U.S. Right to Cut Subsidy on Water Is Upheld : Agriculture: The decision is considered a significant blow to large corporate farms and Central Valley water districts.

In a significant blow to large corporate farms and Central Valley water districts, a federal appeals court Wednesday upheld the government’s right to reduce huge water subsidies to large farms under the Water Reclamation Reform Act.

In a unanimous opinion, the U.S. 9th Circuit Court of Appeals upheld revisions of the 1902 Reclamation Act that Congress enacted in 1982 providing that farmers could get federally subsidized water to irrigate up to 960 acres of land.

The reforms also provided that water districts and their customers would have to pay the full cost of such water on any acreage above the 960-acre limit.

One of the stated goals of the original law was to help small farmers by limiting subsidized water to 160-acre parcels. But large corporate farms got around the limit by claiming that huge amounts of their acreage were leased.

The 1982 amendments were designed to close long-standing loopholes that for decades benefited large Western corporate farmers such as J. G. Boswell Co. and Southern Pacific Land Co. They got water subsidies even though they controlled land far in excess of the law’s original 160-acre limit.

In Wednesday’s opinion, Appeals Court Judge William Norris said the intent of Congress in revising the act was to promote small farming operations, equitable distribution of water and water conservation.

“To these ends, Congress increased the size of farms that could receive reclamation water to 960 acres (whether leased or owned) and raised the price of reclamation water to reflect more accurately its true cost to the government,” Norris continued.

“This is one of the major decisions on federal water policy,” said Hal Candee, a San Francisco lawyer who works for the Natural Resources Defense Council, an environmental advocacy group that urged the appeals court to uphold the law.

Candee said the decision will have a positive impact on San Francisco Bay by reducing diversion of water to farming operations that otherwise would go to the bay.

Robin Rivett of the Sacramento-based Pacific Legal Foundation, a conservative public interest law group which represented some of the water districts, said he was disappointed by the decision and expected that his clients will pursue an appeal to the U.S. Supreme Court. He said the decision will make farming more expensive in 17 Western states and lead to increased food prices.

“Farming arrangements will be drastically changed in the West,” said Stuart Somach, a Sacramento lawyer who represents the Central Valley Water Project Assn.

Wednesday’s decision upheld a 1988 ruling by U.S. District Judge Raul Ramirez in Sacramento.

The specific section of the 1982 law that was challenged by the big farm owners and water districts has come to be known as “the hammer clause.” It compels water districts to make a choice: They can amend existing contracts to conform to the 960-acre limitation or they can provide water to lands in excess of 160 acres provided that they pay the government’s full cost of delivering the water.

The court rejected the arguments of several water districts that the reforms interfered with their contractual right to receive subsidized water from federal reclamation projects for distribution to agricultural users in their districts. The court ruled that the reforms did not violate the due process rights of the water districts, nor did the reforms constitute an improper taking of property under the Constitution.

The value of subsidized water to large farms is immense. The Congressional Budget Office, in a recent study, estimated that the federal government will spend roughly $3.8 billion over the next five years on Bureau of Reclamation water projects but will recover only $275 million under current reclamation policies.

Subsidies to the large farms in the Central Valley, particularly in Fresno’s Westlands Water District, have long been controversial. Congress began subsidizing water in 1902 when it appropriated funds for two mammoth, federal-owned projects to build and operate canals, dams and reservoirs in the Central Valley to provide water for rapidly growing populations in the area.

Candee, of the Natural Resources Defense Council, said that despite Wednesday’s decision the battle over subsidized water is far from over. He asserted that large corporate farm interests had created other “subterfuges” to get around the 1982 reforms.

Specifically, Candee said, large farmers were using land trusts and management agreements in an attempt to illegally obtain subsidized water. The council sued the Bureau of Reclamation for failing to properly enforce the law by permitting large owners to get subsidized water through these devices.

Somach, the Sacramento lawyer, said the suit was baseless.

The suit is now pending in federal district court in Sacramento.