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<br />Pitt et al, August 2001. Replacing the Bypass Flow On The Colorado River
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<br />, Leasing Water from WMIDD
<br />BOR might obtain bypass flow replacement water by leasing water from agricultural users of
<br />Colorado River water, known in government parlance as "extraordinary conservation." Of the
<br />many irrigation districts. in the Colorado River basin, this paper proposes a lease from WMIDD,
<br />because of the low productivity of this water and because of the ecological benefit it would
<br />provide. '
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<br />WMIDD has priority rights on the River for some 440,000 acre-feet of water, dating back to
<br />1952~ Benefiting from federally subsidized infrastructure that delivers and removes water,
<br />,farmers typically pay around $3 per acre-foot ofwater.24 Without a true price signal for the cost
<br />of water, farmers have,no incentive to conserve, and continue to grow water~intensive crops of
<br />extremely low value.
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<br />While WMIDD has publicly stated that it is not willing to sell or lease wate?S (and in Arizona,
<br />no water transfers may be approved without approval of the governing irrigation districr~, it is
<br />likely that an attractive offer would nevertheless stimulate a market response. Figure 2
<br />illustrates that average annual net return27 per acre-foot of water for the least economically
<br />productive 110,000 acre-feet of water in WMIDD per year peaks at $53.28 Significantly, $53
<br />overestimates the economic productivity of water because it is calculated for all water applied to
<br />an acre of a given crop,> rather than the marginal return per acre-foot of water used. However,
<br />terms of a water.lease may specify that land must be fallowed, in which case $53 per acre-foot is
<br />the appropriate value.
<br />
<br />The price for a water lease can be determined in a number of ways, including a standing offer,
<br />individually negotiated contracts, or by a market-based procedure such as auctioning.29 Present
<br />objections by WMIDD to the sale of its Colorado River water suggest that only the first of these
<br />three options is feasible. The Bureau of Reclamation could test the willingness of WMIDD
<br />farmers to sell their water by making a standing offer at a price that reflects their net returns on
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<br />24 Arizona Extension Service (2000)~ Arizona Field Crop Budgets. <htto://ag.arizona.edularec/extJexthome.htn'11>;
<br />BOR collected fees for water delivered until repayment for construction costs WlUl complete. See U.S. Bureau of
<br />Reclamation, (1981). Amendatory and consolidated contract with Wellton-Mohawk Irrigation and Drainage District
<br />for delivery of water, construction of works, repayment, and project power supply (W.O. Draft Rev. 3/31/81).
<br />WMIDD may collect an additional fee for power costs incurred.
<br />25 Personal communication by Wellton-Mohawk representative at Las Vegas briefing 5/8/01.
<br />26 National Research Council, (1992). Water Transfers in the West: Efficiency, Equity, and the Environment, p. 98.
<br />27 Net return is dermed as returns over cash operating expenses. Returns are the sum of the contributions toward
<br />projected income of all products produced by the cropping system, including possible subsidies. Income estimates
<br />are based on S-year county averages for yie.ds for most crops and S-year state averages for commodity prices.
<br />Operating costs include total cash land, preparation expenses' Oabor, chemical and custom application, farm
<br />machinery and vehicles, irrigation water, and other purchased inputs and services), total, harvest and post harvest
<br />expenses Oabor, chemical and custom application, farm machinery and vehicles, custom harveslpost harvest, cottQn
<br />ginning if appropriate, crop assessments, and other materials), and pickup use. Net return does not include costs for
<br />overhead, land ownership, management, and risk.
<br />28 Arizona Extension Service (2000) supra note 24. WMlDD crop acreage from Bureau of Reclamation, Annual
<br />Crop Production Reports, 1996-1998, Wellton Mohawk IDD Data.
<br />29 See WiIIey, Zach, and Adam Diamant (1994). "Chapter IV: Economic Elements of Water Lease Contracting and
<br />Pricing" in Restoring the Yakima River's Environment: Water Marketing and Instream Flow Enhancement in
<br />Washington's Yakima River Basin. Environmental Defense Fund Publications.
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