Last week, Senator John McCain told Colorado's Pueblo Chieftan that he thought the 1922 Colorado River Compact should be renegotiated due to the increasing demand for water in downstream states to account for population changes and increased water demand in places like Nevada, Arizona, and southern California. This has made folks in Colorado none too happy. According to Bob Ewegen, this is the sort of thing that could (and should) cost McCain Colaorado's nine elctoral votes come November.
The problem, from Colorado's perspective, is that in the 76 years since the compact was signed, California, Nevada and Arizona have grown much more rapidly in population — and political power — than the upper basin states. So when the lower basin states talk about "renegotiating" the compact, that's their code for a process of give and take — in which Colorado, Utah, New Mexico and Wyoming give and California, Arizona and Nevada take.Someone should have reminded McCain that in Colorado whiskey is for drinking and water is for fighting.
However politically ham-handed McCain's comments were, they were no better as a matter of policy. There's no need to renegotiate the water allocations and take water away from upstream states. Rather, if Arizona, Nevada, and California demand more water, they should simply pay for it. The best way to deal with shifts in water supply and demand brought about by demographic and environmental changes is through water markets. Particularly if current projections about the effect of climate change on Western water supplies are accurate, the West needs more robust water markets, not more administrative reallocations or "renegotiations."
- Don't mess with water rights in the western states
How hard is this?
Well, let's hope so, anyway.
But I'm sure McCain will have a new position on the subject any day now.
- Learn how to pronounce SAAKASHVILI
- Make a not that Putin is not the President of Germany
War with Canada! The solution to all our problems!
(It does have a venerable history.)
I believe that water rights are a perfect example of rent property. Simple-minded classical economic arguments like the one you've presented don't do justice to this issue. Francis touches on some of the deeper issues that are involved here.
For example, every generation of my family has served in America's wars, some rebels fighting the King's men even before the Revolution.
But I was born in Colorado. My family's military history has nothing to do with my feeling that Arizona, Nevada, and especially California, do not get Colorado's water.
Well, maybe Californians could have just a little bit if they'd promise to stop moving to Colorado and driving up housing prices.
LOL, Donna, and I bet you'd be willing to bottle it up and deliver it to stop them.
Oh, wait, bottled water is on the endangered list in CA... Hmm, where did the bottled water craze start anyway?
It's not okay to privatize the profits but to socialize the risks. If those water rights are worth something, well, so too are the damages people suffer when the river rises.
Never play cards with a guy named "Ace."
Never eat at a place called "Mom's."
I don't quite understand how it's bad policy other than just the say so of Jonathan Adler, but apparently someone died and made him right, so there ya go. Especially since even creating "water markets" would necessitate a complete renegotiation.
Water politics is a quiet war out here. Without a venue for trade, states steal. Nevada and Utah are the two driest states in the nation. We are under constant threat of "shortage". Yet over 80% of water use in Utah goes toward agriculture, which accounts for a small percentage of our economic output. Most of this water goes to alfalfa fields, a low-value crop that the government pays farmers NOT to grow in the East. There is plenty of room for the markets to do their mystical magic out here.
Absent an explanation of why McCain's disclaimers should be ignored, I am unpersuaded by Ewegen's op-ed and by Professor Adler's post.
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What should McCain have said instead of his 'politically ham-handed' remarks? If pointing out that an obvious problem is a problem gets a candidate torn to shreds--see also McCain's comments about energy at the end of the Chieftain piece--, then I guess...the country will continue on its present course.
Never trust a thin chef.
California is a misgoverned state that has adopted socialism with a vengeance. It will continue to increase population at a slower rate than Colorado, Texas, Nevada, Florida, and Baja California. It should not be subsidized!
Even more complex regulatory regimes ought to take into account Adler's point: If downstream states want more water, they should give something up to get it, not take it via political means.
gov98 -- If recognizing historically negotiated rights is "Dead Hand Control," then I guess I am guilty. As for whether more interstate transfers would require "complete renegotiation," I am not so sure this is so. As I read the compact, it does not seem to prohibit states from facilitating greater market (re)allocation of water or participating in voluntary trades.
gs -- I see nothing in the article that suggests McCain believes in shifting toward greater reliance on water markets, or even suggesting downstream states should be compensated for any reduction in their water rights, but I would welcome any such clarification (and promise to post on it if such is brought to my attention).
JHA
Well, if you want the country to continue on its present course, I would agree that McCain is your guy.
I will give you a couple examples that markets will just be really bad at managing, and centralized control, whether you like it or not, is necessary to control.
Saltwater intrusion in coastal areas (and sometimes even some inland areas) is a serious problem in some communities. Drawdown in wells in a single aquifier all contribute to the problem yet it is only the communities closest to the saltwater source that are going to suffer the consequences of too much drawdown. How are your markets going to manage this problem?
The right to pollute water (in the form of permits to discharge from a plant) depends on flow of the receiving stream. How do you manage the flow of a large system (say the Colorado) to maintain this usage of water?
Also there is flood control. Who is responsible for flood control under a market system. Floods are of course an excess of water. How does the market account for water that nobody wants and simply needs to be held back to prevent damage?
I could go on and on.
And if you want a guy who has no particular course in mind for this particular situation or most others (other than "Hope" and "Change"), I would think Obama might be the better choice.
I’m a bit new to this issue (water shortage has never really been a problem in Minnesota) but so far it seems that CDU’s point that the Colorado River Compact already allocates more water than actually is available and gs’ actual quoting of what Senator McCain actually said (something no one else did), I don’t what’s so outrageous about Senator McCain’s comments. There’s apparently a problem with a shortage of water in the West and the governors of the States affected are talking about whether to change an existing agreement. Senator McCain agrees that there’s a problem and supports letting the governors continue to discuss to come up with a solution but doesn’t think the federal government should be imposing one.
I get that Professor Adler and others believe that there should be a market solution to the problem and I tend to agree. But there is nothing in anything that I’ve read in Senator McCain’s remarks which would preclude or impair the ability of the States from finding one. It seems to me that since the status quo apparently isn’t a market solution, that Professor Adler would have been wiser instead of criticizing McCain for something he didn’t actually say to instead applaud him for comments recognizing that the status quo doesn’t work really well, supporting a more federalism-friendly approach to the water, and encouraging or outlining a market-based solution that a McCain administration working with the States could implement the same way that he's done on health care reform.
It seems to me that if you have an interstate compact regarding the use of water and some States want to be able to use more of it but the State where the water is located doesn’t want to be forced to give them more and Senator McCain has essentially said “let them talk among themselves to find a solution but the federal government shouldn’t force any of the States to do anything they don’t want to do” that pretty much precludes forcing Colorado to give any other State any more water than under the existing compact (contrary to Salazar’s grandstanding) and as a practical matter only leaves the States in need of more water with the option of buying more water from Colorado.
The Prof and Steve Neves addressed your concerns in broad strokes. But not your specific question re beneficial use upon transfer. Normally under the prior appropriation doctrine (which does vary in detail among the states where it applies), when one beneficial user sells the right (with an attached priority date) the buyer becomes responsible to continue using the water beneficially, with the same priority date, but possibly a different benefit. In fact, most sales are from agricultural to municipal use, with ag to conservation organizations in second place, if I recall correctly.
Yes, the Colorado is over-allocated. Yes, the entire Colorado plumbing project has been heavily subsidized by the Feds, but does that mean that the desert cities should be asking for even more water from 1000 miles away?
Problem 1: Nobody wants a water market except a few lawyers and economists who haven't actually represented any clients on this issue. Urban consumers? Low and stable prices. Ag. community? Will trade stability for ultra-low prices. Water managers? They're engineers, not traders.
Problem 2: Infrastructure. Water market is libertarian code for cities buying out ag. Little details like moving the stuff, and storing it when you get it there never seem to occur to the advocates. Anyone with a pulse and any interest in water law knows that there is a tremendous infrastructure deficiency in moving water around the Bay Delta. Storage and conveyance facilities (dams, reservoirs and aqueducts) are government-owned, which makes life a little more difficult for private parties who want to get into the wheeling business on a for-profit basis.
Problem 3: Law. The Law of the Colorado River includes Supreme Court opinions, a few Acts of Congress, a treaty with Mexico, and endangered species act permits, for starters. The recent experience of the participants in the Quantification Settlement Agreement (whereby, among other things, the Imperial Irrigation District sold water to San Diego) suggests that developing a "robust" water market within this framework will be .... difficult. Central California has its own problems, with a judge imposing massive restrictions on pumping out of the Bay Delta pursuant to the endangered species act.
Problem 4: Government. There is tremendous government oversight in the provision of water. The constituents of drinking water are highly regulated (Safe Drinking Water Act). The State regulates system design, including fire flow and pressure. As retail water delivery is a pure monopoly, non-government retailers are regulated by the Public Utilities Commission. Water wholesalers, who would be the likely market participants, are governments. (Thank heavens.) Their mission is to deliver low-cost water to their constituents over the long term, so they afford to do things like invest in pressure wells that prevent seawater intrusion and in groundwater recharge from treated sewage. If MWD were a for-profit entity, would any of this be going on?
Problem 5: Experience. Creating a true market for electricity in California was a catastrophic failure. Just about very attempt at privatization of water systems here and abroad has collapsed. (Bolivia, Stockton, New Orleans, etc.) Why should advocates for a water market have any credibility, especially since water is a true life necessity?
Problem 6: The essence of a market is that it responds to shortages with an increase in price. But no one wants the shortage to occur in the first place. Voters want their government to protect them from both shortages and price variations.
Problem 7: Ignorance. Most California water is not subsidized. Neither the State Water Project water nor the California River water gets a dime of subsidy. (The Central Valley Project water is subsidized, but that's changing.) The reason that potable water in Southern California is 100 times more expensive than ag. water in Imperial County or the Central Valley has zero to do with the cost of the corpus of water itself, and everything to do with moving, storing, cleaning and delivering water in a high-cost urban environment. (One of the biggest total energy consumers in the State are the pumps that lift water over the mountains that separate the Central Valley from Southern California. Most people who talk about water don't have a clue.
Problem 8. Ignorance, continued. California already has on the books the laws for a water market. (Water Code 1700 et seq.) Relatively few transfers have taken place. Reasons include: a. establishing that the transaction will not harm a downstream rights holder; b. lack of storage at the destination; c. inability to move the water reliably through the Bay Delta; d. an unwillingness to sell -- farmers are stubborn. Most people who complain about a lack of water markets again still don't have a clue.
So, Prof. Adler, what, precisely, do you mean by a "robust" water market?
This line was hilariously ironic when posted, and Francis's subsequent comment renders it more so.
Pat Buchanan has, of course, made an exactly similar argumnent against those who favor NAFTA and free trade in general. I think Francis has done a more than adequate job of deflating your pretensions in his prior post. I'll just add that I still do not think you have adequately addressed issues that arise because water trading involves rent prices in the technical sense of the term. When you've responded to Francis fully you will have begun to address this issue.
The link to the abstract; $9 to buy the article.
1) You are not allowed to beat people up with "I represent more clients than you do" lines of argument. If such a qualification was valid, you'd have to defer to hairdressers.
2) Your statement "Water market is libertarian code for cities buying out ag" appears to show an ignorance of markets -- wherein WILLING buyers and sellers transact.
3) Your continued reference to government involvement in water as a blockade to water markets is another non-sequitur. The government allocates radio frequencies and we have pretty good markets for cellular, television, etc. (I realize that the market structure is not parallel, but you get my point.)
Finally) There are many ways to structure markets, and water markets will take many forms. You cannot use "this market didn't work because of X" or "that market lacks Y" logic to deny the feasibility for marketing water in places that have Z.
I agree with JHA's main point -- that Colorado water should be reallocated by markets. (Interested readers can see daily examples on this at my blog.
According to the Rocky Mountain News, the Colorado Water Compact is not so untouchable that a 'supplemental agreement' is precluded:Five weeks ago, the Cleveland Plain Dealer reported:McCain is getting flak from his own side:(Speaking of cold dead political carcasses, the odds are that Schaffer is on the way to losing his second Senate bid.)
Perhaps Mr. Schaffer should be less concerned that McCain will force renegotiation of the Colorado River Compact, and be more concerned that an Obama-appointed federal judge will rewrite it. A similar reservation might be voiced about Professor Adler's emphasis on water markets.
Water is bulky, heavy, liquid and falls free from the sky. So capturing it, moving it great distances and storing it has, so far, been the province of government.
At a retail level it is a true natural monopoly and life necessity. So selling it to individual households has, so far, been heavily regulated by government.
Now, it's possible that a "robust market" could spring up between these two endpoints. But the law allowing for that market already exists and it ain't much used. Now it's possible that the principal reason there aren't more water transactions is a lack of staff at the State Water Resources Control Board. Or that the existing law is badly drafted.
But somehow neither you nor Prof. Adler ever seem willing to get in the weeds and explain how to lift the constraints on the formation of a robust market in a way that voters would accept. (And no, I don't think an all-in auction is politically feasible, even if such an auction could be designed.)
We in the Great Lakes states solved this problem by creating the Great Lakes Compact. If our politicians do nothing else well, which I believe to be the case, they did in this case. They saw this problem coming and used the legislative process to nip it in the bud. To me, it was an amazing example of federalism at work.
White people are just going to have to accept that times have changed. Permitting the predominately white upstream states to keep their water while the new Hispanic and Asian states are denied water is just not going to happen, no matter what old Anglo agreement they signed back in the old America.
It will take a while for the new white minority to adjust its expectations, As time passes they will appreciate the new order and the need to accept and accommodate the needs of the new Americans.
Problem 6: The essence of a market is that it responds to shortages with an increase in price. But no one wants the shortage to occur in the first place. Voters want their government to protect them from both shortages and price variations.
So they want the absurdly impossible. Why should anything concrete be sacrificed in the service of rank insanity?
Francis, presumably you don't disagree that there are tremendous inefficiencies in the use of water in the SW, and that the most efficient way to deal with the pinch that is now being felt is through more market pricing of water and more water trades. Consumers would use water more sparingly if they faced the marginal costs of replacement, and farmers would be wealthier if they had greater abilities to sell water to the cities.
Further, it won't permit construction of even minimal water storage and distribution networks.
California (and to a lesser extent, Nevada) have coasted along confident that their congressional clout would be sufficient to allow them to sieze unfair allocations of water in order to continue their fantasy spiral into socialism.
I largely disagree with your points or find them unresponsive or irrelevant to the arguments I made in my paper. Very briefly, in order.
1. Of course those who benefit from the current system don't want change, but many organizations and individuals would like a shift toward markets, including conservation organizations that seek to purchase instream flows or benefit from water salvage in agriculture. I also think many are simply unaware of the benefits of moving toward more markets.
2. The infrastructure exists for some water transfers and trades, but not others. So? Allowing for gains from trade creates entrepreneurial opportunities for those who can figure out how to get water to where it is needed.
3. Yes the law needs to be changed. That's part of the point of my paper!
4. Yes the government creates many obstacles to greater reliance on markets -- and many are unnecessary. Again, I am advocating changes in this regard. Many other government interventions aren't particularly relevant to a shift toward markets.
5. The California electricity market was anything but a "real" market. The government still controlled consumer prices, barred long-term contracts and inhibited supply enhancement. Combining such measures with wholesale deregulation was a recipe for failure, as many market advocates noted at the time. As for the experience with water markets overseas, I beg to differ here as well (even though in my paper I call for market-pricing of water rather than water system privatization). For more on the issue of privatization, I recommend this and this.
6. Yes market prices increase if demand outpaces supply -- but this is the best way to create incentives for more efficient use, conservation, and supply enhancements. There are also plenty of ways to reduce private variation in private markets. I'm sure voters like getting free or underpriced stuff from government and wish this could be done without creating real shortages, but that combination is not possible.
7. There's plenty of subsidized water in California and even more elsewhere. Whether some portion of the water in California is free from subsidy and sold at market prices is irrelevant to the broader argument.
8. California has had some successes with some market reforms, including water banks. But California's laws are hardly a model of
As for what I would do, my recommendations in the paper include: 1) defining, and recognizing the security and transferability of property rights in water resources;
2) eliminating government subsidies for water use and distribution; 3) moving toward market-based
prices for water in municipal systems; and 4) identifying and reducing legal and regulatory barriers to water
transfers, particularly interbasin and interstate water transfers. I would also enact salvage legislation and recognize instream flows and other environmental uses as beneficial uses.
One quick and final point: All of your objections neglect to address the dramatic uncertainty and instability in water supplies that are likely to result from climate change. This increased uncertainty requires more flexible and adaptive water institutions. Whatever flaws water markets have -- and I'm the first to admit that they are not perfect -- they are far more suited to this challenge than the administrative alternatives.
JHA
Perhaps you've forgotten a bit of your American history...