Depleting Water Supplies from the Colorado River Could Wreak Havoc on Western States

In the midst of the worst drought in 1,200 years, Western U.S. states face an unprecedented reduction in shares of Colorado River water. Currently, Lake Mead and Lake Powell are at drastically low levels, which threatens the generation of hydropower and water supplies for 40 million people. If levels on Lake Powell get too low, the integrity of dams and even the Western U.S. electrical grid are at risk. The Colorado River supplies water across California, Arizona, Nevada, Utah, Colorado, New Mexico, and Wyoming, as well as Mexico. 

This dire and uncharted territory could throw the seven Colorado River Basin states into legal limbo, as the Bureau of Reclamation has set an ultimatum for the states to agree to severe reductions of 2 to 4 million acre-feet, out of the 15 million acre-feet first allocated in a hundred-year-old compact that is the foundation of rights to use water from the river. At the high end, the proposed reductions total eight times Los Angeles’s annual water usage and more than Arizona’s entire share. The Bureau has given the states until mid-August 2022 to come up with a reduction plan. If they do not, the Bureau has threatened that it will implement its own plan. If no voluntary compromise is reached, and the Bureau imposes mandatory reductions, the agreements that govern the assumption of shortages among the states may be tested. 

An agreement to share the reduction burden may prove elusive. Governed by the 1922 Colorado River Compact and a series of further agreements and judicial orders, the states on the Colorado River have sparred over water allotments for decades. The Compact divides the area into an Upper and Lower Basin. The Upper Basin includes Colorado, Utah, Wyoming, and New Mexico. The Lower Basin includes the more heavily populated Nevada, Arizona, and California. Upper Basin states are obligated not to deplete the flows of the Colorado River below levels established under the 1922 Compact and subsequent agreements. The gap between supply and demand is inevitable, because at the time of the Colorado River Compact, the Compact allocated up to 3 million acre-feet more per year than current estimates of the River’s average annual flow. California has senior rights to its allotment of 4.4 million acre-feet per year ahead of the two other Lower Basin states; Arizona (2.8 million acre-feet per year) and Nevada (300,000 acre-feet per year). Under the current Bureau of Reclamation management guidelines, if reductions are necessary, Arizona and Nevada would thus see their shares depleted first. And Colorado has already signaled that it and other Upper Basin states are reluctant to make further reductions. On July 18, 2022, the Upper Basin states sent a letter to the Bureau of Reclamation proposing a five-point plan, but noted that the amount they could reduce usage was limited, because the Lower Basin states’ and Mexico’s depletions are more than double that of Upper Basin states. 

At this point, it is unclear if California and the agencies within the state holding rights on the river will agree to reductions, or whether the Bureau would mandate such reductions before cutting off Arizona and Nevada. In any case, given the severity of the shortage, the necessary cutbacks will likely require California to reduce its use. 

Those reductions could have major impacts in California’s agricultural industry. Several California water agencies rely on Colorado River water. The Imperial Irrigation District holds rights to 70% (percent) of California’s allotment, or 3.1 million acre-feet, and is reliant on its diversions for $2 billion worth of agricultural use, including production of vegetables, cattle, and alfalfa, an especially water-intensive crop. Other major California agencies with Colorado River water rights include Palo Verde Irrigation District, Coachella Valley Water District, Metropolitan Water District of Southern California (which supplies agencies across Southern California, including Los Angeles), and the City and County of San Diego.

As states are now forced to redouble their efforts to conserve water, the Bureau of Reclamation is also working to update the guidelines that govern the Colorado River. On June 23, 2022, the Bureau of Reclamation published a notice in the Federal Register requesting public comment as it begins the process to revise the current guidelines. Public comment is open until September 1, 2022, and can be submitted here.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Russell McGlothlin, an O’Melveny counsel licensed to practice law in California, Heather Welles, an O’Melveny counsel licensed to practice law in California, and Katie Sinclair, an O’Melveny associate licensed to practice law in California, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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