Emerging research on fracking and water policy: A panel discussion

All right.

I think I'm going to go
ahead and get things started.

Good morning and
thank you for coming.

I'm Sarah Mills.

I'm a postdoctoral fellow
in the Center for Local,

State and Urban Policy, CLOSUP,

which is a research center
based here at the Ford School.

This event today is
part of our CLOSUP

in the classroom initiative.

It's an effort to more
actively engage students

in the research that
we do in CLOSUP.

This includes not
just bringing students

in to our research projects
as policy analysts, but also,

thanks to a grant from
the provost's office,

developing two new undergraduate
courses that allow us

to bring our research into
the classroom physically.

My colleague, Debra
Horner, taught a class

in Michigan Politics
and Policy in the fall

where her students
incorporated data

from our Michigan Public Policy
Survey into their projects,

and this event today
is part of a class

that I am teaching
right now, titled Energy

and Environmental
Policy Research,

which is teaching
students how to develop

and conduct policy research in
these domains, drawing heavily

from the work that
we're doing in CLOSUP.

Before I forget to mention
it, I invite you all to come

to see the students discuss
their independent research

projects two weeks from today

in a classroom just
across the hall.

The information is on
the back of the program.

At that conference you'll
see what the students have

been doing.

Some of them have
been using data

from CLOSUP's biannual
energy policy surveys.

Others are developing
case studies

on environmental policies
in particular states.

Others are looking

at how environmental
technology policy is framed

in the media or in
policy debates.

And still others are
inventorying how the types

of policies that local
governments have in place

for emerging issues, such
as food and waste policy.

Because this event is part
of that class, really,

what I'm aiming to do today is

to model how researchers
use discussions

with their colleagues, often
at research conferences,

to help define their own
work and then test ideas

for new projects, but
in the spirit of CLOSUP

in the Classroom, this panel
really isn't staged today.

Today we're going to
be discussing a project

that we hope to scope out
to become a CLOSUP project.

One of the threads of research

in CLOSUP is the
CLOSUP fracking project.

In the past our activities have
included public opinion research

on attitudes towards
fracking, as well as in-depth

and comparative case
studies, looking at how states

and local governments
are regulating fracking.

Not just environmental
policies related

to fracking operations,
but also tax policy.

This is the current focus of
CLOSUP's director Barry Rabe,

and just last week,
my postdoc colleague,

one of my postdoc colleagues
in CLOSUP, David Houle,

received a grant from
the government of Quebec

to convene a panel

at the Midwest Political
Science Association to talk

about how Canadian and
U.S. subfederal fracking

policies compare.

Anybody that does
research though knows

that sometimes the research
ideas and collaborations come

from odd places, and this map
last fall really caught my eye.

It's from Ceres, a
nonprofit that deals

with sustainable investments
and other business activities,

and shows that much of
the fracking and other oil

and gas related activity around
the country is taking place

in areas that also
have high water stress.

So the red colors are
higher water stress.

To some extent I knew
this, but two things

about this map really
caught my eye.

One is about how much
active fracking basins cross

state boundaries.

You can see those
basins in white.

And as I mentioned, this is some
work that we've been doing here

at CLOSUP of comparing
how different states

regulate fracking.

But another thing that really
caught my eye was how much oil

and gas development there
was in the Great Plains,

right atop the Ogallala
Aquifer which is a resource

that we know is

under considerable
stress from overuse.

This hasn't been something
that CLOSUP has studied before,

but I had been at an event
a couple months earlier

where I ran into Jenna Bednar, a
professor in political science,

and she mentioned her
interest in wanting

to study governance
in the Ogallala.

So this is -- in case you're
not familiar with the outlines

of the Ogallala, there it is.

And you can see if I go
back to the other map,

that there's lots
of overlap here.

Once I saw this map and
shared it with Jenna,

she agreed that this seemed
like the perfect opportunity

to scope out a new project.

So we have expertise in
fracking policy here at CLOSUP,

and Jenna is interested
in water governance,

but we didn't have much
experience in the Great Plains,

and that is where
Margaret comes in.

We found Margaret's work
by combing through fracking

and water -- combing
through the literature,

and her work really combines
fracking and water policies,

specifically in Texas, and
so we invited her here today,

honestly, to better
understand her research

and to pick her brain
and to help us scope

out what this next CLOSUP
project might look like.

So with that, I realize that you
don't have the bios for them,

so I want to give a bio for each
of the panelists, and then step

out of the way and let you
guys talk about what you know.

So Margaret Cook is finishing
her Ph.D. in civil engineering

at the University
of Texas at Austin.

She has a dual master's
degree in public affairs

and environmental and
water resource engineering,

and her research focuses
on using policies, markets

and technologies to alleviate
the effects of water constraints

on fuel extraction
and energy generation.

She's looked at the potential
for mitigation of water stress

in Texas through collaboration
on water conservation

or reuse technologies,
technology improvements

between the energy
sector and others.

She's also examined
the potential effects

of future drought and heat
wave on power generation

at thermoelectric power plants
in Texas and the Midwest.

She has used her expertise
at the Texas legislature,

the U.S. Department of Energy,
Apache Corp., which is one

of the fracking companies,
and Austin Energy

to inform her research.

Jenna Bednar is a professor
of political science

and the Edie N. Goldenberg
endowed director of the Michigan

in Washington Program at
the University of Michigan.

She's also a member of
the external faculty

at the Santa Fe Institute.

She studies how the interaction
between legal systems

and culture affects the
ability of a social system

to withstand shocks and
produce collective goods.

And Barry Rabe is the director
of CLOSUP and the J. Ira

and Nicki Harris
Family professor

of public policy
in the Ford school.

He's also a nonresident
senior fellow

in the governance
studies program

at the Brookings Institute, and
a fellow of the National Academy

of Public Administration.

I've mentioned much of his
research already on fracking,

but should also note
that he recently served

on the National Research Council
Committee on Risk Management

and Governance Issues in
Shale Gas Development.

So I've asked each
of the panelists

to spend just a few minutes
talking about their research

and then I'm going to turn it
over to them really to engage

in this discussion, comparing
and contrasting their work,

and then there will be
plenty of time to open it

up for your questions to
the panelists as well.

>> [Inaudible] Margaret Cook.

I'm a Ph.D. candidate at
the University of Texas,

and I'm from Texas, so it's a
really important place for me,

it's home, it's where
I live now.

I'm from actually South Texas,
which is one of the areas

that blew up with the
shale boom that happened

in the early 2000s, and it's
also a place that's very prone

to drought.

Actually, most of Texas
is very drought prone,

and on top of that, we
had this huge increase

in hydraulic fracturing
in combination

with horizontal drilling,
and that's --

we already had oil and gas
activity, we were already used

to that, but then we added
this hugely water intensive

technology to the system and it
made all of these areas of Texas

that were not previously
economically viable targets

for oil and gas development,

it made them now economically
viable, and they were places

that weren't used to that
oil and gas activity already.

They had maybe agricultural
activity, but not oil and gas.

And then some of them
were next to cities,

and so you had this new friction
in areas that weren't used

to this boom, like the Permian
Basin in West Texas that had it

for decades before,

and so they're getting
used to these changes.

And then in many of these areas
they already had agricultural

water use, they already had
some industrial water use,

power plants, whatever,

some municipal water use
depending on the area.

So already competing
sectors and many

of them were already
over-withdrawing their aquifers,

they were mining them, or
over-allocating their rivers,

and then you add oil and
gas activity on top of that.

And so this last guy in, oil
and gas, marginal water user,

on top of water stress, on
top of a huge one-year drought

in 2011, followed by four years
after that of more drought,

created this kind of
hurdle towards we have

to do something about
this water use.

And so that's kind of the
motivation of my research,

but it's also the
motivation of the 83rd

and 84th legislative sessions,
where the legislators came in,

in 2013 and 2015, to try to make
changes to their water system.

And so that's part of my
research, part of the motivation

for my research, is what can
we do in this water system

to make sure that oil and
gas is not hurting the people

that are in that area.

I mean, the people that are
selling their water to oil

and gas activities are
people that are getting money

for their mining rights.

They're definitely
getting a benefit,

but then their neighbors next
to them, they might not be.

And so we don't want this
social issue of people upset

about water being depleted.

We also don't want to shoot
ourselves in the foot,

even though we do
like guns in Texas,

but we also like our feet.

So we want to make sure that
we have water for the future

and that's something
that we have to plan for,

and a drought is usually one we
plan in Texas, unfortunately.

Pray for rain and then plan for
it, and so that's how we made

that push towards water
savings as a state,

but they didn't get all
the way there and so some

of my research is
what else can we do.

It's what are we doing, what can
we do better, what changes need

to be made on this system.

And one of the particular
things that I think

that we should push more towards
in Texas is water recycling.

So right now we have a permit
by rule system that says

if you're doing it right, you
can do it, for water recycling,

but there's no incentives
for it, and we have a lot

of disposables so
that's also an incentive

to just truck the water
and get rid of it.

And from a water
system perspective,

if you're disposing contaminated
water, you're getting rid

of those contaminants, that's
a really important thing,

but you're also taking
water out of a system

for the foreseeable future, and
that's not normal for that area.

Usually water is being sent
back to the river, evaporates,

goes back somewhere
else, but it's also --

it means that it's not going
to be economically used again.

And so if we could find ways
to, within the market for water

if it exists in the area,
recycle our water and be able

to use it again, that's
something that I think

that the legislature
should do a better job of.

And so in one of the
papers that I wrote I looked

at the policy framework
because we have to know

and understand that, but
then what else can we do

to reduce our water use in
energy, reduce our water use

in the other sectors,
recycle our water,

all of those different things.

So that's just one example of
how we can be better as a state.

I think that's a
good introduction,

you know, [inaudible].

>> All right.

So we had dinner --
I have to confess,

we had dinner together
last night, and Barry

and I just basically spent the
entire dinner grilling Margaret.

She knows so much and
we know so little,

and so that's what I
encourage all of you

to think about right now.

We're going to say a
few things, but really,

we want to turn very quickly
the spotlight back on to her

because as I explained
to her, we in Michigan,

we love our water, right,

but we have a very
different relationship

to water than Texas.

We are the, I guess it's safe to
say, the world's most plentiful

in terms of fresh
water resources.

We have it abundantly in
Michigan and so we're blessed.

Texas is in a very
different situation.

So I just want to -- you know,
I'm a scholar of federalism.

I think about federalism
as a collective action.

Probably my interests
in water management

and water governance has
to do with water resources

that span boundaries,
political boundaries,

which then become governance
challenges because it means

that different political
units need

to overcome their distinct
interests to collaborate,

to manage this shared resource.

So what I want to do is
just give you quickly kind

of a framework for thinking
about this type of problem,

and so then we might
apply it to the kinds

of water governance issues
that Texas is facing,

and more generally, this
interesting challenge that comes

with the water and energy nexus.

Right. So the Ogallala,
which Sarah put a map up,

for those of you who
aren't familiar with this,

it's a massive water
resource that's underground.

Right. So it spans from
South Dakota down to Texas,

eight states in all can
tap into the Ogallala.

In terms of volume, the water
in the Ogallala is equivalent

to Lake Erie and Lake Huron.

So it is truly massive, and
it is the primary resource

for irrigated agriculture
in many of those states

that touch the Ogallala.

So it's tremendously important
for agriculture for the kinds

of things that we eat
every day, like bread.

But those states, of those
eight states, their dependence

on the Ogallala varies
widely, depending, of course,

on their natural rainfall and
their surface water resources.

So where Wyoming and South
Dakota have only negligible

withdrawals from the Ogallala,

Kansas and Texas are very
heavy users of the Ogallala.

So we think of a
resource like the Ogallala

as a common pool
resource; that is,

it's a shared resource
that's finite and depletable.

The estimates are -- even
though it's a massive resource,

the Ogallala is, as I
said, being depleted

and at very fast rates.

So the estimates are that
the lifespan of the Ogallala

at current depletion rates
is only decades; that is,

this is truly an urgent issue.

And if it's already having --

its withdrawal rates

and depletion levels are already
having significant effects

and stresses on farmers
in Kansas and Texas,

and some extent in Oklahoma, so
requiring deeper and deeper --

as the water levels drop,
deeper and deeper pumps

to withdraw that, which are
much more capital intensive.

And so what that
does is, is it drives

out the small scale farmers who
can't afford those larger pumps.

So it has this kind of perhaps
not immediately intuitive

consequence as the
levels are dropping.

So common pool resources create
a collective action problem;

that is, if the users could
agree to limit their use,

this resource could
be sustained.

So it's not hopeless.

That said, unless they
agree collectively and are

able to form some sort
of credible commitment

to that collective
agreement, each one of them,

acting independently, has an
incentive to stick their straw

in and suck as much as possible
as quickly as possible, right,

to get it before the other
users of the system get it.

So this, for a political
scientist, you know,

it's a nasty problem for
those who are using it,

but it's a fascinating
one for us as scientists.

So the Ogallala currently
has no plan

for common resource management
across those eight states.

Some states, and there
are some local districts,

which I hope we'll be able
to talk about a little bit,

who are making some attempts,

but because this is a
collective action problem,

because of the common pool
resource nature of this aquifer,

unless the entire
community commits

to changing its behavior,

these independent actions
actually will lead to what some

of -- if you've studied
the prisoner's dilemma,

the suckers payoff; that is,

those who self-limit are
shooting themselves in the foot.

So in 2009 political
scientist Elinor Ostrom

at Indiana University won
the Nobel Prize in Economics

for her work, both
theoretical and empirical,

studying successful management
of these common pool resources.

One thing that emerged from her
work, which is very surprising

to people, is that it
doesn't require, say,

the federal government to step
in and take over; that is,

the users of these common
pool resources can manage

to form a collective agreement.

She laid out a set
of eight principles

that are commonly seen in
successful management practices.

These include monitoring,
punishment,

things you might
expect, flexibility,

community participation
in the rule setting,

congruence between
local rules and --

between the rules and
local conditions and,

first and most importantly,

a clearly defined boundary
for this community.

So the community of users
must be clearly known to all

who are participating
and all be involved

in the collective management.

So in the case of an aquifer,

they could form an
interstate compact.

This is something that's
allowed under United States law.

The states could collectively
agree upon a set of rules

to manage this resource that
Congress could then okay,

but they haven't done so.

There hasn't been any attempt.

There are some successful
models.

Something that we are
all familiar with here

in Michigan is the
Great Lakes Compact,

a tremendously successful,
I believe,

model that does quite well
with Ostrom's principles.

It was tested recently with the
Waukesha diversion, and although

that diversion was so to divert
the water resources outside

of the basin only by about a
mile and a half, but even though

that seems like a negligible
diversion, it was years

in the making, cost the City
of Waukesha $5 million just

in generating proposals for
this, and over $200 million

in cost to the city to
comply with the terms

that were eventually ironed out
within the compact; that is,

it is a well-tested compact
that is likely to be successful

in managing our resource.

There might be some similar
opportunities in the Ogallala.

So as I close, I just want
to lay out some challenges

with the Ogallala that we might
think about with Barry's remarks

on fracking and then as we turn
things back over to Margaret.

So first, the varying
stress levels.

Groundwater different from
surface water in the sense

that there are varying
replenishment rates.

Nebraska, very spongy soils
so the water in the subbasins

within Nebraska is
replaced much more quickly

than they are in, say, Texas.

There's also a varying
need for it, of course,

because of the differences in
rainfall and river systems,

but those are the kinds
of challenges that ought

to be something that
can be overcome

by a well-worked out compact.

Another big problem
though is the urgency

that I mentioned earlier, that
we really are at a moment when,

by the end of this century,
farmers may not have use

of the Ogallala waters.

And overcoming this challenge
is a political process

and political processes
involve lots of compromises

and can be very, very slow
in coming, so we can't wait.

We need to get moving on this.

Another one which we've
been talking a little bit,

Sarah and Barry and
I, is interesting

about the Ogallala is different
from, say, the Great Lakes,

is this is -- it's underground
so it's a hidden resource,

and I think there is something
quite special about that,

in the sense that there might
not be the same perception

of this being a shared resource

and so there might not
be the same perception

of a natural community, and that
affects the willingness of users

to think about themselves as
participants in this community.

But then, and most
significantly, of course,

for this panel, is fracking.

So the question is are these
new energy opportunities

and economic opportunities
provided by fracking,

is that necessarily competitive

with the other users
of the Ogallala.

We would intuitively think so,

but these two independently
have some ideas about ways

that fracking activities
could actually be helpful

to sustainability goals.

And so I'll let them explain for
themselves the kinds of things

that they've discovered
in their own research,

but it is counterintuitive
and very interesting, I think.

So in sum, the Ogallala, a
very tricky problem on its own,

and the question now will be
with the water energy nexus,

will that be helpful or harmful

to sustainable management
of this resource.

>> Thank you.

In some ways, if you think
of the decade prior to this,

there was enormous
expectation that on a range

of environmental issues, even in
cases where, in a federal system

like the U.S. or Canada,
there was not going

to be new federal legislation
or initiative or some new steps,

that there was so much
concern about a range

of common pool issues

that individual states had great
incentive and growing capacity

to address them, and a growing
likelihood consistent with some

of what you were saying,
Jenna, in Lin Ostrom's work,

that multiple states could and
would come together and form,

if not formalized compacts,
entities to deal with problems,

especially that work
at a regional scale.

A lot of academic work on this,

a lot of very active
policy discussion.

Think about climate change.

If we were meeting seven
or eight years ago,

there would be 23 states,
including this one,

and four provinces linked

in three regional
cap-and-trade zones.

Today that has collapsed to
ten states and two provinces.

Look at renewable energy.

In the Ogallala region there
was a major initiative called

Powering the Plains.

It brought together
Central Plains states,

provinces like Manitoba,
asking how can we come together

and share resources and promote
wind as a collective good

and with it deal with any
negative externalities

that might emerge.

You might find a pulse for that
organization on the web today,

but it's never really emerged

into a sustained collective
action type entity.

And then when you
think of shale,

which has these interesting
multistate components to it

and operates in an area where
neither federal jurisdiction

in the U.S. or Canada is
particularly strong or likely

to be so, similar
questions began to be raised

at the very early
stages of the shale boom

and what would that mean.

Could not only individual
localities and/or states figure

out what the right way was to
be good environmental stewards,

whether that was water,
land use or anything else

within their boundaries, but
could they join together,

particularly in this case that
there had been some tradition

of oil and gas governance
through an interstate compact,

the Interstate Oil and Gas
Compact Commission created many

decades ago.

There was some strong
expectation that river basins,

the Delaware River Basin,
Susquehanna River and the like,

might play a strong
role in oversight

and really bring states
together more substantially.

They do play a role, but it's
largely limited and constrained.

And even in the efforts by
the U.S. federal government,

post-Deepwater Horizon,

to reorganize the Interior
Department inspection process

and create what is now known
as BSEE, the Bureau of Safety

and Environmental Enforcement,

to rethink how we would
do offshore oil drilling.

One of the key missions for
that bureau was to think

about the relationship between
federal and state jurisdiction,

and in an area like the Gulf
where you have multiple states,

including Texas, playing
a substantial role,

what a strong regional presence,

coordinated mechanism
might look like.

We now realize that that
has struggled mightily,

not just on the federal part,

but stitching the cross-state
aspects of the society.

And so I think a challenge
in this area is that often

when we launch a
multistate initiative,

it's the Great Lakes
compacts of the world

that are the exception.

They are really hard to launch
under any circumstances,

but I think in many areas
they are hard to see

as durable examples of policy.

Again, the Great Lakes
case is so interesting

and so different in that regard.

You can launch something, you
can bring something together,

you can have a memorandum
of understanding,

you might even have a compact,
but to sustain that politically

over a period of time,
particularly or possibly

with special challenges in the
energy, in part for the reasons

that you cite, Jenna, possibly
for others, it's really,

really hard to maintain
and sustain that.

Among the challenges, along with
the relative lack of visibility

of some of these energy
sources, are the fact that,

at least in the U.S. context,

a great many states see energy
production and development

as an issue of interstate
competition rather

than collaboration.

States, for the most part,

are actively exploring how
they can maximize drilling

and production.

We have relatively few states
that have put tight constraints

or refused to go forward with
drilling, and that's not likely

to change anytime soon.

We've seen a number
of shifts and changes

in how states regulate.

And Dan Ramey's [phonetic] here,
who's really looked very closely

at these issues in a great
many states and what that means

for localities, and we see
some really mixed outcomes

and results.

But thinking about getting
ways to get, in this case

of our unit analysis of
states, to play collaboratively

over time is really challenging,

in part because what they're
often arguing is they develop

these resources, whether they
are nonrenewable resources

like oil and gas or
renewable ones like wind,

is that a primary driver

for development is
economic development.

So in the case of
portfolio standards

in rural energy development,
whether it's the Ogallala states

or others, the idea is
it's partially related

to environmental goals, but
it's also homegrown jobs

and economic development and
making the case to go forward

with that alternative.

That's really true in all

of these Ogallala
states, by the way.

Whether they have a regulatory
mandated portfolio standard

or not, they are all big
wind production states,

but they've had a hard
time sort of coordinating,

working across borders, really
unique problems and challenge

in this regard with Texas
because of the unique nature

of their grid and
their limited ability

to trade electricity
and move that.

We've seen real challenges
in this area.

One area where I've
had some interest

in asking is it possible
to do it a better way

and don't expect any aha,
takeaway moments on this,

but is the fact that almost all
of the states that engage in oil

and gas development tax it, and
we all know the difficulties

of imposing a tax on
consumption of fossil fuels,

the challenging route to where
any kind of a carbon price

in any jurisdiction in the
U.S. is more than nominal,

or even raising gas tax prices
in a state like Michigan

where the potential
link to the benefits

of improved transportation
are substantial.

It's one of the hardest
things to do politically,

regardless of the partisan
control of government

at that particular time.

These energy extraction
taxes are different.

They are called severance
taxes or production taxes.

They exist in virtually
all states and they tend

to have rather high rates
in states we tend to think

of as averse to taxation.

They're politically
conservative.

States like Texas, states

like North Dakota
have very high rates

and strong bipartisan
buy-in on issues

that we would not
normally expect to see.

Of course, there's
a reason for that.

It's possible to
export a lot of the cost

because the ultimate costs or
transfer of those taxes is paid

at the pump and in a great
many states, including Texas,

most of the oil and gas
is being exported for use

in another jurisdiction.

It's also been traditionally
a way, and certainly in states

like Texas this goes
back to the 19th century,

it is a way to often
cover general revenues

or earmarked funds for a project
like education without having

to impose more visible
and controversial taxes

on sales, property or income.

So if you go into a legislature
in Austin or Bismarck,

North Dakota, or some
of these other states,

to even propose cutting oil
extraction taxes is the last

thing you want to do politically

because these are
popular energy taxes.

And with that then does come the
issue of what you do with all

that revenue if we live in a
society in a bunch of states

that are going to continue
to be producing oil and gas

into the near term future,
or it seems quite likely.

Well, one is that there's going
to be tremendous volatility

and fluctuation in
their revenue produced

because these are often linked
to production and the price

of oil or gas, and we're
clearly seeing that in many

of these jurisdictions.

And for the most part, states
have not gone the direction

of actually thinking

about setting aside these funds
longer term or investing them

in ways that they might try
to reduce or address some

of the negative externalities
that have emerged

or are likely to emerge.

There are a few emerging
possible exemptions to that.

In the Ogallala region one
that jumps out is Colorado,

which has reformed its severance
tax through statute eight times

in the last 15 years, in
each case taking a portion

of that money and putting
it into water conservation,

energy transition, wastewater
treatment, or the like.

That raises all kinds
of issues, too,

then of whether you're becoming
actually dependent on oil

and gas extraction to
sustain the activity.

We're seeing this in a few
other jurisdictions as well.

But those are really
the exceptions.

Those are really the anomalies.

Most of the states that are
producing this bounty continue

to really use it to
suppress other kinds of taxes

that cover some core services,

although with variation
and exception.

So I do think that this is an
area of potential consideration

and interest going forward.

And even in a state like
Michigan, this is a state

that has a history with this

because my understanding is
the first extraction tax passed

in North America was in
this state and was focused

on copper and copper mining.

And the first time this
tax was applied in the U.S.

on trees was the State of
Michigan that was doing a lot

of clearcutting, and so
stumpage fees and that kind

of resource extraction
has been part

of the Michigan [inaudible].

And, of course, we do have
oil and gas extraction taxes,

although we don't do
much production here,

probably won't be going forward,
but they are small sources

and pieces of the puzzle.

Interesting in that
they are a way to sort

of link potentially the impact
of drilling through some kind

of a cost and pricing mechanism.

Here, mindful, and Margaret,
I'd be welcoming your thoughts

on this, where the whole
question of using economic tools

and pricing and fees on any
kind of water production,

preparation, transition
is wrought with political

and ethical considerations
and yet continually comes

up into the conversation.

Do we put a price on carbon, do
we put a price on extraction.

What do we even mean when we
put a price on water and think

about that as something

that might leverage better
public policy going forward,

or do we take that off the table
because the politics and ethics

of doing that are
just too challenging.

So those are a few
additional thoughts.

And I wanted to turn it back
to you before I think we open

up for questions, see if you
wanted to respond to anything

that Jenna or I had to say.

>> Sure. So putting
a price on water.

There are a lot of ethics
challenges with that just

because we need water to live.

We don't want to make it
unaffordable for the people

that need it, and so
that's a good base level

of we need to provide it.

But on top of that we have this
excess water that's not just,

you know, the supporting
life amount of water

that we often sell, and we sell
it to municipalities and we have

to buy it from municipalities
to be able to drink it,

so that's one example.

But ag gets water, energy
gets water, power plants,

oil and gas, industry gets water

and at some point somebody's
going to pay for it.

So there is a price on
water and it changes based

on who owns that water.

So in Texas, for
example, because that's

where I've studied,
the ownership

of water changes how
we're going to pay for it.

And so we have a
surface water system

where we've allocated
water rights

and we have junior
water rights holders

that just got their
water right recently,

versus the older water rights
holders that have had it

for a century or something
like that and they have a lot

of power over the junior
water rights holders.

If there's a drought, the senior
water right holders are the ones

that are going to
get their water,

the junior water
right holders are not,

and they might be
the ones that go

to the senior water right holder

and say can I have
your excess water,

I will pay you a certain
amount of money to get it,

and so then we set a price
for water based on scarcity.

And we set another
price on water based

on just the marginal water user.

If we have all of the
water rights allocated,

which we do in most of our
rivers in Texas, then oil

and gas comes in and they
need water, they're going

to pay a marginal price
for it and it's going

to be significantly higher

than what those other
water users pay.

So another scarcity price.

And that's just surface
water in Texas.

Our groundwater is owned by
the landowner and limited

where there are groundwater
conservation districts in Texas.

They're small, regional
governing authorities

that can set spacing, withdrawal
limits, monitoring policies.

Like you mentioned, it's a best
practice that I would suggest

to them, but not
all of them do it.

But anyway, they can set those
policies on water withdrawal

and that can limit the amount

that the landowners
will withdrawal,

but not significantly enough

that they don't sell
it to other operations.

And so there's a lot of water
sale to oil and gas activities,

especially in South and West
Texas, where their water scarce

for surface water, and so there
are prices on water associated

with that and they're
often lower.

If they're huge water contracts
and for the smaller amounts

that are trucked into areas,
they'll have much higher prices.

And so we do set
a price on water

and because we set this price
on water, we can influence

that market in other ways and so
there might be policy mechanisms

that we could put into place or
just water management situations

that we can influence
where oil and gas activity,

it exists in Texas, it's
going to exist in Texas,

agricultural activity exists
in Texas, it's going to exist

in Texas, but it doesn't need to
compete for water necessarily.

They could work together
where oil and gas pays

for water conservation efforts
that agriculture cannot afford,

they just don't make the kind
of money that oil and gas does,

and a capital investment

for that water could be
also a management technique

for the future, so that they
are using that same amount

of water now, but in the future
there's less water being used.

So that's something that
they can keep in mind with --

the competition that exists
for water now could be more

of a collaboration for
water in the future.

So that's one of the
things that we've studied

in Texas in particular.

And in areas where there's
not a policy framework

for water rights, for
water limitations outside

of the groundwater conservation
districts in particular,

so in areas of the Ogallala
and other aquifers in Texas

where there's not a
limiting authority there,

there's not an incentive
to conserve.

So you have that water
price that exists,

but it's really just an
incentive to sell water.

It's not an incentive to
reduce so I stay under the cap

that exists from the limiting
authority and I can sell water

and farm, I'm going
to farm and sell water

and just use more of
it in those areas.

So that's one of the
problems that exists in some

of our aquifers in Texas,

is we do have groundwater
conservation districts,

some of them are limiting the
amount of water that's withdrawn

in that area, some of them
aren't doing it as well

as they could, and some of them
there is just no groundwater

conservation district
in the first place

so they're just not
limiting it at all.

And we have this patchwork quilt

of regulation that's very
confusing in some cases

and means that we aren't
necessarily managing our

groundwater in particular
as well as we could.

So that's one example of
pricing and management in Texas

that will influence the
Ogallala in particular.

>> [Inaudible] I have a
question kind of drawing

on what you just said.

So I'm hearing that groundwater
conservation districts,

which you have done a good job
of describing a little bit here,

are one mechanism by which
there can be limits placed

that help conserve
that resource,

but some of your research has
also looked at the activities

of -- or the decisions
of individual actors,

of individual landowners
outside of the context

of groundwater conservation
districts that have,

by their own initiative,
then placed limits on that.

I wonder if you could
describe that for the audience,

and then talk a little bit about
whether that's changed norms

in industry, what opportunities
might exist for scaling that up,

whether there's an opportunity
for policy to support those kind

of good behaviors of
individual actors.

And then, Jenna, maybe
jump in on that, too,

how you're collective management
work like informed that.

>> Sure. So landowners,
by nature, with the rule

of capture giving them
ownership of the groundwater

under their lands,
have a lot of power

over how that water is used.

So if I am an oil and
gas company and I come in

and I would like to use
the mining water rights,

so I will probably ask to
use the groundwater rights

in that contract
that I negotiate,

and a landowner can say, yes,
you can use my groundwater,

you will only use
my groundwater,

you will not go outside of this
lease to bring water onto it,

and you can't recycle
it and you're going

to pay me for that water, too.

And they can put that in
that contract and that means

that there's going to be
extra extraction of water

in that area, and that's not
great, from my perspective.

It's great for the landowner
because they're making money.

But they can also, on the
other side of the spectrum,

say you're going to recycle
the water that you use

on my property, you're going
to use only the brackish water

under my lands, and you're
still going to pay me for it.

And so they could get
a competitive price

for brackish water that they
would get for the fresh water,

but they're also saving
the fresh water that's

under their lands and
they're recycling water

on the property as well.

And so there's an example of
that existing in Irion County

where if you went in on
Google Maps, you can zoom in

and you can actually see
the treatment facility.

It's big circles on
the ground there,

so it's pretty cool looking,
if you like that kind of thing,

or disgusting if you don't.

It's brown water.

Anyway, but it's neat because
this landowner used his

particular power because
he had a huge swath of land

in that county where the company
did want to access that oil

and gas and it wasn't
economically infeasible for them

to recycle the water, and
the brackish water price was

competitive to what they
were paying for fresh water.

And oil and gas companies
can use brackish water.

There's no reason
that they can't.

Their frack fluids are
able to use salty water.

We have innovated in that
industry that we can recycle

and reuse water that we
wouldn't want to drink.

So there's not a reason
that we need to be competing

for fresh water as
much as we are.

We have the ability to do this.

And so the companies have
innovated in that direction,

but if they don't have
to or if the landowner is

like the first situation,
not letting them do it,

then we have a problem there.

And so one way that
policy can come in is

to prohibit the ability
to limit the contracts,

but it's questionable
whether they can do

that because groundwater is a
private property right in Texas.

They would be inhibiting
the landowner's right

to sell their water, except

that they're also inhibiting
other landowners' ability

to sell their water
on that contract, too.

So that's something that
the legislature needs

to investigate more, is whether
they're able to influence

that contract design
to encourage more

of the outside water use,

the water recycling,
things like that.

Basically, don't prohibit
recycling as an example of that.

Do you have any additions?

>> Well, maybe I'll just
say something as a way

of encouraging you to
tell us a little bit more.

So, you know, water,
again, something that's

so tricky about it is it flows.

As a resource it doesn't stay
put and so as one person draws,

more will flow in so it creates
these negative externalities

for other potential users.

But one thing that is a
possibility in the Ogallala,

if it's not possible to get the
eight states to form some sort

of collaborative compact,

as we have with the Great
Lakes Compact, which is also,

by the way, eight states,
there may be subbasins

within the Ogallala that
are well-defined enough

that you might be able to create
a smaller scale of community.

Up until the moment that Lin
Ostrom passed away she was

consumed with thinking
about the scalability

of these common pool resource
practices, with monitoring

in particular being much easier

between users who
know one another.

As you take it up in level,
it's not just the complexity

of the interests, which,
of course, is true,

but there's just the anonymity

that for some reason
creates these barriers.

If we can bring it down
to a smaller scale,

then there may be ways

of creating these more localized
successful management practices.

I am totally fired up about
this idea of separating

out fresh water from
brackish water, for example.

And so it would be interesting
to look, for example, in Texas,

at the underground landscape,
if you will, of the Ogallala

and see if there
are these pockets

that might lend themselves
to being imperfect,

but better communities of
management than we have now.

So I don't know to what
extent, you know, we see --

it would be interesting
to look to see

where we have these groundwater
management districts arising;

do they, to any extent,

correspond with these natural
subbasins within the Ogallala.

>> I don't know the
answer to that either.

So there are three major --
in the panhandle of Texas,

so I don't know if you're
familiar with Texas,

but I stole your Michigan hand

and I have made a
Texas hand [laughter],

so we have a panhandle
sticking out on top,

and that basically covering
that entire panhandle area,

almost the entire panhandle,

are three huge groundwater
conservation districts

that were some of the first
created and they were created

because agricultural water
use is really important

in that area, and in the 1950s
we had a huge drought in Texas

that spanned almost a
decade and we were concerned

about both surface
water and groundwater,

and so in particular in
that area they wanted

to manage it better and they
developed these three areas.

And then on top of that we've
added 95 more much smaller

districts, some of those in the
southern part of the Ogallala.

So I would say the northern part

of the Ogallala is more
hydrologically aligned

to the aquifer; whereas,
the southern part in Texas,

though it's all southern.

>> Right.

>> But anyway, the northern part
of Texas, the southernmost part

of the Ogallala in Texas is
more county-sized groundwater

conservation districts.

They're not really
hydrologically aligned.

So those would have
to work together

between the different districts,
and they do that already

in the groundwater
management areas of Texas,

but they would have to have
more groundwater conservation

districts involved.

I mentioned groundwater
management areas.

Groundwater conservation
districts do not cover the

entire State of Texas and
they can set limitations

on withdrawal.

They don't do it for
certain types of wells,

like domestic wells or rig
supply wells for oil and gas,

but for the most part if you've
got a large well on the property

for some type of farming
activity, then you're going

to be regulated by your
groundwater conservation

district, if it exists.

But there are places that don't
have groundwater conservation

districts and they
still have to plan

for their groundwater supplies
and our water planning cycle

that occurs every
five years in Texas,

and so we have groundwater
management areas

that cover the entire State
of Texas so that those areas

that don't have a district
are still sort of governed,

there's still something
kind of planning for them.

And so that also means that all

of the groundwater
conservation districts

that are small districts

in a big area are also required
every year to meet together

to plan for the future
of their aquifer,

and so that would be one example

of this type of bigger, regional
authority that we could use

as an example of the
community working together.

So you have what
is the difference

between these small groundwater
conservation districts

where everybody probably
knows each other or knows

of each other, and they
definitely know who's hogging

all the water because there's
definitely gossip going

around about that, but they
have those small groundwater

conservation districts and then
they have the larger groundwater

management areas, and how
well are those working

to get those groundwater
conservation districts together

to plan for that supply
for the future and is

that actually affecting the
water supply in that area.

And I don't know enough

about those groundwater
management areas

and how successful they
are at limiting the amount

of water that's being
withdrawn, but I do know

that they are responsible
to the planning process now

and that means that we're
actually using numbers

that exist, and not numbers
we appreciate and would

like to exist, to plan for
our water in the future

and that will change
how they manage it.

>> I'd like to follow that and
actually build on your question

from Lin Ostrom, Jenna, and that
is do they know one another.

And one question I've had in
cases like this across states,

say, in the Ogallala -- and
given the fact that most

of these states have very
small governing capacities,

they're part-time legislators,

in some cases legislators
are not allowed

to have any financial
support to leave the state

and go to conferences.

They have very thin agencies.

There's some of you
who heard Riordan Frost

from American University
present his comparative ranking

of the American states,
his eco-efficiency index.

The states of the Ogallala rank
almost exclusively, not Texas,

but almost all the others toward
the very, very bottom in terms

of capacity, performance on a
range of environmental issues.

So there's a question
of how even in the case

of these subbasins
representatives

of different states
would begin this kind

of a conversation is
a challenging one,

from my perspective, and I
don't know that it's going

to change any time soon.

And yet it's intriguing
to hear what you're saying

about the Texas case with
these local districts

and presumably local
water professionals

who are engaging in this.

And I've instructed some other
work that I've done in Texas

to find how deep
these networks are,

and in some cases there
are streams of funding

to staff local agencies,

to build these networks
and connections.

Can you say more about how
these districts are funded

and staffed, and in your
experience whether this work

ever kind of crosses over
into neighboring states

and jurisdictions and has a kind
of cross-state component to it?

Again, here I offer that
because in my experience working

with the National Academy review
of the offshore drilling work,

we just could not find any sense
that states were conversing

at all about contingency
planning,

even after the Deepwater
Horizon incident.

So I'm really curious
your thoughts on how

that might come together
using Texas an example,

and perhaps one of the more
likely states in this region

to even think about
staffing these pieces.

>> Sure. So groundwater
conservation districts are

funded in a lot of different
ways, and I wish I had the map

that showed the different
ways that they're funded,

but they might have
fees that they assess

on water withdrawals, they might
have taxes that they assess

to the entire area that the
groundwater conservation

district is in.

That means that the
landowners and the other people

that do not own land in the
area are still paying taxes,

depending on how it's assessed.

If it's on property, then it's
still just the landowners.

So it really depends

on the groundwater
conservation districts,

and some are severely
underfunded

and so they are the ones

that are probably not monitoring
the water that's coming out.

The better funded the
groundwater conservation

district is, the more
research they're doing

about the water supply
in their area,

the more work they're trying
to do to manage that water.

So it really is closely
tied to the amount

of work that they can do.

And so there's a groundwater
conservation district outside

of Austin that's particularly
well-funded and just

that shining example of this
groundwater conservation

district that goes to the
legislature and advocates

for groundwater management,
but they're also right outside

of Austin, which is
where the legislature is,

and they have the Barton
Springs, which is kind

of a treasure of that area.

So it really depends
on the districts

and finding those
examples of the ones

that are actually trying
to manage their water well

and do the research for it and
have staff that are able to go

to the legislature and advocate

for that groundwater
conservation district those are

the ones to target for this
is an example of what to do.

As far as collaborating
with neighboring states,

I'm not aware of
any collaboration.

I know that we tend to sue
other states for their water.

So there's a little bit of
collaboration between New Mexico

and Texas, especially in West
Texas where there's not a lot

of water to collaborate
over, and some of --

so we have an agreement
with them to give us water

from the Elephant Butte
Reservoir, and they do that,

except that their groundwater
wells in the southern part

of New Mexico are inhibiting
flow into the Rio Grande

and the flow into
that reservoir,

meaning we're not getting as
much water as we were supposed

to get, and now that case
is in the Supreme Court.

So where we do have
agreements with those states,

that also tends to lead to
disagreements with those states

because we're not getting
enough water from them,

especially since
we are downstream

of everyone elsewhere there
is something going on.

The same with, it's not
groundwater, but the Red River

in the northern part of Texas,

there was just a Supreme
Court case over water

that Tarrant Regional Water
District wanted to get

from Oklahoma, and they were
trying to purchase that water.

They were buying it.

They weren't trying to steal it.

But Oklahoma put out a bill
and their legislature said, no,

we will not sell
water to other states.

And Texas said, well,
we deserve this water

because we have this compact,
we need a quarter of the water

in this whole river basin, and
the Supreme Court said, no,

if you deserve that water,
you wouldn't be paying for it.

So we are on the blunt end
of some water situations

and often tend to use the law
to try to get it on our side,

but that doesn't always work.

So Texas might -- with
those situations in mind

with New Mexico, with Oklahoma

and we also have water debt
issues with Mexico as well

because we have a
border river with them,

might inhibit participation
of Texas in a compact

so it would have to be in
their interest to participate,

like somehow if there
was limitation

across the entire aquifer,
it would secure water

for our future, which
is generally the idea

of that compact, but there
would have to be some type

of economic incentive for
them to be interested in that

and I think that's
important for Texas

as a player in that system.

Probably for the
other states as well.

>> Before I -- sorry.

I have to be at the microphone.

Before I open it up, are
there any other observations

or discussion between you that
you want to make sure we get

in before we open
it up for Q and A?

>> I wanted to make
one tiny point,

just because Margaret mentioned
this earlier, but for those

of you who aren't -- you know,

maybe this is your first
exposure to water law.

Water law, it doesn't
treat water the same.

If it's surface water
versus groundwater,

it doesn't treat it as a system.

And so in Texas the same water,
because remember it flows,

can bubble to the surface and
be governed by one set of --

actually, quite well-regulated
set of rules, and then dip

under the surface and
be unregulated entirely.

It's the same water.

Right. So there is something
kind of messed up with the way

that the law manages water
resources and I think

that this makes these compacts,
whether they're very local

or interstate, even
more important.

>> I think that's one reason
why the New Mexico case is

interesting though,
is the problem is

that there's groundwater
wells that they've permitted

in the state that are
withdrawing just a heck of a lot

of water that are affecting
the surface water supplies.

And New Mexico's case
is it's groundwater,

it's not surface water;

and Texas' case is it's
affecting our water supplies.

And so Texas has to
admit groundwater

and surface water are connected
even though they don't do

that in their own policy.

So that's a pretty
interesting part of that.

>> And here I would only add on
this is a complication not just

of states and localities, but of
federal law and federal policy,

as is true in so many areas,
but it's acutely so in water.

We've had so little new
statutory development

or revision of existing
statutes.

Which is if one looks at
the relatively simple,

straightforward question
of assuming authority

for permitting to states
and the 40-year divide now,

where only two states have
that authority, one is Michigan

and the other New Jersey
related to wetlands,

independent of the courts,

but reflecting a
fundamental disagreement

between the U.S. EPA and the
U.S. Army Corps of Engineers,

both of whom look at
different statutes

and see different things for
exactly the same water bucket.

So EPA looks at the
Clean Water Act

and an almost incomprehensible
set of paragraphs in there

about their jurisdiction
and says, aha,

we have the authority, and
ACE counters and says, no,

if we look at the Rivers
and Harbors Act going back

to the late 19th century,
we see the same thing,

and the battles just
continue to rage.

So this is a perennial issue,
but it kind of crosses levels

of government, and I'm not sure
anyone has particularly cracked

this problem and, hence,
it devolves to states

and localities, and
perhaps in a good way

with opportunities here,
but because of an inability

to design an effective
policy regime for a long,

long time in almost
every area of water.