees to use reasonable efforts to market the Severed Property such that a sale
can be closed on or before September 30, 2027. If sale of the Severed Property is closed, but
Loan A has not been fully satisfied for any reason, by October 1, 2027, the Loan A payment due
October 1, 2027 shall be paid from the sale proceeds. If a sale of the Severed Property has not
closed and Loan A is not satisfied by September 30, 2027, PAWSD shall make the Loan A
payment due October 1, 2027. The Districts shall continue to market the Severed Property until
they have received net proceeds equal to the Floor Price. Net proceeds in excess of the amount
required to pay off Loan A shall be disbursed (i) first to PAWSD the amount required to
reimburse PAWSD the $219,104.95 principal portion of the 2026 Loan A payment and any
annual installment payments made between the date of this Agreement and the date that Loan A is fully paid off, and then (ii) to the Districts, pro rata based on their percentage ownership
interests, unless otherwise required by CWCB.
f. SJWCD shall be responsible for managing and maintaining the Running Iron Ranch at its
sole cost and expense, except that (i) any Park Ditch assessment or expenses allocable to
PAWSD’s shares in the Park Ditch through the closing of sale of the Severed Property and (ii)
any expense arising in relation to the former gravel mining operation and its reclamation on the
Ranch shall be the responsibility of PAWSD.
Section 2 – Negotiation of Amended Loan Agreement with CWCB
Upon execution of this Agreement, SJWCD shall undertake to negotiate with CWCB the
terms of a new or amended loan agreement providing for (i) application of the net sale proceeds
from the Severed Property to the payment of Loan A, (ii) conveyance by PAWSD of its
remaining interests in the Running Iron Ranch, Park Ditch Company Shares, and Project Water
Rights to SJWCD, (iii) SJWCD assuming obligations for the Loan B tranche of the CWCB
Loan, and (iv) PAWSD being released by CWCB from obligations related to the CWCB RIR
Obligations (provided that SJWCD shall not be responsible for addressing any claims or
obligations PAWSD may have relating to water conservation). The terms of the new or amended
loan agreement must be acceptable to SJWCD and CWCB and shall be approved by PAWSD so
long as they accomplish the requirements stated in this paragraph. PAWSD and SJWCD shall
communicate and coordinate with one another about the CWCB negotiations and the potential
sale of a portion of Running Iron Ranch on at least a monthly basis while the Agreement is in
effect.
Section 3 – Diligence Cases for Project Water Rights
Notwithstanding the Settlement Framework and this Agreement, the Districts agree to
take all reasonable actions necessary and appropriate and in a timely manner to maintain the
Project Water Rights in support of the Project. Without limiting the foregoing, the Districts shall
jointly prosecute the application for diligence filed August 31, 2026, for the Project Water Rights
decreed in Case No. 04CW85, with SJWCD leading the effort at its expense.
Section 4 – Conveyance of Running Iron Ranch to SJWCD and Release of PAWSD from
CWCB RIR Obligations
Contemporaneously with, or as soon as reasonably practicable after, the sale of the
Severed Property as provided in Section 1 of this Agreement and contemporaneously with
CWCB entering into a new or amended loan agreement with SJWCD, PAWSD shall be released
from the CWCB RIR Obligations and reimbursed for the $219,104.95 principal portion of the
2026 Loan A payment and any annual installment payments made between the date of this
Agreement and the date that Loan A is fully paid off, as provided above. Upon satisfaction of the
foregoing, PAWSD shall convey its remaining interests in the Running Iron Ranch, shares in the
Park Ditch Company, and Project Water Rights to SJWCD. PAWSD shall convey its interest in
the Running Iron Ranch by a special warranty deed acceptable to SJWCD, with PAWSD having
the right to obtain title insurance at its discretion and expense. Project Water Rights shall be
transferred without warranty by a bargain and sale deed and applicable assignment acceptable to
SJWCD, subject to payment by PAWSD of its pro rata share of all outstanding dues and
assessments as of the date of transfer.
Prior to December 31, 2027, SJWCD must: (a) enter into a contract for the purchase and
sale of the Severed Property; and (b) reach an agreement with CWCB to release PAWSD from
the CWCB RIR Obligations and reimburse PAWSD for the $219,104.95 principal portion of the
2026 Loan A payment as well as any annual installment payments made by PAWSD between the
date of this Agreement and the date that Loan A is fully paid off; or PAWSD shall have the right
to terminate this Agreement.
Section 5 – Mutual Release and Dismissal of Lawsuit
Upon consummation of the transactions contemplated by this Agreement, including (1)
conveyance of all of PAWSD’s interest in the Running Iron Ranch remaining after sale of the
Severed Property, the Project Water Rights, and shares in the Park Ditch Company; and (2) the
release of PAWSD from any further obligations with respect to the Project other than those
obligations set forth in this Agreement, the Running Iron Ranch, the CWCB RIR Obligations; the
Districts shall (a) file a stipulation of dismissal of the Lawsuit with prejudice and with each party
to pay its respective costs and fees, and (b) execute a mutual release discharging one another and
their successors and assigns from claims arising from or relating to the Districts’ ownership of
the Running Iron Ranch, Project Water Rights, and Park Ditch Company shares. The Districts’
only remaining claims against each other shall be the potential claims stemming from the
Districts’ performance (or lack of performance) of the obligations set forth in this Agreement.
Section 6 – PAWSD Cooperation in Completion of Community Water Supply Study and
Project Planning by SJWCD
a. Upon request by SJWCD after execution of this Agreement, and without limiting
PAWSD’s obligations under the Colorado Open Records Act prior thereto, PAWSD shall provide
such data and information necessary or appropriate for a municipal water supply study to be
conducted by or on behalf of SJWCD independently or in cooperation with other interested
parties, provided that the provision of such data is not prohibited by any applicable law including
the Colorado Open Records Act. PAWSD may condition its provision of data on nondisclosure
agreements with service providers contributing to the water supply study which agreements are
consistent in form and substance with confidentiality obligations commonly undertaken by such
service providers and no more restrictive than PAWSD’s agreements with any other service
provider given access to similar PAWSD data and information.
b. PAWSD agrees to provide reasonable non-financial support for SJWCD’s planning
efforts for the development of the Project and to acknowledge the Project and its related water
rights in PAWSD’s future long-term water supply planning. If PAWSD includes additional water
storage beyond its existing reservoirs in its planning, PAWSD will acknowledge and include the
Project as a potential storage option for future water demand growth. PAWSD commits to a
periodic evaluation of future water purchases from the Project based on its long-term demand
projections, an evaluation of costs, and alternative sources of supply. PAWSD agrees to
reasonably cooperate and provide further assurances in support of future water court applications
concerning the Project’s conditional water rights. PAWSD’s obligations under this paragraph
shall terminate upon the earlier to occur of: (1) cancellation of the Project’s conditional water
rights; (2) sale of Running Iron Ranch by SJWCD; (3) any formal abandonment of the Project by
SJWCD; and (4) December 31, 2039.
Section 7 – General Provisions
a. Attorneys’ Fees and Costs. Each party shall pay its own attorney’s fees and costs
associated with this Agreement; provided, however, in the event of a material breach of any
provision of this Agreement, the breaching party shall be required to pay all attorneys’ fees and
costs incurred by the non-breaching party or parties as a result of such breach.
b. Further Assurances. Each party agrees, without the receipt of additional consideration, to
promptly execute such other documents and take such other actions as may be reasonably
requested to facilitate or implement the terms of this Agreement and consummate the
transactions it contemplates.
c. Opportunity to Consult. Each party agrees that it has had ample opportunity to consult
legal, tax, and other advisors concerning the terms of this Agreement.
d. Governing Law. This Agreement shall be governed by and construed in accordance with
the laws of the State of Colorado without giving effect to the conflicts of law principles of any
jurisdiction. Any disputes arising from this Agreement shall be resolved in Archuleta County
District Court.
e. Warranty of Authority. Each signatory below represents and warrants that he or she is
duly authorized to enter into and bind the respective District to the terms of this Agreement.
f. Severability. If any provision of this Agreement is found to be invalid or unenforceable
by any court or other lawful forum, such provision shall be ineffective only to the extent that it is
in contravention of applicable laws without invalidating the remaining provisions of this
Agreement, unless such invalidity or unenforceability would defeat an essential purpose of this
Agreement.
g. Entire Agreement; No Representations or Warranties. This Agreement embodies the
entire agreement and understanding between the Districts with respect to its subject matter. This
Agreement supersedes all prior agreements and understandings between the Districts with
respect to such subject matter. Each party by signing this Agreement agrees that: (a) no promises
or agreements not expressed herein have been made to it; and, (b) in executing this Agreement,
no party has relied upon any statements or representations made by any other parties, parties’
attorneys or agents concerning the subject matter, basis or effect of the Agreement except as set
forth herein.
h. Counterparts. This Agreement may be executed in counterparts, all of which shall be
considered one and the same agreement and shall become effective when the counterparts have
been signed by both Districts and each District’s signature has been delivered to the other
District. Scanned copies of signatures in connection with this Agreement shall be effective as
originals.
Executed and entered into as of the date of the last party to sign.
San Juan Water Conservancy District
By: ______________________ Date: ________________
Title: _____________________
Pagosa Area Water and Sanitation District
By: ______________________ Date: ________________
Title: _____________________
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March 17, 2026 – Court Order Vacates Upcoming Trial in Lawsuit between PAWSD and SJWCD
Pagosa Area Water and Sanitation District (PAWSD) initiated a lawsuit against San Juan Water Conservancy District (SJWCD) in December 2024. PAWSD’s intention was to sell the ~660-acre Running Iron Ranch which is jointly owned by both water districts in agreement with the Colorado Water Conservation Board (CWCB).
SJWCD opposes the sale and continues planning to build a reservoir – the San Juan Headwaters Project – on the property. The reservoir may hold up to 11,000 acre-feet of water to be held in storage for future community needs. Sufficient water rights are already owned by the two districts to fill the off-channel reservoir.
On March 13, 2026, a mediation session was held by both boards, resulting in a framework for settlement of the lawsuits. Both SJWCD and PAWSD approved the agreement at their March 16 board meetings.
On March 17, attorneys for both boards submitted a joint motion asking that court vacate the already scheduled trial. The same day, Judge Justin Fay of the Sixth Judicial District Court signed an order granting the joint motion. Negotiations continue and include considerations of status reports, reporting timelines, and a deadline for dismissing the case.
November 9, 2024 – Statement of the San Juan Water Conservancy District regarding purchase offer for future reservoir site
The San Juan Water Conservancy District will not pursue a recent purchase offer from a private developer for the Running Iron Ranch. The SJWCD board made that decision by a unanimous vote at a special meeting held November 7, 2024.
The offer received by SJWCD does not commit to a future reservoir at the Running Iron Ranch as Pagosa Area Water & Sanitation District board members publicly stated the offer would.
SJWCD cannot sell reservoir project water rights it holds. The SJWCD board has a fiduciary duty to maintain ownership of the project water rights and manage them for the benefit of the public.
SJWCD was asked to sign a nondisclosure agreement. SJWCD is a water conservancy district subject to Colorado open records laws. SJWCD will manage its records in accordance with applicable law.
A statement made by SJWCD on November 1, 2024, explaining why SJWCD opposes sale of the Running Iron Ranch as a policy matter is posted on the SJWCD website at sjwcd.org.
November 1, 2024 – Statement of the San Juan Water Conservancy District opposing Pagosa Area Water & Sanitation District sale of future reservoir site
The San Juan Water Conservancy District opposes the Pagosa Area Water & Sanitation District’s sale of public property held as a future reservoir site in a private deal to a land developer. SJWCD will work to halt sale plans based on short-sighted and narrow views of current PAWSD board members.
PAWSD board members refuse to share details of its plan with SJWCD, co-owner of the reservoir site, despite a specific request that they do so and a contractual duty to consult SJWCD.
SJWCD calls upon PAWSD to work cooperatively with SJWCD and the public to secure our water future. SJWCD also calls upon the public to demand from PAWSD an open and informed discussion of water needs and conditions that affect our future water supply.
It is simply wrong for PAWSD to sell public land vital to water storage without making every effort to retain the property as it agreed to do.
Public Property for a Future Reservoir
The Pagosa Area Water & Sanitation District (PAWSD) and San Juan Water Conservancy District (SJWCD) co-own property known as the Running Iron Ranch. The Ranch was purchased as the site for a future reservoir with funds provided by the State of Colorado – a grant to SJWCD and loan to PAWSD.
In 2015, PAWSD, SJWCD, and the State entered into an agreement to restructure the PAWSD loan and provide a substantial reduction in interest owed to the State. That agreement sets out a timeline designed to keep the Ranch in public hands while the lengthy process of planning, permitting, and building a reservoir can proceed. The first part of the timeline is a 20-year planning period. PAWSD agreed to “make every effort to retain the Running Iron Ranch” during the planning period (2015-2035).
SJWCD Opposes PAWSD’s Action to Sell Running Iron Ranch
In recent weeks, PAWSD’s board voted to sell the Ranch. SJWCD opposes the sale as a policy matter. SJWCD does not believe PAWSD’s action to sell the Ranch is based on sound water planning or economic analysis. 2
Selling the Ranch deprives County residents and property owners of the best available site for a future reservoir. The sale plan abandons land now in public hands and dedicated to use for water storage and public purposes consistent with a reservoir.
PAWSD has not engaged with SJWCD to discuss these concerns. Instead, PAWSD voted on October 24, 2024, to sue the SJWCD as a tactic to complete a sale over SJWCD’s objection.
PAWSD’s Rush to Litigation is a Bad Use of Limited Public Funds
Public/ratepayer funds should not be spent litigating when cooperative efforts could answer the questions that divide PAWSD and SJWCD. The Districts’ funds would be better spent on professional services assisting the SJWCD, PAWDS, and the community plan for long-term water needs, evaluate drought risks, and assess the feasibility and requirements for building a reservoir at the Running Iron Ranch.
In 2008, PAWSD issued a Source Water Protection Plan identifying drought as a risk to PAWSD’s water supply. That Plan, available on PAWSD’s website, called for ongoing public education on water conservation and planning for future storage. PAWSD’s current board members are walking away from planning for water storage.
SJWCD applauds residents, businesses, and PAWSD for taking steps to conserve water. Conservation efforts will not, however, put water in the San Juan River during hotter drier years. In Spring 2024, snowpack above Navajo Reservoir peaked at roughly 105% of the 30-year average. The April – July runoff, however, was only 70% of average. Our water needs include faucets and more – the health of the river and access for recreation, a key to our local economy.
SJWCD believes planning decisions are best made in open and transparent processes informed by current water conditions and a forward-looking perspective.
SJWCD Invites the Public to Support Cooperative Efforts
SJWCD is ready to work with PAWSD and other community stakeholders in a cooperative planning effort. SJWCD has been moving over the past year to build public awareness of our watersheds and environmental conditions affecting them, introduce community members to the Running Iron Ranch, and engage professional services for reservoir planning. SJWCD foresees public uses of the Ranch beyond water storage.
SJWCD has included PAWSD in many of its public outreach efforts, and SJWCD designated board members to provide a clear channel of communication to PAWSD’s board. In contrast, PAWSD board members have taken it upon themselves to negotiate sale terms without involving SJWCD in any of those discussions.
SJWCD encourages the public to reach out to board members of both SJWCD and PAWSD about the potential sale of public property identified years ago as the best available site for future water storage.