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Overview
An overview of water reallocation
and the barriers to its
implementation
Landon Marston and Ximing Cai*
The growing number of areas facing water scarcity necessitates adaptive water
management strategies beyond traditional water supply and demand manage-
ment methods, which are becoming increasingly difficult in many regions. Water
reallocation offers a flexible water management approach to mitigate water scar-
city under changing socioeconomic, climatic, and environmental conditions. In
spite of the numerous benefits of reallocating water between users, examples of
successful water transfers are relatively sparse and the expected benefits are
rarely met in full due to several complex impediments. This study overviews the
current body of water reallocation literature, with a particular focus on the key
barriers to wider implementation of water reallocation. We argue that to over-
come these obstacles a more interdisciplinary approach to water reallocation
should be advanced that couples developments in the natural sciences and engi-
neering disciplines with current water reallocation scholarship, which is predom-
inately rooted in the social sciences. Many examples of water transfers from
around the world are used to illustrate both the benefits and challenges associ-
ated with reallocation, as well as to identify measures to overcome some of the
major difficulties. We conclude by calling for an integrated research platform
that focuses on supporting both voluntary and nonvoluntary forms of water real-
location; however, a greater emphasis should be on nonmarket means of water
transfer since it is more feasible for many regions where water rights are not well
defined and institutional capacity is insufficient. © 2016 Wiley Periodicals, Inc.
How to cite this article:
WIREs Water 2016. doi: 10.1002/wat2.1159
INTRODUCTION
Traditional water supply and demand manage-
ment techniques have faced challenges in many
regions throughout the world trying to adapt to the
rapid changes in overall water availability and
demands. Over 2.3 billion people (approximately
one-third of the global population) live in areas with
chronic water shortage,
1
despite that many of these
regions already have water supply and demand
mechanism in place to better utilize their water
resources. Globally, numerous basins are closing or
are already closed, i.e., all or most of the renewable
water is already allocated or committed for some
purpose.
2
Water management institutions, infrastruc-
ture, and water laws that were put in place decades
or even centuries ago are not equipped to handle
these rapidly evolving conditions. Water reallocation
can inject antiquated water management systems
with the flexibility they need to meet the most press-
ing demands within regions facing water scarcity.
Water reallocation is the transfer of water
between users who are committed formally or infor-
mally to a certain amount of water, for example, by
water right (also known as a water entitlement),
water use permit, or agreement, when the existing
allocation is physically impossible, economically
*Correspondence to: xmcai@illinois.edu
Ven Te Chow Hydrosystems Laboratory, Department of Civil and
Environmental Engineering, University of Illinois at Urbana-Cham-
paign, Urbana, IL, USA
Conflict of interest: The authors have declared no conflicts of inter-
est for this article.
© 2016 Wil e y Pe r i o d i cals, Inc.
inefficient, or socially unacceptable. Some authors
3
consider the initial development of a water resource
as reallocating water from environmental to human
uses; however, we contend that for water to be real-
located it must first be formally or informally com-
mitted to a water use (i.e., allocated). We follow the
precedent in the literature and use the terms ‘reallo-
cation’and ‘transfer’interchangeably; however, the
term transfer has a broader meaning in that it is not
necessary that the water be initially allocated to a
specific purpose.
Water reallocation can act as an important
component in a water supply and demand manage-
ment portfolio and has been shown to improve the
cost effectiveness, adaptability, and reliability of a
water resources system.
4,5
Water supply management
primarily involves structural measures to increase the
availability, reliability, and quality of water resources
for productive uses, while demand management
intends to reduce the use of water through increased
efficiency from source to disposal. Reallocation,
while considered by some as strictly a demand man-
agement strategy,
6–8
may not directly yield overall
water savings but it can greatly increase the benefits
received from water use. Reallocation can, however,
prompt water conservation since it incentivizes an
increase in water productivity and allows any super-
fluous water to be transferred to more efficient users
(i.e., more benefits derived per unit of water), essen-
tially providing additional water supplies for new or
growing demands, especially those with higher mar-
ginal values of water use. In this way, reallocation
acts as a two-way bridge connecting the purposes of
both water supply and demand management. Where
traditional engineering supply measures and conser-
vation efforts fall short, reallocation will prove to be
critical in ensuring the benefits derived from a
region’s water resources are optimized and water is
used in a more sustainable way.
Researchers,
9–11
practitioners,
12
and politi-
cians
13
have cited the benefits of water reallocation,
yet its realization is far behind what is needed or
expected and when implemented it is not as effective
as theorized.
14,15
As more regions search for ways to
deal with growing water scarcity, this study provides
a timely overview of water reallocation based on a
comprehensive search of English language journal
articles and reports, including major works and
important recent contributions. The purpose of this
review is to draw a consensus amongst the current
literature as to the primary ways water reallocation
has taken place around the world and the major
obstructions to its wider implementation. In addition
to overviewing the current body of literature, which
primarily focuses on the institutional, economic, and
social obstructions to water reallocation, we also
demonstrate how greater input from the natural
sciences and engineering fields can lead to more
holistic understanding and solutions to water reallo-
cation impediments. We discuss reallocation cases
from six continents to demonstrate the ubiquitous-
ness of water reallocation and give specific context to
major issues and/or concepts; nevertheless, the cur-
rent study reflects the literature, which primarily
focuses on countries with higher occurrences of water
reallocation (e.g., United States, Australia, Spain, and
China). Although each area faces unique challenges
when reallocating water, many of the issues this arti-
cle highlights (e.g., third-party effects, lack of infor-
mation support, and transaction cost) are evident in
most cases of reallocation, regardless of a specific
region’s governing or socioeconomic system.
This study begins by explaining the impetuses
for water reallocation, which are broadly categorized
as water supply forces and water demand forces.
Next, the various forms of reallocation are outlined,
including voluntary versus nonvoluntary realloca-
tion, intrasectoral versus intersectoral reallocation,
temporary versus permanent reallocation, and local
versus nonlocal transfers. Major obstacles to wider
implementation of water reallocation are discussed,
as well as measures taken in practice or proposed in
the literature to resolve hindrances to effective water
reallocation. The article concludes by calling for
researchers to work within a broader interdiscipli-
nary framework for water reallocation so that it can
become a more viable tool for water planners and
managers around the world.
IMPETUS FOR WATER
REALLOCATION
Changes in societal preferences toward how water is
distributed across all users, coupled with evolving
water demands and limited water supplies, prompt
governments to establish the requisite framework for
formal water reallocation. In some regions, water
supply development and demand management will
continue to be sufficient in managing water
resources; yet a growing number of regions around
the world are facing inadequate water supplies to ful-
fill unsustainable demands, with some regions
already past ‘peak water’and moving toward even
less water availability.
2
When water in a river basin
becomes fully allocated (i.e., a ‘closed’basin), estab-
lishing a means for reallocation to occur is critical to
allow for new water-dependent development to take
Overview wires.wiley.com/water
© 2016 Wil e y Per i o d i cals, Inc.
place; otherwise water allocations, and hence devel-
opment, will be relatively fixed. Figure 1 depicts the
typical development of water resources, starting at a
point (a) where renewable water supplies (blue outer
circle) can easily meet all water demands (red inner
circle). Water supplies expand through engineering
measures as demands for water grow (Figure 1b). As
water demands approach available water supplies,
water is typically allocated or committed to specific
users or purposes (division of the demand circle
amongst different users or sectors, represented by dif-
ferent colors). Next, water demands begin to outpace
renewable supplies and traditional supply and
demand management strategies are unable to fully
reconcile the difference between water supplies and
demands; thus, the water source is overcommitted,
leading to water scarcity and resource overexploitation
in many places (Figure 1c). Water reallocation allows
for the redistribution of water to new, growing, more
productive, and/or more needed uses from a social
perspective and also provides a mechanism to bring
water use back within sustainable limits (Figure 1d).
In areas with fully allocated waters (i.e., the basin
is closed), reallocation can be driven by new or increas-
ing water demands caused by technological advances,
socioeconomic development, changes in societal under-
standing or values, and/or population growth. For
instance, the expansion of water-intensive crops for
biofuel production, along with water guzzling oil
and gas recovery technologies, have already been
shown to be restricted in some areas due to water
availability,
16–18
thus making reallocation an attractive
solution in meeting these new demands. Growing sci-
entific insights regarding the value of environmental
sustainability and ecosystem services have lead some
societies to demand a change in the current allocation
of water,
19
which often neglects environmental uses in
favor of human needs. Recognition of previously
neglected water rights of people groups or nations fur-
ther necessitates water reallocation as a means of
adjusting to shifting values or governmental positions
(e.g., reallocation of water in South Africa to increase
the equitable distribution of water after apartheid
20
or
the US government calling for reallocation of nearly
10% of Arizona’s total developed water supply to
meet formally unrecognized Native American water
claims
21
). Water reallocation has been shown to
resolve conflict among, and balance the needs of, mul-
tiple water users while improving local and regional
economic robustness.
5,22
Water reallocation can also be necessitated due
to limited water supplies. Augmenting water supplies
through traditional measures, such as dam storage, is
becoming more challenging due to increasing eco-
nomic cost, a better understanding of the associated
environmental consequences, and the physical scar-
city of unappropriated water. At the same time, cur-
rent water supplies are being reduced by the
deterioration of existing infrastructure, a growing
issue in industrialized countries where many dams
and other structures are near or have surpassed the
end of their design life and are filling with sediment.
Water availability is expected to reduce significantly
in some basins already facing water scarcity due to
climate change, further straining the current water
resource system.
23,24
Moreover, groundwater deple-
tion and the degradation of water by point and non-
point source pollution have reduced viable water
supplies in many regions, especially developing
(a) (b)
(c) (d)
FIGURE 1 |(a) Initially, water demands (red inner-circle) can be
easily met by renewable water supplies, which are much greater in
size (blue outer-circle). (b) Over time, water demands grow and
supplies are expanded through engineering measures, as is illustrated
by the expansion of both the inner circle and outer circle, representing
increasing water demands and supplies, respectively. As water
demands approach available supplies, water is allocated amongst
each of the current users, as represented by the division and coloring
of the inner demand circle. (c) Water demands eventually outpace
available supplies (inner demand circle now larger than water supply
circle), leading to over-allocation, water scarcity, and environmental
degradation. Under this condition, water allocations are fixed and no
new uses can occur due to a lack of unappropriated waters. (d) Water
reallocation remedies this common occurrence by allowing water use
to return within sustainable limits through allocations to the
environment (decrease in the size of the inner water demand circle)
and permitting water rights to be transferred between new and
existing users (new users represented by additional fragmentation of
demand circle, while the size of each slice—i.e., the amount allocated
to each user—can dynamically change as well).
WIREs Water An overview of water reallocation
© 2016 Wil e y Pe r i o d i cals, Inc.
countries.
10
When current supplies are inadequate
and further source development is infeasible, reallo-
cation becomes the most cost effective means of sup-
plying water to the highest priority users
25,26
and, in
some cases, can reduce water shortage vulnerabilities
by diversifying users’water sources
4
(see the case of
Manila in Table 1, which gives examples of different
forces driving water reallocation). For example,
Firoozi and Merrifield
33
used a theoretical model to
demonstrate how a water portfolio including water
reallocation could delay the construction of costly
reservoirs.
COMPARISON OF WATER
REALLOCATION FORMS
Water reallocation can take many forms that vary
in duration, spatial scale, complexity, and required
institutional structure. The transferred water can be
used to serve numerous purposes, such as improv-
ing water quality and ecosystems, directly meeting
water demands, enhancing system flexibility and
reliability, and decreasing water supply cost.
34
For
all forms of water reallocation, it is important to
have diverse water users with different water
TABLE 1 |Reallocation is Typically Driven by Limited and/or Changing Water Supplies and Evolving Water Demands
Reallocation
Driven by…Driving Forces Cases
Limited water
supplies
1. Law/policy change 1.
Arizona, USA
—a change in law made treated effluent transferable water, distinguishing it
from other surface and groundwater sources. Longstanding downstream users of treated
municipal water have seen water availability decrease as it is sold to other users
27
2. Economic
feasibility
2.
Maipo River Basin, Chile
—burgeoning cities determined that buying water rights from
farmers through the area’s water market was five times less costly than building a new
dam
25
3. Climate change 3.
Lima, Peru
—pronounced recession of glaciers in the Andes, a major water source, may
lead to long-term declines in available water
28
in an area already facing water-related
tensions amongst sectors. Water has already been transferred from agriculture to urban
uses, with more reallocation potentially forthcoming
4. Reliability of water
supplies
4.
Manila, Philippines
—the city of Manila receives 97% of its water supply from a single
source, subjecting it to risk during times of drought.
29
Reallocation, among other methods,
have been used to bring about greater water security and reliability
5. Infrastructure
degradation
5.
Kansas, USA
—John Redmond Reservoir filled with sediment more rapidly than projected,
thereby reducing available water supplies for M&I and cooling operations at a nuclear
power plant. Instead of developing more storage, a portion of the flood pool was
reallocated to conservation storage
12
6. Infrastructure
development
6.
Delhi, India
—the City of Delhi reduced water losses by lining irrigation canals that
transferred its municipal supplies. Farmers contend that this reduced recharge to their
groundwater wells, thus indirectly reallocating water from their historic irrigation uses
29
7. Insufficient
infrastructure
7.
Sana’a, Yemen
—unreliable municipal water infrastructure has led to the pervasive use of
tanker trucks to reallocate water from agricultural wells to domestic users
29
Evolving water
demands
1. Recognition of
previously
neglected rights
1.
Nevada, USA
—judicial courts partially recognized previously unacknowledged water rights
of Native Americans. This prompted further reallocation of water through market transfers
and negotiations between the city of Reno and Indian tribes
27
2. Recognition of
environmental uses
2.
California, USA
—the California Supreme Court ruled that the city of Los Angles reallocate
water back to the Mono Basin because the ecological and environmental harm the
transfers caused were in opposition to the public interest
30
3. Growing/Emerging
demands
3.
Coimbatore, India
—growing urban demands, including an emerging water-intensive
textile industry, led to numerous formal and informal water transfers from rural agriculture
to urban uses
31
4. Population growth 4.
Amman, Jordan
—a rapidly increasing population due in part to an influx of refugees of
war has caused domestic water demands to outpace supplies. Agricultural water has been
reallocated via tanker trucks to urban dwellers
29
5. Economic
development
5.
Lesotho & South Africa
—water is transferred from Lesotho to South Africa to meet the
needs of South Africa’s evolving economic hub
32
Examples of some of the more common forces necessitating water reallocation are described in this table.
Overview wires.wiley.com/water
© 2016 Wil e y Per i o d i cals, Inc.
requirements and productivity levels since transfers
are generally prompted by differences in users’mar-
ginal value of water. The applicability of different
forms of reallocation depends on various condi-
tions, particularly, the development of water rights
(i.e., do property rights exist for market transfers?),
institutional development (i.e., do organizations and
policies exist to implement reallocation?), and infra-
structural development (i.e., is appropriate engineer-
ing, information, and transaction infrastructure
available to facilitate reallocation?). In practice, a
combination of water reallocation approaches
is used.
Meinzen-Dick and Ringler
31
categorized three
forms of formal water reallocation: administrative
reallocation, collective negotiations, and market-
driven reallocation. Administrative reallocation is a
mandatory (nonvoluntary) measure taken by a cen-
tralized public or quasi-public entity (e.g., river
basin authority) to redistribute existing water enti-
tlements. Collective negotiations and water markets
are voluntary and decentralized reallocation meth-
ods which permit users to sell their water rights to
other users, which can include a government entity.
Other, informal means of reallocation can some-
times be found in practice that rely on force, sur-
reptitiousness, or illegal means to reallocate water
to other purposes.
31
Table 2 provides some exam-
ples of how different water reallocation forms have
been used around the world to transfer water
between different users and places. The following
sections describe the typical forms of reallocation
and the relative benefits and drawbacks of
each form.
Nonvoluntary Reallocation
Administrative Reallocation
Administrative reallocation involves the transferring
of water by the national, provincial/state, or basin
entity from one user to another, usually under the
premise that it is for the benefit of society as a whole.
Administrative reallocation has been used to meet
environmental flow requirements
35
and social equity
concerns,
20
because these needs often cannot be
directly met by these stakeholders; therefore, the task
falls to the government to fulfill their water needs
under the public trust doctrine. Administrative reallo-
cation may be more suitable in many areas because it
has fewer institutional and investment requirements
than voluntary reallocation, especially when water
rights are not well defined.
Common forms of administrative reallocation
are through the redistribution of the storage volume
in publicly-owned reservoirs, revoking water rights
(through forfeiture or abandonment provisions),
eminent domain, legal action, or construction of
large-scale water projects. Administrative water real-
location in developed countries like the United States
often considers input from other stakeholders but
direct stakeholder consultation is much rarer in
developing countries.
31
For instance, reservoir stor-
age originally dedicated to irrigation in the northeast-
ern Hubei Province of China was unilaterally
reprioritized to recreation and tourism purposes dur-
ing a drought event, which had negative ramifica-
tions on the livelihoods of low-income farmers who
depended on the water for drinking.
40
In some cases,
indirect or direct compensation may be provided but
payments often do not fully recompense the former
users.
40
Other Means of Nonvoluntary Reallocation
Nonvoluntary water reallocation can occur by other
means that do not depend on law or custom for
justification, but instead on force or stealth. Inher-
ently, these type of transfers do not involve com-
pensation and are done unilaterally by those
seeking to acquire water. Common examples
include stealing water from agricultural canals or
municipal lines or infringing on others’groundwa-
ter pumping by over-extracting from a nearby well.
Forcible water reallocation can be motivated or
justified along ethnic, racial, and/or class lines, as
has been shown in the reallocation of water from
Palestine to Israel during the formation of Israel
last century
41
and between white settlers in
South Africa and black South Africans. In the latter
case, white South Africans first took claim of 91%
of the land and then installed riparian water rights,
which necessitates land ownership to acquire a
water allotment, thus implicitly reallocating water
from black natives to new white land owners.
42
Nonrevenue water (i.e., water intended for sale
for a specific purpose but reallocated to unauthorized
users by theft or to the environment and/or aquifers
through distribution leakage), is a form of nonvolun-
tary water reallocation and a major issue in many
developing countries.
43
In several underdeveloped
regions, a vibrant tanker truck industry has formed
where parties with water access (sometimes illegally)
transport and then sell their water to domestic users
with limited or no access to fresh water. In places like
Karachi, Pakistan, this form of reallocation accounts
for roughly one-fifth of the population’s domestic
water supply.
44
Nonvoluntary water reallocation can also be
seen within transnational river basins. For example,
WIREs Water An overview of water reallocation
© 2016 Wil e y Pe r i o d i cals, Inc.
Turkey acted unilaterally in diverting and storing
water within the headwaters of the Tigris and
Euphrates Rivers to expand irrigation within the
country, thereby implicitly reallocating water from
downstream users (Syria and Iraq) to upstream uses.
This has in turn forced Iraq and Syria to overexploit
their groundwater reserves.
45
Voluntary Reallocation
Collective Negotiations
Collective negotiations can create innovative solu-
tions for water reallocation, which provide mutually
agreeable terms between existing water users, old
and new users, or users and the government.
31
Infor-
mal voluntary negotiations are seen widely around
TABLE 2 |Broad Categorization of the Most Common Types of Water Reallocation between Different Uses and/or Places
Reallocated
Between
Example Cases
Location Form Case Description
Human and
environment
1. China 1. Administrative 1. The Chinese government ordered a portion of irrigation water
within the Hei River Basin to be reallocated to maintain greater
instream flows in an effort to restore the ecosystem of the region.
Detrimental impacts to farmers due to a decrease in irrigation
water were partially offset by a significant crop pattern change
and financial support from the central government for more
efficient irrigation technology
35
2. Australia 2. Market 2. Water markets have been established in Victoria, Australia to
allow greater allocations of water to environmental purposes. A
cap on water extractions has ceased further overexploitation and
the government has purchased billions of dollars’worth of water
for the environment but there is debate to how effective these
efforts have been
36
Agricultural and
nonagricultural
1. Wyoming, USA 1. Negotiations 1. The city of Casper, Wyoming helped the Alcova Irrigation District
with irrigation improvements, such as canal lining, under the
agreement that water savings (several 1000 AF/year) would be
transferred to the city for municipal water supply
37
2. Indonesia 2. Administrative,
negotiations, and
nonvoluntary
(illegal means)
2. Textile factories in West Java have placed new demands on
available water resources, prompting transfers from agricultural
users through government reallocations, deals with farmers,
and/or unpermitted withdrawals
38
Traditional and
new uses
1. New Mexico, USA 1. Negotiations 1. In the upper Rio Grande basin, water was voluntarily reallocated
from agriculture to support a ski resort. The transfer was protested
in the courts by local interest but eventually the transfer was
allowed
27
2. Texas, USA 2. Negotiations 2. During drought conditions in Texas, energy producers bought
water from nearby farmers and municipalities to use for hydraulic
fracturing
39
3. Iran 3. Administrative 3. The rapid growth of Isfahan, Iran has been supported by
developing industries, such as steel production and tourism, which
required reallocation of water to maintain, especially during dry
years. For instance, during drought conditions all agriculture water
was reallocated to support urban uses
29
Upstream and
downstream
1. Tunisia 1. Administrative 1. The downstream and water-rich areas of northern Tunisia,
redistribute water to water-poor regions upstream. In this way,
much of the water is reallocated from its original purpose
(irrigation) to cities/tourist resorts
29
2. Mexico 2. Nonvoluntary
(stealth)
2. Monterrey, the largest city in the state of Nuevo León, continues
to claim more water from the El Cuchillo reservoir, insidiously
reducing water supplies allocated to farmers in the downstream
state of Tamaulipas
29
Examples from around the world are given for each reallocation form.
Overview wires.wiley.com/water
© 2016 Wil e y Per i o d i cals, Inc.
the world but are most prevalent in Asian and South-
east Asian countries, where water scarcity exists but
no formal water markets are in place.
46
As seen in
Spain, this type of reallocation lays the foundation
for further institutional reform and the formation of
a formal market.
6
Negotiations allow for reallocation of water at
all scales: from small cities and nearby farmers to
neighboring nations. For instance, a small city in
Utah struck a deal with a nearby irrigator to have
the option to purchase his senior water right during
times of drought for a onetime payment of $25,000,
along with 300 tons of hay and $1000 for any year
that the city exercised its right to the water.
47
Before
the demise of the Soviet Union, the regions that are
now Kyrgyzstan and Uzbekistan agreed for reservoir
storage in a Kyrgyzstan dam, which was designated
for hydropower generation during the harsh winters,
to be reallocated to irrigation supplies for Uzbekistan
during the summer growing season. In return, energy
rich Uzbekistan would provide cheap energy supplies
in the winter months to offset Kyrgyzstan’s loss of
hydropower.
48
Water reallocation by collective negotiations is
typically beneficial to all stakeholders involved in the
agreement, yet one of the key concerns with this real-
location method is that it sometimes acts to the deter-
minant of those not involved in negotiations (i.e., it
tends to have negative externalities). Appropriate
governance is required to guide and manage nego-
tiated water transfers so to protect third-party users,
especially environmental uses, which may be ‘invisi-
ble’and ignored during negotiations.
31
Market-Based Reallocation
Water markets provide a means for current water
users to trade their existing water rights, either tem-
porarily or permanently. A prerequisite for well-
functioning water markets is fully specified, exclu-
sive, transferable, and enforceable water rights
49
; this
requirement implies a robust legal, institutional, and
regulatory framework that is able to monitor,
enforce, and provide the necessary infrastructure for
transfers. A sufficient number of willing market parti-
cipants with different opportunity cost of water
improves the economic efficiency of markets. Empiri-
cal studies largely support that markets move water
from low-value uses to higher value uses as theo-
rized
8,50
; however, prices are generally not equalized
across all users, as would be expected in a perfect
market, because water markets often exhibit high
transaction cost, administrative regulation, and parti-
cipants who invoke their market power to distort the
market.
51
Markets are necessitated by water scarcity
and can take form gradually, as in the Murray–
Darling Basin of Australia, or relatively rapidly,
driven by a catalyzing event such as a lawsuit to pro-
tect endangered species, as was the case in Texas.
52
Formal and informal water markets are active in at
least nine countries, with varying levels of sophistica-
tion and success.
11
Market-based exchanges of water rights have
demonstrated significant welfare gains to buyers, sell-
ers, and the economy on whole (although there can
be losers, as discussed later). The water markets of
the Murray–Darling Basin Australia were first estab-
lished in the 1980s and are among the largest, most
advanced, and active in the world
53,54
and offer a
glimpse of the potential benefits of water markets.
Australia’s National Water Commission reported
55,56
that water markets increased the gross regional
product of the southern Murray–Darling Basin by
$370 million, lessened the effect of the Millennium
Drought on economic output by $4.3 billion, and had
a net positive effect on the environment because trans-
fers to downstream users also benefited riverine
ecosystems.
Other Distinctions amongst Reallocation
Forms
Intrasectoral Versus Intersectoral
Reallocation
Traditionally, reallocation has almost exclusively
occurred within the agriculture industry.
57
Often
water reallocation within the agriculture sector
occurs within a ditch or mutual irrigation company,
whose existing canal network makes reallocation
amongst users feasible.
46
In these cases, water rights
or shares in the irrigation company (which entail a
certain amount of water) can be traded with other
company shareholders on a temporary or permanent
basis.
There is now increasing interest in intersector
reallocation due to changing economics, recognition
of environmental water needs, and policies regarding
water transfers.
57
Intersectoral water transfers are
more complex and regulated, thus increasing transac-
tion cost and decreasing their occurrence. In the
Western United States and, to a lesser degree, the
Murray–Darling Basin of Australia, the price of
water sales and leases between agriculture users can
be 10 times less than between agriculture and urban
users, even after considering transaction, delivery,
and treatment cost.
8,54
This indicates the potential
benefits of out-of-sector water transfers, yet several
obstacles remain, as discussed later.
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Temporary Versus Permanent Reallocation
Permanent water reallocation is the transfer of water
entitlements from one entity to another for perpetu-
ity. The permanent reallocation of water acts simi-
larly to supply expansion and, in some cases, delays
costly supply and demand management efforts to
increase water availability and/or reliability.
33,34
Temporary water reallocation typically occurs over
1 year, although longer leases can be between 2 and
100 years (leases from 25–40 years are most com-
mon, however
13
). Typically, temporary transfers
occur through spot markets, contingent transfers,
dry-year options, water banks, and eminent domain.
In most regions, temporary water reallocation is far
more prevalent than permanent water reallocations.
Local Versus Nonlocal Reallocation
Most water reallocations occur locally as these trans-
fers exhibit lower transaction cost and fewer regula-
tory restrictions. Nonlocal reallocation of water
requires significant differences in the opportunity cost
of water between users to overcome the large social,
administrative, and physical cost to transfer the
water. Furthermore, nonlocal transfers frequently
necessitate significant infrastructure investments that
far exceed the capacity of the stakeholders. There-
fore, governments nearly always play an integral role
in large-scale, nonlocal reallocation of water. For
example, the Chinese government lead nonlocal
water reallocation efforts in the Hei River basin,
35
the Yellow River basin,
40
as well as the South–North
Water Transfer Project.
58
IMPEDIMENTS TO EFFECTIVE
WATER REALLOCATION
Despite a voluminous collection of water reallocation
research, successful examples of water reallocation
are relatively sparse. Its implementation is hindered
due to many social, institutional, economic, environ-
mental, and physical barriers that have proven diffi-
cult to overcome. For these barriers to be abated, we
contend that a more holistic approach should be
employed that couples advancements in the natural
sciences and engineering disciplines with current
water reallocation scholarship, which is predomi-
nately rooted within the social sciences, especially the
field of economics. The following sections overview
the major difficulties faced in carrying out water real-
location and offers suggestions of what can be done
to overcome some of these obstacles, including
research needs.
Poorly Defined Water Rights
The efficacy of voluntary water reallocation, specifi-
cally water markets, is often hindered by the lack of
well-defined and enforceable water property rights,
especially in developing countries.
29
However, adju-
dicating all water rights can come at a great cost and
take considerable time. For example, in an effort to
better facilitate water markets, the State Engineer
Office of New Mexico has sought to adjudicate state
rights in the Middle Rio Grande but they have esti-
mated it will cost $300 million and take over
50 years.
59
Private water rights, and subsequent trad-
ing of these rights, are only effective if they are
enforced and monitored. As noted by Leidner
et al.,
50
the costs of monitoring and enforcement
may also act as a barrier to voluntary water realloca-
tion. Zhang
60
asserts that experimental water mar-
kets established in Zhangye City by China’s Ministry
of Water Resources were unsuccessful, in large part
because there were few measures to stop water users
from extracting water in excess of their entitlement,
thus reducing their need to purchase water in the
market.
Water is typically owned by the state, which
grants usufructuary rights to private parties or local
communities for use under specified conditions.
Voluntary water reallocation requires fully specified,
exclusive rights that are separated from land, as well
as provisions for trade of the rights; however, these
requirements are rarely met, especially in many devel-
oping countries.
11
How to effectively and equitably
promote water reallocation by transitioning from
land-based water rights (either formal or informal) to
use-based rights is a pertinent question for research-
ers and policy-makers. In an effort to promote water
reallocation, water licenses in Australia’s Murray–
Darling Basin were separated from land rights and
converted to volumetric entitlements
53
(typically by
equating land area to a given allocation of water).
Even when riparian rights are converted to use-based
rights, it is difficult to break the linkage between land
and water rights in users’minds, which can act as a
barrier to trade, especially the permanent reallocation
of water. For instance, Giannoccaro et al.
15
found
that a lack of permanent water transfers in Southern
Spain’s water market could be partly explained by
irrigators’reluctance to separate water entitlements
from their land.
When water users are small and fragmented it
can prove challenging to establish individual water
rights, especially in developing countries that lack the
institutional capacity to overcome this difficulty. In
these instances, water entitlements may be allocated
to local communities or water user associations that
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can assign water entitlements internally, as the case
in Mexico.
61
Hadjigeorgalis,
11
along with Rosegrant
and Binswanger,
22
argue that developing countries
may be able to assign tradeable water rights using a
subsidiarity approach that includes stakeholder par-
ticipation, instead of the centralized top–down
method recommended by donor agencies. This
approach is more likely to efficiently and equitably
allocate water, while also being more socially
acceptable.
Water right doctrines typically have a beneficial
use provision, most of which require right holders to
‘use it or lose it.’Although these provisions are
meant to prevent speculation and nonbeneficial water
uses, they can also act as a deterrent to water reallo-
cation due to fear that a right might be lost or
reduced when temporarily transferred. Many West-
ern US states have addressed this issue by including
provisions in their water transfer programs that pro-
tect water right holders from forfeiture or abandon-
ment of their water rights if they are transferred to
other users. However, many water users are still
unwilling to enter transfer agreements because they
are fearful that the legislatures will eventually revoke
their excess water rights.
13
The difficulty in properly assigning and enfor-
cing tradeable water rights amongst human users has
been given significant attention in the water realloca-
tion literature. However, the daunting task of reallo-
cating the appropriate amount of water to the
environment may prove to be an even grander chal-
lenge. Growing understanding of the societal benefits
offered by environmental flows (i.e., water needed to
maintain ecosystems, as well as the livelihoods and
well-being of people that depend on these ecosys-
tems) has led to efforts to formalize environmental
water allocations; yet, reallocating water from pro-
ductive human uses to environmental uses involves
difficult trade-offs, which are exacerbated due to the
uncertainty and challenges in quantifying environ-
mental flow requirements in terms of volume, dura-
tion, timing, frequency, and quality.
The science required to determine the required
flow regime for healthy riverine ecosystems has
evolved considerably in the last two decades, with
more than 200 different environmental flow assess-
ments developed,
62,63
including the index of hydro-
logic alteration (IHA) method
64–69
; numerous studies
have also reported on water requirements for terres-
trial ecosystems.
70,71
Despite the seeming plethora of
approaches for assessing environmental flows,
debates remain regarding the applicability and merits
of each method. Additional scientific support is
needed to answer remaining critical questions that,
left unanswered, will continue to restrain water real-
location’s potential, especially for ecosystem restora-
tion. For instance, how much water has already been
over-depleted (allocated to human uses) from ecosys-
tems? When reallocating limited water supplies, how
are trade-offs made between different, and sometimes
conflicting, flow requirements of various ecosystem
services? What is the ‘natural’state of the environ-
ment and to what degree can the system diverge from
this state before hitting a critical (unsustainable)
point? What flow regime and water quality are
needed to restore ecosystems to a target level (and
how do we determine the ‘target’level)? How will
reallocation to other human uses affect the environ-
mental and ecological systems that have become
dependent on the original human water use (e.g., eco-
system associated with irrigation)? How will ecosys-
tems and human systems coevolve in the future and
what implications does this have on water realloca-
tion? Answers to these biophysical questions can be
integrated into social science research on water real-
location, thereby linking ecohydrology and ecosys-
tem services with stakeholder outcomes.
Third-Party Effects
Third-party effects, i.e., impacts to those not directly
involved in the transfer of water, are one of the great-
est hurdles to water reallocation reaching its poten-
tial as a water management strategy.
50,72
The
legitimate potential for negative third-party effects
can cripple reallocation opportunities that may create
a net positive economic and/or social benefits at a
regional level or different location, yet have detri-
mental effects at the area of origin. Most water pol-
icy dictates that water reallocation can only occur if
‘no injury’occurs to other users, but these rules vary
greatly and are difficult to quantify. The incidental
effects of water reallocation aren’t typically identifia-
ble immediately, making it difficult to quantify
damages and compensate those negatively impacted.
The reallocation of water can cause impacts to the
quality and availability of water for other users,
including the environment. Furthermore, water real-
location can have negative externalities that permeate
throughout the area of origin and beyond, such as
the deterioration of a community’s values and cul-
ture, which are often tied to the livelihoods that the
water once supported, a depression in land values,
excessive weeds and dust from fallowed fields, reduc-
tion in the local tax base, and harm to supporting
industries, such as agribusinesses. If proper reinvest-
ments and policy measures are not in place when
water is reallocated out of a region, the area
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exporting water will likely face socioeconomic and
population decline.
73
Rural communities within the American West
have attempted, mostly unsuccessfully, to require the
water rights purchaser to pay the county of origin a
fee for the amount of property tax revenue lost as a
consequence of water rights being transferred out of
the region.
47
Nebraska mandates that property taxes
must be paid on the pretransfer land value, which
ensures that local government remains funded but the
additional cost may deter some water reallocation.
13
Researchers have suggested a fee or tax paid on real-
located water to compensate third-parties,
57
as the
case between the Southern California’s Metropolitan
Water District (importer) and the Palo Verde Irriga-
tion District (exporter), which established a $6 million
fund to provide grants for community projects,
business loans, and vocational training to offset
losses associated with the required fallowing of
land.
13
Murphy et al.
72
found a tax on transfers to
compensate those negatively affected provides very
economically efficient and socially acceptable out-
comes, while an alternative approach of allowing
third-party participation in market outcomes
increased volatility, reduced economic efficiency, and
prompted strategic behavior.
Water reallocation is often viewed as a way to
meet the neglected water requirements of the envi-
ronment, as seen in the United States,
74
Australia,
75
and China
35
; ironically, water reallocation has also
been opposed for environmental externalities it some-
times creates. Some areas have legislation prohibiting
water transfers that would cause ‘unreasonable
impact on fish, wildlife, or other instream uses,’
76
with the most significant in the United States being
the Endangered Species Act. Reallocation of water
can disrupt the temporal pattern of instream flows
and reservoir releases, thus negatively impacting
other uses—especially ecosystems that require a very
particular flow regime. Furthermore, reallocation to
upstream or out-of-basin diversion points can reduce
the incidental environmental benefits achieved in the
previous conveyance to downstream users. Environ-
mental externalities can be exacerbated when irriga-
tors replace transferred surface water with increased
groundwater extractions because when surface water
and groundwater are hydraulically linked this can
lead to a further reduction in baseflow, which is criti-
cal for ecosystems during low-flow conditions.
69
Small wetlands and riparian ecosystems have formed
along some irrigation conveyance systems, which
would also be threated if water is reallocated from
agriculture. Llop and Ponce-Alifonso
77
have taken a
first step toward establishing the trade-offs between
economic benefits and the environment under differ-
ent reallocation schemes using a computable general
equilibrium (CGE) model with an ecological sector.
Most water transfer schemes are based on con-
sumptive use, not the full diversion, so to ensure
downstream users dependent on upstream users’
return flows (nonconsumptive portion of withdra-
wals) to fulfill their water right are not adversely
effected.
22
This protection, however, can impede
potential reallocation by adding greater uncertainty
and cost due to the challenge in quantifying con-
sumptive use and return flows. In a recent survey,
one US State said determining the amount of water
consumed by the original user was the most difficult
challenge in assessing water transfers.
13
Water conservation measures have been imple-
mented to make ‘saved’water available for transfer
to other uses,
40,57,78
though in most cases, water is
not truly saved but inadvertently reallocated from
those that depend on the existing return flows to
other users.
78–80
Water conservation and efficient
water use (profit per drop) are often goals of water
agencies, yet reduced return flows to streams and
aquifers have implications on other water users,
including the environment, which are difficult to
measure and typically happen with considerable
delay. Qureshi et al.
81
found empirical evidence that
excess water produced from investments in more effi-
cient irrigation and conveyance systems do not pro-
vide a justifiable increase in environmental flows; yet,
management practices that reduce consumptive water
use (such as land fallowing, deficit irrigation, and less
water-intensive crops) allow for considerable oppor-
tunities to reallocate water to the environment.
The Colorado Big Thompson Project (CBT) in
northern Colorado is the most active water market in
the United States,
54
largely because it has circum-
vented the return flow issue by assigning rights pro-
portional to streamflow and retaining rights to return
flows internally. Water users can access return flows
but their availability is not guaranteed. Chile and
Mexico have adopted a similar approach, yet the
institutional barriers to transition to proportional
water rights may make it infeasible for most
regions.
54
Other methods to sidestep the complexity
of determining return flow rights have been taken by
New Mexico and Wyoming, which determine the
permissible water transfer volume using standard for-
mulas applied for different conditions to avoid addi-
tional costs, time, and uncertainties that can act as
barriers to trade.
76
Similarly, assumptions regarding
return flows, consumptive use, and third-party
impacts can be established as a rebuttable presump-
tion, thereby shifting the burden of proof to those
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with objections to the transfer. This could reduce the
number of baseless claims, while allowing for greater
consideration under special circumstances; however,
the imprecision of these methods may limit some
transfers.
The inadequacies of current approaches in pro-
viding economical, scalable, and reliable estimates of
a user’s consumptive water use and utilizable return
flows necessitates the creation of new methods and
technologies.
82
Continual improvements of relatively
new technology, namely remote sensing tools (e.g.,
Landsat Thermal Infrared Sensor), can help quantify
consumptive water use and thus provide quick and
inexpensive information for reallocation decision
making. However, determining utilizable return flow
volumes will likely prove to be even more challeng-
ing, especially from irrigation systems, because
hydrologic heterogeneity and the dearth of data have
encumbered the development of inexpensive and
widely acceptable methods for quantifying return
flow. The usefulness of return flow depends on the
path of the flow (i.e., via natural systems such as
aquifers and interflow, or man-made pathways such
as drainage systems), the duration for it to become
available for reuse, and its quality—all of which are
very difficult to determine. For example, a useable
quantity of return flow may not be truly useful due
to extraordinary salinity from irrigation districts
(e.g., the Aral Sea case in Central Asia
48
), increased
temperature from power plants, and, more seriously,
the various types of pollutants from industrial areas
return flow. Therefore, new technologies and meth-
ods for determining return flows must consider the
quantity and timing of their availability, but also the
quality.
Lack of Information Support and Limited
Stakeholder Involvement
Benefits derived from voluntary water reallocation
often do not meet expectations because participation
is relatively limited—water transfers in many markets
are around 2–5% of total water demand.
60,74,83
Giannoccaro et al.,
84
along with Tisdell and Ward,
85
argue that the overestimation of benefits by theoreti-
cal water market models is because stakeholder’s per-
ceptions and values are not considered. Many water
users, especially farmers (which hold the majority of
water entitlements), exhibit a general aversion to the
commoditization of water through market
mechanisms,
61
instead preferring that a public entity
maintain control of water allocations.
86
The distrust
of water markets have been shown to stem from
beliefs that markets will disadvantage low-income
farmers,
61
perceptions water and land rights should
not be separated,
46
and views that water should not
be treated as a commercial good.
84
However, Bjorn-
lund
46
and Giannoccaro et al.
84
have shown that
these negative perceptions of water transfers are
somewhat abated over time and drought induced
water scarcity acts as a catalyst to market involve-
ment.
56
Early adopters to water markets in Victoria,
Australia were typically newer farmers with a farm
plan, more educated, higher earners, and female.
87
Improving the transparency of water realloca-
tion decisions and increasing the availability of infor-
mation regarding the timing, location, volume, price,
and purpose of water transfers is critical to improve
market performance, achieve societal acceptance of
water reallocation
61
(both voluntary and nonvolun-
tary), and enable new research. Governments can
increase acceptance and awareness of water realloca-
tion by launching outreach programs to educate citi-
zens and gain trust. They can also make potential
buyers and sellers feel more comfortable trading
water rights by sponsoring mock transfer programs
or engaging in ‘seed’trades as a basis for larger
and/or longer future agreements.
The government is best suited to collect data on
water supply and facilitate data exchange, while
users are able to better determine their own demand.
With the exception of Australia, where the state and
commercial water brokers make transfer records
available, information on water transfers is fragmen-
ted, incomplete, informal, or nonexistent.
88
Transfer
data can be made available through a real-time,
searchable online geographic interface system, which
would allow potential reallocation participants to
gage transfer activity, inform prospective transfers,
and gain insights into the spatial and temporal trends
in the basin. In addition, governments can provide
seasonal or long-term projections of water supplies
so that water users can assess their needs and poten-
tially free-up water (e.g., fallowing land or shifting to
less water-intensive crops) for transfer.
Comprehensive, accurate, timely, and accessible
information is needed to support water reallocation
and research advancements. The growing capabilities
of technologies such as remote sensing, geographic
information systems (GIS), low-cost sensors, mobile
phone applications, and cyber–physical infrastructure
can provide critical data concerning water availabil-
ity, quality, and demands. These data can lead to
more informed reallocation decisions with increased
efficiencies, decreased cost, and reduced uncertainty.
New data mining techniques and Big Data predictive
analytical tools can harness the voluminous amounts
of data these technologies can provide to bring about
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new insights and solutions to complex water reallo-
cation issues.
9
However, before these tools are used,
some fundamental questions must be addressed:
How can the water use of heterogeneous and frag-
mented users be monitored and measured and how
can this information be included in the decision-
making process? What other tools and new technolo-
gies are needed to account for and allocate the ever
changing water (full hydrologic cycle) within the
basin? How can information describing human pro-
cesses, institutions, and stakeholder behavior be col-
lected and paired with physical and ecosystem data
in a meaningful way?
Transaction and Transition Cost
Transaction cost are the collective cost of acquiring
information, identifying transfer opportunities, nego-
tiating or administratively determining transfer
details, conveyance (including water loss and infra-
structure cost), mitigating third-party effects, and
monitoring and enforcing transfers.
22
More broadly,
transition costs are the institutional costs to shift the
institutional structure to one more favorable to water
reallocation. This may involve reorganizing water
agencies jurisdiction to match hydrologic boundaries,
strengthening water rights, loosening policies restrict-
ing water reallocation, reforming water-user associa-
tions, building new transfer infrastructure, and the
general facilitation of reallocation.
89
The water reallocation literature primarily
focuses on transaction cost associated with markets;
however, transaction costs are prevalent in all reallo-
cation forms and have not been proven as a larger
deterrent in markets than they are for other transfer
types. The key difference between transaction costs
in voluntary transfers versus administrative realloca-
tion is that the water authority absorbs the cost of
administrative reallocation, whereas the individual
participants bear much of the cost in voluntary real-
location.
11
There are particular factors that have
been shown to either increase transaction costs or
make transaction cost a greater deterrent in both vol-
untary and nonvoluntary transfers. First, transaction
cost increase with larger geographic dispersion of sta-
keholders and greater number of small fragmented
users due to the infrastructure and coordination
required to facilitate transfers.
22
Second, high trans-
action cost (in terms of time and money) can deter
small or short-term water transfers because the mon-
etary cost may exceed the actual value of the water,
while the time to gather information, gain approval,
and complete the transfer may go beyond the time-
frame of when the water is required.
13
Third, the
uncertainty associated with determining environmen-
tal requirements can add greater cost and make real-
locating water to the environment potentially more
challenging than reallocating water to other water
users.
36
Finally, transaction cost have been shown to
be a greater barrier for some water users (namely
agriculture) than others (industry) due to the latter’s
greater economic gains from utilizing water and
capacity to absorb additional cost.
89,90
Insufficient water infrastructure often con-
strains potential transfers by not offering a means to
store and then convey water to the new user; yet, the
cost to build, maintain, and operate infrastructure
projects can make many transfer schemes economi-
cally infeasible. Ansink and Houba
51
contend that a
lack of water transfer infrastructure leads to narrow
markets and bilateral oligopolies, which creates a
non-Pareto optimal water allocation because of an
imbalance in market power between potential buyers
and sellers. Private water vendors have capitalized on
the dearth of water infrastructure in many developing
countries by creating an informal nonpipe water dis-
tribution system to serve unmet water demands.
However, these water transfers are sometimes illegal
and have been shown to cost up to 12 times more
than a formal utility, which can amount to a signifi-
cant portion of the income of poor consumers who
often rely on such a system.
91
One solution is to rea-
dapt existing infrastructure for the purpose of water
reallocation (i.e., infrastructure sharing). Infrastruc-
ture sharing has seen some success (see Iseman
et al.,
13
e.g., in the United States) but requires consid-
erable planning and coordination of operations
amongst treatment facilities, canals, pumps, and stor-
age systems.
34
These systems are often inefficient
because they are being utilized for reasons beyond
their originally designed purpose. This can increase
transaction cost considerably and can possibly strain
infrastructure in meeting its original purpose or limit
reallocation potential. Further advances in smart
infrastructure (i.e., the nexus of physical and cyber
infrastructure) have the potential to revolutionize
water management and make reallocation a more
physically and economically feasible option.
92
How-
ever, any engineering solution will also necessitate
collaboration by agencies controlling major compo-
nents of a region’s water infrastructure.
34
The uncertainty and lack of information
regarding water availability further increase transac-
tion costs. It is difficult to determine the potential for
water reallocation when basic questions still need to
be answered, such as how much water is available,
of what quality, at what time, and at what location.
The traditional assumption of stationary hydro-
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climatic conditions has been deemed inappropriate
with our growing understanding of the impacts of cli-
mate change and human interference,
93
yet no meth-
ods exist that incorporate the complex, uncertain,
and rapidly changing effects of climate and human
change on water resources. It is difficult to reallocate
water if we are uncertain how much water is even
available and how this availability changes over time
and under different conditions. Key research ques-
tions need to be addressed, including the following:
What impact do climate change and socioeconomic
growth have on water availability of a particular eco-
nomic sector? Given nonstationary hydro-climatic
conditions, what is the reliability of the water supply
in meeting all water demands? To what degree can
water reallocation mitigate the negative impacts asso-
ciated with climate-change related fluctuations in
water availability?
Unsuitable Institutional Structure
and Operation
The efficacy of water reallocation is largely depend-
ent on water governance institutions, including how
they coordinate and cooperate amongst themselves.
94
As Table 2 previously demonstrated, reallocation can
occur under vastly different government or institu-
tional settings around the world. Yet, water transfers
are more efficient, equitable, and/or sustainable
under certain legal and institutional frameworks than
others. Grafton et al.
88
provides a comprehensive
and integrated method to benchmark how well an
institutional structure promotes water reallocation
(namely through markets) over time and against
other institutional types.
Overcomplicated regulations or restrictive rules
that limit water transfers to other uses or places can
dissuade water reallocation, keeping water locked in
economically inefficient uses. For instance, Spanish
law classifies priority levels to different water uses
and prohibits the transfer of water from higher prior-
ity uses to lower priority uses. This legal constraint
therefore inhibits potentially beneficial reallocation
between agricultural and recreational uses or some
industrial uses.
6
In addition, policies not directly
aimed at water resources, such as China’s and India’s
policy promoting food self-sufficiency, can have large
implications on how water is allocated throughout
the country, constraining space for water
reallocation.
Since the agriculture sector controls the major-
ity of water rights, many researchers have focused on
how the institutional structure of irrigation organiza-
tions (IOs; including irrigation districts) has impeded
water reallocation.
7,95
IOs are entities that hold com-
munal water rights and supply irrigation water to its
members. They are widely found in various forms in
both developed (e.g., Ghimire and Griffin
7
) and
developing (e.g., Rosegrant and Binswanger
22
) coun-
tries. The literature shows that IOs are less likely to
transfer water rights than irrigators not in IOs prima-
rily because of difficulties in (1) collectively deciding
on transfer prices, (2) determining the distribution of
water transfer gains amongst members, (3) providing
equitable compensation methods for individual water
conservation efforts, and (4) quantifying the inciden-
tal district impacts due to seepage reduction (which
replenishes aquifers and can be used again) and the
increased internal water conveyance cost.
94,95
Ghi-
mire and Griffin
95
found IOs with larger water enti-
tlements are more likely to participate in intersectoral
water reallocation, which implies that merging IOs
with smaller water right holdings could act as a cata-
lyst for reallocation. In addition, reallocation can be
fostered by reshaping IOs ownership structure, such
that members own a share of the organization’s
water right (opposed to exclusive possession by the
IO), voting privileges are weighted by irrigated acre-
age to prevent small holders from exerting dispropor-
tional influence on transfer decisions, exit or
termination fees assessed on IO members who sell
their rights are waived or reduced, and water is
priced according to its opportunity cost.
75,96
The present operation of most water storage
systems locks in current water uses and therefore
must be adjusted to facilitate water reallocation.
Many basins have undergone extensive natural and
human induced changes, yet the operation of the
basin’s dams still abide by the water control plan
from the time of its design, thus implicitly assuming
the same hydrologic conditions, basin development
(e.g., land use patterns, other reservoirs), and water
withdrawal patterns have remained constant
throughout the years.
97
The assumed stationarity of
human and natural systems leads to a miscalculation
of water availability and a misappropriation of water
to demands that may now hold less economic or
societal value than when first allocated.
There have been recent calls for water to be
reallocated to meet environmental and ecological
objectives by changing reservoir operation
procedures.
98–100
However, adjusting reservoir oper-
ation rules to meet such objectives may jeopardize
the original purposes of the reservoirs. Thus, research
is needed to determine the tradeoffs between the new
(ecological) and original (societal) objectives and
how to balance these in the reallocation of reservoir
storage.
101
Great reallocation potential also exists
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through the joint-operation of multiple reservoirs
within a river basin. Institutions can coordinate reser-
voir operating procedures to reallocate water to meet
basin-wide objectives, not just water uses adjacent to
the reservoir. Basin-wide mechanisms for information
sharing, coordination, and regulation are not in place
in many regions and technical difficulties in develop-
ing optimal operations of multiple reservoirs still rep-
resent research challenges.
102
Federal multipurpose reservoirs in the United
States provide an example of reallocation of reservoir
supply in response to changing conditions but also
highlight the need for continued progress. The Water
Supply Act of 1958 has expedited reallocation of fed-
erally operated dams and allowed the Corps to real-
locate 640,000 acre-feet of storage across 44 dams to
municipal and industrial water supply since its incep-
tion
103
(Figure 2); however, this represents only a
small percentage (0.3%) of the 216 million acre-feet
of storage across its portfolio of dams. Further reallo-
cation will be required (and in some cases is already
needed) to obtain greater economic or social benefits
from water resources.
97
In particular, storage space
allocated to flood control may hold promise for real-
location because the hydrologic record upon which
flood storage was based has changed, thereby chan-
ging risk profiles and flood storage requirements.
Overcoming the obstacles to water reallocation
will require an integrated systems approach and col-
lective action amongst researchers of different disci-
plinary backgrounds, practitioners, and policy
makers. In particular, researchers need to move
toward more interdisciplinary water reallocation
research by consolidating advances in natural
sciences, engineering and social sciences. We propose
an initial path for the unification of the social
sciences, natural sciences, and engineering fields into
water reallocation solutions in Table 3. A summary
of the major water reallocation barriers overviewed
in this article is provided in Table 3, where we also
show how contributions from the social sciences, nat-
ural sciences, and engineering can be integrated into
holistic approaches to overcome water reallocation
obstacles. Economic studies of water reallocation
(chiefly related to water markets) should be extended
to include a broader social science context to deal
with equity and community resilience associated with
water reallocation. Meanwhile, natural science and
engineering studies should be extended from tradi-
tional focuses on water availability and water supply
to more effective realization of water reallocation
through novel infrastructure development, system
operations and information support.
9
CONCLUDING REMARKS AND
SUGGESTIONS FOR FUTURE
RESEARCH
Water reallocation exhibits great promise as an
adaptive water management tool which can reduce
the economic, social, and environmental harm caused
by water scarcity. Despite its promise, this study
notes the numerous and diverse barriers that hinder
water reallocation from reaching its potential.
Reforms in water institutions and policies are
required to make water reallocation a more viable
and widely used water management strategy; how-
ever, these changes must be guided by improved sci-
entific understanding and new tools to assess the
trade-offs and interdependencies involved in any
water reallocation decision. Past research offering
only policy, economic, institutional, or engineering
approaches to water reallocation has not been widely
implemented because it only addresses one part of a
grander problem. The complex economic, social,
technical, environmental, and institutional underpin-
nings of water reallocation must be all integrated into
proposed solutions, not simply ignored or assumed
away. Decision making must be based on a compre-
hensive scientific understanding of the complex
human-water system, informed through new data
collection and interpretation tools, and be actionable
through advances in technology and smart infrastruc-
ture. This appears to follow the calls from Integrated
Water Resources Management
104,105
(IWRM), but
5,000
4,500
4,000
3,500
3,000
2,500
2,000
Usable reservoir storage (thousand acre-feet)
1,500
1,000
500
00510
Percentage of storage reallocated (%)
15 20 25 30 35
FIGURE 2 |Percentage of total reservoir storage reallocated
under the Water Supply Act of 1958 (abscissa) for 44 different-sized
(ordinate) US Army Corps of Engineers’reservoirs. The size of each
bubble represents the relative volume of reallocated storage. The
majority of dams have had less than 3% of their storage reallocated.
Data are obtained from Ref 103.
Overview wires.wiley.com/water
© 2016 Wil e y Per i o d i cals, Inc.
research for water reallocation is expected to provide
a specific and realizable context to implement IWRM
to solve real world water management problems, as
outlined by Biswas
106
who reviewed the implementa-
tion obstacles of IWRM. In short, a broader interdis-
ciplinary framework is needed to guide water
reallocation decisions and remove its barriers.
Although suitable choices of particular reallocation
forms vary by regions depending on the various gov-
ernance, legal/regulatory, and social systems, shared
issues (e.g., poor governance, lack of information
support, transaction cost, and third-party effects)
exist among all water reallocation occurrences; thus,
the proposed integrated research framework can be
utilized around the world as a means of overcoming
these common barriers.
Until researchers resolve some of the critical
barriers to water reallocation discussed throughout
this article, water reallocation will continue to be
challenging or infeasible in many areas. Nonmarket
means of reallocation will remain the primary avenue
of reallocating water in the foreseeable future.
107
Water markets can take considerable time and
resources to establish, even if the prerequisite
TABLE 3 |The Removal of Water Reallocation Barriers Requires an Interdisciplinary Approach that Integrates the Social Sciences and the
Natural Sciences and Engineering into a Holistic Framework
Major Barrier to
Reallocation Social Science Focus
Natural Sciences and
Engineering Focus Holistic Approach Anticipated Outcome
Poorly defined water
rights
Establish water rights
and improve policies
to facilitate proper
reallocation
Quantify environmental flow
requirements
Link environmental
water requirements
to stakeholder
outcomes and create
a systems approach
to evaluate trade-offs
between
environmental and
human water uses
Balanced water
allocation to
human-nature
needs
Third-party effects Assess economic and
noneconomic third-
party impacts, as
well as methods for
compensation
Estimate consumptive water use
and return flows more
accurately and develop more
effective monitoring methods.
Assess impacts of climate and
societal change on water
Cooptimize water
benefits based on
physical and
socioeconomic
connectedness
throughout the
system
Reduced/enhanced
negative/positive
externalities
associated with
reallocation
Lack of information
support and limited
stakeholder
involvement
Increase transparency
regarding transfers
and clarify
stakeholders’values
and beliefs
Increase reliability of water
availability and use data,
improve information
accessibility, and monitor
environmental effects. Provide
insights into the human-water
system through advanced
information technology,
especially Big Data tools
Incorporate hydrologic
data and human
responses and values
into a coupled
human-water
framework
Reduced uncertainty,
lower transaction
cost, and enhanced
stakeholder support
Transaction and
transition cost
Comprehensive
identification and
mitigation of social
and economic factors
that lead to high
transaction cost
Advance physical and cyber
infrastructure, novel operation
schemes, reliable forecast, and
robust methods to deal with
uncertainty
Manage transaction
cost through an
integration of
institutional, policy,
scientific, and
technologic advances
Reduced transaction
cost and better
informed decision-
making
Unsuitable
institutional
structure and
operation
Identify institutional
structures and
policies that inhibit
proper reallocation
Improve system operation
schemes, provide more reliable
hydrologic information, and
facilitate communication
among stakeholders by novel
technologies
Establish adaptive
institution based on
scientific and
engineering
information support
and agency
collaboration
Improved institutional
support and
mitigated
institutional
barriers
WIREs Water An overview of water reallocation
© 2016 Wil e y Pe r i o d i cals, Inc.
institutions, policies, and infrastructure required to
facilitate a water market are already in place, which
typically is not the case (especially for intersectoral
markets). Although much of the literature supports
water markets over other means of reallocation
because of its potential economic efficiency and
decentralized approach, pragmatically, widespread
application of water markets may not be appropriate
or even feasible in many circumstances, especially
cases that require immediate solutions. Thus, scien-
tific research and institutional development are
needed to support nonmarket based water
reallocation (i.e., administrative and collective nego-
tiations), which often have fewer prerequisites and
can be implemented more readily. Specific to admin-
istrative reallocation, continued research regarding
how to optimally reallocate storage in existing multi-
purpose reservoirs offers a promising means of man-
aging scarce water resources at a very low cost.
Regardless of what method of reallocation is
employed, it is evident that water reallocation will
play a critical role in dealing with growing water
scarcity and in some closed basins it is likely the only
way to meet future demands.
13
ACKNOWLEDGMENTS
This article benefited from discussions with Professor Steven M Gorelick of Stanford University and Dr. James
Nickum of the University of Hong Kong. In addition, we would like to thank two anonymous reviewers whose
comments greatly improved an early version of this article. L.M. is thankful for support from the Department
of Defense through the National Defense Science & Engineering Graduate Fellowship Program (32 CFR 168a).
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