Austin, TX—Texas water law can unintentionally encourage waste while making it harder to conserve, share, or reallocate water—even as drought intensifies and demand surges, according to a new policy report released by the Property and Environment Research Center (PERC).
The report, Improving Texas Water Markets, outlines how outdated rules can discourage farmers, cities, and utilities from investing in efficiency. Water users who conserve can risk losing their rights, while barriers to trade mean that water that could be saved or transferred often remains locked into historical, less-valuable uses.
How Texas water policy can discourage conservation
Under current Texas law, water conservation is often penalized rather than rewarded. Conserved water is not clearly protected as a transferable property right, meaning farmers, cities, and utilities that invest in efficiency can risk losing access to the water they save. At the same time, voluntary water transfers face barriers such as slow, costly approval processes that give third parties broad power to block otherwise beneficial trades.
Together, these rules lock water into outdated uses, discourage investment in efficiency, and prevent water from being shared when it could help communities, farms, and rivers during times of shortage.
Voluntary water markets offer a better approach
The report highlights voluntary water markets as one of the few realistic tools available in fully allocated river basins. These markets allow water to move to higher-value uses through agreements between willing buyers and sellers—rather than forcing users to cut back through government mandates—while respecting priority dates and existing property rights.
By respecting priority dates and vested property rights, markets reduce conflict, lower transaction costs, and make it practical to lease or sell water during droughts or shortages. In doing so, they reward efficiency by allowing users to benefit from the water they conserve while improving flexibility for communities and river systems alike.
“Texas is struggling to meet the demands of a rapidly expanding population with shifting water needs,” notes report author Amy Hardberger, a professor of water law at Texas Tech School of Law. “Although water rights are transferable, current regulations create high transaction costs, which inhibit markets. Veto rights vested in third parties lead to an underutilization of the resource, and use-it-or-lose-it provisions can create unintended consequences by encouraging inefficient applications. Policy changes can accelerate markets, increase water efficiency, and help the state manage shortages.”
Smart reforms can help people and rivers
Rather than creating new mandates, the report outlines targeted reforms to make existing tools work better, including:
- Clarifying water rights so users understand how much water is actually consumed versus returned to rivers
- Explicitly protecting conserved water so efficiency investments are rewarded, not punished
- Steamlining transfer approvals to reduce unnecessary delays and objections
- Using existing institutions like the Texas Water Bank and Water Trust to facilitate trades and support environmental flows
In over-allocated basins, the report concludes, voluntary water markets may be the only practical way to improve environmental conditions while meeting human needs.
The report was written by Amy Hardberger, the George W. McCleskey Professor of Water Law at Texas Tech School of Law, where she is also the Director of the Center for Water Law and Policy.
