Monthly Archives: October 2015

Unbundling Water Rights, Unbundling, pgs 10-12

The main concept here — formally separating a water right into its components — is a neat trick.  One part is the right to keep getting water allocations into the future (share).  The other part is the immediate allocation, based on the current hydrology.  Here in California, we saw a couple transfers of the entire water right in the last drought, and the media absolutely could not make the distinction between buying some of this year’s wet water and buying the right to that water in perpetuity.  Nearly every story was about the shockingly high costs of a water transfer ($5K) and how people were paying sky high rates per acrefoot.  But the buyers were buying all the future acre-feet in that water right as well.

The article starts to get into converting water rights to shares, mentioning converting senior and junior rights.  Later in the paper, it gives more detail on how to weight those proportions so senior rights holders get more and junior rights holders get less.  This is the first place we see that this paper is precisely about what it says: converting appropriative rights to an unbundled system.  It doesn’t address pueblo rights, riparian rights, or a horrible mixture of rights.  I do think we could we could find a formula for converting those as well, if we wanted to make this happen.

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Since I’ve never seen a super-duper water market, maybe I just don’t understand what a super-duper water market would be like.  Maybe there would be an ease of transaction that I am not picturing.  But I don’t have the sense that transactions here are substantially legally hampered by the distinction between this year’s water and the right itself.  Buyers and sellers know what they’re trading.  If it is a few hundred dollars per acre-foot, it is a chunk of this year’s water.  If it is a few thousand dollars, it is the right with all its future water as well.

My sense is that when trades are locked into legal disputes, they’re not locked up over the nature of the right.  They’re locked up over details particular to the exchange.  A third party lives off the return flows from the seller.  A local group contends that a seller sold surface supplies, replaced them with groundwater and damaged a spring.

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OK, so far I think I’ve got it.  Unbundling the right into the current allocation of water and the share of total supply into the future.  A mention of water accounts, of water brokers.  I see the same thing as before, that the promised rewards are predominantly economic.  I am starting to get the vibe that this solution is a hammer looking for nails, that the problems it describes aren’t exactly California’s problems (but still withholding judgment).  I would love to know what you guys are getting from this.

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Unbundling Water Rights, Introduction, pgs 7-10

Hello, friends.  Let’s start with the Introduction, starting on page 7, going through page 10, stopping at the header Building Blocks.  We can go back to the summaries once we understand the material, if we still want to.

Professor Young writes clearly and well.  I can’t improve on his text by summarizing or explaining it.  I hope you’ll read it yourself and come back to give your own impressions.

My impressions:

It is feels almost circular to point this out, but this work is all about capitalism and markets.

The primary insight of that experience is that progress comes from building the institutional conditions that enable markets to flourish. In Australia, the gains came from implementation of a sequence of reforms that simplified the system and gave users every incentive to consider selling their water to someone else. As the systems used to define water rights were improved, the value of the rights increased. Water trading became the norm, and profits increased. In the first decade of water reforms, the internal rate of return from holding a water right averaged well over 15% per year (Figure 1).

Success is increased GDP and profits to people who were lucky enough to hold rights at the beginning.  This work takes those goals as self-evidently good; it doesn’t build a case for them.  If you are interested in other goals (human flourishing, consistent food production, deep ecology) you won’t see them included here.  This is a proposal very rooted in capitalist trade: historic instruments of trade, turning water use decisions into economic decisions, pricing risk, incentivizing investment.  Nothing wrong with that, but I’ll hold the bias in my mind as I read along.

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We’ll go through the six core concepts in detail later.  After that came four characteristics, pg 9.  I liked the first two characteristic of robustness and hydrologic integrity.  Our current system doesn’t have those, so they’d be an improvement.

The third characteristic favors the already rich:

  • Efficient management of supply risks so that those who need access to a very reliable water supply have the opportunity, at an appropriate cost, to secure it.

The fourth characteristic again commodifies water.  This is the very goal of this proposed process, so of course it does.  I keep noting it so that I remember to think critically about it, rather than uncritically accept this characteristic as a good thing.

  • Incentives that encourage people to search for more efficient ways to save and use water and also, to invest in resources that use water.

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Another concept directly applicable to water is the idea of double-entry book keeping, which requires everyone to operate under a simple rule: if one account is to be credited, another account has to be debited.

Dude.  You have got to be a hardcore economist to attribute conservation of mass to double-entry book keeping.

Your turn, y’all.  What did you see in the first couple pages of the introduction?

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Book club?

Are any of you interested in reading this proposal to convert western water rights to Australian-style water rights with me?

It is admirably clear and well written.  I have quite a bit to say about it, both pros and cons.  It’d be easier to chunk it out and discuss it with others, if you are up for it.  I could see this being real dull for laypeople.  It’d give me lots of blog fodder.  Are you interested?  Will you read along and comment?  Authors, if we do this, would you please stop by to answer our questions?

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I have read the paper once.  Here are my first impressions, before I try to understand it closely.

  • This is very profoundly a rights structure and a process blueprint that maintains current power and wealth distributions.  I am not surprised that Australia managed to convert to this, because it privileges and benefits existing power holders.
  • It doesn’t give an explicit definition of success.  By implication, I understand success to be increased economic development (pg 6, p3) or minimized losses to gross ag value (pg 7, p2).
  • There is a lot of real nice cleverness in here, presumably gained from experience.
  • Doing this would require infrastructure investment that would help a whole lot no matter what water rights reform we adopt.  If we could do real-time metering of every water use and see that all show up on centralized online water rights accounts, we’d be in a new world of water management regardless of water rights structure.
  • If conversion to these rights is so profitable to the winners of the share/allocation trading scheme, why are we issuing grants to initiate the metering and account building/water resource sharing plan (pg 27, p1).  Why is this all on the State dollar?  Why isn’t this a loan from the state, to be recouped out of future trading profits?
  • The water resource sharing plans (pg 12) look a lot like a water transfer programmatic EIS, which has proved an impossibility for the State for twenty years, despite considerable motivation.  From here, I can’t see how a process that includes third parties could develop these water resource sharing plans. Not given the way they shut down later legal redress.
  • The effort involved in developing water resource sharing plans strikes me as non-scaleable.  For every basin here?  For the projects?  Hoo boy.
  • Nevada should totally try this and let us watch.  No one cares what happens there, so there’s nothing to lose.

If this list made you kinda tingly and intrigued, please say you’ll join the book club. This is a real proposal, clearly and carefully made.  Given the love for Australia we see again and again, it’d be good to understand it thoroughly.

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Who’s next, the Woolfs?

Oh, hey, the Dieners!  Salt of the earth, I tell you.

Diener

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OK. I threw that up there because it made me laugh that I recognized the name. There are so few people in the west side districts that the same charismatic faces have to be trotted out to the media every time. But then I felt bad for singling out one person, so I started looking harder at the rally flyer.

My objection to this rally is that it fundamentally misrepresents the intended beneficiaries:

“It’s time that farmers, farm workers and families come together and fight for the water we desperately need,” grower Wayne Western said in a news release.

You can search for each of the names on the flyer (I like to add “thousand acres”, in quotes, in hopes of finding out their farm sizes), and you’ll find that these are very large, very sophisticated operations. It isn’t farmers, farm workers and families so much as agribusiness corporations, farm workers who are paid to be there, and living family trusts. These people are media trained; they testify before Congress; they are using paid staff time to organize this.

Nothing about that is intrinsically wrong. I would listen to the argument that adjusting to climate change requires the sophistication of large agribusiness, that aggregating wealth allows farmers to have their own satellites or location-specific genetically modified seeds or half-million dollar harvesters, that modernity requires this somehow. What is intrinsically wrong is hiding behind a false image to garner public sympathy.

Worse than that, they aren’t very good at it. The #takebackourwater hashtag links to speakers that were clearly instructed to start new twitter accounts for today. The hashtag is wide open for abuse. I would love to see the Winnemem Wintu start tweeting to #takebackourwater during the rally.

I am not sure that press is good for the west side in any format. That organizer, Wayne Western. That’s a great name. Here he is, talking about solar power and brackish desal. But it doesn’t quite say what farm he’s with. On September 26th, he talked about the rally on the AgLifeWeekend radio show. He’s a foreman, 19 years. What farm is that again? At 3:36 listen to him answer “a large family farm … outfit” on the west side. It is very clear that his bosses do not want him saying where he works. (I sympathize; god knows my bosses don’t want me saying where I work.)

You know, Westlands seems all-powerful, but they get a lot of bad press. You know who I fucking never read about? Dudley Ridge, the wholly unaccountable water district. Lost Hills Water District. Those are the people who have the sense and the discipline to stay silent. Social media is two-edged.

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I am seeing a lot of interest in water rights.

This talk, at UCLA.  This talk, in Sacramento.  An article about water rights being politically toxic, which prompted a few thoughts:

More than half a dozen independent experts interviewed for this article proposed similar fixes for California’s water rights system. They all started with the same premise: Lawmakers can’t dump the current system and start from scratch, for reasons both practical and political.

“We’re not going to throw water rights out. We’re going to fiddle around the margins,” said Peter Gleick, president of the Pacific Institute, an Oakland-based think tank.

Opposition to water rights reform is going to stay constant until a new system is proposed, and then winners under the new system can start advocating for it.  For example, I have proposed a system in which five million acres of agriculture get better water rights than they have now, and cities’ water rights change with their populations, so they don’t need to fear future population increases.  If that reform were seriously on the table, it would garner the support of more than half of agricultural interests (the Friant, in the Sacramento Valley, the coastal farmers, some of the Delta) and all cities.  “Fiddl[ing] around the margins” will only ever draw opposition, because fiddling around the margins will over ever be taking away (some aspects of some) rights from some people.  We aren’t going to fiddle around the margins to make our existing water rights stronger for some.  The vague concept of water rights reform will get opposition from all potential losers; clear and concrete proposals for water rights reforms will get support from the new winners and opposition from the much smaller group of actual losers.

Assemblymember Perea says:

Lawmakers should also look for new opportunities to store water in dams and groundwater reservoirs, Perea said.

“Once we look at those conversations, then, if we need to, we can talk about water rights,” he said. “Once you start talking about changing water rights, you’re really talking about a generational shift. That is such a monumental task — and it’s so critical that we get it right — that I think we should start from an understanding of where we are today before we go making such dramatic changes.”

Eh.  We don’t have to get water rights reform exactly right.  But it should have a good process for modification built into it.  Suppose we’ve underestimated the effects of climate change?  Suppose we want to grow more food?  A new water rights system will need adjusting by 2060 or so.

Prof Hanemann says:

UC Berkeley’s Hanemann thinks lawmakers will eventually take up water rights reform. While it might not happen during the current drought, he said, California is likely to confront an even worse drought soon enough, thanks to climate change.

Year Six.  I make my predictions up front and I’m saying Year Six.  If we are still in drought for two more years, I bet the new administration takes it up.  If we get a couple wet years, it’ll start the count over.  But people won’t believe until Year Six.

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Next I’ll be reading this. It looks like a real proposal, which is wonderful.  It is a real proposal to be more like Australia and I still don’t understand why that is the goal, but before having read it, it looks to have more content than any other proposition for water rights reform that I’ve seen.  (If you see others, please send them along.)

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