The interstate river compact: Incentives for noncompliance

Twenty-one western United States rivers are governed by interstate compacts. This paper examines the issue of compliance with interstate river compacts in the western United States and some of the factors influencing compact compliance. Theoretical arguments and empirical evidence presented in this paper suggest that upper basin states governed by interstate compacts with percentage delivery rules are more likely to comply with compact requirements than states whose rivers are governed by fixed delivery rules. Evidence indicates that both the frequency and level of noncompliance tend to be larger under a fixed allocation rule. Under such a rule the upper basin state bears a greater share of a shortage and experiences greater variability so it would have a greater incentive to cheat. A comparative study of the South Platte and La Plata Rivers is consistent with this hypothesis. Given the large demands imposed on many western United States rivers, our analysis suggests that compliance analysis is likely to be an important component of interstate negotiations and that administration of interstate compacts will become increasingly important.