Race to the well's bottom

By law, owners of California farms have the right to “reasonable and beneficial” use of the water underneath them. But they’re entitled to that water strictly for use on the same land. They can’t, for example, sell the water to a nearby town.

And there begins a tale of woe. That is, it’s a sad situation if you’re trying to find ways to manage demand for water so that the state can protect the resource, says Matthew Fienup (pronounced FEE-nup) of Cal Lutheran’s Center for Economic Research and Forecasting (CERF). Agriculture is responsible for most of the state’s water use – at least three-quarters in Ventura County – so conservation efforts will have to address the economics of farming and ranching.

At first, it might sound like a good thing that growers aren’t allowed to profit from water that comes to them at little cost. But think about it, says Fienup, who recently co-authored an op-ed on the drought with CERF director Bill Watkins.

“That literally creates an incentive,” he says. “You better just draw the thing down to the bottom, because the aquifer under your parcel is the aquifer under the parcel next door, and if you don’t draw it down to the bottom, your next-door neighbor’s going to.”

Under the current scenario, farms do in fact profit from the water under the ground – they sell it in the form of, say, berries – but they’re given little incentive to preserve water resources over time.

The prohibition on transferring “overlying” water rights is just one twist in a maze of policies and regulations that contributes as much or even more to California’s water woes than the lack of rain. And the problem only gets worse during a drought. According to Fienup, a new faculty member who’s becoming a specialist on local land use issues, the emergency water ordinance for Ventura County encourages growers to use their water quickly (before steeper surcharges are phased in) and to plant thirstier crops (which have higher water allowances).

Fienup and Watkins have a proposal that, they believe, cuts through the maze of issues. They are aware, however, that it can’t succeed without extraordinary political leadership and multiple changes to California law.

They want the price of water to go up – by a lot. Fienup thinks that something on the order of a 10-fold increase will be necessary in Ventura County. As things stand, he explained, residents of Orange County pay more than 13 times Ventura’s water rates, due largely to distribution costs.

The CERF economists conceded that a water price hike would punish low- and middle-income families, and so, for fairness’ sake, they propose a minimum allocation of free (or very cheap) water for everyone. That allowance wouldn’t hold down demand for water or the price.

To prevent the price hike from driving growers out of business, Fienup clarified, each one would have to be given a fixed allocation of water to use or to sell.

Think of what high prices for water would do:

• To cut costs, more homeowners and businesses would switch from lush green lawns to gravel, succulents and other low-water plants.
• More cities would follow San Diego and begin desalinating ocean water.
• With changes to laws and water infrastructure, treated wastewater would become more attractive for use on farms and yards.
• Cultivation of and consumer demand for very water-intensive crops would begin to drop. (California alfalfa, Fienup notes, is a vehicle for exporting the state’s fresh water to places like Southeast Asia.)
• The water used to produce meat would also be better reflected in higher prices.

Sounds popular, right? Actually, when discussing the price-hike proposal with taxpayer groups, attorneys, water purveyors and water officials, Fienup has heard positive responses. Or, at least, he has seen his listeners nod before shrugging their shoulders.

“People all agreed with the message, but nothing’s gonna happen,” he said. If the United Water Conservation District tried to raise local rates by itself, “everyone would sue.” (As a necessary first step, Fienup welcomes litigation to clarify water rights.)

Still, necessity has been known to move quixotic proposals forward. If rainfall does not alleviate the supply problem, the state will increasingly look for new ways – beyond fines and education programs – to manage demand for water. “And nothing coordinates demand like prices,” Fienup says.

As an economist and citizen, he admits he hardly knows what to hope for these days: “If it rains, we may not fix any of this. We might just skate by.”

CLU Magazine