STEVE INSKEEP, HOST:
California's drought has the state rethinking who has the right to its water. A complex system dating back to the 19th century divides up the state's supplies. And that system is not working well in this 21st century of greater population and drought. Californians are being forced to rethink how they share water. Molly Peterson reports from our member station KPCC.
MOLLY PETERSON, BYLINE: Over the last dozen years, fields of sugar beets and alfalfa an hour east of San Francisco have given way to a planned community of single-family homes.
This is Mountain House, a town of 15,000. To build it, says general manager Ed Pattison, developers bought water from a neighboring district with a-hundred-year-old rights.
ED PATTISON: They felt that they were making the right decision at that time - one straw, one water supply.
PETERSON: This summer, state regulars turned off the supply to Mountain House and other senior water users for only the second time in history. Pattison had to diversify the town's portfolio quickly by paying double to replace water.
PATTISON: I can't say that we even have the budget for it.
PETERSON: Mountain House is just a quarter built out so far. Now, Pattison says, prospective homebuyers are raising doubts about his still-growing town.
PATTISON: People who had actually bought homes that are in escrow are worried about their investment. And I told them, we're working through this. You will have water.
PETERSON: California water rights have grown into a tangled mess since the Gold Rush. Some people have rights because they own property next to a river. And it used to be you could claim water by nailing a note to a tree and diverting its stream. Those people are still at the front of the line. Then after 1914, people applied to the state to get water permits. Regulators keep those hundred-year-old junior rights in a fireproof safe in Sacramento.
(SOUNDBITE OF BEEPING)
PETERSON: Records room staffer Matt Jay opens up the safe.
MATT JAY: Here we go.
PETERSON: He reveals paper claims with golden seals, real ink signatures and...
JAY: And all sorts of small print. This was issued July 3, 1919.
PETERSON: Even just these newer rights together claim five times as much water as the state has in a normal year. On top of that, the state is only now starting to track how much the oldest, highest priority users take. Any right to water in California is more like a license to look for it than a guarantee you'll get it. And Brian Gray, an emeritus law professor at UC Hastings, says under the state constitution, water use has to be reasonable.
BRIAN GRAY: Reasonable in light of the available water, reasonable in light of competing demands for water, reasonable in light of the effects that diverting and using the water may have on the natural environment.
PETERSON: What's reasonable is evolving, thanks to drought and climate change. More water users are fighting costly and heated legal battles over this idea. But Gray and others believe California can take a new approach - helping rights holders to buy, sell and move water around more easily. Australia did something similar, says lawyer Alex Campbell, and for a similar reason.
ALEX CAMPBELL: In a word, drought.
PETERSON: Campbell works for Waterfind, a company that created a NASDAQ-like water-trading platform during Australia's recent drought. He says trading water promotes better use of it.
CAMPBELL: Having a market that everybody has access to, no matter how much money or how much land they have, means that there is an equilibrium that's naturally found within the market.
PETERSON: Waterfind is hoping to help California establish real-time water trading, like Australia has. Some farmers and cities say buying and selling water looks a lot better now that the drought is making the limits of their rights clearer. For NPR News, I'm Molly Peterson. Transcript provided by NPR, Copyright NPR.