Water vs. water rights
In American law, water is deemed 'personal property'. Personal property includes 'goods', i.e. things that are movable. The Uniform Commercial Code covers the law of contracts for the sale of goods and would therefore cover water purchase contracts. In contrast, water rights are deemed 'real property'. A water right is a right to use a certain annual quantity of water at a certain place, diverted from a specific point of diversion at a certain rate, and in perpetuity - as long as the water right holder follows the law and the prescribed conditions of the water right. Typical real property concepts and documents apply to sales of water rights just as they apply to sales of land: the deed is the conveying instrument, the mortgage is the security document and the statute of frauds requires that contracts of sale be in writing. But water rights are not exactly like land rights: a water right is a right to use the water, not ownership of the water; some types of water rights may be lost by non-use; and state constitutions or statutes may declare that the state's water resource is owned by the public or dedicated to the use of the public.
The law of groundwater allocation: various methods2
Several doctrines have developed in the USA for groundwater allocation. Some states use the Rule of Capture (also known as the English Rule or Absolute Ownership Doctrine), which holds that the owner of a tract of land owns all water underneath that land and can pump water without limit, except for prohibitions on malicious or wasteful use. Similarly, the Reasonable Use Doctrine (also known as the American Rule) permits unrestricted pumping, except that the use of the water must be for a reasonable purpose and be used on the landowner's land. The Correlative Rights Doctrine holds that landowners overlying an aquifer must share the aquifer. The Prior Appropriation Doctrine applies the principle of 'first in time, first in right' to groundwater; the earlier 'senior user' may enjoin a later 'junior' right holder who impairs the 'senior' right holder's use. The Restatement of Torts §858 rule combines elements of the doctrines of Reasonable Use and Correlative Rights.
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