ADWR Water Allocation Process

One month ago, the Arizona Dept. of Water Resources (ADWR) held a public meeting to announce that they were beginning the process to allocate (or reallocate) approximately 96,000 acre-feet of Colorado River water delivered via the Central Arizona Project (CAP).  This is water that was made available by the big Arizona Water Settlement that was crafted almost 10 years ago, but under the language of the act was not available for reallocation until 2014.

As you might expect from the state agency responsible for management of the state's water they have proposed a tightly controlled administrative process for deciding who should get the water and how much they should be entitled to.  Oh, and there are also some costs associated with this water.  But as is typically the case, the cost for this water only covers the "costs" of administering the process, then when the recipient takes the water they will pay the "costs" for delivery.  There are no "opportunity costs" or "scarcity costs" included.  Now admittedly these costs are greater than what has been paid by those who currently possess allocations of Arizona's Colorado River water, but that is all water under the bridge, so to speak.  And what the entities who manage to "win" an allocation of this water will get is something slightly less than a continuously assured supply of renewable water.

Because this is water that was relinquished by agricultural contractors it holds a priority within the CAP system that is lower than the standard municipal and industrial allocation.  What this means is that when there is a shortage on the Colorado River that impacts Arizona's supplies this water may be unavailable for delivery.  ADWR has analyzed the expected reliability of this water and believes that up to 2/3 of this water should be continuously available, depending on the assumptions you use (a summary of their analysis can be found if you click the "presentation" link on the process page).

So far that's all well and good.  Where I have a problem is the whole process they have proposed for determining who is "worthy" of receiving an allocation of this water.  This is what administrative agencies always try to do and they never seem to get it right, especially in situations where you are dealing with a scarce resource.  People try to game the system, assumptions have to be made about where future demand will reside, and there just tends to be a whole range of normative "calculations" that need to be made to justify the actions of the agency.

I am planning to draft up some comments recommending that they at least try to allocate some of this water via a market-clearing auction (CAP staff proposed something similar as part of the ADD Water process that you can find here - click the link for "ADD Water Program Proposal").  I have no hope that it can all be auctioned off (there are too many bureaucratic hurdles in the way) but it just seems to me that given the year-to-year variability that might be present in at least some of the water available and the well-known superiority of market mechanisms to allocate scarce resources, an auction has to be the best way to ensure that this water is allocated in an equitable and efficient manner.  It's a long shot, but someone has to take the first shot.

Cato Article - Downsizing the Federal Govt. - BuRec

There's definitely some Cato Institute stuff that's just too far out there for me, but when they take on federal control of water resources in the West and advocate for more use of markets to allocate a scarce resource, they can probably reel me in.  I enjoyed this article, mostly for its advocacy of water markets.  I think it's easy to find examples of where the federal government has screwed up in their long-standing management of Western water and they do a good job of chronicling those in the article.  But they largely overlook much of the good that has resulted from those efforts - the Colorado being a prime example of both the good and bad of what the Bureau has done. 

We would not have the infrastructure that is needed to weather extremes of climate, like we have been experiencing the last couple of decades in the Colorado basin were it not for the extensive infrastructure built by the Bureau and that infrastructure could not have been built by any smaller unit of government.  We also could probably be figuring out better ways to manage the water of the basin if it weren't for ongoing federal control of the basin and all that infrastructure.  But the Southwest that we currently have - good and bad - clearly wouldn't be around today if not for what the Bureau did with the Colorado.

And the article clearly does a much better job of chronicling what's wrong than of proposing workable solutions.  That's think-tank work for you.  But still a pretty good article if you swing toward the free-market side on water management.

hat-tip to Marginal Revolution for the link that eventually led me to this article.

Article on the value of property rights and markets to deal with uncertainty in water management

I came across a link to this article on the PropertyProf Blog - a great source of scholarly research and other fun stuff dealing with property law.  This one comes from Jonathan Adler, professor at Case Western Reserve Law School and also a contributor to the Percolator blog from the Property and Environment Research Center (PERC) - a great resource for finding solutions to environmental problems that incorporate private property concepts.

The article is titled Water Rights, Markets, and Changing Ecological Conditions.  Here's a link to the SSRN page that it can be downloaded from.  In it he tries to lay out the reasoning to support increased reliance on private property rights and market mechanisms to deal with uncertainty in water management resulting from factors like climate change.  Should be well worth reading.