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cheap water is playing out in the Lower Basin. In the past dozen years, municipal purveyors foreseeing shortfalls as early as the first decade of the new millennium began to devise mechanisms to reallocate water. The essential mechanism that has evolved during this time period is the transfer of water resulting from the voluntary reduction in use. There are two models. One, is a salvage model. That's where the right holder who uses less, either by conservation or even fallowing, retains the right to that increment that is not being used and assigns or leases that increment. The second model is what I think is generally termed a forbearance model. That's where the right holder, by pre-arrangement, refrains from using a certain amount of water, allowing another party who also has rights in that same source, to consume it instead. Now each of these models can be combined with storage and, in most cases, obviously that's preferred. These models over the last 12 years have involved transactions between public agencies involving large blocks of water. Witness the first major transaction in the last '80s: The IID- Metropolitan 106,000 acre- feet per year transaction. In the early '90s, there was the Palo Verde- Met pilot project involving landown- ers in the Palo Verde District. In the early '90s, there also was the pilot project that Met and the Southern Nevada Water Authority had with the Central Arizona Water Conservation District storing water. Then, of course, there is the big grand daddy that is planned - the 200,000 acre-feet per year transfer between lID and the San Diego County Water Authority, the negotiations surrounding which are still ongoing. Finally, of course, on behalf of my client, I want to note the e:lCpected storage of ground- water in central Arizona that will provide the basis for the Southern Nevada Water Authority to divert water out of Lake Mead once the off-stream storage regulations, which are now at OMB [Office of Management and Budget], are released and issued, and contractual arrangements are negotiated for that storage under Arizona's new groundwater storage program. These models are all to be contrasted with another model that's actually been operating for many decades in Colorado. That is the model relating to Big Thompson Water in the Northern Colorado Conser- vancy District. There you have a centralized location where bidding and asking prices are posted and in which units of water can be transferred in fairly short order. This, in my judgment, is probably the only Colorado River example on the spectrum of market- ing and reallocation that approximates what econo- mists would call marketing. This panel is going to take that spectrum which, runs from rhis Colorado Big Thompson example, of direct immediate transfers of units of water, to at the other end, forbearance reallocation. They're going to tell you what they like and dislike about particular examples along that spectrum. DENNIS UNDERWOOD, EXECUTIVE AsSISTANT TO THE GENERAL MANAGER ON COLORADO RIvER ISSUES, METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA I've had some previous titles, Commissioner, Director, now it's a very long title. I have concluded that the length of your title is inversely proportional to the amount of authority and power that you have. Before I start, I would like to state my biases. Some of my comments today will be drawn from my past lives, not necessarily my present life. Those biases are: I'm a strong advocate for state rights, but I recognize that there is need for a federal presence and role on the Colorado River. I believe we have an obligation to provide water at the lowest possible cost. I believe public interest crosses agency bound- aries. Our economic and environmental well-being are insepa- rable. And I have a strong confidence in the Law of the River and its ability to evolve to address issues. I'm also going to make a few comments about water as a commodity, as a prelude to my discussions relative to the Colorado. I think you'll agree that water is not in the true sense a commodity. You don't really have absolute ownership. In any state constitu- tion, generally, it's limited to the right to use. It's not yours to misuse; it's not yours to waste. The user has inherent stewardship responsibilities while the water is in his or her control. Your right is limited to beneficial use. Why? Because there's no substitute for water. It's essential for life. It determines our environ- mental quality and well-being, our existence, quality of life and our ability to prosper. Our environmental and economic well-beings are interdependent. I think it's also important to note, as was pointed out in the panel before, that portions of our waters WATER MARKETING ON THE COLORADO RIVER I'm a strong advocate for state rights, but I recognize that there is need for a federal presence and role on the Colorado River. - Dennis Underwood SYMPOSIUM PROCEEDINGS SEPTEMBER 1999 o