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WSW Issue #1686 Staff Analysis and Special Report September 8 2006
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WSW Issue #1686 Staff Analysis and Special Report September 8 2006
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WSW Issue #1686 Staff Analysis and Special Report September 8 2006 Congressional Budget Office/Water Allocation
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CO
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9/8/2006
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WSW Issue #1686 Staff Analysis and Special Report September 8 2006
Water Supply Pro - Doc Type
Litigation
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Page 2 of 3 <br />The report expresses a view of federal water policies and western state water rights doctrines that fails to <br />take into account the fact that water is a complex mixed economic good with both public and private qualities. <br />Water uses may or may not be exclusive and consumptive. It does not recognize that historically water use has <br />been prescribed and is protected by an extensive body of law that defers to states in the allocation of rights. That <br />assignment of rights forms the basis for any successful and efficient market. State water rights, once vested or <br />perfected, are Constitutionally protected property rights. However, the exercise of state water rights has been <br />proscribed by means of federal environmental statutes that provide an ecological "safety net." Further, as <br />described in the report, state water rights are subject to recognized federal reserved water rights. <br />CBO interprets the Supreme Court's views in Sporhase v. Nebraska related to ground water, a particular <br />type of water "commodity," as authority to reallocate interstate waters to serve the national interest. However, the <br />Court's decision may be seen as narrowing "State" restrictions on the exercise of a property right, allowing the <br />interstate transport and use of ground water on adjacent lands. The decision is generally seen as limiting, not <br />expanding, governments' authority to restrict water use. The Supreme Court has exercised jurisdiction over the <br />"equitable apportionment" of interstate streams, but never ground water. Further, interstate surface waters have <br />most often been divided through the negotiation of interstate compacts (ratified by the Congress), which are <br />binding. It seems unlikely that Sporhase could lead to a federal reallocation of interstate waters. <br />CBO seems to imply that Native American water rights settlements could provide a significant source of <br />water to be reallocated in the future to meet non - Indian uses. Tribes may or may not be disposed to "trade" their <br />waters, even if allowed. Further, past settlement agreements have been careful to accommodate existing non - <br />Indian water uses. Still, remaining unsettled and unquantified claims are a substantial source of uncertainty and <br />an obstacle to the use of market mechanisms to move water to more "efficient uses." <br />The report recognizes some third -party impacts, but does not clearly address market failures and <br />externalities related to the fact that water, while a commodity in interstate commerce, remains in part a public <br />good. Its use for one purpose does not necessarily exclude all other uses. Further, water uses are both <br />consumptive and non - consumptive. Therefore, purely free market mechanisms alone can not bring about the <br />most efficient allocation of the resource, and some government intervention is justified. Again, federal <br />environmental laws recognize and protect water uses that a free market may "undervalue." Similarly, state <br />instreamflow statutes attempt to balance public uses with private property rights to the use of water. It is <br />government intervention, not the market, that provides the greatest protection for environmental and instream <br />values. The report notes many states prohibit private instreamflow rights, but there are "market mechanisms" that <br />allow private individuals and organizations to acquire and dedicate water for public instream use. <br />The report promotes the expanded use of markets to reallocate water from current to future uses and <br />"thereby mitigate the potential costs of adapting to changing conditions for drought and to potential climate - related <br />changes in water demand ... and supply." It assumes that water demands exceed supplies and that legal and <br />administrative obstacles — not economic considerations (such as conveyance costs) — are responsible for the lack <br />of effective water markets. Often whether or not there is a market for water depends on the availability of existing <br />infrastructure. The report also suggests that federal agricultural policies, price support and loan programs, <br />"...make transferring water to nonagricultural uses more difficult and expensive for prospective purchasers. In the <br />West, where irrigation accounts for such a large share of freshwater withdrawals, such programs may significantly <br />reduce the amount of water available for non - agricultural use." <br />With respect to water conservation, the report states the "...federal government might also assess the <br />impact of refining or expanding its cost - sharing program for improvements to irrigation systems, its conservation <br />plans for irrigation districts supplied by the Bureau of Reclamation, and its water- efficiency standards for plumbing <br />applications." It continues, "One option for encouraging efficient water use would be to phase out infrastructure <br />subsidies that support the delivery of water to agricultural and municipal users at rates that generally do not cover <br />costs. Changes that move water prices toward levels that correspond more closely to opportunity costs <br />encourage more beneficial use of water resources economy wide." Opportunity costs are often mentioned, <br />without any clear discussion of what those opportunities are, or are not. <br />CBO does appear to recognize a potential benefit from greater federal expenditures for research and <br />development (R &D) into technologies such as desalination, and "...the collection of data on streamflow and <br />groundwater levels specifically to enhance the reliability of predictive models." Specific reference is made to U.S. <br />Geological Survey streamflow and ground water data gathering activities. <br />hq: / /www .westgov.org/wswc /1686spc.html 10/24/2006 <br />
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