Damming the Money Stream of the Water Profiteers

Californians who recently learned a very expensive lesson about futures trading from Enron Corp. may soon get a second dose of market manipulation, this time courtesy of the federal government.

Instead of watching out for the water needs--and pocketbooks--of taxpayers, the Department of the Interior may soon sign long-term water contracts that provide multimillion-dollar windfalls to agricultural corporations at the expense of cities and consumers.

A hundred years ago, Congress made a bargain with farmers in the dry West: Taxpayers would subsidize dams, canals and water to promote settlement and irrigate family farms. In return, farmers would have to repay only a fraction of the true cost of the investment. The subsidies were locked into long-term contracts that the Interior Department signed with water districts promising to deliver millions of acre-feet.

Yet for decades, some reclamation beneficiaries in California’s Central Valley have been farming the taxpayers as much as the land.

Huge companies maneuvered to capture the multibillion-dollar subsidy intended for family farmers, leading Congress to close the loopholes and reduce the subsidies that encourage overuse of water resources.

Now the original water contracts are expiring, and Interior must negotiate new contracts under much tighter terms dictated by a historic 1992 water reform law. Given the growing demand for water throughout the state, some of these giant farm operations have a new scheme for enriching themselves at public expense: Instead of using subsidized water for growing crops, they want to sell some of their government-provided water back to the government--or to water-short cities or farms--for huge profits.

Bennett Raley, who is in charge of the federal water program at the Interior Department, approves. “We believe in the free market,” Raley says. “It’s their water.” Well, actually, it isn’t “their” water.

The water originates in the mountains and the rivers of this great state. It belongs not to any particular contractor or farmer but to all the people of California, who paid for its development, storage and delivery with costly subsidies. The Interior Department’s customers enjoy the use of the water only because of their contracts with the government, and those contracts now need to be renegotiated.

The government signed contracts to provide subsidized water for food and fiber production, not to award a public resource to a particular group that could convert it into an annuity for personal profit. If there is a market in California for $1,000 an acre-foot--and there is--why would any responsible federal official sign a 25-year contract to sell water to farming concerns that will resell it for a profit of 800% or 1,000%?

If the water market is that healthy, why shouldn’t the taxpayers, who built and subsidized the projects in the first place, get to sell the water for a large profit?

If the contractor’s intent in signing a new contract is merely to market a portion of the water, then, learning from the Enron example, we should not be concentrating public resources in the hands of a few private individuals.

Yet farming interests, many with long-standing ties to the Bush administration, are pressuring federal officials to sign new contracts that deliver them control of vast amounts of water.

Water is already an overcommitted resource in California, with competing interests divided among cities, agriculture, industry and the environment. Global warming has raised concerns of diminished Sierra snowpacks and runoffs in the future, which would reduce our ability to fill our reservoirs.

Surely this is not the time for responsible government officials to commit water to one group of contractors and force the rest of the state to cut deals that enrich private interests from the sale of public resources.

Doesn’t it make sense for Raley and his co-workers at the Interior Department to use great caution in deciding how much of the public’s subsidized water to include in those new contracts, instead of promising vast volumes that irrigators will turn around and resell--perhaps even to the government--at a huge profit?

It’s not their water, Mr. Raley, unless you give it away.