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U03124 categories of lost income and amenities are: (a) future net income that would be generated directly and indirectly in the basin by future diver- sion uses of currently unused waters; (b) current and future values and incomes directly and indirectly associated with instream uses; and (c) losses to the general public from deterioration of public services and quality of life. 2. Compensation should not be restricted to construction of and funding for water storage. Payment should be made to agencies not faced with this constraint if possible, i.e. to units of general government. 3. Compensation should not aim at keeping the price of water in the basin of origin below its real scarcity value. 4. If water storage is the most efficient form of compensation from the area of origin's viewpoint, construction of the storage facili- ties should be delayed until they are actually needed. The proper pay- ment would be the present value of the planning, filing, land acquisition, and construction costs. 5. The amount of compensation paid to losing parties should be based on the assumption that those parties will act rationally to adapt to the new water supply situation-that they will undertake all cost- effective steps to minimize their income losses in the face of dimin- ished water supplies. Compensation should then equal the sum of these mitigation costs plus residual damages. 6. These principles should be applied to all out-of-basin trans- fers, regardless of the nature of the exporting agency. VI. CONCLUSION In many areas of the United States, particularly in the West, local supplies of water are insufficient to meet demand. The prior appropria- tion doctrine recognizes the value of allowing water, like other re- sources, to be moved to locations where it can be applied to a beneficial use. Nevertheless, restrictions on the movement of water out of the area of origin exist in a number of states. The consequences of absolute restrictions on the transfer of water for use off riparian lands has caused some eastern states to move in the direction of an appropriation rights system.6l The Nebraska prohibi- tion against interbasin transfers has now been rejected. It is generally recognized that rigid limitations on the manner and circumstances under which water transfers may occur unnecessarily restrict poten- 61. See, e.g., J. Sherk, Slale Legislative Issues in the Conversion of Riparian Rights Systems to Prior Appropnation Systems (Oct. 10, 1984) (unpublished manuscript, Land and Natural Resources Division, U.S. Dept. of Justice).