Dysfunctional Water Management: Causes and Solutions

When talking about managing something, it is usually good to start with a proper appreciation of who owns or controls that something and what they want to achieve by managing it. Because most U.S. law derives from English law, it is fairly easy to identify the owner of the water. The states “own” the water. Under English law, the king owned all the water. The king, by custom, granted riparians the right to use the water, provided that their use didn’t substantially interfere with the utility of the water for other users.

Prior to the industrial revolution in England, such interference was rare; there was a lot of water, and the population was limited. As the country industrialized, interference, especially due to pollution, became much more common, but it was generally ignored as unimportant, setting a precedent for not controlling the impacts of pollution. This precedent was the beginning of a long history of failing to define management objectives for water. Ignoring (even denying) the “public values” inherent in good management of water resources in favor of allowing anyone to use water for anything they individually desire has little consequence when and where water is found in surplus. It results in disastrous allocations of public resources when water is scarce.

The colonies (and the United States) adopted much of the English law regarding water. The states (representing the citizens) became the owners. Even with water rights in the West, the states still own the water. Water rights give their holders the right to use the water, but not the water itself. As the owners, states could have developed clear management objectives. They did not. In the eastern United States, water was plentiful and pollution continued to be ignored, as was, by then, traditional. In the West, things were a little different. In the West, water was scarce, but the idea of allowing anyone to use water for anything they desired (provided the use was “beneficial,” a poorly and loosely defined concept if ever there was one) persisted. The States essentially institutionalized squatters’ rights to use water in perpetuity as a property right, first-come, first-served. With the exception of promoting short- (and some long-) term economic development, current and future potential benefits to the owners of the water (the state and its citizens) were completely ignored—something no private entity would ever do. Well, hardly ever.

Worse yet, water rights were designed to be like squatters’ rights to real property. Real estate doesn’t move. Not surprisingly, water rights tend to greatly inhibit the movement of water use in time and space. This is because water rights law generally prohibits changes that adversely impact any existing water rights holder. Water flows downhill, so such impacts are virtually impossible to avoid if the timing or place of use of a water right is substantively changed. If water use cannot change, then it becomes much more difficult, even impossible, to adapt to changing economic, social, environmental, and (dare I say) political conditions.

The fact that water rights are property rights in the West creates another pernicious problem—theoretical overallocation. In many cases, water rights holders have water rights far in excess of the amount they actually use. In some basins in Texas, the ratio of “paper rights” to actual use approaches three to one. In theory, unused rights generally revert to the states. In practice, that rarely happens. Many states, including Texas, require that new rights be justified assuming that all the water in “paper rights” is actually used. Clearly, if all paper rights are assumed to be fully used, the cost of reservoirs and other facilities needed to make new rights reliable enough to be of value is much higher—sometimes enormously so—compared to what would be needed if current actual use were assumed. The requirement that full utilization of paper rights be the basis for water planning and granting of new rights imposes enormous, unnecessary costs on obtaining new water. It therefore drives up the value of existing rights, making it harder to change the status quo while also making it harder for water rights holders to realize the value in existing rights (higher prices, less demand). I assert that many (certainly not all) perceived water shortages in the United States are caused more by our water rights systems than by hydrology.

West or East, the states—the owners of the water—have generally never identified and prioritized water use or allocation in a rational manner relative to the overall public interest. In fairness, doing so is not exactly easy, especially since the priorities are likely to be highly dependent on the watershed and because political and watershed boundaries rarely coincide. Regardless, without well-defined and prioritized objectives, good management is simply impossible.

The federal interest in water is different. The federal government generally (with some exceptions) does not own and has no claim to water. The federal interest in water management derives from three main sources: first, the resolution of disputes between the states—the Constitutional prerogative of the Supreme Court; second, the protection of interstate commerce—navigation and navigable waters and waters that impact navigable water; and third, the management of most of the largest water resource projects in the country.

The resolution of disputes between the states is not a matter of management, or even of reason. It is a matter of law. I believe it is fair (and an understatement) to say that the law on resolving disputes between states is “not settled,” to use the legal jargon. It is extraordinarily hard to manage resources well in the absence of legal guidance. The situation leads to intentional mismanagement to support legal arguments in cases that may or may not be taken up at some time in the future. I’ll leave it at that.

The protection of interstate commerce is what justifies the Clean Water Act, the Endangered Species Act, and the regulatory authorities of FEMA and FERC, among other things. I believe it is fair to say that Congress has considered the objectives of the many acts it has passed in this regard. I believe it is also fair to say that Congress has failed to state many of these objectives in a way that is clear enough to guide the management of resources. Worse, I believe it is also fair to say that Congress has largely failed to provide guidance as to how to balance the achievement of objectives when they conflict. This leads directly to management of resources being dictated by (often inconsistent and/or conflicting) judicial fiat(s). The lack of clarity of objectives can be worse in terms of management than no objectives at all.

The same problem exists when it comes to management of federal water projects. Management objectives are usually poorly specified in the authorizing legislation. When subsequent legislation has imposed additional objectives, usually no balancing guidance is given. In some cases, storage in projects has been arbitrarily allocated to particular purposes to make the cost/benefit and political numbers work. But in almost all of these cases, all the storage must be operated conjointly if any benefits are to be provided at all. In other words, the allocation of storage has little or nothing to do with the production of particular forms of benefits. It is no wonder that the agencies charged with managing these projects are constantly under pressure. The threat of lawsuits and the potential to incur the wrath of any one of 535 members of the U.S. Congress is compelling rationale for not making changes. Unfortunately, while that rationale is compelling, it is not in the national interest (and often not in the interest of the plaintiffs or constituents). It is, however, no wonder that it is impossible to adapt the utilization of vital federal water management facilities to changing needs and conditions.

Just as in the states, lack of legislative direction presents major obstacles to effective management of federal projects. Because the management of water is in major part a local issue, it is very hard to get Congress to focus on management of individual projects, especially existing ones. Improving management does not generate the kind of local political capital that funding new projects does. In fact, as will be discussed, the perception that some people will lose out can carry political costs. The political courage to make good management a priority is hard to come by. The ability to engage in the kind of rational debate over what water management priorities should be, and how they should be balanced, is in short supply.

As much as people like to win, they hate losing even more. When reacting to a water management change that benefits someone else, the normal reaction is “Hell, no!” based on the assumption that if someone else is better off, they themselves must be worse off. Most of the time, it isn’t so. The good news is that much of the time it is relatively easy to make all parties better off. The bad news is that our current water management is so atrocious that much of the time it is relatively easy to make all parties better off. The point is that the perception that water management is a fixed-sum game is a large portion of the reason it is so hard to make management better.

There are four main reasons water management is not fixed- sum. First, water can be (and often is) used and reused many times before it evaporates or flows to the sea. Managing to exploit reuse can dramatically increase benefits. Second, in many cases the timing of water deliveries is as—or more—important than the total quantity. Improving timing can lead to more benefit from less water. In my experience, this is especially true for hydropower projects, where water supply and environmental benefits can be achieved with little impact on the value of power produced. Third, water management involves making trade-offs between different objectives, and often a large increase in one objective can be had with little or no decrease in others. Finally, individual water management stakeholders often have multiple objectives and can be compensated for a decrease in one objective with an increase in another.

The problem is that most stakeholders and water managers approach water from the standpoint of volume alone. Using volume as the only measure eliminates the ability to increase the size of the benefits pie, and often leads to unrealistic or even irrational perceptions of the conflicts between stakeholders. Water management is definitely not a fixed sum game. Water management disputes can be resolved much more easily, and sometimes only, when the discussions center on the mix of benefits provided, and not on allocating an arbitrary and fixed measure of water available.

The owners of the water and the water management facilities can achieve substantially more benefit by changing the status quo. The following are examples:

We can continue to draw down reservoirs to produce low-head hydropower. Or, the water could be stored in existing reservoirs and managed collaboratively by several utilities in lieu of building new, environmentally damaging facilities that cost orders of magnitude more than the value of the power lost (e.g., Kansas River, KS). We could build six big new federal reservoirs at the cost of several billion dollars. Or, we can manage just one of those reservoirs in conjunction with three smaller reservoirs owned by local utilities to produce enough additional reliable supply for the next $50\text{years}$ (e.g., Washington, D.C.). We could let six neighbor utilities all try to find enough water to meet their individual (and overstated) demand projections. Or, they could collaborate to find and manage enough water to meet a much smaller and realistic projection of their joint demands (e.g., Las Vegas, NV). The potential is enormous. The value of our existing water infrastructure exceeds, by two to three orders of magnitude, the present value of our continuing investment in new infrastructure. Therefore, a small percentage increase in the benefits we get from the infrastructure we already have is worth much, much more than all the benefits we will get from new construction.

Why change the status quo? Do the math.

Legislatures need to be motivated, and must have a means of dodging the inevitable political heat that will be generated.

History has endowed us with dysfunctional institutions and legal structures for water management. Existing structures do not allow us to adapt our management of water resources to changing needs and hydrologic conditions. A large part of the problem is the lack of clear management objectives for a publicly-owned resource. Reliance on adversarial processes to develop management solutions hinders our ability to create win-win outcomes. Institutionalizing the use of collaborative processes as the primary means of making water management decisions, establishing clear and understandable federal and state management objectives and tradeoffs, providing for rolling reviews of the operation of water management facilities and water allocation policies, and, in the West, establishing of functional water markets would go a long way toward improving management. Implementing these recommendations will take a concerted educational and lobbying campaign and may require a BRAC-like commission to provide recommendations for legislative action.