New Conservation Tool

In one month alone two events have turned the way the American West divides up its scarce water in a new and improved direction.

In mid-December Southern California’s Metropolitan Water District agreed in principle to buy enough surplus water from the Imperial Irrigation District to meet the annual needs of 400,000 city dwellers. This week, in the first written policy statement of its kind, the U.S. Department of the Interior said that it approves such deals and will help put together others where it can.

A decade ago only a few theoretical economists talked about owners selling water that was surplus to their needs, and there was a general impression that such sales were either illegal or injurious. Water law was widely interpreted to mean that holders of water rights must use the water or lose the right to it. State law was amended in 1980 to authorize sales of surplus water. The new Interior Department policy makes it clear that the right to sell also applies to water from federal projects.

The question of water sales gained in importance as inflation pushed the price of new dams and canals out of reach. High costs made it clear that water supplies would not be increased by new dams and canals and that supplies could keep up with population growth only if they could be stretched out.

Having buyers and sellers agree on a price for water is one way to make water last longer, because it creates an incentive for holders of water rights to avoid waste. For example, about 100,000 acre-feet of water a year seeps through the dirt walls of the Imperial district’s canals, but until the Met put a price on that seepage the district had no incentive to line its canals and prevent waste.

The federal declaration on water sales has two purposes: encouraging similar steps to save water that might then be sold at a profit, and trying to prevent the social damage that would occur if urban areas were forced to invoke their right under law to divert water from farms if city supplies run low. Most of the clients of Interior’s Central Valley Project are farmers who use the federal water to irrigate crops and who would face the loss of water under those circumstances.

The new Interior policy directive says, in effect, that it does not care what price farmers put on water that they get from the Central Valley Project as long as the federal government gets its costs back. Some will argue that water from federal projects is cheaper because taxpayers subsidize federal irrigation systems and that at least part of any profit from a sale should go to the government.

The best counter-argument is that taxpayers are better off if the example set by the Metropolitan Water District agreement with the Imperial Irrigation District is widely followed. Taxpayers then could avoid, or at least postpone indefinitely, a need to spend billions of dollars for new dams. They also would avoid pitting urban and rural areas against one another.