Author Archives: Rodney T. Smith

About Rodney T. Smith

Rodney T. Smith, Ph.D., President of Stratecon Inc.—an economics and strategic planning consulting firm—advises public and private sector water users on the acquisition, sale and leasing of water rights and water supplies in the western U.S. He is routinely involved in economic valuation of water rights, water investments, and negotiation of water acquisition and transportation agreements and has served as an expert witness in the economic valuation of groundwater resources, disputes over the economic interpretation of water contracts, economics of water conservation and water use practices, and the socio-economic impacts of land fallowing. For more information, see www.stratwater.com.

Texas Laments Unreliable Water Deliveries from Mexico

In his article “The price Texas pays for Mexico’s water debt” recently published in the Texas Water Journal, the chairman of the Texas Water Development Board, Carlos Rubenstein, calls for active participation by the U.S. State Department, White House and Texas officials to have Mexico live up to its obligations under a 1944 Treaty between the United States and Mexico. The article is an excellent source for a concise history of the 1944 treaty and projects and summarizes the economic hardship suffered in the Rio Grande Valley when there are inadequate water supplies. It is less successful in identifying the water resource management problems facing the parties.

While Mexico may indeed have a “water debt problem”, it is not the one identified in the article. Texas’s interpretation of the 1944 treaty is not correct. The real challenge is how can the parties work together to create reliable water supplies in the face of highly variable hydrologic conditions. Continue reading

City Slickers Come to California’s Central Coast:

Harvard’s Continuing Education in California Groundwater Rights

On January 22nd, Reuters posted an article “Harvard Buys Water Rights in Drought-Hit Wine Country.”  An email flurry broke out with seemingly everyone in my contact list sharing a link.  The article reported that the Harvard Endowment “has quietly become one of the biggest grape growers in California’s drought-stricken Paso Robles wine region, securing water well drilling permits to feed its vineyards days before lawmakers banned new pumping.”  According to Reuters, a wholly-owned subsidiary of the $36 billion Harvard Endowment Fund has spent more than $60 million to acquire 10,000 acres in Santa Barbara County and San Luis Obispo County since 2012.  Harvard’s entity now numbers among the top 20 wine growers in Paso Robles.

Reuters asks was Harvard’s move a “well-timed water play”?  Is it?  Nope.  Instead, it is covering itself from investing in vineyards in a region with a rapidly increasing groundwater overdraft problem. Continue reading

Is BDCP a Doable Deal Redux—Part 2

After reading the California Debt and Investment Advisory Commission’s study (“CDAIC Study”) on Bay Delta Conservation Plan (“BDCP”) financing considerations and risk, State Water Project (“SWP”) contractors and (especially) Central Valley Project (“CVP”) contractors should take a fresh look at the financial realities of relying on the BDCP. Unlike the study’s discussion of BDCP affordability,  which was marred by economic flaws, the study offers a useful discussion of financing and risk that water agency board members should consider as part of their fiduciary duty in making BDCP decisions.

The study makes a good first step in scratching the surface of risk assessment of the BDCP. Prudence requires more risk assessment. Continue reading

Is The BDCP Doable—Redux, Part 1

Call me skeptical. After reading the California Debt and Investment Advisory Commission’s The Bay Delta Conveyance Facility: Affordability and Financing Considerations, my skepticism metastasized.

  • The affordability analysis buries the cost of BDCP water—although it creates the opportunity for teachable moments in economics. (Part 1)
  • three card monteIn contrast, the discussion of risk and financing considerations must be studied by anyone who has invested or intends to invest a nickel in the BDCP. (Part 2)

WARNING: you may regret your actions.

Continue reading