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beneficial use purposes. So that part of it would be a Corps decision. In order to have any reallocation
<br />beneficially affect you with regard to water rights, you would have to go to the state, the TCEQ, and you
<br />would have to amend your water right permit. Basically, the water permits authorize you to store water,
<br />and they authorize you to divert and use water. And the amount that is authorized for diversion and use is
<br />based upon an analysis that would have been done at the time the permit was issued, to determine the
<br />firm yield of this project. And the simple explanation of that is if you start into the drought of record, with
<br />the reservoir full, how much water can you take out on an annual basis and still have water left by the
<br />time the drought of record is over with. And most of the state -- like in Denison, which is where I'm from --
<br />the drought of record was in the 50s -- 1950 to 1956 and 1957. And so they will look at that period and do
<br />this calculation, and they will determine how much water you can take out on an annual basis and get
<br />through the drought of record with one year's worth of water left in the reservoir. And it's dependent on the
<br />storage, and it's dependent on how the drought of record works, from the standpoint of evaporation,
<br />temperature, and so forth. So, you'd have to get the Corps to do the re- allocation, and you'd have to get
<br />the state, the TCEQ, to change your permit based on that reallocation. If you could accomplish those two
<br />steps, you could have a change in the authorized amount of use out of the reservoir. I'm going to give
<br />you a huge generalization here -- I cannot tell you this applies in your situation -- I know the Corps has
<br />on some frequency engaged in re- allocation. There are two reasons, I think, why that happens. One, the
<br />Corps historically has been very conservative in estimating flood storage space. They've been very
<br />protective. They want to make sure that their project prevents flooding, etc. Two, if they lose some of that
<br />flood storage space into conservation storage and it gets to be beneficial use, that's a revenue
<br />enhancement to the Corps, because you're going to have to pay them for the storage space for that
<br />water. So they have some incentive to want to do that. It's always going to be fact specific and fact
<br />dependent. They're going to take a good, hard look at it if you ask them to do that. That would be a way
<br />you could increase the amount of water that's available to you out of Lake Pat Mayse.
<br />A second question raised was if you were to try to increase the height of the dam for purposes of
<br />increasing storage. That, too, starts with the Corps of Engineers, because as I said it's their reservoir;
<br />they actually own the dam. You might have paid for the construction of it, but they're the owners. So they
<br />would have to consent to make that change. And in order for that change to be effective for you, in terms
<br />of increasing your diversions from the project, you would have to go to the state again, the TCEQ, and
<br />you would have to amend your water rights permit. I think I know the answer to this, but I'm not 100
<br />percent sure. I talked to the gentleman at the state who is their staff person over the Red River Compact,
<br />and he doesn't know the answer to this either. As I said, the state has the full rights of ownership and
<br />control of that water up to Pat Mayse Reservoir. But in the compact, Pat Mayse Reservoir is identified and
<br />the storage capacity is identified. If you were to raise the dam, you're going to increase that storage
<br />capacity, and so there's at least a bit of an issue, the kind of thing that lawyers love, there's a bit of an
<br />issue, and some Oklahoma lawyers would come along and say, "Whoa, you can't do that, because really
<br />what you've really got the right to use is that 109,000 or so acre feet of storage that it was listed at
<br />(between 415 and 451 msl)." There are two documents that are attached to the compact that are
<br />generally not available; they live over at TCEQ. One is an engineering report, and one is a legal analysis.
<br />I talked to him today about the legal analysis, and it says the identification of those projects is not
<br />determinative of the rights under the compact.... (Somewhere in there is) the language that says the
<br />State of Texas has the right to control all waters up to that reservoir. It's not a matter of how big you make
<br />it over time, because some of the reservoirs were even in the planning stages as opposed to the
<br />construction stage. So I think the answer is, that would be between the State of Texas and the Corps of
<br />Engineers, and the Red River Compact would not come into play. But there is at least an issue out there
<br />that somebody would choose to fight about.
<br />Let me take the third thing that we talked about, and try to break it down. If you determined that it was
<br />prudent, smart, good business, whatever, to try to divert water from downstream of Pat Mayse Reservoir,
<br />it is clear to me that the Compact does come into play at that point in time. So while you go to the State of
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