But if you want to get complex, consider that a number of different water rights apply with varying force in Western states. California recognizes pueblo
water rights granted to pueblos under the Spanish and Mexican governments, City of Los Angeles v. Pomeroy, 124 Cal. 597, 640-41 (1899), Hooker v. City of Los Angeles, 188 U.S. 314, 319-320 (1903), legacy riparian water rights, In re Waters of Long Valley Creek Stream System, 25 Cal.3d 339 (1979), appropriative (first in time, first in right) water rights, and water reserved by the United States government.

Every interest becomes a special interest at some point or another. In the case of water in California, urban areas like L.A. or the San Francisco Bay area are wealthier than ag interests, when aggregated together.

OTPR: Reading your blog is what sent me on a mission to figure out what actually happened with Dudley Ridge. I figured there was something missing from the conversation/post. I’ve been meaning to go back to comment but forgot until now.

To register for any of the water events, please visit http://www.austrade.gov.au/USAWaterSeries .

My impression is that the farmers in Dudley Ridge are retiring ag land, and making a profit, but not a scandalous profit. (Except that their ability to sell the state’s water is a scandal in itself.)

If you “set aside” something for one use and then the user uses it for something else, the distinction between the two uses either becomes meaningless or someone is doing an end-run around the system. Right? What am I missing?

Lakis, the complexity is real. No one needs to complexify California water; the real lesson here is that nearly any simplistic take is wrong.

Was the water “intended” for use in agriculture? Depends on the scale you look at. It was an agricultural water district in the State Water Project. The district itself was ag; the State Water Project serves both ag and urban. If you think of it as Dudley Ridge water, it was “intended” to be ag. If you think of it as SWP water, it could be ag or urban. If you think of it as California’s water, it could have environmental, ag or urban benefits. Is someone making a profit? Presumably yes. But it is not an extravagant profit of ten times the yearly cost of water. It is probably a small profit on the total value of all their future water, with the caveats that dfb mentions in his item 7).

Here’s what I understand at this point: water that was “intended” for use in agriculture has been diverted to development and someone is making a profit on the differential (otherwise why do it?). Is that correct?

1) Water rights were not sold. Rather, the farmers sold contractual rights to water. There is a major difference between water rights, which are property rights, and contract rights, which are controlled by the contract itself.

2) Water rights, the kind that are property, can and are sold regularly just as you would sell any piece of property such as a house or car. Those transfers are generally not controversial.

3) Contractual rights are just that, the right to receive the performance of the other party. The transfer of contractual rights may also transfer duties and obligations of the seller to the buyer.

4) Dudley Ridge and its farmers sold/transfered a contract to Tejon Ranch. Among other things, the contract says that Department of Water Resources (DWR) will deliver and sell water at a given price. In return, Tejon Ranch will need to pay the purchase price of the water, costs related to transporting that water, and some infrastructure costs. In that regard, assertions that farmers are buying subsidized water and selling it for much higher prices is only partly true.

5) DWR only contracts with the water districts, not individual farmers. The farmers have a secondary contract with the water district for a particular allocation of water. DWR contracts are online at: http://www.water.ca.gov/swpao/wsc.cfm

6) Contracts can forbid or provide for transfers of contractual rights. They can also require consent of the other party. In this case, the farmers likely needed approval from the district to sell their allocation and perhaps even approval of DWR (I have not read their contracts,yet).

7) It is not clear yet how much the farmers and the water district actually received, that they received a profit, or what the money went toward. It is quite likely that the bulk of the money went to the water district to pay infrastructure costs. Water districts sell bonds to pay for water delivery systems within a water district. It then sets fees based on expected water sales to its farmers. Farmers dropping out of the district will upset the water district’s revenue forecasts because those farmers will no longer pay those water delivery fees. This is especially true when large farms drop out. It is also possible that the farmers contractually would still be on the hook to the water district despite taking no water deliveries.

Bottom line: Please use the correct terms and differentiate between contract rights and water (property) rights. They are very different creatures of the law.

As a public entity, Dudley Ridge is subject to California open records laws. Feel free to contact it for a copy of the contracts it has with these farmers and those contracts related to the transfers. There is a lot of drama still left in this story and it will be retold many times over in the next decade.