Drought Turns Water Into a Cash Crop

By PETER SANDERS

As Don Bransford prepares for his spring planting season, he is debating which is worth more: the rice he grows on his 700-acre farm north of Sacramento, or the water he uses to cultivate it.
After three years of drought in California, water is now a potential cash crop. Last fall, the state activated its Drought Water Bank program for the first time since 1994. Under the program, farmers can choose to sell some of the water they would usually use to grow their crops to parched cities, counties and agriculture districts.

Water -- or the lack of it -- has been costing the state dearly. According to Richard Howitt, a professor at the University of California, Davis, the drought and resulting water restrictions could cost as much as $1.4 billion in lost income and about 53,000 lost jobs, mostly in the agriculture sector.
In the water market, demand is already outstripping supply. Water agencies, worried about being left high and dry in the hot summer months, are expected to request at least twice the amount of water as the bank will have to sell.
"The state is offering about $275 per acre-foot of water, which is a reasonable deal," said Mr. Bransford, who has been growing rice for 29 years. An acre-foot, equal to slightly less than 326,000 gallons, is roughly the amount two suburban households consume in a year. He is considering taking 100 acres out of cultivation and selling the water he would have used to irrigate it to the state water bank. It is a move that could bring him roughly $90,000.
As water has grown scarce, cities have tried to spur conservation by increasing the price to consumers. Last Tuesday, the Los Angeles water utility agreed to raise rates on consumers who fail to reduce their water usage by 15%. Mayor Antonio Villaraigosa suggested earlier this year that Angelenos begin using lawn sprinklers only twice a week.
For farmers such as Mr. Bransford, figuring how much to plant and how much water to sell is a tricky calculation. Last year, with the price of medium-grain rice at record highs, farmers were eager to grow as much as they could. Prices haven't been set this year, but will likely remain high.
In addition, the water bank is still wending its way through a complicated approval process from state and federal agencies. The bank can't formally open for business until those kinks get worked out. If the approvals don't happen soon, farmers like Mr. Bransford will have no choice but to plant their crops instead of selling their water.

A speed buoy is seen in the shallow waters of Folsom Lake in California. Under a state program, farmers can choose to sell some of the water they would usually use to grow their crops to parched cities, counties and agriculture districts.

"We're going to make it happen," said a federal official involved in the process, while declining to specify when.
Though a series of powerful storms in the past few months have brought rain and snow, the statewide snow pack is at 88% of normal and many major state reservoirs remain only about half full. Last month, Gov. Arnold Schwarzenegger declared a statewide drought emergency.
"The situation is a lot more favorable now than it was a few weeks ago, but we don't know what the rest of the spring is going to look like," said Debra Man, assistant general manager and chief operating officer of the Metropolitan Water District, which provides water to 26 Southern California cities, including Los Angeles. Her agency has been authorized to purchase up to 300,000 acre-feet of water from the state. That was intended as a safeguard so her region would have "water in the bank," she said.
Ms. Man said the drought has forced her agency to secure water earlier than usual, reconfigure various water lines and spread the word about conservation. "Last year we took steps to have a very aggressive outreach plan to educate consumers to get ready, because things are getting serious."
Drawing from the water bank, however, is no mean feat. Moving water from the verdant northern part of the state to the dry south requires navigating myriad state, federal and local regulations, environmental concerns and the availability of pumping stations.
"The state has been working with exporters since last October trying to develop an agreement on how to get this done, but we're still mired in a regulatory morass," said Mr. Bransford, the rice farmer.
State officials said the water bank is a crucial tool to ensure adequate supplies into the dry summer and fall months. "We have to make sure we have the proper coordination for water and health and safety needs, and we want to ensure that communities with those critical needs will have access to water," said Lester Snow, director of the state's Department of Water Resources.
Write to Peter Sanders at peter.sanders@wsj.com