Thursday, February 12, 2015

Water Down Under: A Report from Australia by Barbara Cosens: Post 4: The nature of the right to water

[The Water Down Under series of posts is by Barbara Cosens, who is in Australia this semester working on water law issues there.  See more about this series, and previous posts herehere, and here.]

In the first of three conversations with UIdaho 3L law student Claire Freund on adaptability of Australian and U.S. water law introduced in an earlier blog, we explore the nature of the right to water.  Adaptability in the face of the uncertainties created by the intersection of climate change and population growth requires an overlapping capacity to respond at multiple levels of water management including the individual.  Yet rapid response can be destabilizing if not carefully prescribed.  In the case of an essential and common pool resource like water, a balancing act between governmental discretion to manage and the certainty of individual investment in development of water must take place.  We see this play out in the various ways governments approach defining the nature of the water right – specifically (1) how much latitude does government have to regulate water allocation and use; and (2) how transferrable are individual water rights. Australia and the western U.S. are currently following very different trajectories on these issues.   The degree of latitude for government regulation depends on the how we define the property interest of the water user.  In both countries this issue is currently in the lower courts and (fortunately) not settled law. Both Australia and the U.S. began their process of defining that interest with adoption of the common law of England.  Aridity over much of Australia and that portion of the U.S. west of the 100th Meridian, led to substantial divergence from English common law in both countries.  Both retain the concept that water is a public good, held by the state but with individual use rights. But, whereas Australia adopted a concept of shared shortage, the western U.S. rewarded investment by granting superior rights to those who developed first.  Currently, Australia defines water rights as subject to considerable regulation by the state.  Reductions due to drought or environmental needs of up to 70% of historic use in a process or registration of rights have not required compensation -- an outcome that would result in rebellion among water user communities in the U.S.  In contrast, U.S. lower courts currently view any reduction in beneficial use as the result of governmental regulation as compensable -- an odd outcome that results in government having less latitude to regulate use of a public good than it has to regulate land use.  Somewhere between the two viewpoints lies the most legally defensible as well as the most adaptable solution.  One in which government has the power to respond to drought and environmental needs within bounds that provide sufficient certainty for water users to plan.   Complementing the inquiry into adaptive capacity for government regulation, individuals must also have capacity to adapt, both because response is much quicker at the individual level and because it can be tailored to local needs.  This leads us to the question of transferability.  Transferability requires: clarity in definition of the right; authority to transfer; and because water is a shared public good, attention to third party impacts.   In the western U.S., water rights are defined by priority and application to beneficial use and the clarity of this definition has been aided in recent decades by adjudication and the corresponding creation of centralized water right databases.  Australia began addressing the transferability of water rights during the 15-year Millennium Drought (1995-2010) through a process of registration of water rights that included what is referred to as “unbundling”.  Unbundling separated the water right from the land, thus making it transferrable without sale of land.  It is in the attention to third party impacts (one of the greatest limits on transferability of water because of increasing transaction costs), that the two countries have taken very different approaches.  In the western U.S., an individual inquiry into third party impact takes place before any transfer is approved.  In Australia, the government may approve a transfer if it is consistent with the general water plan for the region.  The U.S. process increases transaction costs, but protects other uses of a shared resource.  The Australia process, reduces transaction costs, but substantially increases the possibility of third party impacts.  As with the definition of the property interest, a middle ground between the two approaches might be the best.  In a project with Mike Brady and Jon Yoder, economists from Washington State University, we are looking at definition of the consumptive portion of a diverted irrigation right as the presumptively transferable portion.  Australia’s process of unbundling, taken a step further to separate out the portion of the water right that crops actually consume, could accomplish this without altering the use right itself.  The individualized inquiry into third party impacts would be much faster for the consumptive portion of the right.  Its addition in Australia might then be less onerous.   In the face of increasing demand and drought, both Australia and the United States are wrestling with the same issues regarding the definition and transferability of water right.  In doing so, each would be wise to take a page from the other’s playbook.

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