State’s Water Bank Doing Fine--Except for Buyers : Drought: Some farmers say the price of making purchases is too steep. Demand has slacked off.

The state water bank, the innovative centerpiece of Gov. Pete Wilson’s plan for helping victims of California’s tenacious five-year drought, has fallen short of expectations.

While the government managed to surprise skeptics and pool 782,383 acre-feet in its emergency account, the price of that water--up to four times the normal rate in some areas--put it out of reach of some of those hit hardest by the drought.

Deterred by the cost, dozens of once-eager buyers from Santa Clara to Bakersfield have either canceled their orders for bank water or dramatically reduced the amount they plan to purchase. As a result, officials with the California Department of Water Resources now confront a dilemma that seemed unfathomable when the bank was created in bone-dry February: They have more water than people willing to buy it.

Bill Klepper is a compelling case in point. The San Joaquin Valley farmer lost his sole water supply when the State Water Project cut off shipments to its agricultural customers this year. When he heard about Wilson’s water bank, Klepper viewed it as a sure-fire way to keep his 2,300 acres of pistachio trees alive.

It did not work out that way.

“The price is just way too high,” said Klepper, who hopes the young trees he is growing near Lost Hills can “take some stress” and survive the summer on the measly amount of water he was able to scrounge from local sources. “For the cities, it’s no big deal. But for us? Forget it.”

There have been other problems as well. Environmentalists complain that the bank lacks a reliable mechanism for ensuring that some water is dedicated to fish and wildlife needs. When he established the drought bank, Wilson pledged to allocate some of the emergency supply to declining fisheries in the Sacramento-San Joaquin Delta. There is water available for fish in the bank; the snag is over who will pay for it.

“I’m not at all confident that the (Wilson) Administration will follow through on that pledge, and I’m not sure the governor had the power to make the pledge in the first place,” said Thomas Graff, senior attorney with the Environmental Defense Fund.

“The trouble with the way the bank was set up is that there were no guarantees (for fish and wildlife). . . . That’s why the state is facing this problem now.”

Grumbling can also be heard among some Northern California farmers who agreed to fallow their land this year and sell their water to the bank. Initially, the farmers believed that their actions were vital to help communities scrape through a desperate water crisis. Instead, the bank’s biggest beneficiary--the Metropolitan Water District--may buy enough water to bring Southern California’s supply close to normal levels, possibly removing the need for strict rationing.

“A great number of people up here felt pressured into participating in the water bank, but many of them did so because they believed they were helping cities get through an emergency situation,” said Paul Minasian, an Oroville lawyer who represents numerous agricultural water districts north of Sacramento.

“They are now very much aware that life in Southern California is going along pretty much as normal this year while one out of two acres in Northern California is out of production. . . . That does not make for happy feelings.”

Despite such misgivings, even critics acknowledge that the state did a commendable job assembling the bank quickly during a time of crisis. Agencies benefiting from the bank--such as the MWD--have still higher praise.

“When the bank got put together we all told the department ‘go out there and get water’ and by God they did,” said Tim Quinn, who represented the MWD in negotiations for state bank water. “This is the kind of dilemma one ought to want to have in the middle of a drought--what to do with water.”

Richard Howitt, an agricultural economist at UC Davis, agreed and argued, “The fact that they didn’t sell it all tells us that the supply and demand of water came into balance in California this year.”

Advocates of voluntary water transfers say the state bank also set an important precedent. Although not yet perfected, the bank proved that moving water between a willing buyer and seller can work.

“I think there were a lot of lessons learned, both positive and negative ones,” said Graff, who has pushed the concept of water transfers in California for a decade. “We’re encouraged because now Aladdin’s lamp has been lit, and I don’t think you can jam the genie back in the bottle.”

When Wilson unveiled plans for the bank, it was hailed by many as a landmark effort to coordinate the redistribution of water from areas with plentiful supplies to areas in need. Although some minor water transfers occurred in the past, nothing on the scale of Wilson’s centralized drought bank had been attempted in California.

Under the program, the state urged Northern California farmers with ample river water to sell some of their supply to the bank, which would allocate the water to thirsty communities, fish and wildlife and depleted state reservoirs. The Department of Water Resources set out to pool up to 1 million acre-feet for these purposes.

At first, potential sellers courted by the state were wary. The price offered by the bank--$125 per acre-foot--was considered too low, and many growers feared that their future water rights could be compromised if they chose to sell.

Before long, resistance melted and water began flowing into the bank. The emergency supply is slightly more than the amount used by Los Angeles in a normal year, and is valued at close to $105 million, according to state calculations.

The Department of Water Resources made the purchases based on requests filed by water agencies from Los Angeles to the Bay Area. Those requests--and the severity of the drought when the bank was formed in February--persuaded experts that the demand for bank water would greatly exceed the supply.

“When we went into this thing, everyone was fearing that we wouldn’t have nearly enough bank water to fulfill demand,” said Tom Clark, general manager of the Kern County Water Agency in Bakersfield. “Well, the opposite happened.”

One reason was the heavy March rains, which eased the drought’s pinch in many areas and reduced the desperation of many anxious cities and farmers. The price of bank water also drove many buyers away. Although the state purchased the water at $125 per acre-foot, the price for buyers rose because of administrative fees and costs associated with shipping the water through the delta.

The Kern County Water Agency was among those scared off by the price. Initially, farmers served by the agency planned to buy 165,000 acre-feet from the bank. Gradually, growers dropped out, and the agency has slashed its request to 53,000 acre-feet--one-third of its original need.

Urban areas also found the price a bit too lofty. The Santa Clara Valley Water District initially figured on buying 50,000 acre-feet from the state bank; now, it wants only 20,000 acre-feet.

“We were really driven by the economics of the situation,” said Robert R. Smith, assistant general manager of the district. “This year, we just could not afford to purchase any more than we did.”

Surplus water--perhaps as much as 405,000 acre-feet--might not seem like bad news during a drought, but controversy is swirling around what to do with the leftover bank water--and who will foot the bill.

Environmentalists--citing Wilson’s initial pledge--want some of it used to aid fish in the delta. Several species in the delta, a web of rivers southwest of Sacramento, are suffering because of unprecedented exports of water by the massive State Water Project and others during the drought.

With the state facing a potential $14.3-billion budget deficit, there are no substantial government funds to buy water for fish. Consequently, State Water Project contractors--those 30 agencies that purchase water through the state system--fear that they will be saddled with the costs.

While the water agencies would be willing to buy the excess bank water if it is held in reservoirs for their use next year, they object to paying for water released into the delta.

“What we’re concerned about is that they will use the water for the purpose of benefiting fish and wildlife and then stick the water contractors with the cost,” said Quinn of the MWD, the largest of the state project contractors.

Douglas Wheeler, Wilson’s secretary of resources, acknowledges, “In our haste to assemble the water bank, we did not include a mechanism to deal automatically with the needs of fish and wildlife. Any future bank should absolutely do that.”

As for this year, Wheeler noted that a bill before the Legislature would provide $5 million to the state Department of Fish and Game to purchase bank water for the delta fish. Although $5 million would buy at most 40,000 acre-feet of water--far less than the amount environmentalists say is essential to help the delta recover--Wheeler believes that that supply would meet the delta’s most pressing needs.

While Klepper and many of his neighbors lament the bank’s failure to meet their expectations, those farmers who were able to afford the emergency water call it a savior.

Doug Anderson, who grows pistachios on 140 acres near Lost Hills, will shell out about $260 per acre-foot on bank water this year--about quadruple what he normally spends. The high cost hurts, but Anderson says it is worth it.

“We bought enough just to get by, no more than that,” Anderson said. “I think I can handle it this year, but this can’t go on. We can’t dodge a bullet every year.”