Water & Drought

July 15, 2014

Drought's blow to California economy: $2.2 billion, 17,100 jobs, report says

California's dogged drought will cost the state's economy $2.2 billion and an estimated 17,100 jobs, but consumers will largely be spared higher prices, according to a major study released Tuesday .

The pain is not felt equally, experts at the University of California at Davis warn, and there could be more over the horizon as precious groundwater levels fall in what the study calls the "greatest water loss ever seen in California agriculture."

"On average, it's not so bad," said Richard Howitt, an emeritus professor of agricultural economics at UC Davis, "but in certain parts of the Central Valley, it's extremely bad."

Howitt cited, in particular, the "pockets of pain and poverty" in the Tulare Basin. The overall socioeconomic impacts are "likely to be significantly higher" than those in the state's 2009 drought, analysts say, because water deliveries are lower.

Statewide, all told, an estimated 428,000 acres of irrigated cropland have gone out of production, amounting to 5% of the state's total.

Because growers are diverting scarce water supplies to high-value crops, the analysts say that most of the fallowing has affected feed and other annual crops. Less than 13% of the Central Valley's fallowed land had been planted in higher-value crops like nuts, fruits and vegetables.

The study by the UC Davis Center for Watershed Sciences, presented at the National Press Club, concluded that this year's drought has reduced surface water deliveries to farms by 6.6 million acre-feet.

By significantly boosting groundwater pumping, California farmers have been able to make up about 5 million acre-feet of the lost supplies. The resulting shortfall will cause $810 million in lost crop revenues and $203 million in lost livestock and dairy values, according to the report.

"In California, no water, no crops," Howitt said.

About 70% of the estimated crop revenue losses occur south of the Sacramento-San Joaquin Delta, the study notes.

The additional groundwater pumping, moreover, adds several costs of its own. Farmers will pay an estimated $454 million in added pumping costs this year, the analysts say. In doing so, the report warns, they will also be depleting a resource whose management needs to be improved.

With the increased pumping, groundwater this year will account for 53% of the state's irrigation water deliveries. That's a lot more than last year, but Howitt said that inadequate monitoring makes it difficult to track the status of the remaining groundwater supply. He likened it to writing from an account whose balance is a secret.

California Department of Food and Agriculture Secretary Karen Ross, whose agency partially funded the drought study, acknowledged that it was ready for a "very vigorous discussion" about groundwater management proposals now being presented in Sacramento.

"The anxiety of the farm community is very, very high," Ross said. "They understand there is going to be change."

Continued drought in 2015 and 2016 will likewise boost pumping costs between $438 million and $459 million a year, the study estimated. With falling water tables, farmers can expect to see pumping price increases of 5% or more.

Failure to replenish groundwater in future years will hit hard, the analysts say, adding that "the drought is likely to continue through 2015" regardless of the periodic El Niño storm conditions.

"Don't count on El Niño," said Jay Lund, director of the watershed sciences center, referring to the climatic changes triggered by a periodic band of warm water off the Pacific coast of South America.

The UC Davis analysts presented their findings amid continued Capitol Hill talks over a California water bill. Quasi-negotiations have transpired behind closed doors, with participants swearing themselves to public silence, since the Republican-controlled House passed a 68-page bill in February and the Democratic-controlled Senate countered with a 16-page bill in May.

The House bill limits part of a 1992 law that directed more water to protect the Sacramento-San Joaquin Delta. It removes wild-and-scenic protections from a half-mile of the Merced River to potentially expand McClure Reservoir. It allows more storage at New Melones Reservoir, lengthens federal irrigation contracts to 40 years and preempts some state law.

The Senate bill, chiefly authored by California Democratic Sen. Dianne Feinstein, includes none of those provisions. Some of it locks into place steps the Obama administration has already taken on its own.

The secretiveness of the talks has frustrated House Democrats who represent Northern California districts that include portions of the crucial Sacramento-San Joaquin Delta. The UC Davis analysts were scheduled to brief congressional staffers on their findings.

"We are encouraging them to reach a compromise," Ross said, adding that she considered the odds of congressional success at "50-50."

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