a

GAO

United States Government Accountability Office

Report to Congressional Requesters

March 2005 KLAMATH RIVER 

BASIN

Reclamation Met Its 

Water Bank 

Obligations, but 

Information Provided 

to Water Bank 

Stakeholders Could Be 

Improved

GAO-05-283
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-05-283.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Anu K. Mittal at 

(202) 512-3841 or mittala@gao.gov. 

Highlights of GAO-05-283, a report to 

congressional requesters 

March 2005

KLAMATH RIVER BASIN 

Reclamation Met Its Water Bank 

Obligations, but Information Provided to 

Water Bank Stakeholders Could Be 

Improved 

Reclamation has changed how it operates the Klamath Project water bank, 

as it has gained more experience, to help it meet its growing obligations and 

mitigate costs. For example, Reclamation initially obtained most of the 

water for the water bank by contracting with irrigators to either forego 

irrigation altogether (crop idling), or use only well water (groundwater 

substitution). It later added the option to pump well water into the irrigation 

canals for others to use (groundwater pumping). For the period 2002 

through 2004, Reclamation’s water bank expenditures totaled over $12 

million, and the cumulative cost could exceed $65 million through 2011. 

GAO’s analysis of water bank contracts and river flow records found that 

Reclamation met its water bank obligations by acquiring and delivering the 

required amount of water for 2002 through 2004. However, Reclamation has 

not provided stakeholders with systematic and clear information concerning 

the water bank’s management and status and its decision to use river flow 

data that are not publicly available limited stakeholders’ ability to monitor 

water bank activities. This has led to confusion and doubt among 

stakeholders on whether Reclamation met its water bank obligations. 

The water bank appears to have increased the availability of water to 

enhance river flows by reducing the amount of water diverted for irrigation, 

but the actual impacts are difficult to quantify because Reclamation lacks 

flow measurement equipment and monitoring data for the Klamath Project. 

Reviews by external experts of the impacts of the 2002 and 2003 crop idling 

contracts indicate that significantly less water may have been obtained from 

these contracts than Reclamation estimated. Given the uncertainty 

surrounding how much water can be obtained from crop idling, in 2004 

Reclamation officials decided to rely primarily upon metered groundwater 

wells for the water bank. However, Reclamation has since learned that 

groundwater aquifers under the Klamath Project, already stressed by 

drought conditions, have shown significant declines in water levels and are 

refilling at a slower than normal rate in recent years. As a result, 

Reclamation is considering lessening its reliance on groundwater for the 

2005 water bank but is uncertain if it can meet its water bank obligations, 

particularly for spring flows, while increasing its reliance on crop idling. 

Although several alternative approaches for achieving the water bank’s 

objectives have been identified by Reclamation and other stakeholders, 

limited information is available regarding their feasibility or costs. Some 

alternatives to the water bank include permanently retiring Klamath Project 

land from irrigation or adding new short-term or long-term storage. Each 

alternative has been considered to varying degrees, but significant analysis is 

still needed on most alternatives before any implementation decisions can 

be made. Meanwhile, Reclamation and the National Marine Fisheries 

Service have an ongoing dialogue regarding the water bank and will likely 

reconsult on Klamath Project operations, including the water bank, in 2006. 

Drought conditions along the 

Oregon and California border since 

2000 have made it difficult for the 

Bureau of Reclamation 

(Reclamation) to meet Klamath 

Project irrigation demands and 

Klamath River flow requirements 

for threatened salmon. To augment 

river flows and avoid jeopardizing 

the salmon’s existence, 

Reclamation established a 

multiyear water bank as part of its 

Klamath Project operations for 

2002 through 2011. Water banks 

facilitate the transfer of water 

entitlements between users. 

This report addresses (1) how 

Reclamation operated the water 

bank and its cost from 2002 

through 2004, (2) whether 

Reclamation met its annual water 

bank obligations each year, (3) the 

water bank’s impact on water 

availability and use in the Klamath 

River Basin, and (4) alternative 

approaches for achieving the water 

bank’s objectives. 

What GAO Recommends

GAO recommends that 

Reclamation improve the 

information provided to 

stakeholders by systematically 

providing public information on 

management decisions and the 

water bank’s status. 

The Departments of Commerce and 

the Interior reviewed a draft of this 

report and generally agreed with 

the findings; Reclamation agreed 

with the recommendation. 
Page i GAO-05-283 Klamath Project Water Bank

Contents

Letter 1

Results in Brief 5

Background 8

Reclamation Modified Its Water Bank Operations from Year to Year 

as Its Obligations and Costs Increased 14

Reclamation Met Its Water Bank Obligations, but Information 

Provided to Stakeholders Could Be Improved 17

The Water Bank Appears to Have Increased the Availability of Water 

for River Flows by Reducing Irrigation Use, but the Extent of Its 

Impacts is Unclear 25

Limited Information Is Available Regarding Alternative Approaches 

for Achieving Water Bank Objectives 30

Conclusions 40

Recommendation for Executive Action 41

Agency Comments and Our Evaluation 41

Appendixes

Appendix I: Scope and Methodology 43

Appendix II: Information on Water Bank Applications and Contracts 45

Appendix III: Comments from the Department of the Interior 50

Appendix IV: Comments from the Department of Commerce 52

Appendix V: GAO Contacts and Staff Acknowledgments 55

GAO Contacts 55

Staff Acknowledgments 55

Tables Table 1: Reclamation’s Water Bank Expenditures, Fiscal Years 2002 

to 2004 16

Table 2: Number of Water Bank Applications and Contracts by Type 

and by Year 45

Table 3: Volume Represented by Water Bank Applications and 

Contracts by Type and Year 47

Table 4: Acres of Land Offered in Applications and Accepted under 

Contracts by Type and Year 49

Figures Figure 1: The Klamath River Basin 2

Figure 2: Reclamation’s Klamath Project 10

Figure 3: 2002 Augmented Klamath River Flows and Key Dates 20

Figure 4: 2003 Augmented Klamath River Flows and Key Dates 21
Contents

Page ii GAO-05-283 Klamath Project Water Bank

Figure 5: 2004 Augmented Klamath River Flows and Key Dates 22

Figure 6: Groundwater Pumping for the Klamath Water Bank 28

Figure 7: Upper Klamath Lake Expansion Options 34

Figure 8: Long Lake Storage Option 38

Figure 9: Proportion and Number of Water Bank Contracts by Type, 

2002 to 2004 46

Figure 10: Proportion and Volume of Water Acquired for the Water 

Bank by Contract Type, 2002 to 2004 48

Abbreviations

BLM Bureau of Land Management

FWS Fish and Wildlife Service

NMFS National Marine Fisheries Service

NOAA National Oceanic and Atmospheric Administration

USGS U.S. Geological Survey

This is a work of the U.S. government and is not subject to copyright protection in the 

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permission from GAO. However, because this work may contain copyrighted images or 

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Page 1 GAO-05-283 Klamath Project Water Bank

United States Government Accountability Office

Washington, D.C. 20548

A

March 28, 2005 Letr

The Honorable Henry A. Waxman

Ranking Member

Committee on Government Reform

House of Representatives

The Honorable Mike Thompson

House of Representatives

Located in the Upper Klamath Basin, the Bureau of Reclamation’s 

(Reclamation) Klamath Project (Project) is a federal water project 

spanning the borders of southern Oregon and northern California. Initiated 

in 1905, the Project was designed to dam the Upper Klamath Lake to 

manage Klamath River flows, drain nearby lakes and marshlands to create 

approximately 200,000 acres of farmland, and provide farmers with 

irrigation water through an elaborate system of canals and drains. As a 

result, Project operations largely determine the amount of water flowing in 

the Klamath River, which subsequently passes through several 

hydroelectric generating dams before running freely into the Lower 

Klamath Basin and emptying into the Pacific Ocean, as shown in figure 1. 

On average, about 1.5 million acre-feet—nearly 500 billion gallons—of 

water pass from the Upper Basin to the Lower Basin annually.
Page 2 GAO-05-283 Klamath Project Water Bank

Figure 1: The Klamath River Basin

Location of the Klamath River Basin

Medford

Redding

Crater Lake

Klamath Falls

Upper Klamath Lake

Lower

Klamath

Lake

Agency Lake

Klamath River Klamath River

Lost River

Trinity Lake

Salmon River

Yreka

Trinity River

Scott River

Gerber Reservoir

Shasta River

Sprague River

Sycan River

Williamson River

South Fork Trinity

J.C. Boyle Dam

Iron Gate Dam

Copco

Dam 1 & 2

Wood

River

Requa

Hoopa

Klamath River

Tule Lake Clear Lake

Keno Dam

Pa

cific

O

c

e

an

Oregon

California

Source: Reclamation.
Page 3 GAO-05-283 Klamath Project Water Bank

Drought conditions since 2000 have made it difficult for Reclamation to 

balance the demands for irrigation water by farmers on the Project with the 

requirements for specific river flows and lake levels for threatened and 

endangered species. The southern Oregon/northern California coho (coho), 

a species of salmon native to the river, was listed as threatened under the 

Endangered Species Act in 1997, and two species of sucker in Upper 

Klamath Lake were listed as endangered in 1988. Project operations were 

severely impacted in April 2001 when Reclamation cut off water deliveries 

to the majority of Project irrigators in order to meet river flow and lake 

level requirements to protect the coho and suckers under the act. As a 

result, agricultural production was impaired or eliminated on much of the 

Project, and some individuals engaged in acts of civil disobedience to 

protest Reclamation’s actions.

To avert future crises similar to 2001, Reclamation proposed a new 10-year 

Project operations plan for 2002 through 2011. As required under the act 

and applicable regulations, Reclamation consulted with the National 

Marine Fisheries Service (NMFS) on its biological assessment of the plan to 

determine its effect on listed species.1

 NMFS issued a final biological 

opinion finding that the plan would jeopardize the continued existence of 

the coho and likely adversely modify its critical habitat.2 In its opinion, 

NMFS recommended an alternative plan to protect the coho, which 

included the establishment of a multiyear water bank to provide additional 

river flows that would better protect critical habitat. Reclamation 

incorporated the water bank program into its Project operations plan 

through 2011. The biological opinion also provides for reinitiation of 

consultation to modify the plan if, for example, new scientific information 

on river flow requirements for coho becomes available.

1

NMFS, within the Department of Commerce’s National Oceanic and Atmospheric 

Administration, is responsible for administering the act with regard to ocean dwelling and 

anadromous species, such as salmon, which live part of their lives in freshwater and part in 

saltwater. See 50 C.F.R. § 402.01(b)(2004); See GAO, Endangered Species: Federal Agencies 

Have Worked to Improve the Consultation Process, but More Management Attention Is 

Needed, GAO-04-93 (Washington, D.C.: Mar. 19, 2003).

2

The biological opinion was the subject of litigation in 2003 when it was challenged as 

arbitrary and capricious by several environmental groups. The U.S. District Court in 

California agreed, in part, and remanded the opinion to NMFS with instructions to amend it 

by addressing certain deficiencies. The court added that the biological opinion would 

remain in place until NMFS’ amendment was issued. Pacific Coast Federation of 

Fishermen’s Associations v. Bureau of Reclamation, U.S. Dist. LEXIS 13745 (N.D. Cal. 

2003).
Page 4 GAO-05-283 Klamath Project Water Bank

To comply with the biological opinion, Reclamation must meet certain river 

flow requirements and also provide a water bank of 30,000 acre-feet in 

2002, 50,000 acre-feet in 2003, 75,000 acre-feet in 2004, and 100,000 acre-feet 

from 2005 through 2011 to supplement river flows.3

 In broad terms, a water 

bank is an institutional mechanism that facilitates the transfer of water 

entitlements between users and/or uses. As such, Reclamation’s water bank 

is not a physical reservoir where water can be deposited and withdrawn as 

needed but is an administrative process under which Project irrigators who 

volunteer to participate are paid by Reclamation to forego their contractual 

entitlement for one irrigation season in order to make more water available 

for release downstream. Water accrues to the water bank over the course 

of the year when participants do not use irrigation water for their crops as 

they normally would. By March 31 each year NMFS and Reclamation will 

meet to determine a flow schedule, including water bank deliveries. 

According to Reclamation, the water bank provides a temporary means to 

augment river flows for threatened species and also allows it to meet its 

contractual responsibility to deliver water to Project irrigators while longterm, basinwide solutions for balancing water demands are evaluated. To 

collaboratively develop potential long-term solutions to improve habitat 

conditions, some of which could increase river flows, the biological 

opinion also requires Reclamation to initiate a Conservation 

Implementation Program to bring together stakeholders, including federal 

agencies, tribes, and the states.

This report addresses (1) how Reclamation operated the water bank and 

how much it cost from 2002 through 2004, (2) whether Reclamation met its 

annual water bank obligations each year, (3) the water bank’s impact on 

water availability and use in the basin, and (4) alternative approaches for 

achieving the water bank’s objectives.

To address the objectives of this report, we visited the Klamath Project and 

met with and collected documentation from Reclamation and NMFS 

officials, as well as representatives from other stakeholder federal 

agencies, tribes, irrigators, commercial fishermen, academics, and 

conservationists. To determine how Reclamation operated the water bank 

and its costs, we analyzed water bank planning, contracting, and 

expenditure documentation. To determine whether Reclamation met its 

annual water bank obligations, we analyzed water bank contracts and 

3

Reclamation identifies the water bank as a pilot program that the agency contends is not 

subject to the National Environmental Policy Act.
Page 5 GAO-05-283 Klamath Project Water Bank

documentation of Klamath River flows. To describe the water bank’s 

impact, we analyzed relevant land, surface water, and groundwater use 

data; reviewed relevant studies; and met with stakeholders. We did not 

review the water bank’s impact on fish species because the short history of 

the water bank makes it difficult to obtain reliable information. To describe 

alternative approaches to the water bank, we met with potential land 

sellers, reviewed studies of water storage options, and reviewed the status 

of basinwide efforts to increase flows. We performed our work between 

May 2004 and February 2005 in accordance with generally accepted 

government auditing standards.

Results in Brief Reclamation has modified its water bank operations from year to year as its 

obligations and costs increased. Reclamation obtained water for the water 

bank by contracting with irrigators to either (1) forego irrigation altogether 

(crop idling), (2) irrigate using only well water (groundwater substitution), 

or (3) pump well water into the irrigation canals for others to use 

(groundwater pumping). Based on each year’s experience, Reclamation 

modified its water bank operations to better meet its increasing obligations 

and to mitigate costs. For example, in 2003, Reclamation solicited 

applications for water bank participation from irrigators to either forego 

irrigation water or substitute groundwater at fixed rates, while in 2004, 

Reclamation broadened the program’s selection criteria to include 

contingency contracts for groundwater pumping that could be activated “as 

needed” to deliver additional water and sought to reduce costs by

competitively bidding rates with irrigators. However, as Reclamation’s 

water bank obligation increased each year, the water bank’s expenditures 

also increased. Reclamation’s water bank expenditures through 2004 

totaled more than $12 million. Based on Reclamation’s projected annual 

costs of about $7.6 million for fiscal years 2005 through 2011, the 

cumulative cost of the water bank could exceed $65 million through fiscal 

year 2011.

While Reclamation has met its water bank obligations each year since 2002, 

its management and accounting practices have created confusion for 

stakeholders. Our analysis of water bank contracts and river flow records 

found that Reclamation acquired and delivered the required amount of 

water for 2002 through 2004. However, the manner in which the agency has 

managed and accounted for the water bank has caused confusion for 

stakeholders, such as tribes and irrigators. For example, on issues where 

the biological opinion is silent—such as how to count any water spilled 

from dams to prevent flooding and regarding when, or if, Reclamation can 
Page 6 GAO-05-283 Klamath Project Water Bank

reclassify baseline river flow requirements—Reclamation has not been 

clear in communicating what actions it took and why it took those actions, 

resulting in a lack of transparency for stakeholders regarding the operation 

of the water bank. Furthermore, Reclamation has not provided 

stakeholders with systematic and clear information concerning the water 

bank’s status or operations and its decision to use river flow data that are 

not publicly available has limited stakeholders’ ability to independently 

monitor water bank activities. This has led to confusion and doubt among 

stakeholders on whether Reclamation actually met its water bank 

obligations. We are recommending that Reclamation take steps to improve 

its communications regarding the operation of the water bank.

The water bank appears to have increased the availability of water to 

enhance river flows by reducing the amount of water diverted for irrigation 

in the Project, but there is uncertainty regarding the extent of its impacts 

on river diversions and groundwater use. In 2003, when the water bank 

primarily relied on crop idling to obtain water, 20,335 Project acres were 

unirrigated, about 60 percent more than 2002. However, because of annual 

variations in irrigation demand and because Reclamation does not have 

reliable water flow measurement equipment on the Project and monitoring 

data for the Project, assessing the precise impact of the water bank on river 

flows has been an ongoing issue. Moreover, throughout the life of the water 

bank, Reclamation has used varying assumptions regarding the amount of 

water that can be saved by crop idling as more research and information 

has become available about this practice. Because of the uncertainty about 

how much water crop idling provided in 2003, in 2004, Reclamation 

officials decided to rely primarily upon metered groundwater sources for 

the water bank. However, the U.S. Geological Survey (USGS) and Oregon 

Water Resources Department have found evidence that groundwater 

aquifers under the Project, already stressed by drought conditions, are 

refilling at a slower than normal rate in recent years. Many wells have 

shown significant declines in water levels, and an increasing number of 

wells have been deepened to reach groundwater in Klamath County in 

recent years. Reclamation is considering lessening its reliance on 

groundwater pumping and substitution for the 2005 water bank, but is 

uncertain whether it can meet its water bank obligations, particularly for 

spring flows, while increasing its reliance on crop idling.

Although several alternative approaches for achieving the water bank’s 

objectives have been identified by Reclamation and other stakeholders, 

limited information is available regarding their feasibility or costs. Possible 

alternatives to the water bank have been studied to various levels of detail, 
Page 7 GAO-05-283 Klamath Project Water Bank

including permanently retiring Project land from irrigation or adding new 

short-term or long-term water storage capacity. For example, under the 

land retirement alternative, at least 50,000 acres of irrigated land would 

need to be permanently removed from agricultural production to achieve 

an estimated 100,000 acre-foot reduction in irrigation. However, the 

feasibility and costs of land purchases and the impacts of this alternative 

on river flows and the agricultural economy have not been fully assessed. 

Similarly, there are several options for increasing water storage, either by 

expanding storage on Upper Klamath Lake or by building a separate 

reservoir. However, there is little reliable information available regarding 

the total costs, environmental impacts, and certainty of water availability 

for storage under these alternatives. Although NMFS’ 2002 biological 

opinion required the collaborative study of the feasibility of alternatives to 

increase river flows, Reclamation and other stakeholders are still 

developing the framework for this process. In the interim, Reclamation and 

NMFS have an ongoing dialogue regarding water bank management and 

will have the opportunity to consider alternative ways to more effectively 

manage the water bank when they meet for a planned reconsultation on the 

biological opinion in 2006. For example, Reclamation officials may 

consider proposing more flexibility to manage water bank volumes in wet 

or above average water years, thus preserving funding and resources for 

dry years.

We are recommending that Reclamation take steps to improve the 

information provided to stakeholders regarding water bank management 

and accounting by regularly and systematically providing—through media 

such as a water bank Web-link or a monthly or biweekly press release—

public information on the rationale and effects of management decisions 

related to forecasted water availability, unexpected spill conditions, or 

other significant events, as well as regularly updated information regarding 

the water bank’s status, including the amount of water bank deliveries to 

date. In commenting on a draft of this report, the Departments of 

Commerce and the Interior generally agreed with our findings. 

Reclamation concurred with our recommendation, agreeing to add a water 

bank page to its Internet Web site that will include background information 

on the water bank, current information that is regularly updated, such as 

the status of water bank deliveries, and links to other relevant Web 

resources. Commerce and Interior provided written technical comments 

which we incorporated as appropriate. We requested comments from the 

Department of Agriculture but none were provided. Interior’s comments 

appear in appendix III and Commerce’s comments appear in appendix IV.
Page 8 GAO-05-283 Klamath Project Water Bank

Background The Klamath River Basin, spanning the southern Oregon and northern 

California borders, covers over 15,000 square miles. The Klamath River 

originates in the Upper Basin, fed by Oregon’s Upper Klamath Lake, a large, 

shallow body of water composed of flows from the Sprague, Williamson, 

and Wood Rivers. The river subsequently flows into the Lower Basin in 

California, fed by tributaries including the Shasta, Scott, Salmon, and 

Trinity Rivers, and empties into the Pacific Ocean. River flows and lake 

levels depend primarily upon snowpack that develops during the winter 

months, melts in the spring, and flows into the river basin. Rainfall and 

groundwater from natural springs also contribute to flows. On average, 

about 1.5 million acre-feet of water pass from the Upper Basin to the Lower 

Basin annually at Iron Gate Dam.

The Secretary of the Interior authorized construction of the Klamath 

Project in 1905.4 Reclamation dammed Upper Klamath Lake, drained and 

reclaimed Lower Klamath and Tule Lakes, stored the Klamath and Lost 

Rivers’ flows, and provided irrigation diversion and flood control on the 

reclaimed land. About 85 percent of the Project lands obtain irrigation 

water from Upper Klamath Lake and the Klamath River, while Gerber 

Reservoir, Clear Lake, and the Lost River supply the remainder of the 

Project. Water is delivered to Project lands using an elaborate system of 

canals, channels, and drains, including diversions directly from the 

Klamath River. The distribution system is considered highly efficient, 

ensuring that water that is diverted for use within the Project is reused 

several times before it returns to the Klamath River. Homesteading of the 

reclaimed lands began in 1917 and continued through 1948. 

As shown in figure 2, the Project is currently composed of about 207,000 

acres of irrigable lands. Historically, about 200,000 acres of Project lands 

have been in agricultural use annually.5

 For example, in 2003, the most 

recent year for which data is available, about 202,000 acres were 

considered to be in agricultural use, of which about 180,000 acres were 

irrigated and harvested. Crops grown and harvested on the Project include 

alfalfa, barley, oats, wheat, onions, potatoes, and peppermint, and cattle 

4

Interior authorized the Project under provisions of the Reclamation Act of 1902, 32 Stat. 

388.

5

Includes harvested, unharvested, and fallowed land. Fallowing is the practice of not 

seeding land for one or more seasons, for example, to destroy weeds or conserve soil 

moisture.
Page 9 GAO-05-283 Klamath Project Water Bank

graze on more than 40,000 acres of irrigated pastureland. In addition to 

farm and pastureland, four national wildlife refuges were set aside by 

executive orders in conjunction with the construction of the Project.6

 The 

refuges, managed by Interior’s Fish and Wildlife Service (FWS) support 

many fish and wildlife species and provide suitable habitat and resources 

for migratory birds of the Pacific Flyway. About 23,000 acres of the two 

refuges within the Project water delivery area—Tule Lake and Lower 

Klamath National Wildlife Refuges—are leased for agricultural purposes.7

6

The Lower Klamath Lake Wildlife Refuge was established in 1908; the Clear Lake Wildlife 

Refuge was established in 1911; the Upper Klamath Lake and Tule Lake Wildlife Refuges 

were established in 1928.

7

The Kuchel Act (Pub. L. No. 88-567 (1964)) specifies that refuge lands be leased for 

agricultural use to the extent consistent with their primary purposes, waterfowl 

management. Contracts are issued for 5 to 8 years but require annual renewal. These lands 

are the most productive lands in the Klamath Basin and represent about 10 percent of the 

land area receiving Project water.
Page 10 GAO-05-283 Klamath Project Water Bank

Figure 2: Reclamation’s Klamath Project

Note: Due to space limitations, Upper Klamath Lake is not shown to scale with the Klamath Project.

Keno Dam

Upper Klamath Lake

Location of the Klamath Project.

Upper Klamath Lake

National Wildlife Refuge

Source: Reclamation.

Klamath Falls

Siskiyou County Modoc County

Oregon

California

Link River Dam

Lost River

Bonanza

Dairy

Olene

Midland

Tulelake

Lower Klamath National

Wildlife Refuge

Tule Lake

National Wildlife

Refuge

Miller Creek

Clear Lake Dam

Clear Lake

National Wildlife

Refuge

Gerber Dam

66

140

140

39

139

70

97

Klamath County

Klamath River

Rivers and lakes

Klamath Project areas

National wildlife refuges

Malin

Merrill

Lake Ewauna

Agency Lake
Page 11 GAO-05-283 Klamath Project Water Bank

Reclamation, through contracts, provides water for irrigation and 

hydropower production and must also provide water for the national 

wildlife refuges. Reclamation has entered into contracts with numerous 

irrigation districts and individual irrigators on the Project to provide for the 

repayment of Project costs and the right to receive Project water. The 

contracts most commonly specify a land acreage amount to be covered by 

the contract—not a specific water amount to be delivered. Also by contract 

with Reclamation, California-Oregon Power Company (now PacifiCorp) 

obtained the right to use certain amounts of water, after requirements of 

the Klamath Project are satisfied, for hydropower generation at its 

privately owned and independently operated dams on the Klamath River 

downstream of the Project.8

 PacifiCorp’s southernmost hydropower dam, 

Iron Gate Dam, located about 20 miles downriver of the Oregon-California 

border, is the last control point before Klamath River flows run freely to the 

Pacific Ocean. Finally, the national wildlife refuges have federally reserved 

rights for the water necessary to satisfy the refuges’ primary purposes, and 

Reclamation must satisfy refuge water needs after its other obligations are 

met.

Reclamation is also obligated to protect tribal trust resources, such as 

water and coho salmon. The Klamath River Basin is home to four federally 

recognized tribes, identified by Reclamation as the Klamath Tribes in the 

Upper Basin area of Oregon, and the Hoopa Valley Tribe, Yurok Tribe, and 

Karuk Tribe in the Lower Basin area of California. Each tribe has longstanding cultural ties to the Klamath River, its tributaries, and native fish 

species. Furthermore, the Klamath, Hoopa, and Yurok tribes have, either by 

treaty or executive order, reserved rights to sufficient water quality and 

flows to support all life stages of fish life in protection of tribal fishing 

rights.9

 As with all federal agencies, Reclamation has a trust responsibility 

to protect these tribal resources and to consult with the tribes regarding its 

actions in a government-to-government relationship.

Reclamation must comply with the Endangered Species Act to ensure that 

any action it authorizes, funds, or carries out is not likely to jeopardize the 

continued existence of any listed species of plant or animal or adversely 

modify or destroy designated critical habitat. Interior’s FWS and 

8

PacifiCorp’s hydroelectric dams are operated under a Federal Energy Regulatory 

Commission license; relicensing of the power project is scheduled for 2006.

9

The Karuk Tribe of California did not obtain federal tribal recognition until 1979, and is 

seeking recognition of a fishing right.
Page 12 GAO-05-283 Klamath Project Water Bank

Commerce’s NMFS are responsible for administering the act.10 If FWS or 

NMFS finds that an agency’s proposed activity is likely to jeopardize a 

threatened or endangered species or destroy or adversely modify its critical 

habitat, then a “reasonable and prudent alternative” that would avoid such 

harm must be identified. Three species of fish that are of particular 

importance to the cultures of the tribes—the threatened southern 

Oregon/northern California coho, and the endangered Lost River sucker 

and shortnose sucker—are affected by Project operations. NMFS listed the 

coho as threatened in 1997, and FWS listed the two species of suckers, 

which populate Upper Klamath Lake and rivers other than the Klamath, as 

endangered in 1988.

Drought conditions since 2000 have complicated Reclamation’s efforts to 

balance the irrigation water demands on the Project with the requirements 

for specific river flows and lake levels for threatened and endangered 

species. Reclamation operates the Project according to an annual 

operations plan that helps the agency to meet its various obligations and 

responsibilities, given varying hydrological conditions. In 2001, responding 

to Reclamation’s biological assessment of its proposed Project operations 

plan, FWS and NMFS issued biological opinions that suggested11

Reclamation take numerous actions, including maintaining higher water 

levels in Upper Klamath Lake and two reservoirs on the Lost River and 

higher flows of the Klamath River below Iron Gate Dam. Because of the 

new biological opinions and drought conditions, Reclamation was 

prohibited from releasing normal amounts of water to most Project 

irrigators, which impaired or eliminated agricultural production on much 

of the Project.

Subsequently, Reclamation proposed a new 10-year Project operations plan 

for 2002 through 2011. NMFS reviewed Reclamation’s biological 

assessment of the plan to determine its effect on listed species, and issued 

a final biological opinion on May 31, 2002, directing Reclamation to 

establish a multiyear water bank to provide additional river flows. 

10Along with NMFS, the FWS administers the act and is responsible for protecting terrestrial, 

or land-dwelling species, and freshwater animal and plant species, including suckers.

11Although the opinion “suggested” that Reclamation implement certain measures, such as a 

water bank, to prevent harm to the threatened or endangered species, such 

recommendations were required to be implemented if Reclamation was to be protected 

under the act from enforcement actions for prohibited “takings,” for example, actions that 

result in harm, harassment, or the killing of protected species. See 16 U.S.C. §§ 1532(19), 

1536(b)(4), 1536(o)(2), 1538(a)(1)(B).
Page 13 GAO-05-283 Klamath Project Water Bank

Reclamation incorporated this water bank into its Project operations plan 

through 2011. NMFS and Reclamation can reconsult on the requirements of 

the biological opinion as warranted, for example, if new scientific 

information on river flow requirements for fish is developed. 

Reconsultation is likely during 2006, when ongoing studies of Klamath 

River flows are expected to be completed.

Although NMFS’ biological opinion recommended a water bank as an 

alternative and specified the amounts of water to be provided each year, it 

provided Reclamation little specific guidance regarding the structure, 

management, or operation of the water bank. Water banking is broadly 

defined as an institutional mechanism that facilitates the legal transfer and 

market exchange of various types of surface water, groundwater, and water 

storage entitlements. Water banks have been proposed or are operating in 

almost every western state. However, significant differences exist in the 

way that each bank operates with respect to market structure, degree of 

participation, pricing, regulatory oversight, environmental objectives, and 

other factors.12

Under Reclamation’s water bank program, participating irrigators would be 

paid to forego their contractual entitlement to water for one irrigation 

season in order to make more water available for release into the river. 

Water acquired by Reclamation would accrue to the water bank over the 

course of the year as participants did not divert water for irrigation 

purposes as they normally would. A schedule for delivery of additional 

flows is determined by NMFS and Reclamation by March 31 each year, with 

the majority of the water bank provided in the spring and early summer 

when the water is most needed by the coho. According to Reclamation, the 

water bank would enable the agency to augment river flows for threatened 

species and also meet its contractual responsibility to deliver water to 

Project irrigators until other solutions for balancing water demands were 

identified. Reclamation was also required to initiate a Conservation 

Implementation Program that would bring together basin stakeholders, 

including federal agencies, tribes, and the states, to collaboratively develop 

12California’s state administered Drought Water Bank, operating since 1991, is a 1-year 

leasing program to reallocate water between users during drought conditions and acts as a 

clearinghouse that pools water and allocates supplies to critical demands in the state. In 

contrast, Oregon’s Deschutes Water Exchange Groundwater Mitigation Bank, administered 

by the Deschutes Resources Conservancy, facilitates surface water leases and time-limited 

transfers to create mitigation credits for groundwater pumping in the Deschutes Basin.
Page 14 GAO-05-283 Klamath Project Water Bank

long-term solutions, some of which would increase flows, such as surface 

water storage and groundwater resource development.

Reclamation Modified 

Its Water Bank 

Operations from Year 

to Year as Its 

Obligations and Costs 

Increased 

Reclamation modified its water bank operations from year to year as its 

obligations and costs increased. Reclamation acquired water for the water 

bank by contracting with irrigators for the water needed to augment 

Klamath River flows as required by the biological opinion. As it gained 

more experience each year, Reclamation modified its water bank 

operations to better meet the increasing obligations and to mitigate costs. 

As its annual obligations increased, Reclamation’s annual water bank 

expenditures also increased, totaling more than $12 million through 2004. 

Based on Reclamation’s estimated annual cost of about $7.6 million for 

fiscal year 2005 and onward, the cumulative cost of the water bank could 

exceed $65 million through fiscal year 2011.

Reclamation Modified Its 

Water Bank Operations 

from Year to Year to Meet 

Increasing Obligations

Reclamation initiated the Klamath Project water bank program in 2002, as 

recommended under NMFS’ biological opinion, with the objective of 

purchasing irrigators’ water entitlement for one irrigation season so that 

this water could be used to provide additional Klamath River flows for 

threatened coho salmon. The water bank is not a physical reservoir of 

stored water but an administrative mechanism through which Reclamation 

contracts with irrigators both on and off the Klamath Project. Through 

these contracts irrigators agreed to either (1) forego irrigation altogether 

(crop idling), (2) irrigate using only well water (groundwater substitution), 

or (3) pump well water into the irrigation canals for others to use 

(groundwater pumping), thus making water available to augment river 

flows. Water accrues to the water bank over the course of the irrigation 

season as water bank contractors forego irrigating their land by crop idling 

or groundwater substitution and as groundwater is pumped into canals 

under water bank contracts. However, because Reclamation is required to 

provide large amounts of water in spring and early summer before 

sufficient water has accrued to the water bank, it actually “borrows” water 

for the bank from short-term storage supplies. This water is later replaced 

by foregone irrigation water over the course of the year.

Reclamation modified its water bank operations each year, changing its 

composition, selection process, contracting process, and program rules as 

it gained experience to meet its increasing obligations. In 2002 when the 

obligation was 30,000 acre-feet, the water bank sources included crop 
Page 15 GAO-05-283 Klamath Project Water Bank

idling off-Project and groundwater pumping; in 2003 when the obligation 

was 50,000 acre-feet, sources included crop idling on-Project and 

groundwater substitution; and in 2004 when the obligation was 75,000 acrefeet, all three sources of water were included in the water bank. 

Reclamation modified the selection process from relying on only two 

irrigators in 2002—without a public application process13—to soliciting 

applications from any qualified irrigator in both 2003 and 2004. In 2004, 

Reclamation solicited water bank applicants earlier in the year than it had 

in 2003, in part, to allow successful applicants more lead time in planning 

their irrigation.14 Reclamation also modified the contracting process to 

obtain more flexibility by competitively bidding contract rates in 2004 

rather than paying a fixed rate as in 2003 and entering into contingency 

contracts for groundwater pumping that could be activated “as needed” to 

deliver additional water to meet its increasing water bank obligation and 

uncertain delivery schedule. These contingency contracts allowed 

Reclamation to acquire only the amount of water it needed to meet the 

agreed upon delivery schedule. Finally, Reclamation expanded its program 

rules to make participation in the water bank more practical and attractive 

to potential applicants. For example, Reclamation changed the rules for the 

2004 water bank to allow harvesting of crops on land under crop idling 

contracts, reflecting the fact that some crops such as alfalfa can grow with 

water from subsurface moisture alone.

Similarly, Reclamation modified its monitoring process for the water bank 

over time. For example, in 2003, Reclamation monitored every participant 

for compliance with the program rules. Enforcement staff examined and 

tested each crop idling parcel of land at least once over the course of 2003’s 

water bank to ensure that no intentional irrigation occurred. In addition, 

Reclamation relied on self-policing by irrigators who called in tips 

identifying potential cheaters. A Reclamation official estimated a greater 

than 95 percent compliance rate in 2003 and only terminated the contract 

of one participant who intentionally irrigated fields after deciding to 

withdraw from water bank participation without notifying Reclamation. In 

13While NMFS wanted Reclamation to operate a water bank in the spring of 2002, the final 

biological opinion was not released until May 31, 2002. Nevertheless, NMFS and 

Reclamation agreed to operate the water bank from May 1 to May 31, before the biological 

opinion was finalized and released.

14Those participating in the water bank do not have to forego irrigating all of the land they 

own in a given year, but they must forego irrigation entirely for the year on those lands 

accepted into the water bank.
Page 16 GAO-05-283 Klamath Project Water Bank

contrast, during 2004 Reclamation sought to reduce enforcement costs and 

increase efficiency by examining and testing crop idling parcels of land 

only toward the end of the year while following up on tips identifying 

potential cheaters throughout the year. In 2004, Reclamation found no 

intentional violations.

Water Bank Costs Could 

Exceed $65 Million through 

Fiscal Year 2011

Reclamation’s water bank expenditures through fiscal year 2004 exceeded 

$12 million and could total more than $65 million through 2011. As shown 

in table 1, Reclamation’s total expenditures have increased annually as the 

water bank obligation has grown from 30,000 acre-feet in 2002 to 75,000 

acre-feet in 2004. 

Table 1: Reclamation’s Water Bank Expenditures, Fiscal Years 2002 to 2004

Source: Reclamation, Klamath Basin Area Office.

Note: Dollar amounts are not adjusted for inflation.

Reclamation attributes the increasing costs of the water bank to the 

increasing annual volume of water purchases, as well as increasing 

administrative costs due to the large increase from 2002 to 2003 in the 

number of contracts to manage and the addition of the groundwater 

pumping program in 2004 and its associated contract negotiations. 

Reclamation estimates that the 100,000 acre-foot water bank requirements 

for fiscal years 2005 through 2011 will cost at least $7.6 million annually, 

bringing the total water bank costs to more than $65 million. For 2005 and 

onward, according to Reclamation, the water bank will be a specific budget 

Fiscal year

Expenditures 2002 2003 2004 Total

Groundwater substitution 

or pumping contracts $1,000,000 $1,788,711 $4,009,451 $6,798,162

Crop idling contracts 0 2,700,789 637,258 3,338,047

Klamath Basin Rangeland 

Trust contracts for offProject crop idling 948,300 0 690,221 1,638,521

Administration 2,479 175,233 255,119 432,831

Other 10,215 22,213 144,785 177,213

Total $1,960,994 $4,686,946 $5,736,834 $12,384,774
Page 17 GAO-05-283 Klamath Project Water Bank

item in its budget request.15 Accordingly, Reclamation requested $7.626 

million for fiscal year 2005 and plans to gradually increase annual budget 

requests to about $7.660 million by 2011.

Reclamation’s expenditures fall into five categories: groundwater contract 

costs, crop idling contract costs, Klamath Basin Rangeland Trust contract 

costs, administrative costs, and other costs. Reclamation’s largest water 

bank expenditures were for groundwater contracts with irrigators—for 

both substitution and pumping—totaling nearly $7 million, or 55 percent of 

total expenditures from 2002 through 2004. Reclamation’s second largest 

water bank expenditures were for crop idling contracts with Project 

irrigators, totaling about $3.3 million, or 27 percent of total expenditures. 

Reclamation’s contracts with the Klamath Basin Rangeland Trust to forego 

irrigation of pastureland outside of the Klamath Project totaled more than 

$1.6 million, or about 13 percent of total water bank expenditures through 

2004. Reclamation’s administrative costs—mainly payroll and overhead—

for planning and implementing the water bank comprised about 3 percent 

of total water bank expenditures. Reclamation also incurred other costs 

related to the operation of the water bank, such as water quality analysis, 

contract compliance monitoring, and a contract for assistance from the 

Oregon Water Resources Department.

Reclamation Met Its 

Water Bank 

Obligations, but 

Information Provided 

to Stakeholders Could 

Be Improved

Reclamation met its water bank obligations to provide additional water to 

supplement Klamath River flows each year since 2002. However, the 

manner in which the agency has managed and accounted for the water 

bank has caused confusion for some stakeholders, such as tribes and 

irrigators, and has reduced the transparency of the water bank’s status and 

operation.

15The 2002 through 2004 water banks were unanticipated and thus not included in 

Reclamation’s budget requests nor specifically provided for in agency appropriations. 

Instead, funds appropriated for feasibility studies under the Klamath Basin Water Supply 

Enhancement Act of 2000 were used, as well as other budget sources such as the Central 

Valley Project and the El Paso Water Reclamation and Reuse Program.
Page 18 GAO-05-283 Klamath Project Water Bank

Reclamation Met Its Water 

Bank Obligations Each Year

According to NMFS and Reclamation officials, Reclamation’s obligation is 

to both acquire the amount of water required in the biological opinion each 

year and deliver the water—some of it or all of it—in accordance with the 

schedule mutually agreed to by both agencies. Regarding the acquisition of 

water, NMFS concluded, and our analysis of Reclamation contract records 

verified, that Reclamation met its obligation to acquire 30,000 acre-feet in 

2002, 50,000 acre-feet in 2003, and 75,000 acre-feet in 2004, by contracting 

for about 47,000; 59,000; and 111,000 acre-feet, respectively. Appendix II 

provides detailed information on water bank applications and contracts. 

According to Reclamation officials, they contracted to acquire more water 

than required, in part to serve as a buffer against unexpected changes in 

water conditions and as insurance against uncertainty about how much 

water is actually obtained from crop idling.

Regarding the delivery of water to augment flows, NMFS concluded, and 

our analysis of USGS river flow records verified, that Reclamation met its 

obligation each year as established in the schedule agreed upon with 

NMFS. We found that, in total, Reclamation augmented Klamath River 

flows by approximately 30,000 acre-feet within the brief 2002 water bank 

time frame—meeting its 30,000 acre-feet schedule requirement; by more 

than 71,000 acre-feet in 2003—surpassing its 50,000 acre-feet schedule 

requirement; and by more than 95,000 acre-feet in 2004—surpassing its 

74,373 acre-feet schedule requirement. According to Reclamation officials, 

these augmented flows represent water provided per water bank 

requirements plus additional releases of water purchased and stored to 

meet tribal trust obligations. Because the water bank is not a physical pool 

of water allowing the constant measurement and monitoring of deposits 

and withdrawals, estimating the status of water bank accruals or deliveries 

and differentiating water bank deliveries from tribal trust deliveries during 

the year is neither precise nor easy. Reclamation views water bank 

deliveries as simultaneously meeting both its requirement to augment river 

flows under the biological opinion and its tribal trust responsibilities. 

However, to account for its annual deliveries, Reclamation officials have 

generally counted augmented flows as first satisfying the water bank 

requirement and consider excess flows, such as the approximately 20,000 

acre-feet delivered above the water bank requirement in 2003 and 2004, as 

tribal trust deliveries.
Page 19 GAO-05-283 Klamath Project Water Bank

Augmented flow is defined as the volume of water in excess of base flows 

measured at Iron Gate Dam.16 Klamath River base flows are determined 

according to “water-year types.” Based on an April 1 forecast of snowpack 

and runoff, Reclamation initially classifies each year as Wet, Above 

Average, Average, Below Average, and Dry in accordance with the 

biological opinion.17 Each classification requires a specific base flow of 

water at Iron Gate Dam. Forecasts are updated at least monthly, 

incorporating actual water conditions as the year progresses, and providing 

Reclamation with increasingly accurate data with which to determine if the 

water-year type needs to be reclassified during the year. 

In 2002, the water bank operated from May 1 to May 31, during which 

Reclamation met its water bank delivery obligation by augmenting flows by 

approximately 30,000 acre-feet, as shown in figure 3. NMFS released its 

final biological opinion on May 31 directing Reclamation to operate a water 

bank through 2011.

16Klamath River flows—actual and base—are calculated by taking the average daily flow 

rates measured in cubic feet per second (1 cubic foot per second per day equals 1.9835 acrefeet).

17The Department of Agriculture’s Natural Resources Conservation Service provides the 

forecasts.
Page 20 GAO-05-283 Klamath Project Water Bank

Figure 3: 2002 Augmented Klamath River Flows and Key Dates 

a

The augmented flow during May 2002 consists of water bank deliveries only.

Note: Klamath River flows are measured at Iron Gate Dam.

In 2003, Reclamation met its water bank delivery obligation by augmenting 

flows by at least 50,000 acre-feet as agreed in its schedule with NMFS. 

Heavier than expected rainfall in early spring prompted Reclamation to 

move the official start of the water bank from April 1 to May 21, as shown 

in figure 4. The water bank operated between May 21 and October 31, 

0

500

1,000

1,500

2,000

2,500

Cubic feet per second

Sources: GAO analysis of USGS river flow data and Reclamation water bank and water-year type data.

Average daily Klamath River flow

Base river flow required for a Dry water-year

Base river flow required for a Below Average water-year

Augmented flow equals 29,965 acre-feeta

5/31/02:

• 2002 water bank 

ends

• Final 2002 

NMFS biological 

opinion released

5/1/02:

• 2002 water 

bank begins

7/10/02:

• Water-year 

type changed 

from Below 

Average to 

Dry

9/1/02:

• Fish die-off 

begins

9/30/02:

• Fish die-off 

ends
Page 21 GAO-05-283 Klamath Project Water Bank

during which time Reclamation reclassified the water-year type from Dry to 

Below Average due to better than expected water conditions.

Figure 4: 2003 Augmented Klamath River Flows and Key Dates

a

The augmented flow between May 21 and October 31 consists of both water bank and tribal trust 

deliveries.

Average daily Klamath River flow

Base river flow required for a Dry water-year

Base river flow required for a Below Average water-year

Augmented flow equals 71,428 acre-feeta

Spill condition exists

Sources: GAO analysis of USGS river flow data and Reclamation water bank and water-year type data.

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Cubic feet per second

4/1/03:

 • Initial start date 

for 2003 water 

bank

• Klamath Project 

irrigation season 

begins

• "Spill condition" 

exists

5/21/03:

• Spill condition 

ends

• 2003 water 

bank begins 

(revised start 

date)

6/13/03:

• Water-year 

type changes 

from Dry to 

Below 

Average

7/9/03:

• Reclamation 

declares water 

bank exhausted, 

subsequently 

reopened

10/31/03:

• 2003 water 

bank ends
Page 22 GAO-05-283 Klamath Project Water Bank

Note: Klamath River flows are measured at Iron Gate Dam.

In 2004, Reclamation met its water bank delivery obligation by augmenting 

flows by at least 74,373 acre-feet as agreed in its schedule with NMFS. As 

shown in figure 5, the 2004 water bank started on April 1 and ended on 

October 31, as planned. The water-year type was reclassified from Below 

Average to Dry on May 7, shortly after the water bank began due to a 

smaller than expected water supply.

Figure 5: 2004 Augmented Klamath River Flows and Key Dates

Average daily Klamath River flow

Base river flow required for a Dry water-year

Base river flow required for a Below Average water-year

Augmented flow equals 95,176 acre-feeta

Sources: GAO analysis of USGS river flow data and Reclamation Water Bank and water-year type data.

0

500

1000

1500

2000

2500

Cubic feet per second

4/1/04:

 • 2004 water 

bank begins

• Klamath Project 

irrigation 

season begins

5/7/04:

• Water-year type 

changed from Below 

Average to Dry

10/31/04:

• 2004 water 

bank ends
Page 23 GAO-05-283 Klamath Project Water Bank

a

The augmented flow during 2004 consists of both water bank and tribal trust deliveries.

Note: Klamath River flows are measured at Iron Gate Dam. Average daily flow data for October 11, 

2004, is missing. Therefore, the 2004 augmented flow calculation does not include data for that date.

Reclamation’s Management 

and Accounting Practices 

Confused Stakeholders

Although Reclamation met its annual water bank obligations each year, the 

manner in which the agency managed and accounted for the water bank 

confused stakeholders. Specifically, for two issues where the biological 

opinion is silent—how to count spill water released to prevent flooding, 

and whether Reclamation can reclassify the water-year type designation 

midyear due to changing water conditions—Reclamation has not been 

clear in communicating related management and accounting decisions. 

Furthermore, Reclamation has not provided stakeholders with systematic 

and clear information concerning the water bank’s status or operations, 

and its decision to use river flow data unavailable to stakeholders limited 

stakeholders’ ability to independently monitor water bank activities. This 

has led to confusion and doubts among stakeholders on whether 

Reclamation actually met its water bank obligations.

Reclamation’s management of the water bank during 2003’s spill 

condition—when water was released by dams to prevent overflow or 

flooding—and its lack of clear communication with stakeholders, caused 

significant confusion. Heavier than expected rainfall in early spring of 2003 

caused a “spill condition” to exist on April 1 when the water bank was set 

to begin. However, the biological opinion does not specify how much, if 

any, spill water can be counted as a water bank delivery. In the absence of 

specific guidance from NMFS, Reclamation could have counted spill 

toward water bank deliveries in one of three ways: (1) up to the amount 

already scheduled for delivery during the spill; (2) in its entirety, including 

water above the scheduled amount; or (3) not at all. According to 

Reclamation officials, they eventually decided to reset the water bank’s 

start to May 21—when the spill condition ended—and started counting 

augmented flows as of that date. However, Reclamation did not clearly 

communicate its decisions to stakeholders leading to confusion among 

stakeholders on how, or if, Reclamation was meeting its water bank 

obligations. For example, according to some tribal representatives, 

Reclamation provided a preliminary status report in July stating that over 

20 percent of the water bank—over 11,000 acre-feet—was delivered during 

the spill. This contradicted a Reclamation official’s statement that the 

agency had retroactively reset the water bank’s start date to after the spill 

conditions ceased. Reclamation officials concede that stakeholder 

confusion as a result of these actions was understandable. Subsequently, 
Page 24 GAO-05-283 Klamath Project Water Bank

NMFS and Reclamation agreed that, beginning in 2004, spill water will be 

counted only up to the amount already scheduled for delivery by the water 

bank.

Similarly, Reclamation’s reclassification of the water-year type—which 

determines the base river flow requirement—has also caused confusion for 

stakeholders. Like spill conditions, the biological opinion is silent on 

whether the water-year type can be reclassified midyear after its initial 

determination in April. NMFS and Reclamation officials contend that 

reclassifying the water year type to reflect changing water conditions is 

necessary to reflect the most current and accurate data available. However, 

some stakeholders, such as the tribes, contend that midyear 

reclassification is not allowed under the biological opinion and could lead 

to the improper manipulation of water bank delivery schedules. While 

Reclamation issued a press release informing the public of its 

reclassification of the water-year type in 2003, the impact of such changes 

on the water bank was not clearly articulated. For example, Reclamation 

did not mention that it would also change its estimate of year-to-date water 

bank deliveries as a result of the midyear reclassification in water-year 

type, leading to stakeholder concerns that water deliveries were being 

manipulated to benefit irrigators at the expense of fish. Reclamation 

officials believe that reclassifying water-year types is in compliance with 

the biological opinion and that the confusion related to reclassifying the 

water-year type stems from Reclamation’s attempt to incorporate the most 

recent and accurate data on water conditions in their water bank delivery 

schedules.

Reclamation also has not clearly or systematically communicated the water 

bank’s status and operations, further increasing stakeholder confusion. 

Specifically, Reclamation does not have a systematic mechanism to 

communicate information regarding the water bank to all stakeholders. 

Rather than regularly providing updated calculations of year-to-date 

deliveries to all stakeholders simultaneously through a single mechanism, 

such as a Web site or regularly scheduled press releases, Reclamation 

provides information on the water bank and its status “upon request” and 

through occasional press releases. Consequently, different stakeholders 

receive different information at different times. According to Reclamation 

officials, they meet regularly with the tribes and discuss the water bank’s 

status. However, Reclamation does not systematically seek feedback on the 

operation of the water bank from all stakeholders, limiting the 

opportunities to clarify misunderstandings. As a result, after several years 

of operation, questions continue to persist among stakeholders, including 
Page 25 GAO-05-283 Klamath Project Water Bank

some Project irrigators and tribes, on basic topics such as the purpose of 

the water bank. Reclamation placed some information about the water 

bank application process on its Web site; however, Reclamation has not 

made other water bank information—such as the year-to-date status—

available since that time, in part, because Reclamation has been reluctant 

to release status information that will almost certainly require revision later 

in the year.

Finally, Reclamation’s use of river flow data generated by PacifiCorp to 

estimate the water bank’s river flow augmentation has reduced the 

transparency of the water bank and limited the ability of stakeholders to 

independently monitor the operation of the water bank. The PacifiCorp 

data used by Reclamation to calculate actual Klamath River flows is not 

available to the public. Therefore, interested stakeholders must use a 

different source—the publicly available USGS data on actual Klamath River 

flows—to calculate year-to-date water bank deliveries. The PacifiCorp and 

USGS flow data differ because each uses a different formula to calculate 

the average daily flow. Thus, Reclamation and stakeholders will arrive at 

different augmented flow calculations, depending upon which data source 

they use. For example, we found that, in 2003, augmented flows appeared 

to be about 2,500 acre-feet greater when using USGS data than when using 

PacifiCorp data. Furthermore, Reclamation, using PacifiCorp data, would 

calculate that it had met its water bank obligation on a different date than a 

stakeholder would using USGS data, creating the potential for stakeholder 

confusion and doubt regarding the status of water bank deliveries. 

Reclamation officials told us that as of October 2004 they began using the 

publicly available USGS data to calculate and communicate the water 

bank’s status.

The Water Bank 

Appears to Have 

Increased the 

Availability of Water 

for River Flows by 

Reducing Irrigation 

Use, but the Extent of 

Its Impacts is Unclear

Reclamation’s water bank appears to have increased the availability of 

water to enhance river flows by reducing irrigation water use on the 

Project, but there is uncertainty regarding the extent of its impacts on river 

diversions and groundwater resources. In 2003, when the water bank 

primarily relied on crop idling to obtain water, there was a significant 

increase in the amount of land not using irrigation water compared with 

recent years. While it was likely that a reduction in river and lake 

diversions for Project irrigation resulted, a university study funded by 

Reclamation found that the reduction attributable to the water bank alone 

was highly uncertain due to the lack of effective flow measurement 

equipment and monitoring data for the Project. Because Reclamation was 

uncertain about how much water crop idling actually provided to the water 
Page 26 GAO-05-283 Klamath Project Water Bank

bank, Reclamation shifted to groundwater substitution and pumping as the 

primary sources for the 2004 water bank. However, USGS and Oregon state 

officials have since found evidence that groundwater aquifers under the 

Project, already stressed by drought conditions, are being pumped by an 

increasing number of wells and refilling at a slower than normal rate, 

prompting Reclamation to consider lessening its future reliance on 

groundwater substitution and pumping.

Crop Idling under the Water 

Bank Has Reduced the 

Amount of Irrigated Land, 

but the Extent of Its Impacts 

on River Diversions Is 

Unclear

In 2003, Reclamation obtained about 60 percent of its water bank 

acquisitions by contracting with irrigators for crop idling on nearly 14,500 

acres of land, based on the assumption that water foregone from irrigation 

on those lands would be available to enhance river flows. Crop idling 

contributed to a significant increase in the amount of land not irrigated in 

2003, compared with recent years. For example, according to 

Reclamation’s 2003 crop report, a total of 20,335 Project acres were not 

irrigated, which is about a 60 percent increase over 2002 when 12,546 acres 

of land were not irrigated, and well exceeds the average of 7,665 acres of 

Project land not irrigated due to agricultural fallowing practices from 1998 

through 2000—the three years preceding Reclamation’s restriction of 

irrigation water in 2001.

Although the number of acres of crop land idled is a useful indication of the 

water bank’s impacts, it does not provide a reliable estimate of the true 

extent to which irrigation water has been made available for river flows. 

According to Reclamation officials, the precise impact of the water bank 

cannot be determined because of year-to-year variation in irrigation 

demand and its determining factors such as temperature, precipitation, and 

crop types. Moreover, throughout the life of the water bank, Reclamation 

has used varying assumptions about the amount of water that can be saved 

by crop idling as more research and information has become available 

about this practice. Specifically, in 2002, Reclamation assumed that it could 

obtain about 5 acre-feet of irrigation water per acre of crop idling, in 2003 

and 2004 assumed 2.5 acre-feet, and is currently assuming that it can obtain 

2 acre-feet per acre through crop idling. To help it quantify the actual 

results of the water bank, Reclamation has turned to other organizations 

for assistance. For example, after the 2002 water bank was completed, 

Reclamation engaged USGS to review the assumptions and results for its 

off-Project crop idling. In February 2004, USGS reported to Reclamation 

that, based on the available data, the amount of water actually obtained per 

acre of crop land idled during the 2002 water bank was most likely in the 

range of .9 to 1.3 acre-feet of water per acre.
Page 27 GAO-05-283 Klamath Project Water Bank

Similarly, in 2003, Reclamation was again unable to obtain precise 

information on the measurable impacts of the water bank for the year, so it 

contracted with California Polytechnic State University to study this issue. 

This study concluded that without effective flow measurement equipment 

and monitoring data for the Project it could not precisely estimate the 

impact of the water bank in reducing Upper Klamath Lake and Klamath 

River diversions to the Project. According to the study, in 2003 the 

reduction in diversions compared with 2000 may have ranged from 11,000 

to 71,000 acre-feet and, moreover, this reduction may have been 

attributable to numerous other factors in addition to the water bank, such 

as heavy rainfall, a large amount of groundwater pumping, changes in 

irrigation district operations, and awareness among Project irrigators of 

the need to reduce water use. Based on subsequent university analysis, 

Reclamation now estimates that it actually obtained about 2 acre-feet of 

water per acre from crop idling in 2003 and 2004.

Despite the ongoing uncertainty regarding the impact that reducing the 

amount of irrigated land has on the availability of water for river flows, 

Reclamation officials told us they must continue to rely on crop idling for a 

significant portion of the water bank. While some stakeholders favor taking 

farmland out of irrigation, they are also uncertain of the extent to which 

crop idling reduces diversions for irrigation. For example, both tribal and 

fishing industry representatives told us that they doubt that Reclamation 

can accurately estimate how much additional water is actually made 

available to the river. Some irrigators question the effectiveness and 

accountability of crop idling as a strategy for the water bank, and also are 

concerned about the economic impacts to taking farmland out of 

production.

Groundwater Pumping for 

the Water Bank under 

Drought Conditions Raises 

Concerns about the Impacts 

on Aquifers

Because of the uncertainty regarding the measurable impact of crop idling, 

Reclamation shifted to groundwater for most of its water bank acquisitions 

in 2004; however, the impact of groundwater pumping on basin aquifers 

during ongoing drought conditions is largely unknown and continued 

reliance may not be sustainable. Reclamation obtained over 70 percent of 

the 2004 water bank deliveries by pumping nearly 60,000 acre-feet of water, 

either to substitute for irrigation water or to fill canals for use by others. 

Figure 6 below shows a groundwater pump delivering water into a canal for 

the water bank. According to Reclamation officials, in the absence of 

stored water, groundwater pumping is the only way to meet required flows 

in the spring and early summer because land idling provides little water in 

the April through June time period. An advantage of groundwater pumping 
Page 28 GAO-05-283 Klamath Project Water Bank

for the water bank is that, unlike crop idling, flow meters on pumps and 

wells allow the exact measurement of the amount of groundwater being 

used in place of river diversions for irrigation. 

Figure 6: Groundwater Pumping for the Klamath Water Bank

The impact of groundwater pumping on Upper Basin aquifers, however, is 

not well understood, and its use during drought conditions is a matter of 

growing concern for Reclamation and others. The basin has suffered 

drought conditions since 2000, resulting in less rain and snowmelt to fill 

lakes, rivers, and aquifers. Recognizing that water demand would cause 

more users to turn to groundwater but that there is little reliable 

information on the groundwater hydrology of the Upper Klamath Basin, 

USGS and the Oregon Water Resources Department initiated a cooperative 

study in 1998 to study and quantify the Upper Basin’s previously unknown 

groundwater flow system. The study, funded in part by Reclamation, is 

expected to be substantially completed in 2005. 

Nevertheless, USGS and Oregon Water Resources Department officials 

have found evidence that groundwater aquifers in the Upper Basin, already 

Source: GAO.
Page 29 GAO-05-283 Klamath Project Water Bank

stressed by drought conditions, are being pumped by an increasing number 

of newly drilled wells and refilling at slower than normal rates in recent 

years. According to state officials, well drilling sharply increased after 

2000, and an increasing number of domestic wells have needed to be 

deepened—a symptom of dropping water levels—in Klamath County 

during that same time frame. According to state records for Klamath 

County, Oregon, from 1998 to 2000, 14 irrigation wells were drilled; from 

2001—when Project deliveries were restricted—through 2003, 124 

irrigation wells were drilled. From 1998 to 2000, 21 domestic wells were 

deepened; from 2001 to 2003, 30 domestic wells were deepened; and in 

2004, another 13 were deepened. Furthermore, USGS officials have 

identified wells in various parts of the Upper Basin, within and outside the 

Project boundaries, which have shown significant water level declines. For 

example, wells outside the Project have shown declines of up to 10 feet 

since 2000, thought to be primarily attributable to climatic conditions. 

Wells within the Project have shown a variety of responses to pumping—

some wells seem to decline during irrigation season and then recover 

substantially during winter months, while other wells have shown steady 

year-to-year declines, some dropping more than 15 feet.

Reclamation engaged USGS in May 2004 to conduct an assessment of their 

current water bank strategies and any potential strategies that could help 

the agency meet its obligations. Specifically, Reclamation asked USGS to 

(1) document current and planned water bank activities, (2) assess the 

effectiveness of the 2003 and 2004 water banks, (3) determine if sufficient 

information is available to assess the impact of the water bank on Klamath 

River flows, and (4) develop a matrix of water bank management options, 

including their potential positive or negative consequences. In December 

2004, USGS officials briefed Reclamation officials on their assessment, 

presenting the pros and cons of various management options to assist 

Reclamation’s 2005 water bank planning. Reclamation officials are 

considering lessening their reliance on groundwater pumping and 

substitution for the 2005 water bank but are uncertain whether they can 

meet their water bank obligations, particularly for spring flows, while 

significantly increasing their reliance on crop idling.
Page 30 GAO-05-283 Klamath Project Water Bank

Limited Information Is 

Available Regarding 

Alternative 

Approaches for 

Achieving Water Bank 

Objectives

While several alternative approaches for achieving the water bank’s 

objectives have been identified by Reclamation and other stakeholders, 

limited information is available with which to reliably judge the feasibility 

or costs of these alternatives. Possible alternatives to the water bank 

include permanently retiring Project land from irrigation, expanding Upper 

Klamath Lake storage, or building a new reservoir separate from the lake. A 

large amount of Project land was offered for retirement by willing sellers in 

2001, and a number of storage options have been evaluated to some extent, 

but implementation is not imminent for any of these alternatives. Although 

one of the objectives of the Conservation Implementation Program, 

required under NMFS’ 2002 biological opinion, is the collaborative study of 

the feasibility of water storage and groundwater development alternatives, 

Reclamation and other stakeholders are still developing the framework for 

that process. In the interim, Reclamation and NMFS have an ongoing 

dialogue regarding water bank management and will likely reconsult on 

Klamath Project operations, including the water bank, in 2006.

A Significant Amount of 

Irrigated Land Would Need 

to Be Retired to Adequately 

Enhance River Flows, with 

Unknown Costs and 

Impacts

As an alternative to the water bank, permanently retiring a large area of 

irrigated Project land could provide 100,000 acre-feet of water to enhance 

Klamath River flows, but little reliable information is available to 

comprehensively assess this option. It is not known with any certainty the 

amount of irrigated land that would need to be retired to replace the water 

bank, how much irrigated land for retirement could actually be obtained 

from sellers, or the price at which it could be obtained. Furthermore, while 

this option is viewed positively by some Klamath River stakeholders, the 

potential impacts on the agricultural economy from retiring a large portion 

of Project lands is cause for concern in the farming community. 

The amount of irrigated land that would need to be retired to reduce 

irrigation and enhance river flows by 100,000 acre-feet can be roughly 

estimated at about 50,000 acres but is not precisely known. As discussed 

earlier in this report, estimates of forgone irrigation water can prove to be 

much less than expected, and the lack of reliable water flow information on 

the Project makes it difficult to accurately determine the specific effects of 

crop idling—which is the short-term equivalent of permanent land 

retirement—and other strategies for reducing river diversions. 

Reclamation, irrigators, and tribal representatives told us that they believe 

that retiring irrigated land would reduce river diversions, but none are 

certain as to precisely by how much. Nevertheless, Reclamation, based on 

its most recent estimate of the amount of irrigation water obtained from 
Page 31 GAO-05-283 Klamath Project Water Bank

crop idling for the water bank, assumes that irrigation is reduced by about 

2 acre-feet of water per acre idled. Using this assumption, Reclamation 

estimates that at least 50,000 irrigated acres—about 30 percent of the 

acreage currently irrigated by water from Upper Klamath Lake and the 

Klamath River—would need to be retired to reduce irrigation by 100,000 

acre-feet. However, according to Reclamation officials, because crop idling 

provides little water from April to June, such land retirement by itself will 

not provide sufficient water to meet spring river flow requirements under 

the biological opinion. Furthermore, the actual reduction in irrigation 

would depend upon factors such as the extent of irrigation on the land 

before it was retired and how it is used after retirement.

Although there may be a fairly large number of potential willing land sellers 

on the Project, the amount of irrigated land actually available for purchase 

and permanent retirement is not known. In 2001, the American Land 

Conservancy (Conservancy)—a national, nonprofit organization involved 

in land conservation efforts—obtained 1-year agreements with 78 different 

landowners to purchase over 25,000 acres of irrigated land for the purpose 

of land retirement. The Conservancy made agreements with willing 

sellers—who, according to Conservancy officials, were generally aging and 

fearful of future drops in property values—expecting that the federal 

government would purchase the land for retirement. However, according to 

the Conservancy, Reclamation was not interested because the land was not 

in a single block. Moreover, according to Reclamation officials, the federal 

government is not interested in acquiring more land in the Klamath Basin. 

Subsequently, the Conservancy’s agreements with the sellers lapsed. 

Whether a coalition of willing sellers could be put together again is 

unknown. An incentive to potential sellers could come from an expected 

increase in power rates in 2006. According to a recent Oregon State 

University economic study, an increase in power rates could raise 

agricultural production costs by an average of $40 per sprinkler-irrigated 

acre, potentially making agriculture unprofitable on as much as 90,000 

acres of Project land. This scenario could potentially make more land 

available for sale and might even result in some voluntary land retirement 

due to lack of profitability, thus increasing river flows.

Additionally, the price at which land might be obtained for retirement is 

unknown. According to the Conservancy, the appraised value of the 

potential willing sellers’ land in 2001 was $3,000 per acre. However, based 

on 2001 estimates from an Oregon State University and University of 

California economic study, the market value for Project irrigated land can 

range from $300 per acre for Class V soils—the lowest quality for 
Page 32 GAO-05-283 Klamath Project Water Bank

agricultural purposes—to $2,600 for Class II soils— some of the better 

agricultural soil on the Project. In addition, Project landowners are 

concerned that property values may have decreased due to the uncertainty 

of water deliveries for irrigation after the 2001 water restriction. Using the 

2001 price estimates from the universities’ study, the total cost to retire 

50,000 acres, assuming the land is available from willing sellers, could 

range from $15 to $130 million, depending upon the mixture of low and 

high valued land offered for sale.

Finally, while tribal representatives and others favor significant irrigated 

land retirement as a means to reduce demands on the river, the extent of 

impacts on the agricultural economy is cause for concern in the Project 

farming community. Tribal representatives and downstream fishing 

representatives told us that irrigated land retirement is essential to 

restoring the balance between the supply of and demand for water in the 

basin. However, according to Klamath irrigators, the Klamath agricultural 

economy is fragile and must maintain close to current levels of agricultural 

acreage in production to sustain its infrastructure. Irrigators argue that 

retiring large amounts of irrigated farmland on the Project could eliminate 

or adversely impact key aspects of agricultural infrastructure, such as fuel, 

transportation, equipment and fertilizer suppliers, and affect a whole host 

of other dynamics of the agricultural community. However, retiring land 

with the lowest agricultural value could help minimize the potential 

negative effect on the region’s agricultural economy. According to the study 

by Oregon State University and the University of California, retiring lands 

with the least productive soils and, therefore, lowest agricultural value, 

would have the smallest potential negative effect on the region’s 

agricultural economy. 

Expanding Upper Klamath 

Lake or Building a Separate 

Reservoir Are under 

Consideration, but Costs 

and Impacts Have Not Been 

Extensively Evaluated

Adding water storage capacity in the Klamath River Basin could provide an 

alternative to the water bank for river flow augmentation, and several 

options to either expand Upper Klamath Lake or build a separate reservoir 

have been considered or pursued to various extents. In general, Klamath 

River stakeholders—irrigators, tribes, federal entities, and others—view 

either option favorably as a potential solution to help balance competing 

water demands. However, the extent and reliability of information 

regarding the total cost for each water storage option, the amount of water 

potentially provided, the certainty and sustainability of water storage, and 

the environmental impacts are largely unknown. 
Page 33 GAO-05-283 Klamath Project Water Bank

Upper Klamath Lake Expansion Upper Klamath Lake (including adjoining Agency Lake) is the primary 

source of water for the Project and the Klamath River. To satisfy the water 

contracts of irrigators, as well as river flow and lake level requirements, 

Upper Klamath Lake must be full at the start of the irrigation season. 

However, when the lake exceeds its maximum storage capacity—generally 

due to heavy runoff before the irrigation season begins—the lake goes into 

“spill condition,” releasing water into the Klamath River (and eventually 

into the Pacific Ocean) to avoid flooding the surrounding area. Expanding 

the lake’s capacity by purchasing and flooding adjoining properties with 

water that would otherwise be spilled would enable Reclamation to 

preserve this water for peak demand periods—late spring to early fall—for 

both fish and irrigators. It would also reduce irrigation demand from these 

lands, leaving more water in the lake for Project and other uses.

In 1998, Reclamation prepared a report identifying numerous options for 

expanding the lake, but only six options were evaluated regarding their 

feasibility for water storage development. Collectively the six options have 

the potential to provide approximately 100,000 gross acre-feet of water, 

however, according to Reclamation officials, evaporation losses would 

reduce the net usable water storage to about half that amount. As shown in 

figure 7, the six water storage options—listed roughly from north to south 

and by proximity to each other—include Agency Lake Ranch, Barnes 

Ranch, Wood River Ranch, the Williamson River Delta Preserve, Caledonia 

Marsh, and Running Y Marsh. 
Page 34 GAO-05-283 Klamath Project Water Bank

Figure 7: Upper Klamath Lake Expansion Options

• Agency Lake Ranch is a 7,125-acre, Reclamation-owned marshland 

located on the west side of Agency Lake. Reclamation purchased the 

Upper Klamath

Lake

Agency

Lake

Barnes

Ranch

Agency Lake

Ranch

Wood River Ranch

Williamson River Delta Preserve

Caledonia

Marsh

Running Y Marsh

Potential water storage areas

Source: Reclamation.

N
Page 35 GAO-05-283 Klamath Project Water Bank

land in 1998 to store spill water during periods of high inflow to the lake. 

Agency Lake Ranch currently has the capacity to store about 13,000 

gross acre-feet without flooding neighboring properties. However, it has 

the potential to store up to 35,000 gross acre-feet of water if the existing 

levees surrounding the land are raised, at an unknown cost. 

• Barnes Ranch is a privately owned 2,671-acre pasture bordering the 

west side of Agency Lake Ranch with the capacity to store 15,000 gross 

acre-feet of water if the levees surrounding the property are improved. If 

the Barnes Ranch is acquired and Reclamation removed the levees 

bordering Agency Lake Ranch and Agency Lake, a combined total of 

approximately 40,000 gross acre-feet of water could be stored and 

would potentially fill to this capacity in most years. In January 2004, 

Reclamation had Barnes Ranch appraised for $5.9 million, but the 

owners and Reclamation have not yet agreed on a purchase price.

• Wood River Ranch is an approximately 3,000-acre site on the north end 

of Agency Lake, adjacent to Agency Lake Ranch. The Bureau of Land 

Management (BLM) purchased Wood River Ranch in 1994 to restore as a 

wetland, among other objectives. Because of its proximity to Agency 

Lake Ranch and Barnes Ranch, Reclamation officials would like to 

convert the land to store approximately 7,500 gross acre-feet of water. 

However, local BLM managers feel that this would not be compatible 

with the existing goals and objectives of the Klamath Resource 

Management Plan, telling us that converting the land to water storage 

would destroy wildlife habitat and reverse a 10-year, multimillion dollar 

restoration effort accomplished with many private contributors.

• The Williamson River Delta Preserve is a 7,440-acre site, located at the 

southern end of Agency Lake, that was converted from wetland to 

farmland in the 1930s and 1940s. The Nature Conservancy purchased 

two properties—Tulana Farms in 1996 and Goose Bay Farms in 1999—

and is developing a restoration plan for the combined site. With the 

encouragement and financial support of Reclamation, the Nature 

Conservancy has considered the option of returning the properties to 

Upper Klamath Lake. Reclamation estimates that the preserve would 

add 35,000 gross acre-feet of water storage capacity, at relatively low 

cost with the Nature Conservancy’s collaboration. 

• Caledonia Marsh is a privately owned 794-acre farm on the southern end 

of Upper Klamath Lake with the potential capacity to store nearly 5,000 

gross acre-feet of water. According to Reclamation, the owner has 
Page 36 GAO-05-283 Klamath Project Water Bank

expressed interest in selling; however, the surrounding levees would 

need to be improved and the Highway 140 road bed raised to protect the 

neighboring property, Running Y Marsh. The cost of these improvements 

has not been determined.

• Running Y Marsh is a privately owned 1,674-acre farm and wetland area 

adjacent to Caledonia Marsh with the potential to store about 10,000 

gross acre-feet of water if converted to lake storage. However, because 

of the high value crops grown there, the owner is not currently 

interested in selling the property to Reclamation.

For all of these options, while it would be relatively easy to determine the 

amount of additional water storage provided by measuring changes in the 

lake surface area, there are a number of associated uncertainties and 

constraints. For example, since these storage areas are essentially 

extensions of the lake itself, filling the additional capacity is dependent 

upon adequate flows into the lake—if the lake does not fill to capacity, the 

storage areas would not be filled to their capacity. In addition, use of the 

additional stored water in these areas would be constrained by the 

minimum lake level requirements set out by the FWS biological opinion for 

Upper Klamath Lake to protect the two species of sucker. As an extension 

of the lake, the new storage areas could not be drained below these 

minimum levels. Finally, the environmental impacts of developing water 

storage areas vary and would need to be addressed by Reclamation as part 

of the water storage development process.

Separate Reservoir Development The development of a separate reservoir would create a long-term storage 

area in the Klamath Basin that could far surpass the capacity of the water 

bank as a source of flows for the river, potentially benefiting all Klamath 

River stakeholders and protected species. Evaluation of such potential 

water storage areas has focused on Long Lake Valley, located southwest of 

Upper Klamath Lake. Developing Long Lake Valley into a reservoir would 

enable water to be stored that would otherwise be spilled into the Klamath 

River when Upper Klamath Lake’s water level exceeds the maximum lake 

elevation. Reclamation, irrigators, and others generally agree that Long 

Lake Valley is the most viable option currently available for new reservoir 

development.

According to Reclamation, converting Long Lake Valley into a reservoir 

could yield up to 250,000 acre-feet of water, with a depth of 250 to 300 feet 

when full. Thus, Long Lake represents “deep” water storage, which 

generally contains colder water—beneficial to fish—than shallow Upper 
Page 37 GAO-05-283 Klamath Project Water Bank

Klamath Lake can provide. Reclamation indicated that the reservoir’s 

250,000 acre-foot capacity would be filled by pumping water from Upper 

Klamath Lake to Long Lake between March and June, using the piping 

system shown in figure 8. However, much like the Upper Klamath Lake 

expansion options, the certainty of Long Lake’s water supply depends 

entirely upon the availability of spill water to fill it and, according to NMFS 

officials, the impacts on the river of diverting these flows to a reservoir 

need to be studied. Once filled, Long Lake could provide a sustainable 

supply of water to supplement river flows. In addition, the amount of water 

stored by Long Lake and delivered to enhance river flows could easily be 

measured by metering water flow in the pipeline to and from the lake or, 

potentially, in a pipeline emptying directly into the Klamath River. 
Page 38 GAO-05-283 Klamath Project Water Bank

Figure 8: Long Lake Storage Option

Reclamation completed an initial study of the geology of Long Lake Valley 

in March 2004, which determined that Long Lake Valley’s floor would 

pper Klam

66

140

66

North

Geary Canal

Pumping

station

Fish screen

Potential pipeline to Klamath River

To Klamath

Falls

140

Klamath Falls

Upper Klamath

Lake

Klamath River

Long Lake

97

Link River Dam

Source: Reclamation.

Ridgeline

Ridgeline
Page 39 GAO-05-283 Klamath Project Water Bank

provide a good barrier to prevent water leakage. Geologic investigations of 

Long Lake Valley are continuing in 2005. To date, Reclamation has not 

conducted a full feasibility study for Long Lake development, and it will not 

do so until a funding plan has been established. Reclamation estimates that 

a feasibility study would take three years to complete and would cost 

approximately $12 million. Subsequently, reservoir construction funds 

would need to be obtained. There are no reliable estimates available, but 

Reclamation’s most recent projection of construction costs is about $350 

million, not including real estate acquisition costs. The Long Lake 

development project would take at least 10 years to complete, which 

means that Long Lake would not address any immediate water demand 

issues in the Klamath Basin. Based on Reclamation’s initial study, if 

Reclamation can address funding, technical, and environmental impact 

requirements, Long Lake may offer a promising long-term storage option 

for the Klamath Basin.

Reclamation’s Conservation 

Implementation Program Is 

Still Being Developed

Storage options and other potential long-term solutions to water quantity, 

quality, and wildlife resource issues are expected to receive greater 

attention in coming years under Reclamation’s Conservation 

Implementation Program. In addition to the water bank, NMFS’ 2002 

biological opinion required Reclamation to establish such a program, and 

Reclamation and other stakeholders began developing the framework for 

future collaboration in 2003. One of the objectives of the program is the 

development and implementation of feasibility studies to identify 

opportunities for increased water storage and groundwater development 

alternatives. The Governors of the states of California and Oregon and 

heads of the Departments of the Interior, Agriculture, and Commerce, as 

well as the Environmental Protection Agency, signed an agreement in 

October 2004 to coordinate their efforts to achieve program objectives, and 

Reclamation is currently preparing a third draft program document for 

stakeholder review.

The Water Bank Could Be 

Modified in 2006

Reclamation and NMFS will have the opportunity to discuss revising some 

elements of the biological opinion, including the water bank, when they 

meet for an expected reconsultation in 2006. Reconsultation could address 

the following potential changes to the biological opinion, affecting 

Reclamation’s responsibility for river flows, its water bank obligation, and 

how it operates the water bank:
Page 40 GAO-05-283 Klamath Project Water Bank

• Adjusting Reclamation’s level of responsibility for ensuring Klamath 

River flows to reflect information currently being developed regarding 

the water quality and quantity requirements of Klamath River fish, as 

well as historic natural flows of the Klamath River. Based on a recent 

USGS study of irrigated acreage in the Upper Basin, Reclamation—

currently held responsible for ensuring 57 percent of needed flows—

may suggest reducing that number to about 40 percent. Such an 

adjustment would not directly alter Reclamation’s water bank 

obligations; however, it would decrease Reclamation’s overall 

responsibility for ensuring Klamath River base flows by increasing the 

responsibilities of other basin stakeholders, such as the states and other 

federal agencies. According to NMFS, such a change would need to be 

considered within the context of the U.S. District Court’s 2003 criticism 

of the allocation of responsibility for providing flows.

• Not requiring a water bank in Above Average or Wet water years, thus 

eliminating the cost and effort of obtaining and managing the water 

bank when natural flows are abundant.

• Changing the method for determining water-year types from a five-tier 

system to a more incrementally adjustable method that would cause less 

dramatic changes in flow requirements, thus addressing one of the 

concerns raised by stakeholders. Currently being piloted by 

Reclamation with FWS for managing Upper Klamath Lake levels, this 

method would reduce the magnitude of changes and the need for 

significant water bank delivery recalculations.

Conclusions Water shortages in the Klamath River Basin have created serious conflicts 

and placed Reclamation in the difficult position of balancing competing 

demands for water among numerous stakeholders. Over the last three 

years, Reclamation has demonstrated commitment and resourcefulness in 

this task, particularly under drought conditions, by implementing and 

meeting the obligations of the temporary water bank. However, whether 

Reclamation can continue meeting its water bank obligation using current 

methods is unclear, given the uncertain results of crop idling and the 

unknown sustainability of groundwater pumping. This uncertainty adds 

urgency to Reclamation and stakeholder efforts to collaboratively identify 

and evaluate long-term solutions. In the mean time, because the water bank 

acts as the primary mechanism for balancing competing demands for 

water, Reclamation must be able to clearly communicate to stakeholders 

how the water bank is managed and how water is accounted for. This 
Page 41 GAO-05-283 Klamath Project Water Bank

information will make the management and accountability for this public 

resource more transparent to all those that rely on and are affected by the 

water bank.

Recommendation for 

Executive Action

We are recommending that Reclamation take steps to improve the 

information provided to stakeholders regarding water bank management 

and accounting by regularly and systematically providing—through media 

such as a water bank Web-link or a monthly or biweekly press release—

public information on the rationale and effects of management decisions 

related to forecasted water availability, unexpected spill conditions, or 

other significant events, as well as regularly updated information regarding 

the water bank’s status, including the amount of water bank deliveries to 

date.

Agency Comments and 

Our Evaluation

We provided copies of our draft report to the Departments of Agriculture, 

Commerce, and the Interior for their review and comment. We received a 

written response from the Under Secretary of Commerce for Oceans and 

Atmosphere that includes comments from the National Oceanic and 

Atmospheric Administration (NOAA) and from Interior’s Assistant 

Secretary, Policy, Management and Budget that includes comments from 

Reclamation and BLM. Overall, NOAA stated that the report accurately 

reflects the history of the water bank, and Reclamation expressed 

appreciation for GAO’s efforts to report on the complex Klamath River 

Basin situation. We requested comments from Agriculture, but none were 

provided.

Reclamation agreed with our recommendation to improve the information 

provided to stakeholders regarding water bank management and 

accounting. Reclamation agreed to implement steps to enhance water bank 

communications through systematic feedback to stakeholders with 

information regarding the water bank. Reclamation said that it would add a 

new page to its Web site exclusively for the water bank, which will include 

background information, new information as it becomes available, links to 

relevant Web resources such as USGS’ Klamath River gauge at Iron Gate 

Dam, and graphics showing the status of water bank flow augmentation. 

This information will be updated at least biweekly, with notices posted to 

direct stakeholders to updated information. Reclamation plans to complete 

these changes to its Web site by June 30, 2005.
Page 42 GAO-05-283 Klamath Project Water Bank

NOAA, Reclamation, and BLM provided comments of a factual and 

technical nature, which we have incorporated throughout the report as 

appropriate. Because of the length of the technical comments provided by 

Reclamation and BLM, we did not reproduce them in the report. Interior’s 

transmittal letter and response to our recommendation are presented in 

appendix III, and NOAA’s comments are presented in appendix IV.

We are sending copies of this report to the Secretaries of Agriculture, 

Commerce and the Interior, appropriate congressional committees, and 

other interested Members of Congress. We also will make copies available 

to others upon request. In addition, the report will be available at no charge 

on the GAO Web site at http://www.gao.gov.

If you or your staffs have any questions about this report, please contact 

me at (202) 512-3841 or mittala@gao.gov. Key contributors to this report are 

listed in appendix V.

Anu K. Mittal

Director, Natural Resources

and Environment
Page 43 GAO-05-283 Klamath Project Water Bank

Appendix I

Scope and Methodology ApApenednxidexiIs

To determine how the Bureau of Reclamation (Reclamation) operated the 

water bank and how much it cost, we analyzed Reclamation’s water bank 

planning, contracting, and expenditure documentation. We researched and 

analyzed laws, regulations, the National Marine Fisheries Service’s (NMFS) 

biological opinion, and related court cases pertinent to the water bank and 

how it operates. For each year of the water bank, we reviewed and 

analyzed data on applications and contracts in comparison with the 

biological opinion requirements. We reviewed and analyzed expenditures 

for contracts and program administration, as well as future budget request 

estimates, for total costs incurred to date and expected future costs of the 

water bank. Finally, we interviewed staff from Reclamation, NMFS, and 

other relevant agencies, as well as stakeholders—including representatives 

from tribal, commercial fisheries, and irrigator groups—on water bank 

program obligations, operations, and monitoring.

For each year of the water bank program, we reviewed and analyzed data 

on water bank contracts to determine whether Reclamation met its water 

bank acquisition obligations, and we reviewed and analyzed scheduled 

base Klamath River flows, as well as the daily average Klamath River flows, 

using both U.S. Geological Survey (USGS) and PacifiCorp-generated data 

to calculate the augmented flows to determine whether Reclamation met 

its water bank delivery obligations. We interviewed staff from Reclamation 

and other relevant agencies, as well as stakeholders— including 

representatives from tribal, commercial fisheries, and irrigator groups—on 

water bank program obligations, operations, and monitoring.

To describe the water bank’s impact on water availability and use in the 

Klamath River Basin, we interviewed staff from Reclamation, USGS, the 

Oregon Water Resources Department, California Polytechnic State 

University, and the Klamath Basin Rangeland Trust. We gathered and 

analyzed Reclamation crop reports, a USGS study of irrigation water use, 

and a California Polytechnic State University study of the 2003 water bank 

to describe the impact of crop idling on river flows. To describe the impacts 

of groundwater use, we collected and analyzed Oregon Water Resources 

Department information on groundwater pumping, well drilling, and well 

deepening in Klamath County, Oregon, and USGS information on well 

levels in the Upper Basin. We also collected descriptions of the joint 

USGS/Oregon Water Resources Department study of Upper Basin 

groundwater and the USGS study of Reclamation’s water bank. In addition, 

we interviewed and obtained relevant documentation from stakeholders 

including irrigators, tribes, and commercial fisheries. We did not review the 
Appendix I

Scope and Methodology

Page 44 GAO-05-283 Klamath Project Water Bank

water bank’s impact on fish species because the short history of the water 

bank makes it difficult to obtain reliable information.

To describe alternative approaches to the water bank, we collected 

information and interviewed staff from Reclamation and the Bureau of 

Land Management, as well as potential land sellers, irrigators, irrigation 

experts, economists, and conservationists. We also toured the Klamath 

Project area by plane and car to visit and observe potential irrigated land 

retirement options and water storage areas. In addition, we collected and 

analyzed documentation of potential water storage locations, a study of 

options for increasing water storage, as well as a Reclamation study of a 

potential new reservoir. Finally, we reviewed the requirements for 

coordinated efforts among stakeholders in NMFS’ biological opinion and 

the status of basinwide planning to increase river flows.

To assess the reliability of the noncomputerized data we received, we 

interviewed officials most knowledgeable about the collection and 

management of each data set. We assessed the relevant general and 

application controls and found them adequate. In addition, we reviewed the 

methodology of the economic and water use studies and interviewed the 

authors to discuss their scope, data quality, and results. Finally, we 

conducted tests of the reliability of computerized data. On the basis of 

these interviews, tests, and reviews, we concluded that the data from the 

various sources and studies were sufficiently reliable for the purposes of 

this report.

We performed our work between May 2004 and February 2005 in 

accordance with generally accepted government auditing standards.
Page 45 GAO-05-283 Klamath Project Water Bank

Appendix II

Information on Water Bank Applications and 

Contracts ApendxiI

As shown in table 2, the total numbers of applications from irrigators 

seeking participation in the water bank decreased from 2003 to 2004; 

Reclamation did not solicit applications in 2002. The total number of 

contracts for participation has fluctuated up and down since the inception 

of the water bank.

Table 2: Number of Water Bank Applications and Contracts by Type and by Year

Source: GAO analysis of Reclamation data.

a

Due to the timing of the water bank in 2002, Reclamation negotiated contracts without a formal 

application process.

b

Reclamation negotiated contracts for groundwater pumping outside of the formal application process. 

Reclamation shifted its contracting emphasis from primarily crop idling in 

2003 to primarily groundwater contracts in 2004. As such, the number of 

groundwater contracts (groundwater pumping plus groundwater 

substitution) has grown to represent a larger proportion of all contracts as 

Reclamation’s water bank obligation increased, as shown in figure 9. 

2002 2003 2004

Total water bank applications a, b 521 449

Crop idling a 335 277

Groundwater substitution a 186 172

Groundwater pumping b b b

Total water bank contracts 2 315 141

Crop idling 1 223 53

Groundwater substitution 0 92 41

Groundwater pumping 1 0 47
Appendix II

Information on Water Bank Applications and 

Contracts

Page 46 GAO-05-283 Klamath Project Water Bank

Figure 9: Proportion and Number of Water Bank Contracts by Type, 2002 to 2004

Note: In 2002, there were two water bank contracts—one for crop idling and one for groundwater 

pumping.

The volume of water (acre-feet) offered in water bank applications 

increased by almost 50 percent from 2003 to 2004. The volume of water 

Reclamation acquired through contracts more than doubled since the 

water bank’s inception, as shown in table 3.

0

50

100

150

200

250

300

350

92

2

223

53

47

41

2002 2003 2004

Groundwater pumping

Groundwater substitution

Crop idling

Number of water bank contracts

Source: GAO analysis of Reclamation data.
Appendix II

Information on Water Bank Applications and 

Contracts

Page 47 GAO-05-283 Klamath Project Water Bank

Table 3: Volume Represented by Water Bank Applications and Contracts by Type 

and Year

Source: GAO analysis of Reclamation data.

a

Acre-feet of water.

b

Due to the need to establish the water bank expeditiously in 2002, Reclamation negotiated contracts 

without a formal application process.

c

Reclamation negotiated contracts for groundwater pumping outside of the formal application process. 

d

Reclamation voided two of these 2003 water bank contracts—one crop idling contract for 64.45 acrefeet and one groundwater substitution contract for 254.29 acre-feet.

e

Reclamation only purchased 82,257 of the 110,877 acre-feet it acquired through contracts in 2004, as 

it did not need to exercise the options on all of its contingency groundwater pumping contracts in order 

to meet the delivery schedule.

As shown in figure 10, from 2002 to 2004, Reclamation has increased the 

volume of groundwater as a proportion of the total water bank acquired by 

contract. 

2002 2003 2004

Total volume represented by applicationsa b, c 104,151 154,908

Crop idling b 49,274 75,637

Groundwater substitution b 54,877 79,271

Groundwater pumping c c c

Total volume acquired through contractsa 47,072 59,332d 110,877e

Crop idling 27,072 35,389 d 22,582

Groundwater substitution 0 23,943 d 16,656

Groundwater pumping 20,000 0 71,639e
Appendix II

Information on Water Bank Applications and 

Contracts

Page 48 GAO-05-283 Klamath Project Water Bank

Figure 10: Proportion and Volume of Water Acquired for the Water Bank by Contract 

Type, 2002 to 2004

Note: Reclamation was able to meet the water delivery schedule without exercising the options on all 

of its contingency groundwater pumping contracts, purchasing only 82,257 of the 110,877 acre-feet it 

acquired in 2004. Of this 82,257 acre-feet of water actually purchased, 43,019 acre-feet (52 percent) is 

attributable to groundwater pumping alone, while 73 percent of actual purchases is attributable to 

groundwater sources overall.

As shown in table 4, the total irrigated land acreage offered in water bank 

applications and accepted under contracts has increased since the 

inception of the water bank.

0

15

30

45

60

75

90

105

120

20,000

27,072

23,943

35,389

71,639

16,656

22,582

2002 2003 2004

Groundwater pumping

Groundwater substitution

Crop idling

Acre-feet (in thousands)

Source: GAO analysis of Reclamation data.
Appendix II

Information on Water Bank Applications and 

Contracts

Page 49 GAO-05-283 Klamath Project Water Bank

Table 4: Acres of Land Offered in Applications and Accepted under Contracts by 

Type and Year

Source: GAO analysis of Reclamation data.

a

Due to the need to establish the water bank expeditiously in 2002, Reclamation negotiated contracts 

without a formal application process.

b

Because groundwater pumping does not represent water foregone from a particular area of land, the 

amount of land represented by the pumping is not applicable. 

c

Crop idling included an off-Project contract with the Klamath Basin Rangeland Trust that accounted for 

all 3,161 acres of crop idling in 2002 and 11,133 acres in 2004.

d

Reclamation negotiated contracts for groundwater pumping outside of the formal application process.

2002 2003 2004

Total acreage offered in applications a,b 47,215 67,508

Crop idling a 23,093 33,841

Groundwater substitution a 24,122 33,667

Groundwater pumping b, d b, d b, d

Total acreage accepted under contracts 3,161 25,469 22,371

Crop idling 3,161c 14,430 15,497c

Groundwater substitution 0 11,039 6,874

Groundwater pumping b b b
Page 50 GAO-05-283 Klamath Project Water Bank

Appendix III

Comments from the Department of the 

Interior ApendxiI

Note: Because of the 

length of the technical 

comments provided by 

Interior, we are not 

including them here. We 

have incorporated 

suggested changes into 

the report as appropriate.
Appendix III

Comments from the Department of the 

Interior

Page 51 GAO-05-283 Klamath Project Water Bank
Page 52 GAO-05-283 Klamath Project Water Bank

Appendix IV

Comments from the Department of 

Commerce ApendxiIV
Appendix IV

Comments from the Department of 

Commerce

Page 53 GAO-05-283 Klamath Project Water Bank
Appendix IV

Comments from the Department of 

Commerce

Page 54 GAO-05-283 Klamath Project Water Bank
Page 55 GAO-05-283 Klamath Project Water Bank

Appendix V

GAO Contacts and Staff Acknowledgments ApendxiV

GAO Contacts Anu K. Mittal (202) 512-3841

Edward M. Zadjura (202) 512-9914

Staff 

Acknowledgments

In addition to those individuals named above, Brad C. Dobbins, David A. 

Noguera, and Tama R. Weinberg made key contributions to this report. Also 

contributing to the report were John W. Delicath, Philip G. Farah, Curtis L. 

Groves, Julian P. Klazkin, Kim M. Raheb, and Monica L. Wolford. 

(360453)
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