Markets for Federal Water: Subsidies, Property Rights, and the Bureau of Reclamation

application of CAP agricultural water exceeds this amount, and (3) transfers to urban use may dilute the priority of M&I water users, including those who were not direct parties to the exchange.

If the water-using entities, in conjunction with the Central Arizona Water Conservancy District, the Bureau of Reclamation, and the Arizona Department of Water Resources, were to decide that the ability to transfer CAP water was desirable, each of these contractual provisions could be restructured to facilitate transfers: (1) the Bureau and CAWCD could allow retention of increased income to the selling district provided project costs were paid; (2) transfer between agricultural use and M&I use could be made on an acre-foot-per-acre basis, and (3) transfers to M&I use from irrigation use could be structured so as to leave the existing priorities for water intact (that is, the transferred water could either be placed in a priority below other M&I water or it could carry its original agricultural priority). Municipal and industrial entities desiring more first-priority water would have to purchase it from other M&I entities. Transfers would also need to be structured so as to comply with existing Arizona groundwater legislation.

Market transfers of non-CAP water are already taking place in Arizona, so it is not unreasonable to believe that transfers of some categories of federal project water would be seen as advantageous as well. Given the length of advance time needed for water planning, it probably is not too soon to begin thinking about how a future market for CAP water might be structured to the mutual benefit of the water- using entities.

Bush David B., and William E. Martin. 1986. Potential Costs and Benefits to Arizona Agriculture of the Central Arizona Project, Technical Bulletin 254, Arizona Agricultural Experiment Station ( Tucson, University of Arizona).

Maxey Kenneth G., and Norman H. Starler. 1987. "Cost Sharing in Transition: The Case of Plan 6, Central Arizona Project," Water Resources Bulletin vol. 23, no. 5, pp. 749-759 (October).

McCauley Charles, and Russell Gum. 1975. "Land Subsidence: An Economic Analysis," Water Resources Bulletin vol. 11, no. 1, pp. 148-154 (February).

Saliba Bonnie C., and David B. Bush. 1987. Water Markets in Theory and Practice: Market Transfers, Water Values, and Public Policy ( Boulder, Colo., Westview Press).

U.S. Department of the Interior, Bureau of Reclamation. 1979. Final Environmental Statement, Salt-Gila Aqueduct, Central Arizona Project

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