Technical Report on Market-Based Reallocation of Water Resources Alternative

by Ernest Niemi; Mary E. McCrea

Jan 1, 2007
It is widely recognized that water resources in the Yakima Basin are over-allocated in that the total rights to remove water from the basin's streams exceed the available water supply in certain years. This over-allocation has been confirmed by the adjudication of the surface water rights in Yakima Superior Court in the case of Ecology v. Acquavella. The over-allocation prompted an order by the court in 2005 ordering water rights with a priority date later than May 10, 1905 to be curtailed because of lack of water (Order Limiting Post-1905 Diversions entered March 10, 2005). One potential response to the over-allocation, and the focus of this alternative, is to shift the allocation of water and water rights to increase the value of the goods and services produced with the available supply of water for a given year or over a series of years. This alternative arises from the experience of the American economic system, which broadly relies on markets to allocate resources when the demand for them exceeds the supply. Economists recognize that markets generally can be efficient mechanisms for allocating resources to their highest-value uses.

Water markets and water banks are becoming popular suggestions as tools to resolve water supply problems. Traditional engineering approaches for augmenting water supplies such as new storage reservoirs come with a wider and deeper set of costs than do non-traditional methods (National Research Council, 2004; Howitt and Hansen, 2005). The search for nontraditional means to obtain new supplies of water (as opposed to "new water") points toward conservation in the use of existing supplies and/or reallocation of existing water rights (Howitt and Hansen, 2005). Conservation and reallocation can come with lower costs and provide more flexibility (Economic and Engineering Services, Inc., 2002; National Research Council, 2004). They can be better for the economy both because of the lower costs and because they move water to the highest and best economic use. They can also result in reduced risk when compared with traditional approaches.

Powered by IssueLab