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Abstract

The concept of “priority”—an objective basis for allocating a limited resource—is fundamental to the prior appropriation doctrine. Since Irwin v. Phillips courts in the western states have used the principle of first-in-time, first-in-right to determine respective rights of competing appropriators from the same source of water. Priority is, however, a purely temporal basis for establishing rights, and the historical function of prior appropriation law—to make an initial allocation of the West’s water resources among potentially competing claimants—has been largely completed. Thus, those wanting to make a new use requiring water must look to those already holding water allocations. Water law is moving in the direction of viewing water rights as giving the holder legal control (if not ownership) of some portion of water. Operating on a separate but parallel (and sometimes interconnected) track are transactions enabling new, “out-of-priority” water uses. The notion of out-of-priority water uses appear to be incongruent with the prior appropriation system, but they become important—even necessary—in fully appropriated water systems. Fully realized, they can provide an incentive-based approach for making more effective use of the water supply. In Part II, this article discusses three legal mechanisms potentially enabling out-of-priority water uses: exchanges, substitute supplies of water, and physical solutions. It begins first, in section II.A, with the most traditional mechanism—the voluntary exchange. Examples of exchange opportunities are presented in this section, together with a discussion of related law. In section II.B, the subject is the voluntary exchange’s close relative, the substitute or replacement water supply, in which the supply of water upon which other appropriators depend is replaced from another source to allow the new, out-of-priority use to occur. In section II.C, the article revisits and redefines a third approach known as “the physical solution,” a physical solution that involves making improvements to the manner in which an existing water use occurs so that another use is made possible. Finally, in Part III, the article explores the general legal framework in seven western states governing such actions and, in particular, the requirements identified to ensure no harm to other water users. These include issues related to quantity and timing of water, water quality, and administration. The conclusion is that out-of-priority water uses can enable more effective use of water resources.

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