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Conflict among water users is part of the history of the American West. The conflicts have changed over the years but have not gone away. Environmentalists, who want water to be left in the rivers to preserve threatened species, are now competing with urban and agricultural users for the West's limited water resources. Native American water rights, long ignored, are also receiving more attention.

The federal government is a key player in western water. Through its Bureau of Reclamation, the government developed water supplies that literally made the desert bloom. Developing new sources of water--deciding where the next big water project should be built--has long been the focus of the Bureau of Reclamation. But good options for the large-scale projects are extremely limited, and the federal government now focuses more on the fair and efficient allocation and use of existing supplies. Policy changes that could lead to better use of water are being put in place in parts of California served by the Central Valley Project, the largest water supply project in the United States. Policy changes introduced in California could serve as models for changes throughout the West.

In response to a request from the Ranking Minority Member of the House Committee on Resources, this study analyzes the policy tools slated for use in California, estimates the costs of those reforms to agriculture in the state, and discusses the implications of using those policy tools in the rest of the West.

Marca Weinberg, formerly of the Congressional Budget Office's (CBO's) Natural Resources and Commerce Division, wrote the study under the supervision of Jan Paul Acton and Roger Hitchner. Gary Brown, Coleman Bazelon, and Teri Gullo of CBO; Doug Elmendorf and Aaron Zeisler, formerly of CBO; and Gregory Amacher, Richard Wahl, Daniel Hellerstein, Benjamin Simon, Dennis Wichelns, Noel Gollehon, and Amy Matthews-Amos provided valuable comments and assistance. Michael R. Moore helped develop the agricultural model and also provided general comments.

Sherry Snyder edited the manuscript, and Chris Spoor proofread it. Angela McCollough typed the many drafts. Kathryn Quattrone and Jill Sands prepared the study for publication.
 

June E. O'Neill
Director
August 1997
 
 

SUMMARY

ONE - INTRODUCTION

• Background
• The Changing Federal Role
• Assessing Reform Efforts with a Case Study

TWO - WATER USE IN THE WESTERN UNITED STATES

• Types of Water Use
• Conflicts Over Water Use in the West
• The Role of the Bureau of Reclamation in Developing Water Supplies

THREE - ISSUES IN REFORMING FEDERAL WATER POLICY

• Tools for Reforming Federal Water Policy
• Implications of Policy Combinations: Interactions and Redundancies
• Matching Reform Objectives with Policy Tools

FOUR - WATER DEVELOPMENT, USE, CONFLICTS, AND REFORM IN CALIFORNIA'S CENTRAL VALLEY

• The Central Valley Project and Its Stakeholders
• The Central Valley Project Improvement Act
• The Regulatory Environment for Implementing the CVPIA

FIVE - QUANTITATIVE ANALYSIS OF THE CENTRAL VALLEY PROJECT IMPROVEMENT ACT

• Empirical Framework
• Results of the Empirical Analysis
• Environmental Benefits and Issues in Estimating Their Values

SIX - LESSONS FOR THE WEST

• Regional Differences in Variables That Influence Farmers' Response to Reform
• The Role of Key Variables as Predictors of Farmers' Response to Water Supply Policies
• A Role for Flexibility

APPENDIXES

A - The Central Valley Project Improvement Act
B - The Economics of Tools for Reforming Federal Water Policy
 

TABLES
1.	Diversion of Surface Water for Various Uses in Western and Eastern United States, 1990
2.	Potential Effectiveness of Selected Policy Tools for Alternative Conflicts and Reform Objectives
3.	Selected Crops Produced with Water from the Central Valley Project as a Percentage of Total U.S. Production, 1987
4.	Effect of the Central Valley Project Improvement Act on Agricultural Water Use and Revenues
5.	Effect of the Central Valley Project Improvement Act on Urban Water Use
6.	Ranking of Crops in the Bureau of Reclamation's Five Regions, by Acreage and Revenues, 1990
7.	Regions' Dependence on Water Deliveries by the Bureau of Reclamation, 1989-1990
A-1.	Applicable Charges to Finance the Restoration Fund, by Type of Water Use
FIGURES
1.	Water Projects and Agricultural Regions of California's Central Valley
2.	Cost of Environmental Water Allocations Under Average Water Supply Conditions, as Measured by Reductions in Agricultural Revenues
3.	Total Amount of Water Delivered by the Central Valley Project, 1949-1995
4.	The Bureau of Reclamation's Five Regions in the Western United States
5.	Average Gross Revenues from Crops Irrigated with Water from the Bureau of Reclamation's Projects in 1990, by State
6.	Agricultural Land Values for Irrigated and Dryland Uses in 1988, by State
7.	Average Amount of Water Delivered to Districts in 1989 and 1990, by Region
B-1.	The Effects of a Water Market on a Farmer's Decisions About Water Use
B-2.	The Effects of Tiered Water Prices and a Water Market on a Farmer's Decisions About Water Use
B-3.	Water Prices and Quantities with a Water Market and an Allocation for Fish and Wildlife
B-4.	Water Prices and Quantities with CVPIA Provisions
BOXES
1.	Water Districts
2.	Terms Relating to Water Prices
3.	Using Changes in Gross Revenues as a Measure of the Impact of Water Policy Reform on Agriculture

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