Addressing the structural deficit, Compact obligations, and Post-2026 guidelines for Metropolitan’s Colorado River supply
At last week’s meeting of Metropolitan’s Imported Water Subcommittee, Metropolitan staff provided an overview of some of the key sticking points in the ongoing negotiations to establish operational rules for the Colorado River system when the current guidelines expire next year. The presentation covered the Colorado River’s structural deficit, the Lower Basin states proposal, and the Colorado River Compact.
The Colorado River’s structural deficit
The presentations began with a high-level overview of the Lower Basin’s supply and demand imbalance, commonly referred to as the structural deficit. Laura Lamdin, Senior Engineer at Metropolitan, gave the presentation.
There is an inherent imbalance between water supply and demand in the Lower Basin known as the structural deficit that exists under the current operational rules, even without factoring in the impacts of climate change. The structural deficit arises because, even if Lake Powell releases its Compact amount—commonly considered to be 8.23 million acre-feet (MAF) per year, as outlined in the minimum objective release under the long-range operating criteria developed in the 1960s—and Lake Mead releases enough water to fulfill all contracted demands, including treaty obligations to Mexico, Lake Mead still declines by approximately 1 to 1.5 MAF annually.
Historically, the structural deficit has not posed a critical issue due to various mitigating measures. These include provisions for shortages, paid system conservation efforts, Intentionally Created Surplus (ICS) storage in Lake Mead, and additional releases from Lake Powell. Together, these measures have helped reduce the effective structural deficit. The remaining gap, however, has been addressed by drawing down storage from Lake Mead.
“All of these things together and not needing to address the structural deficit directly have all helped provide reliability to Metropolitan and to California,” said Ms. Lamdin. “However, relying on those voluntary actions is not sustainable going forward. The hydrologic conditions can no longer support those extra releases from Lake Powell, and storage is nearing and could reach critical elevations next year. So we can’t keep going the way that we’ve been going, and the structural deficit is one of the things that the Lower Basin is looking to address more systematically in the next set of guidelines.”
The Lower Basin alternative looks to resolve the structural deficit
In March 2024, the Lower Basin states submitted an alternative proposal to the US Bureau of Reclamation (USBR) aimed at addressing the structural deficit on the Colorado River. Under this proposal, the Lower Basin would collectively take reductions totaling 1.5 million acre-feet (MAF) in most years, which would be sufficient—plus a small buffer—to eliminate the structural deficit. The proposal also accounted for variability, suggesting that if conditions became wetter, smaller reductions might be needed, while drier conditions would require a basin-wide response to collectively address the broader challenges of the Colorado River Basin.
The 1.5 MAF reduction would be proportionally distributed among the Lower Basin states and Mexico. Arizona would take the largest share at 760,000 acre-feet, followed by California at 440,000 acre-feet, Nevada at 50,000 acre-feet, and Mexico at an assumed 250,000 acre-feet. The assumption for Mexico’s contribution is based on its proportional share of the total reductions.
However, discussions with Mexico regarding its role in the proposal have not yet begun. Additionally, the Lower Basin states’ proposal has not been thoroughly vetted at the contractor level within each state. These internal discussions are ongoing, particularly in California and Arizona.
“Addressing the structural deficit, however, isn’t the only consideration,” said Ms. Lamdin. “It isn’t a complete water balance on the system. It doesn’t factor in Upper Basin uses. It doesn’t factor in hydrology, and you still need that wet water balance to work for the system to work, and that’s going to depend both on hydrology and upper Basin uses.”
The water balance after the structural deficit addressed
According to data from the US Bureau of Reclamation, the average consumptive use in the Upper Basin over the past five years has been approximately 4.4 million acre-feet (MAF) per year. In the Lower Basin, total water demand—including the proposed 1.5 MAF reduction—amounts to roughly 12.4 MAF annually when factoring in contracted supplies.
On the supply side, the hydrology of the Colorado River system during the Millennium Drought (2000 to the present) has averaged about 12.5 MAF per year. This illustrates the delicate balance between water availability and demand, with current usage closely aligned with the long-term average hydrologic supply under drought conditions.
“In this very rough analysis, that reduction does balance the system with a small buffer,” said Ms. Lamdin. “But it is worth noting that balancing at 12.5 MAF is really only possible because the Upper Basin has been using less than its compact amount.”
There is variability in precipitation as well as demand, so to manage that variability, the Lower Basin’s proposal proposed continued storage in Lake Mead, providing flexibility to water managers to manage those variabilities.
“We have big reservoirs,” said Ms. Lamdin. “There’s plenty of space, so we can use it to smooth out that hydrologic variability. And that’s how we can take a 1.5 MAF reduction consistently over time. You have a baseline, you take that reduction, but you still allow some variability around that.”
What to do when more than 1.5 MAF of reductions are needed
The Lower Basin’s proposal also accounted for additional reductions that may be required due to climate change or other unforeseen factors. The proposal outlined that these reductions would be shared proportionally among the Upper Basin, Lower Basin, and Mexico. Both basins would commit to reducing their water use and collectively sharing the burden of any additional cutbacks necessary to address the impacts of climate change on the Colorado River system.
Ms. Lamdin highlighted the difficulty in obtaining precise figures for Upper Basin water use reductions in any given year. Unlike the Lower Basin, the Upper Basin lacks large upstream reservoirs, making it more vulnerable to year-to-year variability in water availability. To address this, stakeholders are exploring the concept of an Upper Basin storage pool. This approach would enable entities to conserve water during favorable conditions, retain it in the system, and release it when needed. The goal is to provide a balance of certainty and flexibility in managing water resources.
However, it was emphasized that stored water in such a pool should not be factored into the overall water availability when making operational decisions, such as determining necessary reductions or release volumes.
“This idea of neutrality in storage when it comes to operational decisions is similar to something that we’ve been doing in California for a long time,” said Ms. Lamdin. “We do this with carryover storage in San Luis. Whatever volume contractors have stored in San Luis for carryover purposes is not included in the DWR calculation for determining how much water is available to allocate. So the idea would be that new storage on the Colorado River would operate in a very similar manner. Operational decisions would be based on the amount of system water, while the total water in the system, inclusive of stored water, might be higher. That way, you can use the storage to meet reductions and still have it result in additional system water, just like a wet water contribution would. So if you wanted to use 100,000 acre feet of stored water to meet your reductions, you would take that and convert it from being neutral, and then you would convert it to having it count.”
Discussions ongoing
Releases from Lake Powell remain unresolved. “If you can get agreement on how additional reductions would be shared between the basins, you can design a Powell curve to achieve that, and then also start to factor in other things, like trying to balance power production and other factors. So it ties back to how we are going to share additional reductions above 1.5 MAF. Those discussions at the seven basin state level, at the lower basin level, at the California level, are all still ongoing.”
The situation is made more complicated by current conditions. Both Lake Powell and Lake Mead are forecasted to begin 2027 at relatively low levels.
“While there are different ways that you can approach what the triggers are for having reductions more than 1.5 million acre feet, these are the types of elevations and situations where that could trigger those larger reductions. So that’s just making everything a little bit more difficult.”
The Colorado River Compact: Foundation of governance and key to post-2026 negotiations
Shanti Rosset, Colorado River Program Manager, provided an overview of the Colorado River Compact, emphasizing its critical role as the foundation for all agreements, regulations, and operational decisions governing the Colorado River. A thorough understanding of the Compact’s provisions and its interpretation in the context of the post-2026 guidelines is essential for informing the board’s decisions regarding Metropolitan’s Colorado River supply and future planning.
Far from being a historical artifact, the Compact remains a vital legal framework underpinning the US Bureau of Reclamation’s operations of both Lake Powell and Lake Mead. Every subsequent law or agreement—including the Boulder Canyon Project Act, the Colorado River Storage Project Act, the 2007 Interim Guidelines, and the forthcoming post-2026 framework—must align with the Compact’s principles and provisions.
“In short, if we don’t understand the compact, we don’t understand the legal limits of what Reclamation can or cannot do,” said Ms. Rosset.
In 1921, Congress authorized the seven states in the Colorado River Basin to negotiate an interstate compact, following a Supreme Court decision that established the doctrine of equitable apportionment. This legal principle grants states within an interstate river basin the right to an equitable share of the water in the river. When representatives of the Basin states signed the Colorado River Compact in 1922, the Supreme Court had recently applied this doctrine for the first time in the landmark case of Wyoming v. Colorado.
At the time, most water development in the Colorado River Basin was concentrated in California. The Upper Basin states were concerned that if the Supreme Court applied the doctrine of equitable apportionment alongside the principle of prior appropriation, the Lower Basin—particularly California—could claim the majority of the river’s water before the Upper Basin had the opportunity to develop its own uses. The Compact was designed to resolve these concerns by settling water rights and enabling both basins to make investments based on clearly defined allocations.
The Colorado River Compact divided the Basin into two regions: the Upper Basin and the Lower Basin. Under Article 3A, each Basin was apportioned 7.5 million acre-feet of consumptive use annually. Additionally, the Compact established the Lower Basin’s right to, and the Upper Basin’s obligation for, delivering 75 million acre-feet over 10 years, while also accounting for treaty obligations to deliver water to Mexico.
Different interpretations of the Compact
The Upper Basin and Lower Basin have differing views on the Basin’s obligations under the Compact, and these disputes are factors in the post-2026 basin states’ negotiations.
Article 3A provides that each Basin is entitled to use 7.5 million acre-feet annually. Article 3B allows the Lower Basin to increase its use by 1 million acre-feet; this is understood as Arizona’s development of additional tributary uses, particularly the Gila River. Article 3C anticipated the 1944 treaty with Mexico, and says that the Upper Basin is obligated to deliver half of the Mexico treaty volume when a surplus isn’t available from the aggregate of 3A and 3B.
Article 3D states that it is the Upper Basin’s obligation not to cause the flow at Lee Ferry to be depleted below 75 million acre feet over 10 years. The reason the treaty obligation is described as ‘an obligation not to cause the river to be depleted below’ is that they could not agree on the language, she said. It was a compromise.
Ms. Rosset said Article 3D is central to the current negotiations. It created an obligation on the Upper Basin not to deplete the flows below 75 MAF over a 10-year period measured at Lees Ferry just downstream of present-day Lake Powell. From the Lower Basin’s perspective, if flows at Lees Ferry fall below this threshold, the Upper Basin must reduce its depletions until compliance is restored.
Some in the Upper Basin take a different view. “They think that their responsibility is to keep from exceeding 7.5 million acre feet in annual releases, and it is not triggered when the flow at Lee’s Ferry declines below 75 million acre feet over a 10-year period,” said Ms. Rosset. “The Compact’s language isn’t necessarily unclear, but it’s ambiguous enough to allow both readings, which is why it remains core to the tensions in today’s negotiations.”
Article 8 of the Compact protects ‘present perfected rights,’ which are uses that were established before the Compact’s ratification in 1929. That provision is especially significant for California, because most of the senior rights in the lower Basin, including most of IID’s rights, predate 1929. The Supreme Court adjudicated present perfected rights in the Lower Basin in Arizona v. California.
“The divergent opinions of Article 3 define today’s negotiations between the basins. The upper Basin argues that, because they have never fully developed their 7.5 million acre feet annual allocation, in part because there is insufficient runoff to meet their existing water rights (what they call hydrologic shortages), they aren’t required to conserve additional water,” said Ms. Rosset. “They also argue that the Lower Basin is overusing, in part because of Arizona’s tributary use.”
“The Lower Basin position is more straightforward: That the Compact’s Upper Basin delivery obligations are enforceable when the flow at Lees Ferry falls below 75 million acre feet over a 10-year period, plus half of the Mexico treaty delivery obligation.”
Post-2026 guidelines must maintain consistency with the compact
As Reclamation develops the post-2026 operational guidelines, every alternative must be consistent with the Compact and applicable federal law. That means that the way that Reclamation defines releases from Powell or allocations to Mead users must align with the Compact obligations.
“For Metropolitan, this is not theoretical,” said Ms. Rosset. “It is directly tied to the reliability of our Colorado River supply. Our contracts with the US rely on Reclamation’s lawful ability to make deliveries consistent with the Compact.”
“For this board, our message is straightforward,” she continued. “Compact interpretation determines how much water can lawfully move from Lake Powell to Lake Mead, and therefore how much can be delivered to California. Maintaining the clear Lower Basin position that upholds compact delivery obligations protects California’s long-term rights and the integrity of our water supply.”
“The Compact simultaneously constrains and protects. It constrains Reclamation and the states from unilaterally redefining allocations, and it protects California by embedding priority and delivery obligations that underpin our reliability. As we look towards post 2026, operations that dual nature of constraint and protection are what keep the system lawful and predictable.”
“The Colorado River Compact remains the controlling legal framework for the Basin’s future,” she continued. “It is the document that both divides and unites the states, and it is the standard that Reclamation must meet in every operational decision. For Metropolitan, ensuring the post-2026 framework is grounded in the compact principles is essential to protecting California’s rights, maintaining supply reliability, and securing the stability of the entire lower basin system.”
How Tribal water rights factor in
Subcommittee Chair Mark Gold (Santa Monica) asked about Tribal water rights.
“The compact doesn’t affect tribal water rights,” said Ms. Rosset. “The Boulder Canyon Project Act made it clear that Tribal reserved rights would be met from the state’s allocation, so the state in which the tribe is located is obligated to meet the tribe’s settled rights. The vast majority of the tribes are in Arizona. So when we’re talking about tribal reserved rights and those demands, they’re principally out of Arizona’s allocation. … I think it’s important to understand that it’s one of the factors in the position that Arizona takes, and the position that the federal government takes with respect to Arizona, is that of the 2.8 MAF that Arizona’s allocated, 1.5 MAF of that are tribal reserved rights.”
“The US government has what are called firming obligations as part of the significant water rights settlement that was passed in 2004 in the Arizona Water Settlement Act,” she continued. “As a result, those rights were primarily met by contracts or agreements to have them delivered by the Central Arizona Project. And so while we’re all aware in California of the CAP subordination, over one-third of the CAP’s contract is dedicated to meeting those reserve tribal rights. That is a significant dynamic that is part of our negotiations. There are some additional tribal reserve rights that need to be settled, but none of them are as large as the rights that have already been settled.”
What about Mexico?
Director Dan Denham (San Diego) said it’s a mystery to him that Mexico has not been involved in the conversations so far. “Is this the State Department? Is it Interior? What’s preventing us from having those conversations with what will eventually be a 1.5 MAF gap that someone’s going to have to take care of?”
Ms. Rosset said that while there are no direct discussions underway, Mexico is being updated.
“You may be aware of the minute oversight group, which is the formal entity that was stood up as part of a Minute 323 implementation,” she said. “There are representatives from the basin states who have provided updates to the Mexico counterparts on the progress that we have for the post-2026 negotiations. … And we’ve been hearing from Interior that they are they want to include Mexico, but they want to get certain questions resolved between the basin states first.”
“I have some confidence based on Mexico’s participation with Minute 323 to match the Lower Basin conservation on parity for the 2024 SEIS, that since Minute 319, we have this long track record at this point of collaborating, and Mexico being willing to step up in parity for as long as they get surplus to match the shortage. But I understand, and there is widespread frustration that you’re expressing in the group.”
