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
Necessary Debt
by Fred Selinger
September 5, 2020
This interview with Fred Selinger, lecturer at UC Berkeley and author, was conducted and condensed by franknews.
Fred | My name is Fred Selinger. I am a professional faculty member at UC Berkeley. I have a background in all types of different financial enterprises - mergers and acquisitions on the investment banking side, I’ve managed people’s money, I have licenses in securities and insurance and real estate.
So I asked a good friend of mine, the provost at UC Berkeley - what do you do to teach these kids about money? He said, “Fred, I don't think we do anything - why don’t you pitch me on a class?” Eventually, I got the course at Berkeley. I remember I went to my first class and I had no idea even if anybody would even show up for this thing, and there was a line out the door.
I said, “Uh, what are you guys doing in this line?” They said, “Oh, we've got this class in personal financial management.” I said, okay and it just took off from there. Now, well over 10,000 students have completed the course.
How do you structure the class? What is important to know?
We basically divide the class into four sections.
Number one, saving money. How do you save money and how much should you save? When you save money, what do you do with it? Number two, Investing money. You're going to invest it someplace - real estate, stocks, or a business. Number three, how do you grow that money? Number four, how do you protect your money?
So many people go out into the working world, and businesses will spend thousands and sometimes tens of thousands of dollars to train them on how to make money for the company, but they never learn about how to make money from themselves.
You may have a parent here and there if you are lucky, but basically people have no idea about what they are getting into, and financial mistakes can be very, very costly. I have devoted my life to increasing that education. We start with the educational part of it, and we start with the credit card.
What are the basics of a credit card?
First of all, you have to understand what a credit card is. A credit card is unsecured. What does that mean? It means there are no assets behind it. You're not backing it up with any type of collateral. Whoever is lending you that money is depending upon your good faith that you're going to pay it back.
If you don't pay the money back what are they going to do? Are they going to kidnap your eldest child and hold it as a hostage someplace? What can they do? They can't go into your checking account. They can't go into your savings account. They can't force you to sell your car.
Then, when you go to borrow money and somebody else gets your credit report, they will look at your credit score and see that you don’t pay your bills. And so either they won't lend you money, or they will charge you an enormous interest rate because you are considered to be more risky.
Conversely, a debit card is guaranteed - it is guaranteed by the money in your bank account. When you use that card, the merchant runs it through its system, and if there's available money in your account, the sale continues. If not, they reject the transaction. Plain and simple.
Why use a credit card over a debit card?
No one is tracking debit card transactions, so you are not building credit. Why? Because you're not borrowing any money. The money is already in the account. Credit depends on faith.
People ask me what's money? I say, it is faith. It's what you believe it is.
So credit is based upon your faith. You want to exhibit good faith, a good history on how you handle your financial affairs. You are being tracked and reported to these reporting agencies every day, every time you're doing something.
Why is credit important?
Good credit creates growth. Maybe you can buy a car that helps you drive to your work. Maybe credit will help you invest in a business. Maybe good credit will help buy a piece of real estate. Credit can generate growth. The greater your growth, the more credit you can get. Increased credit then enables you to grow even more.
That's what enables people in our society, who handle their money well, to go out and borrow amounts of money that are far beyond what they even earn in a year. Somebody can make $150,000 a year and borrow $500,000 to buy a house.
That is not always how things worked. At the peak of his career my dad made $40,000.
He bought a house for $18,500. He bought a house for less than his annual income. You can't do that anymore.
What is your credit score made up of?
The FICO score is the big score that reflects our creditworthiness. You will actually have three FICO scores because there are three credit reporting agencies. Not every merchant reports to all three, so each of your scores will be different, they have different material.
Your credit score is built from information on your credit report. A credit report lists everything. It lists any DUIs you've had, any time you've been arrested, any judgments against you. It lists every account you have ever had, and every credit card you have ever had. Your student loans, your rent, and all your transactions are going to be reflected in that report.
There are five basic areas of the credit report. 35% of your score, the biggest chunk of your score, is based upon paying your bills on time, over time. 30% of your credit score is based on how much of your credit limit you are using from month to month. If you have a $1,000 credit limit, and you're spending $900, you are stretched out on your debt. You might be a little riskier than somebody who's been using and carrying around $300 worth of credit from month to month. They would look at that and say, this person could actually go out and buy more, but they're managing their money better because they're not out there spending money on debt. 15% of your score is constituted by how long you've had the credit card and what kind of debts you have. Do you have debts that aren't just one thing? And then the other thing that they look for is, something that would be a red flag, is if you're trying to open up a bunch of accounts all at once. To them, it indicates that this person's getting really tight on money, so they're going out and borrowing, borrowing, borrowing. That scares them.
Are there things that you shouldn’t put on a credit card?
There are four things that they say you shouldn’t put on a credit card - and I got these from the FICO website - bars, massage parlors, pawnshops, and tire retread shops. You probably don't even know what the heck tire retread shops are, but we used to go to them all the time because we were poor. They keep the sides of the tire but put a new tread on it so you can drive it a little further.
What is the biggest blind spot in personal finances for young people?
We have a rule in my class, the rule of Fred - I get paid first. I can't believe the number of people of all ages, who, when they get a paycheck, hand all that money out to somebody else, and don't pay themselves a dime. They don't put a penny away.
No matter what your situation, start saving something. And my recommendation is that the first thing you should save for is an emergency fund that will enable you to live three to six months without a paycheck coming in. I say that because emergencies will come up.
I had a former student at Berkeley whose father died in New Jersey and he had to make a decision about whether to go to the funeral or to pay his rent? I mean, look at what's happened to our economy during the COVID crisis. So many people are living day to day. If they don't get that paycheck, they can't pay the rent, they can’t buy food. 70% of the people in this country, if they had a bill for $400, would have to go borrow money or sell assets. They don't have it. So the first thing you need to do is take care of yourself.