June 30, 2004 - From the June, 2001 issue

Sen. Kuehl Links Develoment to Water: Is a Workable Water Market Needed?

While energy may have trumped all other policy concerns in California over the past year, next on the horizon is that other all-important and scarce natural resource: Water. In the face of staggering growth estimates, a dwindling guarantee of out-of-state water supply from the Colorado River, and escalating issues of environmental quality and groundwater contamination, water advocates in the Golden State-primarily urban, agricultural and environmental-together are going to have to craft very creative solutions if everyone's needs are to be met. Attempting to address one aspect of the water issue, State Senator Sheila Kuehl has proposed SB 221, which seeks to prevent water agencies and developers from over-promising supplies. MIR was pleased to speak with the Senator about her bill, its limitations, and what it contemplates for the future of water markets and water wheeling in California.

Senator Kuehl, let's start with SB 221, your water and land-use bill. I wonder if you could share with our readers a little about your intentions and purposes with SB 221?

The issue has been one of growing concern, and there have been some large court cases as a result. Right now, it's possible to build very large developments without addressing whether water will be available down the line. Recognizing that when you plan a new development, you have to satisfy local government requirements for things like sewers, new schools, access to fire houses, etc., this bill would place a condition that there also be a sufficient, reliable water supply at the tentative map stage for developments of 200 residential units or more. "Sufficient, reliable water supply" is defined various ways in the bill, but the fundamental point is that we can't just build and build without paying attention to whether water districts will be able to continue delivering water.

Would it be fair to say that if the bill were to pass, new development projects would have to drought-proof their water supplies by showing they can sustain multiple water short years?

That's more or less correct. The definition of a sufficient, reliable supply requires water districts to take into account what supply is like in drought years. However, that doesn't mean they have to show that supply is the same in a drought year as it is in a wet one because they are also allowed to count conservation measures.

There has been a lot of controversy in the Legislature regarding water wheeling, and several bills being put forward suggest that there are unresolved obstacles and disincentives to wheeling taking place today. One by Sen. Dede Alpert would not only cap how much surplus revenue the Metropolitan Water District of Southern California (MWD) can hold in reserve, but also mandates that Met return any excess back to its 26 member agencies. The second by Sen. Don Perata would strip the giant wholesaler of authority to set rates for its conveyance facilities and give that power instead to the State Water Resources Control Board. MWD opposes both. Senator, does your bill necessitate the need to resolve current regulatory obstacles to water transfers and wheeling?

Where you use the words "obstacles and disincentives," I might say "fairness in charging for conveyance." The fact is, San Diego wants to be able to transfer water through Met's system for the cost of the water only, and not share any costs of conveyance. I strongly oppose those attempts to solve problems and transfer water. That's like hailing a cab and saying, "The Legislature's going to force you to carry me from place to place, but I'm not going to pay for it."

Neither of those are my bills, and both have been heavily amended. My bill is not about the cost of conveyance-it simply says that if you're going to build large developments, then you ought to be able to convince local government that there will be enough water.

Senator, practically no wheeling is going on now; yet there's a demand for water that's ever growing. It seems your bill would put a premium on the ability to move water throughout the State, especially for growth and development south of the Tehachapis.

It would require some identification of where the water's coming from, yes. Of course, the developer and the local government are allowed to identify sources beyond what they already have. However, while my bill would be made more possible by a workable system for wheeling water, it says nothing about what that system should be.

If there's a claim that the Met is presenting an obstacle-by taking what I consider a supportable position on sharing the cost of infrastructure-then any price is an obstacle. In that case, you could say that including the cost of extra energy is an obstacle to rental housing. In my opinion, the discussion over what it should cost to convey water throughout California is a viable one, and I don't agree that it's an obstacle to wheeling. If the Met says, "We'll be happy to do this at ‘x' price," and San Diego says, "No, that's too high," who's creating the obstacle?

In December, MIR interviewed Tom Graff of Environmental Defense, who said, "I predict that there will be a division in environmental ranks over the viability of water acquisitions as a means to supply areas without current entitlements. If we get to the point where a lack of water availability is a constraint on growth-especially south of the Tehachapis-we'll see a renewed interest in water marketing on the part of many. On the other hand, we'll see a concern from some environmentalists that it's actually a means to facilitate growth." Your reactions?

I agree there will be pressure on both sides, but it will be greater on the side of identifying more ways to bring water to Southern California. I don't think that having to identify sufficient water is a way of stopping growth, nor do I think having water means there must be growth.

I honestly believe this bill is a reasonable planning tool to protect both homebuyers and current uses. Local authorities in California, who might want to see tremendous growth in their communities in order to increase tax bases, etc., are being very optimistic about how much water will be available. If growth continues to take place without planning, both the manufacturing industry and the agriculture industry-which are both lower ranked uses than residential-ought to be very concerned.

In terms of the water wars over where it comes from, how it's conveyed, and to whom it's sold-those are not problems the bill tries to solve. Very large developments of 2,000 or more will likely have to identify various sources, and that will mean wheeling. But that doesn't mean that in the name of growth, we have to say to Met, "You're being punished because you won't let us run our water through your pipes for free." Those are really separate issues.

In April's MIR, Resources Secretary Mary Nichols said, "The fact is, people's position on water markets is totally situational. For whatever reasons, we can't seem to get consensus behind any individual project." Senator, how do we work ourselves out of that situation and into one where we can find consensus on how to move water to the places with the greatest demand?

The solution for coming to consensus is the same regardless of the issue. Whether it's water, electricity, natural gas or any other resource that has to move from place to place, you have to bring the stakeholders around the table and metaphorically lock the doors until you've come to a solution. When Senator Mike Machado was in the Assembly, he did a lot to bring people together and try to hammer out a solution over the water issue. And Senator Jim Costa has assumed the same responsibility in the Senate as the Chair of the Water Committee. Unfortunately, though, the sides just keep reiterating their own points, and that makes Secretary Nichols' statement even more true.

However, the positions on how to move water from place to place are softening. There seems to be less distrust between ag and urban, between north and south than there once was. If everyone can just keep their eyes on the ball in terms of what's fair and modify their positions instead of simply reiterating them, I think we can come to a consensus. The less desirable alternative is that we'll have to do as we've done other times consensus has failed-and that's with action in the Legislature.

Let's turn to the two lawsuits recently filed by the Sierra Club and Friends of the Santa Clara River alleging that four water agencies overstated supplies and understated demand from Newhall Ranch and other projects. What is the status of these suits, and how do they relate to your bill?

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Well, the courts seem to agree with them. As strange as it may seem, SB 221 might actually help to resolve these issues so that we don't have to get into six or seven years of litigation. It's fair warning to a developer to say that before they begin the project, they have to predict honestly whether there's enough water.

The problem, of course, is that when local government-which has the responsibility to approve or turn down projects-accepts ballpark figures or inflated rates from a water district and reduced demand estimates from the builder, then my bill really does nothing to protect them against these kinds of suits.

Earlier this year, the California Court of Appeals rejected the 1994 Monterey Amendments, saying the pact perpetuates the belief that the State Water Project can deliver 4.23 million acre-feet of water to cities and farms, 60% more than is currently supplied, and that because of that pact, local governments may be approving developments based on water that does not exist, particularly in Southern California. If that is true, could it mean that SB 221 is in fact a "no growth" bill?

If that decision is valid, then there certainly ought to be lessened growth of some kind. Otherwise, we're living in the same fantasy we were in when we thought we could not build electric plants and still have plenty of electricity without conservation. However, I don't think there's any such thing as a "no growth" bill.

The fact is, all the building that anyone wants to go forward can happen as long as it includes conservation and recycling-for instance, double piping a large development or instituting programs at the city or county level-but I don't see a lot of that happening at the moment.

There's also the recently reported problem of what global warming will do to water availability. If estimates are accurate, we're going to have a lot less reserve held in the snow pack.

If California is projected to grow from 35 million to 50-some million in 25 years-most of that growth taking place south of the Tehachapis-and there continues to be a demonstrated record of no wheeling or movement of water supplies from north to south, and if wholesale water agencies and agriculture interests continue to hoard their water to protect their rights, don't we have a time-bomb on our hands with respect to how we deal with growth?

In terms of population growth and the way we use our resources, it could easily be argued that we have a time-bomb on our hands. However, they argued that in 1850, and again in 1901-and the answer then was: How do we use what we have better, and move it around more efficiently?

In this century at least, I don't think we're in danger of not having enough water in California to serve the growth that the State needs and wants. But there is an enormous amount of water waste, and we're going to have to embrace a new ethic of conservation in Southern California.

In defense of Southern California, Senator, it does conserve more than perhaps any other region in the country. The problem of projected new growth is that if you put in place a regulatory system which disincentivizes the movement of water from the north to the south in order to preserve development rights-prospective as they might be-haven't we effectively limited our ability to meet demand?

We should certainly not encourage disincentives to the transfer of water. Instead, we should develop a workable plan for that transfer-realizing, however, the distinction between what might be price quibbles and what are actual disincentives.

The fact that Southern California has engaged in conservation is what has enabled us to grow as we have. And that's precisely my point: There will not be a disincentive to growth as long as we can measure how much water is really needed.

Senator, bringing this to a close, did you have any idea when you started, what you were getting into in terms of the depth of people's passions over the water issue?

When I first brought this bill in the Assembly, I wasn't terribly experienced with the water wars. I asked to be on the Water Committee because I'm fascinated by it-both as a Southern Californian and an urban legislator-and I quickly learned how deep those passions run. Unfortunately, people tend to characterize issues of water availability or lack thereof in very black and white terms, when the truth is almost always somewhere in the middle.

The other thing I've found amazing is that this bill has received favorable editorials as broadly as the London Times and the Washington Post-places I did not expect to care much about California's water situation. In general, they were confused as to why it wasn't just warmly embraced; the idea that water has to be there before you build and use it seemed like a good one to them.

The simple answer is: I had no idea what I was getting into. But I don't regret a minute of it.

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