WSP05845

• File Number: 8507
• Description: Rio Grande Project
• State: CO
• Basin: Rio Grande
• Date: 7/1/1997
• Title: Water Management Study: Upper Rio Grande Basin part 2
• Water Supply Pro - Doc Type: Report/Study

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The Economic Setting

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green pastures in the desert would demand less ofthem if they bore the full
cost, as would advocates of protecting the intrinsic value of river-related
resources.

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When there is competition for resources, of course, a federal policy or action
that creates incentives for one competitor generally creates an offsetting
disincentive for another. In particular, as these policies and actions
traditionally have encouraged irrigators and urban consumers to use more
water, they have reduced the water available for those with a preference for
the goods and services derived from instream flows and a natural ecosystem.
More recently, as federal policies and actions increase the likelihood that
those preferring protection for endangered species and the ecosystem will
have their preferences satisfied, they often do so at the expense of
consumptive users, especially farmers, who account for most water
consumption in the Basin. Given the complex set of goods and services
derived from the Basin's natural resources, the growing competition for
them, and the pervasive federal influence on the competition, any decision
regarding these resources affects the composition of incentives and
disincentives affecting the different competitors.

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The market distortions from federal policies and actions trigger all sorts of
responses by competitors for the Basin's water and related resources:
understandably, those who benefit from a particular policy or action try to
protect it, while those who don't benefit try to have it reversed or to strike a
deal with the beneficiaries. In theory, it is possible for the different groups
to compete among themselves and find ways for resources to move from
low-value uses to high-value ones. To some extent, such maneuvering
occurs. This past year, for example, saw extraordinary efforts to avoid
potential environmental disasters by increasing instream flows in southern
Colorado and the Middle Rio Grande Valley with water that otherwise would
have been used or reserved for consumptive use. By and large, however, the
existing economic, legal, and resource-management institutions are sluggish
and considerable resources remain in low-value uses.

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D. Summary

The Upper Rio Grande Basin is home to a complex set of interrelated
physical resources. Powerful economic forces drive the competition for these
resources. Traditional or early economic forces imposed limited and simple
competitive pressures on the resources: water was extracted for agricultural
production and the needs of small settlements. Over time, however, the

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