interviews
Water and the American West
by Richard Frank
October 25, 2021
This interview with Richard Frank, professor of environmental practice at the UC Davis School of Law and Director of the California Environmental Law and Policy Center, was conducted and condensed by franknews.
frank | Can you tell me a little bit about the story of water and how it's tied to the West, and to California in particular?
Richard | A friend of mine who's a Court of Appeals Justice here in California wrote an opinion on a water law dispute and started it with the quote, "the history of California is written on its waters." And I think that the point is true of the entire American West.
Water policy and legal issues are inextricably tied to the development of the Western United States; water is the limiting factor in so many ways to settlement, to economic development, to prosperity, and to the environment and environmental preservation.
Can you talk about the difference between groundwater and surface water– and the policies that regulate each?
There are really two types of water when it comes to human consumption. There's surface water: that is the water that is transmitted by lakes, rivers, and streams. Then there is groundwater, and a substantial amount of water that Americans and the American West rely on is groundwater. That is water that is stored in groundwater aquifers, which are naturally occurring groundwater basins. Both groundwater and surface water are critical to the American West and its economy and its culture.
Traditionally a couple of things are important to note, first of all, water is finite. Second, water gets allocated in the Western United States generally at the state level. There's a limited federal role. Primarily, policy decisions about who gets how much water for what purpose are made state by state.
I think allocation is really interesting in that it's more state-level than federal. How was water and the allocation of water in California designed? Is it a public-private combination? What goes on in terms of the infrastructure of water?
Another very good question. The answer is it depends. Most of our water infrastructure is public in nature.
Again, in the American West, the regulation of water rights is generally done at the state level, but the federal government, historically, has a major water footprint in the American West because it has been federal dollars and federal design and management that really controlled much of the major water infrastructure in the American West — you know, Hoover Dam, and the complex system of dams and reservoirs on the Colorado River in California, with the Central Valley Project that was built and managed by the federal government with Shasta Dam on the upper Sacramento River as the centerpiece of that project. But we also have a California State Water Project, the key facility being the Oroville Dam and reservoir on the Southern River that is managed by state water managers. If we were starting over, that kind of parallel system would make no particular engineering or operational sense.
But, we are captive to our history.
And then you have these massive systems of aqueducts and canals that move water from one place to another throughout the American West. They are particularly responsible for moving water from surface water storage facilities to population centers. In the last 50 to 75 years, these population centers have really expanded dramatically, so you need massive infrastructure to deliver water from those storage facilities, the dams, and reservoirs, which generally are located in remote areas to the population centers. So it takes a lot of time and energy to transport the water, from where it is captured and stored to where it is needed for human use.
California has faced continuous drought – what measures is the state taking now to manage water?
Just to frame the issue a little bit — we have, as I mentioned, a growing population in the American Southwest at a time when the amount of available water is shrinking due to drought and due to the impacts of climate change. We have growing human demand for residential and commercial purposes and at the same time, we have a shrinking water supply. That is a huge looming crisis.
And it is beginning to play out in real-time. You see that playing out in real-time. For example, several different states and Mexico rely on Colorado River flows based on an allocation system that was created in the 1920s, which is overly optimistic about the amount of available water. From the 1920s until now, that water supply has decreased, and decreased, and decreased. Now you have interstate agreements, and in the case of Mexico, international agreements that allocate the finite Colorado river water supplies based on faulty, now obsolete, information. It is a real problem.
What measures do you take now, knowing this information?
If you look at the US Drought Monitor, it is obvious the problem is not limited to the Colorado River. We are in a mega-drought, so cutbacks are being imposed by federal and state water agencies to encourage agricultural, urban, and commercial water users to cut their water use and, and stretch finite supplies as much as possible through conservation efforts.
In California, we have the State Water Resources Control Board, the state water regulator in California, and they have issued curtailment orders. Meaning, they have told water rights holders, many of whom have had those water rights for over a hundred years, that, for the first time, the water that they feel they are entitled to, is not available. Local water districts are also issuing water conservation mandates; the San Francisco water department is doing that, in Los Angeles, the metropolitan water district, is urging urban users to curtail their efforts.
And then agriculture. Agricultural users — farmers and ranchers — have had to get water rights in many cases through the federal government, as the federal government is the operator of these water projects. They have contracts with water users, individual farmers, ranchers, or districts, and they are now issuing curtailment orders. They're saying, we know you contracted for X amount of water for this calendar year, but we are telling you because of the drought shortages we don't have that water to supply. Our reservoirs are low at Lake Shasta or at the Oroville Dam.
When you drive from San Francisco to LA on the five, you see a lot of signage from the agricultural farming community about water. There's apparently some frustration about this. What are the other options for them?
About 80% of all human consumed water goes to agriculture. That is by far the biggest component of water use, as opposed to 20% used for urban and commercial, and industrial purposes.
Over the years, ranchers and farmers, and agricultural water districts assumed that the water would always be there — as we all do.
And the farmers and ranchers have, in hindsight, exacerbated the problem by bringing more and more land into production. You see on those drives between San Francisco and Los Angeles, particularly in the San Joaquin Valley, all these orchards are being planted. Orchards are more lucrative crops than row crops — cotton, alfalfa, and rice. But, if you are growing a row crop, you can leave the land fallow in times of drought.
We don't have to plant. If the water stopped there, or if it's too expensive to get, it may make economic sense, but if you have an orchard or a vineyard it's a high value, those are high value crops, you don't have that operational flexibility and they need to be irrigated in wet years and in dry years. Now, you see these orchards, which were only planted a few years ago, are now being uprooted because the farmers realized that they don't have the water necessary to keep those vineyards and orchards alive. For ranchers, the same thing is true with their herds. They don’t have enough water for their livestock.
The water shortage has never been drier than it is right now. Farmers and ranchers are being deprived of water that they traditionally believed was theirs and they're very understandably, very unhappy about it. They see it as a threat to their livelihood and to the livelihood of the folks who work for them. Their anger and frustration are to be expected, but it's nobody's fault.
To say, as some farmers do, that it is mismanagement by state and federal government officials, I think is overly simplistic and misplaced in the face of a mega-drought. Everybody's going to have to sacrifice. Everybody's going to have to be more efficient in how they use water. All sectors are going to need to be more efficient with the water that does exist.
Looking at this percentage breakdown of water use – is it actually important for individual users to change their water habits?
Well, every little bit helps. When you're talking about homeowners, about 70% of urban water use is for outdoor irrigation. So we're talking parks and cemeteries and golf courses and folks' yards. You know, that used to be considered part of that American dream and the California dream — you would have a big lawn in front of your house and behind your house. Truth be told, that has never made much sense in an arid environment. That's where the water savings in urban areas is critical in the way it really involves aesthetics rather than critical human needs, like water for drinking and bathing and sanitation purposes. There is a growing movement away from big lawns, and away from the type of landscaping that you see in the Eastern US — there is no drought in the Eastern United States. As Hurricane Ida and other recent storms have shown, the problem is too much water, or rather than too little in most of the Eastern United States. So it really is a tale of two countries.
We just need to recognize that the American West is an arid region. It has always been an arid region, we can't make the desert bloom with water that doesn't exist. We need to be more efficient in how we allocate those water supplies. And it seems to me in an urban area, the best way to conserve and most effective way is to reduce urban landscaping, which is the major component of urban water use.
You also write about water markets and making them better – for those who don’t know, what is the water market?
Water markets, that is, the voluntary transfer of water between water users, is more robust in some other Western states. Again Arizona and New Mexico come to mind. California somewhat surprisingly is behind the curve. We are in the dark ages compared to other states. Water markets are kind of anecdotal. There is not much of a statewide system. It is done at the local level, through individual transactions without much oversight and without much transparency. And I have concerns about all of those things.
I believe conceptually watermarks are a way to stretch scarce, finite water resources to make water use more efficient. I can, for example, allow farmers or ranchers to sell water to urban uses or commercial usage or factories in times of drought.
Farmers sometimes can make more money by farming water, than they can by farming crops.
There are efficiencies to be gained here.
The problem in my view is really one of transparency. The water markets are not publicly regulated, and some of the people who are engaging in water transactions like it that way, frankly, they want to operate under the radar.
In my opinion, water markets need to be overseen by a public entity rather than private or nonprofit entities. We need oversight and transparency, so that folks like you and myself can follow the markets to see who's selling water to whom, for what purpose, and make sure that those water transfers serve the public interests and not just the private interests.
There have been a number of stories in the New York Times and the Wall Street Journal and the Salt Lake City Tribune about efforts in some parts to privatize water transfer. Hedge fund managers are buying and selling water, as a means of profiting. And it strikes me that when you're talking about an essential public resource — and in California, it is embedded in the law that public water is an inherently public resource, that water is owned by the public and it can be used for private purposes, but it is an inherently public resource — the idea of commoditizing water through the private, opaque markets is very troublesome to me. I think it represents a very dangerous trend and one that needs to be corrected and avoided.
Why is California so behind?
There's no good reason for it. It's largely inexplicable that since the state was created on September 9th, 1860, we've been fighting over water. In the 19th century, it was miners versus farmers ranchers. In the 20th century, with the growth of urban communities, the evolution of California into one of the most populous states with 40 million Californians, it has been a struggle between urban and agricultural uses of water.
In the second half of the 20th century, there was a recognition that some component of water had to be left in streams to protect ecosystems, landscape, and wildlife, including the threatened and endangered wildlife. That suggestion has made agricultural users in California angry. You will see those signs that allude to the idea that food and farming are more important than environmental values. I don't happen to believe that's true. I believe both are critically important to our society. But the advocates for the environment have a proverbial seat at the water table. So that's another demand for water allocation that exists.
Do you maintain optimism?
Yes. I think it's human nature to look on the bright side. I try to do that through research scholarships and teaching. There are models for how we can do this better in the United States. Israel and Saudi Arabia and Singapore are far more efficient with their water policies and efforts. Australia went through a severe megadrought. They came out of it a few years ago, but they used that opportunity to dramatically reform their water allocation systems. That's an additional model. I think most people would agree in hindsight that their previous system was antiquated, and not able to meet the challenges of climate change and the growing water shortage in some parts of the world.
Here in the United States, we can learn from those efforts. There are also some ways to expand the water supply. Desalination for one. Again, Singapore and Saudi Arabia have led the world in terms of removing the salt content from ocean water and increasing water supply that way. In Carlsbad, California, north of San Diego, we have the biggest desalination plant in the United States right now, and that is currently satisfying a significant component of the San Diego metropolitan areas’ water needs. It's more expensive than other water supplies, but the technology is getting more refined, so the cost of desalinated water is coming down at a time when other water supplies, due to shortages and the workings of the free market are going up.
At some point, they're going to meet or get closer. Unlike some of my environmental colleagues, I think desalination is an important part of the equation.
In a proposal that came up in the recall election, one of the candidates was talking about how we just need to build a canal from the Mississippi River to California to take care of all our problems. That ignores political problems associated with that effort, as well as the massive infrastructure costs that would be required to build and maintain a major aqueduct for 2000 miles from the Mississippi to California. That's just not going to happen. Some of those pie in the sky thoughts of how we expand the water supply, I think, are unrealistic.
interviews
The Wallet
by Kirill Gertman
January 13, 2020
Can you tell me about yourself?
My background is in user experience design and graphic design. At some point I wanted to do more, that led me to my product management career, most of my work has been focused on finance and fintech. Fintech meaning financial technology.
I thought, this is an industry where user experience is pretty bad. Across any kind of application of finance, it sucks for the customer. If I bring my design background and I'm able to improve that experience, I can have a bit more of an impact, and that turned out to be largely true in my subsequent career. I've been in a number of startups. I've also worked in an innovation lab in a bank, and eventually ended up being in crypto, which is I guess why we're talking. There you go.
What part of crypto do you focus on?
Both on consumers and business to business solutions.
I got a job in a company that used to be called Bread wallet – they rebranded to BRD. They have a digital wallet, that allows people to hold their own crypto, primarily Bitcoin, without needing an intermediate.
This is a concept that's very different from what you usually have with your bank. In the financial system most people are used to, the bank is the entity that holds your money. They hold your funds. Obviously they're regulated by the government, but they are the custodians of your money. But Bitcoin – why people think it might be revolutionary – you're able to hold your own money yourself. Be in control of your own funds, which I think is a really interesting concept.
The way it works technically is that every wallet generated on the Bitcoin blockchain has a key. You can think about it as a virtual safe deposit box. Each box has a unique key that fits only that box. Each key is unique, and the person, or the entity, who knows that key, knows that code, can unlock the deposit box, and take the money inside, which makes them the direct owner and puts them in direct control over their funds. No other entity, no other person, without knowing the key, could possibly access your money.
Think about your regular bank account. In various situations a government could freeze your funds. The government can not allow you to move your money to another country. Here this cannot happen.
Why would I choose one wallet over another? How do they differ?
That's a good question. You need to hold Bitcoin somewhere, so you need the wallet. You cannot have Bitcoin or other crypto-currencies without having a wallet, but you're right, there are many different kinds of wallets. I would say the main distinction is that there are wallets that are custodial, and there are wallets that are non-custodial.
What does that mean?
This private key I was talking about before, which is usually represented as a phrase of 12 words – it's literally a sequence of 12 English words that you can memorize, write down, whatever you do with them, but that's your password. Just a really, really long one. Coinbase is probably the biggest one in the States. They store that private key for you, which in effect means they're the same as a bank. They're the custodian of your funds in very much the same way that a bank is.
The other type of solutions are where you store your own key. So you are responsible for storing it in a variety of methods, on paper, or in a digital format, which is what we're doing, memorizing it, which is probably the safest, but also a bit dangerous, because it's 12 words, if you forget one, you're kind of screwed. That lets you have your own keys. Those are the two main distinctions.
If I know nothing about crypto how would I make that distinction?
You can't really have Bitcoin without having a wallet.
Right.
But it depends how each company describes themselves. Coinbase doesn't actually put the word wallet on the homepage. There is a wallet within their system, but for the sake of making it simpler, more accessible, they don't explain that to you. All they say is that you can buy Bitcoin from us and we're going to hold it for you. Which works. It does work for a lot of people. It's really simple. You don't get into any of the technical stuff. You just say, "I want to buy 10 bucks, or 50 bucks, or 1000 bucks, whatever it is, worth of Bitcoin and I want you guys to hold it for me, and I'm going to come back periodically and check, what's the price?"
They just handle this all for you, as opposed to for example, BRD, where I used to work. They have to explain this whole concept, it's a little bit more complicated, but the benefit to you is that you are the person in control over your funds.
If Coinbase gets compromised...something could happen to your money. They're really well protected, it's super unlikely, et cetera, et cetera, but theoretically this can happen. A bank has federal insurance. If a bank gets robbed, the federal government's going to give you your money back. Because this is crypto, that's not going to happen. So you're lost, right? You don't have it. The benefit of you having your own key is, again, you're in control. It's virtually impossible to take it away from you. Unless somebody physically takes it away from you, but that's the same as cash essentially.
Other than factors of security and control, are there other benefits to choosing one wallet over another?
It's always the same Bitcoin. Bitcoin is a blockchain, and everything that happens on the Bitcoin blockchain, regardless of the source, whether it comes from Coinbase or BRD, is all the same.
Is your exchange rate the same? Is accessing or moving your money out of each wallet the same?
That's the trick, right? As long as you're moving money within Bitcoin, that's all the same. If you're taking money out, you are selling Bitcoin and you're buying dollars, or yuan, or euro, whatever, that rate is going to be different for every provider.
If you are selling your Bitcoin back to Coinbase, they're going to give you a certain rate. If you take your Bitcoin out of Coinbase, and you sell it on a different exchange, you're going to get a slightly different rate. Theoretically, the company could charge you whatever they want. But there's also a market that averages this out, and so there is an acceptable range within which the fees that you pay for selling Bitcoin and get dollars back, kind of move.
What do you think happens in the future of this space?
The reality of today is that the vast majority of people who have Bitcoin, who are buying or selling Bitcoin, are doing it purely for speculating purposes. First of all, price tends to go up. It started at zero and now it's just under 7,000 bucks, so that's a really nice increase over 10 years, but there are periods of really high volatility where the price changes a lot. In the last couple of days we're down by three or four hundred bucks.
That's quite a bit, and people try to play that. They will try to buy when they think it's cheap, they'll try to sell when it gets more expensive, pure speculation. If that's what you have in mind, then you're just essentially comparing things like, okay, which wallet gives me better fees on buying and selling? Which one is cheaper? Which one is faster?
That's not why I'm in it, and I think that's not what many people who work in this industry are in it for, but that's the reality of today.
Do you think there will be more buy in from average people?
I mentioned this earlier to you, but I think that a lot of the conversations surrounding Bitcoin, or blockchain, or any version of crypto, says this is a chance for people to not be beholden to banks, and to get out from under a financial system that historically marginalizes people, or that keeps people out, or that takes advantage. And in this scenario, specifically when we're talking about a wallet and what they offer, one of the main things that it offers is your own control.
I think you're going to see some more widespread adoption. This is interesting because essentially that really depends on where you are. Where you are and who you are. Because in the United States, let's say North America in general, there's really no good reason for people to use Bitcoin for anything other than speculation. There's no advantages significant enough, over the existing system that makes it worthwhile for people to use – this is not something a lot of people in this industry would say, but I'm generally a practical and fairly blunt person. For Americans, Europeans, First World countries, it's just more convenient to use a normal bank.
It's easy, you're used to it, and that's what they're doing. If you are marginalized or disadvantaged in that, within the first world, Bitcoin still doesn't make a lot of sense to you simply because it's difficult to get it, but it's also difficult for you to use it. Because nobody else is buying and selling it for goods and services, they're only using it for speculation. It's not helping you very much if you have some Bitcoin.
However, if you were in a number of countries today, where we literally see increased demand for Bitcoin, places like Venezuela, like Iran, like North Korea, this makes a lot of sense. In a place where your traditional central banking based system is collapsing, whether because of economic policy, or sanctions – in the case of Iran it's sanctions, in the case of Venezuela it's more internal factors – it doesn't matter why it happened, the fact is that your money is becoming worthless, quickly, in that situation Bitcoin makes a ton of sense, because the government can't take it away from you. The government can't control it. The government can't screw it up.
That means your government, but it also means someone else's government. The United States cannot impose sanctions on Bitcoin, not in any practical way. If you are in Iran and you want to move your money out, or you want to keep your money safe, say from inflation, it makes a lot of sense for you to start to use something like crypto, which we do see happening, we see it happening today.
The main challenges that folks in those places have is how do they get it in the first place? How am I able to acquire Bitcoin? And that's the limiting factor essentially, because a lot of the infrastructure and services that have been built around Bitcoin, around selling dollars, yen, whatever, has been built based on the things that we're used to using like credit cards. That's how Coinbase works, you put your credit card in, you give them 100 bucks, they sell you 99 bucks worth of Bitcoin and they keep a dollar, whatever it says for their fee. If you don't have a credit card, there's no access for you. People end up exchanging it in person for cash which works. But obviously it's just not as efficient, not as quick. You have to know someone personally. It's very complicated. That's the limiting factor.
But whenever they can get their hands on any kind of crypto, primarily Bitcoin, but really any kind of crypto they do, and it's much more useful for them. If you become a refugee, if you’re forced to flee, you don't need to somehow figure out how to get your money out of your bank account. All you need to do is remember your key, escape, and your wealth, if it's in Bitcoin, stays with you. That's great, that has so many benefits that you can imagine right away.
The main pain points are just how do you get it? How do you move your money from the paper currency, or bank statement into Bitcoin, but once you get past that, that becomes really useful. That becomes maybe life saving, but at the very least it provides financial stability in some way. You get to another country and you can recover your funds. You can start a new life essentially, which is great.
That creates a weird situation where there's two extremes and not much in between. You know what I mean?
Yes. We have fairly unlimited access to the internet in the United States, how is Bitcoin used in a regulated country like China?
Since you mentioned China, China is very interesting because it actually does not allow Bitcoin. Bitcoin as a currency is illegal in China, but it doesn't stop people from using it. But they have to circumvent the law there. People still use it.
There's a big underground in China for cryptocurrencies for that specific reason. It's a cat and mouse game. They're trying to ban it, people are actually interested in it, and so they try to find out a bunch of ways to acquire it illegally and store it.
By the way, the flip side is that China is actually really interested in the technology itself. It's like Bitcoin as a currency is not allowed, but blockchain, the tech that makes it possible, China is super interested in from the state level. They're investing a lot into the development of the tech. They just don't want people to use it as a currency. Which is a little weird, but that is what they're doing.
There are many RFPs, that we’re seeing, by various American agencies, intelligence agencies, State Department, a bunch of agencies that are looking for tools that will allow them to track funds over Bitcoin, sort of over the blockchain. There are a couple of these tools already available. Not a lot. They're looking to build more to monitor the movement of Bitcoins. So again, it's kind of like a cat and mouse game. In China, it's just purely because I want to have my funds available to me. In the U.S. it's really more about taxes.
What are some misconceptions surrounding Bitocin and blockchain?
One thing people don't understand well, is the fact that Bitcoin transactions are irreversible. Wherever Bitcoin moves from, that's it, it's final, it's done. It can never be undone. Which is very different from how a credit card works. You can always call your bank, you can have a charge back, you can have a refund. Many things you can do. It doesn't work like that with Bitcoin.
It's always, always final, which also means it's impossible to steal, but it's easier to dupe people. It's difficult technically to take it away from you, but if you participate in a transaction where I tell you I'm going to sell you my iPhone, you give me a Bitcoin, and I never give you my iPhone. It's done. There's no recourse for you, which is why there's like a lot of ransomware specifically for Bitcoin because you can't get it back.
Another thing that comes to mind is the anonymity of it. People think that Bitcoin is anonymous. It is not. It's what you would call synonymous. Essentially you have a number that represents you. Which is your wallet address. If a government agency can track that, they know even more about you in your transactions than they normally would, because they can literally see every movement of money from that address. But at the same time, if you can hide it, and there are many ways of doing that, that's a whole separate conversation, you can remain anonymous.
That's the trick.
Now you have your name, your social security, whatever, if you use a Bitcoin, you have to have a number, and if a person or government can put these things together…
The assumption is that it's private, but it’s always emphasized that everything is stored and recorded on the blockchain. I realize how valuable that transaction history would be if it were distinguishable.
Well that's the thing, right? The difference between Coinbase or Square cash or a couple of ones versus a wallet like BRD or some others is that a number of these companies collect that information from you at the start. In order to buy Bitcoin from Coinbase, you're going to have to input a bunch of personal information and then it becomes associated with you and becomes stored, and let's say in the kind of mundane scenario, the IRS can look it up and say, "Oh, Tatti bought a bunch of Bitcoin three years ago. She paid $1,000. Now that's worth $50,000 and if you sell it, you're going to owe some taxes on that."