Water Problems in Escalante Valley

State Water Engineer Jerry Olds (masterfully) faced a tough crowd last week in the Enterprise High School auditorium, to present the message to the capacity crowd that their way of life might change. The aquifer that supplies most of the water to the Escalante Valley is being drawn down faster than it is being replenished, and Mr. Olds figures he better remedy that situation.

Mr. Olds figures the appropriate yield for the aquifer is around 60,000 acre feet per year. However, 100,000 acre feet have been appropriated. In other words, the State (mostly in the late-1940s) told people that they had the right to use a certain amount of water. Those people based their businesses, mortgages, and communities on the State’s representation. Now, however, the State has determined that it messed up; it didn’t have that much water to grant. The State needs to curtail use. How should the State go about that difficult task?

As you can see in this link, the State is commencing a groundwater management plan and is soliciting comments. I wanted to post some thoughts (and hopefully get some feedback) before I submitted my comments to the State.

Basically, I see one major flaw at this point. The statute requires that a management plan take into account the economic impacts to the “local community.” However, the model being proposed for the Escalante Valley looks at impacts on a countywide basis. That would create a wildly distorted, and inaccurate, picture of the true impacts, and, in my opinion, would not meet the requirements of the statute. Enterprise and Beryl are quite small, compared to broader Washington and Iron Counties; though a plan might economically devastate those small communities, it might not move the needle a whole lot, if we measure the impact on Washington and Iron Counties, rather than on the communities themselves. It is a model that, by its very design, will understate impacts on rural areas.

Before we upset the apple cart too much by looking for ways to fairly take people’s water, I propose that we start right away looking for voluntary market-based solutions. The problem here is simple: in rough terms, rights to 40,000 acre feet of water should be retired (out of approximately 100,000 appropriated acre feet). The solution might prove to be equally simple: we should consider creating a water bank to buy and retire those rights.

For example, if each acre foot were surcharged $10/year, $1,000,000 would be generated annually. Water is selling for $1,000 an acre foot (more or less). That means that the bank could buy 1,000 acre feet each year. In 40 years, the problem would be solved. To the degree that the State contributed to the bank, that much more water could be retired each year, and the problem could be solved that much faster. Yes, I realize that the math would change as water rights are retired and as the price of water fluctuates; but, the “bank” could easily account for that and make necessary adjustments.

A water rights banking system would place incentives to sell on the appropriate parties. Utah’s appropriation system is “first in time, first in right.” In other words, a user with a superior right gets his water more reliably than a user with an inferior right; everyone knew this going into the deal. A surcharge weighs more heavily on users with inferior rights, because they would pay it every year, when in reality they might not get water (or much water) in some years. Thus, they’d effectively pay a higher surcharge for the water they actually use, giving owners of inferior rights greater incentive to take the water bank’s offered price.

I have pulled out of thin air the $10/year surcharge amount and almost out of thin air the selling price of $1,000/acre foot. So, I don’t want anyone to get too worked up over those numbers. Instead, my intention is to present a structural model that I think could resolve the crisis and, then, let the impacted community tweak that model and insert the correct amounts (e.g., (1) a surcharge that would generate sufficient revenues for the water bank without financially crippling the users and (2) a buying price that would attract some takers).

Thoughts?