Farm Interests Seek to Buy San Joaquin Water Project

With help from key state Republicans in Congress, San Joaquin Valley agribusiness interests are quietly campaigning to buy the vast network of federal dams, reservoirs and irrigation canals that turned the Central Valley into the nation’s most productive farmland.

The ambitious plan to buy the Central Valley Project is getting a warm reception from members of Congress under pressure to balance the federal budget. The effort is championed by Rep. John T. Doolittle (R-Rocklin), chairman of the House subcommittee on water and power.

In California, however, where more than 2 million people rely on the federal water, concern is being expressed that the proposed deal would amount to an ill-conceived takeover by one powerful interest group. Critics, including environmental groups, urban water users and some farmers, hope to hold up the plan for a year and see it substantially revised or dropped altogether.

The purchase plan calls for a new public authority made up of current water and power customers of the Central Valley Project to buy the project for $826 million. That figure, widely criticized as being too low, represents what it would take in today’s dollars to finance the outstanding debt on the project, $2.1 billion due in 2030.

Democratic Sen. Dianne Feinstein said the scheme is moving too rapidly through a Congress controlled by Republicans bent on reform. “With no opportunity for public hearings on the financing question and no opportunity for the involved parties to weigh in on any number of other technical and environmental issues, it would be a tremendous mistake in judgment to push this thing through,” Feinstein said.

But she conceded that the sale might prove unstoppable in the Congress, where the sale of valuable federal assets has strong appeal.

“If it comes over to the Senate, I will put a hold on it. Whether it can be stopped, I don’t know.”

If it is not stopped, Feinstein said, the transfer of the nation’s largest water reclamation project would spark a new round of water wars and deal a mortal blow to the historic accord reached last year to protect fish and wildlife in the San Francisco Bay-Delta region.

The prospective buyers have formed an authority that they say would be able to run the water project far more economically and efficiently than the U.S. Bureau of Reclamation, which built and operates the project.

“We are doing this to protect our own interests,” said Jean Sagouspe, who heads the coalition of largely agricultural water districts that wants to buy the project.

“With the emphasis on reduced spending in Washington, we can’t be sure of a realistic budget when it comes to the federal government meeting our needs,” Sagouspe said. “Right now, there is an $85-million backlog in unfunded maintenance on CVP water facilities.”

Jason Peltier, manager of the Central Valley Project Water Assn. and another member of the coalition, said the coalition no longer trusts the bureau to operate in the best interests of many of its customers.

“The bureau’s role has been redefined, “ he said. “The emphasis is on water conservation, natural resource management and water recycling. That’s fine. But it doesn’t have a lot to do with engineering and hydrology and efficient water delivery.”

At the same time, Peltier took issue with critics who see the transfer of ownership as an attempt to lighten the burden of federal environmental laws.

“A transfer of ownership would involve no diminution of environmental responsibility,” he said. “It [the sale] in no way shields us from responsibilities to the delta, to the Endangered Species Act or anything else.”

However, representatives of the Natural Resources Defense Council and other environmental groups contend that local ownership of the federal water system, as laid out in the proposed legislation, would create broad exemptions from the National Environmental Protection Act, the Endangered Species Act and the California Environmental Quality Act.

In addition, environmentalists argue that the purchase plan assumes a significant increase in water sales--requiring diversions of water now used to sustain fish and wildlife.

Environmentalists are not alone in raising questions about the deal.

The staff of the East Bay Municipal Utilities District, which provides water to 1.2 million consumers, has come out against the transfer proposal.

“It looks like municipal and industrial water agencies like us would bear a disproportionate burden of the costs,” an East Bay district representative said Friday.

Officials of the Metropolitan Water District, which supplies water to 17 million Southern Californians, have also expressed reservations about the transfer. The district does not buy water from the Central Valley Project, but the two depend on the same Northern California watershed.

“We are potentially very impacted,” said Timothy Quinn, director of the MWD’s conservation division. If the new owners of the Central Valley project ended up setting aside less water for conservation purposes, said Quinn, “the responsibility gets picked up by the State Water Project contractors, of which we are the biggest.”

Of greatest concern, however, is the proposed purchase price, significantly lower than what the state was considering paying for the project two years ago.

In an analysis requested by Feinstein, the Bank of America concluded that the $826 million figure reflected “a valuation methodology that is not designed to establish the fair market value of the CVP.” The analysis went on to say that the figure “falls substantially below that which would be generated by other analytical methods.”

Authorized in 1937 by President Franklin D. Roosevelt, the Central Valley Project is described by the Bureau of Reclamation as the biggest irrigation system in the world. It provides water for 20,000 farms and about 2.5 million people spread across 500 miles of the state, from Redding to Bakersfield.

The project also represents the 11th-largest utility in the country in terms of electricity generated from its hydropower facilities.