Odd Lots - Understanding the Real Fight Over Water in Arizona

Episode Date: July 14, 2023

Arizona recently announced new constraints on housing development in the areas around Phoenix. At issue is water rights and scarcity, which have been a challenge for the US Southwest for as long as people have been living there. That being said, the region is currently in the midst of a 25-year megadrought and when you combine that with booming growth, difficult choices may have to be made. But how do water rights get divided? Who holds them? How much is water worth to the housing developers, farmers and semiconductor manufacturers that have flocked to the state? To learn more, we speak with Kathryn Sorensen, director of research at the Kyl Center for Water Policy at the Morrison Institute for Public Policy at Arizona State University. We discuss both current and past water management practices in the state.See omnystudio.com/listener for privacy information.

Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Wisenthal. And I'm Tracy Allo. Tracy, Arizona Water. I'm like, I'm really fascinated by this topic. And I also have a really hard time wrapping my head around it. We sort of hear different things. So just to lay the groundwork here or the groundwater, ha, ha, ha, ha.

We have interviewed a land broker in Arizona. And we have also interviewed an alfalfa farmer. Yes. And water has come up every time. And we sort of hear different things from those two stakeholders. So I remember the farmer was sort of blaming the property developers for water shortages. And then the property developers are like actually agriculture uses the majority of water in the state. And at the same time, you have concerns over water availability. And we saw some news on that front recently. Yeah. So at the beginning of the month, I believe the governor of Arizona announced this plan to sort of constrain the amount of new development that will be allowed around the Phoenix area, which is,

of course, one of the fastest growing areas. And as you mentioned, like, the developers will say, oh, we have plenty of room to add more homes because the farmers are taking up 80% of the water that we have in the desert. And the farmers say, well, there wasn't really a problem with water until everyone started moving to our state. I'm imagining that Spider-Man meme of everyone pointing fingers at each other. But I think the big difference and what's happening now is that we are starting to see water shortages or constraints affect development decisions. Right. So then the big question is like, okay, so Arizona and some of these other southwestern states that in part get their water from the Colorado River all have to conserve water to some extent. There's been this mega drought in the southwest for I think like 25 years now. some of the underground aquifers, they're depleting at some pace.

The water from the rivers is lower than it used to be. So, and then, and we hadn't even, you know, we were talking about housing versus agriculture. There's also a lot of industry and the semiconductors. Yeah. So we sort of have to get a sense, I think, of the big picture of like, frankly, who's going to lose out? Yeah. Who has water today that won't have access to it in the future? Right.

And how do you make those decisions? How do you decide what to prioritize? Right. Because with all utilities, it's never like a pure market. There's not just like a, or at least I don't think. You know, it's like when you try to wrap your head around like how the Texas grid works. You know, it's not like there's like some price of electricity and who pays the most. It's like there's auction mechanisms, there's subsidies, et cetera, all kinds of complexity.

Texas grid is a bit of a special case, but point taken. I think, I think Arizona water might also be in that case of many special cases. So we really do have the perfect guest, someone who is steeped in water. and water policy and made a whole career of it. We're going to be speaking to Catherine Sorenson. She's the director of research at the Kyle Center for Water at the Morrison Institute for Public Policy at Arizona State. Previously, she was the head of Phoenix Water Services. So someone who really knows water and going to break it down. So Catherine Sorensen, thank you so much for coming on Odd Lots. I really appreciate you joining us. Thank you. I'm really excited for our conversation.

Why don't you start just in the very sort of just go back a little bit a few weeks ago? And the governor of Arizona did announce these constraints to some extent on new construction capacity around Phoenix. What was announced and why? Yeah, that's a great question. And there is a complicated answer to that. I told you it's not going to be an easy one. No. It's not an easy one.

So what that related to was actually a sustainable groundwater management in the Phoenix metropolitan area. So in Arizona, we have some of the most progressive groundwater management laws that you will find not only in this country, but literally in the world. Back in 1980, we passed groundwater management that effectively ties water availability. to the ability to grow. And so what that means is that if you're going to subdivided land, which is typically how growth occurs, particularly for, you know, what we call subdivisions, right? Like residential subdivisions.

Right. In the Phoenix metropolitan area, if you are going to subdivide land and grow, you have to prove that you have 100 years of water available for that development. It is a really high bar to me. Necessarily so because you can imagine that people will only invest in our economy. Enterprises will only come to the Phoenix area if they understand that we have secure water supplies. Because we're out here in the middle of the desert. Right. So what the governor announced was actually that all the groundwater in the Phoenix metropolitan area is essentially spoken for.

It is allocated and expected to be used. by those who have a right to it over the next 100 years. So our announcement really was that you can continue to grow, but if you are going to continue to grow, it needs to either be in a place that already has demonstrated this 100-year assured water supply, or if you're going to grow out on the fringes of the Valley of the Sun, outside of the boundaries of places that have this 100-year assured water supply designation,

you can't grow on groundwater. You can grow on other water supplies, but not groundwater. So it was essentially a way of protecting the groundwater so that it is available for those who already have a claim to it and for those who come after. So let me ask, let me back up even further all the way, I guess, to like the pay Pileolithic era. But when we talk about water availability in Arizona and in Phoenix specifically, setting aside constraints currently, how much water is there and where is it coming from? Because, of course, you distinguish between groundwater versus other sources. So what exactly is available in that

area? You know, I love this question because it's super important. Central Arizona in particular is blessed with very large and very productive groundwater aquifers. That means, in layman turns, there's a lot of groundwater. Unfortunately, it's fossil groundwater, meaning that it is not annually renewed by Mother Nature at any significant rate. It's like an oil field. Right. Okay. And probably more valuable to us, I will say. So, but Arizona also, of course, has its own rivers. Those rivers are depending on snow melt from our mountains. And Phoenix in particular is located where three of the state's main rivers come together. So although people, you know, criticize Phoenix for being a big city out in the middle of desert, what they don't really

understand is that Phoenix was actually very carefully chosen by ancient Native Americans who first settled there and who have lived there since crime immemorial because, is where three big rivers come together. So there's a large amount of surface water. There's also this native groundwater, fossil groundwater. And then we import Colorado River water from Western Arizona into Central Arizona as well. So there is a lot of water. There's enough water for what we most value.

I think the question is that there is probably not enough water for everything. So we really have to dial in on what are these things, what are these enterprises, what are these uses of water that we most of them? I guess we'll just keep jumping back and forth between the current time and history, the ancient era. But you know, you mentioned that per the governor's new order, that if you want to build or grow, in certain areas, you can still do it. You just have to find another source of water that's not the groundwater, that the ground, that the hundred years of groundwater availability is essentially spoken for already. Can you talk through, I guess, some of the, maybe it's the economics or the considerations that would go, you know, into thinking like, okay, some entity wants to grow.

What is the second best source of water for them that if they no longer have access to the sort of underground fossil water. So it is all about economics. There are alternatives. The question is how expensive are those alternatives? And would you not just be better off economically by developing more in the center of the Valley of the Sun in the Phoenix metropolitan area where there is already a 100-year water supply designation?

Right. This in some way balances the economics between continued sprawl, which was cheaper on groundwater versus infill development where water supplies are more assured. But yeah, there are alternatives.

There are farmers that are willing to basically sell their higher priority water rates and an entity could theoretically purchase those water rights off of the main stem in western Arizona, the main stem up of the Colorado River, and import them through the Central Arizona Project Canal into Central Arizona. That is hugely controversial, not to mention extremely expensive. But for example, the town of Queen Creek, which does not have a designation of a 100-year-old water supply, the town of Queen Creek is in the process of doing just that because they want to continue to grow.

So for them, the economics work. For individual developers, though, I think that's a much steeper proposition, right? It's one thing for an entire town to decide to import those types of supplies. If you're just an independent developer, that might be substantially more difficult to get it. But that is a possibility. there are also Indian tribes in Central Arizona that at least historically have been willing to lease some of their water for these purposes. It's really expensive, but it's possible. There are also groundwater basins outside of the Phoenix metropolitan area that are specifically designated for the purpose of being pumped and

transporting that groundwater into the Phoenix metropolitan area. Sort of like an Owings Valley in California, if you know that story. You pump someone else's groundwater basin dry and import it into an urban center. Not saying that's sustainable, but it is legally feasible in Arizona. And then, of course, there's reclaimed water. There's the potential to use desalinated brackish groundwater or ocean water. there are alternatives. These are all just really, really expensive.

So if you're a developer, you've got to be thinking, okay, would I rather try to pursue this continued sprawl-type subdivision development or might I be better off purchasing more expensive land that comes with an assured water supply? Sorry to jump back and forth again, but can I ask another backup question? You guys can jump wherever you want to do. It's all good. I think we're on like two separate. timelines. No, but I find it helpful for like thinking about like the different types of water

and set. You're totally right. Well, okay, so just on this note, but the current water constraints, what are they being caused by? Is it simply economic development and population growth? Is it climate change? I imagine it's a combination of a bunch of different factors, but can you maybe explain the constraints to us and then how those constraints inform the current thinking around water availability? So the constraints relating to groundwater that I described have to do both with farming and with continued urban development. You can imagine there are a lot of demands on our aquifers, right? There's continued farming in the Valley of the Sun. Farming in the desert southwest is a very water-intensive enterprise. Farmers continue to draw from the aquifer and they

have the ability to do so in perpetuity. They were essentially grandfathered in to the groundwater pumping restraints under the 1980 Groundwater Management Act. So they have a perpetual right to pump and they continue to do so. And then, of course, the cities have grown in population as well, particularly since World War II. And, you know, they draw on the aquifer for potable water needs as well. And then there's various industries that also draw from the aquifer. And so I think it's a combination of all of those demands that are creating the constraints on groundwater.

Essentially, what the state is coming out and saying is that, look, all that groundwater is spoken for, you know. And not just spoken for today, the state looks out 100 years. We're very proactive about our water management out here in the desert because we have to be. but what the state is saying is that that groundwater over this 100-year chunk of time is spoken for. So those constraints are kind of caused by a combination of all those demands, but also the intentional regulatory decision to protect and guard those resources for the future, right? The state is essentially signaling, no, we're not just going to let you to flink this off until there's nothing left. Regarding surface water, that's a really different

constraints. So I mentioned that we have that Phoenix is located where three major rivers come together. The value of the sun is is lucky to enjoy the flows of the salt inverting rivers. That river system is actually managed by the Salt River Project, it's called. It is one of the Bureau Reclamation's oldest projects and dates back, I believe, to, oh my goodness, 190. 1910, I don't know, I'll probably have that wrong. It's very old. It predates statehood for us. The flows of that system actually are relatively resilient and sustainable, even in the phase of climate change. There's a couple of reasons for that. Scientists have studied the hydrology of those watersheds, and certainly climate change will affect those watersheds. We can't expect some diminishment of snowpack and precipitation in our mountains.

But the way I understand it, not being a hydrologist, is that they're saying that, look, you know, Arizona's already baked, right? It's already hot and dry here. And yeah, it might get a little hotter and drier, but they don't expect that the flows of the Salt and Bertie River system will be affected as much as, for example, the flows of the Colorado itself might be affected. And then if you add to that, the fact that the entire valley of the sun, the whole Phoenix metropolitan area, used to be agricultural.

And that, again, dates back all the way to time immemorial with the Native Americans who first farmed this valley. And in fact, our modern-day canal system follows in many ways the same ancient canal systems that Native Americans first did. So we were always an agricultural valley. Particularly during World War II, a lot of that agriculture increased because of the need to grow cotton for war material. And at the time that Bull Weevil was decimating cotton in the southeast. And so Arizona was a natural place to grow it. And our cotton yields are very high because it turns out all cotton weeds is water and sun. And we got a lot of sun.

So we've been in agricultural valley. Now, what's interesting about that is that it takes on the order of three to six acre feet per acre to grow cotton or alfalfa in our hot desert sun, whereas it only takes about an acre. an acre foot per acre to grow a subdivision. Urban water uses are much less intensive per acre than farming this. And so interestingly, as the Valley of the Sun converted from what was largely an agricultural valley into an urban one, there was a natural water savings built in. So whereas we used to use about one and a half million acre feet of water off the Salt and Bertie River system. Today, that system delivers about half that amount.

So there's just this very natural water savings that is built into the way we grew. And then I'm sorry, I'm being really, I'm not. No, this is great. This is really interesting. Okay, good. Stop me at any time. But then if you take a look at the Colorado River system, that's where we have just some real problems.

the Colorado River system is over allocated probably at least by 1.2 million acre per year, maybe more. And then if you add on top of that, the fact that we've been experiencing, you know, as you said, 20 years of what has been one of the worst droughts on the paleo record. And the fact that the climate is changing and scientists are telling us that the flows of the Colorado a river might diminish by as much as 30 percent. You know, that's a really big problem. Right. And I think that's that's why the commissioner of the Bureau of Reclamation came out and said, hey, look, guys, you're going to have to cut nillies of acreby in water consumption to stabilize this river system. So, I mean, that was a great answer. And you sort of hit on things that both of the other guests that we've talked to about this topic brought up and see it from their angle. And so, you know, we talked to

Chase Emerson, a real estate broker, and he made the exact point that you made that actually as Arizona's water consumption shifts from agriculture to residential use, it actually results in net savings and actually improves the sustainability. On the other hand, you know, we talked to an alfalfa farmer, and he's like, you know, our family's been doing this on this land for eight generations or something like that. And so, you know, as you noted, you know, you mentioned that farmers are sort of grandfathered in. So can you sort of quantify or talk about the sort of implicit subsidy to agriculture that comes from having been grandfathered in? And like, what is the gap between how much, say, farmers are willing to pay for an acre foot of water

versus, you know, a housing developer either inside the valley of the sun or nearby? You know, the subsidy doesn't really come in the form of water. Okay. Let me explain that in a couple of ways. Yes, under the 1980 groundwater management act, farmers were basically grandfathered in, and they have a perpetual right to pump groundwater. I guess you can view that as a subsidy, though the cities and private water companies that also lay claim to groundwater don't really pay much for that groundwater either.

Okay. Right. And I don't know that I would say that farmers are subsidized so much. I think that the difference in the cost that a developer pays for water versus what a farmer pays for water really has more to do with the fact that development is not allowed to rely on mining this fossil groundwater. And instead, they have to invest in renewable surface water supplies and particularly in the infrastructure necessary to deliver it to customers tax. So I think that really the cost difference has more to do with the acquisition of renewable water supplies and the need to develop infrastructure, if that makes sense. Yep. And on the Colorado River, it's different.

So the Groundwater Management Act applies to central Arizona. It does not apply to Western Arizona. And in Western Arizona, on the main stem of the Colorado River, the farmers and Indian communities have the highest priority water rates. Because, of course, Western water lives based on first in time, first and right. Turns out Native Americans were here first. Turns out, you know, farmers kind of came along next. And so they just, they have the highest priority water rates.

Any subsidy that they receive really relates more to the infrastructure. Got it. That often, but not always, has been built by the federal government, typically with repayment provisions, though at times those repayment provisions are lax, I guess. Does that make sense? It does. Yeah, absolutely. It leads into something I wanted to ask you, which is you mentioned infrastructure there. And I guess one question I have, you know, maybe even before we get to tougher decisions about constraining development or maybe pricing water in a different way.

But to what degree can these water constraints be solved with better water management and newer infrastructure? Reinvestment in aging infrastructure will certainly help. But it will not be the answer. It's difficult to deploy that at scale. So, for example, when I was Director of Phoenix Water Services, I asked the engineers to calculate how much water the city of Phoenix was losing to leaky pipes. Now, to put that in context, here in Central Arizona, the cities are regulated such that their water losses in their distribution systems cannot exceed 10%, which is very low. If you look nationwide, water losses are probably at least something more like 30%.

But because water scarce here, we're regulated to a higher standard. But the amount of water that is lost in Phoenix water distribution system pipelines is about 25,000 acre feet of water per year. That's a lot of water. But when you're talking about a problem on the Colorado River, that is, on the order of 2 million acre feet, you're not going to get there. So it's probably a part of the pollution space. I think an important one. I can get out my pipeline soapbox if you want. too, but I think that investing in pipelines is probably one of the best things we can do for water quality and for water resiliency.

But it's unlikely to be deployed at scale to fix the problems on the Colorado. Can I ask a question about perspective? Because, you know, I don't have any impulse. I mean, I really like the Southwest. But it's very unlikely that I'm going to be moving to Arizona anytime soon. That being said, I regularly do consume food, including beef, that may have come from. cows that may have eaten alfalfa that was grown, you know, in Arizona. So I have a fancy race horse that's eating alfah. Is that what you're about to say?

No, I don't own a horse that consumes it. But like, I eat, I eat food. And the desert, other than not having much rain, seems to be a pretty great place to grow food due to stable conditions and other things that you've already talked about. When thinking about Arizona water policy, you know, obviously there's the interest of the developers. and the people who want to move to Phoenix for cheap land, et cetera. But how should we weigh sort of U.S. food security, the interest of food exports, the interest of fairly affordable food? And how much does that inform sort of policy choices that go into the state's water use?

So, you know, the U.S. is a very large country. And certainly we have enough land to grow what we need to grow. It comes down to economics and inefficiencies, right? Agriculture in the desert southwest tends to be very efficient because we have so much sun. And it is for that reason. It is also very water intensive. Alfa growers in the desert southwest can get something like 10 to 12 cuttings per year. If you're trying to grow alfalfa in Montana with a short growing season, you're probably going to get, I don't know, two.

Yeah. Four. So it's not crazy. I mean, it's not crazy that we grow, like that is a very big advantage. Setting aside the water issue. There's a reason that Arizona became a big hotbed. We're growing a lot of alfalfa here. But other parts of the country grow a lot of alfalfa as well.

Would you have to use more land to get a comparable total amount? Maybe. Is that the worst thing ever? Probably not. I think those types of changes could potentially happen over time, particularly in the face of continued water stress on the Colorado River. But more important is the question of vegetables. Because I'm sure you've heard Western Arizona, the Yuma area, and the Central Valley of

California grow the majority of the winter greens that, you know, New Yorkers and, you know, New Yorkers and Minnesotans and, I don't know, Michiganders, whatever you're called, all these people love to eat. And that could be replicated elsewhere, but replicating the growth of vegetables in the wintertime is a very complex undertaking. It's not just about water and sun.

You could probably find that in other places. It's also about the logistics of refrigeration, the labor supply, the quality control. All of this is, it is very, it is highly complex agriculture. It is industrial agriculture. It is not, you know, cute little family farms in Massachusetts, right? So that, I think, is a more difficult proposition. But there will be increasing stress on farms. farmers in western Arizona who have these higher priority water rates,

precisely because they have the higher priority water rights. And as the Colorado River continues to diminish, the cities in central Arizona who have lower priority water rights to the Colorado River, by nature, are going to be looking to acquire those higher priority water rights. Farmers don't have to sell. And certainly there are real consequences for rural communities for their economies, for their cultures, for all sorts of things. I don't need to make light of that. But that pressure will only increase over time.

Farmers don't have to sell, but it turns out that at the end of the day, a lot of them like to. You know, when they want to retire, when you can. kids don't want to take over, you know, that pressure will only increase. So we've already been talking about, I guess, the realities of different water sources and preferences for different water sources. I'm wondering what would happen if, you know, for instance, we see the property developers have a preference for groundwater because it tends to be cheaper. But what would happen if Arizona came in and put a more concrete pricing structure on these rights. Like, A, what would that look like? How would it work?

I hear that term pricing water quite a lot nowadays, but I don't quite understand it. And then B, how would that impact, I guess, the mix of Arizona's economy between, say, agriculture, industry, and real estate? Well, I think it would have a big impact. Looking at kind of the legal issues surrounding that the state would have to impose some sort of tax. That's how you would price water differently. Yeah, the state could come in theoretically and impose some sort of tax on the consumption of water, the consumption of Colorado River water on the consumption of, you know, groundwater. And certainly, I think, you know, farmers, not always, but, you know,

often operate, you know, on the margin of profitability, depending on what kind of crop they're growing. And so certainly I think that could potentially have an impact. I will tell you, I don't see how that would be politically viable in Arizona. Sure. I'm an economist. I always love to go to pricing to fix things, but I think that would be a very difficult proposition politically. for context, the consumption of groundwater in central Arizona is taxed in these areas where groundwater is highly regulated, but the legislature put a very specific cap on that tax. And really, that was for political reasons. And so that tax is so low that it really doesn't alter behavior in any meaningful way.

It's interesting you brought up the reality that culture, and politics and everything aside, the pressure on farmers to sell is likely to grow. And we even brought this up. We talked to a farmer and we said, are you going to sell? And he said, no. And then he said, well, you know, right now the highway is 10 miles away. And so, but maybe one day the highway will be two miles away or, you know, one mile away. And so at some point, there might be a real real estate bid for that area. You know, I want to touch on another dimension that we haven't hit on yet. But that is industrial uses of water. And we know that a lot of the new semiconductor factories that are coming to the U.S. are coming to Arizona, Intel, TMC, etc. Semiconductor production, I think battery production,

too, fairly water-intensive process. It has to be really extremely clean water. Can you talk about how that plays into the demand mix and how that's being accounted for? Yeah, I'm glad you asked that. because when you were saying, hey, you know, should we really be consuming vegetables and dairy and things that's dependent on agriculture in the desert South West, the first thing that popped into my mind is, well, you're already consuming semiconductors that are produced here. And that's also very water intensive. Yeah. So it turns out that the desert is a great place not only to grow cotton and winter vegetables, but it's a great place to grow the high tech industry. Because we do not have natural disasters. Don't have tornadoes. We don't have blizzards. Really doesn't flood often once in a while.

You know, no tornadoes. It's no earthquakes. It's very stable. Our climate is very stable. And the high-tech industry likes that. Yeah. That's why there are a lot of cereal farms out here. That's why we have Intel.

And that's one of the reasons why we recruited TSMC to build semiconductors as well. And yes, those industries are very water intensive. That goes back to the idea that we don't have enough water for everything, right? Human wants are always unlimited. Our ability to fulfill them is limited. We don't have enough water for everything. What do we have enough water for? If the state wants to continue to pursue the high-tech industry, knowing that it is very water intensive, that will entail shifts of how we consume water in this state and what it's used for. It by nature just has to because there are trade-offs. So just on this point, this might be a slightly unfair question or a difficult question,

but, I mean, looking to the future, is it just inevitable that water constraints are going to themselves act as a constraint on economic growth? I don't think so because I think that we are capable of managing our water supplies to meet the purposes that we find most valuable. The politics of that are really hard, but we are capable of doing that. The technologies exist. It is not that difficult from an economic or technological perspective. to move water from where it is today to where you want it to go to meet those increased demands. So, no, I personally don't.

I think that the economic benefit that comes from these types of enterprises is such that it will be worthwhile for us to manage water to meet them. And we will do so. You know what I find really fascinating by this conversation is, you know, I think when people, think about climate change, they think about, oh, you know, like we've invested so much in the desert, et cetera, and we're really going to pay the price as the climate continues to change. But in many ways, as you've described, there are some like real advantages. As you said, the Arizona is already baked. It's already an area that is used to extreme heat.

No, exactly. And then you add in. It's really funny. People are like, what are you going to do about climate change? I'm like, are you kidding me? It's already hot and dry here. Like, you're saying it's going to be. I'm hotter and drier?

We know how to do that. Right. So it's like the potential disruptions to say where people think about climate change winters in, you know, the Northeast, maybe it'll be more disruptive. But as you point out, you know, or as the farmer points out, extremely stable climate. I mean, is stable weather. There's not droughts because there's no rain in the first place. There's not floods because-

You can dry the alfalfa. Yeah. We wish there were more floods. Right, right. And then for the industrial uses, you know, there's no earthquakes or tornadoes, et cetera, which of course is really important for the precision equipment that goes into semiconductors. So it really is striking the sort of like combination of things, like that other than the lack of rainfall, brings together Arizona.

Yeah. And what's important about that context is people need to remember that people have been moving water for thousands of years. And it's actually something we're good at. right? It is not technologically difficult to do it. The solutions are known. Is it expensive? Is it difficult? Is it politically fraught with danger? All those things, right? But it's very doable. And I think also it's interesting to me, you know, this country was settled originally, you know, of course by Native Americans. And then the next kind of way that came over were Europeans. from a temperate climate. And I think that idea of life in a temperate climate speaks with us. And people forget

that desert cities are actually among the oldest cities on the planet. That humans have always lived in deserts and will always live in deserts. And I think in this country, we just have this weird cultural norm that comes from the fact that many of the people

who came over here and founded, you know, this government were from a tempered climate. It's not how all humans experience the world. I don't know. No, I like the sort of like the optimistic idea that part of the human, no, seriously, that part of the human experience and part of being human is like, we're going to find a way to build a city in the desert. Yeah. You know, you mentioned transportation of water and one technology that theoretically, if electricity

costs fall is desalienization of water. And despite the existence of the song titled Ocean Front Property in Arizona, there is no ocean front property in Arizona, though it's a great song. Can you talk a little bit of, oh, it's the George Strait song, I think. Can you talk a little bit about desalinization and the sort of, you mentioned we're good at moving water and as a solution in the future or even currently from the oceans to Arizona for various purposes? Yeah, so it's very, it is usable. Right now it's too crazy expensive to be deployed at scale is what I'll say. I think like other solutions, you know, investing in leaky pipelines, I think it's a tool. I don't think it will be deployed at scale. Certainly not in the next, say, 20 years. It's hard for me to imagine ever being deployed at a scale that kind of fixes the. Colorado River. But I think it is important for us to continue to pursue it. But more importantly, at the end of the day, from an economic perspective, it will just be less expensive to buy out

higher priority water rates. So I think that's the thing to match. And it is, while it is less expensive to buy out higher priority water rights, it is also exponentially, politically more difficult. So you're going to have this weird conflict between what is less expensive economically and what is more expensive politically. And I don't know how that's really going to play out. I think that'll be interesting to watch. Well, this was actually going to be my next and probably my last question. But, you know, we're talking about deciding on who gets certain rights to water that may be more valuable than others. who gets to make that decision ultimately?

So for the most part, those decisions are already made. In the West, with some important exceptions I'll talk about, in the West, for the most part, we already know exactly who has rights to the Colorado River, to the Salt and Bertie River systems, to groundwater. So much of that is already determined. And it's more, and so changing the use of that water is more about entering into voluntary transactions for leases for the sale of that water, et cetera. However, there is a really important exception to that, and that relates back to Native American communities. Many Native American tribes in Arizona have gone through the process of settling their waterways.

claims and know exactly how much water they are entitled to and where it comes from. Other tribes have not notably the Navajo Nation. So there is this outstanding question about how much water they are entitled to off of the Colorado River System. And in an over-allocated river system, there isn't just this water out there floating around that someone isn't already using. So that entails claiming that water, going through the adjudication process, and then, you know, dealing with those who are currently making use of that water.

And so, yeah, so it's an interesting situation. We know the most part who has rights to water exactly where those rights fall in terms of the priority system with some notable and very important exceptions. And that was going to play out. Catherine Sorensen, this was a very helpful and clarifying conversation on a complicated topic. Really appreciate you coming on odd lots. Oh, it's been my pleasure. Thank you so much for it. Tracy, I found that to be an immensely helpful conversation.

You know, and I think the sort of where this is going is what Trevor Bales sort of hinted at. That essentially at some point the bid for those premium water rights is just going to naturally move a lot of this water to the housing. developers. Yeah, and I'm going to slightly refine my priors, because going into this, I was thinking, you know, water wars, big constraint on economic growth. But to Catherine's point, it's more about deciding on that mix, it feels like. And it does feel to me that to some extent the concern is actually not about Arizona. The concern is the people who eat food that is like grown in Arizona. That as you pointed out, there's like, you know, the housing developers will pay more for those water rights. People will live there. Probably that, you know, the semiconductor, but the one,

but then it's like, okay, but someone has to grow those vegetables. Well, she also kind of solved a mystery for me, which is why do we keep building very water intensive technology in the middle of the desert? And her explanation that actually, in many respects, this is a very stable climate that doesn't have to worry about things like hurricanes and tornadoes and earthquakes. That makes a lot of sense. It makes a ton of sense. And I hadn't really thought about that dimension. before. And then I have to say, like, you know, I loved her point that, like, there's always been desert cities. Like, we sort of think it's like, oh, well, we developed air conditioning or, you know, modern plumbing or something. So, like, we're going to, like, build a city in the desert

now. But I like the idea that, like, even before all this, like, humans have always tried to build cities in the desert. It's a little bit dystopian. The idea of, like, climate change means we're all going home to our desert origins. It's a little creepy, but I take the point. Like, to her point, Arizona has a long history of dealing with water scarcity issues. And probably on that basis might be in a better position to do so than places in the Northeast. And as a species, we find a way. That's sort of like, that's my, I got very, I was like, I was expecting this to be much more negative. You learned nothing from Jurassic Park. No, I was, I was expecting to be like way more pessimistic. And I leave like the conversations feeling like humans find a way to do it.

It's certainly a much more nuanced topic than like the water wars have started. So from that perspective, it was incredibly useful. Incredibly useful. Shall we leave it there? Let's leave it there. All right. This has been another episode of the All Thoughts podcast. I'm Tracy Allaway. You can follow me on Twitter at Tracy Allaway. And I'm Jill Wisenthal. You can follow me on Twitter at the stalwart. Follow our producers, Carmen Rodriguez, at Carmen Armin, at Dashel Bennett at Dashbot. And for all of the Bloomberg podcasts, check out the handle at podcasts. And for more OddLodds content, go to Bloomberg.com slash Oddlots, where we have a blog, we post the transcripts and a newsletter, and come chat in our Discord.

We have a water room, although maybe I think it's turned into a climate room. But anyway, people talk about water and there a lot, so this should be a fun thing to talk about. Go to Discord.g.g. slash oddlots. Yep, and you can stream Bloomberg TV on Apple Originals, Roku, Samsung, or any of the other streaming platforms, and make sure to tune in to Bloomberg TV at 10 p.m. Eastern. Thanks for joining.