The Megadrought Has Massive Implications for Business: Action Is Needed

Grant Baker
Associate Manager, Strategic Advocacy and State and Local Policy, U.S. Chamber of Commerce

Published

January 31, 2023

Despite recent storms in California, the fact still remains that the state, like the rest of the American West, remains gripped by an ongoing megadrought, the driest 22-year period in the last 1,200 years. While these storms may have temporarily eased drought conditions in California and topped up depleted water supplies, inadequate water infrastructure limits how much water can be captured and stored for drier periods rather than simply flowing out to sea. In any case, according to the U.S. Drought Monitor, California is still experiencing drought conditions, and in some regions, such as the Imperial Valley, drought conditions and water cuts persist. Outside of California, much of the West continues to wither in a prolonged drought, and as the drought moves east, the Mississippi River has dropped significantly while parts of the Missouri River are now at record lows.

We are already seeing the serious impact this drought will have on our country, and it is clear that unless action is taken, that impact will worsen. Beyond the obvious fact that we cannot survive without water, every industry, and every job, depends on sufficient freshwater resources. To adapt to an unfolding water crisis, policymakers at the state and local level should leverage the array of federal funds and other policy tools provided by Congress and the executive branch to meet this challenge head-on.

A critical issue

Lake Powell and Lake Mead, reservoirs providing water to millions of people across the West, are at critically low levels. Even with well above average snowpack in the Colorado River’s headwaters this year, it will have a minimal effect in restoring these critical water supplies in the long run. Recently, a community outside Scottsdale, Arizona had its water supply cut off due to dwindling water supplies from the Colorado River. Even after heavy rains early this year, at the time of writing, California estimates that statewide 386 water systems are now failing and another 431 are at risk of failing—impacting nearly 2 million people. According to a new report on the impact of the drought on California, the amount of idle cropland in the state increased by an estimated 752,000 acres in 2022, as compared to 2019 which accounted for $1.7 billion in revenue losses. In Texas, cotton farmers have been forced to fallow nearly 70% of all cotton they planted in the state in 2022—driving a 21% drop in U.S. cotton crops, while nearly three quarters of all American farmers (74%) reported that they were forced to reduce harvest yields due to drought, according to the American Farm Bureau Federation.

Beyond agriculture and drinking water, water scarcity will seriously affect other sectors. Water is a critical input for countless industries, from manufacturing to mining, and is needed in almost all types of energy generation. Without enough water, the data centers which power the digital economy would overheat—impacting countless areas of our economy and society. If decisive action is not taken, this unfolding water shortage will have a devastating impact: a shortage of food and clean water, less reliable power grids, unstable digital servers, and a crippled manufacturing sector. It is clear, as severe drought conditions persist, it will continue to have a massive impact on our country and the world at large. Action is seriously needed.

States and localities are taking action

In many states and localities, a range of efforts are already in motion. In Colorado, a renewed effort is underway to expand cloud seeding to increase snowfall during winter months, snowfall which feeds the critical Colorado River Basin. In Orange County, California, a new desalination plant was approved last year, which will provide 5 million gallons of freshwater a day. In Nevada, policymakers have led for years in implementing water conservation policies, such as water-efficient plumbing, water reclamation, and reuse. Additionally, in many states, aquifer replenishment is increasingly seen as a vital way to rebuild natural underwater reserves during periods of heavy precipitation, while ensuring water reserves will not simply evaporate during scorching summers. While none of these examples is an instant solution to solve the water crisis, each is an example of the tools at state and local policymakers’ disposal.

Fortunately, significant federal resources are available to states and localities to implement policy solutions such as these to address this water crisis. State and local policymakers should prioritize these resources to increase their water efficiency, such as water reclamation and reuse projects, as well as to make more freshwater resources available by leveraging technologies like cloud seeding and desalination.

What needs to be done

The Infrastructure Investment and Jobs Act provided $8.3 billion in funding for water resilience to Western states and localities through discretionary grants administered by the U.S. Bureau of Reclamation. This includes significant funding for a range of uses including funding for water recycling, desalination, and water efficiency projects. This includes $1 billion for water recycling, $1.15 billion for projects to improve water storage, $1 billion for rural water projects, and $250 million for desalination projects and studies. With these funds, states can build desalination plants to increase freshwater supply for coastal population centers, use water more efficiently with modernized water storage systems and water recycling, and ensure farmers have the water resources they need with investments in rural water infrastructure.

Many states also still have ample American Rescue Plan Act (ARP) funds available. At the local level, according to data from the National Association of Counties, National League of Cities, and Brookings Metro, cities and counties still have nearly half of their allocated ARP funds remaining. Recently, Congress passed legislation as part of this year’s omnibus which allows states and localities greater flexibility to use these COVID relief funds for infrastructure projects and disaster relief. States should take advantage of this new flexibility to use their COVID relief funds projects to counter the water crisis.

Finally, the President should declare a federal disaster for the ongoing megadrought to free up further federal emergency resources for drought-stricken states as a group of Western governors have previously requested. As the Western Governors noted in their 2021 letter to the President, the Stafford Act specifically allows for a federal disaster declaration for drought. Under the Stafford Act, an emergency declaration would allow for the Federal Emergency Management Agency (FEMA) to deploy significant federal emergency resources for direct assistance to individuals and businesses, as well as public assistance to state and local governments and hazard mitigation assistance.

While the President did declare a disaster for recent flooding in California, this assistance is limited to efforts related to flooding, and offers no assistance for the ongoing drought and the water crisis it has created. By declaring a federal drought disaster, the President can unlock these seriously needed federal emergency resources for states and localities as well as provide direct federal assistance to impacted individuals and businesses to alleviate the damage inflicted by this ongoing natural disaster.

The United States is facing a truly epochal challenge: a water shortage not seen in over a millennium. It is imperative that policymakers at the state and local level leverage every available resource to implement policy solutions to use the water they have more efficiently and to increase the amount of available freshwater. At the same time, Congress and the White House must take action to make further resources available to states and localities. By doing so, policymakers at all levels of government can help build greater water resiliency, ensuring that the United States can address and overcome this challenge.