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Water Banks in the West PDF

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University of Colorado Law School Colorado Law Scholarly Commons Getches-Wilkinson Center for Natural Resources, Books, Reports, and Studies Energy, and the Environment 1994 Water Banks in the West Lawrence J. MacDonnell Charles W. Howe Kathleen A. Miller Teresa A. Rice Sarah F. Bates See next page for additional authors Authors Lawrence J. MacDonnell, Charles W. Howe, Kathleen A. Miller, Teresa A. Rice, Sarah F. Bates, and University of Colorado Boulder. Natural Resources Law Center Tis book is available at Colorado Law Scholarly Commons: htp://scholar.law.colorado.edu/books_reports_studies/58 LAWRENCE J. MACDONNELL, CHARLES W. HOWE, KATHLEEN A. MILLER, TERESA A. RICE & SARAH F. BATES, WATER BANKS IN THE WEST (Natural Res. Law Ctr., Univ. of Colo. Sch. of Law 1994). Reproduced with permission of the Getches-Wilkinson Center for Natural Resources, Energy, and the Environment (formerly the Natural Resources Law Center) at the University of Colorado Law School. WATER BANKS IN THE WEST 1 Lawrence J. MacDonnell -. Charles W. Howe [ Kathleen A- Miller Teresa A. Rice 0* Sarah F. Bates Natural Resources Law Center University of Colorado School of Law August 31, 1994 FOREWORD This report is the collaborative product of a group of researchers. Dr. Charles W. Howe provided the conceptual analysis relating to water bank design in chapter 4. Dr. Kathleen A. Miller, of the National Center for Atmospheric Research, contributed the California Water Bank analysis and most of the discussion related to third-party effects of water banking. Teresa A. Rice prepared the sections on water banks in Idaho and Texas, and the proposed Lower Colorado River Interstate Water Bank and she also contributed to the section on third-party effects. Sarah F. Bates, now with the Grand Canyon Trust, drafted most of the material related to groundwater recharge. The project benefitted greatly from the work of a number of students at the University of Colorado School of Law: Roberta Hoy, class of 1994; Ellen Cadette, class of 1996; Beth Doherty, class of 1996; Sharyl Kammerzell, class of 1996; Dan Reimer, class of 1996; and Mary Beth Searles, class of 1997. We received the cooperation and assistance of water managers from around the West. At the outset we surveyed state water agencies and the Western States Water Council to determine the extent of water banking activity in the West. In connection with our detailed analysis of water banks in Idaho we were greatly aided by Ron Carlson, Phil Rassier, and Glen Saxton. Steve Macaulay provided substantial assistance regarding the California banks, as did Richard Howitt, Ray Hoagland, and Dave Marty. Daniel Beckett provided valuable assistance regarding the Texas bank. Gerry Zimmerman made important contributions to our discussion of the proposed Lower Colorado River bank as did Walt Muir and Bob Johnson. Professors Tom Rutherford and Mark Cronshaw commented on the analysis of water bank design, and Dr. Michael Walsh provided valuable insights based on his work for the Chicago Board of Trade. The authors, of course, remain responsible for any errors in the report itself. The research is sponsored by the U.S. Geological Survey (USGS), Department of the Interior, under USGS award number 1434-92-G-2253. The views and conclusions contained in this document are those of the authors and should not be interpreted as necessarily representing the official policies, either expressed or implied, of the U.S. Government. This publication is a product of the Natural Resources Law Center, a research and public education center at the University of Colorado School of Law. The Center maintains its position of neutrality on issues of public policy in order to safeguard the intellectual freedom of its staff and those with whom it associates. Thus, interpretations or conclusions in Natural Resources Law Center publications should be understood to be solely those of the authors and should not be attributed to the Center, the University of Colorado, the State of Colorado, or any of the organizations that support Natural I Resources Law Center research. i Larry MacDonnell 6 1 f'"lS 1 11 {^T- USING WATER BANKS TO PROMOTE MORE FLEXIBLE WATER USE Chapter 1 Water Banks: An Introduction Chapter 2 Water Bank Experience In The West 2.1 Water Banks in Idaho 2.1.1 History of Water Rentals in the Upper Snake Basin 2.1.2 Current Water Banking Program in Idaho 2.1.2.1 Local rental pools 2.1.2.2 Storage vs. natural flow water rights in Idaho 2.1.2.3 Special status of water assigned to the bank 2.1.2.4 Limitation on out-of-state or out-of-basin transfers 2.1.2.5 Irrigation use preference 2.1.2.6 Deposits into the bank 2.1.2.7 Rentals from the bank 2.1.2.8 Water bank pricing 2.1.2.9 Lease terms and cany over 2.1.2.10 Addressing water rights and third party injury issues 2.1.2.11 Bank administration 2.1.3 Shoshone-Bannock Tribal Water Supply Bank 12 Emergency Drought Water Banks in California: 1991, 1992 and 1994 2.2.1 Introduction 2.2^ The 1991 Bank 2.23 The 1992 Bank 2.2.4 The 1994 Bank 2.2.5 Assessment of the Emergency Drought Water Banks Appendix. Fallowing Contracts 2.3 The Texas Water Bank 23.1 Bank Administrator 23.2 Bank Deposits 2.33 Withdrawal and Use of Bank Water 23.4 Consideration of Impacts 23.5 Bank Finances 2.3.6 Public Concerns 23.7 Conclusion 1 H 2.4 Lower Colorado River Interstate Water Bank 2.4.1 Background i 2.4.2 Proposed 1991 Colorado River Agreement 2.4.3 1991 Proposed Interstate Water Bank , 2AA 1994 Lower Basin State Bank Discussions \ 2.4.5 Bureau of Reclamation's Draft Regulations for the Lower Colorado -1 River Basin ^ 2.5 Survey of Other Banks in the West i 2J5.1 Introduction _ 2.5.2 State Controlled Storage in Kansas 2.5.2.1 State Water Marketing Program 2.5.2.2 Water Assurance Program ~ 2.5.3 Water District Banks i 2.5.3.1 The Dolores Project Bank 2.5.3.2 District banks in Washington State ^ Chapter 3 GROUNDWATER RECHARGE AS A WATER STORAGE AND SUPPLY OPTION i 3.1 Introduction to Groundwater Recharge ^ 3.2 Western State Programs Concerning Groundwater Recharge 3.2.1 Alaska 3.2.2 Arizona 3.2.3 California 3.2.4 Colorado 3.2.5 Hawaii 3.2.6 Idaho 3.2.7 Kansas 3.2.8 Montana 3.2.9 Nebraska 3.2.10 Nevada °\ 3.2.11 New Mexico 3.2.12 North Dakota 3.2.13 Oklahoma 3.2.14 Oregon 3.2.15 South Dakota 3.116 Texas 1 i 3.2.17 Utah 3.2.18 Washington 3.2.19 Wyoming i 3.3 Examples of Groundwater Recharge Arrangements 3.3.1 Groundwater Recharge in the San Joaquin Valley: Kern Water Bank and Arvin-Edison/Metropolitan Water District Arrangements 3.3.1.1 Description of the basin „ iv 3.3.1.2 The Kern Water Bank 33.1.2.1 Terms of the agreement 3.3.1.2.2 Status 33.1.23 Unresolved issues 33.13 Arvin Edison/Metropolitan Water District arrangement 33.13.1 Terms of the agreement 33.13.2 Status 3.3.133 Unresolved issues 3.3.1.4 Orange County Water District, California 33.1.4.1 Description of the basin 33.1.4.2 Nature of the agreement 33.1.43 Parties involved 33.1.4.4 Terms of the assessments 33.1.4.5 Physical requirements 33.1.4.6 Status 33.1.4.7 Unresolved issues 33.1.5 Las Vegas Valley Groundwater Recharge, Nevada 33.1.5.1 Description of the basin 33.1.5.2 Nature of the arrangement 33.1.53 Physical requirements 33.1.5.4 Status 33.1.5.5 Unresolved issues 33.1.6 Arizona-California Colorado River Water Storage Agreement 33.1.6.1 Characterizing the agreement 33.1.6.2 Establishment of the account 33.1.63 Operation of the account 33.1.6.4 Credits to the account 33.1.6.5 Withdrawals from the account 33.1.6.6 Participation by other parties Chapter 4 ISSUES IN THE DESIGN AND OPERATION OF A WATER BANK 4.1 Fundamental Issues in Designing a Water Bank 4.1.1 General Issues 4.1.2 Issues Specific to Water Allocation Mechanisms 4.1.3 Detailed Issues Relevant to the Design'of Water Banks 4.2 Issues Underiying"Supply (Offers to the Bank to Sell) and Demand (Offers to Buy) 4.2.1 Behavior of the Agricultural Seller of Water 4.2.2 Factors Underlying the Demand for Water 43 Alternative Methods of Water Bank Organization 4.3.1 The "Bulletin Board Bank" 4.3.2 Standing Offers to Buy and Sell at Fixed Prices 4.33 Sealed-Bid Double Auctions r 1 1 4.3.4 Repeated Sealed-Bid Auctions Through the Season 4.3.5 Auctions for Water Rights 4.3.6 "Contingent" Water Markets 4.3.7 Future Markets 4.3.8 Other Market-Making Activities n 43.9 Guaranteeing Performance on Trading Contracts I 4.4 Conclusions Regarding Practical Water Bank Design Appendix 4A. Variability of Water Supply and the Farmer's Willingness-to-Sell Appendix 4B. Model of Urban Water Demands 4.5 Third Party Effects of Water Banking i 4.5.1 Types of Third Party Effects 4.5.1.1 Impacts on other water users 4.5.1.2 Local economic impacts 4.5.1.3 Impacts on environmental values ^ 4.5.2 The Problem of Measurability j 4.5.3 Options for Addressing Impacts 4.5.3.1 Impacts on other water uses -^ 4.5.3.2 Local economic impacts * j 4.533 Impact on environmental values 4.5.4 Generalizations and Implications <--j 4.5.4.1 Cross-cutting generalizations 4.5.4.2 Impacts on other water rights 4.5.43 Local economic impacts 4.5.4.4 Environmental impacts Appendix 4C. Rand Study Tables 4.6 Creating Water Banks: Some Recommendations 4.6.1 State Authorization 4.6.2 Bank Design and Operation 4.6.3 A State Bank Chapter 5 APPLYING OUR PROPOSED FRAMEWORK 5.1 Interstate Lower Colorado River Water Bank 5.2 The Texas Water Bank 5.3 The Fort Lyon Water Bank 5.3.1 Summary of Proposed Bank 53.2 Comparing the Proposal and the Framework Chapter 6 SUMMARY AND CONCLUSIONS j vi

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