Law Review
Georgia State University
Water Marketing in Western Prior Appropriation States: A Model for the EastJames L. Huffman
Introduction One suspects that more words have been written on the subject
of water marketing than acre feet of water have been marketed. That is often
the case with a new idea, even a really good one. Because water marketing
is newer in the East than in the West, a western perspective will be helpful
to This Article consists of three parts. Part I responds to the apparent concerns of those in the East about water marketing. Part II discusses the inherent constraints on water marketing under traditional appropriation water rights doctrine; other legal, cultural, and political obstacles to water marketing; and recent water marketing activity in western states. This Article concludes, optimistically, that the future will lead to more water marketing and, as a result, to better use and protection of scarce water resources. I. Water Marketing—Why the Anxiety? Water marketing has long been a subject of mostly reasoned discussion in the American West.[1] Both policy makers and academics have studied the existing water allocation regimes with an eye toward making water and water rights more readily transferable among private and public users.[2] There has been limited progress in reforming the deeply rooted constraints on water markets, and there has been some hand wringing by environmentalists who object to the commodification of water,[3] but for the most part the conversation has been both reasonable and constructive. In Georgia, and perhaps more generally in eastern states,
proposals for water marketing have generated much anxiety and forecasts of
doom. Why the anxiety? Several years ago, I proposed at a conference in There is no doubt that much of the Canadian antipathy to
my suggestion of water marketing springs from national loyalties in the same
way that much of the conflict in the The claim that water is special has several roots. Opponents of water marketing argue that water is a basic human need that should not be subject to the vicissitudes of markets.[7] They understand water to be a critical component of ecosystems that water consumption and transfer will inevitably disrupt.[8] Opponents also claim that water belongs to the people or to the state and, therefore, is not subject to sale by either individuals or corporations.[9] Moreover, because water is a basic human need, they believe that every individual has a right to equal access regardless of personal wealth or circumstance.[10] It seems that proposals for water marketing in On the scale of basic biological human needs, water no
doubt ranks higher than electricity. However, from the perspective of most
Americans, electricity is likely as important as shelter, health care, transportation,
food, and clothing. People who lived in caves, or even in 19th century American
cities, lived comfortably without electricity, yet in the modern world, people
suffer real hardships without electricity. In If water and electricity are so special that they require
protection from market allocation, what about food, shelter, and health care?
Not surprisingly, there is a strong lobby for public health care, and undoubtedly,
there are some who would do the same with food and shelter despite the tragic
record of central planning in Ironically and sadly, the argument for treating water as a special resource is almost entirely backward. “Specialness” implies scarcity or at least a concern about future scarcity. If clean water was abundant everywhere and at no risk of running out, its allocation would not warrant attention, even as a basic human need. However, water draws our attention because it is not abundant everywhere in a useable condition that meets humans’ basic needs. Scarcity requires some set of social institutions for allocation, and a well functioning market is the most effective and efficient institution to allocate scarce resources.[15] The invisible hand of the marketplace is demonstrably far more efficient in the allocation of scarce resources, in the sense of maximizing net social welfare, than the invisible hand of politics.[16] This is not to say that markets always work or that maximized net social welfare is the only or most important goal of public policy. Markets sometimes fail due to high transaction costs, free riders, government interference, and poorly designed or laxly enforced property and contract regimes.[17] Putting these considerations temporarily aside, it is abundantly clear that no social institution yet conceived will yield greater net social welfare from a scarce resource than a well-functioning market. Many market opponents cannot accept this assertion because they are unwilling to put the other considerations temporarily aside, but they should give markets a chance when dealing with a resource as special as water.[18] Some critics of water marketing concern themselves less with the human consequences than with the ecosystem impacts.[19] This objection is arguably well founded if rooted in what has been called the “biocentric” perspective.[20] Markets involve people—what they need and desire. If the policy objective is to protect ecosystems independent from the value humans place on them, markets will not be helpful. In reality, however, policy is unavoidably about human values.[21] Neither policy makers nor individual market participants can escape choosing among alternatives on the basis of what they believe to be important. Simply calling one’s thinking “biocentric” does not make it so. The argument for biocentric, as opposed to anthropocentric, thinking about environmental and resource allocation issues is actually a moral claim that other species, natural objects, and the “natural” ecosystem warrant respect and protection.[22] Every moral claim is, by definition, anthropocentric and therefore deserves the attention of both policy makers and private actors. It is not clear, however, that markets fail to consider morals. Indeed, the various “green” marketing and certification schemes depend on the influence of moral considerations on market choices.[23] Unless society is willing to mandate particular resource allocations on the basis of moral considerations, and thus constrain human freedom, markets are social institutions in which moral factors can influence allocative results. Critics also argue that water markets run counter to the long established principle that water belongs to the people or the state.[24] State constitutions, legislation, judicial opinions, and commentaries frequently articulate this principle.[25] Even if such language is more than mere rhetoric underscoring the importance of water as a matter of public policy, the principle does not conflict with water markets. Riparian and appropriation water law doctrines both grant “usufructuary” rights.[26] While these rights have a limited nature, they are nonetheless property rights that individuals can buy and sell.[27] Because multiple users may have rights to successive use of the same water, regulatory approval of a market transfer is often relied upon for protection of such rights. This requirement does not imply that the state can arbitrarily prohibit transfers in the name of the public good any more than the state can take vested rights in water without compensation. Even when the state owns water or other resources in a proprietary sense, it inevitably grants use rights to individuals and other legal entities.[28] Public ownership proponents further argue that water markets provide a windfall to water rights holders.[29] In a nutshell, they contend that the state has granted water rights to individual users without charge, except perhaps for administrative fees.[30] If the state allows these individual users to sell what they received for free, they realize an undeserved windfall.[31] The argument is unpersuasive for several reasons. First, most individuals who own water rights, particularly the more senior rights with the highest value in the appropriation system, actually purchased them from a prior owner, either as outright acquisitions or as appurtenances to land where the water right was a part of the land’s value. There is no windfall to these owners, and it would be difficult to determine if their predecessors in title captured any windfalls. Second, there are many rights that people acquire for free. One might argue, for example, that most western land grants were originally acquired at prices too low to cover even the administrative costs. Often, children inherit properties of immense value from their parents and grandparents. It is impossible to unscramble the historical unfairnesses underlying today’s property regimes, and it would be foolhardy to deny current and future generations the benefits of water market allocation in the name of avoiding possible windfalls. The state has long been in the business of providing windfalls under various guises. Experience suggests that windfalls are best left where they fall, which for the most part is what the state agents intended. Finally, critics object that markets have wealth distribution consequences that may be undesirable as a matter of public policy.[32] Certainly, it is true that the market may price out some people or may force them to make choices between life’s necessities, and it is also true that some market participants may greatly increase their wealth by buying and selling water. However, neither result is a persuasive reason to oppose the creation of water markets. Every market disadvantages the poor in relation to the rich, but this does not mean that the poor are necessarily worse off than they would be by using some other system of resource allocation. As state and national water planning and management regimes
demonstrate, subsidies are easy to create. Farmers receive subsidies for
irrigation.[33] The II. Water Marketing Out West The Atlanta Journal-Constitution reported that Representative Hanner abandoned his water marketing proposal because of “swelling opposition to Western-style water selling.”[35] The politics of water marketing are undoubtedly complex and challenging. Any interest believing that it can serve its interests through the political process is likely to oppose markets since the state will provide the resource to them for free. Thus, the political scales tilt strongly in favor of public management. Those individuals advocating water markets must find satisfaction in incremental progress—similar to achievements in the use of market approaches to protect the environment.[36] So, what is actually happening in western water markets, and are they really so terrible? As Professor Bross explains in his contribution to this symposium, the historic water law system of the West established private rights in water based on temporal priority of actual use.[37] This system of private rights laid the essential foundation for a water market, but regulation and constraint stood as obstacles when economists and others began advocating for markets in the late 1960s.[38] Some of these constraints reflected early concerns about speculation parallel to the concerns about speculation in western lands acquired under the various homestead and federal land disposal laws.[39] Although the concern was genuine, it made little sense from an economic perspective. Holding land and other resources in anticipation of greater future returns will only happen if the discounted future value is greater than the present value. Mandating present use will sometimes be uneconomic, unless users compromise the resource to extract short term benefits at the expense of unrealizable future returns. Anti-speculation policies probably caused some of the environmental damage that concerns us today. Favored state interests also imposed other constraints on water marketing. Examples of this protectionism will be evident in the following catalogue of historic constraints on water marketing. A. Appropriation Doctrine Constraints on Water Marketing In many states, the appropriation doctrine makes water rights appurtenant to the land where the water use occurs.[40] By making an analogy to riparian jurisdictions where water rights were appurtenant by definition—where one held a riparian right when one owned riparian land—this rule probably seemed logical. However, considering that users could take water from anywhere and use it anywhere, assuming they had a legal right of access to the water source and a legal right to transport the water to its place of use, this rule made little sense.[41] The appurtenance rule tended to benefit agricultural uses, which has made change difficult in most western states where irrigated agriculture has been a powerful political force.[42] Although the rule seemed to be against the interests of water rights owners by limiting their potential market, irrigators generally paid only a fraction of the cost of their water.[43] Therefore, water rights owners did not encounter the true opportunity costs associated with selling to anyone other than a purchaser of their land. The beneficial use doctrine operated as another constraint on water markets by limiting the permissible uses of water.[44] Beneficial uses generally included—sometimes in varying order of priority—farming, mining, manufacturing, municipal use, and domestic use.[45] These definitions of beneficial use tended to change over time as the economy evolved.[46] However, the necessary political changes always lagged well behind the more fluid economic changes. The widespread non-recognition of recreation, wildlife habitat, and environmental protection as beneficial uses, for years after it was apparent that people cared about and would pay for these uses, clearly illustrates this phenomenon.[47] Most western states have prohibited or imposed tight restraints on water rights transfers.[48] These restraints reflect the reality that several water users often hold rights to the same water. An upstream use will return some percentage of diverted water back to the stream to be used successively by downstream rights holders. As a result, the upstream user cannot transfer the full amount of his diversion to another user who would diminish the return flow or return it at a location that bypasses downstream users.[49] This physical reality of water use is not necessarily an insurmountable obstacle to water marketing, particularly as better methods of measuring and monitoring return flows and consumptive use develop. A regulatory regime utilizing these technologies is necessary to assure that transfers do not injure other water rights holders. As previously suggested, a common argument made by opponents of water marketing and by proponents of public intervention in existing water rights regimes is that water rights are usufructuary and, therefore, less protected than possessory rights.[50] Though politically effective, this argument does not withstand scrutiny. Water rights are usufructuary not because water is special or because the public has a particular interest in water[51] but because the physical nature of water is unique. The nature of water makes it possible for multiple uses of the same water and makes it impossible, with some exceptions, to actually possess the same water for an extended period. Water rights owners effectively have a possessory interest in the amount of water that their right permits them to consume. Water markets require a system for assuring that transfers do not injure other water rights owners, and these systems are not difficult to implement if they clearly define water rights. Most western states limited water uses to diversionary uses so that instream rights were not possible.[52] The diversion requirement was a practical method of identifying water claimants and of measuring the volume or flow of a right, but it precluded rights in the many uses dependent on keeping water in the streams. With the rise of the environmental movement and of the growing interest in habitat protection, market advocates correctly argued that there is no reason instream uses cannot be protected by private acquisition of water rights.[53] Many western states still limit water rights to diversionary uses, and while most states have recognized that instream uses can be beneficial, many still limit ownership of these rights to the state.[54] Another major obstacle to water marketing in most states
is the time and expense of state approval of water transfers. These can be
prohibitive costs for many small-scale transfers. Finally, while many states have made it easier to transfer water rights and have expanded the range of beneficial uses that allow a user to acquire these rights, most do not permit marketing of water as a commodity.[56] For markets to serve most effectively as efficient allocators of scarce resources, states must allow water rights owners to sell the use of water without having to transfer the water right. Failing to permit commodity sales of water would be similar to prohibiting the leasing of land. This prohibition distorts the market by failing to recognize the complex variations in water supply and demand from place to place and from time to time. In fact, agricultural water users in the West have engaged in commodity-like exchanges of water for decades.[57] Generally, these have been exchanges and have not involved cash payments. Still, in either case, the market serves to move water to its highest and best use, at least within the confines of an irrigation district or other local entity. Lifting the constraints on the buying and selling of water as a commodity would greatly enhance the efficient allocation of water, particularly when supplies are low and demand is high. B. Other Legal, Cultural, and Political Obstacles to Water Marketing The appropriation doctrine developed in conjunction with the early settlement of the West.[58] Miners and farmers used surface waters to pursue their occupations, sometimes locating themselves close to water supplies and sometimes transporting water over long distances.[59] Except for domestic consumption and some stock watering, early westerners seldom used ground water. As a result, separate rights systems developed for surface and ground water.[60] Although a few states have managed to accomplish some integration of surface and ground water legal regimes,[61] the parallel systems of water rights pose problems for water marketing and for regulation since the surface and ground water supplies often interrelate. For markets to work, water rights must clearly delineate ownership. The purchaser of a right to surface water must feel secure that no one else is claiming the same water through a groundwater right. A similar obstacle to markets can arise from reliance on different legal regimes for water use and consumption and for water quality. Many uses require water of a minimum quality. Unless a purchaser has assurance that the water purchased will meet quality requirements, a viable water market is unlikely. These and other factors pose complications for those seeking to design the necessary property regimes for effective water markets, but none of the complications are insurmountable. In some cases, the solution is simply eliminating constraints and assuring that water rights regimes have the necessary characteristics for effective markets.[62] While historically the physical realities of water have made it difficult to define property rights in water, developing technologies often allow for advancements and improvements that were not previously possible.[63] Where overlapping or conflicting rights systems exist, legislative reform of the existing laws is the only solution that can provide for a coherent water rights regime. Respect for the traditional authority of the states to establish systems of allocation for water is critical to creating a coherent water rights system. Although it is certainly possible for a rights system to exist based on federal law, it would be very disruptive to shift from the well-established state water rights regimes. The federal government can assist in assuring that water markets can work across state borders, and the Commerce Clause of the United States Constitution assures that states will not discriminate against out-of-state market participants.[64] The vacated decision of the Tenth Circuit Court of Appeals in Rio Grande Silvery Minnow v. Keys,[65] provides an example of the threat posed to water markets by federal intervention. Although the court vacated the decision, this case may create precedent for future federal interference with state water rights.[66] The court originally concluded that federal regulations could effectively override contractually based claims to water, and it did not change this conclusion when vacating the ruling.[67] If the federal government or state governments are free to take or invalidate vested property or contractual rights in water, water markets will not be successful. One cannot overemphasize the importance of secure, well-defined, and enforceable property rights. The rights must be exclusive, universal, and transferable.[68] They must be exclusive so that purchasers can rely on the assurances of sellers, hence the need to integrate overlapping or conflicting rights systems. They must be universal in the sense that all water is property and is part of the overall supply. Finally, the rights must be transferable, which is, after all, the function of a market. The apparently failed ACF Basin negotiations among Alabama, Georgia, and Florida illustrate the importance of clearly defined and secure rights to any voluntary agreement among sovereign entities, whether individuals or states. At least three circumstances likely doomed these negotiations from the outset. First, there was no preexisting allocation of water among
the three states.[69] Without something resembling property rights—some
sense of the reasonable entitlements of each state—it is virtually impossible
to agree on a regime of water management. This is particularly the case where
one of the states has the lesser claim in terms of population, square miles
in the basin, and traditional economic use, but still wants the full natural
flow of the river. Given A second reason for the failure of the Third, when one of the principals and presumably many of
the stakeholders seek to preserve the status quo or even restore the status
quo ante, market-type agreements are seldom viable. Market transactions require
that all parties contribute something sufficient to allow everyone to come
out even or ahead. When a party has nothing to offer (a substantial amount
of money presently earmarked for other uses seems to be the only possible
thing that Early thinking and writing on water marketing focused on achieving more efficient use among traditional diversionary water users. Water market advocates recognized that agriculture in particular had few incentives to increase efficiencies. They suggested that water markets would provide those incentives by exposing water users to the opportunity costs of inefficient use. Over the last four decades, instream uses such as recreation, fishing, wildlife habitat, and pollution control have become a much higher priority.[70] These uses pose different challenges in terms of defining enforceable property rights, but the challenges are not insurmountable. C. What’s Actually Happening? In the grand scheme of things, there is not a great deal of water marketing in western states, but when compared to two decades ago, there is reason for optimism from the perspective of a market advocate. For the calendar year 2001, 219 major water transactions were reported—more than any annual transaction total for the previous five years.[71] For 2002, the publication reported 200 major transactions.[72] Thirteen states reported transactions in 2001; Colorado
was the runaway leader, followed by California, Texas, Arizona, Oregon, Washington,
Nevada, New Mexico, Idaho, Wyoming, Utah, Kansas, and Oklahoma.[73] Of the 200 transactions in 2002, 167 were for
municipal uses and 28 were for irrigation.[74] Fifteen
transactions were made “to augment stream flows, maintain reservoir levels,
or restore wetlands and wildlife habitat;” The most active market in the West is the Colorado Big
Thompson Project in Colorado (“CBT”).[78] In 1996, CBT water was trading at $2000 per unit.[79] In 2000, it was trading at $14,000 per unit.[80] The average price in 2002 was $12,822.[81] The experience with this market demonstrates the need for a critical mass of market transactions to create an active market. In The pressures for new water sources and for more efficient
use of existing water sources will increase throughout the West, particularly
in Conclusion Despite the philosophical, practical, and legal obstacles to water marketing, continued growth of water markets in the West is likely. Even some environmental groups have recognized that they might accomplish their objectives better through water markets than through regulation. Interest groups of all stripes can invest heavily in lobbying for and enforcement of regulation without any certainty of initial or sustained success. The acquisition of property rights can provide better security and, at least in some cases, can deliver results at less cost. Philosophical principles will prevent some environmentalists from embracing or even tolerating markets, but others have and will see water markets as a pragmatic and cost-effective way to achieve their objectives. Water marketing is fledgling, but it is alive and reasonably well in the West. It promises less heat and more light in providing concrete solutions to water allocation problems, including the desire to protect the environment. Even where private interests cannot or will not pay the costs, it is usually less expensive and more effective for the state to purchase rights that are publicly held. While not a perfect solution by any means, water marketing should at least become part of states’ water management tool kit. It should be the preferred tool in that kit when it works because of the dim prospects for effective centralized planning of water use even at the state level. However, advocates of water marketing will always be swimming upstream in a largely regulatory world. Although some environmental groups have pushed for marketing, many others continue to resist. Many other interests join in this resistance, including the agricultural industry, which fears that markets will facilitate what is ultimately inevitable—a change in their way of life. In the West, there is an ongoing struggle between those who advocate central planning of water and those who advocate greater reliance on markets. The fact that people switch sides depending on which approach they perceive will best serve their interests makes the struggle more complicated. The bottom line in the West, where most water supplies are fully or over appropriated, is that western states either will reallocate water using the voluntary mechanisms of the market or will reallocate by taking water from some and giving it to others. Those are the two options. States have nearly exhausted the possibilities for augmenting supplies through storage, and environmental interests will vigorously resist the storage opportunities that remain. More efficient use of the available supplies is the only real option, and experience demonstrates that markets generally are far more efficient than regulation and planning. The eastern states should learn from the hard learned lessons of water allocation in the arid West. * Dean and Erskine Wood Sr. Professor of Law, [1]. See, e.g., Comm. on W. Water Mgmt. Water Sci. & Tech. Bd., Nat’l Research Council, Water Transfers in the West: Efficiency, Equity, and the Environment 41 (1992); Bonnie C. Saliba & David B. Bush, Water Markets in Theory and Practice: Market Transfers, Water Values, and Public Policy 35 (1987); Richard W. Wahl, Markets for Federal Water: Subsidies, Property Rights, and the Bureau of Reclamation 127 (1989); Charles W. Howe et al., Innovative Approaches to Water Allocation: The Potential for Water Markets, 22 Water Resources Res. 439, 439 (1986). [3]. See, e.g., infra note 6. For an explanation of the pro-commoditization argument, see Harrison C. Dunning, Reflections on the Transfer of Water Rights, 4 J. Contemp. L. 109 (1977). [4]. See generally James L. Huffman, A North American Water Marketing Federation, in Continental Water Marketing 145 (Terry L. Anderson ed., 1994) (describing a proposed North American water federation). [6]. See,
e.g., Our Water Is Not for Sale to the Highest Bidder, Public
Citizen, at http://www.citizen.org/documents/OurWaterIsNotforSaletotheHighestBidder5.17.04.pdf
(last modified [7]. See James L. Huffman, Markets, Regulation, and Environmental Protection, 55 Mont. L. Rev. 425, 425-26 (1994) [hereinafter Markets]. [11]. See Stacy
Shelton, Proponent of Selling State Water Pulls Plan, [13]. See Kristina
Brenneman & Don Hamilton, Utility Alliance Takes on Takeover, [17]. See Michael Faure & Goran Skogh, The Economic Analysis of Environmental Policy
and Law: An Introduction 130-31 (2003); Barton H. Thompson, Jr., What
Good Is Economics?, 37 U.C. [18]. The joke about the economist stranded on a desert island with only a can of spam to eat who says “assume we have a can opener” is always good for a laugh, but it does not diminish the usefulness of making assumptions about some variables in an effort to understand others. [19]. See Susan Emmenegger & Axel Tschentscher, Taking Nature’s Rights Seriously: The Long Way to Biocentrism in Environmental Law, 6 Geo. Int’l Envtl. L. Rev. 545, 571 (1994). [21]. James
L. Huffman, Marketing Biodiversity, 38 [25]. See, e.g., Colo. Const. art. XVI, § 5 (“The water of every natural stream, not heretofore appropriated, within the state of Colorado, is hereby declared to be the property of the public, and the same is dedicated to the use of the people of the state, subject to appropriation as hereinafter provided.”); Schaezlein v. Cabaniss, 67 P. 755, 757 (Cal. 1902) (“The running waters of the [S]tate of California are public property. One who obstructs them obstructs them under license or permission from the [S]tate, but only upon such conditions as to their use as the state may impose.”). [26]. William Blackstone, 2 Commentaries on the Laws of England 18 (Garland Publishing, Inc. 1978) (“[W]ater is a movable, wandering thing, and must of necessity continue common by the law of nature; so that I can only have a temporary, transient, usufructuary property therein: wherefore, if a body of water runs out of my pond into another man’s, I have no right to reclaim it.”). [28]. See James L. Huffman, The Inevitability of Private Rights in Public Lands, 65 U. Colo. L. Rev. 241, 269-75 (1994). [29]. John L. Fortuna, Note, Water Rights, Public Resources, and Private Commodities: Examining the Current and Future Law Governing the Allocation of Georgia Water, 38 Ga. L. Rev. 1009, 1018 (2004) (“[T]he creation of a private water market would provide a windfall to a relatively small number of permit holders at the expense of the citizens as a whole.”). [32]. Eric T. Freyfogle, Water Rights and the Common Wealth, 26 Envtl. L. 27, 38 (1996) (“Any effort to promote water marketing must take into account, and assume responsibility for, the damaging messages that inevitably come along with it: water as commodity; nature as resource; community as voluntary and dispensable; humans as lords.”). [34]. [36]. See James L. Huffman, The Past and Future of Environmental Law, 30 Envtl. L. 23, 29-30 (2000). [37]. Professor James
L. Bross, Address at the [38]. Andrew Mcfee Thompson, Free Market Environmentalism and the Common Law: Confusion, Nostalgia, and Inconsistency, 45 Emory L.J. 1329, 1352 (1996). [39]. Andrew P. Morriss et al., Homesteading Rock: A Defense of Free Access Under the General Mining Law of 1872, 34 Envtl. L. 745, 797 (2004). [40]. See, e.g., Wash. Rev. Code Ann. § 90.03.380(1) (West 2004) (“The right to the use of water which has been applied to a beneficial use in the state shall be and remain appurtenant to the land or place upon which the same is used . . . .”); see also Salt River Valley Water Users’ Ass’n v. Kovacovich, 411 P.2d 201, 203 (Ariz. Ct. App. 1966) (holding “that the Doctrine of Beneficial Use precludes the application of waters gained by water conservation practices to lands other than those to which the water was originally appurtenant”). [41]. Most states did develop watershed rules that limited the use of water to the watershed of origin. See Olivia S. Choe, Note, Appurtenancy Reconceptualized: Managing Water in an Era of Scarcity, 113 Yale L.J. 1909, 1925-26 (2004). This rule protected downstream rights holders from becoming dependent on the return flow. See id. [42]. Cf. Janet
C. Neuman & [43]. Cf. Saliba & Bush, supra note 1, at 80-81 (describing the heavy involvement of the federal government in irrigation and agriculture policies in the West). [44]. See Janet
C. Neuman, Beneficial Use, Waste, and Forfeiture: The Inefficient Search
for Efficiency in Western Water Use, 28 Envtl. L. 919, 923-25 (1998) [hereinafter Beneficial
Use]. But see Idaho Dep’t of Parks v. Idaho Dep’t of Water Admin.,
530 P.2d 924, 927 ( [51]. Some have suggested that water rights are usufructuary because the public has a special interest in water or that, because the rights are usufructuary, the public has more extensive powers of regulation. Janet C. Neuman & Keith Hirokawa, How Good Is an Old Water Right? The Application of Statutory Forfeiture Provisions to Pre-Code Water Rights, 4 U. Denv. Water L. Rev. 1, 25 (2000). However, the concept of a usufruct appears to be the earliest form of property in the sense that it included the right to exclude and in the sense that it applied to many different kinds of resources, including land. Thomas W. Merrill, Property and the Right to Exclude, 77 Neb. L. Rev. 730, 745 (1998). [52]. Generally, the elements necessary to prove an appropriation right are “(1) an intent to appropriate, (2) notice of the appropriation, (3) compliance with state laws, (4) a diversion of the water from a natural stream, and (5) its application . . . to a beneficial use.” George A. Gould & Douglas L. Grant, Cases and Materials on Water Law (6th ed. 2000). [56]. Although there are no prohibitions on marketing water as a commodity, most state laws effectively limit transfers to the water right itself. Alison Mylander Gregory, Groundwater and Its Future: Competing Interests and Burgeoning Markets, 11 Stan. Envtl. L.J. 229 (1992). [58]. See Wells A. Hutchins, 1 Water Rights Laws in the Nineteen Western States 437-38 (1971) (quoting Hewitt v. Story, 64 F. 510, 514-15 (9th Cir. 1894)). [59]. Barton H. Thompson, Institutional Perspectives on Water Policy and Markets, 81 Cal. L. Rev. 671 (1993). [61]. [62]. Various water market advocates have formulated what these requirements might be. Richard Posner suggested that the essentials of a property system are (1) universality; (2) exclusivity; and (3) transferability. Richard A. Posner, Economic Analysis of the Law 11-13 (1st ed. 1972). [63]. See Terry L. Anderson & P.J. Hill, From Free Grass to Fences Transforming the Commons of the American West, in Managing the Commons 119 (John A. Baden & Douglas S. Noonan eds., 2d ed. 1998). [65]. 333 F.3d 1109 (10th Cir. 2003), vacated, 355 F.3d 1215 (10th Cir. 2004) (“The climatological circumstances that occurred during the appeal and the passage of time have rendered the injunction superfluous.”). [69]. See Joseph W. Dellapenna, The Law of Water Allocation in the Southeastern States at the Opening of the Twenty-First Century, 25 U. Ark. Little Rock L. Rev. 9, 11 (2002). [75]. 2001
Annual Transaction Review, supra note 71, at 16. My colleague
Janet Neuman deserves much of the credit for that success based on her
work as President of the Oregon Water Trust. See generally Neuman & Chapman, supra note
42, at 135-36. Professor
Neuman is currently Professor of Law at [78]. See Water Market Indicators, Water Strategist, Mar. 2002, at 8; see also Howe, supra note 1, at 443. [82]. [83]. See CA: State Government Acts to Facilitate Closure on Quantification Settlement Agreement, supra note 82; CA: Water Agencies Revise Terms of Transfers for QSA, supra note 82. [86]. CA: Metropolitan and PVID Finalize Principles of Land Fallowing Agreement, Water Strategist, Oct. 2002, at 16.
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