Interbasin water transfers present particular environmental risks. Concerns over invasive species and biota transfer have restricted some water projects deemed beneficial to certain communities. The transfer of water from the Devils Lake basin in central North Dakota to the Red River of the North is an interesting case. Devils Lake has been a dry basin for most of the last 4000 years. From 1993 to 2004, the Lake has risen 24.5 feet and quadrupled in volume. This has caused $450 million in flood damages. In order to reduce flood damages the State of North Dakota has constructed an emergency water diversion project to pump Devils Lake water into a canal that eventually drains into the Red River. Manitoba has led efforts to fight the diversion, with concerns about Devils Lake’s water quality, biota transfer, and risk to Lake Winnipeg’s fisheries. North Dakota’s independent action demonstrates the ability of upstream states to divert water. And an August 2005 agreement between the U.S. and Canadian governments and signed by North Dakota, Minnesota, and Manitoba demonstrates the capacity to compromise and collaborate toward mutual water management concerns. The protocol will initiate a joint rapid bio-assessment of the lake and further cooperation to reduce the risk of invasive species entering the Red River. This paper will present this case study of interbasin water transfer and focus on the institutional arrangements that are needed in order to manage international water basins while providing local constituencies the capacity to address local water concerns.