(Ed. note: This blog marks the beginning of a series concerning the transfer of a huge water bank near Bakersfield to a private individual, Stewart Resnick, who is using it to make exorbitant profits at the expense of tax-paying Californians. We encourage you to take note of each installment as it will open your eyes to how private control of pubic water is rampant in the Bakersfield–Ft.Tejon area.)
In 1994, state officials and five of the 29 State Water Project (SWP) contractors met secretly in Monterey, CA, to resolve water shortage issues. The contractors included the Metropolitan Water District of Southern California (MWD) and the Kern County Water Agency (KCWA), which together held contracts for about 75 percent of the state’s water, and representatives fromParamount Farming, a private agricultural corporation owned by billionaire Stewart Resnick.
The result of their meeting was the Monterey Amendments to the State Water Project contracts.
Drought conditions were so severe in 1991 that SWP deliveries to agricultural contracts were zero. While this was consistent with the principles of the original SWP contracts, the strictures enraged agricultural contractors who were also distressed by their obligation to maintain payments on their share of the SWP “mortgage.” It was the ultimate cost-squeeze: “Entitlements” outlined in the SWP contracts meant little to agricultural contractors when drought restricted deliveries.
Most of the water delivered in 1991 by the State Water Project, for example, was sent to the Metropolitan Water District of Southern California, which largely serves urban water districts south of the Tehachapi Mountains. This reflected a long-standing “urban preference” in state water law and SWP contracts that decreed domestic and industrial water rights holders (such as cities and counties holding the requisite rights) would receive water first during droughts, prior to the claims of agricultural water users.
The urban preference was established in the belief that it is more problematic to interrupt urban water deliveries than agricultural deliveries. The Monterey Amendments eliminated the urban preference, greatly imperiling secure water supplies to California’s cities.
In the 1980s, the California Department of Water Resources (DWR) acquired lands known as the Kern Water Bank, with the department seeking to develop an underground reservoir to provide additional south-of-Delta State Water Project storage capacity as insurance for its southern California urban water customers.
Under the secret 1994 Monterey Amendments, DWR agreed to eliminate drought protections for urban areas. To appease urban water contractors and real estate speculators, DWR agreed to change the rules that control water transport through the SWP.
These changes, promoted by the negotiating parties as a means of enhancing water management “flexibility,” have contributed to the ecological decline of the Delta by encouraging increased pumping during certain times of the year.
The Monterey Amendments changed the course of California water history in four ways:
1. Elimination of The “urban preference” (Article 18(a))
The “Urban Preference” was a safeguard established in SWP contracts in 1960 to ensure that agricultural allocations would be cut first during periods of prolonged dry weather or drought.
2. Elimination of the “paper water” safe guard (Article 18(b))
Article 18(b) was included in the original contracts to guarantee that the total amount of water promised could actually be delivered on a “firm yield” basis. This clause in the contracts required the total amount of the Table A Allocations to conform to the “safe yield” of the SWP. Table A water is the maximum amount of water deliverable to each contractor.
However, there is an inherent flaw in the State’s concept of “safe yield.” The true safe yield of the SWP is not the current Table A Allocation total of 4.23 million acre-feet of water a year (MAFY). This is because the contracts were premised on a full build-out of State Water Project facilities. This has not occurred. In fact, the average amount of water actually delivered between 1990 and 2000 was 1.86 MAFY.
The difference between the SWP’s 4.23 MAFY and the actual delivered average of 1.86 MAFY is known as “paper water.” In its 2000 decision invalidating DWR’s first environmental report on the Monterey Agreement, the Third District Court of Appeal called this difference “a wish and a prayer.”
Developers in southern California did not want the State Water Project to reduce its overall commitment from 4.23 MAFY to a smaller figure because they would have more difficulty demonstrating there was sufficient water for their developments. This remains one of the greatest problems with paper water in California today. Article 18(b) was eliminated in the Monterey negotiations with virtually no environmental review of its consequences.
3. Kern Water Bank Given Away by the State
As part of the Monterey Agreement, the Department of Water Resources turned over a state asset, the Kern Water Bank to the Kern County Water Agency. As noted above, the Kern Water Bank is a 20,000-acre alluvial fan that was established as “drought insurance” for SWP urban contractors. Water can be injected or withdrawn from this aquifer easily. The state transferred the bank in exchange for the retirement of 45,000 acre-feet of paper water. In other words, the state gave up a valuable public asset for “undelivered” water to Kern that didn’t even exist.
This privatization of the Kern Water Bank allowed the new owners to buy cheap “surplus” water (known as Article 21 water; see below), store it underground, and then sell it to the highest bidder for gargantuan returns. The Resnicks have reaped millions of dollars in profits since seizing the water bank, all courtesy of California’s water ratepayers.
(Ed. Note: Privatizers everywhere promise more efficient services and cheaper prices while most people have experienced the opposite. And privatized enterprises not only fail in service and price, they concentrate economic decision-making in fewer and fewer hands, spreading inequality, with the predictable result of a failure to deliver the investment essential to sustainable growth.)
4. Article 21: “surplus” water.
State Water Project contract Article 21 provides for the sale of “available” surplus water during periods of heavy flow; this water can be sold just for the cost of transporting it to the buyer. Article 21 water was originally intended only for temporary crops, not for permanent crops such as nut orchards, or for real estate developments. Note: Resnick’s Paramount Farms owns 140,000 acres of nut orchards!
The Monterey Amendments enable state water contractors to exploit available “surplus” water in the State Water Project. This applies particularly to contractors in the southern San Joaquin Valley and those under the umbrella of the Metropolitan Water District of Southern California. During the 1990s, SWP deliveries were well below projected entitlements for project contractors, and very little surplus water was available. During the 2000s, more surplus water was made available after the federal government and the state of California adopted the Cal-Fed Record of Decision, which enabled greater export pumping from the Delta.
The Monterey Amendments Must be Overturned
Overturning the Monterey Amendments would resolve the MWD’s water problems. By returning the taxpayer-created Kern Water Bank to state control, water from this reserve could be used to meet urban preference requirements during drought, as was the original intention. This would substantively increase the water available to MWD from their Table A Allocation.
Further, Article 18(b) should be reinstated. This would allow the Department of Water Resources to reduce deliveries of its contractors’ Table A “entitlement” water to the amount that can be provided within the strictures of sustainable supply and public trust responsibilities. This would ultimately lead to more reliable water service by the State Water Project to its contractors.
Ultimately, the Monterey Amendments must be overturned to stop the deleterious privatization of the SWP. The state’s water is a public resource, not a private asset, and citizens and ratepayers must reassert control over its allocation and deliveries. The DWR is not your friend!
(Ed. Note: Calolee Krieger, Director of the California Water Information Network (C-WIN) is responsible for this article. It has been edited for length. She and C-WIN have filed a law suit to overturn the Monterey Amendments Watch for next week’s revealing article.)