Water rights and their associated infrastructure support human needs and wants, from agriculture to drinking water to industrial uses, but also impose significant external costs, including impacts on infrastructure, ecosystems, food production, and other human uses. In some cases, these costs can be partially abated through careful flow management, physical habitat improvement, and other direct actions, but mitigation requires funding and dedicated water, both of which typically are in short supply. Some state water rights allocation systems include consideration of the public interest when deciding whether to grant a water right, but even water rights that pass a public interest test could impose significant external costs. Current approaches do not adequately address the external public costs associated with water withdrawals, leading to over consumption of water and subsequent loss of the goods and services provided by intact water systems. Current approaches also raise distributive concerns, in that those paying the price of water development do not reap most of the benefits.In this article, I argue that the exactions framework, long used by local governments to manage or mitigate public costs associated with a particular land use, offers a better approach for water rights permitting. Local governments that issue discretionary permits for land use changes often condition the permits on exactions, either the dedication of land or the payment of funds to offset public costs associated with the land use change. Other authors have argued for applying the exactions framework to climate change and to the energy demands of new developments. Here, I make the case that imposing water rights exactions would improve water right permitting by: (1) internalizing the public costs of water withdrawals; (2) producing fairer, more efficient outcomes for other water users and ecosystems; (3) mitigating existing distributive concerns; (4) allocating dedicated funding and water for management of public costs associated with water rights, and (5) allowing regulators to condition water use with requirements and restrictions that might be a taking outside of the exactions context
