Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 2: I'm Joe Wisenthal and I'm Tracy Alloy.
Speaker 3: Tracy Arizona Water.
Speaker 1: I'm like, I'm really fascinated by this topic, and I
Speaker 1: also have a really hard time wrapping my head around it.
Speaker 2: We sort of hear different things. So just to lay
Speaker 2: the groundwork here or the groundwater. We have interviewed a
Speaker 2: land broker in Arizona, and we have also interviewed an
Speaker 2: alfalfa farmer. Yes, and water has come up every time,
Speaker 2: and we sort of hear different things from those two stakeholders.
Speaker 2: So I remember the farmer was sort of blaming the
Speaker 2: property developers for water shortages, and then the property developers
Speaker 2: are like, actually, agriculture uses the majority of water in
Speaker 2: the state, and at the same time, you have concerns
Speaker 2: over water availability, and we saw some news on that
Speaker 2: front recently.
Speaker 1: Yeah, So at the beginning of the month, I believe
Speaker 1: the governor of Arizona announced this plan to sort of
Speaker 1: constrain the amount of new development that will be allowed
Speaker 1: around the Phoenix area, which is of course one of
Speaker 1: the fastest growing areas. And as you mentioned, like the
Speaker 1: developers will say, oh, we have plenty of room to
Speaker 1: add more homes because the farmers are taking up eighty
Speaker 1: percent of the water that we have in the desert.
Speaker 1: And the farmers say, well, there wasn't really a problem
Speaker 1: with water until everyone started moving to our state.
Speaker 2: I'm imagining that Spider Man meme of everyone pointing fingers
Speaker 2: at each other. But I think the big difference and
Speaker 2: what's happening now is that we are starting to see
Speaker 2: water shortages or constraints affect development decisions.
Speaker 1: Right, So then the big question is, like, Okay, so
Speaker 1: Arizona and some of these other Southwestern states that in
Speaker 1: part get their water from the Colorado River all have
Speaker 1: to conserve water to somewhat to some extent, there's been
Speaker 1: this meggage round in the Southwest for I think like
Speaker 1: twenty five years now. From the underground aquafers, they're depleting
Speaker 1: at some pace. The water from the rivers is lower
Speaker 1: than it used to be. So then and we hadn't
Speaker 1: even you know, we're talking about housing versus agriculture. There's
Speaker 1: also a lot of industry, industry and the semiconductors. Yeah,
Speaker 1: so we sort of have to get a sense I
Speaker 1: think of the big picture of like frankly, who's going
Speaker 1: to lose out? Who is going to who has water
Speaker 1: today that won't have access.
Speaker 2: To it in the future, Right, And how do you
Speaker 2: make those decisions? How do you decide what to prioritize.
Speaker 1: Right, Because with all utilities, it's never like a pure market.
Speaker 1: There's not just like I don't at least I don't think,
Speaker 1: you know, it's like when you like try to wrap
Speaker 1: your head around like.
Speaker 3: How the Texas grid works.
Speaker 1: You know, it's not like there's like some price of
Speaker 1: electricity and who pays the most. It's like there's auction mechanisms,
Speaker 1: there's subsidies, et cetera.
Speaker 2: All kinds of Texas gread is a bit of a
Speaker 2: special case. But point taken, I think I.
Speaker 1: Think Arizona Water might also be in that case of
Speaker 1: many special cases. So we really do have the perfect
Speaker 1: guest who is steeped in water and water policy and
Speaker 1: made a whole career of it. We're going to be
Speaker 1: speaking to Katherine Sorenson. She's the director of Research at
Speaker 1: the Kyle Center for Water at the Morrison Institute for
Speaker 1: Public Policy at Arizona State. Previously, she was the head
Speaker 1: of Phoenix Water Services.
Speaker 3: So someone who.
Speaker 1: Really knows water and going to break it down. So,
Speaker 1: Catherine Sorenson, thank you so much for coming on odd
Speaker 1: Lots really appreciate you joining us.
Speaker 4: Thank you. I'm really excited for our conversation.
Speaker 1: Why didn't you start just in the very sort of
Speaker 1: just go back a little bit a few weeks ago
Speaker 1: and the Governor of Arizona did announce these constraints to
Speaker 1: some extent on new construction capacity around Phoenix.
Speaker 3: What what was announced and why?
Speaker 4: Yeah, that's a great question, and there is a complicated
Speaker 4: answer to that.
Speaker 1: And I told you it's not going to be an
Speaker 1: easy one.
Speaker 4: But it's not an easy one. So what that related
Speaker 4: to is actual it was actually a sustainable groundwater management
Speaker 4: in the Phoenix metropolitan area. So in Arizona we have
Speaker 4: some of the most progressive groundwater management laws that you
Speaker 4: will find not only in this country, but literally in
Speaker 4: the world. Back in nineteen eighty we passed groundwater management
Speaker 4: that effectively ties water availability to the ability to grow.
Speaker 4: And so what that means is that if you're going
Speaker 4: to subdivide land, which is typically how growth occurs, particularly
Speaker 4: for you know what we call subdivisions, right like residential
Speaker 4: subdivision in the Phoenix metropolitan area. If you are going
Speaker 4: to subdivide land and grow, you have to prove that
Speaker 4: you have one hundred years of water available for that development.
Speaker 4: It is a really high bar to me, necessarily so
Speaker 4: because you can imagine that people will only invest in
Speaker 4: our economy. Enterprises will only come to the Phoenix area
Speaker 4: if they understand that we have secure water supplies, because
Speaker 4: we're out here in the middle of that destr right.
Speaker 4: So what the governor announced was actually that all the
Speaker 4: groundwater in the Phoenix metropolitan Area is essentially spoken for.
Speaker 4: It is allocated and expected to be used by those
Speaker 4: who have a right to it over the next one
Speaker 4: hundred years. So our announcement really was that you can
Speaker 4: continue to grow, but if you are going to continue
Speaker 4: to grow, it needs to either be in a place
Speaker 4: that already has demonstrated this one hundred year assured water supply,
Speaker 4: or if you're going to grow out on the fringes
Speaker 4: of the Valley of the Sun, outside of the boundaries
Speaker 4: of places that have this one hundred year assured water
Speaker 4: supply designation, you can't grow on groundwater. You can grow
Speaker 4: on other water supplies, but not groundwater. So it is
Speaker 4: essentially a way of protecting the groundwater so that it
Speaker 4: is available for those who already have a claim to
Speaker 4: it and for those who come after.
Speaker 2: So let me ask, let me back up even further
Speaker 2: all the way I guess to like the Paleolithic era.
Speaker 2: But when we talk about water availability in Arizona and
Speaker 2: in Phoenix specifically, setting aside constraints, currently, how much water
Speaker 2: is there and where is it coming from? Because of
Speaker 2: course you make the you distinguish between groundwater versus other sources.
Speaker 2: So what exactly is available in that area?
Speaker 4: You know, I love this question because it's super important.
Speaker 4: Central Arizona in particular is blessed with very large and
Speaker 4: very productive groundwater aquifers. That means, in layman terms, there's
Speaker 4: a lot of ground. Unfortunately, it's fossil groundwater, meaning that
Speaker 4: it is not annually renewed by Mother Nature at any
Speaker 4: significant rate. It's like an oil field, right, okay, and
Speaker 4: probably more valuable to us, I will say so. But
Speaker 4: Arizona also, of course has its own rivers. Those rivers
Speaker 4: are depending on snow melt from our mountains, and Phoenix
Speaker 4: in particular is located where three of the state's main
Speaker 4: rivers come together. So Although people, you know, criticize Phoenix
Speaker 4: for being a big city out in the middle of
Speaker 4: the desert, what they don't really understand is that Phoenix
Speaker 4: was actually very carefully chosen by ancient Native Americans who
Speaker 4: first settled there and who have lived there since crime immemorial.
Speaker 4: Because Phoenix is where three big rivers come together, so
Speaker 4: there's a large amount of service water. There's also this
Speaker 4: native groundwater, fossil groundwater, and then we import Colorado River
Speaker 4: water from western Arizona into central Arizona as well, so
Speaker 4: there is a lot of water. There's enough water for
Speaker 4: what we most value. I think the question is that
Speaker 4: there is probably not enough water for everything. So we
Speaker 4: really have to dial in on what are these things,
Speaker 4: what are these enterprises, What are these uses of water
Speaker 4: that we most want.
Speaker 1: I guess we'll just keep jumping back and forth between
Speaker 1: the current time and history the ancient era. But you know,
Speaker 1: you mentioned that per the Governor's New Order, that if
Speaker 1: you want to build or grow in certain areas, you
Speaker 1: can still do it.
Speaker 3: You just have to.
Speaker 1: Find another source of water that's not the groundwater. That
Speaker 1: the ground that the one hundred years of groundwater availability
Speaker 1: is essentially spoken for already can you talk through I
Speaker 1: guess some of the maybe it's the economics or the
Speaker 1: considerations that would go you know, into thinking like, Okay,
Speaker 1: some entity wants to grow what is the second best
Speaker 1: source of water for them that if they no longer
Speaker 1: have access to the sort of underground fossil water.
Speaker 4: So it is all about economics. There are alternatives. The
Speaker 4: question is how expensive are those alternatives and would you
Speaker 4: not just be better off economically by developing more in
Speaker 4: the center of the value of the sun and the
Speaker 4: Phoenix metropolitan area where there is already one hundred years
Speaker 4: hird water supply designation. Right, So this in some way
Speaker 4: balances the economics between continued sprawl which was cheaper on groundwater,
Speaker 4: versus infield development where water supplies and warsure. But yeah,
Speaker 4: there are alternatives. There are farmers that are willing to
Speaker 4: basically sell their higher priority water rights, and an entity
Speaker 4: could theoretically purchase those water rights off of the main
Speaker 4: stem in western Arizona, the main ten mouth of the
Speaker 4: Colorado River, and to import them through the Central Arizona
Speaker 4: Project Canal into Central Arizona. That is hugely controversial, not
Speaker 4: to mention extremely expensive, but for example, the town of
Speaker 4: Queen Creek, which does not have a designation of a
Speaker 4: one hundred year shared water supply. The town of Queen
Speaker 4: Creek is in the process of doing just that because
Speaker 4: they want to continue to grow, so for them, the
Speaker 4: economics work.
Speaker 5: For individual developers, I think that's a much steeper proposition, right.
Speaker 5: It's one thing for an entire town to decide to
Speaker 5: import those types of supplies.
Speaker 4: If you're just an independent developer, that might.
Speaker 5: Be substantially more efficult kinds it, but that is a possibility.
Speaker 4: There are also Indian tribes in central Arizona that at
Speaker 4: least historically have been willing to lease some of their
Speaker 4: water for these purposes. It's really expensive, but it's possible.
Speaker 4: There are also groundwater basins outside of the Phoenix metropolitan
Speaker 4: area that are specifically designated for the purpose of being
Speaker 4: pumped and transporting that groundwater into the Phoenix metropolitan area,
Speaker 4: sort of like in Owens Valley in California. If you
Speaker 4: know that story. You pump someone else's groundwater basin dry
Speaker 4: and import it into an urban center, not saying that's sustainable,
Speaker 4: but it is legally feasible in a z on them
Speaker 4: and then of course, there's reclaimed water, there's the potential
Speaker 4: to use desalinated breckage groundwater or ocean water. There are alternatives.
Speaker 4: These are all just really really expensive. So if you're
Speaker 4: a developer, you got to be thinking, Okay, would I
Speaker 4: rather try to pursue this continued sprawl type subdivision development
Speaker 4: or might I be better off purchasing more expensive land
Speaker 4: that comes with an assured water.
Speaker 2: Sorry to jump back and forth again, but can I
Speaker 2: ask another backup question.
Speaker 4: Wherever you want? It's all good.
Speaker 2: I think we're on like two separate timelines.
Speaker 1: No, but I find it helpful for about like the
Speaker 1: different types of water, and you're totally right.
Speaker 2: Well, okay, so just on this note, But the current
Speaker 2: water constraints, what are they being caused by? Is it
Speaker 2: simply economic development and population growth? Is it climate change?
Speaker 2: I imagine it's a combination of a bunch of different factors.
Speaker 2: But can you maybe explain the constraints to us and
Speaker 2: then how those constraints inform the current thinking around water availability.
Speaker 4: So the constraints relating to groundwater that I described I
Speaker 4: have to do both with farming and with continued urban development.
Speaker 4: You can imagine there are a lot of demands on
Speaker 4: our aquifers. Right there's continued farming in the Valley of
Speaker 4: the Sun. Farming in the desert Southwest is a very
Speaker 4: water intensive enterprise. Farmers continue to draw from the aquifer
Speaker 4: and they have the ability to do so in perpetuity.
Speaker 4: They were essentially grandfathered in to the groundwater pumping restraints
Speaker 4: under the nineteen eighty Groundwater Management Act, so they have
Speaker 4: a perpetual right to come and they continue to do so.
Speaker 4: And then, of course the cities have grown in population
Speaker 4: as well, particularly since World War Two, and you know,
Speaker 4: they draw on the aquifer for potable water needs as well.
Speaker 4: And then there's various industries that also draw from the aquifer.
Speaker 4: And so I think it's a combination of all of
Speaker 4: those demands that are creating the constraints on groundwater. Essentially,
Speaker 4: what the state is coming out and saying is that, look,
Speaker 4: all that groundwater is spoken for, you know, and not
Speaker 4: just spoken for today. The state looks out one hundred years.
Speaker 4: We're very proactive about our water management out here in
Speaker 4: the desert because we have to be. But what the
Speaker 4: state is saying is that that groundwater over this one
Speaker 4: hundred year chunk of time is spoken for. So those
Speaker 4: constraints are kind of caused by a combination of all
Speaker 4: those demands, but also the intentional regulatory decision to protect
Speaker 4: and guard those resources for the future. Right the state
Speaker 4: is essentially signaling no, we're not just going to let
Speaker 4: you deplete this awkward for Chiller's and nothing left. Regarding
Speaker 4: surface water, that's a really different constraint. So I mentioned
Speaker 4: that we have that Phoenix is located where three major
Speaker 4: rivers come together. The value of the sun is lucky
Speaker 4: to enjoy the flows of the Salt and Verting rivers.
Speaker 4: That river system is actually managed by the Salt River Project.
Speaker 4: It's called it is one of the Beerau Reclamation's oldest
Speaker 4: projects and dates back I believe to Oh my goodness,
Speaker 4: nineteen oh, nineteen ten. I don't know. I probably have
Speaker 4: that wrong. It's very old. It predates statehood for us.
Speaker 4: The flows of that system actually are relatively resilient and sustainable,
Speaker 4: even in the face of climate change. There's a couple
Speaker 4: of reasons for that. Scientists has studied the hydrology of
Speaker 4: those watersheds, and certainly climate change will affect those watersheds.
Speaker 4: We can expect some diminishment of snowpack and precipitation in
Speaker 4: our mountains. But the way I understand it, not being
Speaker 4: a hydrologist, is that they're saying that, look, you know,
Speaker 4: Arizona is already baked, right, It's already it's already hot
Speaker 4: and dry here, and yeah, it might give us feel
Speaker 4: hotter and dryer, but they don't expect that the flows
Speaker 4: of the Saltenbodi River system will be affected as much as,
Speaker 4: for example, the flows of the Colorado itself might be affected.
Speaker 4: And then if you add to that the fact that
Speaker 4: the entire value of the sun the whole Phoenix metropolitan
Speaker 4: area used to be agricultural, and that again dates back
Speaker 4: all the way to time immemorial with the Native Americans
Speaker 4: who first farmed this valley, and in fact, our modern
Speaker 4: day canal system follows in many ways the same ancient
Speaker 4: canal systems that Native Americans first dug. So we were
Speaker 4: always in an agricultural valley. Particularly during World War II.
Speaker 4: A lot of that agriculture increased because of the need
Speaker 4: to grow cotton for war material and at the time
Speaker 4: that bull weav was decimating cotton in the southeast, and
Speaker 4: so Arizona was a natural place to grow it. And
Speaker 4: our cotton yields are very high because it turns out
Speaker 4: all cotton needs is water and sun, and we got
Speaker 4: a lot of sun. So we've been in an agricultural valley. Now,
Speaker 4: what's interesting about that is that it takes on the
Speaker 4: order of three to six acre feet per acre to
Speaker 4: grow cotton or alf alpha in our hot desert sun,
Speaker 4: whereas it only takes about an acre and I'm sorry,
Speaker 4: an acrefoot per acre to grow a subdivision. Urban water
Speaker 4: uses are much less intensive per acre than farming dist
Speaker 4: And so interestingly, as the Valley of the Sun converted
Speaker 4: from what was largely an agricultural valley into an urban one,
Speaker 4: there was a natural water savings built in. So whereas
Speaker 4: we used to use about one and a half million
Speaker 4: acre feet of water off the Salt and Birdy River system,
Speaker 4: today that system delivers about half that amount. So there's
Speaker 4: just this very natural water savings that was built into
Speaker 4: the way we grew. And then I'm sorry being really
Speaker 4: really interesting. Okay, good stop me at any time. But
Speaker 4: then if you take a look at the Colorado River system,
Speaker 4: that's where we have just some real problems. The Colorado
Speaker 4: River system is overallocated, probably at least by one point
Speaker 4: two million acre per year, maybe more. And then if
Speaker 4: you add on top of that the fact that we've
Speaker 4: been experiencing, you know, as you said, twenty years of
Speaker 4: what has been one of the worst routes on the
Speaker 4: paleo record, and the fact that the climate is changing
Speaker 4: and scientists are telling us that the flows of the
Speaker 4: Colorado River might diminish by as much as thirty percent.
Speaker 4: You know, that's a really big problem, right, and I
Speaker 4: think that's why the Commissioner of the Bureau of Reclamation
Speaker 4: came out and said, hey, look, guys, you're gonna have
Speaker 4: to cut millions of acre feet in water consumption to
Speaker 4: stabilize this river system.
Speaker 1: So, I mean, that was a great answer, and you
Speaker 1: sort of hit on things that both of the other
Speaker 1: guests that we've talked to about this topic brought up
Speaker 1: and see it from their angle. And so, you know,
Speaker 1: we talked to Chase Summerson, a real estate broker, and
Speaker 1: he made the exact point that you made that actually,
Speaker 1: as Arizona's water consumption shifts from agriculture to residential use,
Speaker 1: it actually results in the net savings and actually improves
Speaker 1: the sustainability.
Speaker 3: On the other hand. You know, we talked to an.
Speaker 1: LFLFA farmer and he's like, you know, our family's been
Speaker 1: doing this on this land for eight generations or something
Speaker 1: like that. And so, you know, as you noted, you know,
Speaker 1: you mentioned that farmers are sort of grandfathered in. So
Speaker 1: can you sort of quantify or talk about the sort
Speaker 1: of implicit subsidy to agriculture that comes from having been
Speaker 1: grandfathered in? And like, what is the gap between how much, say,
Speaker 1: farmers are willing to pay for an acre foot of
Speaker 1: water versus you know, a housing developer either inside the
Speaker 1: Valley of the Sun or nearby.
Speaker 4: You know, the subsidy doesn't really come in the form
Speaker 4: of water. Okay, let me explain that in a couple
Speaker 4: of ways. Yes, under the nineteen eighty Groundwater Management Act,
Speaker 4: farmers were basically grandfathered in and they have a perpetual
Speaker 4: right to pump groundwater. I guess you can view that
Speaker 4: as a subsidy, though the cities and private water companies
Speaker 4: that also lay claim to groundwater don't really pay much
Speaker 4: for that groundwater either, Okay, Right, And I don't know
Speaker 4: that I would say that farmers are subsidized so much.
Speaker 4: I think that the difference in the cost that a
Speaker 4: developer pays for water versus what a farmer pays for
Speaker 4: water really has more to do with the fact that
Speaker 4: development is not allowed to rely on mining this fossil groundwater,
Speaker 4: and instead they have to invest in and renewable surface
Speaker 4: water supplies and particularly in the infrastructure necessary to deliver
Speaker 4: it to customers tabs. So I think that in turn
Speaker 4: that really the cost difference has more to do with
Speaker 4: the acquisition of renewable water supplies and the need to
Speaker 4: develop infrastructure, if that makes sense. And on the Colorado
Speaker 4: River it's different. So the Groundwater Management Act applies to
Speaker 4: central Arizona, it does not apply to western Arizona. And
Speaker 4: in western Arizona on the main stem of the Coloratda River,
Speaker 4: the farmers and Indian communities have the highest priority water
Speaker 4: rates because of course Western water lies based on first
Speaker 4: and time first and right, turns out Native Americans we're
Speaker 4: here first. Turns out, you know, farmers kind of came
Speaker 4: along the text, and so they just they have the
Speaker 4: highest priority water rates. Any subsidy that they receive really
Speaker 4: relates more to the infrastructure that often but not always,
Speaker 4: has been built by the federal government, typically with repayment provisions,
Speaker 4: though at times those repayment provisions are lax. I guess
Speaker 4: it does.
Speaker 2: It leads into something I wanted to ask you, which
Speaker 2: is you mentioned infrastructure there, and I guess one question
Speaker 2: I have. You know, maybe even before we get to
Speaker 2: tougher decisions about constraining development or maybe pricing water in
Speaker 2: a different way, but to what degree can these water
Speaker 2: constraints be solved with better water management and newer infrastructure.
Speaker 4: Reinvestment in aging infrastructure will certainly help, but it will
Speaker 4: not be the answer. It's difficult to deploy that at scale.
Speaker 4: So for example, when I was a director of Phoenix
Speaker 4: Water Services, I asked the engineers to calculate how much
Speaker 4: water the city of Phoenix was losing two leaky pipes. Now,
Speaker 4: to put this in context, here in central Arizona, the
Speaker 4: cities have are regulated such that their water losses in
Speaker 4: their distribution systems cannot exceed ten percent, which is very low.
Speaker 4: If you look nationwide, water losses are probably at least
Speaker 4: something more like thirty percent. But because water scarce here
Speaker 4: were regulated, you know, to a higher standard. But the
Speaker 4: amount of water that is lost in Phoenix water distribution
Speaker 4: system pipelines is about twenty five thousand acre feet of
Speaker 4: water per year. That's a lot of water. But when
Speaker 4: you're talking about a problem on the Colorado River that
Speaker 4: is on the order of two million acre feet, you're
Speaker 4: not going to get there. Probably a part of the
Speaker 4: solution space, I think an important one. I can get
Speaker 4: out my pipeline soap box if you want me to,
Speaker 4: but I think that investing in pipelines is probably one
Speaker 4: of the best things here for water quality and for
Speaker 4: water resiliency, but it's unlikely to be deployed a scale
Speaker 4: to fix the problems from the color.
Speaker 1: Can I ask a question about perspective, because you know,
Speaker 1: I don't have any impulse. I mean, I really like
Speaker 1: the Southwest, but it's very unlikely that I'm going to
Speaker 1: be moving to Arizona anytime soon. That being said, I
Speaker 1: regularly do consume food, including beef that may have come
Speaker 1: from colors, that may have eaten elfalfa that was grown,
Speaker 1: you know, in Arizona.
Speaker 2: So I have a fancy racehorse.
Speaker 1: No, no, I don't know a horse that consumes it.
Speaker 1: But like eat, I eat food, and the desert, other
Speaker 1: than not having much rain, seems to be a pretty
Speaker 1: great place to grow food due to stable conditions and
Speaker 1: other things that you've already talked about. When thinking about
Speaker 1: Arizona water policy, you know, obviously there's the interest of
Speaker 1: the developers and the people who want to move to
Speaker 1: Phoenix for cheap land, et cetera. But how should we
Speaker 1: weigh sort of US food security, the interest of food exports,
Speaker 1: then the interests of fairly affordable food, and how much
Speaker 1: does that inform sort of policy choices that go into
Speaker 1: the state's water use.
Speaker 4: So, you know, the US is a very large country,
Speaker 4: and certainly we have enough land to grow what we
Speaker 4: need to grow. It comes down to economics and inefficiencies. Right.
Speaker 4: Culture in the desert Southwest tends to be very efficient
Speaker 4: because we have so much sun, and it is for
Speaker 4: that reason. It is also very water intensive. Alfalfa growers
Speaker 4: in the desert Southwest can get something like ten to
Speaker 4: twelve cuttings per year. If you're trying to grow alfalfa
Speaker 4: in Montana with a short growing season, you're probably going
Speaker 4: to get I don't know, two, yeah, four.
Speaker 3: So it's not crazy. So it's not I mean, it's not.
Speaker 1: Crazy that we grow like that is a very big
Speaker 1: advantage setting aside the water issued there's a reason that
Speaker 1: Arizona became a big hotbed grown.
Speaker 4: A lot of alfalfa here. Now that other parts of
Speaker 4: the country grow a lot of alfalfa as well, would
Speaker 4: you have to use more land to get a comparable
Speaker 4: total amount? Maybe? Is that the worst thing ever? Probably not.
Speaker 4: I think those types of changes could potentially happen over time,
Speaker 4: particularly in the face of continued water stress on the
Speaker 4: Colorado River. But more important is the question of vegetables.
Speaker 4: Because I'm sure you've heard western Arizona, the Yuma area,
Speaker 4: and the Central Valley of California grow the majority of
Speaker 4: the winter greens that you know, New Yorkers and Minnesotan's
Speaker 4: and I don't know, Michiganders, whatever you're called. All these
Speaker 4: people love to eat, and that is that could be
Speaker 4: replicated elsewhere. But replicating the growth of vegetables in the
Speaker 4: wintertime is a very complex undertaking. It's not just about
Speaker 4: water and sun. You could probably find that in other places.
Speaker 4: It's also about the logistics of refrigeration, the labor supply,
Speaker 4: the quality control. All of this is it is very
Speaker 4: highly it is highly complex agriculture. It is in industrial agriculture.
Speaker 4: It is not you cute little family farms in Massachusetts, right,
Speaker 4: So that I think is a more difficult proposition. But
Speaker 4: there will be increasing stress on farmers in western Arizona
Speaker 4: who have these higher priority water rights, precisely because they
Speaker 4: have the higher priority water rights, and as the Colorado
Speaker 4: River continues to diminish, the cities in Cintil, Arizona, who
Speaker 4: have lower priority water rights to the Colorado River by nature,
Speaker 4: are going to be looking to acquire those higher priority
Speaker 4: water rights. Farmers don't have to sell, and certainly there
Speaker 4: are real consequences for rural communities, for their economies, for
Speaker 4: their cultures, for all sorts of things. I don't mean
Speaker 4: to make of that, but that pressure will only increase
Speaker 4: over time. Pharmers don't have to sell, but it turns
Speaker 4: out that at the end of the day, a lot
Speaker 4: of them like to, you know, when they want to retire,
Speaker 4: when the kids don't want to take their over. You know,
Speaker 4: that pressure will only increase.
Speaker 2: So we've already been talking about I guess the realities
Speaker 2: of different water sources and preferences for different water sources.
Speaker 2: I'm wondering what would happen if, you know, for instance,
Speaker 2: we see the property developers have a preference for groundwater
Speaker 2: because it tends to be cheaper. But what would happen
Speaker 2: if Arizona came in and put a more concrete pricing
Speaker 2: structure on these rights, like a what would that look like?
Speaker 2: How would it work? I hear that term pricing water
Speaker 2: quite a lot nowadays, but I don't quite understand it.
Speaker 2: And then be how would that impact I guess the
Speaker 2: mix of Arizona's economy between say, agriculture industry and real estate.
Speaker 4: Well, I think it would have a big impact. Looking
Speaker 4: at the kind of the legal issues surrounding that that
Speaker 4: the state would have to impose some sort of tax.
Speaker 4: That's how you would price water differently, you, Yeah, the
Speaker 4: state could come in theoretically and impost some sort of
Speaker 4: tax on the consumption of water, the consumption of Colorado
Speaker 4: River water, on the consumption of you know, groundwater. And
Speaker 4: certainly I think you know, farmers not always, but you
Speaker 4: know often operate you know, on the margin of profitability,
Speaker 4: depending on what kind of crop they're growing, And so
Speaker 4: certainly I think that could potentially have an impact. I
Speaker 4: will tell you, I don't see how that would be
Speaker 4: politically viable or so. Sure. I'm an economist. I always
Speaker 4: love to go to pricing to fix things, but I
Speaker 4: think that would be a very difficult proposition politically. For context,
Speaker 4: the consumption of groundwater in central Arizona is taxed in
Speaker 4: these areas where groundwater is highly regulated, but the legislature
Speaker 4: put a very specific cap on that tax, and really
Speaker 4: that was for political reasons, and so that tax is
Speaker 4: so low that it really doesn't alter behavior in any
Speaker 4: meaningful way.
Speaker 3: Yeah, it's interesting.
Speaker 1: You brought up the reality that culture and politics and
Speaker 1: everything aside, the pressure on farmers to sell is.
Speaker 3: Likely to grow.
Speaker 1: And we even brought this up. We talked to a
Speaker 1: farmer and we said, are you going to sell? And
Speaker 1: he said no, And then he said, well, you know,
Speaker 1: right now the highway is ten miles away, and so
Speaker 1: but maybe one day the highway will it'll be two
Speaker 1: miles away, or you know, one mile away, and so
Speaker 1: at some point there might be a real real.
Speaker 3: Estate bid for that area.
Speaker 5: You know.
Speaker 1: I want to touch on another dimension that we haven't
Speaker 1: hit on yet, but that is industrial uses of water.
Speaker 1: And we know that a lot of the new semiconductor
Speaker 1: factories that are coming to the US are coming to Arizona, Intel, TMC,
Speaker 1: et cetera. Semiconductor production, I think battery production to fairly
Speaker 1: water intensive process. It has to be really extremely clean water.
Speaker 1: Can you talk about that, how that plays into the
Speaker 1: demand mix, and how that's being accounted for.
Speaker 4: Yeah, I'm glad you asked that, because when you were saying, hey,
Speaker 4: you know, should we really be consuming vegetables and dairy
Speaker 4: and things that's dependent on agriculture and the desert south west,
Speaker 4: the first thing that popped into my mind is, well,
Speaker 4: you're already consuming semiconductors that are produced here, and that's
Speaker 4: also very water intensive. Yeah. So it turns out that
Speaker 4: the desert is a great place not only to grow
Speaker 4: cotton and winter vegetables, but it's a great place used
Speaker 4: to grow the high tech industry because we do not
Speaker 4: have natural disasters, don't have tornadoes, we don't have blizzards,
Speaker 4: really doesn't flood often once in a while, you know,
Speaker 4: no tornadoes, it's no earthquakes. It's very stable. Our climate
Speaker 4: is very stable, and the high tech industry likes that. Yeah,
Speaker 4: that's why there are a lot of server farms out here.
Speaker 4: That's why we have Intel, and that's one of the
Speaker 4: reasons why we recruited t SMC to build semiconductors as well.
Speaker 4: And yes, those industries are very water intensive. That goes
Speaker 4: back to the idea that we don't have enough water
Speaker 4: for everything. Right, human wants are always unlimited, Our ability
Speaker 4: to fulfill them is limited. We don't have enough water
Speaker 4: for everything. What do we have enough water for? If
Speaker 4: the state wants to continue to pursue the high tech
Speaker 4: industry that it is very water intensive, that will entail
Speaker 4: shifts of how we consume water in this state and
Speaker 4: what it's used for if by nature just has to
Speaker 4: because there are tradeos.
Speaker 2: So just on this point, this might be a slightly
Speaker 2: unfair question or a difficult question, but I mean, looking
Speaker 2: to the future, is it just inevitable that water constraints
Speaker 2: are going to themselves act as a constraint on economic growth?
Speaker 4: I don't think so, because I think that we are
Speaker 4: capable of managing our water supplies to meet the purposes
Speaker 4: that we find most valuable. The politics of that are
Speaker 4: really hard, but we are capable of doing that. The
Speaker 4: technologies exist. It is not that difficult from an economic
Speaker 4: or technological perspective to move water from where it is
Speaker 4: today to where you want it to go to meet
Speaker 4: those increased demands. So no, I personally don't. I think
Speaker 4: that the economic benefit that comes from these types of
Speaker 4: enterprises is such that it will be worthwhile for us
Speaker 4: to manage water to meet them and that and we
Speaker 4: will do so.
Speaker 1: You know what I find really fascinating by this conversation is,
Speaker 1: you know, I think when people think about climate change,
Speaker 1: they think about, oh, you know, like we've we've invested
Speaker 1: so much in the desert, et cetera, and we're really
Speaker 1: going to pay the price as the climate continues to change.
Speaker 1: But in many ways, as you've described, are some like
Speaker 1: real advantages. As you said, the Arizona is already baked.
Speaker 1: It's already an area.
Speaker 2: That climate stability, extreme heat exactly.
Speaker 3: And then it's really funny, Yeah.
Speaker 4: People like, what are you going to do about climate change?
Speaker 4: You're like, are you kidding me? It's already hot and
Speaker 4: dry here, Like you're you're saying it's going to become
Speaker 4: hotter and drier.
Speaker 1: We know how to do that, you know, right, So
Speaker 1: it's like the potential disruptions to say, where people think
Speaker 1: about climate change, winters and you know, the Northeast, maybe
Speaker 1: it'll be more disruptive. But as you point out, you know,
Speaker 1: or as the farmer points out, extremely stable climate I mean,
Speaker 1: is stable weather. There's not droughts because there's no rain
Speaker 1: in the first place. There's not floods because yeah, yeah,
Speaker 1: right right. And then for the industrial uses, you know,
Speaker 1: there's no earthquakes or tornadoes, et cetera, which of course
Speaker 1: is really important for the precision equipment that goes into semiconductors.
Speaker 1: So it really is striking the sort of like combination
Speaker 1: of things like that, other than the lack of rainfall
Speaker 1: brings together Arizona.
Speaker 4: Yeah. And what's important about that context is people need
Speaker 4: to remember that people have been moving water for thousands
Speaker 4: of years and it's actually something we're good at. Right.
Speaker 4: It is not technologically difficult to do it. The solutions
Speaker 4: are known, is it expensive, is it difficult, is it
Speaker 4: politically fraught with danger? All those things? Right, But it's
Speaker 4: very doable. And I think also it's interesting to me.
Speaker 4: You know, this country was settled originally, you know, of
Speaker 4: course by Native Americans, and then the next kind of
Speaker 4: way that came over were Europeans from a temperate climate.
Speaker 4: And I think that idea of life in a temperate
Speaker 4: climate steaks with us, and people forget that desert cities
Speaker 4: are actually among the oldest cities on the planet, that
Speaker 4: humans have always lived in deserts and will always live
Speaker 4: in deserts. And I think in this country we just
Speaker 4: have this weird cultural norm that comes from the fact
Speaker 4: that many of the people who came over here and
Speaker 4: found it, you know, this government, were from a temperate climate.
Speaker 4: That's not how all humans experience the world.
Speaker 1: I don't know, no, I like this sort of like
Speaker 1: the optimistic idea that part of the human seriously, that
Speaker 1: part of the human experience and part of being human
Speaker 1: is like we're going to find a way to build
Speaker 1: a city.
Speaker 3: In the desert.
Speaker 1: Yeah, you know, you mentioned transportation of water, and one
Speaker 1: technology that theoretically if electricity costs fall is desalinization of water.
Speaker 1: And despite the existence of the song titled ocean Front
Speaker 1: Property in Arizona, there is no ocean front property in Arizona,
Speaker 1: though it's a great song. Can you talk a little
Speaker 1: bit of the George Strait song? I think, can you
Speaker 1: talk a little bit about desalinization and the sort of
Speaker 1: you mentioned that we're good at moving water and as
Speaker 1: a solution in the future or even currently from the
Speaker 1: oceans to Arizona for various purposes.
Speaker 4: Yeah, so it's very it is feasible right now, it's
Speaker 4: too crazy expensive to be deployed at scale, is what
Speaker 4: I'll say. I think, like other solutions, you know, investing
Speaker 4: in leaky pipelines, I think it's a tool. I don't
Speaker 4: think it will be deployed at scale, certainly not in
Speaker 4: the next, say, twenty years. It's hard for me to
Speaker 4: imagine it ever being deployed at a scale that kind
Speaker 4: of fixes the Colorado River. But I think it is
Speaker 4: important for us to continue to pursue it. But more importantly,
Speaker 4: at the end of the day, from an economic perspective,
Speaker 4: it will just be less expensive to buy out higher
Speaker 4: priority water rights, So I think that's the thing to match.
Speaker 4: And it is. While it is less expensive to buy
Speaker 4: out higher priority water rights, it is also exponentially politically
Speaker 4: more difficult. So you're going to have this weird conflict
Speaker 4: between what is less expensive economically and what is more
Speaker 4: expensive politically, And I don't know how that's really going
Speaker 4: to play out. I think that'll be interesting to watch.
Speaker 2: Well, this was actually going to be my next and
Speaker 2: probably my last question. But you know, we're talking about
Speaker 2: deciding on who gets certain rights to water that may
Speaker 2: be more valuable than others. Who gets to make that
Speaker 2: decision ultimately.
Speaker 4: So for the most part, those decisions are already made
Speaker 4: in the West, with some important exceptions I'll talk about.
Speaker 4: In the West, for the most part, we already know
Speaker 4: exactly who has rights to the Colorado River, to the
Speaker 4: Saltenburdi river systems, to groundwater. So much of that is
Speaker 4: already determined, and it's more and so changing the use
Speaker 4: of that water is more about entering into voluntary transactions
Speaker 4: for leases, for the sale of that water, et cetera. However,
Speaker 4: there is a really important exception to that, and that
Speaker 4: relates back to Native American communities. Many Native American tribes
Speaker 4: in Arizona have gone through the process of settling their
Speaker 4: water rights claims and know exactly how much water they
Speaker 4: are entitled to and where it comes from. Other tribes have,
Speaker 4: not notably the Navajo Nation. So there is this outstanding
Speaker 4: question about how much water they are entitled to offer
Speaker 4: the Colorado River system. And in an over allocated river system,
Speaker 4: there isn't just this water out there floating around that
Speaker 4: something isn't already using So that entails claiming that water,
Speaker 4: going through the adjudication process, and then dealing with those
Speaker 4: who are currently making use of that water and stay. Yeah,
Speaker 4: it's an interesting situation where you can kind of, you know,
Speaker 4: the most part who has rights to water, exactly where
Speaker 4: those rights fall in terms of the priority system, with
Speaker 4: some notable and very important exceptions.
Speaker 1: And that was going to bring out Catherine Srenson. This
Speaker 1: was a very helpful and clarifying conversation on a complicated topic.
Speaker 1: Really appreciate you coming on odlags.
Speaker 4: Oh it's been so I think it's must r.
Speaker 3: Tracy.
Speaker 1: I found that to be an immensely helpful conversation, you know,
Speaker 1: and I think this sort of where this is going
Speaker 1: is what Trevor Bale is sort of hinted at that essentially,
Speaker 1: at some point the bid for those premium water rights, yeah,
Speaker 1: is just going to naturally move a lot of this
Speaker 1: water to the housing development.
Speaker 2: Yeah, and I'm going to slightly refine priors because going
Speaker 2: into this, I was thinking, you know, water wars, big
Speaker 2: constraint on economic growth. But to Catherine's point, it's more
Speaker 2: about deciding on that mix. It feels like.
Speaker 1: And it does feel to me that to some extent,
Speaker 1: the concern is.
Speaker 3: Actually not about Arizona.
Speaker 1: The concern is the people who eat food that is
Speaker 1: like grown in Arizona that, as she pointed out, there's like,
Speaker 1: you know, the housing developers can will pay more for
Speaker 1: those water rights, people will live there probably that you know,
Speaker 1: the semiconductor, but the w But then it's like, okay,
Speaker 1: but someone has to grow those vegetables.
Speaker 4: Well.
Speaker 2: She also kind of solved a mystery for me, which
Speaker 2: is why do we keep building very water intensive technology
Speaker 2: in the middle of the desert, And her explanation that actually,
Speaker 2: in many respects, this is a very stable climate that
Speaker 2: doesn't have to worry about things like hurricanes and tornadoes
Speaker 2: and earthquakes. That makes a lot of sense.
Speaker 1: It makes a ton of sense. And I hadn't really
Speaker 1: thought about that dimension before. And then I have to say, like,
Speaker 1: you know, I loved her point that like there's always
Speaker 1: been desert, Like we sort of think it's like, oh, well,
Speaker 1: we developed air conditioning and so or you know, modern
Speaker 1: plumbing or something, so like we're going to build a
Speaker 1: city in the desert now. But I like the idea
Speaker 1: that like, even before all this like humans have always
Speaker 1: tried to build cities in the desert.
Speaker 2: It's a little bit dystopian. The idea of like climate
Speaker 2: change means we're all going home to our desert origan.
Speaker 2: It's a little creepy, but I take the point. Like
Speaker 2: to her point, Arizona has a long history of dealing
Speaker 2: with water scarcity issues and probably on that basis, might
Speaker 2: be in a better position to do so than places
Speaker 2: in the Northeast.
Speaker 1: And as a species we find a way that's sort
Speaker 1: of like that. I got very I was like, I
Speaker 1: was expecting.
Speaker 2: This to be much from Jurassic No.
Speaker 1: I was expecting to be like way more pessimistic. And
Speaker 1: I leave like the conversations being like, humans find a
Speaker 1: way to do it.
Speaker 2: It's certainly a much more nuanced topic than like the
Speaker 2: water wars have started. So from that perspective, it was incredibly.
Speaker 3: Useful, incredibly useful.
Speaker 2: Shall we leave it there, Let's leave it there, all right?
Speaker 2: This has been another episode of the All Thoughts podcast.
Speaker 2: I'm Tracy Alloway. You can follow me on Twitter at Tracy.
Speaker 1: Alloway and I'm Jill Wisenthal. You can follow me on
Speaker 1: Twitter at the Stalwart. Follow our producers Carmen Rodriguez at,
Speaker 1: Carmen Arman at Dashel Bennett at dashbot, and for all
Speaker 1: of the Bloomberg podcasts, check out the handle at podcasts.
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Speaker 1: post the transcripts and the newsletter and come chat in
Speaker 1: our discord. We have a water room, although maybe I
Speaker 1: think it's turned into a climate room, but anyway, people
Speaker 1: talk about water in there a lot, so this should
Speaker 1: be a fun thing to talk about. Go to discord
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Speaker 2: Thanks for joining in.