[env-trinity] Sac Bee Viewpoints: Environmental water market would help the losers in this drought

[Sari Sommarstrom]

http://www.sacbee.com/2014/02/02/6116419/viewpoints-environmental-water.html

 <http://www.sacbee.com/> SacBee.com

Viewpoints: Environmental water market would help the losers in this drought

By Jay Lund, Ellen Hanak and Barton "Buzz" Thompson
Special to The Bee 

By Jay Lund, Ellen Hanak and Barton "Buzz" Thompson 

Last modified: 2014-02-01T06:24:49Z

Published: Sunday, Feb. 2, 2014 - 12:00 am 

 <http://www.sacbee.com/terms-of-service> Copyright 2014 . All rights
reserved. This material may not be published, broadcast, rewritten or
redistributed. 

California is in a major drought, and state and federal regulators will be
under pressure to loosen environmental standards that protect native fish.
This happened in the 1976-77 and 1987-92 droughts, and the current drought
could become much more severe. 

These standards demonstrate the high value society places on the survival of
native fish and wildlife. In past droughts, we have given away some of these
protections because of pressure to make more water available for other uses.
But this time, California can do better. We can create a special water
market that meets the state's goals of both ensuring a reliable water supply
and protecting the environment. In this market, growers and cities would pay
for the additional water made available from relaxed environmental
standards, and the revenues would help support fish and wildlife recovery.

Typically, water trading dampens the costs of drought. Farmers irrigating
high-cash crops such as almond trees can buy some water from growers of
alfalfa, rice and other crops that are less profitable per drop of water
used. Such trading can greatly reduce the overall economic and social costs
of a drought and distribute these costs more broadly. Importantly, such
market transactions ensure that those who use less water than their
entitlement are compensated for the reduction. Because water buyers must pay
for the added water, they also have an incentive to conserve. 

Although environmental uses generally do not have water rights, river flow
and water quality rules intended to protect endangered fish and wildlife
from extinction are similar to very secure water entitlements. But in past
droughts, state or federal decisions to relax environmental standards
essentially became a gift to other water users. The shorted environmental
uses were not compensated, and farmers and cities that benefited had less
incentive to conserve water.

A better approach would create a special drought environmental water market,
so that those who gain from relaxed standards help compensate the losers.
When standards are loosened, fish threatened with extinction may require
additional expensive actions such as habitat restoration and acquisition and
"conservation hatcheries," which help maintain populations of endangered
species outside of their natural environment. 

Unlike past environmental water markets, where agencies only bought water
for fish and wildlife refuges, some environmental flows in this special
drought market would be treated as senior water rights that could be sold.
Fishery agencies could sell some of these flows when they determine that the
reduction will not jeopardize endangered species. The sale of this water
would provide funds that help native species recover.

For example, a relaxation of environmental flow requirements that made
available 100,000 acre-feet of water (1 acre-foot is about 326,000 gallons)
- perhaps worth $400 an acre-foot during a drought - would generate $40
million to help pay for compensating actions. Those actions might include
buying water for environmental purposes elsewhere in the state or creating a
reserve fund to aid native fish after the drought.

Making this new market work would require some new rules, and there are
several options. Compensated relaxation of environmental flow standards
could be done as part of regulatory actions under the Endangered Species Act
(biological opinions, incidental take permits and habitat conservation
plans), negotiated agreements with water users or fixed penalties for
violating flow and water quality standards. The price could be set at the
fair market value of the water made available, the cost of compensatory
environmental actions or a fixed or negotiated fee established by the
regulatory agency.

Creating this type of drought environmental water market would help limit
the reductions in environmental river flows, while ensuring that such
reductions receive some compensation.

For California, this would be an appropriate expression of the state's
co-equal environmental and economic goals for water management in times of
hardship. If we can't all get better together in a severe drought, at least
we can reduce and share the pain fairly in a way that provides some help to
fish and other species that depend on our rivers for their survival. 

  _____  

Jay Lund is director of the Center for Watershed Sciences at the University
of California, Davis. Ellen Hanak is senior fellow at the Public Policy
Institute of California. Barton "Buzz" Thompson is director of the Stanford
Woods Institute for the Environment. Brian Gray, a professor at the UC
Hastings College of the Law; Jeffrey Mount, senior fellow at PPIC; and
Katrina Jessoe, assistant professor of agricultural and resource economics
at UC Davis, contributed to this article.


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