Investment

A Dry 2021 in California Drives Water Conservation Response | Latham & Watkins LLP

Limited water supply, usage restrictions, and higher costs could be stored for next year if the state’s drought conditions continue.

This year has been extremely dry and hot for California, resulting in déjà vu as federal and state governments have once again taken drought prevention measures not seen since former California Governor declared Jerry Brown to end the last drought in 2017. This blog post summarizes key federal and state actions taken to address California’s drought over the past year, along with potential implications for 2022.

California Federal Drought Response

Pursuant to Section 759.5 (a) of Title 7 of the Code of Federal Regulations, the U.S. Secretary of Agriculture is authorized to designate certain drought -affected counties as disaster areas. On March 5, 2021, U.S. Secretary of Agriculture Thomas Vilsack issued a letter to California Governor Gavin Newsom, designating 50 of California’s 58 counties as “major natural disaster areas due to the recent drought . ” In his letter, Secretary Vilsack explained that a “Secretarial disaster designation conducts farm operations in major counties and that those counties are contiguous with such major counties that are worthy of consideration for some specific assistance from the Farm Service Agency (FSA), as long as eligibility requirements are met. ” FSA assistance includes emergency loans.

While the disaster designation underscores the Biden Administration’s keen attention to the climate crisis, Jeanine Jones, manager of interstate resources with the California Department of Water Resources (DWR), said the bar is set very low to qualify, because the purpose of the disaster designation is to quickly make financial assistance available to [agricultural] producers. ” This is in contrast to a declaration of a drought emergency under the California Emergency Services Act, which carries more significant practical effects.

Just two months later, on May 5, 2021, the U.S. Bureau of Reclamation took additional steps to respond to California’s worsening drought conditions, and announced an update to the 2021 Central Valley Project allocating its water supply, which suspended water service contractors north of -Delta will allocate 5% of their contract supply until further notice.

On August 16, 2021, the U.S. Bureau of Reclamation announced the first-ever water shortage for the lower Colorado River basin due to historical drought and low runoff conditions in the Colorado River Basin. Due to the dramatic drop in water level in Lake Mead (reaching 1,075 feet), a tier 1 deficit was declared. As a result, Arizona, Nevada, and the nation of Mexico are required to reduce their water use in the Colorado River by 18%, 7%, and 5%, respectively. Lake Mead is the largest reservoir in the United States in terms of water capacity and a major source of water for California and the southwestern US. If water levels in Lake Mead drop below 1,045 feet, additional usage reductions will be imposed on Arizona and Nevada, and California will be forced to reduce its use as well.

California State of Emergency Proclamations and Additional Drought Response Measures

On April 21, 2021, due to drought conditions in the Russian River Watershed, Governor Newsom issued the first of four state of emergency proclamations (the April Proclamation) in Mendocino and Sonoma counties. Since then, Governor Newsom has issued three additional proclamations, on May 10, 2021 (the May Proclamation), July 8, 2021 (the July Proclamation), and October 19, 2021 (the October Proclamation), extending the state of emergency drought throughout the state. On July 8, 2021, the same day he issued the July Proclamation, Governor Newsom issued Executive Order N-10-21, calling on “all Californians to voluntarily reduce their water use by 15 percent from their levels in 2020. ”

Newsom’s state of emergency proclamations reveal numerous mandates to combat drought conditions across the state. The proclamations encourage water conservation and indicate a potential need for reduction. For example, the April Proclamation mandated state agencies to work with local water and utilities districts to alert Californians of the drought and “encourage actions to reduce water use” in by promoting “water conservation programs.” Within the Russian River Watershed in Mendocino and Sonoma counties, the State Water Resources Control Board (Water Board) was instructed to consider “adopting emergency regulations to reduce water transfers” under of some limited water supply situations. The April Proclamation also mobilized state agencies to “develop groundwater management principles” to assess and minimize impacts on drinking water wells.

Similarly, the May Proclamation directed the Water Board to consider changing the requirements for reservoir discharges or transfer limits to conserve upstream water next year. Also, under the July Proclamation, to ensure water protection in declared drought counties, the Water Board was instructed to consider “emergency regulations to prevent water transfers when water is not available. available to prioritize the rights of water holders or to protect the discharges of stored water. ” Furthermore, the October Proclamation allowed the Water Board to prohibit water waste activities, including the use of potable water for washing sidewalks and walkways.The October Proclamation allowed also mandates local water suppliers to implement water shortage contingency plans that respond to local conditions and prepare for the possibility of a third dry year.

In addition to conserving water resources, the proclamations aim to protect wildlife and natural habitats. For example, the April Proclamation mandated state and local regulatory agencies to “prepare for and address potential Delta salinity issues” and “manage temperature conditions for the preservation of fish ”in the Sacramento River areas. The April Proclamation also ordered the Department of Fish and Wildlife (DFW) to “take actions to protect terrestrial and aquatic species.” The May Proclamation further mandated the Water Board and DFW to review actions needed to protect native fish in critical creek systems in the state, and the July Proclamation mandated agencies of the state to act to protect salmon, steelhead, and other native fish. These measures demonstrate that California is committed to a holistic approach to drought mitigation, covering both human and environmental water needs.

Recently, on December 1, 2021, DWR announced that the State Water Project will not provide water to California farmers unless drought conditions improve in 2022, marking the first time since 2014 that California farmers got zero allotment for water from the state.

Implications

Although the immediate effects of the federal disaster designation and the state of emergency proclamations on daily water users may be limited at this time, the actions suggest that more severe restrictions water may follow, especially if drought conditions worsen in California and the Colorado River Basin.

If past drought contingency measures are an indication of what the future holds, mandatory water conservation and increased enforcement measures could be in store if the current drought continues. For a detailed review of California’s actions during the 2011-2017 drought, see Governor Brown’s Order of California’s First Mandatory Water Restriction.

In connection with the aforementioned, developers and commercial water users should remain informed about any drought contingency measures that may be implemented by regulators or water suppliers in the coming months. Such measures may limit water supply, restrict when water is available, or increase the amount of water.