Tag Archives: Book Club: Unbundling Water Rights

I don’t have it in me to go through the Humboldt Basin case study, although it gets much closer to the complexity that we see in California.  So we’re done with stepping through each section.  Come back, readers!  Come back, Twitter referrals!  It is safe to come back!

Next week I may do some synthesis, but more importantly, I want to get into the question of what this implies about water markets in California.  Which of the elements of changing to market-based rights (accurately measuring all water, linking each right to a water account, converting water rights to shares, issuing yearly allocations, the preposterous water resource sharing plans, the governance) can be used here?  Which do we need to improve water transfers here?  Is this really better than just reforming water rights the way I want to?  Do Australians like their water market?  Would doing this really avoid any political fights?

I had three thoughts about this proposed transformation.  It looks like there is willingness, and it is a pretty simple closed system.  The author clearly spent a lot of time thinking about it.

1. Hold some teaching sessions before the changeover.  Hold at least three meetings, issue paper shares and let people game out a few water years.  This is a big change, so people should get a chance to try it out and practice.
2. Given that the internal rate of return from holding a water rate averaged well over 15% a year (pg 7), why give out grants for system transformation (recommendation, top of page 27)?  Those should be loans, not grants.
3. What are the metrics for success?  How do we know if we have won?  Self-assessed community happiness before and after this switch?  Community satisfaction with water rights system?  If the springs start flowing again?  If the groundwater basin comes into sustainability without people shooting each other?  Total acres farmed?  Level of farm debt?  Biodiversity index?  You know, my mother is a statistician and my father is a scientist.  Either of them would disown me for doing an experiment without explicitly stating what I am testing up front.  How can we assess whether “the market” worked if we aren’t told up front what exactly it is trying to achieve.  Before doing this, be very clear about what will be better in Diamond Valley when the system is up and running.  (If I lived in Diamond Valley, I’d want to be happier after the switch than before.)  Running this experiment and fishing around for improved metrics afterwards is scientific fishing, nearly as shameful as data mining.  You would no longer be welcome at my parents’ table if you were guilty of scientific fishing.

My interest is flagging and I didn’t have any substantive thoughts about these topics.  If you want me to come back to this and think harder, bring up your issues in the comments.

The governance section emphasizes that forming water markets can quickly move water out of a region, causing substantial third party impacts and severe dislocation within the community.  Because it is hard to foresee all of the potential impacts, it is important to have a governing board with members of the most vulnerable communities: farmworkers, tribal representatives, people from historically disadvantaged communities.

HahhahahahahaHAHHAhahaha!  No it didn’t. Of course it doesn’t.  It says that decisions that normally land in the courts be settled by 5 to 7 person appointed boards.  Of those, half should be water-users, the rest from water management.  They should be good listeners with good communication skills and not crooks who succumb to the temptations of insider trading.

I am tired of typing “reinforces existing power structures”, so I’ll switch to my other complaint about Australian proposals.  How does this scale up in California?  How many of these local boards do we need?  One per local market?  Could irrigation district board members fulfill this function?  County supervisors?  What happens if there aren’t enough people who want to do this?  Is the market suspended?  Do boards combine when markets are stable enough to merge?  Are board members paid out of the proceeds from the market?  Are trades assessed an administration fee?

I didn’t understand “tagged trading” well.  It allows for trading between different hydrologic regions, but I don’t understand the mechanics.

The last paragraph on the page discusses permanently selling water away from the region.  It addresses the increased operating costs for the water users that remain.  Australia sets those exit fees at ten times the fixed annual charge for water conveyance.  So basically, the sale of the water has to cover the next ten years of O&M on the infrastructure that delivered that water to the original location.

The section refers us to Appendix E, for Principles for Trading Rules.  As we’ve seen before, these rules that govern trades between river reaches, basins or watershed are so simple they fit on one page.  They do accommodate the increased O&M costs to water users in the source area when some water is sold out of the area.  But Appendix E is explicit:

Exchange rates and trading rules should not be used to achieve other outcomes, such as altering the balance between economic use and environmental protection or reducing overall water use.

So where do we develop rules that protect or compensate third parties?  NOT IN THIS MARKET!  Maybe beside it.  Or around it.  Or somewhere nearby.  Could be adjacent.  Possibly to the left or right of it.  But definitely, definitely not part of the market.

You can imagine my feelings on the “federal government … actively purchasing water rights for the environment.”  Of course my preferences are to reserve generous environmental water (instream flows, etc) before any shares are distributed.

This does seem like a way to achieve Dr. Lund’s proposal, of letting urban users dedicate conserved water to the environment.

The final paragraph of this section is clever.

We are getting there, comrades.  We’ve done more than half of the paper.  Starting about here, I understood less of what I read.  I have a lot of non-rhetorical questions, so if you have explanations, I’d love to hear them.

***

I didn’t follow the first sentence.  It seemed to be contrasting how the shares-based system considers flows in their rivers (physical!) with how others (us? do we fall into rules-based?) consider the flows (theoretical!).  Like, we name pieces of the flows going by as “environmental” water.  I guess so, sortof.  My first thought was that we name some water “project water” because it is only in the river at that time of year because it was stored by a project dam.  But I don’t strongly recognize the behavior of parting out river flows by theoretical names.  Well, maybe we do.  And we would fix that if we changed to a shares-based system.  Because then we’d get real practical about the chunks of water going by, no doubt because someone bought them or could buy them and they would finally be worth something!

Then I burst out laughing, because when we pay a whole lot of attention to the physical nature of water flowing by, the number one part of that flow, the most important “hands off” piece is… conveyance water.  Carriage water?  Really?  That will be a new way of thinking, because I don’t hear about carriage water much.  When I do, it is a side requirement of a water transfer.  For all I know, the people who run the rivers here think about carriage water night and day, but I don’t hear about it.  I hear about water required to meet salinity standards in the Delta.  Maybe we keep the rivers full enough that the carriage water requirement is always fulfilled, making it less central to water policy.

(Additional reflection convinces me that I am being provincial, only considering the conditions I am used to.  I vaguely remember that the Murray-Darling River ran dry in their drought.  Were that happening here, carriage water would become very, very important.)

The rest of this section was best conveyed by Figure 2, which explains a lot.  This whole section also states that some parts of water allocations are properly done by rules, based on values.  Policy-makers who hope to dodge the policy fights by choosing a process (the market!) instead of an outcome are going to be disappointed. We are going to have to define “broad society priorities”, even with this process.