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INTERBASIN WATER TRANSFER



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Water Conservation, Reuse, and Recycling: Proceedings of an Iranian-American Workshop INTERBASIN WATER TRANSFER

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Water Conservation, Reuse, and Recycling: Proceedings of an Iranian-American Workshop Interbasin Water Transfers in the Western United States: Issues and Lessons David H. Getches Sometimes the demand for water justifies transporting it far from the stream where it originates, even into the watershed1 of another river. Population centers, industrial uses, and some agricultural uses produce enough economic value to compensate for the expense of constructing facilities such as canals, pipelines, and pumping stations. The most typical case occurs when a growing city in an arid region looks to a distant source for a water supply. Sometimes the source of water to be exported is considered available because it is relatively plentiful and there are low present demands for its use in the watershed of origin. In other instances, water is taken out of established local uses in order to supply new uses in another basin. For instance, cities in the western United States sometimes buy water rights from farmers to meet expanding water demands. This typically results in drying up of irrigated lands. Economists urge that water transfers should not be impeded by legal restrictions. They argue that it increases efficiency to move water to the most highly valued uses. Yet residents of the areas of origin often resist exporting water. When water is removed from an area it almost invariably causes economic and environmental impacts. These impacts are the greatest in the case of transfers from one basin to another, because once water is diverted there are no return flows so that the water cannot be reused. Several legal measures in the western United States have attempted to ameliorate the impacts on areas of origin with- 1   In this paper the terms “watershed,” “basin,” “catchment,” and “drainage area” are used interchangeably.

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Water Conservation, Reuse, and Recycling: Proceedings of an Iranian-American Workshop out unduly restricting interbasin transfers of water.2 These measures range from simply considering the possible impacts, to providing mitigation, to barring transfers. They vary in effectiveness from state to state, and no state has a truly comprehensive approach. It is difficult to find the appropriate balance between the interests of the area of origin and larger national or state interests. Usually the latter interests prevail, as local areas of origin are usually slower growing and less economically advantaged. Thus, they rarely have sufficient political power to prevent or alter plans to de-water their watersheds. At the same time, there may be significant statewide or national interest to be gained from an interbasin transfer of water, and the area of origin should not have effective veto power over the transfer. Experience in the United States, however, teaches that interests of the area of origin are most typically given little consideration. Indeed, the state or nation may have broader interests in maintaining the ecological integrity or economic viability of a local area, but even these interests have been disregarded in past water development decisions. Most major water development in the United States occurred in an era before the existence of any effective legal controls, including most of those discussed in this paper. This permitted interbasin transfers to proceed relatively unimpeded with little consideration of interests other than those of the importing region. The case of the now-infamous transfer in California between the Owens Valley and Los Angeles is illustrative. In the 1920s, the city of Los Angeles secretly purchased the water rights of farmers in the Owens Valley, some 200 miles from the city. By the time the public discovered that the valley had lost all of its water and the farms and associated economy would be dried up, it was too late to stop the huge interbasin transfer. The city built a huge pipeline to carry the water to Los Angeles residents. The people of the Owens Valley protested and forcibly tried to keep the pipeline from operating. They were unsuccessful, although protests, demonstrations, and occasional dynamiting of the pipeline continued intermittently for 80 years. Only after the state began to legally recognize the importance of environmental interests, including a requirement of environmental assessment, and the state courts of California recognized that the state holds all water in a public trust, did the people of Owens Valley attain any vindication of their rights. The Inyo County government and environmental groups brought legal actions in several courts. After years of litigation, the city of Los Angeles has now been forced to reduce its diversions, to mitigate some of the environmental damage, 2   In the United States, Indian tribes have sovereign powers to regulate resources within their territory. Many of the actions that states can take to control or mitigate the impacts of exports can be considered by tribal governments as well as by states. The nature and extent of tribal sovereignty are not discussed here, nor are the special issues that tribes confront concerning proposals to move water away from their reservations.

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Water Conservation, Reuse, and Recycling: Proceedings of an Iranian-American Workshop and to recognize the interests of the county and its residents. On their own the residents of Owens Valley lacked sufficient political influence, but after environmental protection has become a legally recognized state interest, the valley’s concerns could be at least partially vindicated. Although urbanization of the West surely will result in calls for more interbasin transfers, opportunities to develop such projects are limited by extensive past development. Most of the West’s rivers are fully developed. Nevertheless, the Owens Valley example illustrates that relatively new legal innovations for protecting the interests of areas of origin may be important in ameliorating the existing diversions. As existing facilities are put to new uses, rehabilitated, or expanded, protections for areas of origin enacted in recent years or in the future may apply to these changes as well as to new developments. PRIOR APPROPRIATION PRINCIPLES To understand the framework for the efforts that have been used to deal with interbasin transfers in the United States, it is useful to have a basic understanding of the system of water rights that prevails in the West. The law creates no fundamental barrier to taking water from one watershed to another. In the prior appropriation system, unlike the riparian system water rights that prevails in the eastern United States, water is not legally tied to the land or to the watershed. Prior appropriation began as a simple system that allowed private water users to obtain a water right recognized by the state by diverting water out of a stream and putting it to a “beneficial use.” At first, it was not necessary to ask permission but only to “appropriate” the water. The water right obtained in this way entitled water users to continue taking the full amount of water that they originally had diverted. But the water users would lose the right if they did not continue using it (“use it or lose it”). When there was insufficient water in the stream, users were not required to share the resources. The users with the oldest rights were entitled to take the full quantity of their rights. Once the most senior users exhausted the available water, all water rights holders junior to them would be cut off entirely (“first in time, first in right”). Once a person held a water right, it generally could be put to other uses, used on other lands, and transferred to others, so long as the change in use did not harm the water rights of any other person. Because water rights were considered a form of property, these rights could be transferred to others. Today, the system of water rights in most western states is still guided by the basic principles of the prior appropriation doctrine, but the rules have been codified and expanded in statutes. Moreover, rights are allocated and administered by state agencies and officials who maintain records, enforce rights by opening and shutting headgates and dams, and make decisions that apply statutory criteria. When someone applies for a new water right to change the use of an existing right, most state laws require a finding by a state official or agency that

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Water Conservation, Reuse, and Recycling: Proceedings of an Iranian-American Workshop granting the application will be consistent with “the public interest” or “public welfare.” Some of the earliest cases in which the courts recognized the prior appropriation doctrine involved distant transfers, even to other drainage basins (Coffin v. Left Hand Ditch Co., 6 Colo. 443 [1882]). The riparian doctrine that was applied in many eastern states would not allow transbasin diversions if it were strictly applied, and so the courts in the West decided that they would follow the “first in time, first in right” custom of the early miners, which applied to water use as well as to mineral extraction. This system did not restrict movement of water from a stream to wherever it was needed. In the arid West streams were few and flows fluctuated greatly, so the law was designed to accommodate the needs of those who first arrived and had economic uses for the water. Judges in the leading cases rejected riparian principles and embraced the prior appropriation doctrine based on the assumption that the latter was better suited to the geography and climate of the region. THE DEMAND FOR INTERBASIN TRANSFERS When water users in one basin want to use water from another basin, they may apply for rights to water that is not being used by others, or they may purchase rights to water that is already in use in the basin of origin. On most streams in the West all the available water had been typically appropriated more than one hundred years ago so that new interbasin transfers must result from transfers of existing rights. In less developed areas, however, there still may be unappropriated water available for new rights. It costs nothing to initiate a new appropriation, but it is expensive to purchase a senior water right, because the priority of an older right makes it more secure in times of shortage and therefore more valuable. Many water users like municipalities are willing to pay the additional expense to acquire older water rights, because even in a watershed that is not fully developed, the senior right will provide a more reliable supply of water. Purchasers may also choose to buy senior water rights from far away rather than local senior water rights, although they must incur substantial costs for transporting the water. Usually senior rights close to a developed area are much more expensive than senior rights in a distant basin, and the difference in price may be greater than the cost of building tunnels and pipelines. But cost is not the only factor in a decision to import water. Sometimes cities will choose to pay the cost of transporting imported water from a different watershed to avoid the political controversy of removing water from farms near them. Today, transfers of water rights are an important part of water law and administration. Water rights can be transferred for payments of money, and increasingly we speak of water markets. Marketing enables water to be moved out of old uses that have become less productive, such as mining after the

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Water Conservation, Reuse, and Recycling: Proceedings of an Iranian-American Workshop minerals have been removed or agriculture in areas that produce low-valued crops. The most frequent purchaser is a city that needs a larger water supply to serve a growing population. Indeed, urbanization is a major trend in the West. The fastest growing new demands for water in the West are in cities that can pay farmers enough to induce them to sell because of the relatively low economic benefits from agricultural water use. Cities also are able to pay the costs of building facilities to transport and store water, because they can spread the cost among large numbers of users, and their budgets are sometimes subsidized by general tax revenues. EFFECTS OF INTERBASIN TRANSFERS Diverting water from an area can cause a variety of negative economic, social, and environmental consequences. When water supplies are committed to exports, it discourages investments in new businesses that require water. The transfer of water to another watershed therefore deprives the area of origin of water that could be used for economic growth in that area of origin. It would be ironic for a water-rich area to seek water somewhere else because its local supplies are being exported. The option of “buying back” the water that is being exported exists, but the price may be too high. The impacts of water exports are more palpable when the water being transferred is already being used in the area of origin. The seller of the water rights—such as a farmer selling irrigation rights—presumably will be paid the fair market value of the rights. Although the seller receiving compensation will not suffer hardship, third parties may suffer indirect but significant economic impacts. As the farming economy declines, so will the businesses that depend on selling tractors, seeds, and fertilizer and the banks that lend money. All the businesses that depend on these businesses are, in turn, affected. With less business activity, local governments will collect less tax revenue, causing a decline in the ability of local governments and school districts to provide services to citizens. As community life declines the area will becomes less attractive to new businesses resulting in a downward spiral of economic effects. Almost invariably, interbasin transfers cause environmental impacts. As streamflows are diminished, fish and wildlife habitat can be diminished and destroyed. Wetlands may dry up, and native vegetation may die out. If lands were previously being irrigated and water is then transferred away, the fields can turn to dust and the soils can blow away, degrading the arability of the lands as well as causing pollution problems. Municipalities that are required by law to maintain a certain water quality may find that reduced streamflow will increase their costs of treating sewage, because it is more difficult to dissolve the discharged pollutants in order to meet water quality standards. Environmental problems also can adversely affect the area’s economy. Many rural areas of the West are becoming increasingly dependent on tourism. Tourists

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Water Conservation, Reuse, and Recycling: Proceedings of an Iranian-American Workshop will not come if they are seeking an unspoiled natural environment, including free-flowing streams that are valued for fishing, hunting, boating, and aesthetics. Such areas also may become unattractive to new businesses who are seeking a location with a pleasant, healthy environment. The history of the development of the Colorado River in the southwestern United States illustrates many of the problems of interbasin transfers and the historical inadequacy of government responses. The Colorado River is the major river for the large, arid southwestern region. Much of the region within the watershed of the Colorado is rural and sparsely populated. It is also an area of great natural beauty, with wildlife, fish, and recreational opportunities. The watershed of the river includes parts of seven states and Mexico. The states have fought over allocation of water, with some of their battles being resolved by interstate agreements known as compacts, and others being mediated by the Supreme Court and Congress. Disputes between the United States and Mexico have arisen periodically and have been narrowed by the negotiation of a treaty and subsequent amendments.3 Almost all of the water of the Colorado River is exported to other watersheds for use in growing cities as well as on farms. In the state of Colorado ten tunnels have been drilled through the Rocky Mountains to carry the water away from the basin of origin to population centers east of the Continental Divide. Similarly, in Utah water is taken hundreds of miles to cities on the west side of the Uintah Mountains. California transports Colorado River water through huge aqueducts to farming areas and to large cities on the west coast, including Los Angeles and San Diego. A huge share of the water also goes to California’s Imperial Valley near the Mexican border, mostly for large farms owned by wealthy families and corporations. Arizona pumps water out of the river and up 1500 feet so that it can flow hundreds of miles across the desert through a large canal. A series of dams on the river stores water to feed these out-of-basin uses. Most of the dams, canals, pumping plants, and tunnels were constructed with federal funds. By the time the Colorado River reaches Mexico, in most years there is barely enough flow remaining to deliver water that was promised to Mexico in a 1944 treaty. That water, too, is taken mostly for uses away from the river. After that, the river has been entirely depleted in all but very wet years. The delta in Mexico has changed from an area rich in fish, birds, and wildlife to a dusty plain with a trickle of water occasionally threading through it. Interbasin transfers from the Colorado River have profoundly affected ecosystems, communities, and economies and have been the cause of hostilities and 3   Treaty between the United States of America and Mexico relating to the utilization of the Waters of the Colorado and Tijuana Rivers and of the Rio Grande signed at Washington February 1944; protocol signed at Washington November 14,1944, Entered into force November 8,1945, 59 Stat. 1219; Treaty Series 994.

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Water Conservation, Reuse, and Recycling: Proceedings of an Iranian-American Workshop dissension between the people in the watershed and those in the areas where the water is used. Some of the problems caused by the transbasin diversion of virtually all of the Colorado River are as follows: Nearly all species of native fish in the river are either extinct or endangered. Depletion of flows has allowed salts to concentrate in the river so that at times the water is so saline that it kills crops. Dozens of communities within the natural watershed of the Colorado have limited options for future growth, because control over the use of the water that originates there has been legally vested in large cities and districts that export the river’s water to other watersheds. The Colorado River Delta has lost most of its native species of birds and fish, its wetlands are in danger, and its indigenous communities have nearly been destroyed. ORIGIN PROTECTION LAWS Because of the economic benefits of allowing a resource like water to be moved to uses that have the greatest value; it is theoretically undesirable to inhibit such transfers. Economic theory, however, assumes that all costs are accounted for in determining that there is a net benefit to society. There are two problems with this. One is that the impacts on third parties are not, in fact, considered by the parties to the transaction and, in any event, they are difficult to quantify. Thus, these costs are “externalities” that escape the calculus. The other problem is that while the nation’s economy may be better off if the farmers and the businesses that depend on them in a local area go out of business and a new city grows, there are nevertheless major negative consequences for the local community. It is politically, and perhaps morally, unacceptable to ignore these consequences. Although public policy does not favor prohibiting or creating major impediments to transfers, most experts recognize that basins of origin have valid interests that the law should not ignore. Nevertheless, state laws and policies often fail to recognize the economic, social, and environmental harms that can occur when water is removed from its natural watershed. Prior appropriation law has never limited the use of water to the watershed in which it originates. Consequently, efforts to deal with the problems of interbasin transfers sometimes encounter objections that these efforts are fundamentally at odds with western water law that has placed no limits on where water could be used. LEGAL MEASURES DIRECTLY CONTROLLING INTERBASIN TRANSFERS In 1973, the National Water Commission’s Report recognized the importance of the issue and recommended that transfers from one basin to another be

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Water Conservation, Reuse, and Recycling: Proceedings of an Iranian-American Workshop allowed only when interbasin water transfer provides the lowest cost source of water and the benefits exceed the costs. No state has adopted any such law or policy. States, however, have implemented a number of legal approaches that provide protection for the interests of basins of origin. Some legislation directly controls interbasin transfers. More commonly, laws operate indirectly to limit or mitigate the effects of interbasin transfers. We first consider direct types of controls on interbasin transfers. Prohibition or Severe Restriction In the past, some state laws made certain types of transfers unlawful and made others rather difficult. A few states made water rights appurtenant to specific lands and flatly prohibited their transfer. As early as 1909, Wyoming passed a statute that prevented transfers of water out of agricultural uses. An Arizona law makes transfers of water beyond the boundaries of irrigation districts subject to the approval of the district (Arizona Revised Statutes § 45-172[5]). This effectively gives basin of origin interests a veto power over transfers. As such, it disregards any broader interests a state may have in providing water for economic expansion and human needs in the importing area. Compensatory Storage A Colorado statute attempts to protect the area of origin by requiring that any conservancy district proposing to export water from western Colorado must ensure that present and future uses of water are not impaired nor increased in cost by the proposed project.4 The law was interpreted by the Colorado Supreme Court in a case involving the Windy Gap Project that would take water from the Colorado River through a tunnel under the Rocky Mountains to cities in the urbanized eastern part of the state. The court required the importer to construct storage facilities in the area of origin (Colorado River basin) and held that the importer may not proceed without presenting well developed plans for the reser- 4   “(IV) However, any works or facilities planned and designed for the exportation of water from the natural basin of the Colorado River and its tributaries in Colorado, by any district created under this article, shall be subject to the provisions of the Colorado River compact and the ‘Boulder Canyon Project Act.’ Any such works or facilities shall be designed, constructed and operated in such manner that the present appropriations of water, and in addition thereto prospective uses of water for irrigation and other beneficial consumptive use purposes, including consumptive uses for domestic, mining, and industrial purposes, within the natural basin of the Colorado River in the state of Colorado, from which water is exported, will not be impaired nor increased in cost at the expense of the water users within the natural basin. The facilities and other means for the accomplishment of said purpose shall be incorporated in and made a part of any project plans for the exportation of water from said natural basin in Colorado.” Colorado River Water Conservation Dist. v. Municipal Subdistrict, Northern Colorado Water Conservancy Dist., 198 Colo. 352, 610 P.2d 81 (Colo. 1979).

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Water Conservation, Reuse, and Recycling: Proceedings of an Iranian-American Workshop voir before the proposed diversion for the Windy Gap project could be approved. Under this law the importer must present detailed plans for the compensatory storage facilities and demonstrate that they will be adequate before the water court will approve a diversion of water over the Continental Divide (Colorado River Water Conservation Dist. v. Municipal Subdistrict, Northern Colorado Water Conservancy Dist., 198 Colo. 352, 610 P. 2d 81 [Colo. 1979]). It is interesting that, although the district eventually developed the detailed plans required by the court, the plans were never used. First, the importing district agreed to pay up to $10 million to construct a compensatory storage reservoir known as the Azure Reservoir. Some years later, the parties agreed that the Azure Project should no longer be pursued. Instead, the importing district agreed to pay $10.2 million to the water district in the area of origin so that it could build another storage project of its choosing. The water court approved. The district that proposed the Windy Gap Project made other concessions in order to resolve objections of water users and others. Although no specific statute required it, the district granted the use of storage space to a western slope water district in an existing reservoir owned by the importing district but located in the basin of origin. It also agreed to subordinate the use of its water rights to users in the basin of origin. Payments were also made to upgrade water treatment facilities and to study salinity problems. The concept of compensatory storage embodied in the Northern Colorado Conservancy District Act (May 13, 1937) is based on an accord reached a few years before the Act was passed. The agreement was necessary to reconcile eastern and western slope interests that were to be affected by the Colorado–Big Thompson (CBT) Project. The CBT Project was planned to take water from the upper reaches of the Colorado River and transport it across the Rocky Mountains to the northern Front Range. Negotiations resulted in a resolution that included several principles for transmountain diversion projects. One was that an “essential part” of such projects should be the “construction of a compensatory reservoir on the western slope of sufficient capacity to hold an amount of water equal to the amount to be annually diverted…” This and other principles were included in a legislative report called “Senate Document No. 80, (75th Cong., 2nd session, June 24, 1937)” which in turn was incorporated by reference in the CBT authorizing legislation. Accordingly, the 152,000 acre-foot Green Mountain Reservoir was built on the western slope as part of the CBT. The Bureau of Reclamation is still searching for purchasers of Green Mountain water; some fifty years after the reservoir’s construction, the water remains virtually unused except for electric power generation. It is unsurprising that the National Water Commission’s 1973 Report was critical of compensatory storage schemes in that they may cause “economic waste because the area of origin may not be prepared to use the compensatory storage for many years” (National Water Commission, 1973). The compensatory storage requirement specifically applies only to conser-

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Water Conservation, Reuse, and Recycling: Proceedings of an Iranian-American Workshop vancy districts and only to exports from the basin of the Colorado River. Therefore it does not apply to the larger and more numerous transbasin diversions in Colorado that have been undertaken by Denver and other municipalities. Colorado law provides no area of origin protection against the effects of those transfers. Priority for the Area of Origin States may grant the area of origin a priority right to appropriate the water it may need in the future. The importing basin technically can use water only until the basin of origin needs the water, at which point the basin of origin can recapture its water and invalidate transfer contracts. If enforced, this right obviously would lead to unsettling results for the importer of water. More likely as a practical matter, the importing area could use political and economic power to prevent the area of origin from interrupting long-standing water deliveries in the importing area. California’s area of origin protection laws ostensibly give the exporting area absolute priority to make future use of water over that of the importing area. California’s population is concentrated far from most water supplies. Thus, growing cities where water demand is high depend on removing huge quantities of water from sparsely populated areas with copious water. One California statute reserves for the county of origin all the water it may need for future development (Cal. Water Code §§ 10505–10505.5 [1992]).5 The California law provides that the State Water Resources Control Board makes the determination of when, and to what extent, water is “necessary for the development of the county.” This board is a quasi-judicial body set up to regulate water rights, water pollution, and water quality, whose five members are appointed by the Governor. It is easy to imagine a dispute arising between, say, the Metropolitan Water District of Southern California (the main recipient of State Water Project water) and a small county in the north as to the amount of water that is “necessary for the development of the county.” Once water from the area of origin has been committed to use in another area, the importing area is likely to grow dependent on the water supply. Moreover, investments and plans for growth in 5   § 10505. Restrictions on release or assignment, No priority under this part shall be released nor assignment made of any application that will, in the judgment of the board, deprive the county in which the water covered by the application originates of any such water necessary for the development of the county. § 10505.5 Territorial restrictions on use, Every application heretofore or hereafter made and filed pursuant to Section 10500, and held by the State Water Resources Control Board, shall be amended to provide, and any permit hereafter issued pursuant to such application, and any license issued pursuant to such a permit, shall provide, that the application, permit, or license shall not authorize the use of any water outside of the county of origin which is necessary for the development of the county.

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Water Conservation, Reuse, and Recycling: Proceedings of an Iranian-American Workshop the area of origin may be restrained by the fact that water is committed to the importing area, even if there is a legal right to demand the water for future growth in the area of origin. California’s county of origin statute protects only those counties in which the water “originates.” This wording has been construed to mean that counties are protected only to the extent that water actually originates, in the form of rain or snow, within their boundaries. This interpretation raises difficult problems for the foothill counties. In California, these counties usually receive minimal rainfall but have abundant water in the rivers that are fed by mountain runoff and snow melt. Thus, most of the water “originates” in mountainous counties that are usually too rugged for much future development. The foothill counties downstream, whose potential for development is often much greater, received little protection from the county of origin law for the abundant water naturally flowing through them. This problem became urgent when the state decided to construct the massive Central Valley Project. To solve it, the legislature enacted another area of origin protection law known as the Watershed Protection Act. This was a part of the Central Valley Act of 1933 (Cal. Water Code §§ 11460–11463[1992]).6 The main idea of the Watershed Protection Act was to extend area of origin priorities to the entire watershed area and not limit them to the areas of precipitation. This grants some relief to the foothill areas, which are almost always included in the region or area that contributes to the supply of the stream in question (25 Ops. Cal. Atty. Gen. 8, 19 [1955]). A proviso that the “article shall not be so construed as to create any new property rights…” precludes the board from assigning water rights to an area based on a determination of its potential need. Instead, water users in the area have a priority that allows them to recapture water from any other non-watershed user when they require it in the future. The Watershed Protection Act was enacted in 1933 and was meant to apply to the state’s Central Valley Project (CVP). The Depression was, however, well underway and the state was unable to finance the CVP. The federal government took over the project in 1935 and by 1940 was deeply involved in the water 6   § 11460. Prior right to watershed water. In the construction and operation by the department of any project under the provisions of this part a watershed or area wherein water originates, or an area immediately adjacent thereto which can conveniently be supplied with water therefrom, shall not be deprived by the department directly or indirectly of the prior right to all of the water reasonably required to adequately supply the beneficial needs of the watershed, area, or any of the inhabitants or property owners therein. In no other way than by purchase or otherwise as provided in this part shall water rights of a watershed, area, or the inhabitants be impaired or curtailed by the department, but the provisions of this article shall be strictly limited to the acts and proceedings of the department, as such, and shall not apply to any persons or state agencies. § 11462. Creation of new property rights

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Water Conservation, Reuse, and Recycling: Proceedings of an Iranian-American Workshop business in California. It was nevertheless assumed that the county of origin act and the Watershed Protection Act were still effective since § 8 of the federal Reclamation law purported on its face to incorporate state law to control the way water rights are acquired. Recently, a major agricultural water district has taken legal action under the statute asserting that it has rights to water that originates in its area but was developed under the CVP and used for many years by water districts outside the area (California Environmental Insider, 2000). Public Interest Considerations Most states legally recognize a strong public interest in water. State constitutions and statutes make water a public resource to be held in common for all citizens until private rights are established in it. Therefore, water rights allocation and transfer must be consistent with the public interest or public welfare. In practice, states rarely deny new uses or transfers in order to protect the public interest, but they do impose additional conditions on the water use. The diverse economic, social, and environmental impacts of interbasin transfers are typical of the concerns often expressed under the banner of the public interest—instream flows, fish and wildlife, recreation, water quality, economic viability of an area, and others. Yet, few state laws clearly indicate what factors are to be considered as within the public interest. State law requires Idaho’s Department of Water Resources director to determine whether a proposed water use is in conflict with “the local public interest,” but the statute does not articulate what this means (Idaho Statutes, sec. 42-203A). Therefore, the Idaho Supreme Court has read the statute with reference to other Idaho laws and the laws of other states that use similar terminology (Shokal v. Dunn, 707 P.2d 441 [1985]). Since that decision, the Director of Water Resources has convened hearings aimed at reaching decisions that ensure “the greatest benefit possible to the public [from public waters] for the public” (Shokal v. Dunn, 707 P.2d at 448 (citing Young & Norton v. Hinderlider, 15 N.M. 666, 110 P. 1045, 1050 [N.M. 1910]). Affected citizens can present evidence about matters such as aesthetics, recreation, fish, and ecosystem functions that will be impacted by the proposed water decision. The agency considers not only benefits to the applicant but also economic effects, alternative uses, minimum stream flows, wastewater, and conservation. Modern permitting systems attempt to limit or prevent adverse impacts on the public from water uses at the time new users obtain permits. But not all states apply their public interest requirements to changes of use or transfers. The Supreme Court of Utah, however, upheld the application of the same criteria to changes in use that it applies to new appropriations (Bonham v. Morgan, 788 P.2d 497 [1989]). In Nevada, a statute requires the state to reject an application for a water transfer that would result in damaging the public interest (Nevada

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Water Conservation, Reuse, and Recycling: Proceedings of an Iranian-American Workshop Revised Statutes § 533.370[3]). Wyoming, one of the few states with a special process to evaluate transfers, considers potential economic losses to the community relative to the benefits of the transfer and the availability of other sources of water (Wyoming Statutes Annotated § 41-4-503). California, through the State Water Resources Control Board, reviews proposed transfers to determine if they would cause an unreasonable effect on the economy in the area of origin or on fish, wildlife, or other water uses (California Water Code § 109). Although every state in the West except Colorado uses some type of process to review the public interest in water decisions, they all could improve the way in which they apply these laws. The majority of the states lack clear standards to define the public interest that they are trying to protect. Many of the social, economic, and ecological interests affected by water allocation, transfer, and use are simply not included in the considerations of state agencies. If the elements constituting the public interest were comprehensively articulated, government employees could use them to guide state policy in resolving conflicts among competing interests and to understand better the tradeoffs inherent in any water decision. Another problem is that the public does not always have a role in the process used to review public interest compliance. The processes used to issue permits in some states, for instance, involve only water rights holders and not the members of the public who experience economic, environmental, and social impacts from water use and development. One way that states can consider the public interest in water and include the affected public is through comprehensive water planning processes that articulate the kinds of interests the public has in particular watersheds and that enunciate state policies related to them. The plans can then guide the application of public interest laws. Public Trust Doctrine The examples described above require public interest review before a new water use or changed water use is approved. In some instances, however, courts have held that a state’s decision to permit private use of public resources can be voided when water rights are allocated or transferred without review of the public interest (National Audubon Society v. Superior Court, 658 P.2d 709 [Cal. 1983]; In re Water Use Permit Applications, 9 P.3d 409 [Hawaii 2000]). The public trust doctrine recognizes that water is fundamentally a public resource and that the state should not allow private water rights to impair the public’s interest in water. As applied, the doctrine allows a court to reexamine established water rights in order to ensure that environmental values are not destroyed without prior consideration of the impacts. The doctrine has its origins in civil and common law principles that recognize the public’s continuing rights to use navigable waters and the state’s property rights in the beds of navigable waters.

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Water Conservation, Reuse, and Recycling: Proceedings of an Iranian-American Workshop Instream Flow Protection Laws creating state programs to protect instream flows indirectly address significant issues that arise from interbasin transfers. Most of these laws allow state agencies to enforce minimum streamflows. The state itself may be empowered to appropriate rights to quantities of flowing water, or it may be authorized to reserve an amount of water that is necessary to maintain desired flows from the water that is available for appropriation by private parties. At present, only Arizona and Alaska permit entities other than the state to appropriate waters for instream flows. In all other states only a state agency may hold the right. The recently enacted statutory programs that allow states to appropriate water rights to protect streamflows can be criticized, because the water rights in most streams usually have been appropriated before the laws were passed. Thus, it is possible for senior rights to dry up the stream most of the time. In these states, effective protection of the streamflows ultimately will depend on the acquisition of senior water rights. Some states do permit the state to buy or accept donations of senior water rights with priorities sufficient to maintain streamflows all or most of the time. Private groups have formed “water trusts” to finance purchases of senior water rights; these rights must be transferred to the state agency authorized to hold instream flow rights unless the state allows private entities to hold them. Instream flow protection laws do not protect water for some public uses. The Colorado statute permits appropriations of a quantity of water sufficient “to protect the natural environment to a reasonable degree” (Colorado Revised Statutes Annotated § 37-92-102[3]). The state board that holds the rights has interpreted this language narrowly and has used it almost entirely to protect cold-water fish such as trout. So applied, the law is generally unavailable to protect water quality, riparian vegetation, wetlands, or recreation. Reservation of Rights for Future Use Montana has a system for reserving future rights for the future needs of municipalities. The reservation of a water right protects against all future appropriations, not just transbasin exports, that would interfere with future municipal uses. Reserving a specific quantity of water for the future requires “informed guessing” in order to project future demand. These guesses will invariably be wrong. Thus, the area may end up with too little water (at least from its perspective) and no chance of acquiring more because all the existing supplies are subject to long-term commitments. Or, the area may end up with a claim to more water than it needs that discourages others outside the area from developing and using the water.

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Water Conservation, Reuse, and Recycling: Proceedings of an Iranian-American Workshop Land Use Regulation Colorado has an unusual law that allows local governments to regulate land uses that are of statewide significance (Colo. Rev. Stat. § 24-65.1-101). This generally applies to very large developments or those that affect a large area. It includes large water development projects. By using this law, some counties have prevented major water collection facilities and pipelines from being built in their territory to take water to another watershed (City & County of Denver v. Board of County Comm’rs, 760 P.2d 656 [Colo. Ct. App. 1988], aff’d, 782 P.2d 753 [Colo. 1989]). These laws give extraordinary power to the area of origin to protect its interests, although they can be criticized as disregarding broader interests of the state in allowing water to be used where it is needed the most. On the other hand, local officials in the area of origin—often susceptible to schemes that provide short-term economic benefits—may be persuaded to compromise environmental and other public interests and allow a destructive project to proceed. Federal Environmental Laws Environmental laws that protect water quality, wetlands, and endangered species indirectly deal with the effects of interbasin transfers. If federal permits are required, the permitting authority can insist that the project be modified to reduce the environmental impacts or that mitigation measures be used. These laws can prevent particularly damaging interbasin transfers from proceeding. More likely, they result in negotiated changes in the proposed transfers that mitigate the harm. Nearly all environmental laws are federal, and therefore federalism concerns arise when environmental laws conflict with or curtail the uses of water under state water rights. State laws are generally not very strong or effective in protecting the public’s interest in water, and some water laws say that if rights to use water are in conflict with environmental laws, water rights will prevail. Yet the Constitution makes federal law supreme. The National Environmental Policy Act of 1969 (NEPA) (42 U.S.C.A. §§ 4321-4370, 4321[2][a][1]) requires federal agencies to assess potential environmental impacts of proposed “major federal actions.” The agencies must hold hearings that allow public participation and then prepare a document known as an environmental impact statement (42 U.S.C.A. § 4332[2][c]). NEPA applies to proposals that require a federal approval or license or that will use water from a federal water project if there will be a significant environmental impact. A few western states, including California and Washington, have adopted laws with similar environmental assessment requirements for projects permitted or sponsored by the state. The state or federal laws that require an assessment of environmental impacts are important mechanisms for evaluating the effects of water development and transfer. NEPA is essentially a procedural requirement and

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Water Conservation, Reuse, and Recycling: Proceedings of an Iranian-American Workshop does not mandate that a final decision be environmentally benign. It only requires that the agency adequately present complete information before making its decision. The federal Clean Water Act (CWA) protects water quality (33 U.S.C.A. §§ 1271-1387). Although it is a federal law, the CWA is actually administered by most states. Under the CWA, anyone who makes a “point source” discharge of pollutants (i.e., a discharge from a pipe or ditch) into the waters of the United States must have a permit that limits the quantity of particular pollutants according to standards established by the federal government (33 U.S.C.A. §1362[14]). The permit also must require sufficient limitations on discharges to protect the overall quality of the watercourse receiving the wastewater. Standards for water quality are set by the states and are specific to particular waterways. The permitting program under the CWA has effectively regulated industries and municipal sewage treatment plants that discharge wastes into rivers and lakes. The CWA does not deal with declines in water quality caused by other than point source discharges. Yet, when a stream is depleted, especially by an interbasin transfer that has no return flow to the basin of origin, water quality declines because any waste added naturally or by humans to the stream becomes more concentrated. There are, however, no formal controls of water depletions that damage water quality. A special program under § 404 of the Clean Water Act regulates dredging and filling of navigable waters. The statute defines navigable waters as all “waters of the United States.” This has been interpreted administratively to include all adjacent wetlands, and wetlands are defined as any area capable of sustaining riparian vegetation. The activities covered extend beyond the dredge and fill operations undertaken to deepen channels for navigation. Depositing fill material can include any construction in a waterway or wetland. Thus, the statute covers water projects, dams, and diversion structures. The impact of § 404 on interbasin transfers is much greater than this description might suggest because almost any type of construction activity to develop or use water—and certainly nearly every interbasin transfer from a stream—involves facilities that are on the banks of a stream or that are in or cross “wetlands.” Where these areas are affected by water development activity, § 404 requires the United States Army Corps of Engineers to conduct a global review of the public interest. This gives the Corps extensive authority to review the impacts and require mitigation for the impacts of a water development on the basin of origin. The Endangered Species Act (ESA) (16 U.S.C.A. §§ 1531-1543) is another federal statute that can affect proposals to divert, develop, or transfer water. The ESA absolutely prohibits any action by the federal government that would jeopardize the continued existence of an endangered species. Federal agencies considering activities that could have this effect are required by § 7 of the ESA to consult with the U.S. Fish and Wildlife Service. If, in the opinion of that agency the action would jeopardize the endangered species, the action cannot proceed unless there is a reasonable and prudent alternative that will not cause the jeopardy.

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Water Conservation, Reuse, and Recycling: Proceedings of an Iranian-American Workshop The ESA is extremely powerful because nearly every major water project—not just those undertaken directly by the federal government—either requires some kind of federal approval (such as under § 404 of the Clean Water Act), or receives federal financing. Thus, the ESA has proved to be a formidable barrier to water development that could be destructive of fish or wildlife habitat where endangered species are found. The Act, indeed, may be the most significant law affecting new water development. It protects any affected species in the area of origin, the importing area, and in the area of any pipelines or other facilities. Another section of the ESA, § 9, prohibits actions that “take” or “harass” an endangered species. These terms are broadly interpreted to include even harm to the habitats of endangered species. Unlike § 7, which is specific to federal agency actions, § 9 extends to private actions. The section has rarely been applied to restrict private water development or uses. In one exceptional case, however, the pump diversion facility of an irrigation district killed several endangered salmon. A federal court enjoined the irrigation district’s activities, prohibiting it from “taking” the endangered species (Department of Fish and Game v. Anderson-Cottonwood Irrigation District, 11 Cal.Rptr.2d 222 [Cal. App. 1992]). Public Participation Laws Communities, local governments, individuals, and nongovernmental organizations dedicated to environmental protection often demand to be heard when water is transferred from one area to another. Environmental interests had no place in influencing water decisions under the early laws of the West, and even today the interests of the environment in the areas from which water is proposed to be exported are not adequately represented in the laws and policies of many western states. Many of the laws that were discussed above require public hearings or processes that can be forums for members of the public to present their views to government decision makers. Although water allocation decisions once were made by the state with input only from people who held water rights, today the decision making processes of many states have been opened up to the public. Public agencies usually receive comments from parties directly involved in decisions concerning the allocation, development, and transfer of water rights. Modern laws have begun to include various interests including third parties affected by the allocation of water rights and other decisions concerning water use. All of the federal environmental laws also have public interest participation requirements. Collaborative Efforts Stakeholders (water rights holders, local residents, businesses, environmental groups, and others) who are affected by a water development or transfer have begun to organize and to exert substantial influence over water decisions, not

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Water Conservation, Reuse, and Recycling: Proceedings of an Iranian-American Workshop only those that involve interbasin transfers of water. Dozens of initiatives throughout the western United States demonstrate the potential for these locally based, problem-solving entities. In some cases, such groups have solved problems of diminished streamflows in popular fisheries by crafting voluntary agreements among water rights holders to change the timing of withdrawals. Sometimes third parties affected by a proposed interbasin transfer are able to persuade the proponents to take voluntary action to protect the interests of the public. Unless there is a public process provided for under the law, it is difficult to initiate these negotiations. Only when third parties have sufficient political or legal leverage (for example, the threat that a federal law like the Endangered Species Act will prevent their project from being built) will the proponent of the development activity participate in negotiations. When there is no such legal threat it is difficult for third parties with little political power to get the attention of people who want to develop water. The results, then, are not consistent among similar projects and often provide incomplete relief where the objectors lack political or legal strength. CONCLUSION The western states have made some progress in addressing the impacts of interbasin transfers; however, their efforts are incomplete. Although it can be argued that the most damaging interbasin transfers have already been constructed and most of the damage has been done, pressures will continue to move water out of more slowly growing watersheds to expanding urban areas. Therefore, it is wise to consider changes in state laws that will prevent the kinds of harms that have been experienced in places like the Owens Valley and the Colorado River basin. A committee of the National Academy of Sciences (NAS) studied the effects of water transfers in the West. The committee’s report (NRC, 1992) made the following recommendations that apply to interbasin transfers: States and tribal governments should develop specific policies to guide water transfer approval processes regarding the community and environmental consequences of transferring water from one basin to another, because such transfers may have serious long-term consequences. Water transfer processes should formally recognize interests within basins of origin that are of statewide and regional importance, and these interests should be weighed when transbasin exports are being considered. Although each state or tribe should select the approach that suits its needs best, protection of areas of origin generally would include impact assessment, opportunities for all affected interests to be heard, regulatory mechanisms to help avoid adverse effects, compensation (e.g., financial payments or mitigation), and authority to deny a proposed transfer or water use involving a transbasin export if the effects are judged unacceptable.

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Water Conservation, Reuse, and Recycling: Proceedings of an Iranian-American Workshop States should revise laws that now exempt water facilities from taxation by the county of origin either because the exporter is a public entity or because of provisions that make such facilities taxable only in the county where the water is used. Mechanisms to compensate communities for transfer-related losses of tax base, such as an annual payment in lieu of taxes, may be needed.7 Since publication of the NAS committee’s report in 1992, states have not made any major improvements in their laws affecting interbasin transfers. The recommendations nevertheless provide useful criteria for evaluating and developing approaches for dealing with the consequences of moving water from one watershed to another. Analyzed in this light, the greatest inadequacies of present approaches in the United States are as follows: Decisions do not rely on policies or plans that have been formulated in advance to articulate clear public interest considerations for communities and the environment. There are no methods for weighing the relative importance of national, regional, and local interests when water is removed from the basin of origin. Although several legal devices, mostly operating indirectly, assess or regulate the effects of interbasin transfers, and some water laws include consideration of the public interest, schemes to provide comprehensive mitigation and compensation to the basin of origin have not been tried. The states should enact legislation to deal with all of these issues. Laws presumably will apply to modifications of existing interbasin transfer facilities as well as future diversion. Other countries in arid and semiarid regions almost certainly will be confronted with the prospect of interbasin transfers. The principles expressed here can be considered for application there to the extent they fit the legal, social, and environmental situations of those countries. REFERENCES California Environmental Insider. Westlands rights application threatens to ignite valley water war. August 31, 2000. National Research Council. 1992. Water Transfers in the West: Efficiency, Equity, and the Environment. Washington, DC: National Academy Press. National Water Commission. 1973. Water policies for the future. Final report of the commission. Subcommittee on Water Resources and Environment, Committee on Transportation and Infrastructure, U.S. House of Representatives. 7   National Research Council, National Academy of Sciences, Water Transfers in the West: Efficiency, Equity, and the Environment, 257–59 (1992).