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<br />Water markets can mean an end to water shortages <br /> <br />Page 6 of27 <br /> <br />repairing pipes. The rule is based on the notion that <br />any water conserved now must have been wasted in <br />the past and therefore belongs in the stream for <br />anyone to appropriate. However, the prohibition <br />removes any incentive for water users to improve <br />their efficiency. <br /> <br />"Beneficial use" is another restriction on water <br />rights. To establish a water right under most state <br />laws, an appropriator must apply the diverted water <br />to a beneficial use. States often specify uses <br />considered beneficial. Maintaining instream flows <br />was not recognized as a beneficial use until recent <br />years, and at various times states have explicitly <br />excluded certain uses. For example, Montana <br />passed a statute in 1979 stating that water used in <br /> <br />coal slurry pipelines was not a beneficial use.8) <br /> <br />Some state regulations may be justified on the <br />grounds that they prevent harms to other water <br />users. When an upstream water diverter moves the <br />diversion point, irrigates a different crop, or <br />changes the timing of use, downstream users may <br />be affected. Water that formerly returned to the <br />stream may now return at a different time or in a <br />degraded condition. All western states have judicial <br />or administrative procedures designed to protect <br />other water users. Usually they allow transfers only <br />ifthere is no injury to other water right holders. <br /> <br />But many regulations go beyond protecting third <br />parties and interfere with efficient market <br />allocations. Why shouldn't beneficial use be <br />determined by what users are willing to pay for <br />water? Why can't salvaged water revert to the <br />owner, providing an incentive to invest in <br />conservation? Getting outdated regulations out of <br />the way is a must for improving water allocation <br />through markets. <br /> <br />"Public Interest" Restrictions <br /> <br />States and counties have begun passing area-of- <br />origin protection laws that prohibit or limit transfers <br />6fwater outside its originating basin. Water <br />transfers can be stopped in the name of protecting <br />rural economies, culture, the environment, or the <br />"public interest" generally. <br /> <br />Yet the extent of such harms is exaggerated. For <br /> <br />http://www . perc.org/publica:tions/policyseries/priming_ full.php ?s=2 <br /> <br />9/1212006 <br />