To the Editor,
Eleanor Guerrero’s two-part series on water and fracking asks important questions. Unfortunately, as with all matters involving water in the West, the answers are elusive. Water is an essential input to all productive activity, ranging from farming to industrial production to tourism. In the arid West, it is a scarce resource.
The usual way our society allocates scarce resources is through property rights and the market, a method that produces amazingly good results on a whole, though not without friction. However, water law developed in an odd way – through a complex system whereby rights are established by appropriating water for a particular use. This basic structure of rights-by-appropriation extends to groundwater. Groundwater, however, is subject to uncertainties about total quantity and recharge rates, so there is a fear that a system based on appropriation will create incentives for people to exhaust the resource, even if the uses to which it is put are not particularly valuable.
Because of this concern, the basic system of rights-through-appropriation has become interwoven with an aggressive, but vague, system of state regulatory authority. Guerrero is certainly right to be wary of a system in which water for O&G production is free to the producers. Obviously, it is possible for the O&G produced to be worth less than the price the water would command if it were auctioned off, or to exhaust the resource and devil take the future. But her solution seems to be to give more power to regulators to decide, despite their lack of knowledge, how much of this free water the producers should get. This is the wrong approach. Regulators’ instinct will be to say “no”, and they will be reversed only when users can bring sufficient political pressure to bear.
A superior approach would treat groundwater as a valuable resource which should be turned into property and put into the market. Property owners should be able to tap into underlying aquifers to some extent, as they can under present law, but for major uses, such as mineral extraction or industry, a market-based system of salable water rights should be established. It would be difficult to set an initial price, given the uncertainties surrounding groundwater, but it should be possible for a combination of experts and working business people to come out with rough estimates, and these can be adjusted over time. (We know the price should not be zero, so anything would be an improvement.) PERC in Bozeman is internationally respected for its work on water markets, and could surely be enlisted to help. The main thing is that Montana needs to use its natural resources if it is to become an Opportunity State for its citizens. This requires water. At the same time, of course, we do not want to waste this valuable resource. There are win-win solutions, but not through an increasingly-heavy-handed regulatory system.
James V DeLong