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?
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?
posted by steve u. at 3/21/2007
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6 Comments:
Steve,
Thanks for your thoughts on this delicate issue. Water is the lifeblood of the west. Mark Twain once stated, "Whiskey is for drinking and water is for fighting". This statement is especially true in the second driest state in the nation. With the recent drought and the state snow totals in the 60 percent for the year. Things are a little bleak.
As you know the Utah Farm Bureau Federation has been involved with the process of developing a groundwater management plan since it began last year in the legislative session. Certainly the intent I believe of the taskforce was that the state engineer "shall" take into account the economic impacts on the community. We fought very hard for that. I agree fully with your comments on looking at the escalante valley locally and not at a countywide analysis. Rep. Bowman and our Iron County board discussed this last week at a board meeting. There is talk of having Dr. Bruce Godfrey and others assist in gathering local information from the escalante valley that would assist in determining those economic impacts. Impacts that we believe could be catastrophic to the agricultural industry.
The inherent problem here as you have noted is that the state appropriated water to these farmers and ranchers and there livelihoods depend on those water rights. Should Mr. Olds feel that there is a need to achieve what he feels is "safe yield" the State should buy back those rights at market value. These ag producers have leveraged everything they own based on the water right they have had appropriated. They have also heretofore operated under the understanding that if they could get to the water they could use it. Again the economy has assisted in controlling safe yield. When the costs to get to the water are too great then the market will even itself out.
Interestingly enough there is a disagreement between the current state engineer and a previous engineer as to what really is safe yield.
I would welcome the opportunity to visit with you more in relation to your idea about a water bank, inparticular the part about the state putting money in to make these producers whole.
Thanks for a very supportive session for the agricultural community and as always thanks for your dedication to your constituents and other citizens of the state of Utah.
Todd R. Bingham
V.P. Public Policy
Utah Farm Bureau Federation
Thanks for the input, Todd. What are some sources you see that would help present a picture of likely community impacts? I'm thinking it wouldn't be a Herculean task to put together a model of likely impact on the Valley, by looking at past impacts of variations in things like crop prices and drought/wet years. I would imagine that lenders and local merchants have a pretty good idea of what they can expect when the agricultural sector in the Valley suffers.
Why doesn't the state just scale back percentage wise? Maybe allowing for each who needs what the state promised some type of extra cost, and if not possible, subsidy or tax benefit.
It was the state's mistake, and we all realize water is a rarity in this state, --so just make ratio-scaled adjustments. Of course allowing for others who realize they don't need so much to forfeit some with incentive would be nice. Just a thought. Fairness is always appreciated.
Pundit,
That's what I'm looking for -- an appropriate way for the State to scale back usage. A couple of "easy" ways would be (1) cut everyone's right 40%, (2) cut off the last 40% that was appropriated(in the 40s and 50s, remember), or, as Todd mentions, (3) let the cost of getting to the water (i.e., added pumping costs as the aquifer draws down) drive users away.
Option 1 is too blunt; it could bankrupt everyone. Option 2 also is too blunt. Option 3 favors fat wallets too much and, likely, would not be allowed by the engineer, who wants a plan in place ASAP to curtail use.
The "bank" I propose charges each owner a proportionate amount, to fund a market that would buy and retire the shares. Seems like it could work.
I've been mulling it over, and I wrote the previous comment in haste. I like your proposal. I think it's quite reasonable. I don't have much experience in water rights but used to work for a irrigation non-profit org in Colorado, and think arbitrarily taking away or hinting at such would be bad (water is for fighting, I've seen it); adding some cost or using market principles would likely get a warmer reception.
Fund the bank with monies colledted from Utah trust land sales, water reservoirs.
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