Water shortage: Some farmers in California would rather sell their water than grow something

By: GARANCE BURKE - Associated Press | Friday, January 25, 2008 9:20 PM PST ∞

FRESNO, Calif. -- With water becoming increasingly precious in California, a rising number of farmers figure they can make more money by selling their water than by actually growing something.

Because farmers get their water at subsidized rates, some of them see financial opportunity this year in selling their allotments to Los Angeles and other desperately thirsty cities across Southern California, as well as to other farms.

"It just makes dollars and sense right now," said Bruce Rolen, a third-generation farmer who grows rice, wheat and other crops in Northern California's lush Sacramento Valley.

Instead of sowing in April, Rolen plans to let 100 of his 250 acres of white rice lie fallow and sell his irrigation water on the open market, where it could fetch up to three times the normal price.

What effect these deals will have on produce prices remains to be seen, because the negotiations are still going on and it is not yet clear how many acres will be taken out of production. But California grows most of the nation's winter vegetables and about 80 percent of the world's almonds, and is the No. 2 rice state, behind Arkansas.

Environmental restrictions, booming demand for water, and persistent drought along the Colorado River have combined to create one of the worst water shortages in California in the past decade, and prices are shooting up in response.

The would-be water sellers include farmers who grow rice, cantaloupes and tomatoes around Sacramento and the San Joaquin Valley. Rice, in particular, requires a lot of water; the fields have to be flooded.

The farmers looking to buy water are generally farther south in the San Joaquin Valley and the Los Angeles area and grow such crops as pistachios, almonds and grapes. Because of the heavy capital investment they made in their trees and vines, these farmers cannot afford to stop irrigating their crops and let them die. In contrast, rice, melons and tomatoes are planted anew each year.

Individual farmers don't actually sell their water themselves. Instead, their local water districts represent them in negotiations with other water agencies.

"It's been a good decade since there's been this much interest in buying and selling water on the open market," said Jack King of the California Farm Bureau Federation. "We're prepared to see significant fallowing in several key parts of the state."

As for what this will mean for the cost of food at the supermarket, "it's still too premature to say where prices will settle, but I can say that virtually every agricultural district in the Sacramento Valley is thinking about selling their water this year," said Laura King Moon, assistant general manager of the State Water Contractors Association, which represents 29 water agencies.

Water from Northern California rivers irrigates central California's farm fields and keeps faucets flowing in the Los Angeles area. But it must be shipped south through a network of pumps, pipes and aqueducts, and that system recently developed a kink when a federal judge ordered new restrictions on pumping to save threatened fish.

At the same time, Southern California's other main source of water, the Colorado River, is in its eighth year of drought.

Because of the resulting shortages, Long Beach cannot run fountains, and restaurants there are not allowed to serve customers a glass of water unless they ask for it. Near Bakersfield, in central California, almond and pistachio growers will have to perform triage of sorts and decide which of their nut trees can be saved. And cities across California are drawing down underground supplies of water rather than buying it.

Water on California's open market typically sells for $50 per acre-foot in wet years. But now it is expected to go for as much as $200. Farmers, however, pay $30 to $60, rates that are set under state and federal policy. (An acre-foot is enough water to cover an acre to a depth of one foot.)

Because of rising costs, the huge water agency for the Los Angeles metropolitan recently proposed a rate increase for next year of 10 to 20 percent on the water it sells to cities.

Some environmentalists are troubled by farmers' efforts to sell their water, and warn that such deals don't begin to address the long-term problem.

"Essentially these farmers are getting water for a subsidized price and selling it to taxpayers at an elevated rate," said Renee Sharp of the Environmental Working Group.

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