As California is ravaged by drought, it pushes residents into conflict with companies.
What happens when there's not enough water to go around?
From Bloomberg News and iHeartRadio, it's the big take. I'm West Casova today. California's underground water is in danger of being drained away. The recent epic rainfalls in California have helped to green up parch lawns and dusty landscapes in areas hard hit by drought, but beneath the ground, it's
a much different story. The state's aquifers that feed farms and provide water for homes, which are already depleted, are now at risk of being tapped out, in part by giant commercial farms growing lucrative cash crops.
Because the ground has been depleted, they're having to build these massive wells that plunge one thousand feet or deeper into the deeper aquifer in order to find the resource that they need to water these crops during drought periods.
That's reporter Mark cheddi act He and Bloomberg's Peter Waldman and Sinduja Runkarajin are here to tell us about their investigation of how some companies are turning California's increasingly scarce water into enormous profits, leaving many people in the state with less to drink. Peter, We've seen record floods in California. The places inundated with water after so many years of drought. And that's a good thing, right.
Absolutely, Rainfall, precipitation, snow in the mountains is what California relies on for water, both in the big cities and especially the central Valley where the farms are. The issue is it can be a little deceiving. Scientists say that we're in a mega drought period. Obviously, this year is exceptional, but since about the year two thousand, all of the West has had a majority of sub average years of precipitation. In California, there have been maybe half a dozen good
years in that twenty three year time span. It's problematic in the sense that people tend to relax and they don't focus on the underlying issues, which are quite literal in this case, as we move into groundwater, and.
I think that the idea is that even though we've had a record wet winter here in California, what's been happening is that underneath the surface, our aquifers, our groundwater has been severely depleted for decades or actually up to a century. It will take almost just as long to refill these aquifers, this groundwater, years, decades perhaps to replenish that resource.
So you know, one great wet win isn't gonna do the trick.
Some of that harm is also irrepeatable. Just because it rains more, it doesn't mean that harm is repaired. So that's another component to the story, is that some of the harm has already been caused and rain cannot repair that harm.
And as you write in your stories, Sinduja, this drought problem that's happening underground, that these aquifers and wells have dried up over many years a long way away from being filled, is being exacerbated by some pretty big problems with farming.
Yes, there's been an explosion of permanent crops in Central Valley, and this has been happening for decades. Perman crops require more water, and they require water all around. And therefore, like whether it's a drought period or whether it's a period when you have wet winters, you have to constantly keep watering them. And therefore, you know, in a place where you don't have a lot of sourface water coming in.
You rely on groundwater, and so you have these really deep wells that have to constantly keep supplying water to them.
Peter, what are these permanent crops and why have they become such a big problem.
Permanent crops, in some respects are cash crops, at least in the framework of our article, in the sense that they exploded because our farmers in California and then investors who were lured in by the profit potential, could grow almonds and pistachios and wine grapes and some stone fruits, some citrus, things that grow on trees which require a good deal of financial investment, not just for the land and even not just for the water, but for the
saplings and for the labor, and then take anywhere from ten to thirty years to really bear out. You get these things going, they produce fruit or nuts year after year, and then you can sell them. And in the case of almonds, which was really the prototype permanent crop that took off, California was able to really capture the global market.
Eighty percent of the world's almond production is from California, and sixty percent of that is exported, So you could see the opportunity there for investors who say, oh wow, we get these trees up and going, we will make a lot of money year after year on the sale of the crop itself, especially to places like Japan and China, other parts of Asia and in Europe, and the land will appreciate at the same time. And you can see why the returns were quite attractive, and it's generally considered
a quite stable investment. It counter cyclical at times. So for example, when the investments really took off after the Great Recession, investors had had a terrible experience with land in stock values plummeting, but farmland was holding its value, in fact increasing because food cultivation was viewed as a long term stable bit Peter.
There's also you know this concept now that water managers talk about in California, which is what's called the hardening of the water demand, meaning that the demand for water in the state, especially for agriculture, is pretty constant and steady.
It is not a flexible like it would be if we had mostly like row crops, and I think that has become a challenge as well for the state to manage what's happening now is over time, the groundwater has been depleted, the aquifer has been lowered, So in order to get at this groundwater during drought periods when surface water in the state isn't available or is very limited to, what these big agricultural users have to do is drill
these deeper wells to access the lowering water table. And when twenty thirty, even forty years go, wells could be drilled one hundred two hundred feet deep into the ground to find water from these aquifers. Now, because the groundwater has been depleted, they're having to build these massive wells that plunge one thousand feet or deeper into the deeper aquifer in order to find the resource that they need to water these crops during drought periods.
California has experienced the mega drought that we're going through. It's the driest it's been in twelve hundred years, and the overall water table has dropped two hundred feet and that's left a lot of wells going dry. And in twenty twenty two we've had like fifteen hundred wells that have gone dry. And when you have the resources to drill deep, then you have the insurance to tap into water even when there's a drought.
But then that takes a toll. What is the effect of these wells going dry across the state just on homes and smaller firms.
Obviously, it takes a tremendous toll. It was near record levels last year during the drought, and as our story points out, they're basically either having to get bottled water shipped in or they're having to use water that is sometimes unsafe or tainted, ironically, farming communities up and down the Central Valley. The state auditor found that more than one million Californians don't have access to reliable drinking water. This is in the fourth largest economy in the world.
Kind of speaks to the disparity we're looking at here where these giant wells are pumping out thousands of gallons of water a day, and then you have these communities where they can't get one drop of clean, reliable water.
And let me paint that picture in the context of supporting this story. The first time I went to the Central Valley to start talking to people about the drought was last summer, and I met a water manager in a very small town. It's a really farm worker camp that now has stucco houses on it called Woodville, and the water manager's name there is Ralph Gucerez, and we were talking about the proliferation, and Ralph at first was saying, well, I really think it's the dairies. The dairies are big
water consumers. We all know it takes a lot of water for a cow to produce milk. So we went driving in his pickup and it became very clear that it had changed since the last time Ralph had given this a lot of thought. He said, these lands were now covered with thickets thick as you could imagine, lined in perfect rows with drip irrigation literally into the horizon. It felt like of nut trees. And that's where this extraordinary encapsulation of our story really came out, which was
this really is deeper pockets, deeper wells. That the folks who we were planting out there were clearly very wealthy. They could afford this land, They could buy out the dairies, and they could wait on these nut trees to grow big enough to yield enough to pay their debts and return money to their investors.
Peter kind of had an inklink that there were all these big investors, you know from Wall Street, coming to these really small towns in Central Valley and buying up land and drilling wells and changing things there to own water, to turn things into profit. But I think we didn't know the scale of this. We went to the California Department of Water Resources and we asked them for all of the wells that have been dug by everybody, and we decided to look at some of the deepest wells.
One in six of these deepest wells were drilled by institutional investors.
Since twenty ten, six major institutional investors have QUAE drew their farmland in California to almost one hundred and twenty thousand acres in total, which is basically the equivalent to a third of all the cropland in the state of Connecticut.
After the break, Just how much water are these mega wells pulling out of the ground mark For people who may not be as familiar with institutional investment firms, what exactly are they who invests in them and where does that money go?
UBS is the world's largest bank, John Hancock, which is owned by Manu Life, which is the Canadian investment bank. They actually many times manage money for state pension funds like the state of Florida or the state of Texas, or police pension fund in New Mexico, and so they're basically taking that pension fund money and investing it in farmland in California and managing it to get stable, generous returns out of that investment.
Mark. When you went to these companies and asked about how much water these farms take and the deep wells they need to dig, what did they say?
They had a number of responses.
I mean, essentially, what they said is that they are trying to be good stewards of the land, and that they've installed irrigation systems that are like drip irrigation, which is a lot more water efficient, to reduce the amount of water used. They also referred to the recent rains and floods, saying that they were using that water to recharge the groundwater that had been depleted, and that they have been trying to manage these lands as sustainably as
they see fit. Tiaa told us that in terms of their water use near the Woodville area farm that it had become far more efficient. They'd replaced fourteen older wells with five new ones and installed drip irrigation systems and had followed some land. And they also say that they've replenished more water than they've taken out since twenty nineteen. A lot of that water that they've used to recharge the aquifer was collected during.
The most recent rains.
Hancock has also said that what they're doing is recharging the aquifer with access surface water and groundwater when then get their hands on it. They're also following land and
installing more efficient irrigation systems. PSP, which had drilled some wells near the California aquifers, said that they were abiding by new groundwater management regulations which restrict the amount of water they can pull out of the aquifer, and have also drilled wells in areas that were deemed basically okay by local authorities.
We realized that the wells have been getting deeper and deeper in general. But here are these institutional investors who've drilled wells that were at least twice as deep as all the other agricultural wells, and they're wider in diameter, and they're capable of yielding more groundwater than everybody else around them.
Peter, these big deep wells that Sinduja describes how much water are they pulling.
It's not uncommon to find the large investors and the large agribusiness companies, the big growers with wells that can extract as much as thirty five hundred gallons per minute from the deep aquifer.
One side effect of so many wells being dug is something called subsidence.
For more than a century, farmers have been pumping water out of the ground so much so the land around here is slowly sinking, a process known as subsidence. In less than one hundred years, it's dropped eight and a half.
Meters Sinduja, can you explain how this happens.
Subsidence is one of the things that's happening because of not just deep wells, but prolific well pumping which has happened during this drought period. And the harm caused by s silence is irreparable. Just because we have a good wet year, subsidence won't go away. And the soil, particularly clay, which is amply present in parts of Central Value that we write about, it starts compacting and it's capable of storing less and less water. And that's been happening pretty rapidly.
Subsidence has become an issue for the state because it's actually damaging critical infrastructure, such as the California Aqueduct, which is the just main water artery that delivers snow melt from the Sierras down to Los Angeles through this four hundred mile concrete canal. The state that actually found that parts of that concrete aqueduct had sunk up to three feet over a three year period during the most recent drought.
Basically has caused almost.
A billion dollars in damage that will need to be repaired.
When we come back. What happens when deep commercial wells drain the shallower wells that homes and community these depend on.
We did run out completely. We had no water for a few days, and it was so hard you either ran down upon it and took a shower and went to someone's.
House, or you.
Just went and bottled water and did sponge bath.
That's Shelley Easton. She's a resident of Maderira, California, and she spoke to Bloomberg quick take mark as we heard just there. The water shortage has a big impact on people in the Central Valley whose wells are running dry, and in the story you write how less wealthy communities are often the ones that get hit especially hard.
Yeah, so there's multiple reasons for that.
One is just the lack of water itself means that these communities access to surface water is restricted. Secondly, because there's so much deep water drilling, the water tables dropping, and a lot of these poorer communities just have shallow wells, which essentially means that their wells are going dry, so their most reliable source for clean water basically it goes away.
Essentially.
One of the themes of our story is deep wells drained shallower wells, and a lot of these poorer communities tend to have the shallower wells.
It's just getting more instead of better. And I know the farmers need water because without the farming, we're not going to have food, but they go down so deep because they don't have the irrigation like they used to.
The upshot of our reporting about institutional investors in the Central Valley of California shows the convergence of climate change and inequality, and that's because it's the poorer communities, the farm worker communities that have been chronically under invested and don't have the water infrastructure, particularly adequate wells or municipal
water systems that supply households. This isn't a coincidence because farm worker communities have been sort of left on the dusty byways of the central Valley away from the largely white farming towns forever. So households and small farmer communities communities of farm workers are left without water.
Sinduja. This is obviously a very big and long lasting problem. What is the solution. What is the state doing to try to minimize the depletion of the state's water.
I mean, I think in some cases, you know, importing surface water is like one of those small solutions. But I think the really big thing is to first of all manage water and track who's using how much, and make progress towards The second thing is to really impose limits on what can be taken from the ground and how much water can be taken from the ground, and
see what the impacts of that are. And really I think that when in twenty fourteen Sigma A Sustainable Groundwater Management activis passed, they wanted the local agencies nearby to take responsibility for coming up with plans, coming up with ways to use water sustainably. The state is sort of like trying to have the local agencies come up with plans and then managing and enforcing those plans, and also monitoring them and approving them and denying them where they lack that enforcement.
I think the most significant thing the state has done is pass the Sustainable Groundwater Management Act, which essentially requires the balancing of these aquifers so you're recharging as much water as you're taking out of it. Actually, California with the last state in the West to impose such regulation, and the idea of this act is that over time, it will restrict the amount of groundwater that could be
pumped out of these aquifers. The challenge with this regulation is that the rules don't really have to have teeth until twenty forty, so there's a long runway before a lot of these restrictions will be imposed.
Sinduja, Mark Peter, thanks so much for coming on the show.
Thanks Wes, thanks for having us.
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