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In dry California, water becomes pricey
In bone dry California, water is a hot commodity as sellers cash in on drought
By GARANCE BURKE
Associated Press
2014-07-02 03:22 AM

SAN FRANCISCO (AP) -- Throughout California's desperately dry Central Valley, those with water to spare are cashing in.

As a third parched summer forces farmers to fallow fields and lay off workers, two water districts and a pair of landowners in the heart of California's farmland are making millions of dollars by auctioning off their private caches.

Nearly 40 others also are seeking to sell their surplus water this year, according to state and federal records.

Economists say it's been decades since the water market has been this hot. Unlike the previous drought in 2009, the state has been hands-off, letting the market set the price even though severe shortages prompted a statewide drought emergency declaration this year.

The price spike comes after repeated calls from scientists that global warming will worsen droughts and increase the cost of maintaining California's strained water supply systems.

Some water economists have called for more regulations to keep aquifers from being depleted and ensure the market is not subject to manipulation such as that seen in the energy crisis of summer 2001, when the state was besieged by rolling blackouts.

"If you have a really scarce natural resource that the state's economy depends on, it would be nice to have it run efficiently and transparently," said Richard Howitt, professor emeritus at the University of California, Davis.

Private water sales are becoming more common in states that have been hit by drought, including Texas and Colorado.

In California, the sellers include those who hold claims on water that date back a century, private firms who are extracting groundwater and landowners who stored water when it was plentiful in underground caverns known as water banks.

All of the district's water went to farms; the city of Santa Barbara, which has its own water shortages, was outbid.

The prices are so high in some rural pockets that water auctions have become a spectacle.

One agricultural water district amid the almond orchards and derrick fields northwest of Bakersfield recently announced it would sell off extra water it acquired through a more than century-old right to use flows from the Kern River.

Local TV crews and journalists flocked to the district's office in February to watch as bids enclosed in about 50 sealed envelopes were unveiled before the cameras.

Competition for water in California is heightened by the state's geography: The north has the water resources but the biggest water consumers are to the south, including much of America's produce crops.

The amount shipped south through a network of pumps, pipes and aqueducts is limited by the drought and legal restrictions on pumping to save a threatened fish.

During the last drought, the state Department of Water Resources ran a drought water bank, which helped broker deals between those who were short of water and those who had plenty. But several environmental groups sued, alleging the state failed to comply with the California Environmental Quality Act in approving the sales, and won.

This year, the state is standing aside, saying buyers and sellers have not asked for the state's help. "We think that buyers and sellers can negotiate their own deals better than the state," said Nancy Quan, a supervising engineer with the department.

Quan's department, the U.S. Bureau of Reclamation and the State Water Resources Control Board have tracked at least 38 separate sales this year, but the agencies are not aware of all sales, nor do they keep track of the price of water sold, officials said.

That figure still doesn't include the many private water sales that do not require any use of government-run pipes or canals, including the three chronicled by the AP. It's not clear however how much of this water will be sold via auctions.

Some of those in the best position to sell water this year have been able to store their excess supplies in underground banks, a tool widely embraced in the West for making water supplies reliable and marketable. The area surrounding Bakersfield is home to some of America's largest water banks.

The drought is so severe that aggressive pumping of the banked supplies may cause some wells to run dry by year's end, said Eric Averett, general manager the Rosedale Rio Bravo District, located next to several of the state's largest underground caches.

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Follow Garance Burke at http://www.twitter.com/garanceburke

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