Water markets grow with resource scarcity

News
May 29, 2009
by WLJ
Water markets grow with resource scarcity

“I fully expect that we’re going to see more formal water markets emerge throughout the state as our water issues and scarcity become more pressing con- cerns,” said Karina Schoengold, University of Nebras- ka–Lincoln assistant profes- sor of natural resources and environmental economics.

So far, Nebraska has only developed a few limited, for- mal markets, Schoengold said, although, historically, informal trades have hap- pened with some regularity.

In those cases, a landowner or operator has allowed a neighbor to use a well for a fee or in trade. In the last couple of years, some formal markets have emerged. In 2006 and 2007, the state became a player in the water market when it purchased annual surface water irrigation rights, from irrigators in the Republican River Basin, from the Bostwick Irrigation District.

That water was intended to increase stream flows in an attempt to be compliant with the Republican River Compact. In all those cases, the state has purchased that irrigation right for the sea- son, but there’s no restric- tion in the future. If water remains below necessary levels, the state must rene- gotiate each year. In the Central Platte, what we’ve seen are buyouts where people have volun- tarily agreed to sell their irrigation rights permanently for a one-time payment. In the Central Platte Natural Resources District, a “Water Bank” has actively pur- chased irrigation buyouts to supplement water availabil- ity in the Platte River.

The value of water varies by locale and use, Schoen- gold said. The place that’s in the middle of a drought is going to put a higher price on water than a place that is having normal precipita- tion. Typically, water mar- kets in the western U.S. are willing buyer/willing seller markets. Negotiation takes place to determine a price that’s enough for the seller to do at least as well as he or she would have with that water but at a price that the buyer can afford. If a price can’t be agreed upon, no sale takes place.

Places that have a rapidly growing urban population will place a higher value on water, she said. For example, Nevada and New Mexico have seen enormous increases in the price of water rights. They’ve had to pursue permanent water buyouts, and they’ve been very expensive.

“So far, we haven’t seen any types of markets that have been forced sales,” Schoengold said. “So, when we have an agreement, that price is in the range of values that the market dictates.” — WLJ


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