Drought conditions since 2000 have complicated Reclamation’s efforts to  balance the irrigation water demands on the Project with the requirements  for specific river flows and lake levels for threatened and endangered  species. Reclamation acquired water for the water  bank by contracting with irrigators for the water needed to augment  Klamath River flows as required by the biological opinion. As it gained  more experience each year, Reclamation modified its water bank  operations to better meet the increasing obligations and to mitigate costs. Through  these contracts irrigators agreed to either (1) forego irrigation altogether  (crop idling), (2) irrigate using only well water (groundwater substitution),  or (3) pump well water into the irrigation canals for others to use  (groundwater pumping), thus making water available to augment river  flows. In 2004, Reclamation found no  intentional violations. Water Bank Costs Could Exceed $65 Million through Fiscal Year 2011

Reclamation’s water bank expenditures through fiscal year 2004 exceeded  $12 million and could total more than $65 million through 2011. Furthermore, Reclamation has not provided stakeholders with systematic  and clear information concerning the water bank’s status or operations,  and its decision to use river flow data unavailable to stakeholders limited  stakeholders’ ability to independently monitor water bank activities. This  has led to confusion and doubts among stakeholders on whether  Reclamation actually met its water bank obligations. The Water Bank Appears to Have Increased the Availability of Water for River Flows by Reducing Irrigation Use, but the Extent of Its Impacts is Unclear

Reclamation’s water bank appears to have increased the availability of  water to enhance river flows by reducing irrigation water use on the  Project, but there is uncertainty regarding the extent of its impacts on river  diversions and groundwater resources. However, USGS and Oregon state  officials have since found evidence that groundwater aquifers under the  Project, already stressed by drought conditions, are being pumped by an  increasing number of wells and refilling at a slower than normal rate,  prompting Reclamation to consider lessening its future reliance on  groundwater substitution and pumping. To help it quantify the actual  results of the water bank, Reclamation has turned to other organizations  for assistance. This study concluded that without effective flow measurement equipment  and monitoring data for the Project it could not precisely estimate the  impact of the water bank in reducing Upper Klamath Lake and Klamath  River diversions to the Project. Reclamation officials are  considering lessening their reliance on groundwater pumping and  substitution for the 2005 water bank but are uncertain whether they can  meet their water bank obligations, particularly for spring flows, while  significantly increasing their reliance on crop idling. Limited Information Is Available Regarding Alternative Approaches for Achieving Water Bank Objectives

While several alternative approaches for achieving the water bank’s  objectives have been identified by Reclamation and other stakeholders,  limited information is available with which to reliably judge the feasibility  or costs of these alternatives. Possible alternatives to the water bank  include permanently retiring Project land from irrigation, expanding Upper  Klamath Lake storage, or building a new reservoir separate from the lake. In the interim, Reclamation and NMFS have an ongoing  dialogue regarding water bank management and will likely reconsult on  Klamath Project operations, including the water bank, in 2006. Key contributors to this report are  listed in appendix V.

Scope and Methodology

To determine how the Bureau of Reclamation (Reclamation) operated the  water bank and how much it cost, we analyzed Reclamation’s water bank  planning, contracting, and expenditure documentation. For each year of the water bank program, we reviewed and analyzed data  on water bank contracts to determine whether Reclamation met its water  bank acquisition obligations, and we reviewed and analyzed scheduled  base Klamath River flows, as well as the daily average Klamath River flows,  using both U.S. Geological Survey (USGS) and PacifiCorp-generated data  to calculate the augmented flows to determine whether Reclamation met  its water bank delivery obligations.
Why GAO Did This Study

Drought conditions along the Oregon and California border since 2000 have made it difficult for the Bureau of Reclamation (Reclamation) to meet Klamath Project irrigation demands and Klamath River flow requirements for threatened salmon. To augment river flows and avoid jeopardizing the salmon's existence, Reclamation established a multiyear water bank as part of its Klamath Project operations for 2002 through 2011. Water banks facilitate the transfer of water entitlements between users. This report addresses (1) how Reclamation operated the water bank and its cost from 2002 through 2004, (2) whether Reclamation met its annual water bank obligations each year, (3) the water bank's impact on water availability and use in the Klamath River Basin, and (4) alternative approaches for achieving the water bank's objectives.

What GAO Found

Reclamation has changed how it operates the Klamath Project water bank, as it has gained more experience, to help it meet its growing obligations and mitigate costs. For example, Reclamation initially obtained most of the water for the water bank by contracting with irrigators to either forego irrigation altogether (crop idling), or use only well water (groundwater substitution). It later added the option to pump well water into the irrigation canals for others to use (groundwater pumping). For the period 2002 through 2004, Reclamation's water bank expenditures totaled over $12 million, and the cumulative cost could exceed $65 million through 2011. GAO's analysis of water bank contracts and river flow records found that Reclamation met its water bank obligations by acquiring and delivering the required amount of water for 2002 through 2004. However, Reclamation has not provided stakeholders with systematic and clear information concerning the water bank's management and status and its decision to use river flow data that are not publicly available limited stakeholders' ability to monitor water bank activities. This has led to confusion and doubt among stakeholders on whether Reclamation met its water bank obligations. The water bank appears to have increased the availability of water to enhance river flows by reducing the amount of water diverted for irrigation, but the actual impacts are difficult to quantify because Reclamation lacks flow measurement equipment and monitoring data for the Klamath Project. Reviews by external experts of the impacts of the 2002 and 2003 crop idling contracts indicate that significantly less water may have been obtained from these contracts than Reclamation estimated. Given the uncertainty surrounding how much water can be obtained from crop idling, in 2004 Reclamation officials decided to rely primarily upon metered groundwater wells for the water bank. However, Reclamation has since learned that groundwater aquifers under the Klamath Project, already stressed by drought conditions, have shown significant declines in water levels and are refilling at a slower than normal rate in recent years. As a result, Reclamation is considering lessening its reliance on groundwater for the 2005 water bank but is uncertain if it can meet its water bank obligations, particularly for spring flows, while increasing its reliance on crop idling. Although several alternative approaches for achieving the water bank's objectives have been identified by Reclamation and other stakeholders, limited information is available regarding their feasibility or costs. Some alternatives to the water bank include permanently retiring Klamath Project land from irrigation or adding new short-term or long-term storage. Each alternative has been considered to varying degrees, but significant analysis is still needed on most alternatives before any implementation decisions can be made. Meanwhile, Reclamation and the National Marine Fisheries Service have an ongoing dialogue regarding the water bank and will likely reconsult on Klamath Project operations, including the water bank, in 2006.