Wednesday, December 15, 2004


The Environmental Working Group has released its latest study of California's water subsidies for agribusiness, and found that they're going to a handful of the biggest farms. In other words, agribusiness gets water at a rate far below its market value, and California taxpayers pick up the tab.

This is an arrangement that's been in place for decades. The subsidies were originally part of a New Deal program called the Central Valley Project, which was intended to help small farmers survive the Depression through subsistence farming. There was a limit to the acreage that could be irrigated; if you had more than that, you were ineligible for subsidies unless you sold your excess land.

There were legal challenges, exemptions, and loopholes, and enforcement was inconsistent at best. In the program's early years, Southern Pacific was the largest recipient of subsidized water. By the forties, the biggest corporations in the state were, just as today, the biggest recipients of water subsidies, at a huge net loss to the taxpayers. Currently, CVP irrigators pay $17 per acre-foot of water; by contrast, San Francisco pays about $650 per acre-foot, and Los Angeles pays about $925. (Since the areas receiving the subsidies are mainly in Bush country, this is arguably a county-level analogue to the relationship between tax-donating Blue States and tax-receiving Red States; in this case, "liberals" pay through the nose for water and conserve it, while "conservatives" get water subsidies and waste it.)

Here's how the EWG describes the CVP:

The CVP cost the federal government $3.6 billion to construct. Part of the original deal was that farmers would pay back over $1 billion of this cost within 50 years of project completion. But in 2002 — more than 60 years since the water began flowing — irrigators had only paid back 11 percent of the tab. The reason? CVP recipients had signed 40-year contracts that granted farmers water at rates far below what was necessary to pay back the construction costs.

In fact, some of the water rates stipulated in these 40-year contracts were so low that they don't even cover the costs to the government of delivering the water. In 2002, for example, the contract rate for 17 CVP water districts, each of which paid for almost 300,000 acre-feet of water, was just $2 per acre-foot. Yet the cost for delivering this water to these districts was more than $10 per acre-foot. As a result, by 2002, 19 districts had repaid none of their share of the costs. Two districts did better than that: They had repaid $2 and $1.
Why does agribusiness continue to get these handouts? Basically, because they're used to having them, and they like them; they see them as entitlements. The subsidies don't really help with production; water comprises a small percentage of production costs for most crops. What the subsidies do cause is waste, partially by encouraging a lackadaisical attitude towards conservation, and partially by encouraging the planting of water-intensive crops like rice, which really don't belong in a desert state like California.

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