Water Rights Arrangements in Australia and Overseas

Governments manage water resources by issuing ‘rights’ (licences, allocations, entitlements) to control water use. Water rights vary enormously, within and between jurisdictions, in their duration, security, flexibility, divisibility and transferability.

There are two basic systems used to ration the (variable) supply of water in the jurisdictions studied:

1. Governments devise plans to share the volume that is available for consumption among the holders of each class of right. Water rights are defined in volumetric terms, with a statement of the probability that the nominal volume will be delivered in full in any given year.
2. Governments and courts recognise historic claims to access fixed volumes of water on a strict priority basis determined by the length of time each right has been held.

Governments generally also seek to ensure that sufficient water is available for a variety of environmental purposes.

In jurisdictions using the ‘planning’ approach, governments explicitly set out to achieve a balance between the economic, social and environmental objectives of the community, despite uncertain community preferences and environmental effects.

• thus in the Australian jurisdictions studied, licences can be varied to obtain additional water for the environment. The timing and volume of water requested by right holders may also be varied administratively.

In those jurisdictions with secure and tradeable permanent water rights, such as California and Colorado, agencies obtain additional water for the environment by purchasing existing rights from the current right holders; harvesting additional water; or investing in water savings programs.

Both systems have strengths and weaknesses: in particular, the benefits of clear private rights versus the flexibility of governments to manage the resource.

The economic, social and environmental interests of those affected by water resource management decisions are more likely to be satisfied if sound governance arrangements and processes are in place.

Restrictions on water trading and ‘exchange rate’ problems can adversely affect the efficient transfer of water rights to higher valued uses.

Subsidies and differences in the level of cost recovery in the pricing of infrastructure potentially reduce the efficiency of water trading.

Water rights arrangements are complex, with many inter-relationships and dependencies in their provisions. It is important that care be taken in seeking to adjust any one component of a system, as there would usually be ramifications for the integrity of the system as a whole.