Unbundling Water Rights, Trading Rules and Restrictions, pg 21-22

I didn’t understand “tagged trading” well.  It allows for trading between different hydrologic regions, but I don’t understand the mechanics.

The last paragraph on the page discusses permanently selling water away from the region.  It addresses the increased operating costs for the water users that remain.  Australia sets those exit fees at ten times the fixed annual charge for water conveyance.  So basically, the sale of the water has to cover the next ten years of O&M on the infrastructure that delivered that water to the original location.

The section refers us to Appendix E, for Principles for Trading Rules.  As we’ve seen before, these rules that govern trades between river reaches, basins or watershed are so simple they fit on one page.  They do accommodate the increased O&M costs to water users in the source area when some water is sold out of the area.  But Appendix E is explicit:

Exchange rates and trading rules should not be used to achieve other outcomes, such as altering the balance between economic use and environmental protection or reducing overall water use.

So where do we develop rules that protect or compensate third parties?  NOT IN THIS MARKET!  Maybe beside it.  Or around it.  Or somewhere nearby.  Could be adjacent.  Possibly to the left or right of it.  But definitely, definitely not part of the market.

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2 Comments

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2 responses to “Unbundling Water Rights, Trading Rules and Restrictions, pg 21-22

  1. I don’t understand your comment about protecting 3rd parties. Why does it pertain here? If we accept the Young paper’s proposal that we’ve either got a beneficial use doctrine that must be followed or some other permitting scheme, then haven’t we done our due diligence in terms of protecting third parties?

    Environmental protection is either provided for in rules based allocations or by shares held in trust. Other protected uses / potentially vulnerable third parties might likewise be protected.

    I would really appreciate an example or two of a potentially injured third party that I could use as a framework to understand your comment.

  2. onthepublicrecord

    The usual concern for third parties is for farmworkers or other ag suppliers that lose work/business when acreage is fallowed. (We don’t concern ourselves with this when urban businesses move or fail, but ag is different somehow.)