Can California Dig a Peripheral Canal?

When rumors began circulating in late February that California Governor Arnold Schwarzenegger was about to issue an executive order to study options for a peripheral canal that would divert water from the Sacramento River around the delicate Sacramento-San Joaquin River Delta, legislators, environmentalists, and central valley farmers alike felt the sting of an old wound. The bitter history and potential future of the peripheral canal idea underscores the need for effective and efficient solutions to California’s ever-growing problems of water supply.

In response to these concerns, the governor stated that the environmental study does not lock the state into moving forward on the canal, and that the study will also analyze other options. The governor went on to point out that the environmental review process is so complicated and time-consuming that the state cannot afford to delay much longer.

It is true that additional delays in moving forward with a comprehensive plan for water allocations in the state will only exacerbate the problems and potentially make solutions even more complicated. Timely action is required to safeguard water supplies for the state’s many users, to ensure water quality, and maintain healthy ecosystems in the state. To that end, no reasonable idea should be off the table, even if it has generated some controversy in the past.

A 2007 study by the Public Policy Institute of California (PPIC) urged the government to consider, along with other proposals, what it calls a “peripheral canal plus” plan for the Delta system. The PPIC study noted that several versions of the canal plan could both provide much-needed water to users in Southern California and preserve the fragile Delta ecosystem.

While options such as these may be effective and should be given some consideration, a major challenge will be that infrastructure projects of this magnitude are very costly. As Californians have noticed, the state is not exactly awash in cash at the moment. The PPIC study, meanwhile, made the following recommendation about funding these projects:

Give direct beneficiaries primary responsibility for paying for Delta solutions. Public funds, such as those raised through general obligation bonds, should be reserved for the truly public components of a Delta investment program.

An even more efficient approach should not be overlooked. Water markets have the potential to allocate water resources fairly while encouraging conservation and protecting supply. Research from the University of California at Davis has shown that “regional and statewide water markets, transfers, and exchanges have great potential to improve the flexibility and economic performance of California’s water system, considerably reducing both water scarcity and scarcity costs.”

Currently, state resource agencies set arbitrary rules governing water pricing and allocation. This means that prices vary widely from user to user and ensures that prices are not indicative of the water’s actual value. Only when the water is appropriately valued can lawmakers and taxpayers truly evaluate which capital investments make sense, and at what cost.

There may indeed be effective construction options to help alleviate some of California’s water problems. But until consumers, taxpayers, and lawmakers know the real value of the resource and can use that knowledge to make decisions about water use, expensive projects may just postpone the problems or even make them worse.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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