As the California drought heads into its third punishing summer, the Sacramento region finds itself in the unusual position of having decent water supplies. Now it’s angling to sell millions of dollars worth of its supplies to other parts of the state — even as officials ramp up the pressure on the region’s residents to take shorter showers, let their lawns turn yellow and do whatever else is needed to conserve.

Led by the city of Sacramento, several water agencies in the area are putting the finishing touches on a deal to deliver water for about 70,000 households to Silicon Valley’s water agency, the Metropolitan Water District of Southern California and other jurisdictions where the drought has hit particularly hard.

Sale price: about $11.5 million.

Water-for-cash transactions have been a fact of life in California for years — but remain a sensitive topic, especially among Northern Californians. The complicated plumbing networks operated by the state and federal governments already pump huge volumes of river water from Northern California, where much of the state’s water is found, to areas below the Sacramento-San Joaquin Delta, where the bulk of the population lives — a situation that breeds resentment over south state “water grabs.”

So when a group of water districts from Northern California decide to sell off some of their supplies, the action creates suspicion and fear about the region surrendering its birthright.

“Part of it is a ‘Chinatown’ thing,” said Ron Stork, senior policy advocate at Sacramento environmental group Friends of the River.

That’s a reference to the acclaimed 1974 detective movie built around a fictionalized version of Los Angeles’ infamous theft of water from the rural Owens Valley more than 100 years ago. Owens Valley was essentially ruined, and farmers often invoke “Chinatown” as a shorthand explanation for their reluctance to sell water to Metropolitan, a political powerhouse that serves 19 million Southern Californians from its base in Los Angeles.

Now, Southern Californians are facing unprecedented cutbacks. Farmers are struggling in much of the Central Valley.

By contrast, the urban Sacramento area is in relatively good shape, and officials say they have enough water to sell some of it. The region’s water agencies have spent the past 20 years storing water underground, and they’ve benefited from reasonably ample rain and snow this past winter throughout the American River watershed. Folsom Lake — where much of the water that’s being sold is currently stored — is nearly 90% full, a figure that’s slightly above average for this time of year.

Still, the water sales are being finalized at the same time that area residents, along with other Californians, are being told with increasing urgency that they must cut back on their usage. In the city of Sacramento, for instance, residents can be fined as much as $1,000 for repeatedly ignoring the twice-a-week limit on watering their lawns.

Angered that residents have largely ignored his call for 15% voluntary conservation, Gov. Gavin Newsom threatened in late May to impose mandatory statewide restrictions.

Although urban use accounts for just 10% of California’s water demands, Newsom’s administration argues that homeowners and businesses must do everything they can to ratchet down consumption and help the state survive the drought. And policymakers believe the need for conservation is particularly urgent, even in areas that have ample water, given the interconnected nature of the state’s water delivery system that ships water from wetter regions of the state to thirsty regions elsewhere.

Given the pressure to conserve, Sacramento area officials acknowledge some of their customers might be upset at the idea of water being shipped south. But they insisted the deal won’t jeopardize the availability of water in the Sacramento region.

The sale will ship about 14,000 acre-feet of water out of the Sacramento region. That’s about 4.5 billion gallons, a number that sounds like a lot, but it’s really a small fraction of the region’s total supplies. For comparison, Folsom Lake, when full, holds around 977,000 acre feet.

“It actually has no effect,” said Brett Ewart, a senior engineer with the city of Sacramento.

Jim Peifer, executive director of the Sacramento Regional Water Authority, said the pressure to conserve is coming from the governor’s office and is “happening whether there’s a water transfer or not.” Peifer’s agency, which oversees 20 suppliers serving 2 million residents, supports the water sale. A separate agency, the Sacramento Central Groundwater Authority, has endorsed the deal as well, saying it’s “consistent with the long-term sustainability” of the area’s aquifers.

Meanwhile, the cash proceeds will be funneled back into Sacramento area water systems — to support conservation programs as well as infrastructure that will make the region more resilient. The city of Sacramento, for instance, will use a portion of its $5 million share for its “Leak-Free Sacramento” program, which fixes low-income residents’ plumbing leaks at no cost, said city spokesman Carlos Eliason. The City Council approved the sale late last month.

The Carmichael Water District, which is participating in the sale, will use its $1 million share to help pay for additional groundwater wells.

“It brings in revenue, and that helps us reinvest back in the system,” said Carmichael’s general manager Cathy Lee.

In other words, the influx of cash will help water providers be able to find new sources of water and invest in programs that can help reduce water use without raising their customers’ bills.

Can Northern California shut off the water tap?

Water sales are nothing new in California. Working with sister agencies in Nevada and Arizona, the Metropolitan Water District of Southern California — one of the buyers of the Sacramento area water — has a deal that pays millions to farmers in Riverside and Imperial counties to idle land and send the water to urban residents.

The private sector has tried to nose its way into water deals, with limited success. Before it collapsed under the weight of an epic accounting scandal, energy trader Enron Corp. tried to build a water market in California by purchasing land in Madera County that sat atop a giant aquifer. The plan, which would have used the aquifer as a trading hub, went nowhere.

The Sacramento area deal is raising concerns among some environmentalists. Stork said anytime water levels are reduced in the region, that could “reduce some of our drought reliability.”

Beyond that, Stork is concerned that water transfers can become habit-forming for the buyers. They could get so dependent on the sellers’ water that they press the governor or Legislature to make the transfers permanent.

“It can be particularly difficult to interrupt somebody else’s supply portfolio,” Stork said. State officials “may command you not to shut off the tap.”

Yet other environmentalists say there’s nothing wrong with a region that has relatively abundant supplies selling off some of its water to those suffering the worst of the drought. The sales, they say, also serve as a counter to the arguments several water districts in the Sacramento region have made dating back to the last drought, which officially ended in 2017.

In the previous drought, many of the region’s water districts pushed back against then-Gov. Jerry Brown’s orders to cut residential use by a statewide average of 25% — and as much as 36% in areas such as Sacramento, where water consumption is heavier because of inland California’s hotter summers and larger, grassier lawns.

The Sacramento area districts argued that ordering their customers to conserve was unnecessary, because, unlike other areas of the state, the region has decent water supplies and there was no risk of running out.

But Heather Cooley, director of research at the Pacific Institute, a water-policy think tank based in Oakland, said the water sales highlight how conservation in a water-rich region such as Sacramento can lead to cash rewards. She called it “positive reinforcement” that can foster even more investments to buffer the region against future droughts.

“It does create some opportunities that allow us to help ratepayers, improve the resilience of the system, and then meet water needs,” she said.

Some area water agencies have been selling some of their water for years.

The Yuba Water Agency has been selling water to Metropolitan since 2008 as part of a larger agreement with the state and federal officials, known as the Lower Yuba River Accord, to make water available for environmental needs and other purposes. The Placer County Water Agency sold water in 2020 and 2021 to Westlands Water District — which serves farmers throughout the parched west side of the San Joaquin Valley — and is planning a similar sale this year to the East Bay Municipal Utility District, which delivers water to 1.4 million residents of Oakland, Berkeley and surrounding communities.

“The American River was blessed with a pretty good winter,” said Placer’s general manager, Andy Fecko. The sale “is not causing any kind of shortage for our customers.” The East Bay deal will generate about $14 million in revenue for Placer.

Sacramento has built up its water supplies

The Sacramento region’s relatively abundant water supplies aren’t just the result of one solid winter. Many of the region’s water districts have senior rights that give them legal authority to siphon water from the Sacramento and American rivers, even when lower-priority rights holders are facing cutbacks.

Not only that, Sacramento agencies have collectively stored more than 100,000 acre-feet of water in the past decade, making the area fairly drought resilient, said Peifer, of the Regional Water Authority. That’s about one-tenth of Folsom Lake’s capacity. By contrast, groundwater levels have fallen dramatically in other parts of California, particularly the San Joaquin Valley.

“The good news about the Sacramento area is our groundwater basin is pretty healthy,” said Paul Helliker, general manager of the San Juan Water District. San Juan, which serves a portion of Sacramento’s eastern suburbs, including wealthy Granite Bay, is participating in the water sale with Carmichael and the city of Sacramento.

Helliker’s agency, which has some of the highest per capita water use in the state, is one of the Sacramento-area districts that pushed back against Brown’s statewide cutback orders during the last drought. San Juan also is part of a coalition of water utilities that urged state regulators last month not to issue mandatory cutbacks for districts that had ample supplies and had invested in conservation.

The groundwater supply is what makes the water sale possible. The three agencies will deliver water out of Folsom Lake and through the American River to the Sacramento-San Joaquin Delta, where it will be sent south to the buyers. To make up for what they’re exporting, the Sacramento agencies will rely on water pumped out of the ground, by themselves and other agencies in the region. Everyone participating, directly or by pumping groundwater, will share in the proceeds.

The buyers certainly could use the water — notably Metropolitan, which is buying about one-fourth of the water.

The Southern California behemoth is receiving just 220,000 acre-feet this year from the State Water Project — a critical network of reservoirs and canals that usually delivers about five times as much to Los Angeles and other cities in the south state. Metropolitan recently ordered one-third of its 19 million residents to reduce outdoor watering to once a week, an unprecedented move, and said further cutbacks could come this fall.

Silicon Valley, which is buying half the water, also is in serious trouble. In late 2020 the Santa Clara Valley Water District, under orders from federal dam-safety regulators, completely drained its largest reservoir because of earthquake concerns. The reservoir is out of commission for a decade-long seismic retrofit, exacerbating the region’s ability to cope with the drought.

Other buyers include water districts in Alameda and Napa counties, the southern end of the San Joaquin Valley and the Central Coast region south of San Luis Obispo.

“They’re in a bind,” Helliker said. “Water transfers are sort of a standard practice in California. Those who have water available often times make it available to those who need it.”

This story was originally published June 15, 2022 at 5:00 AM.