Federal Acquisition of Water through Voluntary Transactions for Environmental Purposes

I. INTRODUCTION Throughout U.S. history public land management agencies have attempted to achieve environmental objectives by relying on a broad range of policy tools, including both regulatory and voluntary mechanisms. An important component of these policies has been oriented toward the acquisition of land or partial interests in land from voluntary sellers. However it has become clear that preserving or restoring damaged ecosystems increasingly requires more than land and easement acquisitions. In many situations in the west, water acquisitions to provide instream flows for wetlands and to maintain and enhance endangered species habitat are required. The procurement of water for environmental purposes is becoming increasingly common. In some regions such acquisitions also represent a significant share of the local water market activity. The most common form such transactions have taken in the past is negotiation with individual holders of water rights. However, a basic question is whether alternative mechanisms - such as those that incorporate competitive elements - could be used in some situations to achieve more cost effective outcomes. II. RECENT FEDERAL ACQUISITIONS OF WATER FOR PUBLIC PURPOSES This section summarizes recent federal experience in acquiring water for environmental purposes in the three regions where the federal government has devoted significant resources to water acquisition activities: the central valley of California, the pacific northwest, and the Truckee-Carson river basins near Reno, Nevada. In some locations, private not-for-profit organizations also have been active in acquiring water for environmental purposes. These transactions will not be analyzed in detail although, in concept, the issues discussed in this paper could apply equally well to these cases. A. Pacific Northwest Snake Basin: Total water storage in the upper Snake River basin is about 8.6 million acre-feet, of which 8.1 million acre-feet is stored in facilities operated by the Bureau of Reclamation (BOR). The majority of the storage space is used for irrigation purposes and is under long-term contract with water users. A National Marine Fishery Service Biological Opinion issued on March 2, 1995, requires the Bureau of Reclamation to provide 427,000 acre-feet of water each year to assist in meeting the instream flow needs of anadromous salmon. One of the steps the BOR has taken to assist in meeting the requirements imposed by the Biological Opinion is to initiate a program to acquire storage entitlements and natural flow rights. As shown in Table 1, over the 1995-1998 period Reclamation acquired 75,196 acre-feet at a cost of about $6.75 million (or about $90 per acre-foot on average). The 1998 purchase was for the acquisition of direct flow rights; purchases in other years were associated with storage rights. Reclamation also has leased significant quantities of water on an annual basis from Idaho water banks. On average, Reclamation leased about 342,546 annually over the 1991-1997 period from the three Idaho water banks. Prices varied from a low of $2.70 per acre-foot for water rented from the Payette River bank to $10.50 per acre-foot from the Upper Snake bank. In general prices have been kept low and have varied little over the period despite large variations in the quantities of water rented (see Table 2). The rental prices and bank rental rules - which are determined by local committees comprised primarily of representatives of irrigation districts - are largely designed to protect existing agricultural uses. TABLE 1 Federal Acquisitions of Water for Environmental Purposes - Upper Snake River Basin, 1995-1998 Seller, year of purchase Acre-feet purchased Price (S/a-f) Canyon View ID, 1995 16,000 137.50 Salmon River Canal Co., 1995 6,518 150 Nampa-Meridian ID, 1996 35,000 65 Skyline Farms, 1998 17,678 74 Total, 1995-1998 75,196 Source: Bureau of Reclamation. …