Current WRP Projects: Project 61

Economic Impacts of Curtailment and Demand Management in the Wyoming Colorado River Basin

  • Project Number:  61
  • PIs: Kristiana Hansen and Roger Coupal, Agriculture and Applied Economics, UW; Ginger Paige, Ecosystem Science and Management, UW
  • Period: July 2022 – June 2025



The Colorado River Compact of 1922 requires that Wyoming and the three other states of Colorado, New Mexico, and Utah (together called the Upper Division states) ensure that flows downstream from Lake Powell not be depleted below 75 million acre-feet over a ten-year period (SEO 2016). In large part due to the dry hydrology in the Colorado River Basin (CRB) over the past 20 years, and the expectation that this dry hydrology will continue, the Upper Basin states may have to act to meet this compact obligation. A “curtailment” could be triggered, meaning that Wyoming and the other three Upper Division States would be required to regulate post-compact rights to reduce consumptive water use in proportion to their historical consumptive use. Wyoming would meet this obligation by regulating off water rights in the Wyoming portion of the CRB in reverse priority (starting with the most junior and working backwards by priority date) until its obligation was met.

This fall, the U.S. Bureau of Reclamation announced an increased likelihood of curtailment occurring in the next five years, increasing the urgency of understanding curtailment impacts and exploring proactive solutions. A curtailment event (or multiple curtailment events in successive years) could create significant economic challenges for Wyoming water users. Junior rights holders most at risk of being curtailed could hedge against that risk by entering into advance agreements with any senior rights holders willing to forego their water use for a price. Storage capacity in Fontenelle Reservoir could be used to help replace curtailed water in the short-term.

Policymakers in the region are also considering a multi-year Demand Management (DM) program as another way to reduce or avoid entirely the risk of curtailment. Under a DM program, water users would be compensated for reducing their consumptive use of water on a temporary and voluntary basis. The Upper Basin states would store the conserved water in certain Upper Basin reservoirs (including Flaming Gorge), to provide a “savings account” that could help them assure continued compliance with the 1922 Compact.

We propose to estimate the economic impacts of curtailment and DM to the Wyoming portion of the CRB. Consumptive use of water in Wyoming would be reduced as a result of either curtailment or DM. The economic analysis would evaluate which sectors of the economy— agricultural, municipal, and industrial—would see reductions in consumptive water use under curtailment versus DM, given existing tools for curtailment mitigation (for example permanent and temporary transfers, exchange agreements) and DM program design options. This evaluation will require coordinating with the SEO on estimating the consumptive use of water rights.

We perform the analysis under alternative precipitation/streamflow profiles, to better understand the implications of wet and dry “water years” on curtailment and the ability of Fontenelle Reservoir storage water to mitigate curtailment impacts under different assumptions regarding precipitation pattern and curtailment frequency. We also propose to compare regional economic impacts of curtailment and DM—for example, the indirect impacts in jobs and spending that ripple through the regional economy, as junior right holders try to quickly secure supplies under curtailment, or as irrigated hay production and user fees to municipalities drop under a DM program.


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