Water cuts could create economic 'tsunami' for Colorado Basin

LAS VEGAS — To understand how a future Colorado River water cutback could hurt the economy, start with this fact: The seven river basin states, by themselves, make up the fifth largest economy in the world, a speaker said at a recent water conference here.

Then, consider that the economic output of the areas within those — including Arizona — that depend on the river for water equals that of Australia.

So if this region doesn’t adapt to a cutoff with significant conservation, acquisition of new supplies or both, “the economy will implode on itself,” said Jeremy Aquero, an economic analyst who spoke at a recent Colorado River conference. “The effect will look more like a tsunami than ripple on a pond.”

Between them, the seven basin states have an annual Gross Domestic Product of $3 trillion to $3.5 trillion per year, Aguero said. That puts the region between the sixth-ranked United Kingdom, at $2.86 trillion GDP in 2015, and the fifth-ranked Germany, which hit $3.8 trillion GDP in 2014 and $3.37 trillion in 2015, according to International Monetary Fund statistics supplied by Aguero.

Looking at only the areas within the seven states that use river water, their total GDP is $1.4 trillion, he said, citing figures from an Arizona State University study this year. But economic impacts in areas that use river water would have a significant ripple impact in parts of those states that don’t use the water, he said.

In Utah, for instance, 11 industries and other economic sectors including agriculture, mining, government, transportation and warehousing consume goods and services produced by the others.

“If you disrupt agriculture, manufacturing or housing because of a water-induced interruption, the implications will reach well beyond that specific industry or that specific location,” said Aquero, a principal analyst for the Las Vegas-based consulting firm Applied Analysis.

He spoke at the recent 70th annual conference of the Colorado River Water Users Association in Las Vegas.

“A comprehensive, master-planned approach to the river is both necessary and appropriate,” he said.

“Will you have enough?”

Given the magnitude of population and business growth in this region since the 1920s, “the reality is that water instability has a greater potential to negatively impact both these states and the U.S. than it ever has in modern history,” Aguero said in an interview after his presentation.

His company regularly consults with business clients who consider relocating from other states, particularly California to Nevada. Often, they will look at Nevada v. Colorado v. Texas v. Arizona, and water availability has become a much more common question than it was five years ago, he said.

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“I’m not saying they wouldn’t be coming here ... but they do ask that question, ‘Will you have enough water in 20 years?” Aguero said. “Say you are an investor considering a major investment in Arizona or Utah, and you are concerned about the potential for water resource instability in 10 or 20 years. Will you still make that investment? The concerns about will water still be safe and available will become increasingly important . . .

“The perception of drought and actual drought — the difference between them, the line between them — is thinner than most people think,” he said. “As we think about economic development, these images of a shrinking supply are starting to resonate with businesses and impacting them.”

Showing slides of a Lake Mead beach that used to be the lake bottom, and a Washington Post article about how drought has plagued this region for 14 years, Aguero added that these articles and photos are a problem for the West.

“They raise questions about whether whether we can service our debt or invest,” Aguero said. “In geologic time, it may be insignificant, but in times of commerce it is a clear and present risk.”

Long view ominous

Few, maybe no, experts predict that Colorado River water will be completely cut off, at least not in the near future. The first Central Arizona Project water shortfall, which could occur in 2017 or 2018, would cut off barely a fifth of the project’s 1.5 million acre-foot water supply. That would affect mainly Central Arizona farmers and groundwater recharge, not cities such as Tucson and Phoenix and Indian tribes.

Further off, the prospect for bigger cuts looks more ominous. At the same conference at which Aguero spoke, U.S. Interior Department officials warned that there’s a 30 percent chance that Lake Mead — where much of the CAP water is stored — could drop to below 1,020 feet in five years, compared to a little over 1,080 feet today. At that level, cuts to municipal supplies are more likely.

By 2050, various experts and studies have warned that climate change including droughts could reduce the river’s annual supply by 9 to 45 percent. Probably one of the worst-case scenarios, laid out in a 2014 study from the Geological Society of London, warned that Lake Mead would become largely unusable after 2040 if a drought struck the region at a scale similar to the “megadroughts” that occurred during medieval times.

At the same time, the rates of population growth and job growth in the river basin continue to outpace those rates nationally, despite the real estate market crash of the late 2000s that hit particularly hard in Arizona, Nevada and Southern California, Aguero said.

“If we think about serving the needs of a growing population, that won’t stop coming, that will go where jobs are being created and where they don’t have to shovel snow, where there is economic opportunity, people the northeast portions of the country and migrating south and southwest, it is absolutely continuing today, irrespective of the amount of water available,” he said. “Where will we be in 2060 if we don’t make significant changes in the amount of water we use, or find additional new resources?

“I love it when I hear from conservationists who suggest that we can conserve our way to prosperity,” he added. “We are not going to conserve our way to prosperity, or build our way to prosperity, and we are not going to stop growth on our way to prosperity.

“It will take a master-plan approach to all of those things.”