Washington State follows the prior appropriation, Western Water Law principles. Here as in other states, water rights are usufructory rights, which means that the water itself is a public resource held for all to use. However, the use of the right, once granted by the state, is a property right. This property right can be transferred between users – bought and sold – so long as there is no impairment to existing water rights. Generally, because of impairment concerns, this means that rights can be transferred downstream, but generally not upstream.
Significant concerns have been expressed about the impacts of water rights being sold by upstream, typically smaller farms, to buyers downstream that are often corporations and larger farms. When that happens, water scarcity and limited availability of water rights reduces the available water supply to the affected community. While each water right transaction is unique, large and highly publicized attempts by investment bankers to acquire large agricultural water rights and transfer them downstream to other farms and communities raises the question about what the economic, social, and environmental impacts are from these types of transfers.
Legislative proposals introduced in the 2020 Washington State Legislative Session proposed to limit how water rights could be acquired and transferred. Some legislators suggested that there should be limits or prohibitions on out-of-state entities (such as investment banks) from being able to purchase water rights. It is likely that some of these concepts will be introduced in the upcoming legislative session, with the possibility that such restrictions could be adopted into law.