The middle Deschutes River between Bend, Oregon and Lake Billy Chinook typically experiences critically low flows during the irrigation season. Commercial agriculture in the North Unit Irrigation District and Central Oregon Irrigation District is one major user of Deschutes River water. The overall objective of this research was to estimate the cost to transfer water from commercial agriculture operations to instream flow use assuming a water market existed. Two methods of providing water within commercial agriculture were considered; 1) lining irrigation district canals that supply water to farms and 2) changing on-farm water use. On-farm practices include adopting water conserving irrigation technologies and involvement in Oregon's water conservation program. Supply curves were generated for these alternatives assuming expected and alternative streamfiow levels. Results indicated that changing crop rotations, adopting water conserving technologies and participating in Oregon's conservation program were used, depending on the market price for water. Canal lining, however, was generally the most cost-effective means of providing water to enhance flows in the middle Deschutes River.

Surface water in the Deschutes Basin of central Oregon has been largely over allocated since the early 1900s. Therefore, rapid population growth and urban demand for water in the upper Basin lead to an increased reliance on groundwater in the last three decades. The Oregon Department of Water Resources (OWRD) became concerned in the mid-1990s that groundwater pumping was negatively affecting senior water rights in the lower Deschutes Basin. A USGS study determined that there is a hydrologic connection between the upper and lower portions of the Deschutes Basin. As a result, OWRD banned further groundwater pumping without mitigation in the Basin. In an effort to allow further groundwater development and improve streamflows a coalition of local water users and State government personnel developed the Deschutes Groundwater Mitigation Program (DGMP). The DGMP is a voluntary market-based approach to water management that allows water rights holders to transfer excess water instream, which creates mitigation credits that other water users can purchase to offset new groundwater uses. Senior water rights holders in the Basin are primarily irrigation districts. This research uses the Institutional Analysis and Development (IAD) framework to determine the physical, cultural and institutional factors that influence irrigation district participation in water transactions and the relationships between different levels of decision-making in the Deschutes Basin. Research participants were asked to describe the relationships and interactions between operational decisions, policy formation decisions and constitutional decisions in the Deschutes Basin. Data was collected through open-ended interviews with Basin irrigation districts and a broad section of other water managers (State agencies, environmental advocacy groups, tribes, hydrogeological consultants, landowners and municipalities), and then qualitatively coded to identify important themes and relationships. Results from the operational level of analysis indicate that irrigation districts are primarily motivated by a fiduciary responsibility to their patrons. Water transfers and leases are seen as tools that can mitigate the negative consequences of urbanization and avoid enforcement of environmental regulations related to the reintroduction of anadromous fish into the Deschutes River. Conservation projects help boost instream flows and allow irrigation districts to improve their water supplies and reduce costs. At the policy level of analysis, research participants recognized the value of collaboration in developing shared goals and mutually beneficial water management policies. However, they expressed concerns about the functionality of regional water management organizations. Fort Vannoy v. OWRD, was a 2008 Oregon Supreme Court case that decided who has access to participate in the Deschutes Groundwater Mitigation Bank (DGMB). This was as a constitutional level decision that determined irrigation districts are holders of water right certificates, not landowners, and irrigation districts have the right to determine if excess agricultural water can be transferred to another use in the Basin. These results suggest that there are issues of access and equity within the Deschutes Basin that need to be further examined.