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Monday
August 12, 2002 The Deschutes Water Exchange, a project of the Deschutes Resources Conservancy (DRC), has leased over 7500 acre-feet of water from irrigators to enhance streamflow this summer in Central Oregon’s Deschutes basin. The Deschutes Resources Conservancy is a private non-profit organization dedicated to streamflow restoration and water quality improvement in the basin. The water exchange, founded in 2001, is dedicated to creating an active market for water rights in the Deschutes basin in order to facilitate transfers, promote efficient water use, and restore depleted streamflow, all with the objective of providing benefits to fish and wildlife. The initial emphasis of the exchange is on its Annual Water Leasing Program. The program began in 1996 with donated leases and began paying for leases during the 2001 season. Payments to irrigators provide the incentive for the rightholders to forego the use of all or a portion of their rights on an annual basis. The exchange, the respective irrigation districts and the rightholders then formally lease the water for instream use to the state Water Resources Department. For the 2002 irrigation season, the exchange offered most irrigators a set rate of $7 per acre-foot to lease water instream. In practice, this meant that water users were paid anywhere from $7 to $39 an acre not to irrigate, depending on the duty of the water right associated with the lands. Total lease payments were about $45,000. The 2002 pricing policy is intended to better reflect the priority on flow restoration. “In 2001, we paid for water by the acre based on the assessment cost that the water user had to pay the irrigation district for water delivery. The per-acre payment schemes cause significant price variation per acre-foot of water, due to differences in the duty associated with water rights in the basin. In 2002, we set a fixed price per acre-foot to ensure that we were paying for water alone, rather than delivery, maintenance, or the capital costs of the irrigation district. That way we can maximize the amount of streamflow restoration we can achieve with a limited budget,” said Ray Hartwell, who managed the project for the DWE. Incentives to lease varied by water right, and depended on the leasing compensation rate and the water users private use of water. High-value uses such as commercial agriculture did not generally participate, because the compensations rates were too low to justify leasing all but fallowed acres. Participation was robust among small-acreage landowners. The program was able to secure 12 cfs of additional streamflow in the severely depleted Middle Deschutes River, which should flow at 42 cfs all summer, opposed to a historical low flow of 30 cfs. Tumalo Creek, a major cold-water tributary to the Middle Deschutes, will flow at 6 cfs all summer in part thanks to the program. Squaw Creek, a historically important spawning tributary, should flow at over 5 cfs due to leases, conservation projects, and instream transfers. Both of these streams used to be completely dewatered during the summer due to irrigation withdrawals. The program also secured instream flows of lesser amounts in other area streams. Instream leasing provides an important avenue for realizing streamflow restoration without permanently severing water rights from the land. “Many landowners are not interested in permanently dedicating their water instream, but are enthusiastic about leasing, because they can help the river, earn some extra money, and avoid the burden of irrigating their property solely to preserve their water rights,” Hartwell said. “Also, permanent acquisition of water is time consuming and can be expensive. With leasing, we can significantly increase flows immediately while still working towards permanent restoration solutions.” According to Bruce Aylward, Manager of the Deschutes Water Exchange, the real value of leasing comes from the opportunity it provides to develop a functioning water market. “Leasing of water allows people to see how markets can work for them without obliging them to make any permanent transactions. For this reason, it is the area of market development that has seen the most activity, and a great place to test different approaches to flow restoration,” Aylward said. “Before the leasing program, people only had one option with their water rights. Now, they can choose to irrigate or put their water instream. Leasing is an additional management tool that appeals to many irrigators.” As the final paperwork to the 2002 leasing program wraps up, the exchange is already considering improvements for 2003 and subsequent years. “The fixed price approach used in 2002 was a major step towards a market for instream flows. But there are more comprehensive approaches that we hope can be used to better understand the market and maximize flow restoration within the confines of a limited budget. The leasing program also provided a great place to test approaches to water acquisition that we eventually may want to use with permanent acquisition,” said Aylward. The exchange is considering using a reverse auction mechanism as part of its 2003 program. This would allow more knowledge of what it costs to lease different water rights, and would allow for strategic investment in restoration. “Under the auction approach, you can make the decision to pay more for a water right that will restore a high priority area. The fixed price approach did not allow that,” explained Hartwell. “It will allow us to realize the greatest environmental benefit at the least cost.” In addition to its annual leasing program, the exchange is developing market mechanisms to facilitate permanent acquisition of water rights. It also offers information, valuation and brokerage services. “The main thing right now is collecting the data. There have been so few market transactions that it is hard to say how much we should pay for a water right. Add to that the many variable attributes of a right, and the question of valuation becomes very difficult. We hope that by understanding the market, we will be able to more effectively target water for streamflow restoration,” said Aylward. Gail Achterman, Executive Director of the DRC, applauded the program. “It’s a very exciting program. It provides concrete restoration results-water in the river- at a low price. More importantly, it provides an opportunity to experiment with restoration, gather market information, figure out what works, and then use it to restore the streams and rivers of the basin.” Funding for the project was provided by the National Fish and Wildlife Foundation, the Bend Foundation, and the Oregon Watershed Enhancement Board. More information about the leasing program, the exchange, and the DRC is available at www.deschutesrc.org. |
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