Public funding programs for environmental water acquisitions: origins, purposes, and revenue sources.

• Author: Benson, Reed D.

1. INTRODUCTION II. SUMMARIZING THE RATIONALE FOR ENVIRONMENTAL WATER ACQUISITIONS AND PUBLIC FUNDING A. Why Environmental Water Acquisitions? B. Why Public Funding? C. Some Crucial Caveats on the Role of Water Acquisitions III. WATER ACQUISITION PROGRAMS USING LEGISLATIVELY APPROPRIATED FUNDS A. Federal Appropriations 1. A Handful of Programs 2. Common Elements of Programs Funded Through Federal Appropriations B. State Appropriations: Colorado's Construction Fund Earmark IV. PUBLIC FUNDING PROGRAMS USING REVENUE SOURCES OTHER THAN APPROPRIATIONS A. Restoration Payments by Water Users: Central Valley Project Restoration Fund B. Federal Hydropower Revenues: Columbia Basin Water Transactions Program C. Voter-Approved Bond Funds: Nevada's Question 1 Program D. Dedicated Percentage of Lottery Proceeds: Oregon's Measures 66 and 76 E. Voluntary Contributions by Water Utility Customers: Albuquerque's Living River Fund F. Payments in Settlement of Litigation: Truckee River Water Quality Settlement Agreement V. CONCLUSION I. INTRODUCTION

   Buying and leasing water for environmental purposes has grown in popularity over the past twenty-some years, from a handful of transactions in the 1980s (1) to a fairly well established and widespread practice today. (2) This Article addresses environmental water acquisition programs, not only because they are increasingly important, but also because the topic seems highly appropriate for a symposium honoring Jim Huffman and Jan Neuman. Professor Huffman, of course, has long advocated for nonregulatory approaches to environmental problems, and has written that water marketing "promises less heat and more light in providing concrete solutions to water allocation problems, including the desire to protect the environment." (3) Professor Neuman helped develop the practice of environmental water acquisitions through her long service with the Oregon Water Trust, and her articles on the lessons gained from that organization's early years (4) have surely influenced and assisted new programs across the West.

   This Article deals with the dollars supplied for environmental water acquisitions--more specifically, on public funding programs for this purpose. It identifies a number of programs where some form of public money has been devoted to buying or leasing water for the environment, thus lending a measure of government support for restoring streamflows, wetlands, or other important waters. Some programs involve water acquisitions directly by a government agency, and some provide money to other kinds of entities involved in water transactions. (5)

   The focus is on the origins, purposes, and revenue sources of these public funding programs. What are the circumstances that prompted creation of the program, and how was it accomplished? What was the program set up to achieve in terms of environmental benefits, and how was the program structured to serve those ends? Finally, and perhaps most importantly, what was the source of money provided to--or through--the program? By answering these questions for a range of public funding programs, this Article presents a picture of the reasons why governmental entities have chosen or agreed to devote public dollars to environmental water acquisitions, and of the various types of revenue streams they have employed for this purpose.

   I offer a couple of additional points to clarify what this Article does not do. First, while it identifies more than a dozen public funding programs, it goes into depth on none of them. I chose to leave out the details partly so that I could survey a wide range of programs in a medium-sized article, and partly because I had no intention of holding up any one of them as a model. Second, this Article does not deal with program implementation, that is, it does not address how much money a program has actually spent on acquisitions, how much water it has obtained, or whether it has delivered the kinds of environmental benefits for which it was created. It would certainly be interesting and useful to have the kind of in-depth review of program implementation that Jan Neuman has provided for the Oregon Water Trust, but that article, or book, will have to wait for another day. (6)

   The chief purpose of this Article is to collect and summarize information on existing programs in a way that is potentially useful to water stakeholders and decision makers who may be contemplating a new program. Because the first question regarding such a proposal is likely to be where the money would come from, the Article organizes the programs by funding source, separating those using legislatively appropriated funds from those relying on another kind of revenue. The latter programs get somewhat longer descriptions, mostly because their origins and revenue sources require a bit more explanation. Programs using federal appropriations get only two paragraphs each, partly because they are numerous and relatively homogeneous, but also because Congress seems increasingly unlikely to spend money on luxuries such as water. (7)

   Part II of this Article briefly explains the rationale for both environmental water acquisitions and public funding for them, and concludes with a couple of important caveats about the role of acquisitions in securing water for the environment. Part III addresses public funding programs using appropriated money, touching briefly on several federal programs, and then describing one established in Colorado. Part IV identifies six programs across the West, each of which relies on a different, nonappropriated revenue stream. Part V offers some brief analysis and conclusions regarding the origins, purposes, and revenues of environmental water acquisition programs.

2. SUMMARIZING THE RATIONALE FOR ENVIRONMENTAL WATER ACQUISITIONS AND PUBLIC FUNDING

   Purchasing water for environmental benefits is not cheap: most public funding programs discussed in this Article involve the spending of several million dollars. (8) The rationale for these kinds of expenditures is not intuitively obvious, especially given that western water laws consistently state that water belongs to the public. (9) One reasonably might ask why, particularly in a time of tight federal and state budgets, the public should have to fork over large sums of money to acquire something it already owns. This Part attempts to answer that question briefly, starting with the logic for environmental water acquisitions, and then providing the rationale for public funding of such acquisitions.

   1. Why Environmental Water Acquisitions?

      Although western state constitutions and statutes declare that water is a public resource, (10) they also provide that water may be appropriated for beneficial use. (11) An appropriator obtains a water right, which provides only a limited right to use this public resource, but is nonetheless a form of property. (12) Although state law based on the prior appropriation doctrine thus provides for both public ownership and private rights in water, in practice the latter have been far more important, (13) as indicated by the many western rivers dried up by the cumulative demands of existing water uses. (14)

      In addition to their status as property, two aspects of western water rights are noteworthy from the standpoint of water acquisitions. First, under the famous "first in time is first in right" principle of prior appropriation, the oldest water rights are most reliable in a period of shortage; (15) at times when total demands on a stream exceed the available supply, "senior" rights get their water while those more junior--such as relatively recent rights protecting instream flows--get little or nothing. (16) Second, existing water rights may be changed or "transferred" to a new place or purpose of use, subject to certain restrictions and conditions. (17) These two characteristics, taken together, promote acquisition and transfer of senior rights in places where water is scarce relative to existing and new demands, because such rights offer legal assurance of a secure water supply. (18) State water codes have long provided that water rights may be changed to new uses, and several of them now specifically allow water transfers for environmental purposes. (19)

      Environmental water acquisitions might be far less necessary, however, if appropriative water rights had any of three features they do not have. First, water rights lack an expiration date; a right lasts forever so long as it is exercised at least every few years. (20) Second, water rights do not provide for interruption of use in the event of critically low flows, high temperatures, or high pollution loads--conditions that could cause serious ecological harm and that might be exacerbated by water withdrawals. (21) Third, water rights typically have no mechanism for periodic review or amendment of their terms, including the authorized quantity of water. (22) The day may come when western state water laws include some or all of these provisions, (23) but unless and until that day arrives, established water uses are more or less immune from serious legal scrutiny, at least under state law.

      The federal Endangered Species Act (ESA), (24) of course, has prompted changes in water use in some areas where established practices have impaired the habitat of threatened or endangered species. (25) Because the general prohibition on "take" of listed animals has gone nearly unenforced against water users, (26) however, the ESA has primarily affected those who obtain water from a federal project. (27) Under section 7 of the ESA, federal agencies must undergo "consultation" on the effects of their proposed actions on listed species, concluding with a "biological opinion" from the United States Fish and Wildlife Service (FWS) or the National Marine Fisheries Service (NMFS) on these effects, all to ensure that no federal action jeopardizes the survival and recovery of a listed species. (28) Where these ESA requirements have...