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there are relatively few absolute legal barriers.' Removal of ''legal impediments" will not by itself greatly change the process of water reallocation in the West. Instead, attention now is turning to a more sophisticated evaluation of the nature of water use in the West and the factors that tend to keep water from changing use as readily as the relative value of water uses would suggest. One of these factors is the transaction costs, broadly defined, of making a water transfer! There are substantial engineering, legal and other costs associated with locating purchasable water rights, determining their transferability, evaluating the amount of water that may be transferred, addressing issues of protection of other water rights and the public interest, and physicalIy making the water available for use at the new location. These costs are, of course, in addition to the purchase price for the water right itself. Moreover, the state- level change-of-use processes tend to be slow moving and can be contentious. A second factor is the growing concern with the so-called "third party" effects associated with transfers. Water flowing in a stream is not a resource readily susceptible to private ownership. It serves a multitude of benefits while in the stream. While portions of its flow periodically are dedicated to specific uses intended to benefit particular people it is often true that at least some of the water will subsequently be available for other uses. Because of the shared and interdependent nature of water the legal system recognizes and protects legal entitlements to the use of water but does not give title to the water itself. Legally speaking then, the marketable interest is the entitlement of use, not the water itself. A water use entitlement, whether expressed as an adjudicated water right, a share of a water right, a permit or license, a contract, or some other form, is inherently limited by the manner in which water is shared among a large number of uses. In a water rights context this relational dependency is recognized in the requirement that a change of use cannot occur if it will cause harm or injury to 'Lawrence J. MacDonnell, F. Lee Brown, Charles W. Howe, Teresa A. Rice, The Water Transfer Process as a Mana2ement ODtion for Meetin2 Cbanl!in2 Water Demands. Natural Resources Law Center (1990). 2charles W. Howe, Carolyn S. Boggs, and Peter Butler, 'Transaction Costs as Determinants of Water Transfers,' 61 U. Colo. 1.. Rev. 393 (1990). 1-2 I I I I I I 'I I I I I I I I I I I I I