Proponents of strict new groundwater regulation contend that Michigan lags other Great Lakes states in statutory protections of groundwater. Our review finds that only one state in the region — Minnesota — broadly regulates groundwater withdrawals.

Fears of a water crisis are disturbingly overblown. There is an abundance of groundwater in nearly every area of Michigan.

Minnesota is distinct from Michigan and other Great Lakes states both geographically and meteorologically. The climate in the western half of the state resembles the semi-arid western plains, where evaporation and transpiration exceed precipitation and thus create a water deficit. It is not surprising, then, that Minnesota would enact a more restrictive water-allocation system. Whether that state’s permitting regime is the most effective conservation method is certainly debatable.

A groundwater statute recently enacted in Wisconsin does require groundwater permits, but only in limited circumstances that affect a small number of wells. Still, the Wisconsin regulations are far more limited than those crafted by the Granholm administration in the proposed Water Legacy Act.

Fears of a water crisis are disturbingly overblown. There is an abundance of groundwater in nearly every area of Michigan, and no evidence of a looming scarcity. The greater threats are the economic impact of draconian regulations and the forfeiture of riparian rights.

The Water Legacy Act would encumber thousands of Michigan businesses, including factories, farms and even recreational facilities, as well as public water systems. Merely complying with application requirements, such as evaluating alternative water supplies, modeling withdrawal impacts and devising new conservation measures, would require the services of hydrologists or other specialists and cost each applicant hundreds of thousands of dollars per permit.

A recent analysis by the Michigan Chamber of Commerce calculated application costs ranging from $315,000 to $800,000, depending on the scope of the proposed withdrawal.[27] Applicants also would be taxed to cover the state’s administrative costs. Such costs exceed $1 million annually in Minnesota, where a more limited permit program requires the full-time attention of six government workers and part-time assistance from 23 others.[28]

Harder to quantify, but certainly no less severe, are the indirect costs of needlessly broad regulation. As currently drafted, the Water Legacy Act would grant the DEQ virtually unlimited discretion in permit decisions. The legislation fails to specify the standards necessary for a permit. To the extent that every groundwater-permit application becomes a regulatory crap shoot, investors understandably will prefer to do business elsewhere.

Agriculture, too, would be hard hit. With a good many farmers already struggling to remain economically viable, additional regulatory costs would increase the likelihood of farmland conversions.

Allowing the state a full six months to process each permit application, as called for in the proposed legislation, would only exacerbate the regulatory uncertainties. With the highest unemployment in the nation, as reported in February by the U.S. Bureau of Labor Statistics, Michigan cannot afford to further alienate job providers — especially in the absence of any environmental threat.

The proposed regulations also are needlessly arbitrary. Groundwater supplies vary across the state, as do recharge rates. Yet the Water Legacy Act would treat all watersheds and aquifers as identical. That hardly constitutes sound stewardship.

Beyond the practical defects of the proposed regulations, the imposition of permit requirements would eviscerate the common-law water rights that have prevailed since the state’s founding. This shift from individual control to state control of groundwater would invite mismanagement. Centralized authority is simply too distant and convoluted to make informed and timely decisions. Moreover, government bureaucracies are often driven by politics rather than by an intention to maximize the value of resources. This common phenomenon, in which public employees often act out of self-interest rather than in the public interest, is widely recognized by numerous economists, including Nobel prizewinners James Buchanan and Vernon L. Smith.

Were it not for government mismanagement, in fact, there arguably would not be water shortages in arid regions or so much waste. But federal reclamation projects and a slew of subsidies have encouraged water-intensive crop production and industrial developments where natural supplies are inadequate.

Water rights secured under common law impose direct accountability on landowners for resource use. Simple proof of unreasonable use or contamination is enough to merit judicial intervention. Individuals have legal recourse regardless of whether their injury precisely fits the definition of harm as prescribed by state statute, and complainants need not compete for the attention of overextended government officials (or suffer the painfully slow pace of bureaucratic procedures).

Greater private control over water resources would actually enhance water conservation. As it is, the artificially low water rates set by government encourage unfettered water consumption. But privatization would likely produce water rates that would balance demand with supplies.

Water trading is on the rise, according to the Center for Free Market Environmentalism.[29] For example, California instituted a “water bank” to allow water transfers from farms to drought-plagued areas of the state. Montana allows riparians to lease their water rights to anyone wishing to maintain stream flows for fish.