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Public Dollars for Private Profit?
Before its stock and reputation crashed, the Enron corporation sent emissaries to the Central Valley to investigate the possibilities for turning water into a market commodity. Now it turns out that California’s water districts and farmers didn’t need any outside help. Environmentalists are criticizing state agencies for subsidizing the construction of groundwater facilities that allow farmers and water districts to buy water from the state–and sell it back at a hefty profit.
"Public money is being used for projects that the operators say could be used for environmental benefits, but there is no commitment to making sure that happens," says the nonprofit Bay Institute's Peter Vorster.
A 2000 bond measure called Proposition 13 included $200 million in funding for construction of groundwater storage facilities regarded as essential for solving California’s perennial water woes. By using depleted aquifers as giant underground storage tanks, California water officials hoped to build more flexibility into our system of ways to accommodate water demands.
Proposition 13 money is already helping develop three projects in Kern County, which recently came under fire for using state money to build facilities to stockpile water so the county could then resell it to the state at a profit. Bakersfield-area farmers have already grossed $60 million at taxpayer expense over the past two years by selling water to the Environmental Water Account, a fish protection program that is an integral part of CALFED, the joint state and federal program designed to achieve a long-term solution to California’s water problems, according to a recent article in the San Diego Union Tribune.
Tribune reporter Michael Gardner reported that Kern County farmers were reaping benefits from a $45 million state investment in a water storage facility that was turned over to the Kern County farmers in 1996. In that deal, farmers gave up their rights to buy 45,000 acre-feet of water, but also agreed to sell 130,000 acre-feet of water annually to urban agencies at $1,000 per acre-foot, 10 times what they paid for it.
For the past two years, CALFED’s Environmental Water Account, designed to provide water for endangered fish at crucial points in their migrations, has been buying water from farmers in Kern County, at an average of $256 per acre-foot, about three times what the farmers paid for it, resulting in gross revenues of $41 million.
Kern County water district officials say that their net profits haven’t been that large. But environmentalists say that there is nothing to stop anyone operating groundwater storage facilities from charging as much as they can.
The Bay Institute and the Natural Resources Defense Council have recommended to the Department of Water Resources that groundwater storage facilities receiving Proposition 13 funds be required to provide water for environmental uses at the cost of delivery, says Gary Bobker, the Institute’s executive director.
Central Valley water users are not the only ones who could make a killing on state water, Bobker says. "Yuba County is going to take water out of a river and put it in the ground to service farmers," Bobker says. "They are a water-rich county and they are selling hundreds of thousands of acre-feet to urban users and environmental agencies. Now they’re going to get money from the Department of Water Resources to do even more."
Jerry Johns, chief of water transfers at the Department, says it’s possible that partnership with the Environmental Water Account could become a priority in choosing who gets Proposition 13 bucks. "We’re thinking about it," says Johns.
Bennett Raley, President Bush’s lead water adviser in the West, defended the farmers’ profits. "We believe in the free market," says Raley.
But Adán Ortega, a vice president at the Southland's Metropolitan Water District , says that the current state of California water reflects an outdated system of subsidies that has nothing to do with the free market. The Metropolitan Water District supports recommendations by the Bay Institute and the Natural Resources Defense Council that new groundwater storage facilities earmark water for the environment.
"From our perspective, it is somewhat troubling when the public sector, state or federal, is making a double payment for water," says Ortega. "What we’re interested in is not a free market for water. We believe water is a public resource. It should be utilized in a beneficial manner as stipulated in our state constitution in the public trust."
The intent of Proposition 13, which passed in November 2000, was to improve water quality and provide water for environmental purposes. The criteria for obtaining bond funds include environmental benefits. But currently, there is no requirement that the facility must provide water for the environment once the project is up and running.
Environmentalists fear that in the future, if urban users are willing to pay high premiums for water, programs like the Environmental Water Account may find themselves running dry.
Contact: Jerry Johns (916)651-7051 or Peter Vorster (510)444-5755 SZ.
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