Student Publication
Water Policy Review
23 October 2000
Erik Merriman
History
Before the Gold Rush in 1848, California was a relatively unsettled by whites. When people started to settle here during the Gold Rush, they relied primarily on artesian wells and rivers. Most rivers dried up in the summer (particularly in southern California). However, the population boom from the Gold Rush was soon greater than the water supply that could sustain it; a fact readily made evident during the 1906 San Francisco earthquake, when fire crews were unable to control the blazes due to water shortage.
Shortly thereafter, the city of San Francisco looked for an adequate and reliable water supply, for which it traversed many miles to find in the Hech-Hetchy Valley of Yosemite. The damning and subsequent diversion was the first major effort of an urban center to obtain water in a locality very far from the origin of consumption. In many ways, history follows its same patterns over and over again. Thus it came as a very little surprise that William Mulholland (1) then masterminded a plan to divert water from the Owens River Valley to the municipal districts of southern California thereby allowing southern California to grow to its present size. This pattern of long-distance water transfer was repeated when southern California retrieved water from Parker Dam (2) on the Colorado River to augment its Owens Valley diversion. In more recent times, the East Bay Municipal Water District has practically mortgaged its entire urban center and requested revenues from federal tax dollars to finance a diversion from the Mokelumne River.
Although these large-scale projects served many urban interests, they left many farmers without their most precious resource (water). The Jefferson ideals of small “family” farms had resulted in the Homestead Act of 1860 (stipulating that only farms of 160-320 acres could establish homesteads) and the 1902 Reclamation Act (stipulating that only farms of 160-320 acres could receive federal reclamation water). However, much of the arid West could not turn a profit on such a small plot of land. This, combined with increasing mechanization in agriculture, left poor farmers with few resources little choice but to sell out or go into debt by purchasing on credit. Thus, many “family” farms gradually turned into large corporate farms, often controlled by a few elite. The Boswell Corporation, which now farms much of the western San Joaquin Valley, is an example of such an enterprise. As tenacity overtook them, many small farmers became insolvent, thereby helping to usher in the Great Depression. In a stressful climate of unemployment and poverty, the American population turned toward government to solve massive problems they seemed unable to solve themselves. Under the guiding helm of Franklin D. Roosevelt, the country went into debt to revive the economy. One project that the “New Deal” undertook to alleviate the problems of farmers had its origin in back at the turn of the century, when the state of California decided to undertake a comprehensive statewide water development plan. The plan had never been realized because of the Great Depression. Under the “New Deal” it was termed the Central Valley Project, and was operated by the federal Bureau of Reclamation (BOR). The project would deliver water to farmers who owned 160-320 acres of land. Corporate farms were able to get around the 160-320 acre stipulation because the Interior Department turned a blind eye toward big business with deep pockets. Small California farmers gradually became disenchanted with the 160-320 acre stipulation and lobbied aggressively under a (later) Democratic governor (Edmund G. Brown Sr.) for a second statewide project (the State Water Project – SWP) operated by the Department of Water Resources that had no 160-acre limitation. The technology used to construct these massive projects was unprecedented before and since; indeed the Central Valley Project is the only man-made feature visible on the earth from the moon.
The results were equally enormous. The SWP and the CVP turned the San Francisco/San Joaquin delta into the single most important (and disputed) area of water in California. The two projects combined conveyed water uphill through well over one-half the state of California. At certain times of the year, the SWP and CVP pumps in Tracy actually reverse the flow of water through the delta, deeply affecting the life cycles of many organisms unique to the delta. As a result, the CVPIA (Central Valley Project Improvement Act) has now federally mandated 800,000 acre-feet of water to remain in the system for protection of fish and wildlife species. Even beneficiaries of the projects are now becoming upset at the results. Many farmers are left with no water during times of drought, and the Los Angeles Metropolitan Water District (who in many ways was instrumental in engineering the SWP) no longer receives enough water to satisfy its needs. California (including Los Angeles, the main benefactor of Colorado River water) is now drawing more than its 4.4 million acre feet allocation of Colorado River water, thereby resulting in disputes with the other seven states that draw water from this river.
Since the era of massive government projects, Americans (and Californians) have reconsidered their relation to their environment, passing significant legislation inhibiting the future of such grandiose schemes without prior environmental impact assessment. The National Environmental Policy Act of 1969 (5) and the California Environmental Policy Act of 1970 (6) do not allow the construction of new water development projects until an EIR/EIS is conducted. Likewise, the Clean Air and Water Act of 1972, California’s Wild and Scenic Rivers Act of 1972, and the Endangered Species Act of 1973 have limited water projects and appropriations of water rights, favoring instead considerations related to the environment. In 1983, the California Supreme Court in National Audubon Society vs. Superior Court ruled that Los Angeles could no longer appropriate water from Mono Lake (even though Los Angeles had water rights) because withdrawals were affecting the lake’s unique ecosystem, resulting in a violation of the public trust doctrine. In 1992, Republican George Bush signed into canon the Central Valley Project Improvement Act (CVPIA), which sets aside 800,000 acre-feet of water for environmental purposes and also set aside a $50 million dollar restoration fund financed by surcharges on CVP water. In 1994, 15 state and federal agencies signed the Bay Delta Accord (7), thereby initiating CAL-FED, an agency designed with the intent to resolve many of California’s long-standing water issues.
The combined efforts of these agencies (and hundreds more), jointly issued a Final Environmental Impact Statement and Record of Decision (8) to begin implementation of the proposed project. However, several agencies have since filed suit against CAL-FED. The California Farm Bureau Federation (9) alleges that CAL-FED land acquisitions have proceeded with “minimal public notice and inadequate environmental review.” Furthermore, such acquisitions have failed to mitigate for loss of farmland (as required by law), and have failed to provide clear evidence of how past funds have been used. The actions of CFBF testimony in U.S. Congress have stymied budget appropriations for FY 2001. Rural counties have also filed suit, afraid that CAL-FED conflicts will be resolved with their water. Orange County has filed suit against CAL-FED for not pursuing a peripheral canal. Meanwhile, state appropriations for CAL-FED fell apart in the final hours of its session, and the top executive of CAL-FED has quit. Despite the fervor and good-will intentions of many, it appears that (at least from the outside), political ideologies of California water have not changed. Indeed, Los Angeles, San Francisco, and Colorado River allocations seemed to echo with the invisible hand of Adam Smith; “every person for themselves.” For this reason, water markets have been proposed. This system would not depend upon political follies that have thus plagued (and continue to plague) the state.
One such political reality is that it is unlikely that Californians will willingly go to the ballot box and appropriate funds for the remainder (2.1 million acre-feet) of the SWP as it was envisioned in the 1960’s. Accordingly, in 1982 voters rejected Jerry Brown’s proposal to build a peripheral canal through the Sacramento-San Joaquin Bay Delta. The plan likely would have resulted in less water loss (due to seepage), higher drinking water quality for southern California, and lower water quality for the Sacramento-San Joaquin Bay Delta. Despite this political reality, the DWR continually negotiates its contracts with an extra 2.1 million acre-feet of water, which does not exist. In a recent lawsuit, the Planning and Conservation League demanded that the DWR remove these 2.1 million acre-feet of water from further negotiations. In a sharply worded decision, the Third District Court of Appeals called this extra allocation “paper water”, and ordered the DWR to cease this illusion (9). As a result, the “Monterrey Agreements” (contracts with to-be drought-ridden farmers) were subsequently thwarted, putting urban interests higher on the ladder of priority than rural farming interests.
Thus massive urban sprawl has occurred in deserts that must have water brought to them. Now 70% of California’s population resides in the southern part of the state, while 70% of the water is in the northern part of the state. In the past, our solution was to distribute supply and the demand will come with time. California is now entering an era when there is no supply left to meet demand (i.e. due to environmental constraints imposed by the people and government, we cannot build more projects to increase supply). As the CVP and SWP continue to be utilized as plumbing for water transactions, the question of who gets access and at what price is a scary forethought for both farmers and urban users. The struggle has pitted urban interests against agricultural interests. One result has been a collaborative planning agency like CAL-FED which news reports all but suggest is in the twilight of its years. Another alternative has been to demand conservation practices on both urban and rural fronts. Drip irrigation and the City of Los Angeles toilet replacement program are examples like this. All of these options require great commitments of time and capital on the part of government agencies, and accordingly have burdened taxes for the American people.
Therefore, in light of previous history, I recommend to you a slightly regulated water market that will ease the burden of federal and state tax dollars that seem to be of little avail in the current crisis.
The Resource
As
a Republican administrator you must answer to your fellow Republican
farmers within your party, as many of them depend on the State Water
Project (SWP) for their economic livelihood. Many of these farmers were
among the last to receive water during drought conditions under the
current allocation rules of the SWP, and as a result, politically became
disenchanted with the “Republican” agenda in Sacramento to leave
them without their most critical resource: water. As a result, many
farmers met behind closed doors with Department of Water Resources (DWR)
in order to gain a higher place on the bargaining table during times of
drought. Such contracts were termed the “Monterrey Agreements”. As
you will recall from our discussion about water history, the Third
District Court of Appeals in Planning and Conservation League (PCL) vs.
DWR subsequently nullified the Monterrey Agreements. As a result of this
decision, many of your fellow Republican farmers were left at the bottom
of the drought barrel once again.
Since
the last drought (1987-1992) there has been a call for developing a “water
bank” (10), which has further exacerbated the bottom-rung status
of many farmers. Such a bank would involve the transfer of water from
northern California (including northern California aquifer water) to
Southern California using existing plumbing (e.g. the CVP and the SWP)
to “wheel” water around (in much the same way as electricity is
wheeled on the Pacific Northwest-Pacific Southwest Intertie). However,
in doing this, everyone will become increasing dependent upon this
plumbing system. If the government decides who will get access,
agricultural users will be the first to suffer. If price determines who
gets access, then it is likely that those farmers or urban users who
cannot afford the price will go without. In either situation, many
farmers will be left without recourse. Government control of water
allocation is one of the key components of CAL-FED, which is why the
California Farm Bureau Federation (CFBF) has lobbied for reduced CAL-FED
appropriations during fiscal year 2001. As you can see Governor Davis,
the reason why this administration has invested so much time and energy
into investigating drought is because your administration depends upon
farmer’s votes, and the CFBF is one of the most powerful lobbying
groups in the state of California.
If
we fail to understand the true causes and concerns associated with
drought, especially severe drought, then we cannot underestimate the
disastrous consequences. Do you not remember, Governor, what happened to
the southern Plains of this country during the Great Depression? A cycle
of drought
(11) in this area (combined with poor farming practices, soil
characteristics,
“Suitcase Farmers” (12), and the absence of government
intervention) began in 1931. Many farmers continued to plow their
fields, believing that “rain will follow the plow.” There was not
any vegetation to keep the topsoil in place; to protect it from erosion.
Strong winds blew through most of these fields, removing any remaining
topsoil. Poor and destitute, one-quarter
(13) of such farmers packed their bags and left for greener pastures,
mainly in California. Those who remained suffered from dust pneumonia.
In the spring of 1939, the rains finally fell, ending a dramatic lesson
about what damage droughts can do. Since that time, government
intervention in farming has improved drastically, thereby lessening the
impact of severe erosion since that time. It is feasible that if there
was a drought in California that used up all available water that a
reduction in income would likely result, especially in communities that
are composed of farm laborers. Mendotans, for example, lost
2.2 million in farm labor wages and averaged 20-30% in unemployment
(14) during the 1987-1992 drought. A similar migration of people could
occur; reducing the economic viability of this state. Examples of such
migrations have already occurred for much of the Mexican-American
population of this state (15). Similarly, economies outside
California would likely be affected by higher prices on agricultural
goods (since supply will likely decrease).
Mandates
Current
California law requires that 800,000 acre-feet of water (1/10 of all CVP
water) be set aside for fish and wildlife/habitat enhancement in the
Sacramento-San Joaquin Estuary under the provisions of the Central
Valley Project Improvement Act (CVPIA). Thus, this water is not
available for transfer. The CVPIA also defines water available for
transfer as “water that would have been consumptively used” and
water “irretrievably lost to agriculture.” The California State
Water Code is a little more uncertain in its interpretation of “consumptively
used”; “… the amount of water which has percolated underground, or
has been otherwise removed from use in the downstream water supply as a
result of direct diversion.” This interpretation essentially applies
to fallowed fields.
Groundwater
export also has limitations. All overlying landowners have a superior
right to water. Water Code Section 1220 prohibits most exports of
groundwater from the Sacramento and Delta-Central Sierra basins unless
the voters in the surrounding area have approved the groundwater plan.
Water Code 10750 et seq. authorizes local water agencies to adopt
groundwater management programs. Such plans are highly controversial,
especially in the northern Sacramento Valley.
In
order to more efficiently allocate the scarce good of water among all
parties, the Pacific
Research Institute (PRI) (16) and others suggest that California
move toward water marketing.
The
California Department of Water Resources in Bulletin 160-98 predicts
that by 2020, California will experience shortages of 2.4 million
acre-feet. Such a figure (PRI contends) is inaccurate, because it uses a
“bureaucratic” form of allocation rather than a market system, which
is arguably more efficient and will promote water conservation
(especially among agricultural users).
Farmers
who now receive their supply fairly inexpensively will now profit by
selling their water to urban users at a higher price (that is if they
continue to receive water at such low prices in a market system). Urban
users will gain by buying water at a lower price, thereby creating a “win-win”
situation.
What
many water market analysts have failed to recognize, however, is that if
agricultural users no longer receive water at low government subsidized
rates, many farmers will likely go out of business due to high operating
costs. This is one fundamental point the PRI fails to point out in its
analysis of a recent transfer between IID, San Diego County Water
Authority, and MWD.
Thus
it boils down to a question of access: will the government subsidize
water transfer costs (as has previously been done in the past; putting
farmers at the end of water priorities) or will the market decide (once
again leaving farmers who cannot afford the access fees to foreclose
their business)? And this may result in an economic cost that we cannot
contemplate at this time (as happened with Mendotans during the
1987-1992 drought). As a result of this concern, I recommend that to you
that the government continue to subsidize access for both farmers and
urban users to this state’s plumbing system.
As
farmers conserve more water, they may likely change patterns of crop
plants grown in the state of California. Low-value crops tend to require
large amounts of water, while high-value crops tend to require small
amounts of water. As a result, high-value crops will become even more
valuable as a result of water markets, tending to homogenize California’s
crop makeup, and thereby preventing diversity in our economy. Must I
elaborate the problems with a specialized economy, Mr. Governor? Cuba is
an excellent example of what happens when an economy becomes dependent
on one crop; as the prices rise and fall, people are thrown into cycles
of plenty and poverty. Many become exasperated and flee to more stable
economies, causing the same migration I discussed with you in reference
to drought. As a result, I recommend that the government give economic
incentives to farmers who rotate their crops if water markets are
introduced.
In
an ideal world, water transfers would not include anybody but the two
parties involved. The reality is far from idyllic, and so in moving to
water markets we must also analyze the impacts to third parties. For
instance, when MWD obtained Owens Valley water, it incurred a negative
externality on (former) farmers and habitat areas of the Owens River
Valley, and the price of water did not convey this true social cost.
Thus government policies should allocate a certain amount of water to
environmental and economic uses and/or impose a tax equaling the true
opportunity cost of the transaction to third parties and impart the
revenues received therein to their benefit. (Notice that I am using the
term “third parties” to refer to environmental/habitat concerns as
well as economic interests, such as those in farming) Good examples of
this are the 800,000 acre-feet allotment in the CVPIA for environmental
purposes and the mitigation for lost farmland now required under state
law. In addition, the California Water Code already prohibits transfers
which deprive areas of origin water required to meet beneficial needs
(10).
Thus
the legislation that I propose to you includes a provision for moving to
water markets, with certain restrictions: (1) that the government
continue to provide transportation costs of water via the CVP and the
SWP (2) that government provide economic incentives for crop rotation
(3) that the cost of water transfers reflect the true social cost to
third parties, and that this “tax” be used for the benefit of those
parties adversely affected by water transfers.
Notes
(1)
William Mullholland. Los Department of Water and Power. http://www.ladwp.com/aboutdwp/history/mulholl/mulholl.htm
(2)
Parker Dam and Powerplant. U.S. Bureau of
Reclamation. http://www.lc.usbr.gov/~pao/parker.html
(3)
Central Valley Project Plan and Overview. U.S. Bureau of
Reclamation. http://dataweb.usbr.gov/html/cvp.html
(4)
Central Valley Project Improvement Act. U.S. Bureau of
Reclamation. http://www.mp.usbr.gov/cvpia/title34/f_title34.html
(5)
National Environmental Policy Act of 1969. Department of
Energy. http://www.mp.usbr.gov/cvpia/title34/f_title34.html
(6)
California Environmental Quality Act. http://ceres.ca.gov/topic/env_law/ceqa/guidelines/
(7)
Principles for Agreement on Bay-Delta Standards Between the
State of California and the Federal Government. CAL-FED Bay-Delta
Program (1994). http://calfed.ca.gov/historical/delta_accord.htm
(8)
Programmatic Record of Decision. CAL-FED Bay-Delta Program
(2000). http://calfed.ca.gov/current/ROD.html
(9)
Planning and Conservation League vs. Department of Water
Resources. The Court of Appeal of the State of California, Third
Appellate District (2000). http://www.courtinfo.ca.gov/opinions/documents/C024576.DOC
(10) Water Transfers in California; Translating
Concept into Reality. State Water Project Analysts Office (1993).
http://wwwspao.water.ca.gov/watertran.html
(11)
The Drought. The American Experience. http://www.pbs.org/wgbh/amex/dustbowl/filmmore/transcript/enhance/drought.html
(12)
Suitcase Farmers. The American Experience. http://www.pbs.org/wgbh/amex/dustbowl/filmmore/transcript/enhance/suitcasefarmers.html
(13)
Mass Exodus from the Plains. The American Experience. http://www.pbs.org/wgbh/amex/dustbowl/filmmore/transcript/enhance/massexodus.html
(14)
Grossi, Mark and Mark Crosse. (1999) Rescuing the San Joaquin. Retrieved
October 28, 2000, from
http://www.fresnobee.com/man/projects/savesjr/canals.html
(15)
Schwartz, M.L. et. al. (1994) Desertification and Migration: Mexico and
the Unites States. Retrieved Oct. 28, 2000 from
http://migration.ucdavis.edu/MN-Resources/Schwartz/text/text.htm
(16)
Ending California’s Water Crisis: A Market Solution to the Politics
of Water. Pacific Research Institute.
