Monday, April 19, 2010

What Is the Difference Between a Water Right and a Water Share?

In the many conversations I have had with others regarding water-related issues, the most common mistake I hear is the confusion between "water right" and "water share." Hopefully the following discussion will clarify the distinction.

In Utah, all water is owned by the public. The Utah Code provides that "All waters in this state, whether above or under the ground are hereby declared to be the property of the public, subject to all existing rights to the use thereof. " The Utah Division of Water Rights administers the water on behalf of the public. In order to legally use water, a person must have a water right; in other words, the person must have permission from the Utah Division of Water Rights to use some of the public's water.

Many water rights are owned or held by mutual water companies (e.g., canal companies, ditch companies, or irrigation companies). The company issues stock to shareholders. By owning stock, a shareholder is entitled to use a portion of the company's water right. For example, if a ditch company owns a water right for 1,000 acre-feet of water and the company has 1,000 shareholders, each share represents the right to use 1 acre-foot of water from the company's water right.

The two terms are not interchangeable. Water shares ARE NOT water rights. The distinction between water rights and water shares is important for many reasons. For example, the manner of transferring water rights and water shares differs drastically. To transfer water rights (which are generally considered real property), a seller must convey the water right by deed, the deed must be recorded in the proper county recorder's office, and a Report of Conveyance must be filed with the Division of Water Rights. (Click here for more information.) Water shares are transferred according to the Utah Uniform Commercial Code and the water company's rules and regulations--generally by the seller endorsing the back of the share certificate and then having the company secretary issue a new share certificate to the buyer.

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