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San Diego could sell some of its rights to Colorado River water to Arizona and Nevada under a deal struck Wednesday that could help parched inland states fill a widening gap between water supply and demand.

The San Diego County Water Authority now has a water surplus thanks to a desalination plant the utility opened a decade ago after facing shortages of its own. Water wouldn’t physically move inland, but the utility wouldn’t draw as much from the river as it’s entitled to.

Lake Mead could soon benefit from the nation’s largest desalination plant thanks to an agreement that would allow water agencies in Nevada, Arizona, and California to explore ways to exchange water supplies across the drought-challenged Colorado River Basin.

On Wednesday, the federal government and water agencies in the three states signed a memorandum of understanding to develop a framework for an interstate pilot program that could let agencies in Arizona and Nevada tap San Diego’s Claude “Bud” Lewis Carlsbad Desalination Plant.

The federal government and water agencies in Arizona, California and Nevada signed a landmark agreement Wednesday to explore ways to exchange supplies across the drought-challenged Colorado River Basin.

The goal is to find ways to work across state borders on desalination, recycled water and other projects to ensure adequate water supplies for 43 million residents in three states.

Las Vegas has signaled interest in buying San Diego’s desalination water, the latest development in what will surely be a complex agreement permitting cities to trade water over state lines.

Last week, the board of the Southern Nevada Water Authority, which provides water to the Las Vegas metropolitan area, officially signaled it wants to talk interstate water transfers by signing onto a memorandum of understanding proposed by the San Diego County Water Authority. San Diego is keen to sell off water it doesn’t need but is obligated to buy, like de-salted ocean water from a desalination plant in Carlsbad.

Lake Mead is projected to hit an all-time low by summer 2027, according to new projections released by federal authorities.

The reservoir is forecast to drop to 1,020 feet in July 2027, 20 feet lower than its previous record low of 1,040 feet in July 2022. That year, long-sunken boats and once-submerged rocks emerged from the water.