12 Apr 2009

Strangling the Water Bank

The Drought Water Bank is failing for the same reasons as banks -- nobody knows what anything is worth, i.e.,
water experts say there are a number of hurdles that must be overcome before meaningful supplemental supplies from the state's Drought Water Bank can flow from the Sacramento Valley, through the delta, to the San Joaquin Valley, including resolving environmental constraints, coping with an actual statewide lack of water, addressing inadequate infrastructure and accounting for agricultural market conditions.
When the smoke clears, we should put regional water markets in place and THEN merge them at the Delta, with streamlined permits for Delta transit (should the Peripheral Canal ever happen :)

Bottom Line: Markets will not function when the transactions costs to trade (regulatory uncertainty, above all) are too large.

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