Saturday’s post about Phoenix and the need for proper institutional structures to sort out the West’s water problems was really a bit of shadowboxing with a piece I was working on for today’s paper about New Mexico (sub. ad req.) It’s about an ongoing argument here about a proposed water rights agreement between our Interstate Stream Commission and Intel. The agreement was an attempt by the ISC to do something very much outside the normal water management box, and it’s run into a shitstorm of criticism.
I argue that one of its problems is that we lack the institutional framework under which to consider a deal like this:
But it is also clear that, if López and his team are right about the deal’s legality and merits — and there is reason to think they might be — we do not have the political and institutional framework in this state to have a proper discussion of the issues being raised.
There is no institutional forum for the discussion of an idea like this, a place where the major players with skin in the state water game — the big municipal utilities, irrigators, the pueblos, the state regulators and legislators — regularly sit down to discuss our water future.
The Intel deal is just one small item on the long list of possible solutions to our water problems — increased water conservation, desalination of brackish groundwater, sale of water from agriculture to urban use, improved management of dams to reduce evaporation, long-distance transfers from places that have water to those that don’t, changes in endangered species protections.
All involve, to a greater or lesser extent, old law and engineering versus new realities. But without a sufficiently broad statewide forum in which to have the conversation, the best solutions are likely to founder on the same shoals on which the Intel deal has run aground.
Comments welcome – in fact, encouraged.
Excellent point. Most water institutions were set up for particular users, with particular water supplies. Those institutions often worked at delivering the water, but they were not (are not) structured to move water between uses (ag-urban) or users (ag-ag). This missing inter-operation has become problematic as supplies have grown short/demand increased. Although many advocate a “bureaucratic convergence,” I prefer water markets to reconcile competing interests.
Some fear markets, but they need not lead to thirst (no tap water) or starvation (no ag) — via regulation — and will not lead us there — via common-sense economics.
“…we do not have the political and institutional framework in this state to have a proper discussion of the issues being raised.”
I think we can apply the above sentiment to every issue in this state. Oh well…
I’m glad you used the combined term, “political and institutional” framework, because economists have spoiled the meaning of “institutions” so we never know if it refers to organizations (as in a Rio Grande Basin Council) or legal constructions, like laws or water markets. I think we have too many of the latter and too few of the former! The other important confusion that undermines discussion of water in New Mexico (and the West generally) is the ethics and values we bring to the table. Our water policies are thick with unrecognized cultural values about water: what it should be used for (“beneficial use” and how we should regard nature (stewards vs conquerors). We need to clarify what values we, as a diverse society bounded by a common basin, want to express in our water policies. For that, we need new levels of organizational structures (watershed groups, basin councils, maybe a state water steward rather than an engineer, etc) within which we can come to terms with water, nature, and each other. My organization (www.waterculture.org) is trying to do this, and I invite your participation (also pls visit and comment on my blog, http://blog.waterculture.org)
David –
Thanks for jumping in. I’ve been reading and enjoying your blog.
I’m being intentionally as broad as I can with the phrase “political and institutional framework,” because there are lots of different ways this can happen. I’m not smart enough to prescribe the specific one (nor is it my place as a journalist). If it is your idea of organizations, it has to include what I’ve defined as “people with skin in the game”. We have some great organizations that already exist (down here in Albuquerque the Middle Rio Grande Water Assembly comes to mind). But if the big water utilities, the feds, the acequia folks, the farmers, the Conservancy District, etc., are not at the table, it’s just talk. These are the people/entities whose actions flow from the unrecognized values we’re talking about. That’s one of the great messages that I get out of Ostrom’s case studies.
Compelling points for sure.
“..increased water conservation, desalination of brackish groundwater, sale of water from agriculture to urban use, improved management of dams to reduce evaporation, long-distance transfers from places.., changes in endangered species protections..” are all “now” issues that have to be dealt with under water laws and institutional constructs that almost universally were set up before these issues were even close to reality.
Kansas has tried 3 times in the past 30 years to reorganize its multiplicity of “water agencies” to create just what you suggest – a central planning, regulation and management entity involving all the major players. We never did this, but we have managed to learn to work and play much more nicely with each other – perhaps the next best solution. Good article, as usual.
BTW, please don’t use the white text on black thingy again. After reading it carefully, I spent the next 10 minutes trying to get the black lines off of everyting I looked at! I’m just sayin’…
What interferes with the development of working water markets?
Well, mostly, we do. Voters (either directly or through their elected representatives) time and again have rejected the creation of water markets.
Now, why might voters reject the idea of a water market?
Micro-economics was a while ago for me, but last I checked, key elements for a functioning free market include (a) ease of entry and exit; (b) multiple buyers and sellers; (c) substitutability of good; and (d) absence of government regulation, among others. Now, think about your tap water. Do any of those apply?
Right about here, Zetland’s going to argue for the creation of a market for wholesale water. But how, exactly, is the farmer in the Imperial Irrigation District supposed to deliver his surplus water to San Diego County? Build his own pipeline?
The simple truth of the matter is that water is so critical to life, and its development so critical to the history of the growth of the West, that politics will be involved. Even the absence of political action, when water is involved, is a political act.
So, when you start thinking about institutional structures to sort out problems, you are, for many people, already taking sides in the debate. Many people don’t want new institutions to exist to address water problems, because they’re afraid of the outcomes. I expect the ag. community as a whole, for example, to fight tooth-and-nail against the idea, because new institutions may serve to facilitate ag-to-urban transfers. And many farmers believe, rightly or wrongly, that ag-to-urban transfers have enormous unpriced externalities in terms of impacts to their local communities. (Thinking of this another way, not only is there no outcome that could be mutually acceptable, there isn’t even a mutually acceptable process to consider alternative outcomes.)
So before you decry the lack of existence of various fora to discuss water issues, consider that for many players the current state of affairs is likely preferable.
Skin in the game
One problem in water regulation seems to be that there is no table around which negotiations could occur. Another problem, an extension of conversations that Zetland and I keep having, seems to revolve around ‘skin in the game.’
In regulatory dilemmas, there are often multiple sides, each with their own agendas and their own power bases. A person working for one of the sides has their own set of wins and losses. The wins and losses usually involve betraying or not betraying the core world view of their side.
Few players, except some companies, appear to have any skin in the game. They have interests but little skin.
The logic comes from Principal, Agent, Beneficiary lines of reasoning.
Here are a few introductory examples, which may be wrong but may start a deeper discussion.
The analogy that I will use is of a poker game with antes and betting.
U.S. Congressperson — In water regulations, the only skin that such a person seems to have in the game is their own re-election. Their health insurance and retirement benefits are not at risk nor is any part of their net worth. They can ante up taxpayers’ money or even future taxpayers’ money and can raise a bet by passing new regulations, all at no cost to themselves. So they have little skin in the game and are playing with other peoples’ money. These other people cannot take the congressman out of the game because these other people do not live in the congressperson’s district.
Traditional bureaucrat – The traditional bureaucrat is not betting his or her money in the game and antes up nothing except the threat of regulations and stalling. If the traditional bureaucrat bets, he or she bets with taxes, essentially someone else’s money. To the bureaucrat,there is no skin involved in betting with someone else’s money since there is no personal cost to the bureaucrat to betting unwisely. Essentially, the only risk to the bureaucrat is in not following bureaucratic rules, essentially a bureaucrat has to show up at the poker game in the right clothes. The rationality of their play of the game is less important.
Environmentalists — Environmentalists get to keep being environmentalists by having an environmental issue to defend and having people who are willing to donate to the environmental cause to defend this issue. So environmentalists may have antiskin in the game. They win for themselves as long as the game continues even though they lose on every bet that they make. They also bet with other people’s money–the taxpayers not the environmentalists’ beneficiaries.
Journalists – (Sorry, John, had to do this) Journalists appear to have anti-skin in the game. They win as long as controversy continues and there is a continuing story to write. Like many others, journalists have no real skin in the game because they do not lose if the game goes badly.
Economists – (Yep, David, you were up next) Economists also have antiskin in the game. They win as long as the government or others are willing to pay them for their opinions. They lose once the game is over and no one needs their opinions on this game. Personally, economists seldom have their house, job or net worth on the line in the game itself.
Scientists – (OK, I am in this category) Scientists get paid to offer opinions and conclusions based on verifiable facts about water. But, scientists often have little skin in the game. If a scientist’s opinion costs taxpayers billions of dollars that should not have been spent, the scientist is not fired and does not lose her or his house (the skin they are not putting up). If the scientist got a number of interesting papers published from their wrong opinion, then the scientist is likely to get promoted.
Many people who want seats at the table and claim to be stakeholders have either no skin or antiskin in the game. The people whose money is being gained and lost at the table, the taxpayers and their children and grandchildren, have no seat at the table and often no way to control the size or reasonableness of the bets being placed.
The game would be very different if each person at the table was risking a substantial portion of his or her net worth on every hand, i.e. stakeholders would be betting with their personal stakes and not making highly leveraged bets with other peoples’ stakes.
Or, in econospeak, unfunded externalities severely distort the play of the game.
Thoughts?
Eric, to be blunt I find your approach profoundly anti-democratic and more than a little silly. Under your analysis no one has anything at stake in any political issue except those who stand to profit financially directly from the outcome.
Really? I’m pretty cynical but this goes well beyond how I feel. The politician can use a successful political outcome to assist in his re-election efforts. Enviros and bureaucrats get reputational benefits for achieving outcomes perceived as successful by their peers. Journalists get awards for good work. Lobbyists, lawyers and scientists can use a good outcome to advertise themselves to other clients.
Water disputes take forever to resolve because the solution space is tiny (if it exists at all) and because even those participants with a financial interest at stake bring non-monetary issues — community, a way of life, the secondary jobs created and maintained by the supply of water — to the negotiating table.
At the end of the day, for many people money is not an adequate substitute for water, because without the water they are incapable of living their lives the way they wanted.
Just a quick note on Francis’ question about getting water from Imperial Valley to San Diego.
We’re already doing that. Imperial Valley simply draws less from their lower Colorado River spigot and San Diego takes more from upstream via the Colorado River Aqueduct which currently services us.
Francis,
Thanks for being blunt.
You make my point exactly.
Many of the people who want a seat at the table are playing different games and for different stakes.
Many are playing to their own constituency and not for the overall solution of the problem.
Thanks for making these points better than I did.
This is another great discussion, that exemplifies the multiple points of view we all have, and our various points of departure (two different things).
But getting back to the point, I think, of John’s post, what most people reacted to is the perception (and the reality) that Intel was getting a special allowance and sweetheart deal aside from all (senior) water rights in New Mexico. Is it a “higher value” use for that water? Economics would say, yes, absolutely, if you look at the amount of dollars generated from every gallon used. The problem is, not everyone is going to agree that this is the right metric for “value” in New Mexico.
And yet, and yet… others also get special sweetheart deals, whether within compacts (talking about you California), or within legal frameworks for water rights (state level), or with special historical circumstances (the “we were here first, motherf—-r” principle as I’ve started informally calling it).
Price, stakeholder, skin, value, culture, these are all departure points with all users hoping to get some end-game with water. Interesting post, John, and fun to follow the discussion…even with this terrible jet lag. Hopefully it’s somewhat readable. Best, EPP
A few questions.
1. Should New Mexico remain one of the poorest states in the U.S., at the top of all the wrong lists?
2. If not, how can the citizens of New Mexico change its financial status?
3. Is preserving sight lines of gorgeous scenery more important than creating jobs for state residents?
4. If Intel took its thousands of jobs and millions of dollars of taxes and moved its operations to Singapore, is that a win for the residents of the state of New Mexico?
5. In the last four years, many top notch scientists at Los Alamos National Laboratory have moved to Oak Ridge National Laboratory in Tennessee. These scientists took their money, the jobs that they generated, and their need for water with them to Tennessee. In Tennessee, these scientists are creating a center to attract the next round of Intels to Tennessee not New Mexico. The stress on water supplies in New Mexico will decrease, a solution to the multiple selling of water rights in New Mexico can be kicked farther down the road, and New Mexico will become poorer. Is this an acceptable outcome?
On ‘sweetheart deals’, I own some small companies. We will generate many jobs and many millions of dollars in taxes over the next few years. Twenty communities around the planet want us to move to their community. The communities are competing with each other. The one that wins will offer us a ‘sweetheart deal’ and will be chastised in the press. The ones that do not win will not have offered as good a deal. But they will not get the jobs and the taxes. I am strongly against ‘sweetheart deals’ that do not benefit the residents of the community making the deal (see Bell, CA) but if a community wants the jobs that a company can bring, the community has to do more than say “We have nice views. You are lucky to be here.” Just a thought.
John’s table.
Can we dub this blog as John’s table and have a detailed discussion of a viable solution to oversold water rights here?
I do not care who gets credit for a solution.
I just want to have a discussion until we get to a viable and enduring solution.