In the western US, water rights generally derive from first historical productive use of the water. Older uses take precedence over later uses in case of low wa

In the western US, water rights generally derive from first historical productive use of the water. Older uses take precedence over later uses in case of low water years. So a farm (mine, factory, city) established in the 1800s has a right to use that amount of water before cities established later can take any water. These rights are transferable (sellable), so cities can purchase water rights from other holders. Note that downstream rights holders may have prior claim to water over upstream users. Water allocation rights are generally use-it-or-lose-it, so early water rights are incentivized to make even marginally productive use of their full allocation, rather than to leave it for other higher-value use.