The Colorado River and its extensive system of reservoirs and aqueducts that range from Wyoming to the Mexican border are being depleted by more than a decade of severe drought. As a result, the water levels in the two largest man-made reservoirs in the nation—Lake Mead and Lake Powell—are reaching critically low levels. If the water levels in Lakes Mead and Powell continue to decline as projected by current Colorado River modeling studies, the lakes could soon reach levels that would trigger shortages along the Colorado River system. These shortages would affect the ability of some water users to continue to receive Colorado River water and could also impact the production of hydroelectric energy along the Colorado River, affecting power supply and pricing to millions of consumers from Arizona to Nebraska.

On July 30, 2014, the United States Bureau of Reclamation (Reclamation) entered into a landmark Colorado River System Conservation Program Agreement with the Central Arizona Water Conservation District, the Metropolitan Water District of Southern California, Denver Water and the Southern Nevada Water Authority. The purpose of the agreement is to establish a pilot program (the Program) that would encourage water conservation by compensating Colorado River water users for voluntary reductions in water use in order to keep water levels in Lakes Mead and Powell above critically low elevations. Potential conservation options include increasing water efficiency and fallowing existing agricultural lands.

The falling water levels in Lakes Mead and Powell could result in reduced water deliveries to California, Arizona and Nevada and new restrictions placed on upstream water users in Utah, Colorado, New Mexico and Wyoming who utilize Colorado River water. Lake Powell collects runoff from parts of Utah, Wyoming, Colorado, New Mexico and Arizona, and water released from Lake Powell is stored in Lake Mead, located 180 miles downstream of Lake Powell. Lake Mead, in turn, is a crucial source of water for cities in Nevada, Arizona and Southern California, including Las Vegas, Phoenix and Los Angeles. Lake Mead also supplies water to millions of acres of farmland in Arizona and California. Due to the ongoing drought, Reclamation recently reduced the flow of water into Lake Mead from Lake Powell to a historic low. The volume of water in Lake Mead is directly affected by releases from Lake Powell (which is currently only at 50 percent capacity), and the reduced releases from Lake Powell have caused the level of Lake Mead to sink to its lowest level since it was constructed in the 1930s. 

Under the agreement, Reclamation, the Central Arizona Water Conservation District, the Metropolitan Water District of Southern California, Denver Water and the Southern Nevada Water Authority have agreed to make monetary contributions to implement a pilot program and fund conservation programs called “System Conservation” activities. System Conservation activities are voluntary programs that will result in a “measurable reduction of consumptive use of Colorado River water.” The System Conservation activities will be targeted at reducing water demand for a variety of uses, including agricultural, municipal and industrial. Reclamation will contribute $3 million to the Program and the Central Arizona Water Conservation District, the Metropolitan Water District of Southern California, Denver Water and the Southern Nevada Water Authority will each contribute $2 million. Of the $11 million pledged by the parties, no more than $8.25 million may be for System Conservation projects within Arizona, California and Nevada.

All Colorado River water conserved as a result of the Program will be used to increase the water levels in Lakes Mead and Powell and may not accrue for the benefit or use of any individual water user. Participation in the Program is limited to persons and entities that have existing authorization to divert Colorado River water for beneficial uses. The Program will provide funding for pilot conservation programs in 2015 and 2016, and successful projects may be expanded or extended beyond 2016. The agreement will terminate on December 31 of the year in which the latest System Conservation agreement expires.

Proposals for inclusion in the Program will be judged on 14 factors, including the size of the proposed project, the amount of time required to implement the proposal, the number of intervening water users located between the project and Lakes Mead or Powell, required environmental compliance, the ability to obtain any required third-party consents or forbearance agreements, and the degree to which the proposed project will generate measurable increases in flows or water quality that are beneficial for the environment. Where possible, Program participants will be paid in arrears, after verification that project implementation has occurred. Additionally, on-farm water conservation improvements proposed through the Program may also be considered for funding and technical assistance from the Natural Resources Conservation Service, which could increase the benefit to some Program participants.

To ensure that local concerns are addressed, Reclamation will manage all Program actions in Arizona, California and Nevada. For Program actions in Colorado, New Mexico, Utah and Wyoming, a contracting entity, such as Reclamation, the Upper Colorado River Commission or the Colorado River Basin Salinity Control Forum, will be selected to manage the actions of the Program in those states. Several pilot projects are currently in the planning stages and some proposals may be funded as early as next year. Although the Program is merely a pilot program that cannot fully offset the effects of the ongoing drought, the projects that may come out of the Program could provide the basis for significant future water efficiencies and reductions in water usage that could benefit all parties and increase the viability of the Colorado River system for current and future generations.