Exchange fees complicate water pricing for Gila water

Normally, when someone draws water from an irrigation ditch, it’s because they own that water right. In New Mexico, water rights work the same as property rights. Once you own that land or water, you can use it yourself, lease it, or sell it.

With water from the proposed Gila diversion, things will work a lot differently. That’s because New Mexico doesn’t actually own those water rights—and because so much about the project remains up in the air.

When Congress passed the Colorado River Basin Project Act in the late 1960s, New Mexico was granted the right to trade with downstream users in Arizona for water on the Gila and its tributary, the San Francisco. But New Mexico couldn’t just stick a straw in the rivers and take the water. Rather, it needed to find a trading partner in Arizona.

For decades, no one wanted to be a part of that exchange, though.

Then, in 2004, when Congress passed the Arizona Water Settlements Act, New Mexico finally had a trading partner, the Gila River Indian Community, or GRIC, which abuts the Gila River near Phoenix. GRIC agreed to exchange some of their water from the Gila for water from the Central Arizona Project (CAP), a network of canals that deliver water from the Colorado River to central and southern Arizona.

It’s a complicated deal, but basically, New Mexico has agreed to pay an exchange fee to the CAP on an annual basis equal to the amount of water it diverts on the upper Gila. That exchange fee, in turn, pays for water that CAP delivers to GRIC.

The US Bureau of Reclamation’s Jeff Riley explains it this way: If New Mexico builds a diversion and its water users, for example, divert 1,000 acre feet of water from the Upper Gila, they need to replace the water GRIC would normally divert from the Gila downstream in Arizona.

“That’s because they’re the ones taking the shortfall from the Gila. They’re the ones who would have diverted the 1,000 acre feet if New Mexico had not diverted it,” says Riley. “They do the exchange to make GRIC whole.”

Right now, that exchange cost is $161 per acre foot of water. That cost covers things like operating and maintaining the CAP’s infrastructure and the energy costs for pumping the water.

That price typically goes up each year. Starting in 2017, for example, it will be $164. In 2022, it’s estimated at $227.

If the project were completed in 2022, for example, and New Mexico users diverted 1,000 acre feet, they would have to pay the CAP $227,000.

People planning to use water from the proposed diversion may have other costs, too.

That’s because New Mexico still needs to build the diversion, and then operate and maintain it once it’s up and running. Right now, those costs have only been estimated.

Some of the construction will be paid for by a federal subsidy. But it’s unclear if the state plans to cover the other costs through grants, loans, or someplace else – and which of those costs, including interest on any loans, would be passed along to water buyers.

In many places in New Mexico, such as the Middle Rio Grande, the federal government has already paid for most of the infrastructure, which was built in the early- to mid-twentieth century.

“The Gila is a whole other comparison,” says Kyle Harwood, an attorney who specializes in water rights. “It’s as complicated as you think it is.”

The state has not yet identified any water buyers on the Gila. But New Mexico CAP Entity Executive Director Anthony Gutierrez has said the first phase of the project will divert water for farmers, most likely those just downstream of the diversion in the Cliff-Gila Valley.