31 ELR 10237 | Environmental Law Reporter | copyright © 2001 | All rights reserved

Markets, Mechanisms, Institutions, and the Future of Water

David W. Yoskowitz1

[31 ELR 10237]

Water scarcity is no longer a threat, it is a reality. Increasing populations throughout the country and the world are putting increased pressure on existing supplies of freshwater. Cities, states, and regions are scrambling to find solutions to this burgeoning problem. The impact of drought, which has been felt not only in the typically dry Southwest, but also in the humid Southeast this past summer, compounds the problem. So what mechanisms evolve to help alleviate the problem?

Advances and uses of technology are one means. Desalinization and reverse osmosis processes are becoming relatively cheaper, making their adoption a reality in the near future. This assumes, however, that the user of the technology is near a source of treatable water. Another use of this technology is to treat used water. But this method would have to overcome the stigma attached to it. A number of other possibilities exist, but this Dialogue will focus on one in particular: Water marketing.

The concept of water marketing is not new but has recently come into vogue as a means in which to transfer water to thirsty cities. The attractiveness is that in many, but not all, cases the price and quantity are set by the contracting parties rather than regulating agencies.2 This is appealing because of our society's familiarity with a market economy and the wish of both the federal and numerous state governments to reduce the role of regulation.

Already much has been written on the theory of how water markets should be structured and on the empirical evidence of their existence.3 This Dialogue attempts to draw the connection between water law and the development of markets by focusing on the state of Texas. A number of other western states—Arizona, California, Colorado, and New Mexico—also have water markets developed to one degree or another. The case of Texas, however, allows several methods of marketing to be examined under the guise of a single but diverse water code.

Surface Water Markets

Texas is somewhat unique in its surface water law. It is a state where East meets West, not only geographically and politically, but also in the manner in which it allocated water. Quite simply, for a number of years the state had existed with a dual system of prior appropriation and riparian rights. Texas water law has since evolved from one of conflicting, competing legal systems into an allocation system that fits the needs of the state.

Two basic legal doctrines are recognized in Texas: the riparian doctrine and the prior appropriation doctrine. The riparian doctrine, based on English common law, accords the owner of land contiguous to a watercourse or other natural water supply certain rights to use that water. The use of water, however, must be reasonable in relation to the needs of all other riparian owners. Prior appropriation, on the other hand, accords rights to the use of water to those who take the required steps in diverting the water and putting it to beneficial use.4 This doctrine is controlled by statute. In the western states, prior appropriation is not related to land ownership; instead water rights are acquired by compliance with statutory requirements.5 In addition, surface water may be classified either as diffused surface water or as water within a defined watercourse where only water in a watercourse is subject to state ownership. Texas courts have ruled that the state owns these waters in trust and may allocate the water for the use and benefit of all people of the state.6

The dual system of riparian and prior appropriation rights created conflicts. In 1967, the Texas Legislature merged the riparian system with the prior appropriation system in its passage of the Water Rights Adjudication Act.7 The Act required any person claiming a riparian water right to file a claim for the right by 1969. With the passage of the 1967 Act, Texas consolidated the allocation of surface water into a unified water permit system, and anyone wishing to use surface water must receive permission from the state in [31 ELR 10238] the form of a "water right."8 Today there exists two types of rights: a certificate of adjudication and a permit.9 Certificates of adjudication are permits that were granted prior to 1969. Claims after 1969 are simply referred to as permits. In either case, certificates and permits are licenses to use state water.

Under the current system, water rights are given by state license that grants the holder the use of a specified amount of water at a specific location for a specific purpose. Although in Texas a water right is a recognized property right under the Texas Water Code, the owner of a water permit only has a right to use that water; the owner has no actual title to the water. Nevertheless, this water right can be sold, leased, or transferred to another person. Moreover, the water right can be passed or conveyed automatically with the title to the land, unless reserved in a deed, or can be sold separately from the land.10 There are restrictions, however.

The water code and rules of the Texas Natural Resource and Conservation Commission (TNRCC) place certain restrictions on the transfer of water rights. The TNRCC must be notified of the sale of a water right, and a transfer will not be allowed if it would impair other water rights. The water code prohibits the transfer of a water right to another river basin if the transfer will materially harm any person in the watershed from which the water was taken. The physical transfer of water from one river basin to another is allowed only if there is no prejudice. In this case, it is the water that is transported and not the water right. The Texas Water Code also allows for the cancellation of water rights if there has been no beneficial use in a 10-year period. Once the water right is canceled, the water becomes available for appropriation by other uses.11

Texas surface water law has been anything but orderly.12 Major problems that have affected surface water use, management, and planning stem from Texas' slowly evolving water law. These issues relate to: (1) determining the extent of riparian water rights that pertain to Hispanic land grants, (2) coordinating the diverse Hispanic-English riparian rights and later appropriative water rights, and (3) dealing with difficulties in canceling or reducing unused surface water permits.

The dual system of water rights in Texas began to produce conflict when claimed water rights became greater than supply. This conflict is aptly represented by what took place along the lower Rio Grande River during the drought of the 1950s. The state filed to have the court adjudicate the water rights, which were then redistributed among claimants in 1969.

In Texas v. Hidalgo County Water Conservation & Irrigation District,13 the court determined the water rights for each claimant and the priority of each water right. Essentially, municipal and domestic users receive top priority, followed by industrial uses. Irrigation uses rank third, although they have the single largest allocation as a group.14 The amount of water that may be applied to the beneficial use of agriculture was determined by the courts to be 2.5 acre-feet of water per acre of land per year.

Further decisions were made concerning water users. Class A water rights embrace those entities who acquired rights to use the Rio Grande by virtue of having complied with the appropriation statutes of the state of Texas or whose water rights were recognized by the state (i.e., certified filings). Class B water rights embrace those who have been making "good-faith" beneficial use of the waters of the Rio Grande for irrigation purposes prior to the institution of the lawsuit in 1956. Class A water rights are allocated at a rate 1.7 times greater than Class B water rights.

This distinction between Class A and Class B water rights is important since actual water rights do not necessarily mean this is the quantity allocated to individual irrigators each year. Some pro rata share is allocated depending on climatic conditions, storage levels at various dams, and Rio Grande basin inflows. For example, between 1978 and 1985, agricultural water rights holders received only an average of 41% of their total allotment.15

As of September 1997 there were 813 active water rights along the entire Texas Rio Grande.16 By class of user, irrigation districts and individual irrigators represent the largest number of users. They hold 35% of the total water rights when hydroelectric water rights are included and 86% of water rights when hydroelectric water rights are excluded. Municipal water rights holders represent 10% of claims to the Rio Grande when excluding hydroelectric rights. Industrial, recreational, and mining rights make up less than 1% of the total rights. There also exist a very small number of instream water rights for wildlife and environmental purposes.

As a result of the Water Rights Adjudication Act, a watermaster program17 was established for the Texas Rio Grande users. The Rio Grande Watermaster (RGW) has several duties, which include monitoring rights and determining allocations based on storage levels in its reservoirs and climatic conditions. Water allocation for irrigation districts and agricultural users is decided on a monthly basis whereas the allocation of municipal rights is given at the beginning of the year.18

[31 ELR 10239]

What is of interest for purposes of this Dialogue is the development of water markets along the Rio Grande. In his article on water markets,19 Schoolmaster argues that the water market was developed along the Rio Grande for five reasons. First, the opportunity to augment existing supplies with groundwater was limited. Second, increased population, urban growth, and economic development intensified competition for water between various users. Third, as cities grew and land was converted from agricultural to urban uses, there were large amounts of agricultural water rights but less land to irrigate. Fourth, water rights were enforceable and transferable. Last, third-party effects were reduced by the use of conversion rates that limit the amount of water transferable from agricultural to municipal uses. These reasons have contributed to shortfalls experienced by water right holders, especially municipalities and industry.

Prices for permanent water transactions vary per acre foot according to the type of water right purchased. Because of the conversion factor, a municipality will receive a greater amount of water with the purchase of a municipal water right than with the purchase of an agricultural water right. If the water rights are not purchased, municipalities have been inclined to enter into permanent contractual arrangements.

The terms of water market transfers reflect the broad-based characteristics of market exchange in general.20 The transfer may be permanent, which involves the exchange of water rights, with or without associated land ownership, from one entity to another on a permanent basis. The sale price represents the capitalized value of the water right over time. A permanent transfer from one user to another user class (irrigation to municipal) does require the approval of the TNRCC. The transfer also may be on a term, or a fixed, period basis. This type of contract promises to deliver a certain quantity of water for a specified period of time, up to one year. The contract price reflects the guaranteed delivery of water per year at a fixed price for the specified period of years. Third, transfers may be spot market transfers, a one-time exchange of a quantity of water from seller to buyer. Transfer price here should reflect prevailing conditions at the time (drought or abundance) of transfer. Within the context of TNRCC rules, these three different water transfer categories are considered as two; permanent transfers of water and contracts for sale (covering term and spot categories).

Finally, option contracts in water markets are emerging. These are contingency contracts with water deliveries based on a set of particular circumstances occurring. This may involve general drought contingencies and water reallocations, or excess demand submarkets or users, linked to excess supply submarkets or users. The transfer price here usually includes a fee to activate the option contract.

Two studies examining the water market along the Rio Grande in Texas21 found that 99% of the permanent transfers are from agricultural use to nonagricultural use. In addition, 45% of current urban holdings of water rights were possessed by agriculture users 20 years ago. The many water districts along the Rio Grande participate in rental markets as both lessors and lessees, but they do not sell water rights—sales have been from private individuals and firms.

Market Activity

Although spot transactions for water along the Rio Grande has existed for quite a while, records of these transactions did not begin until 1993. At this time the RGW office began to track a total of six variables that could be attributed to each transaction. These were the date of the transaction, the buyer and seller, adjudication (permit) numbers, the total acre feet purchased, the price per acre feet, and what class the buyer was (irrigation, municipal, or mining).

Since the start of the recordkeeping in 1993 through May 2000, there has been a total of 1,330 spot market transactions. Of this total, the water in 1,109 of the transactions was put to use in irrigation, 111 for mining use, and 110 for municipal use. Irrigators typically are sellers of water to all three user groups, which most likely stems from the fact that they are also the largest holder of water rights as a group. However there is some evidence that individuals are beginning to purchase permanent water rights for the sole purpose of selling water in the spot market.

Prices in the spot market are market-determined. Even though the RGW is responsible for allocating, monitoring, and enforcing water rights, the terms of the transfers, whether permanent or on a one-time basis, are left up to the parties directly involved. Over the period of the data from 1993 to May 2000, the average price paid by irrigators was $ 22 per acre foot, municipalities also paid on average $ 22 per acre foot, and mining firms paid $ 432 (see Table 1). The average size of the transactions also reveals important information about the market. Mining interests engage in relatively small transactions with regard to the number of acre feet purchased (12) and pay on average almost 20 times more per acre foot than municipalities.22 As would be expected, municipalities purchase large amounts of water, 404 acre feet on average, to supplement their current water supplies but pay no more than irrigators on average.

Table 1. Price and Size of Spot Market Transactions

User GroupAverage PriceAverage Size
(per acre foot)(acre feet)
Agriculture$ 22219
Mining432 12
Municipality 22404
[31 ELR 10240]

Groundwater Markets

As surface water rights become scarce, municipalities in the West Texas Plains are turning to groundwater resources to supplement current supplies as well as for future use. Therefore, an understanding of Texas groundwater law is important in the analysis of water marketing in this region.

In contrast to surface water law, which was crafted by the Texas Legislature, Texas groundwater law was judicially created, derived from the English common-law rule of "absolute ownership." Groundwater belongs to the owner of the land above it and may be used or sold as private property.23 The Griffin and Boadu study,24 however, notes that some argue that the "absolute ownership" doctrine is a misnomer for Texas groundwater principles because the groundwater user is not protected from water table declines brought on by one'sneighbor. The practical effect of Texas groundwater law is that one landowner can dry up an adjoining landowner's well leaving the landowner with the dry well without a legal remedy.25 Texas landowners, however, can take legal action for interference with their groundwater rights if one of the five situations arise:

1. an adjoining neighbor trespasses on the land to remove water either by drilling a well directly on the landowner's property or by drilling a "slant" well on the adjoining property;

2. there is malicious or wanton conduct in pumping water for the sole purpose of injuring an adjoining landowner;

3. landowners waste artesian well water by allowing it to run off their land or to percolate back into the water table;

4. there is contamination in a landowners well; or

5. land subsidence and surface injury result from negligent over pumping from adjoining lands.26

In addition to the situations listed above, legal action is available for those lands that fall under the laws and regulations of an underground water district. In 1949 and again in 1985, the Texas Legislature passed a law authorizing, only with local voter approval, the creation of these districts. The purpose of such districts is to prevent waste and land subsidence, to protect water quality, and to conserve groundwater supplies.27 All underground water districts tread a narrow path between respecting private ownership rights of groundwater and protecting water resources.

The trend in the West Texas Plains has been to purchase land and/or water rights to that land for municipal use. The Texas Supreme Court in Corpus Christi v. Pleasanton28 held that under common law, "there certainly was no limitation that prohibited the use of the water off the premises where it was captured. Neither was there any restriction of its use to a particular area." This aspect of groundwater law allows the municipalities to engage in transactions that will transport groundwater off-site for use by the municipalities. In addition, it is not necessary that the municipalities purchase the water right; they may lease it.

Market Activity

For the majority of cities in the West Texas Plains, the only way to increase water supplies is to purchase or lease groundwater rights. As Table 2 shows, groundwater transactions have been taking place for decades in this region.29 Early on these communities came to the realization that their surface water supplies would not sustain them through continued growth and that additional water needed to be obtained.

Table 2. Municipal Water Purchases

TransactionDateType ofSize ofPrice *
Midland #11966Land and20,650 acres$ 112 per acre
water rights($ 36)
$ 3.45 af
Lubbock #11953Groundwater57,000 acres$ 37 per acre
rights($ 10)
$ .02 af
Lubbock #21953Groundwater249.4 acres$ 374 per acre
rights($ 100)
$ 22.6 af
Lubbock #31957Groundwater16,047.7 acres$ 124 per acre
rights($ 35)
$ 3.30 af
Lubbock #41975Real property531 acres$ 418 per acre
sold. Own($ 225)
water rights$ 12.96 af
Lubbock #51985Groundwater1,289.6 acres$ 278 per acre
rights($ 300)
$ 11.88 af
Lubbock #61987Groundwater1,464 acres$ 264 per acre
rights($ 300)
$ 11.35 af
Lubbock #71988Groundwater2,163 acres$ 244 per acre
rights($ 289)
$ 9.19 af
Amarillo #11984Groundwater960 acres$ 250 per acre
rights$ 16.23 af
Amarillo #21988Groundwater25,459 acres$ 99 per acre
rights($ 117)
$ 9.01 af
TransactionOptionsIn Use orDevelopment Cost
Midland #1noneInventory$ 48.6 million
Lubbock #1Several wellsIn usen/a
reserved by
Lubbock #2OwnerInventoryn/a
maintains right
for normal
domestic use
Lubbock #3OwnerIn usen/a
maintains right
for normal
domestic use
Lubbock #4In usen/a
Lubbock #5OwnerInventory$ 500,000 per
maintains right640-acre
for normalsection
domestic use
Lubbock #6OwnerInventory$ 500,000 per
maintains right640-acre
for normalsection
domestic use
Lubbock #7OwnerIn useMinimal,
maintains rightinfrastructure
for normalin place
Amarillo #1Inventoryn/a
Amarillo #2Inventoryn/a
There are commonalities to the purchases made by different municipalities. In examining all the purchases made by the cities of Lubbock and Amarillo, in no case do they hold the real property. These municipalities are only interested in what lies beneath and are not interested in managing the real property. In many instances the owners continue to occupy the land and are granted the right to use the groundwater for basic needs such as domestic use and watering of livestock.

After adjusting prices for inflation, the range paid per acre (not acre feet of recoverable water) from 1953 to 1988 was between $ 37 to $ 418 across municipalities. However, in the 1980s prices began to settle in the mid-$ 200 range for both Lubbock and Amarillo. Beginning in 1975, the price per acre foot of recoverable water began to fall into the range of between $ 9 to $ 13 (except Amarillo #1). Before this point the range was much greater—from $ .02 to $ 22.6. The narrowing range of prices after 1975 may be an outcome of an increase in technological know-how and information.

[31 ELR 10241]

Marketing groundwater is no longer limited to a specific region. Mesa Water, Inc., and its owner, T. Boone Pickens, has proposed sending 200,000 acre-feet of water per year from the panhandle of Texas south to San Antonio. The pipeline to transfer this water would cover a distance of 665 miles at a cost of $ 2.5 billion. Even with the large infrastructure, the cost of delivery would be just in excess of $ 1,000 per acre foot. Currently, Edwards Aquifer water rights, the main source of water for San Antonio, range between $ 700 to $ 1,000 per acre foot, making the Mesa Water deal worth considering according to water utilities personnel in San Antonio.30

Water Banking

The previous examples of markets have shown situations in which extreme need has driven sellers and buyers together. When needs are present but information is lacking, market activity may stifle. Water banking is one mechanism that is available to transfer water among varying uses.

The term "bank" in some cases may be a misnomer. However, we can examine the role that a commercial bank plays as an analogy. In the very broadest sense a commercial bank can be described as a "financial intermediary." They acquire deposits in many forms and are then able to lend a fraction of those deposits to individual entities. The role [31 ELR 10242] played by the commercial bank is bringing two sides of the financial market together—those who have funds to loan out and those who wish to borrow—in the most efficient manner possible. Financial intermediaries can achieve economies of scale because of their specialization. Because they handle a large number of transactions, they are able to spread out their fixed costs. In addition, they can reduce the transaction costs involved in searching for credit information.31 Just as commercial banks act as the intermediary between those with and without money, water banks act as the intermediary between those with and without water.

The 73d Texas Legislature passed, and Gov. Ann Richards (D-Tex.) signed, Senate Bill 1030 (S.B. 1030), which provided for the creation of a statewide water bank.32 The act authorizes the Texas Water Development Board (TWDB) to establish and administer a water bank to facilitate the transfer of water and water rights among willing buyers and sellers throughout the state.

At the same time the Texas Water Bank (TWB) was being created, there was also great concern over the future of the Edwards Aquifer. The Edwards is the primary source of water for the city of San Antonio as well as other municipalities and numerous agricultural interests. In addition, the Comal and San Marcos springs are directly affected by the activity that takes place in the Edwards, and endangered species occupy these springs. Thus, there existed the threat of federal government involvement in the management of the aquifer if the state could not resolve the situation.

Because of the continuing problems with the Edwards and drought situations in other parts of the state, there was concern amongst the legislature about meeting the future needs of the state. The California Drought Water Bank's (CDWB's) first year of operation in 1991 was fairly successful, and its concept appealed to members of the Texas Legislature. The combination of all these factors provided the impetus to create a water bank in Texas. S.B. 1030 is very broad in the manner that it instructs the TWDB to create and operate the TWB.33

Some of the important aspects of the code from a water marketing perspective is found in § 359.3. It is here that the design of the TWB truly emulates that of a financial bank. The role is simply an intermediary, bringing together those who have water to loan and those that want to borrow water. And then, only if necessary, is the TWB to get involved [31 ELR 10243] in the negotiation process as instructed by § 359.12. There is no doubt that the framers of the TWB did not want state government to play a role in fixing price and/or quantities.34 Once the bill was signed, the development for the operational rules for the TWB began. The bank became fully operational on May 13, 1994.

During the rulemaking process a number of issues of concern surfaced. For one, it was expressed that someone could adversely affect their neighbors by depositing acreage or groundwater rights in the bank, where a buyer could then create a cone of depression.35 Also, since the idea of a water bank was really formed around surface water transactions, would there be separate rules for groundwater? To date this issue has not been specifically addressed.

The idea of regional banks was a popular topic. Coincidently the idea of regional banks just proceeded comprehensive water legislation passed by the 75th Texas Legislature in 1997, Senate Bill 1 (S.B. 1).36 The use of regional banks,37 possibly designated by watershed, would provide the opportunity for administrators with intimate knowledge of a region to better meet the needs of their constituents. The regional bank would be modeled after the TWB, and individuals depositing water in a regional bank would enjoy the same rights and protection afforded them by the TWB. One additional feature of the TWB is its registry of buyers and sellers. This functions as a clearinghouse of information but does not carry with it any of the benefits or costs involved with water that has been deposited in the bank. As of October 9, 2000, there is only 1 depositor, 12 registered sellers, and 2 registered buyers.


Water marketing is not new, take for example the groundwater markets in the West Texas Plains, but they are becoming more formal. The need and desire to transfer water to its higher valued use necessitates that markets exist. This Dialogue discussed Texas' legislation and laws on water rights and the resulting impact they have had on the creation of water markets in Texas. By no means can it be said that the markets would not have been created on their own as the very nature and necessity of water requires statutory and legal compliance. Because water is heavily regulated at local, state, and national levels, we cannot expect a water market to operate in the same manner as a market for commodities such as soybeans.

The active spot market for water along the Rio Grande will continue to exist as long as the watermaster is meeting the needs of the market participants, and groundwater exchanges will also continue in the Plains. When the needs are no longer being met by government agencies, other entities (private) will enter in an attempt to organize the market and increase efficiency. The results of this can already be seen. Individuals are creating websites that act as clearinghouses of information.38 The firm can play the role of a broker as well as offering numerous other services related to the transfer of water and water rights. Unlike commodity markets for gold, wheat, and pork bellies, permanent water rights that are bought and sold must be approved by the state regulating agency. These constraints will continue to exist, but for good reason, and there should be no misconception that the transfer of water rights will be perfectly seamless and without a government presence. Eventually, the time taken to approve the transaction will diminish and the trading of water will flow without restraint.

1. David Yoskowitz is Assistant Professor of Economics at Texas A&M International University.

2. An example of a market where price was set by a state agency but quantities were left up to the contracting parties is the California Drought Water Bank (CDWB). The 1991 CDWB set a price of $ 175 per acre foot (af). The CDWB acquired water at a single rate of $ 125/af with the difference between the two rates covering administrative fees.

3. See generally Charles Howe et al., Innovative Approaches to Water Allocation: The Potential for Water Markets, WATER RESOURCES RES. 439-45 (May 1986); BONNIE C. SALIBA & DAVID B. BUSH, WATER MARKETS IN THEORY AND PRACTICE: MARKET TRANSFERS, WATER VALUES, AND PUBLIC POLICY (1987); Bonnie Colby, Transaction Costs and Efficiency in Western Water Allocation, 70 AM. J. OF AGRIC. ECON. 1184 (1990); WATER MARKETING—THE NEXT GENERATION (Terry L. Anderson & Peter J. Hill eds., 1997); David W. Yoskowitz, Spot Market for Water Along the Texas Rio Grande: Opportunities for Water Management, 30 NAT. RESOURCES J. 345 (1999).



6. See id. at 19.

7. TEX. WATER CODE §§ 11.301-11.342 (Lexis-Nexis 2000).

8. See KAISER, supra note 5, at 20.

9. See TNRCC Water Resource Mgmt., Surface Water Rights in Texas: How They Work and What to Do When They Don't, at http://www.tnrcc.state.tx.us/admin/topdoc/gi/228 (Nov. 1996).

10. See KAISER, supra note 5, at 24.

11. TEX. WATER CODE § 11.173 (Lexis-Nexis 2000).

12. See generally O.T. Templer, The Evolution of Texas Water Law and the Impact of Adjudication, 17 WATER RESOURCES BULL. 589 (1981).

13. See 443 S.W.2d 728 (Tex. Ct. App. 1969).

14. Andrew Schoolmaster, Water Marketing and Water Rights Transfers in the Lower Rio Grande Valley, Texas, 43 PROF. GEOGRAPHER 292 (1991).

15. Ric Jensen, The Texas Water Market, 13 TEX. WATER RESOURCES 1 (1987).


17. TEXAS WATER CODE ANN. § 11.301 (West 1998).

18. See Schoolmaster, supra note 14, at 297.

19. See id. at 298.

20. J. Jonish et al., Water Marketing Initiatives in Texas, 21 SELECTED PAPERS OF THE SW. ECON. PROC. 96 (1994).

21. See generally R. Griffin & F. Boadu, Water Marketing in Texas: Opportunities for Reform, 32 NAT. RESOURCES J. 265 (1992); C. Chang & R. Griffin, Water Marketing as a Reallocative Institution in Texas, 28 WATER RESOURCES RES. 879 (1992).

22. For a more detailed discussion, see David W. Yoskowitz, Price Differentials in a Homogenous Product Market: The Case of Water, 7 INT'L ADVANCES IN ECON. RES. (forthcoming February 2001).

23. See KAISER, supra note 5, at 33.

24. See Griffin & Boadu, supra note 21, at 282.

25. For a recent example of the constant battles surrounding "absolute ownership," see Sipriano v. Great Springs Water of Am. Inc., 1 S.W.3d 75 (Tex. 1999).

26. See HUTCHINS, supra note 4, and KAISER, supra note 5, at 32.

27. TEX. WATER CODE §§ 52.001, 52.501 (Lexis-Nexis 2000).

28. See 276 S.W.2d 798 (Tex. 1955).

29. Although groundwater transactions take place in all regions of the state, this Dialogue focuses on the transactions for water that have taken place in the cities of the West Texas Plains. Prices are adjusted to 1984 levels using the Consumer Price Index. Nominal prices are also given. The price per acre foot of recoverable water is provided as another means of comparing and contrasting purchases. The cities of Amarillo and Midland provided estimates of recoverable water. For Lubbock, the price was determined by the number of acres the purchase covered multiplied by the saturated thickness at the time of purchase. Total saturated area was then multiplied by 0.15, which represents the estimated specific yield given the geological characteristics. This figure was then divided into the purchase price (1984 dollars). Information on saturated thickness was obtained from Geraghty & Miller, Inc. (1992) and the Hydrological Atlas for the High Plains Underground Water Conservation District No. 1 (1990).

* All prices are adjusted to the 1984 price level. Nominal prices are in parentheses. Prices in italics are the price per acre foot of recoverable water.

30. See generally Amarillo Man Offers Water to South Texas, LAREDO MORNING TIMES, May 11, 2000.


32. S.B. 1030 (1993) (codified as TEX. ADMIN. CODE ANN. §§ 359.1-359.15 (West 1998).

33. The key aspects of this bill, which have been codified at TEX. ADMIN. CODE ANN. §§ 359.1-359.15, are:

§ 359.3

Board Acquisition of Water and Water Rights. The board may purchase, lease, hold, accept as a gift, and transfer water, and water rights or the right to use water as necessary to operate the bank and facilitate the transfer of water, water rights or the right to use water from the bank for future beneficial use in Texas, including accepting and holding donations of water rights to meet instream, water quality, fish and wildlife habitat, or bay and estuary inflow in accordance with state law.

§ 359.8

Deposits, Studies, Transfers, Cancellation Protection, and Withdrawals.

(a) A water right or portion thereof may be deposited in the bank for an initial term of up to 10 years, unless otherwise held in the Texas Water Trust described in § 359.15 of this title (relating to Texas Water Trust), during which time the water right or portion of the water right deposited is exempt from cancellation by the commission under the terms of Texas Water Code, Chapter 11, Subchapter E, as provided by Texas Water Code, § 15.704. The water right or that portion of the water right deposited is exempt from cancellation under this subsection only once, even if it has been transferred or redeposited. The water right or that portion of the water right which is on deposit remains on deposit until it is withdrawn.

(b) The administrator may accept deposits of water rights, including conserved water, into the bank. The administrator, acting within the purposes of the Texas Water Code, Chapter 15, Subchapter K, may also take any appropriate action to facilitate water transactions both within and external to the operations of the water bank.

(c) The water right or that portion of a water right that has been transferred while on deposit in the bank is exempt from cancellation by the commission under the terms of the Texas Water Code, Chapter 11, Subchapter E, for a period of 10 years following commission approval of any necessary actions relating to the transfer of that water right.

(d) The depositor must notify the administrator within 30 calendar days of the date a contract to transfer a water right or portion thereof is signed.

(1) For transfers requiring regulatory approval, transfers are not complete until all necessary regulatory approvals are obtained. The depositor must notify the administrator in writing within 30 calendar days of the date of receipt of final regulatory approvals. The date of final regulatory approvals is the effective date of transfer.

(2) For transfers not requiring regulatory approval, transfers are not complete until the terms and conditions of the contract have been fulfilled. In these cases, the depositor must notify the administrator in writing within 30 calendar days of the contract closure. The date the contract is closed is the effective date of transfer.

(e) That portion of a water right or the right to use water that has been deposited in the bank may be withdrawn upon the depositor's completion of a withdrawal form, or acceptable substitute, and its submission to the administrator. A copy of this form, or acceptable substitute, must be submitted by the withdrawing depositor to the executive director of the commission at the same time it is submitted to the administrator. The withdrawal is effective upon the date of signature by the administrator on the withdrawal form or 30 days after the submission of the withdrawal form, or acceptable substitute, whichever occurs earlier. A water right may be withdrawn by the administrator under § 359.6 of this title (relating to Bank Review).

(f) A water right may be used as authorized by law while on deposit in the bank. The depositor must notify the administrator of any actions or conditions that would affect the transferability of the deposited right.

(g) A water right transferred while on deposit in the bank may remain in the bank.

(h) With the approval of the board, the administrator may enter into contracts with persons to pay for water conservation feasibility studies, or the preparation of plans and specifications relating to water conservation efforts, or studies to estimate the amount of water that would be saved through the implementation of water conservation efforts.

§ 359.12

Negotiation of Terms. At the request of both the prospective buyer and depositor, the administrator may assist in the negotiation of terms associated with a proposed transfer.

34. See supra note 2.

35. A "cone of depression" is a hydrological term that essentially describes the situation where, depending on the physical makeup of the aquifer and the rate of pumpage, a person pumps water from their well and leaves their neighbor dry.

36. S.B. 1 (1997). S.B. 1 put in place a "bottom-up" water planning process designed to ensure that the water needs of Texas are met and allows individuals representing 11 interest groups to serve as members of Regional Water Planning Groups to prepare regional water plans for their respective areas. These plans will map out how to conserve water supplies, meet future water supply needs, and respond to future droughts in the planning areas. See Texas Water Dev. Bd., Assistance: Regional Water Planning Groups, at http://www.twdb.state.tx.us/assistance/assistance_main.htm#Regional (last modified Sept. 1, 2000).

37. TEX. ADMIN. CODE § 359.13.

38. See generally WaterBank .com, at http//:www.waterbank.com (last visited Nov. 6, 2000).

31 ELR 10237 | Environmental Law Reporter | copyright © 2001 | All rights reserved