Culp Peter - Shopping for Water How the Market Can Mitigate Water Shortages in the American West

Peter Culp 2015

For the past fifteen years, many parts of the American West have been in the grip of a relentless drought. In 2011, the geographic reach of this drought spread east into Texas. Figure presents a map of U.S. drought conditions as of August 19, 2014.

The current drought has highlighted the fact that water users in the West face not only significant imbalances between supply and demand, but also an increasingly unpredictable and variable supply that exposes critical municipal, industrial, agricultural, and ecological values to substantial risks. The drought also provides a sobering example of the enormous economic, political, and social disruptions that water shortages can cause. Since 2006, for example, the canals that carry water from Northern and Central California rivers to supply agricultural users and municipal users throughout the Central Valley and Southern Californiaknown as the State Water Project and the Central Valley Projecthave not delivered the full allocations of water their users expect (California Department of Water Resources ).

These same challenges are replicated throughout the West. The plains of Southeastern Colorado are experiencing Dust Bowl conditions. In New Mexico, the mighty Rio Grande is running so low that local residents refer to it as the Rio Sand. The drought in Texas has caused more than $25 billion in economic damage. Water shortages have also strained interstate relationships: in recent years Montana has sued Wyoming, Kansas has sued Nebraska, and Texas has sued New Mexico and Oklahoma.

Reliable access to water for manufacturing, cooling, and energy production, not to mention for the support and well-being of the hundreds of thousands of employees who work in these businesses, is as critical to the high-tech industry as it is to irrigated agriculture.

The challenge of increasing water scarcity is most evident in the seven states that constitute the Colorado River Basin: Arizona, California, Colorado, Nevada, New Mexico, Utah, and Wyoming. The waters of the Colorado River Basin currently support more than 40 million people, 4 million acres of irrigated agriculture, and an estimated 27 percent of U.S. national GDP (Bureau of Reclamation 2012). To understand the scale of the current crisis, projections from the Bureau of Reclamation () suggest that within the next few years Lake Meadthe massive water reservoir formed behind Hoover Damcould decline to levels that would jeopardize both hydropower production at Hoover Dam and the ability of the Southern Nevada Water Authority (SNWA) to divert water from the reservoir to supply the Las Vegas metropolitan area. To address this risk, SNWA is currently undertaking one of the most complex engineering projects in the world, installing a new $1 billion bathtub drain intake at the bottom of Lake Mead to supplement two other intakes that could potentially be stranded above the lowered level of the lake.

While the United States used to fret about running out of oil, we ignore the fact that water fuels the American economy just as oil does. The Wests agricultural districts produce a vast amount of the nations food; California alone produces nearly half of the total U.S. vegetable crop and more than half of U.S. fruits and nuts (California Department of Food and Agriculture 201314). Renewable energy from hydropower dams in the West accounts for approximately 25 percent of the energy produced in thirteen Western states (National Hydropower Association ).

While many Americans seldom think about water, many businesses are becoming concerned about future supplies. In a 2013 survey by Deloitte Consulting of 184 of the worlds largest companies, fully 70 percent identified water as a substantial business risk, either in their direct operations or in their supply chains (Carbon Disclosure Project and Deloitte Consulting, LLP 2013). Even Silicon Valley giants like Intel, Cisco, Google, and Facebook rely on huge volumes of water. According to Cisco, whose switches and routers provide the backbone of the Internet, 2 trillion minutes of video traversed the Internet each month in 2012 (Glanz ). More than one hundred hours of video are uploaded to YouTube every minute. What makes this possible, beneath the surface of cushy high-tech campuses, is the not-so-soft underbelly: heavy manufacturing to produce computer hardware and semiconductors, used in thousands of large data centers. These server farms (as Google calls them) require vast air conditioning units to dissipate the heat generated by thousands of servers (Glennon 2009). Some server farms use as much energy as a midsized city. Reliable access to water for manufacturing, cooling, and energy production, not to mention for the support and well-being of the hundreds of thousands of employees who work in these businesses, is as critical to the high-tech industry as it is to irrigated agriculture.

Historically, solutions to the Wests water-supply challenges have focused on diverting more water from rivers and lakes, building more dams and reservoirs, or pumping more groundwater. These options, with few exceptions, are no longer physically, politically, or economically viable. A few high-concept strategies still persist in policy discussions, such as towing icebergs from the Arctic or diverting water from the Missouri River for use on the other side of the Rocky Mountains (Bureau of Reclamation 2012). But in most places in the West, we must use the water that we already have in the places that we already have itmore efficiently, more effectively, and more thoughtfully.

There are many tools available to stretch local supplies further, including continued focus on water conservation in urban areas, reuse of treated municipal wastewater (often called effluent), and desalination of seawater and brackish water. But we must do more. In this discussion paper, we will focus on five proposals to encourage the use of market mechanisms to increase flexibility and resiliency in water management: