Study Finds Federal Water Giveaways In The West Exacerbate Strained Water Systems And Cost Taxpayers

A new report out today, Free Water While It Lasts: An Analysis of Wholesale Water Pricing in the Lower Colorado River Basin States, examines new data that shows huge disparities in who pays what for water from the Colorado River and the Sierras and recommends how to keep the water system sustainable into a drier future. 

The report, published by the UCLA Institute of the Environment and Sustainability (IoES) and NRDC (Natural Resources Defense Council) finds that numerous water districts in the lower Colorado River basin are paying minimal amounts for wholesale water supplies, with major agriculture users paying only a fraction—often zero—of what cities pay for the same water. The study highlights how the dirt-cheap prices of federal water for big agricultural districts create powerful disincentives for conservation and efficient use, which has helped bring the Colorado River to historic shortages. 

“In the middle of historic drought, the biggest water users in the West pay next to nothing while our water resources disappear at alarming rates,” says Noah Garrison, a researcher at UCLA’s IoES. “We can’t address the growing water scarcity in the West while we continue to give that water away for free or close to it. Without action, we risk depleting this essential resource beyond recovery.” 

The study analyzed surface water prices at the wholesale level in Arizona, California, and Nevada, and reached three main conclusions:  

• Water obtained through federal projects, including diversions from the Colorado River, is much less expensive than water obtained through state infrastructure or from other surface water projects and sellers. For example, water supplied by the U.S. Bureau of Reclamation from the Colorado River is provided to districts and utilities at a weighted average price of $0.12/AF, compared with an average price of $853.15/AF for water acquired from other, non-state or federal sources.  

• On average agricultural districts pay far less than municipal utilities for the same volume of water. The weighted average wholesale price for districts that primarily provide agricultural water supply in the report is $30.32/AF compared with $512.01/AF for primarily municipal supply water utilities.  

• Californians, on average pay the most for their water, but there are notable major exceptions in the state that get enormous volumes of free water. Due in part to heightened conveyance and delivery costs, Californians pay more than double Nevadans, and seven times more than Arizonans—for the same exact water. 

As the report further points out, even these costs paid by districts and utilities, which remain relatively inexpensive in the face of increasing scarcity, typically reflect only the cost for delivery of the water—the costs of infrastructure and to move the water around. The actual water itself is provided by the federal government for free or nearly free. 

But sustainability and affordability do not have to be at odds as they are under the current system. As the report recommends, creating a Water Reliability and Security Charge on all Colorado River and Central Valley Project deliveries of around $50–$100 per acre foot would finally reflect that water is a scarce resource, encourage more efficient use among agricultural districts, and generate up to $750 million for each system annually.  

“A small surcharge now means huge savings down the line,” says Isabel Friedman, Senior Advocacy Associate at NRDC. “It provides the funding that is needed to fix broken and inefficient infrastructure and build resilience into our water supply systems. The water itself may be free but moving it isn’t, and fixing the system will save the public money over time.”   

This funding could be used to repair aging and subsidence damaged canals, reduce leaks and evaporation, and modernize irrigation systems, while also expanding stormwater capture and water recycling—simultaneously safeguarding the Colorado River as an essential source of water for the Western region while lowering long-term costs for both cities and farms. 

“The Colorado River system is heading to catastrophe and resilient management of the River requires the elimination of all wasteful and unreasonable use of shrinking supplies. When water supplies are essentially free, there are few incentives to use water sustainably,” said report co-author Mark Gold. “The reforms proposed in the report offer a path to stabilize the water collection and distribution system while improving equity and efficiency across states and sectors.”  

The report also calls for a centralized, publicly accessible water database tracking wholesale water prices, volumes, and rights. Improved transparency would allow states and water managers to create more accurate water budgets, prioritize investments, and make better-informed decisions as climate pressures intensify.