My water bills average about $80 a month. Little of that payment is actually for water. Almost the entire bill is for water treatment and delivery systems, sewage systems, stormwater management and purchase of land around Lake Whatcom. Less than 10 percent of my bill is for water itself, at about 2/10 cent per gallon.
How can water be so cheap when it is also so valuable (essential for all life!) and increasingly scarce? I don’t know, but I believe water markets would yield prices consistent with water’s value to us as individuals and to society. And markets would help solve many of our water supply/demand problems.
70 Percent of agricultural water use that is not permitted
Markets for water offer several benefits over the current system of complicated laws and regulations: improved allocation among water users of limited supplies; reduced role of government regulations (many of which are out of date); greater efficiency of water use (less waste); more instream flows for environmental, scenic and recreational values; and prices that reflect the true value of water.
Limited water markets exist throughout the western states. For example, Santa Fe, New Mexico, requires all new construction to offset the water to be used through reductions in existing demand. Developers must have water rights before they apply for permits, which led to markets in which developers bought water rights from farmers. Santa Fe water use dropped 42 percent in the next 15 years.
Whatcom County is home to an ongoing, multiyear project on natural resource markets (the use of farms to provide ecosystem services). After a few years of study, however, project participants concluded that local water markets were not yet feasible because too many regulatory and legal uncertainties surround water supplies, including tribal requests for quantification of their rights and the large quantity of water used by farmers that is not permitted.
Much of the county’s water is not metered, recorded, reported and publicly available.
A key obstacle to markets is the concern that market trades might later be undone when the government quantifies tribal water rights. The Lummi Nation and Nooksack Indian Tribe separately wrote to the U.S. Department of the Interior asking the federal government to quantify their instream flow rights, necessary to preserve their rights to an abundant supply of salmon. Until tribal rights are determined, potential market participants might deem markets too risky.
Another serious obstacle to markets is the large amount of agricultural water use that is not permitted, as much as 70 percent. A report for the Bertrand Watershed Improvement District noted, “… non-permitted water use is one of the most pressing water resource management issues for the area.” It is hard to see how water markets can function when so much of the county’s current water use falls, to some extent, outside the law. This unpermitted water use could be a great opportunity for water markets — a way for farmers to buy water rights to become “legal.”
Much of the county’s water is not metered, recorded, reported and publicly available. The agricultural sector is the key source of this data gap, although permit-exempt wells also lack meters. Without reliable data on actual water consumption, it would be difficult to buy and sell water, although it might still be possible to trade water rights.
Markets would shift water from low- to high-productivity sectors, reduce role of government in regulating water.
Rural homeowners and others are allowed to drill wells and consume up to 5,000 gallons a day without a permit. If some users can take water for free, why would they participate in markets?
Finally, no government entity has stepped forward to take the lead in creating local water markets. These markets must be regulated to avoid adverse third-party effects and to protect the environment. Ecology is the logical candidate for this effort because it must, under state law, approve water transfers through its permit process. However, Ecology has limited resources. Either the county or the Water Resource Inventory Area 1 Joint Board might be able to encourage formation of local water markets.
Water markets could provide major benefits in Whatcom County: improved efficiency of water use within each sector, shifts of water from low- to high-productivity sectors, reduction in the role of government in regulating water, and markets that clearly show the temporal and spatial distribution of water prices and, therefore, value. Unless and until we address some of the problems noted above, such markets are unlikely to form.
ABOUT THE AUTHOR, SERIES
This is one of a continuing series of columns about the water problems and potential solutions in Whatcom County.
Eric Hirst holds a doctorate in engineering from Stanford University and worked for 30 years as an energy policy analyst at Oak Ridge National Laboratory. Since moving to Bellingham more than 12 years ago, he has served on three advisory committees for the city of Bellingham, was involved with the formation and early operation of the Whatcom County chapter of Futurewise and served on the board of RE Sources for Sustainable Communities.
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