Groundwater Quality: A Public Policy Perspective

Prepared by:
Lawrence W. Libby
Department of Food and Resource Economics
University of Florida

Published by: North Carolina Cooperative Extension Service

Publication Number: AG-441-3

Last Electronic Revision: March 1996 (JWM)

The most compelling environmental problems of the next decade - including those relating to groundwater - will be the unintended side effects of reasonably informed people making rational choices within the boundaries defined by law and custom. Only changes in the rights and obligations of users, or in the economic and social costs of water use options, will reduce groundwater pollution. Policy is the process by which those changes are made.

There are lots of evils in the world. Flagrant affronts to prevailing standards of law and deceney are generally acknowledged as such; the perpetrators bear the scorn of society, and some are even locked up.

The far more difficult problems in a complex society are those where there is no evil intent, no deliberate intrusion on the security of others, not even outrageous stupidity - just normal, law-abiding, enlightened folks going about their daily business.

For the most part, environmental and natural resource degradation fall in this latter category. The most compelling environmental problems of the next decade, including those relating to groundwater, will be the unintended side effects of reasonably informed people making rational choices within the boundaries defined by law and custom.

Groundwater Policy as an International Problem

Groundwater pollution problems are fundamentally institutional problems. There are physical and biological dimensions, of course, which require scientific inquiry. But the real roots of the problem - and therefore the means of reducing contamination - are institutional: the mix of incentives, rights and obligations confronting resource users. Only changes in the rights and obligations of users or the economic and social cost of water use options will reduce groundwater pollution. Policy is the process by which those changes are made.

This country's elected and appointed representatives act to create, protect or enhance the interests of people with political access. Governments generally help us deal with problems we can't handle ourselves. Conflict is the beginning point of policy change - not an aberration or malfunction in a democratic society, but a fundamental prerequisite to change Conflicts leading policy change may have any of several logical roots.

Some examples:

People may want a produet or serviee for whieh exelusive rights are impossible. Little incentive exists for a business to provide something that becomes available to everyone whether they pay for it or not. In some instances, use of the service by some does not diminish its availability to others (water quality data, for example), while in other cases this open-access situation can lead to congestion or deterioration (an ocean fishery or groundwater aquifer).
The waste-absorbing capacity of a groundwater aquifer is essentially there for the taking. Little incentive exists for an individual to give up income-producing or utility-producing uses of water if other users continue access and one person's reduced use has no obvious effect on water quality.
Actions by one person may impose unreasonable or unacceptable burdens on others (pollution) or create uncompensated advantages for others (farms as open space). These third-party or spillover impacts of private water use decisions bring requests for government to redefine the boundaries of individual discretion.
Some government actions may occur simply because people want them to occur, without direct reference to spillovers or open-access resources. Recent surveys indicate that many people support environmental protection as a matter of principle, whether or not pollution threatens them directly. The concept of society living in harmony with other parts of the ecosystem has popular support. People are willing to act on that support and ask government to take necessary steps to protect an appropriate natural harmony.

Current Incentives Guiding Groundwater Use By Farmers

The basic incentive driving agricultural users of groundwater is the effect of water on plant and animal growth, which represents a source of income. Residuals returning to the aquifer are an unintended side effeet. Fertilizers, pesticides, fuels and other inputs have a similar income-generating purpose. Farmers make deeisions within an institutional structure designed to facilitate high-quality food production while assuring farmers an acceptable income.

Food Policies and Support Programs

Various food policies enacted over the past 60 years have influeneced farmers' choices and provided them a measure of economic protection from the vagaries of global weather patterns. The character and distribution of U.S. agriculture are influeneed significantly by these policies.

By influencing production decisions, these policies indireetly affect groundwater quality. In general, one may conclude that policies tending to increase the capital-intensity of farming - to substitute capital (in the form of applied inputs) for land and people - place groundwater at greater risk. Land set-aside programs, whether for supply control or erosion reduction, may encourage farmers to work remaining land more intensively.

When operated in conjunction with price- and income-support programs for eligible crops, the incentive for intensification is even greater. Furthermore, to the extent that such programs encourage farmers to increase planting of supported crops, they may discourage crop rotation and other mechanical means of weed and pest control in favor of more chemicals.

If the purpose of these programs is to bolster the price of farm commodities, the farmer tries to squeeze more output from remaining land to sell at the supported price. That generally means more fertilizers, pesticides and water, increasing the potential for groundwater quality problems. Little incentive exists for an individual farmer to restrict applications of inputs when the rules encourage greater intensification for that farmer's neighbors and competitors. Nitrogen fertilizer is cheap compared to the value of lost production if too little nitrogen is applied. Unless a farmer's own on-farm water supply is contaminated by on-site farm practices, the farmer would see little water quality impact from reduced chemical use.

Unregulated Access to Groundwater

Rules guiding access to water also influence farmer actions that may affect groundwater quality. Groundwater is essentially free to anyone who can gain physical access to it. With no regulation or price mechanism to guide allocation of water to competing users, no particular incentive exists to exereise stewardship in its use. Water is taken for granted and applied liberally, with only vague limits of "reasonable use" to guide distribution.

"We Are a Throw-Away Society"

Solid waste management has only recently become a policy issue of national concern. We are a throw-away society in every sense of the term. The cost of adequate disposal is generally passed along to taxpayers and does not affect the price of the product that leaves the residual. Many of those residuals eventually reach groundwater, in some stage of decomposition, perhaps, but still damaging to water quality.

Increasing evidence of the hazards of sloppy waste disposal praetices has led to policy change. But these laws are highly specific to certain water sources, as in the Safe Drinking Water Act, or to potentially dangerous residuals, as in FIFRA (the Federal Insecticide, Fungicide and Rodenticide Act). They do not deal comprehensively with groundwater quality management.

States have undertaken waste management programs that encourage recyeling, partly beeause there are no acceptable places left for burying waste. Still, however, there is little real incentive to shift to products with less waste or to reuse the residual of economic activity if there is clear personal cost from that action. Proper disposal is expensive for the individual and, given the nature of farm production, disposal may be more expensive for farmers than for other businesses.

The Policy Choices

The essential purpose of groundwater quality policy is to change water use behavior. For the most part, people do respond to evidence that failing to change could be painful.

Change can be instigated in several ways: 1) by adjusting the anticipated cost of an alternative (including non-monetary effects); 2) by adjusting the anticipated benefit of an alternative (again including non-monetary effects); and 3) by eliminating certain options through regulation. Policy must intervene someplace in the decision process.

Method 1: Raising the Cost of Actions That Tend to Pollute

A water user unwittingly imposing risk or cost on other users by permitting contamination may be forced to "internalize" that possibility through a higher cost. Taxes, penalties and defined liability make those actions less attractive than other alternatives. The right to use water remains with the individual - but the consequences change.

There are at least six different approaches to raising the cost of actions that tend to pollute:

Taxing the Polluting Action A specific tax may be imposed on the polluting action. Iowa requires agrichemical producers and dealers to pay a pesticide registration tax and levies a 75-cents-per-ton fee on nitrogen fertilizers. Revenue collected is earmarked for addressing contamination problems. While little evidence exists that the added cost to users offsets the cost to those affected by contamination, the general idea is to force those who may pollute to pay part of the cost up front.
The effect of the law on chemical use is unclear. If the additional return on inputs exceeds the tax and other rights remain unchanged, use will likely continue. But the point at which added cost exeeeds added return should come at a lower level of input.

Taxing to Reduce Pollutions Alternatively, a tax may be based on pollution reduction necessary to achieve a pre-defined standard. Success requires knowing 1) how chemical users will respond to a higher input cost of specific magnitudes; and 2) how reduced use of target chemicals will actually affect water quality.
This approch assumes that the standard selected is appropriate, If the quality standard is too high, it could further the "license to pollute" with little useful result. If it is too restrictive, it could impose an unwarranted burden on water users.

Imposing Fines For Exceeding Standards Financial penalties, rather than taxes, may be attached to water quality standards. This approach is similar to taxing, except that required payment is a lump-sum fine for exceeding pre-defined limits on acceptable behavior rather than a marginal addition to cost meant to induce that level of water quality.

Threatening Ineligibility For Public Programs Policy change may also increase the cost of polluting activities by declaring the perpetrator ineligible for public programs. If, however, the only cost of the potentially polluting action is loss of other program benefits, the success of this approach requires that the water user anticipate those other benefits. It also assumes that the added burden of avoiding pollution behavior will not exceed expeeted gains from eross-complied programs.

Establishing Liability New liability regulations may increase the potential cost of certain water uses. In Conneeticut, strict liability rules remove usual common-law negligence tests from water uses that cause ontamination. The guilty party must provide an alternative source of clean water.

Providing Information on Environmental and Health Consequences Finally, new information can create psychic or emotional cost for those who inadvertently pollute groundwater. Data showing pollution and health consequences of certain actions can dissuade the user from those actions.
Incentives to change behavior need not be monetary. An important rationale for colleeting detailed data on groundwater pollution sources and impacts, along with the communication of results to involved parties, is to help polluters realize what they are doing to others. The concept of resource stewardship is founded on a personal value that destruction of natural systems is basically wrong.

Because of the open-aceess nature of groundwater quality, however, the "guilt" approach to changing user behavior is seldom enough. Even if one person agrees that his or her actions may hurt others, that person may be reluctant to bear personal cost if there is no assurance that other polluters will bear such cost as well. The "Why me?" syndrome is at work whenever the burden for avoiding those actions is inequitably distributed. Relying on voluntary behavioral change in response to data and education is wishful thinking in this and most other areas of policy. Education can at best be expected to generate one set of incentives that may reinforce others in accomplishing meaningful change.

Method 2: Compensating Those Actions That May Reduce Pollution

Bribes are often more effective than threats. If overall system gains result from changes in individual behavior, then a little creative social bribery may be in order. Whether a penalty is more "fair" than a subsidy in accomplishing a behavioral change is a matter of opinion.

There are at least four different approaches to compensating those actions that may reduce pollution:

Tax Credits Compensation for pollution-reducing behavior may come in the form of tax credits for land left open for groundwater recharge. Florida's "Blue Belt" amendment to the state constitution permits legislation providing a property tax incentive for farmers and other landowners to protect recharge areas.
Tax Incentives and Subsidies Special interest rates or tax incentives may be available to farmers who employ low-input technologies. A subsidy may help offset uncertainties for a farmer willing to ehange produetion praetiees in the public interest.
Cost Sharing Cost-sharing can help water users "do the right thing." Virginia farmers may be eligible for state funds to help in construeting manure storage facilities. In Arizona, Wisconsin and other states, cost-sharing is available for installing special best management praetices to protect groundwater.
Supporting Development of New Information Governments support research and Extension efforts by universities and other institutions to develop information compelling enough to encourage change. Agricultural practiees that cause less pollution result from this public investment, giving water users options that they would not have had otherwise. Demonstrating that fertilizer applications are excessive could change farmers' practices, resulting in savings for the farmer as well as greater proteetion of the environment.

Method 3: Changing the Water Rights of Potential Polluters

The most direct way to deter actions that contaminate groundwater is to declare those actions illegal. Private property entails exclusive - though not absolute - right to enjoy the services of acquired resourees. Distribution of the "bundle of rights" that defines property is a product of the policy process.

Regulating Land and Water Use Local governments retain primary authority for regulating land use for various public purposes. State regulations may establish water quality standards and declare illegal any actions that violate those standards. Regulations may prohibit certain farm practiees that tend to pollute or mandate other practiees that must be used to minimize damage. Best management practiees have been defined and required for cases of point or nonpoint pollution of groundwater and surface water. Special natural resource districts in several states have authority to restrict the water use options available to individual users.
Individual Inconvenience vs. Public Gain Special interest rates or tax incentives may be available to farmers who employ low-input technologies. A subsidy may help offset uncertainties for a farmer willing to change production practices in the public interest.
Individual Inconvenience vs. Public Gain Special interest rates or tax incentives may be available to farmers who employ low-input technologies. A subsidy may help offset uncertainties for a farmer willing to change production practices in the public interest.
Purchasing Water Use Options Government entities may choose to purchase water use options of potential polluters rather than simply take them through regulation. A state or local government could buy groundwater - sensitive lands outright, thereby removing all land use options of the private owner at a price that compensates for the transfer. In cases where extreme measures are necessary, the power of eminent domain could be invoked to protect the public interest with payment of "just compensation."
Outright purchase removes those lands from local property tax rolls and puts the public in the land managment business, both of which add to the cost of this policy approach. Public purchase of only the right to develop land important to a groundwater aquifer can be a less painful option. Land stays on the tax rolls, but its assessed value is limited by the transferred right to develop. The owner retains all remaining rights that do not pollute the groundwater.

Various other techniques exist by which rights or options available to individual owners or businesses may be redefined in the interest of protecting groundwater. The key distinction between restrictions on property rights and other measures is that action is assured. Reliance on manipulating the enlightened self-interest of individuals whose actions may affect water quality is not required.

Summary: Perspectives on Groundwater Policy

The policy process is the system by which good information is organized for collective and private choiee. While no one should underestimate the physical and biological complexities of groundwater protection, such knowledge and the science behind it are important primarily for their impact on how people use water. Knowledge is useful only if it is sufficiently understood and used by people - business and household owners, community leaders and government bureaucrats. The public policy process is the system by which good information is organized for collective and private choice.
The policy process is centrally concerned with defining incentives or rules that change how people act. An individual voter, taxpayer or citizen reacts to policy options in terms of how they expand or narrow current opportunities in pursuit of a defined goal. There are no absolutes in policy, just points of view.
New information can produce the support necessary for regulation or other policy change. Support is the essential prerequisite to effective policy - necessary, though not sufficient, for success.
We must maintain healthy respect for the rights and intentions of individuals. We must avoid the massive hypocrisy that the only path to enlightenment is "zero flexibility for you and full freedom for me." Few concerned citizens are willing to stop using fossil fuels to protect the ozone layer or pay a premium for biodegradable containers. Groundwater policy will have to abide by similar realities.
We must acknowledge the principle of diminishing marginal utility. Each measurable increment of water quality enhancement must stand the "So what?" test. In policy, clean water is an instrumental good, important only to the extent that it enhances the perceived quality of life.
Improved understanding of human behavior is essential to success in groundwater policy. Reasoned institutional change - and therefore successful reduction of groundwater pollution - requires a more definitive understanding of why people do what they do.
Policy is an observable, predictable process. Opportunities exist for intervention in the evolution of a full-fledged policy problem. Education plays an important role, affecting the basis for poliey action. People as citizens, voters or public officials need to understand the roots of a particular problem and likely impacts of options for dealing with it.

Effective, supportable groundwater protection policies are emerging at every level throughout the United States. They are not coming fast enough for some, and success is elusive. But there is nothing insummountable in these groundwater problems - few profound absolutes standing in the way of progress. Quality can be protected or improved with signifieant changes in the ways we use groundwater - changes possible only through reasoned public policy.

The unedited version of the paper on which this leaflet is based appears in the March-April 1990 issue (Volume 45, Number 2) of the Journal of Soil and Water Conservation.