If only we allowed water trading!

I’ve been feeling a quibbling, hair-splitting mood lately. Must be election gaffe season…

Anyway, the excellent storyteller Abrahm Lustgarten (you may remember his long series for ProPublica on the Colorado River) has written a new piece for The Atlantic asking if we need “a free-market plan to save the American West from drought.” Lustgarten laments that water trading could efficiently reallocate “wasteful” agricultural water to more valuable urban uses, if only it were easy to do so.

Here’s the quibble: We buy and sell (and mostly, lease) water rights all the time. All. The. Time. In fact, according to the Western Governors’ Association, there were over 4000 water transfers in the twelve Western states between 1988 and 2009- that’s over 200 transactions a year. That may not sound like like a lot given the well-known vastness of the West, but it represents over 36 million acre-feet of volume, about 1.75 million acre-feet a year, or enough water to supply 3.5 million households. This counts multi-year transfers only in their first year, so the true volume of annually transferred water is significantly higher. (Also, given how they were reported to WGA, the raw figures are probably underestimates, but whatever.)

Lustgarten is hardly the first reporter to omit this crucial fact, and he won’t be the last. As it happens, he does better than most, with an acknowledgement that folks have been trading water in the West for a long time (many, many nameless writers have suggested that the practice is outlawed or simply unheard of).

Regardless, I think we’re doing ourselves a disservice by pretending that it’s just too darn hard to buy and sell water these days. If farmers or cities need water, believe me, they know whom to call to bid for it. These trades may not be institutionalized or centralized in a clearing exchange, but they constitute robust markets just the same.

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One thought on “If only we allowed water trading!

  1. There is an extremely high variability in the ratio of volume (acre-ft) per transfer (number). The range is from ~4,000 acre-feet per transfer to ~16,000, a factor of 4. Interestingly, the highest ratios are associated with the largest total transfer volumes. In other words, when somebody wants to make a large water grab, they can typically do it with a few large-scale transfers; whereas, if somebody wants to make a more modest acquisition, they will need more small-volume deals. Has anyone studied these data to understand if there are cyclical patterns in these relationships? For example: Which variable is independent, the total transfer volume or the number if deals? Are the low-volume annual transfers due to the fact that the operators could only make small individual deals? In 2008, it took more than 300 transactions to re-deploy only a little more than 1MM acre-feet. Was that their entire water goal, or did they come up short after a lot of effort? Interesting questions.

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