Reform in Water Resources Management in Developed Countries

Reform in Water Resources Management in Developed Countries
ODI Research Study
Hydro Logic?
Reform in Water Resources
Management in Developed Countries
with Major Agricultural Water Use
Lessons for Developing Nations
Hugh Turrall
Overseas Development Institute
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ISBN 0 85003 331 4
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Printed by Chameleon Press Ltd, London
Australian Bureau for Applied Research in Economics
Administrative Coordination Council (UN)
Australian Conservation Foundation
Agricultural Conservation Programme (Aus)
Active Management Area
Central Arizona Project (USA)
Catchment Coordinating Committees
Catchment Management Group
Council of Australasian Governments
Colorado River Basin Project
Conservation Reserve Programme
Colorado River Storage Project
Commonwealth Scientific and Industrial Research
Community Service Obligation
Central Valley Project (California)
Central Valley Improvement Act
Department of Water Resources (California/New South
European Commission
electrical conductivity unit
Environment Protection Act (EPA)
Endangered Species Act (US)
European Union
Geographic Information Systems
Gouldburn Murray Irrigation District
Hunter District Water Board
IAP-WASAD International Action Programme on Water and
Sustainable Agricultural Development
Integrated Catchment Management
International Conference on Water and Environment
(Dublin 1992)
International Food Policy Research Institute
Institute of Hydraulic Engineering (Delft)
Imperial Irrigation District
International Irrigation Management Institute
Inter-Secretariat Group on Water Resources (UN)
Kern County Water Authority
Los Angeles
Long Run Marginal Cost
Murray–Darling Basin
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Murray–Darling Basin Commission
Murrumbidgee Irrigation Area
Mega litre = 1 million litres = 1,000m3
million mega litres
Metropolitan Water District (California)
National Farmers’ Federation
National Hydrologic Plan (Spain)
New South Wales
National Water Resource Programme
Public Works Department
River Murray Commission
Rural Water Corporation/Commission (Victoria)
Salinity Action Group
San Joaquin Valley
State Rivers and Water Supply Commission (Victoria)
State Water Project
Tennessee Valley Authority
United Nations Conference on Environment and
Development (Rio 1992)
United Nations Development Programme
United States Bureau of Reclamation
From Dominion to Concern – The Development,
Mobilisation and Control of Water Resources
Improved engineering knowledge, materials and techniques have rapidly
accelerated water development and control projects worldwide in the
20th century. A ’frontier mentality’ and a belief in man’s innate
superiority over nature fostered settlement and development on a large
scale in arid and semi-arid regions as diverse as the United States,
Australia, and South and Central Asia. The engineer stood, for a time, as
the front-line soldier in the battle to control floods and mitigate drought,
buoyed by his faith in the certainties of science and a philosophy of
control over the natural environment.
Society’s increasing demands for electric power created the impetus to
regulate great rivers, construct large dam-storages and harness natural
flows for human benefit. Extensive irrigation development in tandem
with the ’green revolution’ has resulted in more than 80% of many
developing countries’ water resources being allocated to agriculture,
peaking as concerns mounted about global food security and regional
food deficits in the 1960s and 70s.
Today much of the world’s water is harnessed for multiple productive
uses and the environmental values and characteristics of water systems
are increasingly understood and appreciated. The world’s population has
continued to grow, urbanise and industrialise to the point that both
developing and developed countries face intersectoral competition for
water. In the industrialised countries of the north, water quality and
restoration of degraded natural systems has become an increasingly
important priority. In the south, it is anticipated that competing demands
can be satisfied by making transfers from the technically and
economically ’inefficient’ irrigation sector which has tended, until recently,
to absorb considerable proportions of state finances. At the same time,
water developers must understand the environmental consequences of
over-developing hydrologic systems and where possible, harness the
resource in a sustainable and responsible way, learning from the hardearned experience worldwide. Table 1 summarises the institutional,
political and sustainability characteristics at different stages of water
resource development (after Allan, 1994). The institutional arrangements
for traditional and public irrigation systems have recently been
expounded in some detail (inter alia, Ostrom, 1992; Ostrom and Tang,
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Table 1 Historical contexts for water resources development
Water resource
allocation and
Patterns of
In surplus
Short term
Short term
In balance
(for existing
policies and
of farmers and
addressing the
principle of food
Tendency to
principles of
Tendency to
principles of
In deficit
Seasonal and
shortages (for
leadership unable
to adopt sound
Unable to
policies [i.e.
Unable to
policies [i.e.
In balance
principles of
efficiency and
leadership freed of
pressure from
water resource
ecological use
Source: Allan, 1993
1992), but a similar analysis of water resources management at large has
yet to be attempted. A more pragmatic prescription for sound institutions
of water management stresses that it is not a technical, but a political
subject (Fredericksen, 1992) that requires continuing evaluation and
dynamism. The expert role is to provide technical information to political
bodies in all sectors, both public and private, while ensuring consistency
in both legislation and organisational structure.
A number of developed countries have undertaken substantial water
development for irrigation through the 19th and 20th centuries, and their
experience highlights the importance of developing appropriate
institutional arrangements to manage water wisely as its ’scarcity value’
increases. It is to this accumulated experience that this study turns.
World Trends Affecting the Allocation of Water Resources
Global population continues to grow rapidly, and UNDP estimates a
world population of 8 billion by 2025, or about 60% more than today.
This alone requires considerable increases in food production in global
and regional terms. Although the green revolution has almost removed
food deficits in much of Asia on the back of irrigation and high-yield
production packages, productivity gains have been declining. Commodity
prices of staple foods have steadily declined over the last 15 to 20 years,
changing the pattern of agricultural growth and development (Rosegrant
et al., 1995). The International Irrigation Management Institute and the
International Food Policy Research Institute (IIMI/IFPRI) have estimated
that 80% of the increase in future food demand will have to be met from
irrigated cropping, which will require considerable finesse in
management, especially as a second ’green revolution’ technical-fix is not
around the corner. And the ’green revolution’ has by-passed most of
Africa, where water resources are more precarious and offer little
potential to meet food security in the long term (Field, 1995), especially
considering the past performance of irrigation there.
By contrast, there are conflicting signals in world markets for
agricultural produce, where the very success of US and EC statesponsored and subsidised agricultural growth has contributed to
depressed prices and restrictive trade practices. One of the major
uncertainties affecting future irrigation water use will undoubtedly be
how the world market changes in response to both the management of
northern surplus production and the extent to which major
industrialising nations (such as China) substitute imports for domestic
food self-sufficiency. This in turn will have knock-on effects on the
reallocation of water resources and the impact of conservation measures
in irrigation. It is one thing to identify such crucial influences, but it is
much harder to predict, even coarsely, what will in fact happen. It is
therefore difficult to make contingency plans – an example of why water
resources management is a continuing and dynamic process which needs
a sound institutional framework.
The crucial demographic factor impacting on water resources
management is urbanisation. At current rates of urban growth, more than
60% of the world population will reside in cities in 2025 (Seregeldin,
1994), although it is by no means certain that current trends will
continue. This concentrated demand and the associated residential,
industrial and amenity development will put stress on local and
sometimes regional water systems. Water quality, safe potable supplies
and wastewater management become increasingly interdependent, and
will require enormous capital investment as well as management
capacity, even if, in absolute terms, the volume of water required could
be satisfied by less than a 10% reduction in irrigation usage. There are
strong signals that irrigation investment will be dwarfed by these
emerging requirements, which will be so large (US$600 billion)
(Seregeldin, 1994), that national governments and lending agencies are
exploring all avenues to encourage private investment on a hitherto
undreamed of scale. These projected costs are in part driven by the
increasingly stringent standards for water quality in the industrialised
countries, standards which have reshaped the water industry in Europe
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and the USA.
The economics of water is a relatively new and contentious subject,
born out of its recently acquired scarcity and the very real inability of
governments to continue to subsidise not only the operation and
maintenance of water supplies, but also their construction. Proponents of
economic solutions to water provision find themselves at odds with an
almost universal human belief that water is a ’gift from God’, or a
natural right as a fundamental prerequisite of life. They also have to
contend with multiple problems associated with the recalcitrant economic
characteristics of water itself (see Turral, 1995). Nevertheless, much of the
focus of recent institutional development has been on market-like
initiatives to manage demand and to encourage private sector, profitmotivated activity. The market philosophy has overtaken most of the
planned or ’command’ economies of the world, and the role of the state
in the management of water is being redefined continually.
The new roles for the state appear to be the creation of an enabling
environment for private enterprise and public participation in water
management; environmental care; and data collection, provision and
management. It is possible, however, for the state to retreat from the
active regulatory role that is increasingly commonplace.
In the last 10 years, environmental allocations for in-stream flows,
habitat and recreation have intruded into the water developer’s realm,
complicating economic valuation and the breadth and depth of public
involvement. Crudely put, there are now more users, each requiring
more of a limited resource. This has created a complexity to which few
traditional water managers, engineers, have been sensitised, or trained
to understand. The process of institutional development in developed
country water management has occurred over the last 30 to 50 years as
various elements of this complexity have revealed themselves and in turn
brought the realisation that further change and complexity lies ahead
which cannot be managed exclusively by well-informed individuals and
well-trained technocratic elites.
The International Agenda for Water Policy Reform
An ideal institutional framework for rational water resources management
has been proposed (Bottrall, 1992). It shows why there are gaps between
the ideal and reality. The ideal framework includes the following
• A decentralised and accountable structure that is coherent and
consistent at each layer of administration, from national through
provincial/river basin levels to local.
• Self-management of independent bodies and self-financing at user and
higher levels of activity, according to users’ ability to pay.
• Market mechanisms are an integral part of water allocation,
determining the value of water between sectors, the value to the
management agency and to the user.
• Government has an enabling rather than a controlling role, with key
responsibilities for capital investment, supporting legislation, data
collection and processing, and support for basic technical research and
• A comprehensive and consistent legal code which clearly defines the
water rights and responsibilities of individuals, groups, agencies and
government bodies. A set of procedures for de jure and extra-legal
arbitration of disputes and established enforceable penalties for misuse
and degradation of water resources.
A number of contemporary concepts in water resources management,
summarised in Table 2, have found their way into international policy
prescriptions for developing countries, via a series of international
meetings in the early 1990s and from the resulting dialogue and activities
of the United Nations (UN) family of technical agencies.
These international actions go back to the ’Water and Sanitation
Decade’ (1980–90), following the Mar del Plata Conference and resulting
action plan of 1977 and the emergence of Inter-Secretariat Group on
Water Resources (ISGWR, 1990) under the Administrative Coordination
Council (ACC) of the UN. The New Delhi Statement (1990) concluded
that the long-term future of sustainable development lies in becoming
more demand- than supply-oriented and in developing local capacity in
all natural resources sub-sectors. Capacity building in the water sector
became the theme of the United Nations Development
Programme–Institute of Hydraulic Engineering (UNDP–IHE) conference
in Delft in 1991, and was quickly followed by the International
Conference on Water and the Environment (ICWE) in Dublin (1991).
Three basic elements of capacity building were identified:
• the creation of an enabling environment with appropriate policy and
legal frameworks;
• institutional development, including community participation; and
• human resources development and the strengthening of managerial
The ICWE called for innovative approaches to the assessment,
development and management of freshwater resources, and provided
policy guidance for the United Nations Conference on Environment and
Development (UNCED) in Rio de Janeiro in June 1992. UNCED
highlighted the need for water sector reforms throughout the world. The
Dublin statement reaffirmed that ’it is vital to recognise first the basic
right of all human beings to have access to clean water and sanitation at
an affordable price’, and went on to assert the following principles:
• Water must be managed in a holistic way, taking into account
interaction among users and environmental impacts.
• Water should be valued as an economic good and managed as a
resource necessary to meet basic human rights.
• Institutional arrangements must be reformed so that stakeholders are
fully involved with all aspects of policy formulation and
implementation. Management must be devolved to the lowest
appropriate level and enhance the roles for NGOs, the private sector
and community groups.
• Women must play a central part in the provision, management and
care of the resource.
In 1993, the World Bank issued a comprehensive policy paper defining
its new objectives for the water sector. The Food and Agriculture
Organisation (FAO) recently established an International Action
Programme on Water and Sustainable Agricultural Development
(IAP–WASAD). Likewise, the UN specialised agencies, international nongovernmental organisations (NGOs) and bilateral assistance agencies are
all coordinating or participating in special programmes related to water
resources. The ministerial conference on drinking water and
environmental sanitation (at Nordwijk, the Netherlands, March 1994)
called for strategies for drinking water and sanitation to be developed in
the context of broader strategies for sustainable water resources
management and environmental protection.
These meetings have been at pains to stress that there are no
prescriptive solutions for water management because of its complexity,
arising from its many facets and interactions with other human activities
and natural processes. It is evident, however, that some inherent
contradictions lie even in the development of sound principles of
sustainable water management when it comes to putting them into
practice: what sort and degree of treatment of water as an economic good
is appropriate and practical? What are the limits to cost-effective but
worthwhile public participation? As the principles of good water
management have largely been drawn from accumulated developed
country experience in coming to terms with changing needs, it appears
logical to review how they have been applied in practice in situations
that more resemble those of developing countries, particularly where
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irrigation is the dominant use.
A Brief Summary of Reform in Developed Countries
Worldwide, there is a dichotomy in water use, and in the resulting
pressures for policy reform. The institutional arrangements reflect the
dominance of either agricultural water use (typically in developing
countries) or industrial use, as in northern Europe and temperate North
America. The principle driving force for reform in industrialised
countries has been the environmental lobby, spurred by chemical and
thermal pollution of natural stream habitat, by increasingly tough
environmental standards for potable water quality and by restrictions on
the discharge of sewage effluent (notably the famous European Union
(EU) ’Bathing Waters’ Directive). The push to safeguard environmental
quality has required massive injections of capital into ageing water
infrastructure that was developed, in many cases, in the last century. This
in turn has forced governments to look at alternative means of financing
such needs and has inevitably led to interest in private sector
involvement as managers, developers and even owners of water services
(in the UK).
Although the water quality issue has been the major force driving
reforms in temperate country water resources management, there are a
number of developed countries where irrigation is a major consumer of
water and urban, industrial and environmental water demands have
combined to create a similar competitive environment. This problem
emerged in the western USA at the end of the 1970s and continues to
attract much attention at state and federal level. Continuing urban
growth, especially in Southern California, an arid environment with a
near fully developed water resource, could be analysed for potential
application to developing countries. In the Murray–Darling Basin of
Australia, and the Colorado Basin in the USA, in-stream salinity and land
salinisation are consequences of irrigation development and have brought
a new dimension to inter-state cooperation in river basin management
and environmental allocation of water. Australia has been particularly
innovative in promoting community participation in land and water
management through its ’LandCare’ programme. Both countries have
contrasting water rights systems and a mix of government and private
initiatives in developing water resources, with more corporatist history
in the USA. Both countries have, in recent history, turned to economic
measures and public sector reforms including privatisation to conserve
and re-allocate water and manage demand, in preference to further and
increasingly expensive infrastructure development. These countries have
also experimented with transferable property rights to water.
Spain has a long history of irrigation development and management,
with a strong tradition of user-finance up to the end of the 19th Century,
since when the state has become a major developer of water
infrastructure. Spain instituted river basin management nationwide in
1928 and has worked towards the evolution of a comprehensive and
integrated law to underpin a continually evolving water policy. Entry to
the Common Market spurred considerable public and private investment
in irrigation, and tourist development has placed localised pressure on
water resources in the dry south and south-east. The environmental
debate, especially in relation to natural wetlands, has been slow to
develop in Spain compared with the USA and Australia. Agricultural
growth remains an important national objective and fuels a large slice of
the economy, compared to its more industrialised European neighbours.
Spain has therefore maintained a much greater interest in supply
augmentation than either the USA or Australia, although it has also
pursued demand management as a complementary policy. The current
National Hydrologic Plan (NHP, 1993) envisages an ambitious
programme of inter-basin (and inter-provincial) water transfers from the
well-endowed north and north-east to the south-east and south-west. The
enduring drought that has gripped Spain since the beginning of the
decade, plus the need to comply with EU directives on water quality,
have brought the NHP very much into the public eye, and despite many
years of institutional development and fine-tuning, it is finding
increasingly vocal and potent opposition from environmental activists
and northern provincial politicians.
Although public perceptions of the nature of water as a resource are
changing in developed countries, it is not clear that this is so in
developing ones. The international profile of water is still largely limited
to reaction to the impacts of flood and drought disasters, and many
developing countries have only recently adopted water policies of any
description, let alone ones aimed at integrated and rational management.
Rationale for Present Study
In many developing countries, competition for limited water resources
is increasing as urbanisation and industrial development accelerate, and
as resources are developed to the limit for irrigation. Inter-sectoral
competition to develop and appropriate water supplies is further limited
by increasing environmental awareness and the need to reserve good
quality in-stream flows to maintain habitats and hydrological balance.
The major obstacles to sustainable water development were identified
by the World Bank (1988) and include:
• fragmented sector policies;
• weak institutional arrangements and inadequate intersectoral
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• lack of adequately trained and motivated staff;
• use of inappropriate technology (especially for developing country
contexts) and poor knowledge of alternatives;
• inadequate operation and maintenance;
• poor cost recovery and resource mobilisation; and
• little community involvement.
Further characteristics of policymaking and planning deficiencies in
water resources development were identified by research based on four
semi-arid case-studies (ISPAN, 1993) as an absence of:
• clear and well-understood legal principles;
• adequate data;
• public accountability;
• fair processes of appeal and adjudication; and
• adequate promotional and enforcement capabilities.
Given the limited experience with water reforms in developing countries
and the preceding impediments to sustainable use, it is reasonable to
examine the process and experience of institutional reform in developed
country situations that have the closest similarities in resource allocation
and security. Although institutional arrangements and technology are
closely interlinked, it appears that there is a more significant stumbling
block in institutional development than technology availability, if only
because comparable problems emerged 15 to 20 years earlier and have
been the subject of creative and dynamic response. This history has been
documented (but only partially analysed) at different stages, and contains
the only source of substantive information on economic approaches to
reform and on serious attempts at full cost recovery. It is hoped that
sound analysis will enable some short cuts to be taken in implementing
policy in developing countries, even if it only warns of avoidable pitfalls.
Problems in Water Resources Management in Developing Countries
There are a number of factors underlying the implicit assumption that
there is an inadequate framework of institutions in developing countries
for the rational management and allocation of scarce water resources. The
three main ones are:
• The existing institutional landscape is dominated by public works or
irrigation departments which have evolved as construction and water
development organisations, primarily concerned with large-scale projects
in surface irrigation, flood control and hydro-power development.
• Other aspects of water resource development (urban water supply and
sewage and rural water supply) have been undertaken by parallel
organisations, with the result that management of water tends to be
both fragmented and centralised but with little coordination and longterm integration.
• Newly emerging Water Resources Departments tend, in the main, to
be renamed Public Works Departments (PWDs) and Irrigation
Departments, precisely the organisations that have fostered past
distortions in allocation and use of water. Old attitudes are hard to
change and there may be strong resistance to reform, particularly in
terms of accepting the roles of service provision and management (in
place of construction) and a wider catchment and river basin
perspective in place of a project culture. The situation is compounded
by a lack of donor coherence on these issues.
Consequences of the Prevailing Institutional Bias in Developing
Large capital-intensive irrigation projects have been favoured at the
expense of other uses. As the international profile of large-scale irrigation
has become somewhat tarnished, the focus of investment has shifted to
medium- and small-scale irrigation, rehabilitation and groundwater
development. Now that irrigation investment appears to be declining and
urbanisation heralds massive investment requirements in water supply
and sanitation, a new sectoral agenda may again miss the imperatives of
integrated water management. Sectoral fragmentation has resulted in
monopoly control of data collection and analysis, with very limited
dissemination and provision to other agencies or a wider public.
Inappropriate design and poor construction, coupled with ineffective
management of large-scale water projects has generally exacerbated a
poor level of accountability to water users and the general public. The
provision of water at minimal cost (effectively as a free good) has
resulted in wasteful use and has restricted revenue to the point that
operation and maintenance budgets are usually in deficit. Pricing has not
been an effective tool in allocating water between competing uses
because of the artificially low cost or poor service fee collection.
The legal framework behind water resources management has been
poorly articulated and is inconsistent, with limited specification of
individual or group user’s rights and responsibilities. Transfers of water
within agriculture and between sectors have been conducted by
unilateral agency fiat. Groundwater has effectively been exploited as an
open-access resource, and the longer that this situation has prevailed, the
more difficult any form of regulation has become. Communally organised
water use in small-scale irrigation, domestic water supply and sanitation
has been recognised increasingly, but its place in the wider context of
allocated water rights, and the processes of management and planning,
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is frequently ignored.
The most promising points of intervention in reform lie where the
prevailing power brokers are weakest (Bottrall, 1992) and the developed
country analysis should focus on these points where they are most
relevant to the developing countries situation, in:
• peri-urban and urban allocation and water use in rapidly expanding
• attempts to develop new institutions, such as River Basin Authorities,
water-user groups and federations of water-users; andrelations
between emerging water-user groups and state agencies – innovation,
inertia and resistance in the technocracy.
Focus and Objectives
The study analyses the history of water resources development and
management in the western USA, Australia and Spain. It uses and refines
the framework for institutional analysis in water resources management
that was developed in mid-1994 (Turral).
The study of western US experience draws mainly on the inter-state
compact dividing the waters of the River Colorado and water
management in Southern California. It draws on the development of
federal water law and investment in infrastructure, and examines the
responses to severe and prolonged drought from 1987 to 1992, which
resulted in innovative solutions to manage demand and reconcile
agricultural and environmental needs.
The Australian review is centred on the development of inter-state
water agreements in the Murray–Darling Basin, which is the main focal
point of water use and management in the country. The approach to
community participation embodied in Land Care is also outlined and a
more detailed analysis is made of the heavily industrialised Hunter
Valley on the east coast of New South Wales.
Water development in Spain since Roman times is reviewed,
culminating in nearly a century of legal consolidation and reform leading
up to the present NHP. The plan is discussed in some detail and material
is being collected on the emerging opposition to it. The burgeoning
environmental debate is introduced in the water-stressed Guadalqivir
Basin, in south-west Spain, where ecological problems are more
developed and the supply augmentation proposed in the NHP is
A number of key issues provide the context for comparison and
application to developing country situations. They are:
• The status of existing organisational structures and the processes of
planning and management at national, regional and local levels.
• Patterns of public investment (a) between water sectors and (b) within
agriculture (large-, medium- and small-scale irrigation).
• The use of market-based instruments for efficient use and allocation of
water. Incentives in reform – subsidies, penalties, tariffs and taxes.
• The nature of water law and the relative powers and responsibilities
of the state compared to regional and local levels of organisation.
• Sequences in the reform process: articulation of policy, provision of
supporting legal framework, implementation of legislation and
effective regulation, internal reform of government agencies and
enablement of market and decentralising initiatives.
• Use of privatisation, corporatisation and economic instruments in
service provision. The role of community-based organisations and
state-led strategies for broader community participation in watershed
management and water-use planning.
• The role, constitution, function and effectiveness of planning bodies in
the coordination of sectoral agencies and the determination of cohesive
policy at successive levels of administration. Assessment of the way of
working and effectiveness of River Basin Authorities.
Subsidiary issues might include:
• The level of intensity of competition for water at sectoral and regional
levels. Assessment of the level of vulnerability to water scarcity at a
national and regional level.
• Assessment of the performance of water supply systems for
agriculture, urban and industrial use.
• Determination of factors of system performance in the areas of design,
construction and management and the relationships between
technology and management.
• Management of water quality and strategies for water conservation
and re-use.
• The collection, analysis and provision of hydrological, water-use and
socio-economic data relevant to water resources planning. The use of
computer-based management models for technical management and
economic evaluation of development and operational strategy: the
quantity, relevance and quality of data provision.
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• An analysis of winners and losers in past and present water resources
Formal Hypotheses and Objectives
Despite contextual differences, the pressures to reform water resources
management in the developed country case-studies are similar to those
now emerging in many developing countries, and there is little room for
radically new responses. This experience will yield useful insights for
good practice in ldcs and provide a platform for more comprehensive
and informed analysis in due course. Although it may be harder to
conceive of such direct inference to Africa, there are useful lessons for
water resources development within a strategy of drought coping and
The study will:
• Examine the root causes of inadequate institutional performance and
capability in the allocation, management and planning of water
resources prior to reform. This requires a detailed understanding of
the present impediments to rational use and the historical reasons for
this situation.
• Ascertain the long-term goals for reform.
• Examine the strategies proposed to achieve the transformation, and the
success of those actually used, on a step-by-step basis.
• Assess the results in terms of allocative efficiency, equity and the
enabling role of government.
Although it may be difficult to address these formal objectives with
absolute clarity, the study should develop and synthesise understanding
in four key areas:
• In analysing the patterns of change, what are the combinations and
sequences of factors that facilitate change?
• What are the socio-economic, political and ecological reasons for
significant differences in patterns of change between the case-studies?
• What are the similarities and differences that developing countries
experienced at various stages in the past, to the present? Where does
the transition occur from an interventionist to an enabling government
involvement in water resources management?
• What hypotheses can be made about the sequential action needed to
bring about lasting reform and in-built adaptability to developing
countries water resources management? How do complex management
structures evolve in response to changing circumstances, and how can
flexibility be built into an institutional framework, understanding that
the situation being managed is essentially dynamic?
The Structure of the Paper – How to Use It
The problem of allocating limited water resources, and some
international background, sets the tone for the study in the Introduction
(Chapter 1). The following three chapters (2 to 4) provide a brief
summary of water resources development and management in the
western USA, Australia and Spain respectively. Case studies are
presented to illuminate the detail of water resources allocation and
management problems and analyse the responses made at different times
in recent history.
The issues and findings that are common to all case studies, as well as
their divergent experiences, are discussed in Chapter 5, and their
implications for developing countries are drawn together in Chapter 6.
The Western United States – From Wild West to
Palm Beach Sunset, via the New Deal, Pork
Barrel Politics and an Unholy Alliance of
Reaganomics and the Earth Mothers
Federal Water Policy and National Development
In this chapter we look in turn at federal, regional (Colorado Basin) and
state (California) water management, along a scale of increasing
competition. Each stage incorporates the history of development,
legislation and policy reform, and notes critical impact points such as
drought, which are instrumental in stimulating reform. Technological
solutions have alternated with institutional reform and attempts at
demand management but the increasingly influential environmental
concerns of the late 20th century now press for more fundamental
reallocation away from well-organised and powerful agricultural
Water and Federal Policy
From 1902 until the end of the 1960s, water development, principally for
agriculture and western settlement, was heavily promoted by the federal
government through positive incentive programmes, increasingly
involving semi-autonomous federal agencies. The Environmental
Protection Act (EPA) of 1969 marks a symbolic watershed in public
attitudes to water development and subsidy for irrigators. Since then the
United States Bureau of Reclamation (USBR) has transformed itself
slowly into an agency concerned primarily with data collection, water
regulation and electricity generation, although it retains considerable
managerial responsibility for major infrastructure.
In 1980, total national withdrawals were estimated at 619 cubic
kilometres, representing an increase of 1.7 and 1.22 times the amounts
withdrawn in 1960 and 1970 respectively. Fresh surface water accounted
for 64.4% of that total, 19.5% was from groundwater and 15.8% from
saline surface water. Overall, industrial demand accounted for 57.5% and
irrigation 33.7% of use. Consumptive uses and conveyance losses
amounted to only 171.3 cubic kilometres, 27.7% of the total, of which 85%
was attributable to irrigation.
The Western United States
Capital subsidy and state-led investment in irrigation and drainage
infrastructure has gone hand-in-hand with incentives to achieve food
self-sufficiency and export-led agricultural growth. Positive incentives
continue to be used in environmental legislation and are favoured over
federal regulation. Recent efforts have tried to harmonize agricultural
production incentives and environmental management, especially where
pesticide and fertiliser use impacts on water quality. Estimates of the
extent of public subsidy vary, but Devine (1995) quotes researchers at the
University of Colorado who have determined that USBR projects for
irrigation and hydropower alone have cost the American taxpayer close
to 20 billion 1986 constant dollars over the period 1902 to 1986, and that
the total federal subsidy to irrigation was US$2.2 billion in 1989. Flood
control expenditures have cost the US Treasury US$35–40 billion from
1960 to 1987 and annual subsidies to river traffic, mainly barges, account
for billions of dollars each year (Devine, 1995).
The states have relied heavily on federal support for major capital
projects, but have established a tradition of local financing of local works,
particularly in metropolitan water supply. Although water allocation is
a state responsibility, the federal government has wielded considerable
influence both through leverage attached to subsidies and through
provisions in the constitution that can be interpreted as relating to water
rights and interstate trade. State water legislation tends to have been
more regulatory, particularly in environment and water quality, but the
recent Proposition 65 environmental code in California heralds a possible
new phase, where government involvement in regulation is reduced and
effectively ’privatised’ by shifting the burden of proof of no harm to
polluters and encouraging consumers to take legal action in cases of
Nationally, in view of the status of irrigation as the environmentalists’
whipping boy, a surprising importance was accorded to flood protection,
in terms of the numbers (although probably not stored volume) of singlepurpose dams constructed, especially post-1970. More recently flood
control has given way to non-structural measures such as flood damage
protection insurance, following the establishment of a Federal Insurance
Administration, with responsibility for flood hazard estimation and
public compensation (Magura and Wood, 1980). Recently, federal flood
insurance has also come in for criticism, as its subsidies have been
charged with both stifling private sector insurance and encouraging
inappropriate levels of settlement in the flood plains of the nation. It is
also charged that nearly half a billion dollars have been paid in
compensation to repeat flood victims, accounting for only 2% of all
policy holders, stimulating interest in resettlement options in place of
reconstruction payments.
Frederick (1991) has classified different periods of US water resources
development up to 1990. This could be the beginning of a new period of
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reversal of previous water policy as food production takes on subsidiary
importance to environmental allocation and fiscal responsibility.
Table 3 Phases in North American water development
19th century
the conservation period
private versus public water
growing federal role in water
reshaping the nation’s waters for
economic development, in tandem
with the New Deal
encountering economic and
environmental limits
meeting future water needs
(after Frederick, 1991)
Historical Landmarks
An outline of some of the legislation relating to water resources
development illustrates how the policy environment has changed during
the 20th century:
The Reclamation Act boosted construction, with USBR becoming
responsible for all major hydroelectricity projects. Pinnacle of its
expertise is the Hoover Dam (224m) on the Colorado river,
commissioned in 1936.
Flood control programme begins under direction of US Army
Corps of Engineers.
Tennessee Valley Authority (TVA) set up by Roosevelt to
revitalise the rural economy of Tennessee Valley, via
construction of an integrated system of 32 multi-purpose dams.
Soil Conservation Act, authorised the Conservation Technical
Assistance Programme, operated in conjunction with nearly
The Western United States
3,000 local soil conservation districts. Technical assistance for
drainage and levelling of wetlands up to 1977.
Flood Control Act resulted in US Army Corps of Engineers
taking a more active role in dam construction, following its
earlier mandate (1928) to undertake basin studies. It also made
urban areas that were liable to flooding eligible for federal
Agricultural Conservation Programme (ACP), authorised as an
amendment to the Soil Conservation and Domestic Allotment
Act of 1935, provided direct subsidies for the adoption of soil
conservation technologies. The Small Watershed Programme of
1954 emerged from this.
Watershed Protection and Flood Prevention Act broadened
provisions of the Flood Control Act to agricultural land.
Flood Control Act recognises need for a broader approach to
flood management and requires Army Corps of Engineers to
make information more widely available to other federal
agencies, eventually resulting in the Flood Insurance Act of 1968
and the Flood Disaster Protection Act of 1973, which stressed
non-structural responses to flood problems. The best dam sites
had been developed by end of 1960s, which partly accounted for
the decline in construction activity.
Rising environmental opposition, such as to the Glen Canyon dam in
the 1960s, symbolised the sea change in public opinion that used to
consider large dams as monuments to man’s conquest of nature and
to modernity and economic prosperity.
Wild and Scenic Rivers Act introduced to preserve habitats and
amenities from development.
Congress passes legislation for the National Flood Insurance
programme (updated in 1973).
National Environmental Policy Act requires federal agencies to
give full consideration to environmental impacts of all projects
and shifts the burden of proof to the developer, who must
demonstrate that the environmental impacts of any project are
benign, and must take steps to mitigate adverse effects
accordingly. It requires all federal agencies to prepare
environmental impact statements and provide assessment of
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reasonable alternative solutions, including the ’do-nothing’
option. Originally the legislation was not binding on federal
agencies, although they were supposed to ’pay attention to their
findings in the decision making process’. More stringent and
binding state environmental legislation has subsequently had a
greater impact.
Clean Water Act (Federal Water Pollution Control Act
Amendments) empowers states to impose minimum stream-flow
requirements in order to protect water quality.
Endangered Species Act (ESA) becomes the single most
influential piece of legislation affecting water control, invoked by
US Fish and Wildlife Service to halt the Animas–La Plata project
in the Colorado Basin, because it might have harmed the
endangered Colorado squawfish (Frederick, 1994) (Resources 19).
Safe Drinking Water Act makes water quality rather than water
supply the driving force behind the nation’s water-related
Clean Water Act amendment introduces incentives for landbased treatment of wastewater, adopted by 1,280 communities
by 1982, 80% for irrigation (Postel, 1985).
Second national water assessment completed
US Water Resources Council creates 18 water resources regions:
nine covering 31 states in the east and nine covering 18 states in
the west.
Reclamation Reform Act signals the removal of subsidies for
irrigation development and initiates the slow process of
transforming the USBR into a regulatory, monitoring and
planning agency. Vocal opposition from west-coast irrigation
Food Security Act authorises the Conservation Reserve
Programme (CRP), a multi-objective programme designed to
meet goals for agriculture supply control, water quality and
wildlife habitat in addition to farm income and soil erosion
The Western United States
Clean Water Act amended to manage non-point source pollution
and includes a 50% grant to implement state-level groundwater
protection activities.
Modifications to Central Arizona Project (CAP) to encourage tree
planting in catchments and on buffer strips running alongside
streams in order to improve water quality.
Federal and State Jurisdiction
Although water is a state resource, federal influence has been substantial
through massive injections of federal funds, particularly in western water
development and long-distance transfers. There are three important
aspects of the institutional, legal and political situation which bear on
water transfers and inter- and intra-state water management:
• The constitution of the United States and the division of powers it
makes between the federal government and the states
• The federal system of political representation
• Environment protection legislation
Although the constitution says nothing explicitly about water, the
Welfare and Commerce clauses require congressional approval for
interstate agreements and the subclause that states that Congress has a
duty to provide for the general welfare of the United States has been
interpreted by the courts as giving it authority to authorize large-scale
public works projects.
Federal Congress also has the right to regulate interstate commerce
and legal opinion has held (controversially) that water, like other natural
resources, is a commodity. In 1983, the US Supreme Court reaffirmed this
view and found that the federal government had the right to allocate
water among the states (Sporhase and Moss vs. Nebraska). National
government has largely left the regulation of water to the states, who
have developed their own codes of allocation and use, conservation and
beneficial use. Wyoming and New Mexico have both passed laws
prohibiting interstate transfer of water to protect their resources from
depletion and degradation, although such declarations can be declared
unconstitutional if they clearly discriminate against interstate commerce.
The federal government could authorise interstate transfers as water
resources become more limited, by citing overriding national interest.
Intra-state diversions (such as those in California) do not involve the
federal authorities unless they cross federal land, make use of reserved
Hydro Logic?
water rights or require substantial federal funding. Historically,
individual states and regional alliances have been very successful at
obtaining federal investment in water projects because of alliances and
trade-offs between congressional representatives of those states (two per
state) and a quid pro quo in approval of public works projects. National
level subsidy has been facilitated by two major federal agencies, the
USBR and the US Army Corps of Engineers, and large-scale transfer
projects may take place even if they are demonstrated to be economically
unsound, providing they have sufficient political momentum (such as the
Central Arizona Project).
However, Just (1991) notes that multiple legal jurisdictions over
agriculture and water resources policies, particularly in the west, resulted
in rising uncertainty for western farmers, and that the US Supreme Court
(federal) has become increasingly influential in the resolution of the
administrative overlap governing agricultural to urban water transfer.
One of the more curious jurisdictions is that the federal Forest Service
has responsibility for national water resources assessment (Guldin, 1989).
Environmental interests have extended federal influence over the
states: federal institutions arbitrate between dissenting parties within
states to enforce sound water management using the Endangered Species
Act (ESA) and the Environmental Protection Act (EPA). Interestingly,
little comment has been made on the cost (and hence construction
interests) of retro-fitting dams for improved ecosystem management,
such as equipment to enable the discharge water of different
temperatures from different strata of storage to match required river
temperatures for aquatic insect breeding.
Environmental Legislation and Beyond
The environmental battle is not over when new laws are passed. The
dam construction era was really over by 1980, but the effects of
America’s 5,500 large dams are increasingly apparent. Many
environmental activist groups (such as the Natural Heritage Foundation,
American Rivers, or the Nature Conservancy) and academic researchers
are providing increasingly detailed evidence of ecological despoilation
and indicators of degradation. The long-ignored federal Fish and
WildLife Service has emerged as a new power in the water resources
management arena and, it is argued, the Environmental Protection
Agency wields far more influence than the construction agencies ever did
in their heyday. The USBR has been challenged in court to implement
Environmental Impact Assessments before renewing federal irrigation
contracts, which is likely to encourage further land retirement (Postel,
The Western United States
The main reasons that extensive river regulation by dams results in
loss of habitat and ecological diversity are that:
• the natural flow regime is altered, both at low and high flows, and the
timing of flows is different from the natural situation to which the
ecology had adapted;
• water released from storage has lower temperatures and higher
concentrations of nitrogen compounds, whilst containing less oxygen
(eutrophication); and
• sediment, required for river bed and bank stabilisation and the
regeneration and/or supply of nutrients to downstream habitat, is
almost entirely intercepted and stored in the reservoirs.
In fact, by 1989, all western states except for New Mexico had taken steps
to protect in-stream flows and quality, including the recognition of
environmental allocation as a ’beneficial use’ (Postel, 1989).
The US has spent more than US$500 billion on preventing and
cleaning up water pollution since 1972 (Frederick, 1994), so the
environmental costs have already exceeded the costs of subsidies in
infrastructure by more than a factor of 10. Opponents of dams and river
regulation also point out that aging dams, like the road infrastructure,
are enormous fiscal time bombs. The Clean Water Act has been the prime
mover in redirecting national water financing from construction to water
quality, and section 404 was invoked by the EPA to veto about a dozen
water development projects on environmental grounds. The Supreme
Court ruled in 1994 that this act gives broad authority to impose
minimum streamflows to protect water quality.
The ESA is having its greatest impact in the Columbia Basin, where
dams have produced cheap power, enhanced recreational opportunities,
irrigated millions of hectares and provided inland towns with ports with
ocean access. These achievements have come at the expense of the Snake
River and Columbia River themselves, which have been transformed
from natural wild ecosystems into successive tiers of still-water
reservoirs. The natural migration of salmon has been impeded and stocks
have dwindled, and while there is broad agreement that decisive action
is required to protect salmon, there is no consensus on what form it
might take. Smolts are at present carried upstream in barges owned by
the Corps of Engineers, and at the moment all proposed alternatives have
significant drawbacks: an experiment to aid upstream migration by
artificial spills was terminated when the resulting increase in nitrogen
levels was also found to harm the fish. Another proposal involves
lowering the reservoir water levels so that the flow velocity behind the
dams more closely approximates that of a natural river, to aid smolt
migration at critical times. The preliminary cost estimates for
modifications amount to between US$0.6 and 1.3 billion on four dams in
the lower Snake River, exclusive of lost power, navigation and
recreational revenues. The most extreme and probably beneficial solution
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for the salmon would be to remove the dams completely; an unlikely
option, but one that is under consideration on the Elwha River in
Washington State. The Department of Interior is backing a call by local
congressmen, conservation groups and native American tribes to remove
two large hydroelectric dams, at a cost of between US$140 and 235
million (Divine, 1995). Some federal licences for hydroelectric operators
were issued as long as 50 years ago, and many are up for renewal. The
Electric Consumers Protection Act of 1986 requires the Federal Energy
Regulatory Commission to give equal consideration to power and nonpower benefits and to re-award licences in the broad public interest. This
procedure provides a new opportunity for environmental interest groups
to voice objections and make alternative proposals, and signals a new
period of institutional change, seeking to balance ecological values and
developmental goals in water resources management (Frederick, 1994).
Environmentally aware approaches to water management have been
under development for a long time. In the 1970s the US Fish and Wildlife
Service proposed local strategies for in-stream flow management in
Arizona (Nelson et al., 1978) and logging controls were introduced in
1979. It has taken this long for them to be more widely adopted because
of both institutional arrangements that have historically favoured
irrigators and the absence of a coherent federal–state–local government
view (Isaacson and Fall, 1979).
The West
Settlement of the American west was stimulated by federal sponsorship
of irrigated agriculture from 1902 onwards. The low rainfall (see Map 1)
and desert-like conditions were overcome by massive projects that
harnessed and moved water when and to wherever it was needed. Urban
settlement and growth followed, and the population growth rate in the
west was 22% for the period 1975–80, double that in the east (Micklin,
1985), and the west is now the most urbanised part of the country
(MacDonnell, 1990). There has also been a substantial relocation of
industries (for instance military contractors) from the east, and
development of the electronic and high technology industries throughout
the 1970s. Agricultural development has used both surface water and
groundwater extensively, accounting for 77% of supply in Texas and 49%
in California in 1980. The Colorado and the Ogalalla aquifer supported
over one-third of the total of 21 million ha irrigated in 1980 (Micklin,
Unconstrained development has resulted in total use exceeding
average streamflow in almost every western sub-region (El-Ashry, 1991),
and is responsible for water quality degradation, groundwater mining
and depletion of in-stream flows. In 1986, 44% of renewable supply in
The Western United States
the whole western region was consumed, 90% by agriculture (El Ashry
and Gibbons, 1986). Much of this consumption is on the 20% of western
farming land that is on federal reclamation projects, where rights of
delivery and storage are defined in part by long-term contracts with
federal and private bulk sellers (Ingram et al., 1984). Worse assessments
(Postel 1989) revealed that more than 4 million ha of irrigated land (a
fifth of the national total) was supplied by mining groundwater in
California, Texas, Nebraska and Kansas.
Competition between sectors and between states has existed
throughout this century, but a cycle of development, over-exploitation,
adjustment and new development is a result of continually rising
population and urbanisation. The use of all local surface water was
followed by over-exploitation of groundwater, which (as will be
illustrated) sometimes led to voluntary institutional reform to mitigate
overdraft. Long-range transfers of water, both within and between states,
have expanded irrigation, substituted for groundwater and even
recharged aquifers, particularly near expanding towns. In turn, the river
regulation and conveyance infrastructure for inter-basin transfer has
resulted in many of the environmental externalities that the region now
faces: localised waterlogging, salinity, groundwater pollution and habitat
The fuel crisis of 1973 had only a temporary impact on water
consumption, as pumping costs rose as both energy costs and lifts
increased. Despite a 30% fall in irrigated area in the Texas High Plains
(Postel, 1991), fuel price impacts have faded and groundwater tables have
continued to recede, continuing the trend of increased pumping cost.
Overall, irrigated agricultural area has been declining in the west since
1979, as farmers have intensified to higher-value production, reverted to
dryland farming or abandoned agriculture altogether, although even in
the mid-1980s more than 70% of irrigation was applied to low-value
grain and forage crops (El-Ashry, 1986). Water use per ha declined by
28% over the period 1974–87 because of the improved technology
adopted with intensification programmes (Postel, 1991), but the overall
impact on declining water tables has been minimal.
The current pattern of water use and the intractability of reform and
re-allocation of water is held to be a result of a now inappropriate water
rights system (see Box 1), designed initially to promote water
development and protect settlers from speculative monopolists. This
institutional framework has created powerful brokers for irrigators’
interests, such as the major Irrigation Associations, as well as the smaller
’ditch companies’ (irrigation supply companies) and other private and
quasi-private utilities. ’Pork-barrel’ politics and the associated corruption
and rent-seeking of western water development arose out of an alliance
of interests between business, politicians, constructors and the more
powerful irrigators associations (see inter alia Reisner, 1986 and Repetto,
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Box 1 Water rights in the Western USA
The western states subscribe to variations of the appropriative rights doctrine. It has two basic tenets,
formulated by miners, ranchers and irrigators in the pioneering days of the 19th century, principally
in California. The first is that seniority of use is conferred according to the historical order of
development – also known as ’first in time, first in right’. Seniority is such that junior rights’ holders
may forego water supplies in times of drought until seniors have used their accorded share. Priority
could also be lost by failing to develop water resources with ’due diligence’. However junior
appropriators were protected as senior users were prevented from changing uses in ways that harmed
others. Seniority is complemented by the requirement of ’beneficial use’ of water, where beneficial
use was historically taken to be productive use for drinking water and sanitation, agriculture and
livestock, navigation and industry. The notion also initially preferred private over public use. It is
because of this development perspective that in-stream needs for wildlife, fish and recreation were
overlooked (Matthews, 1994).
By contrast, the rights to groundwater followed riparian practice, derived from water law in the
eastern states, and founded in English practice. The overlying landholder initially had an unrestricted
right of abstraction but this unfettered right caused problems with the evolution of technology to
extract substantial quantities of groundwater. Groundwater has since been brought under various
systems of licences and permits, and in states such as California restrictions and conditions have been
applied which recognise the public trust doctrine and emphasis public over private rights. Most
western states have traditionally been reluctant to restrict private surface and groundwater rights.
The prior rights of the indigenous Indians were established in the ’Winters Case’ of 1908, which
exempted Indians from establishing the proof of prior use. The resulting ’reserved rights doctrine’ has
been used by the federal government to prevent individuals from controlling large tracts of land by
monopolising a sole water resource (Herbert and Martinez, 1981). Federal claims on water must
clearly show that the federal purpose of reserving land requires a water right. It has been used to
adjudicate disputes in potentially damaging state-level water developments, such as those which
would de-water a major river. A landmark decision in 1978 overturned New Mexico state legislation
of 1973 that excepted Pueblo Indians from the provisions of the Winters precedent. The reserved
rights doctrine (Masters, 1978) will find increasing application in the maintenance and restoration of
in-stream and environmental flows, and has therefore generated some uncertainty about the quantities
of water that might be claimed under this doctrine. However, to date, the federal management and
control of water by this means is modest, for instance only 0.18% of the total diverted volume in the
Arkansas River, Colorado Basin.
Prior rights and seniority have been modified over time in a number of ways: in the past senior
users would have received their complete allocation by shutting off flow to juniors until they were
satisfied. As measurement and control technology have developed, it has been possible to model the
apportionment and provide a wider service accordingly (Balleau, 1988).
The appropriative right is specified at the point of diversion from an identified source, limited to
a maximum designated flow rate. The total annual allocation is specified volumetrically, as its place
and purpose of use, including the exact area, if for irrigation. The seniority and ownership (legal title)
are perhaps the most important attributes contributing to the value of the right. The appropriative
system protects traditional technology and does not allow rights to return flows – it is a right of
consumptive use only. Neither of these characteristics provide incentives for improved technology
and water conservation (Matthews, 1994).
American water law has developed in a piecemeal fashion over the last 150 years and has been
strongly influenced by other developments, notably in environmental legislation. Calls for reform cite
the following shortcomings (Davis, 1994):
• The system is not uniform among the western states.
• The law does not integrate surface, underground and atmospheric water law and is not in
harmony with hydrologic reality.
• It fails to promote efficient water use and conservation.
• It is poorly adapted to severe droughts and water shortages.
• Provisions for change of ownership use and reallocation are insufficiently flexible.
• Regulation through the permit system is not integrated within the whole jurisdiction of water
Water quality is not specified under Californian water rights legislation (Kanazawa, 1992) which
provides further complications in promoting environmentally sound management and use and
undermines the potential value of water right transfers.
The Western United States
Box 1: continued
Much recent discussion on economic reforms in water resources management has centred on the
development of tradeable water rights, and the generally low volume of transfer and trades has been
attributed to the institutional and legal impediments to transfer (Rosegrant and Binswanger, 1994).
In California, holders of water rights, both prior and post the Water Commission Act of 1914 (which
consolidated water rights and issued permits to use state-owned water) may transfer appropriative
rights without approval from the State Water Control Board, provided that no other legal water user
is injured (Rosegrant, 1994), and short-term (less than one year) transfers are exempt from compliance
with the Californian Environmental Quality Act.
MacDonnell (1990) notes that most states recognise the ability to make changes to most of the
elements of water right without loss of priority and that restrictions on transfer of ownership can be
enforced with minimal state supervision, but that the process becomes more complicated when
change of use is contemplated. Nunn (1990) asserts that much of the sound and fury over water rights
and transfer originates from California, which she claims to be an example of institutional
eutrophication. MacDonnell clearly demonstrates that California has the least transfer activity (three)
but that in Colorado, Utah and New Mexico the number of transfers involving a change of purpose
or place of use over the period 1975–84 was significant, with more than 3800 in Utah. The volumes
transferred were generally small and mainly involved groundwater in Utah and New Mexico in
contrast to surface water in California, Wyoming and Colorado. By contrast, the volume transferred
in California was nearly 500 times greater than those in any other state over the period 1982–89. A
complex pattern of change of use emerged from research, varying in each state, and agriculture to
urban/industrial transfer accounted for more than 50% of transfers only in Wyoming and Colorado.
Approval rates for transfer varied from a minimum of 70% in Wyoming to 93% in New Mexico and
required 6 to 7 months in New Mexico rising to 20 months maximum in Colorado, where a specially
constituted water court deals with all cases. The opposition rate to transfer is the highest in Colorado,
with challenges made on 60% of the applications, followed by 50% in California.
McDonnell identifies the provisions to limit adverse third party effects as the biggest barrier to
transfers of water right, and notes that decisions concerning public interest lie with the State Engineer
or Water Commission, whose engineering staff are reluctant to assert their powers, being less familiar
with water quality issues attached to rights and social impacts on communities. Nunn notes that third
party effects are not trivial matters in the west and that many modifications to the practice of water
law have been determined by urban centres drawing in water from their hinterlands to fuel economic
Many states have placed restrictions on the transfer of surface and groundwater across state
boundaries, and have been challenged by the federal government under constitutional provisions for
non-restriction of trade between states. An interstate wrangle occurred in 1979 when El Paso (in
Texas), sought to appropriate groundwater from aquifers in New Mexico and was barred by New
Mexican state law. Its appeal under federal provisions was not submitted in time and the case has
lapsed since then.
In the past few years, a working group of the American Society of Civil Engineers has sought to
develop a model water code, rather two model codes, one based on riparian doctrine for the eastern
states and one for the appropriative rights doctrine of the west (Matthews, 1994). It seeks to
consolidate all the changes and provide a consistent law across the states. It is aimed at encouraging
water conservation and easing the transfer process, while shifting the burden of proof that there are
no harmful effects of transfer to the applicant. Temporary transfers would be expedited more swiftly
and easily, and forfeiture of water rights is envisaged after five years of non-use, except in
extenuating natural circumstances such as prolonged drought. The uniformity of legislation is
designed to allow out of state transfers, but subject them to the same approval process and proof of
no significant impairment to other users and third parties, particularly the effects of large inter-basin
transfers on the economic viability of rural areas within a basin. However, the code is still weak on
the substance of jurisdictional conflict and integrated management, although its backers intend to
address this with a model interstate compact. The model code recognises the hydrologic links between
surface, ground and atmospheric water and as a consequence requires the specification of water
quality in the water right, and grant of permits will also require the analysis of safe yield, impacts
on wetlands, in-stream water quality and contamination of aquifers, in accordance with federal and
state environmental regulations. Minimum in-stream flows are also exempted from appropriation. The
definitions of beneficial use are broadened considerably and the idea of economic efficiency is
introduced by the rather ambiguous requirement of ’reasonable’ use.
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1986). There are parallels with developing country irrigation
development, and the history of the ensuing reforms and initiatives are
The Colorado Basin and its Client States
A full, well-written and entertaining history of the politics, patronage and
development of western water, especially that of the Colorado, can be
found in Carl Reisner’s Cadillac Desert (1986), but a brief sketch will
suffice here.
Valley of the Dead renamed Imperial Valley as stream
diversions from the Colorado bring irrigation water to southeastern California, and George Chaffey establishes a private
irrigation trust.
Colorado River Compact signed between six of seven basin
states – excluding Arizona. Cooperation cemented through the
promise of federal funding for the All American Canal and
Boulder Dam, later known as the Hoover Dam.
Total population in the western states reaches 11 million.
Hoover Dam completed.
Hoover Dam electricity generation begins.
Beginnings of water conflict between California and Arizona
over the Parker Dam, and the size of the allocation implied for
Arizona by the Colorado River Compact.
Secretary of State Cordell Hunt formally promises Mexico 1.5
million acre feet (maf) (1.85 million ML) set aside for it in the
Colorado River Compact.
United Western Investigation begins to undertake an inventory
of all options for western water development, which ultimately
yields project proposals such as the peripheral canal around the
California Delta and the Klamath diversion from northern to
southern coastal states. Opposition to north-to-south transfers
within California becomes manifest, based in part around
political rivalry between Los Angeles and San Francisco.
California begins to ’borrow’ unallocated upper basin water for
Central Valley and Coachalla Valley irrigation projects,
exceeding its entitlement of 4.4 maf (5.42 million ML).
California’s diversion climbs towards 5.5 maf (6.78 mML),
prompting a US Supreme Court action Arizona vs. California.
Colorado River Storage Project (CRSP) bill passed to supply
irrigation to upper basin on the basis of massive cross subsidy
from electricity (85% of costs). Total cost of US$1.6 billion
The Western United States
represented a subsidy of around US$2 million per farm (Reisner,
Supreme Court uphold Arizona’s case on virtually all counts
and its 2.8 maf (3.45 mML) entitlement remains intact.
Glen Canyon Dam completed, as part of CRSP.
Legislation passed to initiate the Central Arizona Project (CAP)
interbasin transfer.
Colorado River Basin Project (CRBP) Act passed to authorize
federal funding for USBR to begin the CAP and a large number
of other dams and transfers. Guarantee of Mexico’s Colorado
allocation becomes a matter of (rather ambiguous) national
CAP canal fills ’a man-made river flowing uphill to a place of
almost no rain’ (Reisner, 1986). None of the other five major
projects in the CRBP have received funding.
Population of southern California reaches 20 million.
The Colorado basin has seven member states – Wyoming, Colorado, New
Mexico, Nevada, Utah, Arizona and California – and it runs more than
2,200 km from its sources in Colorado and Wyoming to Mexico, draining
an area of 619,520 km2. Originally a wild and untamed river with
extreme variations in flow, it is now one of the most highly regulated
rivers in the world, courtesy of 20 major dams including the amazing
Hoover Dam. Its proximity to California and the scale of conflicting state
interests has earned it a central place in the lore and substance of
western water development. Indeed, the New Deal philosophy that
emerged in the USBR under Strauss in the 1920s and 1930s was partly
fuelled by the sense that the state should undertake large-scale water
development to provide cheap water and electricity to rural settler
communities who were not supplied or were charged exorbitant rates by
private utilities (Reisner, 1986). The history of water development in the
Colorado Basin is also a history of ferocious competition between two
major federal agencies, the USBR and the Army Corps of Engineers. The
misuse of public money became so obvious in the development of less
important and marginally economic projects that congress finally
prevented them from undertaking their more daring and grandiose super
The Colorado Basin Compact of 1922 apportions equal annual shares
of about 7.5 maf each to the upper and lower basin states, plus about 1.0
maf for evaporation and 1.0 maf to Mexico, although in 1986 outflow was
still of the order of 2.8 maf. The apportionment was made on the basis
of only 18 years of streamflow data, however, and that happened to
coincide with a wetter than average period. The 17.5 maf annual average
streamflow is now acknowledged to be a overestimate, and is thought to
be 14.9 maf per year (from streamflow gauging) or 13.5 maf (from tree
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ring data) over a much longer period (Ingram et al., 1984). The Colorado
River Compact was the forerunner and model for interstate arrangements
in other large river basins throughout the country.
Hydrological science has in fact been ’adapted’ by interest groups to
enhance or diminish average annual flow estimates to support
construction or conservation measures. Similarly, USBR estimates of
energy demand in the Upper Colorado Basin turned out to be much
greater than the reality (Ingram et al., 1984).
The dividing point between the upper and lower basins is at Lees
Ferry on the border between California, Nevada and Arizona, with 2.8
maf per year allocated to Arizona as a junior right holder to California.
Since economic development in the upper basin has lagged behind that
of the lower (mainly in California), water demand has been less than the
allocation, with the result that unused flow entitlements go to the next
most senior rights appropriator. In practice the lower basin states have
made use of the theoretically reserved rights of the upstream neighbours,
who have consequently followed a path of pre-emptive water
development, mainly for use in relatively low value agriculture (El-Ashry
and Gibbons, 1986), such as the Central Utah Project. The benefits of
unused upper basin outflows accrue to the south in the form of reduced
electricity costs, better water quality, irrigation, water supply and
recreational needs. The policy of pre-emptive development has been
widely criticised, but few options have emerged to circumvent the
problem of usufructuary right rather than ownership of water by the
upper basin states. The so-called ’double-dip’ of subsidising irrigators to
grow subsidised crops within the upper basin, when there are incentive
programmes not to produce in other (un-irrigated) states has caused
noisy Congressional indignation, but one with previous precedent in the
era following European reconstruction after the Second World War. In
the early 1980s the Galloway group proposed interstate water marketing
to sell water rights from Colorado to San Diego (El-Ashry and Gibbons,
1986), without resolution by the end of the decade (Nunn et al, 1991).
The basin is very close to fullu using its water and further rounds of
interstate wrangling can be expected as California starts the process of
reducing its use to the specified 4.4 maf per year. The dilemma of the
Colorado basin is an interstate one, which mirrors and is substantially
driven by the rising competition for water between agriculture and cities
(El-Ashry and Gibbons, 1986), within and across the states.
Micklin (1985) reported that the federal Water Resources Commission
noted that Gila River Basin was the most stressed area in the lower
Colorado and that it had estimated that as much as 243,000 ha or 63% of
the area irrigated in 1975, would have to be taken out of production.
The Western United States
Institutional Issues
Helen Ingram is a long-time observer of institutional issues related to
water allocation. As long ago as 1973 she concluded that ’under most
circumstances an integrated and comprehensive treatment of water
resources cannot be organised within the framework of a single
integrated agency’, because of the plethora of values at stake, notably
those of the states, governors,and federal and state agencies. She notes
that resource economists who fail to account for the restraints of political
viability in their organisational recommendations risk disillusionment
when those arrangements fail to perform. She is categorical in saying that
political considerations cannot be sidestepped by granting regional
organisations more formal authority, and that institutional development
requires processes of negotiation and consensus, built on a framework
that prevents the regional agency itself from being captured by particular
interest groups (Ingram, 1973). The summary of reforms and privatisation
of irrigation systems in the Columbia Basin, based on work undertaken
by IIMI in 1992, is typical of many similar examples in other states
including California (Svendsen and Vermillion, 1994).
Ten years on, Ingram and her co-authors (Ingram et al., 1984) were
saying much the same thing:
’Some institutions favour the creation of formal organisations without
careful examination of the incentives to which officers of the organisation
may be subjected. The result is formalism but little capacity to deal
realistically with situations that invite imaginative change. The assessment
that makes a contribution will be one that examines how human beings
are likely to behave and not how we hope they would behave’
’The realistic water resources scholar and practitioner will understand
that institutional analysis, because it deals with complexities and
dynamics, is time consuming, intellectually challenging and costly. It
cannot be done “on the cheap”; it cannot be done with inadequate tools;
and it cannot be purchased in “canned” form from work done elsewhere.’
They had far more to say about what ’stakes’ or interests needed to be
pulled together to negotiate successful regional management of water
resources. The first two statements are expanded on below:
’The realisation that institutional problems in water resources
development and management are more prominent, persistent and
perplexing than technical, physical or even economic problems has
fostered as much frustration as insight among analysts and planners...’
’The paradox of the importance of institutions versus the paucity of
useful analyses....’
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• Technically based demand-projections are notoriously speculative and
unreliable. Nevertheless, private organisations have often been
disadvantaged compared to federal ones in terms of pools of expertise
and data, except where there is disagreement among technical
specialists and agencies.
• Legal rules and arrangements are not the last word in an operative
sense and need to be overhauled in the light of improved knowledge
and changing values (the binding Colorado Compact was based on
faulty hydrological assumptions). Over reliance on rules, especially
overlapping state and federal ones, can result in faulty analysis and
reform agendas.
• Everyone must be clear about the nature of economic power as
represented by different interests, such as cities, power producers,
irrigators, rural communities and industries.
• Everyone must understand prevailing public opinion and the values
that are not captured in economic analyses, such as the value of
agriculture (open space farmland) as an amenity.
• That control of organisational and administrative mechanisms can be
wielded in a number of ways needs to be understood. Ingram
associates the closeness of irrigators and their associations to the USBR
with the fact that many high-ranking officials in the Carter
administration had previously held posts in environmental groups
prior to 1976.
• Old conflicts between rival development agencies have given way to
new, broader and more complex ones between development and
conservation organisations.
• Access to the modifying forces of institutional structures (Congress
and the state legislatures) was not equal amongst interest groups at
any particular point in the water resources history of the Colorado
river. Different courts may have different leanings, the most obvious
example being the environmental sympathies of the Californian
Supreme Court. Federal and state courts had made considerable
improvements in access during the 1970s though, allowing the
individual to take on the state, albeit within the constraints of costs,
legal norms, precedent, the risk of delaying actions and the legal
tradition of considering cases on as narrow a legal basis as possible.
• Public participation had largely been conducted through the ballot
box, both in elections and in referenda, and well-informed and
The Western United States
motivated private pressure groups had established the right to force
public ballots on water resources issues.
Over those ten years the regional and national water management
institutions took a beating at the hands of the environmentalists (not
without good cause); they were captured by a group as powerful and
partisan as that which existed in the earlier construction-dominated era.
In analysing how institutions could negotiate improved water
management Ingram et al. (1984) highlighted intermediate facilitating
actions, such as the introduction of full-cost pricing in irrigation systems
before water markets are established. Sub-rosa water transfers (private
transfers carried when such transfers were not actually permitted in law)
between neighbouring irrigators are one example of a difference between
the statute and practice of law which can point the way to more enabling
action to achieve policy objectives. New institutions can be created within
old ones (such as the state-sponsored drought water banks) or agencies
can be transformed, such as the regulatory reorientation of the USBR
following the Reclamation Reform Act of 1982 (Wallen, 1989). Expensive
legal action, lobbying and land purchases could be avoided by
negotiating settlements by indemnification, as the western Colorado oil
shale companies did to purchase farm water rights.
Barriers to improved institutional analysis were both substantial and
understandable, including the:
• reluctance to be involved in the politically sensitive mechanisms by
which society allocates scarce values;
• perception by (implementing) agencies that they have no mandate to
change or manipulate institutions;
• qualitative nature of institutional analysis;
• attempts by agencies to appear (a) to be uninfluenced by institutional
considerations and therefore (b) to be even-handed to enhance public
image; and
• lack of familiarity with the subject.
El-Ashry and Gibbons (1986) concluded that assessment of components
is inferior to assessment of the sum of the impacts of water development
at a basin level, although environmental effectiveness should match
economic efficiency. Limits to supply development had almost been
reached, ushering in a new era of demand management, where urban
conservation was likely to be cheaper than new resource development.
Supply Augmentation versus Conservation
Inter-basin transfer
Western water development relied heavily on water transfers from the
early days of west coast settlement in Los Angeles (see p. XXX [2.3]), and
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returned to this type of water supply many times in the middle years of
this century. Aggregate western water movement in the 1960s was
estimated to be 22 km3, mainly from the Colorado (12.2 km3 in the Lower
Colorado water resources district where consumptive and conveyance
losses were 1.8 times the average annual run-off), including 5.5 km3
diverted to southern California (Micklin, 1985).
Basin transfers supplied plenty of low-cost water for irrigation and
remedied groundwater stocks in urban and industrial zones of California
and to lesser extent Arizona. The halcyon days of such projects were the
1950s to the late 1970s, ending with the Central Arizona Project, itself a
testimony to the perseverance and power of lobby groups (Cortner and
Berry, 1977). Studies continued into the early 1980s for south-western
transfers from the Columbia River, but the EPA had prevented further
environmentally harmful projects. The North American Water and Power
Alliance proposals were opposed by Canada, and Texas’ plans for water
transfers were opposed by the USBR and the Mississippi River
Commission and foundered on lack of public support for a bond issue
to finance the state’s contribution to estimated supply costs of
Alternative approaches to supply augmentation include the
inconclusive experiments with cloud seeding to enhance precipitation in
the Upper Basin (Agnew and Anderson, 1992; Micklin, 1985) and
desalination. Desalination was already happening at more than 650
municipal and industrial sites throughout the United States by 1983, but
it is just too expensive for general application. It is increasingly
considered for treating salt-affected fresh waters, which is cheaper than
seawater treatment.
Urban water conservation
When irrigated land supplied by the Salt River Project was settled as
Phoenix expanded, overall water consumption was expected to fall by
50%, but remained the same as before, largely because of excessive
garden and public amenity watering (Wehmeier, 1980). Engelbert (1979)
estimated that city gardens were being overwatered by 40% in the late
1970s, and called for water conservation policies.
Urban conservation technology now minimises consumption by toilets,
showers and household appliances. Adoption of technology has been
stimulated by water pricing tariffs (inverted block structures and
attempts at marginal cost pricing) and by uprating building standards for
new housing since 1980, in many of the western states. Subsidised retrofit packages and inducements and reliable automated watering
equipment have had a major impact. The ’Beat the Peak’ demand
management campaign in Tucson, Arizona, in 1976 reduced maximum
demand by 25% over May–August and resulted in a hangover reduction
The Western United States
of 13.3% in the following year, sufficient to defer construction of a new
well-field by only three years (Ingram et al., 1982).
Gibbons (1986) outlined approaches to valuing water in different uses
and summarised the limited economic intelligence on the elasticity of
demand of municipal water supplies (see also Winpenny, 1992). This
information and subsequent evidence indicated that ’cool’ season and
temperate zone water demand is used predominantly within dwellings,
and it is price inelastic and not responsive to price-led demand
management initiatives. There is some inconclusive evidence, however,
that dry season water use for gardening exhibits price elasticities of
between 5 and 8% (a reduction of 4 to 7% in demand for a 10% price
Industrial water conservation
There has been a revolution in industrial water use efficiency throughout
the USA over the past decade (Water and Environment, 1995), with
reductions in water demands for industrial processes themselves, as well
as substantial wastewater treatment and recycling. There has also been
extensive re-use of cooling water and improved technology requiring
lower flow rates and more controlled temperatures in return discharges.
Conservation of water in agriculture
Water conservation in agriculture is more complicated: overhead
(sprinkler, rain-gun and centre-pivot) and micro-irrigation (drip and
spitter) technologies can conserve water if properly managed, but usually
require a change to higher value cropping systems to cover their
increased capital and running (notably energy) costs. Field crop
producers in some areas, (notably the Texas High Plains, Colorado and
New Mexico) have adopted a range of high- performance surface
irrigation technologies (Broner and Liebrock, 1994), such as surge flow,
cablegation and cutback furrow irrigation, in conjunction with recycling
systems, there is some evidence that surge flow is the most cost-effective
option. Conservation tillage practices adopted in Texas were reported to
have made beneficial impacts in both irrigated and rainfed farming
(Postel, 1985). Improved scheduling, automation and more efficient onfarm conveyance all contribute to water conservation, but require high
levels of management for even modest gains. Revised crop patterns using
less water-intensive species and cultivars may help, but evidence is very
patchy to date.
But there is no sign that on-farm water savings are translating into
system- wide economies that allow transfer of water to other uses: new
techniques may not reduce seasonal water use, but may ensure that a
greater percentage is used, increasing productivity. There may also be
benefits in reduced accessions to groundwater-mitigating salinity
problems. Efficiency improvements may simply allow individual farmers
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to reallocate water on-farm and either irrigate larger areas or improve the
match between demand and supply and increase productivity through
increased consumptive use on the same area. Savings on one farm may
simply remove a source of return flows that were previously used by
neighbours, both close by and further down the water system (Keller at
al. 1990). Up-stream efficiency improvements in non-consumptive use
also have marginal impact as the return flows are largely available to
downstream users.
Substantial land retirement has occurred in California, Arizona,
Kansas. In the Texas High Plains land use peaked in 1974 and declined
thereafter (Postel, 1991): 14% of the gross land loss (678,000 ha) occurred
between 1978 and 1982, where groundwater mining supported 40% of all
US grain-fed beef production (Postel, 1985). Land retirement is one of the
few clear cut ways of measurably saving water for groundwater
mitigation or for re-allocation (Ervin, 1991).
Augmentation versus conservation
Curiously, the choice between supply augmentation and conservation is
not a clear one, as is shown with the cities of Phoenix and Tucson in
Arizona, and will be illustrated in the more detailed discussion of
California later. In Arizona, rainfall averages 280mm annually, slightly
higher in the Central Highlands Province, where the state’s groundwater
reserves are recharged. Groundwater mining has been extensive since the
1940s but the innovative Arizona Groundwater Management Act of 1980
has stipulated that there should be zero overdraft by 2025, resulting in
the installation of a meter on every well head in the state (Charles, 1991).
Although the Central Arizona Project has supplied water for
agriculture since the late 1980s and recently began supplies around
Tucson, the water is more saline than groundwater and more expensive,
due to the cost of treatment to potable standards, and despite massive
federal subsidy in both construction and day-to-day pumping and
operation. Although per capita demand in Tucson has been falling (9%
per annum was the peak year over the past 18 years), it will still be hard
pressed to meet the zero overdraft target by 2025. That groundwater
reserves are still 15 times the total consumed by the city so far may have
lessened the urgency of meeting the target (Charles, 1991), and the city
has purchased 8900 ha of irrigated land in the Avra Valley for its water
right alone since 1976.
The Active Management Area, under the control of the city council,
experiments with different price rates and block structures to control
demand, worked out in conjunction with a citizens’ advisory committee
(Water and Environment, July 1995). These aimed to minimise summer use
whilst simplifying administration and improving fairness: because of
public opposition, a two-band excess use higher rate structure has been
replaced by a simpler three-block inverted rate structure which operates
The Western United States
throughout the year. Over the period 1975–95, however, average costs to
the consumer (230–240%) have risen less than supply costs (260%) and
winter consumption has increased by 2%. What proportion of these
improvements can be attributed to pricing, conservation technology and
changed habits is unknown. Garden watering may have diminished
significantly thanks to ’xeriscaping’, an alternative landscaping
philosophy that makes use of indigenous xerophytes such as cacti.
During 1988 alone, the two cities of Tucson and Phoenix purchased
232,800 ha of neighbouring farmland to obtain its water right to augment
supplies (Postel, 1991).
Phoenix uses 25% more water per capita than Tucson – more than 800
lpcd – and has also experimented with complicated multipart water
tariffs. They too have returned to simple and more uniform structures,
so that now industry, residential and commercial properties all pay peak
charges through the four-month summer period, off-peak rates in winter
and a unit rate in the transition periods in spring and autumn. Overall
monthly charges increased by 335% between 1975 and 1995 (Water and
Environment, July 1995), whereas costs have gone up by only 260%.
Average summer water consumption has declined by 30% and average
winter use has also dropped by a quarter, although the early 1990s have
been wetter that average and the longer term pattern may be slightly less
Santa Fe County in New Mexico adopted a land use zoning policy,
after public consultation, to set ceilings on development density
according to the availability of water. However, the plan explicitly allows
for the exhaustion of groundwater over the next 100 years and over 40
years in urban areas, on the assumption that there will be alternative
sources, augmentation or wholesale land retirement in agriculture in the
intervening years (Wilson, 1983).
The Arizona experience with price led demand management has
shown that it is difficult to obtain public support for penalty rates to
curtail usage except in drought periods and that gradual implementation
of conservation-oriented rate structures that appear to be fair and reflect
the costs of provision (Water and Environment, 1995).
Environmental Impacts of Surface and Groundwater Development
Surface water development, especially long-range transfers, is closely tied
to the historical pattern of local development, over-use and in some cases
exhaustion of groundwater. Groundwater mining is a policy of the past
that was thought to be reasonable given that large surface water transfers
could be effected to either stabilise aquifers or substitute for their
supplies. Augmentation is no longer an option, and the environmental
impacts of groundwater degradation from industrial and non-point
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source agrochemical pollution prove the need for sound groundwater
management. Degradation of surface water and increasing demands for
environmental allocation mean that existing quantities of transfer water
may decline in the long term. The interconnections between surface and
subsurface hydrology are becoming increasingly well understood, often
leading to more conservative water supply strategies.
Upstream environmental impacts in the Colorado Basin arise from the
massive inundation behind the major dams – loss of free flowing streams
and associated recreation, sediment trapping, salt concentration and
thermal stratification of stored water. Downstream, flow modification has
altered river morphology as well as habitat and ecosystems, due to
reductions in sediment load and changed nutrient and chemical levels
and temperatures of the in-stream flows. Although the sediment load
downstream of Glen Canyon Dam has decreased form 140 million tonnes
per year to 20, the concentration of total dissolved solids has increased,
due to complex interactions between hydrochemistry, phytoplankton,
diagenesis and temperature (El-Ashry and Gibbons, 1986).
The major problem is salinity: contributions from the naturally saline
Glenwood Springs are greater than 500,000 tonnes/yr, or about half the
average annual load to that point. Irrigation in the Grand Valley
contributes about 179,000 ML of seepage to groundwater and with it,
780,000 tonnes of salt annually to the Colorado, which is equivalent to an
increase of 77 mg/l at Imperial Dam. The impacts of salinity are felt
predominantly in the lower basin, both from natural accession of salts
due to hydrogeological continuity with naturally saline strata and
aquifers, and from irrigation practice. The steady increase in upper basin
water use has also resulted in reduced downstream dilution, which has
enhanced concentrations and the severity of the problem (Keys, 1979).
Damages per mg of salinity were estimated in the lower basin at Imperial
dam over a range of concentrations from 900 to 1,400 mg/l. At 1979
prices, these costs averaged US$33,100 per mg over the basin, rising to
as much as 112,000 US$/mg for urban damages. The estimated losses in
the Imperial Valley were US$33,100/mg falling to 11,200 in central
Arizona (Anderson and Keinman, 1978). Other estimates computed total
costs in 1982 to be US$113 million and they are expected to double in
real terms by 2010 without mitigation (El Ashry and Gibbons, 1986).
The USBR undertook a massive programme of civil and on-farm works
designed to mitigate salinity, which attracted strong criticism from
writers such as Gardner (1988), who doubted both the economic
efficiency and the extent of claimed benefits. These works included
diversion of rivers around naturally saline areas, construction of
desalination plants, and measures to prevent canal seepage, such as
lining with concrete, with a price tag estimated in 1984 to be US$280
million. They noted that land retirement in the upper basin had the most
significant impact in controlling salt loads. A sub-basin study concluded
The Western United States
that improved agricultural water efficiency and the adoption of drycooling techniques in power stations would only reduce salinity levels by
5% in the upper basin and 4% in the lower reaches (Gilliland and Fenner,
1981). Salt taxes have been proposed (Stevens and Vaux, 1990), but
opposed (Gardner 1988) on the basis that it is almost impossible to
quantify the contribution from any given area, and it may even be
difficult to attribute this to an identified polluter. In any event, salt taxes
have not transpired and the following anonymous quote summarises the
current situation, little changed over the past decade: ’the upper basin is
entitled to pollute, the lower basin is entitled to acceptable water quality
and the federal taxpayer is entitled to pay the bill’. El Ashry and Gibbons
(1986) called for concerted action by the member states, but little
response has been made in the last decade. Water quality is an additional
complicating factor in the development of water markets and the
specification of water rights required to support intersectoral transfer.
Water Markets and Reallocation of Limited Water Supplies
The development of water markets has become a popular topic over the
last 15 years (Quirk, 1979) and is currently being promoted for
developing country water management on the basis of conflicting and
incomplete developed country experience. Economists see water markets
as a natural means of allocating an increasingly scarce resource, and
environmentalists have thrown their weight behind them as a likely
means of staving off more water development and dam building. Water
markets are proposed as one way of overcoming the institutional
complexities of water re-allocation from low value (agriculture) to high
value (urban and industrial) uses and side-stepping many of the
organisational impediments noted by Ingram et al. in the preceding
sections. The activities that are deemed to constitute market transactions
Within agriculture:
• informal water swaps and one-off sales between irrigators;
• temporary seasonal transfer by sale; and
• permanent transfer by sale.
Between sectors:
• temporary seasonal sale to alternative user, utility or ’water bank’; and
• permanent transfer of water entitlement to a different use and location.
It is only the fifth form of transfer that makes any meaningful
contribution to long-term water reallocation and satisfaction of rising
urban and industrial demand. Much has been claimed for the potential
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of market-based transfers (Rosegrant and Binswanger, 1994), and both
proponents and detractors have pointed to the low number of
transactions and volume of water transferred to date. Proponents have
made detailed analyses of the legal and transaction cost impediments
(discussed in more detail on page XX [2.3]) and of the inappropriateness
of the prior appropriative rights system for market transfer. The major
objection that exercises dissenters is the possibility of monopoly control
of a vital and natural monopoly resource resulting is severe misallocation
between the ’haves’ and the ’have-nots’.
Enabling conditions for market transfer include:
• the allocation and registration of individual or group water rights,
with good administrative machinery (Simpson, 1994);
• a good existing water allocation and regulatory structure;
• a clear distinction between consumptive and return flows;
• minimal attenuation in the specification of water rights;
• sufficient measurement capacity to be able to quantify savings and
record transfers; and
• a suitable infrastructure for transfer and where necessary storage.
It should be evident that in any late 20th century political environment,
the protection of adverse third party impacts will remain a priority on
political, rural equity and ecological grounds, and therefore all transfers
will be subjected to a measure of scrutiny, the costs of which will be born
by the buyers and sellers. The economic characteristics of water present
considerable natural barriers to development of a conventional market
(see Turral, 1995), with the result that market-like institutions are more
likely than a completely unfettered, regulated and fully informed market.
Young (1986) has suggested some reasons for lower than anticipated
volumes of intersectoral transfer: the transaction costs of storage and
conveyance, negotiation of contract and assurance of no damaging third
party impact imply a differential in values of water use that is much
greater than at present exist. He suggests that water values in irrigation
are capitalised into land values, about which many farmers take a longterm view, and are therefore not inclined to sell at what seem to be
favourable prices. There appears to be a particular problem of market
intelligence and valuation of irrigation water in this sense; MacDonell
(1990) noted that in studies of Colorado Basin water marketing it was
easy to establish the administrative transfer costs of water, but almost
impossible to determine the actual sale price of water right, even when
a change of use was registered. Nunn et al. (1991) suggested that one
way of improving the level of market activity might be for nongovernment, private and state level organisations requiring re-allocation
of water for recreational, in-stream and ecological purposes to get
involved in the purchase of water rights from irrigators.
The Western United States
California apart, there appears to be substantial if low-level water
transfer throughout the Colorado Basin and its neighbouring states (as
indicated in Box 1) and more investigation of the practice rather than the
theory of water markets would be useful. Twenty years of market
activity in the lower Rio Grande, Texas, has resulted in significant
volumes sold to municipalities (Chang and Griffin, 1992) and net
municipal benefits have been estimated to far exceed agricultural costs.
In the seven counties making up the Arkansas River Valley in southeastern Colorado, large transfers have occurred to urban use with
minimal loss to agriculture and the economy at state level. There have
been considerable uncompensated costs imposed on local economies
(Howe et al., 1990), however, and other consequences include accelerated
wind erosion, reduced options for land use and reduced agricultural
productivity (Sutherland and Knapp, 1988).
Livingstone (1987) noted substantial secondary effects on rural
employment and diversity by water market transfers in Colorado,
although the sellers were compensated well. Water rights owned by
distribution organisations in Colorado must allocate shares to their
members, which partially protects irrigators, but if the dominant
shareholders are non-agricultural, farmers must rent water. There are
signs that this is causing a decline in agricultural production and
Thompson (1987) cites declining irrigated areas and an increasing
proportion of small farms as a percentage of total farms. Farmers remain
in production if they can retain their existing water rights or shares and
if they can finance costly new water conserving technologies. Livingstone
(1987) suggested that sequential salvage and re-use schemes might offer
a better balance in satisfying urban demand whilst preserving the
agricultural economy, but that the increased costs to municipalities
effecting transfers might be worthwhile in the longer term to maintain a
more diverse economic base.
In certain instances fallowed land must be kept watered, even if there
is no cropping, to prevent dust storms from wind erosion, as happened
in Phoenix and Tucson in the early 1980s. The Arizona land rush resulted
in more than 500,000 ha being purchased entirely for their water rights,
and has been termed water farming. This land grab was prompted by the
Arizona Water Resources Department requirement that new residential
and industrial subdivisions should have secure water right for at least
100 years, if municipalities were to have any chance of growth beyond
2001 (Charney and Woodward, 1990). Water market proponents have
decried land purchase for water rights as economically inefficient, but an
alternative point of view is that the true value of agricultural water (its
capitalization in land value) is accounted for. It is clear that some form
of land stabilisation costs must be born as part of the transaction.
Charney and Woodward say that because of the clustering of the sale
points of rural to urban transfer, state-wide impacts on agricultural
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productivity and the economy were not significant, even though localised
impacts were. They argue that there is indeed a high economic return to
such transfers and that this should entertain the possibility of
compensation of third party effects, whilst noting that the loss of
autonomy and reduced livelihood options associated with loss of water
right is very hard to value. Thompson (1987) found that it was
increasingly difficult for new agricultural producers in the urban
periphery to obtain rights to water.
Some valuation studies do not show agriculture as being a low value
use of water; trade-off analysis in Idaho valued returns to agriculture at
US$200 per acre-foot compared to only US$8 for hydroelectricity
generation (Long, 1990). Market values for water have been estimated in
the states using the Ollagalla aquifer by calculating price differentials
between sales of irrigated and dryland farms in New Mexico, Colorado,
Kansas and Nebraska (Torrell et al., 1990). Water value accounted for 30
to 60% of the farm price, but this analysis is complicated by a trend of
falling land values since 1983 and considerable variation in values
ascribed to water, ranging from US$1.09 to US$9.5 per acre foot – low
values by any standard.
California and Southern California
California has generated the largest amount of literature on water in the
western states and represents perhaps the most complex situation. This
has also resulted in a bias in the literature, however, that gives an
incomplete, even distorted picture of the management of water in the
west – especially with respect to water markets and enabling conditions
for successful reallocation by water marketing (MacDonnell in East–West
Centre project paper, 1991).
California typifies some aspects of developing country situations –
rapid urban growth and industrialisation simultaneously with
agricultural growth based on irrigation. Apart from Northern California,
there is a widespread deficit in water availability compared to current
use, which is largely supported by three sources of inter-basin transfer.
Institutional reform and innovation has received a new stimulus
following severe and prolonged drought in a complex setting, now made
more intricate with the rise of environmental activism supported by
powerful state and federal legislation. A potted history of some landmark
events in Californian water:
Truckee-Carson water brought from Nevada to San Francisco –
a forerunner of the Central Valley Project (CVP).
The Western United States
Los Angeles City Water Company becomes the Department of
Water and Power.
Work begins on the Owens Valley irrigation project and diversion on
the Owens river and plans for water transfer to the city of Los
Chaffey’s diversion channel in the Imperial Valley is silted up
and not operational.
Owens Valley Project annulled, leaving a large water allocation
for the city and some residual water for a few large landholders
who had taken over the land allotted for homesteaders under
the reclamation project proposal (Reisner, 1986).
Los Angeles city receives its first water supply from the sources
in the Owens valley 400 km away.
Paiute Indians seek water rights allocation in Truckee–Carson dispute
in Federal Courts, especially in respect of Newlands irrigation district.
Saga of claims and counter claims (eventually including urban and
agricultural demand in Reno-Sparks area) begins – not resolved until
Water Commission Act registers appropriative rights and issues
permits and licences through what has now become the State
Water Control. Board
Drought and Owens Valley water ’war’, including dynamiting of
aqueducts and siphons built to take water to LA.
LA is landlord of 95% of farmland in the Owens Valley and 85%
of small town property.
USBR begins work on the Central Valley Project (CVP) to
transfer water from northern to southern California, as
Depression prevents state from financing this scheme under the
State Water Plan. CVP now deliver 4 million ML per year for
irrigation in 1994.
Central Valley Project (CVP) completed.
Water master appointed to oversee legal settlement of
groundwater sharing arrangements in Raymond Valley, southern
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California already using its entire allocation of 3.57 million ML
from the Colorado.
Department of Water Resources launches the first California
Water Plan to address maldistribution of water resources, and
eventually results in the State Water Project (SWP).
SWP approved, just, by voters and leads to successful bond
issue for US$550 million in addition to US$1.75 billion
guaranteed under the Burns–Porter Act of 1959.
State Water Project begins supplying 3.8 million ML per year to
San Joaquin Valley (63%) and southern California (31%).
1976–7 Drought
Metropolitan Water District (in Southern California) reduces wholesale
deliveries to contractors, launches an intensive media campaign to
promote conservation and introduces a surcharge for water
consumption that exceeds prescribed limits.
California Water Policy specifies that water must be used for
fullest beneficial use and that waste and unreasonable use and
methods should be prevented.
Water Law amended to allow right of sale of conserved and
salvaged water.
Public referendum defeats construction of the Peripheral Canal,
an extension to the SWP around the Sacramento–San Joaquin
Delta, the Peripheral Canal, mainly due to opposition in
northern California: signals end of large-scale long-distance
water transfer projects.
Area of origin protection or ’public trust doctrine’ granted to
water sourced from eight areas including Mono Lake.
Selenium hazard from irrigation water diagnosed at five wildlife
sanctuaries and enters public debate (Postel, 1992).
1987–92 Drought
California Water Plan Update
Metropolitan Water District (MWD) and Imperial Irrigation District
conclude agreement to line supply canals on return for share of
conserved water.
The Western United States
Legal injunction prevents LA Department of Water and Power
from abstracting Mono Lake water, describing it as a national
environmental and scenic treasure: LA deprived of 15% of its
existing water supplies.
Truckee–Carson Settlement Act
50% reduction in water deliveries to agriculture, not expected to
seriously affect state-wide crop production.
Water Code Amendment specifies five yearly review of water
plan and policy.
First emergency drought water bank.
California Water Project Improvement Act reallocates more than
1.23 million ML of CVP water supply for fish and wildlife.
Second emergency drought water bank.
US Fish and Wildlife Service lists Delta smelt under the ESA,
resulting in moratorium on water transfer through and out of
the Delta.
Third emergency drought water bank.
Setting and Background
Most water resource replenishment in California occurs in winter, in the
north of the state, whereas most of the demand is in the south in
summer: 73% of the run-off occurs north of Sacramento and 75% of the
state’s use occurs south of this point (O’Mara, 1988). Nearly 4.1 million
ha of irrigated land and extensive metropolitan settlement obscures the
fact that most of the state is desert with annual rainfall ranging from 76
mm in the south-east to 483 mm in Sacramento. The population more
than doubled between 1950 and 1980, reaching 20.8 million at the end of
that period, with two-thirds in the south. Urban growth was
accompanied by an increase of 38% in the irrigated area. Groundwater
abstraction accounted for 50% of all use in 1950, but had declined to only
24% by 1980. State-wide groundwater storage is estimated to be over a
billion megalitres (ML) in 450 defined basins: although this represents
more than 100 times annual groundwater use, less than half is usable due
to cost and quality (DWR, 1993).
Approximately 20% of the water used in southern California is
generated within the area of use and long-distance transfers supply the
balance: 57% from the Colorado, via the Colorado Aqueduct from the
Parker and Imperial Dams, and 15% from the State Water Project. A
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complex and comprehensive hydraulic infrastructure has been developed
that allows water to be transferred form north to south and from east to
west and has allowed the dramatic increases in population, irrigated
agriculture and standards of living (Keller et al., 1992) The enormous
federally funded Central Valley Project transfers northern water to the
San Joaquin and Sacramento valleys, the largest single irrigated area in
the USA.
The first California Water Plan was conceived by the Department of
Water Resources in 1957 to move water from north to south. It resulted
in the State Water Project, which was developed to transfer water to the
San Joaquin Valley and southern San Francisco Bay area in the 1960s.
Water deliveries extended to southern California in 1972, although by
1983 little more than half the ultimate planned delivery was covered by
contract commitments, and initial deliveries were not sufficient to restore
overdraft in localities such as Kern County and south San Joaquin Valley.
The ’imperial state’, as Reisner dubs it (1986), has experienced several
cycles of localised water development, water transfer and recharge, and
repeated over-use of ground and surface water. This has been addressed
in the short term by some demand management and organisational
reform measures, followed by further rounds of large-scale water
transfer, as is illustrated in the historical summary above. This cycle has
been in part due to that fact that the state has no water policy that
integrates surface and groundwater (Keller et al., 1992).
California is now entering a phase where supply augmentation is no
longer a cost-effective or environmentally acceptable solution, and
multiple re-use of water at a basin scale is increasingly common (what
Winrock refer to as a ’closing water system’ (Keller et al., 1992)). As a
consequence, users are becoming increasingly interdependent and
conscious of the importance of efficiency. Management improvements
may have system-wide impacts but system-wide management needs
flexible alternatives and the reallocation of water between uses becomes
increasingly important, with inevitable consequences for established uses
and their water right holders.
Water reallocation for environmental use, coupled with decreasing
supplies of transfer water from the Colorado Basin (as Arizona and
Nevada make full use of the remaining 740 mML/yr of their allocation)
mean that agricultural and urban demand are in increasingly severe
A water balance for 2020
Some consideration of the details of the present water balance and the
pressing demands being made on it is essential background to the
process of policy development and management reform in California.
The state Department of Water Resources (DWR) estimated that the total
supply for 1990, shown in Table 4, would rise to an average value of 80.4
The Western United States
Table 4 California water supply with existing facilities and programs
Imports by local
Colorado River
Other federal
Groundwater overdraft
Dedicated natural flow
Total supplies
1990 SWP supplies are normalized and do not reflect additional supplies needed to offset
reduction of supplies from the Mono and Owens basins to the South Coast hydrologic region.
million ML in 2020, somewhat less at 62.8 mML under drought
conditions. The state policy continues to emphasise the decrease of
groundwater overdraft state-wide, which has been making steady
progress from 2.5 mML/yr in 1980, to 1.23 million in 1990 and targeted
to fall between 0.577 and 0.86 million ML/yr by 2020, depending on the
package of water conservation programmes implemented (DWR, 1993).
The total population is expected to rise to 40 million by 2020, most
growth continuing to be in the southern part of the state, and urban
demand is expected to increase by 61% in average and drought years.
Net urban water demands are expected to rise by the same proportion
to nearly 13 million ML in a normal year and about 4% more in a
drought year.
By contrast, total irrigated area is expected to continue its gentle
decline, from a net area of 3.7 million ha in 1990 to 3.56 million ha in
2020, compared with a peak historical value in 1980 of 3.85 million ha.
The associated fall in irrigation demand only assumes 1990 level
conservation measures, so that 2020 demand will fall by 2.5 to 2.96
million ML per year to around 36 million ML, less than three times the
total urban demand. The impact of commodity price changes and world
markets interactions have been factored into the prediction procedure.
The extent of increase in environmental demand is unknown in the
wake of the Central Valley Project Improvement Act, but was expected
to increase only marginally (1.1 mML) to 36.4 mML in an average year,
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on a par with agricultural use. On the same, now optimistic,
assumptions, predicted environmental allocation falls considerably to
21.33 mML in a drought year. However, the total predicted demand of
more than 82 mML is very sensitive to that actual future level of
increased environmental allocation, modelled by DWR in the range of
1.23 to 3.7 mML/yr.
Two packages of conservation options have been considered to meet
the 2020 demand (DWR, 1993) based on detailed analysis of options with
proven technology and mechanisms and a rather more speculative
package of less well-tested possibilities. The first category of packages
assumes best management practice in urban water management based on
a suite of incentives to reduce demand and adopt conservation measures
(see Box 3). It also envisages the adoption of efficient water management
practices in agriculture.
Without any of the conservation packages, the projected deficit will be
2.7 to 9.6 mML/yr depending on the additional water allocated to the
environment to a marginal surplus of 730,000 ML/yr in a normal year
and more than 4 mML in a drought year. Implementation of the second
level conservation options would, in theory, result in more robust
margins of safety in this finely judged water balance. The point of
sharpest focus for imbalance between supply and demand is in southern
California, where current supplies from local and three transfer sources
amount to 9.55 mML/yr, with no further signs of augmentation (Keller
et al., 1992).
Local water supply and demand issues loom large in the implications
of the state’s water balance; for instance declining Colorado supplies are
off-set by greater deliveries from enhanced flows in the SWP.
The major uncertainty affecting engineering (and alternative) solutions
to improved water distribution and conservation centres on the limits to
water exports from the Sacramento–San Joaquin Delta, from which twothirds of the population and millions of hectares are supplied. The
proceedings of the 1992 State Water Resources Control Board’s (SWRBC)
public hearing and subsequent EPA intentions to promulgate new
standards for water quality and supply in the delta and bay area,
promise more stringent limits on the export capacity of water from the
delta. In 1993, CVP deliveries from Delta exports were restricted to 50%
of contracted supply to federal bulk sellers from Tracy to Kettleman City.
The old engineering ’solution’ to enhance supplies in the southern part
of the state by bypassing the Delta with the ’Peripheral Canal’ must now
be as extinct as the dinosaur it metaphorically resembles, even though it
is claimed it could supply better quality water a judicious ecological
moments and actually improve the Delta’s ecology (Rosegrant, 1994).
The Western United States
Box 3 Water pricing initiatives in the Metropolitan Water District (MWD),
The MWD is a public water wholesaler that currently services 27 member agencies comprising 10
bulk suppliers and approximately 250 retailers who, in turn, provide domestic and industrial supply
to 15 million people living in 239 cities and the surrounding rural areas. MWD services half the
population of California, in an area with a high annual population growth that averaged 200,000
through the 1970s and rose to 300,000. The number of dwellings is rising at a faster rate, with average
occupancy expected to fall from 2.85 to 2.69 over the coming 20 years.
The MWD was created in 1928 by public vote in 13 Southern Californian ’founder’ cities to
construct and operate the Colorado River Aqueduct. Construction throughout the 1930s was financed
from property taxes, since the agency had no water to sell until deliveries commenced in 1941. Even
then, sales were relatively small as the bulk of water supplies were sourced locally, principally from
groundwater, but MWD now provides about 60% of the needs of its service area.
US public law, 100–675 section 207, authorises the Secretary of the Interior to construct new lined
canals in order to conserve 123,300 ML of Colorado River water per year, and requires all water
agencies (including MWD) that have contracts with the Secretary to review pricing policy and
practice, including:
• the recovery of all costs through water rates;
• marginal cost pricing;
• seasonal rate differentials;
• dry-year surcharges;
• increasing block rates.
MWD, at the outset, established a straightforward wholesale water rate structure, designed to recover
capital and operational expenditures from users in an equitable manner. In 1954 service was curtailed
when storage levels in Lake Matthews declined to a critical level after a period of full capacity supply,
resulting in the adoption of trial seasonal pricing structure. Groundwater replenishment was
encouraged by discounting deliveries over a five-month off-peak demand period, and this concession
has continued and is now available year-round.
From the end of the 1970s to the early 1980s, MWD’s approach to pricing changed considerably in
response to the single worst drought year ever experienced in California (1977) and federal restrictions
on property taxes. A cap was set limiting taxes to repayment of general bond debt service to MWD
and the State Water Project (SWP) so that, in 1991–2, taxes accounted for only 9% of revenue
compared to 81% from water charges (tariffs).
Wholesale pricing
It is often argued that water prices at the margin are too low (do not reflect marginal or incremental
costs of supply) which discourages resource conservation efforts. MWD adopted two programmes
based on marginal cost pricing, starting in 1981 with the Local Projects Programme (LPP), which
makes direct payments to qualifying projects that reclaim and re-use water. In 1992 the payment was
US$125 per ML to offset supplies from MWD costing US$212 per ML, and is equivalent to raising the
marginal price of water to US$336 per ML.
At the time demand was reduced by 112,000 ML per year and now the regional goal for 2010 is to
reclaim nearly 500,000 ML per year. In 1988, the Conservation Credits Programme (CCP) was
introduced to allow similar value of credits to agencies adopting effective water conservation
programmes, and price at US$336 per ML at the margin. The expected savings from this initiative are
expected to reach more than 62,000 ML per year.
An acute shortage of imported water in 1981 led to the establishment of the Interruptible Water
Service Program, whereby member agencies pay an additional US$40 per ML (1992 prices) for a noninterruptible service, to have the assurance that supplies will not be curtailed during times of drought.
Agencies which purchase the cheaper interruptible supplies are obliged to maintain service levels
from local sources, although the MWD manager has a priority list for interrupting supply with lowest
priority afforded to groundwater recharge, highest given to injection to seawater barriers, and higher
value agricultural uses lying in between.
A Seasonal Storage Programme was introduced in 1989 to discount off-peak season rates (Oct 1 to
April 30) by US$75 per ML for untreated water and US$87 per ML for treated water compared to the
peak season rate. The intention is to encourage agencies to purchase and store water in the off-season
to enhance flexibility in the dry summer months, and total sales in the 1989/90 financial year were
231,000 ML.
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Box 3 Continued
Dry-year surcharges were adopted in the droughts of 1976–7 and 1987–91, using penalties and credits.
For deliveries over 90% of the prior non-drought year of 1976, a 100% surcharge was levied, but for
each ML saved below the 90% threshold, US$20 credit was awarded. In the second drought this was
simplified to an US$81 per ML rebate for savings during the June to September period below 95%
of the non-drought figure in 1989. As the drought lengthened, the Incremental Interruption and
Conservation Plan introduced conservation targets for member agencies using more extreme
incentives – an additional US$320 per ML for exceeding the target, combined with an US$80 credit
for further conservation.
Retail pricing
The drought pricing approaches are a form of increasing block rate structure, which is generally
considered to be more appropriate for retail than wholesale suppliers. However, it is economically
inefficient, as marginal cost pricing applies to only a few customers in one particular block and thus
the majority (51%) of retail agencies in Southern California apply a uniform rate and only 35% use
an increasing block rate. Retail water rates are higher than wholesale ones due to the cost of local
supply infrastructure and abstraction. All supplies are individually metered and billed monthly or
bi-monthly and wastewater services from 12 agencies are also metered and billed accordingly. In the
long term, the rate of price increase for MWD supplies will outstrip local costs, but is not anticipated
to have the same impact on overall pricing due to the dominance of the local supply costs.
Consumer response to pricing has been much harder to determine, as it is difficult to separate
price responses from the effects of public awareness campaigns, the adoption of conservation
packages and lower water consumption in housing built since 1980. Uncorrected price elasticity of
demand has been estimated to be near to zero for the winter season, compared to across-the-board
summer reductions of less than 3.6% for a 10% increase in charge rate.
Estimates of corrected elasticity are more conservative at less than -0.1 overall, and when drought
restrictions are in force, of -0.05. Total water savings due to price increases in 1990 were estimated
at 107,000 ML which was equivalent to 4% of total municipal and industrial use.
Future MWD pricing policies will continue in this vein, with further analysis of the pros and cons
of conservation-oriented rates and assisting contracted agencies in improving their rate design, whilst
publicising the success of those agencies adopting innovative and effective charging systems.
Source: Water Conservation Pricing Approaches of the MWD. MWD Staff Report August 1992, PMC
Ltd. Carbondale, Illinois
The 1976–7 and 1987–92 Droughts and their Impacts on Institutional
Many of the San Joaquin Valley’s aquifers were seriously depleted in the
1976–7 drought but subsequently recovered in the late 1970s and early
1980s when wetter than average conditions enhanced run-off and exports
from the Delta region. Conjunctive use strategies developed over this
time contributed to a halving of the groundwater overdraft from 1980 to
1990, so that of 10.5 mML of groundwater abstracted, 1.23 mML is still
’mined’ state-wide.
Groundwater played a vital role in helping water users throughout the
drought of 1987–92 as a deliberate policy of over-drafting was used to
maintain water supplies, notably in the San Joaquin Valley (SJV), where
longer term recharge is a proven possibility. Groundwater accounted for
The Western United States
more than 60% of supply over the drought compared to 40% in normal
years, but although long-term recharge is possible, shorter term problems
emerged: accelerated saline intrusion in the Salinas Valley; accelerated
land subsidence in the San Joaquin Valley; and more rapid groundwater
contamination in SJV, notably Kern County and Mendok (DWR, 1991).
Bacterial contamination of urban groundwater worsened due to drought
overdraft in Santa Barbara and Montecito. Remediation of groundwater
degradation is extraordinarily expensive, and more prudent drought
groundwater strategies are needed in future. Enhanced water transfer has
contributed to the long-term decline in overdraft and aquifer recharge
has been enhanced by flow control achieved by the Hidden and
Buchanan dams.
While the six years of drought stretched California’s developed
supplies to the limit, it stimulated innovative water management actions,
water transfer, water supply interconnections, and changes in project
operation to mitigate harmful effects of drought on fish and wildlife. It
is also true that the drought would have had much more severe impacts
in the south if Nevada and Arizona had been using the 740,000 ML of
their entitlement under the Colorado Basin Compact. However, the
Colorado aqueduct flowed full for most of the drought period, excepting
six months of about 25% reduced flow in the first half of 1992. Over the
first five years of the drought, there was minimal economic impact due
to storage, but by 1990, the reservoir storage levels were 16 mML lower
than in 1986. The State Water Project (SWP) stopped all agricultural
water deliveries and supplied only 30% of nominal urban demand. The
CVP reduced agricultural deliveries by 75% and all others by 25%, and
the CVP and SWP limited joint deliveries of water to about one-third of
SWRCB permitted levels. Financial losses in 1990–91 were estimated at
about US$0.5 billion from agriculture and a similar amount from
hydropower and recreational income foregone (DWR, 1981).
Restrictions on flow deliveries in the drought periods stimulated
pricing initiatives to penalise excessive use, but were coupled with more
traditional methods of rationing (to 159 lpcd from more than 600 lpcd)
and limiting supplies. The Metropolitan Water District (see Box ) reduced
deliveries to sub-bulk suppliers and other contractors, whilst engaged in
an intensive media campaign aimed at individual users. MWD also
introduced surcharges on contractors who ordered above prescribed
limits. The drought stimulated the DWR into setting targets to conserve
1.85 mML of water by 2010 – 620,000 mML from agriculture and double
that from urban use.
The Emergency Drought Water Bank
DWR was authorised, by the state Governor’s executive order, to
establish a clearing house to facilitate market-like transactions of water,
principally from agriculture. Negotiations were quickly begun with both
Hydro Logic?
individual irrigators and the water districts to purchase water by
fallowing land, pumping groundwater, and obtaining ’excess’ stored
water. By the end of 1991, 350 contracts had been processed by DWR
with advice from a purchasing committee made up of potential buyers,
to obtain a total of 1.03 mML. Approximately half of this was obtained
by fallowing land and one-third from groundwater; most of the fallowed
land was located in the Delta, whereas planners had anticipated that it
would come from rice-produces in the lower Sacramento Valley, who in
the end demanded too high a price for their water (Keller et al., 1992).
Water sellers were paid an aggregate price of US$101/ML at that time.
In 1991, the three buyers were MWD, Kern County Water Agency and
the City of San Francisco. Rosegrant (1994) shows that total volume
purchased by the second drought water bank in 1992 fell to less than
25% of the previous year’s transfers following unusually heavy late
March rainfall. The total unit price of water fell to less than half the 1991
value of US$142/ML. In 1991, the dominant allocation was to urban use,
followed by storage in the SWP allocation, with agricultural use
accounting for only 10% of the total transfer volume. By contrast, in 1992,
agricultural transfers accounted for nearly half the trade, and urban use
less than a quarter. Transfers in the most recent 1994 drought water bank
have been similar to 1992, with slightly greater volume (around 250
mML) and a marginally lower price of US$55/ML.
The bank took a very active role in certifying, broking, securing
financial banking and acting as a public interest advocate (Keller et al.,
1992). Transfers were deemed, under temporary and then permanent
legal provisions, to be a beneficial use, but transfer of over-drafted
groundwater was not permitted unless it could be deemed to be artificial
recharge water from prior ’groundwater banking’. The amount of water
retained for environmental quality in the Delta was substantial in both
years (roughly 25% of purchases), although this is for some reason not
recorded as a transfer. Limitations in the infrastructure became apparent
when moving the purchased water through a system that was designed
for irrigation and urban supplies, and there are now strict environmental
constraints on the timing and quantities of water than can be moved
throughout the Delta.
Interestingly, the USBR takes the view that water sales are detrimental
to project service and therefore have not allowed transfers of CVP water
to any of the drought water banks. The banks have been very successful
in reallocating water at the margin, and in demonstrating the feasibility
of market-like transfers, although it does indicate the need for strong
brokerage, within the institutional constraints operating in California.
Peabody (Keller et al., 1992) suggests that the groundwater supplied to
the drought water banks was bought at too high a price, which
stimulated uncontrolled withdrawals with third party impacts on
overdraft and resulted in accelerated land subsidence, which damages
The Western United States
aquifer capacity in the long term. He therefore suggests a two-tier pricing
structure for purchases, with substantially lower remuneration for
groundwater. These state-mediated market-like transactions also need to
be considered in their rightful context – the total volume traded in 1991
was less than one sixtieth of the total state-wide supply in 1990.
Supply Augmentation, Conservation and Demand Management
Historically, the serious local and state-wide groundwater overdrafts
have been stabilised by long-distance transfer of water which has both
substituted for pumped supplies and been used for artificial recharge
(Bogle, 1989). Rural to urban water transfer has not been popular,
however, due to the memory of Los Angeles’ appropriation of the Owens
Valley water rights in the 1930s, which resulted in the valley almost
’drying up and blowing away’ (Keller et al., 1992).
The biggest impact on the state-wide overdraft of around 10 mML in
the 1960s has been from the SWP transfers. Initially surface water was
injected to prevent saline intrusion in coastal aquifers, but it has been
such a successful technology that many areas now enhance groundwater
storage in normal years in order to ’bank’ it for the inevitable droughts.
The idea of groundwater banking was discussed as long ago as 1977 as
a strategy for the CVP (Thomas, 1978) and inaction at the time was
attributed to the conflict between private rights to groundwater and the
right of the re-charger to re-abstract. Groundwater injection has also been
used to control degradation and contamination gradients in groundwater
basins and is now being used as part of a strategy of wastewater reuse.
In Orange County, southern California, population grew by 800% to 2
million over the thirty years prior to 1979, placing ever-increasing
demands for water despite osmosis plants, industrial wastewater re-use
and sophisticated conjunctive use strategies. The most recent innovation
recycles wastewater, treated in ’Water Factory 21’, which is injected into
the aquifer where it undergoes further natural bacterial treatment and is
mixed with good quality groundwater. The technique of mixing
wastewater has been evaluated in the saline intrusion zone since 1976,
and has resulted in a permit to inject 100% treated water into the aquifer
for re-use.
Although the SWP is delivering considerably less water than initially
planned, the California Water Plan Update (1993) does not envisage that
deliveries will increase by more than about 2.75 mML per annum by
2020; opposition to financing and exporting water from northern
California is the key constraint. The restriction on exports from the Delta
has prompted some calls to implement the peripheral canal to improve
water quality and reduce transmission losses, whilst providing enhanced
flows for the ecological health of the area. Under the current funding
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climate, and the need to raise substantial user-sourced finance and
opposing environmental groups, it is unlikely that this or any other
major transfer project will be undertaken. As noted elsewhere, the total
volume of transfers from the Colorado is likely to decline by about 15%
as the other riparians exercise their water rights, and recent legislation
has place restrictions on the transfer of water to Los Angeles from Mono
Lake and the Owens Valley.
The California Water Plan envisages relatively modest options to
augment supplies by a total of nearly 2.35 mML/yr by 2020, including:
• water reclamation by wastewater recycling and groundwater
reclamation of an additional 1.23 mML, resulting in a net
augmentation of 740,000 ML after accounting for re-use. Costs are in
the range of US$325–810/ML at 1992 prices;
• solutions to the Delta management problem, yielding a net increase of
370,000–620,000 ML/yr;
• conjunctive use to augment drought supplies on the model of the Kern
groundwater bank – 620,000 ML/yr; and
• additional storage facilities to provide a further 620,000 ML/yr.
There are plans to provide local security and drought mitigation by more
widespread use of desalination. Since 1990, at least five high-capacity
reverse-osmosis seawater treatment plants have been commissioned in
southern California and many more are under investigation. Desalination
of brackish water is less energy-intensive and has higher yields, and is
also under development. The 1992 price of US$325 per ML is still 50%
more expensive than water purchased and delivered from the drought
water bank, but is in the same ballpark as current long-run marginal cost
prices being adopted by MWD (see Box 3). Desalination is still two to
fivve times more costly than surface and groundwater supplies. More
than 20 programmes to enhance precipitation by cloud seeding were
underway in 1991; the estimates of increase in annual precipitation (not
yield) range from 2 to 15%. Research and action to enhance storage and
hydroelectricity generation continues.
The current suite of strategies (DWR, 1993) for demand management
to match supply in 2020 includes:
• water conservation, providing net savings of 1.1 mML/yr through
adoption of best management practice packages for urban use. Gross
irrigation savings of 2.1 mML are envisaged through recently
improved conservation and management practice, but this will
translate into only 370,000 ML/yr in net freshwater savings;
• drought land fallowing to supply 740,000 ML or more via the water
• drought demand management of 10% voluntary rationing could add
up to 1.2 mML/yr in savings; and
• retirement of 18,200 ha of poorly drained land in the western San
Joaquin Valley will yield only 160,000 ML/yr.
The Western United States
Augmentation will supply 1.5 times more water than conservation in
normal years but will make up only 60% of additional use in drought
periods. It is easier to achieve tangible savings through urban conservation
than through agricultural measures, and this is where effort is being
Water conservation in the sunshine state
Conservation of urban water has largely relied on reducing the very high
per capita consumption that is common in California – more than
600–800 lpcd in many districts compared to 200 lpcd in the UK. Amenity
watering received 40% more water than necessary (Englebert, 1979).
Xeriscaping has been widely promoted throughout California (Postel,
1985 & 1992), and one study at Novato revealed water savings of 54%.
Improved water control technology has led to significant water and
energy savings for municipalities (Irrig Expo, Melbourne, 1993), as have
improved leak detection, and innovative repair and replacement
Industrial water conservation was dramatic in the 1980s; in San Jose
conservation and recycling saved 540,000 ML – or enough to supply
9,200 homes (Postel, 1991). Savings ranged from 27 to 90% and the
average investment payback time of under 12 months helped rapid
adoption. The three largest water using industrial groups cut their use
by two-thirds over the period 1970–90 and water savings from 640
manufacturing plants in 12 Californian counties reduced consumption by
19% from 1985 to 1989 (940,000 ML, equivalent to 150,000 households).
Best practice includes retro-fitting low-flow showers, low-flush toilets
and restricted-flow taps, all of which are included in revised housing
codes. Pricing approaches to water conservation are discussed in more
detail in Box 3 on the MWD.
Agricultural water conservation has been partially stimulated by the
energy cost of pumping – 7% of California’s total generation in 1979,
two-thirds of that for agriculture. This figure was expected to double by
the end of the century (Roberts, 1979), but with recent pricing reforms in
the CVP and other federal projects using subsidised USBR generated
electricity, it is likely that further pressure is being applied. The CVP was
criticised particularly (Postel, 1989) as it supplies one-quarter of all
irrigated land in the state, and (prior to 1993) delivered water at a
quarter of the cost of the SWP. Farmers had repaid only 5% of the
estimated US$931 million capital cost over 40 years resulting in one-third
of all CVP deliveries irrigating low value pasture and commodities such
as wheat and sorghum.
It is unfortunate that the new efficient irrigation technologies are more
energy intensive than most surface irrigation methods. Surge flow has
been widely adopted for higher value field crops and for horticultural
row crops, but there is little data on net savings at the district or even
Hydro Logic?
farm level (Turral, 1993). In 1985, half the national area of trickle
irrigation was in California but only covered 115,000 ha (3% of total
irrigated area) (Postel, 1985); the area had trebled by 1991. Other
techniques include:
• the recycling of tailwater (particularly from furrow irrigation) can
contribute to 10% of water savings on farm, although management of
saline run-off can introduce new problems;
• increased flexibility in water ordering and delivery times;
• automatic control of division gates in the delivery system;
• interception drainage to catch spills and leakage;
• low energy use micro- and overhead irrigation; and
• improved scheduling – controlled deficit irrigation.
Until recently the impact of this conservation on fresh groundwater
supplies over the border in Mexico has been ignored, although seepage
from the All American canal supports urban and agricultural needs
which are now being adversely affected.
Recent innovations
A study undertaken by Winrock in 1992 (Keller et al., 1992) identified
three examples of innovations in longer term water management.
Water transfer: MWD will line the delivery facilities within the Imperial
Irrigation District, and in return will receive 123,000 ML/yr of the
conserved water, over a thirty-year period. This market-like exchange is
expected to become a model for further agriculture-urban transfers which
do not have any negative impact on rural livelihoods.
Conservation: Price-driven agricultural water conservation has been
achieved in Broadview Water District through two-tier pricing. There is
a base rate for volumes up to 90% of the historical delivery for specific
crops, and a higher rate thereafter. It was hard to distinguish savings due
to drought or pricing, but farmer interest in and knowledge of
conservation increased.
Water storage and exchange: MWD and the Arvin-Edison Water Storage
District propose to enhance MWD supplies by increasing off-season
aquifer recharge in this closed groundwater basin. MWD will pay for the
increase in recharge capacity and abstract the stored water in the peak
season; Arvin-Edison irrigators will use groundwater for summer
irrigation saving the surcharge on surface water from the California
Aqueduct and free up this surface water for MWD. This agreement is
favoured by environmentalists as storage south of the Delta may reduce
dry-season pumping and its impact on habitat and wildlife. Ironically,
implementation of the proposal was still dependent on an EIA of the
impact of off-season pumping to artificially recharge the aquifer.
The Western United States
Environmental Issues
Salinity is severe problem in California. Water tables in the San Joaquin
Valley are within 1.5 m of the soil surface over more than 500,000 ha,
requiring pumped and surface drainage to prevent salinity impacts on
long term ’sustainable’ agriculture. Between 1970 and 1985, crop yields
in the SJV declined by 10%, an average annual loss of US$31.2 million at
1985 prices (El-Ashry and Gibbons, 1986). Severe salinity problems are
also evident in the Imperial and Coachalla valleys, where there are heavy
clay soils (vertisols). Central Valley agriculture has raised in-stream
salinity by contamination with return flows, so that virgin salt contents
of 51 mg/l change to more than 1320 mg/l below the confluence of the
San Joaquin and Merced rivers. This is one of the reasons that dilution
flows are sought to minimise habitat degradation in the Delta (ibid).
Much of the salinity problem occurs where there is low-value fodder and
grain production, and intensification has been proposed on the better
land, although Ervin (1991) points out that land retirement will remove
a source of water table accession, whereas changing cropping patterns
will at best reduce the extent of the problem but not remove it. The
California Water Plan expects the bulk of land retirement to occur on
marginal lands in the south of the San Joaquin Valley, but has little to
say about the salinity mitigation effects that might result.
The leaching requirement in the Imperial Valley is about 120 mm per
year on about 200,000 ha., which contributes a fifth of the inflow to the
Salton Sea, a natural depression adjacent to the irrigation district.
Ironically, improved irrigation efficiencies and reduced seepage resulting
from the MWD–IID agreement may affect the ecology of this saltwater
There is little information available about strategies and more
importantly non-structural approaches to salinity management, unlike in
Australia. Public domain studies of the performance of structural
measures, which have dominated salinity management strategies to date,
are also hard to find.
Another unfortunate and much publicised consequence of irrigation has
been the emergence of Selenium toxicity at least 22 different wildlife sites
in the state (Postel, 1989), which has resulted in bizarre deformities and
population decline in fish, birds and other wildlife. The problem was
discovered in Kesterson National Wildlife Refuge, which was an
artificially created wetland, intended to store return flows from farms
and overflow water from the CVP. Irrigation has accelerated the leaching
of this essential but also toxic element, which has been further
Hydro Logic?
concentrated by evaporation in ponds and wetlands. Detoxification of
drainage water can be performed by soil microbes, mechanical filtration
and chemical treatment, but at a cost that would not justify the irrigated
agriculture. Where risk levels are high, land retirement is the most likely
Groundwater mining has caused land subsidence, damaging
infrastructure and impairing aquifer storage capacity. The worst overpumping in California has been mitigated by improved allocation and
management (see below) and ultimately by inter-basin transfer (see
above). Nevertheless, overdraft continues, mainly in the Central Valley
where more than half of the overdraft of 1.23 mML is in Kern County.
A more worrying trend has been localised groundwater contamination
caused by over-drafting and possibly excess recharge. This is a much
more serious problem, as aquifer remediation is very expensive. DWR
audits groundwater irregularly (California Water Plan Update, 1993),
however, and it is not clear that there is a continuous programme to
monitor groundwater use and quality.
The importance of wildlife habitat, species diversity, in-stream water
allocation and wetland conservation are all covered under the provisions
of the EPA and ESA and these concerns have been instrumental in
reshaping the state’s water policy.
Institutional Reforms – Past History and Present Innovation
A political analysis of federal, state and local water resources
management concluded that the public interest (as represented by the
federal government) was subordinated to a fragmented administrative
structure, dominated by powerful lobby interests (Cortner and Berry,
1977) and was characterised by long inaction, namely on groundwater
management. Up to that time, there had indeed been a highly
fragmented institutional framework for managing water, but there had
also been some local, innovative institutional reforms to manage
groundwater. The number and diversity of ’players’ has increased
considerably since then, and that the capacity to manage water rationally
has much improved. The links between the various players have been
strengthened by legislation, rising appreciation of a common interest, and
a broadening mandate for key state agencies such as the Department of
Water Resources. But all is not sweet: water development in California
is a litany of successive conflicts over:
• development objectives and strategies;
• investments and their impacts;
• major political and economic interests; and
• water use, valuation of water, and regulatory strategy (Keller et al.,
The Western United States
Participation is highly institutionalised and polarised representing both
narrow economic interests and broader conceptions of public good (ibid),
crystallising into three major interests groups – urban and industrial
water users, agricultural water users and environmental interests. Urban
and agricultural interests’ dominance has waned since the mid-1970s
when sophisticated environmental legislation began. Water conservation
is the common ground between these interests, although conservation
itself may have contrary impacts (Keller et al., 1992) – such as reduced
metropolitan revenues. Farmers may be loath to reveal the full extent of
efficiency improvements if they fear that mandatory restrictions may
result which prevent them from benefiting from either the conserved
water or its transfer. The urban and agricultural groups have each
formed umbrella organisations to represent their interests, but the
environmentalists are represented by a more amorphous group of private
and non-governmental organisations, such as the Natural Heritage
Institute and the Environmental Defence Fund.
These divisions and sympathies are mirrored in state and federal
organisations, although increasingly organisations such as the State Water
Resources Control Board and the Department of Water Resources have
such broad mandates that they are actively concerned with satisfying the
interests of all three factions.
Other players on the institutional landscape are:
• Major bulk water suppliers – CVP a heavily subsidised federal (USBR)
project, SWP;
• Water Districts (also bulk suppliers, but private or parastatal) – MWD,
Irrigation Districts, municipal water utilities;
• State agencies – namely environmental
• Municipal and rural water utilities (local bulk suppliers and service
• Federal agencies – USBR, USACE, EPA, USDA, Fish and Wildlife
Service, Forest Service;
• Industry;
• Private commerce – agricultural commodity traders, processing
industries, etc.;
• NGOs – environmental activist and lobby groups; and
• Recreational interests – such as white-water rafters.
Agricultural water districts include irrigation and drainage districts and
canal or ditch companies. Municipal water utilities may include domestic
water companies, special districts, municipal (publicly owned) water
departments, selected industries and lower level wholesalers (DeCook et
al., 1978).
A survey of more than 1000 Californian Water Districts found two
systems of administration and representation on governing boards
(Goodall and Sullivan, 1979). Property weighted representation was
increasingly under judicial review and has progressively given way to
Hydro Logic?
governing boards elected by one man-one vote. In some water districts,
any resident on the electoral register is entitled to vote, which changes
the balance of power away from large agricultural interests. The legal
nature and autonomy of the water districts allows them to hire staff,
accountable to members. They have sufficient status and clout to
negotiate equally with other users and agencies, which is by and large
not the case in comparable developing country situations (Keller et al.,
Historical institutional responses to groundwater mining
In California, institutional responses to over-exploitation of groundwater
developed early, as groundwater development began at the start of this
century. Permits or licences are not required as landowners have full
rights of ownership to groundwater stocks below their land, unless
special water rights have been adjudicated by the court.
The state experienced the typical adverse effects of over exploitation:
increased energy costs to lift water, higher costs for well-deepening,
change in crop pattern to high-value or rainfed crops, land subsidence,
water quality degradation, saltwater intrusion, and ultimately exclusion
of some pumpers from access to useable water.
Typically, water user organisations were formed, and consultants were
hired to provide advice (Coe, 1988). Often, a new public agency would
arise out of the need to levy taxes, legislate to control abstraction, or
contract to import substitute water. In some cases, water rights were
adjudicated and the idea of correlative rights was introduced.
Santa Clara Valley (later Silicon Valley), was an agricultural area but
urbanised heavily post-war; the population had reached 1.4 million by
1983. Private groundwater abstraction has been increasingly brought
under public management and the overdraft has steadily decreased,
although a major decline of 40 m occurred over the period 1910–50. The
worst case of land subsidence was near San Jose, where the surface fell
over 4 m between 1910 and 1970, and saline intrusion has been evident
along the southern portion of the San Francisco bay.
A Water Conservation District was created in 1929 in the Raymond
Basin to discuss and communally manage the groundwater problem
(Ostrom, 1990), and 10 flood detention dams were built over the next 25
years to recharge the aquifer. This was insufficient to meet the continued
increases in demand and 100,000 acre-feet per year were contracted from
the State Water Project, arriving in 1965, with further contracts to the
Central Valley Project in the 1980s. The main method of controlling
groundwater abstraction has been a pump tax in defined groundwater
zones, with industry paying four times the agricultural rate of US$11/ML
in 1983. Injection wells were installed to mitigate saline intrusion but
later found not to be needed as groundwater levels are now stable at 10
The Western United States
m shallower than their historical maximum and there appears to be no
further land subsidence.
Similar histories exist in the Los Angeles County Coastal Plain and in
Orange County Water District, with slight differences – in the former
case, a groundwater replenishment district was created in the combined
central and west basin in 1959 which levied a pump tax to cover the
costs of groundwater recharge and subsequently water transfers. In
Orange County, yet another alternative to the adjudication of
groundwater rights has been found: the water resource is treated in its
entirety as a public utility, and supply is guaranteed to all users at a
constant price, regardless of source. By contrast Kern County remains a
predominantly agricultural area, irrigating roughly 450,000 ha in 1980,
and continuing to have an annual overdraft of more than 616,000 ML in
1989, even though artificial recharge began in the early 1980s. Water
tables have declined 60 m this century with a consequent decline in
water quality, and land has subsided up to 3.3 m.
Irrigation deliveries from the Central Valley Project began in 1955, and
were supplemented by SWP flows following the formation of the Kern
County Water Agency in 1961, although delivery did not start until 1968.
Levels of artificial recharge have steadily risen, and on aggregate,
additions have exceeded extractions by 1.36 mML since 1977. Interannual and inter-drought period storage has been ’banked’ since 1982,
and is the property of KCWA, which sells it to its members. A two-band
tariff on pumping was instituted in 1975 to finance transport, treatment
and recharge, with agricultural rates half those for all other uses. A
surcharge is levied on those who benefit from water table stabilisation,
but who do not receive or pay for state water. The accumulated overdraft
at the end of the 1980s was still large, and subsidence is still occurring,
and it was feared that unless inter-basin transfers could be further
increased, overdraft was likely to increase as the remaining 30,000 ha of
unwatered but irrigable land is farmed. The various groups in Kern
County have all resisted adjudication of rights, and have pinned their
faith in obtaining further imports of water from the SWP and CVP, both
under intense pressure to increase allocations to other districts, and for
in-stream and delta allocation. A serious salt accumulation problem is
emerging as the basin is enclosed and has no outfall. To an extent the
narrow self-interest of agricultural users in Kern county has been
overtaken by the prolonged drought of 1987–91 and the California Water
Plan Update in 1993.
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Institutional Development
Public sector reform
In he last 15 years federal agencies such as the USBR have moved away
from construction and service provision, to planning, data collection and
water resources management, particularly following the act of 1982. The
USBR has remained the custodian and operator of hydroelectric dams
and has continued to manage large and complex water transfer projects
such as the CVP, which have continued to be cross-subsidised by
concessionary electricity tariffs. Whilst the Bureau has itself attempted to
at least cover the costs of electricity generation, it has met with powerful
and organised resistance from the irrigation districts, who have delayed
and challenged price reforms in the courts.
In California, the Central Valley Improvement Act of 1992 makes four
key reforms to present arrangements:
A minimum of 490,000 ML is to be allocated for environmental
purposes, (10% of historical delivery capacity). It envisages
environmental use of up to 1.23 mML, a quarter of CVP capacity (DWR,
1993). It requires the staged removal of operational subsidies on
irrigation water costs and immediate parity with the SWP pricing system.
It enables water trading within and outside of the project area.
The legislation first became operational in 1993–94, when 490,000 ML of
water were reallocated to benefit winter-run salmon and the Delta smelt.
A similar amount was dedicated to other environmental uses, including
pulse flow and controlled release in the Sacramento and American river
basins to modify in-stream temperatures and flow rates at key times,
such as spawning. Such releases have been given precise specifications
on the quantity and timing of flows. It is expected that some demand
pressure will be eased by the conservation induced by increased pricing
and changes to higher value cropping systems in the service area, but
there is also the possibility of increased groundwater overdraft in the San
Joaquin Valley, due to remaining inconsistencies in water policy which
effectively regulate surface water but have limited impact on
groundwater abstraction.
Organisational arrangements
The organisational framework in California is a complex mix of private,
public and not-for-profit entities; ’privatisation’ is not as big an issue as
in UK and developing countries. Irrigation districts have been privatised
gradually in California since the 1970s, the largest being the Kings River
ID, which benefited from previous experience in the Columbia Basin (see
Box 2). These ’private’ entities continue to receive operational and capital
subsidies. The CVPIA has reduced but not removed these distortions.
The performance of 438 public and private water utilities serving
25,000 Californians was investigated in 1992, with some surprising results
The Western United States
Box 2 The transfer of irrigation management in the Columbia Basin (after
Svendsen and Vermillion, 1994)
The Columbia Basin Project is a large multi-purpose reservoir-based project located near the Canadian
border on the Columbia River. Construction of the Grand Coulee dam began in 1933, water deliveries
in 1951, and an area of 230,000 ha is now under irrigation – roughly half the planned area. Water is
lifted 85 m out of the dam, and thereafter flows by gravity through the system. Three irrigation
districts were established in 1939, each comprising between 2000 and 2500 landowners who signed
repayment contracts with the construction and management agency (the USBR) from the outset. The
system was transferred to the irrigation districts in 1969 following complex and protracted
negotiations resulting in a contract between each of the three districts and the USBR, which adopted
a new roles as a wholesaler of water, an environmental regulator and a planner and manager of water
resources at a more general level.
The study conducted by IIMI analysed the hydrologic and financial performance before and after
transfer and concluded that service quality was high under USBR management and continued
following transfer, although conveyance efficiency in the main and branch canals dipped over an
initial five to six- year adjustment period. As the system has aged, however, there has been a
consistent decline in conveyance efficiency in the main system, attributed to neglect of the rising
maintenance loads and a desire to minimise water charges. In contrast tertiary-level performance has
improved as higher value and less water-intensive crop patterns have been adopted, facilitated by
farmer investment in sprinkler and centre-pivot technology. Hydropower generating equipment was
installed in the main canals in 1985 and there has been a sharp increase in the volumes of water
ordered since, possibly reflecting the profitable nature of electricity generation.
When adjusted for inflation, water charges to the financially autonomous districts are only 78% of
that charged under USBR management. Simultaneously net returns to farmers have risen steadily over
the past 30 years; reduced water charges are thought to have accounted for a 15% increase in net farm
income. The irrigation districts negotiated very favourable capital repayment terms, mainly through
a 10-year grace period and a total repayment period of 50 years, resulting in net repayment of about
12% of total construction costs, including additional works and drainage negotiated prior to hand
over. The cost of pumping is cross-subsidised from hydroelectricity generation by nominal electricity
rates for pumping water out of the dam, rates fixed in 1945 and which are now 1/34th of the
summertime market value. The USBR is seeking to double the tariff just to cover the costs of power
generation, and the issue was still in court in 1994.
It is impressive that such large and complex systems can be handled by three irrigation associations,
and this is one example of a recurring pattern throughout the American west, with the King’s River
Irrigators Association in Fresno California managing nearly half a million hectares.
The IIMI study cites the following enabling factors, leading to successful transfer:
• Established federal policy on transfer and cost recovery generated an air of inevitability, but also
co-opted farmer participation from the outset. Agreement to recover the ’full’ cost of operation and
maintenance was reinforced by legally binding contracts specifying the rights and obligations of both
parties (the USBR and the irrigators’ associations).
• The CBP was effectively and professionally operated before transfer, and a culture of partnership
has been fostered between the USBR and the districts since then. The internal ramifications of
transfer to USBR personnel were smoothed by the transition in the role of the agency and the
possibilities of employment as professional managers in the irrigation districts.
• Pragmatism in not attempting to recover full capital costs, and indeed in maintaining some
operational subsidy, whilst maintaining a consistent federal irrigation policy that encourages
farmers to invest in new technology and longer term investment. Negotiated improvements to the
system prior to transfer.
• A social context where there is a relatively homogenous and small group of farmers, who are well
educated and commercially oriented and who hold considerable legal and political power plus
secure land and water rights.
• Strong legal basis for irrigation associations, supported by a relatively impartial and accessible
legal system.
• An insistence on mandatory external audits.
In conclusion, what has been a successful transfer to private management in administrative and
functional terms, is ’compromised’ by the power of the privatised associations to maintain
considerable operational subsidies and defer capital repayment while increasing actual water use. So,
although there has been progress in improving irrigation management and reducing the direct burden
on the state, broader objectives in rational water resources management, particularly rational and
economic allocation of water, have not been well served.
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(Bhattacharya et al., 1994). The study was undertaken with the American
Waterworks Association and analysed complete data sets for 257 publicly
owned and 32 private water utilities. Both had significant relative price
inefficiency and excessive capitalization. The private utilities were less
efficient than public ones, both technically and in their use of variable
inputs such as labour, energy and materials. The range of efficiency in
public utilities was greater, however, and private utilities were more
consistent in their degree of inefficiency. Both utilities have a negative
marginal product of capital, but private utilities, tending to be larger
were on average more scale efficient. The investigators argue that the
attenuation and non-transferability of shares in public firms has not
resulted in inferior production processes and service delivery, a finding
that has important implications for the tradeable water rights debate and
to privatisation strategies in developing countries, both cases where
similar evaluations are not yet possible.
Accommodating environmental needs
Environmental groups have become more proactive, less obstructive.
Federal programmes, such as the Conservation Reserve Programme
(CRP) of 1985, have tried to improve federal–state coordination and
cooperation. The CRP attempts to meet agricultural supply control,
wildlife habitat, water quality and soil conservation goals through
targeted subsidies and dovetailing with state incentive programmes
(Reichelderfer, 1990). However, this and similar arrangements have not
satisfied economic and environmental objectives, partly because
contradictory state and federal policies, or unrecognised counterincentives. Reichelderfer concluded that absolute cost and costeffectiveness of such programmes is determined as much by the manner
in which agro-environmental incentives are implemented as in the nature
of the incentive itself; and that incentive programmes need to be
designed for the longer term, in anticipation of shifting social, political
and economic conditions, and stress the importance of alternative
incentive strategies that are triggered as changes take place.
The economic appraisal of environmental regulations and provisions
in water management is imminent: the Federal Wetland Reserves
Programme has identified 22.3 million ha throughout the USA that are
eligible for reclassification as agricultural wetland reserve. Easement costs
were estimated for 18.6 million ha based on capitalised net returns to
crop production, to which restoration costs were added. The average
costs for the least expensive 2 million ha range from US$1,245 to 4,850
per ha (Heimlich, 1994), but much further work is needed to assess the
aggregate environmental benefits. A pilot project has sought cost-effective
voluntary enrolment in nine states, and actual per ha costs in California
proved to be considerably higher than estimated due to urban influences
on land values. Heimlich has noted that GIS and large database systems
The Western United States
are important tools for managing effectively and analysing environmental
policy and support programmes such as the Wetlands Reserve.
There has been considerable scepticism in California about
environmental regulation through governmental agencies that may easily
be ’captured’ by those they seek to regulate, or may simply not have the
capability and capacity to enforce standards and codes of practice. In
1986 the Safe Drinking Water and Toxic Enforcement Act became law in
California, and was mainly authored by private environmental
organisations (Helfand and Archibald, 1990). It has become known as
Proposition 65 and it seeks to control human exposure to toxic substances
through explicit warning requirements and endows consumers with
rights to uncontaminated drinking water, shifting the burden of proof to
manufacturers and vendors that these rights are not infringed. It assumes
that the consumer is a more discerning judge of acceptable risk than a
government agency and provides incentives to the public to seek
adjudication in court under the ’bounty hunter’ provision of the act,
which grants a successful plaintiff 25% of the penalties awarded against
a violator. The act explicitly recognises that zero risk is not attainable in
many instances and specifies minimum acceptable risk as a way of
incorporating some cost effectiveness into the preventative measures that
must be undertaken. The list of specified substances (carcinogens and
toxins) that come under the warning provisions is already long and is
expanding. Opponents of Proposition 65 claim that compliance costs are
very high and that it is over-responsive to (unjustified) public fears about
toxins in food and water, without estimating possible social benefits from
some of the very same chemicals. The success of this approach, promises
new opportunities for regulation and for addressing enforcement
problems, providing the guiding rules of the legislation are balance
between costs of compliance and satisfaction of their true intention.
The ’three-way process’
Possibly the most significant institutional innovation is the three-way
dialogue that is emerging between representatives of the major interest
groups in urban, water and environmental use. For 15 years agriculture
and urban interests have been fighting a rearguard action to protect and
increase their water supplies and have been thwarted by environmental
interests who have developed considerable power to delay or halt
projects and programmes. Despite this apparent power, environmentalists
were unable to get support for their own agendas and a climate of
mutual antagonism and stalemate resulted (Keller et al., 1992).
The drought that began in 1987 sharpened the appreciation of this
impasse and prompted representatives of the California Urban Water
Agencies and the California Farm Coalition to discuss transfer of water
from agricultural to urban use. The ’Pardee group’, as it was known,
concluded that such transfers would be severely constrained without
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resolution of the problems associated with exporting water from the
Delta, and therefore sought dialogue with environmental interests, in so
doing forming the ’Hetch–Hetchy group’, named after the venue where
they met in 1991. This resulted in a clear statement of the minimum
requirements of each group (as outlined below), and set a framework for
constructive dialogue to develop long-term solutions:
Urban position:
• Urban agencies must be assured that they will be able to obtain
appropriate quality water supplies with a high degree of reliability to
meet current and future demands.
Agricultural position
• Farmers and agricultural interests sought assurance that they would
not lose control over ’their’ water and that production would not fall
and neither would rural communities suffer social or economic
Environmental requirements
• Immediate amelioration of environment through increased in-stream
allocations and habitat improvement.
• A longer term process for continued improvement in environmental
• Creation of a legal entity to safeguard these gains.
About 60 people were initially involved in informal and relaxed
discussions, with sub-committees delegated to look at specific issues. The
group has enlisted technical support and data provision from the DWR.
To date there has been little of substance in the literature on the
outcomes of this development, although it is considered to be
remarkable, constructive and a model for other pro-active and
cooperative agreements. The Consensus project is one such example: the
USBR and the Fish and Wildlife Service will develop analytical decisionsupport tools for water management, based on technical and institutional
considerations. This initiative resulted from the CVPIA and has now
taken on board a private company, Water Resources Management Inc.
and the Natural Heritage Institute as partners (World Wide Web, 1995).
Drought contingency plans
In 1988, a survey (Moreau, 1991) of 408 large water utilities showed that
approximately half had ordinances or other written drought policies; only
28% had a mechanism for triggering conservation efforts; and most
thought that they were already doing a good job. Ramamurthy and Singh
(1989) proposed a framework to investigate relationships between
The Western United States
agricultural, hydrological and meteorological droughts as an aid to public
policy development in drought mitigation. In response to critical
state-wide shortage, the Governor signed an ordinance in October 1991
that required all municipal suppliers providing water to more than 3000
people or more than 3.7 ML/yr to develop a water shortage contingency
plan. This requires forward estimates over 12 to 36 months of worst-case
water availability and a staged action plan for water supply shortages of
as much as 50%, with appropriate trigger mechanisms. Consumption
limits must be specified and the utilities should provide a method to
overcome revenue impacts of reduced services – a topical contrast to the
UK private water companies’ thinking on this matter! Plans had to be
lodged with DWR by early 1992. This initiative appears to be making a
broader impact with recent calls to define roles of local, state and federal
agencies and to establish appropriate risk levels for intervention in
drought water resources management (Grigg and Vlachos, 1993).
Water markets as part of institutional reform to mediate reallocation
of water
Arguments have long-raged about the pros and cons of water marketing,
particularly in California, and have remained largely theoretical due to
the small numbers of transactions, even though the volume of the
transactions dwarfs those in neighbouring western states (see Box 1). In
1988, Satoh (1988) suggested that efficient water markets in California
were constrained by legal uncertainties surrounding non-quantified water
rights and water-pricing problems originating in the subsidies of the
SWP and CVP (one-quarter of the SWP cost per ML). He suggested that
there should be tolls charged on actual water use by contractors and that
profits should be allowed from unused transfers, and he justified this on
the basis of modelling water selling (as opposed to transfer of rights).
Contrary to neo-classical theory, the development of private property
rights to water in the Kings River Water District demonstrated that such
allocations institutionalise rather than neutralise existing structures and
distributions of power (Coontz, 1991). Intrigued by the low level of water
transfers in California, Young (1986) observed that
• the willingness to pay for water, when real money is at stake, is not
that high at the margin;
• transaction costs to negotiate and process contracts and protect thirdparty interests are large relative to the potential gains;
• conveyance and storage costs are also likely to be large in comparison
to the advantages of trades; and
• there is great potential for indirect third-party effects of trades that is
difficult to quantify and compensate for.
He concluded that the prevailing margin between values in alternative
uses was not in fact sufficient to justify the cost of transfers, because in
many theoretical studies the true values were not calculated on
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comparable bases – such as the inclusion of capitalization of water into
land values, the long-term value of agricultural livelihood and lifestyle,
knock-on effect to rural industry and economies, andthe conflicting
effects of subsidies in water and commodity prices, to name but a few.
It is likely that the development of water markets in California will
remain fairly low key and Rosegrant (1994) identifies the following
• A strong burden of proof is placed on the potential transferors to
verify consumptive use and investigate and assure no harmful thirdparty impacts to other users or the environment under state law.
• The necessity to balance competing interest groups of agricultural,
urban and environmental users, which is complicated by the
environmental restrictions on the transfer of water throughout the
Delta, which is the hub of the water system.
• The need for careful timing of water transfers to account for
environmental and capacity constraints in a system that is fully
committed to supplying existing contractors.
Although it has been claimed that big institutional players (water
districts, federal projects, agricultural corporations) have opposed
development of water markets as inimical to their interests, the drought
bank experience points to an increased role for DWR and CVP in broking
and supporting intersectoral transfers. Rosegrant calls for further
decentralisation and deregulation to stimulate water markets (1994), but
controversy and cautious development will occur precisely because many
Californians and diverse interest groups will see the ’impediments’ noted
above as being necessary and ’fair’, and not lightly deregulated. A
number of commentators have indicated that public money should be
used to purchase rights to enhance in-stream flows and for
environmental allocation, partly and perversely to give the agricultural
community some compensation for such reallocation.
The drought water bank provided the first real experience with
intersectoral reallocation of water by a market-like mechanism, and takes
the discussion of water markets at least one step beyond theory (Keller
et al., 1992). The infrastructural, procedural and institutional
impediments to water marketing have been illuminated in rather more
substance, although other commentators claim the institutional
environment for market-based transfer in California is unusually hostile
(Rosegrant, 1994). Market proponents also claim that the restrictions on
the physical transfer of water imposed by the environmentally set limits
on exports from the Delta make California a unique case (Rosegrant,
1994), whereas others (Keller et al., 1992) maintain that the state’s
The Western United States
capacity for water movement is almost second to none. It is certainly true
that California’s water infrastructure is more sophisticated, more
comprehensive and employs better technical management than almost
any developing country water system. It hardly seems rational to claim
that the impediments found to water marketing in California are unique
– on the contrary, one would expect to find many more in South and
South-east Asia.
The subject of inter-state water marketing is frequently discussed, and
the federal Supreme Court’s decision that water should be tradeable
across state lines is seen as an enabling factor (Young, 1986). It is
notionally a very neat idea with respect to Californian water demands
and the uneconomic irrigation development in the upper Colorado Basin.
Although the water accounting and storage problems are probably
simpler in large up- to down-stream water transfer, the actual mechanics
and transaction costs of broking the trades may be more complicated
than within state, especially if groundwater is involved. For the time
being, inter-state water markets remain an idea and are unlikely to
become a reality for some time.
words: 22377
The state has been more involved in water and municipal services in
Australia than in the western USA. Although irrigation was started by
private trusts it was soon overtaken by public investment,
implementation and management. Irrigation is now part of a major
export industry and contributes to about 28% of GNP (grains, fruits,
vegetables and milk products), along with large marginal enterprises
such as irrigated pasture for wool, mutton and beef. Irrigation
development began at about the same time as it did in the US (late 18th
century) and received major boosts in the inter- and post-war years,
peaking slightly later in the 1970s. The total irrigated area in Australia
(predominantly the Murray-Darling Basin (see Map 3) is less than that
of California alone, and since 1980, less than that of Spain.
User-financing and contracting to repay the capital as well as the
operational costs of water development infrastructure has only recently
emerged in Australia. In the USA it is embedded (at least in theory) in
the framework of the Reclamation Act of 1902. A fundamental difference
between the Australian and North American situation is that price
support and other agricultural subsidies are very rare in Australia,
although large subsidies have been applied in the provision of and, until
recently, the operation of irrigation systems in the states of Victoria, New
South Wales, South Australia and Queensland.
The environmental movement has not been far behind the USA, and
environmentally sound water management has been a major driving
force in water policy and has been high on the political agenda for nearly
15 years.
History of Australian Water Development, Predominantly in
the Murray–Darling Basin
Steamer Navigation – construction of locks begins
Development of irrigation by private trusts in NSW and
Victoria (the Chaffey brothers move over from California)
Navigation flows affected by irrigation diversions; railways
becoming important carriers
Government of Victoria establishes state sovereignty over
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stream flows
Federal Government formed with Commonwealth of States
In Victoria, all but the First Mildura Irrigation Trust have
First Water Act (of Victoria) followed by 15 separate pieces
of legislation to 1980: all combined and revised in the
Consolidated Water Act of 1989. Murray–Darling Basin
Commission (MDBC) affected the process significantly,
particularly water quality
Victorian Government establishes the State River and Water
Supply Commission which energetically pursues water
development in line with the state government’s objectives
1914–1915 Drought – flow in Murray almost ceases in South Australia
Murray Waters Agreement
1915–1979 Rapid rise in water demand (see graph). Construction of joint
works and storages under Murray River Commission
Major storage works
1000 ML
Hume (starts to fill 1929)
Dartmouth finished 1979
Lake Victoria (off
Lake Mulawalla
R. Murray: 13 weirs and locks; R. Murumbidgee: 2 weirs completed
between 1922 and 1979
5 barrages constructed between Lake Alexandrina and mouth
of R. Murray in South Australia to prevent saline intrusion
Murray River Commission granted powers of investigation
throughout catchment
Snowy Mountains Hydro-electric Authority created
1960s–80s Expansion of Snowy Mountains Hydroelectric Scheme – plus
guarantees of minimum drought flows to augment Murray
Clean Water Act (New South Wales)
Murray River Commission introduces of water quality
assessment to determine operation of major storages to
provide dilution flows
Australian Water Resources Council formed to develop
national water planning and strategy. Funded by federal
government, evolved slowly through various stages until
1979. Accompanied by development of individual states’
Water Resources Acts in mid-70s.
National Water Policy; National Water Resources Programme
(NWRP) initiated
NWRP proposals to protect and improve water quality
Rural Water Commission formed from the State Rivers and
Water Supply Commission, Victoria (SRWSC).
Murray–Darling Basin Commission (MDBC) formed
Salt credit scheme (MDBC)
Water Act (Victoria) consolidates and rationalises all previous
legislation in plain English
Queensland ratify agreement and become full members of
Corporatisation of the Rural Water Corporation of Victoria
Privatisation of the Rural Water Corporation of Victoria
There are three levels of government in Australia: federal, state and local.
The states have been responsible for land and water management since
federation, but the federal government has become involved through
capital grants for major works, financial support for water resources
planning (since 1964), and initiatives which transcend political
boundaries, such as coordination of development in large river basins
and water research (since 1968). States cannot levy taxes on personal
income, which is collected by the Commonwealth government and then
redistributed (roughly pro rata) to each state. Local government can raise
revenues to provide and recover costs for municipal services.
As the Murray–Darling Basin (Map 4) dominates the history and
extent of water development in Australia, most of the ensuing discussion
will concentrate on its major member states, Victoria, New South Wales
and South Australia. Constable (1995) identifies three stages of water
resources activity in Victoria, which reflect a similar pattern of events in
the other eastern states:
Experimental water development. The opening up of the interior of the
continent, largely on the basis of private enterprise.
The development period. The 1905 Water Act established a Water
Commission which was responsible for the allocation of water rights as
well as for constructing and operating irrigation and drainage projects.
Legislation gradually introduced up to the 1940s was introduced to
remove all inherited (British) Common Law obstacles to State
Development in surface and groundwater development and to allow the
creation of authorities to provide rural and urban water supply and
dispose of the associated wastes.
New approaches to water management. From 1980 the rising importance of
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environmental impacts of water development initiated a decline in
construction and development and an increase in allocative and
regulatory activity, which was fully consolidated in the Water Act of
1989. This act does not interfere with any existing private rights and
presumes that government powers should be used sparingly, strategically
and only when required. Recognition of the unity of the three phases of
the hydrologic cycle is a fundamental of the act which requires that all
aspects of water be administered in an integrated and comprehensive
Randall, a US academic on sabbatical in Australia, was prompted to
summarise the expansionary (or development) and mature phases of
water development and management (Table 5) which is reproduced here
without alteration as it sets the tone for the ensuing discussion.
Table 5: Characteristics of expansionary and mature phases
Expansionary phase
Mature phase
1. Long-run supply of
impounded water
2. Demand for delivered
Low, but growing; elastic
at low prices; inelastic at
high prices
High and growing; elastic
at low prices; inelastic at
high prices
3. Physical condition of
impoundment and
delivery systems
Most is fairly new and in
good condition
A substantial proportion is
ageing and in need of
expensive repair and
4. Competition for water
among agricultural,
industrial and urban
uses, and instream flow
5. Externality, etc.,
Pressing: rising water
tables, land salinisation,
saline return flows,
groundwater salinisation,
water pollution, etc.
6. Social cost of
subsidising increased
water use
Fairly low
High, and rising
Source: Randall, 1981
Institutional Arrangements for Water Management
Two major bodies reflecting the mix of state and local jurisdictions, both
accountable to Parliament, emerged during the development period. The
State Rivers and Water Supply Commission, Victoria (SRWSC) was
constituted to provide irrigation and water services to rural towns and
settlements outside the metropolitan area of Melbourne, which was
serviced by an autonomous metropolitan authority known as the
Melbourne Board of Works. Both organisations were expected to be
financially self-sufficient, although it proved impossible to recover all
costs from irrigators and subsidies were provided to support services to
small rural communities on the grounds of social equity (Constable,
1995). A similar pattern of development occurred in New South Wales,
with a state Department of Water Resources and a number of
metropolitan authorities, notably for Newcastle and Sydney.
By 1970, Melbourne needed inter-basin transfers to augment its own
basin, which resulted in friction between MBW and SRWSC. Rising
environmental concerns and public pressure for greater devolution and
participation in rural water management led to the creation in 1976 of a
body to oversee water resources, the Department of Water Resources
(DWR), and to be responsible for state-wide strategic planning. This
department has had ministerial and sub-ministerial status and has been
affiliated to different ministries at different times, but is now part of the
Ministry of Conservation and Environment. The SRWSC was
reconstituted as the Rural Water Commission (RWC) in 1984 and lost
some of its administrative and regulatory roles to the Department of
Water Resources.
MBW became an autonomous quasi-private corporation known as
Melbourne Water in 1989, heralding further changes in the water sector.
Economic rationalism and the philosophy of ’user-pays’ emerged strongly
towards the end of the 1980s and with the accession of a conservative
government in Victoria, the RWC was put under increasing pressure to
become financially self-sufficient. The outstanding capital debts incurred
by the RWC and its predecessor from building storage diversion and
distribution works was written off by the state government and the RWC
was corporatised to become the Rural Water Corporation in 1992. It was
committed to achieve a zero internal rate of return on trading on its
operations by 1994 and it met that target. In June 1995 the irrigation
system was privatised into a number of autonomous regional water
boards, or Corporations. Operation of the headworks remained with a
RWC and has been absorbed into DWR, which is now responsible for all
planning, regulation, data collection and monitoring.
Although economic-rationalist policies have been pursued for rather
longer in neighbouring New South Wales, privatisation of irrigation
systems has proceeded with more caution. Pigram and Mulligan (1991)
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reviewed the experience with privatisation and corporatisation in New
Zealand (1988) and both the initiatives underway to develop autonomous
irrigation districts in the Lower Murray and Riverland regions of South
Australia. They concluded that:
’change for change’s sake is not justified, and more than commitment to
political ideologies or free-enterprise philosophies is needed to justify the
accompanying disruption to established structures and modes of
They (rightly) pointed out that a more fundamental question is the extent
to which improvements in technical and economic efficiency can be
delivered under either public or private management, and doubted the
efficacy of converting public monopolies into private ones. The brief
success of reforms under corporatised management of the RWC
illustrates what is possible under state jurisdiction, and the stage is now
set for an interesting comparison between the developments under fully
privatised management in Victoria and the evolving state-backed
arrangements in NSW.
The experiences of New Zealand and South Australia showed the
importance of consultation and public participation for the devolution of
irrigation system management in NSW. A survey of irrigators in the
Lachlan Valley (NSW) indicated that 75% of those balloted opposed
private management of the Jermalong–Wyldes irrigation district and 95%
were against private ownership (Pigram and Mulligan, 1991). The
development of Business Plans to specify key management objectives was
identified as fundamental to reforms, whatever the institutional
arrangements selected for water management, and as it happened this
was fundamental to the corporatisation of the RWC in Victoria.
NSW has a policy of transferring irrigation management from the state
government to community-based management boards (Prathapar et al,
1994). Broadly speaking there are three options: (1) ’commercialisation’
under joint management between the NSW DWR and the management
board (Musgrave, 1994); (2) corporatisation requiring operational selfsufficiency by the management board; and (3) privatisation, following the
write-off of major capital debts. These latter two options were formally
authorised in 1993 following a 3- to 5-year process of increasing the
management responsibilities of the management boards (NSW DWR,
1993). In the Murrumbidgee region there are two irrigation districts: the
older (settled intermittently from 1912 to 1960) Murrumbidgee Irrigation
Area (MIA) (484,000 ha gross) has opted for corporatisation because of
its age and infrastructural deficiencies, a broader spectrum of attitudes
to private management and mix of cropping systems. The relatively new
and modern Colleambally Irrigation Area (CIA) was first settled in 1960
and is smaller in extent (79,161 ha) but accounts for a larger proportion
of the net irrigated area of 136,000 ha in the region. Farmers in the CIA
have opted for privatisation because of the relatively small size and
homogenous nature of the farming systems and infrastructure; 85%
preferred privatisation over the corporatisation option and 77% preferred
the creation of a private irrigation district. The process of electing board
members and facilitating the handover is complete, but it is far too early
to assess performance.
The historical institutional arrangements in Australian water
management were relatively straightforward compared to the situation
outlined in the western United States in the previous chapter. The
emerging institutional landscape may develop more complexity, but it is
founded on a broadly homogenous base and has a more unified and
consistent legal foundation between states, particularly with regard to
water rights, which have been state-owned for most of this century (see
Box 4). This simplicity makes it convenient to summarise early on, but
much of the innovation in Australian water resources management
requires a more detailed understanding of the setting and hydrology of
the Murray–Darling Basin (MDB) and the role and impacts of irrigated
agriculture. Most recent reform in water resources management in
Australia is concerned with cost recovery and economic efficiency (two
major concerns of developing countries), and is less explicitly concerned
with reallocation of water to higher value economic uses, particularly for
cities and industries which are located predominantly along the coastal
belt (see Box 5 on the Hunter Valley). Suitable mechanisms to enable the
transfer of water from low- to high-value uses are under consideration
and being tested in the MDB member states as a means of enhancing
efficiency. It is argued that displacement of low-value agriculture by
export-oriented and horticultural enterprises will improve the cost
recovery and self-financing of irrigation systems and contribute to lower
water use with positive benefits on the water logging and salinity
problems that are crucial to long-term economic and environmental
sustainability. Re-allocation of water for environmental use is also
important, but as the states currently own water and allocate
usufructuary rights, it is not necessarily true that payments will be made
for transfers of water from irrigation to other uses, particularly the
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Box 4 Water rights in Australia
Towards the end of the 19th century, the riparian rights system inherited from Great Britain
was replaced by state ownership and the allocation of usufructuary rights, specified for a
limited period only. The state of Victoria assumed sovereignty over water in 1886 and riparian
rights were abated if they came into conflict with the state’s interest. The state retained the right
to alter or suspend water rights in times of shortage, such as drought.
The system of rights that has evolved in Victoria and the other eastern states is well adapted
to the cyclic variation in water availability in a country that regularly experiences both floods
and drought. Water rights are divided into three categories: the basic water right is attached to
land and is allocated so that even in bad (but not the worst) drought year, the full amount (or
100%) of water right will be delivered. The actual volume involved depends on the storage
security and the system where a farmer is located. The second, optional portion of right can be
purchased up to a maximum volume that is determined by the water managers on the basis of
the amount of water held in storage at the beginning of an irrigation season, and on the basis of
likely depletion of that storage depending on drought forecasting and so on. In good years,
farmers may be able to purchase additional water to more than double the value of their basic
allocation – in the local jargon ’sales’ could be up to 200% of water right (100% of basic right
plus 100% sales). Farmers may also purchase additional unallocated water held in storages and,
since the early 1980s, may purchase unused sales water or complete allocations from
neighbouring irrigators.
The water right allocated to a farm is rarely enough to irrigate the entire area, and may have
seasonal limits attached, so that the allocation for summer irrigation is specified as a different
right from allocations made for, say, winter pasture and supplementally irrigated winter crops
such as faba beans.
In Victoria, water supplied to each farm is measured using a flow metre known as a
Dethridge Wheel, which is mounted in a casement where water is discharged from the main
channel into the farmers’ field channel system. The metre measures accumulated flow and is
accurate to about 3% if installed and maintained correctly, but may err by up to 8% – although
measurement errors usually favour the farmer. A farm may have more than one metre,
depending upon its allocation of water right, the topography of the farm with respect to
command from the channels, and whether the farm has absorbed other holdings in the past.
Farmers pay for the cost of the metre itself and for its installation.
Water that is diverted directly from a river, lake or from a borehole is also licensed and
metered, but it is only charged at the bulk rate which is approximately one-third of the full
delivery charge. Volumetric measurement and charging has been the norm in Victoria since the
1960s, but was only introduced in the late 1970s in NSW.
Farmers are billed on metered water supply in arrears at a number of times through the
season. Orders must be made at least four days in advance and requests can be placed by
telephone and are recorded by an answering service, in place of the older system of giving
orders in writing to the local water bailiff. If farmers require less or more water than ordered,
they inform the scheduling office to avoid inconveniencing farmers who are next on the roster.
The Murray–Darling Basin
Setting and Background
The Murray–Darling Basin contains four principal rivers (Darling,
Lachlan, Murumbidgee and Murray), which drain an area of about 1.1
million square kilometres, which is most of south-eastern Australia and
one-seventh of the county’s total land surface. The basin is hydrologically
complex, owing to the considerable geological age of the area, and is
politically complex, as it covers four states plus the Australian Capital
Territory (ACT). It covers 75% of the state of New South Wales and 56%
of Victoria, with peripheral areas of South Australia (8%) and
Queensland (15%) (Musgrave, 1994).
It is the fourth longest river system in the world (3700 km) but, as
much of the catchment is arid and semi-arid, average flows are small and
account for only 5% of average Australian runoff. However, the mean
annual flow of 12 mML supports 75% of all Australian water use and
95% of its irrigated land. Water is sourced from the system to support a
total population of 1.6 million including those in 16 major cities such as
Canberra (population 25,000). The Murray supplies 43% of normal
demand in Adelaide (1 million), rising to 80% in a drought year
(Alexander, 1990).
Water resources of the Murray–Darling
For most of its length the Murray is very flat, although the headwaters
are at 2000 m on the boundary-forming Great Dividing Ranges to the
south and east of the basin. Summer monsoon rainfall generates flow in
the Darling in the northern region, but there is often little flow through
the arid areas in between. The MDB has a very variable hydrology, with
a 13-fold variation in flow into Lake Hume. Both severe flooding and
drought occur because of the extreme variability of the area’s hydrology
(see inter alia, McMahon, 1984), and flood protection works for rural
towns and farms has resulted in many stretches of the river being trained
and embanked. Clear felling of the upland forest has in the past caused
severe local flooding and soil erosion, but controls over logging and land
clearance and more recently the advent of Integrated Catchment
Management (ICM) have made a positive impact.
As a consequence of this variability more than 400 reservoirs have
been constructed along its length, with a total capacity of 30 million ML
or roughly 2.5 times mean annual flow. In comparison to the Colorado,
the river is not highly regulated in the sense that there is a minimum
outflow to the sea – total annual use is approximately 10 mML and flows
in the lower Murray are typically 5 mML/yr. Irrigation absorbs 90% of
use, while stock and domestic supplies account for 6% and the remaining
4% is supplied to urban centres. Modal flows in the system are much
higher, for example reaching 19.7 mML inflow in 1989 with the result
that South Australia received flows of 12.4 mML. In 1992–3 and 1993–4,
the net flows were similar and are 6 to 7 times greater than the minimum
allocation specified in the Murray Waters Agreement (1.85 mML). Total
diversions in NSW were 3.3 mML and 2.9 mML in Victoria in 1993–4
(MDBC annual report, 1993–4).
Some assurance of drought period flows has been afforded by
interbasin transfers from the Snowy Mountains Scheme (a complex
system of storages designed to meet minimum monthly electricity (total
installed capacity, 3700 MW) and irrigation demands). Guaranteed
supplies can be called on under the Snowy Mountains Agreement
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between the Murray–Darling Basin Commission and the Snowy
Mountains Council (Constable, 1995).
Development and the natural environment
Land clearance, forestry, pastoral development and irrigated agriculture
have all been developed at some historical and continuing cost to the
natural environment, but have also provided the backbone to Australia’s
economic development. One-third of all Australian natural resources
production occurs within the basin, including 67% of fruit production
and 75% of irrigated cereals including rice (more detail is provided later
in this chapter).
Just over half the original basin vegetation remains (Alexander, 1990)
and the Murray supports over 7,000 wetlands covering about 118,000 ha.
Wetlands are natural basins and depressions that store water after floods
have receded; well-defined channels across the flood plain; and small
inlets adjacent to river banks. Billabongs (oxbow lakes) are plentiful
along the meandering path of the Murray in its flat flood plain, as are
lakes, marshes, swamps, lagoons and creeks. The complexity and
ecological diversity of wetlands, reflecting the great climatic variation
along the Murray, has made them an issue of great importance to the
environmental movement and subsequently to the state authorities.
Saline return flows from irrigation have caused significant degradation
to some wetlands and the importance of billabongs and aquatic ecology
in the floodplain ecosystem is being seriously researched (MDBC, 1990).
The ecology of much of the basin is adapted to cyclical droughts and
Figure 1: Murray River salinity profile
periodic flooding, the dynamics of which are being studied by
organisations such as the Freshwater Research Centre in
Albury–Wodonga, with a view to monitoring and quantifying
environmental degradation and specifying flow regimes and
requirements to water managers to sustain the Murray’s natural
Flood plain vegetation, particularly the Red Gum Forests along the
banks of the Murray and Edward rivers between Tocumwal and
Robinvale, have been highly valued for many years. These forests are
watered by over-bank river flooding and from localised groundwater
recharge from the river system, so concern was noted as far back as 1991
when construction of the Hume dam began. Increased summer water
levels in the reaches below the dam extended the submergence period,
killing many trees in lower lying areas. In 1939, regulators and protection
embankments were built to control flooding in the Barmah–Millewa
forests, and research and management have increased progressively since
the end of World War 2. This forest is the largest single stand of river
red gum in the world and its preservation has become an issue of
national significance; management strategies have been outlined that,
given occasional precedence in allocation to forests, can achieve similar
stands and tree quality as existed in pre-river regulation times (MDBC,
Throughout southern Australia, there is a widespread and
fundamental readjustment in environmental equilibrium, as regional
aquifers fill up in response to land use change brought about by
European settlement (Macumber in MDBC, 1990). Salinity is a major
manifestation of this process, although it is not new and highly saline
conditions have prevailed in the past. If the current rates of groundwater
pressure rise continue, it is predicted that the Riverine Plain will become
a zone of regional groundwater discharge (ibid). Much of the
groundwater is naturally saline1 and rising groundwater tables have
resulted in outflows to streams making them brackish. The salinity
gradient along the river Murray is illustrated in Figure 1 and shows that
water quality progressively deteriorates from source to outfall in South
Australia. The contributory effects of irrigation and land clearance for
rainfed farming are described in more detail in following sections.
Algal blooms in the Murray–Darling system have created fresh
controversy and debate about intensive agricultural practices.
Phytoplankton naturally occur and are not normally visible to the human
eye, but under certain conditions they become apparent as a green slime
that eventually turns the water bluish-green or even red. Algal blooms
Many authors have attributed salinity to previous marine history of the parent geology, but
it has been shown that much of the concentration of salts has occurred due to capture of salt
from sea spray and deposition through rainfall (Macumber, in MDBC, 1990)
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were recorded as far back as 1878 along the shores of Lake Alexandrina
in South Australia, and were noted when livestock died from drinking
water contaminated by its naturally produced toxins. Although low
stream flows, turbidity and favourably hot climatic conditions provide
good conditions for rapid multiplication of phytoplankton, nutrient
loading from fertiliser use in upland and riparian catchments is a
significant trigger to an outbreak. Nitrate contamination of drainage and
runoff from agricultural land, plus sediment-borne phosphates are key
compounds in exacerbating algal blooms (Harrison, 1994), and MDBC
and the state water authorities have been promoting point source control
of urban and feedlot wastewater; agricultural drainage and fertiliser
management initiatives; and land disposal of nutrient rich wastewater.
Further work to understand better these complex interactions is being
undertaken to minimise the frequency of algal blooms.
One of the strengths of institutional reform in water resources
management in Australia is that it has taken a system-wide approach
that has been consciously integrated with land-use management. It
recognises explicitly that natural conditions together with intensive
irrigated and dryland farming practices all contribute to the increasingly
evident environmental changes, and that solutions will only emerge from
a clear understanding of the processes coupled with relevant
management strategies applied through community-based initiatives.
Drought protection
Statistically, only one year in five is drought-free in Australia, and in
gross terms this is quickly explained by the deficit between average
annual rainfall (420 mm) and average annual evapotranspiration demand
(more than 1200 mm). These figures mask a very broad range of interannual and inter-seasonal variability in rainfall. Major droughts have
occurred 7 times in the last 80 years, with periodicities of 2–4 years and
6–7 years. There has been much recent interest in drought prediction
based on state-of-the-art CSIRO work using two indices of the El Nino
Southern Oscillation (ENSO): the Southern Oscillation Index to predict
seasonal inflow in the main storages; and Sea Surface Temperature for
the Wright Index region of the eastern equatorial Pacific for inter-annual
conditions (MDBC, 1994). Prolonged and severe drought such as that of
1982–3 triggered considerable interest in demand management techniques
to contain agricultural and urban water use, as elaborated in the
Californian example.
During drought periods, severe desertification has occurred through
wind-assisted loss of topsoil in the dryland farming areas such as the
Mallee (1 million ha), which is reminiscent of the dust-bowl period of the
American mid-west, but on a less dramatic scale.
Coping and management strategies that emerged from the droughts
of the early 1980s were summarised by Framji (1986), and include:
establishing an adequate hydrological and water demand data-base;
routine monitoring of water use, especially at critical times;
seasonal demand forecasting;
seasonal groundwater licensing for drought use only;
adjusting livestock numbers to available forage supplies, in turn
minimising stock water-demand;
• re-using drainage water;
• urban conservation measures such as rationing (alternate day supplies,
split tariffs, sprinkler ban for amenity watering; etc.) and
• initiatives to reduce delivery losses in agricultural and urban water
He also noted that Australian drought management capability was
underwritten by:
• an efficient operation of strategic storages (Snowy Mountains scheme);
• a flexible water rights allocation system that reflects seasonally
variable supply and demand; and
• widespread metering of urban and rural water supply.
Interstate Cooperation in Water Resources Development and
Early in this century, conflicts between navigation and increasing
irrigation development were serious enough to instigate the River
Murray Agreement (1915) which guaranteed equal shares (specified in
monthly allotments) of all flow sourced upstream of Albury (NSW)
between NSW, Victoria and South Australia, whilst giving individual
states retain rights to tributary flows. The agreement established the
River Murray Commission (RMC) with defined responsibility for (1)
planning, and apportioning costs and benefits of development leading to
implementation of works in each state and (2) overseeing the distribution
of water (Constable, 1985). Subsequently, this model was applied to
establish the Dumaresque–Barwon Commission to administer shared
rivers along the NSW–Queensland Border and also to set up the Snowy
Mountains Hydroelectric Authority (Constable, 1995).
The major storages of the basin were constructed by the RMC using
state contributions and later federal monies, and were built by the ’state
constructing authorities’ such as SRWSC in Victoria and DWR in NSW.
Responsibility for cost recovery was initially left to the contributing
states, and federal help has usually been given as a grant. The major
storages of the Hume and Dartmouth have been operated by the state
agencies, under guidelines from the basin authority.
Over time the agreement was modified to broaden the role of the
RMC. In 1948 it was granted powers of investigation with a mandate for
catchment protection and rights to inspect catchment protection works.
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The Commission’s jurisdiction was further expanded to include water
quality and salinity investigation in 1970, resulting in comprehensive
monitoring of biological, bacteriological, chemical and physical
characteristics of River Murray waters. Operating schedules were
modified to accommodate dilution flows for salinity management, and
consultants were engaged to investigate water quality problems.
Constable (1986) considers the agreement to have been fundamental to
establishing rational and equitable water use despite its political
shortcomings, and that without it urban allocation and environmental
consequences would be far worse.
Increasingly vocal lobbying from Adelaide concerning the cost of
maintenance and refurbishment of its municipal water supply
infrastructure because of in-stream salinity led to further changes. In
1982, the RMC began to control water quality, salinity and waterlogging
arising from the expansion of irrigated agriculture in northern Victoria
and southern NSW. These ’powers’ were limited to the right to make
recommendations to the states on water quality standards and objectives,
and stopped short of executive responsibility.
Constable (1995) outlined three major flaws of the previous
arrangements, including the:
• assumption of discretionary powers and unilateral development by
individual states;
• lack of executive power leading to ’self-regulation’ by RMC to avoid
interstate conflict; and
• poor impact on tributary management, because the states resisted the
’interference’ of a non-political institution in sovereign matters.
The 1985 agreement diminished state sovereignty over water and gave
the MDBC the key role of coordinating strategies and policies for land
and environmental management. The Murray–Darling Basin Agreement of
1986, modified in 1988, specifically sought to achieve:
• an ’improvement in and maintenance of water quality for all beneficial
uses – agricultural, environmental, urban, industrial and recreational;
• the control of existing land degradation, and where possible
rehabilitation of land resources to ensure sustainable utilisation of
these resources; and
• the conservation of the natural environment and the preservation of
sensitive ecosystems.’
Queensland sought membership with observer status in 1991 and
obtained the status of ’Contracting Government’ in 1993, following
further amendments to the agreement in 1992 resulting in the River
Murray Act of 1993 (MDBC, 1994). This act includes additional
commitments such as the salinity and drainage strategy and specifies a
system of continuous water accounting of water use by NSW and
Representation in the commission has evolved over time. Initially, each
state had one representative (commissioner) but now has three,
supplemented by three federal commissioners. They are appointed for 5year terms and may be re-elected, and are now supported by a full-time
staff of about 80 specialists and administrators. An independent
arbitration procedure on appointments has existed for many years but
has never been used. Unanimous agreement was required of all
representatives before executive decisions or recommendations could be
made public, and this has been a root cause of the self-regulation noted
above. MDBC reports to a Ministerial Council, which coopts all federal
and state ministers with responsibilities that involve water, land and
environmental management. The council is routinely represented by a
standing committee and is supported by five working groups. A
Community Advisory Committee was established to advise the
Ministerial Council after the formation of MDBC in 1985, and its
members are drawn from technical specialists, the academic community
and the general public. Capital and administration costs are shared by
the four states and the federal government on a pro rata basis, and
Queensland makes a small contribution towards the Commission’s
administrative costs (MDBC, 1994).
MDBC has traditionally coordinated data collection and monitoring
activities and compiled the results, but has contracted the physical
collection effort to the state water managers, whose costs have been
included in their respective state contributions. The 1993 act introduced
greater flexibility in budget management and now allows funds to be
carried over from one year to the next, with the approval of the
Ministerial Council (MDBC, 1994). At present the Commission’s
programme budget is allocated to five programmes with a total value of
Aus$63.2 million in 1993–4. Each programme has specific objectives
against which performance and outcomes are assessed, including land
resources, water quality, natural ecosystems, the River Murray and
community involvement.
Irrigation and the Value of Agriculture
The 1.1 million ha irrigated in the Murray–Darling Basin, consumes
nearly 8,000 GL of water per annum (Blackmore and Lyle, 1993), about
87% of mean natural stream flow.
Rural production accounted for only 28% of Australia’s 1992 export
earnings, a steady decline from 40% in the 1980s. Traditional earners
have been cereals and grains (13.5% in 1984–5, down to 4.7% in 1993)
and wool, which has declined from a mid-1980s figure of 14% of export
income to only 5% (Smith, 1993). Gross value of farm output in 1991–2
was Aus$20.5 billion, of which 77.1% was exported, although the
economic importance of the agricultural sector is now shifting to food
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and fibre processing, with a total value of Aus$30 billion in 1992
(Bonano, 1993).
Irrigation produced about 25% of the farm gate value of the country’s
entire agricultural production in 1991 (Wood and Banks), mostly in the
Murray–Darling Basin. Price (1993) presented the following table on the
relative area, water use and value of three broad groups of enterprise:
Table 6 Enterprise area, water use and returns
% of total
% of
water used
% of total value
of irrigated
Pasture and
Field crops
Source: After Price, 1992
The farming system is always in a state of flux, but there are strong
pressures to increase holding size in all forms of enterprise. This has
been true for twenty years, during which time there has been a steady
decline in mixed farming. Because of recently declining profit margins in
dairying and the meat industry, there is renewed interest in horticulture,
particularly in annual crops, and in winter cropping of pulses and oil
seeds which receive supplemental irrigation (Drew, pers. comm., 1992).
The predominant land use in Victorian irrigation districts is pasture for
dairy and beef production. The irrigation water applied to pasture
accounts for about 60% of on-farm deliveries. Until recently, the area of
perennial pasture was limited by the water right historically allocated to
each farm, but since 1993 farmers may transfer water rights separately
from the land title and may sell or exchange water rights on a seasonal
or long-term basis. The irrigation methods used reflect this emphasis on
pasture as shown in Table 7.
Environmental Impacts of Irrigation in the Murray–Darling Basin –
Irrigation has been practised here since European settlement began, and
salinisation and rising water tables have been a problem since around
1890. The mechanisms that contributing to these twin problems have
been the subject of much research and discussion since the 1970s. The
north of Victoria overlies naturally saline groundwater and comprises of
Table 87 Actual
tables below 2 m and economic losses
due to salinity in the riverine plains zone
Percentage of
area with
Area with
tables (ha)
Economic losses
in $Aus m/yr
Value of
$Aus m/yr
Turral, 1993
New South Wales
Source: After Blackmore and Lyle, 1993
naturally saline soils. The equilibrium of pre-European settlement has
been upset by land clearance for pasture in the hilly areas and by
localised irrigation development. Accessions to the deep and shallow
aquifers have increased because of greater summer infiltration than that
Figure 2: Water logged area in the Goulburn Murray Irrigation District,
1981–1990 (after Malano, 1992)
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which occurred when natural bush conditions prevailed in the dryland
areas, and from deep percolation from poorly managed irrigation.
Salinity levels in the Murray river rise from 0.06 dS/m (deciSiemens/metre) in the headworks storages to 0.8–1.0 dS/m 2,500 km
downstream where the river approaches the sea. The total estimated cost
of salinity to river water users is estimated to be Aus$40 million per
annum and is incurred mainly by urban and industrial users in South
Australia (Blackmore and Lyle, 1993). Other estimates have ranged from
Aus$65 million (1990 prices) annual costs to the city of Adelaide to
maintain its water supply system, and Aus$37 million (1990 prices) lost
from agricultural production (ABARE, 1991). Although most of the direct
economic impacts of salinity occur in South Australia (Musgrave, 1990),
if environmental costs are accounted for the total cost estimates are over
Aus$300 million (Alexander, 1990).
Most of the salt load is discharged from the irrigation districts,
particularly the Barr Creek catchment, near Kerang in northern Victoria,
which contributes about 127,000 tonnes of salt per year. The inferred
average discharge conductivity of this load is 2.2 dS/m (Trewhella, 1984),
which amounts to 33% of the total salt load, measured at Morgan in
South Australia.
Water-table rise and severe salinisation has been a feature of the
Kerang Lakes area (Victoria) since irrigation began in the late 1870s,
when water tables were initially 7–10 m below ground surface. By 1900,
the perched water table had risen to 3 m from the surface and 80 ha of
land was salinised. Following completion of the Torumbarry Weir in
1923, water was cheap and plentiful and salinisation was unchecked until
the installation of surface drains from 1934–6. Rising water tables and
accompanying salinisation has only recently (post-1970s) been accepted
as a reality by farmers in the Murrumbidgee and Goulburn irrigation
The area with water tables closer than 2 m to the surface has been
estimated by Blackmore and Lyall (1993) for the entire Murray–Darling
Basin and is presented, unchanged, in Table 8. The increase in waterlogged area from 1981–90, defined as water tables less than 1 m from the
surface, has been calculated by Malano and is shown in Figure 2 for the
Goulburn Murray Irrigation District in Victoria (GMID).
The situation in New South Wales is not as bad as that of its southern
neighbour yet, and there is time to implement salinity management
strategies based on experience in the Kerang Lakes Area – the are most
severely affected in the 1930s.
The connection of the deep and shallow aquifers is spatially varied
and the precise delineation of recharge and outfall areas is continuing
(Macumber, 1978 and following). Prior streams have been identified as
one of the main mechanisms by which water moves from areas of high
accession to deeper groundwater recharge areas.
Figure 3: Dryland salinity explained (After Sadler and Cox, 1986)
Recent work (Nathan and Earl, 1992) indicates that much of the salt
loading of the river system occurs in winter runoff from saturated saline
soils. The picture is very far from clear, however, and work is needed to
develop a complete model of the component processes of water table rise
and solute transport before meaningful management strategies can be
investigated. The source of accessions has become something of a
political agenda with different interest groups claiming ’someone else’s’
source to be the major contributor to the problem.
Accessions need to be meaningfully partitioned as follows:
• deep percolation from inefficient irrigation;
• deep percolation from the winter rainfall and from summer runoff
from the irrigated area;
• accessions from rainfall on the dryland area within the catchment;
• losses due to channel seepage and leakage; and
• accessions by lateral groundwater flow from outside the irrigation
The interconnection of aquifers has to be much more precisely defined
than at present and more physical data is needed so that some
generalisations can be made. Channel seepage has recently been
measured rigorously by McLeod (1993) but extrapolation is difficult.
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Processes of Salinisation in Irrigated and Dryland Areas
Irrigation-induced salinity
Soil salinity problems arise largely from rising perched water tables or
shallow aquifer water tables which pass through sub-soil strata of high
natural salt content. When a water table approaches to within 1.5–2 m of
the soil surface, capillary rise results in the deposition of salt in the upper
horizons. The electrical conductivity of the deeper groundwater is even
more spectacular than the 5–50 dS/m of some of the shallower water,
and some discharge areas occur where the piezometric pressure is above
ground level at over 70 m, leading to very saline areas.
The irrigation districts all have the same problems of reducing
accessions to groundwater and of controlling salt build up in agricultural
soils, whilst at the same time trying to contain the net discharge of salt
into the Murray River. The advance of the problem varies according to
location. In the Kerang and Tragowel Plain areas, the shallow water table
is already within 1 m of the surface, although it has established a
dynamic equilibrium of decline through the summer period and rise to
within 20 cm of the soil surface during the winter (Poulton, pers. comm.,
Dryland salinity
In recent history (the last 50,000 years) dryland salinity has been an
extensive natural phenomenon of the Australian landscape. Natural and
human-induced salinity currently affects 32 million ha of the continent.
The affected area in non-arid Australia is much smaller, at 1.6 million ha,
and it is estimated that ’only’ 40,000 ha are affected in the MDB
compared to 120,000 from irrigation induced sources. There is a degree
of imprecision and assumption in the partition of the sources of salinity
however, and it is an on-going political debate that has become
institutionalised within the research fraternity, which is itself divided into
a number of factional viewpoints.
The mechanism is best considered in conjunction with a schematic
diagram (Figure 3) and has been understood in western Australia since
the early part of this century, although it was obviously forgotten or
ignored by policymakers intent on placing returned soldiers in settlement
farming areas after the Great War, and again after World War II. The
national policy to develop high agricultural export capacity in the 1960s
also forced a convenient loss of memory and understanding about the
origins and nature of salinisation (Sadler and Cox, 1986).
Under native forest cover, upland catchments achieved an equilibrium
with the prevailing rainfall regime, so that nearly all rainfall was
transpired and very little percolated through to augment the water table.
Land clearance for agriculture allows a small accession of about 30–40
mm/yr, which over the course of 10 to 30 years results in substantial
rises in water tables. Salts present either in the original groundwater, or
in the overlying soil strata are then brought close to the surface. Natural
revegetation or agriculture then results in salts being concentrated near
the soil surface, and in turn leads to seepage and saline contamination of
streams and other surface water bodies.
In the 1970s there was a sharp reversal of public opinion about the
merits of agricultural development, particularly in the drylands of
Western Australia, which was heightened by an extended drought
period. The research base improved and considerable academic and
professional activity raised public awareness of the issue at a time when
general environmental awareness was developing. As in the USA the
professional interests of previously marginal services such as forestry,
fisheries and wildlife contributed much to development of solutions.
Salinity control strategies that emerged for the drylands of Western
Australia have been incorporated into the Integrated Catchment
Management philosophy, which then found a much wider application in
the eastern states. Typical components of salinity control strategies in
dryland areas are (after Sadler and Cox, 1986):
• regional embargoes on alienation (sale or franchise) of state forest;
• legislation to control land clearance, accompanied by compensation to
the landowner;
• prohibition of clear felling and zoning of land clearance in catchments;
• reafforestation via land purchase; and
• engineering measures to treat in-stream salinity, such as dilution or
Institutional Responses to Environmental Degradation and
Economic Losses from Salinity: The Salt Credit Scheme
The MRC and its successor the MDBC have been both hailed as
successful coordinating and enabling institutions and vilified for not
standing up to the states and imposing a more forceful agenda for good
environmental husbandry and professional water management. As
detailed earlier, the Commission was essentially constituted as an
advisory body, initially drawing strength from its ability to coordinate
and construct major infrastructural development and access federal
funds. Following the demise of the construction age, it has had to draw
strength from the provision of access to all relevant technical,
environmental and political information at its disposal, and represent a
broad constituency of interests (Constable, 1995). The problem of salinity
management has resulted in a much stronger executive role for the
commission, which since 1988 has specified contractual rights and
obligations between the member states and diminished their sovereign
power over water resources management.
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An Integrated Approach to Resource Management and Environmental
Salinity levels in the river are a consequence of reduced downstream
dilution due to the diversion of flows upstream for irrigation, the direct
discharge of saline effluent from irrigation areas, and contamination by
saline groundwater sourced from both irrigated and dryland farming
Once saline water tables have risen to the surface, even if they are
subsequently controlled or stabilised, a significant problem remains –
disposing of the salt. The economic and ecological implications of
disposing salt into the main river system, directly or indirectly, are
severe. The Salt Credit Agreement limits disposals to the River Murray
to reduce salinity levels downstream, but leaves the means by which this
is done entirely up to each state and to the farming and rural
communities living within their borders.
The scheme has the following objectives (inter alia, Musgrave, 1990):
• 1988 salinity levels at Morgan, in South Australia, should be adopted
as the baseline for evaluating and developing all future management
strategies. The long-term strategy is to reduce levels by 113 EC units
(0.113 dS/m) from the current average of 640.
• Each state should stabilise its salt loading of the river at values that
should not be exceeded at an average of peak loadings.
• No state should be allowed to increase the net cost of salinity beyond
its 1988 value in real terms.
The agreement thus links land degradation and salinity control in an
explicit but flexible way and has established an important link between
basin level resource management and individual state policy, and
between state policy and the public. The states have effectively forgone
the right to unilateral land and irrigation development.
There are two components to the strategy, enshrined in the 1992
Salinity and Drainage strategy of the formal 1992 Murray–Darling Basin
Agreement, and given added weight when formalised as the
Murray–Darling Basin Act of 1993: (1) the interception of saline flows
entering the system and (2) the limiting of the actual salt loads generated.
Each state will be permitted to dispose of saline drainage water in
exchange for joint funding of downstream mitigation works which will
reduce in-stream salinity by 80 EC units at Morgan, equivalent to a credit
of 15 EC per state. The downstream mitigation methods largely involve
interception drainage to prevent saline groundwater from entering the
river (MDBC, 1990) and the credits will come into force on completion
of the works.
Over the long term, each state only has the right to contribute a
maximum of 4 EC units of salinity at Morgan, and has to manage its instream discharges accordingly. For example, the average contribution
from Barr Creek in Victoria is nearly 10% of the salt loading at Morgan
and has been allocated a credit of 2 EC units, or half the state’s total
credit. Victoria must implement management strategies to comply with
this limit, and make further improvements in the long term in order to
allow an internal transfer of credit to the Goulburn Murray Irrigation
District, where water tables are rising to the surface over an increasing
In theory, the salt credits of each state are transferable, but there has
been little discussion of reallocation between states, nor how this might
be mediated. The focus of activity has been on the southern part of the
basin, especially in Victoria where environmental impacts have been the
The key factor in the agreement is the provision of incentives at the
macro and micro levels, as discussed, but this is in turn supported by
substantial federal funding of Aus$335.5 million over thirty years (at 1986
prices, discounted at 5% to give total present value of costs) (Musgrave,
1990). There is additional state funding both for joint works within the
salinity and drainage strategy and for within state initiatives and
community action, which make the total cost of the programme rather
harder to estimate, since it is bound up with other initiatives, such as the
decade of LandCare (1989–99), which is costing an estimated Aus$340
million. Similarly, private funding by farmers to achieve targets set in
their local management strategies and to improve irrigation practice onfarm is hard to quantify reliably, but total salinity related expenditure
has been estimated to run as high as Aus$110 per annum. The MDBC’s
drainage programme is bilaterally funded by individual state
governments and the federal purse on a 50:50 share-matching
contribution arrangement. Of 20 projects funded in 1993–4 (MDBC, 1994)
and costing Aus$11.47 million, activities were limited to:
• the preparation of the drainage component of land and water
management plans;
• the design, investigation and implementation of drainage works; and
• investigations for future works.
Following in the same vein, MDBC produced a draft Algal Management
Strategy in 1993–4 and endorsed its Irrigation Management Strategy,
begun in 1992, by funding two integrated projects in Sunraysia and in
Shepparton. These programmes have been conceived within a broader
framework of the 1993–4 Murray–Darling Basin Regional Economic
Development Policy to ensure that the goals and objectives of regional
economic development are incorporated into all MDBC programmes and
strategies (MDBC, 1994).
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The development of the salinity management strategy for the basin is
in harmony with the LandCare programme, particularly in its philosophy
of public participation and public action to develop and implement
appropriate responses to the salinity problem.
LandCare was the outcome of an historic partnership between two
unlikely bedfellows, the National Farmers Federation (NFF) and the
Australian Conservation Foundation (ACF), an increasingly influential
environmental lobby group. The key element of a 10-year strategy was
to provide funding for LandCare groups and property planning
(Campbell, 1994), and owed much to the efforts of similar initiatives in
Western Australia (following the Soil Conservation Act of 1983) and
Victoria (farm tree groups and Salinity Action Groups established under
the Salt Action programme of the mid-1980s). By 1994, there had been an
explosive growth in LandCare groups from only 250 in 1989 to 2000
(Campbell, 1994) and the institutionalisation of integrated catchment
planning (ICM) through community-based catchment management groups
(CMGs) which are given technical support from specialists working in
the state agencies or the federal and universities’ science research
community (e.g. CSIRO and the individual states technical departments).
Typical details of the ICM approach are clearly set out in a 1991
Queensland Government Bulletin that recognises the following principles:
• Land and water resources are basic and interactive parts of natural
ecosystems and their management should be based on river
catchments as geographic units which account for the interactions
between these resources.
• The management of river catchments must take account of the
continuous process of change in response to natural processes and
human activity.
• Sound land and water management is best achieved through informed
action of individual users and managers of these resources.
• A balance between economic development and conservation of land
and water resources must be maintained.
The strategy was devised to ensure community understanding, good
coordination between government and community and effective
cooperation between all interested parties in and outside of government.
Through this process it was intended to develop commonly agreed goals
in water and land management with full backing from all stakeholders,
and to ensure that resulting actions fully recognised all environmental
and resource security implications in a systematic, prioritised fashion.
The final goal is that all initiatives should be targeted at achieving
economic and ecological sustainability.
Starting with a commitment to increase awareness of land and water
management issues to a very broad public, the strategy seeks to
emphasise the value of individual as well as community action and
intends to avoid duplication or marginalisation of existing LandCare and
other community groups. Where no appropriate groups exist, there is an
undertaking to form and support them until they are functional entities.
Catchment Coordinating Committees (CCC) are set up to link local
planning and action at community level with catchment-wide planning
and strategy development. Elected representatives of each community
group may sit on a CCC and in turn lobby and liaise with government
agencies and regional and state coordinating committees for ICM.
Within the irrigated areas of the Murray flood plain, Salinity Action
Groups substitute for the CMGs and operate over a jurisdiction defined
by administrative and irrigation system boundaries. These community
groups have a high percentage of farmers on their boards, but
representation of wider interests is normally apparent – local business,
government agencies, teachers and even environmentalists. Formal
educational modules in secondary schools, pioneered in Victoria for
drought awareness and preparation (Framji, 1986), is an important part
of the LandCare programme, as are other approaches to improving land
literacy, such as:
• farmer fly-overs to enable farmers to see catchments and irrigated
areas from the air and observe trends in degradation (or amelioration);
• education packs to explain and allow individuals to recognise
emerging problems; and
• community action research exemplified by Saltwatch, Drainwatch and
Water Table Watch.
Water Table Watch in Victoria has encouraged participating farmers to
install and monitor piezometers on their land so that they understand
how water tables fluctuate and if they are rising. The data collected also
contributes to local and regional databases which give the community
groups and the technical agencies detailed information to support their
planning activities. On the basis of education, experiential learning,
dialogue and data collection, communities are empowered to develop,
evaluate and adapt environmental management plans for their areas, and
are more likely to be ’in-tune’ with broader regional goals. Federal and
state money supports the initiation of such groups and underwrites some
of their activities. The groups develop strategies to manage the problems
as they perceive them, in accordance with funding requirements that they
must meet from their own pockets and supported by targeted subsidies
available for certain activities, such as the capital grants for pumped
It is probably too early to undertake an economic evaluation of these
initiatives, and the results will only be seen in the long term, but it is
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clear that an enormous momentum has been generated, which has
resulted in a considerable change in thinking, especially with respect to
independence from government and development of local initiative.
Clearly, success is not found everywhere and there will always be groups
whose best-perceived option is continued government support for exactly
what they are doing now and have done for years. One SAG in northern
Victoria has achieved some notoriety by refusing to accept the reality of
its situation and rejecting the strategies of its previous board, which was
replaced by a more ’representative’, but indecisive, faction. The previous
committee had obtained considerable capital subsidies for its proposal,
but it required all the beneficiaries to contribute to operational and
management costs – something they were not prepared to do (Horking,
pers. comm, 1991).
There is also a continuing ’turf war’ between the different state
departments, such as conservation and environment versus agriculture,
and water providers versus water regulators, which indicates that the
institutional arrangements are far from perfect despite the bold initiatives
in inter-state arrangements. A sense of inter-state rivalry is also very
deeply seated, particularly between Victoria and NSW, illustrating that
establishing institutional arrangements for rational resources management
is an essential but not sufficient step: in common with many developing
countries with far less-developed institutional frameworks, the culture of
cooperation, inter-personal skills and political agendas play important
roles in shaping and articulating the progress made in policy reform and
implementing supporting strategies. The historical success of MDBC in
coordinating conflicting agendas of the member states has as much to do
with the passage of time and the avoidance of outright conflict as it does
with radical innovation and enthusiastic common vision.
Salinity Management Strategies at the Local Level
Each irrigation district has a salinity management plan or is in the process
of drawing one up. The plans are community-based in conjunction with
the various state and parastatal agencies involved in irrigation. The
overall strategy is to limit the salt load discharged into the Murray in
accordance with Murray–Darling Agreement, and local strategies must
evolve for salt disposal, water table control and improved irrigation
management. The salt credit allowed for the Tragowel Plains Salinity
Management Plan, south of Kerang, is a 0.002 dS/m increase2 in river
salinity at Morgan. In Victoria, the main task is to reduce the salt
discharge from the Kerang area and thus provide some leeway for rising
EC units in Victorian common usage.
salinity loads from the Shepparton area.
Disposal options for saline outflows are limited due to cost, but the
fundamental problem of controlling soil salinity in the root zone will not
go away and requires at least some disposal to account for the additions
from even relatively good quality irrigation water. Drainage options are
limited by the dramatic increase in salt load that would result, especially
where upward groundwater fluxes would be intercepted.
Although drainage is under consideration in Kerang and pumped
drainage is already widely used to control water table levels in fruitgrowing areas in the GMID, sustainable cropping cannot be realised
without minimising deep percolation from irrigation.
On-farm strategies to control salinity revolve around minimising the
amount of percolation contributing to water table rise (Turral, 1993) and
• Improved farm layout: remodelling farms has received considerable
attention from organisations such as the RWC in Victoria, which
initially undertook ’Whole Farm Plans’ for individual farms which
were then implemented and financed by their owners. Latterly grants
were offered towards the cost of hiring consultants to undertake these
plans, which has expanded to include grants for recirculation of onfarm drainage. Saline drainage returns are mixed with good quality
water from boreholes or channels to further minimise salt loading to
the river system.
• Better water management through: improved on-farm distribution
channel layout and capacity; laser grading of fields; use of automation;
water alarms to warn farmers when fields have been given enough
water; and various measures to allow efficient watering at night-time,
when the worst water application practices are followed.
• Gradual introduction of water conserving irrigation technology – surge
flow, drip and micro-sprinklers, centre pivot and other overhead
technologies to replace or substitute for surface irrigation.
• Pumped drainage to stabilise water tables – with disposal of saline
water to local evaporation basins.
• Tree planting – the results of this practice have not yet been
adequately quantified, but there is good evidence that localised
reductions in groundwater levels are observed underneath copses, and
that trees planted parallel to the distribution channels may intercept
a useful proportion of seepage (Heuperman, pers. comm., 1993). Onfarm tree planting programmes have become very popular in recent
years, and although establishment is often difficult, the appearance of
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Box 5 Drought, demand management and community – The Hunter Valley in
The Hunter Valley covers some 22,000 km2 (almost 17% of the area of England) to the east of
Newcastle, a major industrial city on the west coast of mid-New South Wales, where most of the
population of 500,000 is located. The region is one of the oldest coal-producing centres in
Australia, with an annual output in the mid-1980s of around 40 million tonnes. Irrigated
agriculture, covering a relatively modest 30,000 ha, has been practised since the mid 19th century,
but ranching and other agricultural activities generated a total of US$ 223 million in 1982–3.
Both drought and flooding have been severe in the valley, and the worst recent droughts on
record occurred in 1964–6 and 1979–84. This latter drought coincided with the peak of coal and
power development in the central valley, exacerbating conflict between industry and agriculture.
The river is highly regulated, although some legally unprotected provisions for minimum flows
existed in the mid-1980s, and the Water Act (NSW) of 1912 shows that industry and domestic
water took precedence over agricultural requirements, particularly those for annual crops and
The prevailing institutional framework for water management would be familiar to many
developing country water managers: it was fragmented and involved multiple competing
interests, nearly all of them state-owned agencies. The Water Resources Commission (NSWWRC)
was responsible for water resources planning, monitoring and irrigation, and it worked (at a
distance) with the State Electricity Commission, in the development and construction of
hydroelectric facilities. The Public Works Department was responsible for all tidal rivers and flood
mitigation works associated with them. In practice, irrigation and small town water supply was
decentralised from the NSWWRC whilst the Hunter District Water Board (HDWB) managed
metropolitan and coastal industrial needs and sanitation. The dominant philosophy up to 1982
was that of engineering-led supply augmentation rather than demand management, and it is
perhaps surprising that prior to this date, industrial water demand did not feature in NWSWRC
planning documents.
Although agricultural water demand has continued to rise, forecasts for energy demand were so
great in the mid-1980s that it was expected that industrial water demand would exceed
agricultural needs by 2005. The drought period of 1979–84 signalled a number of changes and
introduced the era of demand management:
Annual diversion along the river itself (10,000 ha irrigated) fell to less than 20% of normal
season flows by 1979 and spurred the introduction of metered supply and volumetric charging
to replace flat area taxes in 1980. However, under continued pressure of the drought no water
was allocated for non-perennial crops (all except tree fruits and vines) in 1983. Farmers
increased groundwater use considerably, both from licensed and illegal bores.
The precedence of power generation interfered both with irrigation storage levels and with
cooling storages for coal-fired power stations and industry. Forecasts for continued dynamic
growth in power and the construction of new facilities to provide it is the major factor in water
management strategies. The coal industry has however revised its needs on the basis of
improved water-use efficiency.
Local scarcity in rural towns was exacerbated by inward migration as workers ’flocked’ to the
coal and power industries; augmentation projects could not keep pace with demand, especially
in terms of drought-proof supplies.
environmental demand was just beginning to be articulated with the realisation that 30% of
mean average flow in the river was lost through infiltration and evaporation alone.
Urban water supply was very seriously affected as HDWB had no drought contingency plans
and appeared to be little concerned with the problem until storage volumes fell sharply in
1979, reaching an all time low of 32% in 1981.
Full cost recovery for urban water supply was mandated in 1982, after HDWB had imposed water
rationing, and sprinkler and hosepipe bans for urban consumers. Even with these restrictions, the
volume in storage in 1981 would only have provided supply for about 30 weeks, so something
more was required. At the same time inconsistencies in the application and policing of bans had
aroused much ill-feeling among the general public. The local press also became a very vocal
participant in the water debate, which for a time took precedence over other regular popular
themes. The press took sides with the ’persecuted’ irrigators and made little analysis of the
projected water shortages in the upper Hunter, nor of the state government’s preparation for (and
management of) drought and imminent water allocation problems due to rising competition for
Box 5 continued
HDWB introduced a two-part water tariff in 1983, and adjusted prices to ensure full cost recovery
and the ability to self-finance new capital works, following a critical review by external
consultants in 1981. Over 33% of water was consumed by just 16% of urban consumers prior to
price reform, and unaccounted for water losses ran at about 30%. Industry obtained more water
than it paid for and commercial consumers paid 15.5% of the charges for only 8.4% of the water.
A new president of HDWB was appointed in early 1982 with a mandate for sweeping reform, and
the ’water hogs’ were the targets of a new two-part tariff – the lower part to cover the cost of
service, which was set according to land value. A variable charge for volume supplied and
sewerage services made up the second part, and resulted in a reduction of 30% in per unit
residential demand. This carried over into the second year, when high level consumers reduced
their use, although there was a significant increase in total use among the previously low band
(0–99 kL/yr) customers. Construction of a major new engineering works was deferred for 10 years
until the 1993 expansion of the Grahamstown reservoir and a further on-stream storage scheduled
for 1989 has also been deferred.
The need for bureaucratic and price reform was not generally appreciated by the Board of
HDWB, whose members were fearful of adverse public reaction and the implications for job
security in pushing through the two-part tariff. With almost no prior public consultation, the
board was inundated with over 160,000 telephone calls and suffered a very hostile media
campaign that resulted in the formation of the Hunter District Water Consumers Committee,
which made life very uncomfortable for the board and its members. Successful introduction of the
price reforms is remarkable considering the lack of consultation and the resulting outcry and is
attributed to:
a new and motivated president of the board who would stand by his policies;
dominance of labour party seats in the metropolitan area – implying strong local government
previous and continuing severe drought;
solid backing by the State Minister and Premier.
A decade after this saga, HDWB was corporatised and now recovers all costs, is self-sufficient in
capital financing, and also returns dividend to the state government. In return customers have a
deemed contract which defines their right and obligations. Day (1995) comments that public
consultation may have been the death knell of rapid introduction of a ’user pays’ policy, and
therefore stymied strategic reform and foregone considerable community benefit – an interesting
point of view and one that defies present thinking on the fundamental nature of public
consultation in water resources reform.
Sources: Day, 1987 and Day and Read, 1995
the landscape will be radically altered in some areas, such as the
Kerang District, over the next 10 to 15 years. It remains to be seen
whether this will have a significant effect on controlling water table
A major factor that will contribute to improved irrigation management
will be land retirement and land conversion. A process of structural
adjustment in Australian irrigated farming began in the early 1990s
(Musgrave, 1994), with the result that irrigated livestock production
(mutton, wool and beef) has become increasingly vulnerable, especially
on marginal lands. Pasture accounts for 90% of irrigated land use in
northern Victoria and slightly less in the Riverina. The two main
enterprises are extensive livestock (wool, mutton and beef) and intensive
dairying which, along with the compact horticultural industry, is exportoriented. There has been considerable discussion on moving the focus of
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Table 9 Irrigation water charges in key regions within the Murray–Darling
Murray irrigators
Full recovery
MIA broadacre
Source: ABARE, quoted in Musgrave, 1994
agriculture to a more dynamic horticultural and cropping-based system
with emphasis on quality and niche export markets, but this is not an
immediate reality for most farmers (’The Future of Irrigation in the
Murray-Darling Basin, Symposium, 1993).
To date, real-life responses have varied from bankruptcy to expansion
of holding size, concentration of irrigation on smaller areas of higher
value field crops, and abandonment. In the long term, fewer younger
people are farming unless there are very sound enterprises to be taken
on, which will have a significant effect on water use and water table
loading in marginal areas.
Demand Management and Reallocation of Water
In contrast to California, the main impetus to manage demand and
reallocate water is not rapidly rising and insistent urban and industrial
demand, except perhaps in the Hunter Valley (see Box 5).
Like many developing countries, the federal and state governments can
no longer afford to subsidise the operation and maintenance of irrigation
and other water supply infrastructure, although most state governments
have been more than ready to write off capital debt and have not
engaged in the pretence of capital cost recovery that is characteristic of
USBR projects after handover to private management. The adoption of
demand management (especially in urban centres) is also a consequence
of recurrent drought and environmental externalities associated with
’excessive’ water use.
The Commonwealth has been undertaking a programme of microeconomic reform since 1989–90 based on the premise that welfare could
be improved by maximising the difference between the cost and value
of production. Much of the reform has concentrated on removing
constraints to market forces to allow resources to be allocated to those
who value them most highly (ABARE, 1991). State governments have
imitated such policies with varying degrees of enthusiasm, and with
regard to water have determined that price reform is the first priority in
reducing public expenditure deficit. They have also realised that
environmental degradation, mainly from salinity, is a direct consequence
of subsidising the irrigation of low-value enterprises on marginal lands,
and that price reform may therefore be a good way to control profligate
and uneconomic use of water to mitigate environmental problems. In this
case, reallocation of water from low- to high-value uses is largely
restricted to transfers within agriculture or from agriculture to the
environment to enhance streamflows, seasonal flooding of flood plain
habitat and so on. Victoria has followed the most aggressive state policy
and prior to its current privatisation had embarked on a staged
programme of price reform, to the point where it was almost fully
covering operating costs (IRR (internal rate of return) in 1991 was -0.34).
As illustrated in Table 9, all states have found it hard to do this, although
IRRs on assets in government-managed irrigation schemes had improved,
by 1991, to -1.9 in NSW, -1.73 in Queensland and -5.1 in South Australia
(Musgrave, 1994). NSW is now undertaking partial privatisation prior to
seriously reforming water pricing and in the knowledge that it has a
large pending investment requirement (up to Aus$600 million) to
rehabilitate an infrastructure that is in considerably worse condition than
that in Victoria.
In Victoria, operation and maintenance costs were dramatically
increased by running the main delivery canals well over their design
capacity, to ensure delivery of peak demands. They have cut costs (and
services) by sticking more closely to the design rules.
Further change towards price reform, subsidy removal,
decentralisation to regional irrigation boards, and ultimately privatisation
is envisaged for Australia (Musgrave, 1994). The Water Policy Agreement
by the Council of Australian Governments (COAG) has provided new
weight to these proposals and provides a strategic framework for the
water industry, committing all the states to:
• further price reform to achieve full cost-recovery and removal of crosssubsidies;
• minimal federal or state financing in asset refurbishment, and full
recovery of costs in enhancing or refurbishing infrastructure for bulk
supply by state-owned enterprises;
• clarification of water rights;
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• allocation of water to the environment;
• adoption of arrangements to allow trading of water – inter-sectorally,
inter-state, and within agriculture;
• institutional and organisational reform; and
• community consultation and participation.
A second more strategic development has been the legislation that
requires uniform action on behalf of governments belonging to the
recently formed Agriculture and Resource Management Council of
Australia and New Zealand.
Transferable water entitlements
In some ways, the discussion of transferable water entitlements is a
solution looking for a problem. Musgrave (1990 and 1994) has damned
the water rights system for its high degree of attenuation, although in a
hydrologic sense it is a highly flexible system that allows water to be
redirected under contract terms to where it is most needed. Since major
inter-sectoral transfers are simply not in demand, some of the most
interesting possibilities relate to interstate transfer of ’bulk entitlements’.
First discussions of water markets in Australia emerged in the early
1980s following the visit of an American academic to the University of
New England, Armidale in New South Wales, which has since become
a vocal promoter of economic reform in water management. Water
markets were seen in a slightly different context of easing the pain of
otherwise politically intractable price reform in the irrigated sector:
reallocation would become voluntary and marginal producers would be
compensated for being forced to the margin by being able to sell their
water right, even if using it themselves was no longer a viable option
without some level of subsidy (Randall, 1981 and Musgrave, 1994).
For efficient markets to exist property rights must be non-attenuated
– which means that they must be clearly specified and enforceable, and
be exclusive, comprehensive and transferable (Pigram and Musgrave,
1989). Since water rights are usufructuary and attached to land, and
because water availability is highly variable due to the extreme vagaries
of Australian hydrology, there have been calls to reform the attenuated
rights system of the economically inefficient command and control
system of water allocation and ensure security of supply (Musgrave,
1994). Fixed-term ownership of entitlements is seen as a block that could
be removed (although it has its advantages in environmental regulation
and resource-use control, namely groundwater licences), but achieving
security of supply could only be entertained by having a much smaller
volume of water allocated that was immune from supply variations
imposed by nature and the adroitness of the management of the main
The proponents of more active water markets have no real case to
make concerning improved security of supply, nor of protection of third
party impacts. Add to this that the infrastructure is much less
comprehensive than say in California, and that trades can only be
successfully mediated by allocation from major upstream storages, and
at the moment have absolutely no prospect of being diverted more than
400 km to the coast for industrial or urban use.
Anderson (1990) identified some key differences between US and
Australian water markets:
• Most irrigated land in Australia is a government development,
compared to a high level of private development in most western
states (excluding California).
• Australian water rights are administered by usufructuary allocations
of limited duration (5–15 year licences) compared to private prior
appropriative rights in the US.
• The non-use of water does not result in loss of right (and allows the
possibility of sleeper licences being used for speculative trading,
(Musgrave, 1994)).
• Water transfer experience is new and restricted to agricultural transfer,
compared to a long history of transfer of active rights within
agriculture in Colorado and other western states.
Water transfers have been possible since 1982–3 in NSW and South
Australia (SA) and were introduced on a pilot basis in the late 1980s in
Victoria, Queensland and Western Australia. Initially, only temporary
transfers (per season/year) were allowed, but permanent transfers are
now possible in all states except Tasmania (Musgrave, 1994). The water
supply agency charges a one-time fee for transfers, typically more for a
permanent sale. A volumetric charge is levied in SA, which discourages
large transfers. The buyer and seller negotiate the price of the transfer in
all cases, and formal restrictions normally prevent the size of the transfer
from significantly altering the flow regime and water quality in the
channels, nor having any foreseen adverse environmental impact.
Transfers may be restricted only to other irrigators, but to date nearly
all transfers have been between irrigators. In Victoria, the bulk of
transfers have been of surplus storage in Dartmouth reservoir (Simon
and Anderson, 1990), at a time of plentiful supply. Six water auctions
were held at the start of the 1988–9 irrigation season and began
promisingly with 20 farmers bidding for 2000 ML (enough water for a
200 ha farm, growing pasture), paying prices of Aus$175–775/ML, with
a median of Aus$320 in the first and Aus$158 in the second. The
maximum sale allowed to one buyer was 10% of the volume offered but
in the first two auctions all the water was sold, despite a protest walkout
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by objectors who had assembled to make their point. The remaining four
auctions saw very few sales and only 20% of those achieved the reserve
price of Aus$100/ML, as it appeared that farmers quickly re-appraised
the ’value’ of such purchases. A more recent auction of further water
released following completion of salinity mitigation works in South
Australia (AQUA, 1994) generated spirited bidding and realised prices
ranging from Aus$132–311/ML for Dartmouth water and
Aus$416–500/ML for lower Murray water.
The volume of transfers in NSW has been rather greater, with a peak
one year transfer of 300,000 ML in 1988 (DWR, 1991), compared to total
deliveries of roughly six times that amount, although better rainfall
caused a decline to around 120,000 ML in the following three years. The
value claimed for this transfer is vary spurious as it is based on an
estimate of the gross margin per ML of the dominant crop grown in the
area, claimed to be Aus$17 million in 1988 (Aus$566/ML at 1991 prices).
The recent deliberations between COAG and MDBC have brought the
issue of interstate water trading for irrigation and rural water supply to
the fore, although background work on transferable bulk entitlements has
been undertaken by the Department of Water Resources in Victoria
(Williamson, pers. comm., 1993). A severe drought in NSW and increased
water demand in South Australia has reinforced interest and the first
interstate trade of 20,000 ML, (ironically) reserved for environmental
purposes was made for irrigation in NSW in late 1994, through open
tender and discounting for the greater level of subsidy applied to
irrigation water in NSW compared to Victoria.
ABARE (1991) suggested that tradeable pollution licences might be
applied to salinity management, but that a discharge tax might be
equally effective and rather more efficient. Non-point source degradation
from direct groundwater accession is almost impossible to measure and
apportion, but surface drain discharges could be measured, and there
have been proposals for a drainage levy for some time in Victoria. The
problem with a drainage levy is that it penalises dischargers of differing
qualities of water equally, as sufficiently robust and affordable
technology does not exist to distinguish and record water quality at the
farm outlet. It is equally likely that farmers could evade such
measurement by re-routing surface drainage and other malpractice that
would be very difficult to police.3 Since the COAG/MDBC deliberations
An interesting aside that has some bearing on this is that the RWC had been reducing its
dependence on water bailiffs to mediate orders and undertake deliveries of water on farm,
following the introduction of a telephone-based, computer assisted ordering and scheduling
system. In the past, bailiffs have had responsibility for checking that water meters are
working and have not been jammed or reset, a practice which is less and less easy to detect
without a staff presence on the ground. Design and construction defects in the system have
also been ’covered’ by bailiffs who know when an incorrectly installed water meter provides
tradeable salt permits are again on the agenda, as an institutional
alternative or modification to the administered salt credits.
Privatisation and its Implications for Interstate Cooperation
in the Murray–Darling Basin
MDBC does not currently support COAG and the Victorian government’s
policy on full cost recovery of rural water supplies, but has yet to work
out an explicit policy on transferable bulk entitlements.
The privatisation of the RWC into regional management boards may
have been precipitate as the transfer of its regulatory and data collection
activities was not fully developed at the time. Although the Victorian
Department of Water Resources will assume responsibility for
monitoring, data collection and some regulatory activity, it is understood
that there is a hiatus and a break in continuity of these tasks. Similarly,
it is not clear how the data collection delegated by the MDBC under
terms of the Murray River Agreement will be carried out. The RWC was
delegated responsibility for management of Dartmouth Reservoir by
MDBC, and it is understood that a regional management board continues
to do this on a stop-gap basis. In 1993–4 the RWC, acting as a
corporation with a large government shareholding, was obliged to pay
a dividend to the state government and provided Aus$1 million financed
out of margins on its bulk water charges. Presumably, the privatised
districts now have to do this, but there then remains a grey area between
those who operate headworks and primary distribution infrastructure
and those who more clearly just distribute and manage water within a
Current Victorian proposals suggest the MDBC becomes a bulk seller
to the privatised irrigation districts and in effect becomes a business,
Murray Water, so that it relies on revenue instead of state contributions
to fund its running costs and river management programmes, including
salinity mitigation. Differences in the member states’ attitude to the
extent and pace of privatisation cause significant problems in the short
term, but even if they were agreed, an agreed framework for bulk water
charges would be needed which implies the removal of all subsidies to
farm-gate delivery to achieve an undistorted market for water across
state borders.
Another stumbling block that is emerging is whether bulk water
charges would cover the costs of resource management and monitoring
lower flow rates to a farm than that recorded in the design; under such circumstances they
raise water levels to adjust flow rates accordingly, but under computerised ordering and
eventually automation, such finesse will no longer be possible and farmer dissatisfaction will
increase requiring expensive remedial work.
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services currently undertaken by MDBC or whether these should be
considered as a community service obligation (CSO) and continue to be
paid by state contributions. At present, bulk water rates to rural towns
in Victoria are 3 to 3.5 times greater than for irrigation, and under a
bulk-charging system this differential would be slated for removal or
reduction. It reflects the difference between state government
requirements for a rate of return of 4% on drinking water supply and
sanitation compared to 0% for irrigation, and its removal might come
under the provisions of a CSO to maintain rural economies.
Environmental allocations might also be considered as CSOs but would
have to be accounted for and paid for by the relevant department.
Returning for a moment to more mundane water management, it is
extremely unclear what implications there are for salinity management
and river basin sized integrated planning and management under a
hybrid system. Neither the state nor privatised irrigation boards have
clear functional commitments to the Murray–Darling Basin Agreement,
even if it is now enshrined in law. It is already clear that the privatised
boards see little role for strategic activities such as research, regional
planning and hydrologic monitoring and have every intention of
minimising water charges by paring down ancillary services (Malano,
pers. comm., 1995).
It will be very interesting to see how these issues resolve themselves,
both within the contrasting states (Victoria, sweeping reform; NSW
cautious open-ended reform with continuing state backing, and SA and
Queensland, which maintain strong government involvement, albeit
working to ’sound economic principles’) and (more importantly) on the
recently achieved purpose and substance of interstate cooperation.
Groundwater Management in Australia
The fact that much shallow and perched aquifer groundwater in
Australia is naturally saline has restricted the opportunities for
widespread development. Furthermore, much of the higher quality water
in the MDB is held in deep aquifers (such as the Deep Leads in Victoria),
and even though some have high artesian pressures, pumping is too
expensive for most agricultural uses. Nevertheless, a number of the
nation’s groundwater systems were considered to be under stress
(Jacobson and Lau, 1988) with annual extraction exceeding 1.5 mML per
year from 400,000 operating bores in 1986. (To put this figure in context,
it is only marginally greater than the continuing state-wide groundwater
overdraft in California!) In the arid zone, groundwater recharge may be
of the order of only 1 mm/yr (ibid) and recharge rates elsewhere are
generally low. The stressed groundwater systems were characterised by
annual extractions greater than 10,000 ML per year, and in all but one
extractions are controlled through water allocations and bore licences.
Coastal aquifers have been most at risk to overdraft, as industry and
urban centres are generally located in the coastal margin, but the best
known case is that of the Bundaberg area on the central Queensland
coast where there is heavy use of supplemental irrigation for sugar cane
production. Engineering solutions played a large part in stabilising the
saline intrusion that occurred: a dam was constructed to substitute
surface water for groundwater over half the area and also to contribute
to artificial recharge. The oldest recharge scheme to stabilise saline
intrusion and rapid local water table fluctuations was financed and
developed by cane farmers in the Burdekin area of Queensland, and has
been operating since 1965. This system pumps water through recharge
channels and pits. Both these schemes now have sophisticated
conjunctive use of surface and groundwater to maintain aquifer quality
and resource availability.
Within the MDB itself, a deliberate policy of groundwater mining for
agricultural use has been adopted in the Namoi Valley, in New South
Wales. Large reserves of low salinity groundwater are being exploited
to irrigate cotton and meet stock, urban and rural domestic requirements.
Annual extraction of 37,000 ML exceeds natural recharge by about 2,000
ML per year. Saline degradation may halt irrigation earlier than
exhaustion or uneconomic pumping levels, and incentives to conserve
use have been implemented through licensing and water allocations to
prolong the life of the aquifer. A similar story unfolded in the Murray
Basin in South Australia, although injector wells have subsequently been
installed to stabilise drawdown and prevent further degradation from
surrounding saline deposits and groundwater.
Groundwater has played an important role in drought mitigation: in
Victoria, licences may restrict abstractions in high rainfall years to
enhance inter-annual storage, saving large flows for drought periods.
Conjunctive use strategies mix poor quality groundwater with good
quality surface water (Prendergast, 1993) and many farmers adopt this
strategy in drought years when the percentage of optional water right is
low (see Box 4), or if they are using pumped drainage to control water
tables. Since hydrogeologists are still uncertain of the exact nature of the
many connections between deep and shallow aquifers and of the
processes determining recharge and discharge points, there is much basic
work to be done before more elaborate groundwater use is contemplated.
Extensive mapping has already been undertaken, and recent activities
within state salinity action plans are providing much more detail on
water quality and water table height and fluctuation.
The 1969 Groundwater Act of Victoria introduced groundwater zoning
on the basis of metering and extensive water table measurement in
critical (coastal) zones. A groundwater conservation area was declared in
the Western Port region and licensing was used to secure existing
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irrigation use and freeze further development for irrigation in critical
areas. Jacobson and Lau (1988) report that on average irrigation usage
accounted for only 35% of licensed entitlements in normal years, but that
it rose to 50% in dry years. In 1985, when many licenses came up for
renewal, the revised terms stipulated shorter terms and lower
Pollution of groundwater has been a more pervasive problem; water
from the shallow basalt aquifer between Koroit Creek and Maryrbinong
River in Melbourne has been rendered virtually unusable by industrial
and urban pollution, forcing industries to source more expensive deep
aquifer water. There are many localised problems of industrial, land-fill
and urban waste-water pollution of shallow aquifers, but many have
been amenable to engineering and regulatory solutions.
The lesson from this summary is that there is considerable merit in the
state securing control over groundwater licensing and implementing its
regulations vigorously, along with investigating thoroughly and
monitoring to understand better the dynamics of specific aquifers.
Groundwater policy has been strongly and openly argued and
coordinated with surface water development, perhaps as a consequence
of the small number of institutional players involved. It also helped that
individual have no property rights to groundwater, unlike in California,
where the population and industrial growth measures have admittedly
been much greater.
An Ancient Tradition
Spain has a long, colourful and detailed history of water development,
principally for agriculture, and during the 20th century irrigated area
trebled from 1 to 3 million ha, enabled by a revolution in construction
methods and motivated by agricultural development in a semi-arid
climate. The technical history of irrigation development in Spain is
illustrated by waves of imported technology – syphons, wooden pipes
and clay tiles from Greece; aqueducts from the Romans; barrages from
the Romans and Moors; and shaduf, pumps and windmills from the Arab
world and later northern Europe (Perez and Gallardo, 19871).
Pre-Roman canals (Tartic?) can be found in the Guadalcivir, where
collective farming (known as vacceos) was practised by free men of the
region. The incoming Roman settlers favoured large landlords and
reduced the smallholders of the vacceos to day-labourers as tenants or
share-croppers, a precursor of the latifundias later found in feudal Spain
and its colonies. The largest dam built in Roman times remains today at
Proserpina; it is 400 m long and 20 m high, and Roman technology was
not bettered for dam and barrage construction until the late 19th century.
A dark age of Visigoth domination from the 5th to 7th centuries saw a
breakdown of Roman colonial land ownership and little construction, but
new laws concerning water rights and punishing water theft emerged.
A Mix of Traditions – The Moors in Southern Spain
The present system of water rights and water distribution date from the
Moorish domination of southern Spain from the 8th century to the
reconquest by Castille in the 1200s. In the principality of Grenada the
sovereign controlled water allocation and introduced public finance for
water development, whilst in Valencia water-user associations emerged
Much of this brief history of Spanish water development is taken from Perez and
Gallardo’s french text for an ICID congress in the 1986.
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to develop irrigation with their own and sometimes public monies. The
famous Water Tribunal of Valencia and an irrigation inspectorate were
established as the introduction of rice, oranges, cotton, sugar cane and
mulberries for silk all spurred irrigation development. This era saw little
large-scale development, but widespread small-scale development and
improvements in practice, creating the now traditional Spanish run-off
river irrigation using groynes and training bunds as a substitute for
expensive barrages. Groundwater extraction using animal-powered water
wheels was an important technological innovation of the time.
Although agriculture and irrigation in particular suffered in the
struggle to oust the Moors, Arab water practice and law was confirmed
by the new royal rulers of the 13th century, and water rights were
specified as irrevocably tied to land. Some Roman practices such as strict
rotational distribution and rights to re-use runoff were incorporated.
Some of the earliest details of privately financed canals and headworks
are recorded at this time: the first private canal in Europe was funded by
its users in 1149 in de Taueste and similar arrangements saw the
construction of the Reservoir d’Almansa near Albacete, a structure that
was raised in 1384, 1586 and in 1911, although it now has only a third of
its original capacity due to siltation.
Over the 16th to 18th centuries, water was a ’principality’ subject (as
in the federal USA and Australia of modern times), and permission to
develop water resources was accorded by local government and
sometimes by parliamentary decree. In 1529, the Emperor agreed to fund
irrigation works in Saragosa providing the rights and responsibilities of
all parties were clearly defined. 19 Years later the king was asked by the
Cortes’s of Vadallodid to undertake a national study of river flows and
resource use. The real expertise in irrigation was still the south of Spain,
but this declined severly when the remaining Moorish settlers were
repatriated during the 16th century. New Royal (Castillian) law was
superimposed on Moorish custom and resulted in a confused legislative
framework (which persisted until the beginning of this century). New
engineering expertise developed and the Tibi dam, at a height of 43 m,
held the world record for 300 years from 1590. Like the Hoover Dam, it
was completed very quickly – in only 10 years when normal lead times
were typically 100 years. Clearly, economics was not the dominant
science that it is today!
Agriculture stagnated in the 1600s, possibly due to preoccupations
with Spain’s colonial expansion in the Americas, but a number of earlier
projects continued through this period. In 1550 design studies began on
Spain’s first inter-basin transfer – to join the River Carrion to the
Pisuerga for transport and irrigation use – but construction did not begin
until 1753.
Water and the Nation State
During the first half of the 18th century, the majority of the population
was rural and Madrid contained only 250,000 people, who consumed an
average of only 10 lpcd (litres/capita/day) (compared with more than
200 lpcd today!) Although the Canal de Isabella II was built to bring
water from Lozoya to improve the situation, a population explosion did
not occur until improved public health care in this century lowered
mortality rates and lengthened life expectancy. As in Australia, turn of
the century advances and enthusiasm for sanitation engineering played
a big role in defeating endemic and epidemic disease (NHP, 1993).
The Bourbon dynasty of the 18th century jerked the Spanish people
out of their ’lethargy’ as national mapping was undertaken and an
engineer was assigned to each province (Perez and Gallardo, 1986).
Canals were financed and the old Valencian system of public provision
was adopted by the throne, which split the returns from irrigation 50:50
between the crown and producers. At the turn of the century Tovellanos
diagnosed that a lack of irrigation in arid Spain was holding back
national development and lobbied for rapid construction of barrages and
high dams, dramatically reducing lead times to six to eight years.
National water laws of 1816 and 1819 promoted irrigation development
by local government and community, effectively uniting two disparate
legal traditions from Aragon (free use to riparians allowing private
development) and Valencia (development by royal sanction only). In
1849, service rules and codes for collective agricultural interest were
introduced and tax exemptions were offered to potential investors in
irrigation works.
Eleven years on, rivers, streams and river beds were declared public
property and national water law was imposed on Aragon and Valencia,
restated in the Water Law of 1866 and the Civil code of 1879 which
finally established the almost pan-European formula of public ownership
of surface water with riparian usufructuary rights and private
groundwater ownership accruing to the overlying landholder (NHP,
1993). Syndicates, concessionaires and water-user associations that had
financed diversion works themselves obtained a primary right to use
water, but where public funds had been used (as was becoming
increasingly necessary for major works), users held only secondary rights
of use. The 1866 Water Law was also the last in a series of rulings
enshrining the importance of irrigation associations (syndicates and
concessions) and establishing the primacy of water tribunals in solving
disputes – arrangements which remained in force until the national water
law of 1975.
The powerful figure of Joaquin Costa arrived in Spanish politics with
a vision of irrigation development and agricultural reform as key
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components of national development. He sponsored the Law of 1896 that
released public finance to build the Aragon and Tamarite canals and
heralded a new era of public intervention. By 1900, work had begun on
16 barrages of more than 10 m height and 70 smaller ones, bringing total
irrigated area to 1 million ha (NHP, 1993).
Despite the Gasset Law of 1911 on irrigation diversion and flood
protection, private enterprise remained the major force in financing and
developing water resources, albeit with government assistance, and the
politics of water was increasingly bound up with the politics of interior
settlement (or recolonisation) (Perez and Gallardo, 1986). Subsidies to
users and for irrigation infrastructure were approved in the name of
National Development.
By the 1920s, 70% of the workforce still worked in agriculture and
industrial development was very limited (NHP, 1993), and most public
policy had an agrarian focus. In 1926, River Basin Authorities (RBA)were
established over the entire country (modelled on the Basin Confederation
of the Ebro) and the river basin became a superior unit of management
to the political–administrative boundaries. The RBAs were to manage the
hydrologic cycle in a scientific, rational and integrated manner, with full
autonomy for water allocation, coordination, management and
development and a mandate to act as an umbrella organisation for
existing user organisations in a participatory manner.
Modern Times
Parallel to the US Reclamation Act, the National Plan for Hydraulic
Works of 1933 promoted substantial water transfer from the Atlantic to
the Mediterranean coasts and the rapid development of the interior.
National storage capacity increased from 10 mML to 44.4 mML with the
completion of 917 dams and weirs by 1987, with a further 77 still under
construction at that time. There are 431 reservoirs for irrigation, of which
157 double as providers of hydroelectricity. The highest dam is La Serena
at Badajoz on the Zucar river which towers to 92.45 m and supplies
irrigation water for 60,000 ha from a storage of 3.23 mML (about the
same size as Dartmouth in Australia). Hydraulic development has been
fundamental to Spain’s economic development, again in parallel to North
American and developing country experience, but occurring sometime
between the two (NHP, 1993).
Just over half the workforce was engaged in agricultural activities in
the mid-1950s, but rising industrial demand for electricity instigated a
jump in installed hydroelectric capacity from 1,900 MW in 1950 to 11,000
MW in 1970. Thermal energy output (from coal and oil) actually overtook
hydropower for the first time in Spanish history in 1973 (NHP, 1993).
Substantial migration form rural to urban areas occurred from the
1950s to 1970s, creating a demand for water supply and sanitation
services. There is increasing evidence that this trend has stabilised, and
in some cases reversed, as small businesses and industry relocate to small
towns. Thus the demand for municipal water is still rising rapidly, and
availability has a great bearing on small town urban development (NHP,
Internal colonisation laws have promoted groundwater development
which has contributed 25% of the 3 million ha under irrigation at the
beginning of the 1990s. But private groundwater development, in
common with that in South Asia, has not been rational and sustainable
in all cases, as technology has improved. This necessitated redesignation
of groundwater as public property in the 1985 and the issuance of
permits and licenses to pump from aquifers. In this new and
consolidated law, both surface and groundwater are licensed for fixed
terms, over-riding the previous provisions of the 1879 law to allow
permanent use of state property. Other provisions of this act include the
(NHP, 1993):
• further decentralisation and management by users;
• non-separability of water and land;
• rationalisation of irrigation water use and the transfer of water to drier
areas and zones of groundwater depletion;
• promotion of water conservation, limiting supply discharges and
encouraging wastewater re-use for irrigation and industrial purposes.
It proposes the use of desalination technology for saline water and
brackish aquifers, and for coastal (tourist area) potable water supply;
• protection of the environment and assessment of impact in water
development and management;
• goal of balanced economic and social development; and
• reaffirmation that irrigation remains a national priority.
Irrigation produces more than 50% of total agricultural output in Spain
from only 15% of its cultivated area, and provides many of the business
opportunities in the economy through agro-industrial development, even
though only 10% of the population is actively engaged in agriculture
now. As with Australia, tourism has displaced agriculture as the
principal contributor to GNP (World Water and Environmental Engineering
4, 1994).
Many aquifers remain overexploited and part of the momentum
leading up to the National Hydrologic Plan has been generated by calls
to stabilise aquifers by groundwater recharge as happened on a grand
scale with the SWP and CVP in California. Custodio (1978: 319) noted
that aquifers in Spain were not extensive and were likely to be depleted
rapidly as a consequence of burgeoning groundwater use and entry to
the Common Market in 1986. Recharge management was already
proposed (Martin, 1978: 317) to limit groundwater use to 10% of total
Hydro Logic?
consumptive use, and although such limitations are no longer desirable,
recharge of overdrafted areas is a fundamental objective of the National
Hydrologic Plan.
Inter-basin transfer has been justified because of ancient historical
precedent and more recently the successful completion of the Segura
transfer to Lorca. Thirteen years after initial studies began, the transfer
was approved in 1979 and now delivers 33 m3/s to completely irrigate
71,000 ha and provide supplemental water to a further 60,000 ha, and
aims to mitigate drought in the high-value orchard industry. Water is
pumped over a head of 243 m to the main storage reservoir, requiring
the largest pumping station in the country – rated at 40,000 kW. The
system can be run in reverse to generate hydroelectricity for peak
demand. Interestingly this transfer, first proposed by Pardo in 1933, is
cited as an example of uneconomic development typical of the 1960s and
early 1970s by the authors of the 1993 National Hydrologic Plan (NHP).
The NHP asserts that most irrigation development at the end of the 1970s
was economically sensible, but that little concomitant attention was being
paid to water quality and environmental issues – a statement that would
have many environmental economists reaching for their word processors!
The Rain in Spain – A Precis of the Nation’s Hydrology and
Water Resources
Mean annual rainfall for the whole of Spain is 670mm, which 3400 mML
of water. Evaporation rates are high and reduce the average water
availability to 230 mm/yr or 1140 mML, of which only 200 mML actually
recharges the nation’s aquifers. Although average available water is some
22% less than the European average, water availability of 3
ML/person/year is 20% higher than the rest of Europe, because of the
low population density.
Rainfall in the south-east is as low as 200mm/yr (Almeria), but rises
to more than 1,800mm in Galicia on the north-western Atlantic coast.
Such variation and considerable seasonal and inter-annual differences
mean that reliably available supplies are only 8% of the average figure,
at 92 mML per year or only 240 m3 per person per year, which is less
than a quarter of the internationally recognised minimum for countries
not experiencing water stress (Herreras, 1994). Rainfall declines along the
north–south and west–east axes, whilst evaporation increases, so that the
north has a disproportionate share of water resources, much greater than
that available in the most poorly resourced Jucar–Segura area of the
Consumption of water for irrigation is much greater than in other
European countries and accounts for 80% of total consumption.
Consumptive use by agriculture is 242 mML per year, with a further 43
mML used by drinking water supply and sewerage and a modest 19
mML going to industry. When basin level water use efficiency is
considered, the NHP (1993) estimates that 90% of existing irrigation
water use cannot be reclaimed. This is an interesting figure, and one that
has no parallel in the water accounting exercises undertaken in the USA
and Australia.
Non-consumptive use by hydroelectric facilities accounts for 160
mML/yr and a further 4 mML are run through industrial cooling
systems. Of that 95% returns to rivers, and must be returned at near to
the mean natural stream temperature to comply with environmental
legislation. Gross demand therefore runs at 370 mML/yr. The NHP does
not make explicit allocations for environmental use, although minimum
streamflows are specified in all basins.
Municipal water demands for drinking water and sewage treatment
take priority over all other uses and 80% of this allocation is returned unconsumed. Spain has already quite sophisticated re-use for agriculture,
but under relatively lax standards compared with northern Europe and
current EC water quality directives relating to non-point source pollution.
Most recent statistics show that Spain has more than 1000 dams that
are higher than 15 m or impound more than 100 ML. Total national
storage capacity is more than 500 mML (NHP, 1993), which is a margin
of less than 50% above average annual use, compared to 400–500% in the
Murray–Darling Basin in Australia. Half a million wells extract 55
mML/yr, including about 10 mML of mined water – similar to the net
overdraft in California. Total re-usable groundwater resources at 40% of
annual recharge is estimated to be much higher at 463 mML/yr, although
much of it cannot be economically pumped. Despite this overall excess
of groundwater, saline intrusion is a common feature along the eastern
coast, where tourist development has placed high local demands on
vulnerable aquifers. In summer, coastal populations can increase by a
factor of five (World Water and Environmental Engineering 4, 1994).
Hydro Logic?
The National Hydrologic Plan
Concept and Objectives of the NHP
The NHP was conceived in the wake of the 1985 consolidated water law
to improve the organisational arrangements under the 10 water
Confederations (River Basin Administrations) and to provide for
improved coordination between them at a national level (Abadin, 1986).
The NHP is intended to address the following subjects (Herreras, 1993),
within the context of satisfying demand while:
’ balancing and coordinating sectoral and regional development, increasing
water availability, protecting its quality, economising and rationalising its
use in harmony with the environment and other natural resources.....’
• coordination between river basin and watershed plans;
• evaluation of the alternative proposals for each river basin and water
shed, leading to selection of the most appropriate one;
• establishment of conditions and enabling provisions for transfer of
water resources between basins and watersheds.
Hydrological planning is therefore supposed to be achieved at the river
basin level and more centrally at the national level, and the NHP
provides a framework over 20 years for development and approval of
water resources management initiatives. Herreras (1993) summarises the
long-range goals of the river basin (and constituent watershed) plans as
• provision of detailed inventories of water resources (already largely
• definition of current and future water use and prediction of demand;
• selection of criteria for determining priorities in water use;
• assignment and preservation of water resources;
• setting of standards for sewage and wastewater treatment;
• zoning of irrigation use within guidelines for soil conservation;
• establishment of guidelines for water resources protection and
• development of strategies for aquifer protection and recharge;
• listing and costing of basic infrastructure improvements to meet the
plan’s targets;
• evaluation of hydroelectric power development; and
• definition of criteria for flood management and flood damage
It is clear that this list is somewhat out of tune with the tone of reforms
and planning processes in North America and Australia, and although
it mentions environment and economics and assumes an already wellestablished base of participation and decentralised management, it is very
much an engineers’ and scientists’ agenda.
Although the NHP is a broad-reaching document (three main volumes
of more than 1000 pages, and a mountain of annexes), its central concern
is that of inter-basin transfer (trasvases) to make good deficits of 300 mML
in water-scarce south-eastern Spain, predominantly in the Jucar and
Segura Basins. It explicitly acknowledges that the substantial water
development and regulation to date is inadequate to meet demand and
that even with recycling of wastewater, conservation measures and
strategic use of desalination, further supply augmentation is necessary.
Net transfers of 270 mML per year have been calculated as necessary
over and above the current 50 mML already made. Whole rivers are to
be manipulated to transfer water from three major northern basins along
an east coast corridor stretching south from the Ebro.
The Guadalcivir Basin is the most stressed and has the greatest
negative environmental impact including salinity, nitrate contamination
and degradation of historic wetlands, but is not slated for substantial
transfers and will have to find other, at present not publicly announced
solutions. A considerable number of the options evaluated in the NHP
are not alternatives to long-distance water transfers, but economic and
technical variations in approach.
Other activities envisaged under the NHP include:
• Water quality improvement – Although 97% of the population have
access to piped water supplies, only 40% are served by sewage
treatment works, and planning and distribution of sanitation facilities
has been haphazard.
• Flood protection – Average annual flood damage is estimated to cost
around US$500 million and five economically damaging floods are
expected every year, based on 500 years of records (one of the oldest
data sets in the world). The plan envisages expenditure of around
US$500 million in structural works.
• Improvements in irrigation policy and development – In the wake of
Spain’s entrance to the Common Market and the requirements of the
Common Agricultural Policy (CAP), the projected target of an extra 2
million ha of irrigated land has been reduced to 600,000 ha and will
be concentrated in the southern mediterranean regions where
comparative advantage is greatest (but water supplies are most
vulnerable and limited). A reafforestation policy is advocated for
central Spain where rain-fed farming lands will be retired in
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compliance with EC quotas on grain crops and milk products.
• Expansion of installed hydroelectric capacity by a further 8000 MW –
Older facilities will be upgraded and a limited number of new dams
will be sited where appropriate mainly to stabilise peak loads, which
cannot easily or economically be met from thermal power stations.
• Maintenance of the hydraulic infrastructure – Estimated at US$50
billion over the 20-year life of the NHP (Herreras, 1993).
• Environmental protection and restoration – Assurance of minimum
flows, forest and soils conservation plans, recreational planning.
• Research and development to support implementation of the various
programmes of the NHP.
Financing, EC Regulations and Competing Demands on the Public
and Private Investor
Although Spain has benefited considerably from EC funds for
infrastructural development and from the provisions of the CAP, water
quality standards have caused upheaval and need considerable
expenditure. The provisions for improved wastewater treatment in the
NHP do not take full account of the European Urban Wastewater
Directive (ECUWWD 91/271), although it proposes to spend US$15
billion (Herreras, 1993) in improving the coverage and standard of water
treatment services to 48 million inhabitants of towns larger than 15,000
by the year 2000, and to provide secondary treatment in smaller towns
by 2005. Many water managers in Spain feel that the EU standards are
almost impossible to observe, particularly with respect to verifying levels
of pesticide and fertiliser contamination from non-point sources (World
Water and Environmental Engineering 4, 1994). Spain has been arguing for
concessions from the EC in the scope of its water quality programme,
although much surface water is seriously polluted and many rivers in the
industrial north do not even meet Spain’s own much less stringent
standards. Wastewater treatment has since been excised from the NHP
to become the National Sanitation and Wastewater Plan, which was
approved by Parliament in the spring of 1995, and receive 25% of the
US$15 billion price tag from the Ministry of Public Works, Transport and
the Environment, which in turn hopes to secure substantial contributions
through the EU’s Cohesion Funds. The balance is still expected to be
provided by regional and municipal governments, which may be
optimistic (Water and Environment, July 1995).
Cost estimates for the NHP vary. Jose Borrell, the Minister of Public
Works, has quoted figures of US$27 billion, of which US$15 billion is
required to fund the water transfer schemes, and he has revised the total
downwards on a number of occasions (World Water and Environmental
Engineering 4, 1994). Herreras (1993), who has been very active in
development of the plan, quotes larger sums: US$40 billion funded
through Public Works plus an additional US$25 billion sourced from
other national and regional government bodies as well as private sources,
which would average US$3 billion per year over the life of the plan. A
study undertaken in the late 1980s by a UK engineering firm put the
price tag even higher at US$4 billion per year to 2015 (World Water and
Environmental Engineering 4, 1994). Borrell has proposed to increase
household water charges by US$25 per household to finance the
implementation of the NHP, but at the outside, this would raise a gross
figure of around US$500 million.
Drought and the Re-emergence of Regional Politics
A severe drought began in 1990 and continued with increasingly severe
impacts until 1995. In 1994 reserves were down to 10 to 20% of capacity
and in some large southern cities such as Cadiz and Seville, the situation
was even worse with reserves standing at only 5%. Emergency measures
including hosepipe bans and cessation of night-time deliveries barely
coped with demand, particularly in the tourist areas.
By 1995 the government had spent almost US$165 million in
emergency measures to cope with drought which included interest-free
loans and tax-free credits to badly affected southern farmers (Economist,
20 May 1995). In Andalusia, only 10% of storage capacity remained and
total losses to farmers across the nation were expected to reach US$2.49
billion for the year, despite a moratorium on irrigation fees. Knock-on
impacts on casual harvest work has provided further hardship in the
south, where food prices have risen dramatically.
Spain has a long history of public participation in water development,
and the authors of the NHP claim that it was carefully researched and
sought considerable participation and consensus in its development.
Parliamentary groups unanimously approved a resolution to designate
the NHP as a State Subject and present it to Parliament for approval
(Herreras, 1993). The drought may have contributed to such consensus,
but it is clear that this has unravelled badly in the following two years
as the impacts of the drought and its implications hit harder. The
Economist (20 May, 1995) reported that regions have been threatening
violence against each other and municipalities have been at odds with
regional governments, which are as a consequence attacking central
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government in Madrid. Regional political leaders have polarised the
debate on water transfers accusing the ’profligate south’ of stealing
northerners’ water. There is strong resistance to the exiting proposals to
raise water charges across the board to subsidise developments that
largely benefit the arid south, an argument that recalls the successful
public opposition of North–South transfers in California in 1982.
It appears that consultation for the NHP was actually restricted to a
narrow, technocratic caucus of people who would understand the logic
of national planning and water transfers, without consideration of the
environmental lobby and Spain’s emerging regional politics, particularly
in Catalunya, where the Ebro river is a key feature of all transfer
The drought has focused the debate, in this case in an unexpected
way, and has also brought agricultural and environmental interests in
direct conflict as the degradation of wetlands and rivers has become
extreme: the famous Tablas de Damiel bird sanctuary has almost dried
up. Environmentalists and opponents of excessive government
expenditure in an increasingly straitened economy have united to suggest
that conservation could be further improved through better technology
and pricing, opposing the technocrats view that these mechanisms are
insufficient and are anyway already well-implemented. The proponents
of price control note that per capita water consumption in Spain, at 1000
ML/yr, is only surpassed in the USA, Canada and Russia, and that new
programmes such as the proposed sanitation tax to half-fund the
National Sanitation and Wastewater Plan, will lead to further economic
reform to control water use (Water and Environment, July, 1995).
It is ironic that the NHP, built on the basis of longstanding and ’ideal’
institutional arrangements for water management, should have opted for
such a whole-hearted engineering approach to national water
management, some 15 to 20 years after such solutions have been rejected
by governments and the general public in the USA and Australia. It
would be foolish to say that Spain has not regarded history elsewhere,
for further large-scale water transfer projects may yet be promoted (in
California for instance), once the effects of demand management and
adjustment in the agricultural sector have ceased to restrain demand
within the limits of available supplies. Further developments in this story
will prove to be illuminating, but above all indicate that even the most
’rational’ and comprehensive institutional frameworks for water
management are insufficient, in the final analysis, to achieve equitable
and sustainable water management – the political dimension, famously
ignored by engineers the world over, remains the key that unlocks the
door. Achieving political consensus in a democracy often requires more
than simple logic, or improvements in national welfare that are not
reflected in the majority of the nation’s regions.
The Environment – A Latecomer in Spain’s Water Politics
The key to the emergence of an environmental lobby in Spain appears to
be the nation’s wetlands, which have been severely affected by
agricultural and, to a lesser extent, industrial development. Wetland
conservation and rehabilitation pits environmentalists squarely against
agriculture over competition for limited water resources in the arid south
of the country, competition which is heightened in drought periods.
Degradation has occurred because of a wide range of (mainly
agricultural) activities, including:
• drainage;
• dredging;
• sediment deposition from agriculture and urban development (coastal);
• direct water extraction;
• water-level control;
• water pollution from intensive agriculture and industry;
• introduction of ’exotic’ species such as the Louisiana Red Crayfish;
• intensive aquaculture; and
• road construction.
Agriculture covers 40% of Spain’s land area (20.4 million ha), 27% of the
total arable area of the EC. Intensification has increased since the end of
Franco’s era, and the irrigated area trebled this century. The irrigated
area grew by 13% from 1977–86 and rice cultivation increased by 16%
over the same period. The distorting economic effects favouring shortterm agricultural growth to obtain the benefits of CAP subsidies has been
targeted for particular criticism.
Groundwater mining has severely degraded the Tablas de Damiel
wetlands where local laws favour agriculture development over
conservation. In La Mancha, a long -distance water transfer to restore
water table levels for wetland habitat has not worked as it has proved to
hard to replicate the natural dynamics involved.
Almost half of Spanish rice is grown in the lower Guadalcivir, where
salinity is becoming a problem, as is the level of water control applied to
rice culture. A US$ 727 million ha irrigation project in the Ebro basin
(also a major rice producer) has resulted in salinity affecting land and
water resources on and adjacent to the 66,000 ha Monegros II scheme.
Drainage proposed to mitigate salinity will have further negative impacts
on wetlands. Historically, wetlands have been drained to control malaria
as well as for conversion to arable land, especially after 1860, when a
series of amendments to the 1879 Water Act encouraged drainage works.
Private agriculture and tourism development in the wake of land tenure
reforms in 1952 and promotion of the tourist industry in the 1960s, often
had more impact than state developments. In Huelva, the number of
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housing units rose form 33,000 to 341,000 over 20 years of tourism
development from 1964 onwards.
Wetlands no longer play a major role in flood mitigation and detention
due to the high degree of river regulation across the country, but are still
important sites for groundwater recharge and discharge, wildlife
(especially birds), and scenic value in an otherwise dry landscape.
Aquaculture and hunting have been important business and recreational
activities whose constituents have tended to throw in their lot with
It is estimated that 60% of Spain’s natural wetlands have already been
lost, although full inventories were not undertaken until the 1940s, when
it was concluded that the conversion of many wetlands was not
economic. A comprehensive inventory using the RAMSAR convention
classifications was completed in 1988; it identified 20,000 units but only
2000 covered more than 0.5 ha. The Conservation and Natural Species
Act was passed the following year and sets out administrative
arrangements for wetland protection and conservation. As environmental
protection agencies existed in only four autonomous states at the time,
implementation of the act has been less than whole-hearted, and the
abolition of the Inter-Ministries Commission on the Environment was a
further setback to the ’green cause’. Designation of nationally important
wetlands as parks failed to check their degradation as no restrictions
were placed on groundwater abstraction in the surrounding land
overlying connected aquifers.
Although there is a clear national policy on water resources
development and use, there was no comparable policy on the
environment at the beginning of the decade. The roots of this oversigh
can be traced further back into the confusing and overlapping
jurisdictions of different laws governing ports, shores, coastal protection
and land reform that were not consolidated and rationalised until the
Water Law of 1985. Revisiting the NHP from an environmental
perspective also gives the impression that ecology, habitat, in-stream
flows and even surface water pollution have been given fairly superficial
treatment in comparison with the requirements for ecologically sound
water management that are being articulated in other developed
The fragmented past structure of government laws and organisational
arrangements for environmental protection has been addressed by more
recent water and environmental legislation, but active pursuit of their
goals lags considerably behind events in the United States, where
environmental pressure groups have established powerful positions
through the courts on the basis of stringent federal and subsequently
state legislation. Similarly, the environmental agenda is well represented
by state agencies in Australia, which now have the dominant behind-thescenes power in natural resources administration, as well as an effective
public mandate. The recent gains made by the green lobby in Spain as
a political force, indicate that significant changes are in store for the
carefully wrought NHP and for water management in general in Spain.
Common Themes and Divergent Experiences – A
Synthesis of Approaches to Reforms in Water
Resources Management
General Points
Institutional Reform
There is little retrospective and comparative analysis on water resources
policy reforms and their implementation. Reisner’s witty but polemic
history of western American water development is an exception, but
what is usually written describes current initiatives or, more often, reacts
to known proposals and problems, offering opinions on what might
happen next, based either on modelling or simply a point of view.
It has proved difficult in practice to use the analytical framework set
out in Chapter 1 as more than a set of guiding principles, and impossible
to establish much of the anticipated detail with the information available.
More importantly, breaking down all interactions within the institutional
framework is tedious and ultimately uninteresting and incomprehensible
to the reader, so a more thematic treatment was used.
It is clear that institutional reform, although something of an icon in
today’s development thinking, has been a common feature in the history
of water resources development, and that in many ways, the institutional
arrangements set up to respond to past policy, notably that of water
development, were effective....too effective and too limited in their scope.
Many calls for institutional development and reform presuppose an
’institutional desert’, although in developing as well as developed
countries this may not be the case. Policy objectives have changed to
meet changed political and economic contexts, new and more complete
understanding of natural systems, and public concern over the
management of natural resources and the environment. The problem is
really one of how to develop a clearly articulated transition in policy and
how best to re-order existing institutional arrangements to be not only
responsive, but also proactive in meeting new objectives.
Technical and technically biased institutions have developed along
parallel, but not necessarily linked paths, and the study indicates that
technology and institutional development will continue to be closely
linked. There is evidence of a cycle of technological innovation to meet
demand, followed by institutional adjustment to manage both demand
Common Themes and Divergent Experiences
and, sometimes, the consequences of the technology used. As needs
increase beyond the limits of existing technology and institutional
capacity to satisfy demand, new technology is deployed, often supported
by considerable public subsidy.
In two of the three countries examined in this study there are no
longer any large-scale, publicly financed capital works on technical,
economic and, above all, environmental grounds. Now, local microtechnologies are managing demand, conserving water, and augmenting
supply (e.g. by desalination). Where shortfalls in resources are severe,
technology is still invoked: Israel is investing considerable funds in new
approaches to low-cost desalination, including improbably massive windshear towers (Water and Environment, March 1995). Israel also intends
to use use only treated wastewater for irrigation by the middle of the
next century, a goal that requires considerable infrastructural
development, with a parallel plumbing system for dirty water running
in parallel to the national water carrier. These are extreme and expensive
solutions, but it is foolish to imagine that institutional reform alone will
solve water supply problems indefinitely.
The imperatives to substitute demand management and water
management for supply development are different in all three case
studies, even though there is much common ground between the
solutions proposed and applied. In the western USA, there is direct
competition between urban and industrial needs on the one hand and
agriculture on the other. In Australia, water conservation is an integral
part of the strategy to mitigate salinity and other negative environmental
impacts, and is not explicitly driven by competing urban and industrial
needs. The problem for planners in Spain is simply one of a general
shortage of water for all (justifiable?) economic activity in the south of
the country, and assumes that competition between sectors will not arise
if supplies are increased; the possibility that agriculture might surrender
some of its water for other uses has not been seriously entertained,
whereas it is clearly the key factor in balancing demand and supply over
a range of important economic activities in California. Water demands for
the environment are now at least as large as for agriculture in both the
western USA and Australia, but not yet in Spain.
Whilst there has been much justified criticism of past excess and the
economic ’madness’ of pursuing water development at all costs,
particularly for irrigation, it is clear that the environment has usurped the
godhead of water policy and is in danger of sponsoring the same
distortions and misuse of public funds. Water treatment and delivery is
the giant of the US environmental industry with total revenues in 1994
of US$64 billion (Water and Environment, July 1995), of which US$13
billion was treatment and chemical supply.
The global environment market is estimated at US$305 billion, much
of which will be spent on basic infrastructure investment in southern
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Europe, South-east Asia and Latin America. The World Bank puts the bill
for water-related expenditure as high as US$600 billion over the next 10
years (Seregeldin, 1994 and 1995): a considerable and possibly intractable
financing problem. The cycle of technological development and
institutional reform has tended to oscillate from one ’extreme’ to another,
as the overriding power of politics1 over neatly conceived arrangements
for management is a major factor in both the time lag and degree of
swing in reform.
Better institutional arrangements would concentrate on achieving
consensus between potentially opposing interests and on establishing
procedures and a culture of awareness that looks outside the received
nostrums of the day, ensuring rapid, smooth adaptation. The Australian
approach addresses this problem by internalising much of the politics of
water management and encouraging development through communityled initiatives. This route is expensive, and although the environment
now commands almost unquestioned public expenditure, it is a situation
that sits uneasily with many governments’ professed economic rationale
for removing the subsidies given to water consumers.
The alternative approach in the United States relies on a more chaotic
mix of federal and state law, implemented through an adversarial court
system. The resulting culture of litigation, particularly in the State of
Colorado, is expensive and encourages polarisation. Dissatisfaction with
the effectiveness of a state-administered regulatory approach led to the
innovative Proposition 65 in California, which trys to improve the
implementation of environmental protection. Early indications are that
this is also a costly process and that economic efficiency is not one of its
priorities. The dilemma for Spain in meeting the EU directives on water
quality is similar: massive investments are required, largely in
technology, to meet standards that many would claim are too stringent
– although much has to be done to meet even the country’s own
relatively lax requirements. Environmental economics is not exactly a
new science, but there remains a shortage of information and capacity to
value both key aspects of the environment and strategies that might be
adopted to conserve or enhance it. Clearly much further research is
needed in specifying environmental needs in detail so that appropriate
and economically justified action can be taken.
Science, Knowledge, Truth and Information
In theory, water resources management is founded on sound science and
sound economics, but this study (and others concerning international
conflict between opposing ’narrowly defined’ interests
Common Themes and Divergent Experiences
water allocation) show that science can easily be misrepresented to suit
conflicting agendas. A long-term goal of reforms must be to ensure the
even-handed provision of well-collected and -collated data, that has been
analysed with as dispassionate and open a mind as possible. Equal access
to good quality data has been a fundamental precept of cooperation
within the Murray–Darling Basin, whereas the major remaining problems
in water allocation in the Colorado derive from an inability to revise
allocation arrangements made, in 1922, on the basis of partial and
ultimately incorrect analysis.
Scientific truth is even harder to come by in demand forecasting. It can
be manipulated for different purposes easily, and leaves out important
variables – often not taking account of demand management and
conservation methods (although it is not clear if these impacts should be
considered as one-time improvements or will continue incrementally).
Reform or Revitalisation?
Debate in the developed countries has not been about provision of
services so much as about improving standards of ’satisfactory’ services
to meet increasingly stringent public health, water quality, sustainability
and economic efficiency criteria. Most developing countries are still
talking about how to achieve sufficient coverage of effective and
economically sustainable service provision; develop basic professional
capacity; and meet minimum standards of service provision and
environmental protection.
Full cost recovery is widely recommended to developing country
water suppliers as a means of improving efficiency and reducing the
public expenditure burden, but the study shows that developed countries
have made strong historical use of substantial capital and operational
subsidies in water development and service provision; have continued
capital subsidy, and selected operational subsidies, some which are
reducing, some not; and offer considerable price support for agricultural
commodities (in Spain and the USA, but not Australia).
Water Policy
The institutional framework in the United States is, compared with
Australia and Spain, confused by multiple federal and multiple state
bodies empowered to deal with different aspects of water resources
management and development. The historical confusion of constructionand development-related agencies now includes environmental and
regulatory agencies, which have little sympathy with broader problems
of water provision and management.
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Prolonged drought in California and the Hunter Valley has been the
trigger for institutional reform and the key to the acceptability of demand
management. Pricing reform in the Metropolitan Water District of
California and in the city of Newcastle (Hunter Valley) has been
introduced with minimal public consultation under the smoke-screen of
a drought crisis. It is still rare to find true long-run marginal cost pricing
(LRMC) being practised in the water industry, but alternative supply
arrangements for Californian industry are now based on this principle as
a result of disciplines imposed by drought. Other economic tools have
been introduced, such as bulk discounts for adopting water conserving
technologies, and are used in conjunction with penalties for excessive
Public participation in the western USA has been achieved through
strong private sector and private association involvement (which may not
be widely representative) and via public referenda, namely the proposed
North–South California and Mississippi–Texas water transfers. Public
representation has been widened by reforming membership of water
districts to include all those on the electoral register, not simply the
(declining proportion of) landholders, but there has been less inclination
to involve the public directly in policy formulation and implementation
of water management strategies. In contrast, active and concrete public
participation lies at the heart of all current Australian strategies of land
and water resources management, which are integrated at the watershed
level where possible. This has been an expensive undertaking and it will
be hard to evaluate the economic efficiency of this investment, although
there is little doubt that it is already making a considerable impact. In
Spain, a strong tradition of participation in water affairs was submerged
under the long dictatorship of General Franco, when technocrats were
able to develop the nation’s resources and management systems.
Although the tradition has re-emerged with democracy, government
departments inviting participation appear to have done so on their own
terms and neglected two powerful emerging constituencies – regional
political identity and belated environmental awareness.
Two significant historical water policy failures in California have been
the non-integration of surface and groundwater management and the
allocation of private property rights to groundwater. Although this has
been redressed by recent amendments to state water law and by
technical interventions such as recharge and long-distance transfer,
clearly integrated policies for efficient and equitable conjunctive use are
a very recent ’innovation’. The cycle that water development followed in
California may repeat itself in many developing countries where groundand surface water policies are not well articulated and actively pursued:
• settle – develop surface water resources
• *develop groundwater resources in face of rising urbanisation,
Common Themes and Divergent Experiences
industrialisation and development of irrigated farming
feel negative impacts of development, but continue
understand negative impacts of development and seek augmentation
of supply to mitigate negative impacts of groundwater mining and
increase total supply (inter-basin transfer)
manage demand and reallocate water – augment supply for higher
value uses
return to*
Most arrangements to mitigate groundwater mining in the USA have
been initiated by competing users taking a longer term view and
enforcing common restraint on dissenters through the court system. The
momentum of growth has been so great, however, that these self-formed
institutional arrangements have been overwhelmed and supply
augmentation has settled the problem in 90% of the historical cases.
Groundwater was brought under state ownership and allocated
through renewable licenses in both Spain and Australia, where it has
been a manageable exercise because of the limited development of
groundwater, effective enforcement of regulatory codes (with some
drought exceptions in Spain) and the relatively small number of
extractors involved.
Environment versus Resource Management
In many ways, the environment rather than the problem of matching
demand and supply drives the reform agenda. The volume of
environmental demand is on a par with irrigation allocation and is much
larger than municipal and industrial needs.
Environmental legislation has attained a theoretical dominance over
provision of water services in the United States, but it is not always as
economically or practically efficient as its proponents would like. The
assumption that the state is the obvious and rightful originator and
enforcer of regulations has been challenged in California, not on
economic but on performance grounds, resulting in the innovative but as
yet incompletely evaluated Proposition 65: environmental regulation
policed by the public through the courts. The resulting ’environment
industry’ looks set to become huge, with expenditures which may dwarf
those invested in the infrastructure that generated some of the problems
in the first place. In the past 15 years strong alliances have developed
between environmentalists and public sector reformers to promote full
cost recovery and the valuation of water as an economic resource in
order to curb excessive (predominantly agricultural) use and mitigate its
negative externalities. In the long term, the blocking tactics that have
historically been the main weapon of the environmentalists will have to
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give way to more constructive modes of action, and ones which survive
similar economic scrutiny.
Salinity management remains a considerable and costly challenge: the
Australian approach of establishing a state-level management framework
with mutually agreed targets appears to work, allowing flexibility in the
adoption of appropriate technology, land management strategy, cost
management, and institutional development at a state level. The
importance of public participation in this strategy has already been
summarised, but formal education has also played a significant role for
both the general public and more specialised interests. However, the
federal government subsidising and promoting the best course of action
is curiously parallel to the construction and water development age – the
level and targeting of public expenditure on the environment should be
carefully scrutinised, so that we do not repeat the overspending of the
past for little substantial and long-term return.
The interaction between water management, the environment and
agriculture must be clearly understood, and although it can be modelled,
analysis done to date has little overall policy coherence. Taking land out
of irrigation may enhance streamflow and natural habitat and may allow
for reallocation to higher valued uses, but it may also require substitute
production elsewhere on rainfed lands – where erosion and other
environmental externalities may occur. Local food security and export
production are still important national priorities in all three study
countries. Although Spain and Australia are industrial midgets compared
to the USA and some European nations, their trade base is no longer
founded on agricultural exports, as tourism has become the premier
contributor to GNP. The extent of structural adjustment in agriculture in
the USA and Australia has so far been modest, despite recent declining
trends in net irrigated area. The twin impacts of trade reforms and
environmental regulation will have a determining role in the extent and
rate of land use change and ultimately on the amount of water freed up
through land retirement.
There is still a basket of needs when it comes to incorporating
environmental values into water policy and management practice:
• better specification of habitat and indicators of habitat degradation;
• specification of volume, duration and timing of environmental flows;
• estimation of the costs and benefits of environmental allocation and
modification to water resources systems.
Significant problems remain in ensuring effective compliance with
environmental standards, and require innovative solutions: institutional
inertia and possible capture of state regulators requires alternative
arrangements such as the Proposition 65 approach, but there is
considerable risk of massive litigation resulting in an expensive and
unworkable system. The historical common property resource institution
Common Themes and Divergent Experiences
of Californian recharge district is an attractive alternative, where
considerable effort in consultation prior to establishing binding legal
agreements among the majority of groundwater abstractors reduced legal
costs considerably in the case of the Central Basin (Chapter 2). Other
community-based approaches such as Integrated Catchment Management
have great potential to establish arrangements acceptable to a broad
range of interests without incurring massive legal costs, although they
may be able to enforce the resulting agreements effectively through
appropriate development of modification of local laws.
In all three countries, water quality degradation has added a new and
more serious dimension to groundwater mining, because exorbitant
treatment costs make much chemical degradation effectively irreversible.
By contrast containing and mitigating saline intrusion has improved
through better hydrological understanding, recharge barriers, and
stabilisation by inter-seasonal storage and recharge strategies.
There have been many calls to integrate wetland conservation and
management into river basin strategies (Hollis and Acreman, 1994), and
there is considerable evidence that this has happened to a significant
degree in California and the Murray–Darling Basin, but not so in Spain.
The following wetland habitat conservation activities should be a part of
basin management strategies:
• Make an inventory of all wetlands within a basin, whether untouched,
degraded or lost.
• Assess their existing and potential functions and values.
• Recognize their location, role and importance via formal classification
within land-use assessment and planning.
• Enhance public and political awareness of their value and function.
Integrated catchment management policies are increasingly pursued in
all three study countries, but foremost in Australia. From an ecological
perspective, integrated catchment management requires:
• quantification of hydrological needs in different parts of the basin’s
hydrological cycle;
• consultation and cooperation with the entire population of wetland
users and consideration of all species of flora and fauna; and
• maintenance and enhancement of wetlands as part of sustainable
water resources management.
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Water Allocation
Reallocation of water from agriculture to environmental, urban and
industrial use has been achieved by:
• land purchase for water right (water farming);
• voluntary sale of water right or excess (water trading and marketing
on temporary and permanent bases);
• administrative fiat (environmental legislation and in-stream water use
in SWP);
• short-term water sale to a water bank (Californian droughts);
• cooperative conservation agreement – MWD in southern California
pays for lining in Imperial Valley in return for transfer of saved water;
• negotiated adjudication of water right in groundwater as with
southern California groundwater in the Raymond, Central and
Western basins;
• traditionally, on an interstate basis, by compact – although Colorado
Basin legal apportionments exceed annual average streamflows,
allocation in the Murray–Darling Basin is determined on basis low
flows, and in most years downstream flows are considerably greater
than the minimum allocation;
• or by sale of bulk entitlements across state boundaries by central
agency (MDBC proposals in Australia), or by private sale (possible
under US federal law but opposed by state legislation in the few cases
that have arisen to date);
• (rarely) by loss of water right through failure to maintain beneficial
use (possibly through redefinition of ’beneficial’ use); and
• cessation of license which is re-awarded to other uses/users; land
retirement in agriculture in the western USA and Australia will result
in water rights returning to the state/ bulk supplier as beneficial use
is no longer proven, or licenses are revoked.
Inter-seasonal storage and allocation is increasingly being managed by
banking groundwater (including artificial recharge) in non-drought years
to build up an assured supply for drought use (California). Little data
has been presented on the relative economics of inter-seasonal storage in
aquifers compared to reservoir storage, but it has many potential
advantages in access and minimal capital costs which are traded for
complications in regulation of uses and increased operational costs.
Groundwater banking may be coupled with licensing and other
restrictions on non-drought abstraction (Australia). The use of this
strategy is limited where raising water tables will result in water
contamination from pollutants such as salt or nitrates from agriculture,
and unless there is a discrete closed basin (as in the Arvin Edison
example), water accounting may be too complicated for satisfactory
management and agreement between the various stakeholders.
Common Themes and Divergent Experiences
Water Markets
Water markets are just one of a range of transfer instruments and
mechanisms and their importance has been overblown and based too
frequently on theoretical considerations, with little evidence from actual
practice. Market transfers are much more extensive than recent literature
indicates and have been practised for almost 30 years in western USA.
Excepting California, water right transfers do not suffer from major
structural/water right/legal impediments.
Although there are many transfers, the actual volume is low, except
interestingly in California, where major transfers are brokered and made
by bulk sellers and irrigation utilities. Drought water banking is a
market-like transaction, but is not strictly speaking water marketing,
since transfers are temporary, and are mediated and promoted by a
public agency which specifies purchase and sale prices across the board.
In Utah, the subdivision of water rights for sale has exaggerated the
number of transactions, when in fact the total volume is very modest.
Significantly, a large proportion of transactions in the western states are
conducted between farmers and not between sectors, and in Australia
most transfers to date are of previously unallocated water, bought almost
exclusively for irrigation use.
The transaction costs of water right sales vary and can be quite high,
but they are much easier to assess than the actual sale price, which is
private information unless the use changes. Even where water trading is
active, the time to process transfers can be a significant impediment – the
adversarial water court system in Colorado (N) averages 20 months for
settlement, compared to 2 to 3 months in New Mexico, which has an
administered market operated by the state engineer.
The restrictions that remain in place in the western states and
Australia reflect concerns about third party impacts of transfer – to
neighbouring irrigators, downstream users of returned water, and as a
result of the new use. Water quality needs to be specified in water right
transfers, but this may pose problems beyond the capacity of the system
managers to guarantee, as would be the case in transfers of water
downstream in the increasingly saline conditions of the Murray and
Colorado rivers. In hydrological and environmental terms, careful
scrutiny of proposed water right transfers is both advisable and
necessary, and unlikely to be sacrificed to market efficiency.
Critics of current water rights arrangements hold that market transfers
need to be based on securely specified quantities and timings of flows.
A contrary ’real world’ view is that the nature of the hydrology of semiarid and arid areas does not allow absolute security and requires either
specification of smaller reliable basic rights, augmented by optional
entitlements (as in the Australian irrigation systems); or a tiered rights
Hydro Logic?
system with high reliability (high price supplies) which must necessarily
be small volumes, and lower security high-volume rights. Transfer of
seniority accompanying water rights sales under the prior appropriation
doctrine presents considerable practical difficulties unless water is
reallocated downstream of a common source or storage: even then, water
accounting and establishing seniority in a new locale can cause great
confusion in the successful administration of ’imported’ rights. One
reason that a large proportion of transfers are between irrigators is that
they are manageable because of their proximity and the consequent ease
of administration.
While California has one of the most comprehensive infrastructures to
allow longer distance water trading, and managers have the capacity to
account for consumptive and non-consumptive use in different parts of
the water system, most developing countries could not tackle the basic
administration when the infrastructure is a fixed, imperfect and often
sub-optimally managed irrigation network. There have been suggestions
that public agencies should promote water trading more actively and that
they might establish transfers for environmental use in this way, with
longer term stimulation of a more vibrant market.
There is a need to develop better methodologies for valuing water in
competing uses, and to take account of factors such as capitalization of
land value, job security, lifestyle, and longer term livelihood strategies
when valuing water rights. Such insight might help to explain why shortterm trading and direct sales of water are more common and more
attractive than permanent sale of water rights. Good research is
hampered by the difficulty of obtaining hard data on prices paid for
permanent transfers of water rights away from the agricultural sector.
Water Conservation
Reallocation of water without loss of agricultural production cannot be
contemplated without conservation, and conservation is an integral part
of strategies to reduce per capita domestic water consumption to allow
existing supplies to be spread further. Conservation strategies need a
system-wide approach, however, especially to avoid third-party effects,
such as the loss to Mexico of fresh groundwater supplies as a result of
lining the Grand Canal in the Imperial Valley.
Land retirement – increasingly common in Australia, Texas and
California, is probably the most cost-efficient form of water conservation
and also has the greatest impact on reductions in salt loading.
Agricultural production may suffer locally, but overall impacts on the
state- or basin-scale economy have not been great, as it is generally
extensive enterprises on marginal lands that ’go under’. There can be
unexpected consequences of land retirement; soil surface stabilisation or
Common Themes and Divergent Experiences
permanent revegetation may be required to prevent land degradation
and resulting dust-storms, imposing new costs and requiring some
continued apportionment of water for that purpose. It is the hard option,
where adverse terms of farm trade are left to come into play,
restructuring farms without compensation. Alternatively, incentives must
be offered to retire land, and these can and have included land purchase.
What is adequate compensation? Accounting for knock-on effects to rural
life, rural economies and agro-industry is a difficult, expensive, and
political question.
Water conservation has been more successful in urban water supply
and industrial settings than in agriculture: wastewater treatment and reuse in industry has been very successful. Amenity watering has been
reduced by a combination of technology, price, re-use, publicity
campaigns and alternatives such as xeri-scaping. There is increasing
acceptance of wastewater generally although this may be less acceptable
in some cultures.
Water conservation in urban, industrial and rural water supply and
sanitation has been achieved by:
• better average cost pricing and the introduction of inverted multiple
block tariffs – especially in drought periods;
• LRMC pricing in a few instances, such as MWD’s industrial water
supply incentives for recycling and on-site treatment;
• rationing and restriction;
• land zoning (such as the Tucson land subdivision requirements of 100
years of guaranteed supply); and
• improved technology and processes.
Agricultural use has been reduced on farm but could be reduced more.
Much of the failure to translate improved water-use efficiency into ’spare’
water for inter-sectoral transfer is because:
• savings are used on farm, either because it makes economic sense to
the farmer (and price is still subsidised) or because, in rarer cases, it
is not possible to sell unused parts of water right;
• losses on-farm and return flows made up significant portions of
supply downstream (an extreme example is Imperial Valley–Mexico
situation described earlier);
• establishing accurately the flows made available at any given time may
be hard to do given the limits of flow measurement and detailed
capability in water accounting;
• on-farm savings do not necessarily translate into the same volume
stored for alternative use due to evaporation and seepage losses from
storages, and flow patterns resulting from their operating regime; and
• water quality considerations.
Australian water conservation has been limited due to the predominance
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of surface application techniques on heavy soils, although significant
improvements can be made using a minimum of control and automation.
Scheduling, and improved farm layout (for which subsidies and
subsidised services were provided) and water control have been the main
approaches, along with recent interest in on-farm water re-use to
minimise saline disposal to the water courses.
A major obstacle to more widespread adoption of conservation
technology and practices in irrigation is the disincentive of highly
subsidised water, particularly in US federal projects (e.g. CVP costs of
delivery are 10 times greater than charges in 1985). Water conservation
technology (overhead and micro-irrigation, surgeflow, channel lining) has
made less impact on total water use than land retirement, particularly
where there has been groundwater mining, (such as the Ogallala aquifer
in New Mexico and Texas). Some water conservation technologies may
reduce water demand but involve yield losses which make adoption
unattractive under prevailing agricultural market conditions.
In-stream and habitat allocations are very sizeable compared to
projected savings from improved agricultural use, and provide the
largest element of uncertainty in forward planning (such as the San
Joaquin Valley/Sacramento river allocation and moratorium on water
development and use in the delta region).
Demand Management versus Augmentation
Demand in California has been so great that it has not been solved by
demand management for more than short periods, and inter-basin
transfers have so far guaranteed reliability in supply. Sea and saline
water treatment is tantalisingly close to being an economic option for
enhanced urban and industrial supply, and is already used in many
situations where the local economics do make sense (e.g. 650 industrial
and municipal locations in California by the mid-1980s, followed by a
smaller number of very much larger and more efficient facilities in the
early 1990s). Continued research into new technologies for ’low-cost’
production is crucial to economic acceptance of this energy-expensive
technique. One such programme is the wind shear electrical generation
system under development in Israel (cost US$0.4/m3, compared to
wastewater treatment in California at US$0.25/m3). It involves
construction of a 1000 m (!) wind tower housing turbines and leaves
many questions unanswered, not least disposal of sea salt at a cost
US$400 million.
Inter-basin or long-distance water transfer has been fundamental to the
development of the western USA and to the mitigation of groundwater
over-abstraction, although it has become too expensive to contemplate,
even where it is the least expensive augmentation option. It has also
Common Themes and Divergent Experiences
proved politically unpopular with voters and state politicians, who have
defeated most proposals that emerged in the last 15 years. By contrast,
Spain would like to embark on a highly ambitious national (rather than
state level) programme of water transfers, and is starting to run into the
same level of public opposition, in addition to more mundane problems
of actually raising the required finances. Although there is probably more
experience of demand management in California and Arizona than
elsewhere in the world, it is not clear that such measures do more than
allow a breathing space when population and hence demand is
continually rising. Conservation in agricultural water use has not yet had
the expected impact, and although small real reductions in irrigation
consumption (10%) are adequate to satisfy a doubling of all other
demands, even this target has so far been hard to reach, either by
administrative or water-market-based reallocation. Substantial public
subsidies are still afforded irrigators in the United States, not only
because they are a sizeable and vocal portion of the western electorate,
but because irrigated farming supports a much broader range of rural
industry and enterprise.
The next stage in the US is likely to be whether, on completion of good
programmes of demand management, further long-distance supply
augmentation will be economically feasible, and financially affordable;
politically acceptable in the donor region; and cheaper and more
politically acceptable than retiring irrigated land on a substantial scale,
including valuation of the consequences for US food policy.
It would appear that Spain is approaching the same dilemmas that the
western United States faced in the mid-1970s, when long-term
agricultural commodity prices were expected to continue rising beyond
2010. Instead, prices have decreased consistently for the past 15 years,
although price support has shielded the individual farmer from much of
the economic impact. Substantial reduction in EC agriculture price
support, (not likely but ultimately inevitable), will have a severe negative
impact on the economic justification for Spain’s National Hydrologic
The environmental lobby in Spain has only recently emerged as a
significant political force and is implacably opposed to much of the NHP,
and shows little sympathy for the irrigation development which has
already taken a considerable toll on Spain’s wetlands. It is ironic given
that Spanish water policy, basin administration and the NHP itself have
evolved over centuries, that the ’most logical’ hydrologic outcome for
development and management is set to founder on late-developing
regional hydropolitics and almost unrecognised environmental issues.
The resolution of conflict and dispute over large-scale long-distance
transfer would seem best addressed by public referendum, following a
clearly presented set of options and views of the protagonists and
antagonists. If there is reasonable consensus, self-financing or partial self-
Hydro Logic?
financing becomes considerably more likely.
Alternative Administrative Arrangements
In the USA, there is a characteristic mix of public and private enterprise
developing and providing water-related services, and there has been
throughout this century. It is odd to have pure private water distributors
supplied by subsidised federal or state bulk sellers (CVP and SWP), and
considerable distortions in the economic rationale for private ownership,
management and financing are still evident. Both Spanish and Australian
development has been state-led and state-coordinated, although Australia
is now embarking on a programme of privatisation which may end up
having some of the characteristics of western US water, including relying
on court mediation of disputes. The Victorian and NSW experiences with
corporatisation (Melbourne Water, the RWC and Hunter Water
Corporation) have shown that significant strides can be made in cost
recovery and attainment of self-financing within public ownership. The
Australian approach of writing off outstanding capital debt contrasts
with the insistence on capital cost recovery in US privatisation, where the
actual total contribution to depreciation by irrigation districts has been
very small and substantial operational subsidies have continued to be
Many public sector water utilities operate as corporations in western
USA, but the only broad evaluation of private and public metropolitan
utilities shows both to be price-inefficient and over-capitalised. Public
utilities are superior technically and in the use of inputs such as labour,
energy and materials (Bhattacharya et al., 1994), but overall are less
consistent in their performance than the private sector.
In California organisational innovation is dealing with groundwater
mining through the voluntary formation of water management districts,
groundwater recharge districts (only one) and user-developed
agreements, restrictions and levies (pumping taxes). Both the state and
private organisations have made considerable use of the private sector
for background information and analysis (engineering and hydrology
consultants as well as lawyers), although historically the Water Districts
(both in irrigation and bulk municipal supply) had better links with
federal agencies in terms of influence and access to information. A key
feature of self-imposed organisational change and self regulation by
competing water users has been the importance of prime movers with
long-term interests who are prepared to shoulder a large portion of the
legislative costs of developing, coercing and finalising a binding
agreement for more sustainable management.
Non-government organisations have had relatively unimportant roles in
water management until the emergence of the environmental debate, in
Common Themes and Divergent Experiences
which they have clearly been instrumental in gradually and then
substantially changing the agenda in water resources development and
management, at least in Australia and the USA. Major environmental
NGOs now appear to be moving beyond opposition, lobbying and
activism to a more pro-active involvement with state and private
agencies to manage all aspects of the water cycle and to attempt to
harmonise productive and conservation interests – examples of this are
the 3-Way agreement in California and the genesis of the LandCare
programme in Australia.
Water Rights
There has historically been a sharp distinction between hydrological and
legal understandings of water resources and the US legal approach
separates ownership of atmospheric (!), surface and sub-surface waters,
and does not recognize the linkages between them through the
hydrologic cycle. Hence there is still a need to reform and develop an
integrated water law in the USA as seen in the emergence of the
proposed model codes – a continuing process and one that pits engineers
versus the legal profession and its vested interests (note the number of
water lawyers in Colorado). The broader compass of public water
management in Spain and Australia allowed this integration to be
achieved at a much earlier stage of water development and has avoided
some of the ensuing excesses in groundwater abstraction and the
institutional complications that have arisen.
There have been few real problems of registration of water right in
recent history in any of the study countries, except where minority rights
are concerned (for North American Indian, and possibly Aborginal
claims). Customary use is by its nature incorporated into the
appropriative rights doctrine, and has also been formalised by evenhanded and open processes of licensing and registration in Spain and
From a distance, it is hard not to feel that there is almost unnecessary
complication in the appropriative rights doctrine (even in model code
form) compared to an administered, license-based system as exemplified
by irrigation water rights in Australia, which satisfactorily incorporates
variable specification of flows due to stochastic (drought) uncertainty and
spreads water shortages evenly amongst users. Such specification is
viewed by some economists as a restraint on water transfers, but
intuitively it is hard to see why this understanding and sensible
accommodation of reality cannot specified as part of a transferable
property right.
There is direct conflict in requirements for completely unattenuated
rights for good marketability and quality/re-use/in-stream flow
Hydro Logic?
requirements at other points in the system. The indispensability of such
safeguards has not yet been well thought through by marketeers and it
is likely that these attenuations will not only remain but be more closely
specified (such as the model code requirements for proof of no impacts
on other right-holders when making an application to transfer water).
Water quality degradation by return flows from all users is a problem
that many would solve by adding appropriate standards to the
specification of water right. This is very difficult to police in agricultural
situations, however, as identification and attribution of the degree of
pollution is difficult to determine and it is even harder to enforce
sanctions against those judged to be the culprits. In Australia, where the
water quality of off-farm return flows may be very poor and water rights
may well be amended to specify discharge quality, it is more likely that
a flat rate levy on metered discharge off farms will be imposed.
Hydrologically Sound Scales
Administrative Boundaries
It has been said that the Tennessee Valley Authority has provided the
’default model’ of water management for engineers in the USA and for
their colleagues in developing countries. This model, though not
discussed in detail here, has integrated all development planning at the
river-basin scale and established a new political–administrative
arrangements where only weak ones existed before. Over time, the TVA
has probably been less successful in its objectives in integrated water
resource management (see Helen Ingrams’ writings) as power production
has become its main concern. Even in the USA, the TVA fell foul of
competing federal agencies, such as the USBR, who resented their turf
and expertise being usurped.
In many situations where river basin management arrangements are
introduced, there is immediately some form of conflict between the
jurisdiction and power of the umbrella organisations and the civil
administrative structure of regional and local government that has been
in place for many years. Ingram’s various analyses of this conflict
indicated long ago that it is naive to conceive of integrated, ’one-stopshop’ administrative structures and that the real task of institutional
development is to establish effective links and arrangements between the
different jurisdictions. Developments in interstate cooperation in the
Murray–Darling Basin are perhaps the most relevant examples of how
time, mutual understanding and common goals result in the binding
arrangements to manage a resource to mutual advantage and subjugate
state autonomy in water management to a coordinating body that has no
overriding federal or legal authority.
Constable (1995) makes four observations (founded on long practical
Common Themes and Divergent Experiences
experience) concerning institutional arrangements for sustainable
management of water resources where multiple political jurisdictions are
• Any agreement will generally be limited to the extent of the
individual rights and privileges each jurisdiction is prepared to cede
in achieving the common good.
• The institutional arrangements established to administer such an
agreement must provide clear-cut and uninhibited processes for
ensuring that each party is able to access information relevant to its
own political, economic and environmental interests. These
arrangements should include measures to reach agreement on
technical, operational, management and policy levels.
• The charter under which the institution operates should have sufficient
depth and flexibility to address all relevant matters. Each party should
be represented and provided with expertise of each relevant discipline.
• There must be clear identification of the rights and obligations of each
party, but the institution should possess sufficient executive powers to
act independently of individual parties for the common good.
Privatisation will continue to be a major thrust in reforming institutional
arrangements for water management, but it is clear that there is
insufficient experience of how best to manage the divestment of state
enterprises in a way that takes account of the complex nature and
multiple interests involved in water management. The cost of regulation
has conventionally been assumed by the state, and there is clearly a need
to separate both price and environmental regulators from service
providers, although US experience is beginning to question the efficiency
and effectiveness of such arrangements. Further privatisation of state
roles, such as provision of flood and drought insurance and policing of
environmental legislation has been one solution.
Privatisation of irrigation in Victoria has been rapid and conducted
with great thoroughness, without making any pretence at recovering
capital (sunk) costs. The Rural Water Corporation was dissolved and
government staffing and expenditure rationalised. The target of zero rate
of internal return on the RWC’s operations was achieved for the two
years prior to privatisation, when it was run as a semi-autonomous
corporation – the importance of realising cost recovery pricing before
privatisation. US experience indicates that privatisation itself is unlikely
Hydro Logic?
to instill full cost recovery, especially if the privatised entities are large,
financially powerful and capable of lobbying effectively for the
continuation of substantial subsidies.
A major question mark hangs over the viability of the interstate
agreement on managing the Murray–Darling Basin, particularly the Salt
Credit Scheme, following the formation of private, cost-conscious
irrigation associations in the two states. Safeguarding data collection and
paying for research are immediate casualties of a tendency to price to a
minimum and ignore maintenance costs, and there is an implicit
assumption by privatised irrigation districts that the state will be obliged
to bail them out later on. The evolution of the linkages and arrangements
that ensure good interstate cooperation and action following privatisation
and the establishment of a more complex and confused institutional
landscape, will be very valuable experience for other countries in the
Implications for Developing Countries
Preliminary Points
There are five important characteristics that distinguish developed from
developing country water management:
• Systems of data collection, management and dissemination;
hydrological understanding; and an inventory of actual use all provide
a solid foundation for planning and management. Widespread
monitoring and measurement is carried out by professional agencies
and the resulting data is available for public consumption.
• Well-established, if imperfect, water rights codes exist, with uniform
registration of rights, permits and licences covering most uses. In
contrast with developing countries there is insignificant,
unacknowledged de facto or customary water use.
• It is common for professionally managed, service-oriented
organisations to be responsible for water delivery in both public and
private sectors. There is a longer history of public accountability of
public and private organisations, with relatively open access to
impartial if often expensive arbitration via the courts.
• There are long traditions of water legislation which have been actively
upheld, underpinning a resource-based approach to water
development, that has enabled a transition to integrated water
management and incorporation of environmental values. There have
been obstacles and excesses along the way, but the basic foundations
to allow development of institutions of rational management have
been in place for many years.
• There has been a historical commitment to full recovery of operational
costs of water services – and partial commitment to recovery of capital
depreciation – within the framework of strategic public investment,
although practice has often not reflected the letter of this commitment.
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Policy Reform
A very basic priority for most developing countries is the establishment
of a clear national water policy, with equivalent policies at state or
regional level. National water policy needs to be supported by an
appropriate set of institutional arrangements. The development of such
a policy explicitly requires a review of the existing arrangements and a
commitment to establish a coherent water law, and an oversight
administration to research, oversee and support policy and its
implementation. At a minimum, water policy needs to be coherent with
agricultural and urban policies, and has to recognise economic
constraints in public funding and increasing commitment to userfinancing of operational and even some capital costs associated with
carrying out works arising from water management strategies.
Water resources management is an increasingly complex and dynamic
process. Water resources policy and management strategy is therefore in
a constant process of reformulation and evolution. There may be priority
issues that vary considerably between regions and specific localities
within a country or drainage basin, as well as those which are generic.
The duplication and overlapping responsibility of government water
agencies must be remoned and the agencies bound into an integrated set
of institutions. This does not mean creation of one super-organisation,
although it may mean creation of an oversight and coordinating body.
It is not helpful to imagine that a discrete package of reforms in
developing country water resources management is likely to achieve
more than very short-term goals. Rather, the reforms need to establish a
sound and adaptable institutional base with in-depth capacity to evolve
and respond to a continually changing situation, and capable of
identifying short- and long-term goals accordingly. The Department of
Water Resources in California is now mandated to undertake a formal
review every five years, and periodic review should be a fundamental
part of establishing and evolving an effective water policy in developing
Institutional Development
Apart from the pressing need to establish a coherent and integrated
water management policy in many developing countries, there is a
complementary need to ’get the basics right’ and address the issues
raised in the five bullet points above.
Developing countries are faced with awesome funding problems in the
Implications for Developing Countries
provision of basic urban and rural water supply and sanitation alone.
Hydrometric networks have often been neglected and detailed
knowledge of actual water use is at best patchy. Sound provision of
services and adequate management of the resource base cannot be
undertaken without considerable improvements in data collection and
management. Cost and a culture of secretiveness are the main obstacles
to this, compounded by duplication of roles from overlapping technical
jurisdictions. Establishing an integrated and effective national water
intelligence system is a lot less ambitious than achieving comprehensive
institutional arrangements for integrated and rational water management,
and is a realisable goal in the relative short term. Outside agencies can
help to establish local professional expertise and available information
technology is increasingly cheap and effective.
This process should upgrade professional and administrative capacity
and introduce incentive systems for good service provision, both in
public and private sectors. It is important to develop a broad base of
local capacity and minimise the use of external (international) consultants
in the long term.
Planning capability can be improved by developing capacity for
sensible modelling on the basis of reliable real-world data-sets to
• better demand forecasting;
• economic analysis, especially pricing and feedback for demand
• allocation and environmental impact studies; and
• investigation of groundwater–surface water interaction and water
quality impacts of development;
Beyond the basics – A sound legal framework for water management
Effective capacity to manage water resources depends on sound
institutions which in turn must be built on a sound legal basis. Water
law (incorporating environmental law) provides the skeleton of the
institutional framework. Historically, all three study countries have
evolved complex and at times conflicting water and associated laws,
which were unified and simplified in recent years. The continuing
development of the ’model code’ in the United States shows that it is
particularly important to integrate surface, sub-surface and atmospheric
legal provisions to accord with the physical realities of the hydrologic
cycle. However, the development of two forms of model code (one for
the riparian eastern states and one for the western states’ doctrine of
prior appropriation) indicates that although the form of this unification
may be similar in substance, it may be considerably different in detail
due to the difficulty of parting with legal precedent and long-established
custom. Water quality and environmental-related water legislation has
Hydro Logic?
often been developed separately, and effort is needed to make
environmental provisions coherent and compatible with water legislation.
Although it is easily said and less easily done, care should be taken to
avoid over-legislation and the promotion of a climate of adversarial
litigation which will rapidly become unmanageable and ineffective. Thus
there appears to be a continuing need for good extra-legal fora for
arbitration, so that the courts are used in the last resort. The volume,
expense and protracted nature of many civil actions in the USA is
inefficient and damaging to rational and integrated management.
A distinct difference between the study countries and most developed
countries is that many of the latter do not have an effective rights system,
nor a representative register of right holders, nor the administrative
apparatus to run it. So, whereas much of the discussion relates to
refining and developed countries’ water rights system, definitions,
provisions and enablement of transferability, developing countries have
almost to start from scratch. Starting from scratch is a worrying process
given the typical levels of corruption in public administration where
there is short-term financial gain to be made. Further, comprehensive
registration may require considerable, tedious effort and discomfort for
those given the responsibility of its administration. Practices such as
posting notices requiring registration are often substitutes for pro-active
effort and are less than desirable – especially if they are only posted on
the agencies’ own notice board, something that is not unknown.
There is a substantial caveat that points to broader levels of reform in
public and civil administration: water legislation and registration of rights
is pointless without adequate assurance of ’inexpensive’ access to courts
or substitute arbitration, and impartiality to all parties.
Administrative reform
In many developing countries, there is still the need to break the
dominance of irrigation agencies, the construction agenda and its
associated bandwagon. This has been the key to internal organisational
reform in the USA and Australia, but reformers should beware the
potential for a new construction bonanza in urban and rural water
supply and sanitation which could easily lead to the new agenda of
sustainable management being bypassed. It is clearly important to
actively oversee the transition in public agency role both from
implementation to management and service delivery and from service
delivery to regulatory, data collection and planning/coordination roles.
In many developing countries it would be wise to concentrate on service
delivery foremost, while setting in motion the longer term transition to
a regulatory role; a potential pitfall is that a step-wise approach may
cause difficulties further down the road with overlapping jurisdiction
with other regulatory agencies, most likely those responsible for
Implications for Developing Countries
environmental protection.
Privatisation has a clear role to play, although for developing countries
it is probably more important to attract private capital to finance urban
water supply and wastewater treatment. Privatisation is most appropriate
in sectors where service provision is clearly defined and ’easily’
controlled and where willingness to pay is clearly demonstrated (potable
water, industrial supply and possibly wastewater treatment). It is worth
reiterating that even in the USA private sector performance is no better
than state, although management and service standards are ahead of
most developing countries.
Incentive systems must be rethought for good agency performance.
Joint management arrangements with corporatised, but state-owned
utilities may provide more effective service than fully privatised but
inadequately prepared entities. The long history of the mixed
public–private arrangements in the USA and the corporatisation of
metropolitan utilities in Australia points to the importance of mutually
established contracts between providers and clients at all levels of water
distribution. Adequate sanctioning systems must then be in place to
ensure contract compliance to the advantage of customers and service
providers alike, which returns us to the murky and uncertain world of
legal and civil reform in many developing countries.
Public participation is expensive and needs to be targeted at
appropriate levels. Policymakers should adopt a careful strategy in
developing countries and should begin with a reorientation of attitudes
within the state agencies. The US practice of public participation by
referendum is probably not replicable in many developing countries
although it appears to be cheap compared to the Australian model.
Sustainable Resource Use
Environmental issues of water quality and resource availability are
closely related, and sustainable management of water resources relies
strongly on understanding hydrological and environmental interactions,
and on being able to identify emerging environmental problems in time
to apply solutions. The California experience shows that it is possible to
reverse groundwater mining by combinating regulation and alternative
supply arrangements, and making use of groundwater as a strategic
drought-period water resource. The Salt Credit scheme in Australia is an
innovative, inter-state and basin-level initiative to halt degradation of instream water quality and minimise adverse economic effects on
downstream urban users.
Hydro Logic?
Pre-empting groundwater mining
The critical sustainability problem in developing countries is a localised,
but in some cases frequent, occurrence of groundwater mining and
degradation. which all too frequently only occasions a paper response of
new legislation. Retrospective legislative systems are of dubious worth
if they cannot be effectively monitored and policed, which is likely
considering the sheer number of wells in many developing countries.
Permit systems and licensing need to be developed as early as possible
in groundwater exploitation, but should not be administered in a way
that obstructs economic development. This is a delicate balancing act
which requires a clearer understanding of national and regional
hydrogeology than normally exists today. Areas where water table
decline or industrial and non-point source pollution are degrading
groundwater quality must be prioritised, as this is often irreversible, or at
least very expensive and difficult to reverse. Saline intrusion can be
mitigated by injection technology to create barriers, and possibly to
mitigate groundwater mining, but is useless without corresponding
institutional development to control or limit withdrawals. Substantial first
steps can be made in many developing countries by introducing rational
energy pricing and removing operational subsidy in groundwater use,
especially for irrigation. Capital subsidy may make sense in many
situations, but in return development should be controlled and licensed.
Huge populations make voluntary organisation and cooperation (as in
California’s recharge districts) unlikely, at least not until many undercapitalised (or well-connected) pumpers have gone out of business from
the expense of lifting water from excessive depths or from water quality
degradation. In many cases, it will already be too late for economic
The study has highlighted many possibilities for groundwater
recharge, and seasonal, inter-annual storage in groundwater basins rather
than in surface reservoirs. Internal and sectoral reform is needed in many
developing countries to bring groundwater and surface water agencies
together before coordinated conjunctive-use strategies can be explored.
Drought-coping strategies in the USA and Australia make groundwater
use a key response, and balance recharge and long-term storage within
controlled extraction in normal recharge years with temporary overdraft
during drought years. Although this is a sophisticated and subtle course
of action, and a complex one to understand and control, it has much to
recommend it for developing country use; in reality, it would be difficult
to institute without considerable improvements in the general
institutional framework.
Implications for Developing Countries
Drought has played a major role in promoting change in water policy in
all three study countries. Drought emergency measures in the western
USA have been innovative and have carried over into longer term
planning and management.
Water resources managers in drought-prone developing countries need
to have clearly defined drought management strategies, including
’trigger’ conditions for the implementation of appropriate responses. This
has taken a long time to evolve in California, and is still some way from
reality in the privatised world of UK water. The whole basis for water
management and development in Africa requires a solid foundation in
drought planning and coping strategy that is responsive to drought, but
also takes drought water availability clearly into account when
developing projects and extracting supplies.
Drought or unusual natural water shortages provide the opportunity
to insist on administrative and pricing reforms, and policymakers should
be aware of the possibility. In many situations, however, the effect of
drought may be so unbalancing and chaotic that it offesr little chance for
lasting and constructive innovation in the rush to attend to the crisis
River Basin Administration and Decentralisation – Avoiding the
Pitfalls of Administrative Competition
Rational water policy and hydrologically sound management (at the
basin scale) do not have to work against the political–administrative
apparatus of civil government and, on a day-to-day basis, there is little
evidence of serious conflict between hydrologic and civil administration
in the western USA and Australia. The situation in Spain shows that
even with a long-term commitment to river-basin management, politics
has far greater momentum than the logic of rational management alone.
Water is a highly political resource, and the importance of political voice
has not been lost on environmental activists who have restrained
resource development and set a new agenda for water allocation in all
three study countries.
Conflict between hydrologic scale management and civil–political
administration is most likely to occur when:
• Large resource transfers are involved (viz the Arizona project,
Colorado Basin and the National Hydrologic Plan in Spain)
• The legal system is not clear, transparent and impartial.
Hydro Logic?
There are no unifying management problems, such as drought, water
quality and gross environmental impacts.
In the Colorado Basin unconstrained development has been followed by
periods of adjustment during which competition between irrigation and
urban–industrial demand has emerged in California and other focal
points such as Phoenix and Tucson. Local institutional adjustment
checked urban and industrial demand for a short time in California, but
as demand rose further, supplies were augmented by interbasin transfer
which in turn led to inter-basin and inter-state (Colorado basin) and
intra-state (N–S California) competition. Environmental and economic
considerations changed the institutional framework and innovative
solutions appeared, but it remains to be seen if demand measures will
stabilise or whether, inter-state and interbasin transfers will reappear to
augment supplies and satisfy relentlessly rising demand. Other factors
may limit demand, but it is not clear yet what they might be –
developing countries share this uncertainty, despite having far less
capacity for planned and controlled urban and industrial development.
The implication is that it is desirable to avoid concentrating growth and
demand in one particular state that lies within a large basin, to avoid the
consequent technical and political/administrative complications arising
from inexorable but skewed economic development.
Developing countries should:
• make administrative arrangements that do not conflict with federal or
state agencies, unless they clearly co-opt or replace them;
• avoid establishing parallel administrations without any authority or
with potential for conflicts of authority, but rather try to bind them in
and across state and local administrative boundaries, as with the
• realise that is not practical or pragmatic to attempt to replace politicoadministrative boundaries with TVA type authorities – rather there is
a need to find sensible ways of linking the two, and ensuring that
water policy and practice are coherent at the larger scale; and
• use the RBA as a forum for resolving the administrative–political
problems of different jurisdictions.
The international agencies (World Bank and UN family) have stressed the
importance of public (stakeholder) participation in reform of water
resources policy. It is unclear how this is to be meaningfully achieved in
practice. The Australian Land Care programme is the only substantial
example of wide community involvement in water resources
management in the three study countries. It integrates bottom-up,
catchment-level planning and management within the interstate
framework for river basin management in the Murray–Darling system,
but is underwritten by a 30-year programme of substantial federal and
Implications for Developing Countries
state funding. Similar financial commitment would be required in
developing countries, although it is harder to see this being a practical
outcome in the prevailing economic environment.
The interdependence of water resources with land use and land use
policy has led to the widespread adoption of integrated catchment
management in both the USA and Australia, and points to the importance
of having a coherent forest policy for management, conservation and
preservation of upland watersheds to minimise adverse downstream
impacts such as sedimentation and reduced base-flows. It is this author’s
experience in developing country situations that there is almost no
contact between forest management agencies and specialists and their
water resources/irrigation sector colleagues. This apparently
straightforward oversight should be addressed within the framework of
River Basin Management and integrated catchment management at the
sub-catchment scales.
Demand and Reallocation of Existing Supplies
Outside drought periods, there is little evidence of widespread or longterm transfer of water from agriculture to other uses. There has been a
consistent decline in agricultural area in Southern California from 1970
to 1990, accounting for less than 5% of the total area. It is unclear
whether this has liberated an equal quantity of water for urban,
industrial and environmental use, due to re-use of agricultural return
flows and higher proportions of consumptive use elsewhere in the
system. Water conservation technology in agriculture has certainly been
successful in improving water-use efficiency, but the net releases for
transfer have been relatively small.
The main implication must be that it is exceedingly unwise to allow full
development of water resources for irrigation, and that it would be far
better to reserve flows for metropolitan use in the longer term.
Demand management programmes have been most successfully
developed in urban and industrial water supply, although price has not
been considered to have had a major role. The Metropolitan Water
District of Southern California (MWD) is a bulk supplier to 28 retail
utilities and has experimented with long-run marginal cost pricing
through concessionary rates to encourage wastewater re-use by industry
and rising block tariffs. However, the most successful measure appears
to have been providing bulk discounts for buyers implementing water
conservation strategies. In times of drought, use restrictions, particularly
on amenity (garden and public space) watering have been the major
Hydro Logic?
contributors to reduced demand; with the exception of ’xeriscaping’ in
Arizona, these have not proved to be structural measures.
MWD/DWR have a long-term demand management strategy in
Southern California to 2020, to cope with an estimated extra 7 million
incomers: conservation measures in urban and industrial water supply
will yield a net amount of 1.11 mML from 1.60 mML compared to a net
agricultural contribution of 0.37 mML from a gross saving of 2.1 mML.
Further storage and supply augmentation projects will contribute 0.61
ML. In fact, in more extreme demand situations, demand management
cannot substitute entirely for supply augmentation, partly for reasons of
timing and storage in ensuring the reliability of supply; and the
contribution made by water conservation is not as significant as was
originally envisaged. Developing country water planners will find many
similar situations requiring careful forward planning and need to ensure
that such work is undertaken on the basis of good information and local
It is possible that price-related demand management measures fail to
make big long-term impacts because either long-term demand is
fundamentally too inelastic; the price remains too low to have any real
effect to urban and industrial consumers; or farming lobbies have
sufficient political weight to protect their water allocations and maintain
low prices.
Developing country demand management strategies would be unwise to
pin too much faith in pricing, especially as capacity to pay and service
reliability are considerably below developed country standards. An
overall package of education, water conserving technology and restriction
will ultimately be necessary, but improvements are first required in
tracing unaccounted-for water (in drinking water supply and sanitation)
and improving the coverage and reliability of service.
Environmental water demand is rare in developing countries, but these
concerns will no doubt develop in response to overseas environmental
activism, rapidly growing local environmental awareness, and raised
consciousness among professionals through education and other forms
of intellectual and professional exchange with developed country water
resources issues.
Water Markets and Reallocation of Water
The total volume of inter-sectoral transfers of water has so far been
modest in both the US and Australia. Proponents of water markets point
out that the water rights systems in use are inimical to the development
of tradeable property rights, and therefore should be reformed. A major
Implications for Developing Countries
reason for reluctance to transfer water entitlements is that water
availability is capitalised into the value of irrigated land, but serious
problems remain with the adequate specification of rights in terms of
reliability and third party effects of transfers.
Drought period transfers from agriculture have been more successful,
but this is temporary sale of water, rather than the sale of the water
right. The Drought Water Bank of California has been very successful in
obtaining agricultural water in the short term, and requires land to be
fallowed as proof of transfer – savings must be absolute as technology
is not sufficiently good to show savings though more efficient use. Half
of the 0.99 mML obtained by the bank in 1991 was sourced from
fallowing, much of it in the Delta region, and the total number of
contracts for agricultural, ground and stored water was 350. There has
been a major public sector effort to establish and run the water bank,
which raises the idea of an administered rather than open market in
There are considerable infrastructural problems restraining intersectoral water trades in both the USA and Australia, where transfers
have largely been restricted to within the same irrigation system and for
agriculture. Although Rosegrant (1994) has shown that such transactions
have not been restricted by infrastructural shortcomings in Chile, it
seems clear to this author that arise in most developing countries where
there are more severe and obvious technical and operational deficiencies
in the water infrastructure, which is supported by the wealth of
introspective literature on irrigation system performance and
Water markets seem to this author to be an order of sophistication
above current practice so should not be an immediate priority for
developing countries as there are many more basic problems to attend
to first – not least registration of rights; establishment of sufficient system
and hydrological knowledge to assess third-party impacts; development
of accessible fora of conflict resolution; and above all, rational pricing
which at least covers operation and maintenance costs.
Water trading within irrigation systems should be encouraged and
water sales, as opposed to transfer of right, should be allowed, but
monitored to establish some market intelligence. Markets are certain to
be culturally unacceptable in some cases and would need to be
accompanied by a long-term awareness programme to alter attitudes to
water use. The best options for participation lie in strategies that make
the problems of water management self-evident and encourage people
to collectively take action (even if led by particular interest groups).
The greatest immediate opportunities for reallocation are by
encouraging conservation through pricing and technology on bulk users
– from major storages and reallocating surpluses – especially since rights
Hydro Logic?
are not allocated in precise terms in many administered systems.
Long-term reallocation from agriculture is mainly by land retirement
in the USA and Australia but would be a severe problem in developing
countries due to agricultural population density and equity. There may
be considerable environmental (salinity and water-logging related)
imperatives for land retirement as well as to improve application
efficiency, which may make a positive contribution. As it is likely that
food security will continue to be a priority (and in many cases a
necessity), even while commodity prices decline, the prospects for land
retirement are very slim. How these conflicting influences are managed
in the longer term will have a major effect on developing country
agricultural water use.
Conservation strategies in developing country irrigation
It is hard to envisage widespread adoption of micro- and sprinkler
irrigation because of high capital costs, and more importantly recurrent
costs in energy for pumping. Radical changes in irrigation scheduling are
limited by the physical and operational characteristics of the delivery
systems and by the large number of relatively small deliveries to
individual farms or even blocks. Some improvements are possible
through better system operation and maintenance, and in land levelling
and farm layout. Diversification through changing crop patterns or
seasonal composition to minimise water use also hold out some promise,
but require improved system management to allow sufficient flexibility
in supply and operation.
Cost Recovery and Water Prices
Historically, there has been a strong commitment to recovery of capital
and operational costs of public water investment in the USA and Spain.
In practice, this has been applied more to urban and domestic water
supply than to irrigation. Transfer of irrigation systems to private,
professionally run, irrigation associations in the USA has involved
considerable concessions in capital repayment and, in some instances,
continued operational subsidies. The Central Valley Project (federal) and
State Valley Projects (state funded) do not recover much capital cost, as
bulk suppliers, and may still have substantial operational subsidies. If it
is difficult to realise capital repayment in the commercial world of US
irrigation, there can be little point in insisting on capital repayment in
most developing country irrigation projects, many of which will not have
been built or operated to equivalent standards of service.
There has been no attempt to recover costs of infrastructure in
Australia, although corporatisation and privatisation in irrigation are
based on full repayment of operational costs. There is mounting evidence
Implications for Developing Countries
that ’private’ agricultural water users neglect long-term system
maintenance in order to keep irrigation fees as low as possible in both
the USA and in Australia, with uncertain implications for sustainability
and funding of rehabilitation in the future. This may imply that cost
recovery is better managed by the state to ensure coverage of operation
and true maintenance costs, although there are many intermediate
mechanisms for doing so which also allow increased autonomy to water
users (see Turral, 1995).
Capital finance is the major problem facing the Spanish National
Hydrologic Plan, which requires US$26 billion, two-thirds of which is to
fund the infrastructure for inter-basin transfers. It was envisaged that this
would be met out of future revenue, but political opposition and legal
action to restrict tariff increases makes this unlikely. In all three study
countries, legal action has been taken by users to restrict price increases
for water, a trend which is emerging in developing countries (e.g. Tamil
Nadu, in India). The study intimates increasing dissonance between
legislation (and the legal apparatus) and economically rational
approaches to water management and cost recovery.
Clear price signals from central and local administrations are needed
for rapid attainment of full operational cost recovery and the use of
enforceable contracts, both in public, private and public–private
arrangements, is required. It makes sense to promote price incentives to
encourage wastewater re-use and adoption of conservation technology
in urban, industrial and agricultural activities and to promote rational
(and stop excessive) use.
In the implementation of administrative reform, it is advisable to
sequence full operational cost recovery prior to substantial privatisation,
and develop it incrementally unless there is a ’fortuitous drought’ that
allows publicly acceptable ’leaps’ or changes in rate structures.
There is a clear need to establish transparent cost recovery systems,
preferably through tariffs, and to institute independent audits of accounts
at all levels of water management (within government and within the
private sector and water user associations). Better pricing should go
hand-in-hand with the development of wholesaling and retail agencies
in irrigation and metropolitan water – in both public and private sectors
as appropriate and effective in a given context. The structure of bulk
selling to retail contractors seems to help transmit the right price signals
down to the consumer, providing the major wholesaler is committed to
full recovery of operational and capital costs. As the ultimate bulk
supplier is still a national or state agency in many cases, there is in
practice continuing capital subsidy (e.g. CVP in California), and this
subsidy should be the prime target of reform if pricing is to have any
meaningful effect on demand.
In domestic water supply, there have been many studies of willingness
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to pay in the study countries, but as water charges represent a very small
part of average income (roughly 1%), there has been little innovation in
structuring water charges to ensure service provision to the poorest.
Developing countries must capitalise on their own experience with such
measures. There is an underlying problem that metering is required to
establish of good management and cost-recovery practices. In urban
situations, metering is bedevilled by problems of payment for the
maintenance and monitoring of meters, and it does not have a good track
record in many developing countries so far. It is unlikely that many
developing country irrigation systems would be able to introduce
individual metering of supplies (as in Australia), even at the 40 ha
’turnout’ scale: considerable improvements would be made by the
installation of water metres in all tertiary canals, however, and would be
required for any meaningful bulk water supply arrangements.
Self-financed projects are more common in the domestic and industrial
water supply sector. Quasi-public corporations have historically raised
capital by bond issues or being empowered to levy local taxes: these
organisations have since become public utilities operated commercially
mode, covering operational costs as well as raising sizeable amounts for
continued investment (for example, the Metropolitan Water District in
California). Tariff income has largely replaced tax revenue as these
arrangements have developed, leading up to a range of experiments with
long-run marginal cost pricing to cover the burden of long-term
infrastructural development. Berkoff (1995) notes that in Vietnam (as in
many other developing countries) private financiers almost invariably
prefer discrete investments (such as treatment plants) to rather more
risky diffuse investments such as water distribution and sewerage
collection. He cautions against unbalanced investment and sees little
practical alternative to continued state financing in urban and
agricultural water infrastructure.
Federal environmental legislation in the USA now has a dominant
restraining influence on further water resources development. State water
quality regulations are also becoming more demanding. Dams are being
decommissioned and removed from rivers to enhance streamflow and
restore habitat, although new dams are proposed for flood control and
supply augmentation. Flood control dams appear to have better
justification in environmental terms, but recent decisions in southern
California call for the re-design and evaluation of a proposed flood
mitigation project for multi-purpose use (on economic grounds). Rivers
in Spain, western USA and the Murray–Darling system are highly
regulated, and are now having to redress the environmental
Implications for Developing Countries
compromises of water resources development, often at great expense.
Although environmental sensibilities are less powerfully articulated in
developing countries, they are clearly rising in importance. There remains
a dilemma in finding a compromise between water resources
development and sustainable management of the environment and the
resource: where developing countries still have the option, it is clear that
they should evaluate the environmental consequences and costs of all
development options very carefully. The economic tools for this analysis
are as yet imperfect, however, and this perspective requires a higher level
of sophistication, capacity and information in water resources planning
and management. A recent study for the NRA in the UK concluded that
information and techniques are inadequate for estimating
environmentally related water costs, so clearly this will be an
increasingly important issue in both developed and developing countries.
The added environmental aspect of water resources management
further strengthens the need for substantial policy development and
capacity building in developing countries. It is one that can be addressed
by donor agencies working with public and private sectors and in higher
Developing countries can use developed country experience to
understand and diagnos environmental problems in water management.
They should prioritise the regulation and treatment of irreversible
problems such as groundwater pollution, and develop long-term
programmes to restore mined aquifers. It should be possible for many
developing countries to build in sufficient environmental planning in
water resources development to avoid some of the major economic
problems associated with retroactive legislation and conservation.
Salinity is a major and all too common problem. Prevention is better
than cure, and early implementation of drainage still remains the most
cost-effective way to minimise long-term water table rise and salt
disposal problems in established irrigation systems. Land zoning may
help if it can be effectively implemented and fresh groundwater in
coastal and inland aquifers should be protected.
Severe water pollution problems are on the horizon from non-point
source agro-chemicals to complement those already emanating from
industry (see for instance the Indian studies undertaken by WRN’s
collaborators in 1994 – Vani et al.; Appasamy). It is much harder to see
a way forward in the detection and enforcement of controls on diffuse
pollutants. Although standards are clearly required, legal regulations will
not mean much at this stage and such degradation remains perhaps the
greatest cause for real concern in developing country water management.
A large amount of diagnostic and treatment technology is under
development in the west, but whether it will be affordable and
institutionally appropriate is another matter; within Europe, Germany is
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already in danger of pricing itself out of the environmental services
market as its standards and therefore costs are even more stringent than
in its competitors
Industrial pollution problems are the easiest to control in theory, but
the dynamics of local power and short-term self-interest are at present
more likely to prevail.
Post script
In the introductory chapter, it was postulated that developed country
reforms, at least in countries with substantial irrigation water use, had
meaningful and relevant experience to forthcoming policy reform and
subsequent adoption of new water management strategies in developing
countries. In Chapters 5 and 6 some of the more obvious limitations and
implications have been explored and there is much that is of relevance
to developing country water policy analysts and managers. Deciding
what is relevant is a task that is best left up to those with the relevant
local and technical expertise, and the one statement that can be made
with any certainty is that there are no models or prescriptions that can
be transplanted directly. The writings on water policy emerging from the
international agencies are based, in an accretionary way, on the
experience of developed countries, particularly the USA, and a broad
knowledge of developing country water management issues. They do
however suggest that there are prescribed components and models that
can be picked up and applied. This study urges more caution in
evaluating what is most relevant and appropriate and encourages
developing country reformers to consider the key limiting factors to
management and service provision in their own water sectors, and to
develop appropriate strategies accordingly.
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