Federal water subsidies have resulted in premature and excessive water development that has made the U.S. a poorer rather than richer nation, according to B. Delworth Gardner, professor of economics at Brigham Young University.
And, Gardner told members of the Wasatch Front Economic Forum in the Marriott Hotel, direct beneficiaries of new water development should be required to pay the full costs "just as our pioneer forefathers did. These costs should not be shifted to local property owners or other taxpayers or to electric power users."Discussing the impact of the National Reclamation Act of 1902 and the Colorado River Compact of 1922, Gardner said that almost from the beginning federal water pricing was mishandled.
"The Reclamation Act required repayment of the development costs by the project beneficiaries. But farmers either could not or would not meet these repayment obligations. One important reason was that project costs turned out to be much higher than were announced at the time irrigator approval was sought and obtained," Gardner said.
He said it wasn't absolutely clear whether the underestimation was intentional in order to obtain political approval. "Such a suspicion is supported, however, by the fact that the extent of the underestimation fell substantially as soon as the repayment rules were changed and irrigators were no longer required to pay the full development costs."
Gardner said in some instances it costs $400 per acre-foot in construction costs on federal water proj-ects to produce water that is worth only $50 per acre-foot. What happens to the difference? he asked. "Who captures it? It simply vanishes into thin air. It is deadweight loss suffered by all taxpayers resulting from excessive and premature development."
In order to make water pricing more realistic, Gardner suggests that barriers to water transfers be eliminated. He said federal contracts should be rewritten and state administrative agencies shouldn't deny intrastate transfer petitions unless an urgent public purpose is served.
"Political obstacles that prevent resources from moving to higher valued uses are the principal impediment to economic growth and improvement in our standard of living and quality of life. The economic welfare of generations to come as well as our own hangs in the balance.," said Gardner.