Energy-Environment Newsletter

Energy and Environment Newsletter #2 (April Edition)

Reforms to help solve California's water crisis, fracking regulation, environmental trade-offs from renewable energy, and more

In this issue:

Realistic Reforms That Might Help Solve California’s Water Problem

California is suffering one of the worst droughts in the state’s history. As water tables tumble and reservoirs dry up, Governor Jerry Brown signed an executive order on April 18 requiring a 25% reduction in domestic potable water use, to be implemented through the water companies and utilities supplying municipalities, along with subsidies to convert 50 million square feet of lawns and turf to “drought tolerant landscapes.” But as Reason Science Correspondent Ronald Bailey has pointed out, there are better ways to manage water that would be more efficient, more equitable, and not necessitate rationing by government.

A major part of the problem is that, according to a study by researchers at UC Davis and UC Merced published last year, water users in California have been granted the right to consume about five times the amount of water available in a normal rainfall year. This over-allocation, combined with bureaucratic restrictions on water trading and conservation, has resulted in farmers on average paying far lower prices for water than would be the case if water rights were better defined and the market were more open.

As a result, California farmers have been incentivized to grow water-hungry crops, such as alfalfa, rather than sell their water to users who would value it more highly. Meanwhile, during droughts, farmers without sufficient water end up paying whatever they can afford to buy water from the few rights holders able to sell it – at a price that is likely far higher than if the market were more open.

Unfortunately, while some farmers have more water than they can use but aren’t able to sell it, others are unable to obtain enough water at any price and will see their crops fail and trees die as a result – causing unnecessary suffering and imposing a burden on taxpayers through payments from the US Department of Agriculture’s Disaster Assistance Program.

Even worse than the restrictions on water trading imposed on agricultural users is the zero price paid for most “environmental” uses, which now account for about half of California’s water use. When the price of a good is set at zero, demand is unconstrained. As Reason Foundation’s Shikha Dalmia explains, “environmentalists … have forced the state to abandon critical water-storage reservoir projects to avoid disruption of wildlife and ecosystems [and] divert 4.4 million acre-feet of water every year – enough to supply the same number of families – to restore water runs such as the San Joaquin River, allowing passage of salmon and other fish, among other environmental ends. Without paying a dime, environmentalists have taken control of nearly half of California’s water.”

So, what to do? Ron Bailey suggests three realistic reforms that could dramatically improve the situation:

“First, allow water banking. Under current regulations, holders of water rights cannot pump and store water underground during wet years that such entrepreneurs could make up shortfalls by selling later during dry years.
Second, streamline water transfer approvals. Every transfer transaction must now be lengthily evaluated every year by regulators, even though the new transactions are largely the same as the already-approved old transactions.
And third, establish dedicated water courts staffed with experienced judges to speed rights and allocation decisions and prevent forum shopping by plaintiffs’ lawyers.”

While these reforms would not address all the problems of the current system, they would likely yield far higher returns than Gov. Brown’s top-down demand management approach.

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Fracking Risks Justify Rational Regulation, Not Bans

Increasingly widespread use of hydraulic fracturing, combined with 3D seismic mapping and horizontal drilling resulted in the U.S. becoming the world’s top producer of oil and gas in 2014.

The benefits of this boom are manifest in the dramatically lower prices consumers are now paying for natural gas, gasoline and other related products, which have spurred higher rates of economic growth in the U.S. as the country has become more cost-competitive.

Nonetheless, some groups object to the use of fracking, claiming that it consumes too much water and causes pollution of drinking water with methane (remember the news stories of faucets on fire?). Such claims are understandably worrying, especially in a state such as California where potable water has become scarce. But the reality is that fracking typically consumes far less water than other mining processes , as this paper from the Belfer Center at Harvard University notes, and generally constitutes a tiny fraction of all water consumed, even in states such as Colorado where fracking is undertaken extensively.

While there appear to have been some instances in which poorly constructed wells have resulted in contamination, the most comprehensive study yet undertaken recently concluded that methane in drinking water wells is unrelated to the wells’ proximity to gas and oil wells. So, faucets may have gas coming from them, but it is almost certainly not as a result of fracking per se.

From the abstract of the report: “Our data set is hundreds of times larger than data sets used in prior studies. In contrast to prior findings, we found no statistically significant relationship between dissolved methane concentrations in groundwater from domestic water wells and proximity to pre-existing oil or gas wells. Previous analyses used small sample sets compared to the population of domestic wells available, which may explain the difference in prior findings compared to ours.”
As with all industrial processes, fracking has the potential to cause adverse effects. For example, improper disposal of waste water through deep injection can cause earthquakes. However, these problems are not unique to fracking and can be addressed: it is perfectly feasible to dispose of water in ways that reduce earthquake risk – including diversion to crop irrigation (good news for arid states such as California) – and state regulators are already sharing information about such practices.

Instead of supporting rational regulation of fracking to prevent these adverse effects, however, many activists have pushed for bans on the activity. States and municipalities considering restrictions on fracking would do well to consider the evidence and apply only those restrictions that are fully justified by that evidence.

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Addressing Some of the Environmental Tradeoffs from Renewable Energy Projects

As we have previously noted, renewable energy projects can have adverse environmental effects, harming species ranging from tortoises to birds. On April 14, the Department of Energy announced that it would be funding five projects, at a cost to taxpayers of more than $1.75 million, to develop technologies for protecting sensitive and endangered bat species from whirling wind turbines. This comes two months after the American Bird Conservancy filed a formal petition with the U.S. Department of the Interior, calling for the agency to establish new regulations governing the impacts of wind energy projects on migratory birds in order to reduce the projected 1.4-2 million bird deaths expected to be caused by the industry. Meanwhile, the Texas state Senate has taken a more direct approach to reducing the number of birds killed by windmills: it has approved legislation that would finally end two programs that drove the state’s years-long surge in wind energy production. Approved 21-10, Senate Bill 931 would end the Renewable Portfolio Standard. It would also close Texas’ “Competitive Renewable Energy Zone” initiative, a grid infrastructure subsidy program that enabled investments in wind energy.

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Should Poorer Electricity Consumers Be Subsidizing Their Rich Neighbors’ Solar Panels?

In many states, electric utilities are required to purchase surplus electricity generated by domestic solar photovoltaic installations at the same price they charge for electricity delivered to domestic customers. This effectively results in consumers without solar panels subsidizing the installation of solar panels on other residents’ homes . And it is regressive, disproportionately harming poorer residents.

The problem results in large part from the fact that companies supplying electricity to domestic customers are required to charge pro-rata for both the generation of electricity and for its delivery. Given the significant variable costs of producing electricity, it makes sense to charge for each unit of electricity consumed. However, the distribution of electricity (over power lines, substations, etc.) has very high fixed costs, so it would be far more logical – and result in more rational investment decisions – if electric utilities were able to charge a fixed monthly fee to each consumer to cover those infrastructure costs.

One consequence of this inefficient billing system is that households using less electricity pay a lower share of the costs of maintaining the infrastructure that distributes electricity. Under “net metering,” households only pay for the net electricity they consume – so any power delivered back to the grid effectively reduces the households’ bill by an amount equal to what that household would have paid to draw that electricity. This is effectively a subsidy to solar powered households, who do not pay their fair share of the fixed costs of the distribution infrastructure. Meanwhile, the costs of maintaining the infrastructure remain the same, so those households without solar power must pay more for each unit of power delivered.

The majority of solar panels are being installed on houses owned by wealthier families: according to the Center for American Progress , in 2013 households with income over $40,000 accounted for more than 90 percent of solar installations. This is because poorer families have less access to capital and tend to rent rather than own their accommodation. So, net metering causes poorer households to pay for the solar panels installed on wealthier people’s houses.

Ideally, this problem would be solved by changing the billing system so that electric utilities could bill for the fixed costs of building and maintaining infrastructure by charging fixed amounts to each consumer. (Also, utilities should be allowed to negotiate with consumers over how much they pay for the electricity they buy. But then consumers should perhaps also be permitted to negotiate with electric utilities over how much they pay for electricity – or at least have a say in how prices are regulated.)

An alternative approach is to adjust the rates set by the public utility commission to take into account the effective cross-subsidy. That is what is proposed in a bill introduced in the Missouri legislature , which calls for an analytic comparison of solar’s costs and benefits and proposes the introduction of a monthly fixed fee to offset instances of cost shifting from solar to non-solar customers. That would likely be a step in the right direction.

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Climate Change Not to Blame for Miserable Winter in North East

Cold winters are not a new phenomenon in the Northeastern U.S., as anyone who has visited Jockey Hollow can attest. There is nonetheless a tendency among commentators of a certain disposition to claim that all extreme weather events are a consequence of “climate change” – even colder, snowier winters in the Northeast . However, a new paper from scientists at ETH Zurich and at the California Institute of Technology found that “in most places, the range of temperature fluctuations will decrease as the climate warms.….Temperature extremes will therefore become rarer.” The paper specifically concludes that “Cold snaps like the ones that hit the eastern United States in the past winters are not a consequence of climate change.”

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Logging Might Save Western Forests From Catastrophic Fires

In the past few decades, forest fires in the western U.S. have become increasingly severe, in some cases burning so intensely that they eviscerate everything in their wake. A new study by Forest Service scientists suggests that logging can help end this ecologically harmful trend and return some forests to a healthier status.

Until the mid-1800s, forests in the western U.S. were subject to frequent small fires, many of them set by native people for various purposes. These small fires had the effect of removing dead and dry timber in a piecemeal fashion, thereby reducing the incidence of mega-fires.

Changing land-use patterns in the late 1800s reduced the number of such fires, resulting in an accumulation of dead and dying trees and woody undergrowth – a highly combustible mix. In 1910, a single fire burnt an area the size of Connecticut across Idaho, Washington and Montana, destroying entire towns and killing 86 people. In the wake of that Great Fire, Forest Service chief Gifford Pinchot introduced a policy of fire suppression, which for more than half a century dramatically reduced the number and scale of forest fires.

However, these federal fire suppression policies had the unintended effect of exacerbating the very problem they were intended to solve by increasing the tendency towards less frequent, higher intensity fires. Moreover, without subsequent removal of dead trees, these fires can generate a vicious circle, as David W. Peterson, U.S. Forest Service ecologist and co-author of the new study notes: “Large wildfires can leave behind thousands of acres of fire-killed trees that eventually become fuel for future fires.”

The study found that harvesting fire-killed trees in dry coniferous forests, which exist throughout much of the western U.S., can reduce fuel available for future wildfires. Post-fire logging, also known as salvage logging, has been vigorously opposed by environmental pressure groups as a management strategy on federal lands. The study’s findings also suggest that selective logging in areas with significant amounts of dead and dry wood can prevent the occurrence of catastrophic fires.

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Stronger Property Rights Enable Trophy Hunting to Benefit Conservation

A recent article in the journal Conservation Biology demonstrates the importance of property rights for conservation of endangered species. The article shows that when people who live on land inhabited by a number of game species, some of them endangered, are able to benefit from revenues generated from the hunting of those species, international trophy hunters are willing to pay more for their hunt. The article found that trophy hunters “were on average willing to pay an additional $3,900 for every 10 percentage points of the revenue being given to local communities. By contrast, respondents were less supportive of hunting revenue being retained by governmental bodies: Willingness to pay decreased by $1,900 for every 10 percentage points of the revenue given to government.”

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Study Finds Private Lands More Biodiverse Than Public Land, Draws Wrong Conclusions

A recently published study found that the most biologically diverse land in the United States is in the Southeast of the country – most of which is privately held. For example, the U.S. has the world’s highest number of freshwater mussels, with around 300 species, most of which are found in the Southern Appalachians and surrounding regions. Yet most land set aside by government for ecological conservation is in the Western U.S.

One seemingly obvious conclusion from this is that the private sector is perfectly capable of providing habitat for diverse species. Unfortunately, the article’s authors don’t seem to see that obvious conclusion, asserting that “On private lands, local and state land trusts are essential, possibly through land purchases, conservation easements, and similar instruments.” Moreover, the article fails to acknowledge that existing government legislation, such as the Endangered Species Act, and policies, such as agricultural subsidies, are causing harm to the species the article’s authors seek to protect.

The authors’ proposal that public land ownership should be expanded is ironic given how poorly the federal government takes care of the 30% of the U.S. it already owns. A far better solution would be the precise opposite, as Terry Anderson, Vernon Smith and Emily Simmons proposed some years ago.

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Spotted Owl Could Be Further Harmed by Endangered Species Act “Uplisting”

The federal government is considering “uplisting” the northern spotted owl under the Endangered Species Act from its current status as “threatened” to the more-imperiled status of “endangered.” Since its listing in 1990, the spotted owl has generated a great deal of controversy because of the substantial job losses that occurred as a result of curtailed timber cutting to protect owl habitat. Ironically, in some cases listing under the Endangered Species Act led to accelerated timber cutting, as landowners sought to prevent their property from being put off limits due to the presence of owl habitat. Perhaps because of this, and also perhaps because of the increasing presence of the barred owl-a close relative of the spotted owl that is more aggressive and appears to be out-competing it-the spotted owl’s population continues to decline.

If the spotted owl is uplisted, it may very well harm the owl further, as landowners seek to cut timber and otherwise deny habitat to the bird, as occurred following the owl’s initial listing as threatened in 1990. The petition to uplist the owl reportedly blames private landowners for the owl’s continued decline, and the petition appears to be intended to push the U.S. Fish and Wildlife Service to implement more onerous habitat protection regulations on private lands. If that is the case, it may well backfire. Indeed, in combination with the growing “success” of the barred owl, it may spell doom for the spotted owl.

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States and Private Sector Conserving Sage Grouse but Feds May List It Anyway

A recent Western Governors Association report details federal, state, municipal and private efforts to conserve the greater sage grouse and prevent the bird’s listing under the Endangered Species Act across its 11-state, 165 million-acre range. The report details an impressive array of conservation measures taken, as well as conservation activities planned for 2015. Meanwhile, as the Denver Post reports, “Western leaders, including Gov. John Hickenlooper, are ramping up a political blitz for feds to let states do the job [of conserving the Sage Grouse].” Unfortunately, it appears the U.S. Fish and Wildlife Service is leaning towards listing (it must make a decision by September).

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Sustainability: Higher Education’s New Fundamentalism

An important new report from the National Association of Scholars raises serious concerns about the push in America’s colleges and universities to make “sustainability” a major focus of schools’ curricula, campus life, culture and administration. Notwithstanding attempts to develop the concept in a way that would make it more rigorous and consistent with a free society, the authors of the NAS report show that “sustainability” is generally a vague and inchoate idea that is used to justify all manner of dubious interventions. The quest to make campuses “sustainable” has also come at the price of tolerance for dissenting viewpoints. In response to growing calls for sustainability, the report makes ten recommendations organized under three issue areas: respect intellectual freedom, uphold institutional integrity, and be even-handed.

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Julian Morris is a senior fellow at Reason Foundation and director of innovation policy at the International Center for Law and Economics.