Coasean markets in everything?

by on March 7, 2013 at 12:00 pm in Economics, Law | Permalink

A consortium of Central Texas businesses and communities has floated a novel solution to the tug of war over Colorado River water: Pay downriver rice farmers not to farm rice.

Members of the Central Texas Water Coalition are asking the Lower Colorado River Authority to pay rice farmers at least $100 million not to farm rice in perpetuity. They figure that’s cheaper than the cost of a proposed downriver reservoir, whose costs the LCRA estimates at $206 million.

The full story is here, and for the pointer I thank Bill, a marginally loyal MR reader.

1 Ray Lopez March 7, 2013 at 12:10 pm

High time. Growing rice in Texas makes no sense whatsoever, even though they do have rainfall. Ditto for California. Growing rice in Louisiana is more logical, but better still to import it from Thailand. I’m sure the TX farmers will milk this for all its worth, but it’s better than building another reservoir.

2 Roy March 8, 2013 at 9:15 am

We’ve been growing rice since the Republic of Texas, rice growing was even more widespread in the past with almost all the prairie between the Brazos and Houston committed to rice growing. Suburban sprawl has taken most of the northern and western rice farming areas out of production, but any crop that was farmed for almost two hundred years without large irrigation projects shows that it has made sense for a long time. Do you really think a lot of geographic difference exists between Louisiana and SE Texas?

My family as quite a bit of a connection to Texas rice farming, and while the drought over the last two years has heavily damaged the industry, it is not time to bury it. The rice farmers were here back when Central Texas was howling Commanches, there was generally enough water until Central Texas started tirning the whole Hill Country into suburban ranchettes, complete with idiotic water features, and began developing water hungry industrys. Now Rice farmers may agree to sell out, but it is going to cost a lot more than those CTWC is imagining. The water that runs off these rice fields has downstream users as well, who have their rights too. Remember this is a 160+ year old major industry

3 Bill March 7, 2013 at 12:16 pm

If they withdraw from rice, they will grow cotton and ask for price supports for that as well.

Just withdraw all price supports and market protection mechanisms–why pay people to consume scarce water in the production of ag products which you then pay to support the price of.

4 dan1111 March 7, 2013 at 12:51 pm

+1 for this.

5 revver March 7, 2013 at 1:34 pm

here here +1

6 Bill Harshaw March 7, 2013 at 3:32 pm

Really? I’m no expert, particularly on Texas ag, but cotton has a long tap root so does well in dryer areas, whereas rice likes to be flooded.

7 Bill March 7, 2013 at 7:58 pm

So, this means that the rice farmers WILL convert to cotton if they are paid to withdraw from rice. We have a cotton price support program.

8 Axa March 7, 2013 at 12:36 pm

In the beginning I thought this story was about a water rights transfer operation from agricultural use to urban use. Water rights transfers are clearly regulated and to some degree transparent. But, in this case water rights are not mentioned at all. So, what exactly happened?

9 anon March 7, 2013 at 1:11 pm

It appears that the farmers have a lesser right to the water: “with a second straight year of water cutoffs for downriver farmers because of drought”

Many people in the eastern part of the US have no idea why water is such a volatile subject in the west. Over-simplistically, the western part of the US is a desert. (When people move to the east coast from the west they always comment on how green and lush it is in the east.)

Water law and water rights, including water marketing, are critical in a desert, especially as cities grow.

10 Levi Ramsey March 8, 2013 at 5:03 am

“Whiskey is for drinking. Water is for fighting over.”

(I think it’s –Mark Twain, but can’t be bothered to wikiquote it)

11 Rahul March 7, 2013 at 12:40 pm

Is that a new class of MR readers? 🙂

12 Bill March 7, 2013 at 12:44 pm

It wasn’t me, but another Bill. I am below marginal, and proud of it. I am loyal to no one.

13 Rahul March 7, 2013 at 12:58 pm

How legally enforceable is this? Is there a risk that a few decades later offspring of current farmers demand another payout? How about land sales; can the constraint be binding on subsequent owners of the parcel?

14 Axa March 7, 2013 at 1:07 pm

That’s the reason people invented water rights laws. In Texas groundwater is private property of the land owner above it. Surface water is almost the same, you have to own land adjacent to a surface stream to claim right to use water.

15 Rahul March 7, 2013 at 1:13 pm

Very interesting reading; thanks! I especially loved “law of the biggest pump”: That seems so Texas in spirit. It could almost be the state’s motto.

16 Axa March 8, 2013 at 4:22 am

The “whole” story is not on the paper. It is on the Central Texas Water Coalition website: It’s a PDF called press-kit.

To secure water, they’re requesting the Lower Colorado River Authority.

a) Buy the land. If you buy land, you automatically have the water right associated to it.
b) Buy “rice farming rights”. This is really weird, since I looked for that kind of contract and there’s no record of something similar. Buy or lease the annual water right and that’s it, why make things complicate?

But, there is tiny conflict of interest. Central Texas Water Coalition is integrated by the stakeholders (water users) in the Colorado River basin.The stakeholders are environmentalists, firm customers, the lakes and…….rice farmers. So rice farmers are asking rice farmers to be paid for “rice farming rights” instead of water rights. Strange.

17 dan1111 March 8, 2013 at 7:36 am

“So rice farmers are asking rice farmers to be paid for ‘rice farming rights’ instead of water rights. Strange.”

They would rather be paid to do nothing than subsidized to work? Doesn’t seem strange to me.

18 Bill Harshaw March 7, 2013 at 3:36 pm

Tobacco farmers got a buyout of their quotas/allotments as the federal tobacco program was phased out.

19 Willie March 7, 2013 at 5:31 pm

. “We’re trying hard not to get into a battle over every drop of water and where it’s going to go,”

Good luck on that one. There’s a good reason for the western saying, “Whiskey’s for drinkin’ and water’s for fighting over>”

20 Enrique March 7, 2013 at 9:09 pm

But it’s not a Coasian bargain unless the rice farmers take the bribe !!!

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