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April - June 2014

Private H2O at GC?


Thursday, May 29, 2014

   Private H20 at GC? -  For some time I was thinking about writing a letter to the local newspaper and floating the idea of privatizing the water pumping and distribution system at the Grand Canyon.  But, before I got around to doing it, they ran a front page story about the water woes there and the cost of fixing the system - incredibly some $200 million!!  So, I decided that a longer comment would be in order and that it would be well-received by the editor.  It was and it ran on Thursday, May 22.  I was out of town the week prior to the Memorial Day weekend, so I didn't realize it had appeared until some days later.  The photo, to the right, is of Roaring Springs, located up the Bright Angel Canyon towards the North Rim.  This is the source of water for the South Rim - water is pumped from here down to and across the Colorado River and up to Indian Garden and then up to the South Rim, covering probably more than ten miles.  [Click to see a larger view.]

Privatizing Water at Grand Canyon
By Dennis Foster

A recent article in the Daily Sun highlighted problems with the water distribution system at the Grand Canyon and the Park Service’s contention that it will take some $200 million to fix these problems.  Hardly a year goes by that we don’t hear about pipes bursting and water service along the corridor trails and on the rims being interrupted or shut down during repairs.  While it may seem like quite the dilemma, there is a rather simple solution, although getting the NPS to recognize it may take some work.

The solution, which I proffered to the Deputy Superintendent just a few weeks ago, is to privatize the pumping, collection, distribution and pricing of water.  I did not get the sense that she was going to warm up to this idea, but given the magnitude of this problem, it is worthwhile considering this solution more carefully.  I’ll briefly outline four main arguments in favor of this proposition and consider some likely objections, including one raised by the Deputy Superintendent.

First, this would properly align incentives.  That is the nature of the market.  If a business can’t supply water to its customers, then it loses revenue and profit.  It has an incentive to insure that the system is functioning properly and doesn’t get shut down.  Also, given that such a business can sell stock and/or bonds to raise money necessary for investment, it isn’t subject to the budgeting process of the Park Service and it can make improvements and repairs in a more efficient and cost-effective manner.

Second, the market pricing of water will do more to encourage conservation than any program instituted by the Park Service.  If users pay for water, they’ll have to weigh the benefits and cost of that use.  The concessionaires will be more likely to look for ways to conserve water used by visitors to their hotels, restaurants and gift shops.  And, the residents of Grand Canyon (Park Service employees included) will have to consider their use if they also have to pay for water.  In some ways, the gateway community of Tusayan serves as a model for this, as they must pay for the water they pump from deep wells.

Third, in regards to Tusayan, there have been some critics of their use of these deep wells, and some concern about how this will increase with the ambitious development plans being considered there.  I would suggest that a privatized “Grand Canyon Water Company” be allowed to sell water to Tusayan, which would lessen these concerns.  This will also create a larger market for this water, which will make it easier to raise the resources necessary to provide a high quality system.

Fourth, this proposal relieves the Park Service of an unnecessary burden.  It isn’t at all clear why the Park Service needs to be involved in the provision of this basic necessity.  It seems to me that their time, energy and efforts are better spent interfacing with visitors and contenting themselves to overall management issues.  Imagine what the Park Service could do with $200 million at the Grand Canyon if it didn’t have to use it on the water system!

So, what’s wrong with this proposal?  Some may argue that such an entity would be a monopoly and subject to a host of inefficiencies.  But, that’s the way it is now, and our government-run monopoly is almost certainly even more inefficient because there aren’t good incentives to produce a good product and to do so at a reasonable cost.  But beyond that, under this proposal there will be competition in this new private market – the water sources in Tusayan as well as water hauled up from Valle or Williams, or brought in on the railroad.

Perhaps the most obvious counter argument is that we would be “giving up public lands to private firms for their own private gain.”  Well, yes, that would be true.  But, the NPS doesn’t have to give this resource away.  They could auction off these rights, earning some additional revenue in the exchange.  Additionally, all the really great infrastructure of the park was developed by private firms and/or individuals – the El Tovar, the Watchtower, the Grandview Trail, the Bright Angel Trail, Phantom Ranch, the Grand Canyon Lodge, the Hermit Trail, and others.  The Park Service doesn’t provide mule rides into the canyon, nor do they feed hungry hikers and quench the thirst of river runners at Phantom Ranch.  Xanterra does this.  Likewise, when it comes to water, the private sector can do a much better job than can the Park Service.

Dennis Foster has a Ph.D. in Economics, has taught at the university level for over twenty-five years and has authored many analyses of Grand Canyon issues.  His most recent paper, “The Colorado River Experience:  Assessing the Value of Motorized Rafting” has been accepted for publication in the Journal of Business Case Studies.

      I am quite sure that the Park Service won't give this a fair hearing, but at least it provided me a chance to make the case.  So, if there is any longer term problem with the water, and/or if it really does cost $200 million to fix, perhaps then someone will take this idea seriously.

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