Water Rights
What are Water Rights?
In the most basic sense Water Rights are a group of rights to protect the use of water from a stream, lake, river, pond, irrigation canal and water that collects underground. Since water is a limited resource and in great demand, water rights are regulated by state and federal legislation. Water rights are extremely important and valuable to land owners. When related to agricultural production, the rights to use water can make or break your farm operation.
While many farmers are fighting to protect their water rights, some have found it more profitable to sell theirs. In states like California, where farmers are allotted set acre-feet of water per year, some farmers have been selling excess water rights to developers. With fuel prices steadily increasing and with fracking companies desperate for more water to inject into petroleum deposits, farmers can potentially make millions of dollars (sometimes more than they would make growing and selling crops) selling their water rights to those oil companies.[1] While selling your water rights might be profitable for farmers in the short term, the long term affects in getting a loan or selling your property can be detrimental so it is important that farmers and land owners are informed.
Water Rights: History and Law
Water rights in the western part of the United States have generally developed along a very different path than rights in the eastern part of the country. With arid conditions resulting in less regular rainfall and less surface water, states like California created a hybrid system of water rights. Until 1914, the state accepted riparian water rights, a system that gives landowners a right to a certain share of water flowing through or near their property, but prevents them from diverting that water into storage units to save for dry seasons. The water demands of the California Gold Rush created an appropriative system, one that created a hierarchy of water rights and access based on who had “claimed” the waterways first, that operated in tandem with the riparian system. The dual system was clarified in the California Constitution, requiring that all water use be reasonable and beneficial, but the system wasn’t fully codified until 1914. Currently water usage is still governed by a hybridized riparian-appropriative system, but one closely regulated by various state boards.[2]
Other western states tend to follow some version of California law, with many adopting purely appropriative systems, but many states’ water laws are confusing and contradictory. In most states, landowners with longer historical claims to water access generally have stronger water rights (often regardless of the purpose of the water usage). These hierarchies, however, generally relate only to surface water such as rivers or streams. In states like Texas, landowners ostensibly own the groundwater under their property, but there are no penalties for neighbors who siphon water away from those aquifers. In many western states, where the federal government owns significant portions of land and resources (often including aquifers and rivers), it’s not entirely clear whether states can pump groundwater that sustains federally-owned surface water. While these unclear legal systems may have worked when the West was barely populated, the staggering growth of Western population centers and agricultural production has added new pressure to water law, forcing state governing boards, private citizens, and the federal government to make their cases in court.[3]
Other western states tend to follow some version of California law, with many adopting purely appropriative systems, but many states’ water laws are confusing and contradictory. In most states, landowners with longer historical claims to water access generally have stronger water rights (often regardless of the purpose of the water usage). These hierarchies, however, generally relate only to surface water such as rivers or streams. In states like Texas, landowners ostensibly own the groundwater under their property, but there are no penalties for neighbors who siphon water away from those aquifers. In many western states, where the federal government owns significant portions of land and resources (often including aquifers and rivers), it’s not entirely clear whether states can pump groundwater that sustains federally-owned surface water. While these unclear legal systems may have worked when the West was barely populated, the staggering growth of Western population centers and agricultural production has added new pressure to water law, forcing state governing boards, private citizens, and the federal government to make their cases in court.[4]
All farm lenders take water rights and irrigation systems into consideration when determining your eligibility for agricultural loans. Since access to water (especially through irrigation systems out West) is vital to the profitability and financial success of a farm, potential borrowers looking to purchase land with limited access to water (either surface water or groundwater), with limited irrigation systems, or with water rights currently in conflict with other companies or businesses may find it harder to qualify for farm loans or difficult to obtain good rates on farm loans. Farmers looking for financial help from Farm Plus should take advantage of existing water support programs (either through federal grant money or through irrigation loans) in order to guarantee their access to water and to guarantee their ability to qualify for farm loans.
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Resource Articles Related to Water Rights
- Irrigation Information and Financing for American Farmers
- Drought & Water Issues for American Farmers
- Apply for a Loan
- Resources for Farmers
- Farm Loans & Ag Financing
Should you find your farm operation needing additional long-term capital or a farm operating loan, call Farm Plus Financial toll-free at 866-929-5585 or contact us online to discuss your farm loan options.
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