Tuesday, March 13, 2018

How DECENTRALIZATION and PROPERTY RIGHTS (not Cronyism and Regulation) will fulfill Texas' Water needs

"Behold, I will stand before you there on the rock in Horeb; and you shall strike the rock, and water will come out of it, that the people may drink.”
And Moses did so in the sight of the elders of Israel.
Exodus 17:6

"Water policy" is one of the quieter, ongoing, acts of larceny in which the Texas Legislature engages.  During our first session, in 2013, when the Legislature created an absurd slush fund to allegedly aid "water infrastructure development."  Last year, TPPF released a guide on how to permanently fix the problems, which we finally had an opportunity to read this afternoon.

Water policy in Texas is guided by a 1997 law known as SB 1 (75(R)).  The law attempted to use "planning" to reach a "comprehensive solution" to Texas' water needs.  There is a lot that could be said about SB 1, but suffice to say that it was devised by Karl Rove (Dubya was Governor) working alongside a Democrat Lt. Gov (Bob Bullock) and a Democrat Speaker (Pete Laney).

20 years later, TPPF explains the result of the SB 1 process:
[T]he face that the overwhelming majority of water management strategies in the [State Water Plan] remain to be executed points to problems with its centralized natureOnly 14 percent of the over 3,000 water supply strategies in the 2012 [state water plan] have reported any progress over the last five years.  They remain simply strategies on paper.

The 2017 [State Water Plan] continues to rely on a significant number of new large surface reservoirs without acknowledging the costly, lengthy, and potentially insumountable federal and state permitting procedures to build these reservoirs. (6)

[Author's Note: Emphasis added.]
[A] variety of provisions in SB 1, which were intended to facilitate voluntary water transfers in a competitive market, have been interpreted and applied in a way that obstructs water markets. (8) 
SB 1,  followed by a number of other lousy pieces of legislation, have muddled property rights related to water.  This makes it impossible to profitably develop water resources (of particular note are so-called "groundwater conservation districts").  Essentially, they're taking a problem caused by too much government intervention, and they're trying to solve it with even more government intervention.

The report lists a number of other regulatory impediments to a functional water market, highlights include:
  • "Surface water in Texas, as in most western states, is a public good...." (10)
    • aka. If everybody owns it, nobody does.
    • To the degree to which you can determine rights to use and development...the process is very complicated and very expensive.
  • "[R]egulatory impediments in the water market hinder both buyers and sellers from gaining a better understanding and expectation of prices for water transfers.  The lack of pricing information and other regulatory impediments may stop agricultural users from shifting to lower water-use crops or from investing in more efficient irrigation practices." (10)
    • aka. This is why we grow cotton in the middle of the desert.
  • "[T]he reliability of existing water is weakened by inconsistent responses from regulatory agents."  (10)
TPPF then catalogs the difference in how groundwater and surface water are regulated.  Neither one is good.  The result is unclear property rights, higher costs, and supply shortages.

As far as policy recommendations, highlights include:
  • Force "groundwater conservation districts" to reconognize private property rights.
    • Note: Or you could, you know, ABOLISH "groundwater conservation districts."
  • Clarify the law so that water rights more closely resemble oil and gas rights.
  • Amend the law to explicitly allow for the type of property rights in surface water that we (at least technically) have in ground water.
  • Streamline Permitting
Bottom Line: There's no problem related to water policy in Texas that can't be solved via. clearer property rights and smaller government.  But that would alleviate the artificial shortages and reduce opportunities for the politically directed allocation of capital. And what fun would that be for the average member of the Texas legislature?!?

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