Air Date: Week of November 18, 1994

Water subsidies may be the biggest problem facing rivers in the Pacific Northwest. That's according to Mr. Terry Anderson, Senior Fellow with the Political Economy Research Center, a think-tank in Bozeman, Montana. In an interview with host Steve Curwood, Anderson foresees that environmentalists will team up with fiscally conservative lawmakers to change the way water is managed.

Transcript

CURWOOD: In the weeks and months ahead, the battle over salmon could line up between those who favor vigorous enforcement of the Endangered Species Act and those who argue that such enforcement will cost too many jobs. But there is another position, one that is shared by some environmental advocates and fiscal conservatives alike, and that is the notion that electric power and irrigation are produced at enormous cost to taxpayers in the form of subsidies. And that if power companies and farmers had to pay the real price for irrigation and hydroelectric projects, the economics would change drastically in favor of the fish. Terry Anderson is an economist with the Political Economy Research Center, an environmental think tank in Bozeman, Montana, which promotes free market solutions to environmental problems.

ANDERSON: If you look at the cost versus the benefits on projects in the Pacific Northwest, you will find that benefits are often only 10% of the costs.

CURWOOD: Ten percent?

ANDERSON: And that's the kind of order of magnitude we're talking about. They are enormous drains on the economy, on the Treasury.

CURWOOD: You're saying that for a dime's worth of water someone's spending a dollar? The government, taxpayers?

ANDERSON: Exactly what I'm saying, and that exists all through the West. There are subsidies to the agricultural users, subsidies to the hydro power users, subsidies to the recreational users.

CURWOOD: So they cost taxpayers more than the individual users get back out of them.

ANDERSON: Not only do they cost taxpayers more than individual users get, but when you add up all the benefits, the costs always outweigh the benefits, and that's without trying to account for many of these environmental costs such as the salmon. A good rule of thumb is that it costs $500 to deliver an acre foot of water; that's 1 foot of water covering 1 acre of land, to an agricultural crop, and that agricultural users pay approximately $50 for that acre foot.

CURWOOD: Boy, it's a good deal if you can get it. So why not get rid of these subsidies? Doesn't sound like it's a bargain for anybody.

ANDERSON: I think that subsidized destruction of the environment, as I like to call it, is the place to start in achieving environmental quality. With the growing deficit, I think that there is a real potential marriage between fiscal conservatives and environmentalists, and that's how to get rid of the subsidies. I think if that happens, and I think this new Congress just elected is one that may be right for that, because people are saying we want change. So I think there is hope there.

CURWOOD: So then, it may be, will be possible then to get rid of subsidies. But what do you recommend right now if it's not possible in the near-term to get rid of subsidies or the dams?

ANDERSON: I think that we can, can take a smaller-scale approach and encourage what I like to call free-market environmentalism. Two examples come to mind: one, I think environmental groups should follow the lead of the Oregon Water Trust, which recently leased water from an Oregon rancher to leave that water in a stream for spawning habitat. That doesn't require political change; it doesn't require getting rid of subsidies. It simply requires environmentalists to put our money where our salmon are, our water is. So that's, that's number one. I think secondly, and tied to that very closely, is to allow the existing water users, irrigators, hydro power users, to participate more fully and more freely in a market process, so that if people want to purchase water and leave it in-stream, they can. If we were to just free up the power markets and allow more wielding of power amongst the various quadrants in the country, that would achieve a power efficiency that I think would also enable some water savings.

CURWOOD: I want to ask you, Terry Anderson, what's the next step we should take then, if we were to follow this notion of yours to expand the use of markets to buy water for salmon?

ANDERSON: The next step I think is for the environmental community to begin to understand the power of the marketplace for achieving environmental quality. I personally believe that there is a value to these fish in the stream, in their natural habitat. The problem is translating that value into a market process. And I'm saying that we as environmentalists should become spokespeople for the fish, place a value on them, let that value be at least articulated in the market process. Even if it isn't as big as we might want it to be, at least we get some voice, a voice we now don't have.

CURWOOD: Terry Anderson is an economist and Senior Fellow at the Political Economy Research Center in Bozeman, Montana. Thank you, sir.

ANDERSON: Thank you. It's been a pleasure.