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The Next Big Industry Challenge: Water

Jim Prevor’s Perishable Pundit, November 9, 2009

Water is essential for life, including the life of the produce industry. Although discussions of sustainability have often focused on carbon emission, many experts in the field see water as the issue of the future.

Though, in California, it is the issue of today. Working with the Governor, the State Legislature finally came to a compromise agreement that, though surely not perfect, has been widely hailed. The San Francisco Chronicleeditorialized with a piece titled, A Water Deal at Long Last:

For decades, California’s water wars have flared unabated — cities versus farms, north against south — while half measures left the Sacramento-San Joaquin River Delta drained and decimated. A solution involving all sides was only a dream.

Until now.

After days of closed-door talks and an all-night session, the Legislature pulled off a remarkable achievement this week. With the governor’s prodding, Sacramento has crafted a five-bill package that goes a long way toward ending the constant feuding, promising stable water flows, environmental safeguards, and billions in bond money.

“Save, share and store” is the slogan used by Senate leader Darrell Steinberg, D-Sacramento, to describe the basics of the deal.

Some wanted agriculture to be held to the same water conservation standards as urban areas so they are unhappy with the bill, which requires urban areas to cut consumption by 20% but calls on agriculture to follow “best practices,” and there was a large dispute over the consequences for siphoning off water. So these matters will certainly fester.

Much is still uncertain: The Bill includes authorization for an $11.1 billion bond issue — but that must be approved by the voters — and a crucial issue — a new peripheral canal — is punted off to the future.

Still, most observers see the package as a breakthrough and significant achievement, even if much more work will need to be done.

Prior to the announcement in Sacramento, the drought in California had prompted us to ask Mira Slott, Pundit Investigator and Special Projects Editor, to speak with an expert to get some historical perspective and context:

Holly Doremus
Ph.D., Professor of Law
Berkeley Law
University of California, Berkeley

Author, ”Water War in the Klamath Basin: Macho Law, Combat Biology, and Dirty Politics”

Q: What lessons can we learn from your book for the future of water management and conservation? The title is quite provocative. What’s behind Macho Law, Combat Biology, and Dirty Politics?

A: I can tell you what the conflict was all about. In the summer of 2001, it was a critically dry year in the northwest and the Bureau of Reclamation, which operates the Klamath irrigation project, announced it wouldn’t deliver any water to irrigators at all. That had never happened before.

Q: How did the Bureau of Reclamation justify the action?

A: The reason they said they needed to do that was predicated on protecting two sets of fish in the basin; suckers listed endangered at the top of the watershed and salmon listed as threatened at the bottom of the watershed. The National Marine Fisheries Service told the Bureau of Reclamation it had to leave a certain amount of water in the river downstream for the salmon.

At the same time, The U.S. Fish and Wildlife Service said it had to keep a certain amount of water at the top of the lake for suckers. And that’s why none was left. They literally closed the head gates of the project and this was the first time for a federal irrigation project.

Q: At that time, disturbing reports were documenting thousands of dying fish washing up on the Klamath River shoreline, and environmental groups were outraged. Was this sweeping action to divert the entire water supply from farmers to endangered species an anomaly? What is the probability this phenomenon could reoccur?

A: I see parallels with the Central Valley Project (CVP) and State Water Project (SWP). These involve Delta smelt, tiny fish that live in the estuary in the Bay Delta, and salmon that live in the Sacramento River system. They both need water deliveries at different times. And here we are in a critically dry year, not as dry as it looked early on, but dry.

The Bureau of Reclamation announced a preliminary forecast for deliveries. And water contractors had been told they’d get zero. Since then, it became widely believed they would get something, due to ensuing storm activity, but nothing like normal allocation.

Q: How have expectations panned out? Is there a way to track water allocation activity?

A: The most recent data on CVP allocations that I’m aware of can be found at http://www.usbr.gov/mp/cvo/vungvari/
. For the SWP, the numbers are at http://www.water.ca.gov/swpao/docs/notices/09-07.pdf.

Q: Haven’t cutbacks occurred in the past? Is this forecast scenario so unexpected? Should the produce industry elevate this issue to higher level of concern?

A: It’s not uncommon in recent years to have deliveries cut back a little bit for fish. And that’s what happened in the Klamath Basin. Before the Bureau of Reclamation stopped all delivery to irrigators in 2001, there had been incremental cutbacks. The farmers sued even for those.

Q: How prevalent are lawsuits in situations like this? You reference lawsuits like they’re a matter of course. Is this rooted in pure economics or do these opposing parties view this as a fight for righteous justice?

A: Lawsuits in the Klamath water wars were quite numerous. Everybody sues; that’s part of the lesson. That’s part of what we mean by “macho law”. Two legal systems come into conflict in these situations. Each provides beneficiaries with what they believe are very, very strong rights.

The first one, water rights and water delivery system: irrigators and their water districts hold either water rights under state laws or contractual rights to delivery of water. What they think they have are strong property rights that can’t be interfered with without compensation. They believe this is their legal entitlement.

On the other side is the Federal Endangered Species Act (ESA) passed in 1973. A lot happened in the late 60’s and early 70’s. The Act says the federal government can’t by its actions jeopardize continued existence of listed species. The federal government can’t do something that will cause a extinction. The ESA is widely seen as the strongest in a substantive sense of the federal environmental laws. It flat out says the government may not go ahead with action. Environmentalists think they have a very strong legal right to have fish protected.

Here are two opposing groups, and each thinks they should win. That tends to make the conflicts worse in a sense because it means neither side is inclined to negotiate. They both feel strongly about legal entitlement but also the importance of what they are arguing for.

Q: So this is not primarily an economics issue at its core?

A: Sometimes in the talk surrounding water regulation issues, it sounds like they’re money-related, but it goes deeper. People on both sides won’t change for money. A true environmentalist believes it is not OK to cause extinction for any price.

Q: Similarly, the produce industry is built on generations of dedicated family farms, so your point is that passions run deep on all sides?

A: In the Klamath Basin, most agriculture is actually done on small family farms. For these people, it’s their life. Farming is part of their identity, and with it a sense of obligation for the generations that came before and to pass on to generations after. In California, irrigated farming is done on much larger operations. I don’t know if it can become just business at such a big scale. I imagine in family-run operations, the historical ties remain strong.

Other sets of interests in both the Klamath Basin and Delta complicate matters further. Commercial fishermen have much at stake. Ocean salmon fisheries were closed for the first time last year. There was no commercial fishing off the California coast last year. The fishing families and communities have both an economic and lifestyle interest. Also this is a key part of their identity as growing produce is for the farmers.

Q: What is the history behind water distribution? Do you think farmers have become accustomed to a certain system over the years in which to plan their business operations, both from a cost and crop allocation standpoint? If so, transforming farming methods and the types of fruits and vegetables one grows to accommodate new water utilization regulations could involve huge investments and take years depending on numerous variables.

A: Historically, farmers throughout the West have gotten water, highly subsidized water, through federal irrigation projects. The theory comes from the Reclamation Act, which is a law constructed in the early 20th century. The idea was the federal government had the resources and the ability to construct these projects, but the farmers should actually pay the cost over time. That’s almost never actually happened or if so with zero interest rates over a long period.

The government heavily subsidized these projects, and farmers paid nearly nothing for water themselves, and much less than municipalities or other interested parties do. They do pay for distribution in theory to cover the cost of operating the project, but in many cases they don’t and they get the water itself for free. It’s something that can be changed, but it’s very difficult to change it. There are a lot of federal and state irrigation projects. In California, we have one of each that operates jointly, and the water pricing is a little different, but in both cases are long-term contracts with constraints on price.

The Klamath project is associated with a utility that has a series of hydro electric dams. Those dams have been providing power to the farmers at highly subsidized rates until very, very recently. After an initial contract period, there was legal authority to change rates but it was politically difficult. Finally, it has gone through the Oregon regulatory body. The farmers underpay for water and underpay for power to deliver water.

Q: If farmers have been granted relatively abundant water at less-than-market value, where is the incentive to conserve, develop more efficient irrigation methods, or reconfigure crop production to maximize water use? Doesn’t this system put growers in a precarious situation when water availability dries up?

A: Over the past several years, the farming community and the ag extension community has really started paying a lot more attention to this problem. I was talking to ag extension people a few months ago, who were developing new ways to grow alfalfa so farmers can survive deeper cuts in water availability.

There are ways not to lose a crop in a bad drought. I would have thought in the abstract annual crops are easier to adjust to hydrology. I’ve read, though, about farmers planting almonds because they can go through droughts and they won’t lose the trees.

Q: Water utilization issues seem to have reached a boiling point. Is the California drought the catalyst? And does the focus on global warming exacerbate the problem?

A: One thing that came out of the problems in the Klamat Basin and Delta, I hope, is a greater sensitivity that we live in a wildly hydraulically variable climate. Most scientists believe variability will change more with climate change. Farmers will have to find ways to deal with drought.

In the past, farmers have been dependent on reclamation to smooth over the variability in hydrology. As a matter of self-preservation, farmers have to figure out ways to smooth out their own risk, whether this means investments to help hedge or practices that can better hedge against drought.

Q: To many, the decisions on who gets water appear arbitrary or politically motivated rather than scientifically-founded. What is the reality here? Is this where “Dirty Politics” comes into play?

A: I don’t think the decisions are ever arbitrary, yet they are easily seen as underdetermined. There is a lot of uncertainty in these systems. If trying to protect fish, we don’t know how much water fish need. At the beginning of the irrigation system process, we don’t know what the water situation will be. A lot of these decisions have to be made in advance, estimating weather patterns, etc. The Bureau of Reclamation has a set of models to estimate how much water will be available and makes predictions as time goes on. There may be a lot of calculations premised on historical data.

Everyone thinks it is dirty politics with special interests fighting for their share. There isn’t a mathematical formula cranked through to say, “This is how much water for farmers and this is how much for fish,” in a neat division. Inevitably, a lot of judgments are being made. And of course, given there are these deep divides and a lot of people with a stake in these systems, it’s easy for people to suspect judgments are being made on the basis of raw politics. And sometimes this may be true. Some of the judgment is wholly legitimate and in fact is inevitable. What we want is judgments made on a principled basis and as much transparency in how these decisions are made as possible.

What tends to happen is farmers think the wildlife agencies are demanding too much to protect fish because that’s all they care about. Environmentalists think farmers have more political power, are making calls to legislators, going through back channels, and everyone is bending over backwards to help them.

Accusations are flying around in both directions. We think agencies are trying to do their job to the best of their abilities in a world where they know they’ll get their heads chopped off no matter what they do.

Q: After all these years, have we reached a turning point in addressing water utilization supply-and-demand issues, or will the next big storm wash away the urgency?

A: Drought brings them to the fore, but these are underlying issues. One thing about drought and variable climates… they tend to be issues we sweep under the rug in a wet year; human nature, just the way it is that we put off dealing with these things. There are systematic problems. The demands for water from cities, eco systems, and farmers exceed the reliable supply.

Put it all together and our waters are over appropriated. We’ve made too many promises to too many sets of interests. None of the solutions are easy. That’s one of the reasons we tend to sweep them under the rug. These are not clear-cut answers.

Q: What action steps must be taken to drive the process toward meaningful change?

A: Ultimately, we think what’s needed is better articulation of a workable vision of a sustainable landscape. What we’ve got right now is water law on one side, developed when we thought agriculture was very important and the environment was of little importance. Then environmental laws are all about sustaining the environment.

What we don’t have is a means of putting these sets of interests together. Here’s what we want: we want fish and farms to simultaneously thrive, and here’s how we can combine these goals. The need for that new articulation is made even stronger by the specter of climate change coming down the road.

In the West, climate change is a very real and current threat to our water systems. Because of climate change, we know we can’t go on with the status quo. We see a train wreck coming in the distance. We need to figure out our vision.

Q: Is there a working group, a grand coalition of all these interested parties uniting for a common cause?

A: We’ve tried various things. In the Klamath years, there were various attempts to get groups together, and the same with the Delta. The CalFed Bay-Delta Authority still has its web pages. It’s a partnership with the State of California and the U.S., which is supposed to manage these water projects in the Bay Delta. The idea was that we could have reliable water supply and reliable environmental protection at the same time.

The problem is that CalFed denied the need to make tradeoffs and hard choices: ‘Let’s engage all stakeholders, and give them a reason to join.’ It fell apart in large part because no one got what they thought they had been promised; the environment didn’t get better and farmers’ water situation didn’t get better. Everyone went back to court.

We need a process and mechanism to make the hard choices.

Q: Your book couldn’t be timelier; water wars have resurfaced with a new vigor.

A: We did see this Bay Delta crisis coming. These kinds of conflicts are very difficult to solve because they are quite entrenched in history. People have their emotional and financial investments tied up in many ways. And we don’t have institutions to find a way to make the tradeoff that has political support and credibility.

When I talk about dirty politics, a lot of these decisions are appropriately political. Unfortunately, politics is just a dirty word. The political system is the way we make decisions about these societal values. That’s a wholly legitimate place, albeit an imperfect system, but the only system we’ve got. So we need to try to make it better, instead of prolonging environmental conflicts of the last 10 to 20 years.

Q: Is there general consensus on the soundness of the scientific data and analysis out there? What role can science play in resolving these conflicts?

A: We need science to inform choices but we’re fooling ourselves to say science can make those choices. Science can highlight the consequences of making choices. Science can pinpoint degrees of risk, but can’t tell us the right degree of risk or the right level of cost to reduce that risk. In the context of water conflicts, we often have a high degree of uncertainly with what the fish need. What level of sacrifice should we demand of farmers, of cities or other interests knowing we can’t guarantee things will get better?

Right now state water contractors and federal contractors just filed legal challenges questioning the scientific evidence used by The Fish and Wildlife Service. The law says The Fish and Wildlife Service has to consider the best scientific evidence available. Really what the contractors are arguing about is whether they should have to give up water when there is no certainty the water diverted to fish will save them.

Farmers say cutting off water sacrifices important food production. The fact is that alfalfa going to feed cows is a very inefficient use of water. The farmers don’t want to be told here’s what you should grow. If the argument is we need water to feed the nations of starving people, the farmers need to show that.

We don’t mind sacrifice, but we want to know that society is getting something out of sacrifice. There’s a political question of how much risk we’re willing to submit fish to, and how much we’re willing to give up when we’re not sure we’re solving fish problems.

It’s thought about under good science, but that’s not really what this is about; it’s about social willingness to accept different kinds of error.

We appreciate that Professor Doremus was willing to invest her time to help educate the industry on this important matter.

One of the key points Professor Doremus raises is the failure of the CalFed Bay Delta Authority. The new California water package includes a new board with seven appointed members. It is supposed to oversee water issues in the Sacramento-San Joaquin River Delta. But the good professor’s point is that structure can take us only so far, at some point courage is actually required.

The real courageous act that is required is to move water out of the scope of political allocations and into a market-based system. It is preposterous that states and localities will order people to not wash cars and not water lawns, when unlimited amounts of water are for sale in every supermarket’s bottled water section and when the oceans are filled with water ready to be desalinated.

Farmers have often benefited from political allocations in the past and are loathe to give that up, but keeping water prices below market is pernicious as it reduces incentives for conservation and leads to distorted decision-making such as planting the wrong crops in the wrong places. Besides, with the farm population a tiny fraction of what it was, how reasonable is it to think that farmers will, forever, be able to sustain their advantages politically?

In a discussion we had with Bruce Peterson, he pointed out that water issues will be crucial for the industry to consider, and a stream — pun definitely intended — of newspaper articles has pointed to drought conditions ravaging California, Texas and other regions forcing farmers to leave fields fallow, etc.

The short term solution has to be government action as in California’s new agreement. Long term, we have to have a market-based solution so that water flows to the places it is valued most, its waste is minimized and alternatives most robustly developed.

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