Water projects zoom to top of state's agenda

Here in Wyoming they have an old saying: If you lose your wallet and a neighbor finds it, he will drive 60 miles to return it. But on his way home he will steal your water.

Ever since frontier days, water has played a crucial role in the state's development, particularly in the arid eastern plains where most of Wyoming's population lives. ''Water has always been an issue in Wyoming,'' says Sen. Malcolm Wallop (R) of Wyoming.

Today, this passion over water has not abated. If anything it has intensified. While the rest of the nation wrestles with economic problems, water development has surged to the top of Wyo- ming's political agenda.

Eastern Wyoming is part of what John Wesley Powell dubbed the Great American Desert: low, rolling plains, covered with pewter-colored sage and sparse desert grasses where antelope still play. Consequently, Wyo- ming culture, like that of much of the Rockies, is basically an oasis culture, huddled along streams and around water holes.

Two-thirds of Wyoming's irrigated land lies in this arid but fertile region. One-third lies inside three critically water-short areas in the southeast. Because of lack of surface water (rivers in this part of the country would be called streams in the East) and a plummeting water table, farmers near towns like Pine Bluffs and Carpenter will have to radically change the way they raise crops or go out of business within 15 years, water studies have predicted.

Ironically, the state as a whole has surplus water. Some 1.5 million acre-feet of unappropriated water flow out across its borders. But this liquid bounty is mostly in the mountainous northwest, around Yellowstone. It flows north into Montana and the Missouri River, hundreds of miles and a mountain range or two from the water-short plains.

At a time when many of the state's farmers and rangers face severe water problems, the winds of cultural change are transforming their prized Old West life style. The rural way of life in this, the least populous state in the continental United States, is rapidly being overtaken by an urban, industrial life style rooted primarily in energy development.

The extractive industries have already surpassed agriculture as the largest segment of the state's economy. There is the rapid search, discovery, and development of oil and natural gas in the Overthrust Belt, a geological formation that cuts through south-west Wyoming. This is just one of several major petroleum ''plays'' in the state. Then there are massive draglines which strip-mine millions of tons of coal from rich seams under the Powder River Basin to the northeast. Until the recent oil glut, a number of giant synthetic fuels plants were also planned.

All this new economic activity demands water as well. And water has become a point of contention between farmers and ranchers, the last bastion of the traditional, rural western life style and the urban, industrial energy community that is gradually supplanting it. This has created a sense of urgency regarding water development.

An example of this was last fall's election for governor, pitting the Democratic incumbent, Ed Herschler, a rancher and lawyer, against millionaire oilman Warren Morton. Both candidates agreed water development was the major campaign issue.

In fact, GOP challenger Morton labeled the lack of state water projects under Governor Herschler's first two terms as Wyoming's ''Water-gate.'' But the incumbent's defense was apparently convincing: He easily won reelection.

What the long- and mournful-faced ''Governor Ed'' successfully argued was that he hadn't come up with a large water development program earlier because the state didn't have the money. But since passage in 1977 of an increase in the state's severance taxes, which he engineered, it now has the cash to indulge in a $600 million, five-year dam-building and diversion program.

In the legislative session before the election, Mr. Herschler pulled off a political coup. He presented a ''water plan'' that contained a laundry list of virtually all the state water projects proposed recently in the state. These were all to be studied to come up with projects that would be built by the state.

''In the summer of 1981, both parties realized that water develop- ment was the top issue,'' recalls Charles Scott, a Republican state legislator from Casper who has specialized on water issues. ''Well, the governor decided he needed a water program. So his adminis-tration threw one together . . . . There were no criteria. Herschler just put this great big pork barrel in the middle of the Legislature and the legislators passed it. With no program of our own, Republicans couldn't vote against water development. It would have been like voting against motherhood.''

Last year Wyoming earmarked $114 million in general revenues for water development and the state constructed one new irrigation project. This year it plans to spend $6.7 million on two more projects.

Because it has the money and the desire, Wyoming is leading the Western states into a new era of water development. In the past, the federal government has footed the bill for the lion's share of Western dam building.

But, first under Jimmy Carter and now under Ronald Reagan, it has become clear that the US government is no longer willing or able to subsidize Western water projects totally. Interior Secretary James G. Watt has said, ''The federal government no longer has the capacity to serve as a rich uncle.''

In the past, state and local interests typically put up 10 to 15 percent of the capital required for new dams and aqueducts. Mr. Watt has proposed this be raised to a minimum of 35 percent. Western states are reluctantly going along because they fear the alternative may be no federal money at all.

The first major project to start under this arrangement appears to be raising the historic Buffalo Bill Dam near Cody. The work has been authorized by Congress, but no money has yet been appropriated.

The 72-year-old dam spans a jagged gorge cut by the Shoshone River, which cascades out of the mountains east of Yellowstone. The 325-foot-high dam is to be raised 25 feet and an obsolete electrical generator replaced. Wyoming will contribute $47 million for the work; the federal government, $59 million.

Currently, the old dam is the source of water for 103,000 acres of irrigated farmland which produce crops valued at over $22 million a year. Its extension will allow it to store an extra 74,000 acre-feet of water. According to the Bureau of Reclamation's environmental-impact statement, this will benefit irrigators and allow maintenance of better in-stream flows, but destroy some fish habitat and farmland around the reservoir.

Without major new water projects, the outlook is for continued tension. As Mr. Morton observes, ''What Wyoming wants and needs in the 1980s is jobs and quality of life. Water is the thread which binds these together.''