August 31, 2006  

Donald B. Marron

Acting Director

Congressional Budget Office

Ford House Office Building , Fourth Floor

Second and D Streets, SW

Washington , D.C. 20515-6925  

Re: August 2006 CBO Report – “How Federal Policies Affect the Allocation of Water”

Dear Mr. Marron: 

On behalf of the Family Farm Alliance (Alliance), I have prepared this letter to summarize concerns Western family farmers and ranchers have with the August 2006 Congressional Budget Office (CBO) report titled “How Federal Policies Affect the Allocation of Water”. 

Family Farm Alliance Background 

The Alliance advocates for family farmers, ranchers, irrigation districts, and allied industries in seventeen Western states. The Alliance is focused on one mission - To ensure the availability of reliable, affordable irrigation water supplies to Western farmers and ranchers. Most of our members receive their primary irrigation water supplies from federal water projects. Family farms and ranches of the semi-arid and arid West– as well as the communities that they are intertwined with – owe their existence, in large part, to the certainty provided by water stored and delivered by these projects. 

CBO Report Background 

The CBO report examines the mechanisms that govern water allocation, how they affect the benefits that accrue to society from its use of water resources, how those effects might change over time, and what influence federal policies could have on such considerations. We understand that the paper was prepared in response to a request from Rep. Napolitano (D-Southern California), the Ranking Member of the Subcommittee on Water and Power of the House Committee on Resources. The CBO report is similar to other East Coast assessments we’ve seen of Western water issues. From our standpoint, this report fails to recognize the real issues, and in so doing simply adds to the "body of literature" on water policy that might one day be used to justify ill-conceived changes in federal water policy affecting irrigated agriculture. One of the key objectives of the CBO report is to identify those policies that the federal government might consider to reallocate water to “maximize potential benefits to society as a whole.” Incredibly, though, this report does not even attempt to look at finding ways of enhancing Western water supplies. 

Concerns with the CBO Report 

The CBO report, unfortunately, carries the arguments of some who have found it desirable to pit the needs of the growing cities against the farmers whose forebears settled the West. We do not believe that the government should be in the business of re-allocating resources. The duty of the government should be to enforce existing laws and facilitate monies from the tax base for new projects approved by the voters. 

The CBO report finds that the Commerce Clause gives the Congress the authority to allocate interstate waters to serve the national interest—even if doing so means overriding state law. It fails to report, however, that the Commerce Clause also gives Congress the authority to protect vital industries such as agriculture, which have a direct impact on interstate commerce, as opposed to an indirect impact like reallocation of interstate waters. Further, the report does not address how this will impact existing compacts and treaties, and leaves the reader with the impression that those critical documents would simply be voided.

We do not support the CBO report’s finding that the government could increase its efforts to facilitate the market exchange of various types of surface water and groundwater rights and storage entitlements. These measures will not address competing needs for inadequate water supplies. It’s simply ludicrous to believe that reallocation alone will supply enough water for the tens of millions of new residents expected to arrive in Western cities during the coming decades. 

The report suggests that, “to facilitate efficient water use”, policymakers could reconsider agricultural water “subsidies”. The report does not clarify that the federal “subsidy” often pointed to in early Reclamation projects was merely a forgiveness by the government of interest on the capital expenditure of these facilities. In many instances, local water users have long since paid off the capital expenses. An important social goal of the original 1902 Act was to distribute this reclamation “subsidy” widely and in such a fashion as to benefit the small family farmer and to benefit society as a whole. Like the Homestead Act, it envisioned 160 acre farms providing farming opportunities to as many families as possible. Like the Homestead Act, the Reclamation Act of 1902 was remarkably successful. 

The CBO report suggests that the government could address the demand for water directly—using approaches such as cost sharing for improvements to irrigation systems and conservation plans for irrigators who get water from federal infrastructure projects.

Apparently the authors of the CBO report are unaware that “cost-sharing” programs are already built into federal water programs and assistance programs that serve individual irrigators. The storage and delivery systems are eventually fully paid out by water users. Programs like the U.S. Department of Agriculture EQIP require at least 25% of irrigation system improvements be paid by landowners. In the past four years, hundreds of irrigators in the Klamath Basin have spent over $12.5 million of their own money to replace flood irrigation systems with sprinklers and center pivots. Comparable expenditures have been made by farmers throughout the West. 

The CBO report virtually ignores the negative implications of reallocating more agricultural water supplies to meet new urban and environmental water demands. At what point will too much agricultural land be taken out of production? Do we want to rely on imported food for safety and security? The Europeans, who have starved within memory, understand the importance of preserving their food production capability. They recognize it for the national security issue that it is. Unfortunately, the authors of the CBO report apparently do not. 

Farmers, city dwellers and environmental interests do not have to be at odds regarding the management of such a critical resource. We must recognize that cities cannot expect to grow at an infinite pace with an expectation of cheap water. We must recognize that solutions such as better water management and conservation are part of the solution. And we must recognize that the storage of water, including new storage, facilitates the capture of this scarce resource in times of plenty. 

An Alternative Vision 

As the West has grown, water issues have become increasingly polarized. The CBO report supports the argument made by some that society no longer needs irrigated agriculture in the West, and that we should simply reallocate the water historically used by farmers and give it to cities and the environment. We reject that argument, but would welcome a serious national debate on the question of whether American agriculture should be preserved. We are confident that any critical examination of that question will yield a resounding conclusion that agriculture is vital to the nation. Perhaps then misguided efforts like the CBO report will be replaced with meaningful studies designed to protect this essential national resource while addressing other needs. 

The Family Farm Alliance believes that it is possible for the West to continue to lead the world in agricultural production while finding ways to accommodate exploding urban growth and environmental needs. The solutions will require visionary leadership and a firm commitment to a balanced, workable policy. The Alliance believes the following recommendations can form the basis for that policy. 

            1. The overriding goal of federal water policy must be to provide certainty to all water users; agricultural, tribal, municipal, industrial and environmental, who are dependent on commitments made by the government. 

            2. When water laws and environmental laws conflict, balanced solutions that respect treaty and contractual obligations must be the goal. 

            3. State laws and institutions must be given deference in issues relating to water resource allocation, use, control and transfer. The best decisions on water issues happen at the state and local level. 

            4. Renewed and continued support for the development of new, environmentally sound, sources of water supply is essential. New water supplies must be developed if we want to solve environmental problems, allow for population growth and protect the economic vitality of the West. 

A “politically correct” mindset seems to have become fashionable when it comes to Western water policy. That mindset assumes that the policies of the past, the policies that enabled the West to be settled and to flourish, have now outlived their usefulness and practicality. It is a belief that we no longer need to manage Western water resources in a manner that continues to encourage investment in agricultural production. And many times, it is also a mindset that believes that the continued development and use of Western water resources for agriculture is inconsistent with the nation’s goals to protect and steward the environment. 

Western water policy, over the past one hundred years, is one of the great success stories of the modern era. There are over 180 federal water projects in the 17 Western states, which provide water to more than 31 million people, and provide 140,000 farmers with irrigation water on 10 million acres of farmland. These lands produce 60% of the nation's vegetables and 25% of its fruits and nuts. Millions of acres of arid Western desert have been transformed into the most efficient and productive agricultural system in the world. 

A 1998 study by Dr. Darryl Olsen and Dr. Houshmand Ziari, estimates the impact of irrigated agriculture in the Western states to be $60 billion annually (direct and indirect income). The annual return to the economy from the $11 billion investment in the federal system has been estimated at $12 billion annually. In other words, the economy of the United States receives a greater than 100% return each year on this investment. 

Irrigated agriculture isn’t a good investment, it is an incredible investment. It continues to be a leading economic driver in the West. However, the successes of the past have not come without a cost. The incredible expansion of the population, physical modifications made to rivers and streams, and agricultural practices themselves have impacted the environment. It is these impacts that are now causing many to question the policies of the past. 

Resolving these issues without destroying what we worked so hard to achieve is the challenge that we all face. But to be successful, we must face them together. No resolution will be found unless we find a way to balance all competing needs in a way that supports continued growth of irrigated agriculture. 

By recognizing the value of irrigated agriculture; by creating an environment where an adequate degree of certainty exists; by respecting commitments upon which investments have been made and by following the basic principles outlined in this letter, we can together solve the water issues that today seem so insurmountable. 

Thank you for your consideration of this matter. 

Sincerely, 

Dan Keppen

Executive Director 

cc: The Hon. Saxby Chambliss, Chair Senate Committee on Agriculture, Nutrition and Forestry 

The Hon. James Inhofe, Chair, Committee on Environment and Public Works

The Hon. Robert W. Goodlatte, Chair, House Agriculture Committee T

The Hon. Richard Pombo, Chair, House Resources Committee

The Hon. Don Young, Chair, House Transportation and Infrastructure Committee