Executive Summary for November 4th

For an overview of the latest news on the California drought, we’ve organized the most recent developments in a curated summary, including the most important stories, analysis and data. Our goal is to keep you informed of the day’s most significant events in the field.

Published on Nov. 4, 2015 Read time Approx. 5 minutes

How to Find Enough Water for Growth? Price It Right

Developers around the West are growing concerned about being able to secure enough water for new housing subdivisions, commercial projects and industry. The problem was the focus of a panel discussion at a recent meeting in San Francisco of the Urban Land Institute.

A big issue, according to the panel, is that water isn’t priced realistically. It is a commodity heavily subsidized by government, and therefore it is undervalued. Consumers recognize this, and they take it for granted by wasting water. That includes consumers at every level, including homeowners, farmers and industry.

The solution is to price water appropriately, which means increasing its price in most cases. Many urban water agencies are planning significant rate increases now, but much of the additional money will be used to address a backlog of deferred maintenance and to cover revenue shortfalls caused by drought. Addressing the true value of water and the need to plan for a water-scarce future are generally not considered in these rate increases.

Matthew Diserio, president of the New York firm Water Asset Management, said water needs to be priced at market rates in order to encourage its equitable redistribution. For instance, most of the nation’s water is consumed by agriculture, which obtains that water at relatively cheap rates. If it cost more, farms would be incentivized to conserve water more aggressively and sell the excess, if possible, to the highest bidder, which could be an urban area.

“Until water is valued, there is no incentive to invest,” Diserio said. “When water is priced to total costs, what you end up with is a sustainable, reliable supply of clean water. There is a huge opportunity to commit capital to solve these problems with a little help on the regulatory side.”

That means water agency boards of directors, state agencies and the federal government need to start charging for water’s true worth. For starters, that would require them to account for all their costs, including deferred maintenance, future maintenance, the effect of shortages and the need for additional water or conservation measures to accommodate growth.

Ballot Measure Could Doom Water Tunnels

Californians in November 2016 will get to vote on a ballot measure that would require voter approval all new major public-works projects. If approved, the requirement would apply to the so-called California Water Fix, a $15 billion proposal by Gov. Jerry Brown to build two giant water-diversion tunnels under the Sacramento-San Joaquin Delta.

The California secretary of state certified the measure for the ballot on Monday after verifying hundreds of thousands of petition signatures. It was put forward by Stockton-area farmer Dino Cortopassi, who opposes the tunnel project.

Called the No Blank Checks Initiative, the measure requires the state to seek voters’ permission before funding projects that cost more than $2 billion with revenue bonds. That means borrowing is repaid with receipts from the projects they pay for, rather than from general taxpayer funds.

The tunnel project is highly controversial because its potential effects on the Delta environment and North State water resources are unclear. The Delta is the largest estuary on the West Coast of the Americas and provides some of the water consumed by 25 million Californians and 3 million acres of farmland. But numerous fish species have been driven to the brink of extinction, in part, by that water demand.

Supporters of the tunnel project plan to mount an “aggressive campaign” to defeat the ballot measure, said Robbie Hunter, president of the California State Building and Construction Trades Council.

Alaska Water Exports Get Another Lifeline

Much has been made in the media about an entrepreneur’s scheme to deliver water from Alaska in cargo ships. The company, Alaska Bulk Water, is hoping in particular to capitalize on the California drought by finding buyers in the Golden State.

But the company has been unable to sell a single drop so far and has been at risk of losing its contract with the city of Sitka, Alaska, which is the source of the water it’s offering for sale.

So far, it seems only the city of Sitka is making money on the concept.

Last week, the city granted Alaska Bulk Water another contract extension – its sixth – in order to give the company more time to secure water sales contracts. The 36-month extension comes with a $1 million payment to the city, on top of $1.35 million paid to the city previously.

“We’re looking at another million dollars we get, whether you ship water or not,” Sitka city assembly member Matthew Hunter said in explaining his decision to support the extension, according to a report by Alaska Public Media.

Others didn’t want to give Alaska Bulk Water an exclusive contract, but rather open it up to competitors and thereby increase the odds that water deliveries will actually take place. With the contract amendment, Alaska Bulk will be able to purchase 92 percent of Sitka’s commercial water at just one cent per gallon. Assembly member Bob Potrzuski felt this was too generous.

“Personally I would like to see this contract for significantly less water,” Potrzuski said. “I would get rid of the whole idea of exclusivity and I would give others the opportunity and see what they could do with Sitka’s water.”

Terry Trapp, CEO of Alaska Bulk Water, said that after spending millions to develop infrastructure in Sitka harbor to load ships with water, he’ll be shifting gears these next three years to focus on the demand side of bulk water. He claims the company has potential customers in Mexico, the Middle East, China and South America. It has a corporate office in Seattle and is marketing directly to Southern California.

“Moving water from Alaska to other parts of the world sounds easy. But it isn’t,” Trapp said. “We’ve spent nine years in a learning curve, in understanding the things that we have to do in order to make this happen.”

Top image: In this photo taken May 20, 2015, a construction crew digs a new pool behind a house in Tustin, Calif. Pool construction continues throughout California, despite the drought, because most water agencies have not banned the practice or boosted the price of water significantly. Some critics say water is still far too cheap and does not reflect its true market value. (Gillian Flaccus, Associated Press)

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