September 2011, Issue 52: Editors’ Notes

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This editorial is from the September issue of M&A’s Arizona Water Policy Update.

New policy developments create ripples; sometimes these ripples are unanticipated, even negative. Predicting consequences of a policy change can be both a fascinating and challenging exercise.

Take the case of Intentionally Created Surplus, for example. ICS was recognized as a major policy development in the Law of the River when it was adopted a few years ago. It was, of course, a critical tool for southern Nevada water resource planning; it was also designed to encourage investments in infrastructure, like the Drop 2 Reservoir and the Yuma Desalting Plant. But in the 4 years since the ICS agreement was signed, we have already seen unanticipated ripples.

One ripple has been Nevada and Arizona’s leveraging of ICS to preserve higher water levels in Lake Mead, where the threat of a shortage declaration had loomed for several years. For Arizona, this strategy has the benefit of delaying shortage reductions; for Nevada, it could be critical for maintaining deliveries until the new intake — which has run into significant construction problems — is completed. However, using ICS in this way is risky because it relies on water in storage that may belong to another user.

Another interesting ripple from the creation of ICS followed the April 2010 Mexicali earthquake, which damaged irrigation delivery systems in Mexico. The disaster got the attention of water policy experts in the U.S. and Mexico and resulted in a new Mexican ICS program. This program is not only valuable to Mexico but it is an important part of binational negotiations for shortage sharing and other Colorado River issues.

We recently became curious about how much ICS has actually accrued in Lake Mead and decided to look for data on storage quantities and rates. What we found surprised us: At the end of 2010, more than 800,000 AF of ICS was stored, about 150,000 AF of which had accrued in 2010. Although Nevada holds the largest total balance (about 450,000 AF), California entities accounted for about 80 percent of the storage accrued in 2010.

In light of these burgeoning ICS credit accounts and a possible surplus condition in Lake Mead for 2012 (see discussion under “Lake Mead,” below), several questions come to mind:

  • Given that ICS is “top water” (water that is lost if Lake Mead has to spill), how would ICS holders react to a threatened filling of Lake Mead?
  • How would Nevada, with little in-state storage capacity, manage to “rescue” its large proportional ICS balance?
  • Given the possibility of free surplus water, would Arizona or California commit any canal and recharge capacity to storing Nevada water, even though they have their own ICS balances to rescue?
  • Or, given the possible logistical challenges associated with ICS storage and recovery, would the basin states make yet another policy change to reprioritize all ICS so they could effectively reserve space in Lake Mead?

The situation that could develop is akin to the dog with a tennis ball in its mouth that is frustrated by his inability to catch a second ball. What policy devices will be developed to preserve the “second tennis ball” of ICS (over and above “normal” surplus water) — and what ripples will those policies create in turn?

Juliet M. McKenna, MS, PGTaylor D. Shipman, MS | Mark H. Myers, MBA