New Report Evaluates State Laws Guiding Transfer of Water Rights for Environmental Benefits

September 29, 2015 | Water in the West | Insights

Rob Jordan

A new report from Water in the West explores how Western states can increase water rights transfers to maintain healthy flows for ecosystems while benefiting water rights holders.

Environmental Water Rights Transfers: A Review of State Laws” is the product of a Stanford Law School practicum that Water in the West Executive Director Leon Szeptycki taught in partnership with the National Fish and Wildlife Foundation (NFWF). Szeptycki and the practicum’s student researchers analyzed laws and collected data and other information from 12 Western states to compare those laws, identify best practices, and make recommendations for reducing obstacles for water rights transfers for environmental stewardship. The report is part of a larger effort by NFWF to identify barriers and opportunities for environmental water transactions in Western states.

“Barriers to water markets in the West have come to the forefront of public discussion due to the extent of drought in western states,” said Szeptycki.  “Our work focused specifically on one aspect of this problem – legal barriers to voluntary transfers of water rights for environmental purposes.  Our goal was to survey state laws and see if we could identify existing tools that were already working well.”

Historically, water rights could not be devoted to leaving water “in-stream” under the West’s prior appropriation system.  Approximately thirty years ago, states began passing laws that allowed water rights holders to donate, sell, or lease their right to be used to leave water in-stream to benefit fish, wildlife, or recreation.  Although use of these transactions is increasing, each state’s legal system sets up legal barriers associated with the approval of changes to water rights that inhibit water markets generally, including transfers to environmental uses.

“No state is the same,” said Kori Lorick, a law student who contributed research. “Each state has different stakeholders and different priorities – what works for one may not work for another.”

Key among the report findings are comparisons of review processes for short-term vs. permanent water rights transfers. States like Oregon and Washington have approved large numbers of short-term leases lasting five years or less under expedited procedures., Oregon, for example, strives to approve any rights transfer deal of fewer than five years in only 45 days.  In contrast, California and Colorado do not have as favorable procedures for short-term deals, and have had far fewer deals.

Short-term water rights transfers may appeal to irrigators unwilling to give up control for the foreseeable future. These deals require less cost, scrutiny and data for approval. They allow state agencies and conservation groups to allocate water where it is needed in the short term, while avoiding the potential of paying to protect an ecosystem that becomes irrelevant as a conservation objective over time. Short-term transfers allow irrigators to decide whether to grow a small amount of crops in a drought year, or to sell their rights and make money that way.

Elizabeth Hook, a Stanford Law School student who worked on the project, summarized the findings in one sentence: “Just provide the largest toolkit for deal-making that you can with clarity and streamlining of administration at all levels.”

Specifically, the report suggests states institute five promising legal tools:

- A framework of statutes, regulations and policies tailored to a broad variety of transaction types

- Streamlined, clear rules for short-term water leases

- Policies clarifying that informal, short-term water forbearance agreements are protected, and cannot be abandoned or result in the permanent loss of water rights

- More streamlined tools for measuring water use

- Permanent institutions, such as water banks, that can facilitate and manage short-term transfers of water rights for environmental purposes

Download the report [PDF].