Money down the drain - Private Property Act

For years California's big growers have fed their crops with taxpayer-financed irrigation water. Now they want Uncle Sam to pay them for water they don't get.

Less than a week before the House Ways and Means Committee voted to cut many federal payments to the poor, a bill that would strengthen and extend another federal subsidy sailed through the House with bipartisan support.

The subsidy that survived and prospered provides cheap irrigation water to western farmers. As a result, taxpayers could end up paying growers for water they don't get, despite the fact that they already pay to get the water to the farmers in the first place.

If a multimillion-dollar operation with thousands of acres of cotton and alfalfa could buy only 75 percent of the federally subsidized water it expects to get in a year, for example, the government could have to pay the company for the other 25 percent. And the government would probably pay the company market price for the water, much more than the company was paying.

"Federal taxpayers by and large are footing the bill [for federal irrigation water]," says Wendy Pulling, an attorney with the Natural Resources Defense Council (NRDC). "The perversity is that [under this bill] the taxpayer would have to pay to get that water back. The taxpayers are paying twice."

The Private Property Rights Act, part of the House-passed "Contract With America," would compensate property owners if certain federal environmental laws reduced the value of a portion of their land by 20 percent or more. Because the bill defines property as land and "the right to use or receive water," and because water reclamation law is one of the statutes included, this subsidy could become more of a right.

This represents a radical expansion of the traditional idea of "takings." "Nobody seriously thought that water [reclamation] contracts and takings had anything to do with each other," says Jim McElfish of the Environmental Law Institute.

But it makes perfect sense in the minds of some western lawmakers and their agribusiness constituents. It's a way to turn what environmentalists would call a gift into a right, and it weakens recent environmental laws that divert some federal water away from farmers and toward fish and wildlife habitats.

Proponents argue that the U.S. Interior Department should merely honor the long-term contracts it signed with federal water users to supply certain amounts of water at low prices from its huge system of dams, reservoirs and canals. But water law experts say the contracts make allowances for factors limiting water availability, such as compliance with state and federal statutes.

"For years and years there have been situations in which water supplies have been cut back," says the NRDC's Pulling. "It's in the contracts, which are being turned on their head." Some even fear this bill would lock the contracts at present or more favorable terms, leaving the Interior Department unable to revise contracts come renewal time.

Pulling says the inclusion of contractual water rights in the takings bill "definitely threatens to upset the Bureau [of Reclamation's] ability to comply with the Endangered Species Act (ESA) and other bills without paying to do so." The money to pay growers would come out of the Interior Department's annual appropriations. Takings claims would run so high that Interior "would not be able to buy back the water," Pulling says.

And if the government couldn't afford to pay farmers for water it diverts to fish and wildlife habitats, it could no longer divert that water. "It's a way of gutting important aspects of the Central Valley Project Improvement Act (CVPIA) and ESA through the back door, without public debates focused on the merits of the statutes," Pulling says.

Streams in the Desert

California's arid Central Valley, home to the largest irrigation project in the nation, has become the focal point of this debate. In 1993 growers bought some 3.3 million acre-feet of water from the Central Valley Project (CVP), allowing them to grow water-intensive crops like alfalfa and rice in a virtual desert. Subsidized prices average $15 to $20 per acre-foot, much less than the $50 to $100 per acre-foot at which excess irrigation water has been selling in California, and far less than Interior's estimated $1,850-per-acre-foot cost of supplying the water. By law, only growers with fewer than 960 acres of farmland are eligible to buy water at these low rates, but due to gaping loopholes, two-thirds of the CVP-irrigated farmland belongs to growers with more land than that.

To further compound this unbelievably good deal, some Central Valley growers use their subsidized water to take advantage of yet another subsidy: federal price supports for certain crops, including cotton and rice. Growers in the Westlands Water District, the largest CVP contractor, received $60 million to $70 million in price supports from 1993 to '94, Pulling says. Among those receiving this double subsidy is Republican contributor and Team 100 member J.G. Boswell, who once said, "Water rights are like democracy. Once you have them, you spend a lifetime protecting them."

Boswell and his company have a lot to protect, growing cotton and alfalfa on as many as 192,000 CVP-irrigated acres (a spokesperson for the company refused to disclose the size of its holdings). But one thing's for certain: Boswell's company receives both water and crop subsidies.

Central Valley growers strongly opposed the 1992 CVP Improvement Act, which dedicates some 12 percent of CVP water to fish and wildlife habitats, forcing growers to turn to the market for some of their irrigation water. It also tacks $5 per acre-foot - to be used for habitat restoration projects - onto the price of CVP water.

The Endangered Species and Clean Water Acts use no more CVP water than already is set aside under the CVP Improvement Act, but growers are still angry. Jason Peltier, manager of the CVP Water Association, which represents water districts that buy CVP water, calls the mandated diversion of water to environmental uses a "man-made drought." He says "regulators have acted without regard for the economic, human, and social consequences" of the laws. Environmentalists, on the other hand, argue that since the first part of the CVP was constructed in the 1930s, growers have received an extremely sweet deal at a huge cost to taxpayers and the environment, in the form of extinction of certain types of fish, loss of wildlife habitats and billions of dollars in subsidies.

The Water Lobby

The water-rights provision of the takings bill was a last-minute addition inspired by the people who benefit from it. "Members [of the CVP Water Association] certainly gave the Valley delegation an earful," says Peltier, adding that there was "a lot of lobbying." Fred Middleton of the National Cotton Council of America says his group was part of a coalition of water users and agribusinesses that lobbied on the issue.

Rep. Richard Pombo (R-Calif.), himself a Central Valley rancher, was a key negotiator in a last-minute deal with the provision's sponsor, Rep. Billy Tauzin (D-La.), according to fellow Central Valley lawmaker and farmer Cal Dooley (D-Calif.). Incidentally, Pombo was recently named chair of a task force to rewrite the Endangered Species Act.

But Pombo wasn't working alone, says his spokesperson, Mike Hardiman. Federal reclamation projects are crucial to agricultural interests in several dry western states, and just days before the House passed the takings bill, 39 congressmembers from both parties formed the Western Water Caucus to "work to ensure the continuation of existing water rights," according to a press release.

Subsidized agricultural water is not the only issue that binds this coalition together. Two other western water-rights provisions, also quite inconsistent with the idea of takings, found their way into the House bill. They could force the federal government to compensate ranchers and mining companies who already are profiting from publicly owned land and would "limit the ability of federal land managers to manage the public's land and resources," says Johanna Wald, another NRDC attorney.

Supporters of the agricultural water provision dispute its face-value implication: that growers will be paid not for a reduction in property value but for the loss of a valuable taxpayer subsidy. "This provision only deals with a change in a water right, not a reduction in a subsidy," Dooley says. But the water rights are subsidized by the government, opponents argue. The CVP Water Association's Peltier disagrees. "We're not talking about getting paid for water losses - only for declining land value as a result of less water. We have no expectations of getting paid for a decrease in a subsidy," he says.

Pombo spokesperson Hardiman frames the issue in terms of the needs of western agribusiness. "Water is a life and death issue for California agriculture," he says, adding that "without water rights, property value is dramatically reduced." Hardiman insists that federally-provided irrigation water "is not a subsidy."

Environmentalists say the subsidized water artificially inflates the value of the land. "We're talking about people who have received hundreds of millions of dollars from the taxpayers," Rep. George Miller (D-Calif.) said on the House floor. "This land wasn't worth spitting on until the federal government came along and spent billions of dollars."

Sarah Bailey is an intern.

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