PUB00158

• Year: 1997
• Title: A Bibliographic Pathfinder on Water Marketing
• CWCB Section: Administration
• Author: Ronald A Kaiser
• Description: A Bibliographic Pathfinder on Water Marketing
• Publications - Doc Type: Other

cases, the delivery charges exceeded
the initial cost of the water.8
Purchases by the bank pro-
ceeded slowly until the state guar-
anteed sellers that their price
would be adjusted upward to re-
flect subsequent seasonal price in-
creases. Farmers willing to idle land
or shift from divening surface water
to pumping groundwater were the
principal sellers. The bank pur-

transfers of water rights, but rules
governing where and how the
water can be used are restrictive.
For instance, out-of-state transfers
are prohibited and irrigators re-
ceive preference over all other us-
ers in purchasing or renting
banked water.
· Australia. In Australia, the state
of Victoria, which facilitates trans-
fers, defines water rights as explicit

As supply and demand conditions change, the

historical allocation of water rights becomes

inefficient.

chased 800,000 acre-feet (nearly 1
billion cubic meters) of water, based
on early estimates of critical need
before the buyers made firm com-
mitments.
California incurred a sizable fi-
nancialloss when the bank was able
to resell only about half of the wa-
ter. Unsold water was used prima-
rily for carryover storage and for re-
ducing saltwater intrusion into the
delta of the Sacramento and San
Joaquin Rivers.
In subsequent years, the state
required a signed contract with a
buyer before committing to pur-
chase water.9 The third-party im-
pacts associated with these trans-
fers are unknown, but they were
probably insignificant compared
with the benefits of moving water
to higher-value uses during a pe-
riod of severe drought.
. Idaho. Idaho established the
nation's first permanent water-
banking program in 1979, and
several western states are consid-
ering similar actions. Idaho's bank
allows temporary or permanent

58 . FORUM ftr Applied Research and Public Policy

shares of stored, rather than deliv-
ered, water. Under this system of
capacity sharing, decisions regard-
ing reservoir releases are made by
individual owners of the rights
rather than by a central authority.
Reservoir operators serve like bank-
ers, making releases on request. The
operators also keep track of each
owner's balance on a continuous
basis by adding inflows and deduct-
ing releases and losses from evapo-
ration and seepage. Water users con-
trol the timing of their deliveries,
and transfers can be made simply
by having the operator make the ap-
propriate debit and credit. 10
Banks can operate at any ad-
ministrative level, ranging from
multi-state to water districts to
ditch companies. They can be de-
signed to manage different types of
water-use entitlements. And they
can facilitate temporary water trans-
fers by developing clear, well-defined
rules and procedures that reduce
transaction costs.
Temporary water transfers, how-
ever, are not particularly effective

for adapting to the I ng-term de-
mand and supply sifts that re-
sult from population and income
growth, urbanizatio , rising val-
ues for instream flow, groundwa-
ter depletion, and di ate change.
Indeed, at some poi t, as supply
and demand conditipns change,
the historical alIocat on of water
rights becomes ineffi ient enough
to warrant a permane t transfer of
rights.

Keeping Deserts G en

Transfers 0 permanent
water right are permit-
ted, subjec to review of
third-part consider-
ations, in all the wester~ U.S. states.
The process of resolving third-party
impacts is often SIOW!COStly, and
contentious, however, nd the out-
come of a proposed tra sfer can be
uncertain. Those orch trating the
proposed transfers fac either the
challenge of proving th t a change
will not harm others 0 the added
cost of compensating th third par-
ties who might be adver ely affected
by the transfer.
Ongoing efforts to meet the
water demands of the ra idly grow-
ing coastal area of sou hern Cali-
fornia illustrate the ch lIenges of
securing additional wat r in a re-
gion where supplies a e already
fully developed and alIo ated. The
task is made more urge t and dif-
ficult because access to s me of the
region's traditional sources has
been blocked.
As a result of envir nmental
concerns, for instance, os Ange-
les has been forced to r duce the
water it takes from Mon Lake and
Owens Valley. The regi n is also
losing rights to the unus d entitle-
ments of other states to ater from
the Colorado River.
The Imperial Irrigatio District