Texas public policy foundation
The Case for a Texas Water Market
 
RESEARCH
 

SB 1 (1997) envisioned that Texas would develop a water supply that could meet increasing demand, predominantly through voluntary redistribution of existing water supply. With some notable exceptions, such voluntary transfers within water markets have not widely occurred. Texas needs water markets that allow market participants to value water based on voluntary exchange, accurately assess available information about state natural resources to more rigorously estimate current and future demand, and to determine optimal strategies to supply the water we need. It’s time to make the hard decisions necessary to ensure that voluntary transfers and marketing of existing water rights may occur. Reform of state laws, regulations, and policies that currently obstruct such transfers is necessary. Under existing conditions, the voluntary transfer and marketing of water rights, as we’ve seen, will be significantly hindered. 

The public policy benefits of water markets are numerous. One of those benefits would be the opportunity to move surplus water where available to where it is needed. As articulated by the Western Governors’ Association and Western States Water Council, water transfers are voluntary and flexible by nature. Voluntary transfers decentralize decision-making, provide economic incentives for water conservation, allocate water to new uses, and drive investment. In a functioning water market, potential buyers and sellers of water rights could take into account such considerations related to a transaction as size, cost, timing, distance, duration, means of conveyance, water quality, groundwater recharge, local government, and the environment. 

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