This paper examines potential barriers to water banking as a tool to manage scarce water resources in the western United States. A water dispute is described in northwestern Nevada. The paper outlines the concept of water banking to manage the dispute and discusses the results of a survey to assess local farmers' willingness to participate. Results indicate that farmers axe willing to fallow cropland and lease their water rights to a water bank conditionally. These conditions include:

1. farmers maintain local design, control and operation of a water bank,
2. changes to water law to prevent water right losses, 
3. enable temporary water transfers to occur as part of the hay crop rotation and
4. understand and anticipate potential negative economic impacts to agriculture suppliers and other related local industries from water banking.

Introduction
Water scarcity is one of the most complex and pressing issues facing the arid western United States. Compared with other economic sectors in the west, irrigated agriculture remains the largest user of freshwater accounting for 74 percent of total water withdrawals (Gollehon and Quinby, 2000). Demand for this scarce resource is growing and increasingly represents urban interests whose priorities for water use are divided among recreation, protection of threatened or endangered species and human consumption (Schaible, 2000). Farmers are named as defendants in a number of lawsuits in the western United States where the competition for water resources remains fierce and volatile.

Water transfer mechanisms such as water banking often are proposed as a way to satisfy increased water demand and resolve these disputes. A water bank is a centralized institution that facilitates negotiated voluntary water transfers for a specified time-period without a permanent change in water rights. In order for a water bank to function, there must be institutional arrangements to legalize short-term transfers, a centralized system to monitor release and delivery of banked water, adequate hydrologic capacity to allow storage and delivery without significant water loss to users and water users who desire and are able to rent water. The centralized aspect of a water bank, in particular, can reduce transactions costs through identifying the suppliers and demanders of short-term water transfers, negotiating price paid for water and facilitating the storage and delivery of water to users at the appropriate time and location.

In theory, the market place can direct the flow of water from lowest to highest value (Gould, 1988). Benefits to society from market-based water transfers include the provision of water for recreation and urban consumption plus increased in-stream flow to protect wildlife habitat and ecosystem health. In an effort to consume less water and, consequently, provide water in exchange for revenue, farmers may be more likely to invest in more efficient irrigation technology or grow less water intensive crops (Green and Hamilton, 2000). In over-allocated systems, market-based transfers could result in additional water supplies to help expand existing farm operations, "make whole" junior appropriators or supply other competitive nonagricultural uses. Individual economic incentives for farmers to participate in water banks involve strategic fallowing of fields. When the anticipated market price for an annual crop is significantly low or when rotation of perennial crops is necessary or timely, farmer may choose to fallow fields and receive cash revenue for water. In years when farmers may need to fallow fields, a water bank offers the opportunity to potentially increase or stabilize a farmer's income. This may mean the difference between some farmers remaining in business or selling out.

In sum, in western states where water rights typically are already fully or over adjudicated, water banking can serve as a potential tool to manage scarce water resources. In spite of the incentives described, barriers to the development of water markets are widely documented. Much of the research literature on barriers focus on third party effects that involve a threat to water rights as established through Prior Appropriation Doctrine (Acton and Narayanan, 2000; Gould, 1988; MacDonnell, et al., 1994, 1995; Gopalakrishnan, 1973; Huffaker, Whittlesey and Hamilton, 2000; Whittlesey and Huffaker, 1995; Whittlesey, 1997). Additional potential barriers involve hydrologic limitations and economic externalities (Gillilan and Brown, 1997; Green and Hamilton, 2000; MacDonnell, et al., 1994; McKinney, 1991). Potential social barriers involve farmers' reluctance to participate in a solution they may perceive as foisted upon them either through governmental intervention or by special interest groups (Colby and d'Estree, 2000; Gray, 1989).

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