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Polic Issues Since the /980s, legis/at ion has heen enacted to encourage \'oluntary H'ater rramfers. As with every issue in water marketing, there are a wide range of views on the impacts of transfers. Critical issues include what safeguards should be in place to protect third parties and the affected envi- ronment if water is traded strictly as a commodity? If mitigation measures are incorporated, what degree of protection is provided and who pays for it? A key concern is the effect an increase in ag-to-urban transfers has on the economic base of rural farming communities. Farmers and others fear that urban water buyouts could have negative results including the idling of farmland; loss of jobs; lowering of ground- water tables; increased land buyouts by speculators interested in reselling water to cities at a significant profit; and loss of a way of life. From the urban perspective. jobs created in the cities are much greater in total value than employment losses in farm- ing communities caused by transfers, according to the San Francisco Bay Area Economic Forum. Although there are different opinions on the extent of third-party impacts, most interests agree that po- tential adverse consequences should be addressed. Measures to mitigate third-party impacts include limifing the number of acres taken out of production; restricting the amount of water transferred from an irrigation district; placing a levy on transfers to reduce local governments' social costs; establishing a miti- gation fund to settle damage claims; and compen- sating and retraining displaced farm workers. Transfers of water can adversely affect wild lite habifat, riparian vegetation, wetlands and Of her environmental values in a variety of ways. If not 10 properly conducted, transfers can alter fhe timing and volume of instream flows, critical to the health of many fisheries. Some environmental groups view water marketing as a pragmatic way to reallocate supply to protect ailing fisheries whereby agricultural water could be bought and used for the benefit of the aquatic environment. Other environmentalists are concerned that long-term, ag-to-urban transfers fuel suburban sprawl. State and federal laws do provide general protec- tion for the environment. California prohibits trans- fers that would unreasonably affect fish and wildlife, and the CVP Improvement Act prohibits transfers that would significantly reduce the quantity or quality ot water necessary for instream uses and wildlife. But because of the limited protection of these laws, some believe that a mechanism for funding environmental water transfers should be in place, such as a tax on transfers. Transfers through the Delta must take into account state and federal water quality standards. The CVP and SWP are required to release water from their reservoirs to maintain Delta water quality and flow criteria. During DWR's 1991 drought water bank, approximately 160,000 acre-feet of water were used to meet water quality criteria in the Delta. A busi- ness-sponsored water marketing and finance project recommended that through-Delta transfers include carriage water in an amount that would vary depend- ing on hydrological condifions and type of transfer. An increase in transfers will put greater pressure on the existing water distribution system which could increase fhe push for additional facilities, particularly in the Delta where an isolated facility to skirt the area (once referred to as the Peripheral Canal) has been proposed with various degrees of intensity for years. A key concern is who would pay for a new facility and what assurances would be in place to prevent damaging transfers trom the northern part of the state to the south. (CALFED has backed away from the isolated facility proposal for at least the next seven years as it implements other measures.) Using water transfers to alleviate supply disparify makes sense from an economic standpoint because building dams and reservoirs can be costly and environmentally damaging. Integrating water market- ing into the state distribution scheme would help facilitate a shift of water from agricultural regions, which use most of the developed water, to growing urban areas. According to some economists, reallo- cating 10 percent of the agriculfural sector's water would meet the needs of urban centers for 25 years.