Columbia Basin Water Transactions Program: Annual Economic Report, 2010 WestWater Research June 17, 2010

CBWTP Mission and Origin: Program Mission: Improve aquatic habitats for fish and wildlife by increasing instream flows in key stream reaches within the Columbia River Basin Collaborate with local entities to use market and incentive-based methods to achieve conservation goals Program Origin: Began in 2002 as a joint effort between the Bonneville Power Administration (BPA) and the Northwest Power and Conservation Council (NPCC) Managed by the National Fish and Wildlife Foundation (NFWF), a non-profit organization dedicated to fish and wildlife conservation Funded primarily by BPA and the NPCC

CBWTP Focus Region:

Qualified Local Entities: Eleven “QLE’s” are eligible to submit proposals for funding from the CBWTP supporting incentive-based instream flow improvement programs in their provinces Each QLE is uniquely positioned to implement projects that increase flows in local Columbia River tributaries through partnerships with irrigation districts, landowners, and agricultural producers. State Qualified Local Entity Idaho Idaho Department of Water Resources (IDWR) Montana Clark Fork Coalition (CFC) Trout Unlimited - Montana Water Project (TU-MWP) Montana DNRC Water Resources Division (MTWRD) Oregon Deschutes River Conservancy (DRC) The Freshwater Trust (TFT) Oregon Water Resources Department (OWRD) Washington Washington Water Trust (WWT) Washington Department of Ecology (Ecology) Walla Walla Watershed Alliance (WWWA) Trout Unlimited - Washington Water Project (TU-WWP)

Economic Report Purpose: Program’s Fourth Economic Report Uses price and volume data from CBWTP-supported water right transactions to highlight the program’s accomplishments in 2008 and 2009 Describes trends and themes observable over time among CBWTP transactions. Information is organized into four general categories: Program Results Contractual Forms Program Focus Funding Allocation

2008 and 2009 Accomplishments

2008 and 2009 Summary: 2008: Cumulative volume of 92,466 AF placed instream Total CBWTP funds requested: $2.24 million 2009: Cumulative volume of 83,333 AF placed instream Total CBWTP funds requested: $2.4 million

Full Season Acquisitions, 2008 and 2009:   Lease Agreements Permanent Purchases Volume (AF) Price ($/AF) Average 1,232.30 $27.27 319.72 $877.86 Median 162.8 $26.91 200 $738.15 Minimum 9.52 $5.43 15 $277.78 Maximum 23,592 $70.56 2,029 $1,500.00 Number 32 21

Partial Season Acquisitions, 2008 and 2009:   Volume (AF) Price ($/AF) Average 1,182.53 $71.16 Median 816 $45.49 Minimum 45.23 $25.00 Maximum 3,134 $151.27 Number 9

Number of Transactions Funding Allocation for Leases, 2008 and 2009: Contract Length Acquisition Method CBWTP Funding Number of Transactions Short Term Lease (1-5 Years) Full Season, 1-Year $336,201 9 Full Season, 2-5 Years $77,616 7 Partial Season $855,475 6 Long Term Lease (6 Years and Up) Full Season $1,095,150 8 $47,455 2 TOTAL   $2,411,897 32

Program Results, 2003 - 2009

Transaction Trends, 2003 - 2009: Since the program’s inception in 2003, the cumulative volume of water dedicated to instream flows each year has declined somewhat since 2006 due in part to an increasing number of permanent transactions and the higher cost of water. Prices paid in permanent CBWTP acquisitions have increased since 2003. However, QLE’s continue to negotiate low permanent purchase prices relative to other transactions observed in the Columbia Basin. Annual CBWTP lease prices increased in 2008 and 2009.

Transaction Trends, 2003 - 2009:

Leasing Activity, 2003 - 2009:

Contractual Forms, 2003 - 2009

The Importance of Innovation in Transactions: Creative contracting has supported the CBWTP’s competitiveness in the water market by allowing the program to compete with other buyers on terms other than price. The CBWTP’s environmental protection goals facilitate water acquisitions through a variety of contractual forms such as split season leases, source switching, and conservation. As water right prices and competition increase throughout the Columbia Basin, further expansion and innovation in contractual forms and partnerships will help the CBWTP continue to achieve conservation objectives.

Number of Transactions by Contract Length:

CBWTP Acquisition Methods:

Annual Volume by Contract Term:

Program Focus, 2003 - 2009

Developments in Program Focus: Growth in partnerships Water acquisition funding contributed by project partners has increased since the program’s inception Focus on preserving anadromous fisheries The number of transactions and total expenditures dedicated to anadromous fisheries increased in 2008 and 2009 Location Transactions distributed more evenly among eco-provinces over time

Growth in Partnerships:

Improving Anadromous Fisheries: Total Expenditures

Improving Anadromous Fisheries: Transaction Activity

Improving Anadromous Fisheries: Water Volume

Transaction Activity by Province:

Funding Allocation, 2003 - 2009

Recent Changes in Funding Allocation: 2008: Substantial funding allocated to new long-term lease agreements. The IDWR’s Pahsimeroi River transactions accounted for the majority of long-term lease expenditures 2009: Funding allocation focused on permanent and short-term transactions. 14 permanent purchases completed by the IDWR, TU-WWP, and DRC

Long-Term Leases and Permanent Acquisitions:

Funding Allocation: Short Term Leases

Funding Allocation: Long Term Leases

Funding Allocation: Permanent Acquisitions

Economic Report Summary

Key Observations: The wide variety of contracts and innovative agreements negotiated by QLE’s continues to improve the CBWTP’s ability to increase instream flows despite intensifying competition for water supplies. In 2008 and 2009, program focus and funding emphasized improving habitats for anadromous fish species. The CBWTP dedicated fewer financial esources to residential fisheries. In 2008, CBWTP funds were primarily applied to long-term lease agreements, while 2009 funds were concentrated on short-term leases and permanent acquisitions. Lease rates in CBWTP acquisitions increased in 2008 and 2009 after remaining stable for the program’s initial 5 years. Permanent purchase prices continue to increase throughout the Columbia River Basin.

Annual Summary: 2007 - 2009 2007 2008 2009 Mean $25 1618 $34 1789.32 Lease Price ($/AF/Yr) Volume (AF/ Year) Volume (AF/Year) Mean $25 1618 $34 1789.32 $40.86 700.38 Change from Previous Year -2% 27% 35.64% 10.50% 20% -60.86% Median $23 336 $30 297.5 $31.04 232.58 22% 54% 29.13% -11.45% 5% -21.80% Low $4 46 $5 12.5 $5.71 9.52 525% 35.75% -72.80% -23.80% High $82 27,710 $90.36 23592.2 $151.27 5,026.60 -17% 59% 10.20% -14.86% 67% -78.70% Number 24 19 58% -20.83% 26%