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858 NATURAL RESOURCES JOURNAL [Vol. 40 Fall 2000} MANAGING ECOSYSTEM CONSERVATION 859 Aqueduct to meet its customers' demand.181 Yet, of California's annual entitlement to 4.4 million acre-feet of Colorado River water, only 0.55 million acre-feet are apportioned to MWD.182 With the exception of the conserved water transferred from lID, MWD's diversion of Colorado River water in excess of its rights to 0.55 million acre-feet has come from Arizona and Nevada's unused Colorado River entitlements and, since 1996, from additional water released from Hoover Dam as "surplus" at the discretion of the Secretary of Interior .183 These new agreements set powerful examples of water transfers, although they do not i,nclude environmental goals. Nevertheless, the agreements demonstrate that despite the tangle of rules embodied by the Law of the River, flexibility remains in the system. New provisions for interstate and interbasin water transfers can allow reallocation of developed water supplies to meet environmental demands. States in the Lower Basin a.lready have proposed several approaches for marketing water among themselves. In the Upper Basin, Utah has expressed an interest in marketing its undeveloped Central Utah Project water to downstream users. 1M At least one holder of a senior water right in the Lower Basin has expressed an interest in marketing water to an entity .that would deliver water to the Delta.185 The prospect of claims by U.S. tribes opens the possibility that large, senior priority water rights might be available for purchase for instream flows. New provisions in U.S. and state law would have to address how water could be transferred across the international boundary, and open the market to allow participation by entities representing non- consumptive environmental and recreational uses. New legal provisions would also have to define parameters for the price of water for environmental uses and for the duration of the transferred water right. 2. Environmental Damage Taxes Charging the costs of ecosystem damages to Colorado River water users is another potential use of the market to secure water for environmental purposes. An accounting system that established mitigation and restoration surcharges on all water and power used in the basin, intemalizi,ng ecosystem damage costs, would provide a reliable and broad- based source of funds for Delta restoration. An alternative version of this idea is to levy a surcharge (in water or money) against all U.s. transfers of Colorado River water, with revenues going to restore critical habitat in the United States and Mexico or to purchase water for the Delta. Water purchased or leased for environmental purposes should not be subject to these surcharges. Any fees would be earmarked to protect the "public- good" values of the river, such as habitat, wildlife, and recreation, including protection and restoration of the Delta and upper Gulf of California. Revenues could be collected by an entity authorized to represent environmental uses in the water market, such as buying or leasing water for the environment, and to spend monies for habitat restoration projects. The eligible entity could be established in a binational agreement. This entity could then administer funds to organizations that undertake conservation activities. 3. Mitigation Banking Finally, the United States could revise environmental regulations to allow mitigation transfers and mitigation banking programs to support Delta habitats. Healthy Delta habitats could offset damage to threatened species and habitat components elsewhere in the lower Colorado basin. In some instances, it may be easy to demonstrate that greater benefits would accrue from conservation measures in the Delta than in other areas of the basin. c.o c,;; w w f ;, 0"' 181. Oat'!. derived from U,S. BUREAU OP RECLAMATION, COMPILATION OF RECORDSIN ACCORDANCE WITH ARTICLE V OF THE DECREE OPTHE SUPREME COURT OF THE UN1TEOSTATES IN ARIzoNA V.CAUFORNIA:CAl.ENDAR YEAR 1998, at 16-17 (1999), combining the recordofMWD's consumptive use and "IID /MWD Water Conservation ProgrSDlPhase 1 conserved water made available by no for diversion in current year by MWD." Id. 182. Although California's Seven-Party Agreement of August 18, 1931, apportions 5.362 million acre-feet annually among California's water users, the 1929 California Limitation Act of March 4, 1929, 1929 Cal. Stat. ch. 16, and the 1964 decree, see U.S. BUREAU OP RECLAMATION, supra note 181, at 16-17, limit California's use of Colorado River water to 4.4 million acre-feet per year, of which the first three priority rights to a combined 3.85 million acre-feet belong to agricultural users in southeastern California and the fourth priority right to 0.55 million acre- feet belongs to MWD. 183. See U.S. BUREAU OP RECLAMATION, #DES 00-25, COLORADO RIvER INTERlM SURPLUS CRITERIA DRAFr ENvIRONMENTAL IMPACT STATEMENT 1-3 (July 7, 2000). 184. See Rodney T. Smith. Water MRr~ting: Building Flexibility into Water Allocations, 1996 PROCEEDINGS PROM THE COLORADO RIVER WORKSHOP 113, 139. 185. The Cibola Irrigation District in Arizona has offered to sell 22,560 acre-feet of marketable Colorado River water. See Letter from Dan Israel, Attorney for the Cibola Irrigation District, to Chelsea Congdon, then Senior Research Analyst, Environmental Defense (June 6, 1997) (on file with author). B. Public Participation and Environmental Advocacy The success of any effort to preserve Delta ecosystems, whether administrative, legal, or based on markets, hinges upon its ability to identify and include the interests and concerns of local people-the community of place. Many daily decisions that affect the health of Delta ecosystems, such as the treatment of riparian vegetation, are made at the local level. Communities in the Delta are most directly harmed by degraded ecosystem conditions. If local communities benefit from a conservation strategy, their