Rethinking Waste: How Weak Definitions of Beneficial Use Prevent Efficient Allocation of Water in California
Max Cassell
There is no true market for water in California. To be sure, most of the people who use water in California do buy their water from a municipal utility. And water rights are occasionally bought and sold, either by one farmer to another, or by municipalities buying water rights from agricultural water users to supplement local water supply. But of the over 40,000 active water rights in the state,[1] only a few hundred are transferred in each year.[2]
This is remarkable, because water in California is frequently scarce, and even inside the same sector, different uses of water can vary dramatically in terms of revenue per unit of water.[3] One might ordinarily expect that given these pressures, water would very frequently be transferred from less productive to more productive uses— either from less valuable to more valuable agricultural products, or from agriculture to other uses of water in the state which are more valuable, such as drinking water or industrial water use. There is evidence of significant changes in water use within the agricultural sector, as water use shifts from less valuable row crops to more valuable specialty crops. Perennial fruit and nut crops’ share has increased, up from roughly a quarter of irrigated acreage in 2000 to nearly half in 2018, resulting in higher agricultural productivity even as water usage has fallen.[4] But even though California’s population increased by about 25% from 1997 to today,[5] and even though the state’s GDP has more than doubled in the same time period,[6] water use has not shifted from agriculture to municipal water use.[7] Agriculture, which makes up approximately 1.5% of the state’s GDP, continues to account for approximately 80% of water consumption, a ratio similar to those in the 90s.[8]
Some of this gap is because of structural and technical barriers to transferring water rights. But a part of it is because an important tool for re-allocating appropriative water rights to economically productive uses has historically been interpreted in ways that rob it of most of its force. Appropriative water rights, which grant a water user a right to take water from a source and use it on non-riparian land, are subject to a common-law requirement that the appropriated water be put to beneficial use. The beneficial use requirement was enshrined in California’s Constitution in Article X Section 2, which states that “the general welfare requires that the water resources of the State be put to beneficial use to the fullest extent of which they are capable and that the waste or unreasonable use or unreasonable method of use of water be prevented”.[9]
Typically, this has been interpreted to mean that appropriated water must be put to some economically gainful purpose, excluding uses which serve no purpose and use of unreasonable amounts of water unnecessary for the chosen purposes.[10] Uses of water are not considered unreasonable simply because they are not maximally efficient.
But taken at face value, the constitutional requirement justifies requiring more than that water be put to any economically gainful purpose— it supports requiring water be used gainfully to the fullest extent possible. Similarly, it justifies state action to ban not only wasteful uses of water (such as hosing off driveways and sidewalks, as was done during the 2017 drought),[11] but also uneconomical uses of water which put water to minimally gainful use while more valuable needs go unfulfilled.
Authorization of such action is also suggested by the state’s past banning of “unreasonable” uses of water. The term “unreasonable” is often defined in economic terms, with unreasonable actions being those which are not cost justified (for instance, not taking precautions whose benefits exceed their costs).[12] For the purpose of water rights, this would encompass uses of water which fail to bring benefits greater than the opportunity cost of using water for an alternative purpose.
There is precedent in California for establishing hierarchies of more and less beneficial uses of water, and curtailing that water use which is less beneficial even when it is economically gainful. During the most recent drought in California, the State Water Board curtailed appropriative water rights in order of priority. But it exempted from curtailment water used for essential human health and safety needs, in amounts of 50 gallons per person per day (an amount calculated to provide for eating, drinking, and essential sanitation). In effect, this arrangement declared that water used for agricultural, industrial, and other municipal water uses was less beneficial than water used for human health and safety, and, notwithstanding an earlier priority date, would be curtailed first.
The state has at times also regulated certain uses of water which are highly inefficient, even though they carry some economic benefit. For instance, the regulation establishing minimum instream flows in the Klamath watershed mandates that “inefficient surface water diversions in the Scott River and Shasta River watersheds for livestock watering, which result in excessive water diversion for a small amount of water delivered for beneficial use, are not reasonable in light of the alternatives available”.[13] And the Board has also curtailed water use as unreasonable when its use would imperil minimum instream flows for environmental needs, while allowing human health and safety diversions.[14]
In these ways, the Board has demonstrated that a hierarchy of need exists, and also that whether a use of water is reasonable or not can depend on changing environmental conditions and the other water uses that it impedes.
Under an expanded understanding of what is required for beneficial, reasonable use of water, the California government could enact laws requiring water rights to be used for more efficient purposes preferentially or be lost as per the longstanding common law requirement that appropriative water rights are retained only during continuous beneficial use. This would not necessarily entail stripping rightsholders of their rights by law. It would, however, encourage those rightsholders to either sell their water rights to those who will put that water to economically and socially gainful uses, or to change their usage patterns.
The government could also take the less drastic step of explicitly prioritizing more beneficial uses during times of drought, or when curtailment is otherwise required. Instead of the broad category of all beneficial water uses being curtailed by priority date, with only a small exception for human health and safety needs, the government could create a detailed hierarchy of less and more beneficial uses, where human health and safety needs, other human water uses, other municipal water uses, industrial water use, high value specialty crops, row crops, and grass and alfalfa are each assigned more or less importance. Under this scheme, in the event that insufficient water exists to supply all water rights, water used for alfalfa and other feed grasses would be curtailed in order of priority before the lowest-priority water rights used for high value specialty crops. This would not divest any water user of their rights, but would incentivize them to switch to more productive water uses to avoid the state rightly deprioritizing their negligibly economically productive water usage during times of shortage.
Neither of these policies could presently be enacted by the State Water Board. Rethinking what it means for a use to be beneficial would require action by the state legislature. But as water grows increasingly scarce, and agriculture accounts for a decreasing proportion of California’s economy, the pressure for broader legal reforms of the water rights system is growing. Eventually, the legislature of California may feel the need to prioritize the 95% of the state population living in urban areas above the agricultural interests which account for 80% of the water use in the state. And when they do, constitutional and common law justifications will exist for prioritizing productive use of water.
[1] Kurtis Alexander, California has struggled to track water use. A new system should fix this, S.F. Chronicle (Oct. 21, 2025), https://www.sfchronicle.com/california/article/water-rights-21112273.php.
[2] CA Dept. Water Resources, Water Transfers, https://water.ca.gov/Programs/State-Water-Project/Management/Water-Transfers.
[3] Josué Medellín-Azuara and Jay Lund, Dollars and drops per California crop, California WaterBlog (April 14, 2015), https://californiawaterblog.com/2015/04/14/dollars-and-drops-per-crop-in-california/.
[4] Jeffrey Mount, Ellen Hanak, and Caitlin Peterson, Water Use in California, Public Policy Institute of California (April, 2023), https://www.ppic.org/publication/water-use-in-california/.
[5] Federal Reserve Bank of St Louis, Resident Population in California, Federal Reserve Economic Data (2026-03-03 5:41 PM CST), https://fred.stlouisfed.org/data/CAPOP.
[6] U.S. Bureau of Economic Analysis, Real Gross Domestic Product: All Industry Total in California [CARGSP], FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/CARGSP, March 26, 2026.https://fred.stlouisfed.org/series/CARGSP.
[7] Mount, Hanak, and Peterson, supra.
[8] Id.
[9] Ca. Const. art. X, § 2.
[10] Maeris v. Bicknell, 7 Cal. 261, 262 (1857); Nicoll v. Rudnick, 160 Cal. App. 4th 550, 561 (2008).
[11] Ca Exec. Order B-40-17, (April 7, 2017) https://archive.gov.ca.gov/archive/gov39/wp-content/uploads/2017/09/4.7.17_Attested_Exec_Order_B-40-17.pdf
[12] See United States v. Carroll Towing Co., 159 F.2d 169, 173 (2d Cir. 1947).
[13] Cal. Code Regs. tit. 23, § 875 (2026).
[14] Cal. Code Regs. Tit. 23, § 2921 (2026).