By Larry MacDonnell
INTRODUCTION
The task of allocating the use of surface water resources is made more difficult by the variability of water supplies, both intra-annual and year-to-year. Water uses within allocation systems tend to be based on the typical available supply or the pattern of water availability apparent at the time the uses are established. Extreme events such as drought, especially prolonged drought, can place considerable stress on water allocation systems.
The recent extended drought in California provides a unique opportunity to observe the performance of water allocation systems in that state in response to a considerably reduced supply of water. California should not be understood to be "typical" of states in the Western United States. It is unusual, first, in its recognition of both prior appropriation and riparian water rights. It is unusual also in the extent of its water resources that are controlled by a few large entities and the number of water users, especially irrigators, who rely on water supplied under some type of contract arrangement. Nevertheless the mechanisms utilized to address the problem of allocating water shortages and the general principles they employ may well be applicable in other settings.
This paper makes a preliminary attempt to describe and evaluate the recent California experience with particular reference to the performance of two major water suppliers in the state -- the Bureau of Reclamation and the State Department of Water Resources. Given available time and resources, the objective of the research was to focus on selected aspects of the water allocation process in California, primarily involving the federal Central Valley Project and the State Water Project. Two primary issues are considered: first, how are water shortages resulting from the drought allocated among the users supplied from these two projects (including instream needs) and second, to what degree may available supplies by shifted among users either on a short-term or long- term basis?
The paper begins with a brief overview of the water rights allocation system in California. It turns to the Central Valley Project and the State Water Project and provides a description of these projects and their water supply arrangements. Next the mechanisms employed to allocate water shortages among those holding entitlements to receive water from the two projects are described. Opportunities for water transfers are then considered. Special attention is given to the use of water banks. The paper concludes with some preliminary observations on the California experience during the 1986- 1992 drought.
WATER RIGHTS ALLOCATION IN CALIFORNIA
As mentioned, California recognizes both riparian and appropriative water rights. California courts, in cases arising out of the activities of gold miners on federal public lands, were the first in the West to recognize prior appropriation as a basis for establishing a right to water (Irwin v. Phillips 1855). Subsequently, the California Supreme Court decided that riparian rights also existed as a consequence of private landownership (Lux v. Haggin 1888). In 1914, the legislature subjected new appropriative rights to a permit system now administered by the State Water Resources Control Board. Thus, there are three possible sources of legal right to divert and use the surface water resources of the state.
Present law places considerable discretion with the State Water Resources Control Board in issuing permits (Gray 1989). It must find that there is water available for appropriation and that the appropriation is in the public interest. The Board may subject the permit to terms and conditions including a right of subsequent revision. The Board is to consider water needed for recreation, for fish and wildlife resources, and for water quality in making its determination. Typically this means that the permit is conditioned by a requirement that the appropriation not reduce flows below a minimum level or that certain releases of water occur. Restrictions are placed on exports of water from certain protected areas.
Climate-induced reductions in historical water availability are addressed differently under the two water allocation systems. Riparian law provides a right for those owning land adjacent to a stream or lake to make "reasonable" use of the water. In drought conditions, reasonable use presumably would be expected to decrease to protect the correlative rights of other riparians in the reduced resource. In contrast, prior appropriation law protects the full diversion entitlements of senior users to the extent that the water is available. A prior appropriation right is based on actual use of water rather than riparian ownership of land. It is a priority system. The first to establish their appropriations have better rights than users who come later. In times of shortage, senior users can "call out" junior users sharing the same water source in order to satisfy senior rights.
In Half Moon Bay Land Co. v. Cowell (1916), the California Supreme Court considered an apportionment of water from a creek among riparian users in a period of drought. The Court recited a lengthy list of factors that may be considered in making such apportionments including the length of the stream, the volume of available water, the extent of landownership along the banks of the stream, and the practicability, extent and profitability of the water uses.
Riparian rights generally are considered superior to appropriative rights in California. According to Gray (p. 763): "In the event of shortage, appropriators must cease their diversions in reverse order of priority to enable all riparians to satisfy their demands."
Riparian rights are not dependent on continuing use as are appropriative rights and continue to exist whether or not they have ever placed a direct burden on the stream or lake. The uncertainty created by these "dormant" rights has been reduced in some cases through use of a statutory adjudication process by which appropriative and riparian uses may be quantified and unused riparian rights may be assigned a priority lower than existing appropriative uses (In re Waters of Long Valley Creek Stream System 1979).
In addition to these two basic systems for allocating rights to surface flows, water uses also are determined in many settings by contract arrangements. Division of the available flows of water still occurs under either riparian or appropriation principles, but deliveries of water for ultimate use are made under contract arrangements. Commonly, these contract arrangements define the amount of water to be delivered and the charges for the water, among other things. They may also specify how drought-related water shortages are to be treated. Water from the Central Valley Project and the State Water Project is provided under such contract arrangements.
In recent years there has been increasing recognition of the need to protect water for ecological values including fisheries, wetlands, and riparian habitat areas. Riparian principles protect instream flows to a degree because of their protection of the rights of all riparian landowners to share in the water resources of the stream or lake. Consumptive uses that unreasonably impair the rights of downstream riparians are not allowed. The prior appropriation doctrine, by comparison, bases rights on physical capture of water, primarily for out-of-stream uses. Upstream appropriators are entitled to consume as much water as their use requires so long as the needs of any downstream seniors are met. Thus, stream flows may well depend on the diversion points of those holding senior water rights.
The laws of a number of states have been changed to make possible the protection of water for certain instream or in place uses (MacDonnell, Rice, and Shupe 1989). A variety of approaches are employed including withdrawing certain streams or lakes from appropriation, reserving specified flows of water from future appropriation, administratively or legislatively establishing minimum streamflows, appropriating specified streamflows, and denying or conditioning new appropriations to protect streamflows. Typically these protections are tied to a minimum quantity of water necessary to maintain a fishery in the stream.
The effect of these protections in time of drought depends on the approach taken. In most cases they are subject to all pre-existing water rights. In highly or fully appropriated streams, these instream flow provisions are likely to have little effect under drought conditions because of their junior status. Requirements for bypass flows from storage projects to protect stream flows often are stated in terms of a fixed minimum amount but sometimes are set in variable terms dependent on quantities of inflows to the reservoir.
Until the 1991 legislative session, instream uses of water in California had not been directly protectable through either appropriation or reservation (Gray 1989a). New legislation now allows the transfer of appropriative or riparian water rights to instream uses. The primary mechanisms for protecting instream flows are through terms added to new permits or to permits for a change of use, through restrictions on new water development in designated wild and scenic rivers, and through use of the public trust doctrine. Gray (p. 755) notes that "[t]ypical terms [of a permit] require the applicant: (1) to bypass water under specified flow conditions for the protection of fish and wildlife; (2) to release water to augment natural stream flows downriver of the project; and (3) to release relatively large quantities of water, usually during periods of high water supply to provide flushing flows to cleanse the riverbed of accumulated sediment." Wild and scenic river designations to date in California generally have prohibited the construction of dams and other impoundments on these rivers. The public trust doctrine has been applied to require the reduction of appropriations from streams feeding into Mono Lake because of harm to the environmental values of that waterbody (National Audubon Society v. Superior Court 1983).
With this brief review of the water rights system in California as background, the paper now turns to a look at the two dominant water development projects in the state and their legal structure for capturing and using water resources.
THE CENTRAL VALLEY PROJECT AND THE STATE WATER PROJECT
General Description
Water resources in California are substantial but, as in many other parts of the West, they are not necessarily available at the time when out-of-stream demands for their use are the greatest or at the place where the largest share of these demands occur. Most of the natural precipitation occurs in the winter months while most agricultural needs, by far the biggest water user in the state, exist in the summer. The greatest share of the state's water resources are found in the northern part of the state while the greatest demand for out-of-stream use occurs in the central and southern areas -- both for irrigation and for municipal and industrial purposes.
By the 1930s, there had already been substantial water development in California including the Hetch- Hetchy Project for San Francisco and the Owens Valley Project for Los Angeles. The needs of irrigated agriculture had been met with the major diversions from the Colorado River for the Imperial Valley and with smaller developments in the Central Valley. Particularly in the more arid southern part of the Central Valley, irrigators depended on groundwater development and were rapidly depleting that resource. The growth of California, it was believed, depended on large-scale development of its water resources, particularly those in the north.
Studies of such large-scale water development opportunities began as early as the 1870s, and in the 1920s the state began a series of specific investigations culminating in the State Water Plan proposed in 1931 and approved by the legislature in 1933. Unable to fund the project because of the Depression, the state turned to the U.S. Congress for support under the federal Reclamation program. Congress approved the project in 1935 and authorized additional features in a series of acts over the following years.
The Central Valley Project (CVP) is one of the largest projects constructed and operated under the reclamation program. Its reservoirs have the capacity to store about 11 million acre-feet of water, and 500 miles of major aqueducts have been constructed to carry water to entities holding contracts for water delivery (Driver 1991). Annual firm yield is estimated as 8.2 million acre-feet. As of 1989 there were 309 contracts for water supply, obligating a maximum delivery of 7.1 million acre-feet of water -- primarily for irrigation uses. The CVP provided water to more than 2 million acres in 1978, representing nearly a third of all acreage served by the federal reclamation program in the 17 Western states.
The desire for additional water development, especially for the growing water needs of the southern part of the state, led the California legislature to reopen investigation efforts in 1947. This resulted in development of a Water Plan, adopted by the legislature in 1959, calling for the construction and operation of the State Water Project (SWP). Reservoirs that are part of the SWP have a storage capacity of over 5.6 million acre-feet, and aqueducts necessary to deliver water extend 561 miles (Department of Water Resources undated). The firm yield from project facilities is about 2.4 million acre-feet, though the Department of Water Resources (DWR) has entered 30 long-term contracts providing for a maximum delivery entitlements of about 4.2 million acre-feet.
Water Supply Arrangements
As mentioned, the U.S. has entered into 309 long- term water supply agreements for delivery of water from the CVP. Referred to as "contractors" by the Bureau of Reclamation, the holders of these agreements include public water supply agencies (such as irrigation districts and water districts), cities, companies, and individuals. For most reclamation projects the Bureau enters "repayment" contracts that provide for total payment to the U.S. over the life of the contract of the share of project construction costs allocated to the users represented by the contracting entity. In the CVP the U.S. entered "service" contracts providing for irrigation water supply in return for a fixed charge that was to pay for a share of the construction costs and ongoing operation and maintenance costs. In addition, the U.S. has contract arrangements with entities and individuals who have exchanged their pre-existing water rights (generally riparian rights) for contract supplies from CVP facilities.
There are 30 long-term contracts, all with public water supply agencies, for delivery of water from the SWP. These are 75-year contracts (CVP contracts are for 40 years). The contracts are closely modeled on the first one signed in 1960 with the Metropolitan Water District of Southern California (MWD). They include a schedule providing for an increasing annual delivery of water up to a maximum entitlement. All contractors pay the same amount per acre-foot of delivery entitlement for the cost of construction of the storage facilities (the Delta Water Charge). In addition, contractors pay a "transportation charge" which contains a capital charge for delivery facilities as well as operating and maintenance charges.
Meeting Environmental Needs
The State Water Resources Control Board is required to "take into account, whenever it is in the public interest, the amounts of water required for recreation and the preservation and enhancement of fish and wildlife resources" in issuing water right permits (California Water Code Section 1243). It may condition the issuance of permits to require certain releases or bypasses of water and may amend these conditions at a subsequent time if determined necessary (California Water Code Section 1394). In California v. United States (1978), the U.S. Supreme Court upheld the application of such conditions to operations of the Central Valley Project. This authority has been used to require releases of water from both CVP and SWP facilities to provide minimum flows required to support fish and wildlife needs.
The Bureau of Reclamation provided us with a comprehensive summary of the flow release conditions that attach to their water right permits. That summary is included as attachment one of this paper. Minimum release requirements have been established for all major dams in the CVP except Friant Dam. Most of the permits specify a flow rate that varies somewhat according to the time of the year with higher flows committed in the winter months and lower flows in the summer (including no release requirement at all for Whiskeytown Dam from June 1 to September 30). Two permits distinguish between dry years and other years and reduce the obligation for releases during dry years. The permit for the New Melones Dam on the Stanislaus River establishes a pool of water dedicated to release at rates and times to be determined by the California Department of Fish and Game.
In addition, the special water quality problems of the Sacramento-San Joaquin Delta place obligations on both the CVP and the SWP. Both projects divert large quantities of water from the Delta through major pumping facilities and deliver that water to users to the south. The State Water Resources Control Board requires that these projects be operated so that water quality in the Delta is at least as good as it would have been if these projects had not been constructed (Water Right Decision 1485, 1978 at 10). Now nearly 12 years after this decision administrative proceedings are still underway to determine the specific obligations this places on the operation of the projects, especially concerning flows of water through and out the Delta.
Historically, the Central Valley of California contained vast expanses of wetlands (Reisner and Bates). Probably less than ten percent of these areas remains. There are ten National Wildlife Refuges, four State Wildlife Management Areas, and one privately managed resource conservation district within the Central Valley (Report on Refuge Supply Investigations, March 1989). Only seven of these 15 areas have a firm water supply, and the total supply amounts to only 121,000 acre-feet. The supply for six of these seven comes from contracts with the Central Valley Project.
ALLOCATING WATER SHORTAGES
Central Valley Project
There are at least nine different types of contract provisions found in CVP contracts relating to the effect of shortages on the delivery obligations for water from the project. In general, these provisions give the U.S. substantial discretion in dealing with such shortages. They all absolve the U.S. of any liability associated with the shortages. Commonly, the contracting officer (the Bureau of Reclamation) is given the right to apportion the available water supply in an unspecified manner. Some contracts, however, contain more specific formulas to guide the Bureau in its allocation process. For example, one provision calls for proportionate reduction of all deliveries except where prohibited by other legal requirements or another method is necessary to prevent "undue hardship." Another precludes reductions greater than 25 percent of the quantity delivered in the previous year. A third limits reductions to municipal and industrial users until agricultural users have been cut back by 25 percent at which point, additional reductions are to be shared equally by both classes of users.
As a result of the broad discretion accorded the Bureau and the generally high reliability of the CVP water supply the Bureau had not developed any general policy concerning project management during drought. The long duration of this drought, coupled with the recent scrutiny of project operations in connection with consultations under the Endangered Species Act, has caused the Bureau to document its "decision criteria." Apparently the Bureau has now developed its criteria, but has not yet made them public.
Those users holding water rights settlement contracts such as the Sacramento River group have specific provisions limiting delivery reductions in event of water shortages. In a "critical year," defined in relation to certain inflows into Shasta Lake, Sacramento River contractors can only be reduced up to 25 percent of their annual delivery entitlement. Irrigation water service contractors generally take the first cut. If available water supplies still are inadequate after irrigation contractors have been reduced up to 25 percent, then cuts may also be applied to M & I water service contractors. These additional cuts are shared equally by both classes of contractors unless prevented by specific contract provisions.
The Bureau has developed a "hardship policy" allowing for exceptions in cases of documented special needs. Users requesting a hardship allocation must have a water conservation plan in place that is being implemented. In 1991 they were required to first seek water from the State Water Bank. M & I contractors may seek water to protect public health (basic needs to maintain life and maintain cleanliness to control disease) and safety (fire protection) where no other alternative supplies are available. Irrigators reduced to less than 50 percent of maximum entitlement can seek additional water to prevent loss of trees and vines.
Total annual deliveries from the CVP have been affected by the drought conditions since 1987. In 1986 total deliveries from the CVP were 8.9 million acre-feet of water(Bureau of Reclamation, 1991). In 1987, total deliveries were only 6.3 million acre-feet, and the projected deliveries for 1991 are only 3.4 million acre- feet. Carryover storage in the system at the end of 1991 is projected to be 3 million acre-feet -- the lowest level since the record 1977 drought. The reduction in total deliveries to 3.4 million acre-feet required the Bureau to cut back supplies to most agricultural users by 75 percent, to cut back urban contractors by either 50 or 75 percent depending on their contract, and to cut back the Sacramento River Water Rights Contractors and the San Joaquin Exchange Contractors by 25 percent. About 250,000 acre-feet went to contractors able to make their case under the "hardship" provisions.
As described earlier, permits for most CVP and SWP dams require minimum releases of water to protect the downstream fisheries. In at least three cases these release obligations are reduced in dry years. For the Keswick Dam on the Sacramento River, the minimum release obligation for December through February is 2,600 cubic feet per second in a normal year, compared to 2,000 cubic feet per second in the dry year. During the months of March through August the minimum flow rate is 2,300 cubic feet per second for both normal and dry years.
For Lewiston Dam on the Trinity River, the Bureau has established three minimum pools of water for release dependent on whether it is a wet/normal year, a dry year, or a critically dry year. In wet/normal years the pool is 340,000 acre-feet; in dry years, 220,000 acre- feet; and in critically dry years, 140,000 acre-feet. For Folsom Dam and Nimbus Dam on the American River the minimum flows that must be released may be reduced in the same proportion as are irrigation deliveries in critical years.
State Water Project
There are two important provisions in SWP contracts relating to water shortages. Sections 12 (d) and 14 (b) both state that if the SWP is unable to deliver the annual entitlement at a particular time because of drought the contracting entity may elect to take the equivalent amount of water at another time that year or in the following year "to the extent that such water is then available and such election is consistent with the State's overall delivery ability...." Section 18 (a) provides that agricultural users will be the first to be reduced in the event of water shortage. Such users may be curtailed up to 50 percent in one year but no more than the equivalent of 100 percent of its single-year entitlement over a seven-consecutive-year period. Thus, if a 50 percent curtailment occurs in one year, the total of the additional curtailments over some inclusive seven year period is not to exceed an additional 50 percent of one year's entitlement. If maximum permissible reductions to agricultural users do not take care of the shortages, then additional reductions are shared among all contracting entities on the basis that their contract entitlements represent to all contract entitlements. There is a recognized exception for meeting "minimum demands" for domestic supply, fire protection, or sanitation.
In 1977, the SWP reduced agricultural deliveries by 60 percent and M & I deliveries by 10 percent. The present drought began in 1987. In December 1988, DWR projected the need for a 40 percent reduction in agricultural deliveries for the following year. Above- average precipitation in March 1989 caused DWR to decide to provide full allocations for that year including deliveries of 2.5 million acre-feet to those holding long- term contracts and 1.3 million acre-feet to those taking water on a year-to-year basis. In 1990 agricultural users were cut back their full 50 percent while M & I users were not curtailed. In 1991, agricultural users were cut off completely and M&I users were reduced by 70 percent.
WATER TRANSFERS
California Water Transfer Law
Beginning in 1980, the California legislature has enacted a series of laws aimed at encouraging transfers of water, both on a long-term and short-term basis(Gray 1989). As a general matter these laws apply whenever the transfer would involve a change in the place of use, purpose of use, or point of diversion established in the water right permits governing the appropriation of water. They require such changes to be reviewed by the State Water Resources Control Board, primarily to protect other water rights and the environment.
Long-term transfers, those for periods of more than one year, may not result in substantial injury to any legal user of water or unreasonably affect fish, wildlife, or other instream beneficial uses. Temporary changes are limited to the amount of water that would have been consumptively used. The ordinary requirement for public hearings can be waived if the Board determines that the change can occur without impairment to specified interests. The requirement to go through an environmental impact review under the California Environmental Quality Act (which applies to long-term transfers) may be waived for temporary transfers. Temporary urgency changes are authorized under certain limitations and may operate no longer than 180 days. Finally, there are specific provisions for transfers of reclaimed, conserved, and surplus water.
New legislation added in 1991 provides for leases of water for up to five-year periods to "assist water conservation efforts." Water conservation is defined as the use of less water to accomplish the same purpose of use allowed under the existing appropriative right and may include land lying fallow or crop rotation. This legislation appears aimed at facilitating use of the State Water Bank, described below.
Relatively few water transfers in California are subject to the jurisdiction of the State Water Resources Control Board. Rather, transfers occur most often within the context of the existing permits which typically authorize very broad uses of the water that is being appropriated. A recent study found that the Board received 24 petitions to transfer water between 1981 and 1989, all for short-term arrangements except one (Gray, Vol II -- California, p 12). One interesting finding is that most of these transfers were drought-related. The author's conclusion is:
The transfers approved by the Board during the 1980s demonstrate that California's water transfer legislation works well in times of drought when it is necessary to reallocate water on a short-term basis to ensure that no region of the state suffers inordinate hardship. The categorical exemption of Temporary Changes from the environmental review requirements of the California Environmental Quality Act and the Board's practice of filing notices of exemption for Temporary Urgency Changes enable the Board to expedite its review of drought-related transfer petitions.
We turn now to transfers of CVP-supplied water.
CVP Transfers
Informal seasonal transfers of water have occurred with great regularity among users of water supplied from the CVP. Between 1981 and 1989, more than three million acre-feet of water moved on a short-term basis from users with entitlements to users with needs (Gray, Vol II, p. 22). During this time the Bureau applied an informal transfer policy with five requirements: (1) the transferor must have excess water available for transfer; (2) the transfers must be limited to the current water delivery year; (3) the transferee must also have a contract with the Bureau authorizing the contemplated use of water; (4) the transferor cannot profit from the transaction; and (5) if the transferee pays higher charges for water under its contract than the transferor it must pay the U.S. this higher amount for the transferred water.
In December 1988, the Department of the Interior announced its general support of water transfers involving Reclamation facilities in a statement of general principles. The Bureau of Reclamation supplemented these principles in March 1989 with "criteria and guidance." This new federal policy was at variance with then-existing CVP transfer policy in a number of respects. Consequently, CVP transfer policy has been modified to some degree.
The 1991 Central Valley Project Water Transfer Guidelines, issued in March, are specific only to this year and are aimed particularly at helping with drought problems. They define "transferrable water" as the average of the three highest years of beneficial use between 1980 and 1989, and that would otherwise have been used this year. Such water may be available either because irrigation would be foregone or because groundwater would be used for irrigation. The restriction against profits has been eliminated but other restrictions remain. These include a prohibition against transfers to uses outside the CVP. It also appears to continue the requirement that both parties hold contracts with the U.S. and that the uses are already provided for in these contracts. In addition, there is a general statement that the transfer must not create a "significant adverse impact on CVP supplies."
The Bureau has used the Temporary Urgency Change process to move CVP water through the SWP aqueduct, primarily for environmental purposes. Gray's research revealed ten applications by the Bureau between 1985 and 1989 to change the point of diversion to the take-out for the SWP aqueduct (Vol II, pp. 28- 33). In nine of the ten cases the purpose of the temporary change was environmental -- to support salmon spawning and migration, to improve flows in the Delta, or to supply water to national wildlife refuges in the San Joaquin Valley. The State Water Resources Control Board approved all of the changes.
SWP Transfers
Section 15 of the SWP contracts requires state approval of any disposition of project water by the contractor outside of its service area. The Department of Water Resources (DWR) evaluates such proposed transfers of water. In its 1990 Guide to Water Transfers in California, DWR explains: "The evaluation process includes analyzing in detail the potential impacts on the SWP, studying potential third party effects, briefing the California Water Commission, and extensively discussing the proposed transfer with SWP contractors affected by the proposed transfer." In fact, a few transfers have been approved (Natural Heritage Institute 1990).
DWR uses four general criteria in evaluating proposed transfers. First, it generally limits transfers to water that has historically been beneficially used and not to contract rights that have never been served. Second, it requires that transfers not adversely affect deliveries to other contractors. Third, the transfer must not impair the contractor's ability to meet its payment obligations; the transferee must be able to demonstrate that it will be able to meet its financial commitments. The transferor remains liable for the transferee's financial obligations. And fourth, there must be sufficient capacity in the aqueduct to deliver the transferred water. Though there is no explicit limitation to this effect, it is unlikely that DWR would allow long- term transfers of SWP water to non-SWP contractors because of the existing over commitment of project water. Contractors may impose their own limitations on transfers, and the Kern County Water Agency has developed policies generally limiting transfers to other users within the county.
To date, there has only been one long-term transfer of SWP water -- a 1967 exchange agreement between the Coachella Valley Water District and the Desert Water Agency as holders of an SWP entitlement and the Metropolitan Water District of Southern California as holder of an entitlement from the Colorado River. In addition, two other SWP contractors -- the Devil's Den Water District and the Castaic Lake Water Agency -- have agreed to transfer the Devil's Den contract to Castaic in the late 1990s. In 1989, DWR (and the State Water Resources Control Board) approved a short-term exchange of Kern County's SWP water for future deliveries of CVP water from the Westlands Water District. And DWR has approved (and the SWRCB is considering) a proposed long-term exchange of SWP water from the Metropolitan Water District's entitlement for CVP water out of the delivery rights held by the Arvin-Edison Water Storage District.
WATER BANKS
Water banking has been used in California to facilitate short-term transfers of water in response to drought. Under authority of the 1977 Federal Emergency Drought Act, the Bureau of Reclamation operated a water bank in California to meet the needs of certain agricultural interests in the Central Valley that were being adversely affected by the 1976-1977 drought (DWR 1989). The Bureau established a hierarchy of needs with survival of permanent crops first, crops needed to support dairy and cattle operations second, and other crops third. Through the bank, over 42,000 acre-feet of water was made available to users. A major limitation of the bank was its restriction to water that was part of the CVP.
In early 1991, at the onset of the fifth consecutive year of drought, California Governor Pete Wilson established a Drought Action Team. One important outcome was the creation of the Emergency Drought Water Bank by the Department of Water Resources. This bank purchased about 835,000 acre-feet of water during 1991 and had allocated about 435,000 acre-feet as of September (Macaulay 1991).
The bank is operated by DWR. It has members comprised of entities that supply water for a variety of uses, primarily urban and agricultural. Representatives of these members formed a water purchase committee that, together with DWR, supervised the purchasing of water for the bank and established the "melded" price to be paid for that water. In addition, members provided an estimate of the amount of their "Critical Need" and were required to pay 75 percent of the expected cost of acquiring that water as a condition of membership. Urban critical needs were defined as water needs in areas that had less than 75 percent of normal water supplies, based on 1987 conditions adjusted for population changes. Agricultural critical needs were those to maintain trees, vines, and other high value crops.
Most of the water purchased came from farmers who decided to forego irrigation during this year, primarily in the Delta region (Macaulay 1991). Additional water came from "surplus" supplies in reservoir storage, from surface water supplies that could be replaced by groundwater for the season, and from direct purchases of groundwater. DWR determined the quantity of water available from foregone irrigation based on estimates of the evapotranspiration associated with the crops that would have been grown on the acreage lying fallow. The water bank purchase committee established a uniform purchase price of $125 per acre-foot and a selling price of $175 per acre-foot.
Roughly 80 percent of the purchases occurred without need for review by the State Water Resources Control Board. Nevertheless, DWR has been concerned with assuring that transfers do not adversely affect fisheries and that transportation losses associated with delivering the water are accounted for. Possible adverse effects on local economies resulting from these transfers are being studied.
DWR is actively considering the continuation of the water bank and will certainly do so if the drought continues. It also sees the bank as a means of allowing it to operate the SWP to provide greater annual deliveries with less concern about carryover storage for dry year insurance, relying instead on the water bank to meet dry-year needs.
SOME PRELIMINARY OBSERVATIONS AND CONCLUSIONS
The multi-year drought in California has forced the water allocation processes in that state to cope with the very difficult problem of allocating the shortages. Our preliminary look at the experience during this drought suggests that these processes were able to manage these allocation tasks, though we have not tried to determine whether these allocations could have been accomplished in a "better" way.
For a variety of reasons, there is very little permanent transfer of the rights to use water in California, but the process for making temporary changes of use -- critical in a drought situation -- appears to work, at least as measured by the fact that such applications were almost always approved by the State Water Resources Control Board. It should be emphasized that one reason for the effectiveness of this process is that the usual requirements for hearings and detailed environmental reviews are normally waived. Perhaps the critical need for water in a drought situation warrants this streamlined review, but it raises the question of the degree to which these transfers have resulted in adverse environmental or other effects that ordinarily would have been mitigated. It may be significant that most of these transfers were, in fact, to meet environmental needs.
The CVP presents a situation in which the allocation of shortages is apparently subject to considerable discretion on the part of the Bureau. There is wide variance in the contract provisions that apply to this matter. The two groups of users who traded their riparian rights for project deliveries are in the best position, presumably because of their bargaining power at the time the project was being established. Generally agriculture bears the brunt of any shortages -- a situation that comports roughly with the relative value of water in drought. Moreover, there are provisions for hardship supply of water to keep alive permanent vegetation such as fruit trees and vines.
The process, however, is an administrative one. The Bureau calculates the available supply of water to be allocated each year. The Bureau makes this judgment based on its own determination of how the system should be managed, including how much carryover storage is necessary. Within the broad boundaries of the relevant contract provisions, the Bureau then decides what cutbacks to make to each contractor. Some flexibility is provided through the hardship option. The contractors and users have a very limited role in this process.
The allocation of water shortages in the SWP is more clearly defined. There is a clear preference to protect water deliveries to urban users; agricultural users have only limited expectations under drought conditions. Problems of drought-related shortages in this system are exacerbated by the excess of contract water delivery commitments that exist. While the rules for allocating shortages are more clear than for the CVP the tightness of the system and the way it was managed (making full allocations for the first several years of the drought and then having to drastically curtail deliveries in 1991) present other problems.
The rivers of California, like elsewhere around the West, are heavily appropriated for out-of-stream consumptive uses. Efforts in recent years to maintain sufficient flows of water in these rivers and streams to support the aquatic ecosystem are subject to these uses. The operation of water storage facilities takes away the ecological benefits of peak level streamflows but adds the benefit of being able to provide regulated releases throughout the year and even in drought years beyond the amount of water that might otherwise be available.
The absence of any release obligations for the Friant Dam is under reconsideration as part of the environmental impact statement process for the contract renewals in the Friant Division. The original release obligations for Lewiston Dam were determined to be inadequate and have been changed. Listing of the winter run of chinook salmon in the Sacramento River as a threatened species in 1990 places an affirmative obligation on the federal government to take measures to "recover" the species and caused the Secretary of the Interior to order releases of 340,000 acre-feet of water from Lewiston (the wet/normal year obligation) even in dry years if possible. Listing of the Delta smelt as a threatened species in 1991 will prompt additional attention to water conditions in the Sacramento-San Joaquin Delta.
Perhaps the most important development out of the drought is the creation of the State Water Bank. Though following a market-based approach, the bank uses the centralized, administrative model to water allocation that appears to be favored in California. Large buyers operating through the State Department of Water Resources control the process, setting a single purchase price. At least nominally, DWR controls the allocation process and applies a set of generalized criteria to its allocation decisions. The water bank brings a degree of flexibility to the water allocation process in California that is otherwise unavailable at present. It has apparently created a process for the transfer of riparian water rights used for irrigation, something that has not previously occurred. Most transfers have occurred outside the State Water Resources Control Board review process. A formula has been established to deal with transfers affecting flows in the Delta. Studies are being done of the third party effects of these transfers. Assuming these transactions are found not to have resulted in adverse effects either to the environment or to third party interests the procedures that have been established should help to facilitate temporary transfers in following years.
In a system as institutionally well established as the one in California, major changes are not likely -- even in droughts. The extended drought has exposed the workings of the allocation mechanisms for water shortages. The basic principles reflected in these mechanisms are:
California is likely to move increasingly towards a more market-based approach to water reallocation, both short term and long term. The apparent success of the State Water Bank suggests the opportunities available through this kind of approach and stands in contrast to the limited opportunities in a purely administrative process. Urban and industrial users are likely to fare well under such an approach. Much of agriculture, on the other hand, will be unable to purchase the additional supplies needed in a drought and will likely either operate under these conditions or will seek to transfer its water supply to others. Environmental uses of water are usually placed at a disadvantage in a market system because they are not well represented by interests with funds able to purchase water. More explicit requirements may have to be placed on other users to ensure adequate protection of these values during drought.
ATTACHMENT
Summary of Terms and Conditions in Water Rights of the Central Valley Project Relating to Fishery Protection and Ecological Concerns
In the following summary the Central Valley Project has been separated into it operational divisions. These divisions are primarily defined by the river system upon which the facilities of a particular division are located.
Trinity River Division
Facilities: Trinity Dam and Lewiston Dam located on the Trinity River; Clear Creek Tunnel (diverts water from Lewiston Dam in the Trinity River Basin to Whiskeytown Dam in the Sacramento River Basin), Whiskeytown Dam on Clear Creek, Spring Creek Tunnel (diverts water from Whiskeytown Dam to Keswick Dam). Please note that although Whiskeytown Dam is physically located within the Sacramento River Basin, it is part of the Trinity River Division.
Water rights for facilities located on the Trinity River (Application No. 5627, 5628, 15374, 15376, 16767, 16768, 17374) contain the following term:
8. Permittee shall at all times bypass or release over, around or through Lewiston Dam the following quantities of water down the natural channel of the Trinity River for the protection, preservation and enhancement of fish and wildlife from said dam to the mouth of said stream;
October 1 through October 31 - 200 ft3/sec.
November 1 through November 30 - 250 ft3/sec.
December 1 through December 31 - 200 ft3/sec.
January 1 through September 30- 150 ft3/sec.
Any water released through said Lewiston Dam for use in the fish hatchery now under construction adjacent thereto shall be considered as partial fulfillment of the above schedule.
This release schedule was determined to be inadequate and in 1981 the Secretary of the Interior initiated a program to re-evaluate the release schedule. In that program annual releases have been:
Wet and Normal Years340,000 acre-feet
Dry Years 220,000 acre-feet
Critically Dry Years140,000 acre-feet
In 1991, the Secretary of the Interior directed that annual release on the Trinity River will be 340,000 acre- feet in all year types until 1996, if possible.
Water rights for Whiskeytown Dam on Clear Creek (Application No. 15425, 17375, and 17376) contain the following term:
Licensee shall by-pass or release over, around or through Whiskeytown Dam into the natural stream bed of Clear Creek immediately below said dam for the maintenance of fish wildlife resources such flows as are provided for in Provision 1 of that certain document entitled "Memorandum of Operation Agreement for Streamflow Maintenance for the Protection and Preservation of Fish and Wildlife and the Recreational Resources Attendant upon Clear Creek as Affected by Whiskeytown Dam and Its Related Works and Diversions of Water under Contract with the United States," dated March 31, 1960, a copy of which is filed the State Water Resources Control Board.
Jan 1 through May 31- 50 ft3/sec.
Jun 1 through Sep 30- 0 ft3/sec.
Oct 1 through Oct 15- 10 ft3/sec.
Oct 16 through Oct 31- 30 ft3/sec.
Nov 1 through Dec 31- 100 ft3/sec.
Shasta Division
Facilities: Shasta Dam and Keswick Dam on the Sacramento River.
Water rights for Shasta and Keswick Dams (Application No. 5625, 5626, 9363, 9364, 9365, 9366, 9367, 9368 and 10588) contain the following term:
14. Permittee shall bypass or release into the natural channel of the Sacramento River at Keswick Dam for the purpose of maintaining fish life such flows as are provided for in "Memorandum of Agreement for the Protection and Preservation of Fish and Wildlife Resources of the Sacramento River as Affected by the Operation of Shasta and keswick Dams and the Related Works and Various Diversions Proposed Under Applications 5625, 5626, 9363, 9364, 9365, 9366, 9367, 9368 and 10588 of the United States," between the United States and the California Department of Fish and Game, dated April 5, 1960, filed of record as Fish and Game Exhibit 7 at the hearing of said applications.
Normal Years Dry Years
Jan 1 through Feb 20 - 2600 ft3/sec. 2000 ft3/sec.
Mar 1 through Aug 31 - 2300 ft3/sec. 2300 ft3/sec.
Sep 1 through Nov 30 - 3900 ft3/sec. 2800 ft3/sec.
Dec 1 through Dec 31 - 2600 ft3/sec. 2000 ft3/sec.
American River Division
Facilities: Folsom and Nimbus Dam located on the American River.
Water rights for Folsom and Nimbus Dam (Application No. 13370, 13371, 13372 and 14462) contain the following term:
10. Permittee shall by-pass down the natural channel of American River below Folsom Dam and Nimbus Dam for the purpose of maintaining fish life such flows as are provide for in the certain document entitled "Memorandum of Operating Agreement for the Protection and Preservation of Fish Life in the American River as Affected by Folsom and Nimbus Dams and their Related Works and Diversion of Water Under Contract with the United States," between the United States and the California Department of Fish and Game, dated October 15, 1957, filed of record as Fish and Game Exhibit 19 of the hearing of Applications 13370, 13371, 13372 and 14462.
Normal Years
Jan 1 through Sep 14- 250 ft3/sec.
Sep 15 through Dec 31- 500 ft3/sec.
Critical Years
Apr 1 through Aug 31 and Oct 1 through Oct 31 - deficiencies may be imposed on the above releases in the same proportion as deficiencies imposed on irrigation deliveries for the Central Valley Project.
In actual operations, the Bureau of Reclamation (Reclamation) usually releases higher flows than contained in that agreement. The flow schedule that is generally met for the lower American River below Nimbus Dam is that contained in water rights issued for Auburn Dam, located above Folsom Dam. As Auburn Dam has not been constructed, Reclamation has no legal obligation to meet that schedule but has administratively chosen to do so based upon water availability. Under drought conditions operations are made pursuant to the lower American River are being reviewed by the State Water Resources Control Board, and it is likely that within the next few years that the terms and conditions in Reclamation water rights for the American River Division will be modified.
East Side Division
Facilities: New Melones Dam on the Stanislaus River.
Water rights for New Melones Dam (Application No. 14858, 14859, 19303 and 19304) contain the following term:
17. Permittee shall impound in New Melones Reservoir such water as is necessary to provide (a) not in excess of 98,000 acre-feet per annum for the preservation and enhancement of fish and wildlife to be released at a rate specified by the California Department of Fish and Game, plus (b) such additional water as is necessary to maintain the water quality conditions set forth in Paragraph 19. The above amounts are in addition to the water stored for satisfaction of prior rights at existing Melones Reservoir and for flood control. The Board reserves jurisdiction for the purpose of establishing dry year criteria.
Reclamation has entered into several operating agreements to cover release schedules for fishery and water quality purposes on the lower Stanislaus and San Joaquin River. The schedules developed pursuant to those agreements consider the current demands and water availability from New Melones Reservoir and the Stanislaus River system. The present agreement for fishery releases is an interim agreement and will be replaced with a permanent agreement at some time in the future. Under the interim agreement releases can vary from 98,000 acre-feet per year to 302,000 acre-feet per year.
Friant Division
Facilities: Friant Dam on the San Joaquin River, Madera Canal and Friant Kern Canal.
The water rights for Friant Dam (Application No. 234, 1465 and 5638) contain no provisions for the protection of fish and wildlife. Please refer to the discussion in Decision 935 of the State Water Rights Board (now State Water Resources Control Board) that was summarized in the decision as follows:
In view of the foregoing the Board concludes that to require the United States to by-pass water down the channel of the San Joaquin River for the re-establishment and maintenance of the salmon fishery at this time is not in the public interest and accordingly, the protests of the Department of Fish and Game are dismissed.
REFERENCES
California Department of Water Resources, "The California State Water Project," (Undated).
Ibid. 1976-1977, "California Drought: A Report," (May 1978).
Ibid. "California Water: Looking to the Future," Bulletin 160-87 (November 1987).
Ibid. "Drought Contingency Planning Guidelines for 1989," (January 1989).
Ibid. "Guide to Water Transfers in California," (1990).
Ibid. "Management of the California State Water Project," Bulletin 132-90, (September 1990).
Bruce Driver, "Central Valley Project, California," inFacilitating Voluntary Transfers of Bureau of Reclamation-Supplied Water, Volume 2 - Case Studies (Natural Resources Law Center, 1991).
Brian E. Gray, "A Primer on California Water Transfer Law," Arizona Law Review, Vol. 31, No. 4, pp 745- 781.
Brian E. Gray, "Water Transfers in California 1981 - 1989," in The Water Transfer Process as a Management Option for Meeting Changing Water Demands, Vol. 2 (Natural Resources Law Center, May 1990).
Lawrence J. MacDonnell, Teresa A. Rice, and Stephen J. Shupe, Instream Flow Protection in the West, Boulder: Natural Resources Law Center, 1989.
Steve Macauley, "Water Marketing in California as a Strategy to Meet Future and Urban Irrigation Demands", A paper for U.S. Committee and Drainage Twelfth Technical Conference on Irrigation, Drainage and Flood Control, San Francisco, November 13-16, 1991 (Draft).
Metropolitan Water District of Southern California, A Contract Between the Metropolitan Water District of Southern California and the State of California Department of Water Resources (as of March 1, 1988).
Natural Heritage Institute, Toward Agricultural Water Conservation in California: The Legal and Institutional Substrate, November 1990.
Marc Reisner and Sarah Bates, Overtapped Oasis: Reform or Revolution for Western Water, Washington, D.C., Island Press, 1990.
U.S. Department of the Interior, Bureau of Reclamation, Report on Refuge Water Supply Investigations, Central Valley Hydrologic Basin, California (March 1989).
U.S. Department of the Interior, Bureau of Reclamation, Accomplishments, Summer 1991.
Cases
Irwin v. Phillips, 5 Cal. 140 (1855).
Lux v. Haggin, 69 Cal. 255, 10 P. 674 (1886).
Half-Moon Bay Land Co. v. Cowell, 173 Cal. 255, 160 P. 675 (1916).
In re Waters of Long Valley Creek Stream System, 25 Cal.3d 339, 158 Cal. Rptr. 350, 599 P.2d 6561 (1979).
National Audubon Society v. Superior Court, 33 Cal.3d 419 (1983).
California v. United States, 43 U.S. 645 (1978).