Abstract
Most rivers throughout the western U.S. are fully appropriated. New municipal, industrial, recreational and environmental water demands will likely be met by reallocating water out of agriculture, the region’s largest user of water. The question is: how best to do so? Water markets have long been advocated by many as the answer to this question. This chapter begins with an overview of water allocation law and water markets in the West including a discussion of the various alternative market-based reallocation mechanisms being considered. A summary of recent literature on market activity in the West is followed by a detailed look at transactions in the Colorado River Basin.
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- 1.
The western United States includes: Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming.
- 2.
Saved water implies improvements in conveyance and application efficiency or saved consumptive use. In some states, water law allows for some saved water to be claimed and put to beneficial use, but other states do not allow for conveyance and application savings to be re-used as these are return flows already claimed by others.
- 3.
A set of laws dictating the use of water on Federal and Indian lands also exist. While they impact the availability of water they are not immediately relevant to the focus of this chapter.
- 4.
The particular application of Prior Appropriation varies from state to state, with California and New Mexico also utilizing Riparian water law to some extent. For an overview of the different forms of Prior Appropriation see Getches (2009).
- 5.
The Western Governors Association defines a water transfer as: “A water transfer is a voluntary agreement that results in a temporary or permanent change in the type, time, or place of use of water and/or a water right.” (WGA, 2011, p. vii)
- 6.
- 7.
Generally speaking, the purchase of a water right preserves the seniority date and the quantity of the right. The quantity of the transfer is limited to the historical consumptive use of the water by its owner rather than a diversion amount (Kenney 2005, p. 172). Historical consumptive use may be determined in court proceedings or another jurisdiction. Determination of historical consumptive use preserves return flows to downstream users, but can make the transaction more costly, and may introduce institutional risk into the exchange for owners whose presumed consumptive use may be different than the court determined amount.
- 8.
When a senior “call” is on the river, junior water right holders are not allowed to divert until senior water right holders needs are met.
- 9.
This includes a number of studies, including this one, whose analysis is based on data compiled from the Water Strategist by researchers at the Bren School of Environmental Science & Management at the University of California, Santa Barbara. This data set is available online at: http://www.bren.ucsb.edu/news/water_transfers.htm.
- 10.
As noted by Brewer et al. (2008), the Water Strategist has historically advertised itself as “the only source of published information on water transactions in the West.”
- 11.
Evidence of this is the fact that the vast majority of transactions reported are associated with leases or sales of C-BT shares.
- 12.
Two examples highlight these differences. First, Brown (2006) categorized transactions involving water banks where the original seller and eventual buyer were not reported as belonging to a “water management agency”. Water management agencies include federal or state government agencies, conservancy districts, and water districts, associations and companies. Brewer (2008), on the other hand, attempted to infer based on the description of the transaction and past knowledge, the nature of the buyer and seller in these cases. Second, Brown, unlike Brewer, combined all similar Colorado- Big Thompson transactions within a particular month, into a single case reducing the number of transaction overall (by approximately 30 %) and skewing (relative to Brewer) some statistics relating to the size and number of transactions by type.
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Goemans, C., Pritchett, J. (2014). Western Water Markets: Effectiveness and Efficiency. In: Easter, K., Huang, Q. (eds) Water Markets for the 21st Century. Global Issues in Water Policy, vol 11. Springer, Dordrecht. https://doi.org/10.1007/978-94-017-9081-9_16
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