In the comments, Mr. Kurtz asked:
I don’t get the outrage over the Sandridge deal. Dudley Ridge is a SWP contractor. No General Fund money ever went into the SWP. It is paid for entirely by the users. The growers have been paying for water, and paying off the bonded indebtedness since the project was installed. Now high water costs and marginal returns made it uneconomic for Voinovitch to continue farming that orchard. So I see three choices: a) walk away from his investment, b) continue to consume water at a loss or c) sell the water to another user who values it more highly. What would you do? Or maybe there’s another choice I am missing.
I have a number of reasons for my outrage; most of them can be sourced to different conceptions of what Sandridge (all water users) was really given back at the beginning. If you think that the ag SWP contractors were being given the use of water to make the desert bloom (actually to ‘reclaim’ the dank and desolate annual marsh of the SJV), then selling the water and pocketing the money violates that expectation. This plays out in a bunch of ways.
- Saying the the SWP contractors have paid in full for the SWP doesn’t convince me that they were also buying that water in perpetuity. In my mind, they were paying for conveyance and leasing the annual use of a contracted amount of water. They got what they paid for. Why should they get another $70M windfall for not-using future water?
- I have deeply resented the fact that in our times some people have this extraordinarily valuable gift of water from the state, while others must buy it from them for daily uses. The only reason poor people in Los Angeles pay rice farmers in Sutter for water is that a hundred years ago the Sutter farmers’ grandfathers filed a piece of paper? This is stonecold bullshit. Current farmers in the Valleys didn’t do anything so noble or valuable or virtuous that the people of California should grant them huge wealth as a reward. Further, I as a contemporary city-dweller haven’t done anything so sucky that I should be forced to shell out for water to meet daily needs. Further, even their grandparents weren’t nobler than my grandparents. I mean, it’d be awesome if my great-grandparents had come here in time to get me some sweet pre-14 rights, but they were kinda busy being pogrommed, so they didn’t get to it. So now, <b>I</b> pay their grandchildren for water? There is no supportable justice in that. That’s like inheritable nobility for them, or original sin for me, and neither of those are supposed to be American concepts of justice.
- That said, the sole justification that I have ever heard that made any sense at all was “we gave them rights to water forever because they turned the American west into cute farming towns for us”. You might think that was a bad bargain, as I do, but at least it makes more sense than “because that was the pointless jumbled system that happened to happen, so undeserving people should get tons of money or nothing will ever get done”. In which case, corporate farmers who sell water away from empty shells of water districts are not keeping their end of the bargain because they are not being cute farming towns for us.
- I don’t think the options should be the ones Kurtz outlined (walking away, using water at a loss, selling it to another user) should be the choices. I think Sandridge got what they paid for (conveyance, use of past water) and when that is no longer profitable, the water they no longer want to use should default to the state. The state could then apply it to fisheries, or auction it and use the money they raise that way for something useful for the public. I don’t think Sandridge should have to continue to incur losses by taking that water (if that’s how their accounting turns out), but neither do I think that they should make money on future water. It is a particularly emphatic example because Sandridge appears to be unsympathetic corporate actors.
So that’s some of the reaons behind my outrage. I’m sure I’ll think of more the second I hit post.
On the public record 
I think environmental groups should be forced to buy the water for the fisheries at the going rate since they think it will help the fish. If they don’t like it, let the tax payers sue them for a change.
Well, we do have inconvenient things like property rights and water law. Rewinding history, our definitions of beneficial use and the sanctity of prior appropriation might well have been handled differently, in light of modern sensibilities. Likewise, our treatment of the Indians, and so on.
There wasn’t any gift of water to the SWP, unless you think every freedom we possess is a gift from the Great White Fathers in Sacramento and Washington. Unless you want to live in a Hugo Chavez country, you can’t have government redistributing property that people thought they owned, because taking things away from them is “fair”. I suppose you think those poor people in LA should also be able to help themselves to other folks’ cars and houses, because all the owners have is a silly bit of paper.
Typically, if a land owner in a KCWA service area stops paying his taxes, the water reverts to the other users in the Water District, not the State. That is not about to change. In this case, the water is being put to a more beneficial use than it could be put to in Dudley Ridge.
I could give a rat’s ass whether the Sandridge people are saints or sinners, and it is none of anybody’s business.
I was too extreme in using the example of houses and cars, of course. A water right is the right to use, not to possess. Still, the Sandridge transaction to me is a simple one, of one appropriator selling his appropriation to another user who values it more highly. Would it have been any different if a neighboring grower had an exclusive contract to grow cannabis legally, and would pay Sandridge handsomely for the necessary water? If so, why? (Compare and contrast…remember those bright college years? but I digress) I would like to know the story behind Dudley Ridge WD not stepping in and taking the deal for themselves, in which case the $70 mil would have been spread around a little more. I’m sure the WD had to get something out of it.
And remember, to the extent that any of that $70 large is profit (and I suspect not all of it is) the State and Federal governments will get some 30-47% of that amount (depending on whether it is ordinary income or not).
Your argument would be more appropriate if applied to Westlands, or some other water district subject to Reclamation law. I believe there is some mechanism in place to ensure that sellers who owned land prior to the formation of the District are not allowed to profit from the windfall increase in land values consequent on the construction of the CVP.