Friday, March 12, 2010

Free Market Water

One of the blogs that I follow daily is Aquanomics run by David Zeitland. Zeitland frequently makes that point that water problems will not be solvable unless we put a price on its use such that using too much becomes un-economic. He favors market solutions for water management.

I mention this after reading a new editorial, Water policy should be comprehensive in the Visalia CA Times Delta this week. This begins by stating a fact not well publicized unless you are really following water.
Sacramento lawmakers are preparing to take action to prevent water transfers from agriculture users to urban users. A bill in the Legislature would prevent sale of water from an ag user to an urban user for a contract that lasts more than 10 years.
We know that this has been going of for a long time, not much, but enough to make a few people richer.

I am much more concerned about the level of thought that did not go into one of the comments.
The $74 million purchase price set the price of the water at $5,250 per acre-foot, anywhere from 15 to 50 times more than a farmer would pay for water."
Guess what? This is a "free market" example at its best. Demand outstrips supply and the price goes up. There is little or no regulation and the profit makers have a field day. Everyone better get ready for more and more expensive water in CA because the supply is finite and the demand isn't.
Where people are taking water secured at a steep discount from market rates, and then reselling that on the open market, they are getting rich off the tax payers of California and taking no risk themselves. Yet, this seems to be another part of the Conservative mantra about free markets. This is not a free market. There is already massive intervention by government, both state and local, to support the ag industry. You have to be like a lame brained Glenn Beck not to understand that much.

Zeitland gave a glimpse into just how much that water is worth when he posted this letter about the value, and use, of additional water allocation being given to the Westlands Water District now that we have a normal rainfall year.
How growers elect to "spend" that is anybody's guess:

1. Plant more acres (Cotton?)
2. Substitute for Supplemental water (no acreage change; lower input costs; shift to capital spending?)
3. Substitute for Well Water (no acreage change; lower input costs; add margin to financing package?)
4. "blend" all water costs; farm more acres (NOTE: +35% = 0.8925 AF/acre)
Do we need a new Howard Jarvis to save CA taxpayers?

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