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Section 3 Alternative Agricultural Water Transfer Methods to Traditional Purchase and Transfer 3.9.1 Interruptible Supply Agreements Table 3-8 enumerates the major advantages and issues associated with ISAs. ISAs function in similar ways to rotational crop fallowing, except that there is less predictability for the farmer and M~eI water provider. These plans are like insurance to some extent and thus promote predictability. If wet conditions prevail the M~eI provider will have sufficient supply and not care if the ISA is not triggered. In dry conditions, M~SCI gets the benefits of a backup supply. The advantages, however, are similar for an ISA and a rotational fallowing program: l) the farmer can continue farming; 2) the farmer receives additional financial support; and, 3) third party impacts are minimized. The disadvantages with the ISA's are the increased uncertainty on the part of the farmer and M~eI provider and, since the amount of water available to either the farmer or the buyer is uncertain in any given year, the value of the resource itself is depreciated in monetary terms. • Allows farmer to continue farming • Provides additional • Minimizes third party inputs • Underlying value rests with farmer 3,9.2 Water Banks Table 3-9 points out the major advantages and issues associated with water banks. Water Banks have been successfully used in northern California and other states. The CBT project rental market has operated successfully in Colorado as an informal water bank. The advantage of a water bank is its unobtrusive, almost anonymous feature inputting water seller and buyer together to improve market transfer efficiencies. A bank helps establish a "spot market," particularly if adequately capitalized allowing payments on deposit The primary drawback in this instance is that the water bank by itself is not really an alternative to traditional agricultural transfers. In fact, water banks are often used to either promote one-year, temporary water transfers or as an outright vehicle for sale. Water banks do not functionally recognize a transaction between the irrigator and the water buyer as a necessary condition for an alternative to a traditional agricultural transfer transaction. • Restricts land, water use • Occasional interruption • Senior water rights • Laddering of different water rights • Uncertainty of future • Contract renewal at buyer option availability or buy-out option in contract • Limits flexible use by buyer • None apparent • Commitment from farmer to tie up water rights for duration of contract • Limits opportunities for ISA's • Sacrifice by farmer to tie up water rights for duration of contract or right of first refusal • Limited help in serving future growth, does not provide for permanent annual yield • Uncertainty in ultimate cost • Contract renewal at buyer option to end user or buy-out option in contract 3-30 FINAL DRAFT