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<br />in several respects. <br /> <br />First, it protects only the Colorado River <br /> <br />basin and only as against out-of-basin diversions by conservancy <br /> <br />districts. <br /> <br />Second, it provides prospective protection only to <br /> <br />consumptive 'Water uses--neglecting highly valuable recreational <br /> <br />and other instream values. <br /> <br />Third, its requirement that consump- <br /> <br />tive uses not be increased in cost to future users is both vague <br /> <br />and inappropr i a te--a t least as interpreted to requ i re compensa- <br /> <br />, <br /> <br />tory storage. <br /> <br />VI. ECONOM IC ANALYSIS OF AREA-OF-ORIGIN COMPENSATION <br />(PROTECTION) SCHEMES <br /> <br />This section presents an economic analysis of the issue <br /> <br />of area of origin compensation. <br /> <br />It begins with a consideration <br /> <br />of the rationales for compensation and then presents two con- <br /> <br />ditions which must be met for a transbasin diversion to be <br /> <br />economically desirable: <br /> <br />(1) that it be the least-cost source of <br /> <br />reliable water supply to the prospective user; and (2) that its <br /> <br />benefits exceed all related costs. <br /> <br />Forms of compensation are <br /> <br />then considered. The section ends with a set of general economic <br /> <br />guidelines for designing compensation schemes. <br /> <br />A. Why Compensate Areas of origin? <br /> <br />Why should the export of water be treated differently from <br /> <br />t he export of any natural resource? <br /> <br />In forested areas, no <br /> <br />pretense is made of maintaining local lumber or firewood prices <br /> <br />as the area is logged. <br /> <br />Local areas are not compensated for the <br /> <br />removal 0 f coal or ores beyond the royal ties pa id d i rec t 1 Y to <br /> <br />43 <br />