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Section 3 Alternative Agricultural Water Transfer Methods to Traditional Purchase and Transfer ~ Multiple end uses (M~eI, recreational, and environmental) may wish to participate in rotational fallowing arrangements. Rural and urban areas may seek to preserve water supplies or maintain the economic, open space, or other amenity values, environmental and wildlife interests may secure their interests in flow maintenance, habitat, and access, and recreational interests may seek timing of flows or additional flows. The new kind of supply possible from rotational fallowing program could address a large number of interests and needs, especially where the costs are spread to the third party beneficiaries as well as other users. ~ A better or more stable income can be provided to agricultural users, since an income would be guaranteed during the fallowing year. Parties may also contract to spread payment in other ways, such as advancing some payment to cover agricultural, water conveyance, or irrigation technology investments, or to support investments in long-term improvements; the specific contractual approach would be aimed at addressing the transferors needs/desires. Mutual ditch companies or conservancy or conservation districts may consider managing the program, or other organizations could be established and financed to operate the programs as the parties wish. ~ A permanent transfer of agricultural water rights may not be needed, avoiding some of the negative impacts associated with a traditional agricultural transfer. The ownership of the water rights determines who benefits from appreciation, if any, of their value, though parties could contract to allocate that risk and revenue sharing as they wish. ~ This program, perhaps in tandem with an ISA program, could maximize the benefits of a non- tributarygroundwater conjunctive use program. Non-tributary, non-renewable groundwater bas a firm annual yield independent of surface water hydrology. The life of this groundwater resource could be extended by relying on a rotational fallowing program in average to above average years and pumping groundwater only during below average years, and an ISA triggered in wet years could be used to recharge storage when conditions allow. ~ The assessed value of the land can be maintained at an irrigated agricultural valuation for most, if not all years. ~ The Colorado legislature, in House Bill (HB) 06- 1124, amended CRS 37-92-103, to clarify that rotational fallowing can be adjudicated through a water court proceeding. There are several potential issues and conflicts with rotational fallowing arrangements that may impede or binder the usefulness of this alternative as a tool for meeting future water needs: ~ As with along-term ISA, one important feature is that the owner of the water right is committing themselves and their successors to performance of the contract, so that any later uses of the underlying water right would be subject to the contract. This might most easily be accomplished by keeping the water in its agricultural use, but the commitment of the water right is not a commitment of the water right owner to tie up other resources or continue irrigation in those years when the fallowing is contractually required to produce yield to the end user. ~ Long-term rotational fallowing may be of limited benefit in meeting long-range M~eI water supply or other uses without some arrangement for permanency. If the agricultural user is free to sell the water at the end of the agreement, the end 3-14 FINAL DRAFT