Water Transfers in the West

Efficiency, Equity, and the Environment

Committee on Western Water Management

Water Science and Technology Board

Commission on Engineering and Technical Systems

with the assistance of the

Board on Agriculture

National Research Council

NATIONAL ACADEMY PRESS
Washington, D.C.
1992



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Water Transfers in the West: Efficiency, Equity, and the Environment Water Transfers in the West Efficiency, Equity, and the Environment Committee on Western Water Management Water Science and Technology Board Commission on Engineering and Technical Systemswith the assistance of the Board on Agriculture National Research Council NATIONAL ACADEMY PRESS Washington, D.C. 1992

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Water Transfers in the West: Efficiency, Equity, and the Environment NATIONAL ACADEMY PRESS 2101 Constitution Ave., N.W.Washington, D.C. 20418 NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance. This report has been reviewed by a group other than the authors according to procedures approved by a Report Review Committee consisting of members of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. Support for this project was provided by the Metropolitan Water District of Southern California Agreement No. 2103, East Bay Municipal Utility District, Bureau of Reclamation Contract No. 9-FG-81-15550, U.S. Environmental Protection Agency Contract No. 815848-01-O/R, and Ford Foundation Grant No. 890-0807. Library of Congress Cataloging-in-Publication Data Water transfers in the West: efficiency, equity, and the environment / Committee on Western Water Management, Water Science and Technology Board, Commission on Engineering and Technical Systems, Board on Agriculture, National Research Council. p. cm. Includes bibliographical references and index. ISBN 0-309-04528-2 1. Water transfer—West (U.S.) 2. Water transfer—Law and legislation—West (U.S.) I. National Research Council (U.S.). Water Science and Technology Board. Committee on Western Water Management. HD1695.A17W39 1992 333.91'00978—dc20 92-5740 CIP Copyright © 1992 by the National Academy of Sciences This book is printed with soy ink on acid-free recycled stock. Printed in the United States of America Original cover art by Sally Groom, Washington, D.C.

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Water Transfers in the West: Efficiency, Equity, and the Environment COMMITTEE ON WESTERN WATER MANAGEMENT A. DAN TARLOCK, Chair, Illinois Institute of Technology, Chicago-Kent College of Law D. CRAIG BELL, Western States Water Council, Midvale, Utah BONNIE COLBY, University of Arizona, Tucson LEO M. EISEL, Wright Water Engineers, Denver, Colorado DAVID H. GETCHES, University of Colorado School of Law, Boulder THOMAS J. GRAFF, Environmental Defense Fund, Oakland, California FRANK GREGG, University of Arizona, Tucson R. KEITH HIGGINSON, Department of Water Resources, Boise, Idaho MARVIN E. JENSEN, Colorado State University, Fort Collins DUNCAN T. PATTEN, Arizona State University, Tempe CLAIR B. STALNAKER, Fish and Wildlife Service, Fort Collins, Colorado LUIS S. TORRES, Southwest Research Information Center, Espanola, New Mexico RICHARD TRUDELL, American Indian Lawyer Training Program, Inc., Oakland, California HENRY J. VAUX, JR., University of California, Riverside SUSAN WILLIAMS, Gover, Stetson, Williams & West, Albuquerque, New Mexico Liaison to the Board on Agriculture JAN VAN SCHILFGAARDE, Agricultural Research Service, Beltsville, Maryland Staff CHRIS ELFRING, Study Director ANITA A. HALL, Project Secretary WYETHA B. TURNEY, Word Processor ROSEANNE PRICE, Editorial Consultant FLORENCE POILLON, Editorial Consultant

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Water Transfers in the West: Efficiency, Equity, and the Environment WATER SCIENCE AND TECHNOLOGY BOARD DANIEL A. OKUN, Chair, University of North Carolina, Chapel Hill A. DAN TARLOCK, Vice Chair, Illinois Institute of Technology, Chicago-Kent College of Law NORMAN H. BROOKS, California Institute of Technology, Pasadena RICHARD A. CONWAY, Union Carbide Corporation, South Charleston, West Virginia KENNETH D. FREDERICK, Resources for the Future, Washington, D.C. DAVID L. FREYBERG, Stanford University, Stanford, California WILFORD R. GARDNER, University of California, Berkeley DUANE L. GEORGESON, Metropolitan Water District of Southern California, Los Angeles MICHAEL KAVANAUGH, James M. Montgomery Consulting Engineers, Walnut Creek, California (through 6/30/91) HOWARD C. KUNREUTHER, University of Pennsylvania, Philadelphia (through 6/30/91) ROBERT R. MEGLEN, University of Colorado, Denver (through 6/30/91) JUDY L. MEYER, University of Georgia, Athens DONALD J. O'CONNOR, HydroQual, Inc., Mahwah, New Jersey BETTY H. OLSON, University of California, Irvine (through 6/30/91) STAVROS S. PAPADOPULOS, S. S. Papadopulos & Associates, Inc., Rockville, Maryland KENNETH W. POTTER, University of Wisconsin, Madison P. SURESH C. RAO, University of Florida, Gainesville (through 6/30/91) BRUCE E. RITTMANN, University of Illinois, Urbana DONALD D. RUNNELLS, University of Colorado, Boulder PHILIP C. SINGER, University of North Carolina, Chapel Hill HUGO F. THOMAS, Department of Environmental Protection, Hartford, Connecticut (through 6/30/91) JAMES R. WALLIS, IBM T. J. Watson Research Center, Yorktown Heights, New York (through 6/30/91) M. GORDON WOLMAN, The Johns Hopkins University, Baltimore, Maryland JOY B. ZEDLER, San Diego State University, San Diego

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Water Transfers in the West: Efficiency, Equity, and the Environment Staff STEPHEN D. PARKER, Director SARAH CONNICK, Staff Officer SHEILA D. DAVID, Senior Staff Officer CHRIS ELFRING, Senior Staff Officer JACQUELINE MACDONALD, Research Associate JEANNE AQUILINO, Administrative Specialist PATRICIA CICERO, Secretary ANITA A. HALL, Administrative Secretary JOYCE A. SPARROW, Secretary

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Water Transfers in the West: Efficiency, Equity, and the Environment BOARD ON AGRICULTURE THEODORE L. HULLAR, Chair, University of California, Davis PHILIP H. ABELSON, American Association for the Advancement of Science, Washington, D.C. DALE E. BAUMAN, Cornell University, Ithaca, New York R. JAMES COOK, Agricultural Research Service at Washington State University, Pullman, Washington ELLIS B. COWLING, North Carolina State University, Raleigh ROBERT M. GOODMAN, University of Wisconsin and National Research Council Scholar-in-Residence PAUL W. JOHNSON, Natural Resources Consultant, Decorah, Iowa NEAL A. JORGENSEN, University of Wisconsin, Madison ALLEN V. KNEESE, Resources for the Future, Washington, D.C. JOHN W. MELLOR, John Mellor Associates, Inc., Washington, D.C. DONALD R. NIELSEN, University of California, Davis ROBERT L. THOMPSON, Purdue University, West Lafayette, Indiana ANNE M. K. VIDAVER, University of Nebraska, Lincoln CONRAD J. WEISER, Oregon State University, Corvallis JOHN R. WELSER, The Upjohn Company, Kalamazoo, Michigan Staff SUSAN E. OFFUTT, Executive Director JAMES E. TAVARES, Associate Executive Director CARLA CARLSON, Director of Communications BARBARA J. RICE, Editor

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Water Transfers in the West: Efficiency, Equity, and the Environment The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Frank Press is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. Robert M. White is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Kenneth I. Shine is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy's purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Frank Press and Dr. Robert M. White are chairman and vice chairman, respectively, of the National Research Council.

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Water Transfers in the West: Efficiency, Equity, and the Environment Preface As yet another prolonged drought grips many parts of the arid West, we are once again reminded of the central importance of water. Water is a resource in great demand: beyond the needs of irrigated agriculture —long the biggest water user in the West—we now must ensure water supplies to support urban growth and development, traditional minority cultures, environmental needs, and recreation. We must become more careful in our planning and management so all these many needs can be met equitably and efficiently. More and more, water transfers are being considered, and used, as a major component of water resource management. As defined in this report, water transfers involve a change in point of diversion, a change in type of use, or a change in location of use. They are a mechanism with great potential to help allocate the West's limited water. But, as is the case with all tools, water transfers can have various effects—sometimes beneficial, sometimes adverse; sometimes intended, sometimes inadvertent. The Committee on Western Water Management, of the Water Science and Technology Board, has focused its attention on those effects. The committee's purpose was to look at water transfers that have happened or are being discussed and to develop an improved understanding of the nature, scope, and consequences of water transfers, with a special focus on third party effects and environmental quality. Although much of this report discusses these issues in broad terms, the committee also conducted seven case studies to provide examples that show the diversity of participants and impacts.

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Water Transfers in the West: Efficiency, Equity, and the Environment Water transfers have occurred in the western United States since the initiation of the prior appropriation doctrine. Many have been small scale and relatively routine, but others have been large and controversial. Some of these transfers and proposed transfers have provided the spark for significant controversy in the West. Examples include the Owens Valley transfer in California (dramatically described in the movie Chinatown), transmountain diversions from the Colorado River basin to Denver, and agriculture-to-municipal transfers in Arizona. It is time to move beyond discussions of whether water transfers in general are good or bad per se. Transfers are a management option that western water managers have historically used along with structural measures to meet demand, and all indications are that transfers will be used with increasing frequency because of cost advantages and flexibility. We need to focus attention, then, on the consequences of such transfers and to think hard about how to encourage the benefits they can provide while minimizing the problems. Unlike many other commodity transfers, water transfers can have significant positive and negative effects on “third parties”—people, groups, and values beyond the buyers and sellers involved. The law has afforded protection to some of these third parties—such as existing water rights holders not directly involved in the transfer—but not to all. Third party effects include impacts on Indian and other minority populations, effects on regional economic systems, and environmental effects. This report makes suggestions to help increase the usefulness of water transfers in solving water supply problems in the West while ensuring that third party effects are fairly considered and mitigated. Conflicts over water seem an inevitable part of life in an arid environment, but we can take steps to ease these controversies. The committee hopes this report provides some guidance to the many decisionmakers involved. This report builds on a long National Research Council tradition of addressing the challenges that new demands for water pose in the West. In 1966 the Committee on Water, a forerunner of the Water Science and Technology Board, convened a special committee under the leadership of the distinguished student of water policy, Gilbert F. White, to explore the options available to improve water management in the Colorado River basin. That committee's report, Water and Choice in the Colorado Basin: An Example of Alternatives in Water Management (NAS, 1968), was a masterful survey of nontraditional alternatives for water management in the Colorado basin. The report called for more attention to the expanding equity and environmental demands on the river. It was an eloquent plea for policymakers to

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Water Transfers in the West: Efficiency, Equity, and the Environment enlarge the range of options that they consider when formulating water resource policy. Specifically, Water and Choice advanced the then-heretical idea that states and the federal government should consider alternatives beyond project construction to stimulate regional growth and should give greater weight to environmental values. Water and Choice accurately predicted many shifts in water resource policy that did occur in the past 25 years. The construction of new large-scale water projects is no longer central to regional development; the protection of instream uses and the promotion of social equity are now considered legitimate values. As a result, water managers, providers, and users must now seriously consider a wide range of management options such as water transfers to meet their objectives and to promote the twin goals of equity and efficiency. They are no longer theoretical options, as they once were. Members of the committee would like to thank the many people across the West who met with us and helped us develop our thoughts. We talked with astute representatives of federal agencies, state governments, Indian tribes, environmental groups, agricultural groups, and many other interests. Although the committee takes sole responsibility for the ideas expressed in this report, it could not have completed its effort without this broad spectrum of help. I would also like to thank the project's financial sponsors—the Ford Foundation, the U.S. Department of the Interior, the U.S. Environmental Protection Agency, the East Bay Municipal Utility District, and the Metropolitan Water District of Southern California—for their courage in setting us free to debate such a challenging issue. Finally, I would like to express my profound thanks to the members of the committee. Each approached the task with enthusiasm and dedication. This report is a true peer collaboration and reflects consensus arrived at through mutual learning. The committee expresses special thanks to Wendy Melgin, who steered the project through the planning process before October 1989, and to Chris Elfring, who managed the project from the first case study to the final edit with dedication, humor, and a firm professional hand. Anita Hall and Wyetha Turney provided the staff assistance crucial to a project of this nature, and we thank them. Some readers of this report may be disappointed that we do not offer a definitive resolution of issues such as which communities should be preserved from external change and which should be subjected to the full discipline of the market. They may be equally disappointed that we do not offer detailed federal and state legislative proposals to facilitate desirable transfers and discourage undesirable ones. Committee members have many different ideas on how to solve the prob-

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Water Transfers in the West: Efficiency, Equity, and the Environment lems addressed in this report, but our consensus was that at this stage of the transfer debate it would be presumptuous to put forward a menu of any great detail. Rather we hope that this report will shape the debate by highlighting the issues that state and federal governments must address and the possible avenues of approach. A. Dan Tarlock, Chair Committee on Western Water Management

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Water Transfers in the West: Efficiency, Equity, and the Environment Contents     SUMMARY   1      Third Party Impacts and Opportunities,   5      Assessing Water Transfers and Their Effects,   6      The Role of Law in the Transfer Process,   6      Conclusions and Recommendations,   8      Balancing Efficiency and Equity,   14  1   PRESSURES FOR CHANGE   16      The Historical Context,   21      Why Water Transfers Occur in the West,   23      Changing Demands,   25      Some Recent Transfers,   27      Types of Water Transfer Opportunities,   30      The Case for Transfers,   34      References,   36     BOXES        Why The Committee Focused on Transfers Within States Rather Than Between States,   19      Water as an Investment,   28

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Water Transfers in the West: Efficiency, Equity, and the Environment  2   THIRD PARTY IMPACTS AND OPPORTUNITIES   38      Protecting Third Parties,   42      Rural Communities,   45      Availability of Water for Agriculture,   50      Ethnic Communities,   51      Tribes as Sovereign Governments,   52      Ecosystems,   52      Instream Flows and Related Benefits,   54      Water Quality,   60      Urban Interests,   62      Federal Taxpayers,   63      Opportunities,   64      References,   67     BOXES        Water Transfers in the West: A Study of Six States,   41      Transaction Costs: Their Role in Water Transfers,   43      Leasing Tribal Water for Non-Indian Use,   53       Why “Recreation” and “Fish and Wildlife” Need Separate Attention,   56      Quantifying Instream Flow,   58  3   THE ROLE OF LAW IN THE TRANSFER PROCESS   70      State Water Allocation Laws,   73      Other State Laws,   84      Federal Reclamation Law,   87      Federal Environmental Laws,   91      Federal and Indian Reserved Rights,   92      Special District Laws and State Law Restraints,   96      Options for Improving Water Law and Policy,   98      References,   104     BOXES        The Role of the State Engineer in Water Transfers,   74      Examples of Water-Saving Legislation,   83      Water Quality Effects of Water Use,   85      Facilitating Third Party Participation in the Water Transfer Process,   100

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Water Transfers in the West: Efficiency, Equity, and the Environment  4   ASSESSING WATER TRANSFERS AND THEIR EFFECTS: AN INTRODUCTION TO THE CASE STUDIES   106      Elements of the Evaluation System,   106      Introduction to the Case Studies,   111      Critical Issues,   114      References,   118     BOX        Planning for Water Resources: The Principles and Standards Approach,   107  5   THE TRUCKEE-CARSON BASINS IN NEVADA: INDIAN TRIBES AND WILDLIFE CONCERNS SHAPE A REALLOCATION STRATEGY   119      The Setting,   120      The Water Delivery System,   124      How Water Law Has Defined Rights and Constrained Reallocation in the Truckee-Carson Basins,   125      Recent and Planned Transfers,   131      Conclusions,   133      References,   135  6   COLORADO FRONT RANGE-ARKANSAS RIVER VALLEY: INTERCONNECTED WATER SOURCES   137      The Setting,   139      Major Water Transfer Projects,   143      Institutional and Legal Considerations,   146      Current Water Transfers and Water Marketing,   147      Future Transbasin Diversions,   151      Third Party Impacts,   154      Conclusions,   157      References,   161  7   NORTHERN NEW MEXICO: DIFFERING NOTIONS OF WATER, PROPERTY, AND COMMUNITY   162      The Setting,   163      Third Party Impacts,   171      Conclusions,   178      References,   181     BOX        One Perspective on Adjudications: “Dancing for Water,”   179

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Water Transfers in the West: Efficiency, Equity, and the Environment  8   THE YAKIMA BASIN IN WASHINGTON: WILL TRANSFERS OCCUR WITHOUT JUDICIAL OR LEGISLATIVE PRESSURES?   182      The Setting,   184      Third Party Impacts,   189      Conclusions,   191      References,   193  9   CENTRAL ARIZONA: THE ENDLESS SEARCH FOR NEW SUPPLIES TO WATER THE DESERT   194      The Setting,   196      Water Institutions,   200      Third Party Impacts,   204      Conclusions,   210      References,   211  10   CALIFORNIA'S CENTRAL VALLEY: FEAR AND LOATHING IN POTENTIAL WATER MARKETS   213      The Setting,   214      Water Institutions,   218      Third Party Impacts,   225      Conclusions,   230      References,   232  11   CALIFORNIA'S IMPERIAL VALLEY: A “WIN-WIN” TRANSFER?   234      The Setting,   234      Legal Background,   238      The IID-to-MWD Transfer Negotiations,   240      The 1989 Water Conservation Agreements,   242      Third Party Impacts,   243      Future Agreements,   244      Conclusions,   247      References,   247  12   CONCLUSIONS AND RECOMMENDATIONS   249      Critical Issues,   250      Conclusions and Recommendations,   252

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Water Transfers in the West: Efficiency, Equity, and the Environment     APPENDIXES    A   Glossary   269  B   Acknowledgments of Case Study Participants   278  C   Biographical Sketches of Committee Members and Staff   282     INDEX   287

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