Monthly Archives: October 2015

Unbundling Water Rights, Beneficial Use Approvals, pg 19

My two usual concerns returned in this short section.

The author contrasts two ways of managing third-party impacts.  Sortof.  I have never thought of beneficial use requirements as protecting third parties.  I thought beneficial use requirements simply restricted wasting water, such as using large quantities of water to drown gophers.  I suppose a third party who would otherwise use that water might use the beneficial use doctrine to complain to the Water Rights division of the SWRCB.  But I have always thought of the beneficial use doctrine as between the rights holder and the State.  No matter.  The author isn’t in favor of using the beneficial use doctrine, because it potentially limits economically efficient uses of water.  He thinks the State should manage third party impacts by issuing individual water use permits.

Again, we see a mechanism that favors the powerful (a single elected or appointed official issuing permits to individuals, or an agency issuing case-by-case permits).  At the worst, the elected or appointed official could be bought by election support.  At the least, it takes sophisticated users to negotiate permit processes in agencies.  The people who get water use permits will be the people who are good at interpreting regulations or can hire lawyers.

My second concern is that this commodifies water yet again, and why do we want water traders in the water system?  Reading through the comments of the articles that Steve Bloom linked, I saw the intermediaries called “speculators”.  I don’t know what’s happening in Australia, since my interest in the world ends at the 395, but I don’t see why middlemen should have an entryway into distributing water, nor profit from it.

I really do understand that this is a proposal to commodify water.  But each time I see a new facet of that, I am repulsed again.

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Unbundling Water Rights: Issuing and Accounting for Allocations, pg 17-18

When I read this section the first time, my reaction was that if we had metering on every water right, linked to an online “bank-like accounting system”, we’d be in such a different world that a water market would be a nearly trivial addition.

As always, I am not sure why the emergence of water-brokering businesses is a good thing.  I can tell from the writing that it is, but don’t know why.

This time, as I read it, I may have just understood something new.  The discussion of unregulated systems made me realize that the Australian version of this happens in an entirely controlled river basin.  Every piece of water in the system is fully under human control; they can choose when to release it or hold it back, presumably to match the totals in the traded bank accounts.  That is so far from the case here.  There are unmanaged tributaries, return flows, direct rain events.  We barely have enough gauging to know how much water is in the reaches of the major rivers, and the funding for even those gauges is perennially at risk.  Our reservoirs may or may not have capacity to hold substantial water from year to year.  Even if they have the physical capacity, their storage is governed by flood control rule curves and those will not be violated because someone downstream is holding back water to sell next year.  Changing that would require the U.S. Congress to change each reservoir operations manual.  Fucking Australians with their simple-ass systems, come here to suggest physically impossible management.  Honestly, they need new hobbies.

There is a paragraph about how adjust this for unmanaged systems (which is how I realized the default expectation is a fully regulated river basin).  I understand their suggestion for issuing shares in flow rates.  But what I don’t understand now is the extent of each market.  Each river basin (magically monitored and controlled) is its own market, and trades within that market are super convenient?  But trades along the major rivers of California already take place.  Trades along rivers would be east-west trades, good for getting water to agribusiness on the West Side of the Valley, but not for moving ag water to the cities in the south.

The more I read this paper, the more I don’t understand how to apply it here.  That’s probably why the paper is about converting to a market-based system in Nevada.  Sweet simple Nevada, where even Australian ideas might be progress.

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Unbundling Water Rights: Use It, Sell It, or Save It – Never Lose It, pg 16-17

I have never believed that the threat of “Use it or lose it” ever motivated a grower.  Our water rights system has been unenforced for decades (until now, really).  Have growers really thought that the State Water Resources Control Board is keeping track of their yearly diversions, ready to pounce on a missed irrigation year or a decreased diversion amount?  Until 2009, there was no penalty for not submitting the Annual Statement of Diversion and Use.  I’d be surprised to hear of a water right being yanked for being two decades dormant.  I don’t know but strongly suspect that a water right would be allowed to come back into compliance before it was “lost”.  Plus, conserving water and selling water are now both beneficial uses.  For all the talk about “use it or lose it”, I don’t think the doctrine genuinely hampers water transfers.

(So why does it keep coming up?  My guess is that growers love to talk about government regulation contradicting its intent. The Alanis Morrisette-level irony overwhelms them.  Of course I don’t know their inner thoughts, but I’d bet they mention it to Australian visitors much more often than they consider it in their water use decisions.)

All that aside: sure, whatever.  This section looks good to me.

The paragraph distinguishing irrigation efficiency from economic efficiency is nice, although I will say for the severalth time that flood irrigation methods are not inherently inefficient.  They can be managed well.  (One of my irrigation professors described poor irrigation practices, then dismissed them entirely with “That’s not irrigation.  That’s water spreading.”  Perhaps the author of this paper was using “spreading” the same way.)

Again, I wonder how this recordkeeping scales up to California.  How would we track an individual right’s annual carryover?  This would mean tracking the diversion and also designating some water back up in the reservoir as that individual’s?  But there are so many diversions and so many sources.

I didn’t understand the phenomenon described here:

The importance of allowing market-driven carrying forward of unused water allocations was driven home during the early stages of developing Australia’s water trading systems, when it was discovered that all the gains from trade in some parts of the country were being lost because too little water was being carried forward. Trading was deepening rather than reducing the impacts of drought. When the policy was changed to allow water to be carried forward to the next year, the price of allocations doubled, that is, the value of water increased dramatically.

If you do understand, could you please tell me what was happening?

The warning against making allocations before the precip actually falls and is captured is good, but cannot be reconciled with making allocations early in the year so farmers can make planting decisions.  In California at least, it is either/or.

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By contrast, potblogging brought in huge hits.

I have to say, friends, that slowly reading through a blueprint for transitioning from western water rights to Australian water rights has not created a bonanza of blogging attention. It is worth it, however, to read stupid bullshit like this and really understand what it would take to do that here.

ADDED 10/13: I listened to RAND’s Drought and Water Policy presentation. If the drought continues, ACWA is going to start pushing harder for water markets. I transcribed the discussion of water markets; it is beneath the jump.  When I finish going through the Unbundling paper, I want to start asking for a lot more specifics.  I cannot imagine a transformation like the one described in the Unbundling happening within a decade.  What could come sooner, by Year Six?  Dropping the requirement of a CEQA analysis for water transfers?  State law saying that we don’t care about third party impacts?

My other thought on hearing this discussion is the possibility that the transaction costs for water trades are just that high.  There’s a lot of talk about streamlining and lowering the barriers to moving water.  But water is heavy, hard to track and hard to move.  When you are talking about out-of-basin transfers, the physicality of water may override economic theory.

Continue reading

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Unbundling Water Rights, Conversion from Existing to New Rights System, pg 15-16

Conversion from Existing to New Rights System

Yes, of course the first step in the process is to shut out all newcomers.  I do understand why.  However, this is just one more way that this proposed process rewards existing wealth holders.

The formula for issuing shares is clever.  The formula given only addresses appropriative rights.  With minor tweaking, it could include pueblo rights, and possibly also Indian rights.  I haven’t thought about how it would include riparian rights, but I am sure some clever graduate student could work in a formula that grants all riparian holders the same priority, perhaps adjusted by parcel size.

Issuing shares is where the first major qualitative change in right occurs.  That is the point where the most senior appropriative rights holder changes over from not experiencing any cuts until everyone with a more junior right has been completely shut off to accepting a proportional cutback with everyone else.

Then, a quick reminder that third-parties should have no say in trades and that trades shouldn’t be reversed.

I found this paragraph striking:

Unbundling of rights should reflect the status quo as closely as possible. In over-allocated systems, a case can sometimes be made for simultaneous re-assignment of shares, but unless there is broad community consensus about the best way to do this, great care needs to be taken. The entire conversion process can be destroyed by arguing that the existing regime is inequitable or that now is the time to give someone else an opportunity, to give additional shares to the environment, or both. As a general rule, these conversations are best dealt with separately from the process used to build a register.

Whatever you do, don’t use the conversion process as a time for redistribution, or introducing justice concerns, or anything other than preserving the existing wealth order. Do that separately from converting from old-style rights to water shares, says this paper, but even though I read to the end, we never returned to the idea.

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Unbundling Water Rights, Water Registers and Priority Tiers, pg 14-15

Water Registers

I found the explanation of Water Registers (they’re like land titles, held in a single central location) straightforward enough.  The process seemed like a major effort but as doable as any other part of this proposed undertaking.  I notice that again, increasing commodification of water is asserted as a good outcome of creating water registers.  (‘Banks will like this, now water rights could be mortgaged.’)

Priority Tiers

I am not sure I completely understand the priority tiers.  They relate to the risk of not getting water.  I may understand this better later, but for now, I am assuming that in a good tier, shareholders get allocations in dry years.  In a medium tier, shareholders would get allocations in a normal year. In a bad tier, shareholders would only get water in very wet years.  I’ll go with that until something I read later doesn’t make sense.

This reminds me of bond ratings and tranches, which reminds me of The Subprime Primer.  The Subprime Primer is so great.  My friend and I read it aloud as a play once.  Then my friend moved to Finland.

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Unbundling Water Rights, Water Resource Sharing Plans, pg 12-14

This was the shocking part of the water rights transformation process.  Not the unbundling, not the accounts, not the governing boards.  Within some boundary (watershed? basin? district? river reach?), this plan standardizes and sets the terms for all water transfers.  Once established and the plan is adopted, there should be no legal means to appeal any transfer that follows those terms by any third party.

I had my usual flurry of thoughts about any Australian policy proposal.  First came my standard “motherfuckers with their usual unscaleable bullshit, fucking single-basin, one-river, six-district fuckers, bothering me with their stupid fucking plans for some tiny-ass, no-groundwater, no takings-law hick state.”  How could we possibly write the intra-basin sharing plans?  The trans-basin sharing plans?  How many?  How could we possibly reduce the geographic and hydrologic variety of California to a standardized set of exchange formulas?  But then I figured that we could take some time to write plans for smaller basins, even if we can’t cover the entire state with one plan.  So I calmed down and had a new thought, which was “motherfuckers who apparently have no fucking activists, come tell me to get them all to agree on one formula for one place but they can’t sue after and how does that fucking work?”  Because that’s a neat trick, if you can work it.

In essence, a water resource sharing plan sets out the rules for determining how much water needs to be set aside to provide for base flows, transfer to other systems, and allocations to shareholders. Plans also stipulate how this water may be used and how flows should be managed to take account of environmental needs, facilitate recreation, maintain water quality, and provide other types of public goods. If these plans are made statutory or are prepared under pre-existing executive authority, the opportunity for a third party to legally challenge them is limited.

Then there’s a nice example about standardizing exchange rates (which are the quantification of environmental and third-party effects) down to a coefficient.  There’s not much detail about who, specifically, writes the water resource sharing plans,  nor whether that is a collaborative local process.  Now I like a technocratic imposition of rules and regs as much as the next bureaucratic would-be dictator, but it is increasingly hard to pull that off these days.

***

You know, the State of California isn’t stupid, and the State of California has wanted to “facilitate water transfers” ever since the 1992 Drought Water Bank.  Oh god, does the State of California want to “facilitate water transfers”.  Possibly the only thing the State of California wants to do more than “facilitate water transfers” is “streamline water transfers“.  This schema, with these water resource sharing plans?  They REALLY streamline water transfers.  No outside appeal.  All transfers covered by a plan have standardized, quantified exchange rules.

California has tried to do this for two decades.  The water transfer programs have tried to write one programmatic EIR, so that if you can transfer water within their guidelines, the programmatic EIR will cover the transfer instead of requiring the buyers and sellers to do an independent EIR.  CALFED tried in the 2000s.  Every administration has tried.  The effort never goes anywhere; it has never been able to cover the range and variety of transfers.  It always founders.  Looking at how much the water resource sharing plans exclude third parties and flatten out complexity, I begin to appreciate how strong and coarse-grained a Californian effort would have to be.  This strikes me as the piece of the process that would be hardest to duplicate.  Not the new infrastructure, not converting the rights.  This is the piece that seems like the greatest change.

ADDED 10/12:  This is a good explanation of the current analysis every cross-Delta water transfer must go through.  The proposed water resource sharing plan would replace that transfer-by-transfer analysis.

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