Ag Today October 2, 2017

In 1939, the feds made a Central Valley water deal. It may doom the Delta tunnels.

By Dale Kasler and Ryan Sabalow, Sacramento Bee

Dam builders from President Franklin Roosevelt’s administration wanted to bring water to the parched eastern half of the San Joaquin Valley, but first they had to deal with a cluster of landowners whose ancestors had been there since the 1800s.

The deal they cut in 1939 paved the way for much of the Central Valley Project, an engineering marvel that helped turn the Valley into one of the world’s most productive farming regions.

It has also formed the basis, nearly 80 years later, of a major funding impasse that threatens to unravel California WaterFix – Gov. Jerry Brown’s plan to build a pair of tunnels beneath the Sacramento-San Joaquin Delta to modernize the aging water delivery system begun during Roosevelt’s New Deal.

The issue came to a head when the board of Westlands Water District, the largest of all the water agencies served by the Central Valley Project, voted Sept. 19 against paying for its share of the expected $17.1 billion cost of the tunnels.

The vote by Westlands, which represents hundreds of farmers in Fresno and Kings counties, left a multibillion-dollar hole in the construction budget for WaterFix, which is designed to improve water deliveries to farms and cities south of the Delta. WaterFix advocates have since floated the idea of a scaled-back, less-expensive version of the tunnels.

Westlands’ decision was rooted in a cost-allocation formula imposed by the U.S. Bureau of Reclamation – a formula that has its origins in the 1939 deal and serves as a reminder of the convoluted nature of water distribution in California.

“This just comes with the territory to some degree,” said Jay Lund, director of UC Davis’ Center for Watershed Sciences.

In a nutshell, Reclamation’s formula effectively exempts a large group of water users who get their supplies from Friant Dam, the facility made possible by the Roosevelt-era agreement, from having to help pay for the Delta tunnels. This group includes the city of Fresno and a string of farm-irrigation districts stretching 150 miles south.

For Westlands and many other Central Valley Project customers, Reclamation’s system inflates their costs for participating in WaterFix by several billion dollars. Westlands said farmers’ water costs could quadruple, to more than $600 an acre-foot, if the district jumped into the project.

“I don’t know that we can afford those numbers,” said Westlands director Todd Neves, a tomato and almond grower, as he prepared to cast his “no” vote. So far, not a single CVP contractor has committed to paying for WaterFix.

Reclamation operates its Central Valley Project alongside the State Water Project; both pump water out of the Delta to a variety of cities and farm districts in the San Joaquin Valley, Bay Area and Southern California. Brown’s administration says the tunnels would improve the Delta’s crumbling ecosystem while enabling the pumps to operate more reliably, increasing water deliveries to the two projects’ customers.

The idea has been that south-of-Delta water districts would pay for the tunnels, in amounts that correspond to the volume of water they get. Brown’s Department of Water Resources has said all State Water Project customers south of the Delta must pay, or find another state contractor to take their share.

For federal contractors, the Bureau of Reclamation has taken a different approach – to Westlands’ frustration. Although Reclamation has contributed millions to the planning process, the bureau says that because WaterFix hasn’t been authorized by Congress, it lacks legal standing to compel all of its south-of-Delta contractors to contribute. Participation is voluntary.

What’s more, Reclamation signaled to a major group of customers – the districts getting water out of Friant Dam – that their supplies are probably secure enough that they don’t need the tunnels.

With that assurance in mind, the Friant districts have said they’re probably willing to contribute only a small sum to WaterFix’s budget but not nearly a “full” share. Friant customers get at least 800,000 acre-feet of water a year from the Central Valley Project, enough to nearly fill Folsom Lake to capacity, making them one of the largest customers of the Central Valley Project.

The funding dilemma can be traced directly to the 1939 agreement.

Two years after Congress authorized construction of the Central Valley Project, officials at Reclamation faced a problem. They wanted to build a dam on the San Joaquin River at Friant, just outside of Fresno, to deliver water to the east side of the valley. But they couldn’t build Friant without first making peace with a group of downstream landowners descended from legendary California cattleman and land baron Henry Miller. These landowners had been farming along the San Joaquin since the 1800s, had some of the most ironclad water rights in the state and weren’t eager to let Reclamation dam their river.

“There’s a property right in water. Those users have to be negotiated with,” said Jennifer Harder, a water-law expert at the University of the Pacific’s McGeorge School of Law.

A deal was signed July 27, 1939. Under the “Contract for the Exchange of Waters,” the landowners allowed the government to dam the river at Friant, creating the eastern branch of the Central Valley Project.

In return, the landowners, known as Exchange Contractors, were guaranteed 840,000 acre-feet of water a year, pumped out of the Delta from the Sacramento Valley. To this day, their water costs are shouldered by the Friant water districts.

The Exchange Contractors make no apologies for their special stature, noting that similar arrangements were made with senior water-rights holders in the Sacramento Valley to permit the construction of Shasta and Oroville dams.

“It’s just the reality of the way the system was set up,” said Cannon Michael, an Exchange Contractor in the Los Banos area and the great-great-great grandson of Henry Miller. “It was set up a long time ago and it’s the way California water law came into play….People accept the water rights system for what it is.”

The water rights system, though, has left the tunnels project with one less major group of customers to pay for it.

Not the Exchange Contractors – no one is arguing that these farmers, who’ve never had to pay for their Central Valley Project water, should now have to pitch in for the tunnels.

The Friant customers are another story.

For one thing, they’ve always paid their share of costs for the Central Valley Project, including the cost of water that’s shipped from the Delta to the Exchange Contractors.

For another, even though they don’t get water from the Delta – it all comes from the San Joaquin River, by way of Friant Dam – the Friant group depends on the Delta to operate smoothly. Why? Because if the Exchange Contractors don’t get their full allotment from the Delta, they have the right to pull water away from the Friant districts. It’s happened twice, during the drought years of 2014 and 2015.

Tom Birmingham, general manager at Westlands, said Friant’s unusual status in the Central Valley Project should compel the Friant districts to pay for a full share of the Delta tunnels.

“That’s consistent with Reclamation’s historic practice,” Birmingham said.

Friant water users see it differently. True, their supplies get jeopardized if the Exchange Contractors get shorted. But they’ve been told by Reclamation that the tunnels probably aren’t needed to make sure the Exchange Contractors get all they’ve been promised. So they’re looking at making a modest investment in the tunnels, as a kind of insurance policy to ensure that the Delta pumps can operate more reliably.

“We have an interest in making sure that things get better in the Delta,” said Jason Phillips, chief executive of the Friant Water Authority. Friant’s board of directors issued a statement Thursday saying “we are generally supportive” of WaterFix.

But Phillips said Friant’s member agencies aren’t willing to pay at anywhere near the level Westlands is suggesting.

“We’re probably in the single digits of the percentage of the project,” Phillips said.

For now, Friant officials aren’t in a rush to commit to WaterFix. In its statement of support for the tunnels, the Friant board said it’s premature to say how much it will invest.

“Until we have certain key questions answered and are able to obtain a fuller grasp of how are member agencies could potential benefit, (Friant) is unable to make any additional determinations at this time,” the board said.