The Colorado River is one of the most precious natural resources in the United States, and its future hangs in the balance. The main problem is that the river carries less water flows than the amount people are entitled to withdraw. Federal and state negotiators are arguing over the Colorado River Basin’s next set of operating rules, which will have long-lasting effects on land use and real estate.
On November 19, 2025, ULI’s Water Wise Development Coalition convened land use and real estate professionals with public sector decision-makers to discuss the Colorado River Compact negotiations that are currently underway and their potential impacts on land use and real estate. Guest speakers in the discussion were:
- Anne Castle, senior fellow at the Getches-Wilkinson Center for Natural Resources, Energy, and the Environment at the University of Colorado Law School (former U.S. commissioner for the Upper Colorado River Commission and former assistant secretary for Water and Science for the U.S. Department of the Interior)
- John Berggren, regional policy manager of healthy rivers, Western Resource Advocates
- Ken Ransford, secretary, Colorado Basin Roundtable
- Sarah Porter, director of the Kyl Center for Water Policy at Arizona State University’s Morrison Institute for Public Policy and professor of practice in ASU’s College of Global Futures
The convening delved the status of the river basin, the negotiations, and their implications for land use—which could significantly affect development in the region and beyond.
Colorado River Basin Conditions, Water Supply Constraints, and Regional Exposure
“Prolonged drought and low reservoir conditions have placed extraordinary pressure on this critical water resource that supports 40 million people, tribal nations, agriculture, and industry.”
Areas that depend on water from the Colorado River stretch from Wyoming to Mexico. The seven Colorado Basin states (Wyoming, Colorado, Utah, New Mexico, Arizona, Nevada, and California) signed the Colorado River Compact in 1922 to agree on how to allocate water in the Colorado River, and the Compact still frames a lot of the operations and decision-making about management of the river to this day.
Declining Colorado River Flows and the Structural Supply-Demand Gap
Around 19-million-acre-feet (MAF) (23.44 cubic kilometers) of Colorado River water are allocated per year between the Upper and Lower Basins, Mexico, and natural evaporation and seepage. The problem with this amount is that natural river flows have averaged around 10.8 MAF per year from 2020 to 2025, due to prolonged drought and aridification in the region. In the 20th century, the average was 15.2 MAF per year. In the 21st century so far, the average has been only 12.3 MAF per year, a decrease of almost 20 percent, affected significantly by warming temperatures.
As a result of this gap between water demand and supply, the basin’s reservoirs have been depleted. Lake Powell and Lake Mead, the biggest reservoirs in the basin—and in the country—have fallen to historically low levels during the last several years.
Hydropower Risk and Near-Term Colorado River Storage Projections
The Bureau of Reclamation’s 24-month study projections of Lake Powell and Lake Mead storage in the coming two years show that storage elevation could decrease below minimum power pool within a year. Minimum power pool is the lowest level for hydroelectric power generation; below that stage, the dam’s turbines cannot operate, halting its power production for the region.
Given climate change, the deficit between supply and demand, and projected natural flows, the green (‘most probable’) line hasn’t been super telling in the last couple of years in terms of actual flows. The red (‘minimum probable’) line has been more telling in terms of where we can expect to go.
Policy Responses to Date: Drought Contingency Plans and Interim Agreements
The Colorado Basin states have been contending with declining Colorado River supplies for a quarter century. They have revised usage guidelines that provide for reductions, reached agreements with Mexico to decrease deliveries there, and enacted drought contingency plans. The Department of the Interior and its Bureau of Reclamation subdivision have also engaged in emergency efforts.
Although all of these agreements have helped to alleviate the situation temporarily, none has solved the fundamental problem of the gap between supply and demand, and reservoir levels remain low. As all the guidelines and agreements expire in late 2026, a new process is underway to determine future operations.
Post-2026 Colorado River Operating Rules and the Federal NEPA Process
The means for developing new operating guidelines for the Colorado River is a National Environmental Policy Act (NEPA) process, which the federal government officially commenced in 2023. The Department of the Interior is legally required to coordinate operations of lakes Powell and Mead; in the purpose and need statement for the new guidelines from the Bureau of Reclamation, it acknowledges:
- Imbalance between water supply and demand will be exacerbated by increasingly likely low-runoff conditions.
- Expanded and innovative use of conservation is needed.
- Addressing tribal concerns regarding Colorado River Basin management is needed.
In January 2026, the Bureau of Reclamation published the Draft Environmental Impact Statement (one of the steps in the NEPA process), including analysis of five alternatives for the new operating guidelines. The five alternatives are:
- No Action Alternative—Included as a requirement of NEPA, this alternative reverts Colorado River operations to the decades-old operating framework that was in place prior to the adoption of the 2007 Interim Guidelines for Lower Basin Shortages and Coordinated Operations for Lake Powell and Lake Mead.
Pre-2007 management of the system, which is very limited, doesn’t do enough, and pretty much everyone agrees this would crash the system. So, if we did nothing, it would not be good for the Colorado River.
- Basic Coordination Alternative—This alternative is designed to achieve protection of critical infrastructure within the Department of the Interior and Bureau of Reclamation’s current statutory authorities if no new agreements among Basin water users are adopted.
If the seven Basin states don’t come to an agreement, this is what federal authorities can do. I think most folks would agree it might not be enough to fully protect the system, given the hydrologies that we expect to see. But if that’s all the authority they have, that’s what Reclamation would go forward with.
John Berggren - Enhanced Coordination Alternative—This alternative was developed in coordination with the U.S. National Park Service and the U.S. Fish and Wildlife Service, with input from Basin Tribes and the hydropower industry. It uses an approach of distributing storage between Lake Powell and Lake Mead that enhances the reservoirs’ ability to protect critical infrastructure and support the Colorado River Basin.
This is what the Bureau of Reclamation would like to do if it had additional authorities.
- Maximum Operational Flexibility Alternative—This alternative was developed by a consortium of conservation organizations with the goals of stabilizing system storage, integrating stewardship and mitigation strategies for Lake Powell and Lake Mead, maintaining opportunities for binational cooperative measures, incentivizing water conservation, and designing flexible water management strategies. It uses both system storage and recent hydrology for determining annual releases from Lake Powell and Lake Mead. Additionally, it introduces the Conservation Reserve as a flexible tool for water conservation and management.
We proposed a new conservation tool: conserved water ends up in an accounting pool in lakes Powell and Mead and can then be moved to where it provides the most operational and environmental benefits. In this way, the program can offer an incentive structure for conserving Colorado River water that can also help protect critical infrastructure, meet important environmental targets, improve hydropower generation, and provide other resilience benefits.
John Berggren
- Supply Driven Alternative—This alternative proposes that Lake Powell operation be based solely on historical natural flow. It incorporates concepts from the separate proposals submitted by the Upper and Lower Basin States, as well as ideas emerging from discussions with the Basin States during spring 2025. In this alternative, annual Lake Powell releases would be determined on the basis of a set percentage of the preceding three-year average natural flow, and Lower Basin deliveries would be determined based on Lake Mead elevation.
This alternative would base operations on a recent average of natural river flows. Each half of the Basin would get a percentage of the natural flow.
The federal government gave the Basin states until November 11, 2025, to come up with a high-level framework for a seven-state agreement. However, the states were not able to come to an agreement by that deadline and have been given another deadline of February 14, 2026, to determine the details of their agreement.
By spring or summer 2026, the Bureau of Reclamation will publish the Final Environmental Impact Statement with a preferred alternative for the new set of operating guidelines. By October 1, 2026, when the new water year begins, the operating guidelines will be adopted through a Record of Decision.
According to Berggren, “The Bureau of Reclamation has been clear that they’re not going to use just one of the alternatives. They’re going to piece together preferred elements of alternatives. So, if the states do come to an agreement, then components of that will likely be bolted onto what the feds want to do, to create the new comprehensive guidelines as the preferred alternative next year.”
Potential Land Use Implications
Regardless of what elements are included in the new operating guidelines, water conservation will need to be part of land use considerations in the Colorado River Basin.
Current uses of Colorado River water consist mainly of agriculture (74 percent) and then of municipal, commercial, and industrial use (26 percent). Nearly two thirds of agricultural use in the basin is for alfalfa and other types of hay, which are water-intensive cattle feed crops—around 20 percent of which are exported to countries such as China and Saudi Arabia. A recent study found that shifting from alfalfa to other types of hay, vegetable crops, or wheat would save substantial amounts of water while sustaining or improving net farm profits.
Uses of Colorado River water, apart from evaporation and seepage, are agriculture (74 percent) and municipal, commercial, and industrial use (26 percent).
If farmers don’t willingly engage in conservation efforts—such as switching crops or temporarily fallowing fields—“buy and dry” efforts are likely to continue to increase, according to Ken Ransford, secretary to the Colorado Basin Roundtable. Agricultural buy and dry is the practice by which a municipality or local government authority purchases some or all of a farmer’s water rights. Although these transactions can help support development and population growth in urban areas, they can lead to economic and cultural losses in rural areas. Farmers can also temporarily lease water rights to keep land in production part-time. Ransford noted that open space and farm preservation, through tools such as conservation easements and the Colorado Conservation Easement Tax Credit, are key to maintaining a high quality of life in rural areas, as is continued municipal water efficiency.
The good news is that many municipalities in the Colorado River Basin have been making significant progress in conserving water. A study of 28 urban water utilities in the Colorado River Basin found that total water use dropped by 18 percent between 2000 and 2020, despite area population growth of 24 percent. Municipal conservation efforts often include rebate programs for replacing turf grass with lower-water-use landscaping and for replacing inefficient fixtures. Various municipalities are also ramping up advanced purification of reclaimed water to respond to water supply issues. Additional state and local policy trends that support water conservation are covered in the ULI article,“Eight Policy Trends in Water-Wise Development and Land Use.”
Sarah Porter, director of the Kyl Center for Water Policy at Arizona State University’s Morrison Institute for Public Policy, added that statewide water use in Arizona is slightly below where it was in the mid-1950s, although the population has grown almost sixfold and the economy has grown more than twentyfold since that time. These trends demonstrate the ability to decouple water use from economic and population growth. In other words, water conservation and efficiency can enable ongoing growth.
Uses of Colorado River water, apart from evaporation and seepage, are agriculture (74 percent) and municipal, commercial, and industrial use (26 percent). Source: Communications Earth & Environment, Water Education Colorado
(Source: Communications Earth & Environment, Water Education Colorado)
Given the ongoing water constraints, Porter foresees continued movement toward higher density development. “Historically, our pattern of growth has been predominated by single-family homes, contributing to outward expansion or sprawl. But as water becomes more expensive and less available, it will be one of the factors that pushes the pattern to change,” she stated. Density can go hand-in-hand with technology to advance water resilience. As Porter noted, in denser development, less water goes to landscaping and more water can be recaptured and reused.
Overall takeaways
- Deeper cuts in Colorado River supply are expected, and the impacts of these cuts will vary from place to place.
- Significant reductions in overall water use will be required throughout the Colorado River Basin, which can at least partially be addressed by helping farmers to switch crops from alfalfa.
- Water availability will be a significant determinant of how cities grow.
- With ongoing water conservation and efficiency efforts, per capita water consumption can continue to decline, even with population and economic growth.
Click here to view the complete recording of this meeting. Those who are interested in joining the Water Wise Development Coalition can complete this interest form to be added to the list.
Related Resources:
- Join the Water Wise Development Coalition’s quarterly virtual events by signing up here.
- To learn more about ULI’s Water Wise Initiative, visit the Urban Resilience Program’s Drought Resilience webpage.
- Water Wise Resources List on ULI’s Knowledge Finder.
