Water Transfers

Debates over how water from western federal water projects should be used have become more heated in recent years. Farmers use more than 80 percent of the western water withdrawn for use. Environmental problems, such as selenium contamination and salinity, have been linked to agricultural irrigation. Moreover, as urban populations, tourism, and environmental awareness continue to grow, the demand for water increases for cities, recreation, and fish and wildlife habitats. Building dams to meet new demand is often not an option because of their high price tags and harmful environmental effects. Advocated by resource economists and others, water markets, in which rights to use water are bought and sold, would allocate water to its highest economic use by allowing those who place the highest economic value on it to buy it. This report examines (1) the costs and benefits of water transfers; (2) how water markets might be structured to address the impacts on parties outside of transfers; (3) the legal, institutional, and other issues that would need to be addressed to implement a federal water market; and (4) how transfers of water from federal projects could be coordinated with state law.

GAO found that: (1) water transfers promote efficient water use; (2) water transfers can cause a variety of adverse economic, social, and environmental impacts on third parties, and existing laws do not fully protect third parties from these impacts; (3) strategies are needed to address adverse impacts on third parties and will require the consideration of local conditions and existing laws and procedures; and (4) state and federal water laws can affect water transfers.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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