URBAN WATER INSTITUTE: Are we ready for a “black swan” event in the water business?

Felicia Marcus, Pat Mulroy, Jeffrey Kightlinger, and Tom Kennedy discuss unexpected events and how the water industry can prepare for them

A black swan is an unpredictable event that is unexpected and has potentially severe consequences; covid-19, for example.  Could a black swan event happen in the water industry, and if so, are we ready for it?  At the Urban Water Institute’s spring conference recently held online, a panel of experts tackled the question.

The panelists:

  • Felicia Marcus is the William C Landreth visiting fellow at Stanford’s water in the West program. She is the former Chair of the State Water Resources Control Board, the former Regional Administrator for Region 9 of the EPA, and served as President of the Board of Public Works for the city of Los Angeles.
  • Pat Mulroy is the senior fellow for climate adaptation and environmental policy at the UNLV William S. Boyd School of Law and the former general manager of the Southern Nevada Water Authority.
  • Jeff Kightlinger is the former general manager of the Metropolitan Water District. Before becoming general manager, he served as the general counsel for Metropolitan.
  • Tom Kennedy is the general manager of the Rainbow Municipal Water District in North San Diego County.

The moderator was Dr. Greg Quist, a board member of the Urban Water Institute and the Vice President of  Rincon del Diablo Water District’s Board.

Here’s what they had to say, edited for length and clarity.

The premise for the panel

Dr. Quist began by laying out the premise for the panel discussion.  In the book, The Black Swan, Nassim Nicholas Taleb calls the place we live most of our lives “Mediocr-istan.”  It’s the middle of the bell curve of normality.  Things today will not be much different from yesterday; count on it.  While it may sound dull and boring in many ways, living in “Mediocr-istan” isn’t bad at all.  We follow routines that don’t take away from important things we’re focusing on.  We make assumptions about almost everything, and most of the time, things turn out just like we expect—nothing to worry about.  Things will continue as they have.

Except when they don’t.  Mr. Taleb argues that we actually live in “Extreme-istan.”  Think about 9-11, which changed the world forever.  Or back when Amazon was a little website that sold books in the early days of the internet that went on to completely revolutionize e-commerce.  Or the covid-19 pandemic.  So what are these last three events: 9/11, the rise of Amazon, and the pandemic, have in common?

These events have three common traits,” said Dr. Quist.  “They’re outliers; they were extreme and unpredictable events.  They had tremendous consequences and impact; they literally changed the world.  And in retrospect, looking back, we sort of feel like we could explain these events, or perhaps even we should have anticipated them.  These events are called the “black swans.”  Black swans can be bad, like 9/11 or the COVID pandemic, or they can actually be good.  You may not like Jeff Bezos, but I think Amazon’s business model is an example of a good black swan.”

So we need to get out of “Mediocr-istan,” the world of the bell curve and the anticipated and planned expectations, and recognize that we live in “Extreme-istan” and need to understand how that affects our futures and the futures of the people we serve.  If our future is forged by the unexpected and the unplanned – and it is, it’s our job as water policy leaders to be sure we survive whatever bad black swans come our way or take full advantage of whatever good black swans appear out of the blue.”

QUESTION: Have California and the West experienced any black swans in our history?  And if so, what were they, and what were their effects?

Jeff Kightlinger:  “I think about Donald Rumsfeld.  And I remember when he explained, ‘you have the known unknowns and the unknown unknowns.’  I remember thinking that it was an awkward way of saying it, but it really resonated because, in our business, we think a lot, particularly about the known unknowns.  There was so much planning and thinking about that at Metropolitan; we thought about earthquakes and drought.  We know they’re going to happen, so they are known.  But we don’t know when, we don’t know how big or how bad they’re going to be, or how long they’re going to go.  And so we’re constantly preparing for known unknown events.  And that carries over a lot to the black swan.”

I think about the pandemic.  I did read ‘Premonition;’ I naively thought that wasn’t something I’d see in my lifetime.  I thought we had enough medical control over things to nip it pretty quick, like SARS and other things.  So that was a pretty startling event – the vastness of it and how it really disrupted everything.  And yet a lot of that preparation for earthquakes and things like that helped us to be prepared.  It helped our resiliency; we already had assumed an earthquake would interrupt the supply chain.  So we had backups and things like that.  Of course, it was interrupted for a different reason, but that preparation did help us work through a black swan event.”

Felicia Marcus:  “You can say that almost every severe drought year and every flood year has been approached by everyone as if it were a Black Swan, which is kind of crazy because they’re all obvious in hindsight.  We look at the geophysical record, and we know we’ve had 40 and 400-year droughts.  It’s been relatively wet the last 100 and some years, but we plan for that three to four-year range that we’re used to.  Even after Australia, which had the same three to four-year range over the last 100-120 years, had a 10-year drought from the mid-90s to the mid-2000s.  We still kept thinking we needed to plan for three or four years, and if it went beyond that, it was somehow horrendous and out of the norm.”

“You can say that almost every severe drought year and every flood year has been approached by everyone as if it were a Black Swan.” –Felicia Marcus

We also know we’ve had massive floods, the big one in Sacramento in the 1800s and the big one in LA that led to the channelization of the LA River that we know and have grown to love in strange ways.  And then you have the Yolo bypass, which is really brilliant.  So we’ve done things, but as a whole, any year could be the beginning of a 40-year drought.”

I don’t think we’ve realized that things we’re treating as Black Swans are things we now know we need to expect and need to expect more often.  So there’s a mindset change that we need to make, knowing that we can’t prevent all events or think of every eventuality.  But if you do planning with a broader consciousness and you have those plans on the table, even for the unthinkable, they can be used in the event of a terrorist attack or an earthquake beyond the norm on some undiscovered fault.”

Pat Mulroy:  “I think we’ve come dangerously close to a Black Swan.  I think we’re dangling our toes over the edge.  But in real terms, the West has not experienced the black swans.  Yes, we’ve had droughts.  And then we’ve had events like the Miracle May.  This year, we have a shortage on the Colorado River.  But there’s still enough in there.  The efforts that went on for the last 10-15 years to store water in Lake Mead have buffeted it up 60 feet.  So we haven’t really experienced the Black Swan.  And that Black Swan will be one that we’re quite honestly not ready for.  And I don’t even think we have all the necessary tools in the toolbox for it.”

Tom Kennedy:  “As I was looking at your Black Swan, I was considering this.  I think it’s more like a black frog sitting in a pot, and it’s getting warmer and warmer.  And there’s a lot of signals on the edge of what’s going on here.  Some of these just described are there for us to see, but we’re not seeing them.”

“Water demands per capita are going way down; that has broad effects all over the place on our supply needs, but also infrastructure costs.  And as things are changing, those demands will continue to go down.  They’re going to put amazing and huge financial stressors on all the water agencies and the customers and water affordability.” — Tom Kennedy

Things like water demands per capita are going way down; that has broad effects all over the place on our supply needs, but also infrastructure costs.  And as things are changing, those demands will continue to go down.  They’re going to put amazing and huge financial stressors on all the water agencies and the customers and water affordability.  People have been hollering about it for years; ask avocado growers in San Diego County, who used to lead the state in avocado groves but are no longer there.   So those signals are there for us to see.  But we’re looking at the fat parts of the bell curve, and we’re ignoring the stuff out there.  It’s all there to see that it’s coming.  So I think, rather than swans, we’re frogs sitting in a pot on simmer right now.”

Pat Mulroy:  “The cone of uncertainty, which is what we love talking about in the water business – it still has defined edges.  I love calling those the probabilities that I’ve become allergic to.”

Tom Kennedy:  “You mentioned that we’ve become a little bit immune by having these droughts that happen every once a while, and it seems like it might be a three-year drought or a five-year drought or whatever.  And then it rains for a couple of years and everyone forgets about it.  So how do we not forget about it?

Pat Mulroy:  “It’s human nature to want to forget about it.”

Felicia Marcus:   “I’m of two minds because I think each time we’ve learned something, but maybe not enough.  I think of Metropolitan’s investment in turf rebates, for example, during the last drought.  That was a structural change, where those people will never use as much water as they used to, or the people even in letting their lawns go brown that realized how hard it is to kill a lawn, etc.  So we always learn something; it doesn’t bounce all the way back.  But I do think we need to do more dramatic things.  Like Southern Nevada Water Authority did; it’s a desert versus Mediterranean climate to say, let’s just get rid of non-functional turf now.  And I think we got to do more of those things.  And then you’ll also see visible change.”

Pat Mulroy:  “I think that’s the secret.  Those that are sitting in the chairs of responsibility need to anticipate them.  They don’t have the luxury of being able to just put it out of their mind and forget it and ignore it.  They’re the ones that have to look 10-15 years down the road like Jeff did his entire career.  I mean, it’s the only way it can work.  We have to be that conscience; we have to be those that will almost invisibly create the necessary immunity to black swans.”

Tom Kennedy: I think that when a lot of water leaders are looking at it, they think they’re planning for the worst, but they’re not really planning for the worst.  They think they’re being conservative with the forecast, but they’re not really being conservative enough.  An example was in the Union-Tribune last Saturday; there was an article with a chart that showed all of San Diego’s urban water management plans they’ve done year after year, all of which show an increase in demands, but the starting point is going down the entire way.  So there’s a little bit of fanciful thinking that it was just a recession, or that was the drought of 2014 – it was an anomaly.  It’s not an anomaly when it’s been going on for decades.  So the signal is there for us to read and listen to, but we’re just not doing it.

I think one of the big problems is that if you are a large agency with lots of bond issuance and things like that, and you were to forecast an actual decline in sales as we had back then, your bond rating would have tanked, everything would have been more expensive, and rates would have gone through the ceiling.  And that’s just not perceived politically as sustainable.”

There’s a problem we have in California with the costs for the infrastructure which is a backbone – much of that was built on property tax dollars originally, like Metropolitan’s system.  All that is now dumped onto water rates, where we have very significant constraints from Props 26 and 218 on how those costs can be passed down to consumers.  And they land on people inequitably – on people with limited income or on farmers in urban areas that pay a much larger share than other people.  So until we address some of those fundamental imbalances, I don’t think some agencies will ever really take a hard look at it and do what needs to be done.”

Jeff Kightlinger:  “Tom touched on cost, and that is a real tricky issue for water managers.  We do want to plan for the worst, but you also can’t afford to entirely prepare for everything to be awful.  Why do we build for a 100 or 200-year storm event?  Because if you build for the 1000 year storm event, you wouldn’t be able to build hardly anything.  Everything would have to be so concrete and so hardened for disaster; you’d only be able to build one thing a generation.  So you don’t.”

And then what happens?  Oroville happens.  It was a one in a 1000 year storm event that happened and washed it out and destroyed it.  It was also a 1960s design.  So we’ve gotten smarter.  But we do have to balance that.  Yes, we need to prepare for bad events, but we really can’t afford to always prepare for the worst.  So that’s where that judgment and that hopefully good forethought comes into place – that you’re preparing enough without always over-preparing and bankrupting the system.”

Pat Mulroy:  You have to do a risk assessment.  What risk can I absorb?  For example, with a flood:  yes, there might be some damage but do I have ways of getting through it?  What risks are intolerable?  Those are the risks you really have to take into consideration and buffer against.”

“That’s why we built the third intake.  Did we need it right away?  No.  But we knew the day was going to come … it was the smartest thing I have ever done.” –Pat Mulroy

That’s why we built the third intake.  Did we need it right away?  No.  But we knew the day was going to come when we were going to need it.  So despite the fact that it collapsed in the middle, despite the fact that I have scars on my back for taking it through the funding part of it, it was the smartest thing I have ever done.  I think there’s going to come a day where people are going to say, ‘Dammit, Jeff was right – that tunnel underneath the Delta saved California.’

Because that flexibility is what it’s going to take in order to be able to get through.  So nothing is more critical than going through that risk assessment exercise and saying, what can’t I survive?

Felicia Marcus: How do you get people to be shaken out of a certain level of complacency with climate change?  That’s the game-changer.  It’s the headlines now.  It’s not a black swan.  It is a flock of them coming at us from all different directions, and we don’t know which aspect of it will happen.  So I think there’s an opportunity to say, let’s step back and assess what our risks actually are, educate the public to the fact that we know we can’t protect ourselves from everything, so what are the smartest things to do?

And we need to invest.  We have to invest now so we can be smart the way Pat was with the third intake; we need to be smart the way Metropolitan was in building Diamond Valley reservoir and the Inland Feeder.  The best $2 billion ever spent is how I talked about it.  So we’re going to have to do a lot of those.  And we need to bring the public along, so they appreciate what it takes to get that water to their door, rather than thinking they’re paying for it by the ounce or the bucket.

Pat Mulroy: One tactic that has worked well for me, when I went into business groups, and the complaining would start about the costs, I’d turn the question around – can we afford not to do it?  Is the price of not doing it so much greater than the price of doing it?  And when you look at it coming at it from the backside, it looks very, very different.”

Jeff Kightlinger:  “When I would talk to my Metropolitan Board or my staff about the whole black swan type issue and how you prepare for unpredictability, I remember explaining: think of it as pre-event and post-event.  The pre-event planning is the hardening of your infrastructure, building up storage and reserves – all those sorts of things because you know something bad will happen.  Then it’s about having resources to deal with bad things that happen, which means having money, reserves, and a machine shop; it means having stacks of steel and cranes and trucks and things like that on hand and crews ready to go to be deployed once something happened.  Not quite sure what, when, and where, but it was all preparing for something that will happen.  And how do you handle the post-event?  Because you can’t prevent everything, so be prepared for those post-event actions.

The thinking was, like the military plans for two and a half wars at any one time, we plan for two and a half major breaks in our system at any one time.  We’re usually thinking earthquake, but the idea is to have all the materials to deal with two and a half very destructive system breaks on our system and having enough supplies materials to handle it.”

Greg Quist:  “A lot of us think about water in a very parochial sense based on our own experiences.  In my case, when I turn the tap on, does the water come out?  Is it at a reasonable cost?  Is it reliably high quality?  But there are three legs to at least the California Water stool: the municipalities, agriculture, and the environment.  People don’t really talk about the agricultural and the environment part too much.  And it turns out that’s about 90% of the water use in the state of California.”

QUESTION:  We jumped into a time machine and now it’s 2122.  What would you see in California in 2122 that is different than today?

Pat Mulroy:  “I think you’d see far more desalters and ocean desalination facilities, because trust me, between now and 100 years from now, we will have had that black swan event.  I feel pretty comfortable sitting here saying that today.  So you will have begun to build in some robust supplies that are not dependent on climate, that are not dependent on weather, and start thinking of those creatively.”

Greg Quist: “But now you’ve switched that for another black swan because it’s dependent on energy.”

“That is going to be one of the challenges of the century.  Where’s that sweet spot between water and energy?  Where are the trade-offs? … Because every progressive power solution, for the most part, requires a lot of water, and a lot of the progressive water solutions require a lot of energy.” — Pat Mulroy

Pat Mulroy  Those two are in absolute collision.  The Southern Nevada Water Authority has gone out to the big hotels and the data centers and told them they are not going to be allowed to use evaporative cooling anymore.  28% of all the commercial water use is evaporative cooling; they’ve got to go to dry cooling.”

So what does that do?  Well, first of all, it throws an enormous load onto the power company, and every corporation’s ESG scores are going to tank as a result of switching because the street doesn’t care about water; they care about energy.  So they’re going to see have this enormous conundrum.  And their power bills are going to go up.  So you’ve got a complete collision.”

That is going to be one of the challenges of the century.  Where’s that sweet spot between water and energy?  Where are the trade-offs?  Where can you buffer against the negative effects?  Because every progressive power solution, for the most part, requires a lot of water, and a lot of the progressive water solutions require a lot of energy.  And so those are completely incompatible right now.  And they’re working at cross purposes.”

Tom Kennedy:  I agree that ocean desalination will be part of it, but not likely in the form that we see now in the Carlsbad plant because it’s so energy-intensive.  We really need to fund a Manhattan Project-style thing to figure out a less energy-intensive and better way to do that.  I think that you won’t see lawns.  You’ll see every bit of wastewater reused, not quite the way they used it in The Water Knife, but you’ll see a very different use of water.”

I also think we’ll see changes in ag.  I think that you’ll also see a restructuring of the water rights system, both on the Colorado River and in the antiquated California water rights, where anybody who can claim something from 1914 will have it.  Now, whether that happens by shoveling billions of dollars into people’s pockets to avoid fights in court or whether it actually gets done by Congress or someone else, it’ll be a bloodbath.  It’ll take half a century.  But something’s got to give there.”

Pat Mulroy:  “I think the only thing that’s going to give there are relationships and the ability to work together.  You are not going to get rid of the Compact; you are not going to get rid of some of those priority systems; you’re going to have to find ways that states can adapt because everybody’s going to have to use less.  What’s the pathway?  And what compromises can be struck that every state is willing to cut back and begins to view things differently?  They’ll never let go of it on paper.”

Tom Kennedy:  When you look at California’s 4.4 million allocation, a huge percent of as it goes into the Imperial Valley and the Coachella Valley; a lot of that’s used for export ag and those things, so we’re going to have to have some conversations about what does the waters of the state mean.  With the public trust doctrine in the California constitution, how does that apply?  I know it’s difficult, and some people’s ox will get gored.  And they might get gored with silver spheres that are full of bags of gold on them to make them allow them to get gored, but it’s going to happen.”

Jeff Kightlinger:  How do we untangle the regulatory paralysis?  If you look at Australia, they had to get their back up against the wall before they really made some significant changes to their water rights system and their regulatory system.  Some things, such as over-investing in desal and then mothballing it, are things they’ve regretted.

But on the genius move – they basically said, we’re going to create water strictly for the environment, and we’re going to fund it as a federal priority.  And you’re out of the regulatory business of the water agencies.  You have your own water supply dedicated to fish and wildlife, and you have got billions of dollars the federal government gave you, so you’re no longer regulating them.  Their job is to solve water problems and develop it and not get permits for it based on wildlife issues.

So they really untangled that.  It may take us getting to that kind of crisis moment to get there and for the legislature to have to tackle it because we don’t tackle wicked problems until we’re in a wicked mess.

Felicia Marcus:  If you take me to 2122, I take the more optimistic view.  It’s not just because I read a lot of sci-fi, but I follow a lot of tech, and I think we’re going to be in a very different place in 100 years.  The revolution in sensor technology alone in the last few years is incredible.  Sensors used in testing water for quality allow us to do a lot more in treating water, which will get less energy-intensive and more cost-effective.  Sensors will help us target our investments, such as sensors that can hear where you’re likely to have a water pipe break.  So instead of trying to replace your pipes every couple of decades or 100 years, you can target it.  Communities are already saving 90% of what they’re doing.  They’re not just saving money; they’re doing it faster.”

We won’t have lawns anymore; we’ll be living in denser, more interesting – who even knows what it’s going to look like.  We’ll do more desalting inland. … I think either through evolution or seeing good examples on the ground, or through legislation and regulation that becomes necessary to give that policy backstop for people to make tough decisions, I think you’ll see much more watershed management.  People will come to an agreement in a watershed in the way the Sustainable Groundwater Management Act is set up, where areas have a set amount of time to figure out how they’re going to do this together or someone’s going to do it for them, and nobody wants that.”

I think technology which gives us data and transparency and remote sensing will allow us to think of water above ground and below and across a watershed in a better visual sense and a more democratized sense, so you’ll get more and more public engagement.  All of it requires leadership, which is really hard to come by in an institutional framework where it’s just easier to stick with the old talking points of the past.  And the politics of that are easier.”

But I do think the crises are going to precipitate action.  We need to think about the shape of that action so that people are ready and have thought things through rather than what happened in Australia.  They’ve done a lot of good things since, but for six years, they thought, surely it’ll rain next year because it always had within three to four.  Then they had one wet year, and they were like, yay!  And then they had the three worst years yet afterward.  And so they had to spend all their money on everything all at once, including these big desal facilities they had to pay for but which they didn’t even turn on until many years later.”

I see signs of hope in a lot of places, but I tend to be a glass half full person because I think it’s a better way to live.  It keeps you moving forward and not be pissed off at everybody all the time.  I think it’s a problem in the discourse because people say, ‘you’re bad, I’m good.’ Great, but it doesn’t get us where we need to go.  No one would say that Pat Mulroy was not the fiercest negotiator and a top water fighter on behalf of her agency; she had the ability to be the inspiring voice of collaboration.   We just need to have more of those and more people who can transcend those divides.  But I think technology is going to help us get there.”

Another thing I’m seeing is a whole move towards more nature-based solutions where we get multi-benefit wins.  We just have to figure out how to sell them better.  We’re seeing it happen in LA County.  We’re seeing it happen in setting back floodplains.  We’re seeing it in the upper forest management in pieces.  There’s a way to start at the top of the watershed and go all the way down – even bring back beavers.  There are all kinds of different things that we can make the whole greater than the sum of the parts.  I think that human evolution into being able to do that is the biggest challenge, but can be aided by technological breakthroughs.”

Pat Mulroy:  It is the biggest challenge because right now we’re suffering from paralysis.  We are absolutely reluctant to make a decision in any direction.  And that’s what’s going to get us.  It’s not necessarily the black swan event; I think sitting here, any one of us can imagine what a black swan event would look like.  It is not having the ability to be that core thinking group that can begin to create community movement and build and take the measures that need to be taken.  We are paralyzed.  And a lot of it is regulatory.  The regulatory system is broken from beginning to end, and it has to be fixed.”

Greg Quist: Is that because it’s balkanized?  Pat, do you think it’s a difference between the states and the feds or … ?”

Pat Mulroy:  I’m going to be blunt about that.  It’s because it’s about money.  It’s about FTEs at the federal level, and it’s about contributions going to environmental groups.  My favorite example is DC.  They went through three years of negotiations with the Justice Department to get an agreement with EPA so that sewer water didn’t spill into Chesapeake bay during flood events.  And then the pipe that was the solution crossed a corner of Park Service land, and the Park Service saw an opportunity for FTEs. And so they wanted another three-year EIS lobbed on top of the one that had just been completed.  Come on, let’s get real here.”

Felicia Marcus:  This is the place I disagree with Pat … I think that’s too simplistic, because I think the regulatory system gets abused by a lot of folks, and the folks in it tend to be understaffed and certainly underpaid.  I’ve seen many processes where people will blame something like NEPA or CEQA for what was their own damn fault.  They hire consultants who charge them by the word or by the pound for documents that then do not answer the basic planning questions that have been tossed to them by the regulators, by environmental groups, and by others.  They game it, and then when it takes a long time and has to be redone, or it loses in court, they blame the system when it’s their fault for not writing a clear document and taking into account what people thought.”

When I was at Public Works, we fired all of our consultants because I thought they were so bad.  But I had been a CEQA lawyer, so I had to now walk the talk and read them all.  We did it ourselves.  We kept one consultant who was good, and our documents were shorter and clearer.  We listened to the public, we changed the process, and we got big projects through with people saying thanks faster.  So it’s not all regulators.  It’s not all environmental groups.  It’s on all sides that people abuse a process, I think, in ways that frequently are against their interests.

Jeff Kightlinger: If we’re recommending books, take a look at “This Used to Be Us.” That’s a really good book about how China tackles problems, sort of saying how we used to do this in America.  It’s a pretty fascinating book about how we debate everything to death.  I mean, it’s not just regulators and environmental issues.  Just look at voting bills, voting rights, or you almost name any issue, and it’s like, 50-50.  And it’s tough to get anything to get any consensus on almost any issue.  And unfortunately, that’s where we are.”

We did get an infrastructure bill passed.  We’re all in the infrastructure business.  That’s pretty amazing.  But we did talk about it for 30 years to finally get a drop of money into the system.  It says something that in the 50s and 60s, we were building highway systems and wastewater treatment plants everywhere.  We considered that a good use of public input and resources, and there was consensus around it.  Now, it’s oddly controversial.  So sadly, we seem to make our best decisions in the face of crisis as opposed to getting ahead of the curve.”

“The stark difference between the infrastructure build-out in the 50s and 60s is that was done a lot through federal grant money and money that came through property taxation.  Now all of our capital works have to go right on the rates.  And so they land on everybody in their monthly water bill, and it gets passed down. … And all those costs add up.” — Tom Kennedy

Tom Kennedy:  I think that the stark difference between the infrastructure build-out in the 50s and 60s is that was done a lot through federal grant money and money that came through property taxation.  Now all of our capital works have to go right on the rates.  And so they land on everybody in their monthly water bill, and it gets passed down.  At my agency, I have a wholesaler, and I’m on the Santa Ana Water Authority board.  And then we have Metropolitan on top of that.  And all this different stuff stacks up between the source of supply and our customers at the end.  And all those costs add up.”

So I think that there needs to be a change at the state level with these great budget surpluses, rather than funding projects through SRF loans, which still end up on my ratepayers’ pockets.  If you’re going to try to manage infrastructure, it needs to be done differently, through grants, either federal or state.  

We have a large agricultural area where we’re trying to replace pipelines were built around World War Two and just afterward; but it’s rural and there’s not a lot of people out there.  But to replace them, it gets very expensive.  If I want to apply through the IRWM program, I’m up against all these other projects that look sexier, like a reuse project.  A plain old 12-inch pipeline replacement goes way down the bottom of the list and never gets funded.  But that’s our need.  And that’s a real need around the state.  And it’s just not sexy enough.”

Jeff Kightlinger:  One of the interesting things about representing Metropolitan was it is one half of California; 19 million people.  People would get really excited about a bond issuance, and I would tell them, you’re one in every two Californians, so you’re going to pay for half of it on your taxes, or you’re going to pay for it in your water rates.  It’s the left pocket, right pocket debate at something the size of Metropolitan.  When you get to smaller districts ...”

Tom Kennedy:  It’s distributed differently if it’s through the state.  The people in the low-income areas aren’t paying as much, but with Prop 26 and Prop 218, they all get the same rate for me, and it has to be distributed equally.  So that’s another challenge for us.”

QUESTION: How do we get regulators to look at the unintended consequences of their decisions?  I’m not sure if that’s a rhetorical question or an actual question.

Felicia Marcus:  “I think part of it is to elevate it during the comment period in an effective way.  This is the one place where I’m somewhat cynical.  I think a lot of the airwaves in the discourse are colored by the industry that thrives on conflict.   They can be politicians, they can be lawyers, they can be lobbyists, and you can see it happening.  At the same time, there are some really good ones of all three types.  But the airwaves in most of it thrives on conflict … you get fear and anger on the part of the general public fed by all kinds of things.”

Having been a regulator at the federal, state, and local level, the thing I was most grateful for is when someone just gives you a good either a heads up that there’s going to be an unintended consequence that you could avoid … and how few good suggestions came in.  And when the good suggestions came in, we adjusted our regs.  Including one [during drought years] that said, let’s go to a stress test [for water availability].  And I remember sitting there hearing and thinking, there’s a good idea, we could do that.  And we did that.”

It’s surprising how infrequently folks take the time to say, ‘you could get at what you’re trying to do another way that would have less harm,’ but the discourse in the regulatory arena is … maybe people have seen too many Perry Mason; people come in and think they’ve got to just argue the extreme on one side.  Then they leave it to us to try and figure it out.  Whereas the most successful advocates would come in and say, ‘I know you’re between a rock and a hard place, but have you thought about doing this?  Almost invariably, we would say thank you, and we would do it,  but it doesn’t happen as often.  Because people view it as combat as opposed to just people sitting in different places, trying to figure out a societal challenge, which again, goes to that discourse question.”

You have a lot of either stupid or unethical lawyers and activists who sell their clients that they have to hire them to make a case.  A lot of people obviously fall for it because they keep hiring people who just annoy regulators.  And then when they don’t get their way, they just blame them for being evil or stupid.  And when they lose most of their cases, they blame the courts or somebody for it because they keep getting hired.  But the good ones are really good.  And I wish it felt appropriate to just advertise them all from the dais.”

QUESTION:  Wildfires seem to be a major issue that can affect the water supply in the state of California.   Every summer, it seems like it’s getting worse and worse.  We talked about the energy-water collision; there’s also a fire-water collision.  Felicia spoke about the whole watershed from top to bottom.  And I was always wondering, can Metropolitan get involved in this somehow by helping protect our watershed this year by some other way of doing it?

Jeff Kightlinger:Some of the comments have been about regulators regulating and how we don’t always do think about these problems very holistically.  The Fish and Wildlife people have to look at fish and wildlife; that’s what their job is.  Water people are delivering water.  We know we need the watershed protected, but we’re not supposed to spend our money on the watershed; that’s supposed to be the Forest Service.  And so it makes it hard for people to work holistically across lines and say, we both need to solve this problem; it’s in both our interests.  How do we get the money and tools all put together to do it?  You don’t always get rewarded for that.  So institutionally, people often decide I’m going to stick in my area.”

But we don’t have that luxury.  So that’s where people have to break out across lines.  It is Metropolitan’s job to invest in the Endangered Species Act to make sure we don’t get our permits interrupted.  So we spent a lot of money on the Colorado River and multi-species planning.  We paid pretty much all of California’s share of it – not because we’re generous, but because it’s in our enlightened self-interest.  And we need to find more areas that we can do that and more institutions that will start to do that.

Felicia Marcus:  That’s a great, great point.  I do see the seeds of it happening in a lot of places.  And you’re right; there are wildfire impacts on water quality that have been written around a lot.  Another paper I’ve been working on is the outsized fires that are coming because of us being at a regulatory loggerhead in terms of how many trees can come out, which has led to a buildup of forests.  Some of it is the nature of commercial forestry.  Some of it is the regulatory mindset that I think most thoughtful environmental groups have long left.”

But you add a few degrees temperature rise, and the science is you’re going to have more fires.  And what ends up happening is the contamination, the scorched earth, but you also then end up with the next time it rains, you have this horrible flood and sedimentation in the reservoirs, which reduces our precious storage space.

You also don’t get that thoughtful management of the forest.  It can be rebuilding mountain meadows and the like that can slow the flow, not as much as snowpack used to because we’re going to lose our snowpack, but it can be a substitute and filter the water as it comes down.  So there’s a holistic way to approach it, but we’re moving that way slowly.  California is probably in the lead of the states, but even internationally, folks are getting that you’ve got to bring climate and water together and solve these things more holistically.  And then you also end up with nicer forests and more recreation and perhaps most importantly for the billions of dollars of federal and state funding going into some of this work, you save life and limb in the future for those rural communities.”

QUESTION:  Looking forward optimistically, what are the good black swans that might occur?  What is happening now that we can see that might influence the water industry positively in the few decades?  Like Amazon, for example.  A good black swan.

Pat Mulroy:  I’ve got a great positive Black Swan.  The federal government redoes the way they approach NEPA.  They take all those silos, put them on teams together, and that group has to come up with one EIS that has to touch all those points; not that you finish with one and then flip over and have to do another one.  So start approaching it differently; force those agencies to talk together and work together.  That would be an enormous help for the entire water industry.  And it is definitely a positive Black Swan.”

“We’re getting enormous amounts of data in the water industry that’s pretty fascinating to look at.  It helps us look at trends and sensors and how to plan better and better. … I think this will transform our planning, investing, building, and everything we do as we get better and better at understanding the data and information we’re getting at our fingertips.” — Jeff Kightlinger

Jeff Kightlinger:  I’ll go with the digital transformation.  It seems like the last several decades of progress have been about these things [motions to cell phone] and the fact that everyone has incredibly powerful computers in their hands and can access Amazon and whatever.  And we’re getting enormous amounts of data in the water industry that’s pretty fascinating to look at.  It helps us look at trends and sensors and how to plan better and better.  But we’re just scratching the surface because our industry is still like a pretty old-school industry; we’re always on, always ready.  But I think this will transform our planning, investing, building, and everything we do as we get better and better at understanding the data and information we’re getting at our fingertips.  And our planning is going to get that much better in our building and infrastructure will also get that much smarter.  So that’s one of the hopeful Black Swans I see out there that we’re going to be able to use this information much more constructively than we’re currently doing.  And it’s that’s going to grow by leaps and bounds.”

Tom Kennedy:  A positive black swan for me comes down to restructuring the way costs for infrastructure are pushed around because right now it all ends up in the pocket for the lowest common denominator, which is the ratepayer.  Water affordability is a huge thing.  Our farmers and avocado farmers were the frogs in the kettle; it’s already boiling for them.  And everybody else is starting to come to a simmer and figure it out.  Then when we look out with declining demands and the reconstruction of the infrastructures built 100 years ago, we’re going to have billions and billions and billions of dollars of investments to make.  Right now, the only way to do it is to dump it all on the ratepayer.  So that’s something that Sacramento and Washington need to deal with effectively.”

Felicia Marcus:   “We also spend too much time arguing about who should pay for stuff when we have a lot of stuff; we just have to do better.  This is the old public works director speaking; a lot of this stuff is basic public works.  And I think we waste a lot of time pointing fingers.  That’s not to say some element of beneficiary pays doesn’t make perfectly logical sense.  But there’s just a bunch of stuff we need to do as a society that we should invest in at the scale, state and federal or regional that is more just more effective and doable.  I don’t disagree with that.

” … A potential positive black swan is this next generation … which is multicultural and not as into possessions as our generations, and that they get interested and start engaging in water; they get that water is hard and not to be taken for granted.” –Felicia Marcus

But if we’re looking out long-distance at a potential positive black swan, it’s this next generation, whether it’s the millennials or Z, which is multicultural and not as into possessions as our generations, and that they get interested and start engaging in water; they get that water is hard and not to be taken for granted.  And we have democratization of information about water and interests.  I was just so happy in Glasgow to finally have nature-based solutions in nature and adaptation on the main stage, as opposed to it all being about fossil fuels and mitigation.  Because you can’t get there, you have to do all of that, but you can’t get there from here; you’ve got to deal with the land-based sources, these wildfires, and the potential that it’s finally getting there.

I think the folks who help provide clean, safe water ought to be folk heroes in their communities, rather than just being proud that they’ve done such a good job as engineers so that people can take them for granted.  There’s something humbling and wonderful about that.  The same is true in the water agency world, but we have to start telling the story and engaging people, and then we’ll get the support we need to do the things we need to do.  That’s a black swan; if it could happen, that would make life easier for a lot of people, while other people would be uncomfortable with it.  But I think it’s the way to unlock money and ingenuity and change.”

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