California’s Water Rights Controversy: Should Farmers Be Allowed to Transfer Water to Developers?

by |November 30, 2010

Farm owners in San Joaquin Valley are having to make the decision of whether to use the water they have been allotted to grow crops or to sell it to developers at huge profits.

Two farmers in San Joaquin Valley, California have recently come under scrutiny for proposing to sell their water rights to developers.  As a part of the Dudley Ridge Water District they have the right to draw up to 57,343 acre-feet of water per year from the California State Water Project.  (An acre-foot is the amount it takes to cover an acre of land in a foot of water – about twice as much as an average household uses in a year.) The California Department of Water Resources defines its State Water Project as “a water storage and delivery system of reservoirs, aqueducts, powerplants and pumping plants,” 30% of which is set aside for agriculture and from which farmers are allotted their yearly supply.

Under this potential sale, the farmers would be paid a total of $11.7 million dollars, as they sell the water at a price of $5,850 per acre-foot to the Tejon Ranch who will have access to 2,000 acre-feet per year.  This kind of arrangement is not limited to these two farmers, and is an increasingly common occurrence as the water a farm has access to becomes more valuable than the returns from actually growing crops.  Last year, the Dudley Ridge Water District sold 14,000 acre feet of water to the Mojave Water District for a total gain of $73 million.  While the idea of transferring water is not new, the main difference is that while up until this point the majority of water transfers have been temporary agreements between districts, this is a permanent transfer of water.

Juan Arambula, California State Assemblyman and outspoken opponent of the practice of selling water rights.

Agreements such as these have been met with mixed responses including a grand jury investigation over the Dudley Ridge Water District’s sale last year.  Outspoken opponents of this practice include Independent California State Assemblyman Juan Arambula who says that while this practice may be legal, he still believes it is wrong, and Republican Washington Senator Bob Morton who says that “[these areas] will literally dry up” since these practices would hurt his state’s “economy [and] agricultural production”.  Arambula echoes Morton’s critique asking “What am I going to tell folks when farmers sell their water and put farm workers out of a job…?  They make millions at the public’s expense.”

However, his bill mandating a study to examine the potential economic effects prior to a sale failed in the state legislature, predominately due to resistance from agriculture and the cities that would be receiving the water transfers.

Another commonly echoed argument against permanent and long-term water transfers is that it gives farmers an unfair advantage since they pay a mere $500 per acre-foot compared with the district’s selling price of $5,850 per acre-foot.  Opponents argue that it is both unfair and hypocritical since farmers push for increased water supplies, saying that it is necessary to grow crops, and then sell water at huge profits after buying it at subsidized prices.

Proponents of water transfers argue that the farmers are in fact acting within their rights and that the transfers are an effective way of dealing with the water problems farmers encounter.  Diane Peck, the executive director of the King’s County Farm Bureau, says that arguably, “as landowners, it is their right to sell that water,” and Dale Melville, Dudley Ridge’s Water District Manager, believes that the issue is nothing more than “an economic decision the landowners need to make.”  They also name the numerous problems farmers face including coping with droughts and being required to pay for maintaining the local water infrastructure.  Both of these encourage farmers to sell their water rights since it guarantees a profit aside from their crops and reduces their annual expenses.  Finally, advocates also cite situations, such as in Palo Verde, where putting water rights on the market resulted in a more even distribution of water and provided incentives for conservation amongst those who had originally held the water.

The selling of water rights remains a controversial issue, especially as industry and home development compete with farmers for limited water supplies.  Although opponents point out the numerous problems with the current method, it is nevertheless an issue that will have to be contended with as farmers attempt to gain a profit and developers endeavor to garner the water they require.

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Bill Carson
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Bill Carson

The numbers in this article are the same as the NYT’s, and they are wrong… quote:

Tejon Ranch is proposing to buy the water-right; it would pay approximately $6k for every acre-foot in the water right and all their future yields. This is not a profit of ten times what the farmers would pay for any one year’s water.

http://onthepublicrecord.wordpress.com/2010/11/13/have-we-learned-nothing/

Lakis Polycarpou
Member

Thanks Kavita for an interesting and informative piece.

If I understand the issue correctly, it sounds like farmers are buying water at a subsidized price and selling it for ten times as much. How can that be legal? It seems that if they are selling their water instead of using it for agriculture they should have their water rights revoked.

Chris Gulick
Guest

Bill,the numbers are not wrong. The interpretation of the numbers is. By selling the “future yield” water the “farmer” is rendering the land attached to the water useless. I don’t agree with the concept. If you don’t have “area of origin” or “riparian” water rights you don’t own the water, you are the recipient of a benefit provided by the taxpayers of the state of California. The water diverted from the Delta is owned by the people of the state not by the property owner.This is where my disagreement with the concept starts and ends. Having said that, I don’t… Read more »

dfb
Guest
dfb

A few misconceptions need to be cleared: 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… Read more »

Lakis Polycarpou
Member

Okay, now I’m really confused, which makes me suspicious. I can’t help but think that all this complexity serves some special interest rather than the good of everyone.

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?

On the Public Record
Guest

Dfb, that’s an awesome summary. I’m part of the reason that people are being sloppy about the distinction between water rights and contract rights. I’ll be more conscientious about that in the future. 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… Read more »

Lakis Polycarpou
Member

Okay, but according to the post, the State Water Project sets aside 30 percent for agriculture. If some of that water is then used for development, isn’t that contradicting the “30 percent” policy or legal allocation?

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?

On the Public Record
Guest

Oh. Huh. I believe that there is a 30% policy (presumably the author got that notion from somewhere), but I live and work in the field, and never hear it discussed at any level. This was the first I’ve heard of it, for example. I don’t think people are very attached to the notion that 30% of SWP water must go to ag.

Chris Gulick
Guest

Hold on,someone needs to school me here.
If a property owner sells the “contractual” rights to the water supplying the property does the owner of the property have the ability to secure another contract from the Water District ? Really ?
Anyone who thinks a “farmer/person” would sell “contractual” water rights for the hell of it, versus making a profit, would have to be brain dead unless of course they have the opportunity to replace that supply.
By all means somebody help me understand how this works.

On the Public Record
Guest

Maybe the district could replace the water, but it would come out of the contract amount that they always had. The other farmers would have to agree to cover the sold-away amount. I bet that doesn’t happen often. More likely, the farmer who sold away water switched to groundwater. That’s legal (unless the gw is the underground part of a river), although Kern County is getting pretty worried about it. 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… Read more »

Zoé Jouannelle
Guest

If you are interested in water management and agriculture, I suggest looking into the G’Day USA Water Tour (http://www.australia-week.com/events/usa-water-tour.html). One of the activities, which takes place in Sacramento in late January, is a half-day conference focusing on water reform, drought, and water capture and re-use particularly in regard to the environment and agriculture. This event and other Water Tour activities are free and open to academia and other water specialists, innovators, and researchers.

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

dfb
Guest
dfb

Lakis: As the California Supreme Court has confirmed on a number of occasions “[t]he scope and technical complexity of issues concerning water resource management are unequalled by virtually any other type of activity presented to the courts.” Environmental Defense Fund, Inc. v. East Bay Mun. Utility Dist. 20 Cal.3d 327, 343-344 (1977) (EDF I); National Audubon Society v. Superior Court of Alpine County, 33 Cal.3d 419 (1983) 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… Read more »

fw
Guest
fw

This water is set aside for strictly farming!! not developers for whatever reason they want the rights for. the water rights are for agricultural purpose and use by farmers not a developer so the selling to someone other than another farmer and for higher cost is illegal.

Rajiv Dalui
Guest

Nice post…Thanks for sharing admin..Keep it up

fks
Guest
fks

How about PRE 1914 water rights on sacramento delta islands where i live and farm, Are they fair game that the SWRB thinks they are?