Like the 1930’s state water plan, California is stymied in its plan to re-engineer the Sacramento Delta for a massive water project.  The plan includes building a water superhighway interchange that would allow fresh water to run into the Delta to restore fish habitat, while water also would be conveyed underneath the Delta to Central Valley farms and Southern California cities.

But how will the plan be able to surmount the state’s “project killer” environmental law: the California Environmental Quality Act?  Is the only solution to have the project’s Environmental Impact Report conducted under federal rather than state law?  That is the path California’s High-Speed Rail Project and recent fracking regulations have been taking. And it may signal the path the Delta Tunnels and Bay Delta Conservation Plan will have to take.

History is not exactly repeating itself in the Delta, but as Mark Twain once remarked, history sometimes “rhymes.”  What is happening today sounds much like what happened in the 1930’s in California with the Central Valley Water Project.

Central Valley Project as forerunner

California first came up with a Comprehensive Water Plan in 1921, but the Legislature didn’t authorize the Central Valley Project until 1933.  However, California couldn’t finance the bonds for the project in the midst of the Great Depression of the 1930s.  The federal government stepped in to take over the project in 1934.  Construction didn’t begin until about 1939, 18 years after the state water plan was devised.  Today, California has been trying to implement its new water plan for 31 years since the proposed Peripheral Canal Project was defeated at the ballot box in 1982.

The federal Central Valley Project is not the same as the State Water Project, which was built beginning in the 1960s with state bonds.  To give an idea of the magnitude of the CVP, it delivers about 7 million acre-feet of water to farm, cities and wildlife.  About 6 million acre-feet of water go to farms.  An acre-foot of water is enough for two urban households for a year or one third of an acre of farmland for a year.

By comparison, the State Water Project supplies about 1 million acre-feet of water to farmers and about 3 million acre-feet of water to Northern and Southern California cities during wet years, when not blocked by environmental lawsuits.

Not only did federal takeover of the CVP in the 1930s solve its financing problem, it solved the political conflict between farmers and cities.  The CVP became a water superhighway that mainly served Central Valley farms. By contrast, the State Water Project was a high-speed water conduit mainly serving Northern and Southern cities.

Today, the solution to the state’s water issues is to build a water interchange in the Delta with a separate conveyance system for the environment and another for farmers and cities.  Mixing farm and city water with environmental water is like mixing semi-trailer trucks, bike lanes and endangered turtle crossings on the same freeway. It leads to endless conflicts and court ordered water shutdowns.  It is better to put water into separate ditches for each.

In California, water is a socialized system, not a market. But the second-best thing to a market might be separate water systems for cities, farmers and the environment, wherever possible. The proposed Bay Delta Conservation Plan accomplishes some of this.  Good fences create good neighbors and separate ditches minimize water wars. The Delta Tunnels concept of a super water interchange partly puts water into separate ditches and pipes.

Is Twin Tunnels Project on same track as High-Speed Rail?

The harbinger of what may happen with the proposed Delta Twin Tunnels Project is California’s High-Speed Rail Project.  Recently, both Democrats and Republicans have colluded to switch the environmental clearance of HSR from California’s tough green law to the more lenient federal law.

In February, Rep. Jeff Denham, R-Calif., asked the U.S. Surface Transportation Board to determine if it had paramount jurisdiction over the environmental clearance for the HSR Project.  He is chairman of the Subcommittee on Railroads, Pipelines and Hazardous Materials. The STB, chaired by Obama-appointee Daniel R. Elliott III, ruled it had superior jurisdiction over the environmental clearance process.

This means California’s HSR project will be subject to more lenient federal environmental law.  Both Democratic Gov. Jerry Brown and State Attorney General Kamela Harris had been angling for some time to find a way to run around CEQA for HSR.  This now poses the question of whether the only way to get California’s Twin Tunnels and Delta Restoration Plan approved is to find a similar way around CEQA.

California recently passed a pro-fracking bill, SB4, which establishes a threshold criterion for environment review of oil and natural gas fracking projects. If a fracking project stays within the threshold, then CEQA is not triggered.

California’s water projects may “rhyme” but have no reason. Like California’s HSR Project and new pro-fracking bill, a detour may have to be created around California’s “project killer” environmental law for its Twin Tunnels and Water Bond.  Like the 1930s, federal involvement may be the only way to get a water project done in California.

By Wayne Lusvardi

For some time environmentalists and have been telling fish stories that Central Valley farmers are dodging timely repayment of the costs to build the massive Central Valley Project.  But it is the fish, not the farmers, that are not paying their fair share of the costs of the massive Central Valley Water Project.

The CVP was built in the 1930’s at a cost of $1.3 billion. The CVP is not the same as the California State Water Project, which was built five decades ago through state bonds.

To give an idea of the magnitude of the CVP, it delivers about 6 million acre-feet of irrigation water to about 3 million acres of farmland in the central San Joaquin Valley.  By comparison, the State Water Project supplies only about 1 million acre-feet of water to farmers.

The CVP also delivers water to cities and for wildlife refuges.

CVP was Depression Era Project

In the 1930s Great Depression Era, the federal government built the Central Valley Project when California was broke.  The federal government had to take over the state water plan to stimulate the agricultural economy and bail out California.  The federal government built the separate CVP water system mostly to supply water to farmers, and to reduce disputes between farms and cities.

But with the rise of environmentalism in the 1990s, farm water began to be diverted to “wildlife refuges.” The U.S. Bureau of Reclamation reports that there were no deficiencies in water deliveries for farms until the 1990s.  The CVP carries water to the Sacramento Delta, which is pending a massive re-engineering called the Bay Delta Conservation Plan. 

The enacting Reclamation Law for the CVP required farmers to repay only the principal amount of the bonds, not interest, as long as they met the 960-acre limitation (1.2 square miles). Large corporations don’t get most of the water subsidies from the CVP. Individuals or families own 80 percent of California’s 64,000 farms.

The only water subsidy small farmers receive is the foregone interest on the bonds. Large corporate farms must pay their share of the full cost of the CVP, including interest, to receive their CVP water allocations.

CVP repayment audit

Congress ordered an audit of repayment for the costs of the CVP by farmers, which was completed in March 2013.  The audit, titled Central Valley Project California: Repayment Status and Payoff, indicated the bonds have 18 years remaining until repayment in 2030. But repayments are not keeping up with the repayment schedule due to the variability of water deliveries needed to generate agricultural product sales to meet contractual payments.

In 2011, CVP water diverted for wildlife refuges only amounted to 6.5 percent of total CVP water deliveries (388,488 out of 5,886,610 acre-feet of water). But it is apparently large water users that are being disproportionately hit with reductions in water deliveries, resulting in repayments lagging behind schedule.  As the audit report of the Office of the U.S. Inspector General of the U.S. Department of Interior states:

“To identify why repayment progress was not satisfactory, we reviewed water rate calculations and payment information for four irrigation contractors. We determined that for the 3-year period from 2008 to 2010, actual water delivered to these contractors was only 41 percent of estimated water deliveries used to calculate their contract water rate. The variance in water deliveries resulted in a $45 million shortfall in the contractors’ repayment of capital costs that USBR must recover in future years through rate increases. In the case of one contractor, we estimated that by 2030, their CVP water rate could more than double if current trends continue” (last paragraph on page 6). 

Contrary to the notion that large corporate farms are receiving larger farm water subsidies, their CVP payments face the prospect of doubling.

Farmers can fish, but fish can’t farm

In 2009, U.S. Senators Dianne Feinstein and Barbara Boxer, both California Democrats, snuck their $1 billion San Joaquin River Restoration Project bill through Congress as a rider to the larger Omnibus Public Lands Bill (H.R. 146).  However, this rider bill only funded initial research costs and not implementation.  To fund implementation, the Feinstein-Boxer bill proposed to partly fund the costs of the river restoration project by accelerating the repayment of CVP project costs on the backs of Friant water users.

The Friant Water Authority depends on CVP water from the Friant Dam near Fresno and Madera Counties.

However, since coming back into the majority in 2011, Republicans in the House of Representatives have blocked Congressional funding of the San Joaquin River Restoration Project.

The bottom line to the fish story about farmers reneging on timely repayment of CVP costs is that fish don’t have any money to make payments, but farmers do.  If Congress wants farmers to pay more to repay CVP costs on schedule, all it has to do is to quit reducing water deliveries to Central Valley farmers. Then farmers will pay for river restoration projects jobs programs.

Congress created this problem and also has the solutions in its own hands. To solve the problem of slow CVP payments, politicians and environmentalists first need to stop making up fish stories about how farmers are reneging on their CVP payments.

By Wayne Lusvardi

Almost out of nowhere, the Obama Administration has opened up discussions for possibly privatizing the model asset of the New Deal, the Tennessee Valley Authority, to bring in revenues to the federal government and reduce the long-term national debt.  Part of President Obama’s strategy is to divest and decommission 59 coal-fired power plants in Tennessee, Alabama and Kentucky and replace them with green power.

The TVA is a massive rural redevelopment project of 46 dams and hydropower stations, 59 coal fired power plant units, 14 natural gas fired power plants, five nuclear power plants and navigation channels sprawling over Tennessee, Alabama, Mississippi, Georgia, North Carolina and Kentucky. The TVA reports an $11.6 billion annual budget for 2013 but a projected net loss of $183 million.

Would Obama privatize the Central Valley Project too? 

The question for California quickly becomes: Could Obama also propose to privatize the Central Valley Project that delivers water to farmers in California’s San Joaquin Valley?

The federal Central Valley Project is not the same as the State Water Project, which was built five decades ago through state bonds.

To give an idea of the magnitude of the CVP, it delivers about 6 million acre-feet of irrigation water to about 3 million acres of farmland in the central San Joaquin Valley.  By comparison, the State Water Project supplies only about 1 million acre-feet of water to farmers.

In the 1930s Great Depression era, the federal government built the Central Valley Project when California was broke.  The federal government had to take over the state water plan to stimulate the agricultural economy and bail out California.  Also, by building a separate water system for farmers that was not under state control, the long-term water disputes between farms and cities were lessened.  The CVP carries water to the Sacramento Delta, which is pending a major re-engineering called the Bay Delta Conservation Plan. 

Unlike the TVA, the CVP does not have coal-fired power plants that the Obama Administration wants decommissioned and replaced with green power purportedly to reduce air pollution.  Tennessee air quality is graded as spotty patches of “C,” “D,” and “F.”  California air quality is graded as “F” for most of the Central Valley.

Central Valley Project has only 1/15th the Budget of the TVA

The CVP is not as large as the TVA.  It has 20 dams and reservoirs, 11 hydropower plants, and 500 miles of major canals.  It has a $174.1 million annual budget.   The entire budget for the Central Valley Project is less than the operating deficit for the TVA.

The CVP’s congressional budget appropriation is offset by $39.6 million in fees collected from farmers to fund the San Joaquin River Restoration Project ($1 billion unfunded by Congress, but temporarily funded with $9 million in discretionary funds) and the Indian Water Rights Settlement Account ($26.7 million).

Recovery from farmers of the original capital outlay to build the CVP is projected to fall short by $330 to $390 million by the payoff date of 2031.  Auditors have warned that “the repayment shortfalls could become significant enough to require political intervention.”

According to the Congressional Budget Office, the proposed San Joaquin Valley Water Reliability Act, H.R. 1837, would have accelerated farmers’ repayments by $221 million.  Republican Reps. David Nunes (R-Tulare), Tom McClintock (R-Elk Grove), and Jeff Denham (R-Merced) authored and supported H.R. 1837.   H.R. 1837 is sitting in the U.S. Senate without any action taken by California’s two Democratic senators, Dianne Feinstein and Barbara Boxer.  Feinstein and Boxer oppose H.R. 1837 because it would de-fund the San Joaquin River Restoration Act, a $1 billion jobs program to re-wet the dry portions of the San Joaquin River to restore salmon runs.

H.R. 1837 is best chance at reforming Central Valley Project

It would be much more difficult to privatize wholesale water storage and delivery systems compared to retail water companies. The California Public Utilities Commission regulates private retail water companies, but not wholesale government water agencies. In 2001, the Metropolitan Water District of Southern California pulled back from buying outsourced water from a private supplier, fearing complications to its water rate structure from the deregulation of its monopoly.

It is unlikely the CVP would be privatized for many reasons.  One big reason is that it does not have so-called “dirty” coal-fired power plants that are a target for elimination by the Obama Administration.

H.R. 1837 would have eliminated the Central Valley Project from being a jobs program and vehicle for politicized reparations.  By contrast, Feinstein’s “Bandit River” restoration project would likely:

* Take away more private sector jobs than gained.
* Require more expenditures to enlarge levees.
* Take away water from farmers without any plan to “restore” it with new supplies.
* Result in high salt content in water and seepage to farmlands.

The Obama-Feinstein-Boxer plan for managing the Central Valley Project has been to regulate first, think later.  Stated differently: the policy of the federal government has been to create jobs programs first and only later deal with the consequences to farmers and farmlands.  This is what I explained in my earlier article, “Salmon eating farmers along the the San Joaquin River.”

Alas, the Central Valley Project is not going to be privatized anytime soon. But it could be reformed so that restoring fish to the river doesn’t end up destroying farm jobs.