26 Apr 2010

Don't take our water (or buy it?)

DW sent this:
A North State water agency has filed suit in federal court in Sacramento based on a 77-year-old state law that says water shall not be shipped from its area of origin unless and until the local water contractors’ thirsts have been quenched.
In other words, they do not want "foreigners" to buy the water and take it elsewhere.

I got this context from an insider:
...this suit was filed by the Tehama Colusa Canal Authority members who have a similar contract as Westlands and others and are subject to shortages....they are using the State's Area of Origin laws to try and keep more water local to meet existing needs.

...the courts are keeping everything in flux. Also, we have some real problems with the market working when infrastructure is lacking or it is not available due to regulatory restrictions; and the environmental review processes take too much time or are legally challenged...
Here's an update with more background.

Bottom Line: Barriers to trade have visible winners and invisible losers, but they always harm society overall (aka, highest and best use, assuming no externalities).


  1. Removing barriers to trade is always good? What about NAFTA and the Mexican families that subsequently lost their farms (which is why the Centro Hispano guy in Madison says they are all over here milking cows).

  2. What about NAFTA and the thousands of Americans who got jobs in transporting goods to and from Mexico, in manufacturing, in many other fields that have benefited from the resulting economic growth? The Mexican farmers who were hurt were benefiting from a ridiculous trade barrier that inflated the price of their inferior corn. The very poorest Mexican were the victims of this blatant special interest handout. Instead of griping, the farmers should farm better, grow something else, or quit.

  3. This is a very serious threat. I've heard experienced attorneys refer to area-of-origin as the nuclear option. It is intended to clear the board and will. Few have used area-of-origin because there was no real need until now. I am only aware of two instances, one by Westlands in 2000 that it chose to withdraw (weakest case possible) and another by Solano and Yolo County communities. The latter settled handsomely with MWD and other major water districts, who were forced to buy Sacramento Valley water rights to offset their losses.

    Watershed (aka area-of-origin) protective legislation was enacted before the CVP or SWP were officially created. The laws were passed in order to alleviate the fear of Northern California interests that local water supplies would become depleted. This CVP doc shows historical deliveries. It splits out the various types of parties receiving CVP water. http://www.usbr.gov/mp/cvo/vungvari/water_allocations_historical.pdf.

    California law from the 1930's states that project operations cannot deprive “a watershed or area wherein water originates, or an area immediately adjacent thereto which can conveniently be supplied with water therefrom, ... of the prior right to all of the water reasonably required to adequately supply the beneficial needs of the watershed, area, ....” Water Code §11128. The Legislature later added section 10505.5 to include any appropriation application, permit or license.

    FWIW: I do not think the courts are keeping this in flux. The problem is that it has not been interpreted by the courts so it is likely to make its way through the courts a few times before we get anything truly comprehensible to work with.

    BTW: I do not see this as a clear barrier to trade. It is not clear what the best use of this water can be. There are so many distortions and (mis)allocations of resources it is not clear what is or should be the best natural use of this water now and in the future. It could be that Tehama-Colusa is a better user of this water than Westlands, due to a number of factors such as production level or the Westlands salinity problems (I don't have data to support one way or the other).

  4. @DFB -- great comment (brief!). Although I see it as a barrier to trade (no export), I can also see it as a firming up of property rights *to* the area of origin that would make trade more robust -- assuming that locals have the option to sell/export (and waive area of origin) water, even of over the objections of other locals, which is no sure thing. Complicated.


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