1. Westlands Water District had a fully computerized water market over a decade ago and it was abandoned and the farmers use brokers now. It was a failure.

2. The Murray-Darling Basin in Australia is not a model for a water market in California. Australia is a socialized water infrastructure system and does not issue municipal bonds to build water facilities. They expropriate taxes and build facilities with cash. In the U.S. we use bonds to finance dams and pipelines and that means long-term contracts to buy that water are needed to underwrite the bonds. If farmers had to buy water in a daily or monthly or even yearly spot market no water infrastructure bonds could be issued and no farmers could get bank loans to produce crops.

Moreover, the Murray-Darling basin only serves farmers (not cities) and the water conveyance systems mainly work by gravity flow. California needs huge pumping stations to lift water over the Tehachapi and Mojave Mountains.

And the Murray-Darling Basin separated land from water rights by government edict. So government allocates farmers’ water “rights”. Water rights do not run with the land as they do in California. If California uncoupled land and water rights the property tax based in rural counties would collapse.

3. Water is NOT heavily subsidized. There are NO payments to farmers to reduce the cost of water. Old water facilities have cheap water; new facilities have expensive water. That is not a SUBSIDY.

Farmers pay a huge premium for the price of farm land that has water rights in California. So any assumed water subsidy is offset by having to pay premium property taxes on their farmland. If we cut the water right out to farmers land values would plummet from, say, $15,000 per acre to $100 per acre (desert land values).

If a homeowner has a below market mortgage interest rate, say 4%, and rates climb to 8%, do we accuse homeowners of getting a subsidy? NOOOO! Then why do the economic intelligentsia say farmers get water subsidies?

4. There already is a market for 95% of wholesale water in the State and Federal water systems in California. It is the market in long-term water contracts. Just as homes have long term mortgages that create both a mortgage market and a home re-sale market, water bonds backed by long-term water contracts create a water market.

The other 5% of system water is traded for in the spot market. That is where water prices climb to, say, $1000 per acre foot. The difference between the spot market price ($1,000 per AF) and the price in long term contracts (say $100 to $300 per AF) is not a subsidy any more than your mortgage (say 4%) is a subsidy compared to the interest rate on your VISA card (25%). A VISA card is the spot market for money. Your mortgage is the long term money market.

And a system wide wholesale water market wouldn’t work in California for another reason: why pay for water when you can sue for it?

In an adjudicated groundwater basin a court allocates an amount of water to each participant in the basin. The water is free, but there is a conveyance and treatment cost. Adjudicated water basins are created when one property owner or city sues another alleging the other party overdrafts the basin.

Secondly, environmentalist often get huge allocations of water they do not pay for. They go to court and sue for it.

Imagine if you had a market for new cars but one block of buyer could sue in court for free cars. That would ruin any market.