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<br />Comments to SWSI, November 3, 2003, by John Wiener
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<br />The larger context
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<br />In the semi-arid West, the ability to shift existing water supplies from one use to another is crucial,
<br />given the high economic and environmental costs of new supplies. World-wide, there is
<br />increasing concern with water management and the attraction of reallocation as a demand-side
<br />options in response to scarcity, rather than increased supply, because "they are regarded as
<br />being more environmentally sustainable, cost-effective, and flexible..." (IPCC 2001: 219; citations
<br />omitted.) Adaptation to climate variability, presently and in the future, is affected by the legal
<br />framework of water management, the complexity of management arrangements, and the ability to
<br />"assess current resources and project future resources. This requires continuing collection of
<br />data and the ability to use scenarios with hydrological models to estimate possible future
<br />conditions." (IPCC 2001: 223). The assessment of management techniques is more of a
<br />challenge than the assessment of supply-side technical options (IPCC 2001: 219); little is known
<br />about how water transfer mechanisms which may be superimposed on existing regimes. Every
<br />study of potential impacts of climate variability and change has recommended serious inquiry into
<br />the management institutions and laws governing water allocation and re-allocation, as far as I
<br />know (e.g. USGCRP regional and sector studies, available on-line from US Global Change
<br />Research Program website).
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<br />In the western U.S., there is a long tradition of recommending remedies for the high costs of
<br />transactions in water (WWPRAC 1998, NRC 1992), believed to constrain transfers, but few "real-
<br />lite" experiments. While water banks are theoretically desirable, there is little experience with
<br />truly market-driven efforts. The famous California drought water bank, a leading example of a
<br />transfer mechanism superimposed on a complex historical system of administration, was very
<br />effective as a quick response to a crisis situation but experienced large inefficiencies due to a
<br />rigid price structure (Archibald and Renwick 1998, Howitt 1998, Jercich 1997). The long standing
<br />Idaho water banks have had some beneficial effects but of a very restricted value due to
<br />inappropriate pricing structure and priority rules. Additional experience is found in the Arizona
<br />ground-water exchange areas where trading is limited in scope (MacDonnell, Howe and Miller
<br />1994, NRC 1992, Saliba and Bush 1987).
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<br />It is important that the high transactions costs, in money as well as time, have almost certainly
<br />been a significant drag on agriculture's ability to adjust to changing opportunities. Because the
<br />high cost of changes would have to be financed (by self with opportunity cost, or with credit and
<br />obvious costs), the changes would have to "payoff" quickly. Long-term benefits from perhaps a
<br />huge number of small adjustments are probably being lost because they would take too long to
<br />payoff, or because they are too small to provide benefits big enough to cover the costs of
<br />change. Small changes are, apparently, limited to those "under the radar" within a lateral, for
<br />example; this inefficiency could be eased.
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<br />There has been public concern in Colorado over large water sales out of the Arkansas Valley to
<br />growing Front Range cities (e.g. Governor's Commission, 2000). These transfers have resulted in
<br />substantial negative local impacts because of the Valley's high dependence on irrigated
<br />agriculture and the absence of alternative investments (Howe, Lazo and Weber 1990; Howe
<br />1997; Howe 2000; Howe and Goemans, forthcoming, and see Colorado Water December 2002
<br />issue). The strong cultural and symbolic importance attached to "our water" in the West has
<br />inhibited public acceptance and water market development (Ingram 1990, Thompson 1997).
<br />Further, there is very serious concern that municipal buyers can pay so much more than
<br />agriculture that any reduction of the frictions will only increase the speed with which irrigation
<br />water is drained away (see news item appendix 1 for a statement January 15, 2003). At the
<br />South Platte Forum in October 2003, Peter Binney, utilities manager for Aurora, Colorado, noted
<br />that his water customers were paying more than $3000 per acre-foot under drought emergency
<br />pricing in 2002, (at the highest tier rates, one presumes), and other sources commonly mention
<br />figures in the high hundreds of dollars per acre-foot, not to mention tap fees for hooking up new
<br />homes.
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