And a word to those who look at "exploit" and say "hell yeah, let's stop that"... Exploitation means using water in any way -- for agricultural, environmental or urban purposes.
Here's the abstract:
In much of the American West water shortages are becoming an important concern. With increasing demands for water for municipal, industrial, and environmental uses, transfers of water from the currently predominant agricultural uses to these other uses should produce economic gains. Even though most commodity markets respond rapidly to price differentials and reduce those differentials over time, water transfers out of agriculture into higher value uses are not occurring very rapidly.Anyone interested in water market MUST read this paper to understand many of the reasons that markets are not established or functional.*
The existence of multiple rights of exclusion unbundled from the rights of use under the prior appropriation doctrine in the American West creates an anticommons that has impeded water transactions. This article explains the tragedy of the anticommons, describes the various rights of exclusion that create an anticommons in western water markets, and concludes with case studies that illustrate the difficulty of water transfers.
Bottom Line: Change is only possible when we have freedom of action (compare US and Iranian elections), and we can't have that when too many people can veto that freedom.
* In an oft-cited 1984 article, Henry Vaux and Richard Howitt calculated that transfers from agricultural users would reach 10 percent of total supplies (about 3 maf). In his 1997 thesis [pdf], Newlin uses CALVIN to estimate potential water transfers in SoCal; trading 13 percent of water would reduce "scarcity costs" by 84 percent. Unfortunately, transfers to date have been much less than these modest estimates (perhaps 3-5 percent of ag water -- less than 500tafy).