Sign up to receive email updates, action alerts & health tips from EWG. [Privacy]

Methodology

California Water Subsidies: Methodology

December 15, 2004

Overview

The great majority of farms using Central Valley Project water get it through a water district, irrigation district or mutual water company. Calculating subsidies at the district level is simple because the Bureau of Reclamation publishes each district's CVP water use records annually. With these figures, EWG was able to calculate water subsidies using three sets of assumptions (explained more fully below):

  1. Comparison between what users paid the Bureau in 2002 with how much the water would cost at the Bureau's so-called "full cost rate" — supposedly, what it costs the government to supply and deliver the water, though in reality far short of the real cost.
  2. Comparison between what users paid with the rate paid by the Environmental Water Account, a state program to buy excess agricultural water to protect and restore the San Francisco Bay/Sacramento-San Joaquin Delta watershed.
  3. Comparison between what users paid with the estimated cost of the water if it were coming from a newly constructed reservoir on the San Joaquin River.

Calculating water subsidies at the individual farm level is much more difficult, because all utilities — including the various kinds of quasi-public water user organizations — have a special exemption from state open records laws: They are not required to release the names or water use records of their customers. As a result, the public has no way of finding out where their water or their money is going. When EWG requested farm-level water use data from all the CVP water user organizations under the California Public Records Act, all but one of these requests were denied. (The Banta-Carbona Irrigation District complied.) To calculate water subsidies at the farm level, we therefore had to use a different approach.

As explained in detail below, we used a variety of data sources, including crop data for each farm from California's unique pesticide use reporting database, district level water use data from the Bureau of Reclamation, and hydrologic region-specific water needs data for each crop from the state Department of Water Resources. With this information, we were able to estimate the amount of CVP water used by each farm in each district and calculate their water subsidy amounts according to the same three assumptions we used to calculate district level subsidies.


LINK: For a step-by-step graphic overview of our methodology, click here(PDF). A more detailed explanation of our methodology can be found below.


Advantages and drawbacks to estimating water use

There are both drawbacks and advantages in relying on estimates of water use for our subsidy calculations. We obviously don't know exactly how much water a given farmer is using or what he is paying. It is possible that not every farmer with land in a water district actually receives federal irrigation water. And because we rely on the state's pesticide use data, farmers who don't use pesticides will not show up in our analysis; water subsidies to farmers who use pesticides on only a portion of their cropland will also be underestimated. (In 2001, less than 2 percent of cropland in California was certified organic.) But this method allows us to calculate subsidy values even in districts that don't meter water. Because some irrigation districts charge a flat fee for water use based on acres planted, those districts couldn't provide accurate user records even if they weren't exempt from disclosure.

Our methodology is also more likely to yield accurate representations of actual farm size. Under the 1982 Reclamation Reform Act, CVP users must pay "full cost" for all water used to irrigate land in excess of 960 acres. But the Act contained several significant loopholes, which farmers have ingeniously used to get around the 960-acre limit. Many large landholders within the CVP service area have divided up their farms on paper to get water at the subsidized price, but they continue to work the land as one farm. When applying for and reporting pesticide use, on the other hand, farmers have no incentive to artificially subdivide their holdings — they'd have to apply for more permits and file more paperwork. The bottom line is that unless farmers and districts agree to make their records public, ours is the only way to estimate the amount and value of California agriculture's use of the state's most valuable natural resource.


What is a water subsidy?

A water subsidy is simply the difference between what a contractor is paying for water and how much this water is actually worth. But there are as many ways to calculate the value of a water subsidy as there are ways to figure the true cost of CVP water. We used three different definitions of "true cost:"

  • The Bureau of Reclamation's "full cost" rate: Under the Reclamation Reform Act of 1982, farmers who receive CVP water for more than 960 acres of cropland are required to pay a higher rate than was originally stipulated in their contract. This rate is supposed to cover the "full costs" of water delivery, including CVP operation and maintenance charges, payments toward CVP construction costs, as well as partial interest on these capital costs. These rates vary significantly between each district, based on the distance the water must be transported among other considerations, and are calculated annually by the Bureau. In 2002 the average rate for all CVP districts overall was $38.93. Despite its name, the Bureau's "full cost" rate is widely recognized as being too low to be considered a good estimate for the true cost of CVP irrigation water: Capital interest is calculated only from 1982 onward and an increasing amount of the capital costs themselves have been allocated to CVP power users rather than to irrigators.
  • Environmental Water Account (EWA) rate: The EWA has been described as a virtual water district where the customers are fish. Operated by the state since 2000 as part of a larger program to restore ecosystem health in the Bay and Delta, the EWA buys water from willing sellers within the CVP and SWP at market rates to use for environmental purposes. The water, for instance, may be used to improve water quality in a particular section of river or help restore threatened species such as salmon and Delta smelt. As the EWA is a publicly funded entity, the government is essentially selling CVP water to farmers at very low prices and then buying it back later at much higher rates to replace water that was in the river in the first place. For our subsidy calculations, EWG defined the "EWA rate" as the average price for EWA-purchased water during fiscal year 2002 — 2003, or $129.48 per acre-foot.
  • Replacement water rate: The Bureau of Reclamation and the California Department of Water Resources are currently considering adding a massive new dam (or expanding an existing one) on the upper San Joaquin River to increase water supply. After completing a feasibility assessment for 17 possible sites, the agencies have now developed initial cost estimates for the six sites judged to have the greatest potential. These are highly conservative cost estimates because they exclude the costs for road construction, relocations of existing facilities, environmental mitigation, land acquisition, reservoir cleaning, and interest during and after construction. These estimates are useful, however, because they put a lower bound on what a new supply of irrigation water might cost. For our calculations, EWG defined the "replacement water rate" as the average estimated water cost for the three least expensive San Joaquin basin "water storage" options, plus the average 2002-2003 operation and maintenance rate for the CVP, totaling $170.42 per acre-foot.

For our district level water subsidies analyses, we compared what each district actually paid to the Bureau for the water it used during the year 2002 with what the district would have paid if the water was charged at the Bureau's "full cost" rate, EWA rate, or "replacement water" rate. For those 100 or so farmers who contract with the Bureau of Reclamation directly, we followed the same process, as their actual water use figures are recorded in annual reports from the Bureau. For those farms where we had to estimate water use, we took into consideration whether the farm harvested over 960 acres of crops and may be paying for some of their water at the Bureau's "full cost" rates already. We present minimum and maximum estimates of the subsidy, and are confident that the actual value of the subsidy is included in that range.


Methodology in detail

Due to differences in data availability, EWG used somewhat different approaches when calculating subsidies for entire water districts, farmers that contract with the Bureau of Reclamation directly, and farmers that get water through a CVP water user organization. We looked only at the year 2002 because that was the only year when all the necessary data was available.

A recurring issue in our analysis was that the various datasets we relied on defined what a year is differently: Some used calendar years, others used fiscal years , and still others used water years. Unfortunately, because of the data formats we were given, there was no way to correct for all of these calendar-related discrepancies; there may be some artifacts of this disparity in our analysis as a result.

Another complication is related to how the Bureau reports the annual water use and payments of its contractors. That is, the agency lumps together its corrections and adjustments from previous years with its water use and payment data for the current year. As a result, the information in the Bureau's annual reports may not be a perfect reflection of the actual amount of water used or money paid in some cases. Our methodology also assumes that the vast majority of the planted acreage in each district is irrigated. According to USDA's 2002 agricultural census, this assumption is valid: 95 percent of the harvested cropland in the counties covered by the CVP was irrigated.


Subsidy calculations for entire water districts

  • Calculating total CVP water use: Each year, the Bureau of Reclamation publishes records of how much water each CVP water contractor purchased and how much money the contractor paid for this water. For total water consumption, EWG used the Bureau's "Total Chargeable Acre-Feet" figure as reported in the 2002 CVP ratebook. For total money paid, EWG used the Bureau's 'Gross Revenues' figure in the 2002 ratebook (which includes contract revenue, RRA revenue, unused/paid water, transportation revenue, and voluntary payments/credits). The Bureau's annual ratebooks are available at:http://www.usbr.gov/mp/cvpwaterrates/index.html.
  • Calculating water subsidy value: To calculate the total water subsidy value for each district with respect to the Bureau of Reclamation's "full cost" rate, EWG multiplied the "Total Chargeable Acre-Feet" figure for 2002 by the Bureau's "full cost" rate for district for that year (which is also reported in the annual ratebooks), and then subtracted the Bureau's "Gross Revenues" figure. 

    To calculate the total water subsidy value for each district with respect to the Environmental Water Account (EWA) rate, EWG multiplied the 'Total Chargeable Acre Feet' figure for a given year by $129.48 per acre-foot (the average EWA rate for fiscal year 2002-2003), and then subtracted the Bureau's 'Gross Revenues' figure for that year. 

    To calculate the total water subsidy value for each district with respect to the "replacement" water rate, EWG multiplied the "Total Chargeable Acre-Feet" figure for a given year by $170.42 per acre-foot (the highly conservative estimated average rate for water coming from a new or expanded reservoir on the San Joaquin River), and then subtracted the Bureau's "Gross Revenues" figure for that year. (For more information regarding the EWA and "replacement" water rate, see "What is a water subsidy?" section above.)

     


Subsidy calculations for farmers who contract with the Bureau of Reclamation directly

Note: In our tables detailing these water subsidies at the district level, EWG grouped these farmers that contract with the Bureau directly into two hypothetical water districts (Sacramento River — Willows and Sacramento River — Shasta) based on which CVP unit these farmers received their water from. We did this only for the sake of convenience and completeness. These water districts do not actually exist as such.

  • Calculating total CVP water use: Each year, the Bureau of Reclamation publishes its records on how much water each CVP water contractor purchased and how much money the contractor paid for this water. For total water consumption, EWG used the Bureau's "Total Chargeable Acre-Feet" figure as reported in the 2002 CVP ratebook. For total money paid, EWG used the Bureau's "Gross Revenues" figure in the 2002 ratebook (which includes contract revenue, RRA revenue, unused/paid water, transportation revenue, and voluntary payments/credits). The Bureau's annual ratebooks are available at:http://www.usbr.gov/mp/cvpwaterrates/index.html.
  • Calculating water subsidy value: To calculate the total water subsidy value for each farmer with respect to the Bureau of Reclamation's "full cost" rate, EWG multiplied the "Total Chargeable Acre-Feet" figure for a given year by the Bureau's "full cost" rate for that farmer for that year (which is also reported in the annual ratebooks), and then subtracted the Bureau's 'Gross Revenues' figure. 

    To calculate the total water subsidy value for each farmer with respect to the Environmental Water Account (EWA) rate, EWG multiplied the 'Total Chargeable Acre Feet' figure for 2002 by $129.48 per acre-foot (the average EWA rate for fiscal year 2002-2003), and then subtracted the Bureau's "Gross Revenues" figure for that year. 

    To calculate the total water subsidy value for each farmer with respect to the "replacement" water rate, EWG multiplied the "Total Chargeable Acre-Feet" figure for 2002 by $170.42 per acre-foot (the highly conservative estimated average rate for water coming from a new or expanded reservoir on the San Joaquin River), and then subtracted the Bureau's 'Gross Revenues' figure for that year. (For more information the EWA and "replacement" water rate, see "What is a water subsidy?" section.)

Subsidy calculations for farmers within CVP water districts:

  • Determining which farms reside in which water districts: EWG acquired pesticide use data for every county covered in whole or in part by CVP water districts from county agricultural commissioners and the state Department of Pesticide Regulation. This data includes a variety of information including the name of the pesticide use permit holder (which is often the farm name but can also be the farm owner or farm manager in some cases), the type and amount of crop harvested, the amount of pesticide used, as well as detailed spatial information on harvested crops. Using geographical information systems (GIS), EWG was able to overlay the farm boundaries with the boundaries of individual water districts to determine which district a given farm (or piece of farm) resides in. For most farms, this was simple. For those farms that reside near a water district boundary, this was more complex. 

    The spatial information provided in the pesticide use database is given via 640-acre units of land known as geographical "sections". For those sections that landed entirely within a single water district, figuring out which farm (or piece of farm) was in which water district was easy: any piece of farm residing in that section would clearly be in that water district. For those geographical sections that straddled the border of two water districts, we had to make a simplifying assumption: we assigned those geographical sections that straddled two water district boundaries to whichever water district covered the largest percentage of that section's land area. For example, if a particular 640 acre unit of land contained 70 percent of Water District "A" and 30 percent of Water District "B", we assumed that entire 640 acres (and all of the farms pieces it may contain) was in Water District "A". This simplifying assumption may lead to some errors in assigning farms (or pieces of farms) to water districts, but our calculations predict that this error rate is less than 1 percent. Small farms lying on the boundary between two water districts have the greatest chance of being most affected: it is possible that the entire farm may end up in the wrong water district.
  • Calculating harvested crop acreages for each farm in each water district: Once we identified which farms (or pieces of farms) resided within each water district, we were able to tally up the total number of acres of the various crops harvested on each farm. It is important to note that if a farm harvested 1000 acres worth of tomatoes (or some other crop) in a given year, this does not necessarily mean that the farm itself was 1000 acres in size. The farm may have 'double cropped' — that is, harvested two 500 acre plantings of tomatoes that year. This level of detail can be extracted from the pesticide use database and was incorporated into EWG's analysis. (As a check, we compared the county level harvested crop information contained in the state's pesticide database with data from the USDA's 2002 agricultural census.)
  • Estimating total CVP water use: The California Department of Water Resources (DWR) has published statistics on the applied (irrigation) water requirements for crops in every hydrologic region in California. Each year, the Bureau of Reclamation also publishes its records on how much irrigation water each CVP water contractor purchased. What is more difficult to come by, on the other hand, is reliable information on much other water (surface water, ground water, water-rights water etc.) each CVP contractor used in a given year. 

    Yet using just the first two pieces of information, along with the crop acreages we calculated for each farm from pesticide use records, EWG was able to estimate CVP water use for individual farms within a given district. As an example, take a hypothetical water district containing 700 acres of rice and 300 acres of cotton. If you know that growing rice requires twice as much irrigation water on average as growing cotton in that hydrologic region, and you know that district used 4000 acre-feet of CVP water in 2002, you can calculate that growing an acre of rice in that district required about 4.71 acre-feet of CVP water and growing an acre of cotton required about 2.35 acre-feet. This district might also be getting another 800 acre-feet of water from other sources, but since we are interested only in CVP water use and CVP water subsidies, this water is irrelevant to our calculations.
  • Calculating estimated water subsidy ranges: To arrive at the best estimates possible, EWG made a number of adjustments to our methodology when calculating water subsidy ranges for individual farms in CVP water districts. 

    First, for all our minimum subsidy calculations we did not use the contract water rate but rather the average water rate paid to the Bureau by that district in that year (which is often the same but is sometimes higher than the contract rate) to calculate the "actual amount paid." For our minimum subsidy calculations, we also assumed that the water used to irrigate the first 960 acres of harvested crops †1 was paid at the average water rate and the rest of the water was paid at the Bureau's "full cost" rate — as it is supposed to be but often isn't. For our maximum subsidy calculations, we assumed that all of the water was paid at the Bureau's contract rate. When our final minimum and maximum subsidy estimates differed by less than 10 percent, we cited only the lower value in our database. 

    With these adjustments, we then followed the same methodology as outlined for those farmers who contract directly with the Bureau of Reclamation. That is, we compared the actual amount paid by each farmer with what they would have paid if the water had been charged at the Bureau's "full cost" rate, the Environmental Water Account (EWA) rate, and the "replacement" water rate. (For more information the EWA and "replacement" water rate, see "What is a water subsidy?" section. To see a table of the Bureau's contract and "full cost" rates for each water district in 2002, click here.)

Footnotes

†1 -- According the the Reclamation Reform Act of 1982, farmers are supposed to be able to receive subsidized water for their first 960 acres of cropland. Because our data only allowed us to calculate harvested acres (and not the geographical size of the farm), we assumed in our calculations that farmers were able to receive subsidized water for their first 960 acres of harvested crops. This, if anything, would underestimate the amount of subsidies accruing to each farm.