Pressure for water rights holders to consider alternative means of water allocation has come about by increasing urban growth, concern about drought, and environmental awareness. To balance this discussion, No. 7 in the series considers common concerns about water banking. Examining both the benefits and costs of water banking aids in understanding more fully the potential consequences of choosing water banking as a tool for water resource management. In arid western states, water banking offers an alternative tool for water management. Pressure for water rights holders to consider alternative means of water allocation has come about by increasing urban growth, concern about drought, and environmental awareness.
Water banking is a subject of increasing interest as well as concern and controversy.
They are concerned also about the threat that water markets might pose to their property rights as water rights holders. The possible undesirable effects of water banking are described often in legal terms as third party injuries. A negative externality refers to undesir-able repercussions from shared use of a scarce resource. Repercussions may be described in economic, social, or eco-logical terms, or some combination of all three. The basic idea though is that when one individual demands more of the scarce resource it results in an increase in cost for another demander.