Monetizing Water Rights in the American West
Climate Change Fuels Scramble to Monetize Water Rights in the American West
Here’s a thought-provoking article from The New York Times regarding water scarcity in the western U.S., and the pros and cons of private sector redirection of water supply from agricultural communities to cities.
Water rights, particularly in areas of water scarcity may be extraordinarily valuable, if they can be monetized. Generally, western farmers arrived before the cities, so farmers have senior priority water rights. But population growth in cities and climate change—likely a significant cause of the 20 percent decline in flows in the Colorado River over the past 20 years—are putting increasing pressure on existing state water regulations and compacts, which allocate the surface water of interstate rivers between various states.
While it seems unlikely that the existing framework will soon change to enable statewide or even regional water markets, this article identifies that investors are betting on that change. This should serve as a wakeup call to state governments and water administrators to persevere in their efforts to eliminate inefficiencies and to ensure appropriate allocations of water. Investors believe that the current cost of water to users in the American West is too low. Raising the effective “price” of water paid by users would encourage efficiency and could be used by states and municipalities to buy out or buy options from senior water rights holders. This may free up water for the staggering urban growth western states are experiencing.
Water is extremely valuable—it is fundamental to life—but whether water is “the next oil,” remains to be seen.
(Image acknowledgement: Nick Cote for The New York Times)
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