WATER MARKETS AT
WORK: AN IDAHO MODEL
Don Reading, Ph.D.
Climate Impacts Group, University of Washington
Ben Johnson Associates, Tallahassee, Florida
Climate Prediction Applications Science Workshop
Research and Applications on Use and Impacts
March 9-11, 2004
Tallahassee, Florida
How Markets Work
 Fee simple transfer of ownership of property or commodity
 Must have a property right to transfer
 Benefit to both sides – win/win situation
 Market prices reflect societies value of a good
The nature of property rights for water
 Water is NOT owned in a physical fee simple sense
 Water rights are usufructuary – it is a right to divert and use
 Water supply is NOT fixed
 Water is a ‘necessity of life’
The evolving nature of water rights
►Riparian
...legal theory that owners of land abutting lakes, rivers, or
streams were guaranteed the ‘natural flow without diminution or
alterations’ of the water course. The idea was that property was
an estate to be enjoyed for is own sake and left undisturbed.
(Water Follies: Groundwater Pumping and the Fate of America’s Fresh Waters,
Robert Glennon)
►Prior Appropriation
The essence of this doctrine is a queuing system based on “firstin-time first-in-right”. (Water Follies)
►Hybrid of Riparian & Prior Appropriation
There is also a relative new-comer to the water rights scheme
that is being embraced by a growing number of eastern states,
that of a hybridized version of the riparian and prior appropriation
doctrines.
(Sea Grant Law Center, University of Mississippi)
Idaho Water
Market
Structure
Prior Appropriations water rights are
defined by:
Source
Priority Data
Point of diversion
Place of use
Purposes of use
Time of use
Quantity diverted
Consumptive Use
Water Marketing in Idaho
General Parameters

Water banking considered beneficial use (1977)

No injury to third party (Pareto Optimal)
Mitigation required

Conjunctive management with groundwater

Established procedure for determining injury/mitigation
Moving party does not have to bear burden
Hydrologic modeling used to determine impact
Only consumptive use to buyer

Rental pools (1936)

Lemhi, Payette (2000)
Idaho Water Markets - Recent Values
Location
Date
Start
Length of Term
Water
Source
Administration
Recent Price Posted Price or
Minimum
(acre foot)
Activity
(acre feet
per year)
Purchaser
Rent or Lease
Rental Pools:
District 1
Upper Snake
1930's Up to 20 years
Stored
Committee of 9
$2.95/$10.50
District 63
Boise River
1988 Annual
Stored
Local Dist. 63 Board
$6.50/$6.93
District 65
Payette River
1990 Annual
Stored
Local Dist. 65 Board
$3.20/$8.50
Shoshone-Bannock
Upper Snake
1990 Up to 5 years
Stored
Tribe
250,000 Irrigation/Power/In Stream
3,000 Irrigation/Power
150,000 Irrigation/Power/In Stream
In-Stream Flows:
Lemhi River
District 65K
Lemhi River
Payette - Lake
Fork Creek
2000 Part Year to Annual
Surface
Local Committee
based on net
economic
benefit ($75$100)
2001 Annual
Surface
Local Committee
$2.70
Water Resource Board
$11+
5,000 Irrigation/Power
Water Resource Board
$50
40,000 In Stream (BoR)
300 In Stream (BoR)
2 Conservation
Water Bank:
State
1 year lease to
permanent transfer
State
1979
Snake River
2001 Annual
Surface/
Ground
In Stream
(NMFS)
Permanent Transfer
State
State
1900's
Permanent
Surface/
Ground
Water Resource Director
Various
All
WATER BANK
Water Bank Conditions
The owner/lessor acknowledges the following:
1. Payment to the owner/lessor is contingent upon the sale or rental of
the right from the bank.
2. While a right is in the bank, the owner of the right may not use the
right even if the right is not rented.
3. A right accepted into the bank stays in the bank until the Board
releases it or until the lease term expires.
4. While a water right is in the bank forfeiture provisions are stayed.
5. IDWR reviews validity of water right – not legally binding.
WATER BANK ACTIVITY
In 2003 approximately 175,000 acre feet in the Water Bank
 However only approximately 5,000 acre feet annually are
sold, rented or leased
 Primary reason for bank is to stay the clock (use-it-or-lose-it)
 Activity has been increasing in recent years
 Lease activity has been increasing each year
RENTAL POOLS
Idaho Rental Pools
Limitations
• Administratively determined price
• “Last to fill” penalty for water in the pool
Global Rental Pool (2003, District 1)
• All storage owners must participate (abandoned)
• All owners share in rental receipts
• “Last to fill” is eliminated
• In 2003, the driest year on record, there were no curtailments, but
“price too low”
Caveats
• Three checks written: administrative fee, official price, payment
“under the table”
Considerations for Rental
• For use in Idaho only (year by year legislation for in stream)
• No injury to other water rights (Pareto Optimum)
• No enlargement in use of a right
• Water must be beneficially used
• Water must be sufficient for the intended use
• Water use must be in the local public interest
(effects on public water resource – not secondary effects)
Global Pool
• Modify rental pool procedures
• Carry over greater than 25% of the water right
• Distribution of rented storage by formula
For Suppliers
For Rental Price
• Aimed at making mitigation available every year
• Universal participation abandoned 1st year
• Pricing formula administrated – auction preferred?
IN STREAM
Lemhi
• Instream flows (HB 385)
• Less than full season allowed (now other basins)
• No effect on existing permanent water right
• Junior right holders cannot divert (not specific to Lemhi)
• Priority of water right is maintained
• BoR rent on a per acre basis
Payette – Lake Fork Creek
• Irrigation districts invest in conservation measures
control structures
remote water monitoring gauges
dam modification
• Restore habitat for native fish
• Leased water (small amount) to supplement project
PRIVATE TRANSFERS
Private Transfers
• For use in Idaho only (additional tests on supply and “reasonably
anticipated” demands for water)
• No injury to other water rights (Pareto Optimum)
• No enlargement of a right – only consumptive use transferred to
buyer
• Water must be beneficially used
• Consistent with “conservation of water resources”
• Basin of origin local economy not “adversely affected”
• Water use must be in the local public interest
(effects on public water resource – not secondary effects)
Number of permits
Number of Water Rights
Transfers - Idaho
300
250
200
150
100
50
0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Fiscal Year
Snake River Moratorium after 1992 ( no new water rights)
Recent transfers are a high percent 'change of use' (dairies)
This is the number of permits not volume of water
Idaho Water Markets - Recent Values
Location
Date
Start
Length of Term
Water
Source
Administration
Recent Price Posted Price or
Minimum
(acre foot)
Activity
(acre feet
per year)
Purchaser
Rent or Lease
Rental Pools:
District 1
Upper Snake
1930's Up to 20 years
Stored
Committee of 9
$2.95/$10.50
District 63
Boise River
1988 Annual
Stored
Local Dist. 63 Board
$6.50/$6.93
District 65
Payette River
1990 Annual
Stored
Local Dist. 65 Board
$3.20/$8.50
Shoshone-Bannock
Upper Snake
1990 Up to 5 years
Stored
Tribe
250,000 Irrigation/Power/In Stream
3,000 Irrigation/Power
150,000 Irrigation/Power/In Stream
In-Stream Flows:
Lemhi River
District 65K
Lemhi River
Payette - Lake
Fork Creek
2000 Part Year to Annual
Surface
Local Committee
based on net
economic
benefit ($75$100)
2001 Annual
Surface
Local Committee
$2.70
Water Resource Board
$11+
5,000 Irrigation/Power
Water Resource Board
$50
40,000 In Stream (BoR)
300 In Stream (BoR)
2 Conservation
Water Bank:
State
1 year lease to
permanent transfer
State
1979
Snake River
2001 Annual
Surface/
Ground
In Stream
(NMFS)
Permanent Transfer
State
State
1900's
Permanent
Surface/
Ground
Water Resource Director
Various
All
FLORIDA WATER MANGEMENT
Consumptive Use Permit (CUP)—Allows a user to withdraw a
specified amount of water, either from the groundwater or from a lake
or river. The water can be used to irrigate crops, nursery plants or golf
courses; manufacture various products, including citrus; operate
industrial plants; and provide drinking water for domestic
consumption. CUPs were created as the key mechanism by which
the water management districts and the state can regulate the
consumption of water from the most beneficial uses and in the best
interest of the public.
Florida law states water is a ‘public resource’
Because water is a public resource benefiting the entire state, Florida law
requires waters in the state to be managed on a state and regional basis.
Water is a statewide resource that is permitted and managed by districts for
the benefit of all within the state. While it is politically important to look to
local sources first, it may be in the best interest of the environment, and the
potential sending and receiving regions, to revisit the impacts of allowing
transfers, both economically and environmentally. One of the unintended
consequences of Florida’s “local sources first” policy is that districts and
localities think they “own their water,” and must prevent access by any other
district or locality. (Improving Florida’s Water Supply Management
Structure, A Report form the Florida Council of 100, p. 14.)
Improving Florida’s Water
Supply Management Structure
A Report from the Florida Council of 100
Recommendation 4. Find ways to encourage public-private partnerships and public-public
partnerships.
Allowing market-driven forces to play a role in water management would enhance water supply,
conservation, distribution efficiency and the environment. Creating a structure and atmosphere
that better supports creative solutions to Florida’s water storage and distribution problem
would help to ensure that we are using water in a sustainable manner. Establishing more wholesale
water agencies that can make multiyear contracts to private enterprise would enable partnerships
to develop.
Furthermore, creating incentives for private companies and public entities to develop water
resources and build new water supplies and infrastructure are innovative ways to address future
water needs. If we are able to lease public lands for tree farming and other ventures, why not lease
lands for water supply development to public water suppliers? Excess water (i.e., excess to minimum
flows and levels and local consumption needs now and for the future) on and within state
land could become an income generator for the state and the locals from which water is supplied.
Don Reading, Ph.D.
Climate Impacts Group
University of Washington
King Building
4909 25th Avenue NE
Seattle, WA 98195
Ph: 206.616.5350
Fax: 206.616.5775
karpov@u.washington.edu
Ben Johnson Associates
Tallahassee Office:
2252 Killearn Center Blvd. - Suite 2D
Tallahassee, Florida 32309
Ph: (850) 893-8600
Fax: (850) 668-2731
email: staff@benjohnsonassociates.com
Boise Office:
6070 Hill Road
Boise, Idaho 83703
Ph: (208) 342-1700
Fax: (208) 384-1511
email: dreading@mindspring.com