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To obtain a surface water right in the arid American West, private appropriators have been required to undertake actual physical diversion of the water. That requirement largely negates the role of private contacting to preserve or enhance water flows for recreational, wildlife and aesthetic purposes. In this paper a model is developed and used to examine the courts' rationale for denying private claims to instream flows. The ways in which such claims can be made amenable to the prior appropriation system are explored. The paper is motivated by the failure of public agencies to achieve an approximately optimal solution. [ABSTRACT FROM AUTHOR]