November 2012, Issue 65: Editors’ Notes

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A recent landmark deal will have lasting effects on the price and availability of water in Arizona.

Last month, SRP and the Gila River Indian Community announced a partnership that will enable the tribe to use more of its CAP entitlement. In exchange for guaranteeing SRP access to a portion of its water supplies, GRIC will receive assistance in developing recharge projects along the Gila River — projects that will not only be critical to restoring riparian habitat but will also generate long-term storage credits for use or sale.

Much of GRIC’s CAP allocation — 311,800 AF/yr, as granted under the 2004 Arizona Water Settlements Act — is currently unused, and it will take the tribe decades to build the infrastructure necessary to take full delivery and use the water for agricultural purposes. As a result, “excess water” is available; each year, CAP sells this water to other municipal, agricultural, and industrial users. Under terms of the recent deal, SRP was given the right to buy up to 100,000 AF of water during times of shortage over the next 20 years. Also, GRIC will make available for lease up to 30,000 AF of water for a term of 100 years.

This unprecedented agreement will impact water supplies in Arizona in many ways. First, Indian contract water has the highest priority among CAP supplies (this priority is shared only with M&I contracts); no other sources at this priority level are known to be currently available for long-term lease. Because the 100-year term satisfies the requirements for an assured water supply, lessees may include municipal providers who will pay a premium for this supply. Second, the agreement allows the GRIC CAP water to be leased inany of Arizona’s nine counties, opening up this supply to potential buyers across the state. Third, the new leases will help define a market price for water and may kick-start additional transactions in Arizona’s underdeveloped market. (All long-term Indian CAP leases executed so far used a pricing structure that was determined during water-rights settlement negotiations.) Finally, GRIC’s increasing use of its allocation will diminish the CAP’s “excess water” pool; therefore, demands may accelerate for other types of water supplies as the economy recovers in Arizona.

SRP should be commended for forging this relationship between entities that, in the words of GRIC Tribal Chairman Gregory Mendoza, “…used to be on the opposite sides of the table when it came to water.” Because of this access to additional water supplies during drought, SRP is now in a more secure position.

As the details emerge of how this water will be marketed and priced, those interested in securing additional supplies should be paying close attention.

Juliet M. McKenna, MS, PGMichele Robertson, PG