A proposed flood diversion channel in the Red River Valley that could cost $1 billion or more would reduce periodic flood damage in Moorhead and Fargo but might increase it in less-populous areas downstream. It also may harm the environment.
When human beings alter flowing water — one of the most fundamental forces of nature — the consequences can be significant and not entirely predictable.
In economic terms, such interventions increase the wealth of one group and decrease the wealth of another. Whether society as a whole is better off is a more complicated question. Ideally, the overall benefits exceed the costs, and those who are made worse off are compensated by those made better off. But this seldom happens, and the decision to build large-scale water projects usually is driven by political power rather than economic considerations.
Flooding along the Red River Valley is no idle threat. A devastating 100-year flood hit in 1997, and then in 2009, a record flood forced thousands of Fargo residents to evacuate the area, and about 100 homes were damaged. But centuries of human intervention in the flow of water have produced mixed results.
The 1927 flooding on the Lower Mississippi killed thousands and caused enormous damage. It probably was the worst flood in the history of the United States. Public shock led to widespread support for extensive federal spending to prevent recurrences of this tragedy.
One measure was “mainstem” dams on the Missouri River, a major contributor of water to the 1927 floods. Mainstem meant they would impound the Missouri itself rather than being built to hold water on smaller tributaries such as the Platte, Big Sioux, James, Niobrara or Yellowstone rivers. The best sites were in North and South Dakota and Montana.
The problem was that the affected river valley bottoms constituted some of the best farmland in those states. Reducing flooding in Mississippi, Louisiana and other downstream states meant dispossessing farmers further north. But the dams were built, and the farmers were paid for their land, perhaps inadequately. The affected states were promised other compensation, including poorly conceived irrigation projects that in the end were only partially built.
People have found other reasons to divert water. In the Northwest, the Columbia River basin had enormous potential for irrigation and electricity production. But the Columbia also was vital to salmon spawning, and the salmon industry was of enormous economic importance all along the Northwest coast.
In this case, the dams were built, power generated and land irrigated. Palliative measures such as fish ladders were constructed, but salmon fishermen and processors suffered grave damage and went largely uncompensated.
The two cases differed in that those directly harmed by the construction of mainstem Missouri dams were easy to identify, and their direct economic loss — the value of their farms — was relatively easy to calculate. And it was clear from the outset just what this particular damage would be. (The mainstem dams also caused great environmental damage downstream, but the extent of that would become evident only over several decades.)
Damage to the salmon industry in the Columbia Basin was harder to predict precisely, and it was nearly impossible to quantify exactly how much one fisherman or cannery suffered in economic losses. Other factors, like overfishing and natural fluctuation in fish stocks, were going on simultaneously. So outside of the palliative measures, there was little compensation to those harmed.
In the cases of Red River floodways, the number of people helped probably exceeds the number hurt. But the construction costs are large and the damages episodic. So extensive studies are required to get some estimate of costs and benefits and the net effect of the project. Even the best of such studies often turn out to be incomplete and flawed after the fact when the true effects emerge. Of course, there often are unanticipated benefits as well as unexpected costs.
Anyone with land through which the diversion will run can be compensated for loss of value as a result. But what about a town or farm 30 miles downstream that may experience higher, more damaging flood flows at irregular intervals in the future? Or what about fish and other elements of the river ecosystem? Here past experience is not encouraging.
Ronald Coase, the 1991 Nobel Laureate in economics, demonstrated that as long as property rights are well defined legally, transaction costs are low and information about costs and benefits good, private markets can lead to outcomes that are good for society. But all three of these necessary conditions fail to be true with this type of water project.
The result tends to be protracted political and legal battles. These chew up lots of resources that could be put to more productive uses. Expect more of this in the ongoing Red River Valley case. Someone will lose, either Moorhead residents who will continue to suffer flood damage that might be alleviated or downstream folk who will suffer damage that would not occur if the project is not constructed. It is a messy situation, but that is about all the better we seem to be able to do right now.
© 2010 Edward Lotterman
Chanarambie Consulting, Inc.