In dry California, water fetching record prices
Capital Press 7/2/14
Unlike the previous
drought in 2009, the state has been hands-off, letting the
market set the price even though severe shortages prompted a
statewide drought emergency declaration this year.
SAN FRANCISCO (AP) — Throughout California’s desperately dry
Central Valley, those with water to spare are cashing in.
As a third parched summer forces farmers to fallow fields and
lay off workers, two water districts and a pair of landowners in
the heart of the state’s farmland are making millions of dollars
by auctioning off their private caches.
Nearly 40 others also are seeking to sell their surplus water
this year, according to state and federal records.
Economists say it’s been decades since the water market has been
this hot. In the last five years alone, the price has grown
tenfold to as much as $2,200 an acre-foot — enough to cover a
football field with a foot of water.
Unlike the previous drought in 2009, the state has been
hands-off, letting the market set the price even though severe
shortages prompted a statewide drought emergency declaration
The price spike comes after repeated calls from scientists that
global warming will worsen droughts and increase the cost of
maintaining California’s strained water supply systems.
Some water economists have called for more regulations to keep
aquifers from being depleted and ensure the market is not
subject to manipulation such as that seen in the energy crisis
of summer 2001, when the state was besieged by rolling
“If you have a really scarce natural resource that the state’s
economy depends on, it would be nice to have it run efficiently
and transparently,” said Richard Howitt, professor emeritus at
the University of California-Davis.
Private water sales are becoming more common in states that have
been hit by drought, including Texas and Colorado.
In California, the sellers include those who hold claims on
water that date back a century, private firms who are extracting
groundwater and landowners who stored water when it was
plentiful in underground caverns known as water banks.
“This year the market is unbelievable,” said Thomas Greci, the
general manager of the Madera Irrigation District, which
recently made nearly $7 million from selling about 3,200
acre-feet. “And this is a way to pay our bills.”
All of the district’s water went to farms; the city of Santa
Barbara, which has its own water shortages, was outbid.
The prices are so high in some rural pockets that water auctions
have become a spectacle.
One agricultural water district amid the almond orchards and
derrick fields northwest of Bakersfield recently announced it
would sell off extra water it acquired through a more than
century-old right to use flows from the Kern River.
Local TV crews and journalists flocked to the district’s office
in February to watch as manager Maurice Etchechury unveiled bids
enclosed in about 50 sealed envelopes before the cameras.
“Now everyone’s mad at me saying I increased the price of water.
I didn’t do it, the weather did it,” said Etchechury, who
manages the Buena Vista Water Storage District, which netted
about $13.5 million from the auction of 12,000 acre-feet of
Competition for water in California is heightened by the state’s
geography: The north has the water resources but the biggest
water consumers are to the south, including most of the
country’s produce crops.
The amount shipped south through a network of pumps, pipes and
aqueducts is limited by the drought and legal restrictions on
pumping to save a threatened fish.
During the last drought, the state Department of Water Resources
ran a drought water bank, which helped broker deals between
those who were short of water and those who had plenty. But
several environmental groups sued, alleging the state failed to
comply with the California Environmental Quality Act in
approving the sales, and won.
This year, the state is standing aside, saying buyers and
sellers have not asked for the state’s help. “We think that
buyers and sellers can negotiate their own deals better than the
state,” said Nancy Quan, a supervising engineer with the
Quan’s department, the U.S. Bureau of Reclamation and the State
Water Resources Control Board have tracked at least 38 separate
sales this year, but the agencies are not aware of all sales,
nor do they keep track of the price of water sold, officials
The maximum volume that could change hands through the 38
transactions is 730,323 acre-feet, which is about 25 percent of
what the State Water Project has delivered to farms and cities
in an average year in the last decade.
That figure still doesn’t include the many private water sales
that do not require any use of government-run pipes or canals,
including the three chronicled by the AP. It’s not clear however
how much of this water will be sold via auctions.
Some of those in the best position to sell water this year have
been able to store their excess supplies in underground banks, a
tool widely embraced in the West for making water supplies
reliable and marketable. The area surrounding Bakersfield is
home to some of the country’s largest water banks.
The drought is so severe that aggressive pumping of the banked
supplies may cause some wells to run dry by year’s end, said
Eric Averett, general manager the Rosedale Rio Bravo District,
located next to several of the state’s largest underground
Farther north in the long, flat Central Valley, others are
drilling new wells to sell off groundwater.
A water district board in Stanislaus County approved a pilot
project this month to buy up to 26,000 acre-feet of groundwater
pumped over two years from 14 wells on two landowners’ parcels
in neighboring Merced County.
Since the district is getting no water from the federal
government this year, the extra water will let farmers keep
their trees alive, said Anthea Hansen, general manager of the
arid Del Puerto Water District.
Hansen estimated growers would ultimately pay $775 to $980 an
acre-foot — a total of roughly $20 million to $25.5 million.
“We have to try to keep them alive,” Hansen said. “It’s too much
loss in the investment and the local economy to not try.”
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