On Wednesday, State Senator Melissa Hurtado, D-Sanger joined her colleague, Democratic State Senator Dave Cortese in sending a letter to United States Attorney General Merrick Garland requesting an investigation into possible drought profiteering and water rights abuses in the Western states.
The Senators said they're concerned about the increasing amount of water rights being purchased by hedge funds, their potential anti-competitive practices and the devastating impact that could have on water security.
“Not only do hedge funds and other monopolistic entities trade water as an interstate commodity, they do so at the expense of state and federal policy,” the letter states. “But beyond drought alone, these monopolies no longer even pretend to honor beneficial use doctrines which have historically tied water use to riparian and overlying property owners here in the West.
“The domino effect of this activity consolidates economic power and water itself in the hands of the few and will likely require the 'big stick' of antitrust actions to break up, lest average Americans are brought to their knees for lack of the most basic resource, water. Nowhere is there more urgent demand for the application of the public trust doctrine regarding water rights than these practices which literally steal our most life dependent resource from ourselves and future generations in exchange for a profit.”
The letter referred to a hedge fund which has become the largest landholder in Grand Valley on the Western Slope of the Rockies in Colorado. The hedge fund owns an account to hold water in Lake Powell.
“We are concerned about the ability of investors such as the one described above, or others, to sit on the resources they own allowing them to accrue value during times of crisis, if they so choose, and what that would mean for the people we represent and the position that puts us in collectively,” the letter states. “While water markets have the ability to redistribute water fast and flexibly, they also have the potential to be abused, and are highly sensitive to outside forces that increase demand or reduce supply which could cause prices to soar.”
The letter also states a concern over the ability of hedge funds to aquire water rights through subsidiaries, which would make it more difficult to determine who the actual purchaser is.
The letter also took aim at the marijuana industry. “Recent investigations have cited complex operations involving the purchase or leasing of land and water rights to support substantial grows,” the letter states.
The letter states water profiteering also makes it more difficult on those who are trying to meet the requirements of the Sustainable Groundwater Management Act. The letter also states the uncertainty of biological opinions that determine water allocations is also an issue.
The letter states an estimated 12 billion gallons of water has been stolen in California since 2013.
“I am concerned about the increase in water profiteering across California and the Western States,” Hurtado said. “As the west grapples with historic drought, California farmers and water managers are struggling to find the water we need to survive.
“We must be able to determine how anti-competitive practices and corporate investors may be disrupting water rights — leading to potential water shortages, water theft and skyrocketing water rates.”
“Private interests have zeroed in on our precious water supplies and are buying up local water rights, the economic and social impacts of which could be disastrous,” Cortese said. “Water scarcity is already worsening, threatened by climate change, pollution, and increased demand. We must stand firm in keeping water a resource for the public.
"Nowhere is there more urgent demand for the application of the public trust doctrine regarding water rights than these practices which literally steal our most life dependent resource from ourselves and future generations in exchange for a profit.”
Among those who have also raised concerns are La Paz County Supervisor Holly Irwin in Arizona.
“As a representative of the La Paz County Board of Supervisor’s here in Arizona, I share the same concerns Senator Hurtado has raised regarding Water Rights purchasing and potential drought profiting in our Western states,” Irwin said. “I am seeing this first hand in the unincorporated town I live in and the district I represent.”
Irwin referred to the potential transfer of water rights to the Colorado River owned by GSC Farms LLC to Queen Creek, a Phoenix suburb. Irwin and officials from other counties that depend on the Colorado River fear such a deal would impact their water supply.
“Currently we are awaiting a decision to be made by the Department of the Interior on the transfer of 1,078.01 acre feet per year of 4th priority water rights off the Colorado River owned by GSC Farms LLC to the Town of Queen Creek located 188 miles away from Cibola,” she said. “I believe this is setting damaging policy that threatens our water and economic development for my constituents and our river communities all for profits.”
Two of the most important water systems in the Western United States are the Colorado River and the Sacramento-San Joaquin Delta. The two systems provide water to approximately 70 million people, which is roughly 20 percent of the population of the entire United States, and they irrigate millions of acres of agricultural land across multiple states.
Hydropower facilities along the Colorado River alone provide more than 4,200 megawatts of energy, enough to power 840,000 homes on a hot day. Market based control of these systems could have devastating impacts to those that depend on the water for their daily needs, their livelihoods or their lives, Hurtado's office stated.
Recent reports indicate private investor interest in water rights purchasing, which was likely propelled by the 2015 water crisis in California, has increased significantly, Hurtado's office stated.
California’s drought conditions continue to worsen, and every part of the state will be impacted, Hurtado's office added. The state is seeing an increase in water restrictions — in some districts for the first time ever, Hurtado's office said. Approximately six million people will be affected by the Metropolitan Water District of Southern California’s recent decision to declare a water shortage emergency and order outdoor usage restrictions.
In Mendocino County, water theft is leaving rivers and streams dry throughout the Russian River, Hurtado's office stated. The problem is so serious in one district, there are concerns about the availability of water to fight fires, and locks have been put on hydrants to prevent further water loss.
In the Central Valley, drought has led to an increase in the price of agricultural products, affecting the food supply system as a whole, Hurtado's office stated. Many towns across California face massive water curtailments and some have watched their wells run dry, forcing them to jump through hoops and hurdles just to provide enough water to survive, Hurtado's office added.
Hurtado and Cortese are also pushing a bill, the State Water Resiliency Act, which would take a “top to bottom” look at how water in the state is managed, Cortese has said. The act looks to streamline the process when it comes to water allocations to local communities and agencies.
“Access to safe drinking water and freshwater resources are essential to the health of California’s economy and communities,” Hurtado's office stated.