WATER TRANSFER AND MAJOR ENVIRONMENTAL PROVISIONS OF THE CENTRAL VALLEY PROJECT IMPROVEMENT ACT - A PRELIMINARY ECONOMIC-EVALUATION

Increasing block water pricing, water transfer, and wildlife refuge wa ter supply provisions of the Central Valley Project (CVP) Improvement Act are analyzed in terms of likely farmer response and economic effic iency of these provisions. Based on a simplified partial equilibrium a nalysis, we estimate small, but significant water conservation savings due to pricing reform, the potential for substantial water transfers to non-CVP customers in severe drought years when the water price exce eds $110 per acre foot (1 acre foot equals 1.234 x 10(3) m3) and posit ive net benefits for implementation of the wildlife refuge water suppl y provisions. The high threshold water price is partly a result of req uiring farmers to pay full cost on transferred water plus a surcharge of $25 per acre foot if the water is transferred to a non-CVP user. Th e act also sets an important precedent for water pricing reform, water transfer provisions, and environmental surcharges on water users that may find their way to other Bureau of Reclamation projects.