Water Markets Present a Solution to Florida’s Water Bottling Conflict
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Commentary

Water Markets Present a Solution to Florida’s Water Bottling Conflict

A market-based approach would treat all users equally and result in prices that are more accurately determined by supply and demand.

With more than 30,000 lakes, 700 springs, and 11 million acres of wetlands, Florida has abundant freshwater resources. However, rapid population growth and poor water management policies have led to growing concerns about environmental health and the sustainability of water supplies in the future. 

Those concerns are reaching a boiling point over an application to renew a water-use permit related to a water bottling plant along the Santa Fe River. The permit allows the Seven Springs Water Company to pump water out of Ginnie Springs which is then sold to Nestlé, the world’s largest food and beverage company, for bottling. The Suwannee River Water Management District was set to vote against renewing the permit on March 10, but a last-minute petition by Seven Springs postponed the decision for several months.

Since the 1970s, the Wray family has owned the land surrounding Ginnie Springs, operating a recreational park on the land. The family also owns Seven Springs and held a permit to extract over 1.15 million gallons of water a day from the springs since 1998. When the permit expired in December 2019, Seven Springs filed an application with the Water Management District for renewal. 

Nestlé, the company behind the Zephyrhills and Pure Life water brands, recently acquired a nearby bottling plant in the city of High Springs with plans to purchase water from Seven Springs. The plant was formerly owned and operated by several other water bottling companies, including Coca-Cola, which also bought water from Seven Springs. 

According to the Florida Springs Institute, the Santa Fe River and springs are experiencing negative impacts from a variety of stressors including reduced discharge, excessive recreation, and aquatic plant management activities. While the Floridian Aquifer is vast and deep, only about 20 feet of water near the top of the aquifer is available to feed the springs. Even relatively small declines in the water level can, therefore, reduce or halt spring flows altogether. However, the impact of Seven Springs is considerably less than groundwater withdrawals of agricultural producers and municipal utilities in the area. 

Over the 20 years that Seven Springs held its permit, the company never came close to extracting the daily limit of 1.15 million gallons. However, Nestlé is in the process of expanding the bottling facility’s capacity to increase production volumes to the full 1.15 million gallons a day. Even with plans to increase withdrawals, 1.15 million gallons is less than half of one percent of the average flow through the Santa Fe River near the Ginnie Springs site. Nevertheless, the prospect of the permit being renewed caused an outcry from groups concerned about the environmental impact of withdrawals on the springs and the connecting Santa Fe River. 

A major point of contention is the relatively low cost that Seven Springs pays for the right to withdrawal water before selling it to Nestle. In fact, the only cost to Seven Springs is a $115 permit application fee. Environmental groups are advocating for reforms that would impose greater costs on water withdrawals.   

In response to calls for reform, Florida legislators considered levying taxes on water used for bottling. A bill (SB 1098) introduced by Sen. Janet Cruz would have required the Florida Department of Environmental Protection to collect a 5 cent-per-gallon tax on water extracted for the production of bottled water. The revenue raised by the tax would be deposited into the Water Protection and Sustainability Program Trust Fund. Another bill (SB 1112) from Sen. Annette Taddeo would impose an excise tax of 12.5 cents per gallon on bottled water operators. Both of these bills were postponed after failing to gain traction among state lawmakers. The bills didn’t gain traction during the most recent legislative session. 

While there are legitimate concerns about the impact of large-scale withdrawals on the environment and the sustainability of water supplies, the solution is not to impose arbitrary fees or single out water bottling companies. Rather, Florida should reconsider its approach to water management and permitting. A market-based approach would treat all users equally and result in prices that are more accurately determined by supply and demand.

In a market system, users—including agricultural producers, municipal utilities, and water bottling companies—would be allocated initial rights to extract specified amounts of water commensurate with their land ownership. Those allocations would be treated similarly to property rights. For example, users would be free to sell portions of their allocations to other users. This voluntary exchange of water rights between users would result in market prices and encourage conservation. 

Oversight would only be required to prevent users from extracting more than their commensurate share and to ensure that withdrawals do not cause ecological harm or infringe on other users’ water rights. In effect, this oversight would serve to enforce property rights rather than determine appropriate uses of water. 

Consider an agricultural producer with the right to extract one million gallons of water per day. Under the current system, they would not have any incentive to conserve. However, if they were permitted to sell the right to a portion of that one million gallons, there would be an incentive to invest in strategies to reduce consumption. Suppose those strategies required a monetary investment. If the seller were able to recoup that investment by selling the conserved water at a profit, a rational actor would invest in conservation. 

A free market for water rights would also allow environmental groups to purchase water for conservation. In the case of the Santa Fe River, environmental groups could purchase the rights to an equal or greater amount of water to offset the withdrawals by Seven Springs. Moreover, Seven Springs and Nestlé would face a more accurate market price for water. If the price were higher than the value of the bottled water, they would not continue to operate in the area. 

Australia’s tradeable water permits provide an example of how water markets could function. Under the Australian system, water prices reflect the cost of water delivery and scarcity. In other words, prices increase in times of shortage and decrease in times of surplus. Consequently, market forces encourage conservation when it is needed the most. Adopting a similar system in Florida would help avoid conflicts over water permits and ensure a sustainable supply of water for generations to come.

Vittorio Nastasi

Vittorio Nastasi is a policy analyst at Reason Foundation where he works on Florida policy issues including education reform and water quality management.