Why Water Markets Should be Part of the “Vision” for the Delta, and All of California

SACRAMENTO – Before the end of 2008, the Delta Vision Committee will send Governor Arnold Schwarzenegger a Bay-Delta Conservation Plan (BDCP), “one of the most ambitious infrastructure and habitat restoration projects ever proposed in America,” according to news reports, to restore the Sacramento-San Joaquin Delta, a prime source of drinking water and irrigation for two-thirds of Californians.

As this plan is being prepared, a new study by the U.S. Fish and Wildlife service could lead to severe restrictions in the pumping of water to other regions of the state. The prospect of such reductions points up the need for a policy that facilitates water transfers and encourages conservation. That, in turn, invites a closer look at both the Bay-Delta Conservation Plan and water realities in the Golden State.

Mike Chrisman, California’s Resources Secretary, chairs the Delta Vision Committee. In a recent interview with the Sacramento Bee, Chrisman alluded to both the Central Valley Project and the State Water Project, adding, “this is a big effort. These are projects that are going to be built over quite an extended period of time – 10, 15, 20 years.”

The projects could include a peripheral canal, like the one voters turned down in 1982. Such projects cost money and Chrisman said that “Clearly there will have to be, down the road, some bond measure to help fund some of these efforts.” Karla Nemeth, Chrisman’s liaison to the BDCP, said the plan identifies a “dedicated funding stream,” which would be “contributions from the water users.”

Chrisman insists that something needs to be done now, but that the visionaries don’t all agree on what it is, and concede that they don’t have all the answers. Another likely outcome, according to the news story, is “a new governing body to manage the Delta.”

In water as in many other areas, California abounds in governing bodies, from the various water districts to the Coastal Commission to the state Department of Water Resources and the federal Bureau of Reclamation. These bodies and agencies have not established a water policy that works well for all Californians. Part of the problem, according to a recent PRI study, is centralized management.

In Go with the Flow: Why water markets can solve California’s water crisis, released this month by Pacific Research, Dr. Amy Kaleita observes that the problem for California is not lack of supply but uneven distribution. About 75 percent of the water supply originates in the northern third of the state, with 80 percent of the demand in the southern two-thirds. To facilitate distribution, California has a long history of large and costly water projects, with more on the horizon, at time when the state does not abound in money and its credit rating is low.

California water management is rather convoluted, a combined system of plural water rights known as the California Doctrine. This system, Dr. Kaleita says, “remains largely a disincentive for uses to conserve, lest they lose their rights to the water in the future.” A major impediment to water transfers is “the significant amount of red tape involved in arranging a transfer.”

Go with the Flow shows how California’s water success stories have involved eliminating the bans and restrictions. By doing just that, the California Emergency Drought Water Banks of 1991 and 1992 benefitted urban areas and allowed growers to reduce their operating costs by more than 10 percent. This model can now be given wider application, with good reason.

California is again experiencing drought conditions. Governor Schwarzenegger and U.S. Senator Dianne Feinstein are promoting a costly water bond to funnel money into California’s water storage and conveyance infrastructure. They are overlooking a simpler solution, says Dr. Kaleita.

“Water markets in California,” she says, “would greatly reduce scarcity costs, decrease the need for additional major infrastructure projects, and have the potential to reduce greatly or even eliminate water scarcity.”

Those preparing a report for the governor, and all state policy makers, should make water markets part of their vision for California’s future.

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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