Episode 80: The Policies Driving Our Water Scarcity in the West

Katherine Wright: This was actually ingenious. It actually made sense back in the 1800’s. But today we’re not really as worried about allocating extra water or surplus water as much as we are, you know, making sure that water is going to its highest valued use.

Michael Schaus: This is Free to Offend. I’m your host, Michael Schaus. If you look pretty much anywhere in the western United States, water is and pretty much always has been some sort of an issue. And it’s getting worse, but especially if you live in a little town in the middle of the Mojave known as Las Vegas, water is something that is continually on everybody’s minds.

And it makes sense. I mean, not only do we live in the desert, but also, yeah, we’ve had a hundred-year drought. And then you’ve got people talking about climate change. And on top of that, the population throughout the west, throughout California and Arizona and Utah and New Mexico and Colorado, and obviously here in Nevada, you know, populations keep on growing.

Is it any wonder then that we’ve got a bit of a water issue? And the water issue has gotten pretty bad. It’s gotten the point where folks who are on the Colorado River are all at each other’s throats trying to fight over who’s going to take the biggest cuts because there doesn’t seem to be enough water to go around.

Well, at least with how we currently have things set up, and that is the reason why I’m really happy to welcome somebody from PERC, the Property and Environment Research Center.

If you don’t know about the Property and Environment Research Center, you’ve got to check them out online. They do amazing work when it comes to conservation and environmental solutions that actually take into account markets and incentives.

It’s, if you will, kind of a free market think tank that focuses on conservation and environmental issues, and it’s a great organization. They do tremendous work out there and I’m very happy to welcome Katherine Wright. She is a research fellow at PERK. She’s also an expert on water policy and her current work includes exploration of solutions to Western water scarcity, which is something that hits very close to home if you live anywhere in Nevada.

So, Katie, thank you so much for joining us. We really appreciate it.

Katherine Wright: Yeah, thanks for having me. I’m really excited to have a conversation about water here.

Michael Schaus: So, this is something that, you know, everybody hears about water out here, but not a whole lot of people get real into the weeds about.

Obviously, it’s on our mind, especially if you live in southern Nevada. You know, we hear constantly every couple of months that Lake Mead is hitting a record low, that the Colorado River Compact is still up in negotiations, that California doesn’t want to budge, and are we even going to have water in a couple years?

The big question I guess is how bad is the water scarcity throughout the west and especially when it comes to Nevada?

Katherine Wright: Yeah, I mean, that’s a really great question and I have more of an optimistic outlook. So, I would say we are in a bad situation in terms of we do need to save water.

We do need to think carefully about how we use water and where it’s going. But I am optimistic that we can make changes in the short term and the long term that will alleviate this water scarcity and won’t require us to constantly have to face this Dead pool or kind of apocalyptic scenario that we often see painted about water scarcity.

Michael Schaus: Yeah, I mean, this is one of those issues if you’re just perusing the headlines, it sounds very doom and gloom, which is part of the reason why you’ve got a lot of folks out there saying, “Well, why on earth are we letting places like Las Vegas or Phoenix continue to grow? Because there’s clearly not enough water in the middle of the desert.”

But I think in order to get our brain around some of those solutions and kind of where we actually are, we might want to talk a little bit about how we got here because. As you talk about a lot, there’s kind of various different reasons that we have arrived at the point where we are right now, where we are worried about Lake Mead and Lake Powell and what have you.

Can you break it down a little bit? I mean, over the last a hundred years, the number one thing we hear about is climate change. Whether that’s anthropogenic or just natural climate change, the fact that we’re in a drought and being in a desert, that’s not a good thing. But also, we do have the demographic issue with areas like Vegas and Southern California growing. And of course, we got politics. So how do you kind of break down how we got to where we are right now?

Katherine Wright: Yeah, so I like to talk about water scarcity or the drivers of water scarcity in three buckets.

So, the first bucket, like you mentioned, is climate-induced scarcity. This is the idea that we might have changing rainfall, so the level of rainfall we get changes from year to year. And we might have fluctuations in temperature. And those variations in temperature and precipitation change the timing that we get water delivered. And this timing is especially important because if you’re a farmer and you want to grow something, you have a growing season.

So, we might think of climate induced scarcity as a mismatch between when we need water or, you know, a certain amount of water, and then the timing of which of when it’s needed. So that’s the climate induced scarcity.

And then we have what I call population-induced scarcity, which sounds a little bit more ominous than I always mean it to.

It’s just the idea that you have more people moving to arid regions, and so the demand for water outpaces the supply. But interestingly enough, in terms of population-induced scarcity, these arid regions or these cities that people always point to, like Las Vegas or Phoenix, have actually gone down in total water use over time, which is an incredible feat because the per capita has also gone down and the population’s increasing. So, it’s very impressive that we’ve kind of been able to think about how technology can get us out of that population induced scarcity.

And we also might think that people might move over time if there’s less water available. But the third type of water scarcity that I think can be oftentimes overlooked and is the reason why I’m so optimistic about water scarcity in general is policy-induced scarcity.

This is the idea that some of the rules or institutions or policies we have in place incentivize individuals to use more water than they actually need. And when we’re thinking about quantifying just how much that overuse of water is we don’t really know, but that’s a positive thing, I think, because it means that there’s a lot of ability for us in the future to adjust that without having to decrease agriculture or change the way that we develop.

So yeah, those are kind of the ways that I think about water scarcity.

Michael Schaus: That’s important when you start talking about the policy issue too, because what immediately comes to mind when we think about saving waters, we think about, okay, Las Vegas has to become even more water efficient. But as you point out, Vegas is already highly water efficient, and so is Phoenix.

You know, we’ve got a lot of the cities in these arid regions have done a tremendous amount. I mean, everything from zero escaping to just using less water and being smarter with the water that we use.

Las Vegas, I always like to point out to people, we’re one of the very few places that take water from the Colorado River and put some water back. It doesn’t just go run off into the Pacific or into the Gulf of Mexico.

With all that in mind, when we’re talking about policy, everybody focuses on the cities. How much do the cities actually drive the water shortage that we see right now?

Katherine Wright: Yeah, this is a great, great question. I think it’s often overlooked.

So, people tend to focus on cities because that’s where the majority of the population is, right? So, it’s like people living in cities, if I turn off the tap, if I, while I’m brushing my teeth, or I use less water when I shower. We talked about this, there was a campaign back when I was a kid about, you know, turn off the water while you brush your teeth and just how much water that would save.

And it’s not that that doesn’t save water, but I think it’s also important to consider, how much does it cost to save water in a city versus another location? And how much water could we actually get if everybody in a city stopped using it?

And so, the statistic I like to bring out is what percentage of the Colorado River goes towards cities and what percent goes towards, you know, other things like industry or agriculture.

And what we find is about 20% of total water use is attributed to cities, and 70% is used for agriculture, which means that majority of water is in ag and not in cities.

And we can break that down a little bit more when we think about if we’re asking people to reduce their water consumption, how much does that cost per unit of water saved?

We typically talk about units of water in acre feet, and what that is it’s an acre of land covered in one foot of water. So, it’s about 326,000 gallons. So, if we’re talking about moving water within a city or saving water within a city, it’s going to cost us anywhere from $600 to about $3,500 per acre foot. So, it’s pretty expensive to do that.

And that includes things like zero escaping. It’s low flow technology. So, like installing low flow toilets and low flow showers. And that’s changed over time as well. So, we can think about maybe the first year that you installed a flow toilet, it works really well, but over time it works less and less. And so that price increases over time.

So, you know, that range again is about $600 to $3,500 per acre foot. But if you look at ag, it actually costs us anywhere from, I think, $150 to maybe $350, depending on what we do. So, we can already tell that there’s a price discrepancy from within city water use, so paying someone within a city to change their water use versus paying a farmer to change his water use.

And so, the natural question is, well, if 20% of the water is within city and it’s really expensive to change that in city water use, why are we looking at cities? And traditionally it’s because it’s easier to kind of move water within cities and it’s not as easy to get these ag transfers or in particular move water from agriculture to within city use, and this again ties into kind of the policy induced scarcity. thinking about, you know, what are the rules that actually govern water use in the west.

Michael Schaus: Well, and I was going ask about that too, because this is one of those areas where having lived in Colorado, especially on the eastern plains in Colorado, where water is a big thing.

I mean, Eastern Plains are basically a high desert and everybody’s trying to grow everything from corn to alfalfa out there and they need water. As soon as you talk about potentially cutting water use in agriculture, a lot of folks who depend on agriculture for their living start to panic and kind of understandably so.

The way that the water rights work in the West is if you don’t use all the water that you’re allocated, generally you lose whatever water you don’t use. So, there’s a real incentive there for farmers to say, “Hey, stop it. Don’t talk about taking my water away.” How do you kind of overcome that obstacle in the policy realm?

Katherine Wright: That is one of the bigger obstacles, and it ties into some of the laws, some of the way that prior appropriation, the doctrine that allocates water in the West is written. And it also ties into a lot of past historical incidents, and it’s caused a lot of just different feelings about, you know, these ag to urban transfers or what will happen if ag temporarily moves water to urban environments.

And so just to take like a step back, I’m going to kind of explain prior preparation because I think that will help us understand a little bit more about why some of these transfers are contentious and why they’re classified the way they are.

The way that I typically explain it is as a champagne tower. So the bottle of champagne is your amount of water that you have in a given year, and then you have that tower of glasses. And when you pour out the champagne, the first glass gets filled and once it’s filled, it overruns and goes to the next glasses and so on. And that’s how prior preparation allocates water.

It’s first in time, first in right, which means that individuals who have the oldest water rights, so probably, you know, late 1800s and early 1900s, they get their water first and they get it completely filled to the quantity that they asked for in, you know, the 1900s. And then whatever’s left goes on to the next in time.

And so, the way that then this impacts trade is if you pull a glass out of a champagne tower, the structural integrity of that tower changes. The other individuals in that tower don’t get champagne at the same time. Now, because we’ve allocated water based on priority, this first in time, we need to ensure that any movement of a glass from the tower or any movement trade of water, doesn’t affect any other user’s right to water at a given time.

And the other part of prior appropriation that makes some of these transfers complicated is this beneficial use and they use it or lose it. So beneficial use means that you need to put water towards typically ad industry or municipal use, and sometimes environmental uses are also put in there. So, you have like instream flow.

But typically, or in the past, the storing of water has not been considered a beneficial use. This is changing over time though, so I want to be very nuanced because every state has different definitions of beneficial use. But then the part that you mentioned is the use it or lose it. So, this idea that if you’re not putting the amount of water that you identified in the early 1900s towards the specific beneficial use that your state classified as beneficial in the early 1900s, then you aren’t using your water and someone else could use it.

So, they would take it and move it on to someone else. And so, the way that this impacts trade is if you have water being used on a farm, that water’s probably classified for ag. And so, you can’t just move that water from ag to another use unless you want to go to court and talk about it. And so, you need to be prepared then to say, this is how I’m using every acre foot of water that I have ever claimed for this particular use and how it won’t be changed by me moving it and no one else you can imagine.

Now it’s costly to litigate this. Some states don’t have great court systems for water. And beneficial use might be hard to prove. So, you can see how people are averse to kind of these transfers.

Michael Schaus: And that causes a lot of kind of mind-boggling problems that clearly the incentives are perverse there. You know, I remember reading about in parts of California, putting water back into the ground system is not considered beneficial use.

So, that automatically causes a problem when we’re talking about aquifers that were overallocated and are currently being depleted. You would think we’d praise people that say, “Hey, I want to take some of my extra water and put it back into the system.”

Also, you’ve got water storage. I mean, water storage is something that I know we complain about a lot when it comes to California because we see these massive rains and all this wonderful flooding and you know, real wet season and half the water’s washing out to the Pacific. And we go, “Well gosh, if only people could maybe hold onto some of that for some of those drier years, which we know are coming.”

Is tackling some of that going be a really difficult lift on the policy side? Simply because we’re talking about a system that has been entrenched for, you know, a hundred plus years.

Is that kind of what the main obstacle to that is a lot of folks feel like their rights are going to be infringed when it comes to their use of water?

Katherine Wright: That’s a very hard question. So, I think a lot of people are nervous about legal scrutiny on their rights. So, if you’ve never really had to go to court and have your water right checked to ensure that you’re using the maximum amount, you’re going to be averse to them having legal scrutiny on your right now, because if they find that you’re using any less than what you specified, you know, over a hundred years ago, it’s going to be reduced without compensation.

It’s not a question, it’s not a conversation. It’s this is reduced. You don’t need it. And to kind of give a little bit more context, in the 1800s and 1900s, this was actually ingenious. This was a really low-cost way for the federal government to ensure that a bunch of gold miners didn’t say I want 200-acre feet of water to speculate over essentially. So that it actually made sense back in the 1800s and it provided a really secure property right for people to have back then.

But today, we’re not really as worried about allocating extra water or surplus water as much as we are making sure that water is going to its highest valued use. And so that’s where these first in time, first and right, the priority, the beneficial use really create obstacles to then transferring water.

And so that tied into this kind of fear of, you know, what happens if we introduce legal scrutiny to our water rights can make farmers hesitant to want to engage with some of these alternative transfer mechanisms. That is what they’re called.

And tied into that there’s the historical events of when we have kind of permitted these transfers and kind of overlooked the beneficial use clause or the use it lose it clause. Farmers haven’t been fond of the outcomes of that.

The typical kind of sighted example is Owens Valley. I’m going to paraphrase all of this so, you know, look up the actual historical event if you want the details. But essentially Owens Valley was a farming community and Los Angeles needed more water for a given, you know, the growing population.

And so, some politicians went to Owens Valley and from the farmer’s perspective, the agreement was people from Los Angeles want to move to Owens Valley and become cattle ranchers. Can we buy your property to do that? And so, a lot of farmers sold, but what they didn’t realize is they were actually selling their land to the city of Los Angeles.

And the idea was Los Angeles would then leave that land fallow and they would divert the water that would’ve been used for agriculture to the city. And when a lot of people who were staying in Owens Valley found out, they got very upset because they thought, what’s going happen to our farming community?

And so, as the story goes, you know, some farmers blew up the aqueduct that was going to carry the water from Owens Valley to Los Angeles. That story really colors how farmers feel about these transfers, these ag to urban transfers today. And again, this is in some ways with good reason because if you believe that some type of transfer is going to affect your future, your children’s future, and your current economy, you’re going to be very careful about agreeing to certain long-term plans.

But given what have we done currently to address water scarcity, given these constraints, given these historical experiences, given prior appropriation and other fears.

And this is where I’m somewhat hopeful in that we’ve actually come up with solutions. And they aren’t perfect solutions, but you know, they work better than the alternative. And one is this rotational following.

So, because of incidents like Owens Valley, there have been new negotiations to say what if instead of a permanent sale or a permanent transfer of land to a city, we do it temporarily? So, we say only every other year will we ask you to fallow your land. And we know that a certain amount of fallowing is actually good for agricultural land.

So, it’s this idea of, okay, well some of the solutions we have actually incorporate all these past messiness and we’ve come up with solutions that move water temporarily from ag to urban environments.

Michael Schaus: Well, and all of this scales up in kind of an easy way to understand when you start looking at what’s going on in the headlines. California, for example, they’ve got senior water rights on a lot of the Colorado River, and of course they’re not wanting to restrict their access to that water. And that’s causing a problem with the negotiations between them and the other states that are in the Colorado River Compact.

And on top of that, when water was allocated from the Colorado River, again, we’re talking about a time in history when the river was pretty high. You know, we’ve had a lot of droughts since then and the water level’s just not where it really used to be. So, you can see how on both a big scale and a little scale, all these kind of play out.

Obviously, we’ve got to worry about the long-term solutions. You know, this is something that I think ultimately you have to have long-term solutions in mind, and you have to have these structural changes that we’re going to be moving forward over the course of several decades in order to make it a sustainable place for people to live in arid regions.

But also, we do need some shorter-term solutions as well. I mean, again, looking at the headlines, last year they were talking about how Lake Mead might hit dead pool status sometime soon. Lake Powell is. Yeah. I remember going to Lake Powell as a kid and boy, the pictures look awfully different right now.

What are some of the short-term policy things that we can start doing right now while we work on that kind of longer term, changing the way that we think about water property rights overall? I mean, what’s kind of the progression there, you think?

Katherine Wright: So, I am of the opinion that the long-term solution can actually be implemented in the short term, but the scale is different. So, if in the long term we think about the scale being across the entire Western United States, I would argue that the short-term version of that solution is local communities or irrigation districts implementing it at a smaller scale.

And so, the solution that seems to be advocated now more and more by researchers, academics, policy makers, et cetera is water markets. And this is something that PERC has also been a long advocate and I’ve been a long advocate of.

And so, the question is what do these markets look like? So, in one way, we can think about water markets as just the ability to more freely transfer appropriate rights.

Or we can think about what if we change prior appropriation? And so that probably sounds like more and more like this long term. Everybody’s panicking. Yeah, everyone’s panicking right now. And just some extent that makes sense. I mean, you’re talking about the conversion of different rights, like that’s a very scary situation.

But so, you know, if we explain prior appropriation, like we would explain a champagne tower. We can explain shares, which is the alternative to prior appropriation, as a pie. And this is the idea that the total amount of water available in a given year is like a pie. And every individual, instead of having a champagne glass, has a slice of pie.

And so, if in a given year the pie shrinks, the amount of water shrinks, every individual is then shrunk in a corresponding way, in the same way. And so, individuals could own more than one slice. They could own one slice, but the key thing is that a reduction in water use or you know, those climate induced scarcity impacts everyone in the same way. Each slice is impacted in the same way.

And so, a lot of economists talk about this being the long-term solution or a long-term alternative if we’re being very honest. Because in prior appropriation that champagne tower, the way water is allocated, if we take out a glass to transfer, it affects everybody else. And that’s why transfers are very costly.

But in the pie example, we’re not allocating water through priority. You don’t have to prove beneficial use. And so, the same cost to transfer water don’t exist. And so, you can transfer water a little bit easier.

The best example of this in the United States is the Colorado Big Thompson project. This is where they took some water that wasn’t allocated under prior appropriation and chose instead to allocate it with this share mentality.

And so, what my past research and what my research with PERC does is we say, okay, what were the long-term impacts of this? How did agriculture change? How did development change? How can we think about that? And then kind of broadening the question to say, well, can this be replicated any other place?

The reason that I say this is the long-term solution shares, like thinking about shares is a long-term solution. So, if we think about, okay, well then how does that, how does that make sense in the short term? Because we can’t just transition prior appropriative rights.

Well, the thing is, a lot of these irrigation districts, which are more community or local based institutions, they allocate water already through a share base, so they can make the decision at this very small scale to allocate water Through shares.

And so, this, I think is one of the cool aspects that individuals can really start to make a difference in is irrigation districts, or I think even conservancy districts, which is another institution that allocates water, they can all make decisions on, well, do we want to allocate our prior appropriative rights through prior probation? Or at our small scale, can we allocate it through shares?

This is where I think we have some small short-term solutions is saying, okay, well at a smaller scale, can we implement shares at a smaller scale? If we implement shares, how does that affect our ability to transfer? Or how can we, you know, loosen the rules of prior appropriation at a more local level to permit these transfers that would help alleviate some of this short-term scarcity?

Michael Schaus: Again, it seems like even just thinking as an economist, even on a small scale, if we make it easier for there to be a so-called water market you know, actually inject a little bit of the market forces in there. You know, if you’re a farmer and you’ve got more water than you need, it seems like that would be a beneficial plan where you can send some water to my neighbors.

You know, if one of my neighbors has less water than he needs, we can transfer shares relatively easy or what have you, rather than the current system where all of a sudden, I’m worried about whether I’m going to lose those rights forever or what have you.

So, this is one of the things that, again, thinking of it as an economist, I look at the West and I look at the way that water is governed and there are very few “market forces: on the system.

You know, I love the state of Utah, but they’re one of the highest per capita users of water. You drive through some of the cities and it’s like, yeah, this is unsurprising. Plus, they’ve got a lot of agriculture there.

I did a little bit of research. They subsidize a lot of the water costs, so there’s little incentive on an individual level to conserve, you know, forgetting about any of the water rights even.

I like the idea of trying to move it a little bit more towards a market system because that puts natural incentives for people to think about how to responsibly use and share water.

You said that you’re optimistic about water in the West. I’m relatively optimistic just because I do think, as you point out, a lot of our current shortage is, a result of policies, and that’s something that’s changeable. You know, we can’t necessarily change how much it’s going to rain, and we don’t necessarily want to change how much we’re growing.

When you say that you’re optimistic, how optimistic are you in just the next couple of years? Is this something that you think politicians are starting to pay attention to some of these reforms, or is this kind of like a lot of other big political questions, whether you’re talking about retirement systems or what have you, where they just want to keep on kicking the can down the road until all of a sudden Lake Mead actually is dead pool and then oh, quick we have to do something?

Katherine Wright: I’m incredibly optimistic for a couple of reasons, and the first is, we are starting to see more and more research come out about these share-based systems and, you know, advocating for the share-based system. That’s in part because of the past few years where we’ve seen so much about Lake Mead being dead pool and everyone’s kind of scrambling to say, “Well, we need to come up with some solution so you know, what can we do?”

And so, there’s kind of been this cool space of people are willing to entertain non-traditional solutions or non-policy solutions because we need to be creative within the policy constraints that already exist.

And then I think the second part that makes me a little bit optimistic is individuals can still make decisions about how to manage their water since these are property rights.

So, if you belong to an irrigation district, you can become a representative on that irrigation district. Or you can also be part of conversations regarding the use of your water, how that water’s allocated within those areas. And so, I think that allows a lot of feedback to make different decisions and make different decisions more quickly than perhaps at the federal level.

I also would say I’m optimistic because (and this was part of my work in my dissertation) we’re now finally coming out with more data. So, in the past, a lot of the work on water markets was really high level and it was short-term.

We weren’t able to see kind of long-term impacts. So, we weren’t able to say, you know, here’s the Colorado Big Thompson project, the share-based market. How does it affect agriculture and development over time? Which is an important question because if you’re trying to convince people to implement new types of institutions or policies, the question that they should ask is, “Well, how does that affect me? How has that affected, you know, my community throughout the years?”

And in the past, we weren’t able to really come up with good answers because we didn’t have the data to talk about it. We didn’t follow individuals over time. We didn’t follow water over time.

And so, part of my past research was developing these data sets to say, okay, well how was water used over time? Where was it going? How did it impact these communities? Let’s find these answers. Let’s provide people with actual tools so they can know where their water is going and how it’s affecting them.

And so that makes me hopeful in that we’ve now been able to analyze how these share-based markets have performed. And encouragingly, they’re not purely share-based markets. They’re kind of hybrids. They’re messy. They mimic the real world, which means that we’re not talking about, you know, this ideal institution that will never exist or be implemented in the real world. It’s kind of messy.

It’s not straightforward, but we’ve been able to kind of parse out some of the impacts through these long data sets, which is encouraging because then I think the policy recommendation becomes more realistic of this is what we can change, and it doesn’t have to be a perfect implementation.

Michael Schaus: Perfect. Where can people go if they want to find out more about what you do and what PERC does?

Katherine Wright: So, I would say the website. PERC’s website is great. We have a lot of policy reports on not just water, but also other natural resources. All of their social media, of course, also plugs this.

And they’re a great repository for also, you know, other academics that have incredible work on these topics and are working with even more nuanced topics than just surface water, but also, groundwater and tribal water, all of which are becoming more and more popular. So, I would highly recommend people go there and read about more in depth research.

Michael Schaus:  Excellent. Well, thank you again so much, Katie. I really appreciate it. Again, Katherine Wrights, PERC Research Fellow. Definitely check out PERC. They do amazing work.

I’m just going to reiterate one more time, one of the major benefits of living in the American West is that we live in an incredibly beautiful resource rich corner of the world. This is an amazing place on the planet. The scenery, if you like hiking, if you like backpacking, if you like four-wheeling, if you like anything to do with the outdoors, this literally is a sort of a paradise really.

And to have an organization that’s out there fighting to preserve it in a way that is economically responsible in a way that is geared towards incentives and markets and really looking at the natural economic behavior of human beings and how that plays into the way that we can preserve all these natural resources. A great organization definitely check it out. The Property and Environment Research Center, PERC. Their website is just perc.org. Definitely check them out. Katie, again, thank you so much.

And by the way, for everybody else’s listening thank you for taking the time to listen to these podcasts, we absolutely love it. Please visit Nevadapolicy.org/podcast. You can not only sign up to receive these podcasts right in your inbox, but you can also let us know if there’s a topic or a specific guest that you think we ought to entertain on the show.

Again, Nevadapolicy.org/podcast. Thank you so much for listening. This has been Free to Offend.