The Economic Implications of the Public Trust Doctrine
Gary D. Libecap
University of California, Santa Barbara
National Bureau of Economic Research
PERC
Hoover Institute
October 3, 2006
“Existing water users are distraught by decisions like the Mono Lake case, and
understandably so. Enormously valuable, long-recognized interests in water are at stake.
Such cases portend major changes in the status of water rights. Traditional water users
understand full well that a fundamental transition is taking place in the conception of how
water ought to be used in the West…. Let me start by saying that as a matter of legal
analysis, the holders of existing water rights are in deep trouble.” Joseph Sax (1989, 4756).
I. Introduction.
This paper examines the role of the public trust doctrine in the re-allocation of
water in the American West and the doctrine’s implications for the security of water
rights and incentives for effective stewardship of water. In the West, farmers historically
have used roughly 80 percent of the region’s water, often in low-valued or subsidized
crops, such as alfalfa, cotton, or rice. Farmers typically pay only for the pumping or
conveyance costs for the water and not for its scarcity value.1 At the margin, however,
water values are much greater in meeting growing urban, recreational and environmental
demands. As a result, there are significant allocative gains from moving some water from
agricultural to these new uses. The issue is the mechanism to be used for transferring this
water.
The public trust doctrine raises the question of whether or not water transfers will
occur through market transactions or through the police power of the state. Market
transactions rely on and reaffirm (through precedent) secure property rights to water.
State re-allocation through the public trust doctrine relies instead on judicial and agency
actions and can weaken property rights and their ability to support water exchange and to
encourage private investment in water quality, riparian and aquatic habitat, and other
infrastructure. Because it emphasizes the “publicness” of water, the doctrine encourages
open-access. Open-access, however, brings rent dissipation and the losses associated with
1
the “tragedy of the commons” as more and more individuals seek to use the limited water
resource.2
For “public” resources, those losses can be mitigated only through central,
command-and-control regulation, but the record of centralized regulation in limiting rent
dissipation has not been encouraging. Regulated fisheries continue to be depleted; air
pollution abatement targets have not been achieved; and technological change in the radio
spectrum has been retarded. For these reasons, there is an accelerated trend toward
assigning property rights of some type to resources in order to mitigate the losses of the
common pool.3
Re-allocation of water under the public trust doctrine also is costly, contentious,
and slow. Because private property rights in water are rejected in favor of public
ownership, there is no compensation to current users who lose water. Hence, they can be
expected to resist such efforts even if they are in the aggregate, in the public interest.
Moreover, disputes over water allocation are much more likely to go to trial than to be
settled out-of-court through private negotiation. The public trust doctrine gives standing
to any member of the “public,” to contest uses thought to be inconsistent with the public
trust. Hence, any private agreement between parties can be undermined by challenges
brought by a third party. Drawn-out litigation and trial become inevitable. Finally, water
allocation decisions made by the courts and administrative agencies under the doctrine,
occur without information on relative water values that market trades would otherwise
provide. Accordingly, too-little or too-much water will be applied to new uses. 4 These
problems associated with the public trust doctrine are examined in more detail below in
the context of the Mono Lake case and Los Angeles’ water rights in California and
2
stream access and wildlife ownership in Montana. Before turning to the public trust
doctrine and its impact on water rights, however, it is important to first review the
evidence regarding pressure to re-allocate water and how private water markets are
responding to them.
II. Evidence on Water Prices and Water Exchanges.
Some numbers demonstrate the social benefits of moving some irrigation water to
urban, recreational and environmental uses in the West. About 14 years ago, Griffin and
Boadu (1992, 274-5) reported that the value of water used in agriculture, capitalized over
50 years, was $300 to $2,300 per acre-foot (approximately 326,000 gallons) in the Rio
Grande Valley of Texas. Urban water values, capitalized over the same period, ranged
instead from $6,500 to $21,000 per acre-foot. The average transfer produced net benefits
of $10,000 per acre foot.
More contemporary data gathered from the leading trade journal Water Strategist
by Glennon, Ker, and Libecap (2006) for 2,189 water transfers with price information
from the 12 western states from 1987 to 2005 also demonstrate the economic gains of
further water exchanges.5 Table 1 provides mean price data across the 19-year period for
all states. All values are converted to 1987 dollars and water flows associated with longterm leases and sales are discounted at 5 percent to provide comparable per acre-foot
water prices with one-year leases. As shown in the table, there are substantial welfare
gains from water transfers from agriculture to other uses. Environmental prices are
somewhat lower on average than agriculture-to-urban and urban-to-urban water
exchanges. But this reflects the dominance of one-year leases in most agriculture-to-
3
environmental transfers, whereas urban transactions are more likely to involve long-term
leases or sales. Water prices for sales and long-term leases typically are higher than for
short-term leases because they reflect ownership or long-term certainty of supply. Water
involved in sales and long-term leases also may be from higher-priority water rights
(allowing for such trades) and of higher quality, which often is required if water is moved
out of sector—from agriculture to urban uses, for example.
Table 1
Water Transfer Price Differences by Category
Number of Observations
Mean Price
351
$57
Type of Trade
Agriculture-toAgriculture
1,211
203
Agriculture-toUrban
274
120
Urban-to-Urban
161
57
Agriculture to
Environmental
Source: Water Strategist. Glennon, Ker, and Libecap (2006).
The data in Table 2 illustrate that large amounts of water in fact have been
moving across sectors. The table reports the number and amounts of water transacted
over nearly 20 years. The amounts of water shown are those that are “committed” by
water exchange contracts, ranging from one-year leases to longer-term leases and sales.
As above, for sales and long-term leases, the flow amounts for the term of the contract
(perpetuity for sales) are discounted at 5 percent and brought back to the present.
As shown, agricultural to environmental water transfers account for 7 percent of
all exchanges and 13 percent of all water moved from agriculture. Most agriculture to
environmental water transactions involve either federal or state agencies or non-profit
organizations in efforts to build riparian or aquatic habitats, in many cases to meet
Endangered Species Act requirements. In the transactions, irrigation water is leased or
4
sometimes purchased to augment stream flows. Instream flows are examined in more
detail below.
Table 2
Western Water Transfers, 1987-2005
Classification
Agricultural to Agricultural
Agricultural to Urban
Agricultural to Environmental
Urban to Agricultural
Urban to Urban
Urban to Environmental
Environmental to Agricultural
Environmental to Urban
Environmental to Environmental
Combination
Total
Number of
Transfers
471
1,825
233
38
440
54
0
1
6
164
3,232
Frequency
15%
56%
7%
1%
14%
2%
0%
0%
0%
5%
100%
Amount of Water
(af)
16,241,926
39,747,583
18,186,143
2,549,986
26,600,020
8,925,447
0
62
4,171,200
21,636,937
138,059,303
Frequency
12%
29%
13%
2%
19%
6%
0%
0%
3%
16%
100%
Source: Water Strategist. Glennon, Ker, and Libecap (2006) data set.
The data then reveal that water transfers based on private water rights are
responding to price signals of increasing values in urban and environmental uses. To
understand the role of private water rights in water re-allocation and investment, it is
worthwhile reviewing the nature of private rights under the appropriative doctrine.
III. Appropriative Water Rights.
The appropriative rights doctrine dominates in the American West. It allows
rights holders to withdraw a certain amount of water from its natural course for private
beneficial purposes on land remote from the point of diversion.6 Hence, it allows for the
separation of water from the land in a way not possible under the riparian water rights
system that exists in the eastern United States. Under the appropriative system, ownership
of water is assigned through the rule of first possession or priority of claim. Through this
5
process individuals gain a usufructuary or possessory right to water. The maintenance of
appropriative rights has been based on placing claimed water into beneficial use. This
use-it-or-lose-it requirement historically has led to devoting water to low-valued uses
because water diverters, such as irrigators, could do little else with it and maintain their
rights. As we will see, this, though, is changing.
Because appropriative rights can be separated from the land and sold or leased,
they are the foundation for private water transfers in response to changing economic
conditions described in Table 2. Trades that change the location of water diversion,
nature of use, and timing, especially if they are large relative to stream flow, however, are
restricted by state law and regulated by state agencies because of their potential impact on
third parties. Changes in location of diversion to points upstream, for example, could
harm other rights holders downstream by reducing the water flow available to them.
Changes in the location of use, particularly those that are out-of-basin, can even more
substantially affect return flows and available water to other rights holders because none
of the water exported migrates back to the stream. To mitigate these effects, state water
agencies typically allow changes in diversion and location for only historical
consumptive uses—water that they would consume in any event.7
The reliance of appropriative rights on diversion as a means of definition and
enforcement reduces the quantity of flowing water in the stream. But valuable instream
uses require the maintenance of flows. Historically, only diversion has been accepted as
evidence of beneficial use and as the basis for property rights under the appropriative
doctrine. This condition has meant that instream uses have not been protected under the
prevailing rights structure. Recently, however, instream uses, such as maintenance of
6
fishery habitat, recreation, and amenity values, been added to the list of beneficial uses in
western states, and thereby potentially subject to formal claiming and market
transactions.8
On heavily appropriated streams, where virtually all water is claimed, acquisition
or leasing (during drought conditions) of senior rights, which otherwise would be used
for irrigation, to support instream flows is an effective option for enhancing aquatic
habitat. The most active states have been Oregon, Montana, California, and Washington,
where state agencies, such as the Montana Department of Fish, Wildlife, and Parks, and
in some cases, private environmental groups, such as the Oregon and Washington Water
Trusts and the Trout Unlimited Montana Water Trust have been able to lease or purchase
water rights from farmers and retain the water within streams. Leases often involve dryyear options, where they are activated only during dry years and the farmer is
compensated to allow purchase of the crops foregone, and split-season leases, where
farmers irrigate during the critical crop growing period and release water at the end of the
summer when stream flows would otherwise be very low.9
Federal agencies also are involved in water exchanges to augment stream flows.
In 2000 when the National Marine Fisheries Service required that the Bonneville Power
Authority on the Columbia River and its tributaries mitigate the effects of drawdown for
hydroelectric power generation on species listed under the Endangered Species Act, the
agency indirectly engaged in water rights purchases and leases from irrigators. It did so
by providing funds to state agencies and private organizations to negotiate with farmers.
Additionally, the federal Bureau of Reclamation is an active purchaser of water rights to
retire the water for environmental objectives.
7
In the face of this record of market exchange, what are the advantages of reliance
upon markets rather than centralized state regulation under the public trust doctrine?
IV. The Advantages of Market Transactions for Re-allocating Water.
There are numerous advantages to relying on clearly-defined and secure
appropriative water rights to promote the transfer of water from agriculture to
environmental and recreational uses. One is that the negotiating parties, farmers,
government agencies, private recreational/environmental groups, gain information about
the value and amount of water really required. Would-be purchasers must figure out how
much water they want to buy and how much they are willing to pay for it. Sellers have to
determine the value of their water. If the offer matches these values, some trade occurs. If
it does not, then the buyer has to recalculate willingness to pay, give up the purchase, or
wait until a later time when conditions may have changed. Or the seller has to recalculate how much the water is worth. It is the case that environmental and recreational
values often are difficult to assess, but market transactions force such an assessment in a
manner that does not occur with arbitrary state re-allocation through the judiciary under
the public trust doctrine. As described below, because public trust rulings lead to all-ornothing re-allocations without compensation, the contesting parties have incentive to
develop extreme values for their claims rather than to seek convergence as is the case
with market exchanges. Rulings based on these extreme values are likely to lead to either
excessive re-allocation or too little adjustment in water use.
Another advantage of a market approach is that it recognizes existing property
rights as a basis for exchange. There is a legal framework for bargaining among the
8
parties to redistribute water. There is a recognized owner and a potential buyer. They may
agree or disagree at any point in time. The structure elicits negotiation and cooperation,
and provides for routine, timely re-allocation as values change. It reduces social conflict
and division because in voluntary trade both parties benefit.
A final and related advantage of a market approach and secure property rights is
that they encourage investment in water conservation, storage, distribution, and quality as
well as in related riparian and aquatic habitat. Incentives for private investment by
landowners in such habitat are at stake in the stream access cases examined below. The
alternative to markets is centralized state regulation and re-allocation of water, often
under the public trust doctrine.
V. The Public Trust Doctrine.
The “public trust” is a common law principle creating the legal right of the public
to utilize certain lands and waters, such as tidewaters or navigable rivers, and other
waters and natural resources with high amenity or public goods values.10 Under the
doctrine, the rights of the public are vested in the state as owner of the resource and
trustee of its proper use. It historically came from the notion that government has an
affirmative duty to administer, protect, manage, and conserve access to navigable waters,
and there may be strong economic arguments for such regulation to promote the low-cost
flow of commerce by limiting holdup by riparian landowners.
Broader interpretations are developing beyond care for navigation that have more
potentially pernicious effects respect to private property rights and resource access and
use. In a far-reaching ruling by the California Supreme Court in 1983 in the Mono Lake
9
case (National Audubon Society v. Superior Court 685 P.2d 709) the court stated that the
“core of the public trust doctrine is the state’s authority as sovereign to exercise a
continuous supervision and control over” the waters of the state.11 This opinion energized
expansion of the public trust doctrine in a growing number of western states to restrict
“excessive” diversions from non-navigable streams to protect aquatic environments and
to guarantee public recreational access to streams on private lands and wildlife.12
In these cases, the public trust is used as the basis for state, rather than private
allocation and investment in water. The state, however, may lack the information to
determine the right amount of water to be devoted to habitat and stream flows, and as is
well known, state agency actions are molded by constituent group politics that also may
lead to excessive or inadequate actions. At the same time, despite the advantages of
markets as described above, private parties would be unlikely to invest in recreational and
aquatic habitat if it is solely a public good. In Montana stream access cases where
landowners are denied the ability to limit entry on their lands, the courts insure that
stream habitat is a public good and thereby reduce private motives for investment.
Importantly, the public trust doctrine can be applied retroactively to roll back preexisting appropriative water rights that appear inconsistent with the public trust.13 There
apparently is no constitutional basis for taking challenges of public trust restrictions of
private water rights.14
Much of the extension of the doctrine has occurred through judicial opinions that
have broadened state discretionary authority over water rights. A Lexus/Nexus search
reveals 32 court cases between1985 and 2004 in 12 western states involving public trust
issues with three-fourths of them in California, Colorado, and Idaho. In general, the
10
rulings have held that state responsibilities under the public trust doctrine may extend to
maintenance of stream flow and water levels in rivers and natural lakes, including
groundwater systems linked to them in order to guard for health, amenity values, and fish
and wildlife habitat.15 As another example, a 1988 Oregon statute that authorized
appropriators to sell or lease water they saved requires that about 25 percent be allocated
to the state and held for instream flow maintenance.16 This “tax” is apt to lower
incentives to redirect water through market exchange. Other examples of stream and
wildlife access are examined in more detail below.
VI. The Economic Implications of the Public Trust Doctrine.
Because water is a mixed resource providing private and public goods, there can
be justifiable concerns about private water use that potentially harm public values. The
public trust doctrine is so elastic and potentially expansive, however, that it can lead to
extensive government intrusion in water rights. Accordingly, the benefits of public trust
interventions have to be weighed carefully against the value of the private uses and
investment that will be restricted or prohibited.
In writing about the Mono Lake controversy that led to the 1983 California
Supreme Court public trust ruling, John Hart (1996, 3, 181) saw the opinion as offering a
powerful way of balancing public and private demands for water by stressing its common
property nature. But for those who are concerned about water quality, supplies, and
flexible allocation in the presence of growing scarcity, as are most westerners, caution is
in order.
11
One problem as noted in the introduction is that the doctrine stresses water as a
regulated commons, and the experience with regulated commons often has not been that
satisfactory. Indeed, dissatisfaction with the past performance of centralized regulation of
common resources has led to adoption of more formal, property arrangements. These
include individual transferable quotas (ITQs) in common fisheries, tradable emission
permits for air pollution reduction, and shares in unitized oil and gas fields. In so doing,
the resources involved have been moved from being considered “public” to more
“private” in order to instill incentives for better stewardship and conservation. Where
ITQs have been adopted, fishery stocks generally have rebounded and the value of the
fisheries increased. Tradable emission permits have lowered the costs of achieving air
quality standards. Oil field unitization has brought important efficiency gains.17
Judicial expansion of the public trust doctrine in water appears to move in just the
opposite direction. The doctrine as interpreted by the courts holds that bodies of water
(navigable and non-navigable) belong to the public (common property) and that the
government has a special and inescapable duty to protect them. Accordingly, state
agencies are charged under the trust to regulate allocation and use with adjustments made
as public values change. This is a broad regulatory mandate: “Thus, the function of the
Water Board has steadily evolved from the narrow role of deciding priorities between
competing appropriators to the charge of comprehensive planning and allocation of
waters. This change necessarily affects the board’s responsibility with respect to the
public trust.”18 It is not obvious why greater regulation of this “common” resource
(water) would perform more effectively than has been the case in fisheries, air pollution,
or oil pools.
12
Another problem with the doctrine is that it clearly weakens appropriative water
rights. Their non-vested, usufruct nature is stressed, subject to continued re-evaluation of
their position vis-à-vis changing trust values. Use rights previously granted can be
revoked without payment: “…the foregoing cases amply demonstrate the continuing
power of the state as administrator of the public trust, a power which extends to the
revocation of previously granted rights,” and “Once again we rejected the claim that
establishment of the public trust constituted a taking of property for which compensation
was required.”19
The doctrine, then, potentially adds uncertainty to water ownership, weakening
existing property rights and their ability to promote investment, trade, and efficient use of
water. The foregone private uses may be of higher social value than the public goods at
stake, or there may be gradients whereby some of the private uses are more valuable at
the margin than some of the public values. In this case, society would be better off if only
a partial re-allocation occurred. Regulation, however, is not very effective in handling
such gradations. Moreover, regulatory takings under the public trust doctrine would
reduce information about both private and public values. Collection, measurement, and
consideration of alternative values are not required under the doctrine. Any information
gathered as part of public trust court challenges of existing water rights is unlikely to be
of much help because, as described above, it is presented by both parties in an adversarial
setting to bolster their respective claims. Hence, it is not apt to be inclusive or balanced.
Alternatively, negotiation to purchase water rights to safeguard public values forces the
parties involved to gather information about the true values of both and to consider the
tradeoffs involved in the public trust action.
13
A broad public trust mandate for state regulation also would lower the private
costs of holdup strategies by providing legal standing for parties to contest private water
diversions, investments, or proposed trades as violations of the doctrine. As the costs of
private holdup are reduced, there is potential for abuse. Maximizing social welfare
requires consideration of these tradeoffs and adoption of the least costly approaches in
applying them. Where there is a case for regulatory action, the most effective response is
for state agencies to purchase and retire the water right as part of their mandates, rather
than to use the doctrine to arbitrarily revoke water rights, limiting past uses and potential
exchange.
These problems would presumably apply not only to private water users, but to
public ones as well, suggesting that current distributions for recreational or environmental
protection, at a later date, could be found to be inconsistent with the public trust if values
were to change. As emphasized throughout this paper, an advantage of secure property
rights is that they can be a basis for routine re-allocation through exchange. Public trust
re-allocations, however, would be through regulatory rulings and not be compensable.
Conflict and delay are therefore assured.
A related third problem with the public trust doctrine is that legal disputes brought
under it may be more difficult to privately settle because of the broad legal standing it
authorizes. When parties enter into litigation they weigh the expected benefits of trail
versus settlement. Settlement typically is less costly than trial. If the net benefits of trial
decline for one of the parties (higher cost, lower probability of winning, reduced damage
expectations for plaintiff, higher damage expectations for defendant), settlement is more
likely.20 Under the public trust doctrine, however, settlement costs could be driven up as
14
the number of potential plaintiffs grows. With extensive legal standing available for
groups to challenge existing water uses as implied by expansive notions of the public
trust, any settlement agreement with one party could be thwarted by the appearance of
another plaintiff. Successive settlement negotiations would drive up settlement costs, and
as they increased, disputes would be more likely to go to trial.
Public trust suits are also more likely to go to trail if the plaintiffs generate more
information on their behalf at lower cost than the defendant. The contesting parties
invest in lawyers, experts, and other resources to improve their chances of winning.
Greater investments in litigation expenditures by one party relative to the other, all else
equal, can increase the probability of success in the case. With an ease of obtaining legal
standing under the public trust doctrine, one could image entry by successive plaintiffs,
each more extreme in their demands than the previous. If such plaintiffs are made up of
ardent, “true believers,” it is possible that their labor costs for litigation expenditures
would be lower than for the defendant. Lower litigation costs, in turn, would lead to
greater investment in litigation, a higher probability of winning, and greater likelihood of
costly trial. Moreover, judicial or regulatory decision making based on information
provided by the low-cost plaintiff may be biased because it would outweigh that provided
by the higher-cost defendant.
VII. Application: The Mono Lake Case.
In the 1930s Los Angeles acquired water rights in the Mono Basin and made
investments in infrastructure to connect the basin to the Los Angeles Aqueduct in the
Owens Valley to export water to the city. Regional agriculture, recreation, wildlife, and
15
the integrity of Mono Lake were subsidiary in importance to meeting growing urban
water demand. Moreover the cumulative impact of withdrawal did not become apparent
until much later. Because of a lack of export capacity, the city did not fully exercise its
diversion options until completion of the second aqueduct in 1970. Although there were
substantial water shipments from the Mono Basin from time to time, amounts over
100,000 acre feet did not occur until after 1970.
With these increased diversions, however, concerns about the environmental
impact of water export intensified. By 1981 the level of Mono Lake was 46 feet below
where it had been in 1940. Fearing further loss, the National Audubon Society, Friends of
the Earth, the Sierra Club, and the Mono Lake Committee initially sued the city in 1979
to halt the export of water, citing the public trust doctrine.
Environmental groups organized an effective political and public relations
campaign to save Mono Lake, its tufa formations, and the habitat it provided for water
fowl. A complicated series of legal challenges to Los Angeles’ water rights and
diversions took place simultaneously. These were highlighted by the famous public trust
ruling in 1983. The litigation process was contentious, slow, and very costly. It likely
delayed the response to the diversion problem.
In its 1983 opinion in National Audubon Society v. Superior Court (33 Cal 3d
419) the California Supreme Court held that Los Angeles’ water rights were to be limited
by the state in order to protect public trust values, and it called upon the State Water
Resources Control Board regulate the city’s diversions. Numerous court cases followed
for over ten years as the antagonists fought over the extent and nature of Los Angeles’
water rights and the amount of water to be re-directed to the lake. All the while, Mono
16
Lake’s level continued to drop, streams remained dry, and riparian and aquatic habitats
remained unrestored. And the warring parties continued to waste resources in the
conflicts. By 1991 Los Angeles estimated that it had spent up to $12 million for outside
lawyers and consultants since 1979.
In the end, Los Angeles lost the water. In 1994 the state halted any withdrawal of
water from the Mono Basin for about 20 years until the lake reached a targeted level. The
value of the lost Mono water and hydroelectric power was estimated to be $35,460,000
annually, or nearly half a billion dollars over 25 years at 5 percent interest. These costs
were borne by the citizens of Los Angeles. The ruling invigorated advocacy groups and
they have moved aggressively to extend the public trust to other areas.
One result of the public trust case is that current claims to water cannot serve as a
foundation for contracting over future allocations. Indeed, the new water flows for Mono
Lake that are considered part of the public trust today are not protected over the long-run.
They too could be re-assessed by subsequent courts and directed to different uses. It is a
subjective process with discrete, abrupt changes that will be unsettling to those who had
grown accustomed to a particular water distribution and made investments based on it.
VII. Application: Stream Access and Wildlife.
The Public Trust Doctrine generally reserves the title to the beds, banks and
waters of navigable waterways to the state. The state holds this title “in trust for the
people of the State that they may enjoy the navigation of the waters, carry on commerce
over them, and have liberty of fishing therein freed from the obstruction or interference
of private parties.” As such, the trust denies preferential rights to riparian land holders as
17
against the public who hope to use such navigable waterways for recreation. The public
trust also prevents private landowners from excluding the public from navigable streams
due to any landowner improvements on their stretch of the waterway.21
Each state determines the extent to which the public trust doctrine applies within
its jurisdiction. Montana has adopted a relatively expansive role for the doctrine in stream
access disputes and in potentially in wildlife, with important implications for markets and
private resource investment. The general test for public trust application is whether or not
the waterway is navigable. If it is, then the waterway is held by the state in trust with
public access guaranteed between ordinary high water marks. The test of navigability is
whether or not the waterway is susceptible of being used commercially, such as for
floating logs. But potential use by pleasure craft, including kayaks and rafts during some
time of the year can also satisfy the test. If a stream is deemed non-navigable, then
riparian owners typically own the streambed, but the public may still use the surface for
floating or other recreational activities.
This expansive interpretation of the public trust is occurring as the value of
fishing and hunting is increasing dramatically, and it could undermine private efforts to
invest in habit that would provide greater fishing and hunting opportunities. Rising
recreation demand provides an opportunity for land owners to supply improved habitat
that increases fish and wildlife stocks and to charge an access fee or to capture the capital
gains from the sales of land with greater recreational opportunities. Landowners have
incentive to do so to diversify from traditional agricultural production that may have
relatively lower returns, at least on some lands. These actions are clearly beneficial to
recreationists because they improve fishing and hunting experiences. Since states
18
compete with one another for out-of-state recreationists, who pay higher fees for fishing
and hunting, greater private investment would improve fishing and hunting opportunities
in Montana relative to other states.
Unfortunately, these private efforts have led to court challenges to force
landowners to open their properties to public access for fishing and hunting and to limit
the ability of landowners to charge extra for use of their lands. These legal disputes
follow from political objections to private restrictions on the right of access to naturallyprovided and previously-open resources, such as fish stocks and wildlife herds and
flocks. Because some of the landowners are from out-of-state, local demands for access
coincide with populist objections and resentment of wealthy out-of-staters who are
viewed as tying up natural resources that should be available at no cost to Montana
citizens.
In the 1980s as fishing and wildlife values began to rise in Montana lawsuits were
filed to insure unimpeded access for recreation on Montana rivers and streams. The
immediate issue was whether or not landowners could restrict floating on navigable
waterways as congestion was increasing and as disputes were occurring between rafters
and property owners over launch and exit sites and perceived trespass in other areas.
Rafters already had some legal protection for the right of access to navigable
streams under a 1928 Montana State Supreme Court ruling.22 In 1984, however, the court
applied the public trust doctrine (one year after the California Audubon case) to broadly
extend the right of access and use to most water in the state, previously navigable or not,
even if the streambed and banks were privately owned.
19
The court argued that because Montana’s Constitution specified that “The use of
all water…shall be held to be a public use” and that “All surface, underground, flood, and
atmospheric waters within the boundaries of the state are the property of the state for use
of the people,” the public trust doctrine prohibited the state from granting exclusive
property rights to landowners that would violate the state’s trust responsibilities to retain
ownership for its citizens. The ruling potentially opened all streams to recreational
access between high-water marks.23 To implement the court’s ruling, in 1985 the
Montana Legislature passed a broad Steam Access Law. Unresolved by the court or the
legislature were where and how the public could obtain access and importantly, whether
waterways created and enhanced through private reclamation were to be held open to the
public.
To implement the new stream access law, the Montana Department of Fish
Wildlife and Parks provided written guidance for recreationists and landowners.24 The
agency stated that the public may gain access to streams capable of recreational use,
regardless of streambed ownership, through public road rights-of-way at bridge crossings.
Recreationists can use rivers and streams up to the ordinary high-water mark. It divided
state waters into Class I and Class II categories to outline conditions for use and to
specify when permission was required from adjacent landowners. Smaller, Class II
streams were placed under somewhat more restricted access. Even so, the agency
promoted “reasonable” open access for the public to the state’s streams and rivers.
The potential dampening effects on private incentives to invest in habitat and
overall stewardship, as well as the weakening of overall private property rights to land
seem straightforward. An essential characteristic of a property right is the right to
20
exclude, and as this authority is diminished through public trust requirements, the
strength of the property right is diminished. Rather than to be able to privately determine
where, when, and whom can enter upon their properties to fish or hunt, landowner
decisions are constrained by the Department of Fish, Wildlife and Parks’ rules on access
and the courtesies (“respect landowner property”) the agency emphasizes to minimize
conflict.
It is doubtful that these admonishments will be very effective in protecting private
property as use increases. Norms and customs can be successful in constraining behavior
when group size is small, homogeneous, and subject to peer monitoring, but they break
down as populations become larger and more heterogeneous (Ostrom, 1990). As more
and more recreationists demand access across private property for fishing and hunting,
the strength of these rules is likely to decline, and conflict over access and land use is apt
to increase. If extensive, this conflict could weaken property rights and land values with
unanticipated spill over effects. Because landownership is a primary source of wealth in
western states such as Montana, any regulatory action that potentially lowers land values
could have a dampening impact on overall wealth and well-being within the state,
reducing commercial activity and employment. It is unclear how extensive these effects
might be, but they should be considered in demands to broaden stream and wildlife
access.
The political debate over access to fish and wildlife is an emotional one. It hinges
on distribution of the flow of fishing and hunting opportunities and ignores the long-term
impact on the wildlife stock. For example, an editorial in the Bozeman Daily Chronicle,
April 23, 2006 illustrates the focus on immediate access and not on more far-reaching
21
stock effects. The editorial criticized a proposed $.25 fee considered by the Department
of Fish, Wildlife and Parks to be added to fishing licenses to compensate landowners for
allowing public access to streams at bridges on public roads that cross private property.
The fee was considered following the state attorney general’s opinion that such access
was required under state law. The attorney general’s opinion stemmed from a dispute
over the use of electric fences and no trespassing signs on bridge rights-of-way by
landowners who claimed they were necessary to keep livestock off roadways. The fences,
however, cut off access for fishermen. The $.25 fee was designed to create a fund to pay
landowners to install gates that would allow access to the stream or river. While
landowners may have multiple reasons for such fences, including controlling entry upon
their properties, the need to control the movement of livestock is a real one. Paying for
gates recognizes their property rights to land and introduces negotiation in the stream
access controversy rather than pure reliance upon the police power of the state.
Nevertheless, the editorial dammed the fee and efforts to force fishermen to pay
“for access to what is legally theirs to use. Gates through fences at bridges should be
installed at the cost of the landowner who is illegally denying public access.” The
editorial concluded that game wardens should issue citations to landowners who violate
the state’s steam access law and set a dangerous precedent of “conceding rights to the
landowners that are not theirs.”25 Instead of seeing the merits of enlisting the stewardship
of landowners in protecting aquatic habitat and the stock, the populist distributional
conflict emphasized in the editorial sets landowners and fishermen as competitors for the
value of the land and the fishery, rather than collaborators in enhancing both. As argued
above, competition instills a “tragedy of the commons” potential as each party takes
22
action that dissipates the rental value of the resource, whereas collaboration makes them
joint parties in investing in resource stocks.
Consider what landowners could do voluntarily and routinely, when their property
rights are recognized and respected. During times of drought or dry periods at the end of
summer and early fall when fish stocks are under stress from warm water temperatures
and low stream level, landowners can release some irrigation water to the stream,
mitigating these fish-threatening conditions. Landowners will have incentive to do this if
they view aquatic habitat and the fishery as part of the overall value of their property, not
as a competitor to it. The ability to limit access in some manner to protect livestock,
fences, pastures, and crops contributes to this outcome. The ability to directly capture
some of the benefits of enhanced fishing through sale of access privileges contributes
even more. Landowners would not have to restrict all access in all parts of the streams
crossing their properties for this beneficial effect to occur. There could be negotiated
solutions whereby certain areas were open to all, while others had more limited access,
subject to landowner discretion. Everyone, fishermen and landowners alike would benefit
from conservation and investment in the fish stock. A larger, more vibrant and healthy
stock of fish means more fish for all, even if access to some of the stock required
payment of a fee.
Landowners are particularly essential for such stewardship because they are more
likely to be on site to monitor stream and stock conditions, whereas fishermen (or state
fish and game officials) are more likely to be transient, with higher monitoring and
investment costs. And under open access conditions, they are not the residual claimants
to such actions. Similarly, if landowners invested in repairing the riparian and aquatic
23
habitat of a man-made waterway, such as an old irrigation or drainage ditch, to make it a
fishery, the stock of fish is enhanced. But there are disputes as to whether or not a
waterway is truly man-made. In the recent Mitchell Slough case in Bitterroot County, for
example, on-going litigation hinges on whether the Mitchell Slough was a natural stream
(part of the Bitterroot River) or a ditch. Landowners along the slough cleaned and
improved its habitat for fishing and hunting. They sought to have it listed as a ditch so as
to restrict entry and avoid open access under the 1985 Montana Stream Access Statute.
Not incidentally, many of the landowners are wealthy and from out-of-state. Various
sports groups, including the Bitterroot River Protection Association and the Montana
Fish, Wildlife and Parks Department challenged the designation. In 2006, a District Judge
ruled that Mitchell Slough was a ditch and not subject to public access. But the State
agency is appealing the ruling to the Montana Supreme Court.
There are similar political pressures to mandate public access on private lands for
hunting. Just as water was held in trust by the state of Montana for its citizens so that
access could not be denied even if it flowed across private property, wildlife was owned
by the state for its citizens. Therefore, they too could not be denied access even when
wildlife moved across private property.26 But if landowners cannot control entry for
hunting and benefit in some manner from investing in wildlife habitat (such as leaving
some wheat unharvested for pheasants and turkeys, or brush uncleared for deer), perhaps
through marketing a certain number of game licenses as is possible in Colorado, they
have less incentive to engage in these beneficial actions.
Even if the Montana Legislature were to grant such marketing opportunities to
landowners who invested in wildlife habitat, however, an expanded view of the public
24
trust doctrine could allow the courts to invalidate the law and any landowner investments
would be lost without compensation. Hence, the uncertainty of any commercial right
authorized by statute due to the public trust doctrine would reduce its value and potential
to improve wildlife stocks.
VIII. Concluding remarks: Implications of the spread of the Public Trust.
In 1989 Joseph Sax (1989, 483), the major legal scholar on the public trust, wrote: “The
new era is one of reallocation. The direction is changing from agriculture to urban uses
and in-stream flows for water quality, recreation, and ecosystem protection…No private
property claims are going to halt this transformation.”
The message of this paper agrees with Sax’s assessment of water re-allocation
pressures. It disagrees, however, with his conclusion that private property rights are an
obstacle to this process. Instead, the message is that private property rights and water
markets can be an extremely effective vehicle for promoting smooth, low-cost, and
uncontentious water transfers to meet new recreational and environmental demands. The
public trust doctrine, by contrast, in weakening property rights and in calling for a more
expansive role of the state in water investment and distribution, is more likely to slow the
transformation Sax refers to, make it more costly and less complete.
Advocates of the public trust doctrine stress re-allocation and access to the flow
of recreational and environmental services. As noted above, they fail to see the
implications of their demands for maintenance and investment in the stock. By stressing
the publicness of fish and wildlife resources, the public trust doctrine insures access to
existing resources, while reducing private incentives to invest in them. It may be that the
25
state could invest to supplement private investment and stewardship. But the record with
other natural resources—public timberlands and public rangelands does not bring much
confidence. And with a lack of controls on access, excessive use and dissipation are
likely. Accordingly, to meet the growing demands for water re-allocation, the most
effective response is not expansion of the public trust doctrine, but rather greater
emphasis on private water rights and markets to insure enhanced supplies of high-quality
waterways and aquatic and riparian habitat.
26
References
Anderson, Terry and Ronald N. Johnson (1986), “The Problem of Instream Flows,”
Economic Inquiry 24 (4): 535-53.
Blumm, Michael C. and Thea Schwartz (1995), “Mono Lake and the Evolving Public
Trust in Western Water,” Arizona Law Review, 37: 701-38.
Brewer, Jedidiah and Gary D. Libecap, 2006, “The Economic Costs of the Public Trust
Doctrine: Implications for Settlement and Trial,” working paper, Bren School of
Environmental Science and Management, University of California, Santa Barbara.
Brewer, Jedidiah, Robert Glennon, Alan Ker, and Gary Libecap, (2006), “Water Markets:
Western Water Transfers from Agriculture to Urban Uses, 1987-2005,” Economic
Inquiry, forthcoming.
Getches, David H. (1997), Water Law in a Nut Shell, St. Paul, West Publishing Co.
Glennon, Robert Jerome (2005), “Water Scarcity, Marketing, and Privatization,” Texas
Law Review, 83(7): 1873-1902.
Glennon, Robert Jerome, Alan Ker, and Gary D. Libecap (2006), Western Water Data
Set, Bren School of Environmental Science and Management, UCSB.
Gordon, H. Scott, (1954), “The Economic Theory of A Common-property Resource: The
Fishery,” Journal of Political Economy 62(2): 124–142.
Griffin, Ronald C. and Fred O. Boadu (1992), “Water Marketing in Texas: Opportunities
for Reform,” Natural Resources Journal, 32 (1992): 265-88.
Hardin, Garrett, (1968), “The Tragedy of the Commons,” Science 162: 1243-8.
Hart, John (1996), Storm Over Mono: The Mono Lake Battle and the California Water
Future, Berkeley: University of California Press.
Johnson, Ronald N., Micha Gisser, and Michael Werner, (1981), “The Definition of a
Surface Water Right and Transferability,” Journal of Law and Economics 24 (2):
273-88.
Landry, Clay J., (1998), Saving Our Streams Through Water Markets, Bozeman,
Montana: PERC.
Leal, Donald R., 2005, Evolving Property Rights in Marine Fisheries, Lanham: Md.:
Rowman and Littlefield.
27
Libecap, Gary D. (2005), Rescuing Water Markets: Lessons from Owens Valley, PERC
Policy Series, PS-33, Bozeman: Property and Environment Research Center.
Libecap, Gary D., 2006, “Refilling Mono Lake: Why the Public Trust Doctrine Weakens
Property Rights And Is Bad for the Environment,” Hoover Digest
Libecap, Gary D., 2007, “Chinatown:” Owens Valley and Its Meaning for Western Water
Today, forthcoming Stanford University Press.
Meyers, Gary D. (1989), “Variation on a Theme: Expanding the Public Trust Doctrine to
Include Protection of Wildlife,” Environmental Law 19: 723-35.
Montana Department of Fish, Wildlife, and Parks, 2000, Stream Access in Montana:
Rights and Responsibilities of Landowners and Recreationists, Helena.
Newman, Janet C., 2004, “The Good, the Bad, and the Ugly: The First Ten Years of the
Oregon Water Trust,” Nebraska Law Review, 433-46.
Ostrom, Elinor, (1990), Governing the Commons: The Evolution of Institutions for
Collective Action. Cambridge: Cambridge University Press.
Sax, Joseph, (1970), “The Public Trust Doctrine in Natural Resource Law: Effective
Judicial Intervention,” Michigan Law Review 68: 471-566.
Sax, Joseph, (1989), “The Limits of Private Rights in Public Waters,” Environmental
Law, 19: 473-83.
Sax, Joseph L. (1990), “The Constitution, Property Rights and the Future of Water Law,”
University of Colorado Law Review 61: 257-82.
Simms, Richard A. (1995), “A Sketch of the Aimless Jurisprudence of Western Water
Law,” in Kathleen Marion Carr and James D. Crammond, eds., Water Law:
Trends, Policies, and Practice, Chicago: American Bar Association, 320-29.
Stavins, Robert N., (2003), “Market-Based Environmental Policies: What Can We Learn
from U.S. Experience (and Related Research)?” Workshop, August 23-24,
Donald Bren School of Environmental Science and Management, University of
California, Santa Barbara.
28
1
Glennon ( 2005,1883-85).
Hardin (1968), Gordon (1954).
3
See Stavins (2003) for discussion of the movement toward market-based instruments.
4
Brewer and Libecap (2006) model and test these hypotheses.
5
Texas, New Mexico, Arizona, California, Nevada, Oregon, Washington, Idaho, Montana, Wyoming,
Utah, Colorado. Data collection procedures are described in Brewer, Glennon, Ker, and Libecap (2006).
6
Getches (1997, 74-189).
7
Anderson and Johnson (1986) and Johnson, et al (1981).
8
Getches (1997, 98-146), Simms (1995, 323).
9
Landry (1998), Newman (2004), Water Strategist, selected issues, “Transactions Summaries.”
10
Getches (1997, 217, 224-8). The discussion below borrows from Libecap (2006, Chapters 7 and 8).
11
National Audubon Society v. Superior Court, 685 P.2d. 712.
12
See Blumm and Schwartz (1995). See also, Sax (1990, 270) for discussion of subsequent cases in
California that expanded the public trust doctrine. See also Gray (1994, 262-69). For public trust
application to wildlife, see Meyers (1989).
13
Simms (1995, 321).
14
Sax (1990, 264, 269).
15
Shokal v. Dunn, 109 Idaho 330, 707 P.2d 441, 1985; Mineral County v. State of Nevada, 117 Nev 235,
20 P.3d. 800, 2001; Golden Feather Community Ass’n v. Termalito Irrigation District, 199 Cal. App. 3rd
402, 244 Cal Rptr. 830, 1988.
16
Sax (1990, 277).
17
Stavins (2003), Leal (2005). The following discussion of the public trust doctrine and the Mono Lake
case builds on Libecap (2007), Chapter 8 and Libecap (2006).
18
Audubon Society v. Superior Court 33 Cal 3d 444.
19
Audubon Society v. Superior Court 33 Cal 3d 440.
20
These issues are explored more formally in Brewer and Libecap (2006).
21
Ryan v. Harrison & Harrison Farms L.L.L.P. 306 Mont. 534, 200, WL 828068 (Mont.), 2001 MT 128N.
22
Herrin v. Sutherland 241 P.328 (S.Ct. Mont., 1928), held that if navigable in fact, navigable in law and
pubic can use the stream because the streambed is not privately owned.
23
Montana Coalition for Stream Access v. Hildreth, 648 P.2d. 1088 (S.Ct. Mont.1984) Hildreth had erected
fence across Beaverhead River restricting navigation, but the court ruled that because the Montana
Constitution asserts that the state owns the waters for the peoples’ benefit, they may use a waterway for
recreation purposes if the waterway is capable of supporting that use. A commercial test was not required.
Title to the stream bed was irrelevant in determining navigability.
24
Montana Department of Fish, Wildlife and Parks, Stream Access 2000.
25
Bozeman Daily Chronicle, “Angler fee puts access cost on the wrong party,” Sunday April 23, 2006.
26
Meyers (1989).
2
29