38th of a Series

“Water is the true wealth in a dry land . . . .[I]f you control the water, you control the land. . . .”

- Wallace Stegner

Property rights and the public interest

In 2022, in the midst of California’s three-year drought, the Merced River went dry. The river, which arises in Yosemite National Park and flows through the Central Valley, is essential to the valley’s farmers who produce over half the country’s fruits, vegetables, and nuts.

Subsequent reporting by The New York Times focused my attention on three astonishing facts: (1) the farmers who depend on the river’s water were the very people who drained it; (2) the river had been dry for four months before the state’s water regulators learned about it; (3) nobody broke any laws.

The farmers were exercising their legal rights, some of which go back more than a century, to their shares of the water. Consequently, during the drought the total number of allocated shares remained unchanged; but the total amount of water did not, and so the river went dry.

In the United States, nobody owns the water in rivers, streams, and lakes. These “surface waters,” belong to the people collectively.* But individual landowners and corporations can acquire the right to “manage, divert, use, or sell the water.” I don’t know about you, but the right to sell something you don’t own seems a bit sketchy to me. The only comparable thing that comes to my mind is the stock market, where you can buy and sell shares and options you don’t own. But on Wall Street, they are not considered a public good. Somebody owns them. Otherwise, it’s called a Ponzi scheme.

As with the stock market, beliefs about natural resources are often as important as the underlying fundamentals. So as long as people believe there is plenty of water, few will worry too much about its allocation. But beware when the rains stop, and the people keep coming, and the demand for water exceeds its supply. 

In this country, there are basically two systems for allocating surface waters:

1. Riparian rights, under which landowners abutting a stream, river, or lake have the right to take its water for their own use.

2. Prior appropriation, under which the first to use and claim the water establishes a right in perpetuity (“first in time, first in right”).

Generally, the East, where water has historically been plentiful, operates under the riparian-rights doctrine, while in the drier West, prior appropriation dominates. No permit is required for the former, and the landowner’s rights are not contingent on “using” the water. Under the rules of prior appropriation, however, permits are generally required, and permit holders can lose their right if they fail to “use” the water. “The only requirement for holding on to this privileged status [is] to keep putting the water to work. In short, use it or lose it.”

And that’s exactly what happened to the Merced River.

*Unlike surface water, individual landowners, corporations, or the public at large can own groundwater, including that which has been stored for millennia in deep aquifers, although state laws generally determine its allocation. Needless to say, the matter of water rights is a tricky business.

For a succinct summary of the issue, see “Whose Water Is It Anyway? Comparing the Water Rights Frameworks of Arkansas, Oklahoma, Texas, New Mexico, Georgia, Alabama, and Florida,” by M. D. Smolen, Aaron Mittelstet, and Bekki Harjo.