9298

• UCREFRP Catalog Number: 9298
• Author: Water Education Foundation.
• Title: Colorado River Project
• USFW Year: 1999.
• USFW - Doc Type: Symposium Proceedings.
• Copyright Material: NO

WATER
MARKETING
ON THE
COLORADO
RIVER

SYMPOSIUM
PROCEEDINGS
SEPTEMBER 1999

o

ate now reserved or exempt from water marketing.
Those deal mainly with the environment. Albeit that
water may be available for subsequent use, but in fact,
it is reserved and not allowed to be considered a true
commodity. That includes water for endangered
species purposes, public trust and other public
interests.
The amount of water being reserved for environ-
mental purposes will probably grow, as you heard
from the panel before. The remaining portion, which
can be considered as a commodity, deals with our
ability to exist and to prosper. That right and the
right to use may be diminished. But in a sense, it
reflects our economic well-being, our economic
competitiveness, our ability to support diverse and
sustainable economies. All of which depend on the
water at the lowest possible cost.
Water marketing and water transfers are not new.
There's always been a market where people have
acquired, purchased and transferred water rights. In
the past, there has been little competition. Generally,
water has not been acquired for resale or for leasing,
but for direct use. However, it is now being consid-
ered in a different context.
I think we need to ask ourselves: Are we forcing
the creation of markets, possibly artificial markets,
and higher costs, instead of figuring out how best to
use them to provide safe and reliable water at the
lowest possible cost? Water marketing in the right
context and with the proper safeguards for public
interest can be an effective and efficient means of
helping to provide water at the best price.
There are inherent water marketing and transfers
that occur under the Law of the River. The Law of
the River also includes state law and administration
actions. It provides for the orderly interstate and
intrastate administration of diversions, water use,
reasonable beneficial use, transfers, priorities, river
operations and management. Basically, it sets the
market conditions for the movement and use of water
in the basin.
A good example is that the Colorado River
Compact apportioned water to the Upper and Lower
basins to offset concerns for "first in time, first in
right." The Law of the River also embraces the
concept of water at the lowest possible cost. I'm going
to give some examples under various provisions of the
Law of the River that provide for the right to use,
rights limited to beneficial use, what you don't use
gets passed on and transferred to others. The Colo-
rado River Compact and the Boulder Canyon Act do
not allow states to withhold water that can be put to
beneficial use, and do not allow states to request
water that cannot be put to beneficial use. The water

flows to the needs or to the market at the lowest
possible cost.
In the 1964 Decree, the Supreme Court con-
firmed the division of water for the Lower Basin
states and also called for the accounting of water.
Water that's diverted in one state but used in another
state is treated as though it's diverted in the state
where it is consumed. These are all for accounting
purposes, in other words, controlling the market
conditions. All Lower Basin water users have valid
contracts with the Secretary of the Interior. Again,
these are provisions for an orderly and coordinated
market.
Provisions also provided that unused water or
apportionments in one state in the Lower Basin can
be used by another state. You could consider this a
spot market transfer. The 1931 California Seven
Party Agreement and the '68 Colorado River Basin
Project Act establish priorities. The act also provided,
if you look at the legislative history of the act, that
unused apportionments in the Upper Basin were
intended to extend the Central Arizona Project.
Again, creating an interim market or an interim
transfer, allowing water to flow to where the needs are
at the lowest possible cost.
The same thing happens relative to the Mexican
Water Treaty and the satisfaction of an international
market at the lowest possible cost. Water flows to
Mexico basically at no cost to them.
In addition to that, you have the Code of Regula-
tions, 417, Title 43, which deals with enforcement of
reasonable beneficial use. This addresses the user
stewardship responsibilities.
How is Colorado River provided for in interna-
tional markets? In the 1944 Mexican Water Treaty. In
addition, it has a quality component in Minute 242.
The Law of the River also provides for interbasin
markets and transfers. Basin outflows in Utah,
California, Colorado are intrastate transactions.
However, as for transfers into the Colorado River
Basin, basically there's been a historic prohibition
even about studying it. There is no outright prohibi-
tion, but I believe it still requires concurrence of the
states even to study the potential of a market or water
being transferred into the basin.
The more recent Colorado River interstate storage
and groundwater banking in Arizona is a good
example. In the future, you'll see more of this type of
example. I think we may be just scratching the
surface in terms of cooperative interstate coordination
of river and non-river supplies to make more effective
use of all supplies available to Lower Basin states.
In terms of intrastate - and I'm going to focus
primarily on California - there are cooperative water