Western water managers set aside some long-simmering disputes and approved a sweeping plan on Tuesday aimed at avoiding shortages on the drought-stricken Colorado River.

If approved by federal regulators, the cooperative proposal could reshape the way the river is managed and help to ensure that Southern Nevada has the water it needs as it continues to grow.

"This has never happened before. It is a huge new way of thinking," said Pat Mulroy, general manager of the Southern Nevada Water Authority.

By some estimates, the plan could as much as double the Las Vegas Valley's water supply by freeing up an additional share of the Colorado River and allowing the valley to stretch what it gets from rivers and groundwater basins it hopes to tap in Eastern Nevada.

The proposal came after almost three days of closed-door talks at a hotel-casino near the Strip. It essentially turns Lake Mead into a bank account for Nevada, Arizona and California, allowing the states to buy water from farmers and store it in the lake for future use.

The seven states that share the Colorado River also agreed to allow the joint operation of Lake Mead and Lake Powell to protect water supplies in Colorado, New Mexico, Utah and Wyoming.

The proposal, most of which would apply through 2025, holds several key provisions for Nevada.

Under one, the state would collect credits for the rural Nevada groundwater that Mulroy's agency plans to use in the Las Vegas Valley and release back into Lake Mead as treated wastewater.

Those credits would allow the water authority to almost double the number of people it can serve with its $2 billion groundwater development project.

Mulroy said the states also agreed to let the water authority develop some of its water rights on the Virgin River without having to build a multimillion-dollar pipeline between the river and Las Vegas. Instead, the authority would be allowed to take that water, which could eventually total 20,000 acre-feet a year, after it flows into Lake Mead.

An acre-foot of water is almost enough to supply two Las Vegas Valley households for one year.

Still more Colorado River water would be made available to Nevada in exchange for approximately $80 million in state money to build a reservoir just north of the U.S.-Mexico border.

The proposed reservoir beside California's All-American Canal would be used to store Colorado River water that might otherwise flow into Mexico but not count against that country's river allocation.

For picking up the construction costs, Nevada would get about 280,000 acre-feet of the water the reservoir is expected to save. Mulroy said the state could start taking that water from Lake Mead at a rate of up to 40,000 acre-feet a year as soon as the reservoir is finished.

The interstate agreement reached Tuesday should be forwarded to Interior Secretary Gale Norton by the end of the week, after it has been reviewed and signed by all seven states.

Norton gave the states until this month to submit their consensus plan so it can undergo a lengthy environmental review. She plans to announce a new operating scheme for Lake Mead and Lake Powell and shortage criteria for the lower reaches of the Colorado River by the end of 2007.

In a written statement issued Tuesday afternoon, Norton said she was pleased the states were able to come together. "I appreciate their dedication to working on a long-term solution and recognize that it took much time and effort."

Assistant Interior Secretary Mark Limbaugh, also in a written statement, called Tuesday's breakthrough further proof that the states can "work together in the interests of the management of the Colorado River."

That's big news in itself, Mulroy said. "These are tough issues. But all seven states are signing on. No one walked."

And everyone ended up with some measure of protection.

Mulroy said managing Lake Mead and Lake Powell together is meant to prevent a call on the upper basin that would force Colorado, New Mexico, Utah and Wyoming to cut their water use to ensure annual delivery of 8.23 million acre-feet to the lower basin.

Once a serious bone of contention between the upper and lower basins, the 8.23 million figure was made flexible under the interstate proposal. Depending on water supply and weather conditions, Lake Powell might release less than 8.23 million acre-feet in some years and more than that in other years.

"That's a huge change," Mulroy said.

If a shortage cannot be avoided, the states set a sliding scale of water delivery reductions in the lower basin, all tied to the level of Lake Mead.

The lake presently stands at about 1,140 feet above sea level. The states propose a 400,000 acre-foot shortage if the water level dips to elevation 1,075, 500,000 acre-feet if it hits 1,050, and 600,000 acre-feet if it hits 1,025.

Arizona would bear the brunt of any shortage, though Nevada and Mexico would absorb some percentage under the proposal. A 1968 federal court ruling effectively protects California from sharing shortages in the lower basin.

Lake Mead has not dropped below elevation 1,075 since Hoover Dam was built and the reservoir was filled for the first time in the late 1930s.

And such a drop in the lake level is not expected anytime soon. According to current federal projections, Lake Mead is expected to finish 2007 at elevation 1,135.

As one final piece to the interstate proposal, Nevada agreed to fund a basin-wide study of long-term solutions to what Mulroy has described as a historic math error on the Colorado.

In 1922, the seven basin states negotiated the compact that continues to divide the river based on an estimated flow of 17 million acre-feet per year. However, current records suggest the Colorado's average annual flow is more like 15 million acre-feet.

More than five years of severe drought have brought that discrepancy into stark relief. So has growth in the upper basin, which is pushing those states to develop more of their river allotments.

Mulroy said the state-funded study will examine the costs and potential benefits of alternative water sources that could be used to supplement the Colorado. Those sources include ocean desalination, the treatment of wastewater from coal-bed methane production in the upper basin, and anything else researchers come up with, she said.

In Nevada's case, Mulroy said the study is expected to produce one very tangible result: at least 75,000 acre-feet of new water for the state to use as it sees fit.

Though a lot has to happen in the coming months to turn the interstate agreement from proposal to policy, Mulroy said she is cautiously optimistic.

"This (proposal) will be modeled, and it will be publicly debated, and it will be analyzed up one side and down the other," she said. "But at least it's one the states agree on. The fact that everyone is pushing in the same direction, that's huge."