Economic impacts of water law - state law and water market development in the Southwest

Western state statutes, case law and administrative procedures significantly affect the economic benefits and costs associated with market transfers of water rights. State laws define the uses to which water rights can be applied and the conditions that must be satisfied to change the point of diversion place or purpose of use. Administrative procedures for transferring water rights can involve substantial costs to the transferor and become a significant factor in determining whether a potential transfer can profitably be implemented. Laws and policies that are changing or ambiguous add an additional element of risk to the transfer process and can affect market activity by failing to clarify the conditions under which a transfer may or may not take place. This paper reviews and contrasts key elements in water policies of the southwestern states, focusing on the economic implications of these policies for market transactions. -Author