Water for Sale

Water for Sale is the title of a book by Fredrik Segerfeldt. The last chapter of the book begins:
“Excessively low prices fixed by politicians have lead to waste, lack of caution, and misallocation of resources-in short inefficient use of water. Distribution, moreover, has been managed by bureaucrats and public authorities with a low level of competence, little capital, and distorted incentive structure. In addition, the lack of property rights and water trading has resulted in water being pent up in less productive activities..;”

Mr. Segerfeldt was talking about the water supply in the developing world, but much of this appears true of many of the water distribution systems in our first world country. We delay maintenance of our water infrastructure as we debate the “fairness” of water rates. Our regulators and bureaucrats have allowed water companies to pump so much water from rivers that they no longer flow to the sea or have been reduced to small trickles. They have removed the cost of water from the benefits by artificially pricing water too low. The environmental costs have to be paid for by the water users. Damning and diverting rivers and pumping of groundwater have become as extensive as to change the face of the planet. The nature of governments is they do not take small steps, and then continually reevaluate the course direction. The grand actions governments tend to take are limited by knowledge and a tendency of man to believe that what he wants to see and assumes is the ultimate truth. Governments do not make quick course corrections. Central control of resources produces tragedies. (See Time Magazine article on the impact of a hydroelectric dam on India.)

“The tragedy of the Commons,” by Garreth Hardin was published in Science, December 13, 1968 and at least among environmentalists and scientists of my age are well known. The concept from the article that has survived is that what is a free and common resource is abused. The common of Hardin’s article was a community pasture that was open to all and used to graze cattle. The theory proposed by Hardin was that each cattle owner would try to keep as many cattle as possible on the commons until the carrying capacity of the land was exceeded and the land was overgrazed and the common pasture destroyed by erosion and weed dominance. Hardin said “Freedom in the commons brings ruin to all.” It was sensible for each cattle owner to increase the size of their herd because though the common pasture would be ruined, each individual would have maximized what they got out of the pasture before it was gone. This idea has of late been very poignant to me because of the work being done by the Prince William Soil and Water Conservation District in their environmentally friendly horse farm project. I have watched management techniques utilized to revitalize and manage a pasture from overgrazed with significant runoff to lush, well maintained and thriving along with the horses.

Hardin was arguing for forced population control and pollution laws in a direct command and control manner. To a large part I believe he was wrong in that argument. His assumptions about human nature were wrong; we are not mindless and respond to incentives both perverse and rational. As countries move up the development ladder, they fertility rate falls. The rise of the middle class has coincided with a fall in fertility rate. As people have more they begin to choose smaller families for their well being and the well being of their children. In China where the famously enforced one child rule has been relaxed families are for the most part still choosing one child (perverse incentives), and the crash in population will be devastating for their economy and society.

However, the Tragedy of the Commons is also an argument for private ownership. What is not owned is not protected and what is viewed as free is abused. It is an argument to have quantitative ownership of rights to use a resource. Water rights must be owned and cannot exceed the sustainable rate of with drawl. In California there is no longer any relationship of the water to the land, they have destroyed the natural ecology of water rich areas to deliver the water to Los Angeles, San Francisco and the farms. Water is wealth in California where you can grow three crops a year. As long as water costs less than the real resource cost, farmers will plant and grow as much as their water allocation as the state continues down the path of ruin. Water cannot be banked in California, use it or loose it. Eighty percent of all water use in California is for agriculture and the demand will always be just a little more than the last wet year when times were so good. The incentive scheme has become extremely perverse in California. They did not initially understand the damage they were inflicting on the groundwater basin and the environment. I believe that if we understood the value of a resource and we own it that individuals can work together to protect their common interests.

The Future of California

Unlike many communities in California, the Monterey Peninsula does not import water from the Sacramento Delta or Colorado River. Instead, in its semi-arid climate, the peninsula community is completely dependent on local rainfall for its water supply. The Carmel River has served as the main source for the Monterey Peninsula’s water supply since the first dam was built on the river in the late 1890s. Over 90% of the potable water supplied within the Seaside basin is delivered by California American Water (Cal-Am), a private company. Cal-Am operates several water distribution systems in the area, some of which are interconnected. The main system serves the Carmel Valley, Monterey Peninsula and coastal subareas of the Seaside basin. Presently, water is obtained from approximately 17 wells along the Carmel River and eight wells in the Seaside coastal subareas. The Carmel Valley wells extract groundwater from the Carmel Valley alluvium and operate year-round. Wells in the Seaside coastal subareas are used primarily in late spring, summer and fall- the dry season in California.

Cal-Am traditionally supplied its customers with water from wells located near the river in the Carmel Valley Aquifer. For a long time the water supplied was considered to be groundwater, which is not subject to State Water Resources Control Board (SWRCB) jurisdiction. However, in 1995, the SWRCB ruled that California American Water’s wells were diverting from the underflow of the Carmel River, thus making the diversion subject to SWRCB jurisdiction. Order 95-10 was issued, which held that California American Water had no valid permits for nearly 70 percent of the community’s water supply. Cal-Am went to court and nothing changed for a while.

Finally, in October of 2009 the SWRCB issued a Cease and Desist Order, CDO, for Cal-Am. The Order required Cal-Am to develop water supply sources in places other than the Carmel River. Cal-Am has not developed a substitute supply to date. The lack of a replacement supply was cited by the SWRCB as the reason the CDO was imposed. Initially, the order was put aside while the case was adjudicating, but has been reinstated by the court.

Though the CDO is directed against Cal-Am, the Monterey Peninsula Water Management District, MPWMD has been actively involved in the CDO because 95% of the people who live within MPWMD boundaries are Cal-Am customers. The MPWMD Board of Directors has consistently opposed the CDO due to technical flaws and the potential for adverse health and safety impacts to the community. MPWMD staff provided expert testimony in hearings on the draft CDO in Sacramento in 2008, and offered comments on earlier versions. When the final CDO was approved by the SWRCB in October 2009, MPWMD and Cal-Am filed suit jointly.

The MPWMD was created the California Legislature in 1977, and ratified by the voters of the Monterey Peninsula area in 1978. The District was formed in response to the drought of 1976-1977. The MPWMD Law provides authority for integrated management of the waters of the Carmel River and Seaside groundwater basin. The District’s integrated management responsibilities include control over water supply and demand, a combination which calls on the District to act both as a planning agency and a regulatory body, not as an advocate for unsustainable water use. In response to the SWRCB Order groundwater extraction near the coast increased markedly beginning in 1995, resulting in declining water levels and depletion of groundwater. After a series of studies in the early part of this decade it was estimated that the water being pumped from the groundwater basin was at approximately twice the sustainable yield of the Seaside basin. The Monterrey Peninsula was mining water at an alarming rate seemingly encouraged by the MPWMD

The state has ordered Cal Am to dramatically reduce its pumping of the Carmel River by 70 percent by 2016. Water conservation has been very effective in the region, but rationing may have to occur as the SWRCB steps down the water the Cal-Am may pump each year.

The Coastal Water Project is Cal-Am’s proposed solution to the Monterey Peninsula’s water supply shortage. The project consists of a seawater desalination plant and aquifer storage and recovery facilities. The project will replace water pumped from the Carmel River. Seawater desalination is used in 120 countries around the world for drinking water. As the technology has improved and costs have lessened, costal communities’ car looking to increase water supply from over-stressed rivers and aquifers.

Desalination is accomplished through a Reverse Osmosis (RO) process in which seawater is sent through highly pressurized, fine membrane filters that remove salt and other contaminants. What’s left is pure H20, which is why many bottled water companies use RO filters to produce their product. The project is based upon the recommendation by an independent team of environmental consultants selected by the California Public Utilities Commission (CPUC) of how to best meet the community’s water supply needs. After a series of public hearings and workshops, the Coastal Water Project was suggested as the best alternative to a long-debated new dam and reservoir on the Carmel River.

Cal-Am recently completed a 12-month study, which included operation of a pilot desalination plant at the Moss Landing Power Plant. The pilot plant functioned as a mini version of a seawater desalination plant, drawing 22,000 gallons of ocean water per day from the power plant’s cooling systems and testing a variety of membrane and treatment technologies to help refine design of a full-scale project. Desalinated water produced by the pilot plant was tested for more than 100 compounds in a water quality study that will be submitted to the Department of Public Health as part of the project permitting process. The data collected in this study will be valuable to the ultimate project, regardless of its location. It is estimated that the construction of the desalination plant will cost between $300 and $500 million which will be paid for by a doubling (or tripling) of water rates in the area.