Decision Forces New Water Era Upon California

The court decision blocking construction of homes at Newhall Ranch unless it can demonstrate assured sources of water is “the face of the future” for Southern California, experts say.

The developer must have a 50-year source of water locked in before it can commence work on the first of 22,000 homes. That sheer demand is likely to push up open market water prices.

Yet the fact that Newhall Ranch must have adequate water could spur the development of a new water industry in the state.

Many factors are pushing Southern California into a time of restricted water use. First, the region must cut consumption by roughly 5% over the next 15 years, despite a projected population increase of 6 million in that time. Arizona and Nevada, also growing rapidly, are going to take back their rightful share of Colorado River water. That water has been available to California in recent decades.

Droughts will come. New forecasts based on atmospheric studies of the National Aeronautic and Space Administration say California could be in for a longer than usual drought. In any event, after six years of plentiful rain and mountain snow, the area is due for a dry cycle.

Water costs could go up to pay for removal of arsenic, which occurs naturally in high amounts in ground water in Northern and Central California.

None of that means that gloom and deprivation are inevitable. Everybody should be aware that water is not truly in short supply in California. And Southern California uses no more water now than in 1975, even though the population has grown over the 25 years.

So we should look to opportunity as well as pitfalls in the years ahead. New ways will be found to transfer water from agriculture to use by cities--without depriving agriculture.

And private companies will play a much greater role in water supply. If you understand what is happening right now to assure water in your household in the future, you’ll understand the issues and disputes in the emerging business of water.

The Metropolitan Water District, the cooperative of 27 water districts that is a wholesale supplier to the 17 million people of this region, is preparing for drought by seeking to buy 100,000 acre feet of water to put in reserve. An acre foot is 326,000 gallons, or enough water to supply eight people for one year.

MWD received 16 bids to sell water from agricultural interests and private companies. Some 80% of California’s water goes to agriculture, under a system of federal and state subsidies. Whatever farmers can conserve without limiting their crops, or by recycling their irrigation water, can be sold.

Selling looks economically attractive. Subsidized agricultural water costs farmers about $14 an acre foot. But cities such as Los Angeles pay $460 per acre foot for water. The difference reflects lack of subsidy and cost of the infrastructure to move and store water and to distribute it to homes and industry.

Now with growing population and urban needs, as reflected in Newhall Ranch’s need for water, more investment will be put in drip irrigation systems and in recycling of irrigation water to conserve supplies for urban use.

That’s the prospect that has attracted business. Azurix Inc. a subsidiary of Enron, the Houston energy and trading company, has formed a partnership with J.G. Boswell Co., of Pasadena, owner of cotton acreage and water rights in the San Joaquin Valley. Azurix is offering water to MWD.

Cadiz Inc., based in Santa Monica, has expertise in drip irrigation and owns water rights in the Central Valley and in the Eastern Mojave water table. It has formed ventures with MWD to store water underground in the Mojave and is offering to supply its reserve needs.

But success in the water business will take time because an organized market must develop. Western Water Supply, based in Point Richmond in Northern California, was formed in 1990 to broker farmers’ water supplies. But it has been frustrated because water authorities such as MWD have demanded that it pay a share of the true cost of the public aqueducts and other infrastructure that transports and reserves the state’s water.

Incredibly, MWD’s demand has been disputed in a lawsuit, which MWD won. But the issue is being debated in the Legislature in Sacramento.

We should understand that it is important that the MWD position prevail for the long-term development of water markets and water supplies in California. Water is not like other markets. First there is a public interest--of taxpayers and water rate payers--in the infrastructure built to deliver the water. Secondly, a resource that comes to California through federal and state subsidy is now to be transferred to non-subsidized use. Some compensation for the public’s expense must be developed.

MWD’s purchases of reserve water will work out rules for transferring water and let private companies develop techniques for an orderly market. Only such a market can ensure Newhall Ranch’s ability to develop--and other industries the ability to expand in California.

And with such a market, California can lead the nation, which is beginning to have water problems elsewhere.

“Washington, D.C., is involved in a dispute between Maryland and Virginia over who has the rights to use Potomac River water,” reports Debra Coy, water analyst for Charles Schwab & Co.

Georgia and Florida, too, are now disputing rights to water--a consequence of population growth and development in once sparsely populated rural Georgia.

“Florida is contemplating desalination now,” says Richard Heckmann, president of U.S. Filter, the Palm Desert-based division of Vivendi. Desalination of ocean water is the ultimate solution for water-short areas. Yet for California, desalination of Pacific Ocean water is still 20 to 30 years away, says professor Stephen Erie of UC San Diego, an expert on water.

Why is California better off than Florida? Because it possesses abundant water supplies. All it has to do is allocate them differently. And that’s the process, signaled by Newhall Ranch, that is beginning right now.

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James Flanigan can be reached at jim.flanigan@latimes.com.