11

California's Imperial Valley: A “Win-Win” Transfer?

Success can offer as many lessons as failure, so it is useful to conclude this series of case studies with a discussion of California 's Imperial Valley. In early 1989 the Imperial Irrigation District (IID) and the Metropolitan Water District (MWD) of Southern California signed a water conservation agreement. Two other irrigation districts, the Palo Verde Irrigation District and the Coachella Valley Water District, became part of the agreement in late 1989 (IID and MWD, 1989). In brief, MWD will pay for a program of water conservation for IID. In return, IID will reduce its call on the Colorado River by the amount conserved, and MWD will be entitled to divert this amount into its system at Parker Dam. Although MWD prefers not to characterize the agreement as a water transfer, it is otherwise almost universally viewed as the first major rural-to-urban transfer of irrigation water in California and will be a model for future transfers that try to accommodate urban demands and preservation of the state 's productive agricultural economy. It is important to realize that the Imperial Irrigation District-Metropolitan Water District transfer was an “easy” case because no existing users were displaced and third party effects were minimal or indirect enough to be ignored. Still, it offers an important illustration of the potential of transfers.

THE SETTING

The Imperial Valley lies on the northern edge of the Sonoran Desert in southern California about 50 mi (80 km) west of the Colo-



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Water Transfers in the West: Efficiency, Equity, and the Environment 11 California's Imperial Valley: A “Win-Win” Transfer? Success can offer as many lessons as failure, so it is useful to conclude this series of case studies with a discussion of California 's Imperial Valley. In early 1989 the Imperial Irrigation District (IID) and the Metropolitan Water District (MWD) of Southern California signed a water conservation agreement. Two other irrigation districts, the Palo Verde Irrigation District and the Coachella Valley Water District, became part of the agreement in late 1989 (IID and MWD, 1989). In brief, MWD will pay for a program of water conservation for IID. In return, IID will reduce its call on the Colorado River by the amount conserved, and MWD will be entitled to divert this amount into its system at Parker Dam. Although MWD prefers not to characterize the agreement as a water transfer, it is otherwise almost universally viewed as the first major rural-to-urban transfer of irrigation water in California and will be a model for future transfers that try to accommodate urban demands and preservation of the state 's productive agricultural economy. It is important to realize that the Imperial Irrigation District-Metropolitan Water District transfer was an “easy” case because no existing users were displaced and third party effects were minimal or indirect enough to be ignored. Still, it offers an important illustration of the potential of transfers. THE SETTING The Imperial Valley lies on the northern edge of the Sonoran Desert in southern California about 50 mi (80 km) west of the Colo-

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Water Transfers in the West: Efficiency, Equity, and the Environment rado River (Figure 11.1). The area was originally called the Salton Sink and, for a while in the nineteenth century, the Valley of the Dead. It was renamed the Imperial Valley at the turn of the century by the irrigation pioneer and promoter George Chaffey as part of an effort to attract settlers to the harsh desert. The valley is surrounded on the north, east, and west by mountains, and the entire valley floor is below sea level. The U.S.-Mexican

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Water Transfers in the West: Efficiency, Equity, and the Environment border forms the southern boundary. Two rivers, the Alamo and the New, flow from Mexico into the Salton Sea at the western edge of the valley. These rivers are actually old shallow riverbeds into which the Colorado once flowed when its normal channel became silted up and it overflowed its banks in a southwesterly direction. It has been said that the Imperial Valley is one of nature's jokes—it contains hundreds of thousands of acres of flat fertile land formed by silt deposited in the ancient delta of the Colorado and the growing season is perpetual, but rainfall averages less than 3 in. (0.7 cm) per year. Ground water resources are minimal, so the valley, actually a geologic sink, must rely on the Colorado River for its supply. Irrigation has been a great success in the valley. Approximately 497,000 irrigated acres produces a wide variety of crops. In 1988 some 349,281 acres was devoted to field crops, primarily alfalfa, cotton, Sudan grass hay, sugar beets, and wheat, with a gross value of $250 million. Much of the nation's winter melons and table vegetables come from the valley, and in 1988 some 119,682 acres was devoted to melons, lettuce, and other vegetables. These crops produced a gross value of nearly $460 million. Some land is devoted to citrus and dates. In addition, there is a large and valuable livestock industry, as well as significant honey production. The lifeblood of the valley is the Colorado River, and the valley depends on its senior water rights to sustain itself. Because the basin is an inhospitable place, there was limited use of the river before the valley was promoted and settled between 1901 and 1904. Several Indian tribes, including the ancient Anasazi, practiced flood irrigation along the lower reaches of the river. Mormons and farmers in the Uncompahgre Valley of Colorado had made limited diversions starting in 1854, but California did not begin to use the river until Samuel Blythe developed the Palo Verde Valley upstream. Arizona developed the Yuma Valley in the 1880s, and Imperial diversions began in 1901 when the California Development Company posted a notice and diverted water that ran into a canal that mostly traveled through Mexico on its way to the valley. Water allocation in California today is characterized by the storage and allocation of large blocks of water by federal, state, and local irrigation districts and other public entities. Much of this water is allocated to irrigated agriculture, but the continued growth of the state's urban areas and growing recognition of the need to incorporate instream flow protection into all decisions on water resource allocation create strong pressures for large-scale rural-to-urban transfers and the reduction of agricultural use. Despite its established water rights, its long ability to shape federal reclamation efforts to its

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Water Transfers in the West: Efficiency, Equity, and the Environment benefit, and the high value of many of its crops, the Imperial Valley is now vulnerable to reallocation pressures. It is the last major agricultural area in southern California, its water use practices have long been questioned, and the value of crops grown in the valley varies greatly. The history of the settlement and cultivation of the Imperial Valley is in large part the history of the regulation of the Colorado River and the growth of agribusiness in the state. As a 1991 appellate court opinion upholding the state's power to curb wasteful use practices in the valley observed, IID “has occupied a position of great strength, discretion and vested right in a geographical part of the country that is ‘far western,' embracing a philosophy that is independent in every sense of the word. Recent trends in water-use philosophy and the administration of water law have severely undermined the positions of districts such as IID” (Imperial Irrigation District v. State Water Resources Control Board, 1991). That history has enabled the valley to chart its own destiny, but the valley is increasingly vulnerable to criticism that it uses a disproportionate share of southern California's water. Ninety-eight percent of Colorado River water deliveries to the IID go to irrigation, and the average use is more than 5 acre-feet (6 megaliters (ML)) per acre. A wide variety of irrigation techniques are used. From the start the Colorado River was the basis of the area's survival. About 7,000 people settled in the valley between 1901 and 1904, but the great floods of 1905 and 1907 threatened the rapidly developing agricultural economy. The story of the valley's efforts to tame the river has been told many times, and historians are still debating its meaning (Hundley, 1975; Reisner, 1986; Worster, 1985). For the purposes of this case study, the important points are that the land development perfected some of the earliest rights along the Colorado River, but these rights could not be enjoyed without upstream flood control dams to protect the conveyance facilities from destruction by floods and sedimentation. In addition, the early canal from the Colorado ran through Mexico, which vigorously but unsuccessfully opposed the 1901 diversions. Mexican-Imperial tensions were the major source of many problems. Because the valley's water supply passed through Mexico, the valley faced problems such as pollution, increased financial burdens to maintain the canal, and the threat of revolutionary violence and disruption of supply. The valley's fate was ultimately linked to the development of the entire Colorado River, although it resisted this linkage for two decades. Arthur Powell Davis, John Wesley Powell's nephew, proposed a series of large storage reservoirs along the river in 1902, when he

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Water Transfers in the West: Efficiency, Equity, and the Environment joined the newly established federal Reclamation Service. Initially, most farmers wanted only an “all American” canal, a canal built to serve U.S. land, not a series of flood control and storage reservoirs built in part to protect Mexican interests. By 1920, influential valley leaders such as Phil Swing, long an opponent of storage and a future congressman, recognized that the canal and storage were linked. Valley support for the 1922 Colorado River Compact, which divided the river equally between the upper and lower basins, and the construction of Hoover Dam by the Bureau of Reclamation, were the price that the valley had to pay for federal construction of an upstream storage facility and the All American Canal. Eventually, all water rights and distribution systems were consolidated within the Imperial Irrigation District, formed in 1911 as the result of the bankruptcy of both the California Development Company and its Mexican subsidiary. Today, the district has rights to well over one-half of California's Colorado River entitlement, but its use is vulnerable to economic and political pressures for reallocation. The IID is the major remaining agricultural island in urban Southern California and a much coveted source of water for the MWD and the Los Angeles Department of Water and Power, who face unabated population growth and the loss of former supplies to Arizona and to other claimants in California. Los Angeles' Mono and Owens basin supplies have both been reduced, and MWD cannot count on the availability of surplus Colorado River water now that Arizona has begun to take its share through the Central Arizona Project. The Imperial Irrigation District diverts its water directly from the Colorado at Imperial Dam above Yuma, where it enters the All American Canal. The water is used to generate power as it travels. Once the district makes a call on the Bureau of Reclamation for a delivery from Hoover Dam to Imperial Valley, it must move the water through its canals and laterals to the farmer. The district has five regulating reservoirs to conserve the water, but the total storage space is only 1,900 acre-feet (2,340 ML). LEGAL BACKGROUND Water rights on the Colorado River are defined by state and federal law. In 1928, Congress apportioned 7.5 million acre-feet (9.3 million ML) of the lower basin's share of the Colorado River among Arizona, California, and Nevada. California was given 4.4 million acre-feet (5.4 million ML); Arizona, 2.8 million (3.5 million ML); and Nevada, 300,000 (370,000 ML). In order to begin construction of Hoover Dam and the All American Canal, the seven major users in Southern

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Water Transfers in the West: Efficiency, Equity, and the Environment The patchwork of lush cropland near the Salton Sea in this 1965 photo from Gemini V shows how irrigation can “make the desert bloom.” First called the Salton Sink, and later the Valley of the Dead, the region was renamed the Imperial Valley at the turn of the century as part of an effort to attract settlers to the harsh desert. When irrigated, the flat fertile land is tremendously productive, producing melons, lettuce, and other vegetables valued at nearly $460 million in 1988. CREDIT: L. G. Cooper and C. Conrad, Bureau of Reclamation. California agreed among themselves on the allocation of the 4.4 million acre-feet (5.4 million ML). When the lower Colorado was adjudicated in Arizona v. California (1963), the Imperial Valley was given the right to divert the lesser of 2.6 million acre-feet (3.2 million ML) or an amount necessary to irrigate 424,125 acres as present perfected rights. Under the 1931 Seven Party Agreement, IID, along with the Coachella Water District and a small amount of Palo Verde acreage, has the third priority behind the Palo Verde Irrigation District and the California Division of the Yuma Project, but ahead of MWD, which has the fourth priority. Together, the first three priorities have a

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Water Transfers in the West: Efficiency, Equity, and the Environment right to 3,850,000 acre-feet (4,749,000 ML) per year. The IID can also take an additional 300,000 acre-feet (370,050 ML) per year as a sixth priority if neither the Palo Verde Irrigation District nor the Yuma Irrigation District uses its entitlement. The IID's water rights are subject to the requirement that the water be put to beneficial use. Western water rights are usufructuary—they are limited to the use of the water and cease if the water stops being put to a beneficial use. The prevailing assumption is that water that is not put to beneficial use is either forfeited or abandoned and is open to appropriation by others. Attacks on nonbeneficial or wasteful uses generally are brought by junior water rights holders against seniors. The IID has long been attacked for applying water in excess of crop needs, but its use was not seriously challenged until 1980. The most significant challenge to IID's water use was an ultimately unsuccessful effort by a valley activist to apply the excess land provisions of the Reclamation Act of 1902. The geography of the valley makes excess use and the resulting drainage a serious problem. The U.S. Supreme Court Special Master, Simon Rifkind, noted in 1960 that much of California's water use was “wasted, as is apparent, for example, in the very large unused runoff each year into the Salton Sea.” The IID has been sued by a number of landowners for damages caused by flooding. In 1980 a lawsuit filed by a Salton Sea farmer, who claimed that IID's tailwater drainage was raising the level of the Salton Sea and flooding his land, triggered a series of administrative and judicial orders requiring greater water conservation in the IID, although water salvage investigations had been under way since the mid-1960s. These state orders provided a strong incentive to negotiate a settlement (Reisner and Bates, 1990). In 1984, after a lengthy series of hearings in which a variety of interests (e.g., the California Department of Water Resources and the Environmental Defense Fund) presented substantial evidence on IID's water management practices and the potential for a conservation-induced water sale, the State Water Resources Control Board concluded that IID's use of water was unreasonable under California law and constituted waste (Stavins and Willey, 1983). The next year the Bureau of Reclamation issued a report identifying measures that could conserve 354,000 acre-feet (436,700 ML) per year. THE IID-TO-MWD TRANSFER NEGOTIATIONS The 1989 Water Conservation Agreement signed by IID and MWD accomplishes the largest recorded transfer of salvaged water between an agricultural user and an urban supplier. It is important both in

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Water Transfers in the West: Efficiency, Equity, and the Environment and of itself and as a harbinger of future transfers. The transfer came as a result of both market incentives and legal sanctions. All the major interests—IID, other irrigation districts with higher priorities, MWD, and national environmental organizations, some of whom actively encouraged the transfer—describe it as a “win-win” agreement. The possible third party effects directly attributable to the 100,000-acre-foot (123,400-ML) transfer seem to have been addressed adequately. Four rounds of negotiations were necessary to arrive at the current agreement. The IID initially proposed to sell water to MWD at about $250 per acre-foot ($203 per ML) with an inflation adjustment; IID pays the Bureau of Reclamation between $10 and $30 per acre-foot ($8 and $24 per ML). At the same time, the district was challenging the state board's authority to impose conservation measures. The sale proposal was controversial for both legal and political reasons. The legal problem was that all participants in the 1931 Seven Party Agreement, including IID, took the position that water not used by a senior passed to the next lower priority user who could put it to beneficial use. Simply put, any wasted water was not IID's to sell but MWD's to take. The Imperial Irrigation District broke with this principle, and MWD dropped its junior entitlement claims. The parties agreed that MWD would pay $10 million into IID's conservation fund in return for just over 100,000 acre-feet (123,400 ML) for 35 years. Negotiations were broken off after IID's board rejected the agreement by a 3 to 2 vote in late 1985 and MWD refused to consider a transfer that allowed the district to receive a large profit over and above the capital and maintenance costs of the conservation regime. For a time, an IID consultant urged the district to privatize the transaction. Direct negotiations between IID and MWD resumed, however, in 1987 after an appellate court held that the state had the authority to order the district to institute a water conservation program (Imperial Irrigation District v. State Water Resources Control Board, 1986). The two parties reached a tentative agreement in 1987, but IID continued to adhere to its position that it was selling water. In early 1988, IID dropped the price to $175 per acre-foot ($142 per ML), but MWD refused to counter. As the State Water Resources Control Board proceeded to hold hearings on the means of compliance with a target of 350,000 acre-feet (432,000 ML) of conserved water per year, IID became more flexible. Between May and November of 1989, IID and MWD worked out details of the final agreement, after the parties agreed to split the difference on their estimates of the value of the water, bringing the figure to around $100 per acre-foot ($81 per ML).

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Water Transfers in the West: Efficiency, Equity, and the Environment THE 1989 WATER CONSERVATION AGREEMENTS The 1989 Water Conservation Agreement obligates MWD to pay for both structural and nonstructural conservation projects designed to conserve 106,100 acre-feet (130,900 ML) annually, which it can then take for a period of 35 years. Total capital costs are estimated to be $97.8 million, plus $23 million in indirect costs. The program will be implemented over a 5-year period between 1990 and 1994; then the savings will be constant until MWD or another party agrees to an additional conservation program. The legal questions that initially created potential barriers were finessed. Section 6.5 of the agreement is replete with disclaimers that MWD shall not assert a right to the conserved waters, that the rights of the parties “except as specifically set forth in this agreement” to the use of the Colorado are not affected, and that the conserved water will at all times retain its third priority and has not been forfeited by IID. Likewise, the possibility of MWD 's banking water in Lake Mead during wet years is acknowledged, but the irrigation districts reserve the right to challenge any future banking agreements. Canal lining is the major conservation strategy being pursued, but IID will also build new regulating reservoirs and canal spill interceptors and will automate its delivery system. The agreement will be administered and monitored by a program coordinating committee composed of one IID, one MWD, and one neutral representative. The MWD must bear all capital construction costs, the “ongoing direct costs of the nonstructural projects of the program, and operation, maintenance and replacement costs of the structural projects of the program necessary to the keep the projects . . . in good operating, condition during the terms of this agreement” (IID and MWD, 1989). In addition, MWD must bear $23 million in indirect costs such as lost hydroelectric revenues, “mitigation of adverse impacts on agriculture from increased salinity in the water,” and environmental mitigation and litigation costs from any impact on water levels or water quality in the Salton Sea and the New and Alamo rivers (IID and MWD, 1989). In return for financing the conservation program, IID agrees to reduce its requests to the Secretary of the Interior for water from the Colorado River “below that which it would otherwise have been absent the projects of the Program (in an amount equal to the quantity of water conserved by the Program. . . .” (In normal circumstances, IID will reduce its diversions by 106,100 acre-feet (130,900 ML) annually.) The MWD can make a corresponding additional request of the Secretary of the Interior at its Lake Havasu intake for the amount

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Water Transfers in the West: Efficiency, Equity, and the Environment saved. The agreement also addresses how the burden of shortages will be shared. The IID and MWD Water Conservation Agreement is seen by both parties as a win-win agreement. The MWD, of course, increases its Colorado River supplies by 106,100 acre-feet (130,900 ML), and this additional margin of safety, about 20 percent of its anticipated dry year shortfall, will become important as Arizona takes more of its Colorado River entitlement and supplies become more scarce in both the Colorado basin and northern California. The IID obtains money in return for doing what it may well have become legally obligated to do in any event, while its irrigated acreage is unaffected by the agreement. This is the first such transaction and thus relatively straightforward to negotiate. Future attempts to reach such agreements may be more complicated. THIRD PARTY IMPACTS The three major third party claimants are two other irrigation districts, Palo Verde and Coachella Valley, and the public environmental values associated with the Salton Sea. Future lining of the All American Canal would affect Mexican irrigators who depend on seepage from the All American Canal but were not acknowledged as having a legal entitlement to such water in the treaty between the United States and Mexico allocating the water of the Colorado between the two nations. The Coachella Valley Water District lies northwest of the Imperial Valley. It is a relatively more efficient water user and is concerned that the 1989 Water Conservation Agreement will decrease the return flows it receives from IID. Palo Verde is upstream from IID's intake but below MWD's, so any water taken by MWD can affect Palo Verde. After the 1989 agreement, Coachella filed suit against IID and MWD, basically arguing that under the Seven Party Agreement conserved water must first be shared with other agricultural users. In December 1989 the Coachella Valley Water District, Palo Verde Irrigation District, and IID settled the lawsuit by an approval agreement. To ensure that MWD is taking water on a one-for-one basis for conserved water, the agreement created a measurement committee to verify that IID's programs do in fact conserve water. To resolve the concerns of the Coachella Valley Water District, MWD and IID also agreed to provide protection for Coachella during extremely dry periods when Colorado River supplies fall to critical levels. This protection, if implemented, would reduce the availability of water to MWD during these rare hydrologic events. To compensate for this,

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Water Transfers in the West: Efficiency, Equity, and the Environment MWD will receive 106,100 acre-feet (130,900 ML) annually instead of the original 100,000 acre-feet (123,350 ML) agreed to in 1985. In addition, the minimum agreement period (currently 35 years) will be extended by 2 years for each year that MWD's supplies are reduced. The major environmental values most directly affected by the 1989 agreement are those associated with the Salton Sea. The Salton Sea is 278 ft (93 m) below sea level and was formed when a new channel was opened by the great Colorado River flood of 1905. The conservation measures will lower the level of the lake by about 2 ft (0.67 m) over the life of the agreement. One environmental impact is that lower lake levels, which benefit littoral lands, also result in increased salinity levels in the lake. The Salton Sea also is threatened by the New River, which is basically a conduit for untreated sewage, pesticide residues, and heavymetal contamination from northern Mexico. Pollution is a serious problem along large stretches of the United States-Mexican border. The problems have not been addressed adequately either in Mexico or through international organizations, although the pending Mexico-United States Free Trade Agreement may provide some impetus for the two nations to improve environmental conditions along the border (U.S. EPA, 1991). Such problems are beyond the scope of the IID-MWD agreement, but their existence cautions that even though an individual reallocation may be judged positive, that judgment may be qualified when the case is viewed in a broader context. FUTURE AGREEMENTS The Metropolitan Water District of Southern California has engaged in other transactions to conserve, store, and transfer water. Moreover, such arrangements are being pursued by MWD for the future. The following is a brief description of other similar activities being undertaken by MWD. Arvin-Edison/MWD Exchange. In the San Joaquin Valley, MWD has developed a program with the Arvin-Edison Water Storage District, a large federal Central Valley Project (CVP) contractor, for the storage and transfer of water. Under this program, MWD receives dry year CVP supplies that would otherwise be used by Arvin-Edison in exchange for State Water Project (SWP) supplies previously delivered to Arvin-Edison during wet periods. When MWD withdraws water from its storage account, Arvin-Edison would pump up and deliver the previously stored SWP water to the farmers in its service area.

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Water Transfers in the West: Efficiency, Equity, and the Environment The program is expected to increase reliable supplies available to MWD by about 93,000 acre-feet (115,000 ML) annually under conditions similar to the 1928 to 1934 drought, while improving the local agricultural economy. Implementation of the program, which is now in the final stages of the environmental documentation process, will require capital expenditures within Arvin-Edison of about $20 million for expanded spreading works, a distribution system, and increased ground water extraction capacity. The unit cost of the program is about $90 per acre-foot ($73 per ML). Desert-Coachella Exchange. Under an agreement initially negotiated in 1967, MWD provides additional Colorado River water to ground water basins serving Coachella and the Desert Water Agency. In exchange, MWD can receive during dry periods more than 60,000 acre-feet (74,000 ML) of SWP entitlement water paid for by these other agencies. By April 1986, MWD had accumulated a storage account of 552,000 acre-feet (680,900 ML). During the ongoing drought, MWD has stopped delivery of water to the exchange and drawn down its storage account to about 420,000 acre-feet (518,000 ML). Palo Verde Water Utilization Agreement. Beginning in 1986, MWD conducted negotiations with Palo Verde Valley landowners and the Palo Verde Irrigation District, which has the most senior rights to Colorado River water. The purpose of the negotiations was to reduce the amount of irrigated land in the Palo Verde Valley to make an additional 100,000 acre-feet (123,400 ML) of water available to MWD in dry years. Discussions with the Palo Verde Irrigation District have resumed, following the finalization of negotiations on the Imperial Conservation Program. Department of Water Resources Activities. In addition to short-term water purchases from the Yuba County Water Agency and from La Hacienda, Inc., in Kern County, the Department of Water Resources continues to explore water transfers as a means of increasing the long-term yield of the State Water Project. These activities include: (a) negotiations with the Yuba County Water Agency for a long-term water transfer supply, (b) development of the Kern Water Bank, and (c) possible conjunctive use programs with other Central Valley agencies to increase available supplies to SWP contractors. Part of the yield of this innovative and complex conjunctive use program in Kern County will require a transfer of State Water Project entitlement water from the Kern County Water Agency to the other SWP contractors in exchange for use of the water previously stored underground in Kern County by the Department of Water Resources.

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Water Transfers in the West: Efficiency, Equity, and the Environment Future MWD Transfer Activities. The MWD intends to continue to identify and develop water transfer programs in the future. These programs will emphasize the use of financial incentives in agricultural areas to increase conservation and improve water management, thereby making additional water available to meet southern California's needs. Future programs will include (a) IID-type conservation programs, especially where technically and politically feasible in the drainage-impacted portions of the western San Joaquin Valley; (b) conjunctive use programs similar to the Arvin-Edison exchange; and (c) agreements with landowners and their water agencies to alter farming practices, for example, by fallowing some land in their crop rotation or implementing on-farm conservation, to make additional water available for use by growing urban areas (Quinn, 1990). Other MWD-IID Agreements. The Imperial Irrigation District and the Metropolitan Water District are also currently in negotiation regarding another agreement that would operate in much the same way as the initial 1989 Water Conservation Agreement. The MWD would pay for the implementation of conservation measures. It would then be entitled to place an additional request for water from the Colorado River corresponding to the amount salvaged. Implementation of these conservation measures would result in an additional 150,000 acre-feet (185,000 ML) of conserved water. It is anticipated that the Coachella Valley and Palo Verde districts will insist on measures to protect their interests. Furthermore, closer scrutiny is anticipated from environmental interests concerned about adverse environmental effects, particularly with regard to the increased salinity of the Salton Sea. Many environmental interests support water transfers as a means of avoiding the environmental costs associated with water projects. Indeed, the Environmental Defense Fund played an important role in negotiations leading to the 1989 Water Conservation Agreement between IID and MWD. However, heightened concerns about exacerbating the problems of increased salinity levels in the Salton Sea might limit-such support. In 1988, Congress passed legislation authorizing the lining of portions of the All American Canal and the Coachella branch of the All American Canal. All costs would be paid by the California agencies receiving the salvaged water. The lining project is expected to save 100,000 acre-feet (123,350 ML) annually. An experimental project is being conducted by the Bureau of Reclamation to develop new techniques to line canals while water continues to flow through them. The Imperial Irrigation District has indicated an interest in paying for the lining of the canal, apparently in anticipation that it would then be in a position to market the salvaged water. However, MWD

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Water Transfers in the West: Efficiency, Equity, and the Environment takes the position that such a plan would violate the priorities identified in the Seven Party Agreement, which allocates Colorado River water among the California agencies that rely on it. A further complication exists because Mexican farmers rely on water that seeps from the All American Canal. Although they apparently have no legal right to such water, potential adverse third party impacts on these Mexican communities could be significant. Further, environmental values such as the wetlands created by the leaks may also be harmed. CONCLUSIONS The Imperial Valley case study illustrates four conditions that are likely to produce a presumptively win-win transfer: (1) a large user with surplus water as a result of past practices, (2) the threat of judicial or administrative reallocation due to alleged waste, (3) a well-financed willing buyer with few reasonably priced alternative supplies, and (4) the paucity of well-defined external costs from the specific transfer. The Imperial Valley is beset with several serious environmental problems such as border pollution and the fate of the Salton Sea. The transfer worked, in part, because it was relatively neutral with respect to these problems. When the four conditions are not present in this combination, it will be harder to negotiate winwin transfers. Still, the Imperial Valley shows that a market transaction, stimulated by the threat of judicial or administrative reallocation, can move water to an area of higher demand. REFERENCES Arizona v. California, 373 U.S. 546 ( 1963). Hundley, N. 1975. Water and the West: The Colorado River Compact and the Politics of Water in the American West. Berkeley: University of California Press. Imperial Irrigation District v. State Water Resources Control Board , 186 Cal. App. 3d 1160 ( 1986). Imperial Irrigation District v. State Water Resources Control Board , 275 Cal. Rptr. 250, 267 California Court of Appeals, 4th District ( 1991). Imperial Irrigation District (IID) and Metropolitan Water District of Southern California (MWD). 1989. Agreement for the Implementation of a Water Conservation Program and Use of Conserved Water. December. Quinn, T. 1990. Shifting water to urban uses: Activities of the Metropolitan Water District of Southern California. Paper presented at the Natural Resources Law Center, Boulder, Colo., June. Reisner, M. 1986. Pp. 125-136 in Cadillac Desert: The American West and Its Disappearing Water. New York: Viking. Reisner, M., and S. Bates. 1990. Overtapped Oasis: Reform or Revolution in Western Water Law? Washington, D.C.: Island Press. 196 pp.

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Water Transfers in the West: Efficiency, Equity, and the Environment Stavins, R., and Z. Willey. 1983. Trading Conservation Investments for Water: A Proposal for the Metropolitan Water District of Southern California to Obtain Additional Colorado River Water by Financing Water Conservation Investments for the Imperial Irrigation District. Environmental Defense Fund, Berkeley, Calif. U.S. Environmental Protection Agency (U.S. EPA). 1991. Integrated Environmental Plan for the Mexico-U.S. Border Area (first stage, 1992-1994). USEPA Working Draft, August 1. Worster, D. 1985. Pp. 194-212 in Rivers of Empire: Water, Aridity, and the Growth of the American West. New York: Pantheon Books.