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Is Vegas Burning?

Can Sin City survive without the gift of free water?

By From the November 2011 issue

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With the famous slogan, "What happens in Vegas, stays in Vegas," the Las Vegas Convention and Visitors Authority promises sin--without the wages of sin. Not to be outdone, the local water authority reaches out to newcomers with the offer of cheap and abundant water in the middle of a scorching desert.

Or, rather, it did until recently. The city fathers of Las Vegas are just beginning to appreciate the truth of one of Ben Franklin's maxims--"When the well's dry, we know the worth of water."

Cheap and abundant water was the magic fuel that powered the city's growth for more than half a century. It fed lawns, filled pools, jetted out of fountains, and led to the creation of scores of golf courses (some 60 in all) that dotted around a metropolitan area of close to 2 million people.

But now the magic's gone. There is no free water for future growth.

Water in Las Vegas is still cheap, by the standards of most cities. But it is no longer abundant. At the current price, which is based on historic cost and does not reflect the hard fact of present and impending scarcity, there is just enough water to accommodate the needs of existing residents. That is to say, water is subject to strict rationing. The Southern Nevada Water Authority (SNWA) and its sister organization--the Las Vegas Valley Water District (LVVWD)--have adopted a wide range of restrictions to micromanage and limit water usage, including one that bans restaurants from serving unsolicited tap water and another that prohibits the planting of grass at commercial properties and new residential front yards. LVVWD maintains its own "water police" who patrol the city looking for sprinklers running at prohibited times and other cases of wasteful or illegal water use.

If water is to become abundant again--and that is the great overriding objective of the water authority, which is engaged in a controversial campaign to tap into the small sea of Ice Age water that lies beneath the Great Basin in northern Nevada and western Utah--it will have to be brought in from the outside and it won't be cheap. Still worse, according to many critics, SNWA's multi-billion dollar plan to pump ground water from the Great Basin and send it via a 285-mile pipeline to Las Vegas would result in an environmental catastrophe.

How did Las Vegas go from abundance to scarcity? What is the best solution in balancing the interests of the environment against the city's desire for continuing economic growth and prosperity?

In addressing such questions, one must begin by acknowledging that this is a story wound up in the history and continuing evolution of the American southwest.

Accidental City

IF THE FEDERAL government did anything of lasting consequence during the Great Depression, it was the construction of the Hoover Dam and a host of ancillary facilities, including the aqueduct downstream from the dam that supplies water to almost all cities in the greater Los Angeles, San Bernardino, and San Diego areas. Thanks to these Depression-era projects, the Colorado River supplies one out of every 12 Americans with drinking water, and it irrigates fields that produce about 15 percent of the nation's crops.

Modern-day Las Vegas may be described as an unintended consequence of the building of the great dam. Originally, it was thought that Mormon farmers in the vicinity of today's city would use a tiny portion of the river's flow (less than 2 percent) to create a smaller version of California's Imperial Valley.

That is not what happened. Instead, when the U.S. Bureau of Reclamation began construction of the dam in 1931, the city filled with a rowdy army of construction workers. In her telling of the story in a five-part series called "Quenching Las Vegas' Thirst," Emily Green of the Las Vegas Sun wrote:

[The workers'] needs could be largely summed up in a telephone book under B: boarding houses, brothels and bars. Moreover, that same year, Nevada legalized gambling. Las Vegas added a C to its key services: casinos.

In short, the mob didn't invent Las Vegas. The Bureau of Reclamation did.

No one expected the small number of people living in and around Las Vegas at the time to pick up any portion of the capital cost of building the dam, 34 miles to the south, which was completed in 1936. Like other big Depression-era projects, it was launched and paid for by the federal government.

Three-quarters of a century later, a super-sized Las Vegas relies on Lake Mead, behind the dam, for close to 90 percent of its water--and it still gets that water for next to nothing. Cost-based pricing explains the low water rates charged to residents of the city. Las Vegas may sit in the middle of a desert, but both its operating and its capital costs are low. Unlike San Diego and other cities, it has not borne the expense of building desalination plants and other expensive facilities. And unlike San Francisco, which gets most of its water from a reservoir in distant mountains, it draws its water from a nearby source. The lower cost of delivery is chiefly responsible for the fact that water service is only about half as expensive in Las Vegas (at $33 per month for a family of four) as it is in San Francisco (at $58 a month).

In addition to cheap water, Las Vegas derives another major benefit from the dam. It gets cut-rate electricity from the federal government--supplied at less than half the wholesale price. That, in turn, greatly reduces the cost of recycling and transporting water. More importantly, in the larger scheme of things, cheap electricity allows Las Vegas to outshine Paris as a city of lights. Seen from outer space--with outdoor lighting displays featuring replicas of the Eiffel Tower, London Bridge, and other monuments from around the globe--Las Vegas is the brightest city on the planet.

All of which is to say that Las Vegas led a charmed life in rising from a small railroad town into a sprawling metropolis.

Coping with Too Much Water--and Too Little

FOR MORE THAN two decades, it did not even need water from Lake Mead, as it was able to get by on its own plentiful supply of ground water, with springs that flowed to the surface--some with the force of geysers. By the late 1950s, however, this source had been pumped almost dry--causing the springs to stop flowing and ground to cave in beneath Nellis Air Force Base. The water wells were capped and the casinos and other users hooked up to newly formed system taking water from Lake Mead in 1962.

Over the next three decades, Las Vegas enjoyed prodigious growth without coming anywhere close to exhausting its annual allotment of water from Lake Mead. From 139,000 people in 1960, Las Vegas grew to 305,000 in 1970, 528,000 in 1980, and 853,000 in 1990--and still it had water to spare--water to waste--from an allotment that could easily accommodate a city of 1.5 million people accustomed to using all the water they wanted without having to worry about the cost.

During this halcyon time, no one--not even the casinos--wasted more water than the local water companies themselves. Seven companies shared in the annual allotment from the lake under a formula that encouraged each company to make full use of its share--sometimes dumping any surplus water into storm sewers.

However, as Las Vegas approached the 1 million mark in population, the LVVWD began to worry about future water shortages. In October 1989, it filed applications in Carson City for unclaimed groundwater in northeastern Nevada, with an estimated pull of as much as 800,000 acre-feet of water, or just about double the allocation from Lake Mead.

There was fierce opposition from ranchers, farmers, environmental groups, and others in Nevada and Utah. The controversy continues to this day, with tempers rising on both sides. Opponents say that pumping the aquifer beneath the Great Basin would turn a sparse but beautiful desert landscape into a giant dust bowl. They say it would kill plants and wildlife and recreate the disaster of California's Owens Valley--the subject of Chinatown, the movie starring Jack Nicholson.

As the city's longtime water czar--head of both SNWA and LVVWD--Pat Mulroy dismisses these fears as unfounded, even though one of the fiercest critics includes a water expert who formerly served as a top consultant to the water authority in studying the impact of pumping the aquifer.

While insisting that the water authority has no intention of "mining" the aquifer--or of reducing the net amount of water in storage through withdrawals exceeding the naturally occurring deposits from snowmelt and other forces--Mulroy counters with the argument that her plan is a do-or-die proposition for Nevada and its largest city: "There is no option. It's going to be built. For this state to survive, it has to be built."

As it happens, Mulroy and the water authority put the plan on hold for most of the 1990s. But that was during a period of years in which the closely watched water level at Lake Mead was rising--reaching an all-time high in 1998. But that year also marked the beginning of a 12-year drought in the Southwest, which caused the lake to fall below 50 percent of capacity and set alarm bells ringing inside the water authority. In 2008 it began to build a "third straw" (in reality, a massive underground tunnel) to assure its ability to suck water from the lake even as the water level continued to drop.

No one would accuse Mulroy of being less than aggressive in seeking to ration water through a variety of restrictions and special incentives. In 2009, the water police investigated more than 6,000 cases of wasteful water use and issued nearly $100,000 in fines. Employing the carrot as well as the stick, the water authority pays homeowners up to $7,500 to rip out green lawns. Appearing before the U.S. Congress in 2004, Mulroy took credit for eliminating more than 33 million square feet of ornamental turf through SNWA's "cash for grass" program--enough to bring about a temporary reduction in total water consumption in Las Vegas even as the city continued to experience rapid growth. But as she was at pains to explain to the lawmakers in Washington, this was no more than stopgap. She appeared before Congress to press the case for the pipeline.

Now, SNWA and its supporters are demanding immediate action on the proposed pipeline, while opposition groups have become increasingly energized as well. To go ahead with its plan, the water authority has two big hurdles to clear in coming months. It must obtain a right-of-way from the Bureau of Land Management to build the pipeline. It must also secure water rights from the Nevada State Engineer--which involves the technically complex issue of whether or not the water authority would be "mining" the aquifer (mining groundwater is illegal in Nevada).

If the project does proceed, it will probably mean the end of cheap water in Las Vegas. This time the city--or the water authority--will have to reach into its own pocket. SNWA admits that a near-doubling in water rates may be needed to finance the $7.4 billion project.

Subsidies, Subsidies, Everywhere, and Not a Drop of Sense

EVER SINCE they first became aware of the possibility of water shortages, Nevada's political leaders (prominently including U.S. Senate Majority Leader Harry Reid) have complained that the state was "cheated" under the Colorado River Compact, which was first signed in 1922 and ratified by an act of Congress in 1928. This compact divided water up on a 50-50 basis between four Upper Basin states (Colorado, Wyoming, Utah, and New Mexico) and three Lower Basin states (California, Arizona, and Nevada)--with 7.5 million acre-feet of water going to the Upper Basin states and 7.5 million acre-feet of water going to the Lower Basin states.

It was in the further divvying up of water within the latter group that Nevada drew the short stick. While California and Arizona received allotments of 4.4 million and 2.8 million acre-feet of water, respectively, Nevada got a mere 300,000 acre-feet.

But who is to say what's fair and what's not fair in the heavily subsidized sphere of water management, with its arcane rules and strong aversion to price increases? Back in 1920, Nevada had a population of just 77,000 people. Today it has more than 2.7 million and the water in Lake Mead continues to take care of most of their needs.

Then, again, as David Zetland observes in his book The End of Abundance: Economic Solutions to Water Scarcity, where is the fairness in today's world in the way that the original Colorado Compact treated California's Imperial Valley and Clark County, Nevada, which includes Las Vegas? Both places then had populations of about 8,000 people. But Imperial was assigned 10 times the amount of water because its farmers used more. Under the law of prior appropriation governing water rights, already-haves are assigned the biggest shares--in perpetuity. That gave rise to the following situation described in Zetland's book:

About 1.9 million people live in [Clark County]. And their $100 billion of economic activity accounts for about 80 percent of the [state's] economy. Imperial Valley is also in the middle of a desert, just down the river from Las Vegas. Six thousand farmers grow crops worth $1 billion in Imperial Valley, and they use five times as much water as the people in Clark County use.

Toward a Market-Based Solution

UNDER THE CURRENT mix of policies, water authority in Las Vegas has one foot on the brake and the other on the accelerator: Paying people to murder their lawns while encouraging consumption through low water rates.

Here then is the path to a simpler and more rational future--suggested by scholors at the Property and Environment Research Center (PERC), a think tank in Bozeman, Montana, that looks for free-market solutions to environmental problems.

Since water rates appear to be going up anyway, discard the historic cost-based pricing model and move instead to a pricing system that recognizes the scarcity value of water. Replace rationing with price increases. Instead of limiting customer choice, expand it. Allow farmers, homeowners, and others to sell water to others who are willing to pay a premium price for it. Why shouldn't farmers in the Imperial Valley sell some of their water rights to Las Vegas, if two sides want to strike a deal?

In the case of the proposed pipeline that has kicked up a storm of protest, the water authority should go ahead now in doubling or tripling water rates--and see if that doesn't avert the need for the entire project. Call this a market-ready--as opposed to a shovel-ready--solution.

Does that sound too radical? If so, consider that the average family of four would still pay only about $1,200 a year for water--or $23 a week--even if rates were tripled. For most people, that's not even lunch money.

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About the Author
Andrew B. Wilson, a frequent contributor to The American Spectator and a former foreign correspondent, writes from St. Louis.