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<br />PART lWO: DEFINING THE PUBLIC INTEREST <br /> <br />As the economic and environmental costs of water development projects rise, <br />western states are looking increasingly to reallocate existing supplies to meet higher valued <br />uses. Economic costs are fairly straightforward; they include financial expenses for <br />construction, operation, and delivery of water supplies to end users. Environmental costs <br />are less easily quantifiable; they entail actual damages to ecosystems dependent on <br />instream flows and the administrative and litigation costs incurred by water development <br />proponents and opponents in the decisionmaking process. Often the most controversial <br />component of the reallocation equation, however, is determining what are the higher <br />valued uses intended to be satisfied by water transfers. <br /> <br />Water reallocation is accomplished principally through the use of markets. A water <br />market can be defined as an "institutional setting within which the right to water is bought, <br />sold, rented, or traded among consenting parties,"lO The market allocation of water comes <br />under state regulatory purview--either through administrative agency or court proceedings-- <br />at the point where a transfer of water rights is proposed. A water transfer may involve a <br />change in the point of diversion, place of use, or type of use. Conflicts over whether a <br />water transfer serves a higher valued use tend to focus on those that entail a change in the <br />place of use and type of use, e.g., transfers from a rural area of origin to a municipality. <br />These may carry with them environmental, economic, and social costs that will require the <br />legislature to develop criteria that must be considered in the decisionmaking process. <br /> <br />Because water rights in most western states that adhere to the prior appropriation <br />doctrine are considered to be property rights, they can be leased or sold provided they do <br />not adversely affect existing water rights. In addition to this nonimpairment rule, several <br />states require the regulatory entity reviewing a proposed transfer to consider its impact on <br />the "public interest," generally a vaguely defined term that nonetheless attempts to account <br /> <br />6 <br />