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| Opportunities & Exposures: Natural Resources |
Fluid Arguments
Michael De Alessi
10/01/2004
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In the arid western United States, the earliest settlers fought over streams,
then they fought over rivers. Eventually they banded together to lobby for
ambitious water development projects to transfer water hundreds of miles to
irrigate their land. They succeeded on a grand scale, turning desert into
productive farmland that now provides low-cost produce to the world year-round.
We as a nation, however, continue to pay a premium for this luxury in the
form of heavy agriculture subsidies, environmental degradation and acrimonious
legal and political battles over who should have access to water resources.
Water transfers, and the convoluted body of law and policy that facilitates
them, are ground zero for urban-versus-rural conflicts throughout the
increasingly populous Sunbelt states. Without a new approach to managing these
competing interests, conflicts over water will only worsen.
Californians
recently previewed this rancorous future in a highly publicized three-way
water-rights battle involving landowners in the agricultural Imperial Valley,
developers in burgeoning San Diego and environmentalists. At stake was control
of the 3 million acre-feet of water that Imperial farmers use each year to grow
high-value winter vegetables such as lettuce and asparagus. (An acre-foot is
326,000 gallons—enough to submerge one acre one foot deep.) If this seems like a
lot of water, it is: By comparison, the 3.8 million residents of the city of Los
Angeles use less than 700,000 acre-feet of water annually. Because of laws
crafted decades earlier, the farmers held rights to the water; developers and
environmentalists wanted them.
In California, agriculture is a vital, $27
billion part of the state economy. But cities and environmental groups also have
strong interests in the water. Which of these competing parties is most
important? Fortunately, and perhaps startlingly, we do not have to answer this
question, because there is no real water shortage in California. The state’s—and
the West’s—water problems result from irrational policies and ill-defined water
rights, not from a dearth. This notion amounts to heresy in some quarters, but
the recent Imperial Valley imbroglio would not have arisen if water rights were
strong enough to support a rational price structure.
Irrigate or Abdicate
Western water rights apply only to the use of water. In Imperial,
for example, if farmers do not use their full allotment of water, they lose it.
There is no compensation for unused water, which simply passes on to the next
person in line. Not surprisingly, flood irrigation is the norm.
Environmental
uses often do not count, although some states have expanded the definition of
“use” to include ecological purposes. This enables groups like the Oregon Water
Trust to lease and buy water from farmers and ranchers to keep it in streams for
salmon. Until the state changed the law to allow this as a use, farmers and
environmentalists fought furiously; now they are making deals.
Such
agreements are difficult to find in the Imperial Valley, where growers pay only
the delivery cost of water, approximately $15 per acre-foot. Despite such low
prices, farmers commonly net less than $258 per acre for the produce they grow
using more than five acre-feet of irrigation water. Needing to quench the thirst
of a growing populace, San Diego offered the farmers $258 per acre-foot for this
water.
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