Fair Allocation and Trading of Surface Water Rights Under the Riparian Doctrine.

One key water resource challenge that faces the eastern United States today is how to regulate water withdrawals by offstream users, while preserving the fair sharing philosophy of the common-law Riparian Doctrine. Traditionally, this doctrine requires that riparians (users owning land adjacent to a stream) limit their withdrawals to what can be judged as "reasonable use." Water allocation regulations are currently being formed amid emerging water competition, due to rapidly growing water demand and increasingly frequent water shortages. The study reported in the present dissertation develops a new type of water allocation scheme called the Proportionally Fair (ProFair) Program, which stresses on the fair sharing of water among withdrawers. The ProFair program is based on the Proportional Fairness Criterion, which is originally developed for bandwidth allocation in electronic communication networks. Three different methods are developed to attain the proportionally fair allocation, namely a log-linear programming model, a quadratic programming model, and a greedy procedure called the 'Bottleneck Algorithm'. The performance of the ProFair program, both in terms of equity and economic efficiency, is compared with four alternative hypothetical regulatory programs which are rooted in three different regulatory principles: the Benefit Maximizing (MaxBen) program, based on the principle of maximizing economic benefit, the Downstream Priority (DPrio) and the Upstream Priority with Municipal and Industrial User Privilege (UMIPrio) programs, based on the principle of prioritization according to type of use and/or geographical location, and the No-Rule (NR) program, which represents the status quo in many eastern states, and which is based on the principle of minimal regulation. Mathematical models are developed for each water allocation program. Economic efficiency and equity are measured by aggregate net benefit and a measurement called the Equity Index, respectively. Following the primary allocation programs, this study further develops a trading model to simulate a water rights market under each of the alternative programs. Water allocation and water market simulations under the five allocation programs are performed for the Sangamon River system in Illinois under two economic scenarios and various reservoir capacities over a 30-year period. The simulation results show that the ProFair program dominates all other programs in fairness, generating the highest equity index in any year under any condition. Although the ProFair program results in lower net benefit than the MaxBen and UMIPrio programs, its economic efficiency can be improved through a properly instituted water rights market with complete information and minimum transaction costs. The results also demonstrate that changing supply and demand conditions have significant impacts on benefit, fairness, and market activities of all programs. Based on those findings, the dissertation recommends that policy makers give more consideration to the proportionally fair allocation due to its consistency with the Riparian Doctrine.