A law and economics approach to resolving reservoir sediment management conflicts

The loss of the world's reservoir capacity to sedimentation can be mitigated by altering dam operations to release sediment downstream. However, legal uncertainty regarding whether dam owners are liable for damages to surrounding landowners due to altered operations provides a significant disincentive for sustainable sediment management. Past work recommends that courts apply a "rule of reasonableness" in assessing liability: dam owners should be held liable for damages only if they act unreasonably in altering operations, and surrounding landowners should take reasonable measures to mitigate foreseeable damage. Based on past cases, judicial determinations of reasonable reservoir management and reasonable precautionary measures by landowners are generally highly speculative, controversial, and based on limited information. Courts can ease the future burden of making these difficult determinations with rulings that create economic incentives for parties to act reasonably. For example, courts might entitle landowners to be free from sediment related damages, and protect the entitlement with a liability rule. This gives dam owners an economic incentive to release sediment only if the benefits of doing so outweigh court ordered damages to landowners. Past judicial decisions are largely consistent with this legal regime.