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<br />Water markets can mean an end to water shortages <br /> <br /> <br />Page 3 of27 <br /> <br />· In 1991, at the height of a drought in <br />California, the state established an <br />Emergency Drought Water Bank to purchase <br />water from farmers at $125 per acre- foot(ll <br />and sell it to municipal and other agricultural <br />users for $175 per acre-foot. "By the end of <br />June, 1991, the Drought Water Bank: had <br />purchased about 750,000 acre- feet of water. . <br />. . It was a surprise to many people that such <br />large quantities of water became available so <br />quickly" (Rogers 1993, 9). <br />· Buck Hollow Creek near the Dalles, Oregon, <br />had become a trickle of water in the summer <br />due to irrigation, and the once-plentiful <br />steelhead run had dwindled to 30 pairs or <br />fewer. But in 1994, the newly formed Oregon <br />Water Trust leased a local fanner's water <br />rights and left the water flowing for fish. The <br />price was $6,600, the cost of the 78 tons of <br />hay the fanner would have grown had he <br />irrigated his land. <br />· Chile's new constitution, passed in 1980 and <br />modified in 1988, established secure, <br />transferable water rights. According to <br />Renato Schleyer (1994, 76): "The freedom to <br />buy and sell or 'rent' water has given fanners <br />greater flexibility to shift crops according to <br />market demand. Efficiency in urban water <br />and sewage services has been greatly <br />increased with no impact on prices. . . ." <br /> <br />Unfortunately, these examples are exceptions in a <br />world where public policy hinders the use of water <br />markets. To understand why markets are so <br />important, we must learn how we got to where we <br />are today. In this paper, we will review the history <br />of water allocation in the United States and see how <br />a property-rights-based system became choked with <br />government-imposed obstacles. <br /> <br />The good news is that we are on the brink: of a <br />revolution in water marketing. As our forthcoming <br />book, In Pursuit of Water Markets: Priming the <br />Invisible Pump, will show, water rights are coming <br />full circle--once again returning to a system that <br />allows trade (Anderson and Snyder 1997). In spite <br />of many impediments, water is being more freely <br />traded than in the past. Markets are providing <br />agricultural and urban users with more reliable <br />supplies and with an incentive to conserve, and are <br />enabling environmentalists to purchase instream <br /> <br />http://www . perc.org/publications/policyseries/priming_ full. php ?s=2 <br /> <br />12/2006 <br />