The value of water: Making the market work in Texas

One of the most fascinating challenges of sustainability is the integration of market system thinking with an ecologist’s understanding of natural processes.  No subject highlights this challenge more than supplying water for Texas’s future.

According to most economists, the market is the best system for allocating goods and services.  However, the current cost to use water from our rivers and lakes in Texas (for municipal, agricultural, and industrial purposes) completely neglects the direct monetary costs inextricably tied to the health and productivity of our bays and estuaries. In this way, our water policy is built upon a false price that needs to be adjusted.  If it is not, our coastal bays and estuaries will not survive.

This false price is tied to policies and concepts that date back to a time before our current understanding of how bays and estuaries function. In the past, water was considered “wasted” if it reached the coast unused. Today, our estuarine ecologists know that the health of our estuaries is directly related to freshwater inflows, and that the water that reaches the coast is absolutely necessary for shrimp, oyster and finfish production.

The state of Texas owns the water in our streams and rivers, but charges almost nothing for using that water.  While notable costs are often expended on necessary infrastructure for the diversion, storage, transportation, and treatment of the water taken from our rivers and lakes, the water itself is essentially a “free good,” available to be claimed by a permit applicant.  

Unfortunately, this water is not “free.” There are costs associated with removing water from a river or lake.  Our science is clear—cause and effect exists between lowered inflows and lowered finfish and shellfish production in our bays and estuaries. 

In 2008-2009, 23 whooping cranes died in the San Antonio and Aransas Bay systems. Their deaths were found by federal Judge Janis Jack of Corpus Christi (The Aransas Project v. Shaw) to have been caused by the water management practices of the state of Texas officials presiding over water management on the Guadalupe and San Antonio Rivers. 

In 2011, Nueces Bay was determined by the Basin and Bay Expert Science Team (BBEST) study prepared under Senate Bill 3 to be ecologically lifeless due to the reduction of inflows from the Nueces River system. And the same fate awaits Matagorda Bay in the near term and Galveston Bay and Sabine Lake in the longer term.

Even though we know that there is harm caused to the estuary from our current and proposed water management practices, Texas does not quantify that loss, much less charge it to the water user.  This can and should be done.

In 1997, Dr. Robert Costanza and a group of environmental economists published “The Value of World’s Ecosystem Services and Natural Capital” in the journal Nature wherein dollar values were set for various ecosystems found on the Texas coast, including estuaries, wetlands, algal flats, and submerged sea grass. This group of economists placed a dollar value on natural functions such as waste treatment and nutrient cycling, recreation, food production, and habitat usage.  These are recognized natural functions that, up to that point in time, had not been valued from a dollar standpoint. These economists’ estimated values ranged from about $11,000 per acre per year for estuaries to about $5,500 per acre per year for marshes.

In The Book of Texas Bays, the acreage of our many coastal ecosystems was presented on a bay-by-bay basis.  Using Dr. Costanza’s value metrics, Sabine Lake, Galveston, Matagorda, San Antonio, Aransas and Corpus Christi Bays together produce about $18 billion in ecosystem services each year from the estuary itself as well as associated marshes, seagrass beds and algal flats.  Over the 50-year life of a typical surface water diversion project, these bays could generate about $900 billion in natural value for all Texans according to these metrics. 

Dr. Costanza’s metrics for ecosystem services have been criticized for including certain services for which no one would pay money, including nutrient cycling. However, other services such as food production and recreation directly translate into income for coastal Texans.  These also can be estimated.

For example, in The Book of Texas Bays, the San Antonio Bay shrimp fishery was determined to be worth about $30 million a year, the crab fishery about $1 million per year, oysters on the half shell about $17 million a year, and recreational fishing about $6 million (based on 500,000 man hours @$12 per hour).  Collectively, these marketable services generated about $55 million a year, a number that does not include indirect economic values.  For comparison, the value of the San Antonio Bay estuary is estimated at $1.4 billion per year using Dr. Costanza’s metrics. 

The Texas Water Development Board (TWDB), the Texas Commission on Environmental Quality, and the Texas Parks and Wildlife Department have worked together over decades to produce excellent computer models such as the Texas Circulation and Salinity Model (TxBLEND) that quantifies the relationship between freshwater inflows and changes in bay salinity. Other models, such as the Texas Estuarine Mathematical Programming Model (TxEMP), have been published that link inflows to natural productivity. It should be noted that TxEMP has been subjected to substantial criticism and alternative models can and should be developed. However, TxEMP has been peer-reviewed and published, and is the best model available. 

Given the criticism, care should be taken in the use of TxEMP, yet it is instructive to use this model for illustrative purposes.  If one assumes  that water in the Guadalupe and San Antonio Basins was managed to provide inflow of 1.15 million acre feet (the value which TPWD staff determined to be the lowest target value to fulfill the biological needs of the Guadalupe Estuary System) and if a water supply project were to remove an additional 100,000 acre feet through diversion or impoundment, the bay inflow would fall to about 1.05 million acre feet. 

According to TxEMP, the difference in natural productivity, between what would be produced by the inflow recommended by TPWD and the inflow after a new diversion, for brown and white shrimp, redfish, crabs and oysters is about 14%. This does not include myriad other species found in San Antonio Bay. 

If one assumes that this reduction occurs once every three years, a 14% decline in the reported values for those identified species results in a projected loss of $130 million in natural productivity over the 50- year life of the proposed water project.  During the same time period, the use of Dr. Costanza’s metrics results in the loss of a stunning $3.3 billion.

This dollar loss in coastal productivity can then be allocated to each gallon of “new” water created by the hypothetical project. In the foregoing reservoir example, the TxEMP coastal impact analysis results in a cost increment of $1300 per acre foot.  This cost would be added to the projected cost per acre foot of water production from the new project which was estimated to be about $800, leading to a net cost of over $6 per thousand gallons. For comparison, desalination currently is estimated at about $6 per thousand gallons, a cost that is clearly competitive if the “full cost” of that surface water is calculated and charged. With Dr. Costanza’s metrics, the cost of water produced would rise by $33,000 per acre foot, or about $101 dollars per thousand gallons.

This example is just that—an example. It is intended to communicate what can and should be done to guide future water planning. There is no doubt that we can kill a bay by depriving it of fresh water.  There is also no doubt that we can develop the tools to predict the incremental costs of these harms.  It might take a couple of million dollars per bay system to create fully defensible models, but it can be done.  We just have to want to know the full cost of our water. 

Recently, State voters approved the use of up to $2 billion by the Texas Water Development Board to facilitate development of new water projects. The TWDB should be commended for its willingness to consider innovative approaches for water supplies. In the same vein, the expenditure of this money should be guided by science and the market working together to insure a future that has both adequate water and productive bays and estuaries.  

Jim Blackburn is an environmental attorney, and a professor of sustainable development and environmental law at Rice University in Houston. He is the author of “The Book of Texas Bays” (Texas A&M University Press, 2004). 

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