Klamath River Basin: Reclamation Met Its Water Bank Obligations, but Information Provided to Water Bank Stakeholders Could Be Improved
Published: 2005-03-28T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: 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.
section_title: What GAO Found
paragraphs: 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.

section_title: Letter
paragraphs: 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.
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. 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. 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.
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. 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 long- term, 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  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.
subsections: section_title: Background
paragraphs: 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. 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. 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  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. 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.
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. 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 long- standing 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. 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  Commerce’s NMFS are responsible for administering the act. 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 suggested  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.
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.
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  long-term solutions, some of which would increase flows, such as surface  water storage and groundwater resource development.
section_title: Reclamation Modified Its Water Bank Operations from Year to Year as Its Obligations and Costs Increased
paragraphs: 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.
subsections: section_title: Reclamation Modified Its Water Bank Operations from Year to Year to Meet Increasing Obligations
paragraphs: 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  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 acre- feet, 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 process—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. 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  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.
section_title: Water Bank Costs Could Exceed $65 Million through Fiscal Year 2011
paragraphs: 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.
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  item in its budget request. 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.
section_title: Reclamation Met Its Water Bank Obligations, but Information Provided to Stakeholders Could Be Improved
paragraphs: 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.
subsections: section_title: Reclamation Met Its Water Bank Obligations Each Year
paragraphs: 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.
Augmented flow is defined as the volume of water in excess of base flows  measured at Iron Gate Dam. 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. 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.
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,  during which time Reclamation reclassified the water-year type from Dry to  Below Average due to better than expected water conditions.
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.
section_title: Reclamation’s Management and Accounting Practices Confused Stakeholders
paragraphs: 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,  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  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.
section_title: 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
paragraphs: 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  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.
subsections: section_title: Crop Idling under the Water Bank Has Reduced the Amount of Irrigated Land, but the Extent of Its Impacts on River Diversions Is Unclear
paragraphs: 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.
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.
section_title: Groundwater Pumping for the Water Bank under Drought Conditions Raises Concerns about the Impacts on Aquifers
paragraphs: 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  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.
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  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.
section_title: Limited Information Is Available Regarding Alternative Approaches for Achieving Water Bank Objectives
paragraphs: 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.
subsections: section_title: A Significant Amount of Irrigated Land Would Need to Be Retired to Adequately Enhance River Flows, with Unknown Costs and Impacts
paragraphs: 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  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  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.
section_title: Expanding Upper Klamath Lake or Building a Separate Reservoir Are under Consideration, but Costs and Impacts Have Not Been Extensively Evaluated
paragraphs: 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.
subsections: section_title: Upper Klamath Lake Expansion
paragraphs: 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.
Agency Lake Ranch is a 7,125-acre, Reclamation-owned marshland  located on the west side of Agency Lake. Reclamation purchased the  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  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.
section_title: Separate Reservoir Development
paragraphs: 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  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.
Reclamation completed an initial study of the geology of Long Lake Valley  in March 2004, which determined that Long Lake Valley’s floor would  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.
section_title: Reclamation’s Conservation Implementation Program Is Still Being Developed
paragraphs: 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.
section_title: The Water Bank Could Be Modified in 2006
paragraphs: 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:  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.
section_title: Conclusions
paragraphs: 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  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.
section_title: Recommendation for Executive Action
paragraphs: 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.
section_title: Agency Comments and Our Evaluation
paragraphs: 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.
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.
section_title: Scope and Methodology
paragraphs: 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  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.
section_title: Information on Water Bank Applications and Contracts
paragraphs: 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.
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.
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.
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.
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.
section_title: Comments from the Department of the Interior
section_title: Comments from the Department of Commerce
section_title: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Staff Acknowledgments
paragraphs: 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.