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Billionaire Farmers Scheming to Privatize California's Water Are Under Attack

Two devastating lawsuits have been filed this summer in an attempt to claw back hundreds of millions (and possibly billions) of dollars in ill-gotten profits.

Good news from the trenches of California's water war: The cabal of billionaire farmers and real estate developers that has been engineering a stealth privatization of the state's water supply is under attack. Two devastating lawsuits have been filed this summer in an attempt to claw back hundreds of millions (and possibly billions) of dollars in ill-gotten profits from a group of wealthy farmers and to bring one of the world's largest water banks back under public control. The fallout could be monumental, but whatever the outcome, these suits will no doubt expose plenty of juicy, dark details that could lead to even more trouble for California's water privateers. It's taxpayer payback time.

Filed by a coalition of farmers and environmental groups in the Sacramento Superior Court, the twin lawsuits cut to the heart of the ongoing backdoor privatization of California's water supply, which has allowed a handful of rich and powerful people to enrich themselves at taxpayers' expense, without anyone getting wise. The litigants' objectives are simple enough: to re-nationalize a vital asset and shut down an illegal water racket that has sucked rivers dry, fueled unsustainable real estate growth, and violated California's constitution. But to fully appreciate the importance of these lawsuits, you have to understand the proportions of the scam that was perpetrated. And to do that, you have to learn a little history about the privatization of the Kern Water Bank.

The Kern Water Bank is an underground reservoir located about 300 miles south of San Francisco, in the hottest, driest, southernmost edge of California's Central Valley. In the late 1980s, California's Department of Water Resources began developing the water bank, which can now hold enough water to hydrate the entire population of the city of Los Angeles for nearly two years, as a safeguard against prolonged drought. During wet years, it would serve as a repository for excess water coming in from Northern California, and would be pumped out in dry years to make up any shortfalls in the water supply. California spent nearly $100 million developing the underground reservoir and connecting it to the state's public canals and aqueducts. But in 1995, the state suddenly, and without any public debate, transferred it to a handful of corporate interests.

By signing over control of a massive water holding facility, and the billions of gallons of government-subsidized water it could store, California's water officials created a loophole that allowed them to privatize water without actually doing so explicitly. Once the water entered the Kern County Water Bank, it stopped being a public resource and became a private commodity that could be sold to the highest bidder. Simply put, the transfer turned a small number of wealthy corporate farmers and agribusinesses into private water merchants.

The Monterey Agreements, as the closed-door meetings that privatized the Kern bank came to be called, radically changed the longstanding water regulations that govern the State Water Project (SWP), a series of reservoirs and over 400 miles of aqueducts that deliver water up and down the entire state. By putting a handful of for-profit corporations at the controls of publicly owned water infrastructure, the state heralded in a shadowy, semi-privatized water policy seemingly geared toward one thing: making wealthy people even wealthier.

In November 2009, I wrote about how this water bank transfer arrangement brought in massive profits to the new owners of the Kern bank, whose money-making schemes frequently involved nothing more than buying water at subsidized rates from the state of California, then turning around and selling the water right back to the state at jacked-up rates:

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