Water in California:
Drought, Scams and Rackets

May 26, 2014

The following is excerpted from a presentation made at a Spark meeting in Los Angeles, May 3, 2014.

California has been in the midst of a drought for three years now.

Some powerful forces are not letting this drought crisis go to waste, capitalizing on people’s fears to push through a massive waterworks project that will pump more water to Big Agriculture, driving up people’s water rates. It’s nothing but political theatrics, a scare backed by big agribusiness to justify a big water grab. At its core, it is a war for water waged by California’s super-rich on everyone else.

A Project to Further Enrich Agribusiness

At the core of this water grab is the most expensive public works project in California’s history, Governor Jerry Brown’s water project that goes by the name the Bay Delta Conservation Plan. This plan is estimated to cost up to 67 billion dollars, including interest on the bonds that would finance construction costs.

The plan includes building two massive 35-mile water tunnels to move water from the Sacramento River Delta. The tunnels would stretch under the delta, redirecting water from the Sacramento River all the way south to the huge farms of the San Joaquin Valley and the cities of Southern California. Estimates are that the construction of the tunnels will add $10,000 onto the water bills of each household in southern California.

Once completed, the tunnels would have the capacity to drain nearly the entire flow of the Sacramento River during parts of the year. This would have catastrophic consequences. By reducing the amount of clean water flowing into the estuary from the Sacramento River, it would make the delta dirtier and saltier, and thus less hospitable to plants and wildlife, eventually destroying the largest estuary on the West Coast.

Certainly, demand for water is increasing. But not because of population growth. As it is, urban areas use less than 20% of the water in the state. And that amount has held pretty steady, despite population growth. In Los Angeles County, demand for water has actually been reduced significantly over the last couple of decades, despite the rising population, because of conservation measures. Instead, there is increasing demand for water coming from big agribusiness, which today uses nearly 80% of the water.

Agribusiness claims that it needs more water in order to be able to produce the fruit and produce consumed by the people of this country. And they blame the hike in food prices on the drought.

In fact, prices have gone up because the San Joaquin growers have been reducing the amount of vegetables they produce. Over the last 15 or 20 years, the growers have shifted away from vegetable crops, and toward fruit and nut crops—like almonds, pistachios and grapes.

The bottom line is that San Joaquin Valley farmers can make much more money growing almonds, mainly for export, than growing vegetables for domestic consumption.

California produces 80 per cent of the world’s almonds. That’s right, in the whole world. But growing almonds in an arid climate requires lots of water. And that’s one reason why farmers are looking to get more water.

Big Business Gains, Population Pays

The farms that stand to benefit the most from more water are the biggest farms. And the very biggest farmer is a Beverly Hills billionaire named Stewart Resnick. Stewart and his wife, Lynda, own Roll International Corporation, a private umbrella group that controls many companies. One of them is called Paramount Farms, and it is the largest farming company in America and the largest pistachio and almond producer in the world. The farm in the San Joaquin Valley encompasses 188 square miles of land, which is four times the size of the city of San Francisco. There they grow oranges, almonds, pistachios, and pomegranates; their Pom Wonderful juice launched the pomegranate superfood craze.

This liberal power couple raises huge amounts of money for the Democratic Party. They hobnob with Arianna Huffington and anti-global warming activists. They are major “philanthropists.” A new 54-million-dollar pavilion at the L.A. art museum is named after them.

But behind the scenes, their company, Roll International, is also the largest private water broker in the country. They control a powerful entity called the Kern County Water Bank—an underground water reservoir in the hottest, driest, southernmost edge of the Central Valley. Kern County Water Bank is like the Bank of America of water. It has a capacity that is so large, it would be enough to convert the entire state of Rhode Island into a swampland or to supply the city of Los Angeles with enough water for two years.

Back in the 1980s, the state of California spent more than 100 million dollars building this water bank. But in 1995, California’s Department of Water Resources suddenly, and without any public debate, transferred it to a band of corporate interests led by Roll International.

As a result, Roll International gets a practically unlimited supply of water. They save up water during years of heavy rain, buying the water at a price that is very low, because it is heavily subsidized by the federal and state governments. They may use that water partly for farming. But during years of drought, like right now, they sell the water to other farmers or cities at a price that is 10 or 20 times what they paid for it. This way they book an instant profit of tens of millions—and for doing absolutely nothing.

Now Roll International is buying up land near San Luis Obispo and is trying to convert another water bank in that area to their own private control. For that, they’ll need more water. All this business, it’s just a big scam, a rip-off—which is the reason why so much of this stuff is done in secret.

These kinds of scams have been a part of the development of the enormous system to transport and store water for the last century.

Two Costly Systems to Run

Today, there are two great systems that convey water from the northern parts of California down to the farms and cities in the south.

The biggest water system, the Central Valley Project, was built in the 1930s and is run by the federal government. It reaches from the Cascade Mountains near Redding in the north and goes some 500 miles to the Tehachapi Mountains near Bakersfield in the south. It is comprised of 20 dams and reservoirs, 11 powerplants, and 500 miles of major canals as well as conduits, tunnels, and related facilities. It supplies water to irrigate approximately one-third of the agricultural land in California.

When the Central Valley Project was started, government officials and farmers alike promised that the people who used the water would pay the construction costs—eventually.

But the big farmers get a lot of breaks. First farmers sign 25 to 50 year contracts for water. And then, what the farmers pay is based on how much it would cost to pay back their share of the cost of the construction over 50 years. They don’t pay any interest and there is no adjustment for inflation. And so, what they are paying back is based on the price of the construction in the 1930s, using 1930s prices. And even that they haven’t paid back—yet. Finally, the profits from the sale of hydroelectric power produced by the dams are used to reduce the cost of the water for the farmers. So, that’s a great big gift from taxpayers to these farmers. And that’s not including other agricultural subsidies that they get.

The second big water system is called the California State Water Project, and it is state run. This system was started in the late 1950s, as an extension of the Central Valley Project. The state project was the biggest construction project carried out by a state in U.S. history. It is made up of 21 dams and more than 700 miles of canals, pipelines and tunnels. The State Water Project delivers perhaps only about half the amount as the federal project, depending upon the year.

About 70 per cent of all its water goes to urban areas, and people in those cities pay almost the entire cost of the water for the entire system, including for the water that goes to the farmers.

Both these systems were not only costly to build, they are costly to run. Water has to be pumped over mountains. It also has to be pumped through the San Joaquin Valley, which slopes upward in its southern part. Much of the land lies several hundred feet above sea level. Pumping this water takes about 5 to 10 per cent of the all the electricity produced in the state.

These water projects are also very destructive to the environment. All the rivers and lakes from which they take the water in the north have been destroyed. Often, the salts that had been suspended in the water evaporate, poisoning the land around. The same goes for the farm land that is irrigated. Salts and chemicals, when irrigated, leach into the ground water or collect downstream.

Water for the population should be free, or almost free considering that it literally falls from the sky. But at a time when the liberal-sounding governor and his liberal-sounding state legislature say that there is no money for education, no money to fix the roads and the rest of the infrastructure, the state of California is embarking on a vast new project that will further bankrupt the people and the government, and destroy even more of the environment. Why?

Because water, in capitalist hands, is transmuted into gold.