The Economist: $2 billion well spent
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A few weeks ago, as the Texas legislative session began to wind down without a major move to ensure the adequacy of the state’s future water supplies, the volume of questions and concerns about what would happen if we began to run short cranked up. Rightfully so. Water is not only essential to life, but also to the economy as we know it. Major industries from agriculture to microelectronics to oil/gas exploration to tourism depend on having enough (and affordable) water. Quality of life is also affected; just ask any fisherman, wakeboarder, boater, gardener, or lakefront homeowner.
Recently, Texas has been hit with a one-two punch of shrinking supplies and growing needs. For the past couple of years, much of the state has been in a drought, and 2011 was the driest year on record for many locales. Overall, the state’s water supply reservoirs are just over 66% full, down from 74% full a year ago. However, if you look at a map of individual lakes, there is a sharp divide between the eastern portion of the state, where most reservoirs are at 70% full (or better), and the western half, where a number are empty (or close to it).
The Texas Water Development Board estimates that the state’s existing water supplies (the amount of water that can be produced with current permits, contracts, and existing infrastructure during drought) will decrease by about 10% by 2060 (from about 17 million acre feet in 2010 to about 15 million acre-feet in 2060). The drop is primarily due to continued depletion of the Ogallala Aquifer and a reduced reliance on the Gulf Coast Aquifer.
At the same time, the population of the state is forecast to grow by more than 80% by 2060, from about 25 million in 2010 to 46 million. Water demand is likely to increase from about 18 million acre-feet per year to 22 million acre-feet, a 22% jump. So while supplies are falling, demand is rising, leaving a notable gap if we don’t implement new water supply projects or management strategies.
My long-time friend, the late Bob Bullock, was instrumental in laying the groundwork for planning for water needs, introducing the current regional approach. The state’s 16 regional planning groups have recommended 562 water supply projects which would add 9 million acre-feet per year to the state water supply. Such significant additions to water infrastructure would provide much-needed relief and protection of the state’s population and business complex during times of drought.
Of course these projects are costly, and the estimated investment required for design, construction, and implementation would be about $53 billion. Municipal water providers can foot much of the bill, but state financial assistance is also needed. The Texas Legislature took a positive step for the future in passing legislation creating a fund to finance water infrastructure projects. Texas voters will have to take the next step this fall by voting to approve drawing $2 billion from the Rainy Day Fund to help with financing the loans, thus allowing the resources to be leveraged very effectively. It would be $2 billion well spent, as the economic consequences of running short are vastly larger.
The severe drought of the past several years in Texas has brought a renewed focus to Texas’s water resources and how to plan for the future, particularly given the greater demand for water that comes with expected population and industrial growth. Water supply adequacy is one of the major challenges for the state in the coming years, and developing and funding a successful plan is imperative in order to ensure future prosperity and quality of life.
Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.