Virtual Flood

Feds Promise Big Ag Water That Isn't There

Thursday, March 17, 2005

Virtual Flood

Feds Promise Big Ag Water That Isn't There

The federal government has promised Central Valley agribusinesses it will increase the amount of taxpayer-subsidized irrigation water by 43 percent over the next 25 years, well beyond what the state's infrastructure can reliably supply, according to Bureau of Reclamation documents obtained by Environmental Working Group (EWG).

The documents show that the Bureau's contracts with Central Valley Project (CVP) water districts, which are currently being renewed, promise an additional 1.5 million acre-feet of water a year — water that can't be supplied without costly new dams or severe damage to fish and wildlife, and will set up the districts to reap windfall profits by reselling water at much higher prices. In blatant disregard of federal law, the contracts, which will tip the balance of power in the state's water wars to agriculture for the next 50 years, are being extended without consideration of the environmental impacts of storing and delivering the extra water.

According to the documents, by 2030 the Bureau plans to deliver 5.1 million acre-feet of agricultural water a year to CVP water districts. Yet in a state where drought is a constant threat, the agency was able to deliver this much water only once between 1990 and 2003, and the average amount it was able to deliver in those years was 3.5 million acre-feet. (An acre-foot is the amount of water needed to cover one acre one foot deep — enough to supply two California households for a year.)

chart

CVP water is heavily subsidized

The increased supplies promised in the contracts with 100-odd CVP water districts also mean a huge increase in the value of taxpayer subsidies to CVP recipients. In 2002, CVP water districts received 3.3 million acre-feet of irrigation water at rock-bottom prices, subsidized by federal taxpayers at a rate of $419 million a year based on the government's estimated cost of new water supplies from the San Joaquin River. If the Bureau had delivered 5.1 million acre-feet, as it promises for 2030, at the same rates, the value of the water subsidy could have been as high as $640 million.

It is impossible to estimate the value of the water supply in 2030 since rates are expected to increase by an unknown amount as the contracts are renewed, and may be adjusted from year to year. But even if the average CVP water rate were to double it would still be far lower than the water's market value. In 2002, CVP contractors paid an average of about $17 an acre-foot for their water, while the estimated cost for new supplies is about $170 an acre-foot.

The increased water deliveries are neither intended nor needed for agriculture: The total amount of cropland in the Central Valley decreased by almost 1 million acres between 1987 and 2002, while the amount of irrigated acreage was flat. The largest CVP contractor, the giant Westlands Water District, is getting a government buyout to take at least 34,000 polluted acres out of production, but has been promised more than 300,000 additional acre-feet of water by 2030. Rep. George Miller, the leading CVP watchdog in Congress, says the deliberate over-allocation of water in the contracts amounts to an "annuity" for farmers who plan to resell their water to thirsty Southern California cities.

As with the existing allocations of CVP water, the lion's share of the promised increases will go to the largest and richest water districts and agribusinesses. Of the seven CVP water districts that received, on average, more than 100,000 acre-feet of water a year from 1990 to 2003, all are slated to get increased supplies of 11 to 53 percent, accounting for 41 percent of the additional water. Westlands, which serves 9 of the 10 largest farms in the CVP measured by water use, got about 720,000 acre-feet in 2002. The district has been promised more than 1.15 million acre-feet a year by 2030. That's 60 percent more than its current use, which was subsidized by taxpayers to the tune of $110 million a year at the replacement cost in 2002.

The rich get richer: Much of the extra water will go to a few big districts

CVP water contractor Average amount of water delivered in 1990-2003 (acre-feet) Projected amount of water delivered in 2030 (acre-feet) Percent increase in deliveries by 2030 Value of 2002 water subsidy at replacement water rate
Westlands Water District 755,635 1,155,393 53% $110,000,000
Madera Irrigation District 155,394 198,280 28% $19,900,000
Lower Tule River Irrigation District 144,244 206,542 43% $17,200,000
Arvin-Edison Water Storage District 135,553 188,528 39% $9,410,000
Delano-Earlimart Irrigation District 123,105 144,410 17% $19,000,000
Chowchilla Water District 121,361 155,800 28% $14,400,000
South San Joaquin Municipal Utility District 109,155 121,000 11% $15,900,000

Source: [1,23]

According to the Bureau's documents, the first big increase comes next year, when the Bureau's water deliveries are projected to jump to 4.5 million acre-feet — a 20 percent increase over 2005. After 2006, the Bureau's plan calls for increasing water deliveries 2 to 4 percent every five years.

Water has to come from somewhere

Where will the water come from? The Bureau doesn't say.

The Bureau of Reclamation and the state Department of Water Resources have completed preliminary assessments to build new dams and/or expand existing dams on the San Joaquin and Sacramento Rivers. But even if the most ambitious of these plans are approved, the completed projects on these two rivers would together yield less than 400,000 acre-feet of new water. The price for this water would be high: Not only are the construction costs estimated to be as much as $2 billion or more, but the proposed raising of the Shasta Dam on the Sacramento River would flood hundreds of acres of land considered sacred by the Winnemem Wintu Tribe. And even if these plans are approved, it would take years to make them a reality.

Proposals to increase capacity of the Central Valley Project

Major river affected Proposed new reservoir site Estimated new water supply (thousand acre-feet per year) Total estimated construction costs ($ million)
Sacramento Shasta Dam: 6.5 ft Raise 72 280
Shasta Dam: 18.5 ft Raise 125 - 146 410 - 480
San Joaquin Friant Dam Raise 25 - 150 150 - 840
Fine Gold Creek 15 -115 200 - 540
Temperance Flat: River Mile 274 95 - 225 610 - 1,000
Temperance Flat: River Mile 279 95 - 235 510 - 1,750
Temperance Flat: River Mile 286 95 - 190 410 - 790
Yokohl Valley 70 - 100 350*

*Cost for a reservoir providing 70,000 acre-feet per year; costs for larger reservoir under development.

Source: [3,4]

Some of the additional water could come from a recently unveiled long-term CVP operation plan that would greatly increase pumping from the San Francisco Bay-Delta for use by agribusiness and municipalities, leaving less water for already devastated fish and wildlife populations. This already controversial document — known as the Operations, Criteria, and Plan (OCAP) — became even more controversial last October when the National Oceanic and Atmospheric Administration's fisheries office released a report concluding that OCAP would not impact threatened fish populations — a reversal from the conclusion of a previous draft. The change occurred only after the first draft was shared with the Bureau of Reclamation, prompting 19 members of Congress to call for an investigation into possible political interference. OCAP, if implemented, would increase diversions from the Bay and Delta by approximately 200,000 to 300,000 acre-feet a year.

Now that the Bureau has promised more water, a recent federal claims court ruling opens the door for farmers to sue if they don't get it. In December 2004, a group of San Joaquin water districts received a $17 million settlement from the Bush Administration after they sued the federal government for "taking" what they claimed was their private property. [Link to EWG Takings.] At issue was about 480,000 acre-feet of water the state Department of Water Resources kept in the San Joaquin River to protect the endangered Delta smelt and Chinook salmon during the drought of the early 1990s.

Despite the facts that under California law all water belongs to the people of the state, and that the districts only had a contract for an unspecified amount of this water, the farmers claimed the water was theirs and demanded compensation under the Fifth Amendment prohibition against the government taking of private property. The judge ruled in the farmers' favor — a mistake that Sen. Dianne Feinstein warned Attorney General John Ashcroft and Interior Secretary Gale Norton would "establish a precedent that could require the public to pay tens of millions of dollars to water users in many cases where even a small portion of their anticipated deliveries are needed to protect endangered salmon or other fish."

It was the first federal court ruling applying the Fifth Amendment to actions in compliance with the Endangered Species Act — a radical extension of the takings doctrine — but is not likely to be the last. A similar claim for $100 million was filed in 2001 by farmers in the Klamath Basin of Northern California and Oregon, whose promised water deliveries were reduced to protect endangered sucker fish and threatened Coho salmon. (Recently, West Coast fishermen were allowed to join the case on the side of the government, directly pitting fish against farming.) Now that the barrier has been breached, it is not hard to foresee CVP farmers suing if the Bureau doesn't deliver the water it has promised.

Lack of required environmental studies

Under the National Environmental Policy Act, the Bureau of Reclamation is required to assess the potential environmental impacts of the proposed renewed contracts, and consider alternatives to reduce harm. The Bureau has issued a series of draft Environmental Impact Statements (DEIS), ostensibly fulfilling its statutory obligations. Yet in a major — and illegal — oversight, the studies did not examine the impacts of delivering the amount of water the agency has promised by 2030.

In a January 25, 2005 letter from the Environmental Protection Agency (EPA) to the Bureau, the EPA says the Bureau's "environmental analysis is inadequate" because it is based on current deliveries of water, equal to only 50 to 60 percent of the amounts called for in the contracts. The EPA also said the Bureau's studies failed to consider the impact of increased water deliveries on water quality — a glaring omission, given that hundreds of miles of rivers and tens of thousands of acres of wetlands and estuaries in the Central Valley are impaired by agricultural pollution.

The Bureau assures its critics that none of the contracts will be executed until all environmental review requirements are met. But the Bureau and the water districts are moving quickly to lock in the contract terms for 25 to 40 years (often with automatic renewal for another 25 years.) On Feb. 25, 2005, the Bureau announced that it was nearing completion of negotiations with most CVP contractors and would begin signing the contracts; as of March 11, new contracts for about half of the CVP water supply had already been executed. If the Bureau considers the environmental impacts only after negotiating the contracts, were the impacts ever seriously part of the decision?

This unacceptable rush to sign the contracts will commit the federal government to delivery of water that doesn't exist, commit taxpayers to billions of dollars in construction costs and water subsidies, and commit California to a future in which most of its water is controlled by — and managed for the profit of — Central Valley agribusiness.

Recommendations

EWG urges Gov. Arnold Schwarzenegger and other California elected officials to call on the Bush Administration for an immediate moratorium on the signing of new CVP contracts until their impacts on water supply, water quality and wildlife are adequately considered and all legal requirements met. We also recommend:

  • The Bureau of Reclamation must not be allowed to promise the delivery of more water than it can reasonably deliver.
  • Farmers should not be allowed to resell the public its own water at a higher price. If farmers get more water than they need, it should be returned to the Environmental Water Account, a program to restore fish and wildlife habitat in the San Francisco Bay-Delta, at the same price the farmer paid. In return, farmers should receive a reasonable discount on the water they buy the following year.
  • CVP contracts should not include provisions for automatic renewal after 25 years. Such long-term provisions do not give the state sufficient flexibility to address changing water needs.

 

Virtual Water, Real Profits

When the Central Valley Project was built, beginning in 1937, the government was ambitious about the amount of water the Project could supply each year — too ambitious. The pipe dreams of the Bureau and its customers created millions of acre-feet of "paper water," allocated in the system's original contracts, promising far more water than the Project could realistically deliver. Currently, in a given year the Bureau typically provides about 60 percent of contracted water amounts to users. Only in the wettest of years is enough water available to deliver full contract amounts. [1]

With the contracts up for renewal, it was the obvious time for the Bureau to look at the substantial changes in California's water needs and priorities over 40 years and adjust the contracts to more closely match reality. In fact, the Bureau did the exact opposite: Far from adjusting contracted water amounts to levels the agency can actually deliver, the agency has promised farmers their full contract amounts by 2030. [1,2]

The government has promised Central Valley Project districts 43 percent more water by the year 2030.

CVP Contractor Avg amount of water delivered 1990-2003 (acre-feet) Projected water deliveries in 2030 (acre-feet) Percent increase
Westlands Water District 755,635 1,155,393 53%
Madera Irrigation District 155,394 198,280 28%
Lower Tule River Irrigation District 144,244 206,542 43%
Arvin-Edison Water Storage District 135,553 188,528 39%
Delano-Earlimart Irrigation District 123,105 144,410 17%
Chowchilla Water District 121,361 155,800 28%
South San Joaquin Municipal Utility District 109,155 121,000 11%
Glenn-Colusa Irrigation District 96,029 105,000 9%
Sutter Mutual Water Company 86,918 95,000 9%
Del Puerto Water District 82,865 140,198 69%
San Luis Water District 76,717 124,500 62%
Tulare Irrigation District 72,981 97,680 34%
Panoche Water District 59,149 93,900 59%
Shafter-Wasco Irrigation District 58,054 68,488 18%
Westside Water District 42,583 65,000 53%
Orland-Artois Water District 40,459 53,000 31%
Lindmore Irrigation District 37,697 43,560 16%
Colusa County Water District 37,227 68,015 83%
Orange Cove Irrigation District 36,171 39,200 8%
Sacramento River Settlement Contractors: Willows 34,633 42,545 23%
Saucelito Irrigation District 31,159 36,944 19%
Reclamation District # 108 29,873 33,000 10%
West Stanislaus Irrigation District 29,328 50,000 70%
Kanawha Water District 28,647 45,000 57%
Terra Bella Irrigation District 26,853 27,500 2%
Lindsay-Strathmore Irrigation District 26,089 27,300 5%
Porterville Irrigation District 24,413 30,400 25%
James Irrigation District 21,297 35,300 66%
Natomas Central Mutual Water Company 20,631 22,000 7%
San Benito County Water District 20,267 35,550 75%
Fresno Irrigation District 19,265 36,000 87%
Exeter Irrigation District 15,860 20,620 30%
Broadview Water District 15,260 26,980 77%
Reclamation District #1004 14,413 15,000 4%
Santa Clara Valley Water District 14,329 24,065 68%
Princeton-Codora-Glenn Irrigation District 13,514 15,000 11%
Banta-Carbona Irrigation District 13,148 20,000 52%
Kern-Tulare Water District 12,902 40,000 210%
Central San Joaquin Water Conservation District 12,832 49,000 282%
Dunnigan Water District 11,700 19,000 62%
Colusa Drain Mutual Water Company 11,573 58,100 402%
Pixley Irrigation District 11,505 31,102 170%
Meridian Farms Water Company 11,061 12,000 8%
Plain View Water District 10,850 20,180 86%
Corning Water District 10,850 23,000 112%
Bella Vista Water District 10,514 17,000 62%
Feather Water District 10,085 20,000 98%
Patterson Water District 9,734 16,500 70%
Ivanhoe Irrigation District 9,615 11,492 20%
Anderson-Cottonwood Irrigation District 9,531 10,000 5%
Stone Corral Irrigation District 9,112 10,000 10%
Glide Water District 8,486 10,500 24%
Tranquillity Irrigation District 8,341 13,800 65%
Placer County Water Agency 7,661 35,000 357%
Tea Pot Dome Water District 7,188 7,500 4%
Pacheco Water District 6,313 10,000 58%
Maxwell Irrigation District 6,143 6,000 -
Mercy Springs Water District 6,085 2,842 -
Gravelly Ford Water District 5,977 6,720 12%
Clear Creek Community Services District 5,665 5,000 -
Provident Irrigation District 4,513 5,000 11%
La Grande Water District 4,334 7,200 66%
Rag Gulch Water District 4,015 13,300 231%
Garfield Water District 3,361 3,500 4%
Thomes Creek Water District 3,336 6,400 92%
Eagle Field Water District 2,923 4,550 56%
Oro Loma Water District 2,898 4,600 59%
Fresno Slough Water District 2,783 4,000 44%
West Side Irrigation District 2,721 5,000 84%
Proberta Water District 2,594 3,500 35%
Pleasant Grove-Verona Mutual Water Company 2,222 2,500 13%
4-M Water District 2,159 5,700 164%
Coelho Trust 1,917 2,080 9%
Tisdale Irrigation & Drainage Company 1,851 2,000 8%
Davis Water District 1,801 4,000 122%
Pelger Mutual Water Company 1,704 1,750 3%
Widren Water District 1,582 2,990 89%
Holthouse Water District 1,370 2,450 79%
Centinella Water District 1,357 - -
Stony Creek Water District 1,337 2,920 118%
County of Tulare 1,127 3,963 252%
International Water District 1,095 1,200 10%
Lewis Creek Water District 979 1,450 48%
Hills Valley Irrigation District 961 3,346 248%
Cortina Water District 917 1,700 85%
Glenn Valley Water District 831 1,730 108%
Kirkwood Water District 724 2,100 190%
County of Fresno 676 2,400 255%
Carter/Sartain Mutual Water Company 595 672 13%
Laguna Water District 509 800 57%
Sacramento River Settlement Contractors: Shasta 386 981 154%
Contra Costa Water District 320 1,000 213%
Tri-Valley Water District 317 1,142 261%
Roberts Ditch Irrigation Company 268 300 12%
Myers-Marsh Mutual Water Company 150 255 70%
Reclamation District #1606 91 228 150%
County of Sacramento 82 230 182%
4-E Water District 65 20 -
Swinford Tract Irrigation Company 34 40 17%
Hughes M & M/Tranquillity Public Utility District 34 70 104%
Delta Mendota Exchange* 578,507 806,678 39%
Total 3,523,439 5,055,179 43%

*The Delta Mendota Exchange is not a typical CVP water contractor, but does receive CVP irrigation water.

Source: [1]

A study by the Bureau of Reclamation and the state Department of Water Resources completed in 2003 identified six possible sites on the San Joaquin River for a new or expanded dam and reservoir. [3] Yet none of those options is projected to supply more than 235,000 additional acre-feet a year — and the construction cost to taxpayers is estimated to be as much as $1.75 billion. Officials are also considering raising Shasta Dam on the Sacramento River, with construction costs ranging from $280 and $480 million. [4] But the most water this would provide is 146,000 acre-feet per year, and it would come at a cost beyond construction: The inundation of 780 acres along the McCloud River, considered sacred by the Winnemem Wintu Tribe. [5] Even if one or more of the San Joaquin or Shasta proposals were given the green light this year — which seems unlikely in a time of government austerity both in Washington and Sacramento — it could easily take more than a decade for new supplies to come on line.

Whether or not new supplies are developed, it is clear that the Bureau plans to leave less water in the rivers, Delta and Bay for fish and wildlife and divert more to farms. A long-term CVP operation plan unveiled last June includes large increases in pumping from the San Francisco Bay-Delta. If implemented, this plan (known as the Operations, Criteria, and Plan or OCAP) would increase diversions from the Bay-Delta by approximately 200,000 to 300,000 acre-feet, leaving less water for already devastated fish and wildlife populations. [6]

In August 2004, the first draft of a report by the National Oceanic and Atmospheric Administration's (NOAA) fisheries concluded that OCAP was "likely to jeopardize the continued existence" of several endangered species of fish. But when a revised draft was released the next month, it said just the opposite — that the plan would not impact threatened fish populations. [7] The change occurred after NOAA shared the draft report with the Bureau of Reclamation, prompting nineteen members of Congress to call for an investigation into possible political interference. In an October 8, 2004 letter to the Inspectors General of the Departments of Interior and Commerce, the lawmakers — including Reps. George Miller, Mike Thompson, Hilda Solis, Ellen Tauscher, and House Democratic Leader Nancy Pelosi — noted that the situation was "especially troubling given the recent history of political intervention in NOAA Fisheries' review process, which resulted in the well-documented and catastrophic failure to protect the fish of the Klamath River." [8]

With the Bureau promising contractors a substantial increase in their water supplies over the next 25 years, a real concern is whether the contractors will sue the government if they don't get it. In December a group of San Joaquin water districts received a $17 million settlement from the Bush administration after they sued the federal government for "taking" what they claimed was their private property. [9] At issue was about 480,000 acre-feet worth of water the state Department of Water Resources kept in the San Joaquin river to protect two endangered species of fish during the drought of the early 1990s.

Despite the fact that legally the water belonged to the people of California and the districts only had a contractual arrangement with the state for some of this water, the farmers claimed the water was theirs and demanded compensation from the government. The judge ruled in the farmers' favor, a mistake that Senator Feinstein warned Attorney General John Ashcroft and Interior Secretary Gale Norton would "establish a precedent that could require the public to pay tens of millions of dollars to water users in many cases where even a small portion of their anticipated deliveries are needed to protect endangered salmon or other fish." [10]

The Bush administration ignored similar warnings from the National Oceanic and Atmospheric Agency, California Attorney General Bill Lockyer, and the state Water Resources Control Board which represented Gov. Arnold Schwarzenegger's administration, announcing that the federal government would settle rather than appealing the case to a higher court. [9,11-13] It was the first federal court ruling applying the Fifth Amendment to actions in compliance with the Endangered Species Act — a radical extension of the takings doctrine — but may not be the last.

In 2001, farmers and irrigation districts in the Klamath River Basin in Oregon and Northern California filed a lawsuit against the government in the Court of Federal Claims. The $1 billion suit (since reduced to $100 million) challenges the Bureau of Reclamation's 2001 restrictions on the release of irrigation water from Klamath Lake — referred to as water banking — to maintain lake levels for the protection of endangered sucker fish and threatened Coho salmon. [14-16] (Recently, West Coast fishermen were allowed to join the case on the side of the government, directly pitting fish against farming.) Now that the barrier has been breached, it is not hard to foresee CVP farmers suing if the Bureau doesn't deliver the water it has promised.

Imaginary farmland, real money

 

In September 2004, Rep. George Miller wrote the Bureau of Reclamation demanding an explanation for how the agency could promise water that doesn't exist. The agency responded that it "did not over-allocate the water supplies in the renewal contacts." [17] The Bureau said it had prepared "water needs analyses" for all CVP water users, and the quantities in the contracts were what the contractors demonstrated they would need by 2030. [18] A closer look at these so-called "water needs analyses" shows that they have little basis in reality and are obvious schemes by districts to stake a claim to excess water they can sell at a profit.

Through the Public Records Act, EWG obtained the water needs analyses for 65 districts (all that were complete at the time of our request). We found that more than 75 percent assume that irrigated acreage in the district will increase by 2030 — by as much as twofold in some cases. Overall, the 65 water needs analyses estimated that irrigated acreage will increase by 200,000 acres. But according to the U.S. Department of Agriculture's agricultural census data, in the 18 counties served by the CVP, irrigated farm acreage has remained constant for the last fifteen years. [19]

farm acreage steady chart

What's more, while the Bureau of Reclamation is projecting a substantial increase in agricultural water demand in the over the next 25 years, the state Department of Water Resources is predicting a substantial decline over this period. [20] Statewide, the Department estimates that if current trends continue agriculture will use 3.9 million acre-feet less water per year in 2030. The state says most of this decline in acreage will be in the Central Valley.

Not to mention that 34,000 acres of cropland are being removed from production in Westlands Water District because of severe drainage problems, with the help of a federal buyout. In December 2002, a federal judge in Fresno approved a $139 million dollar deal, with $107 million coming from taxpayers. [21] Nineteen families will share the settlement, but four of these families will get two-thirds of the money. [22] The land is part of an estimated 200,000 acres in Westlands considered unsuitable for production that officials ultimately want to remove from production.

So where did the Bureau get its projections for the water needs assessments? From the contractors themselves. It's not surprising that the contractors would claim that irrigated acreage would increase. They knew this was the key to getting more water. And water is money — big money.

When districts don't need as much water as they have been given, they can sell it on the open market as long as they meet certain provisions established by the Central Valley Improvement Act (CVPIA) of 1992. As the Act's author, Rep. Miller, points out in his September 2004 letter to the Bureau, this can be highly profitable:

"[B]y allowing some contractors to pay below-market rates for far more water than can be used beneficially — or indeed used at all — the Bureau is encouraging those contractors to resell the water at much higher rates, reaping windfall profits for themselves which otherwise would go to the taxpayers who paid for the development of these water resources. The CVPIA did not encourage water transfers with the goal of providing [farmers] an annuity ..." [17]

Agricultural water contractors aren't limited to selling their water to other agricultural contractors. They can sell to thirsty municipalities, and can even enter into long-term water transfer agreements to provide water for growing urban areas. Another option is to sell water to the Environmental Water Account (EWA), which provides a unique mechanism for farmers to profit at the expense of taxpayers' pocketbooks.

The EWA, which has been in operation since 2000, is like a virtual water district where the customers are fish. EWA buys water from willing sellers within the CVP and State Water Project (SWP) at market rates to use for environmental purposes, such as improving water quality in a particular section of river or helping to restore threatened fish species such as salmon and smelt. As the EWA is a publicly funded entity, the government is in effect selling CVP and SWP water to farmers at very low prices, then buying it back later at much higher rates— even though the water never leaves the river. [23]

According to EWG's analysis of the Bureau of Reclamation's records, while CVP farmers paid an average of $17.14 an acre-foot for irrigation water in 2002, the EWA paid an average price that was seven and a half times higher: $129.48 per acre-foot. In 2000, the EWA paid as much as $460 an acre-foot for water from one irrigation district. [23]

Since 2000, the largest broker of water to the EWA has been a powerful SWP contractor known as the Kern County Water Agency. From 2000 to 2004, Kern sold a total of 277,400 acre-feet of water to the EWA at an average price of $198 per acre-foot, making $38.6 million in profit in the process. [9] With the Bureau promising to deliver almost 45 percent more agricultural water to CVP contractors over the next 25 years than today, the profits from water resales will increase accordingly.

Bureau fails to assess environmental impacts of increased deliveries

Under the National Environmental Policy Act, the Bureau of Reclamation is required to assess the potential environmental impacts of the CVP contract renewals and consider alternatives to reduce adverse environmental impacts. The Bureau has issued a series of Draft Environmental Impact Statements (DEIS), ostensibly fulfilling its statutory obligations. Yet in a major — and illegal — oversight, the DEIS did not examine the impacts of delivering the full contract amounts the agency says it will deliver by 2030.

In a January 25, 2005, letter from the U.S. Environmental Protection Agency (EPA) to the Bureau, the EPA concludes that the Bureau's "environmental analysis is inadequate" and needs to be "formally revised", pointing out that:

"The proposed action enables full delivery of contract quantities each year, amounting to almost 1.4 million acre feet per year for a period of up to 40 years. However, the DEIS ... assumes the continuation of current conditions, which equal average annual deliveries of approximately 50 to 60 percent of the full contract amount." [2]

There is no question that increased water deliveries will have significant environmental impacts. Reduced stream flows can lead to altered water temperature, impaired passage, and decreased spawning and rearing habitat, all of which can be major stressors for fish populations. In the early 90s, higher delivery rates — still far lower than those being proposed for 2030 — combined with a drought, forced emergency action to save the Delta smelt and Chinook salmon from extinction, which led to the "takings" lawsuit and $17 million settlement. [9]

The Bureau's failure to assess the environmental impacts of increased water deliveries is not the only problem with the DEIS: As the EPA points out in its letter, the DEIS also "does not address the impacts of water deliveries under the contracts and drainage service on water quality." [2] This is a particularly significant omission given that irrigated agriculture is known to be a major source of water quality problems for the nation's rivers, lakes and estuaries and the fact that "water quality problems in the project area are well-documented," according to the EPA. [24,25]

Today, more than 700 miles of rivers and 55,000 acres of wetlands and estuaries in the Central Valley are listed as "impaired" under the federal Clean Water Act -and the water quality problems in question are linked to agriculture. [25] ("Impaired" means that these waters are unsuitable for drinking, swimming, fishing or wildlife habitat.) At current water delivery rates, agriculture discharges an average of 280,000 tons of salt each year to the Lower San Joaquin River. [2] With increased deliveries, it is likely that more agriculture-related pollutants will be discharged.

The Bureau failed to consider these obvious potential environmental impacts. In a Feb. 25, 2005, press release, the Bureau stated that none of the contracts will be executed until all environmental review requirements are met. [26] But if the Bureau considers the environmental impacts only after negotiating the contracts, were the impacts ever seriously part of the decision?

 

CVP Water Is Heavily Subsidized

The current CVP water contracts have been providing farmers with heavily subsidized water for decades. In 2002, this taxpayer-funded subsidy was worth up to $416 million, according to an Environmental Working Group investigation. Although the new contracts will raise water rates slightly in some cases, the bulk of the subsidies will remain — and if the Bureau increases water deliveries as it has promised, these subsidies could actually increase to a value of as much as $640 million a year.

First authorized in 1936, the CVP now encompasses 20 dams and reservoirs, 1,437 miles of canals, 192 miles of drains, and an array of pumping and power generating facilities. This massive project came with a price tag of $3.6 billion, of which farmers are supposed to pay back $1 billion. As of 2002, however, irrigators had only paid back 11 percent of the tab. The reason? CVP recipients had signed 40-year contracts that granted farmers water at rates far below what was necessary to pay back the construction costs. [23]

CVP repayment over time Source: [32]

Irrigators are not only failing to pay back what they owe, they are also receiving an additional subsidy: No interest. While municipal and industrial users of CVP water must pay back their tab plus interest, farmers get to pay theirs back interest-free. This policy dates to the turn of the 20th century, when the federal government was looking to develop water supplies and other incentives to settle the West. The Reclamation Act of 1902 stated that "charges shall be determined with a view of returning to the reclamation fund the estimated cost of construction of the project." The Bureau subsequently interpreted this to mean that irrigators would not be required to pay back interest — in effect granting farmers a huge subsidy. [27]

Other hidden subsidies

This isn't the only hidden subsidy farmers are getting. For instance, if the Bureau projects that some districts are unable to pay anything towards their allocated costs, the agency increases the rates for power users and applies this money towards the district's debts. As of 2002, 21 CVP contractors had received such "capital relief" totaling more than $21 million dollars, but had paid just $411,041 towards their CVP construction tab. [28] In addition, for decades the Bureau had a policy of extending the repayment period every time a new piece of the CVP was built. That is, instead of setting a fixed repayment date 50 years after the water started flowing to most farmers, the Bureau reset the repayment clock each time a new facility was added to the project allowing payments to be spread out over a much longer period. This policy, which has now ended, increased the farmer's subsidies even more. [27]

The bottom line is that farmers are getting CVP water at artificially cheap prices. According to EWG's analysis of the Bureau of Reclamation's records, in 2002 farmers in the CVP paid an average of $17.14 an acre-foot for their irrigation water. That's one cent for every 190 gallons. By contrast, if irrigators actually were to pay operation and maintenance charges, make payments towards capital costs, and pay interest on these costs (calculated from 1982), irrigators would be paying $38.93 per acre-foot on average according to the Bureau's figures. The Environmental Water Account pays much more for its water on the open market: an average of $129.48 per acre-foot for water in 2002-03. But this is even less than what the water is truly worth, for if the Bureau were to build a new dam on the San Joaquin River the absolute minimum amount this water would cost would be $170.42 an acre-foot and probably a lot more. [23]

The Bureau has repeatedly emphasized that the base contract rates will go up in the new contracts and that these new rates can be adjusted every year to ensure that the farmers pay back what they owe by 2030. Although it is true that in many cases the new contract rates are at least a bit higher than the old contract rates, the Bureau doesn't seem to be taking the massive debt all that seriously: CVP water rates actually decreased virtually across the board between 2004 and 2005 by 81 cents an acre-foot on average, and as much as $8.78 an acre-foot in some cases. [1]

Despite the fact that the CVP, like other federal water projects, was built explicitly to help small family farmers, it is large agribusiness operations that are reaping a windfall from taxpayer-subsidized cheap water. EWG analysis shows that in 2002, 10 percent of CVP farms got 67 percent of the irrigation water and an average subsidy worth up to $349,000 at the market rate for replacement water. The top 5 percent, or 341 farms, got 49 percent of the irrigation water and a subsidy worth up to $513,000. The 25 largest farms accounted for more than 13 percent of CVP irrigation water, receiving on average an estimated 11,900 acre-feet of water, for an average subsidy worth up to $1.7 million. †1 [23]

In 2002 the CVP delivered 3.3 million acre-feet of irrigation water, with an embedded water subsidy worth up to $419 million. But in 2030 the Bureau plans to deliver 5.1 million acre-feet — an increase of 53 percent. [1,2] If this much water had been delivered in 2002, the associated water subsidies could have been as much as $640 million. It is impossible to know what the actual value of the water subsidy will be in 2030 since water rates are likely to increase somewhat when the contracts are renewed and will be adjusted from year to year. However, even if water rates were to double they would still be far lower than market rates. In 2002 CVP contractors paid an average of about $17 an acre-foot for their water. The estimated cost for new supplies, on the other hand, was about $170 an acre-foot and the average rate paid by the state for environmental water in 2002 — 2003 was $129 an acre-foot. [23]

Environmental consequences

Defenders of federally subsidized water projects in the West argue that they "made the desert bloom" (another way of saying that they make it possible to grow crops that are neither economically nor environmentally sustainable). Farms in the CVP produce roughly $3 billion worth of crops a year. [29] But the original intent of federal water projects, set out in the Reclamation Act of 1902, was to encourage Western settlement by small family farms. Initially, no one could receive subsidized water for more than 160 acres, and they had to live on the land. [27] Today, artificially cheap irrigation water in the Central Valley has led to a host of problems besides the CVP-sized hole in the federal treasury. Among the most serious:

  • By allowing the planting of water-intensive crops such as rice, cotton and alfalfa in what is naturally a desert, it has discouraged the efficient use of water. While the average acre of U.S. farmland gets 2.48 acre-feet of water each year, the average acre in California gets 36 percent more, or 3.37 acre-feet. [30] In a state where water demand for all uses exceeds supply by 1.6 million acre-feet in normal years and 5.1 million acre-feet in drought years, this is irresponsible. [31]
  • As urban customers are often reminded, there's never enough water to waste. Inefficient use by agriculture means less water for wildlife and urban users. Wildlife in particular has paid the price. Of 29 fish species native to the Sacramento and San Joaquin Rivers and the Bay-Delta, two are extinct, six are endangered, five are rare, and nine others are declining. [29]
  • Cheap water has also made feasible the continued farming of land unsuited for irrigation because of serious drainage and toxicity problems. One of the worst environmental disasters in the state's history, the mass death of migratory birds at the Kesterson National Wildlife Refuge in Merced County, was the result of toxic salts in the soil carried downstream by irrigation runoff. [23]

It's one thing to ask taxpayers to subsidize farming with cheap water. It's another thing when those subsidies top $400 million a year and the great majority of the subsidies are going to the largest, wealthiest farms. It's still another when the Bureau is promising to increase water deliveries by almost 45 percent over the life of these contracts. Time is running out for an honest and fully informed debate about how the water needs of all Californians will be met in the 21st Century.

Footnote

†1 — Meanwhile, the average farm received only 350 acre-feet of water, for a median subsidy of $7,056. More than 90 percent of CVP farmers got less than 1,000 acre-feet of water in 2002. The average US household uses less than one half of one acre-foot each year.

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