Valuing instream flows using the hedonic price method



[1] The Oregon Water Trust (OWT) uses a market-based approach to protect and enhance instream flows in Oregon. We use the hedonic price method to estimate the effect of numerous variables on the annualized price OWT pays for water rights: the amount of water protected by the transaction, transaction type (state approved or contractual agreement), presence of anadromous and/or resident fish, and if a fish is listed under the Endangered Species Act (ESA). We find evidence of a premium for state-approved transactions and for transactions that protect water in streams with listed species. Adjusting the amount of water protected by each transaction to include only rights that will be delivered with a high degree of certainty produces coefficient estimates that are similar, but more accurate, than using unadjusted water rights amounts.