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More on Pickens: FOX offers soapbox for Pickens mouthpiece; Milloy responds

September 26th, 2008 No comments

FOX offers soapbox for Pickens mouthpiece Warren Mitchell (former chairman of Southern California Gas Company and San Diego Gas & Electric, and director and head of the compensation committee of Pickens’ owned Clean Energy Fuels); Steven Milloy responds.

Keep up the good work, Steve!

Some of my own thoughts on Pickens’ actions are here and here.

Bootleggers and Baptists in Texas and DC: Texas sells Pickens eminent domain powers and wind power transmission rights for his personal 8-acre "water district", while Sierra Club helps to push wind subsidies

July 30th, 2008 2 comments

[Update:  David Zetland at his Aquanomics blog has linked to my piece, astutely noting that if one applies Bruce Yandle`s “Bootleggers and Baptists” metaphor to Pickens’ campaign for wind power and transmission subsidies, Pickens as Bootlegger now has the Sierra Club (as the Baptists) dancing to his tune.  I`ve updated my title accordingly.]

I previously reported on T. Boone Pickens’ plan to suck down half of the water from that part of the Ogallala aquifer that underlies the Texas Panhandle, sell it to Dallas and put the money in his pocket – other users of the aquifer be damned.  Pickens’ has subsequently launched a publicity blitz to get the federal government to subsidize his wind farm power scheme.

It’s now becoming clear how Pickens’ water plan and wind plan are tied together, greased by corrupt Republican legislators in Texas and the apparent willingness of environmentalist leaders – anxious for “clean” energy, to turn a blind eye to Pickens’ water plan.

First, let me note that Pickens and the Republican-dominated Texas legislature have just put on a marvelous display of how government, in Texas at least, is by the rich and for the rich, who are allowed to ride roughshod over the “property rights” of others.  

Last year the Texas legislature, greased by $1.2 million in campaign contributions by Pickens over the previous election cycle, modified its laws who can create a “fresh water supply district” that has powers of eminent domain – powers to forcibly take land from others –  and authorized such water districts to use their rights of way to carry power transmission lines.  Such water districts are authorized to raise cheap money by issuing tax-exempt bonds.  By securing rule changes in his favor, a Pickens-controlled district covering eight acres in the Panhandle acquired the power to issue tax-exempt bonds and to condemn private land for a pipeline and power transmission lines all the way to Dallas.  In Texas, money talks and money rules – and “property rights” means nothing more than the right to collect reasonable value in compensation for what the rich want to take from you.  According to one report,

Going into the 2006 election that preceded this legislative fix, Pickens personally contributed $1.2 million to state candidates and political committees. Recipients of his largesse included each of the 16 senators who faced election in 2006 and one third of the 150-member House. Republicans received 94 percent of all the money that Pickens doled out to state candidates.

Promptly upon the changes in law, Pickens deeded eight acres in Roberts County to five of his employees – two of them the only residents/locally-registered voters within the parcel – to form a water district, which was then approved by Roberts County last November.  Before the change in law, as reported by Business Week, “a district’s five elected supervisors needed to be registered voters living within the boundaries of the district. Now, they only had to own land in the district; they could live and vote wherever.”   In the past, petitions to create a water district required the support of a majority of the registered voters within the proposed district’s borders; the recent changes allow a district to be formed with the backing of whoever owns the majority of the appraised land value within its proposed borders.

As further reported by Business Week,

On Nov. 6, Roberts County held an election to decide whether to form the new district. Only two people were qualified to take part: Alton and Lu Boone [the couple who manage the Pickens’ ranch from which the eight acres were sold]. The vote was unanimous. With that, Pickens won the right to issue tax-free bonds for his pipeline and electrical lines as well as the extraordinary power to claim land across swaths of the state.

The water district also approved “$101 million in revenue bonds to acquire the rights-of-way through up to 12 counties for delivering water and wind-generated electricity.”  Earlier this years, the new water district and Mesa Power (Pickens’ power company) together sent letters to about 1,100 landowners along part of the proposed 320-mile path through 11 Panhandle and Central Texas counties, telling them their “property may be affected” as the water district obtains rights of way for construction of the underground pipeline and aboveground electrical transmission lines, and hosted a number of public meetings telling landowners in Pickens’ way how “fair” Pickens wants to be with them as he lays pipe and power lines across 250 foot swathes of their land.

Construction of the pipeline and transmission lines is expected to begin in 2009, to the tune of roughly $2 billion each.  Pickens is set to spend $12 billion on the world’s largest wind farm in the Texas panhandle, while he expects his water investment in the area — around a $100 million so far – will earn him about $1 billion.

A second, and interesting, aspect of Pickens’ development plans is that Pickens has seemed to have found a way to buy off environmental opposition to his unsustainable, get-rich-quick-at-the-expense-of-others water mining scheme by combining it with an aggressive development of wind power – also turning environmentalists into a foil for his bid for public subsidies for wind power.  Carl Pope, executive for the Sierra Club – which has for the past few years prominently opposed Pickens’ Ogallala reservoir development plans – now jets about with Pickens and lauds him as his new “friend”; Pickens, says Pope, “is out to save America.”  It’s just that Pickens is going to need the help of government and taxpayers: “How to recruit the necessary public support? This would take, it seems to me, a government mandate to get the distribution network in place. … Pickens says he has a game plan, and will announce it next week.”

We obviously need big ideas and big investments, both to deal with water shortages and to replace dirty and GHG emitting energy usage; Pickens’ plans may offer us a way forward.  But we definitely don’t need developers like Pickens using government to force these projects down our throats (and misusing government authority to take property from unconsenting landowners) or to get public subsidies.  Let his plans stand on their own two feet, and let him (and the Sierra Club) keep his hands off of my wallet.  I am also not in favor of water plans that accelerate a race to draw down shared but unowned resources – has the Sierra Club really changed it’s stance on this?

Pickens, the Republicans in Texas and the Sierra Club should all be ashamed of their behavior.

h/t Steven Milloy (it is a bit interesting that FOX, which was a big fan of Pickens when he funded the Swift Boaters, seems to be turning aginst him now.)

T. Boone Pickens accelerates the tragedy of the Western water commons – by connecting thirsty markets to unowned, common-pool resources

June 16th, 2008 No comments

The latest Business Week magazine sports the headline, “Is Water the New Oil?” and a caricature of T. Boone Pickens.  The cover story -“There Will Be Water: T. Boone Pickens thinks water is the new oil—and he’s betting $100 million that he’s right” – describes Pickens’ plans to ship water to eager consumers in Dallas from his ranch and other water rights holdings in the Texas Panhandle region. 

While I’m all for water markets, there’s one small problem that deserves attention:  essentially Pickens will simply be sticking a huge straw into the unowned Ogallala Aquifer and pumping for all he’s worth.  Pickens will have to cover only his own costs (pumping and transportation), but he has no ownership stake in, or incentive to invest in maintaining or sustainably using, water resource itself.  As he draws down the water table, his neighbors will have to shell out more to dig and pump from deeper wells to maintain their own current draws, and if any of them wants to follow Pickens in shipping water to urban markets, then the race to drain the water commons in the Panhandle and other parts of the Ogallala will ratchet up further (it’s already been underway for many years in other parts of Texas and other states in which the Ogallala Aquifer lies).

Pickens may not be planning to replicate the history of the wasteful, competitive pumping of the East Texas common pool oil resources (also seen in the elimination of the passenger pigeon, the Plains bison, the great whales, and the crashing of ocean fisheries), but his own rational self interest is surely leading in that direction.  I hope Pickens can see where this is headed and take a positive role in heading off a destructive tragedy of the commons, which may be in the cards, but is not inevitable.   As Bruce Yandle has noted:

People can build institutions that take the edge off frantic commons behavior. People have unwritten and written constitutions that help to establish social order. People can and do accumulate wealth. People communicate, invent lines of kinship, and develop customs, traditions, and rules of law that limit anti-social behavior. People define, enforce, and trade property rights. People can and do avoid the tragedy of the commons. Indeed, instead of living with tragedies, people triumph over the commons. But the triumphs are never perfect or complete. There is always another commons to manage. …

At very low levels of income, what might be called stage one, human beings cannot afford to do much about property-rights enforcement and the commons. They live in a world where custom and tradition sustain them. As incomes rise and losses from the commons expand, stage two is entered. Fences go up, and rules are set for protecting the commons. Finally, in stage three, markets evolve along with rules of law that define spheres of private and public action. Private rights replace public control, and the triumph replaces the tragedy of the commons.

Life for mankind began on a commons where tragedies were commonplace and the incentive to improve was powerful. Out of the struggle to survive and accumulate wealth evolved markets, property rights, and the rule of law—a triumph on the commons. …

Human beings can and do avoid the tragedy of the commons. But doing so requires property rights and markets, which must be defended if the triumph is to continue.

Easy pickins?  Easy, Pickens.

h/t David Zetland

LA residents to drink recycled sewage, plus more on water rights "reform"

May 18th, 2008 No comments

1.  According to the New York Times, in the face of the difficulties and high costs of obtaining rights to more water, the mayor of LA has just announced plans for $1 billion in investments to increase municipal water supplies by capturing water from sewage and run-off and sending treated water into ground water.  The city also announced other policies that increase the role of the city in policing how citizens and businesses use water, such as increased fines for watering lawns during restricted times, and encouraging businesses and residents to use more efficient sprinklers and plumbing fixtures.  “The move comes as California braces for the possibility of the most severe water shortages in decades,” but also faces continued population growth.

The article does allude to some of the difficulties LA faces due to a lack of regional markets in water, but fails to note that a significant part of the problem that LA is trying to “manage” is a result of the city’s monopoly over municipal water supply and the related absence of a local water market that would present consumers with greater choice, pricing alternatives and incentives to conserve.  While some of the infrastructure investments make sense, greater water conservation could be achieve simply by getting the city out of the water management/dictatorship business.

 2.  I also note a recent short piece on Tradable Water Rights by an MIT environmental econ professor/Brookings Institution senior fellow Michael Greenstone.   I think that there are some very sticky issues involved here, and believe they deserve greater attention – if not necessarily direct government action to reform water rights.

 

Categories: reform, water rights Tags:

"Worldwatch" enviro group praises moves to water rights and markets in China

May 18th, 2008 No comments

Yingling Liu, manager of the China Program at the Worldwatch Institute, has praised recent steps by Chinese water authorities to clarify rights to water and to encourage water trading as a means to resolve serious issues over the use of water.

Here are a few key excerpts for the article (“Water Trading in China: A Step Toward Sustainability”):

“In recent years, scarcity and pollution of water have become the paramount environmental woe in China. Numerous reports and books have exposed China’s water crisis, depicting a nation suffering in the face of black-running rivers and dried-up waterways. Nationwide, the per capita availability of fresh water is only one-quarter of the world average.

“But a new regulation from the nation’s water authority may hold the key to achieving water sustainability in this thirsty country. The Interim Measure for Water Quantity Allocation, which came into effect on February 1, provides a framework for allocating water rights across provinces, autonomous regions, and municipalities that are under the direct jurisdiction of the central government. The ruling’s 17 stipulations lay out the principles, mechanisms, and practices for water allocation, potentially opening Chinese markets for water trading and enabling the use of market tools to promote conservation.

“The need for better delineation of water rights in China has become increasingly urgent. Water demands within shared river basins are frequently at conflict due to industrial expansion and urbanization. … Such competing claims are prevalent in nearly all of China’s major river basins.

“As water demands keep rising, water waste remains pervasive due to the current “open-access” nature of China’s water resources. According to statistics, in 2003 China’s utilization coefficient for agricultural irrigation water was only 0.4-0.5, compared to 0.7-0.8 in industrial countries. Water use per unit of gross domestic product was as high as 413 cubic meters, four times the world average, while water use per value added of industry was 218 cubic meters, 5 to 10 times the level in industrial countries. China’s industrial water-recycling rate was only 50 percent´╝îcompared to 85 percent in industrial countries.

“The traditional practices of promoting conservation through education, moral suasion, and technological innovation are no longer able to keep up with China’s rising water demand. By allocating water rights and introducing market-based tools, the new regulation may accelerate progress toward water saving, protection, and pollution control.”

More here:  http://blogs.tnr.com/tnr/blogs/environmentandenergy/archive/2008/05/18/a-step-toward-water-markets-in-china.aspx

Query:  Is this really a step in the right direction, or should it be faulted as state action in creating property rights?

Categories: China, markets, state action, water rights Tags:

Bad news and needed institutional change: Climate change, water and water rights

May 14th, 2008 No comments

Climate change is having a significant impact on water supplies in the US Southwest and elsewhere.  Scientists increasingly that these impacts can be attributed to human influences on climate – but that is to some degree besides the point.  Presently, water is very poorly used and allocated in many places, due to poorly working markets and politicized government ownership of catchment and regional and municipal distribution networks and other interference.  Consumers do not face marginal costs of water acquisition. 

Not merely to ease the impact of future climate change but also to deal with existing problems, a concerted move to clearer water rights and competition in water supply is needed.  This will necessarily be a sticky process, but one that needs addressing.

Some relevant links and summaries are below.

“climate change has dramatically altered the water flow over the past 50 years in several Western states.

“These changes, which include more winter precipitation falling as rain instead of snow, an earlier snow melt, and new river patterns, combined with a general warming of the region, could cause a “crisis in water supply” for the Western United States, said the authors.

“‘Our results are not good news for those living in the western United States,’ wrote the researchers, led by Tim P. Barnett, a research marine geophysicist at the University of California, San Diego, adding that his findings make “modifications to the water infrastructure of the western U.S. a virtual necessity.”

More on the same story here:  Decline in Snowpack Is Blamed On Warming:

“The persistent and dramatic decline in the snowpack of many mountains in the West is caused primarily by human-induced global warming and is not the result of natural variability in weather patterns, researchers reported yesterday.

“Using data collected over the past 50 years, the scientists confirmed that the mountains are getting more rain and less snow, that the snowpack is breaking up faster and that more rivers are running dry by summer.

“The study, published online yesterday by the journal Science, looked at possible causes of the changes — including natural variability in temperatures and precipitation, volcanic activity around the globe and climate change driven by the release of greenhouse gases. The researchers’ computer models showed that climate change is clearly the explanation that best fits the data.

“We’ve known for decades that the hydrology of the West is changing, but for much of that time people said it was because of Mother Nature and that she would return to the old patterns in the future,” said lead author Tim Barnett of the Scripps Institution of Oceanography at the University of California at San Diego. “But we have found very clearly that global warming has done it, that it is the mechanism that explains the change and that things will be getting worse.”

“There is a 50 percent chance Lake Mead, a key source of water for millions of people in the southwestern United States, will be dry by 2021 if climate changes as expected and future water usage is not curtailed, according to a pair of researchers at Scripps Institution of Oceanography, UC San Diego.

“Without Lake Mead and neighboring Lake Powell, the Colorado River system has no buffer to sustain the population of the Southwest through an unusually dry year, or worse, a sustained drought.  In such an event, water deliveries would become highly unstable and variable, said research marine physicist Tim Barnett and climate scientist David Pierce.

“Barnett and Pierce concluded that human demand, natural forces like evaporation, and human-induced climate change are creating a net deficit of nearly 1 million acre-feet of water per year from the Colorado River system that includes Lake Mead and Lake Powell. This amount of water can supply roughly 8 million people. Their analysis of Federal Bureau of Reclamation records of past water demand and calculations of scheduled water allocations and climate conditions indicate that the system could run dry even if mitigation measures now being proposed are implemented.

“We were stunned at the magnitude of the problem and how fast it was coming at us,” said Barnett. “Make no mistake, this water problem is not a scientific abstraction, but rather one that will impact each and every one of us that live in the Southwest.”

The underlying paper has been published by the American Geophysical UnionLake Mead could be dry by 2021

A research team, led by a group at Columbia University’s Lamont-Doherty Earth Observatory (LDEO) in Palisades, N.Y., reveal in this week’s Science that southwestern North America will likely be saddled with increasingly arid conditions during the next century. This drying effect, the researchers say, is directly related to man-made climate change and will demand new methods for managing water resources in the region. …

In fact, the researchers believe the current six-to-seven-year drought in the region is the beginning of this drying trend. “The current drought is related to the warming due to the greenhouse gases,” says Ting. “In the past, El niño [would] disappate the drought, but now it’s not able to stop the drought.”

Normally, the El Niño and La Niña weather systems are largely responsible for cyclical precipitation and drought in the Southwest. El Niño brings in moisture from the tropics (by the warming of the ocean, which condenses water into the lower atmosphere that is then shuttled into the subtropical regions), whereas La Niña essentially does the opposite, causing cold ocean temperatures in the equatorial eastern Pacific. The latter phenomenon is believed to be the culprit behind both the 1930s dust bowl and a widespread drought in the Southwest during the 1950s.  

“The drought that we’re taking about is not La Niña,” Ting explains, referring to the current dry system. “That is associated with the greenhouse gas warming.” While the consequences are similar, the actual effect on the oceans is very different, she says. Instead of a cooling in the tropics, there will be a uniform warming of the ocean, which will push the Pacific jet stream farther north. As a result, “Canada does get quite a lot more rain,” Ting notes, whereas “the whole state of California, for example, will be much drier.”

 More on the same study here: http://ipsnews.net/news.asp?idnews=37239

  • Forbes, May 14, 2008:  The Water-Industrial Complex

     In 2001, a water shortage in America’s Pacific Northwest wiped out nearly a third of the U.S. aluminum industry. Low precipitation levels in the Cascade Mountains during the preceding winter robbed local reservoirs of the water needed to turn the massive turbines inside the region’s main hydroelectric power plant, the Bonneville Power Administration. Electricity prices skyrocketed. Over the course of a few months, roughly a dozen aluminum plants closed. Nearly a decade later, only one has reopened.

  • Jonathan Adler, The Volokh Conspiracy, March 12, 2008:  Climate Change and Water

Abstract of law review article:  “Demographic changes and existing water use patterns have placed tremendous pressures upon water supplies, particularly in the West. Global climate change will exacerbate pressures on water resources. The gradual warming of the atmosphere is certain to change the distribution and availability of water supplies, with potentially severe consequences for freshwater supplies. While climate change will have a significant impact on water resources through changes in the timing and volume of precipitation, altered evaporation rates, and the like, the precise nature, magnitude, timing, and distribution of such climate-induced changes are unknown. This uncertainty complicates the task of water managers who are already faced with escalating demands. This article argues that climate change, and its projected effects on water use and supply, calls for a fundamental reexamination of water institutions. In particular, this article suggests that market-based institutions are well suited to address the additional pressures on water supplies due to climate change. Many aspects of water markets, including their flexibility, decentralized nature, and ability to create and harness economic incentives, make them particularly well suited to address the uncertain water forecast. A gradual shift toward water marketing and market pricing will improve the management of water supplies, ensure more efficient allocation of available water supplies and encourage cost-effective conservation measures.

“The basic point of the article is that insofar as climate change will disrupt existing water supplies in somewhat uncertain and unpredictable ways, we need water institutions that are flexible and adaptive, and that encourage greater efficiency in water use and allocation. In this way, climate change strengthens the already-strong case for water markets. Market-driven transfer and pricing of water resources will not eliminate the consequences of warming-induced changes in water supplies, but they will make these changes more manageable.”

Like oil, water is an essential part of doing business in almost every industry, and unexpected shortages can trigger potentially catastrophic consequences. The trouble for investors: Companies disclose very little if any information about their exposure to water-related risks.

“This is not an area that companies like to discuss quite frankly,” says Carl Levinson, an economist at J.P. Morgan and the principal author of the recent report Watching Water: A Guide to Corporate Risk in a Thirsty World. “They don’t want to call attention to a vulnerability and that applies very much to the water scarcity issue. Investors in general know very little about what is going on in companies’ supply chains.” …

“Sooner or later, the way in which the world adapts to shortages is with price,” says Levinson. “So my expectation is that water is going to become increasingly costly as an input for all kinds of purposes, and when that happens you’ll see a lot more interest in conserving water.”

Categories: adler, climate change, water rights Tags: