I was completely ignorant of the notion of “water markets” for allocating the water of the Colorado River or the Walton family’s role in that promotion until I read this article by Scott Patterson in the Wall Street Journal on the subject:
The first-ever official shortage on the Colorado River has intensified a debate over how to provide water for 40 million people across the Southwest and irrigate fields of thirsty crops like wheat, cotton and alfalfa.
Few voices outside government are more influential than that of the Walton family, billionaire heirs to the Walmart Inc. fortune, who have long advocated water markets as a key part to solving the region’s woes. But some environmental groups say the Waltons drown out other, nonmarket approaches.
A Wall Street Journal analysis shows that a charitable foundation controlled by the Waltons, the Walton Family Foundation, has given about $200 million over the past decade to a variety of advocacy groups, universities and media outlets involved in the river. No other donor comes close. Two federal officials once affiliated with the foundation have been named to key Biden administration posts overseeing the river.
Putting a monetary value on water has raised concerns among those who benefit from guaranteed access to water and those who believe markets benefit investors while hurting farmers and the poor. Water markets in Australia have been blamed for helping dry up waterways due to overuse by a handful of wealthy farmers and investors.
“Any time that the water starts becoming more valuable than the land, you end up with the possibility of outside speculators,†said Andrew Mueller, general manager of the Colorado River District, a public planning and policy agency that oversees water use in western Colorado. Mr. Mueller said his state has been seeing continued interest in agricultural water and lands by outside investment groups.
While it may be an efficient method of allocating a scarce resource, I can’t help but wonder if it would actually comprise an efficient way of misallocating the resource.
I also wonder about the mechanics of such a market: who would set the price (auction?) and regulate the distribution. Would the inefficiency from the administration of these markets, especially graft, overwhelm their benefits? I don’t have any fixed ideas on these subject and I’m willing to learn.
As I’ve said before I think that the underlying problem is too many people for the available water and states that are far too dependent on real estate development. Unless the costs of water that is being more efficiently allocated make their way into the pockets of developers and politicians I’m skeptical that a water market will actually address the underlying problem.
The old Spanish West generally operates under some variant of the appropriation doctrine, whereas here in the East we generally use a riparian doctrine. They differ in that appropriation doctrine evolved in dry countries, and riparian doctrine in wet countries.
In the appropriation doctrine, the state sets up a prioritized list of users for any water source. Each user has a defined allocation. Regardless of what happens downstream, the highest priority used can take its full allocation, even if the stream is dried up. If any water is left over, the second highest user gets to take all of its allocation, and so forth. The lowest priority user only gets water if all the others above it are satisfied.
In the West, states have generally assigned cities the highest priority, followed by farming and ranching, followed by industry. Most critics of the appropriation doctrine would put farming last on the priority list, because it generates the smallest added value to the water used. Under the Walton plan, industry would be able to outbid farmers and ranchers, and they would disappear. Most resource economists would support this.
The main problem with the Colorado River allocations is that they were made years ago during a relatively wet period. The current drought is a common occurrence, if not the usual state of affairs. There simply isn’t enough water to sustain the populations of the Southwest or southern California.
Now large, nuclear-powered desalination plants on the coast would help immeasurably.
The deep aquifers of the Plains and Southwest are fossil deposits dating from the last ice age, and they are also being depleted. There really is no sustainable agriculture west of the Mississippi.
You may be right about agriculture as such, bob, but there’s been horticulture in those areas for 10,000 years or more. What there hasn’t been are population centers of hundreds of thousands or millions of people. That’s what I think is non-sustainable in the West.
I would further qualify your assertion as west of the Mississippi and south of the Missouri—the area served by the Ogallalah aquifer, the “High Plains” aquifer. I believe that agriculture is completely sustainable in the northern half of Missouri, Iowa, and Minnesota. All of those are west of the Mississippi.
This is a bit dated and sarcastic, but accurate.
https://cals.arizona.edu/swes/tucwater2/Spring%202006/10%20WATER%20LAWS%20OF%20THE%20WEST.htm
Contra Bob, the vast majority of water is used for irrigation – something around 85% – at least in the Colorado river basin. Farming has the largest and oldest rights, which are privileged in the current system.
I’m very skeptical of the market system advocated by the Waltons for a number of reasons.
Interesting link, Andy. I think it should be pointed out that those “laws” were formulated BEFORE San Diego, Denver, Salt Lake City, and Albuquerque became major population centers. Angelenos may think they have first claim but they’re downstream and if the upstream cities keep growing, Los Angeles will lose. Phoenix is a case of its own. The population of that valley has waxed and waned over the last several thousand years. I don’t think its present population is even vaguely sustainable.
Again, my opinion is that all of those cities are now too damned big.
Or to put it another way, more than 2/3 of California’s share of Colorado River water goes to the Imperial Valley alone.
Dave,
The Colorado river compact ensures that downstream users get water. Colorado, for example, can’t simply take more thereby leaving less for LA. Every drop is spoken for before the winter snow melts each Spring.
It’s a complicated arrangement, is historically long-standing and has been adjudicated by the supreme court. My biggest skepticism to the market advocates is that unwinding the present system is just about impossible politically. Water has always been controlled by politics and not economics. I don’t see that changing.
My understanding of what’s being proposed would “break” the present Colorado river compact.
Yes, it would have to break the compact.
What are the chances that the state governments involved would all support that and that the result would survive a federal court challenge? My guess is basically nil. There are too many entrenched interests that are powerful political players who’ve largely captured state governments on this issue.
Even though urban areas represent more population and there are more urban representatives in state legislatures, it’s still been difficult for state governments to reallocate water from agriculture to support urban areas. At least IMO, rewriting the whole system is an interesting idea, but mostly a fantasy.
The whole water shortage can and will be characterized as a climate change disaster due to carbon emissions and therefore deserving of major Federal works projects to alleviate the economic damage.
Nuclear desalination is off the table by
NIMBY so I expect a pipeline possibly from the Columbia or even the headwaters of the Platte .
Would that be expensive? Sure would.
“The whole water shortage can and will be characterized as a climate change disaster due to carbon emissions”
As Dave notes above people writing about this generally blame it on the increase in population and depletion of aquifers. Climate change ma play a part as there has been decreased snowmelt.
Like practically everything else in the universe, it’s multi-factorial. A way of looking at things that I find productive is considering remediation strategies in terms of the difficulty of the strategy. Increasing the amount of water in an aquifer is hard. Ending the use of fossil fuels will probably be harder and more expensive than most credit it—especially if nuclear is ruled out. There is presently no such thing as solar or wind baseline power. It’s practically a contradiction in terms. At the present state of technology every power plant other than nuclear or hydro has baseline power furnished by burning fossil fuels. The water shortage is making hydro less reliable.