WSP09398

• File Number: 8507
• Description: Rio Grande Project
• State: CO
• Basin: Rio Grande
• Date: 7/1/1997
• Title: Water Management Study: Upper Rio Grande Basin part 3
• Water Supply Pro - Doc Type: Report/Study

Water Management Study: Upper Rio Grande Basin

1. Reduce Transaction Costs

The absence of viable markets for water and other resources makes it
difficult for an owner of a resource to identify those who might want to
acquire it and to effect the transaction. We recommend that federal agencies
take steps to increase the likelihood that "buyers" and "sellers" can find one
another and voluntarily make deals to their mutual interest.s We
particularly recommend steps in four areas: increasing the flow of
information, helping bring potential trading partners together, providing
incentives for trades beneficial to federal interests, and participating more
aggressively in trades as either a "buyer" or "seller."

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Federal agencies may be able to reduce the costs of information useful to
potential traders in several ways. One is to create a road map showing
potential "buyers" and "sellers" the federal requirements they must meet
before completing a transaction. Another is to use the assessment of
ecological and economic conditions in the Basin to identify hotspots, where
ecological functions are seriously threatened or the discrepancy between the
value of actual and potential resource uses is especially high. These
hotspots, in effect, constitute the greatest market opportunities for mutually
beneficial trades between "buyers" and "sellers."

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In some instances, agencies might help broker deals by bringing together
potential "buyers" and "sellers" and, if necessary, by sweetening the pot to
cement the deal. Brokerage might be especially useful with respect to
instream issues, insofar as instream advocates in the Basin are poorly
organized and there has been too little communication between those who
want more water in the river and those who might be willing to provide it.
We anticipate growing controversy over instream issues in this Basin,
especially if, as has occurred elsewhere, instream advocates acquire
additional political power and seize opportunities to press their demands
through administrative and legal channels. If groups on the different sides
of instream issues don't talk with one another, the controversy will fester
and everybody will lose except attorneys and others paid to join the battle on
behalf of their clients.

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6 We set "buyers" and "sellers" in quotation marks to exploit common concepts and
language associated with trades, but recognize that, in many instances, there may not be a
transfer of title in the usual sense of buying and selling.

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