by Peyton Fleming
No matter the place — California’s Central Valley, southern Nevada, the Colorado River, the Southern Plains — water is harder to find across much of the West. And, with energy demand and populations growing, once-unfathomable choices about water pricing and the future of agriculture are unavoidable.
“Agriculture cannot be sustained in the Southern High Plains,” Judy Reeves, senior hydrogeologist at Texas-based Cirrus Associates said flatly, speaking at the Society of Environmental Journalists (SEJ) conference in water-stressed Lubbock, Texas where drought is still a daily topic. “We really need to start talking about the next economy here.”
“Water from the Colorado River is over-allocated. Legally, there is no water left,” added Kristen Averyt, associate director for science at the University of Colorado. “You really have to ask, ‘Will there be enough water to go around?’”
Chilling words. Reeves noted that the Ogallala Aquifer, the vast groundwater supply for the Southern High Plains, is losing a foot of water each year; during last year’s devastating drought, it lost more than two feet. Even with new first-ever limits on agriculture withdrawals from the aquifer, Reeves believes West Texas farming does not have a long-term future.
But what can water managers in West Texas and elsewhere in the arid West do to navigate these dire water challenges? Some interesting — and surprising — answers were provided at last week’s SEJ workshop, “Squeezing Blood from a Desert.”
Reality-based water pricing is a critical first step. Western water has historically been under priced, in large part because the federal government financed most of the region’s expensive water infrastructure, including pipelines and dams. But, as Sharene Leurig, water program manager at sustainability advocacy group Ceres said, “the era of federal largesse has passed.” That means Western utility water rates and revenues will need to be aligned with short- and long-term expenses. That means higher water rates.
But tools are available to curb water price inflation. Among the most appealing are strong demand management programs. By using carrots and sticks to reduce water use — especially for water-sapping lawns and landscaping — utilities can avoid having to finance expensive new water supplies.
There are many success stories to point to. Lubbock reduced household water use by 25 percent by using drought restrictions and tiered pricing. San Antonio reduced its water use by 100 million gallons a day without having to raise its water rates. These efforts had enormous benefits in helping both cities weather last year’s drought. Other cities such as Midland, Texas, which paid short shrift to demand management, saw two of its three reservoirs decline below one percent, leading to the utility’s credit rating being downgraded by Moody’s, which cited reduced water sales revenues and an uncertain supply recovery. (A lower credit rating means significantly higher borrowing costs for Midland’s utility which is building new treatment facility to turn wastewater into drinking water.)
Moody’s action against Midland raises two additional important points. The first is that credit rating firms are looking more closely at financial challenges that Western water utilities are facing, including water availability constraints, infrastructure financing challenges and the extent to which they’re using water conservation as a buffer against current and future supply shocks. This is a very positive development because these issues in the past have been largely overlooked by credit rating firms, key gatekeepers in evaluating utilities’ financial health.
The second key point is declining water demand. For many years, US utilities have based their financial assumptions on growing volume sales. Depending on the water utility, as much as 80 percent of a system’s revenue can be volume dependent. But now, demand is declining — not just in Midland, Texas, but all across the United States.
“All over the US, the story is the same – people are using less water,” Leurig said. “Between the 1970s and the late 2000s, the amount of water used by American households fell everywhere; by tens of thousands of gallons each year in Louisville, KY to nearly 100,000 gallons a year per household in Las Vegas.”
This trend is due to wide-ranging factors, including smaller household sizes, water-efficient indoor fixtures, demand management programs, even, the protracted economic slowdown that devastated housing markets, especially in the West.
But whatever the cause, the size of the decline has surprised water systems and creates complex financial challenges since water sales and revenues are their primary means for paying down the bonds that finance new pipelines and other key water infrastructure. In many parts of the West, including Utah, Nevada and Colorado, it begs the argument: are hugely expensive new pipelines proposed in these states even necessary? And, if they are built, will there be enough water sales and revenues to support the debt payments?
“As we look at new water supply projects that are the most expensive ever — among those, a $16 billion pipeline project in southern Nevada — it’s a very compelling question whether they can afford it,” Leurig said.
Peyton Fleming oversees external communications, media relations, outreach materials and the web site at Ceres. This piece was originally published at Ceres and was reprinted with permission.