On the Difficulty of Fixing Water Problems

There have been a series of helpful exchanges, in the comments here as well as elsewhere on the web, between economist David Zetland and Francis, a veteran of California’s water policy world.

Zetland is a bright and articulate advocate for the use of market mechanisms to solve the thorny problem of water distribution under conditions of scarcity. David’s done a lot in helping me understand the value of markets as a potential water policy solution, and the distortions caused by market failures inherent in our current system.

Francis is an equally bright and articulate advocate for what I might call the “realpolitik” of the actual on-the-ground water world. Francis’s repeated “yeah, but” arguments resonate with my three decades as a journalist watching institutions succeed and fail over the years at trying to solve societal problems large and small.

Here, with a  bit of literary license, is a template for the exchange:

DZ: “Markets!”

F: “How, in practice, do you plan to implement that?”

When I wrote last month about Lake Mead’s dropping levels, for example, David said:

[T]he solution to this problem is obvious. Lower demand. If you need a hint on how to do that, I can tell you in 3 minutes, or you can just go and RAISE PRICES.

To which Francis responded:

Really, if you can explain in three minutes how to undo the 80+ years of Supreme Court rulings, Acts of Congress, international treaties, interstate compacts and all the rest making up the Law of the River, have at it and post the video on your website. I could use a good laugh.

Francis often follows with specific examples of existing legal, institutional and political structures that stand in the way of “Markets!” and, by extension, in the way of any particular recipe one might offer up to solve the problem.

And therein lies the reason I’ve become convinced that Francis is having the better of this exchange. It is not enough to articulate a particular solution that might better allocate the scarce resource. Markets? A ban on lawns? Abandon Phoenix? Sure, whatever. But to be in any way relevant, you have to show how that solution might be effectively implemented given the existing legal, institutional and political framework, along with the physical plumbing we have in place or could conceivably build to move the water hither and yon.

The latest round of the argument has played out over the last couple of days over on David’s blog, in response to a proposal by David for the convening of a “California Water Conference” to figure out how to solve that state’s water problems, with the conference’s conclusions to be made binding.

Francis was characteristically quick with the realpolitik:

There are plenty of solutions; there’s just no political will to make hard choices because the politicians are accurately reflecting the will of their constituents. (emphasis in original)

One sees this over and over again in western water fights: any particular suggested solution has winners and losers (if it wasn’t so, the problem would be trivial to the extent that we would already have solved it and wouldn’t be having the conversation) and the political representatives of the losers rightly object. I agree with Francis that the notion of a conference with binding solutions that could overcome the constraints imposed by existing legal and political institutions is, indeed, ridiculous. You need only look at the comment thread on David’s blog, as advocates for particular constituencies complain about being left out, to see that this would not end well.

This is not, however, to say that the problem is hopeless. I’ve been spending a lot of time of late reading about and interviewing participants in the development of the 2007 shortage sharing agreement (SSA) on the Colorado River, which has what seems like a couple of key characteristics that are a necessary precondition for effective solutions.

One is a shared definition among participants regarding the problem to be solved, what Elinor Ostrom calls “an authoritative image”. A key part of this is a common understanding of the data (which in the case of the SSA was an agreed-upon use of the Bureau of Reclamation’s Colorado River model).

As I wrote in another setting (sub/ad I think req), a discussion on how to grapple with water problems on the Rio Grande:

By that, Ostrom meant that everyone involved in trying to solve a shared resource problem like our water system must have a common understanding of the problem’s details: how much water there is and what happens under different future scenarios in terms of its continued use.

But the real key is to have participants – genuine stakeholders with a strong interest in developing a solution with a recognition that the risks of not getting to the table and figuring something out are not acceptable. That’s a hard one to force.

15 Comments

  1. gee, my blushes.

    For the record, I have no particular disagreement with trying to bring economic ideas to bear more effectively on the West’s water problems. But as I have articulated here, on David’s blog and most recently at Obsidian Wings (here, if anyone’s interested) blog, doing so is really hard.

    Residential water service is the purest of natural monopolies; bureaucrats are going to be put in charge. Agricultural water rights have their roots deep in California’s history and will not be surrendered lightly. The Bay Delta is the hub of the water supply for a state with 35 million people and a top 10 economy worldwide; of course politicians will be involved.

    The way forward is not to fantasize about clean slates or secret conferences. But one way forward is through getting interested parties to recognize that the discipline of economics, including for example such specific tools as auctions and demand-based pricing, can assist in resolving deeply entrenched disputes.

    I’d be interested to read how DZ, or anyone else, thinks the Interim Shortage Criteria could have been improved, in a way that would still have gotten the approval of all of the 7 states.

  2. It’s funny how Francis seems to walk right past my words and ideas (here and elsewhere).

    I could have written the paragraph with “Residential water monopolies…”

    I’m not working with fantasies but new ideas and ideas that take politics into account (as Francis mentioned with auctions, and all-in-auctions), but I wish that he (and others) would read the details of those idea with a little more attention.

    My dissertation (and several papers) gets into the complications that politicians can create and/or support. So, it’s quite sad to me that I cannot seem to make plain language even plainer.

    Now — onto your post John…

    “you have to show how that solution might be effectively implemented given the existing legal, institutional and political framework”

    and I have, with AiA, some for free, pay for more.

    “any particular suggested solution has winners and losers (if it wasn’t so, the problem would be trivial to the extent that we would already have solved it and wouldn’t be having the conversation)”

    and that’s why I recommend markets, and economics, since those are win win situations. As an alternative to politics, win-win can be much more attractive.

    I’ve explained these ideas many times, but perhaps they are counter-intuitive to you all, perhaps because it involves unfamiliar ideas that have not been brought to bear in water — ideas from economics.

    I will, of course, continue to engage on these issues, but please try to see how these ideas can be used or adopted, not the potential problems that may not occur or matter.

  3. ps/the interim shortage criteria could have been resolved with equal reductions in rights, with the opportunity for individual holders (MWDSC, CAP, et al.) to trade rights.

    In other words, cap and trade.

    What we saw instead was a scrum of squabbling schoolboys, all eager to offer some subjective opinion of why they should get more and others less.

    It’s no accident that lawyers and politicians seem to see these occasions as win-lose, zero-sum games. That’s because their professions are dedicated to being winners, and making others into losers.

  4. David -

    So let’s take your interim storage idea. It collides with legal reality and political reality. To do what you suggest would require changes in the federal legal structure governing distribution of Colorado River water. And that would have required the agreement of all the states, which would not likely have been forthcoming.

    So what you’re suggesting might be great in theory, but would never have been possible in practice. So what’s plan B? How might market mechanisms be brought to bear on the problem given the real world constraints imposed by the existing Law of the River?

    We know existing western water law creates enormous market distortions. It’s easy to say, “Well, let’s just change the law.” But that’s not going to happen.

    In the shortage sharing discussions, the Environmental Defense Fund and others suggested a very clever set of ideas that created some interesting economic incentives for conservation in their “conservation before shortage” proposal. It didn’t make the cut, but it offered important concessions to the realpolitik of the Law of the River, and made some suggestions that we could yet see implemented on within-state water ops in Colorado. So the kind of ideas I’m looking for are out there.

  5. No ideas yet.
    Just some questions.

    The water behind the dam in Lakes Powell and Meade. Who in a legal sense owns it? Legally, who can force the release of this water through the dam? If the U.S. government owns the water (not the dam but the water), what case law establishes that they own the water? If there is no case law, then who owns the water? On sharing scarce resources, what if some of the stakeholders do not agree with the distribution of the scarce resources? What laws might apply then?

    More questions, possibly, once I read the clever ideas of the EDF.

  6. OK,
    I went and read the EDF’s CBS document.
    I may be missing something, but the bottom line appears to be a water market where some buyer pays farmers and others not to use their water allocation. This sounds like Zetland’s all in auction.

    On the legal side, if I am a California farmer with legacy water rights of 1,000,000 acre/feet a year and these rights predate the state of California joining the Union, I want my water because, according to law, I own it. Droughts and the Law of the River are not my problem since I never signed my legacy rights over to any of these folks. Is there a flaw in this argument? If so, what is it?

    Similarly, if I am running for governor of Arizona for instance and Arizona does not get enough water from the Colorado, then it seems like a no lose solution for me to sue the Federal government for more water. If I get the water, then I am elected governor. If I do not get the water but try to get it, I may still be governor. If I do not even try but cede the water to the Federal government on shaky legal grounds, then my opponent will claim that I do not care about Arizonans and I will probably not be governor. The scenario in this paragraph is another example of the multi person prisoner’s dilemma that occurs so often in politics. Does anyone see flaws in the logic or solutions to the dilemma?

    My guess is that as the water diminishes, there will be lots of law suits, lots of ‘Just conserve’ bumper stickers that do not solve the situation, and very interesting gaming of the system and states’ rights issues.

    Comments?

  7. @John — “It collides with legal reality and political reality. To do what you suggest would require changes in the federal legal structure governing distribution of Colorado River water.” I thought that was the whole point of the recent renegotiation of the CRC — to change the “reality.” In short, it’s ALL a political process, and politicians can decide that it’s all null and void, if they want. Case law does not apply to regulatory guidelines (which is perhaps why we are in this mess). Now I think I see what you and Francis have in common in terms of not getting it…

    @Eric — some of these rights have been superceded by BoR contracts.

  8. David -

    What “recent renegotiation of the CRC” are you talking about? All the negotiations I’m aware of on the Colorado River (and I’ve spent a *lot* of time reporting on this) involve the presumption that there will be no changes to the Compact, and no requirement for Congressional action to modify the main body of federal legislation that makes up the Law of the River. It’s also intended to avoid the risks of litigation. It’s a political process that recognizes those as fundamental boundary conditions for what can be done.

  9. David, I’ve read your work quite closely.

    1. The all-in auction is a model. As far as I am aware, it has not been applied to a single river system anywhere in the world,much less under US law. The Colorado River is one of the most heavily litigated and adjudicated bodies of water on the planet. Have you even run the model against the Colorado River in a mock auction with various sophisticated individuals filling the various roles? Maybe you want to aim your sights a little lower before trying to persuade (quite literally) the Governors of seven different States, the President of the US and a dozen or so general managers of large water systems and other interested parties that you’ve got the best way to solve disputes on the CR.

    2. While it may not seem so very often, this country is still based on the rule of law. And under the federal and state constitutions, government simply lacks the power to seize property rights without compensation. (And courts may even prohibit the seizure altogether as Truman found out in the Steel Mills Cases.)

    The allocations under the LoR are property rights protected by the state and federal constitution. As recently as 2006, the US Supreme Court reissued its decree on the River. There is no higher authority. If Congress were to try to invalidate (even rewrite) the LoR, it would cause (among other things) a huge political firestorm in the Western states and about a decade or so of litigation on really hard issues like the power of the federal government to impair rights created under state law without compensation. At the end of the day, either the feds would lose or we’d have a very different system of property law and federal-state relations in this country.

    3. There are few useful analogies to water law. The best I’ve come up with is that rights to water are a kind of homesteading. The rights were granted because the grantee made use of the water. In the intervening 150 years or so, people have built dams and farms and other infrastructure in reliance on that original grant. And it would be just about as crazy for the federal government to invalidate all the property titles in, say, the State of Oklahoma as it would for the federal government to try to rewrite the LoR.

    4. “Squabbling schoolboys”? I guess you’ve decided not to work professionally on California water issues. Lord knows I’ve said some stupid things in my day, but you just insulted pretty much everyone who might be in a position to hire you.

  10. David -

    At the risk of piling on, the “squabbling schoolboys” comment bothered me as well – and not because of a concern about your job prospects.

    It fails to recognize that the players were each quite legitimately looking after the interests of their constituents. They were not being bad people. They were doing what political actors do in such situations. That’s one of the boundary conditions of how processes like this play out. (In fact, this sort of self-interested behavior seems like basic economics to me.)

    And my reporting suggests that, far from squabbling, they were in fact working hard trying to find a solution space that recognized those legitimate interests It’s noteworthy, for example, that it was a member of the SNWA delegation who came up with a way of addressing Arizona’s key concerns.

  11. Francis or anyone,
    You talk about property rights and homesteading.
    It seems as if water rights are written in absolute area (acres one foot deep) but that the total acreage is shrinking.
    What happens when the rights acreage exceeds the total available acreage, especially if one or more of the rights holders demand their absolute acreage. If the government decides that everyone should get a fraction of their owned acreage, isn’t this the same as the illegal government takings that occurred with land in Connecticut that the local government wanted to sell to developers?

  12. Eric: in theory water gets allocated according to priority; the person with the highest priority gets all his rights, then the person / entity with the next highest priority gets all her rights, and so on down the line until there’s no more water. In practice, California water managers recognize that they can’t simply totally screw over Las Vegas, and so they negotiate new deals. This is what happened with the shortage criteria.

    And when parties, public or private, reach a negotiated solution over their own disputed property rights claims, the constitution is not implicated. The constitution comes into play when the government takes property.

  13. Francis,
    What is the property that is being negotiated?
    You say that California water managers (the Government as far as I know) can’t simply totally screw Las Vegas (again the government but at a different level) and so they (multiple governments) negotiate agreements.
    Where do the rights of the individual private owners show up in this negotiation?

    My posited California farmer probably does not care about the ‘rights’ of the city of Las Vegas nor about bureaucrats in Sacramento. She just wants her water to grow her crops. Does she get a voice in this discussion? Can she veto a negotiation that hurts her? If not, what does she actually ‘own?’

    If she owns rights to a certain number of acre feet of water a year, when and where did the government–local, state, or national–get the right to take away some of what she owns.

    In the example in Connecticut, the town government tried to condemn and seize property in downtown so that they would have land on which to make a new shopping mall and industrial site.
    Thanks.

  14. Eric: This rapidly gets way too complicated for a series of comments. Here’s the short version:

    Imperial County is in the south-eastern corner of California, bordered by San Diego to the west and the Colorado River to the east. Farming began in the early 1900s. The Salton Sea was created, in fact, in 1905 when an early attempt to bring Colorado River water to the area failed and the Colorado River ran north for about a year. So farming in that area substantially pre-dates the Interstate Compact which divided up the water rights to the Colorado among the 7 states.

    The Imperial Irrigation District was formed in 1911. IID asserts that it holds all the water rights associated with farming in Imperial County in trust for the farmers there. IID is a special-purpose governmental agency; it is not the County. Instead its sole duties are to deliver water and power throughout its service area (an area somewhat smaller than the County). But the IID Board of Directors is comprised of elected officials and it must comply with the state laws applicable to public agencies.

    This trust idea is critical. The ultimate owners of the water rights are all the farmers in the District’s service area, collectively. But the District has the authority through its very existence to represent them as a whole. So the District has the power to, in essence, waive its claim to a certain quantity of water rights in return for avoiding litigation.

    Until a few years ago, IID claimed to hold senior rights on the CR to a staggering amount of water, up to 3.3 million acre feet of water per year, depending on the amount of snowpack. Under pressure from San Diego County and the State of Arizona, the major users of water on the lower Colorado River sat down and negotiated a major rampdown of the annual demand on the river. This series of agreements became known collectively as the Quantification Settlement Agreement (or QSA). (The QSA is still being litigated.) IID’s rights under the QSA are to about 2.6 million acre feet of water available for farming.

    Farming in Imperial County pretty much goes on as before. About a week before a farmer wants water, she calls the District offices and schedules a delivery. The District assembles all the demands, looks at the scheduled other demands on the canals that run to that farmer’s property and creates a daily master schedule of delivery. The District calls BuRec and requests a release from Lake Mead of the amount of water needed in about four days time, plus carriage and evap. losses. BuRec releases water through Hoover Dam at the best time in order to meet power demand. The water travels down the Colorado River to Imperial Dam (the travel time is about four days), where it is diverted into stilling ponds (to get rid of the silt) then into the All-American Canal. The water travels down the Canal, into the sub-canals and ultimately arrives at the diversion point at the farmer’s property. She lifts the gate and water flows onto her field.

    Even though there’s a drought on the CR, farmers in IID haven’t felt a bite yet, because there was so much water stored in Lake Mead and Lake Powell. But the drought continues and it looks like shortage criteria are going to take effect. Until now, IID farmers were, essentially, voluntarily taking less water to keep the District under 2.6 MAFY. Now it looks like the District is going to need to work a little harder to ensure that it doesn’t go over that hard cap. The procedures by which the District enforces the hard cap are an ongoing topic at IID.

    [yes, that's the short version.]

  15. Francis,
    Just wonderful.
    This was the information that I was missing.

    Thank you very much.

    Eric

    P.S. Yes, I know that there is a much longer version. Thank you for being lucid and concise.

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