Water Slices and Water Lumps by Rhett B. Larson

While reading Lee Fennell’s book Slices and Lumps, I was struck that the book could have been written using only examples from water law. Fennell’s framework describes nearly all challenges and aims inherent in water management, and connects these challenges to broader questions in life and law. Water law is all about slices and lumps. It involves efforts to slice interests in waterbodies into discrete property rights and lump interests in water together as a resource governed by various institutions. The challenge with slicing and lumping water is that water defies lines, whether drawn to slice or lump. Water sinks beneath lines, flies over them, and flows across them. This Essay relies on Fennell’s Slices and Lumps framework to evaluate two challenges of configuration in water policy and to propose reforms to address these challenges.

I. Slicing and Lumping Jurisdiction over Water.

Water is a spillover common pool resource, meaning that it crosses property and jurisdictional boundaries. This creates challenges for water governance. Indeed, Fennell notes Elinor Ostrom’s observation that self-organizing approaches that might avoid or mitigate the tragedy of the commons are less likely with “mobile resource units” like water, due to difficulties in observation, monitoring, and enforcement. Water diversions or contamination on a river may occur many miles from where their impacts are ultimately felt. The river changes as it flows, and the communities relying on the river change with it. A governance structure that makes sense on one segment of the river may not make sense a few miles downstream. And no two rivers are alike. What is the appropriate scope of water governance institutions over such a complex resource?

The earth is like a golf ball—a sphere covered in divots. Each divot is a drainage basin, within which all water drains to a common point. The boundaries between these basins are watersheds. If there are multiple jurisdictions within a single basin, these jurisdictions can externalize the costs of their water use to their neighbors by damming or polluting the river. If a jurisdiction incorporates multiple basins, the transaction costs of governance become high, with too many decisions involving too many people remote from, and unfamiliar with, the unique hydrologic, economic, ecologic, and cultural conditions of the river. Designing effective water governance institutions presents a Goldilocks problem of finding just the right size. To avoid high transaction costs, jurisdictions cannot be too big. But to avoid externalities, jurisdictions cannot be too small. Arguably, the watershed is just right as the ideal scope of jurisdiction for water governance institutions. Costs of water use will be internalized within the basin, but the jurisdiction is small enough to govern a limited number of stakeholders familiar with, and directly dependent upon, the resource. This corresponds to Robert Cooter’s “internalization prescription” for spillover commons, which states that jurisdiction over spillover commons should be assigned at the smallest scale that internalizes the effects of management decisions.

Long before Cooter, John Wesley Powell made a similar prescription. In 1868, based on his explorations in the western United States, Powell recommended that future western state boundaries correspond to watersheds to avoid interstate water conflict. Congress ignored this advice, and the states in the west have been mired in frequent transboundary water disputes ever since. In the 1930s, the governor of Arizona ordered National Guard troops to destroy the Parker Dam that California was building on the Colorado River, which forms the border between Arizona and California. Harold Ickes, the U.S. Secretary of the Interior, was able to mobilize U.S. Army troops to prevent violence. Around the same time, the governor of Texas mobilized Texas Rangers, and the governor of Oklahoma instituted martial law, in a conflict over the Red River, which forms the border between the two states. These interstate water conflicts were so serious that there is correspondence from within Germany’s leadership predicting that the United States was unlikely to enter into World War II because it would be involved in a civil war over water. The risks of having multiple jurisdictions within a single basin are equally evident in international hydro-diplomacy, as can be seen in water disputes over the Jordan River, Euphrates River, Indus River, and Nile River, to give only a few examples.

Of course, it is too late to reorganize the United States of America into the “United Basins of America.” And reforming national boundaries along watersheds is impossible, particularly within controversial basins where water disputes are often more about sovereignty than water. Despite these limitations, interstate compacts and international treaties often attempt to approximate basin-level governance by creating basin commissions to facilitate cooperative management. But the designs of these commissions have their own Goldilocks problem. If the commission is too powerful, it may fail to cohere out of concerns that member states are sacrificing too much of their sovereignty, or else the commission may be coopted by the basin’s hydro-hegemon. In such instances, basin governance either fragments into inefficient inter-basin slices, or else collapses into a lump controlled by the hydro-hegemon to the detriment of its neighbors. If the commission is too weak, it will fail to achieve its purpose—the appropriate lump of water jurisdiction to limit externalities and transaction costs, and will instead fragment into sliced jurisdictions competing over a transboundary resource. As Fennell notes in several instances, irregular boundaries like those formed by rivers frustrate efforts at appropriate configuration. This condition is illustrated by the conflicts over the Red River and Colorado River, where the dynamic, irregular rivers form contentious borders. Such conditions are the consequence of weak basin commissions. The watershed is a far less irregular and dynamic boundary than the river itself, and thus the more appropriate geographic contour upon which to base jurisdiction.

An inter-jurisdictional commission is the closest approximation of the ideal of basin-level governance. A commission can approximate this ideal so long as it is appropriately empowered, meaning enough power to cooperatively manage the resource, but not so much as to discourage cooperation out of fear of sacrificing sovereignty. The Delaware River Basin Commission (DRBC) is one of the most powerful interstate commissions in the United States, with authority to issue and enforce permits. Pennsylvania petitioned the DRBC to lift its moratorium against hydraulic fracturing within the basin, but New York (the basin’s hydro-hegemon) threatened to sue the DRBC. The commission ultimately sided with New York, providing a cautionary tale of a powerful basin commission coopted by a hydro-hegemon. One possible way to limit this kind of power without risking fragmentation is to impose a fiduciary duty on basin commissions to manage the shared resource to the benefit of all member states.

I have discussed some of these ideas in previous publications. However, while reading Fennell’s book, I contemplated whether I and others who have advocated for basin-level governance are wrong. Fennell quotes Mary Ellen Hannibal, who said, “Nature doesn’t work without connection.” The connections that make nature work are not always terrestrial. Water is connected in a variety of ways beyond the basin. The water that falls as rain in one basin often rose as vapor in another, and the condensation nuclei at the center of that rain drop falling in the Amazon could be a grain of sand from the Sahara. Perhaps basin-level governance is an inappropriate slice, rather than an efficient lump, because it fails to integrate these extra-basin considerations. For example, coastal desalination operations in Israel and California are outside of the Colorado River or Jordan River basins. But should these augmented water supplies be relevant in managing those shared rivers? Cloud seeding operations in Montana outside of the Big Horn River Basin or in China outside of the Yangtze River Basin may change precipitation patterns in ways that impact their neighboring jurisdictions within those basins. Should basin commissions have jurisdiction over such extra-basin augmentation projects?

Augmentation projects are not the only extra-basin considerations that weigh in favor of larger lumps of water jurisdiction. The complex and confrontational negotiations between the Lower Basin States in the Colorado River Drought Contingency Plan (DCP) suggest the need for a broader scope of water jurisdiction. The Salton Sea is a large, inland waterbody created by centuries of irrigation runoff in the Imperial Valley in Southern California. As irrigation efficiencies have improved and drought conditions have worsened, the Salton Sea has largely disappeared, leaving behind an environmental and economic crisis. The Imperial Valley Irrigation District, which receives the majority of California’s allocation of Colorado River water, wanted a solution for the Salton Sea crisis as part of the DCP, even though the Salton Sea lies outside of the basin. This problem is somewhat analogous to the drying up of the Dead Sea in the Jordan River Basin. One proposed solution to the Dead Sea problem has been the “Red-Dead Conveyance,” which would include desalination in Jordan on the Gulf of Aqaba to provide water to southern Israel, a conveyance of water from Israel to Jordan from Lake Kinneret, and then using the reject brine from desalination operations to refill the Dead Sea. A similar project, with desalination in Mexico on the Gulf of California, could address the Salton Sea problem. But these projects may require a broader lump of water jurisdiction extending beyond the basin in both the Colorado River and the Jordan River.

The water fight that inspired the movie Chinatown is another example of why basin-level governance may be too narrow. Officials from Los Angeles famously purchased (or defrauded, depending on your perspective) water rights from farmers in the Owens Valley to provide water to the city through the Los Angeles Aqueduct. The sales and water transport devastated the Owens Valley, which does not share a river basin with Los Angeles. The Owens Valley transfer shares some similarities with a project that conveys water from the Euphrates River in Turkey to Turkish Cypriots in Northern Cyprus via an undersea pipeline. In both cases, bulk water is transferred from one basin to another by pipeline with enormous costs borne within the exporting basin. In both cases, basin-level jurisdiction is too narrow to address these costs.

But reconfiguring basin-level jurisdiction more broadly may only invite higher transaction costs by inviting more stakeholders with whom to negotiate, and more decision-makers less familiar with the resource. Perhaps the answer is not to broaden water jurisdiction to some global water authority, but instead to use basin commissions as sharing platforms through which extra-basin considerations are integrated. Basin-level commissions could adapt water allocations and management decisions based on extra-basin augmentation projects like water imports, desalination, or cloud seeding. Augmenting jurisdictions could bank water from the shared river it does not use because of augmented supplies through artificial groundwater recharge, or lend that unused water to neighboring jurisdictions, with the basin commission managing the sharing arrangements, recharge, credits, and debits. This role could be analogous to the sorts of sharing platforms Fennell discusses throughout her book, like FlightCar, Airbnb, or BorrowMyDoggy.

II. Slicing and Lumping Water Rights to Resolve Water Disputes.

The potential of sharing platforms to help better configure water jurisdiction could also be adapted to resolve water rights disputes. In most of the western United States, water rights are based on prior appropriation, a first-in-time, first-in-right means of allocating water rights. Under prior appropriation, if parties do not use their water rights for five years, they forfeit those water rights, which may discourage conservation, aggravate scarcity, and prolong water disputes. In some instances, these states can become mired in protracted water rights adjudications. In Arizona, the Gila River General Stream Adjudication persists since its filing in 1974, with no end in sight. Similar general stream adjudications have languished for decades in Idaho, Wyoming, Oregon, and New Mexico. These adjudications are difficult to resolve in part because they extend across entire river basins, and may involve tens of thousands of parties.

The Gila River Adjudication in Arizona includes over 38,000 parties and nearly 100,000 claims, in a basin that covers over 58,000 square miles. The parties include large cities, small towns, Native American tribes, mines, utilities, ranches, farms, and a variety of industries. All of these parties are, in some sense, adverse to one another. And the vast majority of the rights being adjudicated are to small quantities of water. Such thinly sliced interests among such a large and diverse number of parties across such a vast area make resolution extremely difficult. But the slicing problem is even more complex than just the number of rights. In Arizona, as in some other western states, surface water rights are distinct from groundwater rights and operate under separate legal rules. The general stream adjudications apply only to surface water rights. However, groundwater and surface water are often hydrologically connected, and pumping from a shallow well located near a river could impact surface water. Water that is underground but so closely associated with the surface that it is subject to surface water adjudication is called “subflow.” It is the sort of composition problem Fennell mentions in the examples of Pando (the clonal aspen colony that looks like of forest of trees, but is in fact a single organism)—a subtle and philosophical question of when and how to consider components as a unitary whole. But there is no question that the bifurcation of surface water and groundwater frustrates efforts to resolve general stream adjudications.

In discussing broader issues of property rights, Fennell describes the central challenge facing resolution of general stream adjudications when she writes: “In practice, division problems often seem easier to solve than the aggregation problems that we most commonly encounter, but this not because they are division problems rather than aggregation problems. Rather, it is a function of the number of parties who must agree to a given reconfiguration, and the monopoly power that each of those parties hold.” The sheer number of parties and the property interests they hold (especially those with very senior priority rights—meaning those earliest appropriators) frustrate efforts to aggregate small rights into workable lumps with which to negotiate a settlement.

One possible approach is to reconfigure all of these slices through eminent domain. But here, again, Fennell notes the problem. She writes that “[a]side from vivid concerns about the loss of autonomy that comes from a forced sale, the compensation provided by the government is often thought inadequate to make up for the owner’s loss, given subjective attachments to property and other uncompensated elements of value.” Water is a unique resource. In some ways, it is like coal, or oil, or uranium—a valuable commodity. But we don’t throw lumps of coal at each other in the winter, we don’t squirt each other with oil in the summer, and we don’t baptize our children in uranium. Valuing water is difficult because it often has unique cultural and aesthetic values. And even when the owner of the water right objectively values water, the sale of water may not account for the damage done to others who relied on the water, as the case of the Owens Valley demonstrates. Even when farmers were fairly compensated for their water rights, the entire community surrounding those farms suffered from the sale.

Efforts to aggregate water rights by eminent domain would be extremely expensive. States could attempt to grant a de minimis exception to certain subflow pumpers, or else grandfather in subflow rights. But creating a new subflow right would mean trifurcation of water rights regimes, and create the sorts of concerns motivating the principle of numerus clausus Fennell references. A de minimis exception would still interfere with senior vested water rights, even if it drains their rights by a million pin holes. Granting those exceptions would likely be considered a taking requiring just compensation to vested senior right holders. I have discussed these challenges in other publications, but never in the context of using sharing platforms to reconfigure slices into lumps to resolve these disputes.

Perhaps the answer here, as with transboundary water jurisdiction, is a sharing platform. Rather than attempt to configure small slices of water through eminent domain, states can encourage voluntary lumping. The state could create Regional Water Mitigation Authorities (RWMAs). The RWMAs would function like the sharing platforms. The state would use a model to estimate how much a given well is pumping subflow. Based on that model, parties could pay a mitigation fee into their RWMA. As long as the parties paid into the RWMA, they would be shielded from liability to senior water right holders. And the RWMA would assume responsibility for making senior vested right holders whole by using their members’ mitigation fees. Those who elect not to pay a mitigation fee into the RWMA would be left to take their chances in the general stream adjudication. The RWMA could make senior right holders whole in several ways—by purchasing other water rights, paying damages, or investing in water augmentation or conservation projects. Additionally, each RWMA would operate a water trust. All or a portion of a water right could be placed in the trust. While in trust, the water would be shielded from forfeiture and used to protect environmental flows. This would encourage conservation without risking the forfeiture of water rights. Additionally, the RWMA trusts would serve as the middlemen in water transactions. The benefit of rights holders participating in the trust would be the forfeiture shield, but the trust would take a cut of all water transactions moving through it. This would build up a bank of water within the RWMA’s trust to be used for both environmental flows and as a means of remedying senior right holders impacted by RWMA members.


These are only two examples of the myriad ways that Fennell’s framework improves our understanding of the challenges of water law and stokes the imagination of how to address these challenges. Indeed, I cannot help but conclude briefly with one more example. Consider the choice to invest in desalination—a lumpy investment without which supplies may be insufficient, but one that may create excessive capacity and costs. Cape Town chose not to make such an investment, and found its supply inadequate. Australia has invested in desalination plants, and found many to be unnecessary and which now sit mothballed. I could go on with more examples, as Fennell has certainly succeeded in making slices and lumps more visible to me in water law, and how they can be harnessed to improve water policy.


Rhett B. Larson is the Richard Morrison Professor of Water Law at the Arizona State University Sandra Day O’Connor College of Law. The author would like to thank Lee Anne Fennell, Omri Ben-Shahar, the University of Chicago Coase-Sandor Institute for Law and Economics, and the participants in the Slices and Lumps Symposium at the University of Chicago Law School.

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