Omaha World Herald November 4, 2004

BY DAVID HENDEE

LINCOLN - Nebraska has prospered for decades by using water from Lake McConaughy for growing corn, generating electricity and, as an afterthought, luring tourists.

That mix, however, may not be the best use of the state's largest reservoir or be best for the future of Nebraska now that deep drought in the West highlights the fragility of the water resource, an economist said Wednesday.

"Communities grow by attracting people, especially very productive, highly educated and skilled people who command high incomes," said Ernie Niemi of Eugene, Ore., an expert on the relationship between regional economies and the environment.

In Nebraska, he said in an interview, a Lake McConaughy flush with water can be a powerful people magnet and economic engine that dwarfs its historic role as a huge irrigation pool.

Niemi said economic policies that harm the environment, or that deplete natural resources, hurt the economy in the long run. That's because the quality-of-life benefits of water, for example, are forceful influences in attracting people to live in a particular place, he said.

Niemi is vice president and project manager at ECONorthwest, an economics and consulting firm. He spoke to nearly 40 people from across the state at the University of Nebraska-Lincoln's East Campus Student Union.

Rep. Tom Osborne, R-Neb., has asked UNL crop, irrigation and economic experts to study drought and water issues in Nebraska. UNL ag economist Ray Supalla and others invited Niemi to Nebraska to help jump-start the study.

Niemi said he is not suggesting that Nebraskans - or Central Nebraska Public Power and Irrigation District, which owns and operates McConaughy - stop using water from the reservoir for agriculture.

"I'm not saying that use is bad. I'm saying that there are tradeoffs, and the tradeoffs are different now than they were in the past," Niemi said. "Once people understand the tradeoffs, they can make their decisions."

Niemi was one of more than 100 economists who wrote letters last year to President Bush and to the governors of 11 Western states telling them that protecting and enhancing the quality of the region's natural environment would strengthen the ability of communities to generate more jobs and higher incomes.

The economists argued that the West's natural environment is, arguably, its greatest long-run economic strength. They said that nearly all communities of the West will find that they cannot have a healthy economy without a healthy environment.

They said, for example, that agriculture - and extractive industries such as logging and mining - now play a smaller economic role because their ability to generate new jobs and higher incomes has declined.

Subsidies to irrigation, for example, prop up activities that would not take place under efficient market conditions, they said.

The notion that what got an industry where it is today will carry it into the future is flawed, Niemi said.

"What you see in the past doesn't have a lot to do with the future," he said.

Niemi said the new economic model evolved from experiences in the Pacific Northwest when federal judges suspended logging on millions of acres of federal forest land to protect habitat of the northern spotted owl.

The perception in the region was that the economy would be crippled, he said.

"There was palatable fear in those communities that jobs and entire communities would collapse and the region would slip into the next version of a long-running Appalachian-style depression," he said.

It didn't happen.

Niemi said the old economic model of "jobs vs. owls" isn't the only option. Now jobs follow people, who move to places with environmental amenities, he said.

Don Gabelhouse, the fisheries division administrator at the Nebraska Game and Parks Commission, said Nebraskans can ignore Niemi at their own economic peril.

"It comes down to, is Nebraska going to be a place where people want to live, or is it going to be a place they want to leave?" Gabelhouse said.

He said the state doesn't have to choose between agriculture or recreation in planning how water will be used.

"But if we had more reservoirs and streams that were full of water, and wildlife abounded on the Platte River basin, would more people want to live in the state and could we attract more from out of state who want to enjoy that form of recreation and the wide open spaces?" he said. "I think the answer is yes."

Niemi tells a story that illustrates the tug that quality-of-life attractions give a region.

He asks people in the audience to raise their hands if they would like a 20 percent increase in income. Hands shoot into the air.

Then he asks how many people are willing to move to New York City to get that income. Most hands drop.

"That's the power of quality of life," he said.