4.8.5. Water Rights.Water rights may have a substantial impact on the uses to which property can be put and, as a result, on market value.1011 The laws governing water rights vary significantly by state, county, or other local jurisdiction. Water-rights law may also be an important consideration in determining liability in inverse takings.1012 Applicable water laws must be taken into account in determining market value for purposes of just compensation,1013 and appropriate legal instructions may be required. 

State laws on surface water rights generally follow one of three systems. In most Eastern states, water law is based on the doctrine of riparian rights. Broadly, water rights are allocated to owners of riparian land—that is, land adjacent to a body of water. Various laws in riparian-doctrine states regulate reasonable use to protect other riparian owners. In most Western states, where the water supply is more limited, water law is based on a prior appropriation system. Under this “first in time, first in right” concept, water rights are allocated based on when a person puts a quantity of water to actual beneficial use, regardless of whether that person owns riparian land. Finally,several Western states (including California, Texas, and Oklahoma) originally recognized riparian rights but later incorporated an appropriation system, creating a hybrid system with both riparian and appropriation elements. Beyond these three surface-water-rights systems, unique variations apply in Hawaii and Louisiana, and pueblo water rights affect a few places in the Southwest. Groundwater rights in the United States are generally allocated based on ownership of overlying land, prior appropriation, or state management.1014

Special rules regarding riparian lands adjacent to navigable waters and the federal navigational servitude are discussed in Section 4.11.1.