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Summary Statement of Larry Morandi National Conference of State Legislatures "Water Transfers and Environmental Protection" Colorado Water Workshop Gunnison, Colorado July 23, 1991 Public interest considerations are incorporated into water allocation decisions in a number of ways: through statutory definitions of criteria; court-imposed directives; land use regulations; and regional planning processes. It makes little difference whether an application to move water from one basin to another is for an original appropriation or for the transfer of an existing waterright--interbasin diversions are likely to generate opposition regardless of the legal regimen employed to assess their effects. In those instances where state law provides no requirement for public interest review, litigation may be used by protestants to leverage concessions--in the form of environmental mitigation or financial compensation--by transfer proponents. Growing political sensitivities to environmental, economic and community concerns have made transfer proponents more willing to negotiate conditions to reduce impacts on basins of origin. Where the applicants have relied exclusively on traditional protections accorded to water rights in the law, they have seen protracted litigation and administrative proceedings drive up the costs of water transactions, thereby diminishing their value. Since all western state water allocation systems allow for some degree of public interest review of water transactions regardless of the formal statutory or case law framework, the most appropriate role for state legislation may be to promote the more efficient operation of those systems. This objective may be accomplished by providing regulatory agencies and the courts with clearer direction as to what constitutes the public interest (including specific environmental and economic criteria that must be considered), as well as defining those interests that have legal standing to challenge a water transfer. The initial approach would help structure the permit review process and alert transfer applicants to the issues that may have to be included in an environmental impact assessment (which may assist them in determining whether their proposal is cost-effective). The second would help the agency or court with jurisdiction in conducting the hearing process. A more comprehensive approach would be to authorize regional water planning forums and to incorporate the resultant planning documents into state administrative hearings, thereby providing regulatory agencies with information on the values attributed to water in a specific area in advance of a transfer application. The focus of a subsequent decision then may shift from determining appropriate mitigation measures (which may not satisfy either party involved in the transaction) to finding alternative sources of water supply for both the applicant and residents in the basin of origin.