Good morning everyone. What a great talkative bunch. I'm glad that everyone's got something cheerful to talk about in this dreary morning. I'm Johanna Nessith and I'm vice president for strategic planning here at CSIS. I also head up our work on global food security and hunger issues and have been engaged in this series that we've been doing on food, water and energy global resource challenges for some time.  We're really delighted to have you all here and we're going to actually put you to work after we feed your intellect a little bit this morning. The way we've designed this session is to actually lead to a working lunch discussion with around some questions that are on the back of your agenda. And what we'll ask you all to do over lunch is gather, gather together at a table and we'll have one person at the table sort of facilitate the discussion and think about compiling the recommendations and thoughts that you all share over lunch in terms of water use and water management. These questions, once we compile the ideas and the recommendations will be actually compiled and used for the subcommittee on water availability and quality, the SWAC. And this is a federal advisory group for the Office of Science and Technology Policy. So we're glad to have sort of a formal outcome for today's process. Let me tell you a little bit about the groups that have organized today's session. We've done this collaboratively with the NIFA at USDA, the National Institute for Food and Agriculture with the Department of Energy, the US Army Corps of Engineers and Colorado State University. So we appreciate everyone's participation and involvement. It's been very much an intellectual partnership and we're pleased to be hosting here at CSIS. To give you a little bit of context, our session today is actually springing out of a fair amount of work that Eric Peterson started while he was working on the Seven Revolutions or the Seven Drivers of Change. He has one piece that specifically looks at resource challenges, food, water and energy. And a year and a half ago he said, look I think we need to start talking about the links among these three issues. And then of course he promptly abandoned us after getting as launched on this. So we've carried out his work and have found that it's extremely difficult to really tackle the links among all three issues. It's easy to sort of poke at water and see where energy is affected or poke at agriculture and see where water is affected, but it's difficult to look at all three links. So we've tried to tackle that as effectively as possible and today we feel that focusing on water makes a lot of sense because water really is the most, it's a finite resource that is dramatically affected by both agriculture and energy. I want to talk a little bit today about water management. I want to mention that we have a couple of companies that have sponsored this year-long series. The kickoff discussion was about a year ago. Syngenta and Chevron have provided support. Kirsten's here from Chevron, so we appreciate that and Lloyd is here from Syngenta. So we're glad to have your participation. These are companies that have done a lot of thinking on these issues and also have developed a lot of different types of technology that we've thought about as we have gone through the year. So with that I'm going to I think turn it over to Mike O'Neill from USDA for a few more introductions then we'll turn to our keynote speaker. I thank you all for being here and look forward to our conversation. Thank you Joanne. I want to echo Joanne's welcome to everyone. Thank you for coming. CSIS has been involved in this process for over a year and actually for some of us that have worked in this subcommittee for water availability and quality through the Office of Science and Technology Policy. We've been at this discussion for the same amount of time just not as organized as they have and so it's been a really nice partnership for us to have a group who had really been thinking about this and CSIS really did a fantastic job of helping us kind of bring this together and for us to kind of bring this to fruition, create an event for us where we can have some of these ideas discussed. I just want to here you can see the different partners, all their fancy logos and things up here but I wanted to just mention the folks who actually took a really active role in helping us pull this together. From CSIS, Caitrin Bowes, Caitrin you should raise your hand. She did just a tremendous job helping us lead this and pull this meeting together and of course Joanna is here with us, Joanna Nesseth and Caitrin Bliss. Caitrin's right up here up front. Thank you. Both for, you know, great job. From Colorado State, Reagan Wascom, who's the director of the Water Center. Reagan has been very active working with us at USDA in terms of developing water strategies for agriculture. Paul Wagner from the Corps of Engineers. Paul, you want to just raise your hand? Yeah, come on, Paul. And Alan Hoffman from DOE, both Paul and Alan are on the subcommittee for water availability and quality with myself and Jim Doberwalski, who's in the back, who's also a USDA National Institute of Food and Agriculture person. Joanna went over the program kind of in general and I really would encourage everyone, I'm hopeful that you'll be able to stay with us all day. We're really interested at the federal level to try and get some ideas for how can we solve these problems at the intersection of food, water, energy, and environment. And really, in many ways for us in USDA, we also take that to the community level. We feel like working with communities at the local level is where we're going to solve our water problems. But we have to do that in the context of solving problems out of watershed scale. And so we're often kind of pulled this tension works between working very locally, but trying to solve things in a more comprehensive watershed context. So as you listen to the talks today, and as you kind of think about your own feelings and thoughts about what you're, you know, where you see these problems developing and where we can find some solutions, try and put that in the context of solving problems at a watershed scale and also, you know, working at the very local level with communities, etc. You know, as Joanna mentioned, we've really worked a lot in water in all across a lot of federal agencies. But most of our solutions have really been in our own little silos. And so as USDA has worked to improve things like irrigation efficiency, or other water management activities, we haven't really done that in a comprehensive way. And so we're hoping that this marks a real change in federal kind of programs where we can start to partner more and develop some solutions that extend beyond our current situations. And we really need new partner partnerships to do this. And so we'll be asking you as we go through the program to think about, you know, who should be the partners that that lead some of these activities? We're really excited about the fact that we, you know, you're going to have a chance to make some recommendation suggestions for us to carry back to the subcommittee on water availability and quality. Many of those folks are here in the room, they'll be I'm sure they'll be paying close attention to your comments. But you know, for me, I really look at this and from the USDA perspective, this ties together issues beyond just water, food, energy, and environment. We have to make decisions like, do we want to grow our own food in this country? Or are we going to import more and more of our food each year? Which has been the tendency over the last few years. And when we do that, we, we raise a lot of food safety and food security issues that we haven't really had to address in the past. So I think that's really a critical question for us to think about. We also need to recognize that, you know, there are a lot of multi sectoral partnerships that are going to need to be for forged in the future to make this work. So how can energy work with agriculture or, you know, work commonly to protect the environment? And can we achieve water, you know, water conservation at a watershed scale? I think that's a really critical problem. We can oftentimes, we can show the conservation in a place, very local place, but can we achieve that over the broader watershed scale? So those are just some questions that we're going to, you know, that I would like you to think about in terms of USDA. But really, you know, we're interested in a lot of different, getting a broad swath of ideas to put forward here. We have two great panels. So I'm going to introduce our keynote speaker in just a second here. But we have two great panels to kind of prime your thinking. And then this afternoon, we'll be doing some, the breakouts that Joanna mentioned. And during those, we'll ask you to kind of follow some questions. So those are all listed on the back of the page of your program. And as you go through, you might want to make some notes and just kind of keep track of some of your thoughts about questions that you'd like to see addressed on a federal level that makes some sense in kind of the intersection of these concepts. So with all that said, I have the honor of introducing our keynote speaker today. David Zetlin is the author of The End of Abundance. And David and I met probably about a year ago in person when we were both working on a program looking at the water footprint of corporations. And really, he expressed some very interesting and challenging ideas for us, particularly in agriculture, but beyond that in terms of managing water in a very comprehensive way. And so today, he told me that his talk is going to be about water and that he's not actually affiliated with any particular university any longer. He's living in Amsterdam and writing about water, which I kind of missed that job application. I should have signed up for that one. I can't think of a better way to spend my time. So with no, you know, with any no further ado, David, please join us up here. It's Mike and thanks everyone. I have jet lag working in my favor today. Okay, great. So thanks for being here. Thanks for all of the hosts. I won't go through naming them again. They're numerous and working hard on this issue. I am an outsider to Washington, DC, and I'm going to talk a little bit about from an outsider's perspective. I know that we're in a friendly crowd today, so I want you to take some of my criticisms and stride. And what I'm trying to do here is bring up some issues that I think are important, potentially give you some solutions to them. But I know that when the rubber hits the road, you guys are under it. So don't take my ideas as too flighty or not thought out. And I will, at least 15 times, mention that I have a blog called Aguonomics. And I recommend that you read this blog and send me interesting tidbits and send me guest posts. And this is a community of about 1200 people who are interested in water issues and policies. So I will mention some things from my blog every once in a while. That's what I'm talking about, Aguonomics. So the first thing is we need to need to know the bottom line. That is that the values of water allocated by individuals in monopolies are unknown. This is how most water issues are founded, as far as I can tell. Most of the time around the world, whether it's retail or urban, agricultural, water is managed by a monopoly. It's managed through a bureaucratic mechanism. It's not generally managed through any kind of market mechanism. That's why we have these questions of the water energy nexus, because you have one monopoly trying to talk to another. There are individuals. These people have discretion. There are managers. There are bureaucrats, technocrats. Some of them are corrupt, especially in the developing world. And because of the discretion that they have, it means that their personal opinions or their knowledge or their lack of knowledge often determines what happens. Sometimes they make brilliant choices, informed choices. Sometimes they work very hard and still make the wrong choice. It's not easy to know how to make the right choice when you're the only person making the decision. And of course, the biggest problem of all is that almost nobody knows what the value of water is once it's allocated by this individual in a monopoly, because the water just arrives. Almost everybody who works in the water business in this room, I'm sure knows that there is almost no price of water anywhere in this country. Water is delivered usually at the cost of delivery, whether it's agricultural or urban, and there is almost no price of water that is based on the value of water. The only thing that gets even close is maybe bottled water and occasional water auctions in the very small marketplace in the United States. So what I'm going to talk about today is that some of the institutions that we've had to manage water have been or outdated and they're outdated in the sense of scarcity now manner matters. So most of our institutions for managing water were built on the idea of abundant water. The Army Corps of Engineers and the Bureau of Reclamation were very, very good at moving water to places and bringing it in such abundance that we didn't need to price it. But now we have an issue which is that everybody wants some of that water. So we have a demand side problem and we also have a supply side problem because either there is a big draw of water for the environment or there's a disruption of water supplies from climate change. There's water quality problems. So supply and demand are out of balance and that's how we get shortages. That's the economic definition that I'll be working with. The big problems with knowledge that we have are a gap in terms of the quantity. We don't know pretty much where water is either underground or flowing. We have an idea that a farmer might divert water. We don't necessarily know the return flows. We have the idea that a household owner might irrigate with water or flush the toilet. We don't know where the quality of that water is or how much is actually going back into the sewer system. We don't have any idea about quality in some ways that are increasingly important especially with different types of chemicals and modern products. But also there's the quality of, you know, can we put a lower quality water on irrigated landscaping, right? And that's the big issue with people that are doing all the recycled water in urban areas. And back again to value, right? Many people say, well, we can't raise the price of water. People can't afford it. Babies are going to die. Grandmother is going to da da da da da da. They have a, they come up with all of these subjective values for water and it sounds really good but when you put money to that decision, people make different decisions. So there's the idea that we don't really know value and it's all a bunch of subjective statements of value. The same issues occur with farmers. The same issues occur with environmentalists who tend to have a very generous idea of how much water, or how much water they should be getting. And this is a, runs right into the farmers who have a very generous idea of how much water they should keep getting. So that, those are the knowledge gaps that I've identified here and I don't think we're going to fill those gaps today but we're going down that road. And another thing that I'm going to bring up is that sometimes we have these old institutions and maybe we want to go get a bunch of knowledge, right? The water energy nexus study appears to require that we have more studies and more knowledge. I'm from California. There's this place called the Sacramento San Joaquin Delta. Has anybody heard of that place? It is, I believe now the grand total so far in, is $500 million has been spent studying the Delta. I don't know how many linear feet of shelf space is occupied by studies of the Delta, but as far as I can tell it's just the political problem, right? Somebody's going to win the Delta based on a backroom deal. It has nothing to do with knowledge, right? So I'm thinking maybe the institution for managing the Delta or a lot of other institutions that we have are struggling with a different scenario that has never been prepared to deal with. So maybe we should consider and reconsider some of the institutions and obviously I'll bring up some ideas for that near the end. So the rest of the talk, I'll talk about us, political economy, my favorite area of interest, the end of abundance, not just my book, but the how we got there, food and water, energy and water and some solutions. So I'm an Aggie. I came out of UC Davis. I was at UC Berkeley just recently doing a postdoc in political economy of natural resources. I am, as Mike alluded to, between jobs just now. My background is different from most economists and most academics. In fact, I traveled for several years before I went to graduate school and I traveled in a lot of developing countries where I was very well acquainted with corruption and missing markets and black markets. And then I came to water. Surprisingly, I found that water has many of the same problems of developing countries. There are no missing markets.  So I bring kind of this political economy angle looking at water and I think about what economists have identified as a principal agent problem. How do we know what to do or how do we know what people are doing for us? There's a book that I have. It should be coming out in 2011. Now I'm also on the job market and this is not an advertisement for my job market but it's interesting that in the academic world it's very difficult to actually talk to humans instead of publish and perish. And so I've been doing this talking to humans thing but that hasn't necessarily added to my CV. And I'm pointing this out because the next thing I say is that when I say things that are uncomfortable people don't want to hire me, right? So if I want to work in the public interest and then I say things like the government is screwing up then the government doesn't want to hire me.  And there's an issue with that and that's why here I am flying into DC and then I'm leaving the country, right? So remember I'm not trying to leave responsibility behind. So who here has been in the government for more than ten years? Less than five years or less than ten years. Okay, not in the government. Okay, good. All right. Who here intends to retire in the government? Okay, great. Okay, good. Now I'm getting out here is what I'm getting out is the idea that when you go in and out of government or in and out of competitive marketplace that you need to be able to sell yourself and sell your ideas to somebody who's trying to make a profit, right? And if you just decide to retire in the government like some people I've met, then all you need to do is show up, right? So the idea here is also that if you have good ideas and you can enact them that that will add to your resume and your CV but you also have to have no fear of getting fired. Economists? One. All right. So I will speak in non-economics talk. I read an interesting article that was at least 30 years old right now about government versus academic economists and academic economists that come into all these great ideas and these models and you know X equals Y. And the government people are like we need to actually make this work, right? So this is really I am trying to put some ideas that help you guys and you have to make them work. Public choice is a some jargon and all that really means is that politicians serve themselves instead of serving their constituents. And the biggest issue of in public choice that I found in terms of this idea of log rolling is the idea that one constituency will make a trade off with another. I will give you apples and you give me oranges. And this has been known to be efficient by the political economy people. But the problem that I have identified in politics these days is that you have a politician who is giving apples to his special interest group and another politician gives oranges to his special interest group and the other 98% of the constituents in those representative areas are screwed. And so what I am noticing is that there is a lot of trading off between special interest groups and the general citizenship is not benefiting. And this is particularly true with water. Agricultural water, water and energy, water and the environment, special interest groups are getting their way quite often on the tail of some idea that it is serving the public but any notion of real cost benefit will point out that that is not happening. And this is if anybody has read this book Cadillac Desert by Mark Reisner, you will know that this was a identified problem with the core of engineers in the Bureau of Reclamation long in the past as far as subsidies going to irrigators from the general public, what we call in economics OPM, other people's money. So other people's money has been devoted to special interest projects and that seems to be happening since the beginning of time but it has been happening more and more and the further away you get from feedback and information and reality, the harder it is for an outside group to identify what's going on. Everybody knows that the health bill is something like 2,000 pages, I'm not sure anybody knows what the health bill really says. So when you have that kind of legislation or you have that rulemaking and it's on behalf of citizens, I'm not quite sure anybody really knows who's getting served but I'm pretty sure that you can follow the money and find out who's getting served. Regulators face a knowledge problem. This is basically the idea that they don't know what's going on and they don't know what people want and this is a jargon that's traced back to a guy named Hayek who was an economist and he was talking about the centralized command and control economy basically predicting the Soviet Union would fall. In 1945 he wrote this article and the Soviet Union did fall for lots of reasons but one of them is that you cannot manage an economy where people want black nylons or Coca-Cola by predicting how many black nylons or Coca-Cola people want. You need signals and signals of supply and demand which are based on prices. This matters in water because as I mentioned water is not priced. We have no idea of the value of water right. So sometimes it's appropriate to have a price of water. I'm not saying universally we should have prices everywhere but I will point out that there is a huge knowledge problem in terms of the value of water. This infographic is just from my blog and I just wanted to point this out as a notion of the different elements involved in water. We've got drought, sewage, river, less developed countries, conservation, my favorite the delta. We've got water rights issues, governance, gray water. You can imagine that everything leads to everything and it's very hard for any of us to get a grasp on these things and I'll tell you one thing that it cannot be managed by any individual, by any organization, by any government. It cannot be managed. What we need to do is set up a robust system where individuals managing their own behavior or their own access to water, their own supply and their own demand can coordinate with each other and some people might have thought about this idea already. It's called a market. I mean a market in terms of signals and information exchange, what we call social networking. It's a kind of market in social networking. When you walk down the street and you don't run into people that's a kind of a market. There's no one in charge. The idea of disaggregated information and using and channeling disaggregated information is what I'm getting at here. And it's very true that sometimes you do need to have someone in charge, you do need to have a rule, you do need to have a law, but you also want to try and disaggregate the responsibility for information and decision making as low a level as possible. And unfortunately that means away from a central federal role. This means towards more local control and I think the most appropriate scale of control for water is the watershed level. Clearly watersheds cross countries, they cross state lines, but they also sometimes are inside of a county, right? So we want to think about water control and water decisions on the smallest, localist possible level so that the people making the decisions are interacting with each other and only each other, not someone who's outside of that area who doesn't necessarily have any idea of what's going on or any skin in the game. This is a bit of a framework for thought. I was a Wandtrip fellow at UC Berkeley. Mr. Wandtrip was a very cranky kind of guy. He was quite ahead of his time in terms of talking about environmental economics and he said there's three layers that you have to think about. There's the constitution, which is a foundation, which leads to laws and laws lead to behavior. Politics of course is about making laws and economics of course is about behavior. We use an analogy of a pie. You can call it an apple pie, peach pie. Now we have a problem with political economy is that the fight tends to be about how to divide the pie, not how to make the pie bigger and what I mean by that is how not to divide the water, but how to make sure water gets to the largest possible value in terms of a social use of water. And that's what we really want to look at when we are working for the people to maximize the value of their water. If you look at almost any constitution in the world, let alone the state constitutions in this country, you'll find out that water actually belongs to the people. The water rights have been allocated to various groups, but the people that are working on water issues really do need to keep this in front of themselves in terms of where is that water going? And let me give you a good example. The Imperial Irrigation District in Southern California controls about 3 million acre feet of water, which is about 10% of the total water supply in California in terms of what is known as, lost the word right now, controlled water, developed water. The Imperial Irrigation District also grows what are considered low value crops. They're actually profitable crops, but there is a huge demand for this water from cities. And I'm not saying take this water away from Imperial and give it to cities. I'm saying make it easier for cities, Las Vegas being one of them, to buy water from Imperial County. So Imperial might be making a huge amount of money on that sale, and that water is delivered by the Bureau of Reclamation for free, but that's okay because that's just a transfer of money between farmers and cities, and they're all Americans. What we want to do is we want to get that water to highest and best use. And if there is a willing buyer and a willing seller, that's a good thing. There's an issue with the allocation of water. Environmental water is a big example that should we allocate that water by votes? Does one senator get to decide where that water goes, or do we want to allocate that water by value? And I'm not quite sure, but I think that the political mechanism can be diverted away from the highest value. So this is a little bit of an economics tutorial on the end of abundance. What I mentioned before is that we had abundant water. All we needed to do was recover costs. That's why it costs maybe $20 an acre foot to get water in Imperial, or it costs $800 or $1,000 an acre foot to get water in Los Angeles. And that's only based on the system recovery costs. Environmental water was wasted, as we all know, so we don't want that to go into the ocean. Most water was used in energy and agriculture. I'm glad to see that those departments are represented here, so you guys control most the water. By that measure, we have 41% and 37% going to energy and agriculture, as most people in the energy sector know, that's usually once through cooling, the water passes through, it comes out thermally polluted. Agricultural diversions, of course, do not mean the water is used up. It goes into groundwater, goes back in the stream, but those are the numbers that the USGS identifies. When you include environmental flows, those numbers drop. Over half of our water is in the environment. Probably most of that's in Alaska, right? But a lot of water is in the environment, and the big problem with the end of abundance is the rise of demand for environmental water. In California, we have the San Joaquin River, which was dried up by a Bureau of Reclamation project a few years ago. They are spending lots of money getting water back into the river to try and recover a salmon run, which was wiped out when the river went dry. So that demand in environmental water is coming from citizens and politicians, and that's the big push in terms on the demand side. And then we're getting shortages. So I'm going to skip that. So the bumper sticker version of shortage is that man makes a drought. Oh, I noticed it was raining outside. So actually, I think we're OK, right? There's no drought anywhere anymore, right? The problem with water, as I mentioned before, is that it's a very local issue. And even if it's raining in Washington, D.C., there might still be a drought in New Mexico. But a drought doesn't mean a shortage, right? A professor quipped, and I think this is a great quip, it's like we don't have a shortage of Mercedes Benz cars in Southern California, right? It doesn't rain. There's a drought, right? But we don't have a shortage. And that's because there is a price for Mercedes. We have a shortage of water in Southern California or Arizona or in Georgia or anywhere you want to choose. India, Pakistan, based on the management failure, right? We're not having a problem with drought. Let's talk about agriculture. So food security, as Mike mentioned, I believe is a mistake as a pursuit. Dan Sumner, my professor at UC Davis, is a big fan of food security. And there is a point. When trade locks down and you can't buy food, there are going to be problems, right? But I'm wondering if that's mistaking the effects for the causes. We have to worry about the causes of that. Food trade is actually more important than food security. Command and control targets for program crops are a disaster as far as water management is concerned. A lot of these crops are grown without respect to water supplies. Most water, of course, in the Ogallala and other places is pumped through groundwater, which is usually mildly regulated but not usually priced at all as far as scarcity is concerned. And the use of program crop programs increases risk because farmers all go towards the guaranteed return of government payment. They don't go towards what's profitable in a marketplace where supply and demand are setting prices. I'm going to say something about ethanol later. Sugar. U.S. consumers pay $2 billion more per year because of the U.S. sugar tariff protection. That benefit goes to farmers. I don't know how many there are. I would say probably fewer than 1,000. Every individual in this country who's living is paying $6 per year to support that program.  I've looked around a lot. There are contenders. And I wonder, I mean, when I ever meet someone from the USDA, I said, Mike, what are you doing about sugar? And he says, well, it's my political masters. And I agree that the politicians do make the rules and bureaucrats can only push so far and so hard against this stuff. But it is a total travesty and disaster that we still have the stupidest policies in the world on things like sugar. And I go to Amsterdam and they're like, what is going on in your country? Or I go to Cuba or I go to Mexico. I go to all these places and they're like, what is wrong with your great country? You can do an iPad, but you can't do a kilo of sugar. I won't point out too much about markets there. Cotton. This is my only quotation. I'll let you read it. I'm a friend of this guy, Philip Bowles. In order to help cotton farmers, we've decided to subsidize farmers, which has expanded the supply of cotton by farmers, which has destroyed the price for farmers of cotton, which has hurt cotton farmers. In order to help milk producers, we've have the milk program. Oh, that's a disaster. Who knows Dan Sumner? Who's heard of his name? Dan Sumner is a professor at UC Davis. I believe he was one of the head economists or something at the USDA. He's had at least three PhD dissertations written about the milk program in this country, like people spending two and three years trying to understand and describe the milk program in this country. And then I hear a senator in New Mexico saying, yeah, we need to help farmers. We need a bigger subsidy for milk. This is a disaster. And it's to help farmers. But it doesn't help farmers. It hurts farmers. And especially hurts the good farmers. The big industrial farmers, they like it because they have lobbyists. Ethanol. Total disaster. I actually, when I was teaching at Berkeley, I asked my students, please contact any congressman and ask them why they are continuing to support the ethanol program. And you cannot get any extra credit if they reply with a form letter. National security, energy and dependence. We love our farmers, green, whatever. Not a single reply came back from all of these staffers. Not a single reply came back that had any cogent explanation about why they were supporting ethanol. It would be much, much cheaper just to send a check to Archer, Daniels Midland and Cargill. It would be cheaper, 10 cents on the dollar, right? But instead, we're having a huge overdraw on groundwater. We've got fertilizer flows. We've got the dead zone. We've got very upset trade partners. Brazil is like, what's up with you guys? Let's just block you in the dough around. I mean, bad policies have huge bad multiplier effects beyond just water. Thermoelectric pollution, I'm just going to leave that go. We know about that. It's not a big deal, but it's at least as far as I can tell. But it does matter. It matters more when you think about environmental water. Tailings. So when you have mining and all that stuff, and then you have the tailings, and the tailings get, they contaminate the groundwater, and then you've got all kinds of environmental problems. The thing is, is that if we have hard rock mining, or we have coal mining, and senators so and so from West Virginia gets this thing approved without permitting, and then the product is sold, and not even talking about carbon pricing, but we're just talking about this huge negative externality called pollution to the local community, and all of those, all the destruction that occurs. It's like, yes, you are making $50 a ton of profit, but you're causing $200 a ton of damage. And everybody who's on the environmental side knows about this problem, but it is huge. And people that are working at DOE should be paying attention to this. Not EPA. And the senators as well from West Virginia. One of my favorite examples from the West is Hoover Dam. As many of you might know, Hoover Dam has a lovely supply of water that's actually kind of running into trouble because we're losing Lake Mead because of a problem with demand. But the annual subsidy of Hoover Power is about $100 million a year to the contractors who are privileged enough to get congressional authorization to buy that power. $100 million a year that is not going in the public purse, that is getting transferred either into energy over consumption because now energy is too cheap or into municipal utilities that are just using that to keep prices down or to shift their portfolio around. So that's $100 million a year from the Bureau of Reclamation, lower Colorado division that is not going into the public purse. I call this an opportunity cost subsidy because if there was an open market auction for that power, and everybody knows there are power auctions about, it depends, but somewhere between every 30 seconds and every 10 minutes, right, and most of the grids in the country, this could be in a power auction. It could be making huge amounts of money for the federal government, but it's not. So the water energy nexus exists because it's managed. Water is managed and energy is managed. We don't have a coffee doughnut nexus because there is a price for coffee and there's a price for doughnut and there's a market for coffee and there's a market for doughnut and supply and demand make them balance. But we do have an energy and water problem because they're very much managed. I'm not saying that we're just going to have this open market tomorrow on energy and water, but I am saying that we should look and see if we can use some pricing tools instead of worrying about having shelves of information on these, managing these two goods. Right, my last two slides. How am I doing for time? Anybody? Good? Okay, I'm hoping to get some questions at the end and I apologize, by the way, for throwing out a huge amount of information and certainly a huge amount of opinion. I don't apologize for that, but I do want to take questions at the end of, if I have some time. So what I want to emphasize is that we want local management. And the reason this is local is because water, unlike oil, is not worth very much, right? The wholesale price of water is about $1 for 1,000 liters or $3 for 750 gallons. $3 to buy you less than a gallon of gas. It's not worth it to move water around, besides all of the environmental impacts. That does not mean that we can't have global information. The role of most of these federal agencies would be well taken. It would be very good if these agencies could facilitate the flow of information. The USGS obviously is a leader in this area. But I know for sure that we don't have any idea about how much tap water costs across the country. You can buy a report from a consultancy for $500. But the government could do this for free and give it away. There's great multipliers in these services that USGS information, the cost benefit on USGS. When the USGS spends a million dollars assembling information and then selling it at cost, like a CD cost, not the cost of acquiring, it's something like 20 to 1. Spend a million, $20 million of value, mostly for Americans. We could do that for tap water. We could do that for irrigation water. I know that the USDA has got their census of agriculture, which is outstanding. But we have almost no idea about what's going on with groundwater around the country. By the way, California, 50th in the nation, the worst groundwater management in the nation. We're very proud of that. I think our deficit is also the worst in the nation. So information is very useful because it helps. Not only does it help people know what the hell is going on, but it helps people make decisions in terms of anything, like sustainability, or should we have a market, or should we not have a market, or should I grow my asparagus here or there? There's just not very much information in water, and that could be very easily assembled at the federal level, and it would be the best place to do it. Obviously what we want to do is we want to trade products. We don't want to trade water. If we're moving water a vast distance in order to grow cotton or to grow switchgrass, and we're not just shipping the product, the finished product, that's a huge mistake in terms of putting the water in the wrong spot. Desalination is the exact same thing. San Diego has got a desalination plant. It's going to come in at about $700 million. They're still kind of building it maybe at the start. And the people there that are going to get that water already use about 300 or 400 gallons per person per day. In California, in Las Vegas, it's 280 gallons per person per day. So they're going to build a desalination plant for this need that they have. But the biggest problem with that need, the reason they're building that desalination plant is because of a political fight called we can't get more water from the rest of Southern California, forget Northern California. So it's cheaper for us to build a desalination plant. Now I think some people talk about the environment and some people talk about wasted money and whatever, but that's really a good example of that. Las Vegas wants to build a desalination plant somewhere else so they can get that water in a swap instead of being able to buy it from IID farmers who would be willing to sell their water for $100 an acre foot. Desal costs $1,000 an acre foot. So Vegas is paying 10 times the price they'd have to pay because it's not easy to buy any water from the farmers. It's a Bureau of Reclamation project. I think somebody from Bureau of Reclamation can push that along, right? Right. So the problem that also we have on the federal level is that when there's a policy handed down from on high and it says do this everywhere the same way, standards are very helpful. They're very useful. But sometimes standards can be not appropriate for local conditions. And there's a trade-off back and forth, right? But I'm not even going to get into the reference on the California Delta because I don't remember what that means. But we do have a problem with handing down a standard and not being adopted to local conditions. I know there was a big fight back and forth about trees that were planted on levees near Sacramento and the Corps of Engineers said you can't have a tree on a levee. And I don't know why. But the trees there were 100 years old. They seemed to be OK. But the trees in Oklahoma were probably a problem, right? But there was this big fight back and forth based on a regulation and not being able to get some kind of, in fact, why was the regulation there? I don't think we need to have amendments to every regulation for every zip code. But sometimes you don't need a regulation at that level. Las Vegas is a case study in everything going wrong in terms of water. But the biggest problem that happened with Las Vegas is that they pushed and pushed and pushed development, which benefited local, political, and real estate interests, taking as granted abundant water supplies. And when they did run out of water, then they did, not only did they push their housing market to the point where it fell, but now they have a hard time recovering because they've already exploited all their water supplies. So it's, you have to pay attention to how much water you have. We all know that. We're in the room. But when the people that are outside the room, which is the other 300 million people in the country, when they go around and they take water for granted and they see that it's free and they see that it's an abundant and there's no price on it and there's no market for it, then they think, well, I'll just use as much as I want.  And then it goes, it doesn't go into, oh, yes, I can. I know you can't. That's what we get. We get this kind of big political protest version of life instead of the gasoline version of life, which is, wow, gas is expensive. I better drive less, right? So what we want to do is we don't want people to wake up in the morning and be virtuous. And that's why we're going to end shortages. We want people to wake up in the morning and say, god, water is really expensive. I'm going to use less. Or it's scarce. Some other version then, waking up with a religious belief that you have to use less water. And I say this because sometimes you go to Singapore, they're very conscientious about water, because if they don't save water, Malaysia will eat them. We don't have that problem here. We have a different problem. And in this country, people are much more attuned to, not to community, but to markets. And I say this because it's a cultural difference. When I went to Australia, why do you people use less water? Because we're all in it together. Well, in this country, I found that that cultural norm is not so strong. But we're very attuned to prices. And when the gasoline price goes up and down, people drive more or less. And water price can be just the same thing. So I want to bring up that analogy as an idea of how to get people to use less, whether it's going to be a farmer who could use less water and then sell that water to another farmer or to a city, or whether it's going to be someone who's using their top water. I'm going to go through a couple of ideas that I've talked about on my blog and in my book just so you have an idea of what I consider to be some useful solutions to all of these problems I've been bringing up. These are ideas. And hopefully, they'll give you some ideas about what you can do in your own area. I'm just trying to throw stuff out here. I had a hard time preparing for this talk today because I wasn't exactly sure about who I was talking to. So I'm just trying to say a lot of stuff and hopefully some of it sticks. So the idea of how to write price retail water, people, economists will say it should be a price on everything. The community activists will say water should be free. It's a human right. We die without it. So in the middle, we have some water for free and then pay for more. So at the tap water level, whether it's Washington, DC or Chicago or Los Angeles, you want to have a certain allocation per person, something like 50 gallons a day, I don't know, for free or for cheap. And then additional water costs more. This is similar to increasing block rates. But the very important difference is twice. The first one is that you do this per person, not per water meter. We're selling water to people, not to meters. Most water managers have no idea of how many people are at the end of the water meter that they service. This is a huge information gap. Secondly, the price on pay for more should be high enough to choke off demand. This is also not very common because most water prices in the urban areas are linked to the cost of delivery. They're not allowed to make money. That's fine. Don't make money. Charge too much and rebate it back. Your customers will love getting a check from you. End of shortage. Auctions for water rights at the wholesale level within irrigation districts. If you have two irrigation districts that are next to each other, if the Bureau of Reclamation wants to auction all of its water, for example, you want to have an auction. I have a design called the All-in Auction. But the basic idea is simple. You have this much water. You auction it. The price of the auction allocates the water to whoever's willing to pay for it. And that's all the water you've got. And that's it. That's how you set the price. You don't set the price. The price is set in an auction. Please end subsidies. End them for infrastructure. End them for operations. End them for giving away energy at Hoover Dam. End them for giving away water rights to political constituencies. Please end personal well exemptions, where you can pump your own water out of your groundwater, enough water from an exempt well to service 50 homes. This is the biggest loophole that developers are driving entire subdivisions throughout the West. In California, we don't worry about that because we don't regulate groundwater. Monitor it. Tax it. If it's being overdrawn, you can tax it. It belongs to the people. You can rebate it back. That's fine. But please just reduce the use of it. Allocate water and groundwater rights. There's a lot of different ways to allocate groundwater. I'm certainly not talking only about markets. Communities can manage it very, very well without any kind of market organization. But we do need to have some kind of sustainability on groundwater. If it's being overdrafted, it's not sustainable. You have to find a way around that. The easiest way, put a tax on a pump. Every hour it runs, pay five bucks. It's simple. You don't have to do too much than that. But there's other ways to do it. And there's very, very good groundwater management outside of California. So take this with a grain of salt. So what we have, local water, when you bring in a federal policy, and this is probably, I should say, this for the Corps of Engineers and the Bureau of Reclamation in particular, because they're the federal agencies. But when you have subsidies coming in for projects and you have cost benefit that is just totally out of control, when you add, let me go for a little example on cost benefit. There's a new dam being debated around in California. I think it's called Temperance Flat. And the idea is that, if you put a dam, there'll be a lake. And the water skiers will ride their water skis in the lake. And that's a public benefit. And that's worth at least 20% of the total benefits of that dam. So the public should pay 20% of the cost of the dam. That's how that mathematics works. Someone makes up a bunch of numbers. And these are economists, by the way. So we are the people that are doing that for you. But we make up numbers about how much each water skier is worth. And then that gets added to the benefit side. Forget the cost side, which is usually overruns. We know that. So it gets added to the benefit side. And then it gets paid for by the beneficiaries who never show up, remember. They're on spreadsheets. But they don't usually show up. And then that dam gets built. And the cost benefit ends up being upside down. And even, I think, the Bureau of Reclamation has been charged on this Temperance Flat Project. And they came out with a 1.15 benefit to cost ratio, even assuming all of that Mickey Mouse number of stuff. The reality has got to be like 0.5. Spend $2, make a dollar. And the farmers have already said, we'll take 75% of the water, but we'll pay 25% of the cost. They've said that in writing. So who's paying the other 75% of the costs for 25% of the water? Don't do those projects. They just shouldn't be done. But then the politicians will take a small campaign contribution and push it ahead. So I'm just pointing out that this stuff gets corrupted away from a good use of our water, the good value of our water. And once that dam is built, it's going to be there for a long time, right? So intercept it early on. And I'll stop. Questions. And David's a great stick around. My name is Martin Appel from the Council of Scientific Society of Presidents, non-government. Two questions. One is, you equated the use of water for energy and water for agriculture. But in fact, one is completely consumptive agriculture. The one for energy isn't. Do you know what partition that is? And two, could you picture in your mind the whole water supply of the United States finding a way to be allocated fairly across the United States, even though most of the water's on the east, most of the man's on the west? So let's go backwards. Yeah, I'm sure I could conjecture a vision of the United States water supply. But I don't think it should be allocated across watersheds without being careful, right? So what I said earlier is that the basic unit of management for water should be the watershed. And that's essentially where the water falls. And then when you start pumping it around, you're going to have energy impacts in terms of the pumping cost. And you can have environmental impacts in terms of the water moving around. So there are projects. Nahuapa is not the one that's been banded around in popular mechanics since the 1950s. Let's bring the water from Alaska down to New Mexico. Those projects, let's go back to John Wesley Powell, who identified in 1879 the need in the West to use irrigation structures to move water out of rivers to dry areas. And he said those irrigation projects in those management districts should be run by the yeoman farmers, a small group of yeoman farmers. And they'll get a little bit of land from reclamation and they'll irrigate the land and then they'll make the desert bloom. And it turned out that those projects couldn't happen. It was too difficult with a small plot of land with as much water as they could get to build a project. They couldn't get the money behind it. So they abandoned the projects as uneconomical. And then the Bureau of Reclamation came in and said, oh, that's no problem. We'll spend someone else's money to bring the water to you. And that's how irrigation got started in the West. So there's really no good reason to have nationwide water infrastructure. Now, agricultural water, the consumptive use, is all over the place. I'll have to defer to Mike and his cadre of scientists. You're an economist or another? No. So Mike knows how to answer that question because he's not an economist. Economists don't know these answers. But what's interesting about agricultural water, of course, is that most farmers have the right to divert a certain amount of water. And that doesn't take into account return flows or water that goes into groundwater. So we really don't know how much water farmers use, the consumptive use of water. There are obviously ways of measuring the plant use of water. But the rights for water that farmers have and the actual consumptive use are totally different numbers. And they're not often reconciled on the same spreadsheet. Energy, as you mentioned, is usually once through cooling type of non-consumptive use. If you talk to someone who's an ichthyologist, a fisheries biologist, they'll say, well, that's a pretty serious use as far as I'm concerned. Or hydro power through a dam that grinds up everything on the way. So and the other problem with energy use of water, especially when you store it behind a dam, is that you're changing the flows over the season. If you store it and you don't have spring floods, then the entire river basin has a different geomorphology. Is that the right word? So you can't just say quantity is quantity is quantity. There's quality. There's flow. There's all kinds of other issues. So there are lots of things going on there. And I'm just leaving it at that. Does that help? Yeah. Next, who's in charge of questions? Yeah. Oh, duly mics. First of all, I want to compliment you on being a pretty ridiculously entertaining speaker for an economist. Lloyd, could you just introduce yourself in your affiliation? Yeah. I'm Lloyd Day. I'm from Syngenta. I used to work for the USDA and I ran some of the programs which you abused. In your speech. Thank you. That's fine. You gave me good material. I did notice your bias against the white crops. Pork? No, sugar, dairy, cotton. Anyways, I'm not going to disagree with your comments. I'm a Californian as well. I'm from Sacramento. I wanted to ask your opinion on the whole Delta Smelt controversy. 10 words or less. My opinion on the Delta Smelt controversy, in the Delta, so this might be a little bit too home neighborhood type of conversation, but the Delta, they have this thing called co-equal goals. We're going to pursue co-equal goals. We're going to pursue water exports from the Delta, which is this big switching place for rivers. And we're also going to pursue ecological stability and health in the Delta. And, you know, it's like going to a football game. We're going to have co-equal winners. You know, you can't have that. So that my first observation is that that language is a lie. And my second observation is that one side is going to win. And my hope is that when one side wins, the other side gets some form of compensation. And I could go on. I've written a whole paper about this that's on my blog. And I will be around later on to chat. I can talk for about 20 years on this stuff. And I do have opinions, yeah. Hi, my name is Julie Van Eggman with Bear Corporation. When you were talking about the use of water in energy, it came to mind the, I think it's really a lot of water usage used in shale fracking. Right. Have you developed any theories or thoughts about how that can be managed? Well, the first thing, so shale fracking, this is for natural gas, is that right? So the idea is that you're going to inject high pressure water mixed with some interesting mix of chemicals, which is a trade secret, apparently, underground in order to frack the rock and get natural gas out, and then you can sell it. So the biggest issue with this, and the same thing is actually coming up with hydrothermal generation because they're doing, now they're drilling wells to inject water to get to use anywhere on the planet, which is, I think, an interesting innovation to get hydrothermal energy out. But I'm not sure about how hydrothermal, if it needs fresh water or not, but in either case, you're going to be having a big draw of water. And if that water is just coming out of a diversion right, say that you have a farmer and he sells his water right to the fracking interest and the farmer used to flood irrigate his land and he would put on, I don't know, I'll make up a number. He put on five acre feet and one would be, or two feet would be used. So three feet are return flows or three feet are going into groundwater. But he has a right to divert five acre feet. If he sells those five acre feet to the company that wants to do the fracking and they divert all five acre feet underground mixed up with their chemical solution, then you've just increased the use of water, even though the rights are exactly the same. And the return flows are going to be contaminated and maybe polluted. So you have to watch out the quantity. And then the worst case scenario would be some kind of water diversion from groundwater, for example, where there's absolutely no limit on how much you can use. And that will end up robbing other groundwater users from the same basin. So you have to worry about that kind of new use. I just want to make one closing comment, David. Thank you so much for joining us. This is a great thought provoking way to start the day. And one comment that you made really rings with me as I think about agriculture and food and what people buy and what rising demand means. As we look at rising incomes in developing countries, the first thing people do is buy better food, more proteins, more water intensive and food intensive things. So when you think about the fact that people don't necessarily limit their food intake, we have tremendously growing problems with obesity. I don't know that the market always works as well as we need it to. So I think your point that you have, water pricing would be able to take down some of the demand but you have to find a way to make people feel this is scarce, it's important to conserve. And I think that's one of the goals of our discussion today is to think about beyond just market signals, what are some of the sort of personal or moral or ethical signals that you try to send through messaging, through communications that help people understand this is a scarce commodity and we need to be careful with it. So I think that's a really valuable piece that you've left me with and I hope we can talk about more today. So thank you very much. Thank you. Thanks everyone. Thank you. Thank you.


TfNN, The Tiger, Financial News Network Update. Good morning, everyone, Basel Chapman here. I come in after the 9 o'clock, Tommy O'Brien, Morning Market Kickoff Show. This is the 10 o'clock, Tiger Financial News Network Market Update. We're looking at the Dow at down 114,000 and 38,447. This nine-period moving average is turning down, but it hasn't crossed negative yet, so there's still some internal strength. We're looking at the S&P at this particular point. Also down, it is down 12, and it's got this arch formation that says be careful, because if you take out the left side low of 49, let me just get right now, 49.71, that's that dreaded H pattern you've got to be careful of. Meantime, it's holding pretty well. The 9-period moving average is very much over the 14, so that's a good sign. We're looking at the QQQ, that's the index 100, of course that has invidia, that has all those semiconductors, that has the tech sector as well, down three and a quarter at 424.06, and that's gone below the left side low that was really important, so it really started that H pattern, but the 9 is still over the 14, so that hasn't yet given a sell signal. It's real close. IRWM, the Russell 2000, trying to move up, but it can't, it's down $1.13 and $197.77, it's stuck in a range, but let's go to gold. Our gold is down about two points at 2038, suck at the 50-period exponential moving average, it's just trying to rally, but it can't get any traction, and if you look at the dollar, it's funny, because the dollar is holding okay, but it's not really showing strength, it's just holding very nicely at 104.05 down just one tech. Now let's go to the bonds, U.S. bonds are trading, they are up 330 seconds, barely changed at 118 and 330 seconds, those yields are still on the upside. Now let's just go to the Crudor, talking about upside that Crudor has been trying and trying and trying to break away from the 200-period moving average, look on the daily chart on the left, this is the yellow line, this is the thick yellow line, that is the 200-period exponential moving average, let me just open this out before we go to the break and we do my show the Tiger technicians out, look at that 200-period moving average, it's just been a repellent, a magnet and a repellent zone until Crudor is trading in the 79-80 area, that's going to be a magnet. So I'll be back in a moment, I think there's going to be a balance coming up very soon, we'll see, I'll be right back for the Tiger technicians out and check out my opening cold data news data, see you in a few moments.