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There are three sets of options that a legislature may consider to incorporate public interest criteria into water transactions. They are not mutually exclusive and, as a package, can provide an administrative agency with flexibility in balancing competing public interests vying for scarce water during both a rule-making process or factual consideration of a transfer application. The first would determine public interest values and the manner in which they would be applied; it would include the establishment of water planning processes to balance contending interests. The second would condition water transfers to protect the public interest; it would emphasize mitigation measures to compensate for impacts. The final set would utilize the market to provide incentives to conserve water that would subsequently be made available for transfer; water moved accordingly would not affect its continued use in the basin of origin. Defining and Applying the Public Interest Ensuring that public interest values are considered in a water transfer requires a determination of applicable criteria, a process capable of factoring them into a decision, and means of mitigating any adverse impacts. Defining the public interest may be accomplished by specifying criteria in statute or by leaving it up to a regulatory agency or water court to determine what factors are appropriate (citations from statutory and case law were presented in Part Two of this report). Absent specific statutory guidance as to what constitutes the public interest, the legislature may consider placing the burden of assessing potential impacts in the area of origin on the transfer applicant. In its original fonn, Colorado's 1991 proposed Senate Bill 4 would have required "any party applying for a change in a water right which will cause water to be removed from any irrigated area" to submit to the water court with jurisdiction over the filing "an assessment of the environmental and economic consequences of 35