WSP06745

• File Number: 8126.700
• Description: Arkansas River Coordinating Committee - Committees - Subcommittees
• State: CO
• Basin: Arkansas
• Water Division: 2
• Date: 12/1/1994
• Author: AWRA
• Title: Water Resources Bulletin - Administrative Institutional and Structural Characteristics of an Active Water Market
• Water Supply Pro - Doc Type: Report/Study

Administrative, Institut.ional. and Structural Charac'i.ensti.cs or an Active Water Ma.rket

of water sought to be transferred per application was
lowest in Utah (6.3 acre,feet) and New Mexico (9.6
acre,feet) and highest in Wyoming (878 acre-feet) and
California (5,000 acre-feet). There have been relative-
ly few permanent water transfers in other states, In a
recent survey on the "Impacts of Water Transfers on
Agriculture in the Great Plains States", less than
7,000 acre-feet of water, excluding Colorado, was
reported to have been transferred from agriculture to
other uses over the last five years (Michelsen, 1994;
unpublished report, Water Committee, Great Plains
Agricultural Council).
Markets for the temporary transfer of water rights
have also developed to address short-term or immedi-
ate drought needs. Examples include water banking
in California and seasonal rental markets, usually for
agricultural use, in other areas. The focus of this
paper is on markets for permanent, rather than tem-
porary, transfers of water rights.

FEW ACTIVE MARKETS EXIST

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Although individual transfers are occurring in
many areas, markets consisting of regular transac-
tions, rather than sporadic individual transfers, have
been slow to develop and are few in number, Exam,
pies of areas with some form of established or recog-
nizable water market include: the Arva Valley near
Tucson, Arizona; western Nevada's Truckee and Car-
son Rivers near Reno, Nevada; and the Front Range
of the Colorado Rockies from Pueblo to Fort Collins,
Colorado, During the 1970s and mid-1980s, the City
of Tucson, Arizona, purchased and retired irrigated
farmland in the Arva Valley to obtain rights to the
ground water for urban use, Because ground water
rights are appurtenant (tied) to the land in Arizona, it
is necessary to purchase land to acquire the associat-
ed water rights and then apply for a transfer of the
historical amount of water consumptively used to
another location or use. This market has experienced
stop and go activity and is essentially dependent on a
single buyer, the City of Tucson, In Nevada, agricul-
tural surface water rights are being purchased and
transferred in the Truckee,Carson river basin to meet
urban growth and industrial demands (upper basin)
and to support, wetlands (lower basin). Uncertainty
about legal, administrative and transfer issues are
<ontributing to the variability and thin market for
these rights,
Some of the most active markets are along the Col-
orado Front Range where water rights continue to be
nurchased from individual farmers and irrigation
<ompanies for transfer to municipal and industrial

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uses. Much of lhe activity al<mg the Front Range
occurs within two water management districts, the
Northern Colorado Water Conservancy District
(NCWCD) and the Southeastern Colorado Water Con-
servancy District (SCWCD), The NCWCD includes
the South Platte river basin in northeastern Colorado
and the cities of Boulder, Fort Collins and Greeley.
The SCWCD includes the Arkansas river basin in
southeastern Colorado and the cities of Colorado
Springs and Pueblo. Both districts import additional
water from the Colorado River basin through trans,
mountain diversions.
The number and size of water market transactions
in each of the areas discussed above varies signifi-
cantly, but transactions are often limited to one or
just a few specific types of water rights that are well
defined and relatively easily transferable to other
locations and uses, Contributing to the slow develop-
ment and variability in markets and transactions are
the lack of well defined or quantified rights (amount
of water, time and priority), institutional restrictions
and high transaction costs (Young, 1986). In addition,
where transactions have occurred, there has been
wide variation in the prices for water rights (Colby,
1993; Person and Michelsen, 1994), These conditions
indicate that even where transfers are occurring,
most of the so called markets for water rights are
thin, or very weakly established if they exist at all,

LESSONS FROM AN ESTABLISHED
WATER MARKET

My purpose here is to examine one of the more
established water right markets in an effort to learn
about the institutional, hydrologic, administrative,
and supply and demand characteristics of a function-
ing water market. The water right transfer market
that has developed for Colorado-Big Thompson (C-BT)
Project water in northeastern Colorado is one of the
most active and well established water markets in the
western U ,S. C-BT Project water has been actively
traded between agriculture, municipal and industrial
uses since the early 1960s, In several ways the C-BT
market symbolizes a best case example of existing
water markets, because it lacks many of the restric-
tions or difficulties faced in other markets, C-BT
water rights (actually allotments, representing a
share in the delivery of the project water supply) are
reliable, well defined, have relatively few restrictions
on use and transfer, and can usually be transferred at
low cost. In fact, some consider the C,BT market to be
a model for the development of other water markets
(Woter Strategist, 1990), Because the C-BT market

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WATER RESOURCES BULLETIN