<br />VOL, 30, NO.6
<br />
<br />DECEMBER 1994
<br />
<br />WATER RESOURCES Buu.ETIN
<br />AMERICAN WATER RESOURCES ASSOCIATION
<br />
<br />ADMINISTRATIVE, INSTITUTIONAL, AND STRUCTURAL
<br />CHARACTERISTICS OF AN ACTIVE WATER MARKETl
<br />
<br />Ari M, Miche/sen2
<br />
<br />ABSTRACT: Voluntary water transfers t.hrough markets have been
<br />advocated by many diverse groups as a means to reallocate sCBrce
<br />wat.er supplies in the semi-arid western U.S. Although transfers of
<br />water rights have occurred almost since the creation ofpnor appro-
<br />priation laws over a century ago. functioning water markets have
<br />been very slow to develop and arc few in number. The structure,
<br />composition. administration and transactions of one of the most
<br />well established water markets. shares in the Bureau of Reclama-
<br />tion, Colorado-Big Thom'P!Kln project, are examined to betler under.
<br />stand the institutional and transfer conditions that sustain an
<br />active water market. Results from a detailed study of C-BT project
<br />records reveal that between 1970 and 1993 there were 2.698 trans-
<br />actions through which over one-third of the project water changed
<br />ownership or type aruse. Further analysis shows that the transac-
<br />tions involved many individual sellers and categories of buyers
<br />with different uses, including agricultural buyers. The transfer
<br />activity and efficiency of the C-BT market has lead some to suggest
<br />that it be used as a model for other market~ However, because this
<br />market has fewer institutional restrictions, a well developed inrras-
<br />tructure and unique market conditions, it will be difficult to trans-
<br />rer this model to other areas without accompanying modifications
<br />in water right administration and institutions.
<br />(KEY TERMS: water transrers; water markets; watcr rights; insti.
<br />tutions; reallocation; administration.)
<br />
<br />INTRODUCTION
<br />
<br />Economists, water resource managers, lawyers,
<br />environmental groups and politicians have advocated
<br />the use of voluntary water markets as a means to
<br />reallocate scarce water supplies in the semi-arid west-
<br />ern U,S. (Anderson and Turner, 1993; Howe, 1986;
<br />Driver, 1986; Yardas, 1993; Meyers and Posner, 1972).
<br />The demand for water continues to increase with the
<br />growth in population, industry, recreation, environ-
<br />mental and other uses, At the same time, the normal
<br />!lows of many western rivers are already fully allocat-
<br />ed and new water supplies are increasingly difficult,
<br />
<br />if not impossible, to develop further. This is seen as
<br />evidence that the western United States' water econo-
<br />my is moving from the expansionary phase to the
<br />mature phase (Randall, 1981). In other words, "we are
<br />moving from an era premised on the continual devel-
<br />opment of new supplies to a reallocation era premised
<br />on the better use of existing supplies" (National
<br />Research Council, 1992), One consequence of these
<br />conditions is that there is increasing attention on
<br />transferring water rights from one use or location to
<br />another, My purpose here is to examine one of the
<br />more established water right markets in an effort to
<br />learn about the institutional, administrative and
<br />transaction characteristics of an active water market,
<br />
<br />MARKET TRANSFERS ADVOCATED
<br />
<br />Interest in transferring water through markets has
<br />grown quickly, Numerous individuals and groups
<br />have advocated and discussed water market issues in
<br />publications, papers and conferences, often with the
<br />recommendation that market transfers should playa
<br />significant role in meeting current and future water
<br />needs, For example, in a study for the Western Gover,
<br />nors' Association, the Water Efficiency Task Force
<br />reported that "Voluntary transfers are the linchpin of
<br />a strategy to enhance water use efficiency in the
<br />West" (Driver, 1986), Following a series of workshops
<br />in 1991 and 1992, the Western Governors' Association
<br />and Western States Water Council endorsed a set of
<br />principles and recommendations for managing west-
<br />ern water, Their report includes recommendations to
<br />manage water on a watershed or problemshed basis
<br />and the preference for using market-like rather than
<br />
<br />lPaper No. 94147 of the Water Resources Bulletin. Discussions are open until August I, 1995.
<br />2Departmcnt or Economics, Vancouver Campus, Washington Statc University. 1812 E. Mcloughlin Blvd.. Vancouver, Washington 98663.
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