
Water
The economics of issues we face today.
Traditional Methods of Deciding Water Rights
Riparian Water Rights
Riparian water rights were adopted by the eastern United States from European law. Because the eastern US historically had plentiful water, it did not need to develop a strict system of allocation.[i] The riparian doctrine states that all owners of land adjacent to a stream, lake, or pond gives the land owner a right to that water.[ii]
The riparian water rights can be further subdivided into two distinct doctrines: natural flow and reasonable use. Prior to the 19th century, the natural flow doctrine dominated U.S. water management. This doctrine states that each adjacent landowner is entitled to an “undiminished” supply of water, both in quality and quantity.[iii] One striking feature of riparian water rights is that it requires very little government regulation. The ambiguities in ownership of quantity and quality of the water can also lead to difficulties enforcing water ownership.
In this way, riparian rights can lead to the tragedy of the commons. Because the system is largely self-governing, those who own land adjacent to water sources can withdraw as much as they would like as long as it does not, in theory, affect the same usage by a neighbor. In this way, ideally, water under the riparian doctrine should serve as a public good.
“When I speak of this common right, I do not mean to be understood as holding the doctrine that there can be no diminution whatsoever, and no obstruction or impediment whatsoever, by a riparian proprietor in the use of the water as it flows, for that would be to deny any valuable use of it. There may be, and there must be allowed to be, a reasonable use. The true test of the principle and extent of its use s-whether it is to the injury of the other proprietors or not.”
-Tyler v. Wilkinson (4 Masons U.S. Reports 397)
The reasonable use doctrine, as quoted above in the Tyler v. Wilkinson, responds to the current reality that water is not an infinite resource, and must therefore be allocated to certain uses. The reasonable use doctrine is designed to allocate water to the most economically beneficial uses.[iv]
Appropriation Water Rights
Appropriation water rights were developed mostly in the western United States, as a response to the increased scarcity of water. Under prior appropriation, an owner must be granted the ability to withdraw or impact water flow, a right that can be taken away or restricted by a governmental body.[v] Some states have, under this doctrine, required owners to purchase a permit to use the waterways. In this manner, states have attempted to value water in a monetary way. By allowing permits, states may employ a cap-and-trade system of water management, which would control the overall withdrawal levels of the water.
[i] Copas, David. 1997. The Southeastern Water Compact, Panacea, or Pandora's Box? A Law and Economics Analysis of the Viability of Interstate Water Compacts. William and Mary Environmental Law and Policy Review.
[ii] Abrams, Robert H. 2013. Riparian Right. Prod. Encyclopedia Britannica. September 11. Accessed December 5, 2014. http://www.britannica.com/EBchecked/topic/504336/riparian-right.
[iii] Copas, David. 1997. The Southeastern Water Compact, Panacea, or Pandora's Box? A Law and Economics Analysis of the Viability of Interstate Water Compacts. William and Mary Environmental Law and Policy Review.
[iv] Ibid.
[v] Ibid.

Figure 1: Distribution of Water Policy Doctrines in the U.S. Source: http://academic.evergreen.edu/g/grossmaz/BINNEBBD/
States labeled in green follow riparian doctrine, states in orange follow traditional appropriation rights, blue states follow a modified riparian doctrine, and gray states follow a hybrid of both policies.

Figure 2: Requirements for Appropriation Water Rights. Adopted from Copas, "The Southeastern Water Compact..."