Title: The Development and Present Status of Water Rights and Water Policy in the United States
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Title: The Development and Present Status of Water Rights and Water Policy in the United States
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Publisher: Raleigh Barlowe, Elco L. Greenshields and Wilfred H. Pine
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Abstract: Richard Hamann's Collections - The Development and Present Status of Water Rights and Water Policy in the United States
General Note: Box 12, Folder 8 ( Collected Materials on Water Law - 1952 -1957 ), Item 7
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THE DEVELOPMENT AND PRESENT STATUS
OF WATER RIGHTS AND WATER POLICY
IN THE UNITED STATES


BY
WELLS A. HUTCHINS


SOME ECONOMIC ISSUES IN
WATER RIGHTS


BY
S. V. CIRIACY-WANTRUP


ORGANIZATION AND ADMINISTRATIVE
ARRANGEMENTS FOR AN EFFECTIVE
WATER POLICY


BY
HARRY A. STEELE AND MARK M. REGAN


DISCUSSION


BY
RALEIGH BARLOWE, ELCO L. GREENSHIELDS, AND
WILFRED H. PINE


Reprinted from JOURNAL or FA~x EcoioMIcs
PROCEEDINGS NUMBER
Vol. XXXVII, No. 5, December, 1955
PURCHASED OR U.S. DEPARTMENT OF
A CUURE FOR OFFICIAL USE











THE ECONOMICS OF THE CONTROL AND
USE OF WATER
Chairman: William E. Folz, University of Idaho
THE DEVELOPMENT AND PRESENT STATUS OF WATER
RIGHTS AND WATER POLICY IN THE UNITED STATES
WELLS A. HUTcmHNs
Production Economics Research Branch
Agricultural Research Service
Uses of Water
THE beginnings of irrigation agriculture in the Southwest are lost in
antiquity. In that region, many Spanish-American and Indian com-
munities dependent upon irrigation came under American sovereignty a
little more than a century ago. Other important nuclei were the Mormon
settlements in Utah, and later the Greeley colony in northeastern Colo-
rado. In the meantime, California gold miners were using stream water
to wash gold out of the ground. Hydraulic mining in western states and
territories gradually declined in importance, but the lessened use of
water that resulted was more than offset by the growth of irrigation and
stock raising enterprises and municipalities.
Irrigation agriculture has continued to grow, and it is still on the in-
crease. According to census returns, the area irrigated in the 17 western
states in 1890 was about 3.6 million acres, and it was 7.5 millions in 1900.
By 1950 this had increased to nearly 25 million acres, with an additional
million and a half in other states.
Most uses of water during the 19th century were effectuated with
gravity diversions from streams, accompanied in some cases by reservoir
storage. In this present century, however, ground water has grown con-
siderably in relative importance. The area irrigated solely with ground
water in 1910-the first year for which census records are available-was
less than 5 percent of the total, but it was nearly 29 percent in 1950. In
addition to irrigation, much ground water is pumped for municipal, in-
dustrial, and air-conditioning uses.
Storage of water for agricultural, municipal, industrial, power develop-
ment, and flood control purposes has progressed correspondingly. In
1950 more than one-third of all irrigated land was benefiting in whole or
in part from storage facilities. Great dams and reservoirs constructed by
both public and private enterprise are, in numerous localities, impressive
features of the landscape.


1







WATER RIGHTS AND WATER POUCT


Rights to the Use of Water
With growing demands for water of limited supplies came the inevi-
table question of rights of use Water, as well as land, is property. And
just as privileges of land use are rights of property, so privileges of water
use are recognized as property rights entitled to protection under the
due process clause of the federal constitution.
Rights of individuals to the use of water-commonly termed water
rights-fall chiefly into several broad categories, or systems of water rights.
With respect to watercourses, the two systems are: (1) The riparian doc-
trine, based upon ownership of land bordering a natural stream. Such
situation of the land entitles the owner to use water of the stream on his
riparian land. (2) The appropriation doctrine. This sanctions the taking
of water from a stream for use on or in connection with land, which
need not border the stream. The essential principle is that priority in
time of beginning the diversion and beneficial use of water gives priority
of right.
The riparian doctrine was brought to this country from Europe as a
part of the civil law or common law, or both, depending upon local in-
terpretation. It is generally accepted in the East. In the West this doctrine
is recognized in varying degree in some of the states, but it has been com-
pletely repudiated in others. As a practical matter, the doctrine relates
primarily to ownership of private land. The riparian right of a private
landowner is held in the West to have accrued when title to the land
passed from public to private ownership.
The doctrine of appropriation is considered to underlie early Spanish
and Mexican water rights in several southwestern states, but not in
Texas. There these early rights are held to have been riparian. The Utah
Mormons and the California gold miners contemporaneously, but inde-
pendently of each other, developed comparable systems of priority of
rights to the use of water based solely upon priority in time of initiating
the uses. This doctrine originated essentially in customs of occupants of
public lands, by sufferance of the sovereign owner. Its application to
private lands, now recognized in all jurisdictions in which the doctrine is
accepted, came later.
From these several sources the appropriation doctrine spread through-
out the West. In some western states it is recognized concurrently with
the riparian doctrine. No eastern state has yet adopted the appropriation
doctrine in the comprehensive form in which it is extant in the West.
Rights to the use of percolating ground waters divide into several
systems under which ownership of land overlying the ground water
supply is essential to the right of use, and, in addition, an appropriative







Wsts A. Hvrcrms


system comparable in most respects with that pertaining to surface
sources.
The earliest principles governing rights of use of percolating ground
waters were those of the English doctrine of absolute ownership. These
were the easiest principles for courts to apply, because they allowed a
landowner to make unrestricted use of percolating water found in his
land, although some courts held that the use must be without malice or
waste. Impairment or destruction of usefulness of a neighbor's water
supply, caused by the first party's heavy pumping, was without remedy.
Inequities of this system led some eastern courts to turn to what was
termed the American rule of reasonable use. Under this rule a landowner
might withdraw and use water in any quantity, so long as the use bore
a substantial relation to reasonable use of the overlying land. He could
not waste the water, nor could he export it from the area to the injury
of other owners. Shortly after the turn of the century, California followed
the eastern lead and then, in many decisions over the years, developed
and refined the principle of reasonable use. The resulting California
doctrine of correlative rights, which in many respects is comparable to
the riparian doctrine of surface waters, accords coequal rights of reason-
able beneficial use to all overlying landowners, and subjects any surplus
water to appropriation for nonoverlying use. In time of water shortage,
it confers upon all overlying landowners the right to an apportionment of
the available water supply. Statutory application of the appropriation
doctrine to rights of use of percolating water began during the late 19th
century, but it has had its greatest development in the last 25 to 80 years.
The foregoing systems of water rights are those developed primarily in
the customs, legislation, and court decisions of the several states. But
the United States has been an interested party, first through ownership
of the public domain, later because of the extensive developments of
water resources that have been financed with federal funds. Early uses
of water by the Mormons, gold miners, and others were made chiefly on
the public domain, where for years they were acquiesced in silently by
the government. Finally Congress expressly confirmed both water rights
and rights of way that had accrued by priority of possession on public
lands, provided they had vested under local customs, laws, and decisions
of courts. This and subsequent congressional legislation accepting the
application of state laws to both past and future acquirement of ap-
propriative rights on public lands, together with the approval of the
United States Supreme Court and that Court's declared view that each
state is free to choose its own system of water law, have been of major
importance.
Although the right of individuals to appropriate water on the public







WATER RAR Ault WAIR POLICY


domain pursuant to state law was thus established long ago, actual owner-
ship of unappropriated nonnavigable water has been a source of con-
tention for years. Many western states, in their constitutions or statutes
and even in court decisions, assert state or public ownership of all waters
within their boundaries, subject expressly or impliedly to private rights
of use. On the other hand, the United States for several decades has been
asserting its ownership of all unappropriated water of nonnavigable
streams on the public domain and, in several interstate water cases, has
pressed its claim upon the United States Supreme Court In the North
Platte River case the Court took note of the arguments pro and con, but
pointed out that the rights involved in that controversy had been obtained
by appropriations made by the Secretary of the Interior pursuant to
state laws, as directed by Congress in the Reclamation Act. It was there-
fore concluded that so far as the narrow issues of that case were con.
cerned, the question was largely academic. The Supreme Court has not
yet ruled upon the fundamental issue.
Water Rights Systems in Practice
The courts of various eastern states have rendered decisions respecting
riparian rights, but on the whole the development in this region of princi-
ples that govern rights to the use of water under the riparian doctrine has
been meager. The fact that something else is needed to achieve best
utilizatioT-ntfwater supplies is indicated by the rather widespread interest
currently shown in trying to work out forms of suitable legislation.
The West, on the contrary, has had a century of experience with both
riparian and appropriative rights. Each state has a statute that provides
for acquirement of appropriative rights; most of them similarly provide
for their adjudication and administration. The riparian doctrine, however,
is primarily a judicial doctrine, declared and developed by the courts
with little direction or assistance from legislatures.
Conflicts between these opposing riparian and appropriative theories
have occurred throughout the last century, and in some jurisdictions
they are still in progress. Insome states conflicts have been resolved by
r uda e in toto. Elsewhere gys has been
oetoward imposing the same n
upon riparians uner w the rr
ino longe_ tomay wasewatfr frthat on Pr, P"-, "'n a Jflion to use.
In a few states, as a result of legislation or court decisions, or both, ri-
parian owners must make actual use of water, or suffer loss of their rights.
Elsewhere this is not the case. A difeult problem in these Uatter states is
that of thaum ria i Eforts to declare the unused riparian
right &su iw 1i t compensation, in those states in which







WEis A. HuTamrqs


the right of indefinite future use is firmly held to be a property right, raise
serious questions as to validity of the restrictive measures. These ques-
tions, disturbing as they are from the standpoint of best utilization of
water, are inevitable under current interpretations of constitutional prin-
ciples. So long as these interpretations prevail, solutions in those jurisdic-
tions in which the unused riparian right is held to be an established
property right appear to be through prescription, voluntary purchase and
sale, and condemnation.
i p p rtinn, n in states that
recognze no other doctrine, has been sub ected to criticism for decades.
it istraue t vae o te appropriation doctrine eponee
of western agriculture is recognized, as well as the ever-present impor-
tance of assuring to a water project the continuing right to use economi-
cally, reasonably, and efficiently the quantity of water upon which its
development is predicated. Als _oPMgeizedhova ae wea ssin
operation, such as perpetuation of rights to specific quantities of water
re s; decreeing of excessive
quantities of water in early adjudications; and reluctance of courts to order
prior appropriators to make extensive changes in long used methods of
diverting, conveying, and applying water in order that thereby more
water may be made available for junior appropriators. In such respects
the rigid principle no i hsh but it is not furtherin the best
utilization of limited
The idea of modifying the strict-rinciple of riority under compelling
circumstances seems to be ainin in favor. This is discernibe, for
example, in authorization of res'ttions upon- "id s;
administration certa areas ectionpursuant to stipulated con-
tions; an proposals for measuring existing as well as new rights by
consumptive use- th e-tLhai hadgite diverstioa=a-L1f wrt rtf
work of our constitutional policy of protecting private property rights
against impairment without due process of law.
Economic as well as legal and policy questions arise in this compli-
cated riparian-appropriation relationship. Dr. Wantrup will discuss some
of these issues this afternoon.
In the field of ground water law, an outstanding development in recent
years has been enactment of numerous statutes aimed at preventing or
correcting dangerous overdrafts upon ground water basins. Enactments
in 11 western states are based upon the appropriative principle. Generally
these states are the ones with the smallest total acreages irrigated solely
with pumped ground water. The ro being attacked in several
other states b imposition f r4C thens it certain aesas~- o l, bu not on
an appropriative basis. One of these latter states-Texas-which in O-







WATER Rwars AND WATEr POLiCY


had the second largest total area irrigated with pumpedground water,
recogzs Eng dor-rim vt wwnffhi; ,f rMra
authorizes restrictions
or resident i-ro
Ground water aw, on e whole, is now in an important stage of de-
velopment, stimulated by enormous increases in use of water. The uses
apparently are still increasing. Supplies in many extensive areas are over-
drawn. As contrasted with surface water law, the ground water legislative
field is still new, and experience in administration is limited. Opinions as
to advisability and workability of different forms of public control differ
sharply. Opposition in some sections is bitter. Some interests oppose any
kind of control, but te ce resistance is provoked by pans that dy
the appropriative principle. Despite formidable objections, the over-all
trend in the West is toward statutory control, but with marked variations
in form of control in which appropriation currently plays a very conspicu-
ous part.
Weaknesses inherent in legal solutions of the problem of ground water
overdraft thus far attempted will doubtless be brought into focus as
more experience is had. In the meantime some attempted solutions take
an essentially physical approach, without disturbing prevailing theories
of ground water rights. These include acquirement of alternate supplies
of water for the purpose of supplementing those of overdrawn ground
water basins. Also included is proposed manipulation of replenishment
and discharge of basins with a view to increasing available storage capac-
ity and facilitating conservation and better utilization of the waters.
Organizations for Contraland Use of Water
Organizations for diversion of water and conveyance to the place of
use have been employed from time immemorial. In one form or another
they have played an essential part in the irrigation economy of the seden-
tary Indians, Spaniards, Mormons, and other group settlements in the
West Towns, early districts, and mutual companies exercised these func-
tions in the development of Utah. Mutual irrigation companies, which
are nonprofit enterprises owned and operated by the water users, also
became and still are important in various other regions, notably Colorado
and southern California. Commercial irrigation companies, the purpose of
which was to bring profits to the providers of capital, generally proved
unprofitable and now are of minor importance. Growth of cities led to
development of large municipal water supplies by the cities themselves,
the water often being conveyed from distant points.
The irrigation district movement has been a feature of western agricul-
ture since the 1880's. Irrigation districts are taxing entities, empowered







WmtU A. HvrCaMs


among other things to issue bonds payable from proceeds of assessments
levied against benefited lands, and to cooperate with the United States.
Their influence has centered chiefly upon financing supplemental develop-
ment and improvement of existing systems, rather than new construction.
The Bureau of Reclamation deals with water users on federal projects
chiefly through irrigation districts organized under state laws.
In many states, numerous types of districts other than the conventional
irrigation district have to do with water, not only in its conservation,
storage, and utilization phases, but also its riddance and avoidance.
Purposes of these districts cover a wide range, including chiefly irriga-
tion, municipal, development and distribution of hydroelectric energy,
soil and water conservation, drainage, flood control, sanitation, navigation,
and recreation. The principle is being applied to replenishment of de-
pleted ground water basins and prevention of waste and pollution of the
water. This form of ground water control merits study in states in which
physical and economic conditions differ so widely, from one section to
another, that currently local option appears necessary to establishment of
practicable public regulation.
Most recent developments in the organizational field are water authori-
ties, both interstate and solely within states. They include large areas;
and they contemplate undertakings considerably more comprehensive
than those of local districts. Their development purposes may be single
or multiple: or they may be created to develop plans for controlling and
coordinating the use of waters of single streams or even entire watersheds.
Water Policies
Federal water policy began to develop early in the history of the
nation. The power vested in Congress by the Constitution to regulate
commerce among the several states was held to comprehend navigation,
and control of navigable streams. This was extended to their upper non-
navigable reaches and nonnavigable tributaries if necessary to protect the
navigable capacity of the main stream. Commerce power also includes
improvement of navigable waters, flood protection, watershed develop-
ment, generation and sale of power in connection with navigation and
flood protection, and regulation of nonfederal power developments on
streams subject to federal jurisdiction. Directly from the Constitution is
derived the requirement for congressional approval of interstate com-
pacts, such as those that provide for apportionment of water of interstate
streams. Such co~gcts are as binding upon the states that enter into
them as are decisions of the United States Supreme Court adjudicating
their respective rights according to principles of equitable apportionment.
These well grounded policies, all actively implemented, have placed the


___







WATER BmtO ANh WAV* POUCY


United States government in a dominant position with respect the
ibgdiftkses of themation's rivers
SFederal policies that relUti t use of water for irrigation and other
benefiial purposes stem likewise from other constitutional powers of
Congress. Among these are the power to control and dispose of property
belonging to the United States, and the power to provide for the general
welfare, Policies based upon them are expressed by such acts of Congress
as those sanctioning appropriative rights on the public domain, entry
and reclamation of desert lands, and transfer to the states of large acre-
ages of land for development under the Carey Act. All of these policies
contributed materially to development of western irrigation. In addition
is the impact upon western agriultural economy of the Reclamation Act
and related legislation during the present century, which is so well known
as to require but little emphasis.
Among water policies of western states may be noted: Assertion of
state or public ownership of all or certain classes of water, subject to
rights of use, and dedication to appropriation of waters in excess of those
to which existing rights attach. Administration by state officials of private
rights to use of water. Constitutional and statutory declarations prohibit-
ing waste of water and enjoining highest beneficial use, Creation of or
authorization to create districts and other political subdivisions for con-
trol and use of water. Several states extended financial aid to irrigation
districts by way of purchasing or guaranteeing their bonds-in some
cases at substantial loss. A few states promoted and developed water
projects with state funds. State policies that have most profoundly affected
their water economy are those for control of water rights and creation of
water entities.
Federal and state water policies sometimes conflict States have dis-
puted some of the incidents of federal reclamation, such as ownership of
water, forms of contracts with water users, and the 160-acre limitation.
Resentment at federal influence upon local policies is sometimes heard.
Nevertheless, cns ion t r mln rocts have reached
such proportions as to leave the states little or no choice oer n to
welcome or to seek federal funds for large-scale develo ients .
Some Salient Points
In the East the riparian doctrine prevails, but principles governing
rights of use are not generally well developed. Some western states recog-
nize both riparian and appropriative rights, others appropriative only.
Where the doctrines coexist, the tendency is to lessen their differences.
As a matter of fact, the public interest'is as well served by irrigation of
riparian as nonriparian land when the same standards of actual beneficial







WEiL A. HUTCHIN


use are applied. Both doctrines show weaknesses in practice, some eco-
nomic implications of which Dr. Wantrup will discuss shortly. Substantial
modifications have been made in the riparian doctrine, but in some states
unused riparian rights present a difficult problem. Some modifications
of the appropriation doctrine appear probable. More experience with
ground water statutes is needed before appraising their workability with
assurance. Political subdivisions, adequately empowered, may be capable
of adjusting conflicting rights and coordinating uses of water in compli-
cated physical and legal situations.
Federal water policies derived from the commerce power, which are
longest in the making, have placed the federal government in a domi-
nant position respecting such uses of public streams. Federal public land
and reclamation policies have materially influenced western agricultural
economy. Some aspects of federal water policy are the subject of con-
troversy-witnessed, for example, by the Hoover Commission's recom-
mendations, and by the public power issue. In some respects federal and
state water policies conflict. Examples of coordination, however, include
state control over navigability only in the absence of paramount federal
control, and construction of reclamation projects with federal funds under
water rights acquired pursuant to state laws.











SOME ECONOMIC ISSUES IN WATER RIGHTS1
S. V. CIMACY-WANTaUP
Unfversit of Caliornia
1. Water Rights and Economic Change

T HERE is no need to explain that my topic, as originally assigned,2
refers-to a veritable Pandora's box brimful with troublesome eco-
nomic issues. If they should escape all at once, I could do no more than
list them. I propose, therefore, to raise the lid only very slightly and to
focus this paper on the economic issues in water rights-especially on
those issues that are created by economic change. This session seemed
a propitious occasion for such a theme because the preceding paper has
given an excellent legal background.3
Attention has been given elsewhere to public investment in resources
development, with its economic issues of evaluation, cost allocation, pric-
ing, and public preference.' But in an economy in which resources are
developed largely by private enterprise, the public's influence upon the
institutional framework of individual action is no less important than
influences operating through direct public investment. In water-resources
development, the most important of these institutions are state water
laws, their interpretation, and administration. Here, as for other property
laws, economic change poses the issues of institutional lag and of flexi-
bility versus rigidity. At the present juncture, these economic issues in
water rights are acute in four important problem areas.
First, in the riarian-doctrine states of the East increasing consumptive
use of water started
appropriation. This movement new interest in the old rob-
let of an e r fl il of riparian relative to appropiation
rights in the course of economic change.5
SGiannini Foundation Paper No. 148.
"The Economic Issues in Water Development."
SWells A. Hutchins, "The Development and Present Status of Water Rights and
Water Policy in the United States. Mr. Hutchins also commented helpfully on
several legal points touched upon in this paper. Other constructive comments were
made by Stephen C. Smith.
SS. V. Ciriacy-Wantrup, "Cost Allocation in Relation to Western Water Policies"
Journal of Farm Economics, vol. 86, February, 1954, pp. 108-129; and "Benefit-Cost
Analysis and Public Resource Development," Ibid., vol. 87, November, 1955, pp. 676-
689.
'Robert H. Mar uis Richard M. Freeman, and Milton S. Heath, Jr., "The Move-
ment for New Waterf ghts Laws in the Tennessee Valley States," The Tennessee
Law Revoew, vol. 23, no. 7, April, 1955, pp. 797-887. Additional references are listed
in the footnotes of this article.







S. V. CRACY-WANMTRUP


Second, in the approriation-doctrine states of the Wes increase
indus'trl za tion, urban ffl
in water demand. e chan eshave the question of ter
or not tea priatiopriatio a e wih its emphasis on "first in time, first
Sin n it," may entail rigiditiesn fr tion demanf.87i ht
boh lor the heariand of the appropriation doctrine-the Great Basin and
Mountain states-and its western and eastern fringes-the Pacific Coast
and High Plains states.
Third, the great increase in the use of ground water during the last
generation has called attention to difficulties of applying either the ripar-
ian or the appropriation doctrine, both of which were developed pri-
marily in connection with surface waters. This experience is especially
interesting in California, which relies for slightly more than half of its
total water use on ground water, and where both legal doctrines are
operative side by side.7
Fourth, modern engineering and large publicly financed multiple-pur-
pose projects have increased the export of water from one watershed into
another. The interstate problems centering on exports from the Colorado
River watershed to the Pacific Coast and the Great Plains area are well
known. No less important, however, are intrastate problems that have
arisen in California in connection with the "County of Origin Law"s and
the "Watershed of Origin Law." This issue of regional water "reserva-
tions" is of interest far beyond California.
In taking my illustrations from these four problem areas, I shall try to
stay clear of the relevant constitutional issues such as "due process,"
"delegation of power," and "federal versus state law." Such issues are
more in the domain of law than economics. An example is the issue of
how unused riparian rights should be treated if a riparian-doctrine state
moves toward appropriation.

*Jack R. Barnes, "Water for United States Industry," Resources for Freedom
(Washington: Govt. Print. Off., June, 1952), vol. V, pp. 83-98. (Report Ne. 9,
Selected Reports to the Commission; A Report to the President by the President's
Materials Policy Commission.) Additional references are listed on pages 97 and 98
of this report.
'Patricia McBride Bartz, with a foreword by S. V. Circiacy-Wantrup, Ground
Water in Californa: The Present State of Our Knowledge (Berkeley: University of
California, College of Agriculture, Agricultural Experiment Station, February, 1950,
2d ed.), 67 p. (Giannini Foundation Ground-Water Studies No. 1.) Processed.
). Herbert Snyder, with a foreword by S. V. Circiacy-Wantrap, Ground Water
in California: The Experience of Antelope Valley (Berkeley: University of Califonia,
College of Agriculture, Agricultural Experiment Station, February, 1955), 171 p.
(Giannini Foundation Ground-Water Studies No. ,.) Processed.
SCalifornia, State of, Water Code 195s (Sacramento: California Printing Division),
Section 10505, p. 195.
*bid., Section 11460, p. 205.







EoDNo02 INW OIN WA1O PIECTS


Much has been written on othdieibity over time of water rights.
There is fairly general agreement that the riparian doctrine has elements
of flexibility and that the appropriation doctrine may lead to rigidities
for reasons already mentioned. One might conclude, therefore, that from
the standpoint of adaptability to economic change h~ a teRi
bul Ul the rpaian doctrine might be more desirable. Accordingly, some
studuet hnave urged caution on iose riprian-doctrine states which pres-
ently are considering changes in their water laws with greater emphasis
on appropriation.1 Let us look at this problem somewhat Sloser.
First, we may ask in what sense can the riparian doctrine be credited
with flexibility in the course of economic change? The point usually em-
phasized in this connection is that riparian rights are not lost through
nonuse; "new" uses, therefore, compete on an equal legal basis with
"older" uses. The economic significance of this flexibility is frequently
overestimated. Hiparian rghts are lost to upstream users-both riparian k
an nonr n-throu rescrition. In California, particularly, many q
important water rights have been established through prescription.
Furthermore, in "semiriparian" states-such as Washington, Oregon, Cali-
fornia, Nebraska, and Kansas-the legislatures and the courts have sub-
stantially curtailed the significance of the unused riparian right.
iparian rights are "coitlr" and thriifnre iuertain and insecure in
terms of quantitative defnition." If demand for water based on coequal
rigtexeeds the supply, some form of rationing becomes necessary.
Such rationing, like any authoritative establishment of water rights
among claimants, is a function of the courts; it is commonly called "ad-
judication." Presumably, the courts could use economic criteria, for
example, the marginal value productivity of water, as basis for rationing.
They could also keep adjudicated shares in the scarce supply flexible over
time to allow for economic change.
Actual court cases dealing with water rationin are very few. There
is en pparAn users m ration-
ing altogether; for the rest to apply an equapee t to
quantities actually used Ra, od T ord to equate m
and supply; to regard adjudicated shares in the supply as quantitave
For example, Marquis et al., op. cit.
They are coeqal within the two traditional preference classes of "natural" and
"arti uss-rovided the latter are "reasonable and beneficial." As interpreted
by most courts, naturaluses are for ardeand livestock wat
In some riparan-onWe states, for ampa
for consupive uses is employed This is a first step i thenctio
tion. By mitin the number of r e uantties ad
coal matt in ofthe ways, aproprition Is appia a







S. V. CIMUCY-WANTRUP


rights, subject to voluntary exchange between individual users-with the
restriction, however, that there shall be reappont
upon which the orignal -aioent wa&jad@tezhange 5uifiienhj to
jus.y it. This, at least, is the tendency in California, where the riparian
octrine has been developed furthest and where it is applied to ground
water in the form known as "correlative-rights doctrine." Court cases in
other states through which water rationing among coequal riparian rights
has actually been accomplished have not come to my attention.
This tendency in court action h nb, j .....ft4. f rom the stand-
potf o sim city and judicial fairness. The economic implicationsiow-
ever raise mUlL h&uc. Tih au being ivestigated at present in our
ground-water studicesfor two recent court actions known as the Ray-
mond Basin and West Coast Reference cases in Los Angeles County,
California.12 Definite conclusions should, therefore, be avoided. Merely
a few general points may be mentioned.
The court reference procedure'" applied in these two cases has
worked fairly effectively. Established overlying and nonoverlying uses
have been recognized as coequal in right through mutual prescription.
Water rationing in accordance with the "safe id" ter
b s'Teiasm KfifiT^ nom icationor faymon smrs
been accepted by the Supreme Court of California. On jheL he hand,
the element of flexibility inherent in the ri arian- gn een re-
pac tosoe extetyan element f flexibility more characteristic for
the a rop action doctrine as explain later Section 3). Econonc cin-
teria for water rationgiave no een developed. Most importantly, in
both cases alternative supplies of water from the Colorado River through
the Metropolitan Water District are available. In other words, in these
two cases rationing of ground water does not imply reductions of total
water use by individuals. Rationing merely induces a supplementation of
relatively inexpensive local ground water by relatively expensive im-
ported surface water. The crucial test, therefore, for the social acceptance
"California, State of, Report of Referee (Sacramento: Department of Public
Works, Division of Water Resources, 1943), 392 p. In the Superior Court of the State
of California in and for the County of Los Angeles, No. 1323. City of Pasadena, a
municipal corporation, Plaintiff, vs. City of Alhambra, a municipal corporation, et al.,
Defendants. For the decision in this case see: Pasadena v. Alhambra, 883 Calif.
(2d) 908, 207 Pac. (2d) 17 (1949); certiorari denied, California-Michigan Land i&
Water Co. v. Pasadena, 339 U. S. 397 (1950).
California, State of, Draft of Report of Referee (Sacramento: Department of Pub-
lic Works, Division of Water Resources, February, 1952), 175 p. In the Superior
Court of the State of California in and for the County of Los Angeles, No. 506806.
California Water Service Company, a corporation, et al., Plaintiffs, vs. City of Comp-
ton, et al., Defendants; California Water Service Company, a corporation, et al,
Plaintiffs, vs. Alexander Abercromby, et al., Defendants.
California, State of, Water Code 1953. Sections 2000-2076, pp. 66-68.







ECONOMIC ISSUES m WATER R~CInS


of water rationing on the basis of riparian ideology, implemented through
the correlative-rights doctrine, is still to come. This test will come when
adjudication is applied to ground-water basins without access to water
imports.
The foregoing note of caution does not imply that rationing of ground
water to balance demand with the "safe yield" of a basin is necessarily
desirable. Such rationing could be accomplished effectively by employing
the appropriation, doctrine-as is done in a number of western states. In
secular perspective, it appears fortunate for California that this approach
was not chosen. Economically, ground-water and surface-water resources
are closely interrelated. Depletion of ground-water resources, which to a
considerable degree is economical for individual users, is iot detrimental
to "permanency" of the whole economy if such depletion builds up, over
time, a sufficient economic foundation for the development of surface-
water resources that is beyond the economic strength of individuals.
This proposition is subject to an important restriction: that depletion of
ground-water resources does not lead to destruction of the underground
reservoir itself. Underground storage capacity is an important resource.
Ground-water depletion may decrease irreversibly the use of this re-
source throu omin~pa ctionit-wa.ter. ..of
Iun. The economic issue of irreversibility in the use of underground
storage is involved in the two court cases mentioned. But space does not
permit developing this significant issue here.14
If one is so daring as to attempt a summary in this complicated and
controversial field, one may sa that from the standpoint of flexibility
in the course of economic change the riparian doctrine offers only small
advantages if applied to surface waters. These advantages are more than
offset by disadvaitaes notEer esects, such as uncertainty and i-
security in quantitative dnition ad discrimination aaIst notenIa
oniparian uses. On the other hand, as applied to ground water in
California, the riparian doctrine has facilitated the development of both
ground water and surface water in the course of economic change. But
under economic conditions where ground-water development cannot be
"firmed up" subsequently by surface-water development, the correlative-
rights doctrine is not yet fully tested.
3. Riidit and the Appopriation Doctrine
Let us now turn to the economic issueof rigidity in water rights. As
already indicated, these issues have been raised in connection with the
"The economic significance of irreversibility in the use of natural resources is
developed further in S. V. Ciriacy-Wantrup, Resource Conservation, Economics apd
Polcies (Berkeley: University of California Press, 1952), 895 p.







S. V. CnAcrINWArnuT


appropriation doctrine. Here again the economic sig ifiEance of admit-
tedly existing elements of rSiei*y in frpanriy pvrestimated. Further
more, rigidity can be reduced through c ativy minor changes in
appropriaion stutes and their administration.15
Firs it may be well to differentiate between rigi and se in
wa terth e s e uses avoeseonoi
hange are excluded because of pr appropriations may be unmdeiU-
a other hand in h sense that t indi-
vidual approprualr ias encouraged t_ velo water resources ha
econo tm is desirable. Such encouragement does not n arily
e gity in water rihts. ih a nr is
rtaa revenue cos f h d2 lnm t l be
taken into account ad fully c asated if his right is transferred to

wate ig tshrouh bjing and seing-with
l if they are "flppI'Mlnt or a its 3 t ln if ther notEug not
Imlgti3g. Appropriation rights are far better suited for such transfer
than riparian rights because th former are dea defined in quanty,
season ustion, priority, points of diversion, and other way .LaEO s
es hreor e appropriaonotrine avrs e wte
nigats mu _h ,Curse of economic ciaange. The marketfor water rights and
its imperectiQonare an intoresifr topic for the economiAs..ut in this
paper, I am more concerned with competition between "new" and "old"
uses by means other than the market mech.aism.
Most appropriation statutes establish preference classes among "rea'
sonable and beneficial" uses.1 The highest class is always "domestic" and
"municipal"; the next highest is usually "irrigation"; the third highest
class is usually "industrial"; "recreational" uses-if they are recognized as
"reasonable and benefcial" at all-have generally the lowest preference
rating. Some statutes, for example, in Texas, reverse the ranking of irriga-
tion and industrial uses and also establish preference ratings for various
industrial uses.
It should be noted that these preferences areoperative primarily while
appropriation is pending ad, m some s31atute, under ta-shrtge
emergencies. .e-gr A ran"B of
isn't e, first in right" holds under normal conditions. In other words,

in th admini-strative
%pai Ia In term of
sungg elow ot be "minor.
F-or aDnret but excellent gBliar of western water laws see; V. S. President's
Water Resources Policy Commission, Su ari of the Water-Lw Doctrines of the
Seventeen Western States, Appendix ," Water Res.arces Lawt (Waashbi gto Govt
Print Off., 1950), voL 8, pp. 711-777. This nnmmary ha hnn prp___ ad le Wels A.
Hutchins. -







EcONOSLE NIOia Di W&-u llomS


after appropiations have become Mp npmry rightl. a seeinr but "3owew
use does not yield to a uni but hher e. M palities nd other
public agencies can, of course, prevail over a senior appropriator through
eminent-domain proceedings.
Some states allow municipalities to hold water rights for future rather
than present needs; temporary appropriation by others is authorized wth
respect to the "surplus" over the present need of the municipality."
Municipal reservations may also be established by coditionig appro-
priation permits?. In Texas, all appropriations except from the 1io
Grande are subject to reservations in favor of municipalities without the
necessity of condemnation or reimbursement-.9 Such municipal reserva-
tions do not raise economic issues except the problem of compensation
to the temporary appropriators. More serious economic issues are created
by regional water reservations. These will be considered later (Section 4).
As far as statutory preferences are elective in allocating water among
uses, the sig"ficaunt issue is the low
uses relative to igaon. agricultural economist may not add to his
popularity bi ng this issue;but sooner orlater it willhave tobe
met in several western states.
fairly good economic argument could be made in favor of a reversal
ofth statutory ra e average value prouc
use is far higher in dithan in e. kurtermor in the
terminates, t consumptive use m inalthoug increasing-is

ntheva d of recr national uses-owhich are largely noncosumptive

rapid increase in the demand for recreational uses, relative to that for
irrigation uses, can be expected in several western states.
In spite of the existence of a favorable economic argument, based on
the average value product, a reversal of the usual statutory rann
pears neither desirable from the standpoint 6fein water
rz nr politically feasible. Another approach to thb issue seems more

One may propose eliminating statutory references altogethq-zcegt I


T is it approach taken in Washingto. in most oher western states
ds are tendencies in this direction. The classification of uses into those
SCalifornia, State of, Water Code 1958. Section 10,5. p, 83 Scton 1208 p. 49;
ad $eqotte 146.Q1484, p. 58.
*JW., SeWtio 459M55., p.1, See nlW bdlow.,footote 9s.
Tex. Bernon's Civ. Stats., arts. 7472 and 7472a.
C"acy-Wantrup enefit-Cost Analysis...," op. ct.
v. ode Wa. Soc. 90.04.080. See also below footnote S8







\ ^J I~,~-r^f J1 S. V. CIACY-WANTRUP

are and those that are not "reasonable and beneficial" implies a
S (ardng of uses. The fnal decisions rest always with the courts so long as
they conform to declared, constitutionally valid legislative intent. Eco-
F nomic change affects court decisions.
In most states t"ft agnier charged pefally wih the ad-
m | inistration of appropriation statutes cooperate with the courts in rede -
h heeas s at e to id biecim accordance wi-h changing economic
Sconditions 22 Tese agencies could also cooperate with the courts in the
determination of preferences. Elimination of statutory preferences, there-
fore, would not necessarily create an institutional vacuum. Toh econ
mist, greater participation of professionally well-euipped executive
agencies in the deermnation o reerences is not objectionable. My
lgI ens, however, may raise the constitutional issue of delegation of
legislative powers. I do not feel competent to explore whether or not
this issue would be involved. In California, the courts have upheld execu-
tive agencies in the exercise of reasonable discretion in granting and
conditioning appropriation permits.23

4. Economic Change and Water Reservations
Finally, a few comments on the economic issues of water reservations.
As already indicated, these issues have become acute in California, but
they are potentially of significance for several other western states.
Appropriation always contains an element of planning for future water
needs. However, all appropriation statutes contain a "due diligence"
clause. This means the appropriator, in order to perfect the appropriation,
must be diligent in developing water resources for reasonable beneficial
use. As just noted, exemptions from this essential requirement are estab-
lished by statute for municipalities, the highest preference class of
uses (Section 3). Quite different from such reservations for preference
classes, and raising more difficult economic and political issues, are water

"For example, California, State of, Water Code 1953. Section 275, p. 35 and
Sections 1253rl255, p. 51.
"Sections 1253 and 1254 of the California Water Code provide that the Depart-
ment of Public Works shall allow appropriations under terms and conditions which
"in its Judgment" will best serve the public interest in water conservation. How-
ever, in acting upon applications the Department shall be guided by the policy that
domestic use of water is highest and irrigation next highest. The California Supreme
Court, in East Bay Municipal Utility Dist. v. State Department of Public Works,
1 Calif. (2d) 476, 479-481, 35 Pac. (2d) 1027 (1934), upheld the action of the State
agency in inserting in a permit, pursuant to these statutory provisions, the following
condition: "The right to store and use water for power purposes under this permit
shall not interfere with future appropriations of said water for agricultural or
municipal purposes." This decision was called to the author's attention by Wells A.
Hutchins.


__







ECONOMIC IssUE mN WATmER IG S


reservations for whole regions as established by the two "area of origin"
laws mentioned in the beginning (Section 1).
Of these, the Watershed of Origin Law is more sweeping and economic-
ally more significant in spite of the fact that it applies only to the Central
Valley Project, whereas the County of Origin Law applies to the whole
state. The essential part of the Watershed of Origin Law is the follow-
ing:"
In the construction and operation by the authority25 of any project under
the provisions of this part a watershed or area wherein water originates, or an
area immediately adjacent thereto which can conveniently be supplied with
water therefrom, shall not be deprived by the authority directly or indirectly
of the prior right to all of the water reasonably required to adequately supply the
beneficial needs of the watershed, area, or any of the inhabitants or property
owners therein.
These provisions are in some respect analogous to the riparian doctrine
which, as we know, is recognized in California side by side with the ap-
propriation doctrine. A respected legal opinion26 holds, therefore, that the
two laws will stand up in court if and when tested. But these provisions
go much further than the riparian doctrine. The areas of origin are so
broadly defined as to include nonriparian lands. Furthermore, they re-
ceive a prior right-not a coequal right-to all future "reasonable and
beneficial" uses.
The reservations created by the area of origin legislation apply only to
public water resources development, that is, primarily by the state of
California and those state and federal agencies to which water filings by
the state are assigned. An appropriation by a municipality, a public dis-
trict, or a private user is not subject to the prohibitions quoted above.
This situation-which is sometimes not sufficiently appreciated-may re-
sult in discrimination against appropriations initiated by state and federal
agencies in favor of later appropriations by others. Junior appropriators
may, for some time, encroach upon the available water supply and obtain
a better right than the senior public appropriator because only the latter
will have the responsibility of satisfying the eventual demand from the
areas of origin. This encroachment, added to the uncertainty concerning
the quantities eventually needed for the areas of origin, forms a serious
threat to public water development.
In fairness to the areas of origin, one should also note that the very fact
California, State of, Water Code 1953. Section 11460, p. 205.
The term "authority" refers to the Water Project Authority of the State of
California.
"Henry Holsinger (Principal Attorney, Division of Water Resources), "Water
Reservations for Counties and Areas of Origins." An address before the Common-
wealth Club of California, March 24, 1955.







S. V. COnurc-WANTMr P


that primarily water development by the state is involved gives economic
justification to some form of water reservations. State water development
is supported by contributions from the areas of origin. This contribution
may be smaller than that from the areas of destination. Still, the economic
issues would be different if the costs of water development were borne
entirely by the areas of destination-as is common in California if water
is transported from one watershed to another by a municipality, a public
district, or a private user.
In actuality, such considerations of economic fairness are less important
than the political issues. Public water development requires the political
support of areas of origin as well as of destination. Areas of origin will
not give their support if they are afraid that the public undertaking may
curtail their potential future development. On the other hand, areas of
destination, which bear the greater portion of the costs, contain a greater
portion of the population, and have greater economic strength, will not
give their support if they know that their water rights are uncertain and
insecure.
A minimum basis for a solution of this dilemma would seem a removal
of the uncertainty and insecurity of water rights for areas of destination.
Public projects need secure water rights clearly defined in acre-feet per
annum, seasonal distribution, points of diversion, and other ways custom-
ary for appropriation. Such rights can be given only if the future needs
of the areas of origin, likewise, are clearly defined and limited. Physical,
economic, and political issues are involved. A number of proposals have
been advanced in the California Legislature that tend in this direction.'
A discussion of the economic implications of these proposals would re-
quire another paper. It seems possible that agreement on this basis will be
reached.
In spite of this possibility, the economist must confess a certain un-
easiness with respect to the general proposition that the relations between
water rights and economic change are effectively taken into account
through regional water reservations, however clearly defined. For the
economist, the kind of water use is certainly of no smaller and frequently
of greater significance than its regional distribution. An approach empha-
sizing flexibility would seem a desirable supplement if not alternative to
planning for a "frozen" regional distribution of water use. Such an ap-
proach would rely less on regional water reservations than on transfers of
water rights if and when needed in the public interest. Such transfers may
be accomplished through voluntary agreement and sale or through con-
For example, Assembly Bills 8057; 8108; 8868; 8799; and Senate Bill 1640. (1955
Regular Session.) There Is also a proposed constitutional amendment (66) which asks
for ascertaining the water surpluses and deficiencies in all sections of the state.







ECONOMIC ISSUES IN WATER RIGHTS 885

demnation under due process and with full compensation for deferred
revenues and costs. For both procedures, appropriation rights are better
suited than riparian rights, as already suggested (Section 3).
Condemnation raises, of course, a number of issues that go far beyond
the feld of economics. Condemnation of water rights for "public use" is
well established (Section 3). The "public interest," however, is a much
broader and more evasive concept. Some experience in this area is avail-
able. The state of Washington permits any person to condemn a lower
water use for a higher use.2 For this purpose any beneficial use is de-
clared to be a public use. The courts determine which use is the higher
one on the basis of the public interest This experience needs careful study
constitutionally, politically, and economically. Before such studies are
available, recommendations are premature. Besides, my assignment was
to raise issues, but not necessarily to solve them.
SRev. Code Wash., sec. 90.04.030.









ORGANIZATION AND ADMINISTRATIVE ARRANGEMENTS
FOR AN EFFECTIVE WATER POLICY
HARRY A. STEELE AND MARK M. REGAN1
Production Economics Research Branch
Agricultural Research Service
U. S. Department of Agriculture
O RGANIZATION and administrative arrangements are of strategic
importance both in formulating policy goals and in effectuating
their attainment. The impact of water problems and policy is felt at every
level of government and organizational issues concerning water manage-
ment arise at each level. Despite the many commission and committee
studies and reports in recent years, progress toward the crystallization of
thinking on the nature of the organizational arrangements needed to deal
with water resources has been slow. Unresolved issues remain one of the
chief characteristics of the nation's water policy.
Water policy and organizational arrangements are mutually inter-
related. The type of water policy we establish has a direct bearing on the
kind of organization and functions essential for carrying out its provisions.
At the same time, the kind and distribution of functions and responsibili-
ties may materially affect the policy developed and applied. Ideally, the
type of organization should depend on policy goals. Realistically, the in-
stitutional considerations likely to bear on organizational arrangements
are certain to affect policy.
In the idealistic approach, the process would begin by defining the
principal characteristics of desired goals. Thereafter, it would consider
the functions essential for achieving these goals and would distribute the
responsibility for them in accordance with the performance capacity of
various levels of participation. The end result of the ideal process would
be an effective operating mechanism for resource planning and manage-
ment.
Resource Policy Goals
Policy has been defined as a settled or definite course adopted and
followed by a government, institution, or individual. "The policy of any
unit is the direction in which it means to go, the lines of future action it
intends to follow."2
The chief purpose of policy is to orient plans. "A plan is a policy given
concrete form in a particular situation."3 Policy may be established by
SThe authors are indebted to Donald J. Lehman, General Services Administration,
for helpful suggestions on the content and form of this paper.
SJohn D. Black, et al., Farm and Other Operating-Unit Land Use Planning, Cam-
bridge, Mass., 1955.
'Ibid.







ARRANGING AN EFFErlVE WATER POLICY


adopting a stated set of goals or evolving piecemeal through progressive
formulation of a series of specific plans. In either instance, planning and
policy-making require continuous study, revision, and change to reflect
changing needs, to keep pace with new technologies, and to recognize the
evolution of political attitudes. The main advantage of an overall policy
framework is the continuing necessity for systematic consideration of all
related short-term and long-term aspects of decisions concerning a given
proposal. When attention is centered on a specific project, these aspects
are often disregarded.
The resource policy goals that follow are modifications of those sug-
gested by the Missouri Basin Survey Commission:' (1) The policy should
strive to attain eventually the comprehensive development of all land and
water resources in the local area, state, basin, and nation. (2) The policy
should encourage diversified development, should respond to changing
needs, and should assure a balanced investment, which would advance the
program by logical priorities on a consistent course. (3) The program
should be planned on the most economical basis that will maximize net
benefits for widespread distribution, and costs should be borne in direct
relation to benefits received. (4) The people who will be affected by the
policy should have ample and continuing opportunity to participate in
the formulation of the program and to influence its operation. (5) The
combined efforts of local, state, and federal governments should be em-
ployed in carrying out the policy and program. (6) The policy should
recognize our limited water supply, and preferences in the use of this
vital asset should reflect the public value of competing uses.
Essential Functions
In order to achieve the resource policy goals indicated, the principal
program management functions that would need to be performed at one
or more levels of participation include:
1. Resource planning and evaluation. Careful planning is essential if
sound programs are to be developed. This includes establishing specific
objectives for various segments of resource programs; developing con-
sistent standards for formulation, evaluation, and selection of projects;
application of systematic estimating techniques and procedures; review
and appraisal of project plans; provision of adequate basic data and re-
search; scheduling investigations in proper sequence; and arrangements
for periodic review and revision of plans.
2. Supervision of construction and installation. The installation of struc-
tures and the application of measures necessitate scheduling construction
operations; establishing specifications for structures and measures; pre-
Missouri Basin Survey Commission, Missouri: Land and Water, 1953, p. 62.







HArRY A. STErEL AMD MAmK M. REGAN


scribing rules and regulations for construction contracts, force account
operations and compensation arrangements for acquired property; estab-
lishing requirements for easements and rights of way; supervision and
inspection of construction; and approval of completed installations.
3. Operations management. Systematic maintenance and coordinated
operations are essential if the benefits of any program are to be fully
realized. Management of operations includes regulation of reservoirs to
maximize their effectiveness; coordination of system-wide activities; car-
rying out legislative requirements; and arranging for effective mainte-
nance of installations.
4. Resource budgeting. Periodic preparation of resource budgets is
essential in obtaining the necessary authorizations and appropriations.
Budgets should take into consideration resource goals, national require-
ments, levels of economic activity, urgency, balance between purposes,
and geographic distribution. Preparation of a consolidated annual re-
source budget would rule out piecemeal activities and provide an annual
review of projects and program interrelationships.
5. Financial management. Arranging for the division of financial re-
sponsibility among various participating interests is essential in coopera-
tive programs. This includes establishment and application of consistent
cost-sharing policies and procedures; fixing rates and assessments; nego-
tiating agreements and contracts and supervising their execution; and
setting up and supervising accounts for reimbursable purposes and deter-
mining charges and payments for various purposes and participating
groups.
6. Coordinating related resource developments and activities with
water-management projects. In order to assure effective programs, maxi-
mum use should be made of many interrelated activities and authorities.
These include education, credit, and other incentives to stimulate partici-
pation by individuals and groups; utilization of authority to control use of
resources through zoning, land-use ordinances, subdivision and building
regulations, and water laws. In addition, various types of resource districts
may need authority to enter into contracts, issue bonds, and levy taxes
in order to carry out assigned responsibilities.
7. Integration of functions and responsibilities. In order to achieve an
effective resource program, this maze of functions and responsibilities
requires unified direction in an institutional framework. Such direction
should offer means of harmonizing competing uses and conflicting inter-
ests, assuring widespread participation in decisions, sharing responsibility
keyed to authority, participation and benefits, and using the; combined
efforts of various levels of government in balanced and coordinated
efforts.







ARRAXNC An EFrNFIXrz WATra Po=uC


Distribution of Responibility for Functions
Interest, authority, and ability to perform functions effectively would
appear to be the main considerations in assigning responsibility for func-
tibns among the various levels of government.
The establishment of uniform standards and criteria might be per-
formed most effectively at the regional or national level. This would in-
clude setting overall goals for development of resources, use of consistent
evaluation and cost-sharing standards, coordination of operations, ap-
proval of basinwide resource budgets, coordination with national policy
and related nationwide resource programs, and various integration activi-
ties essential for establishing a comprehensive resource program.
Primary responsibility for exercising legislative authority to control land
and water use, the execution of local district agreements, and the pro-
vision of features that are largely of local concern can usually be carried
out more effectively if assigned to state and local groups.
However, most functions would appear to require varying degrees of
joint participation by federal, state, and local governments if resource
policy goals are to be achieved. This would include most phases of plan-
ning and evaluation, management of operations, preparation of budgets,
and financial management.
Joint participation in performing such functions appears to be con-
sistent with the division of governmental responsibility in the resource
field between federal and state authorities. The responsibilities assigned
to the states are extensive and their participation is essential for an effective
resource program.5 Equally essential is the utilization of federal authority,
with its responsibility for reflecting the broad public interest in providing
assistance in planning and financing resource programs. In order to be
most effective in serving the various interests and making optimum use
of the authorities and'devices available, account must be taken of the
rights and desires of the different participating groups and provision must
be made for reconciling differences. In case mutually acceptable compro-
mises cannot be reached, organizational arrangements should provide as-
surance that the broader interest would prevail.
The prevailing distribution of governmental responsibility for various
types of resource programs varies considerably. Rarely are interrelated
activities under the jurisdiction of different agencies or governmental
levels advanced on a fully coordinated or integrated basis. Variations in
responsibility stem from several sources. These include legislation ap-
plicable to particular projects and programs, conflicts of jurisdiction and
interest, differences in financial ability, diversity in authority granted
SS S. C icy-Wantrup, Respuc Conser.ation Berkeley: University of Caliornia
Press, 1952, p '852.







IIAnY A. STEELE AND MAm~ M. REGAN


resource-management agencies, and political attitudes. The resulting
situation creates a challenge for sound and acceptable institutional ar-
rangements.
In these circumstances, it is not surprising that an almost endless variety
of arrangements have been suggested for local, state, river-basin, and
federal participation. Examples of the types of organizations that might
exercise authority and the problems likely to be encountered are outlined
in the sections that follow.
Local Organizations
In recent years there has been much discussion of local participation
and responsibility in the development of land and water resources. States
have authorized the creation of specialized local districts of many types to
deal with the development of land and water resources. District types in-
clude soil conservation, drainage, levee, irrigation, water conservancy,
river regulation, reclamation, and public power. Aside from those for
conservancy and river regulation, local districts have been formed largely
to carry out single-purpose types of development.
Invested with appropriate powers, local districts are effective agencies
for the development of resources. They may undertake limited develop-
ments on their own initiative, or they may take an essential part in co-
operative activities with state and federal governments. For compre-
hensive resource programs, multiple-function watershed- or conservancy-
type districts provide a more effective means of representing local inter-
ests and fulfilling obligations than the more limited purpose districts.
Among the questions that need to be faced in establishing local districts
are the appropriate size, their relationship to single-purpose organizations
and traditional local governments, the means of coordinating operations of
neighboring districts, the nature and extent of financial authority, and the
methods of assessing charges.
The recent passage of the Watershed Protection and Flood Prevention
Act has posed a new set of responsibilities for local organizations. The
program authorized by this act is, in effect, one of federal technical and
financial assistance to local organizations for watershed, irrigation, and
drainage programs. The local organization must apply for the program,
cooperate in planning, carry out the construction, furnish rights-of-way
and any necessary water rights, and provide for operation and mainte-
nance. The federal government will provide technical assistance and
financial aid for part of the construction.
This reveals the need for a local organization with adequate financial
resources and the authority to meet these responsibilities: The initial
standard soil conservation district act did not suggest the powers to tax








ABRANGING AN EFFECrVE WATER POLICY


or to incur indebtedness. Only in California and Colorado do soil conser-
vation districts have taxing power. Neither did the standard act include
the power of eminent domain, and only Arkansas and California added
this power.6
As a result of these limitations in the powers of soil conservation dis-
tricts, a serious problem exists as to what should be done to meet the local
responsibilities required in the watershed act in order tb take advantage
of federal assistance. Should the soil conservation district enabling acts
be amended or should new districts be created?
The pattern of state action is not clear. Some states-Colorado for
example-have amended their soil conservation acts to empower soil con-
servation districts to carry out watershed projects and to levy taxes for
this purpose. Other states-Tennessee for example-have provided for
watershed districts to carry out the program.7
In the immediate future, there should be intensive research on and
discussion of the responsibilities of local districts under the watershed
program and of the powers needed to meet them.
State Organizations
In a water-development program the states and their political sub-
divisions must assume an active and responsible role, for they are integral
units in the broad institutional framework of water-resource develop-
ment.8 The extensive powers of states over the use of land and water
resources could often be more effectively used if adequate and properly
staffed organizations were available.
As water becomes an increasingly critical element in our economic life,
the states will need to examine the laws under which water is controlled
and used and to devise new state agencies to administer these laws. With
the trend toward federal grants-in-aid for local development, the states
will need to make adequate provision for establishing local districts for
resource development and to provide more guidance to these subdivi-
sions.
Several states have successful water-resource planning and develop-
ment agencies. The Montana Water Board is an outstanding illustration.
Kansas has just created a water board with comparable powers. Many
states have agencies to administer water laws, but they lack the power to
plan and develop resources. A large number of states have created special

SW. Robert Parks, Soil Conservation Districts in Action, Ames: Iowa State College
Press, 1952, p. 14.
Data from an unpublished manuscript by Kirk Sandals, Soil Conservation Service,
June, 1955.
Missouri: Land and Water, p. 247.







HARRY A. SiTr~r Amm MA= M. RwAow


study commissions to examine water problems and recommend changes
in state law.
Recognizing that the states are faced with serious water problems, the
governors at their December 1954 meeting in Chicago passed a resolution
directing the Council of State Governments to make a study of water
problems. This included appraisal of the various legal doctrines relating
to water rights, the possibilities of developing new bases for water rights
and new legislation for watershed organizations.

Regional and River Basin Organization
While the states need many changes in their laws and internal organiza-
tional policies, they also face difficult policy issues in working together
on interstate problems. These include the division of water in interstate
streams, pollution control, and joint planning and development.
States may cooperate with each other in many ways. Uniform and re-
ciprocal laws, and administrative agreements are examples. However, the
interstate compact is the chief form of coordination of water control and
development. Many interstate compacts have been used to divide the
waters of an interstate stream or for similar purposes. In some instances,
states with common problems have established planning and coordinating
agencies by interstate compact. In other instances the compact has pro-
vided for a representative of the federal government.
In the last 20 years the river basin has been generally accepted as the
appropriate physiographic unit for planning and developing water re-
sources. The interrelated and competing uses of water within a river
basin result in varied and complex problems that can be solved best by
integrated action within its natural boundaries. This principle has been
recommended by all major commissions and organizations on water
policy. It is recognized in congressional acts and administrative orders.
Although there appears: to be agreement as to the objective of river-
basin development, the kind of organization needed to meet the objec-
tives of basin planning continues to be controversial. It has long been a
subject of debate out of which has come several proposals for river-basin
organization.
Since 1949 interagency committees have been created by administrative
action in the Missouri, Columbia, the Pacific Southwest, Arkansas-White-
Red, and New-York-New-England basins. These are committees of inter-
ested federal agencies and states engaged in activities relating to water re-
sources. They operate by mutual agreement, and to a limited extent they
achieve a measure of coordination by frequent consultation and review.
Attention is usually limited to the authorized programs of the res
tive members. The Arkansas-White-Red and New-York-New-England







ABaxamo ~ r AN EuacrmB WATER PoUCT


committees have carried on elaborate investigations under congressional
and executive direction. They issue voluminous reports on the resource-
development potentials of their areas.
The Tennessee Valley Authority Act created in 1933 a government
corporation to develop water, land, and other resources of the valley. This
corporation was given authority to make decisions, and responsibility
for resources as a unified whole. It was directed by law to work coopera-
tively with and through local and state agencies. The Tennessee Valley
Authority has served as a model for similar organizations recommended
in other river basins. Consideration was most active in 1937 and 1988'
and again in 1944 and 1945 when a Missouri Valley Authority was de-
bated.1
The Water Resources Policy Commission recommended that Congress
set up river-basin commissions to coordinate surveys, construction activi-
ties, and operations of federal agencies in the several basins. These com-
missions would be guided by independent chairmen appointed by the
President, with state agencies participating in the planning process.
The Missouri Basin Survey Commission recommended a 5-man Mis-
souri Basin Commission to direct the resource-development activities of
the federal government and to coordinate them with the resource-de-
velopment activities of the states. The recommendation provided that the
commission must be ratified by 7 states before it could become effective.
A minority of the Survey Commission, however, recommended a Mis-
souri Basin Commission with essentially the same powers created through
an interstate compact. The compact approach has been favored also by
the Missouri States Committee, the Council of State Governments, the
American Farm Bureau Federation, and other organizations. Usually only
advisory powers are proposed for the compact commission."
Senator Hennings, Vice Chairman of the Missouri Basin Survey Com-
mission, introduced a bill in 1954 that provided for a federal commission
in combination with an interstate compact12 By the Hennings formula

*William E. Linchtenburg, "Roosevelt, Norris and the 'Seven Little TVA's',"
Journal of Politics, Vol. 14, No. 3, August, 1952.
"Water Resources Law, Vol. III, Report of the President's Water Resources
Policy Commission, 1950.
n Revised draft "Missouri River Basin Compact." Prepared for the Missouri River
States Committee by the Council of State Governments, January, 1958. It is inter-
esting to note the change in powers for the compact commission between this study
and the first one "The Missouri Basin's Water Resources, Organizing for Operation,
prepared for the Missouri River States Committee by the Council of State Govern-
ments, September, 1951. Also see Frederick L. Zimmerman and Mitchell Wendell,
"Representation of the Region in Missouri Basin Organization," American Political
Science Review, March, 1954.
S. 825, 88d Congress, 2d Session.







HARRY A. STEEL AND MARK M. REG-A


the commission plans would be reviewed by the compact board. This bill
was designed to assure for the basin the full advantages and benefits of
both the majority and minority proposals'
Recent studies of the basic organization for river-basin development
include those by the President's Advisory Committee on Water Re-
sources,14 and those of the second Hoover Commission and the Commis-
sion on Intergovernmental Relations. The report of the Advisory Com-
mittee is nearing completion and the reports of the two latter commissions
were released early in the summer of 1955.2" The Hoover report proposes
a Federal Water Resources Board, which in turn would set up river-basin
commissions to represent federal, state, and private interests. Their func-
tions would be limited to planning and project coordination. They would
not be administrative bodies; nor would their boundaries coincide rigidly
with drainage areas. The report suggests that the scope and purpose of
basin commissions should vary in accordance with changing economic,
social, and political conditions.

National Planning
A series of unresolved policy issues are encountered at the national
level. These revolve around the plans and programs of various agencies,
the coordination efforts of the Bureau of the Budget, and the activities
of interested congressional committees.
The main issues are (1) achieving coordinated water policy and giving
positive direction to planning and scheduling of water-development pro-
jects; 2) providing independent review for engineering and economic
feasibility; (3) scheduling projects in relation to the overall budget and
the need for the services of the projects, and (4) presenting programs to
Congress so that it may have alternatives to choose from within the gen-
eral framework of feasible projects.
In the 1930's, the National Resources Planning Board, and in more recent
years the Federal Interagency River Basin Committee16 and the Bureau
U. S. Senator Thomas C. Hennings, Jr., "Statement in the Senate on Introducing
Bill to Establish a Missouri Basin Commission and Compact Board," Press release,
April 19, 1954.
"Established by Executive letter, May 26, 1954, initially as the Cabinet Com-
mittee off Water Resources Policy.
Commission on Organization of the Executive Branch of the Government, "Water
Resources and Power" (two volumes) June, 1955; and the Commission on Inter-
governmental Relations, "A Report to the President for Transmittal to Congress,"
June, 1955. The Intergovernmental Relations Commission recommends the establish-
ment of a permanent Board of Coordination and Review to advise the President and
Congress on a coordinated national resources policy at the National level and between
it and the States; and that similar agencies be established at the State level.
The activities of this Committee were modified, and its name changed to Inter-
Agency Committee on Water Resources by Executive letter, May 26, 1954.








ARRANGIN AN EFFw IVE WATER POLICY


of the Budget have tried to achieve coordinated policy and to establish
standards for planning water projects. The National Resources Board
established regional committees and compiled lists of projects. It also
issued reports that attempted to set standards and procedures, such as
"Public Works Planning" and "Regional Factors in National Planning and
Development" The Interagency Committee was established following the
dissolution of the Resources Board. Until the last year, its monthly meet-
ings have been largely devoted to review of reports. It also established
several standing subcommittees.
A major effort toward achieving uniformity was the preparation by the
Subcommittee on Benefits and Costs of the report "Proposed Practices for
Economic Analysis of River Basin Projects." This report compared evalua-
tion procedures followed by the various agencies, and for the first time
presented a reasonably consistent approach for project analysis. The
Bureau of the Budget has issued Circular A-47, which prescribed by exe-
cutive regulation many of the procedures outlined in the Subcommittee's
report. Although efforts to achieve more coordinated policy and uniform
planning procedures have made progress, much remains to be done before
there is agreement."
Most groups studying national water policy have recommended an
independent board of review. The proposal of the Water Resources Policy
Commission is typical. It recommended that Congress should authorize
a board of review to analyze and review all projects and programs before
their presentation to Congress. Such an agency should have the authority
to reappraise all findings of economic feasibility, to consider all programs
in terms of broad national interest, and to modify proposed programs in
the public interest. Some groups would have the board go further and set
the standards and procedures for planning projects.
The first Hoover Commission proposed that the rivers and harbors and
flood control activities of the Corps of Engineers be transferred to the
Department of Interior. It expected to coordinate water-development proj-
ects by putting all major construction in one agency.
The second Hoover Commission recommended that the President's
Committee on Water Resources be transformed into a water resources
board in the Executive Office of the President. This board would consist
of 5 cabinet members and 5 public members recruited from engineers,
economists, and others of recognized ability. It would have a nongovern-
ment chairman. Its main functions would be to recommend broad policies
to the President and to coordinate plans and activities of agencies at both

""Discussion of Budget Bureau Circular A-47 and the Related Power Partner-
ship Principle," Hearings before the Committee on Interior and Insular Affairs,
House of Representatives, 84th Congress, 1st s.









the Washington level and in the field. The Commission expressed the
view that only a small staff would be required, as the resources of goven,-
ment agencies would be available. The report further recommends that the
staff of the Bureau of the Budget be strengthened in order to evaluate fully
the merits of water-development projects presented for appropriations. The
functions would be similar to those of the coordinating board proposed by
the intergovernmental Commission, which would also report to the Con-
gress.
From time to time there has been discussion of improving ways in
which interrelated river-basin activities of different agencies might be
handled by various congressional committees. One solution that has been
suggested is the development of a coordinated program and a unified
budget for each basin, which would aid the Congress and its committees
in their determinations.18 The modification of congressional committee
functions and the provision of more adequate professional staffing has
also been proposed.19
Conclusions
The implementation of water-resources policy requires appropriate
administrative machinery supported by an adequate legislative base. The
powers of both state and federal governments need to be utilized, as each
level of government possesses certain powers that the other does not have,
and each has a distinctive contribution to make. The integration of these
powers at the local, river-basin, and national levels is essential as the
foundation for effective organizational arrangements. Provision needs to
be made for the integration and coordination of federal, state, and local
participation at all stages of resource development, including the estab-
lishment of project objectives, collection of basic data and research, plan-
ning and evaluation, scheduling construction, project and program opera-
tions, and cost-sharing arrangements.
The major problem appears to be that of developing organizational
arrangements balanced in a way that will harmonize conflicts of interest
sufficiently to be acceptable to the participating groups. The lack of prog-
ress in adopting at least certain features of the many proposals that have
been made in recent years for improved organizational arrangements indi-
cates the difficulty of reconciling conflicts and suggests the need for
greater emphasis on getting recommendations fully understood by all
who are affected.

Missouri: Land and Water, p. 242.
S. V. Criacy-Wantrup, Resourc Conserwaton, p. 366.


HAZny A. SiTLE AND MARK M. REGAN







WATER RIGHTS AND WATER POLiCY-DISCuSSION


DISCUSSION: THE DEVELOPMENT AND PRESENT STATUS OF
WATER RIGHTS AND WATER POLICY IN THE UNITED STATES
RALEIGH BAULOWE
Michigan State University

Wells Hutchins is widely regarded as our leading national authority on the
subject of water rights legislation. In his paper here today, he has given us a
brief but comprehensive picture of our present water rights and water policy
situation. I have no quarrel with any of his comments. However, I would like
to elaborate upon some of the issues he has mentioned regarding surface water
rights, particularly in light of our situation here in the East.
Two aspects of our present water rights situation bear special emphasis.
first, the rise of our water rights system is the story of a people who have
adjusted their legal doctrines regarding water use to fit the changing needs
of their time and of their particular locations. And, second, even with the
progress made in the past, considerable need still exists for future adjustments.
The colonists who settled our eastern states gave little thought to the ques-
tion of water rights. No one worried about the fact that the 1800's would be
here before the riparian doctrine would become part of the English common
law. Water was plentiful compared with the demand for it, and it was
accordingly treated more or less as a free good.
It was only later when conflicts of interest developed among water users that
need arose for a water rights system. Most of the early conflicts involved the
effects of diversions and stoppages of flow upon the time-honored use of water
for domestic and navigation purposes. The riparian doctrine was developed to
meet these needs; and as time went on, it was accepted by the courts in all of
the eastern states.
With the settlement of the more arid lands of the West, it soon became ap-
parent that the riparian doctrine ran counter to the paramount need of this
area to appropriate waters for irrigation and other purposes. This situation led
some states to abrogate the riparian doctrine and replace it with the doctrine
of prior appropriation. Others modified the riparian doctrine by combining it
with the appropriation principle.
When we stop to analyze the three general water rights systems we now have,
we must conclude that these systems have tended to meet the needs of their
respective areas. At the same time, however, we must also recognize that adjust-
ments are needed if these systems are to meet the changing conditions of our
dynamic age. Mr. Hutchins has commented on the changes needed in the West.
Let me elaborate upon our surface water rights situation here in the East and
some of the problems we will encounter as we try to adjust to our need for
change.
One of our first needs so far as irrigation is concerned is for some clarifica-
tion of our present water rights situation. Some of our courts have gone much
farther than others in spelling out their interpretations of the riparian doctrine.
The courts in some states have tended to interpret this doctrine somewhat rigidly
by following a "natural flow" approach, which permits riparian owners to
take water out of a stream only when their actions have no appreciable effect







RALEGH BAfm.owE


upon either the quantity or quality of water remaining in the stream. In other
states, they have favored a reasonable use" doctrine, which permits riparian
owners to use reasonable amounts of water for beneficial purposes such as irri-
gation.
A third situation exists in states such as Michigan where neither the courts
nor the legislature have as yet indicated a definite position regarding irrigation
water rights. (Here in Michigan we find it impossible to tell farmers exactly
what rights they have in the use of water. When questions are raised, we
expound upon general principles and point out the risks that the irrigator takes.
But we usually end up with the admission that we live in a "water rights
wonderland.")
Much of the uncertainty that we feel in some of our states regarding our
unsettled irrigation water rights situation could be dispelled by a few strategic
state supreme court decisions. In some cases these decisions might also alleviate
part of our need for water rights legislation. Over the long run, however, most
of our eastern states will probably fnd it desirable to seek legislation embody-
ing some use of the appropriation principle. This legislation may take several
forms. Some states may wish to modify their present riparian doctrine to permit
the beneficial use of their surplus waters under a prior appropriation system.
Others may set up special water districts with powers to integrate their use of
water resources. And still other approaches may be devised in some states.
Two principal barriers now stand in the way of this type of legislation. The
first of these involves the need for arousing public interest in our need for water
rights legislation; while the second concerns our need for a legal basis for
action.
Even with the great amount of publicity now being given to water issues,
the problem of selling the idea of new legislation to the general public and to
the members of our state legislatures is still far from easy. To begin with, the
subject of new water rights legislation is far too complicated to be easily sum-
marized in a single paragraph. It calls for change, for limitation of the potential
and unused rights held by riparian owners, and for adjustments in long-accepted
legal doctrines. In most cases, it also calls for additional government controls
and for more red tape.
This combination of unfavorable factors has scared away some prospective
supporters and has dampened the enthusiasm of others. But some progress
has been made. Active educational programs favoring new legislation have been
carried on in several states and special study committees have been set up in
others to consider and draft possible legislation.
Once we build up political support for new legislation, we still face the
problem of securing a suitable legal basis for action. Certain types of public
control are possible under the police power. But a stronger measure of control
is needed f our states are to allocate appropriation rights among particular
individuals. In facing up to this situation, none of our eastern states find them-
selves in the enviable position that the western states enjoyed when they first
accepted the riparian doctrine. Our riparian owners can point to the long-
vested nature of the use rights they exercise. As Wells Hutchins indicated,
these use rights are recognized by the courts as property rights; and the holders
of these rights cannot be divested of them without due process of law.
A few of our eastern states have laws declaring their paramount interest in


I







ECONOMIC ISSUES I WATiE BIGHTS-DISCUSSION


the use made of the surface waters within their boundaries. It is possible that
these and some other states may be able to exercise or reacquire some of the
rights now claimed by riparian owners. In many cases, however, the reacquisi-
tion of these rights can be accomplished only by gift, purchase, condemnation,
prescription, or possibly by tax reversion.
An additional factor that complicates our water rights situation is that of
increasing demand and increasing competition. Here in the East, our usual
problem has been that of too much rather than too little water. But with in-
creasing population pressure and with new technology, we are becoming more
and more water conscious. The development of portable irrigation equipment
has favored a tremendous increase in the demand for water for supplemental
irrigation purposes. In Michigan, for example, the total farm area set up for
supplemental irrigation has increased almost 30-fold since 1940. And the word
that irrigation practices can step up the yields of crops such as potatoes from
an average of 150 to 450 bushels per acre will undoubtedly bring additional
demands for irrigation water in the future.
In addition to our water needs for irrigation, more water will be needed by
our growing cities. Our industrial needs for water will probably double during
the next two decades. More water will be needed during dry seasons to float
away the affluent from our many sewage disposal plants. Our sportsmen and
recreational interests will insist that we maintain adequate supplies of clear,
cool water in our streams and lakes. And our navigation and hydroelectric
power people can be expected to protest any infringement of their rights.
These conflicting demands make our problem much more than just a matter
of securing irrigation water rights. All of our eastern states-and our western
states too-must appraise their water situations in terms of how they are going
to allocate their limited water supplies among competing uses and how they
can secure a distribution of water rights that will result in the maximum social
benefit.
When we consider our growing competition for the use of water, our problem
in securing political support for new legislation, and our need for a strong legal
basis for action, it sometimes seems that the prospects for securing a better
allocation of water rights for agriculture are dim indeed. But our situation is
not without hope. The uses we plan to make of water have a high priority in
our society. And our society has demonstrated its ability to adjust its legal
institutions to meet the changing needs of time. As we modernize our water
laws, however, let us always remember that new problems are bound to arise
in the future and that their solution may also call for reappraisals and readjust-
ments in our water rights system.

DISCUSSION: SOME ECONOMIC ISSUES IN WATER RIGHTS
ELCO L. GREENSHELDS
Agricultural Research Service
To me it is regrettable that Dr. Wantrup, who has done so much constructive
thinking on the economic issues in water development policy, chose to limit
his paper to economic issues in water rights. Despite the fact that Dr. Wantrup
has recently given attention to the issues of evaluation, cost allocation, pricing







ELCO L. GmmaSHJFLDS


and public preference in public resources development, I am sure that he has
much more to contribute on these important and troublesome issues. His recent
articles on cost allocation and benefit-cost analysis are excellent. Nevertheless, at
this meeting it was hoped that we might have an opportunity to further ex-
amine some of the economic issues that continue to thwart the nation's effort
to establish a sound development policy for water resources.
Dr. Wantrup's examination of the economic issues in water rights very ade-
quately points out the general problem areas. Economic change brings with it
new uses for water and also changes in the relative social and economic values
of water among the several major uses. The appropriation of the right to use
water on the basis of concepts of priority of uses established long ago may no
longer promote the use of water for the greatest public good. It seems clear
as Dr. Wantrup points out, that some industrial uses produce a much higher
economic return per unit of water used than use of water for irrigation. We
agree that water law should rest largely on economic values and that the estab-
lishment of water rights must recognize the need for a proper balance between
flexibility and rigidity. On the one hand, rights cannot be so flexible that present
developers will have too little security to risk full optimum development for
beneficial uses. On the other, rights cannot be so rigid that new and higher
valued uses cannot enter into competition with established uses.
Dr. Wantrup's statement that the influence of institutional framework is
more important than the influence of public investment on water resources
development is not fully acceptable. Currently and looking forward to the next
decade or two, public investment and public programs are directly or indirectly
setting the course for most of the development of surface water resources. Only
on the assumption that Dr. Wantrup's reference to water law encompasses the
existence of the basic concept of vested private property rights in water, can we
find a basis for agreement. The way in which water rights have been established
and administered does not appear to be such a crucial issue.
In regard to water rights, I should like to point out that their value or pros-
pective value depends on public investment in no small way. In many areas
rights to undeveloped water would have little value except for the prospect of
development through public programs. The cost of development, if borne
entirely by private capital, would be prohibitive, and no value would be
attached to undeveloped water.
Of the problem areas in water rights, Dr. Wantrup has appropriately empha-
sized the one that relates to ground water. His analysis of the ground water
rights problem is well done. I can add nothing to it except to say that I hope
we shall have the benefit of his further study of this situation.
Now I shall comment briefly on the topic to which some of us had hoped Dr.
Wantrup would direct his attention. A listing of the economic issues in water
policy is hardly necessary for this audience. Each of us is confronted with these
issues in different ways. Some may have only an academic interest. Others here
are directly concerned with economic issues either through actual work or in
consultation with those responsible for carrying out programs in water re-
sources. The latter group especially needs the thinking of professional research
workers who are not so deeply involved.
I would like to know, for example, how Dr. Wantrup thinks taxes and interest
should be treated in the economic analysis of hydroelectric power projects and







ARRANGING AN EmF~criVE WATE POLICY-DJSCUSBION


alternative steam plants. It appears to be generally agreed that comparable
rates should be used, but should hydro-project rates be used for both or should
alternate steam cost rates be usedP This is the essential issue that arises in the
allocation procedure recently agreed upon by the Federal Power Commission,
the Bureau of Reclamation, and the U. S. Army Corps of Engineers. Apparently
the Hoover Commission recommends that the private rate (at least for taxes)
be used while the Bureau of the Budget recommends merely that comparable
rates be used without saying whether they shall be based on the cost of public-
hydro or private-steam power.
The current trend toward the inclusion of monetary values for secondary,
indirect, and intangible effects in determining the economic justification of
water resources projects raises a number of issues. How far should federal
agencies go in this direction? Does the inclusion of secondary effects have us on
the verge of wasting public funds on uneconomic projects? Aside from the
question of the advisability of including these indirect effects are the difficulties
in measurement. Economists must get more precision in their measurements
of prospective benefits if we are to get the right answers. Clarification is needed
in the use of secondary benefits in project justification, cost allocation, and as a
basis for repayment. The use of secondary benefits for project justification is
limited from a national public viewpoint. But from a local-area viewpoint these
secondary effects can provide a basis for assessing charges. The problem is how
to reconcile these differences. The whole area of the appropriate base for
assessing charges and repayment needs thorough analysis. One base is cost
of service; another is the value of service or the ability of beneficiaries to make
repayment.
Clarication of issues of this type would appear to be as important in estab-
lishing an effective water policy as the improvement of existing water law.
Several such issues need to be resolved before we can be sure how or to what
extent water laws should be modified. This is not to say that water right laws
do not need revision nor that all such revision necessarily must wait for clarifica-
tion of the broader economic issues.

DISCUSSION: ORGANIZATION AND ADMINISTRATIVE
ARRANGEMENTS FOR AN EFFECTIVE WATER POLICY'
WnILFED H. PINE
Kansas State College
An effective policy is interpreted, I believe, by Steele and Regan to include
summarily, first, the determination of direction of action intended to be taken;
second, the plan of action; and third, the operation of the plan. They have
listed some guiding principles for establishing a policy, described the functions
needed to achieve policy goals, and showed how the functions are or may be
distributed among various levels of government.
Steele and Regan state that water has many interrelated and competing uses

SContribution No. 222, Department of Agricultural Economics, Kansas Agricultural
Experiment Station, Manhattan.







Wuamw H. Pnqs


and has limitations. They might have pointed out more carefully these char-
acteristics, both physical and economic, because these characteristics compli-
cate the problem of determining policy and organizational and administrative
arrangements to deal with water. Are these characteristics peculiar to water and
do they require unusual organizational and administrative arrangements?
Maximization of net benefits and allocation of costs according to benefits are
listed by Steele and Began among the guiding principles. The importance of
these two principles needed more emphasis. They should have major roles in
determining the policy and the organizational arrangements for making the
policy effective.
One of the most serious weaknesses in present arrangements for planning
and developing water resources is lack of provision for the association of costs
and benefits. Lack of knowledge of kinds, amounts, and incidences of costs and
benefits is one reason for this. It will continue to exist to some extent so long as
values differ for individuals, values change, and new techniques of production
are adopted. But knowledge now is sufficient to associate costs and benefits
much more closely than is being done. An effective water policy depends on
legal, organizational, and administrative arrangements that will provide as
nearly as possible for this association. Present arrangements, for example, pro-
vide for flood control projects to be financed by the federal government, while
costs of watershed programs are shared by local people.
Are there local benefits for watershed programs and not for flood control
projects?
Authority is given as one criterion for distribution of functions. Authority is
not assumed to be fixed and unalterable with respect to organization and
administrative arrangements. But additional emphasis is needed on making
changes in authority for arrangements that are suitable otherwise. Laws, rules,
and regulations are not always easy to change so existing authority will influ-
ence an effective water policy. Political situations may prevent needed changes
in authority. This suggests also that emphasis should be given to the separation
of the functions of planning from operations. Planning and program evaluation
often are not objective and are influenced adversely, if preformed by the agency
responsible for construction and operation.
The functions required for an effective water policy, as I understand Steele
and Began, are in terms of planning, construction, and operation. The distribu-
tion of these functions is primarily on the basis of level of government. A local
organization should be interested, able, and authorized to deal with water
problems of local interest only. Some problems, perhaps most of them, will
require more than one level of organization to solve them. The nature or scope
of the water problem may be more important in determining responsibility at
each level of government or organization than are the functions in dealing with
any one problem.
The nature of water suggests almost inevitable conflicts of interest but, as
stated by Steele and Began, the broad interests should prevail. They observe
that there now exists a wide variation in governmental responsibility bearing
little relation to considerations of interest, ability, and authority. The resulting
situation creates a challenge for sound and acceptable institutional arrange-
ments. For example, rural and urban conflicts exist for the use of ground water
in the Wichita, Kansas area. Local groups-cities, counties, irrigation districts,







ARRANGING AN EFFECTIVE WATER POLICY-DISCUSSION 903

and others-are interested. The area includes more than one county. Water
might be obtained from distant sources including streams in which other states
are interested. However, the problem probably should be solved by a combina-
tion of state and local organizations. What should be their separate and joint
responsibilities?
The authors discussed, rather thoroughly, present arrangements and major
alternatives that have been suggested by various individuals or agencies. This
is a valuable contribution. More specific recommendations for organizational,
and administrative arrangements for particular or type problems would have
improved the paper.




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