Water: When Markets Fail

Last week, Stanislaus Superior Court Judge William Mayhew ruled that the Oakdale Irrigation District’s (OID) On Farm Conservation Program couldn’t proceed until it addressed environmental concerns raised by Oakdale farmers Louis Brichetto and Robert Frobose. The ruling was yet another in a series of legal setbacks for a district determined to balance its budget with out-of-region water sales, and costs be damned.

The district’s ongoing legal woes are just another symptom of California’s misguided faith in markets as the controlling authorities for water policy. In theory, water sales represent win-win situations for all parties involved. In fact, they’ve become an exclusive system, benefitting a few market players at the expense of the general public.

Want examples? Consider the Westlands Water District, one of OID’s favored customers. Located in the arid western portion of the San Joaquin Valley, Westlands has poor groundwater and historically junior water rights. Nonetheless, it’s bought its way to enough political power to command tremendous water subsidies even while the state as whole has suffered the worst drought in public memory.

Last September, the federal government forgave a Westlands’ debt of $350 million dollars owed for its share of the Central Valley Project’s construction costs, guaranteed the district almost 900,000 acre feet of cheap federal water, and relaxed environmental standards for Westlands’ historic drainage problems.

But mostly because Westlands’ farmers have planted acre upon acre of permanent nut crops, even the guarantee of 900,000 acre feet of cheap water isn’t enough to slake the district’s enormous thirst. That’s why Westlands has been one of OID’s most reliable customers.

But recently, OID farmers and the public in general have become skeptical about OID’s claims to have “surplus water.” OID had to cancel a water sale last year when farmer Louis Brichetto pointed out the district hadn’t observed requirements of the California Environmental Quality Act, and OID’s latest water sale proposal is on legal hold, per Judge Mayhew.

Despite years of falling groundwater levels, requests from local farmers to be annexed into the district, the ongoing demise of the San Joaquin Delta and its devastating effects on Delta farmers, fisheries, and recreational users, OID insists that its water sales have no environmental impacts.

But no one should blame OID for its ongoing charade about “surplus water” and positive impacts. State and federal governments have long supported water sales on the theory that market-based decisions are far more effective than government standards.

One major effect has been to divert water from ecosystems necessary for farmers and fisheries with less political clout than behemoths like Westlands and Southern California’s Metropolitan Water District. The ongoing deterioration of the San Joaquin Delta damages the public interest in too many ways to list, but that doesn’t prevent us from continuing to divert Delta water to unsustainable farming operations to the south.

The San Joaquin Valley has become a vast monoculture, as nut trees replace staple food crops, driving prices up not only for foods people eat every day but for the water needed to grow them. Water that could be far more efficiently applied nearer its points of origin is sent to regions far less efficient at using it, resulting in losses from evaporation, costs of transfer, litigation, and reduced groundwater recharge.

In theory, markets should improve efficiencies and reduce costs. In fact, water sales have become a “costs-added” way of exploiting a public resource, with the public bearing the costs and fewer and fewer players reaping enormous benefits. In today’s water market, far too many people are getting soaked while far too few prosper at their expense.