If you own or run a business, you understand the phrase: "cash is king!" Similarly, consumptive use volume is the cash equivalent in the water market. What do I mean by this? Well, an increasingly common theme for water transactions across the West is for the administrative agencies to only transfer the water right volume of water historically consumed. This action decreases the potential for adverse impacts and helps ease resistance to water market transactions. As a result of this administrative stance, the single most important volume in the water market has become "consumptive use." To better understand this importance, lets look closer at the volumes associated with surface irrigation water rights as they relate to a basic income statement.
1. Diversion Volume (Revenue). The diverted volume pertains to all of the water diverted from the source. For example, lets say a water right's beneficial use is for flood irrigation. If this water right owner opens their headgate and runs 1 cubic feet per second for 120 consecutive days, the diverted volume for this water right is 237.6 acre-feet. For the purposes of the income statement analogy consider the diverted volume the Revenue.
2. Nonconsumptive Volume (Expenses). When applying traditional flood irrigation methods much of the diverted volume is not consumed by the crop. This water includes conveyance water, return flows, waste and seepage water. In essence, this water is the equivalent of expenses. It is required for business (to deliver water), but doesn't appear on the bottom line at the end of the day. The nonconsumptive use varies from project to project and is difficult to calculate because of the dynamics of water.
3. Consumptive Use Volume (Cash): Consumptive use pertains only to the annual volume of water used for beneficial purposes. The consumptive use for irrigation includes water transpired by growing vegetation, and evaporated from soils. This is water that does not return to ground or surface water. As a result, this is the water that is available for transfers -without adversely impacting other users- and directly represents the water market "profit" at the end of the day.
When viewing your water rights from a business perspective, diverted volume (revenue) minus your nonconsumptive volume (expenses) equals you water right conumptive use (cash). This value dictates you water right value and defines the water market opportunities for your water right assets.
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