Federal and state water agencies from California, Nevada and Arizona have signed an agreement to explore new approaches to managing shrinking Colorado River supplies, including the possibility of future interstate water exchanges tied to desalination, recycled water and other supply projects.

The memorandum of understanding, signed Wednesday at the Claude "Bud" Lewis Carlsbad Desalination Plant, brings together the Bureau of Reclamation, the San Diego County Water Authority, the Metropolitan Water District of Southern California, Southern Nevada Water Authority, Arizona Department of Water Resources, Central Arizona Project and Salt River Project.

The agreement does not create any new water-sharing arrangements but establishes a framework for discussions on how agencies in different states could jointly finance and benefit from future water supply projects. Officials said such partnerships could help stretch limited Colorado River resources while avoiding the need for costly new infrastructure.

"Next-generation strategies in the face of climate volatility must include interstate partnerships that deliver water where it's needed most," said Dan Denham, general manager of the San Diego County Water Authority, in a statement. "New ideas are challenging to implement, but it's in everyone's best interest to make this work."

Water officials said the Colorado River system faces mounting pressure from decades of drought, declining reservoir levels and increasingly extreme weather. Reservoir storage across the system has fallen to about 36% of capacity, while low snowpack and record heat have further strained supplies for the more than 43 million people who depend on the river.

Shivaji Deshmukh, general manager of Metropolitan Water District of Southern California, said many agencies are already investing in projects designed to reduce dependence on the river, but some of the largest efforts require regional cooperation and significant funding.

"The MOU signed today demonstrates our commitment to discussing how to develop flexible partnerships across borders to pool funding, advance projects, and allow water to be shared when and where it is needed most," Deshmukh said in a statement.

Under the concept being explored, participating agencies could help fund projects such as desalination plants or water recycling facilities in another state and receive water benefits through operational exchanges using existing delivery systems. Officials emphasized that any future agreements would not alter existing water rights or reallocate Colorado River entitlements.

Southern Nevada Water Authority general manager John Entsminger said the discussions reflect the growing need for regional solutions.

"As Colorado River conditions grow more challenging, regional partnerships like this are an essential tool to help ensure sustainable water supplies," Entsminger said in a statement. "This agreement allows us to explore forward-thinking, strategic investments that will strengthen water resilience in Southern Nevada and across the Lower Basin."

Arizona officials described the agreement as an opportunity to develop new supplies while making use of existing infrastructure.

"This is an important step in addressing the goal of augmenting the water supplies of the Colorado River by creating a mechanism to deliver those supplies through an exchange using existing infrastructure," said Tom Buschatzke, director of the Arizona Department of Water Resources.

He added that the agreement represents the kind of innovation Lower Basin states believe is necessary to stabilize the river system over the long term.

The agencies did not announce a timeline for specific projects or future exchange agreements. Instead, officials said the memorandum marks the beginning of discussions aimed at creating a framework that could support long-term investments in water reliability across the Southwest.