AGRICULTURAL TO URBAN WATER TRANSFERS IN 
COLORADO: AN ASSESSMENT OF THE ISSUES AND OPTIONS 

 
by 

 
Teresa A. Rice and Lawrence J. MacDonnell 

 
 
 
 

Completion Report No. 177 
 
 
 
 

 



.'
AGRICULTURAL TO URBAN WATER TRANSFERS IN COLORADO:

AN ASSESSMENT OF THE ISSUES AND OPTIONS

Teresa A. Rice and Lawrence J. MacDonnell
Natural Resources Law Center

University of Colorado

December 1993

The activities on which this report is based were financed in part by the Department of
the Interior, U.S. Geological Survey, through the Colorado Water Resources Research
Institute. The contents of this publication do not necessarily reflect the views and
policies of the Department of the Interior, nor does mention of trade names or
commercial products constitute their endorsement by the United States.

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 Resource Law Center publications should be understood to be
solely those of the author(s) and should not be attributed to the Center, the University of
Colorado, the State of Colorado, or any of the organizations that support Natural
Resources Law Center research.

COLORADO WATER RESOURCES RESEARCH INSTITUTE
Colorado State University

Fort Collins, Colorado 80523

Robert C. Ward, Director



ABSTRACT

With constraints on the additional development of water supplies and in the face
of growing urban demands for water cities have increasingly been turning to the water

• transfer process as a means of expanding their supplies. Urban encroachment onto
formerly irrigated croplands long has caused the use of irrigation water to change to
urban use. Now cities are reaching out greater distances to find agricultural water that
can be transferred to urban use. To make the transfers economically warranted the size
of the transfers tends to be large. This transfer of large quantities of water from often
rural areas with little alternative economic opportunity is prompting many western states
to revisit their water transfer laws.

This report examines approaches taken in the western states to both better
facilitate the water transfer process and better address so-called third party effects. The
report focuses initially on water transfer law and procedure in Colorado and notes that
Colorado emphasizes a single kind of transaction--one in which there is a permanent
purchase of a water right and a consequent total cessation of the associated activity
(most commonly, irrigation).

The report then provides a detailed evaluation of a variety of approaches used in
other western states involving (1) conditioning water transfers, (2) requiring reduced
water use, (3) providing incentives to conserve, and (4) facilitating short-term transfers.

Finally recommendations are made for changes in Colorado law and procedure
providing incentives to save water, establishing water banks, and addressing third party
effects.



Acknowledgement

The authors would like to thank the following persons for their helpful comments:

Kathleen Miller, Environmental and Social Impacts Group,
Natural Center for Atmospheric Research; Larry Morandi,
Senior Fellow, Environment and Natural Resources, National
Conference of State Legislatures; and Charles W. Howe,
Professor of Economics and Director of the Research
Program in Environment and Behavior, University of
Colorado.

Valuable research assistance was provided by Beth Doherty and Sharyl
Kammerzell, Class of 1995, Nathan Keever, Class of 1994, and Peter Ampe, Class of
1993, University of Colorado School of Law.



TABLE OF CONTENTS

SECfION 1: INTRODUCI'!ON . . . . . .. . .. . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . ... 1

SECfION 2: WATER TRANSFERS IN COLORADO. • • • • • • • • • • • • • • • • • • • • • • • • • .. 2

2.1 Transfer Experience 2

2.2 Colorado Transfer Law .. • . . . • . . . • . • •.• . . • • • •.• • . . • . . • • • • ... • • • . . . . . . .. 5

2.2.1 Standards Imposed in Defining the Right to be Transferred 6

2.2.2 Additional Limitations on Transfers .•.............•............ 7

2.2.3 Conditions to Protect the Local Area ............•.. . . . . . . . . . .. 11

2.2.4 Plans for Augmentation .....•.•..•..•.•...•••.............. 11

2.2.5 Temporary Changes of Water Rights •.......•................. 12

2.2.6 Transfers Involving Special Categories of Water . . . . . . . . . . . . . . . . .. 13

SECfION 3: WESTERN STATE APPROACHES TO TRANSFER AND REALLOCATION
OF AGRICULTURAL WATER 13

3.1 Conditioning Water Transfers ............•.•........•.............. 14

3.1.1 Protection of Water Rights Generally. . . . . . • . . . . • . . . . • • . . . . . . .. 14

3.1.2 Water Delivery Protections For Water Users Sharing Common
Systems 15

. 3.1.3 Protecting the Public Interest . . • . . . • . . . . . . . . . . . . . . . . . . . . . . . .. 19

3.1.4 Practical Application of Public Interest Considerations 20

3.1.4.1 Pacific Power and Light in Wyoming . ~ . . . . . . . . . . . . . . . . .. 23

3.1.4.2 Box Elder Creek in Utah ..•.•.....••................ 25

i



3.1.4.3 The Sleeper Case and Public Welfare in New Mexico 27

3.1.4.4 Honey Lake Valley in Nevada. • . • . • • . • . . . . • . . . • . . • . . .. 29

3.1.5 Comprehensive Administrative Review of Transfer Benefits and Costs. 32

3.2 Regulatory Approaches to Reducing Agricultural Water Use . . . . . . . . . . . . . .. 34

3.2.1 Prohibition Against Waste and Unreasonable Use in California 36

3.2.1.1 Imperial Irrigation District •...•.••...•............... 37

3.2.1.2 EI Dorado Irrigation District . . . . . . . . • • . . . . . . . . . .. . . . .. 39

3.2.1.3 Yuba County Water Agency ................•......... 41

3.2.2 Arizona Requirement to Reduce Groundwater Use 43

3.2.3 Oregon's Proposed Duty of Water .•....•..................... 45

3.3 Providing Incentives to Conserve . . . . . • . . . . . • • . . • . . • . • . . . • . . . . . . • . . .. 46

3.3.1 Trust Water Rights in Washington •....•••....••...•.•.•....... 48

3.3.2 Oregon's Water Conservation Law • . .. . • . . • . . • • . • . . • . . . . . . . . .. 53

3.3.3 Montana's Salvage Statute ......•...•..•.................... 55

3.4 Short-Term Transfer Approaches 56

3.4.1 State Laws Supporting Short-Term Transfers ...•............•... 57

3.4.2 Water Banking 59

3.4.2.1 The California Water Bank . • . . • • . • . . . . . . . . . . . . . . . . . .. 59

3.4.2.2 The Idaho Water Bank . • . • • • . .• . . . . . . . . . . . . . . . . . . . .. 63

3.4.3 Dry-Year Options 66

3.4.3.1 Dudley Ridge AgreementWith Metropolitan Water District .. 68'

3.4.4 Land Fallowing Agreements . . • • . . ••. . • • • • . • . . . . . . . . . . . . . . . . . .. 70

ii



3.4.4.1 Palo Verde Irrigation District 70

. SECTION 4: SOME OPTIONS FOR COLORADO • • • • • • • • • • • • • • • • • • • • • • • • • • • •. 72

4.1 Incentives to Save Water 73

4.2 Water Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 75

.4.3 Third Party Effects '. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 77

4.4 Recommendations '................ 77

SECTION S. SUMMARY 79

ApPENDIX (excerpts from HB93-1l58) 81

TABLES

Table 3.1 Public Interest Review for Proposed Water Transfers 21-22

iii



1

SEcnoN1: DITRoDucnoN

The major source of new demand for consumptive use of water in the West today

comes from the growing urban sector. The population of the West long has been

concentrated in its urban areas, but the dominant demand for the additional development

of water until recently has been for irrigation use. Even now, 80 percent of all water

withdrawals in the West from both surface water and groundwater go to agricultural uses.

The traditional solution to meeting new water demands in the West was to enlarge

the usable supply-either by building water storage projects or by tapping groundwater

sources. Concern about protection of remaining undeveloped streamflows and about. .
mining of groundwater limits the ability of these sources to meet new demands.

Increased attention has turned to purchasing rights to water used in irrigation and

.transferring the water to urban uses.

From a purely economic perspective such transfers make good sense. The dollar

value of water used in agriculture is generally much lower than the value of the water in

urban uses. Moreover, the cost of developing new supplies of water has increased to a

point that transfers of agricultural water are likely to be less expensive in many cases.

Cities generally have the revenue-generating capacity to be able to afford the cost of

acquiring additional water supplies from either source.

Experience with agricultural to urban water transfers in recent years highlights

both the benefits and the problems with these transfers. Commonly, such water transfers

occurred in the past when urban growth expanded onto agricultural land. Either formally

or informally, water used for irrigation became part of the urban water supply. The land

use and the water use shifted simultaneously and incrementally so the effects were

perhaps less noticed and raised fewer concerns.

In the past several decades there have been two important differences in Colorado

(apparent also in other parts of the West): (1) cities are purchasing water rights used on

agricultural lands far removed from their boundaries; and (2) the purchases are of larger

blocks of water rights (and, often, the land on which the water is used). Transfers have

moved from a gradual, incremental process of change to-in some cases-highly visible,



2

sometimes rather dramatic transactions.

The implications of large-scale, long distance water transfers are prompting review

of state water transfer policies. This completion report begins with a brief summary of

water rights transfer experience in Colorado and a discussion of Colorado law applying to

transfers. It summarizes approaches found in the western states addressing agricultural

to urban water transfers. These approaches are discussed under four broad headings: (1)

Conditioning Water Transfers; (2) Regulatory Approaches to Reducing Agricultural Use;

(3) Providing Incentives to Conserve; and (4) Short-Term Transfer Approaches. Finally,

we offer several recommendations for consideration in Colorado.

SECTION 2: WATER TRANSFERS IN COLORADO

2.1 Transfer Experience

An 1891 case presented the Colorado Supreme Court with the question. of

whether an irrigation water right could be transferred with its original priority to urban

use from land outside the urban area,' The City of Colorado Springs needed to improve

and expand its water supply from Fountain Creek and intended to do so by purchasing

senior agricultural water rights and transferring their use to the city. The court explicitly

supported the right of the city to separate the use of the water right from the land on

which it had been applied and to move it for use within the city.

Since this decision more than 100 years ago (if not before) water rights in

Colorado have shifted from agricultural to urban use with some regularity. Most of these

transfers have occurred in the rapidly urbanizing Front Range of the state. The rate with

which this was occurring in the 1960s and 1970s caused some observers like Raymond

Anderson to sound the alarm. Anderson and other colleagues at Colorado State

University carefully researched the transformation of agricultural lands in the northern

part of the Front Range at this time and noted the loss of high quality agricultural lands

1 Strickler v. City of Colorado Springs, 16 Colo. 61, 26 P. 313 (1891).



3

and the weakening of the agricultural economy.'

The South Park area of Colorado, referred to by some as Colorado's Owens

Valley', is probably the earliest example in this state of cities buying up large areas of

distant agricultural lands to be able to transfer the water rights to urban uses. A high

mountain valley averaging 9,000 feet in elevation, South Park contains the headwaters of

the South Platte River which, on its way eventually to the Platte and Missouri Rivers,

passes through Denver and other Colorado Front Range metropolitan centers. In the

1930s Denver began the process of buying large cattle ranches in South Park and

transferring the irrigation water used to grow alfalfa and other pasturage to its urban

water supply. In the 1970sand 1980s Aurora and Thornton acquired most of the

remaining ranches and water rights. Irrigated acreage i~ South Park declined from

35,000 acres in 1969 to less than 4;000 acres in 1991.4

Transfers of agricultural water from the Lower Arkansas Valley in Colorado have

captured considerable attention in recent years. Agriculture continues to be a central

part of the economy of this part .of the state, but the loss of sugar beet processing

facilities in the 1960s and 1970s (and thus the demand for production of sugar beets)

noticeably weakened the agricultural economy in the area. Major purchasers of

agricultural water rights in the Lower Arkansas have been the City of Pueblo and Pueblo

West Metropolitan District, located upstream on the Arkansas River; the City of

Colorado Springs, located upstream on a tributary to the Arkansas; and the City of

Aurora, located east of Denver in the South Platte drainage.

Perhaps the most dramatic effects of agricultural to urban water transfers can be

2 RL. Anderson, N.J. Wengert, and RD. Heil, "Physical and Economic Effects on the Local Agricultural
Economy of Water Transfers to Cities," Environmental Resources Center Completion Report No. 75,
Colorado State University, October 1976.

3 The movie "Chinatown" dramatized the purchase of water from the remote Owens Valley in the early
part of the century to support the rapidgrowth of the City of LosAngeles. Seealso William L. Kahrl, Water
and Power (Berkeley: U. of California Press, 1982).

"Lawrence J. MacDonnell, Charles W. Howe and Teresa A. Rice,"Transfers of Water Use in Colorado,"
Chapter3, in The WaterTransfer Process as a Management Option for Meeting Changing Water Demands,
Vol. II, NaturalResources Law Center (April 1990).



4

seen in Crowley County. Construction of the Colorado Canal in the 1890s made possible

the irrigation of much of the land in this area. Unfortunately, the water rights associated

with the canal are relatively junior in priority on the Arkansas River, and the supply of

water to those holding shares in the Colorado Canal varies dramatically from year to

year. Most of the shares now are owned by Colorado Springs and Aurora, and irrigated

acreage in Crowley County has declined from 68,000 to 4,000 acres.

The purchase and transfer of a majority of the shares in the Rocky Ford Ditch

serving land near Rocky Ford, Colorado to Aurora provoked an aggressive response by

other water users in the Lower Arkansas. Most of these shares had been owned by the

American Crystal Sugar Company and were sold to a Canadian investment company

after the sugar company closed its processing facility in Rocky Ford in 1977. As a

condition of changing the water right Aurora agreed to establish a natural ground cover

on all lands to be taken out of irrigation.

In December 1991, a company wholly owned by Houston-based Coastal

Corporation offered shareholders in the Fort Lyon Canal Company about $2,200 per

share of canal company stock on condition that it must acquire a majority interest in the

canal company. Transfer of this amount of shares would mean the dry-up of at least

another 48,000 acres of irrigated land in the Lower Arkansas-close to the total of 56,000

acres taken out of irrigation in the Lower Arkansas since the 1950s. The company's offer

was unsuccessful, but it heightened awareness of the concerns raised by such transfers.

Finally, the City of Thornton's purchase of 47 percent of the shares of the Water

Supply and Storage Company in the Poudre Basin in northcentral Colorado prompted a

strong reaction from water users in this area. Thornton purchased shares through private

brokers who did not inform the sellers of the actual purchaser. Thornton is located 50­

60 miles to the southeast of the lands irrigated by Water Supply and Storage, and the

new water use will require construction of a pipeline to move the water out of the

Poudre to the city. The change of water right proceeding involved 17 weeks of trial at a

substantial cost to all parties.

Changes of water rights involving a change from irrigation to other types of use

are common in Colorado. Between 1975 and 1984, 858 applications were filed seeking a



..

5

change of water use. About 67 percent of this total involved a proposed shift in water

use from primarily agricultural to primarily non-agricultural purposes. Another ten

percent involved new uses within the agricultural sector. As of July 1988, 689 of the

applications had been approved by state water administrators or the court,'

Though agricultural to urban water transfers are not unusual, they are

nevertheless controversial in Colorado as in other parts of the West. Colorado law

governing transfers is summarized in the following section. In general, policy in Colorado

supports the ability of a water right owner to sell that right to another and to make

changes of use of the right, subject only to the condition that no other water rights are

thereby injured.

2.2 Colorado Transfer Law

A water right, under Colorado Jaw, is a property right and, more specifically, a

priority right to the use of water. Based in part on this view of water rights as property

rights, in the late 1800s. Colorado courts ruled that a water right can be transferred and

changed, including a change in the point of diversion and place of use, so long as there is

no injury to other water rights holders.' The court adopted the position that the right to

sell the priority to the use of water was comparable to the right of possession and use of

the water.' In 1899, these concepts were recognized in a statute authorizing a change in

the point of diversion,"

Appropriative water rights contain a number of elements, most of which may be

SLawrence J. MacDonnell and others,The WaterTransfer Process as a Management Option for Meeting
Changing Water Demands, Vol. I, Natural Resources Law Center (April 1990), at page 26.

. 'Stricklerv. City of Colorado Springs, 16 Colo. 61,26 P. 313 (1891); Fullerv. Swan River PlacerMining
Co., 12 Colo. 12, 19 P. 836 (1888). Much of the material in this section of the report was adapted from
Lawrence J. MacDonnell, Charles W. Howe and Teresa A. Rice, "Transfers of Water Use in Colorado."
Chapter3, in The WaterTransfer Process as a Management Option for Meeting Changing Water Demands,
Vol. II, NaturalResources Law Center (April 1990); and Lawrence J. MacDonnell, "Changing Uses of Water
in Colorado: Law and Policy," 31 Ariz. L. Rev. 783 (1989).

7Strickler, 16 Colo. at 70, 26 P. at 316.

8Act of April 6, 1899, ch. 105, 1899 Colo. Sess. Laws 235.



6

changed under Colorado law. Generally, there is a specific point of diversion. There is a

specific rate of diversion in the case of direct flow rights and a volumetric quantity of

water in the case of storage rights. Water rights are characterized by specified types of

use and have an implied or express time and place of use. By statute, change may be

made in the point of diversion, in the type, place, or time of use, or between direct flow

and storage rights,"

2.2.1 Standards Imposed in Defining the Right to be Transferred

As a threshold matter in transfer proceedings, Colorado courts may consider the

scope of the original water right, and how that right has been historically exercised. In

many of the early decrees the elements of the water right were not clearly specified.

Direct flow rights are commonly described in terms of a maximum flow rate with no

volumetric limitation. Similarly, there is often no specified time of use, although a time

of use might be implied by the type of use. For example, an irrigation water right is

generally limited to the usual irrigation season in the area of use whereas domestic water

use is assumed to be year-round. Where water rights are decreed for multiple types of

use, which is not unusual in Colorado or other areas of the West, establishing a time,

place, and quantity of use becomes more problematic, and will depend on actual use.

Historic use patterns provide a potential limitation on the transfer of a water

right. In considering how much water might be changed or transferred, courts look

behind the decree to the historical practice of diversion and beneficial use of the water."

Many of the early decrees provided rates of diversion well in excess of the water actually

diverted and used. To allow an enlarged use of water based on the decreed amount

might result in injury to subsequent appropriators. As a result, Colorado courts during

transfer or change proceedings during the first half of this century considered whether

the unused quantity-the difference between the decreed amount and the amount

9Colo. Rev. Stat. § 37-92-103(5) (1990 & Supp. 1992).

1~ Green v. Chaffee Ditch Co., 150 Colo. 91, 371 P.2d 775 (1962); Weibert v. Rothe Bros., 200 Colo.
310,618 P.2d 1367 (1980); Mayv. U.S., 756 P.2d 362, 371 (Cola. 1988).



7

historically used-had been abandoned," In 1962, the Colorado Supreme Court clarified

the characterization of this unused water in concluding that, regardless of the decreed

diversion rate or amount, a water right exists only to the extent of actual beneficial use.

Therefore, the unused quantity of water should not be called "abandoned" because it had

never been legally perfected." Regardless of how it is characterized, water decreed but

not historically used may not be transferred.

Another consideration during review of change requests is how much water is

sufficient for the purpose for which the appropriation was made. This is called the "duty

of water" and, under Colorado water law, diversions are limited to this amount even if

. this is less than the decreed rate of diversion." Duty of water, a term in use in several

western states, has been defined by the Colorado Supreme Court as "that measure of

water, which, by careful management and use, without wastage, is reasonably required to

be applied to any given tract of land for such period of time as may be adequate to

produce therefrom a maximum amount of such crops as ordinarily are grown thereon,'?'

While the duty of water can work as a ceiling in calculating the transferable quantity of

water, historic use could actually be less than the duty, in which case the amount

historically used would become the ceiling.IS

2.2.2 Additional Limitations on Transfers

Once the water right is more completely defined, considering historic use and the

duty of water, other provisions of Colorado law may further affect the amount of water

that can be transferred, or otherwise condition the proposed new use of the water right.

"Fort Lyon Canal Co. v. RockyFord Canal,Reservoir, Land, Loan & Trust Co.,79 Colo. 511,519-20, 246
P. 781,789 (1926); Farmers' Reservoir & Irr. Co. v, Town of Lafayette, 93 Colo. 173,24 P.2d 756 (1933).

12Green v. Chaffee Ditch Co., 150Colo. 91, 371 p.2d 775 (1962).

"Romlnteck! v. McIntyre Livestock Corp., 633 P.2d 1064, 1067 (Colo. 1981).

"Farmers' HighlineCanal& ReservoirCo.v, Cityof Golden, 129Colo.575,584,272P.2d629,634(1954).

USee Weibert v. Rothe Bros., 618 P.2d 1367, 1371-72 (Colo. 1980); Orr v. Arapaho Water and Sanitation
Dist., 753 P.2d 1211, 1223-24 (Colo. 1988).



8

The most fundamental of all requirements is that the change not injuriously affect the

owner of, or persons entitled to use water under, a water right.

The issue of injury to other water rights is the most commonly disputed aspect of

changing or transferring a water right. Injury can occur if the change of use of a water

right causes an increase in depletion of the stream or a change in the timing of stream

flows relied on by other water rights. Injury is inevitably a question of fact, and extensive

engineering analysis may be involved in making such a determination.

While Colorado courts have often equated no injury with continuation of stream

conditions at the time of other users' initial appropriation, any change in the point of

diversion or the place, time or type of use is likely to alter stream conditions on a highly

appropriated stream. Since 1954, Colorado courts have instead characterized the injury

analysis in a way that has been described as "an exercise in balancing depletions,'?' This

approach seeks to keep the stream intact by ensuring that the depletion of the stream

from the new use does not exceed the depletion of the stream caused by the original use

to the detriment of other water rights. To make this determination, courts will consider

both the amount of water diverted and the amount"of return flow to the stream. Historic

use under this analysis, therefore, is measured by the depletion resulting from the use."

Injury to other appropriators may also occur as a result of a change to water

quality resulting from a transfer. For proposed transfers involving a plan for

augmentation, water quality issues may be considered during the transfer process."

Changes to water quality resulting from a transfer generally will be allowed unless the

changed quality renders the water unacceptable for existing downstream uses."

A recent decision by the Division One Water Court explicitly requires, in a

16Leonard Rice and Michael White, Engineering Aspects of Water Law78 (1987).

l1Danielson v. KerbsAg., 646P.2d363,373(Colo. 1982); alsoappliedto storagerightsin S.E.Colo.Water
Cons. Dist. v. Ft. Lyon Canal Co., 720 P.2d 133 (Colo. 1986).

ISColo. Rev. Stat. § 37-92-305, (5) (1990). Plans for augmentation are discussed i.!!!'m at Section.2.2.3.

19See Lawrence J. MacDonnell, "Water Qualityand Water Rights in Colorado," Natural Resources Law
Center Research Report, July 1989, at pages 18-25.



change-of-water right proceeding, protection of groundwater supplies relied on by those

holding groundwater rights," Thus, if irrigation return flows have supplied water

through percolation to a tributary groundwater aquifer and a groundwater appropriator

relies on this recharge, a change of an irrigation water right will be conditioned on

providing replacement water in a manner that parallels-in amount, time, and

location-the previously percolated return flows.

To encourage transfers of water rights, Colorado law specifically provides that

injury to other water rights may be offset by imposing terms and conditions upon the

transfer." Several types of terms and conditions are suggested in the statute including

setting parameters on the new use of water, relinquishing part of the right being changed

or a related water right, and imposing limitations on the period of diversion." In

recognition of the fact that the effects of a proposed transfer may not be known until

implementation, Colorado law also requires that all transfer decrees provide. for retained

jurisdiction by the court for reconsideration on the question of injury for some specified

period determined necessary or desirable," Transfer applicants must submit a proposed

decree to the water court setting out a plan for preventing injury to other water rights in

any case in which a statement of opposltion has been filed. This requirement is intended

to encourage discussions between the applicant and opponents prior to any formal

hearing on the merits of the application,"

Colorado law also protects water users from injury to their water delivery system

in situations where the users share common water facilities and water is to be removed

from the system for use elsewhere. In general, established patterns of use may not be

ZOConcerning the Application for Water Rights for the City of Thornton, Memorandum of Decision,
Division One Water Court, August 15, 1993. .

21Colo. Rev. Stat. § 37-92-305(3) (1990 & Supp. 1992).

llId., § 305(4, 4.5).

23Id., § 304(6)(1990).

24Id., § 37-92-305(3) (1990 & Supp. 1992).



10

altered to the detriment of other shareholders," The water court can use its general

authority to impose terms and conditions on the transfer to protect the remaining

shareholders. For example, a shareholder in a mutual ditch company proposing a water

rights transfer may be required to relinquish a portion of his water right to compensate

for ditch losses resulting from the transfer," And the party seeking to sever his ditch

company water right from his irrigated lands may be required to dry up his lands and

take them out of the ditch company's system," These water delivery protections are not

uncommon in western states, and are discussed more fully in Section 3.1.2 of this report.

Furthermore, under Colorado law, mutual ditch companies can impose reasonable

restrictions on transfers in their by-laws, such as requiring transfer approval by the

companies' Board of Directors, and limitations on the manner, type and place of use."

For example, The Rio Grande Canal Water User's Association in southern Colorado

limits the use of water toirrigation purposes, and makes the water appurtenant to the

land." Other companies, like the San Luis Valley Irrigation District, allow transfers of

water only.to other lands within the district, and even then, subject to the approval of the

Board of Directors." These types of restrictions will. be upheld by a court unless they

are found to be unreasonable or against public policy,"

2SSee Lawrence J. MacDonnell, ~Changing Uses of Water in Colorado: 31 Ariz. L Rev. 783, 809 (1989),
citing Great Western Sugary. Jackson Lake Reservoir and Irrigation Company, 681 P.2d 484 (Colo. 1984).

uBoulder v, White Rock Ditch & Reservoir Company v. City of Boulder, 157 Colo. 197,201,402 P.2d 71,
74 (1965).

27MacDonnell, supra note 25, at page 809, citing Matter of Application for Water Rights of Certain
Shareholders in the Las Animas Consolidated Canal Company, 688 P.2d 1102 (Colo. 1984).

28Colo. Rev. Stat. § 37-92-304(3.5) (1990).

29Articles of Incorporation, Rio Grande Water User's Association (1987), at Article IX.

3~ules and Regulations of the San Luis Valley Irrigation District, Article 1, Section 3, as amended March
6, 1990.

"Model Land and Irrigation Company v. Madsen, 87 Colo. 166, 285 P. 1100 (1930); see also Zoller v. Mail
Creek Ditch Company, 31 Ct. App, 99, 498 P.2d 1169 (1972); Costilla Ditch Company v. Excelsior Ditch
Company, 100 Colo. 433, 68 P.2d 448 (1937).



11

2.2.3 Conditions to Protect the Local Area

When water is removed from agricultural lands, the impact on the land can be

severe. Weeds can replace valuable crops and threaten a neighbor's productive fields.

Additionally, in many parts of the West, exposed soils may be blown away, wearing down

the topsoil of the land and possibly creating problems for adjacent farms and houses.

For this reason, the Colorado Legislature recently enacted provisions authorizing the

water court to require the revegetation of lands from which irrigation water is

removed," Revegetation is defined as "the establishment of a ground cover of plant life

demonstrated to be, without irrigation, reasonably capable of sustaining itself under the

climatic conditions, soils, precipitation and terrain prevailing for the lands.?" Since,

generally, a portion of the water to be transferred is used to accomplish the revegetation,

the water court retains jurisdiction over the transfer until the revegetation requirement is

satisfied. At any time, the applicant may request a final determination from the court

that no additional water must be applied to satisfy the revegetation condition.

2.2.4 Plans for Augmentation

Colorado water law contains a unique provision authorizing the adjudication of

plans for augmentation. An augmentation plan isdefined as:

a detailed program to increase the supply of water available for beneficial
use in a division or portion thereof by the development of new or alternate
means or points of diversions, by a pooling of water resources, by water
exchange projects, by providing substitute supplies of water, by the
development of new sources of water, or by any other appropriate
means."

These plans originally were intended primarily as a way of integrating existing

appropriations of tributary groundwater (closely linked hydrologically to surface water)

into the priority system applicable to surface water appropriations, The major use,

32Cala. Rev. Stat. § 37.92.305(4.5) (Supp. 1992).

33Id.

34Cala. Rev. Stat. §37-92·103(9)(1990).



12

however, has been to allow new, out-of-priority uses of tnbutary groundwater to proceed

so long as "augmentation" measures are taken to protect existing water rights," New

development and use of tributary groundwater in fully appropriated areas are made

possible through the replacement of all stream depletions resulting from the new use.

Generally, this is accomplished through the retirement of existing consumptive water

rights and, consequently, many changes of water rights in Colorado occur in connection

with plans for augmentation. Other sources of replacement water are effluent from the

use of imported water, and nontributary groundwater. Although there have been some

concerns about the hydrologic uncertainties and the complexity in administration

associated with many augmentation plans, experience to date has been generally positive.

2.2.5 Temporary Changes of Water Rights

Parties taking water from the same stream may, under Colorado law, temporarily

loan or exchange water," However, the only valid purposes for an exchange or loan

under this statutory provision ~s to save crops or for using water in a more economical

manner." While a court decree is not needed to implement such a temporary change,

written notice must be given to the division engineer which must include the duration of

the change." Other water users may challenge the temporary change on the basis of

water rights injury. In the event of such a challenge, the proponent of the temporary

change must show that no injury will result,"

35See Lawrence J. MacDonnell, "Colorado's Law of 'Underground Water': A Lookat the SouthPlatteand
Beyond," 59 U. Colo. L. Rev. 579 (1988).

36Colo. Rev. Stat. § 37·83·105 (1990).

38Id.

3~owman v, Virdin, 40 Colo. 247, 90 P. 506 (1907); see generally. MacDonnell, supra note 25, at pages
797-98.



13

2.2.6 Transfers Involving Special Categories of Water

Colorado law distinguishes several legal categories of water. The ability to

transfer, and the rules that may condition or limit this ability, differ somewhat among the

categories. For example, if groundwater is within one of eight designated groundwater

basins within the state, it is legally classified as "designated groundwater," and its transfer

must initially be authorized by the state ground water commission," Another category

of water in Colorado, imported or foreign water, is water that is introduced into a stream

system from another, unconnected system. Because this water is not part of the native

flows relied upon to fulfill in-basin water rights, it may be used and reused to extinction,

providing an unusually flexible and therefore valuable source of water for transfer." In

evaluating a potential water transfer in Colorado, the impact of such legal categories

must be considered."

SECTION 3: WESTERN STATE ApPROACHES TO TRANSFER AND REALLOCATION

OF AGRICULTURAL WATER

In the West, a water right is a property right that, in general, can be sold and

transferred from one use or place of use to another. Within this broad framework that

allows water to move, however, western states vary in the manner in which they

encourage or deter the transfer process, and the factors considered in deciding whether

and under what conditions to allow such transfers or reallocations to occur. For

example, Wyoming requires an evaluation of the impact a proposed transfer may have on

the local economy, and may condition or deny a transfer based on this impact.

Additionally, some states' laws encourage or mandate the conservation of irrigation water

that is then available for reallocation to another use. Finally, many western states allow

40See MacDonnell, supra note 25, at page 799, citing W·Y Ground Water Management District v.
Goeglein, 196 Colo. 230, 233, 585 P.2d 910, 911 (1978).

41MacDonnell, supra note 25, at page 801.

"otner legal categories that are important to a transfer of water in Colorado are salvaged water,
conditional waterrights, contract water, interstate water and tribalwater. For a discussion of thesecategories
in relation to water transfers, see generally. MacDonnell, supra note 25, at pages 798-808.



14

for the short-term movement of water from irrigation to non-irrigation use. This section

of the report will look at (1) conditions that may be imposed on agricultural to urban

water transfers; (2) state laws and programs that mandate a reduction in agricultural

water use; (3) state laws and programs that, through incentives, encourage a reduction in

agricultural water use; and (4) state laws and programs

that allow for short-term transfers of water from agricultural to other uses.

3.1 Conditioning Water Transfers

Traditionally, western states have uniformly protected other water rights while

considering a request for a change of use of an existing water right. Beyond this, many

states examine impacts on water users sharing the same delivery system as that of the

transferor. Other potential consequences of a transfer, such as degradation of water

quality or effects on the local economy, typically were not considered during the transfer

proceeding. State laws, however, have been changing, in recognition of these third party

impacts. Increasingly, states are requiring that both injury to water rights and impacts on

other values be addressed as a condition of water transfers. In addition, a few states are

taking a more comprehensive view of potential impacts of water transfers, and have

adopted, or are considering adoption of, a statutory scheme that sets out these broader

concerns.

3.1.1 Protection of Water Rights Generally

As discussed in Section 2.2 under Colorado transfer law, conditions are commonly

imposed on water transfers in order to protect other water rights from injury. In general,

appropriators have a right to the continuation of stream conditions existing at the time of

appropriation." Colorado law is perhaps more developed regarding protection of other

water rights than any other western state."

43See discussion supra at Section 2.2.2.

44Compare descriptions of thewatertransfer laws ofsix western states(Arizona, California, Colorado, New
Mexico, Utah, and Wyoming) in articles appearing in 31 Ariz. L Rev. No.4 (1989).



15

3.1.2 Water Delivery Protections For Water Users Sharing Common Systems

In the West, where water sources are far apart and supplies often scarce, water

supply systems have developed to move the water from where it is found to where it is

needed. These systems, managed by a variety of public and private organizations, may

involve an intricate web of canals radiating out from the main stream or source, and

from these canals many water users take water, including agricultural users who divert

water for use on their farms.

Water supply systems have developed so that the users in the system are

necessarily linked. Collectively they are responsible for the cost of maintaining the

system. They also share the water costs, in terms of evaporation and seepage losses,

incurred in getting thewater from its source to their farms. In situations where a low

volume flow of water in a ditch or lateral would quickly dissipate or evaporate, they rely

on the larger flow related to the many users in the system to create an adequate "head"

to carry water along the ditch to the headgates.

Because of this interconnectedness, transfers of water both within and out of the

system raise concerns for the remaining water users. Reducing the amount of water that

is delivered through a ditch may reduce the head of water so that some users' water no

longer reaches their farm or, if it does reach the farm, cannot be taken out by the user's

original diversion structures. A transfer may also affect evaporation and seepage losses,

for example, where the velocity of the ditch or stream is significantly reduced by the

transfer. And, in genera], the costs of operating and maintaining the system are not

proportionately reduced. In fact, average costs may increase as a result of a transfer and

resulting change in patterns of delivery. Such average-cost increase results from two

facts. First, there are fewer parties to share ditch costs. Second, overall operating costs

may increase, for example, because seepage losses are proportionately greater when

there is less water in the ditch," As a result, although the transfer of a water right in

appropriation states has been traditionally limited only by the no-injury rule, several.

4SKathleen A. Miller, "The Right to Use Versus the Right to Sell: Spillover Effects and Constraints on
the Water Rightsof IrrigationOrganization Members," Water Resources Research, Vol.23,No. 12,pp. 2166­
73 (1987).



16

states now explicitly protect the remaining water rights holders when a transfer is

proposed.

In a few states, including Colorado and Nevada, the obligation to consider these

types of water delivery impacts rests with the state entity charged with administering

water transfers. Colorado law, as discussed in Section 2.2.2, protects remaining

shareholders in a mutual ditch company from assuming an additional burden for

increased evaporation and seepage losses caused by the transfer. The transferring

shareholder may be required to leave some portion of the water otherwise transferable in

the ditch to compensate for these losses," Nevada law, like that of Colorado, may also

require the transferee to monetarily compensate the remaining shareholders for any

increased costs caused by the transfer,"

Colorado cases have upheld the right of mutual ditch companies to impose

restrictions and even prohibitions against transfers of shares out of the ditch (see Section

2.2.2).48 Idaho and Arizona take a somewhat different approach to protect water

delivery systems. Both states require that the water supply organization consent to the

transfer. In Idaho, no water right represented by shares of stock in a corporation may be

changed or transferred without the corporation's consent," Standards governing what

may and may not be considered by the corporation in denying or conditioning a transfer

have not been developed by case law or administrative rules. The only case dealing with

the issue, dating back to 1949, upheld the decision of the corporation to withhold consent

because the new place of use was at a location that "could not be served by the irrigation

system of the corporation" and such use ''would tend to disrupt the unity of the

46gee discussion §upra at Section 2.2.2.

47Nev. Rev. Stat. § 533.370 (Michie Supp. 1991). This provision reads that the state engineershall approve
change applications if, amongother conditions, the proposed change, if withinan irrigationdistrict, "does not
adversely affect the cost of water for other holders of water rights in the district or lessen the district's
efficiency in its delivery or use of water."

48gee discussion supra at Section 2.2.2.

49Idaho Code § 42-108 (1990).



17

. corporation and to impair the very purpose for which the same was formed.?" Whether

the corporation has any obligation to allow the shareholder to offer economic or other

types of mitigation prior to blocking the proposed transfer is not clear under current law.

Similar to Idaho's consent requirement is an Arizona law requiring prior approval

and written consent by the water organization for all transfers of water rights from lands

within irrigation districts, agricultural improvement districts, or water user associations."

Moreover, transfers from the watershed or drainage area that supplies a water supply

organization's irrigation water are subject to the organization's approval," Similarly,

Wyoming law requires a party requesting a change of the point of diversion and means of

conveyance to have the consent of the "other owners" of the ditch associated with both

the old and new use."

While Utah statutory law does not require the consent of the water supply

organization for proposed transfers, such consent was required in a recent Utah Supreme

Court case-at least for mutual ditch companies. The court held that a shareholder in a

mutual ditch company has no standing before the state engineer to seek a change in the

point of diversion of their portion of the company's water right." The court concluded

that the company holds the legal title to divert the water; thus, only the company may

initiate a change to the water right. The proper course for the shareholder to follow,

according to the Utah Supreme Court, is to ''bring its request for change application" to

the company's board of directors. If the request is unreasonably denied, the shareholder

may seek judicial relief," In reaching this conclusion, the court found that the company

has a duty to manage its affairs in the interest of its shareholders as a whole and, as a

SOJohnston v. Pleasant Valley Irrigation ce, Ltd., 69 Idaho 139, 145,204 P.2d 434, 438 (1949).

"Arlz, Rev. Stat.§ 45-172 (1987).

s2Ariz. Rev. Stat. § 45-172 (1987). The organization must approve or reject the proposal within 45 days
or the proposal is deemed accepted. Yd. .

SlWyO. Stat. § 41-3-114 (Supp. 1993).

s4East Jordan Irrigation Co. et al. v, Morgan, No. 920125, 1993 LEXIS 108 (Utah Sup. Ct. Aug. 5, 1993).

sSYd. at page 20.



18

result, the company "clearly has an interest in reviewing the [change] application to

determine whether it is in the best interests of the company and its shareholders.?"

The ditch company may object to the transfer of shares of its water in the transfer

proceeding itself. New Mexico law provides that "[a]ny person, firm or corporation or

other entity" has standing to object to a transfer," In a recent New Mexico case, two

ditch associations filed protests to the proposed transfer of shares of their irrigation water

supply to a large-scale commercial and residential development," The New Mexico

State Engineer denied the transfer because of injury to other water rights.

California legislators in 1993 are considering a proposal to address issues raised

when individual water users seek to transfer their allocated water for use outside of a

district's service area. The proposal, known as Assembly Bill 97, would authorize water

suppliers (including districts) to establish a "water user-initiated transfer program." Any

user wishing to transfer all or a portion of its allocated water supply would submit a

request to the water supplier. Following specific criteria in the statute, the water supplier

would then determine the amount of water available for transfer. In addition, water

suppliers may condition or deny the transfer request only on specified bases, including

impacts (1) to water quantity and quality; (2) on the ability of the supplier to meet

delivery obligations; (3) on the supplier's finances, such as increased costs for providing

water service; (4) on the supplier's ability to meet state permit and license conditions; (5)

on the appropriate maintenance of fallowed land (not defined); and (6) in general, on

the supplier and its users' economic, operational or water supply status. Decisions by

providers regarding approval, denial or conditioning of the proposed transfer would be

S6Id. at 15.

s7N.M. Stat. Ann. § 72-12-3(0) (1985). Other western states have similar provisions. See Wash. Rev. Code
§§ 90.03.380, ·.015 (1990); Nev. Rev. Stat. § 533.365, ·.345, ·.010 (1986); Utah Code Ann. § 73·3·7, -3 (1989).

S8In re Application of the EI Prado Water and Sanitation District, File No. 057, 0932, 0933, State of New
Mexico, Findings and Order of the State Engineer, dated April 30, 1992, at 9. The State Engineer must
consider the proposed transfer's impacts on the conservation of water and the public welfare even absent a
protest, but may rely on ditch company protestants to establish these elements. See discussion of this case
infra at Section 3.1.3.3.



19

subject to judicialreview, under an accelerated process."

Regardless of which approach is taken by the states-requiring the state

administrator to consider harm to water delivery systems or leaving that decision to the

district or company-many states now specifically seek to protect the original water

delivery systems from a range of adverse effects that might result from an out-of-system

transfer.

3.1.3 Protecting the Public Interest

Several western states now address potential impacts, aside from injury to other

water rights, during the water transfer process. Legislatively or through case law they

have developed limits on water transfers for the purpose of protecting a variety of non­

water right interests such as harmful economic or environmental effects. These types of

conditions all fall under the general "public interest" or "public welfare" heading; they are

intended to protect public values and address public concerns as opposed to preventing

injury to ,individual water rights.

Typically, state statutes provide little guidance to administrators in determining

public interest. For example, a Nevada law requires the state engineer, in considering

applications for changes of water rights, to determine whether the proposed change

"threatens to prove detrimental to the public Interest.?" Factors to be considered in

defining the public interest are often lacking, as was critically noted in a recent district

court order:

The existence of unappropriated water and a conflict with existing rights
are, more or less, objectively verifiable criteria. Conversely, detriment to
the public interest is, by nature, significantly more subjective. Moreover,
determining,detriment to the public interest begs the question of which
factors are to be considered in defining the "public interest."
Unfortunately, our legislature has not provided any guidance on this

591993 Cal. Sess. Laws, Assembly Bill No. 97.

~ev. Rev. Stat. Ann. § 533.370(3) (Michie Supp. 1991).



20

issue,"

By comparison, Idaho law requires that transfers of a water right be approved only if, in

addition to finding no injury to other water rights:

(1) the change is in the local public interest, defined as the affairs of the
people in the area directly affected by the proposed use; and
(2) a change in the nature of use from agricultural use would not change the
agricultural base of the local area,"

Idaho and Nevada are two of ten western states that require, by statute, case law,

or administrative procedure, some type of public interest review for proposed water

transfers (see Table 3.1). The types of concerns embodied by these provisions vary from

state to state, but include (1) local economic impacts; (2) net benefit to the state; and (3)

environmental impacts. In those jurisdictions requiring that transfers be conditioned or

denied to protect the public interest, conditions have been as varied as the range of

interests protected under this standard. States may require the transferor to submit data

on the economic impacts of a proposed transfer. Transfer applications could be denied

altogether if harm to the public interest cannot be adequately mitigated.

3.1.4 Practical Application of Public Interest Considerations

Given the legal authority to condition or deny transfers to protect public values,

how have state water administrators exercised this authority to condition or deny requests

to change water from agricultural to urban use? Several state administrators

report that public interest concerns are increasingly raised during transfer

61Pyramid Lake Paiute Tribe of Indians,et al v. R. Michael Turnipseed, Case No. CV91-2231, CV91-2232,
CV91-2245, ConsolidatedDept. No.5, SecondJudicialDistrict,WashoeCounty, Order dated August31, 1992.

62Idaho Code § 42-222 (1990).



21

TABLE 3.1. PUBLIC INTEREST REVIEW FOR PROPOSED WATER TRANSFERS

State Source Standard!

CA Cal Water Code §386 does not unreasonably affect fish, wildlife, or other
beneficial uses..•does not unreasonably affect the
overall economy of the area

ID Idaho Code §42- must be in local public interest (defined); change
222(1),-203(A)(5) cannot be approved if would significantly affect the

ag base of the area

KS H.B. 2070 (1993) can't reduce water available to meet present or
future needs in area, unless net benefit to
state/emergency; factors to determine net benefit:
current and future use (including instream),
economic, environmental, public health/welfare
impacts'

MT Mont. Code Ann. must prove overall change is reasonable use of
§85·2·402 water, determined by existing! projected state

demands (including instream flow), net benefits to
state; if transfer out of state, must not be
detrimental to public welfare

NB Neb. Rev. Stat. §§46- interbasin and intrabasin transfers must be in public
289,-294 interest, but interbasin approved only if net benefit

to state and receiving basin greater or equal to
adverse impacts to state, basin of origin; relevant
factors include net economic, environmental, other
benefits, any adverse impact

NV Nev. Rev. Stat. Ann. cannot be detrimental to public interest
§§533.370(3), - .345

NM N.M. Stat. Ann. §§72- cannot be detrimental to public welfare
12-7, -5-23

'In addition to these standards, four states consider the availability of alternative water supplies (MT,NB,
KS, WY) and three consider the use of conservation practices (10, KS, NM) in deciding on applications for
transfers of water rights, Mont. Code Ann. §85-2-402(1)(b)(iii) (1991); Neb. Rev. Stat. § 46-289 (1988); H.B.
2070 (Kansas), enacted 1993; Wyo. Stat. § 41-3-104(a) (1977); Idaho Code § 42-222(1) (1990); N.M. Stat. Ann.
§§ 72-12-7 (applies only to wells), and 72-5-23 (Michie 1978 & Supp. 1992).

~is standard applies only to transfers greater than 2,000 cfs per year, and to be transferred over 35 miles.



22

TABLE3.1 continued

UT

WA

WY

Bonham v. Morgan,
788 P.2d 497

Rev. Code Wash.
Ann.§§90.54.020;
90.02.005; DOE,
Stand.Oper.Rules PR
0-1000, B.3

Wyo. Stat. §41-3·
104(a)(i,ii)

must not prove detrimental to public welfare; if state
engineer believes will unreasonably affect current
beneficial uses, including public recreation, natural
stream environment, must withhold approval
pending Investigation'

must consider several public impacts for new
appropriations; AG advised DOE same applies to
transfer requests; includes water quality, instream
and other environmental impacts; favors regional
systems over private; separate provision requiring
maximum benefits to state'

must consider all facts pertinent to transfer including
economic loss to community, state; extent to which
such loss will be offset by new use; availability of
other sources

3Utall's standard applies only to permanent transfers; different language applies to temporary transfers and
does not include public welfare considerations.

"Telephone conversation with FredRajala, Water Resources Program, Washington Department ofEcology
(Oct. 21, 1993).



23

proceedings," But, as the following examples illustrate, in fact very few agricultural to

urban transfers have been conditioned or denied for public interest reasons. Many of the

public issues that are raised during transfer proceedings are not expressly incorporated

into the final order approving or denying the application. Moreover, some public

concerns may be addressed through outside negotiations that do not become a part of

the transfer record. In the end, a court or state water administrator may base a decision

to deny or condition a proposed transfer on the more traditional "no injury to water

rights" standard. To a decisionmaker, the no-injury standard, if applicable, may provide a

more legally defensible, and thus less likely to be challenged, foundation for conditional

approval or outright denial of a transfer application. For whatever reason, administrative

and court decisions to date may not accurately reveal the extent to which public interest

factors are considered in agricultural to urban water transfers.

3.1.4.1 Pacific Power and Light i~ Wyoming

Under a 1973 Wyoming statute, the Wyoming Board of Control must consider, in

addition to issues of injury to other water rights, the following:

(1) The economic loss to the community and the state if the use from

which the right is transferred is discontinued;

(2) The extent to which such economic loss will be offset by the new use;

(3) Whether other sources are available for the new use,"

The law may provide authority also for the Board's consideration of other factors

affecting the public interest," Transfer applicants must provide data on the economic

63~ telephoneconversations withLarryHolman, Chief, WaterRightsBureau, MontanaDept.of Natural
Resources (Mar. 19, 1993); Andy Sawyer, Attorney, california State Water Resources Control Board (Mar.
8, 1993); Paul Saavedra. New Mexico State Engineer's Office (Mar. 17.1993); Eric Gronlund. Water Rights
Division. South Dakota Dept. of Environment and Natural Resources (Mar. 16. 1993).

64Wyo. Stat. § 41-3-104(a) (1977);

6SThe statute begins with broad language that requires the State Boardof Control to consider"all facts it
believes pertinent to the transferwhich may include.... Wyo. Stat. § 41-3-104(a)(1977). See GeorgeA. Gould,
"WaterRightsTransfers and Third-Party Effects: 23Land& WaterL.Rev. 11.19(1988); and MarkSquillace,



24

effect of a proposed water transfer, whenever economic impact is a concern. If data is

not provided the application may be denied."

The 12-year history of Pacific Power and Light Company's efforts to make water

available for its Dave Johnson Power Plant near Glenrock provides an example of how

the Wyoming Board of Control approaches water transfers. In 1980, Pacific Power filed

an application to transfer irrigation water rights from the North Platte River and one of

its tributaries near Saratoga to its power plant, 223 miles downstream. In 1981, the

Board rejected Pacific Power's transfer application," While the Board seemed most

disturbed by the great distance the water right was to be moved, denial of the application

was based on several reasons, including (1) the lack of adequate evidence to determine

the transfer's impact (including those caused by the generation of electricity for possible

out-of-state use) on the economy of Carbon County; and (2) an inadequate showing by

Pacific Power that it had considered sources of water supply closer to the power plant."

Eleven years later Pacific Power was before the Board on a different transfer

application, again involving a change of water rights from irrigation use to industrial use

and, once again, involving a proposed use at the Dave Johnson Power Plant. The water

rights in this proposal were from the Douglas Canal in Converse County, much closer to

the power plant. As proposed, the diversion point would be moved from the canal 10.7

miles upstream to the intake system for the power plant. Notice was sent to all parties

diverting water at one of the eight headgates located between the Douglas Canal and the

power plant intake, and no one appeared to protest at the public hearings. The

applicant submitted an economic evaluation of the transfer, as required by state law.

The report concluded "water is significantly more valuable to the area's economy if used

"Water Rights Transfers in Wyoming: Chapter 6, in The Water Transfer Process as a Management Option
for Meeting Changing Water Demands, Vol. II, Natural Resources Law Center (April 1990).

"See Petition of Pacific Power and Light, Wyoming Board of Control Docket No. 1-80-4-5 (1981).

67Squillace, supra note65, at 9, n.9O; Wyoming StateBoard of Control Order,Docket No. 1-80-4-5 (1981).

68Id. at pages 9-10. Wyo. Stat. § 41-3-104(iii) (1977) specifically requires the Board to consider "[w]hether
other sources of waterare available for the new use."



25

for power production at the Dave Johnson Steam Power Plant tha~ in its present

agricultural use.?" Further, the report found that the state would receive an indirect,

but no less relevant, financial benefit from the proposed transfer. More coal would be

extracted from a nearby mine for use at the power plant, increasing state severance tax

revenues."

The Board approved the Douglas Canal transfer with little discussion of the

economic impacts, merely setting out statutory requirements regarding economic impact

and concluding that "[t]he Board in reviewing the testimony given and exhibits submitted

determined that the petitioner satisfied this requirement of the change of use statute,'?'

Contemporaneous with the Douglas Canal transfer proceeding, Pacific Power submitted a

petition for an exchange plan involving the Douglas Canal water rights." The exchange

plan was approved by the State Engineer, considering only injury to other water rights,

and was conditioned only to avoid or mitigate such injury.

3.1.4.2 Box Elder Creek in Utah

Prior to a 1989 court decision, the only basis under Utah's change statute and

existing case law for rejecting or conditioning change applications was impairment to

other vested water rights." In Bonham v. Morgan,7. the Utah Supreme Court held that

the State Engineer must apply the broader statutory criteria required for new

69James T. Jacobs and Chris T. Bastian, for Canyon Land and Livestock, "Economic Evaluation of Change
in Use of a Portion of the Mortons Incorporated Appropriation, Converse County, Wyoming" (March 1992),
at page 7.

7°ld.

71Wyoming State Board of Control, Order Record No. 40, page 412, para. 17 (Nov. 27, 1992). In
Wyoming, no other transfer from irrigation to municipal and industrial uses has been denied by the Board
where the applicant has provided an economic evaluation. Telephone conversation with Allan Cunningham,
Board Analyst, Wyoming State Board of Control (March 19, and May 17, 1993).

nWyo. Stat. § 41-3-106 (Supp. 1993).

73Utah Stat. § 73-3-3(1989); Salt Lake City v. Boundary Springs Water User Assn., 270 P.2d 453, 455 (Utah
1954); Craft v. Hansen, 667 P.2d 1068, 1070 (Utah 1983).

74788 P.2d 497 (Utah 1989).



26

appropriations when considering change applications. In this case, an irrigation company

and a water conservancy district filed a joint application to change a portion of the

company's water rights to the district's water treatment plant. The transfer required

modification to the water collection system, already under construction when the

application was filed in 1984. Heavy runoff during this construction resulted in damage

to property below the collection system. During the transfer application proceedings, this

property owner filed a protest, claiming that the construction of the new collection

facilities increased the risk of flood damage to his property, and thus was contrary to the

public welfare.

The Utah Supreme Court's ruling in this case significantly expands the

considerations that apply when reviewing applications for changes in point of diversion or

place and nature of use. Since Bonham was decided, no applications involving a change

of water rights from agricultural to urban use, and raising public welfare concerns, have

been submitted to the State Engineer, but a recent application to change a diversion

point iIIustrates how public interest factors may be applied in future transfer proposals.

A few years ago, Brigham City sought to move a point of diversion for a municipal

and industrial water right. The change was needed because of a road realignment

proposed by the Utah Department of Transportation. The City's water right had been

changed prior to Bonham from irrigation to power and municipal use. During the more

recent change proceedings, the State Division of Wildlife expressed concern that the

proposed change would dry up the fishery in Box Elder Creek, a tributary to Bear Lake.

As a result, the City was required to submit data that included flow recommendations for

protection of the fishery in the creek.

FoIIowing three public meetings, a permit was issued subject to two conditions

imposed to protect the fishery and public recreation. First, the applicant must establish a

wetland area as a replacement for an area that would be lost by the change, and must

maintain a .5 cubic feet per second (cfs) flow from Mantua Reservoir to this area.

Second, the applicant must maintain a 2 cfs minimum flow at the confluence of Box

Elder and Big Creeks. Third, the City must submit at the end of five years (1) proof that

the water has been put to beneficial use; and (2) data on streamflows. With this



27

information, the Department of Water Resources may then impose additional or

different permit conditions if determined necessary to protect the fishery or public

recreation.75

3.1.4.3 The Sleeper Case and Public Welfare in New Mexico

A 1985 decision of a district court in New Mexico rejected a water transfer

application because of the economic impact the transfer might have on a northern New

Mexico community. The applicant, Tierra Grande Corporation, had purchased land and

water for the purpose of creating a recreational lake as part of the development of a

large ski resort near Ensefiada, New Mexico. The new use would require the retirement

of approximately 78 acres of previously irrigated land. Before the State Engineer, an

irrigation user organization, the Ensefiada Land and Water Association, protested the

transfer, claiming that the proposed transfer would impair existing rights and be contrary

to the public interest. Despite the Association's protest, the State Engineer approved the

transfer at the recommendation of the hearing officer who found that the transfer wo~ld

not impair existing water rights. The Association appealed the State Engineer's decision

to the state district court.

In Sleeper v. Enseiiada Land and Water Association." the district court focused on

the impact the transfer would have on the local culture, rather than a strict balancing of

economic benefit, and reversed the State Engineer. The Association had introduced

evidence of various community and cultural impacts that will result from the transfer.

Further, agricultural lands would be permanently dried up, and the remaining water users

along the ditch would be burdened with an increased financial obligation for

maintenance. Evidence offered by the applicant attempted to show that the local

economy would actually be better off, although it would be changed from one based on

agriculture to one based on tourism. The Association countered that the resort economy,

7STelephone conversationwith Kent Jones, AssistantState Engineer for Appropriation, Utah Department
of Water Resources (May 17, 1993).

76No. RA 84-53(C), slip. op. (N.M. Dist. Ct. Apri116, 1985), reversed, 107N.M. 413,759 P.2d 200 (1988).



28
.

while providing some menial jobs, overall would provide little economic benefit to the

local residents. The court concluded that the living culture of the northern New Mexico

region is recognized as possessing significant value that cannot be expressed in monetary

terms, and rejected applicant's assumption that increased economic benefits are better

than preserving a cultural identity.

Reversing the district court, the New Mexico Court of Appeals found that state

water law in effect at the time of the application did not allow the court to consider any

public interest factors during a transfer application proceeding. The only valid

consideration under the controlling statute was injury to other water rights." Since the

transfer would not harm existing water rights, the application could not be denied."

More recent cases involving the transfer of water out of agricultural use are

subject to 1985 amendments to New Mexico water law allowing the State Engineer to

consider public welfare." In 1992, the State Engineer denied an application to change

surface irrigation water rights to groundwater rights for domestic, commercial and

municipal uses. The water rights, once changed, were to be an integral part of the

proposed Las Sierras development project, which included residential subdivisions and

commercial enterprises. In denying the application, the State Engineer found that the

amount of water that could be transferred would be less than the amount required for

the full development of the project, and ruled that the "public welfare is not well served

by approval of only a portion of the water supply required for a proposed planned

"N.M. Stat. Ann. § 72-5-7 (Michie 1978).

7&rhis case is discussed in F. Lee Brown. Charles DuMars. Michelle Minnis. Sue Anderson Smasal, David
Kennedy and Julie A. Urban. "Transfers of Water Use in New Mexico: Chapter 4. in The Water Transfer
Process as a Management Option for Meeting Changing Water Demands. Vol. II. Natural Resources Law
Center (April 1990). at pages 20-21.

79In 1985, New Mexico amended its laws. requiring the State Engineer to consider publicwelfare in water
rights transfer proceedings. 1985 N.M. Laws. Ch. 201. §4. amending N.M. Stat. Ann. § 72-5-7. See Timothy
De'Young, "Protecting New Mexico's Instream Flows," in Instream FlowProtectionin the West,revised edition,
Natural Resources Law Center (1993).



29

development project in which the ultimate water requirements are known.?" The order

seems to strain, however, to link this reason to injury to water rights, as it goes on to

state "[u]ltimate cumulative effects to existing water rights resulting from the use of water

within the proposed Las Sierras development project are not known and therefore a

determination cannot be made as to whether those effects would not constitute

Impairment.?" Interestingly, the findings in this case clarify that New Mexico water law

does not recognize preferential beneficial uses of water, and rejects the idea that the

state engineer should consider cultural impacts, as was suggested by the district court in

the Sleeper case:

Whether a given area is to be preserved for traditional uses, such as
agriculture, or converted to new uses such as subdivisions and commercial
enterprises is more appropriately decided by local governmental entities
charged with land zoning and development activities."

Fleshing out the meaning of New Mexico's public welfare criteria is thus left to future

decisions.

3.1.4.4 Honey Lake Valley in Nevada

The Nevada State Engineer recently considered a set of applications to change the

point of diversion and place of use of agricultural groundwater rights. The ultimate plan

of the applicant, pursued in separate stages, was to consolidate groundwater rights in

Honey Lake Valley Basin and export the water for municipal use in Washoe County.

Honey Lake Valley is located about 35 miles northwest of the Reno-Sparks metropolitan

area, where there is a high demand for water for municipal use," Numerous parties

SOln re Matter of the Application of the EI Prado Water and Sanitation District, File No. 057, 0932, 0933
et al, New Mexico State Engineer, April 30, 1992, at page 9.

SlId.

82ld. at findings number 42 and 43.

83See Pyramid Lake Paiute Tribe of Indians vs. R. Michael Turnipseed, Case No. CV91·2231, -2232 and ­
2245, Consolidated Department No.5, Order Reversing State Engineer Ruling Nos. 3786 and 3787 (Aug. 31,
1992).



30

filed protests to the change applications, claiming water rights and other types of injuries

under the proposed changes. The Pyramid Lake Paiute Tribe and the cities of Reno and

Sparks, among other concerns, argued that the importation of Honey Lake Basin water,

which has high salinity levels in some parts of the basin, would degrade the quality of the

Truckee River. 'The Tribe asserted that the lower quality imported water would

eventually alter the quality .of water at Pyramid Lake (the terminal lake for the Truckee

River) to the detriment of certain threatened and endangered fish species. The cities

argued that the imported water would cause the discharge from the Reno-Sparks

Wastewater Treatment Plant to violate discharge permit standards."

Finding that the "Nevada Legislature has not offered any guidance on this

issue.':" and that public interest is a matter within the State Engineer's discretion, the

State Engineer looked to "public interest considerations ... found throughout" Nevada

water laws," Among these are the "policy of the state to encourage efficient and non­

wasteful use of these limited supplies," the prohibition of the "pollution and

contamination of underground water," the recognition of "the use of water for wildlife,

including the establishment and maintenance of wetlands and fisheries," and the

declaration that recreation is a beneficial use of the state's waters," Considering these

and other statutory statements, the State Engineer concluded that the "[I]egislature had

provided substantial guidance as to what it determines to be in the public interest.':"

Thirteen "principles" are set out that "should serve as guidelines in ... determination of

54In re Applications 53407 et ai, Ruling No. 3787A, Supplemental Ruling on Remand, Nevada State
Engineer (Oct. 9, 1992), at pages 17-18. The State Engineer's Supplemental Order on Remand was affirmed
by the District Court September 27, 1993. The applicant has proposed to address Truckee River and Lake
water quality concerns by agreeing to Import Honey Lake Valley water only into basins other than Truckee
Meadows. Telephone conversation with Peggy Tweed, Assistant Attorney General, Stateof Nevada (Oct. 21,
1993).

SSId. at page 9.

84Id.

87Id. at page 10.

88Id. at page 11.



31

what constitutes 'the public interest,'?" Most of the principles reflect traditional

considerations-for example, that the proposed use be beneficial and that the applicant

demonstrate the economic ability to complete the project. In general, the principles are

directed towards promoting the beneficial use of water, protecting declining water tables,

ensuring water for financially stable development, and avoiding speculation and waste.

In applying these principles to the Honey Lake Valley transfer proposal, the State

Engineer approved the transfer. He noted the high demand for water yet virtual lack of

available surface supplies in the Reno-Sparks area, and concluded "it is in the public

interest to facilitate augmentation of the Reno-Sparks water supply as well as to augment

the supply in some of the valleys north of Reno-Sparks that have declined so long as the

other public interest values are not compromised or can be mitigated.?"

What were the "other public interest values" considered in this case? Tribal

concerns for the effect of the transfer on plant life, wildlife and wetlands were for the

most part rejected. Evidence persuaded the State Engineer that wildlife and plant life

would not be impacted, and while some wetland loss was acknowledged, "there is an

overriding public interest value to put this water to its highest and best use by allowing

for the export of 13,000 acre feet annually for municipal use." Regarding concerns for

endangered and threatened fish species and for water quality impacts, the State Engineer

found that it is not in the public interest to impair endangered and threatened species at

Pyramid Lake or to degrade the quality of the Truckee River. While the State Engineer

noted that "it would threaten to prove detrimental to the public interest to allow the

water to be used in such a manner as to violate any water quality or discharge standards

of water discharging into the Truckee River or to further impair any threatened or

endangered species," he did not find evidence of such impacts from the proposed

transfer." In other words, such factors are relevant-though apparently not deciding in

89Id. at pages 11-13.

9OId. at page 14.

91Jd. at page 20. The ruling requires that a monitoring plan be implemented to, among other matters,
determinewater quality changes. Id. at 21.



32

this case.

As the foregoing examples illustrate, many western states provide some

mechanism whereby potential impacts from water transfers can be considered and, in

some cases, mitigated. In contrast to the traditional no-injury standard, however, these

types of considerations are often subjective, guided by few or no standards, and may be

time consuming to identify and evaluate. For these reasons and others, many state water

administrators and judges remain hesitant to base water transfer decisions on public

welfare considerations.

3.1.5 Comprehensive Administrative Review of Transfer Benefits and Costs

A few states explicitly provide for a comprehensive administrative review of

proposed water transfers. Strategies adopted by California and Kansas are presented

here.

The Kansas provisions, initially adopted in 1983 and amended in 1993, set out

several requirements that must be met before a transfer application may be approved.

Generally, the Kansas Chief Engineer must ascertain whether the benefits to the state

from the transfer outweigh the benefits to the state if the transfer is not approved. No

transfer may be approved unless the transfer applicant has adopted and implemented

(for at least 12 months) conservation measures consistent with the guidelines established

by the Kansas Water Office. Applicants providing a public water supply must also have

implemented a rate structure determined to be effective in encouraging the efficient use

of water."

While the conservation requirements are an important tool for encouraging the

efficient use of water, the ''benefits to the state" analysis, as explained in the statute,

contains broad language mandating a comprehensive review that includes, but is not

limited to, the effectiveness of conservation measures. In weighing the benefits to the

state, the water administrator must consider all relevant matters, including:

any current beneficial use being made of the water;

9Z1993 Kansas sess, Laws. ch, 219.



33

• any reasonably foreseeable future beneficial use of the water;

• the economic, environmental, public health and welfare and other impacts of

approving or denying the transfer;

• alternative sources of water available to the applicant and present or future users

for any beneficial use;

• whether the applicant has taken all appropriate measures to preserve the quality

and remediate any contamination of water currently available for use;

the proposed plan of design, construction and operation of works or facilities used

in conjunction with carrying the water from the point of diversion;

the effectiveness of conservation plans and practices adopted and implemented by

the applicant and any other entities to be supplied water by the applicant;

• the conservation plans and practices adopted and implemented by any persons

protesting or potentially affected by the proposed transfer; and

applicable management program, standards, policies and rules and regulations of a

groundwater management district.

This new law has yet to be tested. At a minimum, transfer applications in Kansas may

be more costly for the applicant, and may take a longer period of time for resolution. At

the same time, the final decision will reflect broad-based regard for the potential impacts

from the transfer.

California law, which applies the same criteria to transfers as govern new

appropriations, requires a similar comparison of both present and proposed water uses as

well as consideration of alternative supplies. The State Water Resources Control Board

must, at the request of any party or on its own motion, "identify and evaluate the benefits

and detriments, including but not limited to economic and environmental factors, of the

present and prospective uses of the water involved and alternative means of satisfying or

protecting such uses.?" In a draft guide to water transfers produced by the Department

of Water Resources in 1989 and not yet finalized, the potential effects of water transfers,

which "must be fully and carefully considered," include environmental and social

93Cal. Water Code § 1058 (1971); Cal. Code Regs. tit. 23, § 756 (1987).



34

consequences, such as water quality and energy resources (e.g, decreases in power

generation or demand); compliance with environmental laws and regulations, such as the

California Environmental Quality Act; effects on groundwater supplies; and economic

and financial considerations, such as loss of jobs or income or a reduction in property

values."

Both California and Kansas have taken a comprehensive, "big picture" view of

water transfers. With some provisions, like those addressing conservation practices, these

states are evaluating whether the transfer applicant in fact needs the water requested.

With others, the provisions instead assume the water is needed, and focus on whether the

social, economic and environmental consequences on balance are acceptable, considering

the welfare of the state as a whole.

While states like Kansas are attempting to encourage water conservation in the

context of water transfers, other states are .moving to directly mandate more efficient use

of water.

3.2 Regulatory Approaches to Reducing Agricultural Water Use

Most agricultural water uses were established long ago. In some cases these uses

involve a larger diversion or withdrawal of water than may be necessary to obtain good

crop yields. More recently, there is a growing recognition among western states that

water resources must be available for a broad' and expanding set of uses. Irrigation

accounts for about 90 percent of western water consumption and 80 percent of all

withdrawals from streams and aquifers. More efficient use of irrigation water could

reduce this major source of demand. Under western water law, established water rights

must be based on beneficial use, which incorporates the notion that the use must be

reasonable and without waste. These concepts-"reasonable use" and

"waste"-traditionally are measured by local custom and practice. A use is reasonable,

and therefore not wasteful if the method and quantity of use follows local custom. But,

in many areas of the West, highly inefficient irrigation practices have been sanctioned

94"A Guide to Water Transfers in California," Draft, California Dept. of Water Resources (June 1989).



3S

and perpetuated under this standard. Some states are now reconsidering their laissez

faire approach to water use practices,"

Waste could be defmed as any amount of water diverted or withdrawn from a

source in excess of the minimum quantity that can be delivered to the field and used to

produce maximum expected crop yields." Some of the "excess" diversions return to the

stream system as return flows. In many locations in the West, these return flows are

relied upon by downstream irrigators, and the additional water applied to the lands may

be valuable in flushing harmful salts from the soils. It may be possible to require that at

least some portion of the return flows never be diverted. In many cases, however, this

would necessitate improvements in diversion and delivery systems-perhaps at

considerable expense.

Another part of the excess may be consumptively lost to the system through

evaporation, transpiration, and deep percolation. This water appears to be a good

candidate for regulatory control. Yet such water may be the source of phreatophytes and

wetlands providing valuable habitat. Legal, policy, and technical questions remain but,

nevertheless, states are beginning to revisit assumptions about existing water rights and,

in some cases, adopting programs and requirements to reduce agricultural water

requirements-thereby making water available for other uses.

States have taken different approaches to accomplish such a reduction in

agricultural water use. Laws and programs that provide voluntary incentives to

encourage users to reduce their' water use are described in the next section of this report.

This section focuses on state laws and programs that, in effect, require a reduction in

9SSee Steven J. Shupe,"Wasted Water: The Problems andPromise of Improving Efficiency Under Colorado
Water Law," in Tradition. Innovation and Conflict: Perspectives on Colorado Water Law73,7S (Lawrence J.
MacDonnell, ed, 1986); and Steven J. Shupe,"Waste in Western Water Law: A Blueprintfor Change," 61 Or.
L. Rev. 483, 489 (1982).

"In defining waste, consideration must be given to the amount of water that will produce the maximum
physical yield of crops. Application of water to crops beyond this amount causes productivity to decrease.
The optimumeconomic yield incorporates suchadditional factors as the farmer's cost for water,supplies and
services as well as the price he can expect to receive for the crop produced. At a minimum, any amount of
water applied in excess of what is needed for the maximum physical yield of the crop is clearly waste, and
consideration of economic factors is likely to further reduce the "optimum" amount of water to be diverted
or withdrawn.



36

agricultural use. These types of laws and programs generally impose a penalty, in terms

of money or water, for failure to reduce use. For example, states may establish a duty of

water for irrigation based on efficient use of water, and any portion of water rights held

by the user over this duty would be subject to possible loss or forfeiture. Arizona has

taken this type of approach in managing its groundwater. In California, state law

definitions of waste and beneficial use, and enforcement of these provisions, have forced

some irrigation organizations to seek improvements leading to more efficient use of

water. Oregon is considering adoption of a duty of water for agricultural use, which

would likely also require reductions of agricultural use in at least some areas of the state.

Supporters of a regulatory approach to promote water conservation believe most

water users will not change, will not invest in system improvements, unless mandated by

law. Additionally, supporters argue, efficiency requirements can provide irrigation

organizations with the justification they need, legally or politically, to make efficiency

types of improvements. The following examples describe several of the regulatory

approaches taken today by western states for the purpose of reducing agricultural water

use.

3.2.1 Prohibition Against Waste and Unreasonable Use ill California

Both California statutory law and the state's constitution prohibit waste and

unreasonable use of water." The concept of reasonable use is not defined by statute,

and court cases have indicated that whether or not a use is reasonable depends on the

facts of a particular case," These situational facts, however, must be considered in light

of state-wide concerns, including the increasing need to conserve water,"

California law also imposes an affirmative duty on the Department of Water

97CaI. Const. art X, § 2; Cal. Water Code § 100 (West 1971).

98V. Dong, Div. of Water Rights, SWRCB Memo to Files 262.0(09-18-27); A-22782; A-24240; A-28255
(Nov. 19,1991)[hereinafter V. Dong Memorandum]; Tulare Irrigation District v, Lindsay-Strathmore Irrigation
District, 3 Cal.2d 489, 45 P.2d 972, 1007 (1935).

99Joslin v. Marin Municipal Water District, 67 CaI.2d 132, 429 P.2d 889 (1967); Environmental Defense
Fund, Inc. v, East Bay Municipal Utility District, 26 CaI.3d 183, 161 Cal.Rptr. 466 (1980).



37

Resources (DWR) to prevent misuse of water,and sets out a procedure for investigating

misuse and for notifying the water provider of findings under this process:

The department [of Water Resources] and [State Water Resources
Control] [B]oard shall take all appropriate proceedings or actions ... to
prevent waste, unreasonable use, unreasonable method of use, or
unreasonable method of diversion of water in this State. loo

Any party can submit complaints to the Board pursuant to DWR regulations establishing

a procedure for investigating allegations of misuse of water.lOt Downstream water users

may have an interest in pursuing this avenue because, under California law, water that is

wasted or unreasonably used is considered unappropriated and subject to appropriation

by others.:" Parties who claim to be impacted by the alleged misuse of water can

obtain relief if the Board orders the water provider to prevent or terminate the misuse,

and these orders are subject to enforcement procedures."

Finally, California courts have ruled that a water user may be required to spend a

reasonable amount of.money for improvements or to endure some amount of

inconvenience for the overriding public policy of preventing waste and unreasonable use

of, and maximizing the beneficial use of, the state's water resources." The following

examples, involving the Imperial Irrigation District, the EI Dorado Irrigation District and

the Yuba County Water Agency, illustrate how these requirements have been

implemented.

3.2.1.1 Imperial Irrigation District

lOOcal. Water Code § 275 (West Supp. 1993).

101cal. Code Regs. tit. 23, §§ 4000et seq.; and California State Water Resources Control Board, Decision
1600, DecisionRegardingMisuseof Water by ImperialIrrigationDistrict (June 21, 1984)[hereinafter Decision
1600], at page 20.

I02Car. Water Code §§ 1202, 1225 (West 1971 & Supp. 1993).

I03Decision 1600, supra note 101, at page 21.

I04People ex reo State Water ResourcesControl Board V. Forni, 54 Cal.App.3d 743,751.52; 126Cal.Rptr.
851 (1976), and V. Dong Memorandum, supra note 98, at page 18.



38

Imperial Irrigation District (110) provides irrigation water to about 460,000 acres

within a service area encompassing over one million acres in Imperial County, California,

and stretching from the south side of the Salton Sea to the Mexican border. In addition

to irrigation water, used primarily to grow alfalfa, wheat, cotton, sugar beets and lettuce,

IID serves municipal, industrial and domestic users in the Imperial Valley. The sole

source for the lID's water supply is the Colorado River, diverted at Imperial Dam and

carried by gravity flow along 1,760 miles of conveyance and distribution facilities. In

addition, 110 collects irrigation return flows through a network of drainage canals that

drain into the New and Alamo Rivers and then into the Salton Sea.105

IID's Colorado River diversions averaged 2,855,000 acre feet annually between

1965 and 1980. An estimated 1,036,446, or over one-third of the diverted amount,

entered the Salton Sea as irrigation return flows. These return flows accounted for about

71 percent of all water entering the Salton Sea during this time. Water entering the

Salton Sea is not available for subsequent beneficial use. Consumptive use within IID,

identified as the amount of water lost to crop evapotranspiration, averages about

1,700,000 acre feet annually, or approximately 66 percent of the water delivered to

farmers. The balance of water carried through the system, about 34 percent of the

amount diverted from the Colorado River, is attributed to tailwater, leachwater, and

canal SpillS.106

Prompted by a 1980 petition filed by a farmer owning land adjacent to the Salton

Sea, the Department of Water Resources investigated lID's water storage, delivery and

use practices. The farmer claimed that excessive amounts of Colorado River water were

reaching the Salton Sea and flooding the farmer's adjacent land, as a result of lID's

wasteful and unreasonable operational practices. The State Water Resources Control

Board (SWRCB), following hearings, concluded that lID's failure to implement practical,

available measures to reduce losses of water was unreasonable and constituted a misuse

lOSDecision 1600, supra note 101, at pages 5-7.

I06Id.



39

of water under the state's constitution.!"

After losing its appeal of this Board decision, lID was ordered by the Board to

develop, within about four months, "a specific written plan of implementation containing

a definite schedule for implementing additional water conservation measures" sufficient

to conserve a minimum of 100,000 acre feet of water annually by January 1, 1994.108

Facing the possible forfeiture of its water rights, lID entered an agreement with the

Metropolitan Water District of Southern California (MWD) just days before the deadline

for submitting a written conservation plan. MWD agreed to fund system improvements

in the lID system, and lID agreed to transfer the saved water to MWD. While lID was

pressured into the agreement with MWD, lID was also permitted to transfer water saved

by improvements even though the SWRCB had determined that such water was being

wasted.!"

3.2.1.2 El Dorado Irrigation District

EI Dorado Irrigation District (EID) is a rural district serving part of EI Dorado

County in northern California. Crawford Ditch is part of EID's delivery system and

supplies water for irrigation and domestic use. The ditch, dating back to the 1850s, has

been repaired and upgraded over the years, but much of the original earthen structure

remains, interspersed with pipe housed in wooden trestles on steep or rocky terrain or

where 'ditch failures have occurred.

In 1980, anticipating growth and development in the county, EID filed an

application with the State Water Resources Control Board (SWRCB) for water right

permits under the proposed South Fork American River Project (SOFAR). In its 1982

I07Brian E. Gray, "Water Transfers in California: 1981-1989," Chapter 2, in The Water Transfer Process
as a Management Option for Meeting Changing Water Demands, Vol. II, Natural Resources Law Center
(April 1990), at pages 34-35.

I08California State Water Resources Control Board, Order WR 88-20, Order to Submit Plan and
Implementation Schedule for Water Conservation Measures (Sept. 7, 1988),at page 44.

I09See California State WaterResources ControlBoard, Decision 0-1600 (Sept. 1988); Smithand Vaughn,
"Taking Water to Market," Civil Engineering 70-73 (March 1987); and "Let's Make a Deal: The IID/MWD
Water Conservation Agreement," Water Strategist 5, 15 (Jan. 1989).



40

order issuing permits for SOFAR, the Board, finding excessive losses in the district's

conveyance system, required EID to initiate a water conservation and system

improvement program:

Prior to any consumptive use under this permit, permittee shall
demonstrate ... that ... permittee has reduced its annual loss of water by
2,000 acre-feet (AF). The annual loss may be reduced through system
improvements, reduction in consumptive demand, or both."

The order mandated additional savings of 2,000 acre feet (up to a total of 12,000 acre

feet in savings) with the use of each additional 5,000 acre feet of consumptive use of

water under the permit. In compliance with this order EID spent about $5.4 million

dollars to improve the Crawford Ditch system, resulting in water savings of about 2,800

acre feet annually along a 16-mile section of the ditch.!"

The District believed that, under California law, any water saved by these

improvements would be available to the District for beneficial use or transfer.

Subsequent developments have cast doubt on EID's rights to any saved water. When an

environmental document prepared in connection with these improvements was released

to the public, three complaints were filed with the State Water Resources Control Board

alleging that EID's diversion of water into Crawford Ditch amounted to a waste or

unreasonable use of water and was harmful to the fishery. Two complaints were from

downstream water users and one was filed by the State Department of Fish and Game.

Additionally, the SWRCB staff has taken the position that any water saved through the

district's improvements does not belong to EID for transfer. The staff report

distinguishes conservation measures that reduce the use of water previously put to

beneficial use from improvements that reduce historic waste or unreasonable use.

Because the water saved by EID had previously been wasted in the staffs view, it should

Il°California State Water Resources Control Board, Decision 1587 (Nov. 1987).

IIlLetter from W. Robert Alcott, District Manager, EI Dorado Irrigation District, to W. Don Maughan,
Chairman, California State Water Resources Control Board re: Investigation of Complaint Regarding EI
Dorado Irrigation District'S Diversion of Water Into Crawford Ditch in EI Dorado County (Dec. 13, 1991).
Note that the V. Dong Memorandum, supra note 98, at page 18 states "EID spent approximately S5.43M to
improve the [Crawford] ditch in order to conserve 8,500 AFA of water."



41

revert to the State and be subject to appropriation." Nothing has yet been resolved,

and there is still disagreement over the need for instream flows and rights to the saved

water.

3.2.1.3 Yuba County Water Agency

Serving an area near the foothills of the Sierra Nevada in northern California, the

Yuba County Water Agency (Yuba) provides water for irrigation, domestic, and

hydroelectric use. Anticipating future growth in the county, in the 1960s Yuba developed

a water storage project, the Yuba River Development Project. A primary feature of this

project is the New Bullards Bar Dam which has a capacity of nearly one million acre

feet. Much of the storage water has not been applied to beneficial use within the

agency's service area for several reasons, including a lack of funds to complete diversion,

conveyance and delivery systems." This may be the result of less growth than

anticipated, and consequently less money to pay for the facilities. Under its state water

rights permits, the agency has until the year 2010 to perfect its water rights by applying

the water to beneficial use.

Unable to use all of its storage water, knowing that drought conditions were

hitting other areas of the state harder than their service area, and consequently presented

with an opportunity to increase revenues to the agency, the agency, in 1987, began

transferring surplus water to water-short areas of the state. From 1987 through 1991"

Yuba sold the use of over 800,000 acre feet of stored water.

The agency, and the districts within the agency, have received $30 million for the

water transferred. About a third of this money has gone to local water conservation,

flood control, water quality, and water. distribution and conveyance projects.

I12See Letter from Edward C. Anton, Chief, Division of Water Rights, State Water Resources Control
Board, to Mr. Robert Alcott, District Manager, El Dorado Irrigation District, et al, re: Investigation of
Complaint Regarding El Dorado Irrigation District's Diversion of Water Into Crawford Ditch in EI Dorado
County (Dec. 5, 1991); and V. Dong Memorandum, supra note 97.

113Paul M. Bartkiewicz