the essential
Besieged by flames since last Tuesday, Los Angeles is running out of water. A recurring problem in California, a state prone to droughts whose particular management of water and its capture by large private companies raises questions.
The deadly fires in Los Angeles have brought back all the concerns linked to the decisive problem of water management in California. Many residents are beginning to criticize the management of local authorities, firefighters having sometimes had to deal with dry hydrants or with low pressure.
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In the early hours of the fires, the three reservoirs of one million gallons each (about 3.7 million liters) in the Palisades area were empty, according to the Los Angeles Water Department. Janisse Quiñones, director of the department, told Los Angeles Times that the situation was due to the “huge demand” on the system, “four times higher than normal for 15 hours straight”. According to authorities, the city’s 114 reservoirs were all at maximum capacity before the first flames.
Between drought, supply problems and capture by large companies… How did water become a true blue gold in California?
The power of the California agricultural sector
In 2015, during an unprecedented drought, the Californian agricultural sector had to reduce its consumption by 25% for 9 months. California, which was facing one of the worst droughts in its history, was forced to play the coercive card.
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The “Golden State” is the main American producer of artichokes, asparagus, broccoli, cauliflower, celery, lettuce, spinach, tomatoes and melons, it is also known for its almonds, of which it is the world’s leading producer. About 42% of vegetables produced in the United States come from California and its more than 2,300,000 hectares of agricultural land, according to the Department of Agriculture. This gives the enormous Californian agricultural sector a certain power which allows it to alone capture 80% of the state’s water consumption, including 40% from the public domain. Because yes, in the United States, water can be held by private companies, which can further complicate its management during a crisis situation.
GETTY IMAGES NORTH AMERICA – JUSTIN SULLIVAN
The example of the Resnicks
While firefighters faced a lack of water to fight the flames, a couple of billionaires sparked controversy. The Resnicks are directly accused of monopolizing the state’s water reserves, of which it owns a massive part of the supply system. Stewart and Lynda Resnick head an $8 billion agribusiness empire called The Wonderful Company, the largest agricultural corporation in the state. Nearly half of Americans buy at least one of their products: almonds, pomegranate juice, tangerines, flowers… This company, valued at $5 billion, consumes nearly 450 million m3 of water each year according to the magazine Mother Jonesrelayed by International Mail.
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But how did this private group, like several others, get their hands on California’s water reserves? According to the investigation by our American colleagues, the Resnicks “skillfully” played their cards during meetings 20 years ago. A deal reached in 1994 – called “The Monterey Agreement” – allowed them to hold the majority of the Kern Reservation’s water. Water has therefore been privatized and even financialized.
Water, a financial product like any other?
Furthermore, since 2020, investors can bet on the evolution of water prices in California, as they can on wheat and oil. Concretely, so-called “futures” futures contracts have been launched. This type of contract corresponds to the possibility for an individual to purchase an asset at time T for delivery and payment at a future date. It is a bet on the future which proves advantageous if the water flow increases in the following six months, and unsuccessful if it decreases. At the time, voices warned of the risk that water price movements would move away from the real economy and generate speculative bubble phenomena. A privatization and financialization of water which are proving cruelly problematic, at a time when Los Angeles is burning.
