Cadillac Desert (67 page)

Jensen held his board of directors under “an almost absolute dictatorship” —those were Warne’s words—so the prospect that the growers would get anywhere were slim. When Warne tried intervening on the growers’ behalf with some friendlier members of the Met’s board, they spurned him. One day, however, an old colleague of Warne’s from his Interior days, who had since become chief counsel for the Kern County Water Agency—which owns the largest entitlement of all in the State Project, 788,409 acre-feet—called. The lawyer, Stanley Kronick, told him that the issue of cost-of-delivery surplus water was extremely important to the growers, and could jeopardize the whole future of the project, because without it the growers might not be able to pay their way, and the project could default. Kronick wondered whether he shouldn’t go down to Los Angeles and speak with the board himself.

Warne remembers being faintly amused. “Sure, Stan,” he said. “You’re welcome to try. But you aren’t going to get anywhere, you know. Joe Jensen is adamant, and the rest of them have got their heels dug in. I’ve been over it with them a dozen times already.”

Nonetheless, Kronick said, he was going to try. A few days later, Warne received another call from him. When he picked up the telephone, he felt sure that he knew what he was going to hear.

“Well,” said Kronick, “they agreed.”

The fifty-two members of the board of directors of the Metropolitan Water District are protected, by charter, against conflict-of-interest disclosures. No one has to release information on stock ownership, business connections, or anything else that might provide a clearer picture of where their true interests lie. As a result, no one knew much about them—though many tried to find out—except what was obvious: in the 1960s most were white, male, middle-aged or older, wealthy, and passionately committed to water development.

Therefore, the most cynical interpretation of the Met’s decision to let the San Joaquin growers have its customers’ unused water cannot be proved. They did it, this argument goes, because when they realized what a bonanza it would be to the growers they all invested in valley agriculture themselves. After all, if they had their customers’ interests truly at heart they should have held out for a higher price, forcing the growers to share at least some of the capital and interest costs. The people who make this argument usually take their listeners on a guided tour through California’s verdant history of public graft to reinforce their point. Bill Warne, for his part, doesn’t share such paranoid suspicions. In his mind, they did it because they knew they would need the valley’s help when the time came to get more water from the north. “With the environmental opposition to new development, the Met realized it had to stop fighting with the valley and close ranks,” he says. “Maybe this was their way of making peace.”

Whatever the answer, the first of the surplus water was delivered to the San Joaquin Valley in 1973. Precipitation stayed near or above normal for the next ten years, except for the two freak years of the drought, and consumption in southern California remained well below predictions. As a result, there was a literal flood of surplus water in the valley, sold at an average price of $3.50 per acre-foot—the same incredibly low price the Bureau charged. Even in 1976, the beginning of the drought, the state inexplicably let go of 580,110 acre-feet of “surplus” water that it might well have husbanded for the near-catastrophe waiting around the corner. The Kern County Water Agency, whose clients include many of the biggest and wealthiest growers in the state, took 442,250 acre-feet of that amount, setting a pattern: since 1973, it has gotten between one-half and three-quarters of the share. By the end of 1981, it had received a total of 1.8 million acre-feet of surplus water. It got it for around $6 million—the alleged cost of delivery. Meanwhile, according to Richard Walker and Michael Storper, two analysts at the University of California, the Met’s customers had been assessed about $170 million for the same water—water they never received. The growers had gotten a $164 million gift.

After peaking at 524,247 acre-feet in 1979, Kern County’s surplus deliveries began to diminish as the Met called on more of its entitlement, but it was virtually guaranteed hundreds of thousands of acre-feet for years. Meanwhile, as the Peripheral Canal debate was raging on, and the Met was saying that without the canal southern California would perish, an internal study, not intended for release, predicted that “as much as 750,000 acre-feet [of unused water] in the MWD service area” would be available if the canal was built. In other words, the Peripheral Canal would not so much save Los Angeles as allow the growers to keep using hundreds of thousands of acre-feet of surplus water while metropolitan Los Angeles paid for it. The farmers, for their part, seemed to be counting on it, for they were using surplus water to expand their acreage well beyond a level sustainable with contract water alone. According to at least one agricultural economist at UC-Davis, they were also using it to irrigate permanent crops—exactly what Bill Warne had said they must not do. It would have been very foolish of them to do so unless they expected to have a lot of surplus water for a long time.

It was the same old story again. The big farmers had managed to get something (a lot of water) for next to nothing. People in Los Angeles, meanwhile, were being taught a different lesson: that you can get nothing for something.

All of this raises a further question: who, exactly, are the farmers getting most of the water?

In 1981, Les Melville had been growing olives for nearly fifteen years on his fifty-acre farm near Oroville, the town that grew up alongside the Water Project’s monumental dam. He bought the farm in the 1960s, and through innovation, and a lot of lavish care, he raised the previous owner’s average yields from around thirty tons a year to 250 tons a year. It was a remarkable effort. Then, having finally accomplished what he set out to do—prove you can make a good living on a fifty-acre farm—he began to go broke.

“When we started here in 1967,” Melville told an interviewer, “we ended up with some $500 per ton of fruit. In 1980, we were down to $350 a ton. We’re getting less for our fruit now than we were getting in 1946.” Melville’s costs, meanwhile, were constantly rising, and his disposition and his health were failing. The problem wasn’t competition from imported olives; it was the California Water Project.

At the other end of the valley, the Prudential Insurance Corporation was farming more acres of olives than all four-hundred-odd olive growers in Tehama County, where Les Melville’s farm is. Prudential had five thousand acres planted in olives on its McCarthy Joint Venture A ranch near Bakersfield, in which it owned a 75 percent interest, and those five thousand acres were only about a quarter of the entire ranch. Its olive trees were planted very close together, like hedgerows—not because the country wants more olives than anyone can produce, but because the fruit can then be harvested by machine. Machine harvesting wastes fathomless numbers of olives, but saves a substantial amount of labor. The olive-harvesting machinery was developed, in large part, by the taxpayers of California, who finance the agricultural experimentation programs of the University of California’s extension service—which are largely devoted to inventing and perfecting laborsaving machinery. (One of its star creations, the tomato harvester, is said to have displaced twenty thousand agricultural workers.)

When Prudential’s olive trees matured in 1978, they began producing all at once. California’s production of olives increased by 46 percent in that year—a single year—and olive prices fell like overripe olives. Of all the state’s growers, however, only one was relatively unaffected by the drastic drop in wholesale prices: the Prudential Insurance Corporation. The company was well aware that its prolific production would cause the collapse of the market, and therefore decided to write an unusual contract with Early California Industries, the state’s largest independent olive processor. In exchange for an opportunity to defer the purchase price of $1 million, Early Cal agreed to buy Prudential’s entire harvest. Previously, it had bought from many small growers around the state, like Les Melville, who now had to look elsewhere to sell their production. The deferred payment, Early Cal proudly remarked in its annual report, “bears no interest and is repayable only on termination of the contract.” It was what labor unions like to call a “sweetheart” deal. With a single stroke, a New Jersey-based insurance corporation had, in its first year of competition, with a single gigantic orchard, pretty much captured the olive market of the United States.

Like a number of other corporations, holding companies, and investor cartels, Prudential got into farming in the 1960s, when Congress passed legislation allowing investors to deduct all expenses on a number of crops (chiefly orchard fruits and nuts) while the trees or vines are maturing and bearing no fruit. All of a sudden, a lot of land that wasn’t worth very much was worth a great deal—in an inverted sense. According to economists at the University of California at Davis, the new tax provisions amounted to a tax break of $346 on an acre of land for persons in the 70 percent bracket. For corporations it was less of a break, but still a good one. With its 75 percent share of the McCarthy Ranch, Prudential could realize a tax saving of around $1 million per year, farming the government. Then, when the trees were mature, it could begin earning at least that much income every year. It was all made possible by the State Water Project.

The land on the far southwestern side of the San Joaquin Valley, where the McCarthy Ranch sits, is underlain by a brackish, boron-poisoned aquifer. The quality of the water ranges from execrable to unusable. The climate is so dry—around six inches of rainfall a year—that the few small freshets barely trickle during the rainy season. Until the late 1960s, when the first deliveries from the California Water Project arrived, $50 an acre would have been a good price. Now it is worth at least $2,000 an acre.

In August of 1981, the California Institute for Rural Studies released a report on property ownership in five water districts within the service area of the State Project. Most of the districts are in Kern County; most of the farms are neighbors of the McCarthy Ranch. Together they accounted for two-thirds of all the entitlement water delivered to the San Joaquin Valley by the project. However, because the Kern County Water Agency, the region’s main water broker, had been receiving a flood of surplus water (1.8 million acre-feet) as well, the five districts had actually received about half of
all
the water the State Project had delivered throughout the state.

The CIRS report corroborated what the Department of Water Resources had taken unusual pains to point out: that the majority of farmers receiving project water were small farmers. Of 479 identifiable owners in the five water districts, 291, more than half, had farm holdings of 160 acres or less. Nine out of ten worked farms smaller than 1,281 acres. But those farmers owned less than a third of the total acreage; the other two-thirds, which amounted to 227,545 acres, was owned by eight companies.

The largest of the farmers was Chevron USA, the main subsidiary of the Standard Oil Company of California. Chevron owned 37,793 acres in the immediate vicinity, in addition to 42,000 acres scattered elsewhere in the valley. In second place, with 35,897 acres, was the Tejon Ranch, one of the great land empires of California—272,516 acres all told. The principal stockholders of the Tejon Ranch are members of the Chandler family, which owns the Los Angeles
Times
—the strongest voice for water development in California for the past eighty years.

In third and fourth place were two more oil companies, Getty and Shell, which owned 35,384 and 31,995 acres, respectively. The presence of Getty (and Chevron USA) in the service area of the California Water Project again pointed up the architectural brilliance with which the project was conceived. They pay a severance tax to California on oil they pump off Long Beach, which is immediately put into a fund that makes annual interest-free “loans” of $25 million a year to the State Water Project, which delivers doubly subsidized irrigation water to their formerly worthless land.

Fifth place belonged to Prudential’s McCarthy Ranch, whose total acreage was 25,105. (If these numbers are bewildering, it helps to know that a good-size Illinois farm consists of six hundred to a thousand acres.) In sixth place was the Blackwell Land Company, whose 24,663 acres are part of a burgeoning U.S. land empire being assembled by a company of foreign investors, among them S. Pearson and Sons of England, Mitsubishi of Japan, and Les Fils Dreyfus of Switzerland, an offshoot of Lazard Frères.

Tenneco, the huge chemicals and food conglomerate, was seventh among the eight largest owners, with 20,180 acres. A few years before, Tenneco executives had been making some unusually candid statements to the effect that small family farms are the most efficient food-producing units human beings could ever create, and said it might give up farming altogether. When the State Water Project became operational, the company began singing a different tune. In the early 1970s, it bought the old James Ben Ali Haggin-Lloyd Tevis estate, the Kern County Land Company—300,000 acres of prime valley land—and metamorphosed into one of the most ardently competitive agribusiness growers in the world.

In last place, with 16,528 acres—a plot of land that is still considerably larger than Manhattan Island—was the Southern Pacific Railroad, the largest private landowner in California. In 1981, besides owning 700,000 acres of California forest and range land, Southern Pacific owned a large portion of downtown San Francisco and 109,000 acres in the Westlands Water District, where, between the good graces of the Bureau of Reclamation and the dilatory expertise of its battery of lawyers, it was still receiving subsidized federal water for $7.50 an acre-foot.