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2 Scarcity: The Challenges of Water and Environmental Management in the Delta and Beyond INTRODUCTION Ecological rehabilitation in the delta faces many challenges, reflected in the long and difficult history surrounding the delta and ongoing politi- cal and legal controversies. The challenges include the reluctance of many interested parties to confront several crucial facts. These include the reality that water is scarce; the many biological and physical changes that have occurred in the delta; the presence of many policy and legal directives that have independent and conflicting objectives; and the inherent uncertainty regarding future socioeconomic, climate, biological, and other changes, and our consequent inability to plan for them in a comprehensive manner. In this chapter, we discuss these challenges, but because the historical context is critical to understanding the challenges, we begin with it. THE HISTORICAL SETTING The modern history of California has been characterized by steady and occasionally explosive population growth. During the 20th century the state's population grew more than 20-fold, from 1.5 million in 1900 to almost 34 million in 2000. There were two periods of astonishingly rapid growth. Between 1900 and 1930 population grew by 382 percent and be- tween 1940 and 1970 it grew by 289 percent (U.S. Bureau of the Census 1996). Almost all of this growth occurred in the southern three-quarters of the state, most of which is arid or semiarid and has a Mediterranean climate with a wet season between November and April followed by a dry season 35

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36 SUSTAINABLE WATER MANAGEMENT IN THE DELTA from May through October. The climate is unfavorable to development in the sense that water demands for irrigated agriculture, air condition- ing, outdoor domestic uses, and recreational purposes tend to peak in the warm dry season. However, precipitation throughout California is gener- ally unreliable, and California is subject to persistent and sometimes severe droughts, even in the seasons when precipitation is expected. The combination of rapid population growth and general aridity led to a 20th-century water resources development program punctuated by the construction of major water storage and conveyance projects. The Los Angeles and San Francisco metropolitan areas, the foci of urban settlement, outstripped local water supplies early on and began to import supplemental supplies from remote locations. Most famously, the City of Los Angeles acquired land and water resources in the Owens Valley on the eastern side of the Sierra Nevada and constructed conveyance facilities to bring the water to the Los Angeles basin (Kahrl 1983). At about the same time, San Francisco developed a storage and conveyance project to the east in the Tuolumne River basin, which drains a portion of the west side of the Sierra Nevada. There followed, in 1929, further development of the Mokelumne River basin, also a western Sierra drainage, to supply the growing demands of the East San Francisco Bay region and, in 1939, the Colorado River Aqueduct to bring water from the Colorado River to support growth throughout the South Coast basin of southern California (Hundley 2001). During the 20th century, California also became the largest agricultural state in the nation. Although there had been extensive rain-fed ("dry- land") farming in the late 1800s, it thrived only during an exceptionally wet period, and most subsequent agriculture was irrigated. Early irrigation communities relied on water from neighboring streams and groundwater. Dating back at least as early as 1855, California recognized the "prior appropriation doctrine" for the allocation of surface-water rights. This system, which follows the maxim "first in time, first in right," allows the first water users (known as "senior" appropriators) on a stream system to divert their entire allotment before the chronologically next water user is entitled to divert a single drop. Because water rights are of theoretically infinite duration, many senior irrigators in California could argue that they hold more secure water rights than later-initiated uses, such as the application of water for the protection of the natural environment. Re- cent court decisions, combined with the state constitution, the developing public trust doctrine, and legislation have combined to create in practice a more rational method of allocation. The construction of large storage and conveyance projects, which began with the federal Central Valley Project (CVP) in the 1930s and 1940s, allowed the expansion of agriculture in both the Sacramento and San Joaquin valleys and offset, to some degree, the significant groundwater overdraft that was present in the San Joaquin

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SCARCITY 37 valley. Subsequently, in the 1960s and 1970s, the state of California built its own State Water Project (SWP), which served agricultural users in the San Joaquin valley and urban users in both the San Francisco Bay Area and the South Coast basin (Hundley 2001). Both the CVP and the SWP use the SacramentoSan Joaquin Delta to move water from the Sacramento River and other waterways draining into the delta to the pumps at the southern end of the delta for conveyance to users located to the south. Figure 2-1 is a water-balance table for California. All of these water projects were constructed in response to increasing concerns about the local or regional scarcity of water supplies to support the large population and economic growth and in anticipation of more such growth. An important consequence of the pattern of increased demands followed by new water storage and conveyance projects was that it created the assumption that with investment more water could be made available to support such growth. This assumption continues to be true except that for a variety of reasons the cost of additional supplies has risen dramatically. FIGURE 2-1 California water balance. SOURCE: California Department of Water Resources (2005).

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38 SUSTAINABLE WATER MANAGEMENT IN THE DELTA Increasing commitment to water conservation, including more efficient and more productive use,1 and economic changes, particularly in the urban sec- tor, have resulted in reductions of per capita water use. Improvements in agricultural efficiency have occurred to some degree but more is expected. In recent decades, new increments of water supply, exclusive of what has been conserved, have become more costly and the reliability of sources has decreased for all uses. In California and the arid southwest, urban waste- water reuse for golf course and public landscape irrigation has become common. Agricultural reuse that entails recycling of surface runoff from irrigation is also found with increasing frequency. There has been little rec- ognition in recent and current planning for the delta that water is a scarce resource and that modern management plans should be tailored to manage scarcity (NRC 2011). The historic strategy of developing storage and conveyance facilities in response to growth in water demand is being replaced with a variety of sup- ply- and demand-management alternatives, including conservation. Com- petition for water for all purposes, including recreation, fishery resources, protecting water quality, and ecological functioning, will remain intense. Fewer high-yielding source areas and storage sites are available now than formerly, because most such areas and sites have already been developed. Nonetheless, they should be considered during objective comparison of al- ternatives for improving streamflow and meeting water-supply needs. This would include consideration of environmental effects. Water impoundment and transfer facilities can result in significant en- vironmental damage, by altering streamflow regimes (Junk et al. 1989, Poff et al. 1997), blocking the migration paths of anadromous fish and altering their life cycles (Andersson et al. 2000, Dudgeon 2000, Jansson et al. 2000, Morita et al. 2000), damaging downstream habitats (Kondolf 1997), and modifying water temperatures and impairing water quality (Clarkson and Childs 2000, Walks et al. 2000). These environmental costs, although usu- ally not monetized, are real costs that must be counted together with the other costs of construction for a full accounting. Storage facilities in the SacramentoSan Joaquin system were designed based on precipitation and streamflow data of the historical period of record (since the late 1800s). The assumption that past climate is a reason- able approximation of the future is no longer valid (NRC 2007, Milly et al. 2008). Sound planning now requires consideration of a much wider range of assumptions regarding rainfall and runoff. Most projections suggest that there will be an increase in the frequency and intensity of droughts 1 In general, the committee uses the term "conservation" as shorthand for "conservation and more productive and more efficient water use." See Gleick et al. (2003, 2011) for a dis- cussion of these terms.

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SCARCITY 39 and floods. Testing previous assumptions, developing new ones, and test- ing them against various alternative management scenarios is necessary to provide an informed basis for future public investments and will be an essential part of future water resources and environmental planning. The results of such analyses might be that water supplies will be reduced, and the magnitude of scarcity increased. A more uncertain and variable water future will require water planning and management for the delta that is anticipatory as well as adaptive. It will require plans and operations that include suites of techniques and technolo- gies designed to manage a highly variable and uncertain waterscape. Most important, the future will require planning and management that specifi- cally acknowledge and take into account that there is not enough water to meet all desired uses in California with the required degree of reliability everywhere and all the time. DIMENSIONS OF SCARCITY The standard economic definition of scarcity is an insufficient quantity of some resource or commodity to satisfy all wants for it (Baumol and Blinder 2011), and it is used by the committee here. These wants include water for urban, agricultural, and industrial water use and for the aquatic environment. They can change as we gain better understanding of natural processes, multiple stressors, and changes in climate, and in response to changes in public priorities regarding environmental investments, changes in technology, and changing economic, regulatory, and legal conditions. Water scarcity has long existed in much of California, save, perhaps, for exceptionally wet years. The magnitude or intensity of scarcity has grown over time and it continues to grow. Symptoms of this scarcity include legal rulings that require increased allocation of water to support fisheries and environmental flows, demands for more reliability of water supplies from agricultural and domestic diverters, and concerns about the ecological condition of the delta itself and differing positions about how delta waters should be allocated. While some Californians have increasingly recognized the scarcity of water, not everyone has. The failure of plans for water management in the delta to acknowledge scarcity has greatly hindered the ability of agencies to craft and implement water plans and policies that will be widely accepted. The management of delta water by court decisions reflects in part the lack of adequate water resource planning that takes scarcity into account. Historically, scarcity has been acknowledged mainly during times of drought. The primary means of coping with scarcity has been the rationing of supplies, and through penalties as well as short- and long-term increas- ing block ratesrates that increase as use increases. A drought water bank

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40 SUSTAINABLE WATER MANAGEMENT IN THE DELTA was established and functioned effectively in the later stages of the drought of 1987-1992. It had the advantage of allocating water from lower- to higher-valued uses. It served to mitigate potentially disastrous impacts and also allowed the state to develop carryover supplies to help mitigate the ef- fects of a continuation of the drought (Carter et al. 1994). These measures were short-term, one-time efforts to manage supplies that were temporarily short. Thus, beyond the occasional drought, the concept of long-term scar- city has not figured prominently in delta water plans, or water-management regimes, or the state's approach to water transfers. Evidence for the existence of water scarcity in California can also be found through an examination of the extent to which the waters of Cali- fornia have already been legally allocated by California water law. Under Water Code 1205-1207 (2012), the State Water Resources Control Board has designated numerous stream systems "fully appropriated" year- round or during specific months including many stream segments in the bay-delta region. This means that the state has approved a total volume of water rights that equals (or even exceeds) the surface supplies available in an average year, although there is no mathematically precise calculation for this allocation. The California Water Code simply required the State Water Resources Control Board to determine that the "supply of water in the stream system is being fully applied to beneficial uses" and that "no water remains available for appropriation." Under limited circumstances the board may continue to grant water rights, even if the source is fully appropriated. Indeed, some degree of overappropriation is common in the western states. In the case of agricul- tural projects, for example, the Water Board's historic practices called for approving new water rights as long as water was available in at least some of the years (in low-water years appropriative water rights in California are satisfied on a first-come first-served basis in order of application priority until the supply runs out). This practice, together with other current and historic factors, has caused some stream systems to be overappropriated, at least in dry years. In such cases, according to the State Water Resources Control Board, the face value of legal water rights exceeds the volume of water hydrologically available for use. According to the Water Board's 2008 estimate for the Central Valley Watershed, for example, appropriative water rights in the watershed have a face value of 245 million acre-feet, as com- pared to an average annual runoff of 29 million acre-feet. In other words, in some basins, the Water Board has overallocated available supply by more than 800 percent (measuring supply as average annual runoff) (SWRCB 2008). In evaluating the significance of overappropriation, sequential return flows and reuse of both agricultural and urban right holders' waters must be considered. Overappropriation is mitigated by reusing water as it flows downstream from the source toward the ocean (agricultural runoff is added

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SCARCITY 41 to the downstream users' supply), and water is increasingly intentionally reused (double use) for agricultural and urban purposes. Although the specific amounts needed and diverted for agricultural use are not generally accurately measured, they probably should be in the future. These calculations consider only human water users and do not incor- porate estimates of the volume of water necessary to sustain the natural en- vironment (which itself raises difficult questions concerning the meaning of "to sustain" and "natural environment"). If environmental needs are added to the sum of other allocations, then the volume of water necessary to fully satisfy all water rights and environmental needs would exceed supply by an even greater multiplier. In 2009, the Sacramento-San Joaquin Delta Reform Act required the State Water Board to develop new "flow criteria" to protect public trust resources of the delta ecosystem (Cal. Water Code 85086). On August 3, 2010, the State Water Board issued its final report, Development of Flow Criteria for the Sacramento-San Joaquin Delta Eco- system. The report concluded "the best available science suggests that cur- rent flows are insufficient to protect public trust resources" and "[r]estoring environmental variability in the Delta is fundamentally inconsistent with continuing to move large volumes of water through the Delta for export." The Water Board noted that its recommendations lack binding le- gal effect unless they are implemented through adjudicative or regulatory proceedings. The recommendations were intended, in part, to inform the development of the Bay Delta Conservation Plan (BDCP) (see Chapter 1). The presence of intensifying scarcity of delta water means that the planning for and the management of the delta's water resources in the future must differ from the planning and management of the past. The changes required respond not only to scarcity but also to the fact that many of the extensive human-caused changes to the delta's physical and aquatic environment are essentially irreversible. Such irreversibility must also be accommodated in future water planning and management regimes. The improvement of the bay-delta ecosystem must recognize the limits imposed by and variations represented in historical, current, and likely fu- ture conditions. But at the same time, the maintenance of current channel configurations and island uses should be reconsidered if planning is to be comprehensive. It should be widely understood that recovering ecosystems to histori- cal conditions is highly problematic because baselines have shifted in re- sponse to significant changes in the larger landscape itself, in climate, and in ecological conditions. Indeed, restoration of ecosystems to a historical baseline is no longer possible in many areas--almost certainly including the delta--and is constrained in most areas by human pressures on the en- vironment (NRC 1996). Given the dramatic declines in salmon and smelt populations, the fundamental shifts that have already occurred in the delta

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42 SUSTAINABLE WATER MANAGEMENT IN THE DELTA ecosystem, current policies and societal values, and the projected changes for the system, including rising sea level, levee failure, and changes in the timing and volumes of runoff, realistic visions for the future of the delta will not directly match or may not even closely resemble any specified historical baselines (Nichols et al. 1986, NRC 1996). California's "Two Co-equal Goals" Contemporary planning for water management in the bay-delta region is directed at two co-equal goals: providing a more reliable water supply for California and protecting, restoring, and enhancing the delta ecosystem. "The co-equal goals shall be achieved in a manner that protects and en- hances the unique cultural, recreational, natural resource, and agricultural values of the delta as an evolving place" (Cal. Water Code 85054). There are positive attributes of having established these goals. Any planning exercise needs to have clear goals. Making environmental protection a co- equal goal, instead of its more historical position as an afterthought, has the potential to change the way people plan for and manage water use. Mak- ing the goals co-equal from the outset should force planners to consider trade-offs between water supply and environmental protection. Specifying the co-equal goals in legislation is educational because the goals necessarily become part of the public discourse about water. But despite the positive attributes of specifying the co-equal goals, their potential value cannot be fully realized until some additional conditions are met. For example, in practice, it is not clear what co-equal means. Does it mean that any additional water will be allocated half-and-half to support each goal? Or does co-equal imply some proportional allocation? Or does it mean that water for support of one goal should not be avail- able at the expense of water to support attainment of the other? Yet if the attainment of either or both goals requires more water than is currently available, and additional water is unavailable because of scarcity, then the co-equal goals cannot be attained. Even though California has adopted the policy of decreasing reliance on the delta,2 in practice the evidence suggests that demand for the delta's water has been increasing, and it might well continue to increase. For example, as Isenberg (2011) pointed out, major urban water users are required by the 2009 legislative package to reduce 2 "The policy of the State of California is to reduce reliance on the Delta in meeting Califor- nia's future water supply needs through a statewide strategy of investing in improved regional supplies, conservation, and water use efficiency. Each region that depends on water from the Delta watershed shall improve its regional self-reliance for water through investment in water use efficiency, water recycling, advanced water technologies, local and regional water supply projects, and improved regional coordination of local and regional water supply efforts" (Cal. Water Code 85021).

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SCARCITY 43 their water use by 20 percent by the year 2020, while agriculture--which uses three times as much water as all other human users in California--is not required to achieve any specified reduction in water use. In short, the lack of a specific definition of "co-equal" means that the co-equal goals have not been operationalized in a fashion that would permit an objective assessment of how well different water management alternatives for the delta would attain them. Current planning efforts for the bay-delta region and the studies they are based on do little more than assert that the goals are co-equal. Ef- forts are needed to address different degrees of goal achievement so that resources committed to achieving each goal can be balanced; otherwise, how can the constitutional requirement of reasonable beneficial use be met? Without such efforts how can the best action alternatives be selected? A fundamental problem is how to allocate scarce water. By positing the co-equal goals without specifically defining them, the legislature has given planners the opportunity to create the necessary balance. Yet, this has not been the focus of planning so far. It appears to be assumed that additional water will have to be found to serve the co-equal goals. When water is scarce, it is not possible to allocate water to support one without reducing the allocation for the other. Of course additional water can always be found by reallocating water from some other use that is independent of the uses envisioned by the co-equal goals, but in California, that simply moves the problem of scarcity to another locus. The first public (November 2010) draft of the BDCP reviewed by the National Research Council (NRC 2011) and other planning documents do not adequately--and certainly do not explicitly--address the degree to which allocated water is available to support the co-equal goals. Back- ground documents and the goal in legislation of reducing reliance on delta water implicitly acknowledge water scarcity, but the details need to be ad- dressed, clarified, and made specific, because they are at the heart of the planning process. Only when the goals are made specific and operational will the trade-offs required become apparent, and the trade-offs will require policy judgments about priorities, acceptable risks, and acceptable costs. Such judgments should be informed by science. Future water planning requires that estimates of water availability based on past hydrologic patterns be augmented with anticipated variabil- ity in the location, magnitude, timing, and type (e.g., rain versus snow) of precipitation (see Chapter 4). As scarcity intensifies, alternative scenarios of restoration and reliability should be created to ameliorate environmen- tal damage and rehabilitate habitats. Restoring aquatic habitats to some previous baseline condition will rarely if ever be practical, especially if that condition is far in the past, because of all the changes that have already oc- curred and the likely cost (Chapter 4). In the face of all of these ecological

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44 SUSTAINABLE WATER MANAGEMENT IN THE DELTA and environmental constraints, an effective system of planning and man- agement will need to consider a broader array of alternatives and options for managing water than has been characteristic of the past. Perhaps more importantly, all delta and export water users will need to more generally acknowledge that water scarcity is a fact of life. Water Planning to Manage Scarcity As the effects of water scarcity become more pronounced, success- ful water planning and management will require widespread public ac- ceptance of a set of principles to avoid the struggles to achieve consensus among competing interests in the past. In addition, the NRC's review of the first public (November 2010) draft of California's BDCP suggests that improvements are needed in the planning process itself, including specify- ing responsibilities and improving organization. Possible approaches to developing these improvements are discussed in Chapter 5. In addition, regulatory improvements and principles are needed to ensure more robust, comprehensive, and accountable planning. They include application of constitutional provisions and the public trust doctrine, more comprehensive water conservation, inclusion of groundwater in statewide planning, and formalizing a long-term water-market system. Among these new principles are the following: Recognize that not all uses of water are always compatible with each other. It is not always possible, for example, to provide reliable and high-quality water supplies while simultaneously protecting all aquatic species and aquatic ecosystems. The current planning objec- tive that all listed species will be protected, that levees and land use will be maintained, and that the reliability and volume of water sup- plies will be maintained, all while maintaining flood protection, is not tenable or even realistic in an era of varying and hard-to-predict water scarcity. Therefore, planning efforts that acknowledge these difficulties are more likely to lead to lasting and effective outcomes than those that pretend the difficulties do not exist. Provide better definition of competing uses; acknowledge, specify, and account for trade-offs in planning and decision making. With competing uses, more water for one use implies less for another. Trade-offs normally require a balancing of uses, but frequently the need to balance, the terms of the trade-offs, and the implications for different uses are obscure. For instance not all delta islands can survive in the future; a variety of circumstances (Chapter 3) may cause smelt numbers to continue to decline; delta drinking water may require more treatment to protect public health, reduce undesir-

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SCARCITY 45 able taste and odor, and meet EPA water-quality standards; regulated and future contaminants of concern in upstream municipal waste discharges must be removed; and agricultural drainage may require remanagement. If the trade-offs and alternatives are addressed spe- cifically and transparently, outcomes are likely to be more effective and agreements more long-lasting. Modify practices that do not reflect the scarcity value of water. They include pricing that is determined only by the costs of capture, storage, transport, and treatment of water, which implies that water is not scarce at all. By assigning to water a scarcity value of zero, many current policies signal consumers that water is available with- out limit, even while the limits imposed by scarcity are intensifying. As a result, more water is used than would be the case if its price reflected scarcity. Although they do not include an actual scarcity value for water, many California water utilities such as the East Bay Municipal Utility District and the Marin Municipal Water District use increasing block rates (higher prices at higher use rates) in an effort to mimic marginal cost pricing. Careful consideration should be given to proposals to include a scarcity premium in the price of water to signal users that water is not freely available (Zilberman and Schoengold 2005). Such values can be estimated with some ac- curacy and they can also be determined on a trial-and-error basis if prices are established and imposed administratively (Baumol and Oates 1979). They can be determined as part of contract negotia- tions or renegotiations, or they can be altered from time to time, as appropriate, by water wholesalers. One method of achieving this is through a continuing state market for transferring supplemental wa- ter, which would establish a scarcity premium. This premium could be projected into the future for varying climate conditions. The cost of water to users should reflect its scarcity, and allocation should be based on analysis that allows for informed decision making. In pricing water it is important to recognize that costs are not always paid in terms of dollars and cents. The concept of opportunity cost (e.g., Stiglitz 1986) is both pertinent and important. Simply, an opportunity cost is the value of the most desirable opportunity forgone as a consequence of a specific allocative decision. A decision to divert water for some consump- tive use entails an opportunity cost in terms of the environmental services and amenities forgone by not continuing to allocate water to instream en- vironmental purposes. Historically, such opportunity costs were either low or perceived to be low. However, there is evidence, some of it controver- sial, that environmental opportunity costs may no longer always be small or negligible (Costanza et al. 1997, Safriel 2011). The growth in the real

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46 SUSTAINABLE WATER MANAGEMENT IN THE DELTA value (i.e., adjusted for inflation) of water in alternative uses is a symptom of growing scarcity. As the population of California grows and as the state continues to develop economically it seems likely (although not inevitable; Hanak et al. 2011) that water scarcity will continue to grow. This should be reflected in an analysis of alternatives, including improvements in water- use technology, reuse technology, economizing on water use, and various degrees of long-term species protection. The magnitude and intensity of future scarcity will make allocative decisions harder as the values of all uses grow and as the opportunity costs of uses forgone also grow. This means that decisions to reallocate water away from one use to another will intend to involve higher and higher stakes. Paralysis in the face of these high stakes will enhance the prevail- ing tendency to lock water into existing uses. The danger in such paralysis will likely be that Californians will be using their water less efficiently and productively--and maybe substantially less--than could be the case if wa- ter were reallocated from existing low-valued uses to higher-valued ones. Consequently, it will be important to develop new, innovative institutions to develop the tools that will facilitate the reallocation of water among uses as a response to intensifying scarcity. Some uses are not monetized in terms of dollars and cents. Environ- mental goods and services [e.g., the provision by the environment of food, fiber, and shelter for humans; see Constanza et al. (1997) and Daily (1997)] and environmental amenities are examples. These uses tend to be public goods in the sense that the services and amenities cannot be withheld from persons who refuse to pay for them. They have value nevertheless, and because of their public-good nature they complicate the allocation process. They can be protected in several ways, including making administrative allocations of water to service environmental uses, taxing water trades and water consumption, and the use of environmental water accounts. [See Booher and Innes (2010) and Appendix F of this report for discussions of California's Environmental Water Account.] That does not mean it could not be improved. A forward-looking plan for managing environmental scarcity should consider alternative ways to protect environmental services and other water-based public goods. A number of measures to address scarcity are already available. They are either weakly enforced or not enforced at all in California, although they are incorporated into California water law. Use of these measures is consistent with the principles enunciated above. They are consistent with the proposition that exclusive reliance on supply augmentation measures "encourages a simplistic and sometimes counter productive attitude" that we have to "get more" (Hanak et al. 2010). The fact of water scarcity does not means that the state is "running out of water." Although most surface flows have been fully allocated or overallocated, the state can use a num-

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SCARCITY 47 ber of tools that optimize the use of existing supplies. As described below there are several tools currently available for use within existing legal authority. Other tools, which could be combined in a prioritized program to increase net benefits from public and private investments, may require additional legislative authorization. Enforce the constitutional prohibition against nonbeneficial, unrea- sonable, and wasteful water use. The California Constitution, article 10, 2, limits all water rights to "such water as shall be reasonably required for the beneficial use to be served, and such right does not and shall not extend to the waste or unreasonable use or unreason- able method of use or unreasonable method of diversion of water." The ideal way to implement this fundamental tenet is through sound water planning of the type recommended in this report. That will require significant changes in responsibilities, organizations, and commitment to a traditional but not recently applied principal of independent objective planning. This constitutional provision restricts the types of uses allowed to those that are deemed "beneficial," a determination that depends on the facts and circumstance of each case, and that may change over time to reflect societal values. For example, in 1935 some farmers claimed that winter irrigation constituted a beneficial use because it simultaneously benefitted their alfalfa crops and drowned gophers living in their fields. The California Supreme Court rejected the argument because it was "self-evident" that the use of water solely to eradicate pests was not a beneficial use (Tulare Irrigation District v. Lindsay-Strathmore Irrigation District, 1935). Today recognized beneficial uses include domestic uses, fire protection, fish and wildlife, industrial uses, irrigation, mining, municipal uses, power produc- tion, recreation, and other uses (SWRCB 2010). The constitutional provision also restricts the amount of water that can be applied for a specified beneficial use, such as irrigation. One Cali- fornia court, for example, allowed a lawsuit to go forward claiming that direct diversion of water from the Napa River to protect vineyards from frost was an unreasonable use or unreasonable method of diversion (State Water Resources Control Board v. Forni, 1976). More recently (2011), the State Water Resources Control Board restricted use of Russian River water for the purpose of frost protection and ruled that diversion outside their demand management program was an unreasonable use of the water (SWRCB 2011). Thus, although water rights are a protected form of property in Cali- fornia, the scope of the right does not include nonbeneficial, unreasonable, or wasteful uses of water (Gray 2002). The California Water Code 275

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48 SUSTAINABLE WATER MANAGEMENT IN THE DELTA authorizes the department and board to "take all appropriate proceedings or actions . . . to prevent waste, unreasonable use, unreasonable method of use, or unreasonable method of diversion of water in this state." Under this provision, the constitutional prohibitions can be enforced through several mechanisms. First, before approving an application for water rights, the Water Board must determine that the proposed use will be reasonable and beneficial (Central Delta Water Agency v. State Water Resources Control Board, 2004). Moreover, even after water rights have been issued, water users and citizens can challenge existing water uses as unreasonable. Hanak et al. (2010) suggest that the state has a wide range of authority: A property right in water wholly depends on its reasonable use. The state has authority to declare a variety of water practices unreasonable, even if they were considered acceptable in the past. These may include exces- sive evaporative and conveyances losses, inefficient irrigation techniques, failure to adopt or to implement best management practices, and perhaps other profligate uses such as the irrigation of water-intensive crops and landscaping, failure to install low-flow water appliances, and continued reliance on imported water, instead of using cost-effective alternatives such as demand reduction, use of recharged groundwater, and recycling reclaimed wastewater. Protect values recognized under the public trust doctrine. California water rights are inherently limited by the public trust doctrine. In its seminal decision of 1983, the California Supreme Court made clear that the state's navigable lakes and streams are subject to the public trust to protect navigation, commerce, fishing, recreational, ecological, and other public values (National Audubon Society v. Superior Court, 1983). According to the court, the state possesses both the power and the duty to protect trust assets. In the case of water rights, the Supreme Court explained: "the state has an af- firmative duty to take the public trust into account in the planning and allocation of water resources and to protect public trust uses whenever feasible." Even after the Water Board issues water rights, according to the court, the state retains "the power to reconsider allocation decisions" and in some cases that power "extends to the revocation of previously granted [water] rights." If state agencies fail to act, members of the public can bring a court action to enforce the public trust (Center for Biological Diversity, Inc. v. FPL Group, Inc., 2008). Improve water conservation (including using water more efficiently and productively). In 2009, the California legislature set new con- servation requirements for urban water use requiring a 20 percent reduction in per capita use by December 31, 2020 (Water Code

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SCARCITY 49 10608.16(a), 2009). Urban water suppliers have a suite of options that can be used to achieve targeted reductions. They include (1) wa- ter recycling and reuse; (2) appropriate pricing structures in which prices reflect the scarcity value of water as well as delivery costs and feature tiers which are constructed so that the price of water rises as the volumes used by consumers increase; (3) water rationing, where appropriate; (4) restrictions on outdoor uses of water; and (5) edu- cational programs [see Gleick et al. (2003, 2011) for discussion of examples]. The legislature did not establish a parallel requirement for agricultural uses even though such uses account for 77 percent of consumptive use statewide in California (Hanak et al. 2010). Instead, the legislature re- quired agricultural water users to implement "efficient water management practices by July 31, 2012," but generally limited them to measures that are "locally cost effective and technically feasible" (Water Code 10608.48, 2009). Agricultural water users also have an array of options for reducing and economizing on the use of water. The options include (1) irrigation scheduling and management of soil moisture in which the timing and vol- ume of irrigation applications are linked to the moisture requirements of the crop (Eching 2002); (2) tiered pricing structures similar to those available to urban users but tailored for agriculture; (3) the substitution of closed- conduit irrigation systems--drip, micro, and sprinkler--which may allow more precise management of irrigation water (Heermann and Solomon 2007); (4) tailwater (excess irrigation water) recycling; and (5) regulated deficit irrigation in which the timing of moisture stress is carefully con- trolled so as to reduce water applications with minimized impacts on yield (Fereres and Soriano 2006). These techniques cannot be effectively used to economize on water everywhere all the time. Thus, for example, the careful timing of irrigation applications and active management of soil moisture, as well as tiered pric- ing, are difficult to use when water deliveries are not available on demand. Similar conclusions hold for regulated deficit irrigation. Closed-conduit irri- gation systems work best in circumstances where the infiltration properties of the soil are highly variable. Recycling of surface runoff from agriculture is most effective on soils with low infiltration rates. The result is that conservation techniques must be applied and operated on a local basis and account for local circumstances. Blanket prescriptions for achieving agricultural water conservation on a statewide basis are un- likely to be successful (Gleick et al. 2011, Hanak et al. 2011). One excep- tion to the inapplicability of blanket prescriptions is the need to measure water deliveries and applications and devise consistent procedures for ac- counting for water deliveries and use. Water deliveries and applications are

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50 SUSTAINABLE WATER MANAGEMENT IN THE DELTA not widely or consistently measured in California agriculture, and account- ing practices are not consistent either. Thus, while it may be inappropriate to require the agricultural sector to reduce water use by some fixed volume or proportion, the availability of conservation opportunities and the need to measure and account for water use suggest that there are opportuni- ties to improve water management in agriculture and achieve significant water savings (Cooley et al. 2008). Christian-Smith et al. (2010) document through case studies a number of successful efforts by California growers to increase the productive and efficient use of water. These documented successes underscore the possibilities and opportunities for further improve- ments in water use in agriculture. Groundwater monitoring and regulation. There is no comprehen- sive permit system for the regulation of groundwater in California, although groundwater accounts for approximately one-third of the state's water usage in an average year. However, there are local and regional avenues for management (Nelson 2011). Of the 431 groundwater basins in California, 22 have been adjudicated through the court system and are the subject of management under court supervision (CDWR 2009). In most other areas, overlying land- owners can freely withdraw the percolating groundwater (that is, groundwater that does not flow as an underground stream) beneath their property for reasonable and beneficial use. There is no state regulation of such withdrawals and there is no comprehensive re- quirement for groundwater management. One result of this situation is that groundwater underlying the southern Central Valley of Cali- fornia has almost certainly been persistently overdrawn (Faunt 2009, Famiglietti et al. 2011). Continuation of unsustainable, persistent overdraft would likely have serious consequences for the economic and food and water security of the United States (Famiglietti et al. 2011). "Rights" to extract groundwater are subject only to the "correlative" rights of other overlying landowners withdrawing from the same source. As one California court complained in 2006: "California is the only western state that still treats surface water and groundwater under separate and distinct legal regimes" (North Galilee Water Co. v. State Water Resources Control Board, 43 Cal. Rper 3d 821, 831 [Cal. App. 2006]). Rather than acknowledge the connection between surface and subsurface supplies, the court explained, California depends on water classifications "that bear little or no relationship to hydrological realities." In 2009, the legislature enacted modest reform by requiring the monitoring and reporting of groundwater elevations (Water Code 10920). However, the legislature could provide

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SCARCITY 51 additional tools to address water scarcity by joining other western states in recognizing the interconnection of surface and groundwater [see, for example, Thompson (2011) and a 2006 congressional hearing on this topic (U.S. Congress 2006)]; by enacting more stringent water-use measurement and reporting requirements; and by considering mechanisms to extend the surface-water permit system to groundwater withdrawals. These mecha- nisms would likely be politically unpopular, but they would provide the state with a comprehensive mechanism to ensure that extracted groundwa- ter meets the constitution's reasonable and beneficial use standard. Water Markets Under some circumstances, water markets can be helpful in allocating water among competing uses to achieve economically efficient use. Mar- kets have the advantage of being strictly voluntary because they rely on the willing participation of buyers and sellers. In market transactions, the buyer will typically be motivated because the water is available through market exchange more cheaply than through any other method. Similarly the seller is motivated because the water can be sold for more money than could be realized by using it in any other available opportunity. This means that successful exchanges benefit both seller and buyer. Markets are simple and straightforward and lead to economically efficient allocations so long as there are not significant adverse third-party impacts and as long as en- vironmental uses are appropriately accounted for. Exchanges that involve agricultural-to-urban short-term transfers in the delta have been increasing in recent years (Macaulay 2009). Virtually any water-market scheme will need to accommodate environmental uses and other instream uses. Exam- ples of techniques for accommodating environmental uses of water include funding mechanisms such as taxes to buy water for environmental purposes and administrative allocations that ensure that some level of environmental flow is protected (NRC 1991). Accommodating environmental uses and accounting for third-party impacts may entail large transaction costs in con- nection with management of delta waters. A principal example is the state of Oregon, which uses a combination of implicit taxes on water trades and administrative allocations to ensure that appropriate quantities of water are left in place for environmental purposes. Such transaction costs should be assessed in any consideration of the desirability of adopting market or market-like arrangements to resolve delta water problems. There are different types of water markets. There are markets in water rights in which the right to use some specified amount of water in perpetuity is exchanged. There are lease-like markets in which specified quantities of water are exchanged for use over a specified period of time with no transfer of rights. This type of market exchange was used for a 2-year period during

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52 SUSTAINABLE WATER MANAGEMENT IN THE DELTA the drought of 1987-1992 in California to mitigate shortages that would have had very high cost impact. The resulting exchanges had large net ben- efits and averted severe drought impacts (Carter et al. 1994). There are also spot markets where water can be purchased in some specified amount for use immediately. This kind of market tends to be informal. Finally there are markets for options wherein a potential buyer pays a potential seller for the right to take a specified amount of water in a dry year. The buyer also pays for the water if and when it is transferred. Where water markets have been used extensively, they illustrate a common pattern in that the vast majority of exchanges do not entail the trade of water rights. Long-term transfer of water from willing agricultural sellers to the state that in turn could make it available for instream uses or supplemental supplies, particularly south of the delta, offer a significant opportunity for better management of California's waters consistent with the state constitutional provision. Water markets are but one tool that can be used to manage scarcity. Given that they are particularly suited to managing scarcity, they should be given careful consideration in the development of future water plans. The need to acknowledge scarcity in planning for the delta's water future encompasses the need to include in the array of alternatives some consid- eration of institutional arrangements that are particularly well adapted to managing scarcity. The methods should include information about changes in the degree of scarcity that users could respond to, should encourage water conservation (i.e., discourage excessive use), and if possible should include information about the value of water. Prices and markets are two examples. Care must be taken in designing and regulating water markets. Where markets have been used successfully, the market arrangements in ques- tion did not involve "free-market" transactions (Dellapenna 2000, Sinden 2007). The transfer of water rights, for example, almost always entails a change in the place of use, the season of use, the type of use, or the pattern of return flows. Moreover, almost every type of water exchange has the potential to impose adverse impacts on third parties other than the buyer or the seller. For transfers in excess of 1 year, the California Water Resources Control Board provides public notice and opportunity for comments and evaluates petitions for transfer to ensure that they "would not result in sub- stantial injury to any legal use of water and would not unreasonably affect fish, wildlife or other instream beneficial uses (Cal. Water Code 480-84, 1825-1745). The potential for third-party effects underscores that markets, whatever their type, may not work in all situations. Some regulation of such markets is required. Indeed, the best documented market arrangement in recent history, which entailed the development of the California Drought Water Bank, involved a clear and transparent set of rules and was carefully super-

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SCARCITY 53 vised by the state which acted, in effect, as a water broker. The resulting short-term or lease market, administered by the California Department of Water Resources, led to large monetary benefits for those who purchased water and also resulted in positive impacts on statewide employment. Even in that case there were adverse third-party impacts, although the costs of those impacts amounted to only a small fraction of the total benefits that accrued from the Drought Water Bank (Carter et al. 1994). REFERENCES Andersson, E., C. Nilsson, and M. E. Johansson. 2000. Effects of river fragmentation on plant dispersal and riparian flora. Regulated Rivers: Research and Management 16:83-89. Baumol, W., and A. Blinder. 2011. Economics: Principles and Policy. Mason, OH: South- Western Cengage Learning. Baumol, W. J., and W. E. Oates. 1979. Economics, Environmental Policy and the Quality of Life. Englewood Cliffs, NJ: Prentice-Hall, Inc. Booher, D. E., and J. E. Innes. 2010. Governance for resilience: CALFED as a complex adap- tive network for resource management. Ecology and Society 15(3):35. Available at http:// www.ecologyandsociety.org/vol15/iss3/art35/. Accessed June 4, 2012. Carter, H. O., H. J. Vaux, and A. F. Scheuring, eds. 1994. Sharing Scarcity: Gainers and Los- ers in Water Marketing. Davis, CA: University of California Agricultural Issues Center. CDWR (California Department of Water Resources). 2005. California Water Plan: A Frame- work for Action. Highlights. Bulletin 160-05. Available at http://www.waterplan.water. ca.gov/docs/cwpu2005/cwphighlights/highlights.pdf. Accessed March 1, 2012. CDWR. 2009. Court Adjudications. Available at http://www.water.ca.gov/groundwater/gw- management/court_adjudications.cfm. Accessed July 12, 2012. Christian-Smith, J., L. Allen, M. J. Cohen, P. Schulte, C. Smith, and P. H. Gleick. 2010. Cali- fornia Farm Water Success Stories. Oakland, CA: The Pacific Institute. P. 75. Clarkson, R. W., and M. R. Childs. 2000. Temperature effects of hypolimnial-release dams on early life stages of Colorado River basin big-river fishes. Copeia 402-412. Cooley, H., J. Christian-Smith, and P. H. Gleick. 2008. More with Less: Agricultural Water Conservation and Efficiency in California. A Special Focus on the Delta. Oakland, CA: The Pacific Institute. P. 67. Costanza, R., R. d'Arge, R. de Groot, S. Farber, M. Grasso, B. Hannon, K. Limburg, S. Naeem, R. V. O'Neill, J. Paruelo, R. G. Raskin, P. Sutton, and M. von den Belt. 1997. The value of the world's ecosystem services and capital. Nature 387:253-260. Daily, G., ed. 1997. Nature's Services: Societal Dependence on Natural Ecosystems. Washing- ton, DC: Island Press. Dellapenna, J. W. 2000. The importance of getting names right: The myth of markets for water. William and Mary Environmental Law and Policy Review 25:317-377. Dudgeon, D., 2000. The ecology of tropical rivers and streams in relation to biodiversity and conservation. Annual Review of Ecology and Systematics 31:239-263. Eching, S. 2002. Role of Technology in Irrigation Advisory Services: The CIMIS Experience. Management Workshop on Irrigation Advisory Services and Participatory Management in Irrigation FAO-ICID. Montreal, Canada. Famiglietti, J. S., M. Lo, S. L. Ho, J. Bethune, K. J. Anderson, T. H. Syed, S. C. Swenson, C. R. de Linage, and M. Rodell. 2011. Satellites measure recent rates of groundwa- ter depletion in California's Central Valley. Geophysical Research Letters 38:L03403, doi:1029/2010GLO46442.

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54 SUSTAINABLE WATER MANAGEMENT IN THE DELTA Faunt, C. C., ed. 2009. Groundwater Availability of the Central Valley Aquifer, California. U.S. Geological Survey Professional Paper 1766. Fereres, E., and M. A. Soriano. 2006. Deficit irrigation for reducing agricultural water use. Journal of Experimental Botany 58(2):147-159. Gleick, P. H., D. Haasz, C. Henges-Jeck, C. Srinavasan, G. Wolff, K. K. Cushing, and A. Mann. 2003. Waste Not, Want Not: The Potential for Urban Water Conservation in California. Oakland, CA: The Pacific Institute. Gleick, P. H., J. Christian-Smith, and H. Cooley. 2011. Water-use efficiency and productivity: Rethinking the basin approach. Water International 36(7):784-789. Gray, B. E. 2002. The Property Right in Water. Hastings West-Northwest Journal of Environ- mental Law and Policy 9:1-27 Hanak, E., J. Lund, A. Dinar, B. Gray, R. Howitt, J. Mount, P. Moyle, and B. Thompson. 2010. Myths of California water: Implications and reality. Hastings West-Northwest Journal of Environmental Law & Policy 16:3-73. Hanak, E., J. Lund, A. Dinar, B. Gray, R. Howitt, J. Mount, P. Moyle, and B. Thompson. 2011. Managing California's Water: From Conflict to Reconciliation. San Francisco, CA: Public Policy Institute of California. Available at www.ppic.org/main/publication. asp?i=944. Accessed June 4, 2012. Heermann, D. F., and K. H. Solomon. 2007. Efficiency and uniformity. In Design and Op- eration of Farm Irrigation Systems, 2nd edition, edited by G. Hoffman. St. Joseph, MI: American Society of Agricultural and Biological Engineers. Hundley, N., Jr. 2001. The Great Thirst: Californians and Water: A History. Revised edition. Los Angeles, CA: University of California Press. Isenberg, P. 2011. Doing More with Less: Moving Toward Long-Term Sustainable Use of Delta and Bay Water. Plenary address to the 10th Biennial State of the San Francisco Estuary Conference, Oakland, CA, September 21, 2011. Available at http://aquadoc.typepad. com/files/isenberg_sf_estuary_conf_final_09_21_11.pdf. Accessed July 12, 2012. Jansson, R., C. Nilsson, M. Dynesius, and E. Andersson. 2000. Effects of river regulation on river-margin vegetation: A comparison of eight boreal rivers. Ecological Applications 10:203-224. Junk, W. J., P. B. Bayley, and R. E Sparks. 1989. The flood pulse concept in river floodplain systems. Pp. 110127 in Proceedings of the International Large River Symposium, edited by D. P. Dodge. Ottawa, Ontario (Canada). Department of Fisheries and Oceans, Cana- dian Special Publication of Fisheries and Aquatic Sciences 106. Kahrl, W. L. 1983. Water and Power: The Conflict over Los Angeles Water Supply in the Owens Valley. Los Angeles, CA: University of California Press. Kondolf, G. M., 1997. Hungry water: Effects of dams and gravel mining on river channels. Environmental Management 21:533-551. Macaulay, S. 2009. Advancement of progressive management strategies to promote regional and statewide water supply reliability in California, United States of America. Con- sultancy Report for Rijswaterstaat Centre for Water Management, Dutch Ministry of Transport, Public Works, and Water Management. Davis, CA: West Yost Associates. Milly, P. C. D., J. Betancourt, M. Falkenmark, R. Hirsch, Z. W. Kundzwicz, D. P. Lettenmaier, and R. Stouffer. 2008. Stationarity is dead: Whither water management. Science 319: 573-574. Morita, K., S. Yamamoto, and N. Hoshino. 2000. Extreme life history change of white-spotted char (Salvelinus leucomaenis) after damming. Canadian Journal of Fisheries and Aquatic Sciences 57:1300-1306.

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SCARCITY 55 Nelson, R. 2011. Uncommon Innovation: Developments in Groundwater Management Plan- ning in California. Woods Institute for the Environment, Stanford University, California. Available at http://www.stanford.edu/group/waterinthewest/cgi-bin/web/sites/default/files/ Nelson_Uncommon_Innovation_March_2011.pdf. Accessed June 4, 2012. Nichols F., J. Cloern, S. Luoma, and D. Peterson. 1986. The modification of an estuary. Sci- ence 231:567-573. NRC (National Research Council). 1991. Water in the West: Efficiency, Equity and the Envi- ronment. Washington, DC: National Academy Press. NRC. 1996. Upstream: Salmon and Society in the Pacific Northwest. Washington, DC: Na- tional Academy Press. NRC. 2007. Colorado River Basin Water Management. Washington, DC: The National Academies Press. NRC. 2010. A Scientific Assessment of Alternatives for Reducing Water Management Effects on Threatened and Endangered Fishes in California's Bay-Delta. Washington, DC: The National Academies Press. NRC. 2011. A Review of the Use of Science and Adaptive Management in California's Draft Bay Delta Conservation Plan. Washington, DC: The National Academies Press. Poff, N. L., J. D. Allan, M. B. Bain, J. R. Karr, K. L. Prestegaard, B. D. Richter, R. E. Sparks, and J. C. Stromberg. 1997. The natural flow regime. Bioscience 47:769-784. Safriel, U. 2011. Balancing water for people and nature. Pp. 135-170 in Water for Food in a Changing World, edited by A. Garrido and H. Ingram. London: Routledge. Sinden, A. 2007. The tragedy of the commons and the myth of a private property solution. University of Colorado Law Review 78:533. Stiglitz, J. E. 1986. Economics of the Public Sector. New York: Norton. SWRCB (State Water Resources Control Board). 2008. Water Rights within the Bay/Delta Watershed State Water Resources Control Board. Available at http://deltavision.ca.gov/ BlueRibbonTaskForce/Oct2008/Respnose_from_SWRCB.pdf. Accessed July 17, 2012. SWRCB. 2010. Water Quality Control Plan for the San Francisco Bay Basin. Chapter 2: Beneficial Use. Avaiable at http://www.swrcb.ca.gov/rwqcb2/water_issues/programs/ planningtmdls/basinplan/web/docs/bp_ch2+tables.pdf. Accessed June 4, 2012. SWRCB. 2011. State Water Resources Control Board Resolution No. 2011-0047: To Adopt a Proposed Russian River Frost Protection Regulation and Associated Environmental Impact Report. Available at http://www.swrcb.ca.gov/waterrights/water_issues/programs/ hearings/russian_river_frost/docs/rs2011_0047.pdf. Accessed June 4, 2012. Thompson, B. H., Jr.. 2011. Beyond connections: Pursuing multidimensional conjunctive management. Idaho Law Review 47:273-322. U.S. Bureau of the Census. 1996. Population of States and Counties of the United States, 1790-1990. Washington, DC: U.S. Government Printing Office. U.S. Congress. 2006. Conjunctive Water Management: A Solution to the West's Growing Wa- ter Demand? Hearing Before the Subcommittee on Energy and Resources of the House. Committee on Government Reform, 109th Congress. Available at http://www.gpo.gov/ fdsys/search/pagedetails.action?sr=151&originalSearch=&st=Volatile+Memory&ps=10 &na=&se=&sb=re&timeFrame=&dateBrowse=&collection=&historical=false&granul eId=CHRG-109hhrg27514&packageId=CHRG-109hhrg27514&bread=true. Accessed July 12, 2012. Walks, D. J., H. W. Li, and G. H. Reeves. 2000. Trout, summer flows, and irrigation canals: A study of habitat condition and trout populations within a complex system. Pp. 115-125 in Management and Ecology of River Fisheries, edited by I.G. Cowx. London: Blackwell Science. Zilberman, D., and K. Schoengold. 2005. The use of pricing and markets for water allocation. Canadian Water Resources Journal 30(1):1-10.

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