In the world of water rights, adjudication is a big deal. Its implications to water markets is also rarely understood. For this reason, I wanted to provide some clarity.

Definition

The most basic definition of adjudication is “a judicial decision.”

What does this mean?

Water courts, district courts, and other courts across the West are reviewing water rights and making judicial decisions regarding their parameters (priority date, flow rate, etc.). This process helps define the rights and the proper allocation under the prior appropriation doctrine. The underlying goal is to get rid of the junk.

What are the market challenges?

  1. Adjudications are ongoing and can take awhile (40 + years).
  2. Adjudications represent a snapshot in time.
  3. An adjudicated right can still be lost through forfeiture, if not properly managed (used) post adjudication.
  4. Many courts are only adjudicating flow rates, which provides no insight to the marketable volume transferred in water transactions.
  5. As a result, water rights go through another (mini-adjudication) in the administrative change process.
  6. The courts are looking at a specific point in time. For example, Montana is still adjudicating water rights according to water use previous to 1973. A lot has changed since 1973.

What is my recommendation?

Water rights are a valuable assets that require management. Don’t sit on your hands and expect these rights to take care of themselves. Pro-actively document your historic use, and monitor your water use moving forward. This work will increase the value of your assets (water and land), save legal costs in court disputes that may arise, and better position your assets for opportunities in the emerging water market.