Document Type

Report

Publication Date

January 1980

Abstract

Changes in water use patterns are an inevitable consequence of relentless social transformations taking place. Especially where waters have been fully appropriated, the needs of a dynamic society must be met through transfers in water ownership. Yet, there are a variety of factors that may operate as impediments to the shifting of water according to social preferences as expressed through water markets. As a mechanism for facilitating water transfers, exchagnes, or rentals, the concept of "water banking" and "water brokering" may be fruitful. This repot appraises the potential for initiating and operating such a service within the legal, institutional, and organizational framework prevailing in Utah. Questions addressed are: What are the special characteristics of water rights and water right owners that constitute important elements of the market arena? How would a banking and/or brokering service effectively deal with the mix of marketable water right equities ranging from the "general corporate right" (exercised in satisfying an unlimited variety of individual uses at the pleasure of the corporation, i.e. municipality, conservancy district, etc.); the individual proportion of "share" of a mutally owned right; to the individually owned water right? However would the water banking operation be coordinated with the State Engineer who must approve all changes in use? What are the organizational alternatives for establishing a water bank? Should such a service be sponsored and operated as a public or private activity? What are the legal considerations that must be addressed? Are there constitutional, statutory, or procedural consideratiosn taht seriously constrain the operation of a water banking/brokering service? Can such a service be made to complement present institutional structures and whatever forms of banking and brokering they may currently provide? What are the economic considerations in the creation of a water banking/brokering service? It is concluded that a water bank could be effective in facilitating cost-effective and resource efficeint matchups of buyers and sellers of water. There are no constitutional, statutory, or regulative elemetns in Utah water administration that would seriously hinder the operation of a water banking/brokering system. However, there are some institutional peculiarities and debt encumbrances that may limit the market potential of particular water right equities. The protection of third party interests to any water rights transaction is a central consideration in arranging water transfers, exchanges, or rentals. Therefore, the water bank must be staffed by individuals having technical understanding of the hydrologic and legal impacts and the economic externalities that accompany particular water use changes. An appraisal of existing Utah organizations capable of assuming a water banking/brokering service suggest the Office of the State Engineer (public) and the Utah Water Users Association (private) as the two most liekly candidates. It is recommended that the evaluation of these two organizations now be made in more detail with respect to suitability of the new banking/brokering service to basin mission, current operating policies and programs, organizational structure, and fiscal and budgetary framework. Decision to initiate the concept should probably begin with a limited level of service, adding more comprehensive and more professional elements as justified by oeprating experience.