Relevant and even prescient commentary on news, politics and the economy.

Miya Water’s quest to plug leaks

Via David Zetland’s Aguanomics. I continue to follow David’s thinking on how to plan, price, and ultimately use water in a 21st century manner. He offers interesting notions on the roles of government/pricing (and markets). There is currently big bucks involved and only to grow in importance and critical decisions to be made. Water is also an intensely watershed based arena (local) except when it is not. Re-posted with permission.

Miya Water’s quest to plug leaks

While in Jerusalem, I had the opportunity to speak with Tami Gaoni Feldman of Miya Water.
Her company is in the business of reducing non-revenue water (NRW), or water that goes into pipes but never reaches a customer’s meter gets paid for.
 
Well-managed water systems might have a NRW rate of 5 percent (due to fire hydrants, flushing the system, minor leaks, etc.). In a poorly-managed and maintained system, NRW rates range from 40 to 90 percent. The most common causes of high NRW rates are theft of water, non-payment of bills, leaking pipes and miscalibrated meters.
 
IBNET tracks NRW rates for about 2,000 utilities.
 
Tami told me that Miya is working with one of two utilities in Manila, where the 300 staffers in the NRW division tackle 100 leaks per day and overall system losses of 300 ML per day (about 240 acre feet per day). Miya has had some success so far in reducing NRW from 67 to 50 percent.
Miya uses three main tools to reduce NRW: monitor and fix leaks, manage system pressure to reduce leaks in low-demand periods (middle of the night), and increase payment for services. As a first step, Miya makes sure there are water meters at big junctions, to make it easier to track down branches with high 24/7 baseline use.
 

These technical details were interesting, but Miya faces an additional problem: water managers and politicians facing water shortages prefer to increase supply (via desalination, reclamation, groundwater pumping, etc.) instead of reducing NRW losses.
 
This behavior does not make sense from a cost-benefit perspective. A decent NRW program will increase revenue per unit of treated water pumped into the system. Those revenues mean that NRW programs “pay for themselves.”
 
I hate to say it, but this feature is even more attractive than my “raise prices” recommendation: it’s an engineering solution (water managers like those) that will not increase prices (politicians like those).
So why is it hard for Miya to sell its services?
 
I see two main reasons. First, a good NRW program requires up-front financing to pay for staff, software, meters, and so on. For most cash-strapped utilities, additional money is hard to come by. So why not get a loan from a bank or development agency? Because (according to Tami, but within my understanding) bankers are not familiar with NRW programs. They are more comfortable with making loans on physical assets like desalination plants that can be pledged as collateral.
 
Now stop and think about this for a second. What happens if a water utility fails to repay a loan on a NRW program? There’s no collateral to grab. What happens if it fails to repay a loan on a plant? Yes, there’s collateral, but then what? Are the bankers going to drag a plant from Dhaka back to Geneva? So the “collateral excuse” is hollow.
 
That leaves conservatism and one other excuse: managers and politicians like new facilities that they can pose in front of, cut ribbons for, etc. There’s no photo opportunity at a non-leaking pipe.
We couldn’t think of any other reasons, but maybe you can.
 
Until then, I will conclude that NRW reduction programs are an underutilized method of improving utility performance.
 
Bottom Line: Every water utility should have a program to track, report and reduce its NRW rate — for its financial stability, environmental stability, and the good of its customers

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The water data hub is LIVE!

Who gets water at what prices in the US still appears to be considered a local issue in the US at its core, and at best regional during droughts that cross borders or as it pertains to agricultural use and ‘retail’ (cities and burbs).

 The issue of private versus public ownership is not very visible yet in US news, nor our need to repair our infrastructure (see my series on water  links to Part 1-5) .  And our friends in Texas haven’t sent any recent alerts to me on their current problems (have any of us followed any other drought concerns on the national stage?). Water distribution questions did actually make national news in 2007/2008 droughts along the east coast and southwest but quickly disappeared.  However, the fault lines on who has access to water, news on how we actually obtain fresh water,  and questions on price structures became quite sharp and very legal in a only a year or two.

The question on an international scale remains largely invisible to US and perhaps is time to revisit.  The IMF and World Trade Organization ownership rules are considered arcane and not relevant unless it involves the occasional town water supply and a company like Nestle’s.

Ian Wren and David Zetland have begun the Water Data Hub to help centralize primary source material worldwide. The authors announced the hub to help centralize data at David’s Aguanomics:

I’ve been looking for a centralized source of water data for over a year, a place where I could go to find data on any kind of water question.

Although that quest led me to IBNET — a fantastic resource on water utility data in many countries — I was unable to find a good centralized index of water data.
Even more depressing, I was unable to get any interest or support out of organizations (USGS, World Bank, OECD, et al.) whose missions might imply support for just such an idea.

So, I decided to set up my own water data hub (WDH) — a central location that links to water data, no matter where it is, who owns it, or what dimension of water it describes.

Last November, I asked for help on this project, and Ian Wren (from San Francisco) joined me.

It’s thanks to Ian’s hard work (weekends and evenings!) that I can now invite you to visit waterdatahub.org!

So, please go there and add data sources. The WDH, like any network, gains value with the number of links.

Oh, and don’t forget that anyone can add a link to the hub. You only need a WDH account (free and easy to set up). So, go ahead and add your favorite data source from the World Bank, Exxon-Mobile, the Nature Conservancy, et al.

Note by my wording that the WDH does not host, own or control data. It’s basically an index of data controlled by other organizations.
 
The big goal now is to make a census of data, so that we know what exists, what’s missing and what overlaps.
Future developments:

  • WDH 1.1: You can add records for data that exist but are not available to the public. This will make it easier to contact data owners to ask for access and — hopefully — to pressure them to release it to the public.
  • WDH 1.2: Anyone can comment on the quality of data sources held elsewhere; this will help everyone understand the uses and limitations of data — information that is not necessarily available from data owners.
  • WDH 2.0 (2013): We will start the very difficult process of “normalizing” data from many sources (using translation tables) to make it possible to assemble a data table from 2+ sources linked to the WDH.

Note that the WDH will make it easier for anyone who analyzes data to do their job; analysis is too difficult to automate.

As you might expect, I am running WDH as a stand-alone, academic, non-profit. At the moment, we do not need money as much as your time.

Bottom Line: Please add new spokes to the WDH (get it?) and tell others about the water data hub.

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King of California

David Zetland at Aguanomics offers this review of a topic that gets little national attention – the use of water between watershed areas, water rights, and how we value water to date at least in this area of the country. Use of water and policy on water use tends to be regionally and locally based, making a one size fits all answer to the problems of water use less than useful.

King of California — The Review

In this book, Mark Arax and Rick Wartzman illustrate the fascinating details behind a family that combined hard work, farming wisdom and political maneuvering to turn “lake-bottom land” into a farming empire, with help from government workers who may have ignored the Public interest and badly-written and ill-enforced government laws.
The book (subtitle: “JG Boswell and the Making of a Secret American Empire”) traces the story of the Boswell family, which left Georgia’s cotton lands for California. The Boswell began marketing cotton in Los Angeles and then moved into production, turning land, abundant water, and very sharp management into one of the largest farming operations in the US and world. I won’t summarize the fascinating, well-written story, but here are some notes I took on the way:

  • During a conflict over flows from the Kings river in the 1880s, Mr. Church raised his dam on the river, reducing water available to downriver farmers. This action — more akin to “possession is ownership” than riparian rights or prior appropriation — invoked a similar response: the farmers downstream blew up the dam and got “their” water. See this post on irrigation in the West 100 years ago, including how the government has to subsidize projects too risky and unprofitable for private companies.
  • Huge land grants from the Spanish and Mexican eras were mostly along the coast of California, not in the Central Valley. The Mexicans allocated huge tracts in the Valley just before California was annexed by the US in 1850. These tracts were reaffirmed by the US Land Commission for California. In 1871, 516 men owned 9 million acres of California land. Those who later abused the Reclamation Act of 1902 — including Southern Pacific — had lots of practice.
  • Miller & Lux, two German migrants based in San Francisco, owned 1.3 million acres in the Central and Santa Clara Valleys. Some of their land was irrigated by the San Joaquin River, but farmers upstream were taking enough water by prior appropriation (“first in time, first in right”) to reduce flows next to M&L properties with riparian rights (“take what you want as long as you do not damage your neighbors”). In resulting disputes, California “found a way to blend both riparian and prior appropriation rights under a formula of `beneficial and reasonable’ uses. What this meant on the ground was that the water generally went to those with the most creative lawyers and engineers.” [p. 80]
  • The abuses of the Federal laws took place when individuals/families/corporations acquired multiple 80- or 160-acre parcels from programs dedicated to assisting small farmers and assembled them into illegally-large parcels. Abuses of water-related programs occurred when farmers with large farms took water that was supposed to go to small farms or paid subsidized prices for that water. Subsidies were (and still are) huge: Farmers only paid a portion of the cost of delivering water, without paying the capital costs of the projects that constructed them, the interest on those costs, and so on.
    The worst part of these abuses was not that the Federal Agencies (Bureau of Reclamation or US Army Corps of Engineers) willingly helped big farmers abuse and avoid the rules. It wasn’t that politicians exempted abuses via special amendments in unrelated laws. It was that these very talented and rich farmers took the subsidized land and water instead of paying the market rate. That’s like Bill Gates paying $0.85 for his $2.00 Big Mac.
    Of course, this kind of corruption, of the rich and powerful working with government to become more rich and powerful, has a long and infamous role in US policies, including the recent financial crisis that bailed out Wall Street and left taxpayers with the tab.
    So these were crony capitalists, not free marketeers. (There’s one point in the book where Boswell says he “sent back” his cotton subsidy check. Yes, he did that once, but cashed the other ones.)
  • Harry Chandler (1864-1944) ran the Los Angeles Times for “what is good for real estate” [p. 214]. That’s because he owned large tracts in the San Fernando Valley (his maneuvers to add water to them are portrayed in the movie Chinatown), Tejon Ranch, and other places. He was perhaps a central character in the story that I traced in my dissertation, and more directly in “The end of abundance: How water bureaucrats created and destroyed the southern California oasis
  • In the late 1970s, the government looked set to break up Boswell’s empire, based on its use of water reserved for 160 acre holdings. Boswell and Salyer (another big land holder) spent big money to “get access” to politicians and staffers, to present their views. In the end, they won an exemption from the limit, based on the idea that their private water rights were not affected by laws dictating that access to infrastructure and water was reserved for smallholders. Boswell et al. stayed in the business of collecting subsidies. (The weirdest case [p. 379] was when they got money for flood damage on land that they claimed was going to be used for wheat but were paid (in-kind) to not plant in wheat. When the government ran out of wheat for “payment in kind” for fallowed land, it bought wheat from Boswell’s other operations, to give it to Boswell, who sold it again. Without any of these programs, the land would have been flooded. With them, Boswell’s triple was worth millions of dollars.)
  • We know that big farms are good for individual farmers who can make more money from their management expertise. But small farms allow more people to make a living off of farming. Is that more productive? Maybe. Is it more profitable? Maybe (especially if subsidies are removed; they tend to go to bigger farms*).
    But are small farms better than big farms for the community? In a 1946 study that compared the company town of Arvin (dominated by the DiGiorgo family) to Dinuba, a similar-sized town in the area with many small farms, social scientist Walter Goldschmidt found Dinuba to be better in every way.** This result indicated that the logic behind the Reclamation Act was sound, even as it pointed out how Reclamation (and most other subsidy programs for farmers) had undermined the existence of towns like Dinuba.
    I’m not worried so much about reducing the number of people working in farming (currently less than one percent of workers) as much as the jobs those people have: 85 percent of them are hourly laborers making $8/hour. Why does that bother me? Because it’s the result of government subsidies, not free market dynamics.
  • Arax and Wartzman ask an important question near the end of their book: big farmers like Boswell used federal subsidies to build huge farms on the bottom of a lake. They got rich and their crops were part of a vast system chasing yield. What were the costs? The Tulare Lake — the largest lake west of the Mississippi — was turned into farm land with troublesome runoff and little environmental value. Taxpayers sent huge checks to “welfare farmers.” Their workers were more like wage slaves than farmers. Communities (as Lloyd Carter has documented) were weak and troubled.

I will soon post more on government failure in agricultural policy (Westlands).
Bottom Line: I give this book FIVE STARS as a fascinating history of a family that was good at farming and even better at working with bureaucrats and politicians to destroy the environment, local communities and small farmers for the sake of more subsidies, cheaper land, and free water.


* According to the USDA  [pdf], production and subsidies are shifting to larger farms that are run by wealthier people — and that’s only between 1989 and 2003!
** There is some debate over whether Goldschmidt was right to conclude that “similar” areas ended up having such big differences in farm size and quality of life. Hayes and Olmstead review them in this paper [pdf] with useful notes on the size of oil revenues and cost of water pumping on farm size and crop mix. They claim that small farms would pay almost double the cost of water in Arvin without considering shared pumping facilities. But even without such quibbled, they also agree that the larger farms — however they got there — were not contributing to community life. (In other words, Las Vegas differs from San Francisco for many reasons, but do you want government programs to encourage more cities like Las Vegas?)

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Water

Ten great cities dying of thirst in Wallstreet 24/7 points to a problem already serious in some cases, and during the 2007/2008 drought made readily apparent – our lack of will to address water infrastructure problems and replacement, and our use of water that is outstripping sources.

This report by Ceres and Water Asset Management (link repaired) shows that few participants in the
bond market—including investors, bond rating agencies, and the utilities themselves—
are accounting for growing water scarcity, legal conflicts and other threats in their
analyses. Some are even inadvertently encouraging risk by rewarding pricing and
infrastructure plans that encourage increased water use despite near-term supply
constraints. By overlooking these critical factors, all involved are allowing water risk to grow—and remain hidden—in the bond market.

Obsidianwings carries a post on water:

While the Republicans celebrate their historical victories, the Democrats lick their wounds, the bankers count their bonus money, and the rest of us try to hold on to our jobs, homes, and retirement savings, some large US cities are facing a real challenge:

They’re running out of water. (see above link)

No water is a real problem.

And not just an “I can’t water my lawn” problem. A”my city can’t generate electricity”, or “these millions of acres can no longer be productive agricultural land” problem, or “it’s going to cost me five times as much for water next year” problem.

Or, a “this city can no longer support it’s population” problem.

This country and its economy has, to a great degree, been living off of infrastructure built years ago. Decades ago. It’s wearing out, being used up, being overwhelmed by the increasing demand being put on it. It will take effort, and costs money – a lot of money – to rebuild.

I’m not seeing that happening. We have a reduced tax base because the FIRE sector blew the economy up, and because we’ve moved all of the non-tech middle class jobs offshore. It’s worth a Congressperson’s political life to suggest raising tax rates, on anyone, in any form, for any reason.

World bank and water describes the transnational ownership and distribution trade in water infrastructure, distribution, and human dimension for access to water for drinking and sanitation.

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Can the U.S. Government do anything right ?

Robert Waldmann

I hate to type that headline given the health care reform debate, but I am alarmed by Karen DeYoung’s article in the Washington Post about new efforts to get Afghans to stop producing opium — all new this time with carrots.

The problem is that the price of wheat is too low.

The average Helmand farmer cultivates less than an acre of land, with about half an acre planted in poppy yielding a gross income of about $2,000. After paying 45 percent of that in production costs, and 10 percent in local taxes, he nets about $900, more than twice what he would earn from wheat at current, albeit rising, prices.

OK if there is one thing the US government can do it is drive up the price of wheat to subsidize wheat farmers. So what’s happening ? Check after the jump.

First, the program is funded at $300 million out of the total Afghan effort of
$65 billion. Odd proportion there.

Still that’s a lot of money given that Afghan farmers don’t make much growing opium

More than 365,000 Afghan farm households earned about $730 million from poppy last year

Hmmm and they grow opium because they would make half as much growing wheat so buying wheat forward at twice the world price would mean paying 730 million for about 365 million in wheat costing oh about 365 million so what the hell is the problem ? Now obviously this will also involve buying wheat from people who currently grow wheat (smaller crop than opium by value so even if no targeting is possible this will less than double the cost so it is still chicken feed compared to the cost of the war). I guess the people smuggling opium out of Afghanistan will maybe smuggle wheat on the way back, but, you know, at twice the world price a kilo of wheat is still not worth much.

My proposal is to buy wheat forward at a high enough price that farmers will be busy growing it and not have time for opium.

The problem is that that would be welfare and not for US farmers. So we must have no “subsidies” and instead sell fertilizer for one tenth of its market price (good think poppies just hate fertilizer) plus low interest loans which do no good at all to opium farmers (except that they do). The program is complicated (sounds like it was designed by Ira Magaziner) the key point is that it is based on vouchers. Huh?

“The way [the assistance] is offered is important,” said the senior U.S. military official, one of several who spoke on the condition of anonymity because they were not authorized to discuss the program on the record. “We are not providing subsidies . . . we are not just handing out cash.” Farmers will have a “stake” in the program, he said, buying vouchers for seeds and fertilizers for about 10 percent of their value. Cash will be distributed only as credit or for work performed, the official added.

Unsurprisingly

The timeline is daunting. A planned “civilian surge” of hundreds of U.S. aid officials and agriculture experts has been slow to arrive. A micro-finance loan program is in the planning stages, and although $300 million in aid has been set aside for “rapid response” initiatives, including voucher programs for seeds and fertilizer, distribution has been sluggish. Mohammad Gulab Mangal, the governor of Helmand, whom U.S. officials have praised for encouraging local communities to turn away from poppy, held the first of eight scheduled outreach meetings only last week.

US policy is damaged by the strangely different rules for military operations and for aid. Killing people is urgent and collateral damage is acceptable, but giving money to people uh oohhhh we have to worry about creating dependency (which is, you know, the whole point of the operation).

in conclusion

Wages in Helmand for lancing, $15 a day, are the highest in the country.

“What we’re looking for is a way to compete with that,” the senior military official said of the opium economy. “This is not easy. . . . There is no silver bullet.”

The US government can’t afford to compete with people who pay $15 a day?!?

I’d say a less pathetically low amount of silver is the silver bullet.

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The Biofuel-Backlash Backlash

Out here on the edge of the grain belt, my local newspaper’s editorial board today bravely stood up for biofuels. They argue, in part, that corn supply is not fixed:

In 1995, before the ethanol boom began, American farmers produced 162 million metric tons of corn for food and export.

By 2007, ethanol production was taking 62 million metric tons of corn. So the corn left for food and export was — 308 million metric tons.

That’s right, 308 million metric tons — 82 percent more than before the ethanol boom, thanks to higher yields and more land in cornfields.

Corn for everybody! Almost makes you wonder why the price is so high.

While I don’t quite match their numbers with data from the USDA’s Foreign Agriculture Service, corn production and supply have in fact increased since 1995 — though they managed to pick a relatively low-production year for their comparison:
U.S. Corn Production and Supply
(Source: USDA Foreign Agriculture Service. Click to embiggen.)

However, their characterization of ~300 million tons available for (human) consumption is misleading, and increased ethanol demand isn’t exactly a blip in the U.S. corn market. Here’s a coarse breakdown of the corn crop’s uses:
U.S. Corn Uses

Traditionally, the major use of corn has been for animal feed. That’s been in a roughly 20 million metric ton range for the last ten years. (Before the mid-90s, corn production was relatively volatile and a lot of the variation was reflected in animal feeding modes.) Other food and industrial uses have usually taken second place, and exports have mostly fallen in the range of 40-60 million MT annually.

Since the USDA began breaking out ethanol as a source of corn demand in 2002/2003, it’s taken up an additional 50 megatons of corn. Should the 2008/2009 ethanol forecast comes true, that’ll be more like 75 megatons. Were that corn not indirectly pumped into American gas tanks, it could nearly triple U.S. corn exports; or, from another perspective, we’re set to use a bit more than an eighth of the world crop for fuel. A couple more years of billion-bushel (~25 megaton) growth in corn directed to ethanol production and ethanol could take over from animal feed as corn’s primary use in the U.S. This also goes to show that converting the entire current corn crop into ethanol wouldn’t make much of a dent in U.S. gasoline demand.

A curious (and worse) argument is that corn ethanol is a gateway to better future biofuel-production processes. It strikes me that a lot of the current ethanol production capital in the U.S. is one way or another ill-suited either to currently more efficient sources of carbohydrates like sugar cane or to hypothetical cellulosic properties. The big unit trains of ethanol tankers are mobile enough, but otherwise all these giant distilleries are in the middle of corn country for a reason, which is to say subsidy-farming.

Added: See also Menzie Chinn at Econbrowser.

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WTO Doha, agriculture, and values

As I re-do templates for eventual updates to the site, I found this graphic on AB from the early days. I did misplace the link, sorry. But it appeared to be a great graphic for several thoughts:

1. The foundering of the Doha agreements was centered around agriculture protection.

2. Our beliefs about values are reflected where the money goes, perhaps. I think all of us agree certain government programs appear to be forever programs. But I would ask what drives it, and what are our values in letting it go on forever. Is it the private/government great divide, or does current mainstream economics as publicly descibed simply side step or cover the issue?

3. Why is the issue described in a so-called neutral frame? Does my auto mechanic tell me where I can go or not? He/she helps to get there, wherever there is, but the philosophy of mechanical service is not the point of auto use for me.

4. Are we being car-jacked, whether liberal and conservative? Without the media labels, how do we frame the issue without using the term class-warfare, which appears to simply close off discussion. If conservative, are you being car-jacked (many here can describe the left of center car-jacking)?

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