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The U.S. federal government will use $1.2 billion from the Inflation Reduction Act to compensate cities, irrigation districts and Native American tribes for most of the water conserved under the agreement.

The governors of Arizona, California and Nevada have announced a historic water-sharing agreement for the Colorado River in an attempt to salvage one of the West’s major sources of drinking water that has dwindled in severe drought.

The agreement this week marks the culmination of months of tumultuous negotiations among seven Western states, whose 40 million residents rely on the Colorado River for drinking water, agricultural production and hydroelectric power.

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