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The Scandal of State Water Project Privatization

Or Why Montecito Must Pay $600 for Supplemental Water


The privatization of the State Water Project began with the infamous Monterey Amendments begun in 1995. An element of those amendments transferred the Kern Fan to the Kern County Water Agency (KCWA) from State Water ownership for little or no real consideration. What is the Kern Fan?

The Kern Fan is the term used to designate a very large ground water basin in Kern County. State Water, as part of its program to improve water deliveries, bought 20,000 acres of land overlying the Fan that it intended to use as a storage reservoir for its water. State Water invested approximately $30 million. This storage reservoir would have been an invaluable addition to the State Water Project in times of drought such as we are in now. The transfer to KCWA occurred in 1995 and was finalized in August 1997; it was thereby immediately transferred from KCWA to a joint powers agency called the Kern Water Bank Authority, which is now the present owner. The Kern Water Bank Authority comprises various water districts in Kern County and one in neighboring Kings County called Dudley Ridge. Dudley Ridge is where Montecito Water District is negotiating to pay $600 per acre-foot, which water is to come from the Kern Water Bank Authority. If State Water had still been the owner, that water would be available under the normal terms of the project contract for a few tens of dollars.

The Kern Fan transfer to KCWA and thence to the Kern Water Bank Authority is to me the crux of the outrage and scandal. There is certainly outrage over the granting of title from State Water to KCWA for no consideration. And now we know that the Kern folks were concerned about potential State Water operations in “their” water basin and that those operations might compromise local supplies of ground water. That was the primary reason for turning the Kern Water Bank over to the locals. However, we now know that the Kern Water Bank Authority is doing exactly what the State Water Project was going to do and much more at a substantial profit. And we know now that many of the Kern Water Bank Authority members and beneficiaries of these profits don’t even have a stake in State Water.

That this was a needless privatization is without question.

Of those entities that now own the Kern Water Bank Authority, the largest is Westside Mutual Water District in Kern County, which was never a participant in the State Water Project. It owns a little over 40 percent of the Water Bank. However, the Dudley Ridge Water District owns about 9 percent of the water bank. The sole owner of Westside Mutual is Paramount Farms, the largest almond grower in California, which is owned in turn by Stewart Reznik. Paramount Farms is also the majority owner of Dudley Ridge. With Paramount’s positions in these two water districts, it also becomes the majority voting bloc in the Kern Water Bank Authority. So the owner of Paramount Farms is the primary beneficiary of the transaction now being contemplated by the Montecito Water District.

What is particularly galling is that Paramount Farms has contributed practically nothing to the cost of repaying the vast investment that created the State Water Project whose aqueducts are absolutely necessary to these water transfers. This farming of water by Paramount has been going on since at least 2002 and the State Water Project contractors are paying the bills. This scandal must end!

Arve Sjovold retired as chief cost scientist from Santa Barbara’s Tecolote Research, Inc. and served on the City Water Commission from 1967-1970. When the State Water Project contracts faced revisions known as the Monterey Amendment, Sjovold was a plaintiff representative to help DWR prepare a new environmental impact report.

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