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INTRODUCTORY ESSAY
by David Haber





Everyone who finds himself for the first time in sections of the arid
West is struck by the dry channels where rivers are said to flow and
by the parched, dusty soils. It is no surprise to learn that legislatures
in the western states have been concerned since settlement began with
distributing to irrigators and cities what water there is, so as to make
life possible. Indeed, a good deal of the history of the western United
States is a history of its evolving water policy and that policy's con-
sequences.
But in the eastern United States the wealth of water is seen every-
where-in glistening lakes, in majestic rivers, in the rich green foliage.
From the humidity that envelops one there is often no escape. Little
wonder, therefore, that there has been little legislative concern with
who should be allowed to use water, under what conditions and at what
costs. Legislation in the East has been principally concerned with drain-
ing water from areas where it was too plentiful, with making streams
more navigable, with pollution control. Other legislation authorized the
type of organization that could utilize a plentiful supply by distributing
and selling water to urban populations and by producing and conveying
hydroelectric power. Conflicting claims for the same supply were not
considered a general problem but treated as an instance to be dealt with
by judges best equipped by tradition and training to manage the caprices
of man.
The courts languidly settled an occasional dispute by well established
principles of justice. The origin of these principles is not too clear,
but they seemed suitable for the limited judicial purpose. Nature in-
tended a river to follow its course. Those who settled on its banks were
therefore enabled to have the river flow by in its natural state, undimin-
ished in quantity and unaltered in quality. But even in the course of this
limited settling of an occasional dispute, this principle, despite its lofty
and poetic ring, proved impractical People had to still their thirst, to
bathe and fish and to water their domestic animals. The courts realized
that the stream's scenic beauty must give way to these limited domestic
uses, but this was to be the only exception, and no more. The principles
permitting those contiguous to a stream to use water in this limited way
but otherwise preserving the stream in its natural state came to be
known as the rule of "natural flow."
But when mills and factories began to dam streams for power and
other purposes, the "natural flow" rule seemed unworkable. In some







LAW OF WATER ALLOCATION


states the problem was sufficiently great to warrant an exceptional in-
terference by the legislature through the enactment of Mill Acts, but in
most of the eastern states the courts gradually shifted their position from
a principle of "natural flow" to one of "reasonable use," allowing each
landowner contiguous to the stream to make a "reasonable use" of his
water on his "riparian land," so long as his use did not interfere with
the "reasonable use" of others. Case by case this principle was applied
and given sufficient continuity to settle the particular dispute without too
much concern for developing generalizations adequate for allocating water
between all the present or potential users on a stream, within a water-
shed, or within the state. For most people water was plentiful. No over-
all scarcity existed or was anticipated. For the relatively few who got
into each other's hair, the principle of "reasonable use" served well
enough to keep the peace by impressing the litigants with the court's
honest effort to equitably settle their conflict.
Underground water, too, was treated in accord with well-established
principles of justice. He who owned the land was said to own it up to the
heavens and down to the lower depths. He, thus, was entitled to capture
the water which oozed through his soil (though an underground stream
visible by surface signs was treated according to the principle of "rea-
sonable use"). In an era of plenty, little attention was paid to the fact that
"oozing" water replenishes streams and that the capture of oozing water,
or "percolating water," as it began to be called, under one person's soil,
might dry up the "percolations" under another's soil. The effect of
ground water uses on stream supplies rarely were the subject of litiga-
tion and the occasional drying up of a new well dug by another was part
of the gamble of owning land; it might cause occasional inconvenience but
was of little general economic concern. When cities began to use ground
water supplies and pumped large quantities of water to be sold away from
the pumping site, many eastern states modified their "rule of capture" to
a rule of "reasonable use," with undefined boundaries, which made it
clear, nonetheless, that large-scale pumping, transportation and selling
of ground water to the detriment of wells in the vicinity of the pumping
site required compensation. But there were very few cases in which the
problems arose and the new principles underwent little refinement.
The use of surface water not found in lakes or streams did not con-
cern the courts at all. In the humid East the problem was how to get
rid of the surface water and disputes arose mostly because one land-
owner sought to drain his land by inundating his neighbor. No one
seemed to vie for the use of this water and the courts developed no law
on the subject.
Since the turn of the century, litigation apparently fell off sharply in
most eastern states, but, paradoxically, since the end of World War II,
concern about water allocation has increased. It seemed to some observ-
ers that water supplies were not keeping pace with increasing demand:


I


xxvi







INTRODUCTORY ESSAY


growing urban populations and industry were using more water, and new
uses like air conditioning and supplemental irrigation put a further strain
on the existing supply. Some statistics showed that soon there might not
be enough water to supply all who needed it at a particular time and place.
The dramatic effect produced by periodic droughts gave warning that
these statistics might not be far off the mark. Why litigation did not in-
crease was not clear-and is not clear today. One can only speculate
that the large users have not yet found condemnation or purchase too
costly and that the smaller users' interference with each other and with
larger users was not sufficiently drastic to be brought into court.
It was a group of these smaller users and potential users, namely,
farmers who were using or intended to use water for supplemental ir-
rigation who spearheaded the recent concern with water allocation law
in the eastern states. In many states, particularly in the Middle West and
Southeast, the question was discussed and studied and legislative commit-
tees and study commissions gave the matter their serious attention. In a
number of these states bills were proposed which sought to adopt the
water law developed in the arid West.* The opinion grew that this law
would remedy many alleged defects of eastern law. Born of pioneer tra-
dition, the western law guaranteed the first user the quantity of water he
actually had put to use and assured all subsequent users the amount they
had originally diverted from the stream in the order of their priority. It
was thought that the western law would provide investors in irrigation
equipment and other water users with greater certainty than the eastern
law, governed by the not-too-well defined concept of "reasonable use,"
which, on the whole, did not permit allocation of definite quantities, since
readjustment in existing uses would constantly have to be made to ac-
commodate new "reasonable" uses. It was also thought that eastern law
encouraged waste by confining use of stream water to land contiguous to
the stream, allowing water not used in this way to spill into the sea.
Western "appropriation" law, on the other hand, did not thus limit the
place of use and was therefore thought to better serve the public interest
by permitting a more complete utilization of the valuable supply. Fi-
nally, western law was thought to be preferable because of its elaborate
system of administration and enforcement. Permits and licenses have to
be obtained from expert administrative bodies before water can be used.
In times of shortage a watermaster can close the headgates of users, in
the order of their priority. And the extent of each user's rights is fixed
by streamwide adjudication procedures allocating water to each user in
relation to the rights of all other users on the stream. By contrast,
eastern law is administered by courts with little or no help from expert
agencies. Relatively cumbersome damage and injunction proceedings
are the only means of enforcement. A streamwide adjudication of any

For further discussion of these bills, see pp. 1-62, 87-94, 172-174.


xxvii






LAW OF WATER ALLOCATION


permanent value is nearly impossible. Case by case litigation between
two litigants is the rule.
The movement for a change in eastern water law at this writing has
resulted in the adoption of a western-type appropriation law in the State
of Mississippi. When this study began in early 1955, bills had already
been proposed or introduced in a number of states looking toward the en-
actment of western water-allocation techniques. These bills provided a
focus for an investigation of water allocation control in the East. This
study attempted to investigate to what extent a change to western law
would be desirable. Among the questions considered were: Is any change
in water allocation law necessary? Are there alternatives to western
law better suited to eastern conditions? Would a change to western law
or similar changes violate constitutional guarantees of due process ? Is
a change in the law really a solution or partial solution for scarcity con-
ditions in the East, or should the eastern states preferably focus their
attention on development of usable water supplies through dams and other
public projects?
The papers and discussions in this volume do not provide, of course,
complete answers to these questions. Further studies are needed. Each
state ultimately will have to formulate its own conclusions suitable to the
special conditions with which it must cope.

The Eastern Law

It was difficult within the limitations of this study to explore the ef-
fect of eastern allocation law on the actual behavior of water users.
Discussants at the symposium did indicate that farmers contemplating
investment in irrigation equipment were concerned over the certainty of
their rights and that continued vagueness of the law might tend to deter
some potential irrigators. How extensive this attitude is and what effect
uncertainty of the law has on other water users could not be ascertained
without an extensive field investigation. All one could ascertain from the
readily available material consisting largely of judicial opinions and
statutes was the structure of the law from which certain hypotheses could
be deduced.
The papers and the discussions of the present eastern law to some ex-
tent support the fears of those who advocate a change. The judicial form-
ulation of the reasonable use concept is so vague as to make uncertain
what types of uses might in the future be found reasonable. Seasonal
storage and irrigation in particular enjoy a very precarious status. Both
the vagueness of the reasonable use doctrine, and its requirement that
present users re-adjust so as to allow new reasonable uses, mean that no
one can be sure how long he will be able to take the same amount of water
from the stream. This uncertainty is only slightly ameliorated by the
doctrine of prescription which under certain circumstances permits one

1j


xxviii







LAW OF WATER ALLOCATION


states the problem was sufficiently great to warrant an exceptional in-
terference by the legislature through the enactment of Mill Acts, but in
most of the eastern states the courts gradually shifted their position from
a principle of "natural flow" to one of "reasonable use," allowing each
landowner contiguous to the stream to make a "reasonable use" of his
water on his "riparian land," so long as his use did not interfere with
the "reasonable use" of others. Case by case this principle was applied
and given sufficient continuity to settle the particular dispute without too
much concern for developing generalizations adequate for allocating water
between all the present or potential users on a stream, within a water-
shed, or within the state. For most people water was plentiful. No over-
all scarcity existed or was anticipated. For the relatively few who got
into each other's hair, the principle of "reasonable use" served well
enough to keep the peace by impressing the litigants with the court's
honest effort to equitably settle their conflict.
Underground water, too, was treated in accord with well-established
principles of justice. He who owned the land was said to own it up to the
heavens and down to the lower depths. He, thus, was entitled to capture
the water which oozed through his soil (though an underground stream
visible by surface signs was treated according to the principle of "rea-
sonable use"). In an era of plenty, little attention was paid to the fact that
"oozing" water replenishes streams and that the capture of oozing water,
or "percolating water," as it began to be called, under one person's soil,
might dry up the "percolations" under another's soil. The effect of
ground water uses on stream supplies rarely were the subject of litiga-
tion and the occasional drying up of a new well dug by another was part
of the gamble of owning land; it might cause occasional inconvenience but
was of little general economic concern. When cities began to use ground
water supplies and pumped large quantities of water to be sold away from
the pumping site, many eastern states modified their "rule of capture" to
a rule of "reasonable use," with undefined boundaries, which made it
clear, nonetheless, that large-scale pumping, transportation and selling
of ground water to the detriment of wells in the vicinity of the pumping
site required compensation. But there were very few cases in which the
problems arose and the new principles underwent little refinement.
The use of surface water not found in lakes or streams did not con-
cern the courts at all. In the humid East the problem was how to get
rid of the surface water and disputes arose mostly because one land-
owner sought to drain his land by inundating his neighbor. No one
seemed to vie for the use of this water and the courts developed no law
on the subject.
Since the turn of the century, litigation apparently fell off sharply in
most eastern states, but, paradoxically, since the end of World War II,
concern about water allocation has increased. It seemed to some observ-
ers that water supplies were not keeping pace with increasing demand:


xxvi







xxx LAW OF WATER ALLOCATION

difficulties of formulating and enforcing a decree which would apportion the
available supply between upstream and downstream users. Finally, the ar-
bitrary distinctions between water in a water course and diffused surface
water and oozing ground water affect not only the certainty of investment
as previously indicated but also present obstacles for a unified adminis-
tration in the public interest of all water in the hydrologic cycle.
These difficulties with the present eastern law from the perspective
of both investment protection and allocation of water in the public inter-
est are, to some extent, illustrated by the papers dealing with the Paw
Paw River*, which present a relatively uncomplicated water problem in
an eastern state. The study of the Paw Paw problem shows that an exist-
ing and even greater potential water shortage due principallyto increased
supplemental irrigation during the drier months might be solved in sev-
eral ways. One possibility is the allocation of all surface water in such a
way as to bring about the maximum utilization of surface water supplies
during the summer. One can hypothesize that this would require at least
private and public storage of stream water and diffused surface water dur-
ing the wet seasons for use during the dry seasons, and diversion of stream
water for irrigation on both riparian and non-riparian land. Obstacles under
present law are the doubtful status of irrigation and of the type of storage
contemplated; the supposed prohibition of uses on non-riparian land; and
the lack of rules governing the relation between diffused surface water
and stream water users. Other suggested solutions of the Paw Paw prob-
lem call for optimum utilization of both surface and ground water during
the dry season including perhaps the recharging of ground water aquifers.
Here the lack of law on the relative rights of ground water and surface
water users presents the difficulty.
Finally, another suggestion for alleviating the Paw Paw shortage in-
volves the transportation of water from the Great Lakes. Theoretically,
this type of physical solution is always available and the notion that it
should be adopted in preference to complex legal allocation mechanism
found its expression in a question raised by some of the non-lawyer sym-
posium participants: "Will law make water?" The implied suggestion
was to tackle the problem through large dams and transportation of water
from areas of relative plenty; engineering, not law, will accomplish the
desired goals. Further consideration of possible engineering solutions,
however, brings one to the realization that these involve complex policies
which may have to include adoption of applicable water allocation laws.
The water in the Great Lakes may be plentiful, it is not necessarily
free. Various states may have a legally protectable interest in the water
and object to diversion whether the water is of any particular use to them
or not. Moreover, even a slight lowering of the lake level due to extensive

*See pp. 495-517.







INTRODUCTORY ESSAY


diversions to inland water shortage areas may affect navigation adversely
and also affect many established shore activities*. The law of water allo-
cation between states is very unsettled depending on case-to-case deci-
sions by the United States Supreme Court which issues decrees subject to
revision in the light of changing circumstances. No investment in expen-
sive diversion and transportation facilities would be sound without at least
some authorization under an allocation agreement among all the states and
provinces bordering on the Great Lakes.
Furthermore, the suggestion that the solution to current shortage prob-
lems in the eastern states lies entirely in the direction of developing more
Water rather than adequately allocating existing supplies among competing
users tends to overlook the intimate relationship between allocation and
development when subjected to cost-benefit criteria. For example, as
some of the papers and symposium discussion clearly bring out, ideally
the additional cost of water development is justified only where it brings
about a benefit to the community over and above the benefit achievable by
an optimum allocation of the existing supply. An expenditure for develop-
ment to satisfy all needs where the same could have been achieved by
proper allocation of existing supplies at a lesser cost would seem to be
unjustified. t Moreover, the usual method of financing water development
through taxation or through charging the users of the developed water,
tends to ignore any special benefit water users existing prior to the de-
velopment may derive from the project. Their supply would remain un-
diminished by new users because of the additional water brought into the
area. The share of the cost of development these prior users are made to
bear should depend, of course, to a large extent upon the amount of water
new users would have a right to deprive the prior users of (were there no
new developed water which made this deprivation unnecessary). This right

See U.S. Corps of Engineers, Effect on Great Lakes and St. Lawrence River
of an increase of 1,000 cubic feet per second in the diversion at Chicago, Rept. by
the Division Engineer, North Central Division, January 1957,63 pp. For further
discussion and reports of recent studies, see Great Lakes, Programs and Prob-
lems, Statements presented to the Great Lakes Commission at the Annual Meeting,
November 12-13, 1956. Published by the Commission, Ann Arbor, Michigan, 53 pp.
t Of course, these theoretical relationships do not occur in a pure form in any
actual situation. Making water available to an area always involves a combination
of allocation and development. For example, a particular allocation scheme may
require some water users to shift from stream sources to ground water sources
and thereby to incur the cost of drilling wells. Even the use of stream water alone
involves, of course, certain costs for facilities to divert the supply to the point of
use. The question of cost comparison, therefore, is realistically one of comparing
one type of allocation-development scheme with alternate allocation-development
schemes.




';


xxxi






xxxii LAW OF WATER ALLOCATION

depends, of course, on a system of water allocation which ideally should
be adapted for use as an equitable yardstick for leveling water charges.
In other words, where the method of financing development of new water
involves charges to water users, these charges, as a matter of sound and
fair economic policy, should be levied against both existing and new users.
The amount charged existing users will be dependent on their rights under
the water allocation law. Therefore, the law ideally should be so designed
as to result in an equitable distribution of charges between existing and
new users.
A further connection between the cost of development and water alloca-
tion policy stems from the fact that it is uneconomical in most instances
to plan a project to meet only immediate requirements. The project should
be adequate to take care of future needs as well. To some extent water-
planning engineers can predict these future needs by established projection
methods, but prediction is of necessity imperfect.* Prediction is only one
aspect of adequately dealing with problems involving human behavior.
Control is its necessary corollary. Prediction is an attempt to make the
social control least burdensome. Unless prediction is supplemented by
controls which help it come true, the consequences are likely to be more
burdensome than the proposed control. Thus, a development project based
on certain predicted needs is likely to prove a waste of money if there are
no allocation controls which steer potential users into using the water as
predicted. The hope is that the prediction is sufficiently accurate so as
not to create unbearable tensions, but it cannot be exclusively relied upon.
It is thus apparent that transportation of water from the Great Lakes to
the Paw Paw area will not turn out to be a fair and adequate solution un-
less the water allocation law is harmonized with prediction of future uses
involved in such a project, and unless this system of allocation contains
principles and machinery to deal with the intricate cost-benefit relation-
ships set out above. The paper on the Michigan water rights law indi-
cates that the present riparian law does not deal with these complications
and proposes an outline for suitable legislation which will be alluded to
later on in this essay, after a discussion of western law.



Is there water for California? Bank of America, San Francisco. September
1955, p. 6.
General trends of water demand are difficult to predict. Moreover, these gen-
eral trends do not show the particular pattern of uses along a stream. Yet the
amount of water needed at any particular time depends not only on the gross de-
mand but is greatly affected by the particular arrangement of uses along the stream.
For instance, the total amount of water needed will tend to be greater where the
more consumptive uses occur upstream.








INTRODUCTORY ESSAY


The Western Law

The papers and discussion of western law show certain advantages over
the eastern law, but also indicate difficulties, of which some are inherent
in the appropriation system, while others could be avoided by proper draft-
ing of the proposals that seek to enact western law in the East.
The major advantages which were noted are: First, a greater degree
of certainty of rights, and allocation of water in the public interest, owing
to the priority relationship of appropriation rights and the requirement
that water be put to actual beneficial use; so that unused rights are not
allowed to persist as under the reasonable-use system as threats to es-
tablished, existing uses. Second, a greater chance that water will be used
where it is most needed because of the absence of the riparian-land re-
striction. Third, the appropriation system does away with some of the dis-
advantages of judicial administration by frequently providing for adminis-
trative acquisition, adjudication and distribution procedures. Despite these
advantages, on fuller consideration, the appropriation system seems far
from perfect. Only some of the difficulties encountered in the West can
be avoided by a more careful drafting of the eastern appropriation pro-
posals. Other defects seem to be inherent in the appropriation system.
For example, the alleged certainty of an appropriation right depends
upon the dependability of the supply. Under scarcity conditions, junior ap-
propriators must yield to those who had acquired their rights earlier.
Moreover, where senior and junior rights are scattered all along the
stream, the actual enforcement and administration of priorities is very
complex. A junior appropriator upstream must be made to allow enough
water to pass to reach a senior appropriator in the middle of the stream,
and so on. It is not always easy to administer these complexities accu-
rately on a day-to-day basis where there are extensive fluctuations in
stream flow. These shortcomings seem unavoidable under the appropria-
tion system.
A further complication is encountered in some of the western states
where riparian and appropriation rights co-exist and the riparian rights
have not been limited to a specific quantity of water. This complication
will also be encountered if some of the eastern proposals are adopted,
particularly provisions similar to those in the Michigan proposal* which
suggested-continuing some of the existing riparian rights in some unde-
fined way. This problem can be avoided-constitutional difficulties apart-
by legislation which assigns to existing riparian rights a definite quantity
of water and in effect translates them into a species of appropriation
rights. Many of the eastern proposals seem to tend in this direction.
Other uncertainties found in the western law that could to a large extent

See pp. 1-62.


xxxiii







LAW OF WATER ALLOCATION


be avoided by proper drafting are the lack of definite provision for rights
to "return" water and the uncertain status of prescriptive rights. A further
uncertainty, stemming from the lack of data on the amount of water which
has actually remained unappropriated by prior diverters, has received
some attention in the eastern proposals. Adequacy of the necessary data
collection, were these proposals to become law, will largely depend on
the amount of money the legislature is willing to spend.
Perhaps more important than the persistence of the uncertainty of water
rights under western law is the fact that the strict appropriation system
during periods of dynamic economic change tends to prevent optimum util-
ization of existing supply by freezing the allocation of water to established
uses. There are two principal ways of ameliorating this difficulty. One
way is not to grant new permits to every comer but only to those whose
use is likely within the foreseeable future to best serve the public interest.
The other method is to cut down established rights when the method of use
has become wasteful, either because the user is using more water than
necessary for his particular use or because changes in the economy make
his use less beneficial than potential competing uses. This latter method,
of course, takes away one of the supposed major advantages of the appro-
priation as against the riparian system, namely, the relatively greater
certainty of individual water rights. Mr. Fisher's paper on western law*
indicates that in the course of its development the western law has adopted
both methods of dealing with the problem of "waste,"t but in an inadequate,
haphazard way. Legal phrases in modern western statutes such as "public
interest" and "reasonable beneficial use" have not on the whole been em-
ployed by the courts and administrative agencies to convert the appropria-
tion system into a method of allocation which guarantees the optimum util-
ization of existing supplies. The eastern proposals seem on the whole not
to have done much more than to copy these phrases. They do not seem to
have fully utilized the opportunity to spell out more fully the elements of a
water allocation law which would guarantee adequate certainty of invest-
ment and at the same time provide for the optimum utilization of water for
the benefit of the community.
The desirability of adopting western law in the eastern states thus seems
somewhat doubtful at this stage of the investigation. It is true that the pa-
per dealing with possible due process objections to the adoption of western
law in the East found these not insurmountable, provided sufficient need
could be shown.t Moreover, the paper and discussion by Professor
Wantrup, ** in analyzing the economic meaning of the criteria, "protec-
tion of investment" and "public interest," give the appropriation system

See pp. 75-153.
t See pp. 94-139.
t See pp. 473-474.
**See pp. 531-563.


xxxiv







INTRODUCTORY ESSAY


as modified in the West a higher score than the riparian law and point out
that there are many institutional practices which counteract some of the
"freezing effect" of strict priority. Though these points may underscore
the need for a change in the riparian law, they seem to be insufficient to
justify the substitution of a system which, while it may be an improve-
ment, still contains many avoidable difficulties.
Finally, most of the western statutes and all of the eastern proposals
fail to provide for a unified administration of ground and surface water,
which, as indicated in the example of the Paw Paw basin, may prove in-
dispensable to the solution of some eastern water problems. In many
western states ground water is not subject to the prior appropriation
law. In those states where ground water use has been allocated under
prior appropriation, there seems to be little indication that this has
led to unified administration of ground water and surface water sources.
In instances where obvious interrelation between stream and ground
water uses makes a crucial difference, the courts and administrative
agencies have found all of the old methods of allocating water inadequate
on the whole, and have had to create virtually new rules to fit the re-
quirements of the situation.* Even where a relation between ground and
surface sources is not at issue, and the only problem is the proper allo-
cation of ground water the strict prior appropriation system seems in-
adequate, as Mr. Harris' discussion of the Lea County situation dramat-
ically illustrates. The eastern proposals seek to avoid these difficulties
by dealing with surface water only, but this strategy may prove dangerous,
since in giving current legislative approval to an artificial legal dichotomy
between ground and surface water, these bills, if enacted, may prove in
fact to have erected a further obstacle to unified administration in the
future.

The Market

S The tendency on the part of some to minimize the importance of legal
change by suggesting engineering solutions has already been alluded to.
The same tendency led some to suggest that the purchase and condemna-
tion of water rights Works sufficiently well to achieve adequate water al-
location. The theory was that despite some of the inadequacies of judicial
and administrative allocation, a readjustment takes place through pur-
chase and condemnation which results in a water use pattern that meets
public needs adequately. The previously mentioned paucity of litigation


*J. Herbert Snyder, "The California Court Reference Procedure-Economics
and Law in the Allocation of Ground Water", Land Economics, Vol. 33, No. 4,
pp. 286-303.
tSee pp. 155-164.







LAW OF WATER ALLOCATION


in the eastern states tends to support this hypothesis. The argument can
be made that were it not for market readjustments, the inadequacies of
the law would be reflected by an increase in litigation. No final answer
can be given to this contention, since, as mentioned earlier, the absence
of litigation in the east was not explained by any of the papers or discus-
sions presented at the symposium and must await further field studies.
But at least in theory there are reasons why the market mechanism
and condemnation procedures might not operate so smoothly as supposed.
Condemnation is available only for a "public use." While the category of
public uses may be expanded somewhat, it cannot possibly cover all those
who must make use of water. The very least that would be required would
be a law authorizing a state agency or agencies to condemn private water
rights and distribute water on some basis to private users. This method,
suggested in Professor Wollman's paper,* involves, of course, a drastic
change in the existing law. Though it may prove a convenient method for
administering a water allocation policy, the underlying problem remains
unsolved. The question of whom the water should be distributed to and at
what cost is simply shifted from the courts to the water distributing
agency. Some criteria must be established as a basis for the agency's op-
eration. Moreover, as shall be pointed out hereafter, the principle of paying
the full condemnation price to the holders of existing rights and charging
the full price either to the general taxpayer or to the new water users
may sometimes not reflect sound economic policy.
As to the purchase of water rights in the open market, the eastern law
seems to present certain obstacles which may tend to distort the market
mechanism. The survey of Michigan lawt lists a number of such obstacles.
Among these is the fact that under riparian law a present user may lose
his right without receiving any compensation and without proof that the new
use is more productive. Moreover, the present law requires agreement
with all the interrelated users or potential users before one can be cer-
tain of a continued right to use a definite quantity of water. This encour-
ages speculation and wrong guesses on the part of individual sellers as
to what their release may be worth. Some of the discussants suggested
that these difficulties do not exist to the same extent under western law,
which facilitates the transfer of water rights by making possible the
purchase of individual claims to a definite quantity of water and thus
obviates the necessity of contracting with all interrelated users. But lest
it be assumed that this advantage alone justifies adoption of western law
in the East, it should be noted that the requirement under western statutes
and the eastern proposals that a change of use must be approved by the
administrative agency may prove a serious obstacle to easy transferabil-
ity of water rights. To what extent this requirement has seriously inter-
fered with the operation of the market mechanism in the West is not known.

See pp. 577-578, 581-582.
t See pp. 423-424.


xxxvi







INTRODUCTORY ESSAY


Besides these difficulties due to the nature of present law, there are
other reasons why the market mechanism may not be too effective a regu-
lator for protecting the public interest. These are discussed in the paper
on Michigan law and in Professor Wollman's paper. For example, the
market may reflect cost-benefit ratios for the nation but not result in
optimum productivity for the state. The market may be imperfect because
of lack of competition. Moreover, many uses of water produce benefits
which are not measurable in money terms or are not revenue-producing.
These uses have to be subsidized by general taxes. Tax policy depends
on other independent factors. Thus even a wholly productive use might
not be able to meet the full price for water demanded by the market.
Ideally, compensation for existing users whose use must be eliminated
or reduced to give way for new uses would be kept to an amount necessary
to guarantee their investment, an amount which frequently may turn out to
be less than the full market price.

Alternative Solutions and Suggestions for Further Study

The analysis of eastern and western law, of the interrelation between
water development and water allocation, and of the likely obstacles to an
effective operation of the market mechanism, leads to several conclusions
about the necessary elements of a comprehensive water allocation law. It
must be a system that permits unified administration of all the water in
the hydrologic cycle and it must be a system that allows for changing use
with changing times, without jeopardizing too much both the public interest
in optimum use and the expectations of investors. Compensation for in-
vestors must not become too great an obstacle to change and should there-
fore be kept to the minimum necessary to allow safe investment. A form-
ula such as one calling for payment of original capital outlay plus a fair
return may satisfy this need. Moreover, the number of occasions for com-
pensation may be reduced and the optimum use in the public interest may
be made more certain by advance water-planning to govern all future al-
locations of water as well as all future water development projects. That
the technical "know-how" for this type of planning is not entirely absent
can be gleaned from Professor Wollman's paper. Finally, cost-benefit
factors should play a role in deciding who should pay the compensation to
previous investors and the cost of "developing" new water.
The paper on Michigan law shows how all these elements can be incor-
porated into a water allocation law. It concludes that, ideally, such legis-
lation should provide for administration by an administrative agency, but
it indicates that even a statute that would change the law as administered
by the judiciary may achieve partial improvement.
Aside from the far-reaching suggestion in the Michigan paper, some
of the discussants made other suggestions for changes which would par-
tially improve the existing law. The suggestions were made in the course


xxxvii







LAW OF WATER ALLOCATION


of the Saturday morning symposium discussion.* At that session most of
the participants agreed that Wherever possible further study should be
made before legislation is adopted. It is hoped that the papers in this
volume have covered much of the ground work for future students and will
prove helpful in guiding the direction of further research.






























1


* See pp. 595-635.


xxxviii




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