Metropolitan Water District of Southern California (“Metropolitan”) has recently executed five new lease agreements with landowners in the Palo Verde Irrigation District (“PVID”). The agreements are aimed at preserving Metropolitan’s Colorado River water supply, which is reduced when PVID and Yuma Project consumptive use exceeds 420,000 AF.
PVID and Yuma are not signers to the Quantification Settlement Agreement, so their Colorado River water use is not capped. In addition, they have higher priority water rights than Metropolitan, so if they use more than their historical consumptive use of 420,000 AF, it comes out of Metropolitan’s share under priorities 4, 5 and 6a.
Metropolitan has taken various actions to preserve its Colorado River water supply, including executing a 35-year fallowing program with PVID. Metropolitan has also acquired land in PVID and executed land leases that include water management terms. (For background on the Metropolitan–PVID fallowing program, see “Transactions,” Water Strategist May 2004 and July/August 2001).
Previous land leases, which required lessees to implement certain conservation actions and allowed Metropolitan to call for fallowing up to 35% of the irrigated acres, expired in December 2016. The new leases include similar terms governing implementation of conservation measures and fallowing calls. The agreements also specify consumptive use amounts that are 30% lower than the historical consumptive use on the property, and the farmers pay lower rent prices than previous leases.
Of the five new agreements, two 10-year contracts for a total of 2,233 water toll acres have consumptive use limits of 3.5 AF/acre rent prices of $150/acre. The contracts include an incentive credit of $37.50/AF applied when consumptive use is less than 3.15 AF/acre, and they include an additional cost of $187/AF of use when consumptive use exceeds 3.5 AF/acre. All prices are escalated by 2% annually.
One contract for 3,582 water toll acres has a term of four years and 10 months. It has a consumptive use limit of 3.5 AF/acre. The rent price is 10% of the gross farm revenue for operations on the property, with a minimum of $200/acre. There is no escalation clause on the rent price. However, there is a 2% annual escalation for the incentive credit of $37.50/AF applied when consumptive use is less than 3.15 AF/acre and the additional cost of $187/AF of use when consumptive use exceeds 3.5 AF/acre. This property includes 1,254 acres that are used for permanent crops (olive trees). The contract has a provision allowing for a 15-year renewal on that portion of land, with a 3 AF/acre consumptive use limit and a 2.7 AF/acre incentive credit trigger.
The remaining two agreements cover a total of 9,562 water toll acres. Both have 10-year terms but water use limits and pricing are separated into two five-year periods. For the first five years, they have consumptive use limits of 4 AF/acre with a rent price of $175/acre, an excess use cost of $187/AF, and a credit incentive of $37.50/AF—with one contract having a trigger of 3.6 AF/acre and one having a trigger of 3.8 AF/acre. For the second five years, the contracts have a rent price of $193/acre, an excess use cost of $206/AF, and a credit incentive of $41.50/AF. The two contracts vary slightly on consumptive use limits and credit incentive triggers. One has a limit of 3.7 AF/acre and a trigger of 3.33 AF/acre; the other has a limit of 3.6 AF/acre and a trigger of 3.42 AF/acre.
Based on the consumptive use limits, the 30% conserved calculates to over 24,000 AF/year in the first five years and over 22,000 AF/year in the second five years (not counting any water use or savings from the one potential renewal).
The agreements were designed to meet a set of Metropolitan’s policy objectives:
- Reducing consumptive water use on the land
- Providing a revenue stream for Metropolitan
- Maintaining a vibrant agricultural community in the Palo Verde Valley
- Creating a fair and transparent selection process to promote community acceptance and participation
- Keeping administrative costs low by managing the number of leases executed, and
- Advancing innovative farming techniques that can serve as a model to others.
“We’re not in the agricultural business, but we are in the conservation business,” Metropolitan General Manager Jeffrey Kightlinger said. “Our hope is that some of these farmers will find innovative ways to save water that can be shared across the region and state. We all benefit when water is used wisely while our economy is allowed to thrive.”
One additional short-term (3-month) agreement was executed to allow for a tenant from a previous lease to grow single crop of spinach on 40 acres. That contract, however, had no water use provisions.
Written by Marta L. Weismann