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 TH E
COLORADO
RIVER

paid. At some point, a state that is not currently using
its full allocation will, and the water will have to
come back. That's why the proposals Utah has been
looking at are more of a lease proposal, although I
guess if a state made a decision that it wanted to part
with its apportionment forever for a certain amount
of money I assume that could be done under the
rights of that state.
But I do have some concerns about building out
on a source of water that could be pulled back in the
future. Yet, I have great faith in my colleagues in the
legal community, most of whom are smarter than I,
that language could be drafted in a contract or
whatever that says, "When the water is needed back,
it comes back."

PEARSON: I want to make a couple of distinguish-
ing points. This concern about leasing water, then
having the municipal community dependent upon
that supply and then not getting it back was one we
faced. With respect to the water bank, what we do is
bank water in advance. For
example, whoever that partner is
in an interstate banking
arrangement with would pay in
advance to store water so when
they went to recover it, that
water wasn't being taken away
from a current ongoing use but
in fact was simply being
withdrawn from a reserve
account, which in this case is an
underground aquifer.
The other thing that
distinguishes the Arizona water
bank from either a private water
bank or any other type of
institutional water bank is we're
not making a profit. There's an
underlying assumption here that somehow we're
squirreling away vast amounts of money if we engage
in interstate banking and/or in trust state banking.
That is not the case. If you look at our state law, it
very carefully lays out the charges that we can impose
to bank water through the Arizona water bank. Those
charges are based on actual costs to bank water, the
cost for the operation, the construction of the
delivery system, the operation and construction of
the recharge facility, the operation and construction
of the recovery well.
All of those are actual costs. There's no profit
margin, if you will, in that and we were very careful
to do that for a number of reasons. Most importantly
because we did not see water as a strict commodity.

We don't use a

water supply in

a vacuum. How

SYMPOSIUM
PROCEEDINGS
SEPTEMBER 1999

~

we use that

water direcdy

impacts our

neighbor.

- Rita Pearson

In fact, even the notion of forbearance - and I'm a
little concerned about Mike's description - is that
that concept, as Phil responded to, jumps the priority
chain. If Utah was to forebear from its use of water
and sell that to a Lower Basin state, what happens to
the rights of the Upper Basin states who have rights
in that unused water supply? Now suddenly you're
charging for something that was formerly available
for free. No value has been added to that tesource so
it's difficult to identify what the value of that
forebearant is. There is no substitute good so it has
critical impacts on the economies dependent upon
that shared water resource.
And finally, use affects others. We don't use a
water supply in a vacuum. How we use that water
directly impacts our neighbor. So for all of those
reasons, a pure market doesn't work and our bank was
specifically called a bank because it, in fact, is not a
market transaction.

COMMENT FROM THE AUDIENCE: I'm
Michael George from Western Water Company and I
hope somebody will sit next to me at lunch. I feel it's
necessary to have some response from someone who
hopes to make a business out of water marketing.
First of all, I would say there's a basic value judgment
issue here about profit versus stewardship. I don't
think it's an either/or choice, I think it's a both/and
choice. It would be silly to have a business proposi-
tion or develop a business plan around the notion
that we're going to go to a free market with the
highest bidder taking all resources.
On the other hand, we do have private water
rights. They've been developed over time and there's a
whole body of law that we've been talking about that
protect those water rights. Unless we figure out how
to allocate water on a better basis, we're going to have
a continuation of what we've been talking about here,
which is endless litigation and lack of trust, et cetera.
I don't think that a water market is a solution to
allocation entirely, but neither is it apparent to me -
or I think anybody else as an objective observer - that
a political allocation mechanism has solved all those
problems.
In terms of water marketing, I think markets
operate at the margin. That is in any system. Pat,
you've talked about pork bellies. But we're not going
to get to a commodity market entirely. The base
supply, the vast majority of water, has been spoken
for and is being put to beneficial use. What we're
talking about is whether at the margin we can
ameliorate dislocations. It strikes me that some of the
new users of water are going to be those who end up
being most insistent on market mechanisms because