Water Transfers for a Changing Climate

Abstract

The prior appropriation doctrine provides for the allocation of most surface water rights in the Western United States. It is rightly praised for overcoming the uncertainty that plagued the riparian doctrine, which historically dominated water allocation law in the Eastern and Midwestern United States. When water users are confident about the security of their water rights, as they are in prior appropriation doctrine states, they are more willing to invest in projects that demand a reliable water supply. Unfortunately, the very certainty that protects water users under prior appropriation law can stifle efforts to reallocate that water as times and needs for water resources change.

Water use for irrigation best illustrates the problem. Irrigated agriculture accounts for well over 80% of the freshwater resources used in the West. But even as agriculture has become less important to the economic health of Western states, and even as Western cities and water demands to serve those cities have grown, moving water from agricultural to urban use has proved very challenging. To be sure, it happens, but transferring water has proved far more difficult, more time-consuming, and more expensive than it needs to be. Ironically, this has led many cities to opt for even more expensive, and often more environmentally-destructive water projects. What becomes apparent from analyzing this situation is that while prior appropriation is well-designed to create property rights in water, those rights are too often defined in ways that make them less fungible and thus less susceptible to easy marketing. Fixing this problem has become especially urgent given new stressors on our water supplies that result from climate change.

This article offers concrete solutions to promote the development of robust water markets. It begins with a review of the history and law water transfers in the Western United States. It then considers two case studies that help illustrate the opportunities and obstacles to the efficient movement of water. One case study considers the Northern Colorado Water Conservancy District and its innovative mechanism for transferring water from its Colorado-Big Thompson Project; the other looks at a still evolving proposal often described as the “Super Ditch,” that seeks to move water from agricultural to urban use without requiring farmers to relinquish control over their water rights. The article then derives lessons from these and other examples and concludes with a series of practical and creative ways for reforming Western water law to help ensure that water gets to where it is needed most efficiently.

Keywords: water resources, water transfers, water marketing, water law, prior appropriation, climate change

JEL Classification: K32, Q20, Q21, Q25