The 1922 and 1948 Compacts

Article III(d) of the 1922 Colorado River Compact states:

“The States of the Upper Division will not cause the flow of the river at Lee Ferry to be depleted below an aggregate of 75,000,000 acre-feet for any period of ten consecutive years reckoned in continuing progressive series beginning with the first day of October next succeeding the ratification of this compact.” (emphasis added)

How would the Upper Basin cause a 10-Year flow of the Colorado River at Lee Ferry to fall below 75,000,000-acre feet?

The most direct way would be for the Upper Basin states to collectively use more than 75,000,000-acre feet over a 10-Year Period.

Are there other sources of cause?

Consider Article IV of the 1948 Upper Colorado River Basin Compact. The first paragraph states:

“In the event curtailment of use of water by the States of the Upper Division at any time shall become necessary in order that the flow at Lee Ferry shall not be depleted below that required by Article III of the Colorado River Compact, the extent of curtailment by each State of the consumptive use of water apportioned to it by Article III of this Compact shall be in such quantities and at such times as shall be determined by the Commission upon the application of the following principles:”

Does this language simply acknowledge the “cause” formulation in the 1922 Compact?

Do the principles help define the cause formulation?

First principle: “(a) The extent and times of curtailment shall be such as to assure full compliance with Article III of the Colorado River Compact;”

Nope.

Second principle: “(b) If any State or States of the Upper Division, in the ten years immediately preceding the water year in which curtailment is necessary, shall have consumptively used more water than it was or they were, as the case may be, entitled to use under the apportionment made by Article III of this Compact, such State or States shall be required to supply at Lee Ferry a quantity of water equal to its, or the aggregate of their overdraft or the proportionate part of such overdraft, as may be necessary to assure compliance with Article III of the Colorado River Compact, before demand is made on any other State of the Upper Division;”

Does this implement the “most direct cause” discussed above? Upper Basin states who exceed their entitlement are responsible for meeting reductions required by the 1922 Compact.

Third principle: “(c) Except as provided in subparagraph (b) of this Article, the extent of curtailment by each State of the Upper Division of the consumptive use of water apportioned to it by Article III of this Compact shall be such as to result in the delivery at Lee Ferry of a quantity of water which bears the same relation to the total required curtailment of use by the States of the Upper Division as the consumptive use of Upper Colorado River System water which was made by each such State during the water year immediately preceding the year in which the curtailment becomes necessary bears to the total consumptive use of such water in the States of the Upper Division during the same water year; provided, that in determining such relation the uses of water under rights perfected prior to November 24, 1922, shall be excluded.”

Is this a “spillover provision” allocating any further reductions required by the 1922 Compact not covered by the second principle?

The belief that the Upper Basin guarantees the flows stated in Article III(d) of the 1922 Compact is not consistent with the plain meaning of the language.

What Would Nino Say?

He would ask about the circumstances today.

Did the Upper Basin states use Colorado River water above their entitlements, individually or collectively? No? Well, are there other causes? Hydrologic conditions! Did the Upper Basin cause hydrologic conditions? No! Don’t expect the judiciary “to come and save the day.” Nothing in these compacts address how to address current circumstances.

What Should Interior Do?

Consider how the 1944 Treaty between the United States and the Republic of Mexico formulated Mexico’s 1.5-million-acre-foot entitlement to Colorado River water. Article 10(b) states:

“In the event of extraordinary drought or serious accident to the irrigation system in the United States, thereby making it difficult for the United States to deliver the guaranteed quantity of 1,500,000 acre-feet (1,850,234,000 cubic meters) a year, the water allotted to Mexico under subparagraph (a) of this Article (1,500,000 acre-feet) will be reduced in the same proportion as consumptive uses in the United States are reduced.” (emphasis added)

An explicit causation standard (extraordinary drought or infrastructure failure)! The reduction in deliveries to Mexico must be reduced in the same proportion as consumptive uses in the United States. Why not reduce the consumptive use of the Upper and Lower Basins by the same proportion, pending an alternative agreement among the two basins?

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• responsible risk management

• adaptative management in future Bureau operational policies

• the Bureau sets “rules of the road”, water users decide how to respond to water supply risks

From Hydrowonk’s perspective (see Is the Colorado River Basin Bankrupt?), the Bureau is on the right pathway, although there are a few outstanding potential pitfalls.

Welcome to Responsible Risk Management,

The Bureau examined the Colorado River’s future under five scenarios (a no action scenario and four alternatives) utilizing Decision-Making under Deep Uncertainty (“DMDU”). DMDU is a framework for choosing policies when there is disagreement on how the world works, the time path and statistical variability in key drivers (such as hydrology and economic development), future likelihoods, disagreement on policy objectives and trade-offs, and path dependency (today’s choices shape tomorrow’s circumstances).

In other words, DMDU is an excellent framework for analyzing the Colorado River’s future. In describing its approach, the Bureau mentioned that they have been working on this framework for more than a decade.

The draft EIS stress-tests alternatives across thousands of plausible futures. It examines how alternatives avoid catastrophic failure over wide range of future circumstances. Its analysis focuses on robustness and vulnerability, determining where alternatives fail and how badly. See table for High Level Performance Metrics used in the Bureau’s assessment of the alternatives.

Anticipate a Bureau post-2026 operations policy that works “well enough” across many plausible futures. A comprehensive plan should include dynamic adaptative policy pathways (defining indicators of the need to switch policy) and set criteria for determining “how wrong” must the policy be for it to become unacceptable.

Welcome to Adaptative Management

The Bureau signaled the inevitable role of adaptative management. The post-2026 operations policy may have a short term (20 years or less). Discussion of operational alternatives states implementation “adjusted as necessary.”

The prospect that post-2026 operations are subject to adaptative management is an improvement over pre-2026 operations. The volume of water in storage at Lake Powell and Lake Mead has been in freefall for 25 years (see chart). Shortage provisions initiated in 2007, followed by the 2019 Drought Contingency Plan, did not reverse the declining trend. By 2022, the Colorado River was in disarray. Long-term reliance on ineffective policy is a recipe for disaster.

Welcome to Water Users Being Responsible for Managing Water Risks

The Bureau received a question whether the EIS will analyze how new water supplies, such as desalination, would address water shortages. The Bureau’s answered “no.” Hydrowonk supports the Bureau.

The post-2026 operations will set the “rules of the road” for Bureau declarations of available Colorado River water, given the Law of the River. Water users are responsible for how they respond. Incur water shortages? Invest in new water supplies? Change water resource management? Enter into voluntary transfer agreements with senior water users?

The Bureau could regularly update anticipated availability of Colorado River water. Currently, the Bureau’s five-year probabilistic projections serve this role. The post-2026 operations will become the new framework for determining water availability. The quantification of curtailment risks for basin states could be based on the updated “risk ensemble” included in the Bureau’s assessments. Water users can incorporate the Bureau’s risk assessment into their decision-making about how best to manage their curtailment risk of their Colorado River water supplies.

Potential Pitfalls

The “dialogue” among the basin states and interested parties includes potential pitfalls.

Maintain Priority. The alternatives identified in the draft EIS generally follow some adherence to the priority system, with hybrid alternatives including some role for pro rata reductions. Allocation decisions conflicting with federal law and contractual provisions are an invitation for litigation lotteries.

Avoid Misapplication of Evaporation/System Losses. Recognizing evaporation and system losses is part and parcel of the existing water rights regime, although not as contemplated by some interests. By impacting the volume of available water, evaporation losses reduce the volume of available water apportioned under the priority system. Regarding system delivery losses, water delivery contracts specify delivery points for a defined quantity of Colorado River water. Bureau uses available water to meet its delivery obligations and absorb system delivery losses.

Embrace Shortage Sharing Article of 1944 Treaty. Article 10(b) contemplates shortage sharing between the United States and Mexico triggered by infrastructure failure or drought. The Colorado River water allocated to Mexico “will be reduced in the same proportion as consumptive uses in the United States are reduced.” Any post-2026 policy reducing Mexico’s 1.5-million-acre-foot of Colorado River water delivered at the border not equal to the reduction of consumptive use in the United States would be inconsistent with the 1944 Treaty. This position, of course, does not prevent voluntary agreements to further reduce the consumptive use of Colorado River in Mexico with acceptable compensation.

Next Steps

Can the Colorado River Basin states reach a consensus on proposed post-2026 operations by February 14, 2026? We will know soon. Without consensus, the Bureau will select its own preferred alternative in its Record of Decision. With consensus, the Bureau has another alternative to assess in selecting its preferred alternative. In the end, count on the Bureau to have the tools for selecting a preferred alternative that represents prudent risk management of the Colorado River for the United States and Mexico.

The discussion of post-2026 triggers has moved from basing cutbacks on lake elevations to the amount of water in storage. For Lake Mead, these are two sides of the same coin (see chart). The line “Reclamation Estimate” plots the available capacity of Lake Mead above Dead Pool (895 feet) by Lake Mead elevation. The line “fitted curve” is an estimated statistical model relating Reclamation’s estimate of available Lake Mead capacity to a “quadratic model” based on Lake Mead’s elevation, where the increase in available storage increases at an increasing rate with the elevation of Lake Mead. (STAT/NERD ALERT! The model includes the elevation and the elevation squared as explanatory variables). Two peas in a pod.

Hydrowonk understands the attractiveness of discussing triggers in terms of the amount of water in storage rather than lake elevation. However, lake elevations are measured. The amount of water in storage is not measured but estimated (presumably based on lake elevation). Therefore, Reclamation’s track record in forecasting Lake Mead elevation will provide insight into the accuracy of forecasted amount of water in storage.

Reclamation track record shows an ability to identify the fluctuating downward trend in Lake Mead’s January elevations (see chart). The “August Prediction” line is from Reclamation’s 24-month study released in August of the prior year. The “Actual Elevation” line is the record elevation of Lake Mead on January 1^st of indicated year. They generally move together (correlation is 0.78). Reclamation’s forecast was higher than the actual January elevation in eleven of the fifteen years (by an average of 14 feet) and lower in four of the fifteen years (by an average of 8 feet). Lake Mead’s actual January elevation was seven feet lower on average than forecasted by Reclamation from 2011-2025.

Another way to look at Reclamation’s forecast record is to assess how informative its August forecast for next January’s Lake Mead elevation is in predicting next year’s actual January Lake Mead elevation (see chart). For each one-foot increase in Reclamation’s forecast of the January Lake Mead elevation, the actual January elevation increases by 0.68 feet. The average forecast error is zero. Given Reclamations August forecast of 1,059.28 feet for January 2026, Hydrowonk’s model’s forecast is 1,061.09 feet. Both approaches support the Tier 1 shortage declaration.

Whenever one forecasts the future, forecast errors are inevitable. No one is clairvoyant (especially about hydrologic conditions). For Reclamation’s August 2025 forecast of a January 2026 Lake Mead elevation at 1,059.28 feet, Hydrowonk’s forecast has material uncertainty (see chart).

Given the above uncertainty, what is the risk that actual January 2026 elevations are in different trigger tiers than Tier 1? See chart. Hydrowonk’s forecast predicts the probability that the actual January 2026 elevation falls within Tier 1, Tier 2a, and Tier 0 is 65%, 25% and 15% respectively. The probability that the actual January 2026 elevation falls into Tier 3 is zero.

As the future evolves, of course, Lake Mead’s elevation will follow a future, unknown course. As elevations hover near trigger thresholds, relying solely on “Most Probable Inflow Scenarios” ignores the growing underlying uncertainty of projections.

Suppose Reclamation’s forecast was 1,052 feet for January 2026, just above the threshold for a Tier 2a declaration. In this circumstance, the probability that the actual January 2026 elevation falls within Tier 1, Tier 2a, and Tier 0 is 60%, 31% and 8% respectively, with the probability that the actual January 2026 elevation falls into Tier 3 is 1% (see chart). While both forecasts trigger a Tier 1 shortage, a professional risk manager would not see the alternatives as comparable. The march to Tier 2a shortages is more likely to occur under the alternative forecast than Reclamation’s 2026 forecast.

What is missing? Placing Reclamation’s forecasts within a risk management structure. What would this look like? Stay tuned.

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According to Reclamation’s 2012 Water Supply and Demand Study, population growth in the Basin could range from 25% to over 90% by 2060. This growth could drive annual water demand increases of 3 to 5 MAF. The report also models climate change impacts, projecting a drier region with more frequent and severe droughts, and some projections show the river’s yield dropping by as much as 20%.

Dry hydrology is not just a future condition that shows up in some planning scenarios. It is already happening. Since 2000, hydrology has been at unprecedented dry levels. According to Reclamation’s 2024 Record of Decision, which was prepared for the Supplement to the Interim Guidelines, the 23-year period from 2000 to 2022 was the driest in over 100 years and among the driest in the last 1,200 years.

Just after the DCPs were adopted, Reclamation began work on the post-2026 process. A report detailing the alternatives that were developed for analysis under the NEPA process was released in January, and the draft EIS is expected soon. (For discussion of the post-2026 alternatives, see Water Strategist, “Colorado River Post-2026 Operational Guidelines Alternatives Provide Panoply of Criteria for Analysis”).

Despite ongoing efforts to develop future management protocols, worsening drought conditions and declining reservoir levels demanded immediate action. In 2022, persistent drought conditions and reservoir elevations were at levels that prompted notice from Reclamation that the Basin States and Mexico would need to conserve an additional 2 MAF to 4 MAF beyond the levels specified in the DCP to avert an imminent crisis. Both Lake Powell and Lake Mead elevations had dropped dangerously close to the levels in which they would no longer be able to generate power.

In response, Reclamation—working with the Basin States—revised near-term operations for Lake Powell and Lake Mead. These adjustments secured nearly 3 MAF in system conservation through 2026. In corresponding treaty minute, Minute 330, the Mexican government committed to generating 400,000 AF above the levels specified in Minute 323 for the Colorado River system and Mexico’s Water Reserve, and the United States committed to providing $65 million in funding for conservation projects in Mexico. Fortunately, 2023 brought more favorable hydrology. The immediate crisis was averted.

Rodney T. Smith contends that the crisis was foreseeable, given the long-term trend toward 14.3 MAF in natural flows. He advocates for aligning management protocols with actual hydrology, preserving the Law of the River, and enabling water markets to improve flexibility and risk response. (See “The Colorado River in Disarray,” Hydrowonk Blog August 19, 2022).

The Colorado River’s future hinges not just on technical fixes or temporary conservation gains, but on a fundamental shift in how we plan for scarcity, manage risk, and allocate responsibility. The hydrologic realities—now unmistakably drier and more volatile—demand that water managers move beyond 20th-century assumptions and embrace a framework grounded in actual flows, flexible operations, and market-based tools. Recognizing 14.3 MAF as the long-term average is not merely a statistical adjustment; it’s a strategic imperative.

As the post-2026 process unfolds, the challenge is not whether we can agree on a new set of guidelines—it is whether we can build a durable governance model that reflects ecological limits, legal obligations, and the realities of drought. The work ahead will test institutional resilience, political will, and our collective capacity to adapt. But it also offers a rare opportunity: to reimagine Colorado River management for a future that is not only sustainable, but equitable and resilient.

Read Part 1: Are Colorado River Water Supplies Being Wasted?
Read Part 2: Shortages and Cutbacks—Nearly Two Decades of Colorado River Management History

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Anyone knowledgeable about the Colorado River knows that this is false.

Under the 2007 Interim Guidelines, California was not subject to any reductions—but Arizona and Nevada were. When the Interim Guidelines were being prepared, the probability Lake Mead falling below 1,025 feet was a remote 3%. In 2015, when Rodney T. Smith characterized a drawdown to that level as a Black Swan Event—a low probability event with a major effect for which people are unprepared—the probability had risen sharply to 30%. Even with the prescribed cutbacks under the Interim Guidelines, if Lake Mead’s elevation fell to 1,025 ft., allocations to the Lower Basin States and Mexico would exceed the volume in Lake Mead by about 40%. Simply put, the Interim Guidelines did not cut back enough. (For Rodney T. Smith’s discussion characterizing a drop in Lake Mead’s elevation to 1,025 ft. as a Black Swan Event, see “Obama Administration’s Objectives for the Colorado River Basin,” Journal of Water December 2015).

In this context, the Upper and Lower Basin prepared their Drought Contingency Plans, which were adopted in 2019. The Lower Basin DCP overlays the Interim Guidelines and implements cutbacks sooner and includes California in the cutbacks, allowing for a greater level of delivery reductions during extreme shortages. Also in 2019, Mexico also agreed to cutbacks. (See table).

While there were no formal, detailed federal guidelines for apportioning shortages prior to 2007, cutbacks have been part of the operational criteria during shortage conditions for nearly two decades. Actions that have been taken since the DCPs were adopted will be covered in Part 3.

For information about the petition read Part 1:

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The Colorado River is suffering because of overallocation and persistent drought, but that is not stopping a group of environmental organizations from pushing for a federal definition and enforcement mechanism to ensure that water of the Colorado River is not wasted.

On May 6, 2025, an environmental coalition submitted a petition to the U.S. Bureau of Reclamation requesting that the agency “utilize its legal authority to stop waste of Colorado River water” in the Lower Basin. The groups state that the river is imperiled by over-allocation and climate change, and they call for swift action to “reform the use of Colorado River water.”

The Natural Resources Defense Council (“NRDC”) took the lead as signer of the petition and are supported by several Waterkeepers and local organizations, including Los Angeles Waterkeeper, California Coastkeeper Alliance, Russian Riverkeeper, Alamosa Riverkeeper, San Diego Coastkeeper, Inland Empire Waterkeeper, Orange County Coastkeeper, Utah Rivers Council, and Great Salt Lake Waterkeeper. The petition was penned by students of the UCLA Frank G. Wells Environmental Law Clinic.

The petition is centered on an assertion that Reclamation is not upholding its legal obligation to make sure that water deliveries in the Lower Basin States are not being used in unreasonable or wasteful manners.

“This petition lays out how—under existing law, and by its own admission in federal court—the Bureau has a mandate to ensure that the water it delivers to California, Arizona, and Nevada is not squandered on unreasonable uses,” said Cara Horowitz, director of the Frank G. Wells Environmental Law Clinic at UCLA School of Law.

The petitioners are requesting that Reclamation undertake three specific actions:

• Undertake a process with stakeholder input to define the phrase “reasonably required for beneficial use;”

• Develop a robust, consistent, and transparent process for determining whether Lower Basin water users are adequately avoiding wasteful, unreasonable uses of water;

• Require and perform periodic reviews of Lower Basin water users to ensure that all water deliveries are, in fact, being used reasonably.

While appearing to be simple procedural actions, these requests take aim at a foundational concept of water rights management—reasonable and beneficial use.

While “reasonable and beneficial use” is often defined by what it is not, it is well understood throughout the water industry. It is addressed in state constitutions and statutes throughout the West and is a key concept of the Quantification Settlement Agreement (“QSA”).

The QSA was signed in 2003 with a primary purpose to bring California’s water use from the Colorado River within its 4.4 MAF annual allocation and to facilitate certain water transfers. According to a recent public outreach document by the San Diego County Water Authority, it was also designed to promote efficiency.

In addition to pushing for a lengthy federal process to define beneficial use and develop new enforcement measures, the coalition appears to have an underlying condemnation of priority water rights administration—the long-held “first in time, first in right” principle that is used throughout the West to determine the order in which curtailments are implemented—and a sense of urgency that suggests that they believe no action is being taken to improve management of Colorado River. These issues will be addressed in parts 2 and 3 of this series.

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Background: The Inflation Reduction Act of 2022 allocated $4 billion to address drought in the West. This funding supports the Bureau of Reclamation (BOR”)—particularly in the Colorado River Basin—implementing water conservation measures, habitat restoration, and drought mitigation projects. Seven Colorado River Basin states are now engaged in discussions with BOR to develop a long-term strategy to address Colorado River water shortages after 2026. The funding provided by the Biden Administration jump started short-term actions for the 2023-2026 period. State and local water agencies will undoubtedly develop long-term plans based on requests for additional long-term federal taxpayer funding.

En Attendant DOGE: How will DOGE ensure that federal taxpayer funding is efficient? Colorado River interests have their “hair on fire” worrying about DOGE pausing existing funding. For those who look down the road at bit, post-2026 planning may need to “reboot.”

Proposal. Support federal funding commitments be justified by a transparent Department of the Interior (“DOI”) cost-benefit analysis consistent with sound economic/finance principles, risk management and use of cutting-edge forecasts defining the dimensions of future challenges and estimated impacts of proposed actions under guidance provided by the Office of Management and Budget (“OMB”). Transparency requires that DOI analysis be subject to public review prior to entering into funding commitments or cancelling earlier federal funding.

Precedent: OMB Circular No. A-4 provides guidance to federal agencies on developing regulatory analysis as required under Section 6(a)(3)(C) Executive Order 12866 of September 30, 1993, as subsequently amended. In effect, the proposal has OMB developing comparable explicit guidance for DOI funding decisions, which would supplement existing guidance on budgeting procedures in 2 CFR 200 and OMB Circular A-11.

Public Policy Benefits: A rigorous review prior to cancelling existing or approving new funding commitments increases the prospect that the use of federal taxpayer dollars is efficient. This proposal enhances communication between the Executive and Congressional branches on budget requests and provides incentives for improved planning and decision-making by parties seeking federal funding:

• Proposed budget items for Congressional approval would have stronger “case statements” for funding decisions that pass rigorous screening.

• Parties seeking federal funding will know the “burden of proof” facing requests for federal funding.

The second point is an alternative to the strategy of channeling “chicken little.”

Implementation: President Trump may wish to issue an Executive Order that directs OMB in collaboration with DOGE to provide guidance principles to DOI for the use of federal taxpayer dollars to address drought in the western United States. The guidelines would place sidebars on the inevitable policy and political debate on where, for what and how much federal taxpayer dollars should be invested in the Colorado River Basin.

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Arizona is facing a critical water supply challenge. The over-appropriation of the Colorado River requires new water conservation to meet the water demands of economic development in Arizona. With groundwater use reaching its limit in Central Arizona, Arizona’s future economic development faces unprecedented challenges in securing adequate surface water supplies. A case example of these challenges are playing in Buckeye, where, as explained in a recent article in Axios, limited water supplies and resulting challenges have halted development and left some houses stranded (approved but unbuilt).

Meeting surface water supply challenges require institutional reform today.

Alternatives

There two alternatives for addressing the situation:

• Placing the private sector’s future in the hands of public agencies to devise and implement innovative water transactions on a timely basis, versus

• Facilitating private initiatives for water conservation and water transactions based on mutually agreeable prices between buyers and sellers

Components of a Successful Federal Water Policy

Continued recognition that water rights are constitutionally protected private property rights. A federal policy relying on voluntary transfers will have cities focus on securing new water supplies at mutually agreeable prices with senior water right owners rather than holding economic development hostage to regulatory/legal scheming for taking water from agricultural interests.

Maintain federal deference to state water law. Unfortunately, some municipal interests invest in lobbyists and lawyers to federalize state water law to overturn senior agricultural water rights. Repelling these initiatives will require municipalities to return to the bargaining table.

Require landowner consent to water transfers involving agricultural water rights administered/held by irrigation districts. Irrigation districts must not siphon off significant monies paid by municipalities for water made available by farmers. Landowner consent under long-term contracts assures that municipal payments for conserved water are used to provide economic incentives for water conservation.

Develop predictable “rules of the road” for voluntary transfers. Development of water transfers faces significant delays, transaction costs, and risk of regulatory non-approval or (for approved transactions) a follow-on litigation lottery. Federal policy should provide guidance on assessment of the environmental consequences and the impact on reliability of Colorado River water for other water right holders from moving diversions of Colorado River water “upstream” or “downstream”. Rules of the road will reduce regulatory risk and incentives for litigation lotteries.

Given the differences in the size of the Colorado River Basin states economies, economic losses from COVID-19 are measured as the difference between the pre-COVID-19 trend of real GDP and actual real GDP as a percentage of pre-COVID-19 trend of real GDP. Reflecting the availability of data from the Bureau of Economic Analysis, Department of Commerce, the time period for determining the pre-COVID-19 trend only extends back to 2018.

Arizona

Arizona is the most resilient economy in the Colorado River Basin (see figure). Like the national economy, Arizona’s real GDP fell significantly (8.4%) in the 2^nd quarter of 2020. The economic recovery in Arizona was so brisk that by the 2^nd quarter of 2021 (only one year later) real GDP rebounded and even exceeded its pre-COVID-19 trend until the 3^rd quarter of 2023. Future growth in Arizona and replacing lost Colorado River water will be a key future driver of the vitality of Arizona’s economic base.

The figure below shows the quarterly loss of Arizona’s real GDP from COVID-19 as a percentage of pre-COVID-19 trend real GDP. By 4^th quarter of 2021, Arizona’s real GDP was 2.9% higher than pre-COVID-19 trend of real GDP. Within a year and a half, Arizona’s real GDP returned to the pre-COVID-19 trend by the 2^nd quarter of 2023 and fell below pre-COVID-19 trend real GDP. Are the Colorado River shortage declarations since 2022 having an impact on the Arizona economy?

California

California is the laggard of the largest Colorado River Basin states (see figure). Like the national economy, California’s real GDP fell significantly (12.2%) in the 2^nd quarter of 2020. The California economy rebounded marching towards the pre-COVID-19 trend of real GDP but hit a wall with the economic malaise of the national economy.

The figure below shows the quarterly loss of California’s real GDP from COVID-19 as a percentage of pre-COVID-19 trend real GDP. On the eve of the national economic malaise (4^th quarter of 2021), California’s real GDP was only 1.8% below pre-COVID-19 trend real GDP. With the onslaught of the national economic malaise, California’s real GDP has become unhinged from its pre-COVID-19 trend. For the last five quarters, actual real GDP has been more than 8% below pre-COVID-19 trend real GDP. Is the notorious outmigration from California heralding a permanent stagnation of California’s future? Ask Elon Musk.

Colorado

Colorado’s economy is more resilient than California’s (see figure). Like the national economy, Colorado’s real GDP fell significantly (10.6%) in the 2^nd quarter of 2020. The Colorado economy rebounded marching towards the pre-COVID-19 trend real GDP but stalled a bit with the economic malaise of the national economy. Unlike California’s, Colorado’s real GDP moved in tandem, but still below, the pre-COVID-19 trend of real GDP.

The figure below shows the quarterly loss of Colorado’s real GDP from COVID-19 as a percentage of pre-COVID-19 trend of real GDP. On the eve of the national economic malaise (4^th quarter of 2021), Colorado’s real GDP was only 1.2% below pre-COVID 19 trend real GDP. With the onslaught of the national economic malaise, Colorado’s real GDP fluctuated between 2% and 4% below the pre-COVID-19 trend of real GDP.

Nevada

Nevada’s economy was especially hard hit by COVID-19 (see figure). Nevada’s real GDP fell significantly (21.7%) in the 2^nd quarter of 2020. The Nevada economy rebounded marching towards the pre-COVID-19 trend real GDP but stalled with the economic malaise of the national economy.

The figure below shows Nevada’s quarterly loss of real GDP from COVID-19 as a percentage of pre-COVID-19 trend of real GDP. On the eve of the national economic malaise (4^th quarter of 2021), Nevada’s real GDP was 2.6% below pre-COVID 19 trend real GDP. With the onslaught of the national economic malaise, Nevada’s real GDP fluctuated around 5% below the pre-COVID-19 trend of real GDP.

New Mexico

New Mexico’s economy was hard hit by COVID-19 (see figure). New Mexico’s real GDP fell significantly (12.1%) in the 2^nd quarter of 2020. The New Mexico economy rebounded slowly marching towards the pre-COVID-19 trend real GDP but stalled with the economic malaise of the national economy. Since the onslaught of the national economic malaise, New Mexico’s real GDP is slowly creeping towards the pre-COVID-19 trend of real GDP.

The figure below shows the quarterly loss of New Mexico’s real GDP from COVID-19 as a percentage of pre-COVID-19 trend of real GDP. On the eve of the national economic malaise (4^th quarter of 2021), New Mexico’s real GDP was 7.9% below pre-COVID 19 trend real GDP. With the onslaught of the national economic malaise, the loss of New Mexico’s real GDP initially increased to 11.3% of pre-COVID-19 trend real GDP by the 2^nd quarter of 2022, turned around and declined to 6.3% of pre-COVID-19 trend real GDP by the 2^nd quarter of 2023, and turned around again and reached 9.0% by the 2^nd quarter of 2024.

Utah

Utah’s real GDP fell significantly (7.9%) in the 2^nd quarter of 2020 (see figure). The Utah economy rebounded towards the pre-COVID-19 trend real GDP but slowed down with the economic malaise of the national economy. Since the onslaught of the national economic malaise, Utah’s real GDP has been slowly falling behind the pre-COVID-19 trend of real GDP.

The figure below shows the quarterly loss of Utah’s real GDP from COVID-19 as a percentage of pre-COVID-19 trend of real GDP. On the eve of the national economic malaise (4^th quarter of 2021), Utah’s real GDP was only 0.9% below pre-COVID 19 trend real GDP. With the onslaught of the national economic malaise, the loss of Utah’s real GDP initially increased to steadily reaching 5.5% by the 2^nd quarter of 2024, slightly more than Colorado’s loss but significantly below California’s.

Wyoming

Wyoming’s real GDP fell significantly (13.1%) in the 2^nd quarter of 2020 (see figure). The Wyoming economy rebounded towards the pre-COVID-19 trend real GDP but slowed down with the economic malaise of the national economy. Since the onslaught of the national economic malaise, Wyoming’s real GDP has been slowly but erratically increasing towards the pre-COVID-19 trend of real GDP.

The figure below shows the quarterly loss of Wyoming’s real GDP from COVID-19 as a percentage of pre-COVID-19 trend of real GDP. On the eve of the national economic malaise (4^th quarter of 2021), Wyoming’s real GDP was still 8.0% below pre-COVID 19 trend real GDP. With the onslaught of the national economic malaise, the loss of Wyoming’s real GDP initially increased to 10% but, from the 2^nd quarter of 2022, declining until the 4^th quarter of 2023 and reaching 5.5% by the 2^nd quarter of 2024, slightly more than Colorado’s loss but significantly below California’s.

Final Thoughts

COVID-19 disrupted the economies of the United States, as well as the Colorado River Basin states. The economic dynamics within the Colorado River Basin going forward are different than they were a century ago. Addressing the over-appropriation of the Colorado River must look into the future while learning from the past.

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Humility. Our predecessors were mistaken about the availability of Colorado River water when devising the 1922 Colorado River Compact. Are we confident that we can predict the future? Hydrowonk is not. The future is inherently uncertain. Therefore, prudent planning must consider the underlying uncertainty of future hydrologic and economic conditions. Since the 1990s, the Bureau has made significant progress in developing tools to assess the uncertainty of hydrologic conditions. Time to integrate the underlying uncertainty of economic conditions into the toolbox. Machine learning and, eventually AI, should become part of the tools the Bureau and Colorado River water users employ for planning and assessment of transactional opportunities.

Flexibility. The prudent use of Colorado River water in the future must adapt to changing future hydrologic and economic circumstances. Hardwiring future Colorado River water use to assumed future conditions as of today will miss the mark. Relative to today’s expectations, the timing, magnitude and duration of “unexpected” future conditions will require flexibility in the future allocation of Colorado River water. Responsible water resource planning must find the optimal mix of short-term versus long-term arrangements governing the use of Colorado River water.

Predictability. The effectiveness of planning and development of transactional opportunities will be enhanced by predictability of the “rules of the road.” Our predecessors wisely stated entitlements in terms of consumptive use rather than diversions. The Bureau has developed the tools for measuring consumptive use of Colorado River water for its annual report to the U.S. Supreme Court on Arizona v. California. What are the environmental consequences and the impact on reliability of Colorado River water for water right holders of moving consumptive use and storage of the Colorado River water “up” or “down” river and across the Upper and the Lower basin?

The experience of California during the 1990-91 drought is worth considering. The California Department of Water Resources (“DWR”) administered a “Drought Water Bank” between willing sellers and buyers of water. A major portion of the water was made available by groundwater substitution in the Sacramento Valley where senior water right holders of Sacramento River surface water reduced their diversions from the river and increased groundwater pumping. A key issue was the inter-connectiveness of groundwater and the Sacramento River.

After the drought, DWR developed “rebuttable” presumptions of the portion of pumped groundwater that was presumed to be connected to the Sacramento River depending on the distance of groundwater pumping from the Sacramento River. This rule provided a guidepost for anticipating DWR approval of transactions based on switching from using Sacramento River water to increased groundwater pumping. The presumption was “rebuttable” in the sense that DWR would consider evidence challenging the accuracy of DWR’s quantification for the specific circumstances of a proposed transaction.

DWR’s rebuttable presumptions established guideposts for reviewing disputes among parties in contested hearings. While the approach does not eliminate the potential uncertainty of regulatory review of proposed transactions, it does provide the framework for regulatory review. That is, while one cannot eliminate regulatory uncertainty, one can reduce it. What else can one expect?

In the blink of an eye in Water World, it will be midnight, December 31, 2026. How the water community focuses its efforts will have a bearing on the prospect of successfully addressing the over-appropriation of the Colorado River. Managing the river for the future requires embracing the uncertainty of hydrologic and economic conditions and thinking in terms of risk management.

Time to manage the Colorado River as an integrated system. Cooperative agreements among Colorado River water users across states, across sovereign nations, across basins, and across borders with humility, flexibility and regulatory predictability will be a legacy worth leaving.

It is time for us to step up, bring creativity, imagination, and innovation to the table. It is time that we act like we believe that the Colorado River is a unique and socially valuable resource worthy of sustainable management for generations.

In Part 5, Hydrowonk presents further data on the impact of COVID-19 on the economies of each Colorado River Basin state to provide a starting context for thinking about how to address the Colorado River Basin as one integrated system.

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The 1922 Colorado River Compact, of course, equally divided 15.0 million acre-feet per year of Colorado River water. The Upper and Lower Basins share reductions required to meet the United States obligations to deliver 1.5 million acre-feet per year of Colorado River water to the Republic of Mexico under a 1944 Treaty. With more than two decades of natural flow of the Colorado River below the long-term average of tree ring studies, it was inevitable that the Bureau of Reclamation declared the need for the basin states to reduce their reliance on the Colorado River.

There is an inevitable potential impasse between the Upper Basin and the Lower Basin. With historical use less than their apportionment under the 1922 Compact, the Upper Basin states look towards the Lower Basin states, “the cause of the problem,” to reduce their use of Colorado River water. With the Upper Basin “7.5 million acre-feet per year guarantee” over running ten-year periods under the 1922 Colorado River Compact, Lower Basin states look at Upper Basin states to reduce their water use in the face of dwindling availability of Colorado River water and still receive 7.5 million acre-feet (presumably, less its share of deliveries of Colorado River water to Mexico, 0.75 million acre-feet, for an adjusted total of 6.75 million acre-feet). Meanwhile, the seniority of Indian Water Rights on the Colorado River and the “shortage sharing provision” of the 1944 Mexico-United States Treaty stand awaiting. Resolving disputes over the above legal framework will ultimately reflect the economic facts on the ground.

A New Narrative for the Colorado River Basin

COVID-19 shattered the historical narrative that the Lower Basin is growing faster than the Upper Basin. Going forward, California is not the economic juggernaut of the Lower Basin. Looking forward, Lower Basin growth will be concentrated in Arizona, the Lower Basin state with the most junior priority to Colorado River water. Southern Nevada’s economy is driven by the tourism industry. The Nevada State Engineer has a policy that new casino development and related entertainment ventures use permitted groundwater, not Colorado River water. Nevertheless, casinos hire employees and local vendors who will place new water demands on Southern Nevada water agencies. Nevada’s underuse of its Colorado River entitlement since 2008 may diminish over time.

With among the most resilient Colorado River Basin economies in the Upper Basin (Colorado and Utah), should the historical narrative be relegated to the dustbin of history? Probably. How?

Hydrowonk sees two pathways getting to a general destination. A common tool will be negotiation. One road seeks mutually acceptable legislative revisions of the 1922 Compact. The other road finds mutually acceptable transactions given the legal structure of the 1922 Compact.

Either path requires acknowledging that a new “big three states” is emerging (Arizona, Colorado, and Utah) for reallocating water within their own state boundaries as well as securing Colorado River water from other basin states (most notably California?). The role of Nevada will depend on whether Mark Wahlberg’s efforts with the Las Vegas Chamber, supported by Governor Lombardo, for recruiting Hollywood to move to Las Vegas (joining the NFL, MLB, WNBA, NHL, and soon the NBA) will prove successful. New Mexico and Wyoming, of course, face their own challenges, but their relatively small size suggests that they will not lead the charge for solving the challenges for the entire Colorado River Basin.

California, alone, cannot solve the basin’s challenges. It will be incapable of offsetting shortages in Arizona of up to X00,000 acre-feet per year (pick a number) and accommodating expanded long-term water demands in Colorado and Utah.

Key Role of Tribes

As an advocate of the priority system, Hydrowonk envisions a critical role for Colorado River tribes in addressing Colorado River challenges. Tribes with rights to the Colorado River have the most seniority. Generally, tribes have only partially exercised their rights. Full development of their rights has lingered for decades due to federal inaction and neglect, although the new initiatives by the Biden Administration and Arizona are promising. New investments in on-reservation water conservation/resource development can generate new water supplies allocated between (i) additional on-reservation development and (ii) providing new water resources for non-Indian right holders.

Binational Cooperation

The 1944 Treaty has a shortage sharing provision where the United States delivery of 1.5 million acre-feet per year of Colorado River water to Mexico would be reduced pro rata with the reduction in deliveries of Colorado River water to US water users. The major user of Mexico’s Colorado River entitlement is the State of Baja, which faces significant water shortages today that are anticipated to become increasingly more severe over time. New investments in water conservation/resource development in Baja can generate new water supplies. As with Indian Country, new water supplies would be allocated between (i) meeting Baja’s current and future water demands and (ii) meeting US water demands.

A New Economic Narrative: Joint Ventures for Water Resource Development

Municipalities seeking Colorado River water must abandon a “cost-based” assessment of transactional opportunities and embrace a “joint economic gain” perspective. That is, they should devise water resource development/conservation programs where they pay the costs and share the generated water with Indian tribes and Mexico. Moving from “it won’t cost you a dime” to a joint venture perspective will enable economic development on the reservation and in Mexico as non-Indian economies to flourish by mitigating the economic cost of water shortages.

As discussed in Part 4, rethinking the Colorado River requires further evolution of the Bureau of Reclamation’s role as watermaster of the Colorado River.

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The table below presents key findings:

• Estimates of real GDP growth pre COVID-19 versus the 1^st quarter of 2022 through second quarter of 2024 (the onslaught of economic malaise at the national level)

• Estimates of lost real GDP for the 2^nd quarter of 2020 (the depth of the national economic downturn), for the 1^st quarter of 2020 through 4^th quarter of 2021 (the “v-shaped” recovery period), and the 1^st quarter of 2022 through 2^nd quarter of 2024 (the onslaught of economic malaise at the national level).

See Part 5: Deconstructing the Impact of COVID-19 on Each Colorado River Basin State for state specific figures and future discussion. There are five takeaways.

First, Colorado River Basin states generally grew faster than the United States economy pre COVID-19. Only the State of Wyoming grew slower at a rate of 1.84% versus the US rate of 2.90%. Utah, California, and New Mexico were the three fastest growing states followed by Arizona, Colorado, and Nevada.

Second, during the economic malaise since the 1^st quarter of 2022 (see Part 1), growth of Colorado River Basin states has been a mixed bag. Economic growth in California and Wyoming has lagged the growth in the national economy, although Wyoming’s growth rate has increased relative to its low growth rate pre COVID-19. Growth among the other larger Colorado River Basin states (Arizona, Colorado, and Utah) has been faster than the national economy. New Mexico remains the fastest growing Colorado River Basin state. The growth in Nevada rivals the growth in Arizona and Colorado.

Third, at the depth of the downturn in the national economy (2^nd quarter of 2020), only Utah and Arizona suffered smaller losses in their real GDP than the United States generally. Nevada suffered the most severe losses, undoubtedly due to its economy’s dependency on tourism. After second place Wyoming, California lost 12.25% of real GDP during the dark 2^nd quarter of 2020.

Fourth, during the “v-shaped” recovery period (1^st quarter of 2020 through 4^th quarter of 2021 discussed in Part 1), Arizona, Utah and Colorado averaged the smallest reductions in their real GDP, 1.09%, 2.59%, and 3.62% respectively, versus the national loss of 3.91%. California averaged a larger loss of its real GDP (4.34%) than the national economy followed by New Mexico, Nevada and Wyoming.

Fifth, Arizona is the only Colorado River Basin State resilient to economic malaise since the 1^st quarter of 2022. (In fact, Arizona’s real GDP averaged slightly above pre COVID-19 trend growth). Colorado and Utah are experiencing smaller losses of their real GDP than Nevada, the second-best performer in the Lower Basin. California’s performance finds a sister state in New Mexico. Wyoming is in the middle of the pack. See Part 5 for further discussion.

In sum, Arizona, Colorado and Utah are now the most robust economies in the Colorado River Basin. California is the least among the larger states and, arguably, on the verge of further decline. These economic dynamics are enhanced by migration from California to other states including the three major resilient Colorado River basin states (Arizona, Colorado, Utah), as well as Florida, Texas and somewhat (at least for the music industry) Tennessee. The different impact of COVID-19 on the Colorado River Basin states undoubtedly reflects differences among the states in their different economic bases as well as their COVID-19 and other policies (e.g., “business climate”).

As discussed in Part 3, the impact of the COVID-19 economic recovery will require us to rethink how to address the over appropriation of the Colorado River.

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What happened? How did the Colorado River Basin states cope? What does this mean for addressing the challenges of an over-appropriated Colorado River?

Hydrowonk lays out a framework for addressing the question in five parts:

• Part 1: The Nature of the National Economy Recovery

• Part 2: COVID-19 and the Economies of the Colorado River Basin States

• Part 3: Rethinking the Over-Appropriated Colorado River

• Part 4: The Evolution of the Bureau of Reclamation’s Role

• Part 5: Deconstructing the Impact of COVID-19 on Each Colorado River Basin State

Hint: (a) COVID-19 busted the historical narrative that future Lower Basin development is stronger than future Upper Basin development, (b) solutions must acknowledge the seniority of Indian water rights in the Colorado River Basin for broadening the geographic scope for new water investment/development opportunities, and (c) the shortage sharing provisions of the 1944 Treaty between Mexico and the United States can provide a catalyst for binational cooperation.

Visions of the Economic Impact of COVID-19

In February 2020, diversity of thought flourished about the impact of COVID-19 on the US economy. Some (such as the Trump Administration) envisioned a rapid “v-shaped” recovery where the severe shutdown of the economy would be followed by a rapid recovery. Others (such as Wall Street analysts) foresaw a “u-shaped” recovery where the economy would not reach its bottom for many quarters, if not years, followed by an extended and slow recovery. Hydrowonk’s meditations yielded a vision of a “tilted L” where the bottom would be reached rapidly with recovery delayed by disruption of supply chains requiring time to restore the economic relationships underlying our economy.

What Happened?

The US economy was expanding steadily during the first three years of the Trump administration. Real (inflation-adjusted) Gross Domestic Product “GDP” (value of goods and services produced in the United States) increased at an annual rate of 2.9% (see figure below of the annualized seasonally adjusted real GDP by quarter estimated by the Bureau of Economics, Department of Commerce).

The economic disruption started out looking “v-shaped” followed by a “tilted L”. Real annualized seasonally adjusted GDP stood at $21.0 trillion in the 4^th Quarter of 2019 (the eve of COVID-19), bottomed out quickly at $19.1 trillion by the 2^nd Quarter of 2020, and marched briskly back to $21.1 trillion by the 1^st quarter of 2021 (all in 2017$). How long would the COVID-19 recovery take to restore pre-COVID-19 growth in the US economy? From the perspective of early 2021, Hydrowonk’s “tilted L” was missing. By 4^th Quarter of 2021, real GDP reached $22.0 trillion, just short of $22.2 trillion of the pre COVID-19 trend.

Economic malaise has overtaken the economy since the 4th quarter of 2021. Real DGP was flat for the first half of 2022. Since then, real GDP has remained stubbornly below the pre COVID-19 trend (evidence of a “tilted L”?). The lost real GDP departing from the pre COVID-19 trend (the dotted line less the solid line in the above figure) bottomed out at $260 million (2017$) in the 4^th quarter of 2021 and then increased and fluctuated around $650 million (2017$) thereafter with no end in sight—see figure below.

Hydrowonk leaves it to economic historians to figure out the causes of the extended impact of COVID-19. Macro-economic, monetary and regulatory policies are “the normal suspects.” The role of disrupted supply chains may make a cameo appearance.

In Part 2, Hydrowonk shows the diverse impact of COVID-19 on Colorado River Basin States economies which provides the backdrop for Part 3’s discussion of rethinking the Over-Appropriated Colorado River.

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This dispute has garnered widespread interest from parties interested in groundwater rights and responsible groundwater management. Third parties supporting the challenge include the California Building Industry Association, Western Growers Association, California Farm Bureau Federation, American Pistachios Growers, Pacific Legal Foundation, Howard Jarvis Taxpayer Foundation, and individual landowners as far from Indian Wells Valley as Madera. Hydrowonk is unaware of any third parties intervening on behalf of Indian Wells Valley.

The California Constitution and common law require groundwater basins to be managed towards maximizing the reasonable and beneficial use of groundwater, without causing an undesirable result. SGMA codifies the definition of “sustainable yield” as the “maximum quantity of water, calculated over a base period representative of long-term conditions in the basin and including any temporary surplus, that can be withdrawn annually from a groundwater supply without causing an undesirable result.”

In Indian Wells Valley, the GSA utterly fails to consider any strategy to manage the Basin to maximize the beneficial use of groundwater. Instead, it intentionally focuses on the elimination of agriculture.

Principles of Responsible Groundwater Management

Hydrowonk has followed the development of adjudicated groundwater basins in California for more than four decades. This experience has revealed “rules” for effectively addressing groundwater overdraft.

1. Understand the dimension of the challenge.

This inevitably involves working through alternative analyses on the nature, extent, and urgency of meeting the challenges of groundwater overdraft. “Dueling hydrologists” will provide alternative visions, although there are ways to separate “pepper from fly****.

2. Define a system of pumping rights.

By its very nature, addressing groundwater overdraft requires reductions in pumping relative to historical levels after the use of any temporary surplus in a basin. A responsible system includes equitable treatment of existing groundwater rights. Overlying users have priority over appropriators (those who pump groundwater for use off their lands), subject to prescription. “Dueling lawyers” will advance alternative ways to balance competing rights.

In the end, adjudications involve proportionate reductions from a defined historical baseline, commonly with a “ramp down period” providing time for pumping to decline to long-term levels.

3. Develop an action plan.

A Groundwater Sustainability Plan must, ironically, be a plan. Specific actions should address identified components of groundwater management. Given the inevitable variability in hydrologic conditions and the less than “perfect knowledge” of underlying science, monitoring actual circumstances on the ground should guide improving groundwater management strategies and accessing their effectiveness. Learning is inevitable and should guide refinements or even “rethinking” when the facts on the ground fly in the face of earlier conclusions, assumptions, presumptions, or wishes.

4. Fees and Assessment Must Be Related to the Costs of the action plan.

Reasonable fees and assessments must be tied to a specific plan. Funding “aspirational” ideas not backed by substantive analysis of potential effectiveness doesn’t pass muster.

Indian Wells Valley Failure

Hydrowonk experienced first hard the arbitrary nature of Indian Wells Valley GSP when he was retained in 2021 by Mojave Pistachios LLC to comment on Indian Wells Valley then proposed plan and replenishment fees.

1. Indian Wells Valley’s Replenishment Fee is Unreasonable.

The replenishment fee is to fund the first phase of Indian Wells Valley “Groundwater Augmentation Project” (the purchase cost estimated at $2,112 per acre foot over five years) and an associated Shallow Well Mitigation Project (estimated at $17.50 per acre foot until imported water supplies are delivered no later than 2035) for a total Replenishment fee of $2,130 per acre foot.

The Groundwater Augmentation Project is inchoate. There is a lack of a disciplined project plan. Rather than set by the funding requirements of a disciplined project plan, the replenishment fee is set to speculatively raise a financial reserve over five years to fund assumed water acquisitions, not yet identified, with the presumption that Indian Wells Valley will “figure out later” how the water will be delivered, at what cost, and whether there are purchasers of imported water.

The replenishment fee must be tethered to the funding requirements of an executed project’s development and finance plans. Standard commercial practice includes at least some evidence of the potential terms of water acquisitions and conveyance arrangements with specific parties. Project plans lay out the timing of critical tasks (such as definitive agreements for acquisition of water and conveyance, environmental review, regulatory approvals, financing arrangements, and necessary construction schedules) and the required funding to reach each identified milestone. Risk assessment identifies key risks and risk management strategies to manage identified risks as they materialize. A finance plan identifies reasonable and prudent fees to pay the project’s life cycle cost at the least cost to ratepayers over time, who have a demonstrated demand for future replenishment water.

None of these elements are part of the GSP. Rather than engage in responsible project development, Indian Wells Valley aspires to build a financial war chest without any concrete project or finance plans. Therefore, $2,112/AF of the proposed replenishment fee of $2,130/AF is unreasonable and ultimately imprudent.

2. Replenishment Fee is Unprecedented.

Indian Wells Valley replenishment fee is an extreme outlier of replenishment fees levied in California. The Mojave River Adjudication fees are less than $700 per acre foot, tied to the actual cost of replenishment operations. The Antelope Valley Adjudication follows the same model, where the watermaster’s annual report includes Appendix O, “Financial Analysis of Replacement Water Assessment” showing how the rates are calculated from the cost of actual operations.

As required by Proposition 218, local agencies set replenishment fees based on the revenue requirements of actual operations that provide actual replenishment water. Replenishment fees are not set to fund financial war chests for future, hypothetical ventures.

3. Replenishment Fee Renders Irrigated Agriculture Economically Unviable.

Mojave Pistachios LLC transformed 1,400 acres from alfalfa to pistachios before the California Legislature passed SGMA. The movement towards higher-valued agriculture has historically been advocated on long-term public policy grounds.

Permanent crops represent significant investment and patience. Pistachios take six years from the first year of planting before trees generate commercial yields that do not reach maturity until the ninth year. Lack of water places significant investment at risk. The economic value of pistachios trees increases until trees reach maturity and then decline with the age of trees. Using data from the UC Davis Department of Agricultural & Resource Economics 2015 “tree loss calculator” for pistachios in the South San Joaquin Valley, pistachio trees reach a peak economic value of $80,000 per acre by the ninth year (full maturity) and starts declining over time (see “Economic Value of Pistachio Trees by Age of Trees”).

Using UC Davis Crop Budgets, Hydrowonk calculated that the annual economic loss per acre foot of water is about $1,575/AF, 26% below the proposed replenishment fee. Therefore, faced with a $2,130/AF replenishment fee, the prudent economic decision is to shut down, abandon the orchard and convert land to the next best (inferior) economic use, which may be permanent abandonment.

Imposing unreasonably high replenishment fees renders any future irrigated agriculture in Indian Wells Valley even more economically unviable. Unlike the case of orchards already planted, where significant capital investments have been already made, new ventures face even lower anticipated future income when making investment decisions due to upfront capital investment including land acquisition costs, the cost of installing irrigation systems and other improvements, and the cost and delay in establishing commercially viable trees.

4. Entire GSP Based on Economic Illiteracy.

Indian Wells Valley’s GSP is based on an unreasonable and unprecedented proposed replenishment fee that will destroy the economic viability of current and future irrigated agriculture in Indian Wells Valley. What is the explanation? Imprudent project development, inadequate economics, and economically flawed decision-making.

Prudent project development starts with a project plan, budget and schedule that includes securing the terms of necessary agreements with a plan for project financing. Indian Wells Valley has reversed the process. It seeks to set a replenishment fee presuming a demand for imported water from an undefined project including unspecified timing, amount of water and financial terms.

Given Hydrowonk’s experience in negotiating long-term agreements and acquisitions as well as conducting due diligence on water projects and investments, the GSP and proposed replenishment fee evidence undisciplined decision-making. On the one hand, the GSP contemplates a Groundwater Augmentation Plan to provide 5,000 AF per year of imported water “no later than 2035.” In the interim, the Shallow Well Mitigation Plan will mitigate the impact of pumping above the Basin’s sustainable yield. For groundwater users responsible for funding imported water, they pay replenishment fees today to fund an unknown project that may never materialize.

Indian Wells Valley planning has failed. It lacks concrete evidence of the ability and willingness of groundwater users to pay for imported water that would support the negotiation of actual transactions for water and conveyance. In effect, it wants the future users of imported water to pre-fund a project without a plan, including the estimated price tag for conveyance. Even worse, the GSP presumes that agriculture cannot pay the fee and that it will cease production. The intent of the GSP is to extinguish agricultural use. On June 14, 2024, Indian Wells Valley is moving to shutter wells for agricultural uses that cannot and have not paid the replenishment fee. Many have already left the valley.

5. GSP Lacks a Finance Plan

Under Indian Wells Valley’s assumptions, acquisition of Table A State Water Project (“SWP”) Contract Amounts to secure, on average, an acre-foot of imported water costs $10,560/AF ($2,112 per acre foot paid over five years). When the Mojave Water Agency acquired Table A SWP Contract Amounts to provide replenishment water, it financed its acquisition and now includes the debt service costs in its calculation of its annual replenishment rate. This reflects a common practice of water agencies—finance the acquisition cost of long-lived assets. Depending on the duration of the finance plan and interest rates, the annualized acquisition cost of Table A SWP Contract water is in the range of $300/AF (2021$) to $500/AF (2021$)—see table.

6. GSP Does Not Consider the Quantity of Fresh Groundwater Available in Storage or a Ramp Down Plan.

The GSA fails to consider the massive size of the basin, more than 500 square miles. A recently completed report by four independent technical teams evaluated the total useable groundwater in storage, estimating that there is more than 40 million acre-feet of fresh groundwater that can be recovered. It further estimates that pumping at current levels over the next 20 years would result in a net depletion of less than 1 percent. Water levels have dropped less than 1 foot per year historically and would cause no undesirable results within the basin over this period. The GSA fails to reconcile its strategy to prohibit a nominal amount of storage to support current beneficial uses, as required by the California Constitution Article X, section 2 and common law.

The lack of Indian Wells Valley economic reasoning is also reflected in the GSP’s lack of a ramp down of pumping to the assumed basin’s sustainable yield and withdrawal of temporary surplus.

What the optimal period is to delay the initiation of pumping cutbacks with payment of replenishment fees? This requires balancing the economic value of different time profiles of allowed groundwater pumping over sustainable yield without a replenishment obligation versus the economic cost of allowing a transition period where allowed groundwater pumping exceeds sustainable yield ahead of the initiating pumping cutbacks and payment of replenishment fees for an economically viable imported water project. The GSP does not consider the question, let alone answer it.

The administrative record for the Shallow Well Mitigation Project and the economics of pistachios provides the starting point for determining a reasonable delay in imposing pumping cutbacks with payment of replenishment fees as an alternative to its proposed “Project”, which does not preserve current beneficial uses and is not designed to benefit agriculture in the first instance.

As described in Indian Wells Valley’s Engineer’s Report, “the purpose of the Mitigation Fee is to fund shallow well mitigation efforts in order to mitigate the undesirable results occurring from the basin-wide chronic lowering of groundwater levels, reduction of useable groundwater in storage, and degradation of water quality.” Discussing the plan’s revenue requirement, the Engineer Report states, “Because the anticipated damages (from groundwater overdraft) are rather linear, any reduction in the amount of the overdraft should correlate to an equal reduction in the total estimated costs; therefore the $17.50 charge should not need modification if there is less overdraft than anticipated (116,000 AF).”

While the report does not address the impact of groundwater overdrafts greater than anticipated, if anticipated damages are “rather linear” for a cumulative overdraft up to 116,000 acre-feet, then the mitigation costs for overdraft above of 116,000 acre-feet would also be $17.50/AF.

The optimal delay of pumping cutbacks balances the economic benefit of groundwater versus the cost of mitigation (see “Economics of Optimal Delay of Pumping Cutbacks”). The economic benefit of pumping equals the present value of Mojave Pistachio’s net revenues with groundwater through the year when pumping cutbacks are initiated with payment of replenishment fees. The mitigation costs equal the present value of mitigation costs for Mojave Pistachio’s annual groundwater pumping under four assumptions: the current mitigation cost of $17.50/AF and three assumptions about the annual rate of escalation in mitigation costs (5%, 10%, 15%). In the figure, each curve shows the difference between the present value of economic benefits and present value of mitigation costs through the year pumping cutbacks are initiated with payment of replenishment fees.

The optimal year that pumping cutbacks are initiated with payment of replenishment fees depend on the escalation assumptions (see table). Under the proposed mitigation fee without escalation, pumping cutbacks would not be initiated until after the year 2060. For annual increases of 5%, 10% and 15%, pumping cutbacks with payment of replenishment fees should start in the year 2056, year 2044 or year 2040, respectively. Given the time profile of economic benefits of delaying the initiation of pumping cutbacks, the lower the time profile of mitigation costs, the longer the optimal delay in initiating pumping cutbacks with payment of replenishment fees.

In other words, the economic management of Indian Wells Valley groundwater resources should include a significant delay in the initiation of pumping cutbacks with payment of mitigation fees. This conclusion reflects the significant economic value of groundwater use and the relatively low costs of Indian Wells Valley mitigation plan. In fact, the above analysis understates the optimal delay because the analysis did not include the value of groundwater use of other municipal, industrial, and agricultural users in Indian Wells Valley. A comprehensive analysis should also incorporate the economic stakes of these other groundwater users.

7. Another Flaw: Conflating Stocks versus Flows

The $2,112 per acre foot component of Indian Wells Valley’s replenishment fee was calculated as the estimated acquisition cost of SWP Table A entitlements paid over five years. In effect, an acre foot of “excess” groundwater pumping in one-year is to fund the permanent acquisition of replacement water into the indefinite future. As discussed above, if Indian Wells Valley were to finance water rights acquisition costs like other water agencies, the annualized cost would be less than $500 per acre foot (2021$), or less than a third of the $1,575 per acre foot economic loss from shutting down pistachio farming. A coherent and economically literate GSP can sustain existing agriculture. Indian Wells Valley incoherent and economically illiterate GSP cannot.

Indian Wells Valley SGMA Lawfare

Indian Wells Valley used a “pay to litigate” principle to avoid addressing a substantive challenge to its GSP. By not paying the $2,130 per acre foot replenishment fee on its groundwater pumping since 2021, Mojave Pistachios lacked standing to challenge the GSP. The appellate court agreed.

Legal Double Speak

Hydrowonk discovered the legal defense “three step” years ago. First, argue the facts if they are on your side. Second, if the facts don’t help, argue the law. Third, if neither are helpful, argue procedure. Indian Wells Valley “defense” of its GSP runs directly to the third step.

Channeling the wisdom of Law and Economics, consider the consequences of the “pay to litigate” principle. In this instance, Mojave Pistachios had two options to have standing:

1. Do not use water and go bankrupt, so one can challenge the GSP on legal and reasonableness grounds, or

2. Pay the replenishment fee and challenge the GSP while incurring unsustainable economic losses hoping the legal system moves faster than the path to bankruptcy (an unlikely scenario).

Under the “litigate to pay principle”, Mojave Pistachios must sacrifice its trees upfront to challenge the validity of the GSP. In this circumstance, Indian Wells Valley faces a $112 million judgment ($80,000/acre lost value for nine-year old trees on 1,400 acres) plus accrued interest if it loses the litigation lottery.

Time Now for Common Sense?

The economically optimal management of the groundwater basin can accommodate delay before initiation of a phase-in cutbacks with replenishment obligations to fund an economically viable imported water project. Indian Wells Valley has substantial time to proceed in the development and implementation of an imported water project in an orderly and prudent manner. In fact, since Indian Wells Valley retained a team in 2019 to secure water rights for its “Groundwater Augmentation Plan,” they have entered into no definitive agreement to acquire water. If there is an urgency for action, Indian Wells Valley is not acting like it.

Instead, they have focused their efforts and spent millions on expensive engineering evaluations to import water from distant sources through a 60-mile pipeline to be constructed over open desert ground. Even assuming environmental review could be completed, and the project permitted, it is highly unlikely construction financing could be completed when there are no willing off-takers. Fearing that their scheme is unfinanceable, Indian Wells Valley has its hand out to federal taxpayers.

The delay in the optimal timing of initiation of pumping cutbacks provides the time needed to resolve the legal issues over Indian Wells Valley GSP. With judicial guidance, perhaps Indian Wells Valley may even develop coherent project and finance plans to replace its haphazard approach taken to date.

California Supreme Court Will Chart the Course for California’s Future

The California Supreme Court can clarify the ability of groundwater right owners to challenge the reasonableness of Groundwater Sustainability Plans eviscerating groundwater rights and setting of unreasonable fees and assessments. Do not let the “pay to litigate” rule provide unlimited protection of arbitrary decision-making without due process. Under the appellate court decisions, Indian Wells Valley groundwater users must enter bankruptcy to have standing to challenge Indian Wells Valley GSP. Without California Supreme Court guidance, California’s future will be one where property rights and “investment backed expectations” are relegated to the dustbin of history. Traveling this road will place water-related investment opportunities in California on equal footing with water-related investment opportunities in Bolivia.

Disclosure

In 2019, Indian Wells Valley’s legal counsel asked Hydrowonk to submit a proposal to provide advisory services regarding the acquisition of supplemental water supplies to address the area’s groundwater overdraft. The submitted response included a disciplined project plan with an emphasis on assuring that the structure of water acquisitions minimize the life-cycle costs of addressing the overdraft problem and are effectively integrated with the science underlying a Groundwater Sustainability Plan. To ensure timeliness of execution, Hydrowonk proposed a structure of retainers and success fees based on the actual acquisition of water.

This approach was not attractive to Indian Wells Valley. As they say on Wall Street and in private equity markets, “sometimes the best outcomes are the deals that don’t happen.”

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Over four years ago, a Los Angeles Times Editorial stated: “The Salton Sea is a disaster in the making. California isn’t doing anything about it.”

Last year, the Bureau of Reclamation and the Imperial Irrigation District announced an agreement on the Salton Sea as part of federal action to reduce California’s use of Colorado River water. The $250 million of federal funding was not a good deal for the Salton Sea.

With the continued inaction since 2017, when the Imperial Irrigation District’s obligation to mitigate the impact of its conserved water transfers to the San Diego County Water Authority ended, the facts are clear:

The rapid decline in Salton Sea’s elevation is accelerating

Continued delay will only mean that the dimension of the challenge in five years, ten years or longer into the future will be substantially greater than the challenge today.

What are the dynamics of the Salton Sea’s elevation?

As reported in a previous post, the long-term, sustained decline of the Salton Sea is a conundrum. Under the terms of the historic long-term water conservation and transfer agreement between the Imperial Irrigation District and the San Diego County Water Authority, the impact of the transfer through 2017 was fully mitigated. So, what other forces are at work?

Let’s update the facts about the Salton Sea’s elevation. The chart below shows daily average elevation by year to show how the Salton Sea’s elevation is evolving over time. There are three eras of trends in Salton Sea elevation since 1988 (earliest year for available USGS. data). From 1988 through 1995, there was an increasing trend in Salton Sea elevation of 0.138 feet per year. Thereafter, a declining trend in Salton Sea elevation began. Between 1996 through 2005, there was a decreasing trend in Salton Sea elevation of 0.11 feet per year. The decline in Salton Sea elevation accelerated after 2005 to a rate of 0.45 feet per year through the year 2017. The elevation of the Salton Sea has been in free fall for the past seventeen years. Since the end of the Imperial Irrigation District’s mitigation obligations in 2017, the elevation has fallen from 235.496 feet below sea level to 239.326 feet below sea level by 2022.

The variability of Salton Sea’s elevation around these trends is instructive (see chart). For the USGS historic record 1988-2017, the variability of the actual Salton Sea elevation around trend ranges from a low of -0.45 feet to a high of +0.62 feet. With the end of mitigation water being delivered into the Salton Sea starting in 2018, the deviation below trend declined by 0.808 feet in 2018, 1.054 feet in 2019, 1.088 feet in 2020, 1.331 feet in 2021, and 1.528 feet in 2022. In other words, the actual decline in the Salton Sea’s elevation in 2018 was 2.8 times the trend declines from 2006 to 2017 (trend decline of 0.42 feet plus a deviation below trend of another 0.808 feet), in 2019, 3.4 times the trend declines from 2006 to 2017, in 2020, 3.4 times the trend declines from 2006 to 2017, in 2021, 4.0 times the trend declines from 2006 to 2017, and in 2022, 4.4 times the trend declines from 2006 to 2017.

Does this signal an acceleration in the decline of the Salton Sea’s elevation with the termination of mitigation water delivered to the Salton Sea? From a statistical perspective, a new trend cannot be confirmed with a few data points, although the run of five years of deviations below trend with an acceleration of declines after the delivery of mitigation water ended may be “some type of signal.” Continued inaction should eventually provide enough data to support a statistically robust estimate.

In the meantime, public health costs accumulate and environmental collapse marches on.

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Channeling Elon Musk, Hydrowonk keeps it short and sweet. First, honor and protect the legacy of the Imperial Valley’s pioneers who literally dug your community out of the dirt with their own bare hands. Second, channel the wisdom of Lloyd Allen.

What does Hydrowonk know about the legacy of the Imperial Valley? Isn’t he a city slicker? Guilty.

But, on February 22, 1926, Hydrowonk’s dad was borne in El Centro. Dad grew up in Holtville until the Great Depression drove him and his folks out of the Valley, ultimately to Fresno. “Granny Belle” (grade school education out of Colorado) proudly educated Hydrowonk about life in the Imperial Valley and later Westlands. Hydrowonk learned a thing or two before Inglewood junior high.

Why does Hydrowonk have the audacity to talk about Lloyd Allen. Because I knew the man since the early 1990s until his death on May 28, 2006. See postscript below for my remarks at Lloyd’s memorial service held at 10:00 am on Saturday, June 3, 2006 in the Erickson Gymnasium at the Calipatria High School.

Listening to Lloyd

Hydrowonk imagines Lloyd preparing for a meeting with the Bureau of Reclamation. As you listen to Lloyd, think about David Hayes’ remarks I read at Lloyd’s memorial service.

Lloyd says:

“IID is committed to find reasonable terms for the Imperial Valley to enter into a new agreement with the Bureau of Reclamation to conserve an additional 250,000 acre-feet per year for four years (2023-2026). This objective can be achieved by placing the current negotiations in the context of IID’s earlier agreement with the San Diego County Water Authority, the Quantification Settlement Agreement, and related agreements.

IID took decisive actions to implement California’s 4.4 Plan initiated by the Clinton Administration and supported by the other Colorado River Basin states. IID entered into a series of agreements that currently makes available about 500,000 acre-feet per year of conserved water to the following parties:

• San Diego: 200,000 acre-feet by on-farm and system conservation and 77,000 acre-feet from the lining of the All American and Coachella Canals

• San Luis Rey Settlement Parties: 16,000 acre-feet from the lining of the All American and Coachella Canals

• MWD: 105,000 acre-feet from the extension of a 1988 agreement originally scheduled to terminate in 35 years (2023)

• Coachella: up to 100,000 acre-feet per year

In reaching these agreements, IID addressed many issues with various parties including:

• Market-based pricing for conserved water with San Diego including an extra premium when there is less than 7.5 million acre-feet of Colorado River water in the Lower Basin

• Economic mitigation to address the socio-economic impact of land fallowing

• Environmental mitigation for the Salton Sea and financial contributions from IID, San Diego and Coachella to the Department of Water Resources for long-term planning for addressing the Salton Sea

IID entered into these agreements only after extensive local public input prior to board approval.

The current negotiation for additional water conservation by IID can build upon this foundation.

Once again, IID’s commitment to conserve 250,000 acre-feet per year for four years is the cornerstone of California’s proposed plan for addressing the current emergency on the Colorado River. The proposed land fallowing by Palo Verde Irrigation District and Bard uses pre-existing agreements with the Metropolitan Water District. Coachella’s proposed reduced use of Colorado River water involves suspension of groundwater recharge programs.

In contrast, IID must secure voluntary participation by landowners to participate in a new IID water conservation agreement with Reclamation, which will require harmonization of IID’s existing on farm program for its agreement with the San Diego County Water Authority.

IID stands ready to do the heavy lifting. Having said that, we are hearing from landowners clear concerns that must be addressed for a successful new agreement:

1. Recognize the priority and scale of IID’s water rights, including all junior water right owners throughout the Colorado River Basin recognizing IID’s senior priority and any water conserved under the new agreement in no way diminishes IID’s senior priority.

2. Reclamation’s recognition of evaporation and system losses must follow the priority system and be consistent with Reclamation’s water delivery contract with IID
   a. Evaporation: reduces the volume of Colorado River water available for delivery under the priority system
   b. System Losses: quantification of IID’s Priority 3a water right at 3.1 million acre-feet is at Imperial Dam and IID’s Present Perfected Water Rights of 2.6 million acre-feet in Arizona v. California is based on water use in the Imperial Valley

3. Reclamation is responsible for any environmental mitigation obligations and liability for reducing the flow of the Colorado River from Lake Mead to Imperial Dam.

4. Assure that new water conservation exclusively addresses the risks created by the long-term drawdown of water storage at Lake Powell and Lake Mead, rather than limiting the curtailment of Colorado River water available to junior water rights owners under Tier 3 of the 2019 Drought Contingency Plan.

5. Assure that the economic arrangements for IID are reasonable within the current context and the precedent set by IID’s agreement with San Diego

6. Assure that the impacts of the new water conservation on the Salton Sea are fully mitigated and indemnification of IID, landowners and water users for any liability.

7. Address the socio-economic impact on the Imperial Valley economy from any land fallowing undertaken as a last resort to make conserved water under IID’s new agreement with Reclamation.

If a new agreement includes credible commitments to addressing these concerns, we believe that we will have an agreement that will secure the necessary public support for board approval.”

Hydrowonk has nothing to add.

In Memory of Lloyd Allen

Hydrowonk spoke at Lloyd’s memorial service on behalf of himself, and former Department of the Interior officials of the Clinton and Bush administrations. I am honored that Lloyd’s beloved widow, Luz, requested a copy for the family.

“Good morning. My name is Rodney Smith. I worked with Lloyd as an economic advisor to the Imperial Irrigation District since the early 1990s. I have been blessed to know and spend considerable time with Lloyd. As you all know, Lloyd was a devoted husband, father, business partner, community leader and IID director. This morning, I am here to honor Lloyd’s memory and share with you ‘outside the valley’ views of this truly remarkable man, based on my own experiences as well as other individuals who have asked me to present their thoughts this morning in his honor.

Lloyd was forthright. I met Lloyd in the early 1990s. Ralph Menvielle called me at my inlaws on a Memorial Day (never found out how Ralph got their number) to say that Ted Lyon, Bill Condit and him were concerned about a pending agreement with Metropolitan Water District concerning the All American Canal. These three wanted a second opinion on the district’s alternatives before approving the agreement. Lloyd and his colleague, Don Cox were ready to sign and viewed Ralph’s venture a waste of time. I was retained on a 3-2 vote. After the engagement, which included a lengthy report and many briefings in closed sessions over a hectic 60 day period, the board decided to sign a renegotiated agreement with Metropolitan. As I left the closed session on the day of the vote, Lloyd took me aside before going into open session, shook my hand and said, ‘Rod, I was against getting you involved; I was wrong’. I was hooked.

Lloyd was an educator. Lloyd educated many a city folk about farming in the Imperial Valley. My friend and colleagues, John Carter and David Osias and I received many a tutorial about sugar beets, crop rotations, land maintenance, irrigation practices, agricultural markets, hardware stores and the like. During the recent financing of IID’s purchase of the Western Farm Lands, I accompanied Lloyd to San Francisco for the ‘road show’ with the Bond Rating Agencies. Lloyd captivated an audience of San Francisco financiers dressed in Italian suits and tasseled, skinny-toed shoes. I am convinced that the many years that Lloyd made these trips speaking on behalf of the Valley and IID’s policies was critical to the success of that financing, where IID received an across the board upgrade in its bond ratings and an unprecedented reduction in the cost of bond insurance.

Lloyd was a gentleman. My wife, Lisa, routinely observes meetings of the Colorado River Board of California as part of our tracking for our publication. At all times, Lisa commented how Lloyd was sure to say hello to her and offer kind words and gestures. His continued interest in my wife’s recovery from her surgery a few years back harkens back to days when civility and manners reigned. Lloyd had vision.

Lloyd’s feet were firmly planted in the Imperial Valley. Yet, Lloyd had an instinct about and understanding of the changing circumstances and evolving challenges for the Imperial Valley. Lloyd was not a prisoner of the past when preparing for the future.

Lloyd had courage. Lloyd stood by his convictions. When state and federal officials told Lloyd how it ‘was going to be’, if it was not right for the Imperial Valley, it was wrong.

Lloyd had humor. Lloyd used his hat collection in negotiations. He told the city folks that he could wear a ‘black hat’ or a ‘white hat’. It was their choice. He wore ‘Black Hats’ when talking to the Valley’s enemies and ‘White Hats’ when working with the Valley’s friends. Once, after all us IID folks listened to harangues from a series of big city politicians, Lloyd asked me during a caucus: ‘Rod, what on earth did the Valley do to piss those boys off?’ I answered, ‘Lloyd, they are jealous; the Valley’s forefathers planned for their community’s future, their’s didn’t’. ‘Well Rod, they shouldn’t be mad; they should be ashamed.’ Yep!

Lloyd had integrity. Lloyd never forgot his obligations. He was constantly aware of his constituents’ interests and would never betray them. This was unspoken but known by all. When Lloyd indicated what was needed to serve the Imperial Valley’s interests, the city folks listened and the Imperial Valley prospered.

I knew Lloyd, of course, as a politician, an IID director. Lloyd used his vision, convictions, knowledge, integrity, and an unwavering sense of responsibility in reaching his decisions. While mindful of political considerations and passions of the moment, Lloyd would never stray from his long-term path. In other words, Lloyd was more than a politician; Lloyd was a leader.

I appreciate the privilege to share with Lloyd’s family, friends, the Imperial Valley community, the San Diego community and others what Lloyd Allen meant to me, an ‘outsider of the Valley’. But the true measure of a man is more than what he meant to his confidants. I close with what Lloyd meant to those on other sides of the table.

I start with David Hayes, Secretary of the Interior Bruce Babbitt’s point man on Colorado River matters during the Clinton Administration. When I contacted David to inform him of Lloyd’s passing, he responded: “I would very much like to have you share my condolences with Lloyd’s family and many admirers. David wrote:

I had the honor of working closely with Lloyd on water-related issues of supreme importance to the Imperial Valley, the State of California and the entire west. In my experience, no leader of any community was more effective in representing his constituents’ interests than Lloyd Allen.

As all of you know, Lloyd had a down home charm, a deceptive ‘aw shucks’ demeanor that was both disarming and effective. When I visited the Imperial Valley on behalf of the United States Government—not always-so-welcome emissary, Lloyd was unfailingly courteous and generous—always looking for me to leave with a bag of fresh tomatoes and onions; a friendly but subtle reminder of what the Valley was about.

And yet what really distinguished Lloyd Allen was not only his genuineness as a human being, but also his remarkably clear-headed and visionary understanding of how best to advance the interests of his beloved Imperial Valley.

I personally will always be grateful to Lloyd for the courage and leadership that he showed at every turn in that regard. Lloyd always had his eye on the prize—security and prosperity for the Valley—and through his untiring efforts, he earned that prize for the Valley, creating a long-lasting legacy of which his family and community should be very proud.’

The Clinton Administration gave way to the Bush Administration. Bennett Raley followed David Hayes. When I contacted Bennett about Lloyd’s passing, he requested that I read the following: ‘Lloyd Allen represented the Imperial Valley with integrity and honor. His leadership during trying times defined the meaning of public service. I will miss him.’

For once, we can all agree with Bennett Raley. We will all miss Lloyd Allen.”

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A former NLF player turned senior water right user shared his experience as a member of the NFL union. A major function of the NFL players union is to periodically negotiate a collective bargaining agreement with NFL owners. While some but not all NFL players are millionaires, NFL owners are billionaires.

How does the players union level the playing field? By building a war chest. A portion of the players’ dues is placed into an account to build up the financial resources to support the negotiation of the next collective bargaining agreement.

The size of the fund is determined by the union’s executive committee. Given the union’s experience from earlier negotiations, they set the target for the fund with a contingency. With adequate resources to represent their union members, union leadership negotiates the collective bargaining agreement. Historically, union leadership has not spent the entire fund. Unused funds are rebated to the players who contributed to the fund.

Has the time come to form an association of users of senior water rights, including Present Perfected Rights due to the crisis on the Colorado River? Beats Hydrowonk.

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He noted the speeches at last week’s annual meeting of the Colorado River Water Users Association (“CRWUA”) ranged from “pessimistic to panicked.” “Yet, for all the hand ringing, none of the state and federal officials offered a plan or proposal for action to avert catastrophe. Just calls for more meetings and conferences.” “Even the Interior Department, the federal water master on the river, had nothing to offer.” “Federal representatives simply suggested that the department will have something to say next year.”

Governor Babbitt is a decisive leader and man of action. When he was Arizona’s Governor, he addressed Arizona’s severe groundwater overdraft by establishing the 1980 Groundwater Management Act. When he was Secretary of the Interior in the 1990s, he laid out the “rules of the road” for water transfers on the Colorado River in a memorable keynote speech at a CRWUA annual meeting. His speech provided the guidelines for the Imperial Irrigation District (“IID”) offering a 3.1-million-acre-foot cap on its Priority 3 Colorado River water right, as well as structuring IID’s historic agreement with the San Diego County Water Authority. Hydrowonk knows this for a fact, being in the audience of Secretary Babbitt’s speech and taking Secretary’s Babbitt message back to the Imperial Valley and the negotiating table.

Governor Babbitt views the 2019 DCP as a “plan available for immediate action that was not mentioned or discussed in Las Vegas.” Under the 2019 DCP, the parties “agreed to substantial reductions, timed to declining water levels in Lake Mead.” While the formal triggers in the 2019 DCP are related to August 2022 projections of Lake Mead’s elevation as of January 1, 2023, Governor Babbitt’s proposal is based on the reasonable presumption that the “easiest” reductions beyond the current curtailments under the formal 2019 DCP triggers is an acceleration of the inevitable from 721,000 acre-feet in 2023 under the formal DCP triggers (shaded grey row) to 1,375,000 acre-feet immediately (shaded red row)—see table.

Governor Babbitt argues “the lake continues to decline toward disaster. We must now accelerate the timetable and implement the full agreed reductions without further delay.” “We cannot continue to gamble that a miracle will somehow materialize to make the cuts unnecessary.” “As the states continue to procrastinate, it is imperative for the Interior Department to come off the bench and use its authority as federal water master to compel the states to begin full implementation of the DCP agreement.”

Governor Babbitt recognizes that his proposal will not solve the problem. However, “a good start; something that can be done now, a means to break the impasse and build momentum for the difficult decisions that lie ahead.”

Not only is Governor Babbitt a leader and man of action, he is also a master strategist.

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There is a long history of inaction on the Salton Sea by the state and federal government. With the Imperial Valley making it clear the need for the Salton Sea to be dealt with, the money for restoration projects was likely added to gain the Valley’s support for the agreement. Under the agreement, IID must conserve 250,000 AF/year for four years, but more conservation in the Imperial Valley means less water flowing into the Salton Sea.

Watch the feature on Spectrum News 1, which includes footage from an interview with Hydrowonk

Search “Salton Sea” here on Hydrowonk Blog to read additional coverage.

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