Water crisis squeezes California's economy

California farmers, who produce half the nation's fruits and vegetables, say they will idle fields and cut back on planting lettuce, cotton, rice, and more.

Silicon Valley computer-chip makers and other industrial/commercial users say they will rethink manufacturing processes that use water, or dramatically raise the price of products they sell.

Cities from Sacramento to San Diego say drought-era practices of rationed water – low-use toilets and washers, designated water days for lawns and cars – are back, including stiff fines for those who don't follow the rules.

After 35 years of hemming and hawing over how to fix the largest estuary in the Western Hemisphere – the sprawl of canals, levees, and flood plains that join the Golden State's two river systems – the state has been told by a federal judge that business-as-usual is now illegal.

A new ruling to stop pumping up to 37 percent of the water that flows through the delta to protect endangered fish species has sent shock waves of concern into the three main sectors that have long competed for it: cities, farms, environment.

The estuary provides water to 23 million Californians and about 5 million acres of farmland. Overused and under maintained for years, the delta and its water are at the heart of the state's economic vitality, its wildlife habitat, shipping, transportation, drinking water, and recreation.

"In the water business we are facing the biggest challenges here in over half a century … there is no way any knowledgeable person could contest that," says Tim Quinn, executive director of the Association of California Water Agencies, which represents more than 450 of the state's water agencies that provide water to 95 percent of the state's farms and cities. "The state has had some success in better managing this problem for the last decade, but we have hid ourselves from the biggest issue … and Mother Nature is telling us there is no more hiding."

The biggest issue, say Mr. Quinn and others, is the clash between the environment, the California economy, and the population, which is pouring in at more than 600,000 per year.

In recent years, the use of water in the delta has been crippled as a result of drought as well as age, with deteriorating levees that are vulnerable to flood, earthquake, and subsidence. It was environmental groups who most recently challenged water use. The ruling by US District Court Judge Oliver Wanger in Fresno Aug. 31 came after a suit against state and federal water officials by the Natural Resources Defense Council (NRDC) and three other environmental groups.

The agricultural community in the Central Valley appears to be the most worried about the consequences of the judge's action.

Stephen Patricio, chairman of the board of directors for the Western Growers Association and a 30-year farmer of 2,000 acres of cantaloupe near Firebaugh, Calif., says the impact of a 30 percent or more reduction of water to his region will have a domino effect on other jobs.

He expects his $6 million payroll, employing about 600 people during the harvest, will drop to about $1.5 million this year and force him to cut 400 jobs. Those losses will contribute to another 2,400 layoffs in related industries: truck drivers, tractor operators, seed operations, warehousing, repair, and fuel, he says.

The announcement is already having an effect on the loans farmers receive to operate their farms during 2008.

"Ninety percent of these farms need to be financed, and lenders have made it very clear that without a water plan, there is no money for 2008 crops," Mr. Patricio says.

Eighty percent of the water in California moves from above the delta to farms and communities in the south of it via pumps. The environmental groups said that current use of water pumping through the delta endangered several species of fish, including two kinds of smelt (long fin and delta), steel head, green sturgeon, winter and spring salmon, and split tail.

"This ruling was essentially an agreement that we need to protect habitat in the delta more than we have been, and what state and federal agencies have been doing is likely to drive the smelt to extinction," says Barry Nelson of the NRDC. "For all the serious concern about how the state is now going to meet its water needs, no one is saying that the court got it wrong. Everyone has known for a long time that this was coming."

Water agencies, farmers, and scientists agree, saying the ruling will force a much-needed opportunity to fine-tune the use of water to avoid waste.

"This alarm as been sounding about the delta for 30 years, and we've been pushing the snooze alarm," says Peter Gleick, president of the Pacific Institute, a nonprofit think tank in Oakland, Calif. "This may lead to some of the first discussions ever on how we manage growth in the state, how people live, how much we waste, and what crops we farm."

He notes that farming just three common crops – rice, cotton, and alfalfa – as well as irrigated pastures for cows use about half of the agricultural sector's allotment but earn a fraction of agricultural income. "We can continue to have a healthy economy with less water, but there has been no demand to do that yet," he says. "This ruling may drive us to do things we ought to be doing anyway."

Anticipating the reduced water spigot from the delta as of January 2008, water agencies north of it are telling their clients to cut back on water use. They are already spending money in new ad campaigns to remind users to cut back or face the possibility of mandatory laws with fines.

"We are spending millions to get the conservation message out that we need to conserve as if we are in a crunch," says Jeff Kightlinger, of the Metropolitan Water District of Southern California, which serves agencies and 18 million residents in six counties. He says the new rationing will affect 2 of every 3 Californians.

"Farmers across the state know this will be very tough and not pleasant," says Dave Kranz, spokesman for the California Farm Bureau Federation. "To the extent that you take farmland out of production for whatever reason, it increases another problem, which is providing enough American-grown food to serve the US population as well as demand from other countries."

Solutions are now in the works. A commission appointed by Gov. Arnold Schwarzenegger is planning to make recommendations next month, including ideas for dams and more storage capacity.

State Senate President pro tem Don Perata (D) is pushing two measures. One provides $200 million for immediate safeguards of freshwater flows from north to south. The second is a $5 billion bond that includes $2 billion to fix the water supply, improve flood protection, and boost fisheries in the delta, and $2 billion for water storage projects such as dams.