State water law is a complicated mess, a piece-by-piece accumulation and accretion of disparate laws since 1917. Worse, these laws confound solutions to the problems we face today in managing an increasingly scarce and precious resource.
This paper has three purposes:
The first element is straightforward, but the second and third (especially suggesting a viable transition path) are much more challenging.
- Identify key problems in water law,
- Suggest what a better system of water law would look like, and
- Articulate a transition path that moves from today’s system to one that meets the 21st Century challenges we face.
I write as a former engineer and energy policy analyst with no background in law. Also, I am new to Washington State water issues, having worked on Whatcom County issues, not state issues, for the past four years. Because of these characteristics, I am not encumbered by years of tradition and conventional wisdom, which may help in pointing the way to a better future.
One final point before beginning: Water is life. It is absolutely essential for all forms of life and, therefore, more valuable than electricity, natural gas, internet service, cable TV, trash pickup and a host of other products and services that generate much more public attention than does water.
Washington water law derives from western water law, which includes the principles of prior appropriation (first in time, first in right) and use it or lose it (relinquishment, discussed below). In Washington all waters are owned by the state and managed on behalf of its residents by the state Dept. of Ecology. State water law is based on a system of water rights dating to 1917 for the use of surface waters (water taken from streams, rivers, lakes and reservoirs) and to 1945 for ground water (water taken from wells).(2) These rights have four features that might have made sense decades ago but now complicate solutions to current problems. The state grants water rights that are:
- Permanent (They last forever unless they are not put to beneficial use.);
- Fixed in quantity, even though the amount of water available fluctuates each year; and
- Based on the date of the user’s claim or application (i.e., Some rights are more senior than others).
Before discussing each of these four attributes, it is worth pausing for a moment to think about the significance of a “right” to use a certain amount of water. Are there any other goods or services for which this is true? Again, our purchases of electricity, natural gas, internet service, cable TV, trash pickup, and so on grant us no right to specific amounts of each service. In almost all cases, we pay monthly bills that include fixed and variable charges to cover the capital and operating costs of the systems that provide these services.
PROBLEMS WITH CURRENT SYSTEM
PERMANENT: Once Ecology grants a water right, the owner maintains the right to use water in accordance with the permit/certificate forever. For example, someone who applied to the state in 1917 for the right to use a certain amount of water each year, say to irrigate 50 acres of farmland, in 2018 still has that same right. And that right remains attached to the land in perpetuity.
This permanence makes little sense in a changing world. Indeed, as Washington’s population continues to grow (Whatcom County is growing at about 2 percent/year) and as the adverse effects of climate change continue and worsen,(3) the amount of water available for human use is almost certain to decline. But state water law cannot adjust to these facts. What happens when the law collides with reality?
FREE: Given the growing scarcity of water and its essential nature, it is surprising that the state allows anyone to use water with no payment. This “freedom” creates serious economic problems. In particular, the normal principles of supply and demand cannot work if – by law – the particular commodity has a predetermined and fixed price of zero. In a normal market, the commodity’s price would reflect its scarcity on the supply side and its value on the demand side. As demand increased and/or supply decreased, the price would increase until it reached a point where supply and demand were in equilibrium.
In addition, no owner of a water right has any incentive to return that right to the state for use by anyone else because there is no penalty (i.e., cost) to retaining a water right even if the user does not need the water.(4)
FIXED IN QUANTITY: The amount of water available varies enormously from day to day, month to month, and year to year depending on the amounts and timing of snowfall and rainfall, as well as the amounts of water stored in aquifers and each winter in glaciers and snowpack.
Nevertheless, water rights include a maximum instantaneous flow rate (in gallons/minute) and a maximum annual consumption (in acre-feet). These fixed rights contrast with the variability of the underling resource. The only allocation of water during times of shortage occurs through the seniority system, discussed below.
PRIOR APPROPRIATION: State water law established powerful protection for senior rights. The earliest claims and rights to water are the most senior and, therefore, the last to be shut off during droughts and other low-flow periods. Conversely, those who obtained their water rights only recently are the first to be curtailed. This system allows for no proportional allocation of water rights during shortage periods. Nor does it allow for allocation of scarce water to those who value it most highly (i.e., would be willing to pay the highest price to use that water).
OTHER PROBLEMS: In addition to these inherent problems with the system of laws now in effect, other problems complicate resolution of water-supply problems.
State law is unable to adequately recognize tribal rights to water.(5) These rights, which predate all other water rights, have two components. The first, and likely larger, is the tribal right to sufficient flows in the creeks and rivers to support salmon and other wildlife. The second is sufficient out-of-stream water to support life on the Native American reservations, i.e., for agriculture, commerce, business, and homes. Because these rights are likely large and the most senior, although largely unquantified, their exclusion from state law is a serious omission.(6)
The prior appropriation system undermines environmental quality. Specifically, ample supplies of clean water needed to protect of fish and other wildlife are junior to most water rights. For example, Ecology’s instream flow rules protect instream flows only from later, more junior, water rights.(7) During a drought, all water rights senior to those for instream flows will be fully met even if flows drop below those needed to sustain healthy fish populations. Because most instream flow rules were developed after 1980, their ability to protect the environment is limited. Also, the earlier rules did not account for the interactions between groundwater flows and surface water flows.
Many of the water rights are claims. These claims are just that, filings from people asserting their (or their predecessor’s) use of water before 1917 for surface water or 1945 for ground water. Ecology can review claims for reasonableness, but does not make site inspections to verify them. As a consequence, some (many?) of the claims assert water quantities that appear to be unrelated to the actual water use and purpose. This could be a serious problem: In Whatcom County, almost 40 percent of the amount of water rights is for claims.(8)
Finally, current state law complicates creation of water markets. The first-in-time, first-in-right system of senior rights makes it difficult to set a reasonable market price. In principle, the more senior a water right, the more value it would have in a market. However, well-functioning markets require many buyers and sellers of a uniform, commodity-type product. Slicing water rights by seniority complicates the potential for true price discovery.
The details associated with water rights further complicate creation of markets. As examples, each water right specifies the point of withdrawal/diversion, the point of use, the purpose(s) for which the water can be used, the maximum flow rate, and the maximum annual consumption. Although these details are important in ensuring that water supplies are not over appropriated, this disaggregation complicates creation of markets.
The key to my proposed solution to our water-supply problems is a combination of Ecology-determined allocations followed by annual markets. It also requires abandonment of the long-established system of water rights.(9)
Under this proposal, Ecology would prepare a water budget for each year. It would start with meteorological forecasts and use these forecasts to estimate the amount of water available in each river basin. Ecology could use the 62 Water Resource Inventory Areas (WRIAs) as the basis for this geographical disaggregation.(10) The allocation for instream flows would likely be based on Ecology’s Instream Resources Protection Program, which has set values for instream flows for several basins throughout Washington.(11) These values, expressed in cubic feet/second (cfs) for the 1st and 15th of each month estimate the amount of water needed for streams and rivers to support fish, other wildlife, recreation, and scenic values.
Ecology could also allocate water for basic household use for indoor purposes (say, 150 gallons/day). An allocation for indoor residential use is intended to ensure that all households, regardless of income, have sufficient water to meet their daily needs, including cooking, bathing, clothes washing, and toilet flushing. An alternative approach would encourage water purveyors (municipalities, water districts, and water associations) to ensure that minimum amounts of water are made available to all households at a reasonable cost (with, perhaps, subsidies to support low-income households).
All other out-of-stream water users and uses would then be subject to annual water markets.(12) That is, water used for commercial, industrial, agricultural, and outdoor residential uses would be bought and sold on local water markets at prevailing market prices. For those who depend on a reliable, long-term supply (e.g., farmers whose crops are not replanted each year), brokers could establish long-term markets for water supply (effectively providing insurance against drought and associated price increases).
A key issue for these new water markets is their geographical scope. Markets work best when they include many buyers and sellers, none of which can exert market power. This objective requires large areas to work well. However, environmental considerations may require that separate markets be established for each tributary as well as various reaches along the main stem of the primary river in each WRIA. This objective leads to small areas. Ultimately, the geographical scope of these water markets will likely be determined by science (ecology and economics) and negotiations among different stakeholders.
In general, water supplies and water demand are negatively correlated. Specifically, when stream flows are lowest during the summer, demand (especially for irrigation) is highest. Therefore, markets will likely need to be disaggregated by time (e.g., monthly) as well as geographically. Thus, prices will be higher in the summer than in the winter and lower during years with ample precipitation than during droughts.
Finally, if the state establishes water markets and is the primary seller of water (“wet” water, not “paper” water), then it will collect money from these sales. How that money should be used will be a major issue: Should it be returned to citizens through lower taxes, used to fund water projects, or go into the state’s general fund?
How to get from here to there is a major problem, perhaps the major problem. The simplest solution would be for the state to gradually (say over a 10-year period) withdraw water rights from all users. For example, a city that has the right to, say, 100 acre-feet (af) of water, would have the right to only 90 af in year one, 80 af in year two, and so on until it no longer had any water right after 10 years. During this transition from the current system to one dominated by markets, consumers could be encouraged to meter their water use (critical for agriculture and those using permit-exempt wells) and to improve the efficiency with which they use water (through operational changes and capital improvements).
Because all water is managed by the state on behalf of its citizens, the state should have no legal problem in withdrawing rights to use water. However, such a decision would surely provoke multiple takings lawsuits.(13)
The approach outlined above would make it easier to design and implement water markets. These markets would start small and grow over time.
An alternative, perhaps politically more palatable, approach would have the state purchase all the extant water rights. Two questions immediately arise:
- Where would the money come from to make these purchases? One option is to use the proceeds from future water markets to pay for these initial purchases.
- How would the parties decide on a suitable price for each water right? For example, how much more is a water right dating from 1920 worth than one from 1990? How much more is a certificate worth than a claim?
These and other complications, plus the fact (noted above) that the state – not individuals – owns the water, favor the initial approach.
Most people would agree that the current system of laws governing water supply and demand in Washington State is unworkable and counterproductive. Beyond that, there may be little agreement, in particular on the political feasibility of changing the system.
This paper outlined the major problems with today’s system, suggests one alternative for a sustainable water future, and hints at ways to make the transition. I hope others, who know more than I do about state water law and economics, will offer their ideas and suggestions.
1 - (from title) I thank Jim Bucknell, Bill Clarke, Jean Melious, and an anonymous reviewer for their very helpful comments on a draft of this paper.
2 - For a useful explanation of state water law, see J.K. Pharris and T. McDonald, An Introduction to Washington Water Law, Washington Office of Attorney General, Jan. 2000.
3 - These effects include reduced glacier mass, higher air temperatures and less rainfall in the summer (both of which increase demand for water and, in the case of lower rainfall, reduce supplies), and lower summer streamflows.
4 - For irrigation water uses, farmers must (with some exceptions specified in law) relinquish any portion of their water right that is unused for five consecutive years. That is, Ecology is required to take away the unused part of their water right.
5 - For a useful explanation of Native American water rights, see R.P. Osborn, “Native American Winters Doctrine and Stevens Treaty Water Rights: Recognition, Quantification, Management,” American Indian Journal, II(1), Fall 2013.
6 - The only way to quantify these tribal water rights is through federal or state court adjudication. Once these tribal rights are established, the state could then allocate the remaining water to other users.
7 - For basic information on Ecology’s program to protect streamflows, see https://ecology.wa.gov/Water-Shorelines/Water-supply/Protecting-stream-flows.
8 - E. Hirst, Whatcom Water Rights and Applications: Insights from Ecology’s Data, Feb. 2016.
9 - Because there is almost no chance that the political will exists to abandon 100 years of state water law, I present here only the broad outlines of what might be a reasonable long-term alternative to current water law. Others will likely have alternative perspectives, and I hope they present their ideas and proposals.
10 - These WRIAs were established by Ecology (WAC 173-500) in 1976.
11 - Ecology, Setting Instream Flows in Washington State, Feb. 2014. Unfortunately, Ecology has developed instream flow rules for only about half of the state’s WRIAs.
12 - Society, acting through the state legislature, might decide that certain uses and users should be partially or fully protected from water markets. For example, society could decide that agriculture’s use of water for irrigation is allocated, at least in part, outside of markets.
13 - Such a scheme, while simple to understand and implement, might be considered a taking. The Fifth Amendment of the U.S. Constitution states that “private property [shall not] be taken for public use, without just compensation.” However, the fact that the state gave people water rights for free undercuts the takings problem.