Prices, Not Politics Should Allocate Water

Published: 
Friday, August 2, 2013

WaterRoman Polanski’s 1974 classic Chinatown starring Jack Nicholson and Faye Dunaway demonized water transfers in Southern California as the scam de jure of corrupt politicians and greedy land speculators. Hollywood’s connection to reality is often a tenuous one, and Chinatown is no exception. Water markets can generate enormous economic, social, and environmental benefits, as PERC scholars have long documented. But the film is accurate in one respect: water is a deeply politicized issue in California.

An example worth considering is the Cadiz Valley Water Conservation, Recovery, and Storage Project, a proposed groundwater recovery and storage venture in the Mojave Desert. Cadiz Inc. is a publicly traded company that owns forty-five thousand acres atop a large aquifer and at the base of two San Bernardino County watersheds.

The corporation plans to drill wells that would capture groundwater coming from the watersheds before it filters through the aquifer and is lost to evaporation and saltwater contamination at nearby dry lakes. Cadiz would then pipe the captured groundwater to the Colorado River Aqueduct which supplies southern California with much of its water. The project also contemplates storing surplus Colorado River water during wet years for extraction and use during dry years.

Despite the fact that Cadiz would create a reliable water supply from water that would otherwise be lost, the project has been hamstrung by lawsuits, regulatory reviews, and political agendas. Specifically, critics claim the project will eliminate local mining operations, that the groundwater is potentially contaminated, and that conveying the groundwater out of the basin will negatively impact the Mojave Desert ecosystem.

Another source of opposition comes from politicians who view the Cadiz project—and others like it—as a threat to centralized water management authority. Southern California water utilities are currently considering a plan to rebuild the State Water Project, the government run and now failing infrastructure that transports water from Northern California, and the development of local and less expensive supplies undermines the need for such investments. Politicians from Northern California know this, and they’ve come out in force against Cadiz.

Indeed, this is not the first time politics have threatened to derail the Cadiz project. In 2001, Cadiz Inc. had nearly reached an agreement with the Metropolitan Water District (MWD) when pressure from Senator Dianne Feinstein killed the deal. Ten years later, Feinstein still strongly opposes the project and is leveraging all of her political strength to stop it.

The Cadiz project has the potential to capture otherwise wasted water and send it to southern California municipalities who are desperately in need of more reliable water supplies.  The fate of the project should depend on economic and environmental considerations, not the back-alley politics and favoritism featured in Chinatown.

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Reed Watson is the executive director at PERC. He is also the Director of PERC's Enviropreneur Institute, an educational program and launchpad for environmental entrepreneurs. Watson’s research focuses on the implementation of market-based solutions to natural resource conflicts. With Terry Anderson and Brandon Scarborough, he coauthored Tapping...
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