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FRBSF
WEEKLY LETTER
January 2, 1987
Irrigation and Water Quality
The availability of water has long been an
important issue in the West. In California's fertile
Central Valley, imported water allowed agricultural activity on a scale that was impossible
when farmers relied on deep water wells. More
recently, water quality has b~come as important
an issue to California agriculture as water
quantity.
Farmers in the Central Valley have long known
that repeated irrigation of their crops can cause
salts to build up and to damage the quality of
their soil. In the last few years, it has become
apparent that in some Cases the measures taken
to alleviate the salt problem have caused the
trace element selenium to accumulate in concentrations that threaten wildlife.
The area currently affected covers 42,000 acres
that produced $41.6 million in crops in 1984, of
which over half was cottonseed. Other important products included tomatoes, melons, alfalfa,
and sugar beets. This part of the San Joaquin
Valley represents only .13 percent of California's
farm acreage and .29 percent of the state's agricultural output, but at least 500,000 additional
acres in California could become embroiled in
the same issues. This Letter describes the origins
of the problem and discusses potential solutions
and ways of financing them.
Historical background
The extensive use of groundwater from deep
wells made the original agricultural development of California's San Joaquin Valley possible.
By the 1950s, the supply of groundwater was
seriously depleted and other water sources were
needed for intensive farmingto continue.
Moreover, repeated irrigation on the west side of
Fresno County had caused enough salt to
accumulate in the soil to preclude growing tree
fruits and grapes. Because the surface water
used in irrigation naturally contains salts, it adds
to the already saline soil of the region by leaving
traces of salt in the soil upon evaporation. If the
soil is left untreated, the salt accumulates until
the soil becomes useless for growing many
crops.
The salt can be leached from the soil by applyinglargeamounts of irrigation water. Without
drainage, however, the resulting saltwater sits in
the root zone of many crops because an impermeable layer of clay in the San Joaquin Valley
prevents the water from percolating further
down.
In 1960, Congress passed the San Luis Act
authorizing construction of an extensive irrigation system in the Westlands Water District
(WWD), which serves 942 square miles in western Fresno and Kings counties. The Act required
the federal and state governments jointly to construct drainage facilities that are crucial for
alleviating the salt problem.
The San Luis Drain was to begin about 25 miles
southwest of Fresno and deposit the drainwater
some 200 miles north into the San Joaquin
Delta, which runs into the ocean through San
Francisco Bay. Kesterson Reservoir, which stood
near the halfway point, was supposed to regulate the flow of water to the Delta. The State of
California was unable to raise the funds for its
contribution to the drainage effort, but the
federal government began the project on its
own. Between 1968 and 1975, an 85-mile
stretch of canal was constructed between the
Kesterson site and the southern end of the
planned drain.
Meanwhile, the California Department of Fish
and Game entered into an agreement with the
WWD to manage wildlife at Kesterson subject to
the restriction that the reservoir's primary purpose be to manage drainwater on its way to the
Delta. The potential toxic effects of selenium on
wildlife were not considered when the reservoir
and wildlife refuge were established. Indeed,
selenium tolerance levels for wildlife and
humans still are not well-documented.
A combination of financial and environmental
problems stopped work on the San Luis Drain in
1975. Federal funds became more difficult to
get, and questions arose about the future repayment of federal loans. In addition, environmentalists expressed concern about the potentially
FRBSF
harmful effects of releasing the drainwater into
the Delta. They argued that the massive amounts
of water entering Delta waterways from the San
Luis Drain could considerably alter the ecosystem by making parts of the Delta more saline.
As a result, the finished San Luis Drain was an
85-mile canal that ended at the Kesterson Reservoir, rather than the planned 200-mile canal
through Kesterson into the Delta.
The selenium problem
By 1982, a wildlife monitoring program revealed
that fish in the Kesterson Reservoir had elevated
levels of selenium in their bodies. In 1983, water
fowl deformities and deaths were linked to toxic
levels of selenium. The selenium, which occurs
naturally in scattered pockets of San Joaquin
Valley soil and is harmless in small amounts,
was being leached out of the soil and carried in
the San Luis Drain to Kesterson,. where it
accumulated at dangerously high levels.
In 1984, a petitioner asked the U.S. Bureau of
Reclamation (USBR) and other regulatory agencies to enforce water quality standards in the
Kesterson Reservoir. If drainage continued, concentrations of selenium, and other trace elements, would increase and further endanger
wildlife.
u.s.
In response, the
Department of Interior and
the WWD agreed in 1985 that drainage to Kesterson Reservoir would have to end. Affected
farmers could mitigate the need for drainage
immediately by conserving irrigation water or
recycling their used irrigation water. If these
practices by themselves did not stop the flow of
drainwater to Kesterson, the underground drains
that flowed into the San Luis Drain had to be
plugged by June 30, 1986. At present, all drains
have been plugged at WWD expense.
On-farm management
The current situation is unsustainable. Conservation and recycling can mitigate the soil and
water quality problems only to a limited extent.
Reducing irrigation to the point where drainage
is no longer required causes salt to accumulate
in the soil, while recycling irrigation water
causes salt and trace elements (including
selenium) to accumulate in the recycled water
and ultimately also in the soil. Farmers therefore
can recycle water only a limited number of
times, and even then must face the problem of
disposal. The useful life of drainwater can be
extended by mixing it with fresh water in subsequent applications, but adding fresh water
creates additional drainage needs.
These problems are severe as the USBR estimatesthat,with no drainage system, farming in
the affected areas will no longer be feasible in
about ten years.
Farmers could mitigate problems to some extent
by altering crop patterns. For example, they
could plant more crops that tolerate high concentrations of salt to alleviate the need to flood
and drain the soil. The affected area already produces many relatively salt-tolerant crops, including cotton and grains, but most of these crops
are oversupplied worldwide. As a result, their
prices are so low that further increasing production is not economically feasible.
Other solutions to the water quality problem are
more draconian. They include stopping the
delivery of irrigation water altogether and halting agricultural production. Stopping irrigation
deliveries, however, would likely deplete
groundwater without eliminating the salinity and
selenium problems that currently exist. Stopping
production is technologically feasible, but
would destroy local farms and communities.
A less extreme solution being considered calls
for taking out of production only th.e land in
which selenium exists. However, the soil testing
in progress is not exhaustive enough to determine the exact location of all selenium deposits.
Moreover, the tests conducted so far indicate
that this solution would require a large amount
of land to be taken out of cultivation.
Long-term solutions
Long-term farming in the area formerly served
by the San Luis Drain will require environmentally safe resumption of drainage. Current proposals fall into two general categories: environmentally safe disposal of wastewater and treatment of wastewater to remove harmful agents.
Most of the alternatives calling for disposal raise
environmental issues similar to those that have
led to the current situation. For example, disposing wastewater either in the Delta or in Monterey Bay would raise the same kinds of
questions that halted completion of the San Luis
Drain ten years ago. Alternatively, disposing
drainwater either in evaporation ponds on farms
or in more remote areas raises the same possibility of selenium toxicity among wildlife that
closed the Kesterson Reservoir just a few months
ago. The danger would likely be less severe
because alternative disposaLsites that are not
nesting areas could be chosen, although the
problem of potential toxi{:ity would remain. In
addition, each of the options being studied
would cost a minimum of $85 million, and
some could run as high as $225 million.
Treatment may provide the more promising
alternative although it too involves high costs.
Actual costs would depend largely on the standards established for treated water. For one technology, called reverse osmosis, capital costs
could vary from $27 to $148 million, while
operating costs could be anywhere from $980 to
$2,200 per acre-foot of water treated. For comparison, the market value of water has been estimated at $100 to $200 per acre-foot. Several
other water treatment options also exist, and
WWD is now conducting research on lower cost
alternatives to determine their effectiveness.
More information is required before reasoned
judgments can be made about the effectiveness
of various options. It already is clear, however,
that any long-term solutioR that allows environmentally safe agricultural land use will involve a
major investment.
Financing the changes
Historically, the federal government has borne
much of the responsibility for water projects in
the West, but that arrangement appears to be
breaking down. The WWD has agreed to pay
some of the costs associated with establishing a
new drainage system that includes safe disposal
or treatment of wastewater. Each year for the
next 20 years, WWD will set aside $5 million to
be used for its 35 percent share of up-front construction costs (to a maximum of $100 million).
In addition, the WWD will pay all operating and
maintenance expenses for the life of the project.
Participating farmers could well end up paying
for much of the cost, but some other funding
sources are available. For example, California
voters approved a bond measure last June that
allows water districts to borrow up to $20 million to research water management techniques.
WWD currently is using some money borrowed
under this program to build and study a smallscale selenium treatment facility.
Another potential funding source is the sale of
water. The federal government recently gave
local water districts permission to sell their
water. The market value of water is estimated to
be $85 to $192 per acre-foot greater than the
price WWD pays for it. However, because
federal government subsidies reduce the WWD's
cost, any profits from water sales would likely be
split between WWD and the federal
governrnent.
Resolving the water quality problem in an
environmentally and economically feasible
manner poses difficult problems and will involve
considerable expense. The resolution of immediate issues faced by the WWD will be watched
closely because the roles that farmers, environmentalists, water districts, and the federal governmentplay in the solution are likely to set a
precedent for similar problems when they arise
in the future.
Carolyn Sherwood-Call
Opinions expressed in this newsletter do not necessarily reflect the views of the management of the Federal Reserve Bank of San
Francisco, or of the Board of Governors of the Federal Reserve System.
Editorial comments may be addressed to the editor (Gregory Tong) or to the author .... Free copies of Federal Reserve publications
can be obtained from the Public Information Department, Federal Reserve Bank of San Francisco, P.O. Box 7702, San Francisco
94120. Phone (415) 974ยท2246.
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BANKING DATA-TWELFTH FEDERAL RESERVE DISTRICT
(Dollar amounts in millions)
Selected Assets and Liabilities
Large Commercial Banks
Loans, Leases and Investments' 2
Loans and Leases 1 6
Commercial and Industrial
Real estate
Loans to Individuals
Leases
U.S. Treasury and Agency Securities 2
Other Securities 2
Total Deposits
Demand Deposits
Demand Deposits Adjusted 3
Other Transaction Balances4
Total Non-Transaction Balances 6
Money Market Deposit
Accounts-Total
Time Deposits in Amounts of
$100,000 or more
Other Liabilities for Borrowed MoneyS
Two Week Averages
of Daily Figures
Amount
Outstanding
Change
from
12/10/86
12/3/86
204,152
183,867
51,512
67,115
39,558
5,595
12,746
7,539
209,256
56,507
39,204
18,822
133,927
65
40
468
19
119
2
67
43
1,008
- 1,043
- 13,640
129
165
46,830
269
32,021
25,132
Period ended
12/1/86
-
Change from 12/11/85
Dollar
Percent!
-
-
5,572
3,498
237
1,068
1,366
182
1,978
96
6,049
5,749
4,839
4,022
3,721
93
23
70
-
32
2,030
6,137
1,370
Period ended
11/17/86
66
63
3
, Includes loss reserves, unearned income, excludes interbank loans
Excludes trading account securities
3 Excludes U.S. government and depository institution deposits and cash items
4 ATS, NOW, Super NOW and savings accounts with telephone transfers
S Includes borrowing via FRB, TT&L notes, Fed Funds, RPs and other sources
6 Includes items not shown separately
7 Annualized percent change
2
1.2
-
2.9
11.3
14.0
27.1
2.7
2.2
1,023
Reserve Position, All Reporting Banks
Excess Reserves (+ )/Deficiency (-)
Borrowings
Net free reserves (+ )/Net borrowed( -)
-
2.8
1.9
0.4
1.6
3.5
3.3
18.3
-
16.0
5.7
@FedFRASER