January 3, 2013

Whiskey is for Drinking, Water is for Fighting

Why Resolving Water is Important but Difficult for the Western US

Colorado River Basin
Written by Sig Silber
Global Economic Intersection

An enormous struggle and debate is taking place in the Western U.S. involving water. This struggle includes among other things:

  • Historical disputes over who owns what water.
  • The modern relevance of the principle of “first in time first in right” referred to as the Priority Doctrine and written in the constitutions of many Western States. In theory, water markets allow the use of water to move from lower-value applications to higher-value applications but the public does not always think this is fair especially if the right to use the water moves from one location to another.
  • Conflicts over the appropriate roles of the Federal Government and the States. Many streams flow through multiple states and in reality states do not have the financial resources to provide and manage the required infrastructure. But in general, water is owned in trust by states and the right to use (a usufructuary right) is permitted by states to users. So in many cases there ends up being overlapping roles.
  • Conflicts among various categories of water users including Native Americans, descendants of original Spanish settlers, more recent acquirers of water rights, mining and extractive industries, and growing municipalities (urban areas) and last but certainly foremost crop irrigation which represents between 80 and 90 percent of water consumption in the West.
  • Variations in the water supply. Some of these variations are cyclical and not well understood either by the general public or water administrators. Although science clearly indicates that Warming means wetter, it is also likely that the geographical distribution of precipitation will change and a certainty that losses to evaporation will increase.
  • Agreements made relevant to sharing water among States and with Mexico often were made during wetter than usual periods and thus present challenges during drier than usual periods exacerbated by a growing population and impacted by Warming.
  • The current economic value of water is low. Its marginal utility in irrigated agriculture is usually less than $100 an acre foot (the amount of water it takes to flood an acre to a depth of twelve inches i.e. just slightly under 326,000 gallons).
  • Other than weather modification (cloud seeding), there are essentially no other methods of increasing the water supply which have a sufficiently low cost to be viable for agriculture so conservation is the only viable approach in that sector.
  • More methods of increasing the water supply work for the municipal sector because water is a small component of the costs of a household and most businesses. In the past, three or four families could have their water needs met by one acre-foot of water. Some “green” developers are able to achieve water efficiencies that allow up to six families to have their needs met by one acre-foot of water.
  • Oil and gas are becoming a larger user of water but in most cases this water is separate from the water used for agriculture and municipalities and to a very large extent is not consumed (depleted) but instead is re-injected back into the ground. Water used in the oil and gas industry generally need not be of drinking water quality. There is a concern that oil and gas operations will pollute domestic and agricultural water quality but no pattern of this occurring has been substantiated in more than 70 years of drilling or production.

Reduced Political Power of Farmers to Protect Their Water Rights

Farmers represent less than 1% of the workforce (may not count individuals who operate a farm on a part time basis or in other ways are not identified as farm workers) and use 80 to 90 percent of the water while their political clout is diminishing. The economic multiplier for agriculture is probably in the range of 2 to 3. Total economic impact is more than the work force but still is not sufficient to have significant political power in most States. In New Mexico, agriculture accounts for 1.7% of SDP but only about a third of this is related to irrigated agriculture. The economic impact of impeding the growth of municipalities carries more weight than the well-being of farmers. The analysis of the impact of agriculture is facilitated by the widespread use of a single model called IMPLAN It has limitations especially related to the value added after the product leaves the agriculture sector for example the manufacturing of wool into a sweater and sale of the sweater would not be included in the multiplier since the multipliers are mainly backward looking and mainly address the agriculture sector and its suppliers. I will now discuss a few of the situations in some detail. Additional information on the water problems facing Western States can be found at WesternStatesWater.org.

New Mexico Lower Rio Grande Adjudication

This is the New Mexico part of an irrigation project begun by farmers and private parties that was nationalized and completed by the Federal Government. It was designed to serve two counties in New Mexico and two counties in Texas. The Treaty of May 21, 1906 with Mexico requires the provision of 60,000 acre feet of water to Mexico which depending on many factors might be sufficient to irrigate 20,000 acres. Litigation in this area began while the area was controlled first by Spain and later by Mexico which gained its independence from Spain in 1823. The US gained possession of the west side of the Rio Grande first via the treaty with Texas which brought the Texas portion of the area under US control. New Mexico became a Territory of the US in 1850 and the east side of the Rio Grande came under the control of the US in 1853 as a result of the Gadsden Purchase.

The Lower Rio Grande within New Mexico was managed by the US from its office in El Paso, Texas and New Mexico was a virtual colony of Texas up until at least 1912 when statehood was granted. The US and the railroads were eager to have the west populated and a series of programs were initiated by the government and the railroads towards this end including the Homestead Act of 1862, the Mining Act of 1872, the Desert Land Act of 1877, and the Carey Act of 1894. In 1866, the Territory of New Mexico enacted legislation to provide for incorporation of companies for construction of irrigation works and in 1867 the Federal Government provided for maps of rights of way for irrigation projects.

Development proceeded more rapidly in Southern Colorado and in Mexico creating conflicts among irrigators up and down the Rio Grande. The Southern Pacific Railroad reached El Paso on May 19, 1881 and the Santa Fe Railroad reached El Paso from Albuquerque on June 11, 1881 and growth accelerated in those areas. A free running Rio Grande did not always meet the needs of the downstream farmers and ideas for a reservoir were floated first by farmers in the Mesilla Valley of New Mexico and then by businessmen in El Paso. The International Dam site about four miles north of El Paso gained strong support in Washington based on lobbying carried out by Colonel Anson Mills. In May of 1902, immediately prior to the passage of the Reclamation Act of June 17, 1902, Arthur Powell Davis, Assistant Chief Engineer for the new Reclamation Service selected the dam site at Elephant Butte, 100 miles upstream of El Paso because of its greater storage capacity, lower reservoir evaporation, and minimal loss of arable land. The Financial Panic of 1893 restricted both private and public capital but a private entrepreneur with strong ties to British capital created a British Company and undertook to finance the Rio Grande Dam and Irrigation Company (RGD&IC) founded by Mesilla Valley farmers to construct a large storage dam with about 237,000 acre feet of storage in a canyon below a rock formation referred to as Elephant Butte nine miles west of Engle, New Mexico, and a diversion facility at Leasburg New Mexico to divert water in a controlled manner to a 15 mile system of canals serving 15,000 farms and other related irrigation infrastructure the full extent of which remains to be determined in the ongoing litigation.

At the time of the passage of the Carey Act in 1894, the opinion in Washington was still to encourage private investment to develop the West. That philosophy changed as it became evident that private capital was in some cases insufficient to cope with the extreme vicissitudes of surface water flow both floods and droughts. After construction of the Leasburg diversion facility (essentially a weir dam) and a certain number of canals by the RGD&IC, private interests in El Paso, Texas managed to stop the RGD&IC and its construction of its major storage dam by claiming that the Rio Grande at Elephant Butte was a navigable waterway and invoked the War Powers Act to stop the obstruction of the river by a private dam. Years of litigation ensued and ultimately a default judgment was entered in 1903 to strip the RGD&IC of its assets and permits on the basis that the work, delayed by the Federal Government, was not completed within the five years allowed. During this time, the US hypocritically advanced its own plans and the construction of its own dam began in 1910 at virtually the same location as planned by the RGD&IC. Some of the diversion dams of the RGD&IC were improved by the Federal Government between 1903 and 1910. Although the matter went before the US Supreme Court three times and the International Court at the Hague and there has been additional litigation since then, no definitive decision has yet been rendered over a matter that occurred more than 115 years ago and the litigation continues by the descendants of those impacted. Possibly because of the Panic of 1907, the owners of the private dam and those served by the partially completed private project were not compensated by the Federal Government as was done on all of the other 22 private dams of that era which one way or another were nationalized including the Carlsbad Project on the Pecos River in New Mexico.

The failure of the federal government to follow norms of behavior when nationalizing a private venture has resulted in 115 years of litigation which now is complicated by the recent droughts, agreements made between the irrigation district established in New Mexico and the one in the El Paso Texas area (a second County in Texas benefits from drainage water from the Project), conflicts with Mexico and the low level of efficiency of the Project. I calculate that crops are only using about 25% of the water. That is a very low efficiency and is essentially unexplained. A further complication is the increasing attractiveness and expanding acreage of pecans which is a relatively efficient crop in the sense of dollars of product produced per unit of water consumed but nevertheless uses more water per acre than other crops grown in that area. With an essentially fixed or declining supply of water, paradoxically higher on-farm productivity per acre creates administrative problems as fewer acres can be irrigated. As another example of progress creating problems, drip irrigation when surface water is involved and unused water can return to the river does not reduce the amount of water required per ton of production but increases the production and thus the use of water per acre.

So there are many issues to be resolved and this process moves very slowly. In the meantime, many New Mexico farmers are receiving far less than their normal allotment of water and this is especially troublesome to the farmers in the New Mexico portion of the Rio Grande Project which is administered by the Elephant Butte Irrigation District (EBID). The legal process to sort this out is part of what is called the Lower Rio Grande Adjudication (LRGA) Stream Issue 104.

One aspect of the issue is that the general rule in the West is the concept that the first party to put water to beneficial use has the better right to continue to do so and in times of shortage the party with the senior rights should get their full allotment and the party with the most recent priority right should not receive water that year. Clearly that is harsh but it is the way things are handled in the West. The Rio Grande Project was established on the basis of an equal full allotment for each acre irrigated as described to potential members in informational material published by the Elephant Butte Water Users Association in 1905. Though subscription agreements to the EBWUA required that members surrender their management of their water rights to the EBWUA, there is a legal dispute as to whether or not it required that the member surrender their title or their priority during times of shortage. Therefore, when there was a full allotment of water, as the EBWUA supposed, the EBWUA would manage the water as to timing of delivery for everyone. But in years of shortage as was unforeseen at the time, the EBWUA perhaps should have been required to deliver the water according to priority date – which they and their successor the Elephant Butte Irrigation District (EBID) has not done, but has instead curtailed all users proportionately thus not taking into consideration the original priority date of those who farmed the 31,000 acres of bottom land prior to the appearance of the US Reclamation Service the predecessor of today’s Bureau of Reclamation.

This issue of pro rata distribution of water versus priority distribution of water is one of the major issues now being litigated before a New Mexico District Court. To some extent it may be a question of the relative roles of the Federal Government and State Government in the administration of this Project and the water which is central to the Project. The goal is to “adjudicate” the water rights of each farmer or other user of the water. At this point the hydroelectric facility at the Elephant Butte Dam is not part of the litigation. But more recently permitted groundwater wells which supplement the surface flow of the Rio Grande but presumably are tapping into an aquifer that is connected to the river is part of the litigation. So it gets very complicated.

Middle Rio Grande Lack of Enforcement of the Priority Doctrine

The Middle Rio Grande Conservancy District MRGCD is a form of an irrigation district (created under a different provision of New Mexico Statutes than EBID) and extends north of Elephant Butte to the Cochiti Dam north of Albuquerque. It is an irrigation district embedded in the major population center of New Mexico.

The MRGCD area is a smaller irrigation area than the Lower Rio Grande but important nonetheless. The distribution of water is managed by the MRGCD. Although in times of shortage it would appear to some that farmers with earlier “priority dates” i.e. the date when they applied to put water to beneficial use should receive their full allocation of water and those with later priority dates would receive water only as available after the senior water rights holders have received their allocation, the desire for harmony seems to have led to the non-enforcement of the Priority Doctrine. Thus this matter also is in court the subject of a law suit filed by Janet Jarratt a farmer and former Board Member against the MRGCD.

A number of years ago a similar situation occurred on the Pecos River, a much smaller river but one also governed by an Interstate Compact. Texas sued to receive the water they believed they were due. My reading of the Pecos Compact is that the Priority Doctrine should have been enforced but the New Mexico Legislature instead took the approach of buying sufficient water from New Mexico farmers to meet the obligations to Texas thus removing the need to do what is called a “Priority Call” on the Junior (more recent priority date) water rights holders and instead transferring the costs to New Mexico taxpayers. Perhaps, if you accept Modern Monetary Theory, the Federal Government could have assumed this cost but they didn’t. The Rio Grande is at least ten times the size of the Pecos River so any effort to protect the junior water rights holders would probably involve in the range of ten times the amount of water and the price of water along the Rio Grande is five to ten times the price along the Pecos so it could get quite costly.

One of the complications in all of this is that in some cases municipalities may have some water rights which are junior to some farmers and a priority call might impact municipalities. A farmer can fallow his field for a year. A city can’t stop providing water for residents and businesses.

Colorado River Basin

The largest river in the Southwest is the Colorado River as shown below. The Colorado River Basin, including its tributaries impacts parts of seven Western States: Arizona, California, Colorado, New Mexico, Nevada, Utah, and Wyoming. Although only the NW and SW parts of New Mexico are naturally part of the Colorado River System, the Rio Grande is also shown on this map because a tunnel transfers water under the Continental Divide from the Colorado River System into the Rio Grande Stream System.

The Colorado is divided into an upper basin and lower basin. Each basin is entitled to receive 7.5 million acre feet (maf) of water over ten year periods under the Colorado Compact. Mexico is entitled to 1.5 maf under a Treaty with the US. In addition to the original 1922 Colorado Compact and the initial Treaty with Mexico, there is a collection of other laws and International agreements and court decisions that apply which collectively are known as the Law of the River.

The potential amount of available water in the Colorado Basis over the last 100+ years has averaged 16.4 maf. The usage over the past ten years has averaged 15.3 maf. Thus, although there have been tight periods, the reservoir system has enabled all lower basin states to receive their 7.5 maf requested deliveries and Mexico has received 1.5 maf partially because the upper basin states so far are not using their full allotment. The current forecast predicts both increased demand and reduced supply. There will be shortages within the seven Western States and Mexico. Using various scenarios of population growth and increased efficiency, consumption is projected to increase to a range of from 18.1 maf to 20.4 maf by 2060. This results in a median estimate of basin shortfall of 3.2 maf. This range has a fairly large confidence interval. The shortfall could easily be greater than predicted. Precipitation variability could create management problems beyond what is apparent from simply looking at averages. How these shortages will be shared is not as clear as one might like or expect so considerable litigation should be anticipated. Among the legal issues are the interpretation of the multiple agreements and their ability to be modified.

Bureau of Reclamation shows the possible ways of increasing the water supply to meet this projected gap in supply and demand. The options were rated on a number of evaluation criteria. Obviously that is a complex process and this report should be viewed as an initial screening. Other than weather modification (cloud seeding), which the authorities are reluctant to employ on a large scale for reasons that baffle this author, all the other sources are too high a cost to be economic for farmers. So if the improvements are funded by the Federal Government or the individual States, this will clearly be a subsidization of municipalities which are exhibiting the most rapid growth.

It is a bit similar to Peak Oil. We have not reached peak oil on a worldwide basis. But we have reached peak low-cost oil. It is a similar situation with respect to water in much of the West. The cost of adding to water supplies exceeds its value to agriculture. This raises the question of who should pay for the cost of adding to water supplies and whether or not the Priority Doctrine should simply be enforced which mainly means reducing the use of water in irrigated agriculture by those farmers with more recent priority dates. Thus a water administration issue becomes a political issue. It is not just farmers versus cities but states versus states, and the US versus Mexico.

There are many players in this equation and each situation (and there are many more than I have described) have their own history usually containing indiscretions sometimes by well know individuals in the history of the US. Some of the famous sayings in this area are “There is no law west of the Pecos” and “There is no God west of El Paso”. Curiously, on Christmas I watched a very entertaining movie with John Wayne that involved a dispute over water. No courts were involved in resolving this dispute – just guns. Hopefully we have progressed from that period of time but the time required for resolving this sort of dispute has greatly expanded and may not be available.

Water is an issue which somehow did not get much attention in the last presidential election but it is an issue that is likely to gain importance over time and ultimately will have to be dealt with. Each of the three or four situations I have described has its own dynamics so one has to become familiar with those dynamics to really understand all the issues which prevent an easy solution.

To summarize, the Fiscal Cliff is not the only major issue confronting the U.S. Provision of water to agriculture and municipalities is another challenge which may actually be more challenging. You can’t print water. Nevertheless, we have powerful institutional arrangements in place for dealing with both the equitable distribution of water and adjusting to changes in the overall situation. In most cases, those involved have concluded that cooperation is preferable to litigation. But in other cases, the conflicts appear to be intractable. Thus it remains unclear if the system will hold together. I suspect it will not.