Water for the Southwest/ A valuable commodity. Clamor grows to buy, sell, lease water -- but obstacles remain

Water, civilization's most precious natural resource, is not yet traded alongside pork bellies in the trading pits of Chicago's commodities markets. But in the West, where water has been treated as something of a public good for nearly a century, there is a growing clamor to buy, sell, and lease it in the open marketplace.

The notion of treating water as a commodity has been promoted by environmentalists who want to see the price of water reflect its real value. The premise: Cheap water is wasted water.

Furthermore, the notion is catching hold with those who need water and want to buy it from the farmers who have it, but can't always use it. This is especially true among the growing Sunbelt cities.

The potential for marketing water is great, but so are the obstacles.

At the southern end of the immense and sweltering flatness of California's San Joaquin Valley, where a state canal supplies irrigation water, farmers make the erstwhile desert bloom for about $55 per acre-foot (an acre of water one foot deep).

At the northern end, where an older federal project supplies water, it costs farmers only about $5 per acre-foot.

According to a state legislative study, if the northern region sold some water to the southern region, each side would benefit by roughly one million dollars a year -- through cheaper water for the South and high-water profits for the North. Two California assemblymen even went down to the valley this spring to try to interest farmers in, such a trade.

If the entire state traded water between regions in an open market, the potential revenue all around would amount to $156 million a year by 1995, according to Henry Vaux, an economist with the University of California at Riverside,

But little water trading activity has actually taken place. The West's long history of water wars has turned farmers and rural communities into skeptics.

Farmers fear losing their rights to the water if they allow someone else to use it. And communities fear farmers will sell out, take their profits, and leave local commerce to wither away.

``The only real obstacles are people's attitudes, but those are going to take awhile to change,'' says Jerry Meral, director of the Planning and Conservation League in Sacramento.

In the Rocky Mountain states, water rights have been traded for years, and water markets are becoming more widespread and sophisticated.

In the Northern Colorado Conservancy District, which includes Fort Collins and Boulder, farmers frequently sell their water shares to pay off part of their debt, says water broker Craig Harrison. Often they lease the water back; sometimes they shift to crops that require less water. ``If someone sells all their water, they grow wheat,'' he says.

``We haven't gotten to the point where the prices are listed in the newspaper,'' says Mr. Harrison. ``But we may.'' Harrison is trying to encourage commodity investors -- and not just water users -- into the water market.

The selling of water rights has become frequent enough in some New Mexico river basins -- usually a farmer selling his water to a city -- that prices have risen dramatically.

Rights that typically sold for $500 a decade ago, now sell for $2,000 to $3,000 and occasionally as high as $9,000, according to Dr. F. Lee Brown, economics professor at the University of New Mexico in Albuquerque.

Leasing water, which consists of selling an actual quantity of water rather than selling a water right in perpetuity, is becoming more popular, says Dr. Brown.

In 1980, the Intermountain Power Project of Delta, Utah, bought rights to 45,000 acre feet of water from farmers in the Sevier River Basin. The farmers were so willing to sell that the power consortium had to limit each farmer to selling 20 percent of his water shares.

Selling water between states is more complex legally and more volatile politically.

But in 1982 the US Supreme Court ruled that water is a product of commerce and that a state cannot prevent its export for economic reasons. This decision, Sporhase v. Nebraska, `` created a water market'' between states, says Charles DuMars, a law professor at the University of New Mexico.

In one ambitious plan, a group of entrepreneurs have proposed building a dam on the Yampa River in Colorado, which would add water to the Colorado River.

Over a thousand miles away, the San Diego County Water Authority guaranteed the group it would buy at least 300,000 and up to 500,000 acre-feet of this additional water every year.

The project is pending, but most states in the Colorado River Basin are opposed to it. A primary reason is fear that once San Diego becomes too dependent on that Colorado water, Colorado would never get it back.

``Taking water which is just flowing down the (Yampa) river and selling it to San Diego makes a lot of sense,'' says Dr. DuMars. ``But there's a lot of history supporting the Western states' reluctance to transferring water downstream.''

There are a number of misgivings about marketing water as a commodity. In a dry region, water is symbolic of a community's future and security, says Brown.

The old Hispanic farming communities of northern New Mexico see their community irrigation ditches as so closely linked to their cultural tradition that one simply ``can't talk about the water as a commodity,'' he explains.

Brown adds, the southwestern Indian tribes see in water a counterpart to the land they lost in the 19th century. They lost their birthright then, and they don't want to risk their water rights now. He feels this community value of water needs to be protected.

Myron Holburt, assistant general manager of the Metropolitan Water District (MWD) in Los Angeles, points out that a city's growth, land values, and economic health depend on water. ``So even if a farmer wants to sell, the community is against it.''

``This board would not approve anything that dries up someone's fields,'' counters Larry Michaels, general manager of the San Diego County Water Authority.

Mr. Holburt is currently negotiating what could be the biggest water trade yet. MWD is contributing $10 million a year to have dirt canals in California's Imperial Valley lined. In return, it will receive the water saved -- guaranteed to be at least 100,000 acre feet a year.

``I think that's probably the tip of the iceberg as far as water trading goes,'' says Mr. Vaux.

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