Water Markets
From the first moment man discovered the value of a thing he has found a way of trading for it. In the typical sense, value translates from rarity. When valuable things are in short supply, there will be an increase in demand for them. Increases in demand cause an increase in value. This is no less true for water. The average consumer rarely thinks about where her water comes from. She turns on a faucet and it is there for her. At least in the United States, the apparent readily available supply of water escapes the concerns of a majority of our population. Although it is often taken for granted, water is in short supply, and that supply is dwindling.
The Eastern Snake Plain Aquifer is Idaho’s largest water resource. It covers over ten thousand square miles and probably contains close to a billion acre feet of water. That’s enough to cover the entire Snake River plain with water one hundred and forty feet deep, twice as deep as Lake Erie.In the early nineteen nineties, recognizing a need to protect the future of this important public trust and to keep the aquifer from becoming over appropriated, Idaho issued moratoria on new water rights from the aquifer. Almost overnight, bona fide local water markets were born. It was no longer possible to appropriate water by putting it to beneficial use and applying for a permit. Now, in order to meet water needs, a person, company, or other entity must purchase its right to use water from someone that already possesses it. Each year more and more empirical evidence indicates the west’s water resources are becoming scarcer.In Idaho, fewer and fewer remaining areas do not receive focused management from the state’s Department of Water Resources. Limitations on issuance of new water rights guarantee a water market will affect every member of the public in some way or another over the coming years.
Water rights are rights in property and even though the “elements” give a right value, they can limit its transferability in the local market model. Water rights can be “sold, donated, mortgaged, deeded, leased, devised or otherwise treated in most ways like any other real estate.” Water rights are also protected by constitutional takings doctrines. But, unlike other real property, water rights are only a permission to use a public resource. Most real property markets function on the basis of certainty and enforceable contracts. The reality of water is that it is anything but certain.
A standard property model functions on the idea often coined as a “bundle of sticks”; 1) a complete legal description of what is owned 2) the right to exclude others and exercise control over the property and 3) the transferability and right to sell what is owned. A water rights transaction is more particular. It is plagued with the nuances of regulatory procedures, state statutes and the unpredictability of the resource year after year. A water right may not be transferred outside of its source. This element limits the area in which a right can be transferred although the state may allow a change in source if there is a significant showing that the latter is a tributary to the original and the two are hydrologically connected. Under the state’s conjunctive management rules, this has provided some interesting case law. The No injury doctrine and a lack of standing requirements on protests, limit the ability to transact in water without a detailed analysis of the effects of a transfer. This doctrine requires that a change in the elements of a right only be approved or conditioned in such a way as to do no harm to other appropriators, whether they be junior or senior. The doctrine rests on the theory that other users have “vested rights” in the continuation of conditions as they existed at the time of their own appropriation.
Because the science is not exact, these doctrines contribute to the uncertainty of a water transaction. The doctrines of anti-speculation and beneficial use also distinguish water transactions from their real property cousins. These doctrines require the water to be associated with a particularly identified use or associated with land. They require transfers to demonstrate precise use, location, purpose and provide for abandonment or forfeiture when water is not utilized for a number of prescribed years. These hindrances are not necessarily a bad thing when one considers the broader picture of necessary water management.
Successful Water transfers involve specialized knowledge in administrative law, property law, contracts, hydrologic engineering, environmental policy and public administration. Idaho Water Company and its business partners can provide you the assistance needed to navigate these highly specialized areas.
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Sources:
"Idaho Water Resource Board." Idaho Department of Water Resources. N.p., n.d. Web. 04 Apr. 2015.
<http://www.idwr.idaho.gov/waterboard/WaterPlanning/CAMP/ESPA/>.
See Robert Jerome Glennon, Unquenchable (Island Press 2010).
Fereday, Meyer & Creamer, Water Law Handbook: The Acquisition, Use, Transfer, Administration, and Management of Water Rights in Idaho. Givens Pursley (2013).
Peter Culp, Robert Glennon & Gary Libecap, Shopping For Water: How the Market Can Mitigate Water Shortages in the West. Hamilton Project (2014).
See City of Pocatello v. Idaho, 152 Idaho 830 (2012).
Barton H. Thompson (Jr.), John D. Leshy & Robert H. Abrams, Legal Control of Water Resources (W. Academic Publ'g 2012).
