- Texas is a top water-consuming state in the United States and is increasingly relying on groundwater. Groundwater markets are attracting greater attention as a mechanism for transferring water from rural to urban areas. However, excessive extraction is being exacerbated by the "rule-of-capture" that governs the use of groundwater in Texas combined with widespread subdivision of land. Overexploitation of common-pool resources is not inevitable. A cooperative approach to groundwater management could reduce the negative economic impacts of water transfers in the area of origin and provide landowner incentives to regulate extraction. Landowner associations, monitored by local groundwater conservation districts, offer an instructive model for sustainably managing groundwater while at the same reallocating water resources from rural to municipal uses. Taylor and Francis Inc.