How Growers Gamed California’s Drought

Consuming 80 percent of California’s developed water but accounting for only 2 percent of the state’s GDP, agriculture thrives while everyone else is parched.

03.30.15 9:15 AM ET

“I’ve been smiling all the way to the bank,” said pistachio farmer John Dean at a conference hosted this month by Paramount Farms, the mega-operation owned by Stewart Resnick, a Beverly Hills billionaire known for his sprawling agricultural holdings, controversial water dealings, and millions of dollars in campaign contributions to high-powered California politicians including Governor Jerry Brown, former governors Arnold Schwarzenegger and Gray Davis, and U.S. Senator Dianne Feinstein.

The record drought now entering its fourth year in California has alarmed the public, left a number of rural communities without drinking water, and triggered calls for mandatory rationing. There’s no relief in sight: The winter rainy season, which was a bust again this year, officially ends on April 15. Nevertheless, some large-scale farmers are enjoying extraordinary profits despite the drought, thanks in part to infusions of what experts call dangerously under-priced water.

Resnick, whose legendary marketing flair included hiring Stephen Colbert to star in a 2014 Super Bowl commercial, told the conference that pistachios generated an average net return of $3,519 per acre in 2014, based on a record wholesale price of $3.53 a pound. Almonds, an even “thirstier” crop, averaged $1,431 per acre. Andy Anzaldo, a vice president for Resnick’s company, Wonderful Pistachios, celebrated by showing the assembled growers a clip from the movie Jerry Maguire in which Tom Cruise shouts, “Show me the money,” reported the Western Farm Press, a trade publication. At the end of the day, conference attendees filed out to the sounds of Louis Armstrong singing, “It’s a Wonderful World.”

Agriculture is the heart of California’s worsening water crisis, and the stakes extend far beyond the state’s borders. Not only is California the world’s eighth largest economy, it is an agricultural superpower. It produces roughly half of all the fruits, nuts, and vegetables consumed in the United States—and more than 90 percent of the almonds, tomatoes, strawberries, broccoli and other specialty crops—while exporting vast amounts to China and other overseas customers.

But agriculture consumes a staggering 80 percent of California’s developed water, even as it accounts for only 2 percent of the state’s gross domestic product. Most crops and livestock are produced in the Central Valley, which is, geologically speaking, a desert. The soil is very fertile but crops there can thrive only if massive amounts of irrigation water are applied.

Although no secret, agriculture’s 80 percent share of state water use is rarely mentioned in media discussions of California’s drought. Instead, news coverage concentrates on the drought’s implications for people in cities and suburbs, which is where most journalists and their audiences live. Thus recent headlines warned that state regulators have ordered restaurants to serve water only if customers explicitly request it and directed homeowners to water lawns no more than twice a week. The San Jose Mercury News pointed out that these restrictions carry no enforcement mechanisms, but what makes them a sideshow is simple math: During a historic drought, surely the sector that’s responsible for 80 percent of water consumption—agriculture—should be the main focus of public attention and policy.

The other great unmentionable of California’s water crisis is that water is still priced more cheaply than it should be, which encourages over-consumption. “Water in California is still relatively inexpensive,” Heather Cooley, director of the water program at the world-renowned Pacific Institute in Oakland, told The Daily Beast

One reason is that much of the state’s water is provided by federal and state agencies at prices that taxpayers subsidize. A second factor that encourages waste is the “use it or lose it” feature in California’s arcane system of water rights. Under current rules, if a property owner does not use all the water to which he is legally entitled, he relinquishes his future rights to the unused water, which may then get allocated to the next farmer in line.

Lawmakers have begun, gingerly, to reform the water system, but experts say that much remains to be done. For years, California was the only state in the arid West that set no limits on how much groundwater a property owner could extract from a private well. Thus nearly everyone and their neighbors in the Central Valley have been drilling deeper and deeper wells in recent years, seeking to offset reductions in state and federal water deliveries. This agricultural version of an arms race not only favors big corporate enterprises over smaller farmers, it threatens to collapse the aquifers whose groundwater is keeping California alive during this drought and will be needed to endure future droughts. (Groundwater supplies about 40 percent of the state’s water in years of normal precipitation but closer to 60 percent in dry years.)

Last fall, the legislature passed and Governor Brown signed a bill to regulate groundwater extraction. But the political touchiness of the issue—agricultural interests lobbied hard against it—resulted in a leisurely implementation timetable. Although communities must complete plans for sustainable water management by 2020, not until 2040 must sustainability actually be achieved. The Central Valley could be a dust bowl by then under current trends.

There are practical solutions to California’s drought, but the lack of realistic water prices and other incentives has slowed their adoption. A shift to more efficient irrigation methods could reduce agricultural water use by 22 percent, an amount equivalent to all the surface water Central Valley farmers lacked because of drought last year, according to an analysis that Cooley of the Pacific Institute co-authored with Robert Wilkinson, a professor at the University of California Santa Barbara, and Kate Poole, a senior attorney at the Natural Resources Defense Council. 

The Brown administration has endorsed better water efficiency—and put a small amount of money where its mouth is. Conservation is the No. 1 priority in the governor’s Water Action Plan, and the drought measures he advanced in 2014 included $10 million to help farmers implement more efficient water management. An additional $10 million was allocated as part of the $1.1 billion drought spending plan Brown and bipartisan legislators unveiled last week. Already more than 50 percent of California’s farmers use drip or micro irrigation, said Steve Lyle, the director of public affairs at the California Department of Food and Agriculture; the new monies will encourage further adoptions.

Meanwhile, underpriced water has enabled continued production of such water-intensive crops as alfalfa, much of which is exported to China. Rice, perhaps the thirstiest of major crops, saw its production area decrease by 25 percent in 2014. But pasture grass, which is used to fatten livestock, and many nut and fruit products have seen their acreage actually increase. Resnick told the Paramount Farms conference that the acreage devoted to pistachios had grown by 118 percent over the last 10 years; for almonds and walnuts the growth rates were 47 and 30 percent, respectively.

One striking aspect of California’s water emergency is how few voices in positions of authority have been willing to state the obvious. To plant increasing amounts of water-intensive crops in a desert would be questionable in the best of times. To continue doing so in the middle of a historic drought, even as scientists warn that climate change will increase the frequency and severity of future droughts, seems nothing less than reckless. 

Yet even a politician as gutsy and scientifically informed as Jerry Brown tiptoes around such questions. The Daily Beast asked Brown if in this time of record drought California should begin pricing water more realistically and discouraging water-intensive crops. Responding on the governor’s behalf, spokesman Lyle simply skipped the water pricing question. On crop choices, he cited a reply Brown recently offered to a similar query: “Growing a walnut or an almond takes water, having a new house with a bunch of toilets and showers takes water. So how do we balance use efficiency with the kind of life that people want in California? … We’re all going to have to pull together.”

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“California Has One Year of Water Left, Will You Ration Now?” asked the headline of a widely discussed opinion piece NASA scientist Jay Famiglietti published in the Los Angeles Times on March 16.  The headline overstated the situation somewhat, and editors soon corrected it to clarify that California has one remaining year of stored water, not one year of total water. As Famiglietti was careful to state, California’s reservoirs today contain enough water to supply a year of average consumption.

So if California endures a fourth year of drought, the only way to keep household taps and farmers’ irrigation lines flowing will be to summon to the surface still greater volumes of groundwater. But that strategy can’t work forever; worse, the longer it is pursued, the bigger the risk that it collapses aquifers, rendering them irretrievably barren. Aquifers can be replenished—if rainwater and snowmelt are allowed to sink into the ground and humans don’t keep raiding the supply—and that is the expressed goal of California’s forthcoming groundwater regulations. The process takes many decades, however, and extended relief from further droughts.

California is caught between the lessons of its history and the habits of its political economy. Droughts of 10 years duration and longer have been a recurring feature in the region for thousands of years, yet a modern capitalist economy values a given commodity only as much as the price of that commodity. Current pricing structures enrich a handful of interests, but they are ushering the state as a whole toward a parched and perilous future. 

The price of water, however, is not determined by inalterable market forces; it is primarily a function of government policies and the social forces that shape them. Elected officials may dodge the question for now, but the price of water seems destined to become an unavoidable issue in California politics. “As our water supply gets more variable and scarce in the future, we’re going to have to look at how we price water so it gets used more efficiently,” said Cooley of the Pacific Institute. “In some ways we’ve come a long way in California’s water policy and practices over the past 20 years. But if you look into a future of climate change and continued [economic] development, we can and need to do much better.”

Mark Hertsgaard has reported on politics, culture and the environment from more than 20 countries and has authored six books, including HOT:  Living Through the Next Fifty Years on Earth, which will appear in paperback April 17.