Water transfers between agricultural and urban areas can create conflict in the West, but they promise to remain a key tool as water-scarce states deal with growing populations and new industries, according to a new report by the Western Governors' Association.

The report from the WGA and its affiliate, the Western States Water Council, looks at how voluntary water-transfer agreements are being used across the region and offers a set of policy considerations.

"Transfers are occurring all over the West, and there are some clear benefits -- they're efficient, they're voluntary and they're pretty flexible," said Tom Iseman, the WGA's water program director and an author of the report. "But there are impacts, and we need to find ways to address those impacts."

The report looks at history, drivers, policies and trends in water transfers, and includes three case studies of successful projects.

Nathan Bracken, legal counsel for the Western States Water Council and another author of the report, said he was struck by how water challenges and solutions are unique to their local circumstances, and by how important relationships are in dealing with them.

"What stood out to me as we put this report together was the value of people on the ground being able to look at their specific challenges in their basin and work with other members of the basin to come up with a solution that works for them," Bracken said. "That solution might not be applicable anywhere else."

Take, for instance, Deschutes County, Ore. In 2006 and 2007, it was the fifth-fastest-growing county in the country and was facing skyrocketing water demand. At the same time, the region was looking at environmental requirements that called for substantial increases in stream flows to support endangered salmon and steelhead.

The report's case study found that by working proactively and forming a coalition of stakeholders that aimed to address agricultural, environmental and urban needs in an integrated way that included water transfers, reservoir management and an emphasis on water conservation, the region is on track to free up 260,000 acre-feet of water by 2025.

Although water transfers can sometimes have negative environmental impacts, green groups have also been able to use them to their advantage, making purchases of their own to increase stream flows.

The number and type of water transfers in the West vary by state, depending on legal and infrastructure circumstances.

California has traded as much as 1 million acre-feet a year in years with high numbers of transfers. In Texas, trading jumped to 1.7 million in 2011 amid an ongoing drought, after the state averaged 150,000 acre-feet's worth of trades between 2007 and 2009.