Today I’m speaking at a CLE conference here in Sacramento on water rights. Here’s a little excerpt from my remarks.
But in the case of water rights, the right to exclude is not paramount; rather, what is paramount is the right of use. Water rights differ from most other property rights precisely in that they are usufructuary. Thus, when the government says that one cannot use water to which one is otherwise entitled, the impact of that regulation on one’s property interest is as severe as the physical occupation of real property; for in both instances, the paramount “stick” in the relevant bundle has been taken. And, just as physical occupation impinges the important but secondary right to use real property, so too does regulatory restriction on water rights impinge those rights’ important but secondary right to exclude for water rights. If a water right holder must let the government “use” his water for environmental purposes, then the fact that he can still exclude other private parties from using that water is no consolation at all.
Hence, critics of applying a categorical compensation rule for water rights miss the point when they attempt to poke holes in the analogy of water rights takings to physical occupation. What matters is not that the impinging government action is similar to the physical occupation of real property, but rather that the right that the government’s action impinges is as significant to water rights as the right to exclude is to real property. Using that analogy, government use restrictions on water should enjoy the same categorical rule of compensation as physical occupations of real property.