Water Markets

Allowing water to be traded on the open market is smart—with guarantees for basic life needs to be met by government controlled water sources—and this article from PERC is about that.

An excerpt.

We like to nod sagely at the abstract “value” of water, yet few of us know its actual price. For reference, the average cost of the bottled water you toss back at a family barbeque is about a buck-and-half per gallon. On my 215 arable acres along the San Pedro River of southeastern Arizona, the price is considerably less. In fact, the only “price” I’ve ever tracked is the electric utility’s rate to operate a commercial irrigation pump—around $120 per month, or 0.003 cents per gallon.

Until recently, I couldn’t have even told you how much water I was using. That is, until my family agreed to an irrigation-reduction contract with the Arizona Land and Water Trust. This market transaction has spurred us to conserve water and represents the first instance of water payments in one of the Southwest’s most ecologically significant riparian areas. It also demonstrates how information can be discovered through the application of site-specific knowledge. Friedrich Hayek is no doubt nodding in his grave.

Here’s how it happened: My family supplies beef to farmers’ markets and restaurants in Tucson and Phoenix, and we finish our cattle on irrigated land along the San Pedro River. We recently adopted a “no-till” model of pasture management, hoping to establish a base crop of native perennial grasses that would provide year-round forage for our cattle. We also hoped the change would reduce our water consumption by increasing the soil’s capacity for retaining our limited rainfall. The experiment has paid off—and in some unforeseen ways.

After spending a couple of seasons fiddling with seed-drills and 14-way native seed mixes, we discovered that reestablishing native grasses was actually quite simple. By ending the annual tillage and using regenerative grazing practices, we were able to develop a thick sward of native grass that is both beautiful and productive. Nevertheless, even though we were interested in conserving water, we still had no absolute sense of our water consumption or any incentive to economize, since the resource went “un-priced” in any meaningful sense.

Then, a few years ago, the Arizona Land and Water Trust approached us about their privately funded irrigation-offset program. The Trust heard about our work with native grasses and, knowing that we refuse public subsidies, invited us to apply to their Desert Rivers Initiative, which seeks willing farmers to fallow their fields seasonally so that water can be left in-stream to improve riparian conditions. In exchange, the program pays landowners the equivalent commodity value of the crop they would forego.

We agreed to participate, but with a caveat: Rather than a full fallowing, we proposed an arrangement in which we reduced, rather than ceased, our pumping. A recent picture in National Geographic, which showed the extent of perennial grass root structure (with root mats 13 feet deep), convinced us of the net positive hydrological gains of well-managed perennial pasture. We wanted our pastures to remain a “sponge” for the riparian zone, rather than become an un-irrigated hardpan that would simply flush water into the river basin.

About David H Lukenbill

I am a native of Sacramento, as are my wife and daughter. I am a consultant to nonprofit organizations, and have a Bachelor of Science degree in Organizational Behavior and a Master of Public Administration degree, both from the University of San Francisco. We live along the American River with two cats and all the wild critters we can feed. I am the founding president of the American River Parkway Preservation Society and currently serve as the CFO and Senior Policy Director. I also volunteer as the President of The Lampstand Foundation, a nonprofit organization I founded in 2003.
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