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

Water Management Study: Upper Rio Grande Basin

economic forces at play in the Upper Rio Grande Basin, as elsewhere,
changed and developed. As the economy changed some demands for
particular goods and services grew, and others diminished. Currently, the
traditional sector remains relatively steady, but the urban sector has grown
tremendously. With this growth comes demand to use more resources for
industrial and residential consumption. The growing demand for the Basin's
resources from urban residents conflicts with the traditional demands from
Pueblos, acequia communities, and those in the agricultural sector.
Traditional interests want to secure their historical rights, urban interests
want to secure rights to meet their increasing municipal and industrial
needs, and environmentalists want to secure uses created by the river's
natural flows.

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The rigid legal and institutional framework that guides current water policy
in the Basin was designed and set in place when the resources faced limited
and simple competition. This framework cannot adequately address the
current competitive pressures. As a result, water and related resources in
the Basin are allocated suboptimally and, from an economic perspective, this
misallocation leads to economic distortions that create powerful economic
forces for change.

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No comprehensive study ofthe dislocations stemming from federal policies
and actions has been undertaken. This chapter's discussion of the
competition for resources and the relative economic values of different
resource uses indicates that the most severe economic dislocations occur
when federal policies and actions (as well as other factors) create incentives
for water to be used to produce agricultural products whose value is less
than the full cost of producing them. In the urban sector, similar distortions
favoring water consumption are apparent primarily in the two major
metropolitan areas, Albuquerque and EI Paso, which have a history of
consuming water at rates that deplete aquifers and do not reflect the full
costs of securing replacement surface water. The extent of the distortion
probably is greater in Albuquerque, insofar as its pricing structure has given
less attention to water's true scarcity and per capita water consumption
exceeds EI Paso's by more than 40 percent.

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On the flip side of the coin, the strongest evidence of market distortions
disfavoring competitors occurs regarding the benefits of in stream flows. The
studies showing marginal values for instream water exceeding marginal
consumptive values and households' significant willingness to pay for the
benefits of somewhat higher instream flows in some areas support the
conclusion that, but for the absence of appropriate institutional mechanisms,
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