Minimization of Third-Party Injury in Multi-Party Water Right Transfers in Colorado

In the western United States, prior appropriation is the dominant form of water rights. In times of scarcity, the most senior water rights are given priority. Water right transfers can increase economic efficiency by moving water toward higher value uses, but the parties involved must prove that transfers do not reduce water availability for third-party users. In this study, prior appropriation and water right transfers were studied using the Upper Gunnison River Basin in Colorado as a test case. Streams and diversion structures were combined into a simplified network object in the R language. A flow allocation model was then developed to solve for the set of withdrawals and streamflows consistent with mass balance constraints and prior appropriation. The first objective of this work was to explore the drivers on water availability under prior appropriation. Specifically considered were the effects of spatial and temporal hydrologic variability, as well as the set of upstream and downstream priorities, on water availability for a given water right holder. Additionally, the effects of these drivers on water right transfers and third-party injuries were explored. Next, a number of case studies were developed which showcase strategies for using carefully constructed water right transfers for various ends. Multi-party overlapping water right transfers were considered as a solution to the problem of third-party injury. Multi-party water right transfers were also suggested as a means to reduce transaction costs in water right transfers. Symmetric, bilateral water right transfers were considered as a way of transferring hydrologic risk. Lastly, downstream water right transfers were suggested as a strategy for increasing instream flows in vulnerable reaches. In addition to these heuristic case studies, a web-based tool was developed which allows users to explore water rights within the Upper Gunnison River Basin and test the effects of multi-party transfers on third-parties and instream flows. I hope that this tool will be useful for water managers, regulators, and educators who would like to develop a better understanding of prior appropriation rules and the effects of water right transfers.