[env-trinity] Report Reveals Enormous Cost of Agricultural Water Subsidies

[Daniel Bacher]

New Report Reveals Enormous Cost of Agricultural Water Subsidies

by Dan Bacher

A small group of wealthy farmers receive the vast majority of water and 
subsidies from the federal Central Valley Project, concludes a 
groundbreaking report issued on December 15 by the Environmental Working 
Group (EWG).

The study was issued as Indian tribes, anglers, commercial fishermen and 
environmental groups are challenging the negotiation of long term contracts 
between the U.S. Bureau of Reclamation and CVP growers because of their 
disastrous impacts upon salmon and other fish populations.

The EWG investigation is the first to name individual recipients of water 
subsidies in California.  It concludes that the CVP, authorized in 1936 to 
support family farmers, is providing up to $416 million of subsidized water 
at the expense of fish and the environment.

It dispels the erroneous notion that many people still have of agriculture 
being made up of individual yeoman farmers in the Jeffersonian tradition – 
right out of the classic Grant Wood painting of a farmer holding a 
pitchfork, with his wife standing steadfastly beside him.

“It confirms that large agribusiness operations – not the small family 
farmers that federal projects were intended to benefit – are reaping a 
windfall from taxpayer-subsidized cheap water,” according to the report, 
written by Bill Walker and others.

In 2002, the largest 10 percent of the farms received 67 percent of the 
water, for an average subsidy worth up to $349,000 each at market rates for 
replacement water, according to the study. Twenty-seven large farms each 
received subsidies each worth $1 million or more at market rates, compared 
to a median subsidy for all recipients of $7,076.

The report contends that one farm – Woolf Enterprises of Huron, Fresno 
County - received more water by itself than 70 CVP water user districts, for 
a subsidy worth up to $4.2 million at market rates. Woolf Enterprises is a 
member of the huge Westlands Water District, a district that Craig Tucker of 
Friends of the River describes as the “Darth Vader of California water 
politics.”

Among other revelations of the report include:

• CVP farmers get about one fifth of all the water used in California, at 
rates that by any measure are far below market value

• In 2002, the average price for irrigation water from the CVP was less than 
2 percent of what LA residents pay for drinking water, one tenth the 
estimated cost of replacement water supplies and about one eighth of what 
the public pays to buy its own water back to restore the San Francisco Bay 
and Delta.

The report says, “The original intent of the federal water projects, set out 
in the Reclamation Act of 1902, was to encourage Western settlement by small 
family farms. Today, artificially cheap irrigation water in the Central 
Valley has led to a host of problems, including the inefficient use of 
water, devastation of fish and wildlife habitat and severe toxic pollution.”

George Miller (D-Martinez), the author of the Central Valley Project 
Improvement Act that made fish and wildlife a purpose of the project for 
first time, hailed the release of the study. Miller has been very critical 
of attempts by the Bush administration to “fast track” Central Valley water 
contract renewals without sufficient public notice and comment regarding the 
impacts of increased water diversions on endangered and threatened fish.

“We have known for years that the Bureau of Reclamation rewards its favored 
customers with cheap water at the expense of everyone else, including the 
American taxpayer,” he said. “Now the Environmental Working Group has 
calculated that price tag – and at over $400 million, it is staggering.”

“What is especially outrageous is that the Administration is secretively 
negotiating long-term water contracts worth billions of dollars that would 
provide these same handouts to these same special interests for decades to 
come, while the rest of California is either running short of water or 
paying top dollar for it. I wrote a water reform law in 1992 to end these 
costly giveaways, but the Bureau of Reclamation is ignoring the law and the 
public and trying to lock in these subsidies for generations.”

Tupper Hull, spokesman for the Westlands Water District, blasted the study, 
claiming that the report “completely cooks up a fanciful description of the 
subsidies.”

He  said the actual cost of water to individual farmers in the district is 
not 7 to 8 dollars per acre-foot, as the study contends. “That’s the cost to 
the irrigation district,” he stated. “The individual farmer in the district 
will actually pay $20 to 90 per acre foot.”

He was particularly critical of the report’s conclusion that the average 
price of irrigation water was less than 2 percent of what LA residents pay 
for drinking water.

“First off, LA is paying for taking the water twice as far, twice the cost 
of conveyance. Then they have to pump the water over the Tehachapi 
Mountains, all at enormous cost” he said. “ Then the water is treated with 
chlorine and then shipped through water systems to homes – all of that, too, 
at enormous cost. To make this comparison doesn’t make much sense. This is 
junk economics.”

However, Walker emphasizes  that CVP farmers are receiving between $60 
million and $416 million in water subsidies each year, depending on how the 
“market value” of the water is defined. The subsidy amounts are the 
difference between what should have paid for the water minus what they 
actually paid. The subsidy was calculated at three different rates – the 
Bureau of Reclamation’s “full cost” rate ($60 million), the State 
Environmental Water Account rate ($305 million), and the Replacement Water 
Rate ($416 million).

The State Environmental Water Account rate is the difference between the 
average CVP rate and the price paid for CVP water by the Environmental Water 
Account, a state-federal joint agency, to restore fish and wildlife habitat 
in the Bay-Delta. The Replacement Water rate is obtained by comparing the 
average price for CVP water to the estimated coast of replacement water 
supplies from proposed dams and reservoirs on the San Joaquin River.

“No matter what market value is used for comparison, the total subsidy to 
CVP farmers exceeds the actual amount they paid in 2002, about $48 million. 
That means that CVP water users are getting a minimum discount of 55 percent 
below market value, ranging up to almost 90 percent, for the water they 
receive,” the report states.

As a solution, the study advocates far-reaching water policy reform. 
“Reforms to make details of water subsidies public, limit the amount and 
value of water subsidies to large farms, and encourage conservation by 
pricing water at rates closer to market value are needed to end the disaster 
for taxpayers and the environment by the Central Valley Project,” the report 
advises.

I commend Bill Walker and the other writers of the Environmental Working 
Group study for doing the first real in-depth analysis of federal water 
subsidies and their impacts in the Central Valley. For years, fishing and 
environmental groups have complained about the cost of federally subsidized 
irrigation water projects on fish and wildlife, especially on salmon and 
other anadromous species. This report documents with hard data how a project 
meant to benefit small farmers has in fact mainly served the needs of the 
Westlands Water District and other large Central Valley agribusinesses –with 
enormous costs to the taxpayers, fish and the environment.

To read the full report, go to: http://www.ewg.org