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<br />The California Legislature has authorized compensation to the city of Los Angeles <br />for the effects of state orders to reduce diversions from Mono Lake tributaries to protect <br />public trust values. Assembly Bill 444 and Assembly Bill 1442, both enacted in 1989, <br />established an Environmental Water Fund which is anticipated to receive deposits of more <br />than $60 million from State Water Project water sales during the 19905 for projects with <br />significant environmental benefits. A portion of the fund may be used to provide <br />alternative sources of water to Los Angeles to offset its losses of Mono Lake diversions. <br />Replacement projects may include implementing water conservation measures, enlarging <br />storage and delivery systems, and expanding water marketing options.89 <br /> <br />Incentives to Conserve Water <br /> <br />The doctrine of prior appropriation requires water to be put to "beneficial use" <br />(which is variously defined in western water codes); water that cannot be put to beneficial <br />use must return to its source for use by the next senior water right holder. The doctrine <br />assumes that "waste" will nOt occur because nonessential water will be made available for <br />additional appropriation. The beneficial use requirement may promote inefficient water <br />use, however, because a water right holder is unlikely to acknowledge that any water <br />withdrawn is unnecessary to fulfill his needs for fear of losing the right. As a result, there is <br />little incentive to conserve water (unless, for example, the conserved water can be used to <br />irrigate additional acreage on the same property). <br /> <br />Allowing the transfer of conserved water may satisfy some alternative uses without <br />diminishing scarce water supplies and adversely affecting basins of origin. Because 80 <br />percent to 90 percent of the water consumed in the western states is held by agricultural <br />water rights, the farming community will be the target of most conservation-transfer <br />proposals. When combined with water conservation efforts in urban areas, the transfer of <br />conserved agricultural water is often viewed as a means to supplement municipal water <br /> <br />45 <br />