Informal water contracts could provide quicker, cheaper ways to reduce impact of droughts

May 31, 2024

Droughts continue to overburden the systems and infrastructure that bring water to citizens and businesses. This is especially true in places like the western United States, where water resources are scarce, and the rules that determine who gets water mean that farmers and other landowners who use water for irrigation often have first priority.

Developing new water supplies by building new dams or digging new wells has become more expensive and difficult, so transferring rights to existing supplies from lower-value irrigated activities to higher-valued urban uses often makes sense. However, those with water rights must go through complicated and costly formal processes to sell or temporarily lease their water access to municipalities or industries that need it in times of crisis.

A new study, published recently in Earth’s Future, proposes a new solution: cost-effective informal water contracts, which could be a quicker and more affordable way to bring water to cities and homes during droughts and other emergencies.

“We have growing demands for water by cities and other high-value industrial uses, but we don't have much more that we can tap, either from groundwater or surface water,” said senior author Greg Characklis, PhD, who is the W.R. Kenan Distinguished Professor of environmental sciences and engineering at the UNC Gillings School of Global Public Health and director of the Center on Financial Risk in Environmental Systems, a joint program between Gillings the UNC Institute for the Environment. “So, during dry weather periods, it would make sense to find a solution for water to make its way to more highly valued uses, similar to what we do with other types of resources.”

Informal water leases, the approach proposed in the study, give those who have legal rights to water an option to temporarily bypass the complex and expensive regulatory process of transferring those rights through use of a financial arrangement in which the seller agrees not to take the water to which they are entitled, leaving it in the stream for the buyer to divert using their existing right. It is the avoidance of the formal transfer of the right from buyer to seller that enables more rapid and less expensive transfers. This can be useful during droughts, which are increasing in frequency and severity due to rising temperatures and climate change.

While formal regulatory approval considers important environmental and legal factors, as well as impacts on third parties who might be affected by the diverted water, the process can be complex and costly. Researchers in the study say that parties who enter into informal water agreements can use compensatory releases to address and compensate for any negative impact on the environment or third parties.

“Let's imagine,” Characklis explained, “that an urban user was upstream of an irrigator, and the irrigator foregoes water withdrawals so that the urban user can divert it. This could impact the flow of water between the two, other users in this stretch of the stream or environmental quality. So, in a case like this, if the urban user wants to buy water from this irrigator, they might have to buy 25% more than they’re actually going to use and leave that 25% in the stream to flow down to the fish.”

Even with this additional cost, Characklis says the transfer would still be much quicker and less expensive than the formal transfer process.

The researchers in the study modeled this approach to informal leasing in the Upper Colorado River Basin using data available from the state of Colorado, where agencies have developed a network-based water system model, StateMod, as part of a broader push to make water rights, demand and supply data available online.

Results show that between 1950 and 2013, the state could have accrued $222 million in benefits by using informal leases to reallocate water from irrigators to urban users.

“We were able to do a lot of modeling and testing [in Colorado] because we had a tremendous amount of information,” said lead author H.B. Zeff, PhD, formerly a research scientist at UNC-Chapel Hill who is now with the Bureau of Reclamation in Colorado. “But this idea of informal transfers could probably be applied in almost any basin in the western U.S. that has a similar type of institutional structure – which is essentially all of them.”

This research, completed in collaboration with Pat Reed, PhD, of Cornell University and Antonia Hadjimichael, PhD, at Penn State University, has broad implications as global climate change continues to put a strain on our environment. The study demonstrates one creative way to get water quickly to users in need during droughts. When informal water contracts are designed correctly, researchers say they can recreate the effect of a formal water sale for a fraction of the price.

“The inability to rapidly reallocate water during droughts is really a huge hole in our management of water resources,” Characklis said. “And this is a new conceptual idea for how we might do that.”

Read the full study online.

This research was supported through the Integrated Multisector Multiscale Modeling (IM3) initiative led by Pacific Northwest National Laboratory and funded by the U.S. Department of Energy’s Office of Science.

Contact the UNC Gillings School of Global Public Health communications team at sphcomm@unc.edu.