Money from the Inflation Reduction Act approved earlier this year sets aside more than $1 billion for programs aimed at conserving Colorado River water. But, new reporting from Politico finds that may make it more difficult to negotiate deals to save water down the road.

Annie Snider covers water issues for Politico, and joined The Show to explain.

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The Colorado River at border of Arizona and California.

Interview highlights

So what is this dynamic at work here where this money that is setting aside, basically for saving water on the Colorado river, may be making it harder to create these similar kinds of deals down the down the road in the future?

ANNIE SNIDER: Yeah, so I think to understand what happened here, you have to kind of go back a year, where we were at a incredibly dire moment along the Colorado River. We've been in two decades worth of mega drought and water levels were falling fast towards the point where water managers were really scared that they might not be able to get water out of one of the reservoirs downstream to Arizona, California and Nevada. And so the states worked really hard to negotiate a deal that would conserve enough water to sort of head off that disaster in the near term.

The idea is they want to bolster reservoir levels for three years and give themselves time to negotiate new rules that will govern the river in the future. During what we all acknowledge is it going to be a much drier period of time going forward. We're not going to be able to rely on the same amount of water going forward. And so this deal that was reached last May had the three states agreed to consider 3 million acre feet of water — that's about a billion gallons worth of water — in exchange for $1.2 billion worth of funding.

And much of what is happening here is water users, farmers, cities agreeing to not use water that they would otherwise be entitled to for that three-year period, keep that water in the reservoirs. And in exchange for getting federal funding. And the problem here is that they, a lot of those agreements, a lot of those contracts are actually built on pre-existing agreements to conserve water. Sometimes this was agreements between farms and cities, where the farms would use less water and cities would get to use that water. And some of these were agreements that had been crafted under prior efforts to sort of try and shore up reservoir levels.

And in those agreements, the going rate for water had previously been somewhere in the $260, $270 per acre foot range. But the funding that's available from the Biden administration through the Inflation Reduction Act is actually going to be compensating water users closer to $400 per acre foot if they're agreeing to save water over that three-year period. So that is a significant price reset.

Is the thinking then that going forward water users might be amenable to future deals to pay them to not use water, but at the newer rate, the $400 rate?

SNIDER: Yeah. So the going-forward question is a very big, very live question right now. I think the first thing that I think most water managers would say is that they want to try and get away from these kinds of one-off deals where you're constantly paying somebody with water rights to not use that water on an annual basis. The goal of these longer term negotiations is to be able to get away from that sort of one-off payment system and craft rules that are gonna bring everything much more in line with the reduced flows along the river.

But I think everyone would agree that there are probably gonna have to be some of these kinds of agreements going forward. And in fact, some of the deals that that were pre-existing to this to this short-term deal from the Biden administration are actually gonna pick back up. Right? So some of these are instances where farms with these big strong legal water rights are transferring water to cities. There are agreements like that that are going forward for another 15 years after end of this.

And we are actually seeing some of those farm districts trying to renegotiate the pricing because they, you know, once they've gotten the $400 price point from the Biden administration, it's awfully hard to go back to a lower one. And so I think those kinds of agreements are absolutely going to be part of the future ... and it sure looks like we're driving up the price for those.

Is there a sense from folks in the water manager, water policy world of where that extra money might come from?

SNIDER: That is the open question. The Biden administration's inflation reduction Act funding disappears in 2026. There's a $4 billion pot of funding for drought mitigation. That's where this, this short-term funding is coming from, but it has to be spent by 2026. And so it's unclear if there's going to be a new revenue stream coming from the federal government, or if it's gonna have to be scrounged up by states and local officials.

A lot of times the cities and municipalities are the entities that sort of the greatest risk, the ones that don't have a strong of water rights. And so certainly within California we've seen deals architected to transfer water from farms into cities and a lot of that is being borne by urban and suburban ratepayers.

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