Water & Power: A California Heist (2017) Script

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♪♪ MARK ARAX: There's probably no landscape in the world that has been more manipulated than California.

(explosion)

From the very beginning, it was about capturing water and moving it from where it was to where it wasn't.

♪♪ Because of that manipulation of water, a great civilization has risen.

We've created two world-class cities --

Los Angeles and San Francisco.

And in the middle, we created the most fertile farm belt the world's ever known.

♪♪ But with the growth of suburbia, the growth of agriculture, and the demands of the environment, all those things are putting immense pressure on this system.

And the system has started to crack.

♪♪

♪♪ They've been pumping and pumping and pumping from these aquifers that have taken hundreds if not thousands of years to build up.

Water has become gold.

To be traded and sold and we're extracting it in the same way.

But it's not enough.

The more water we need, the more water we will always need.

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♪♪ NEWSCASTER: California officials are putting mandatory restrictions on water use in place.

REPORTER: California is now in its worst drought since the 1970s.

NEWSCASTER: The hardest-hit area in the entire state, Tulare county.

NEWSCASTER: This is the town without water, East Porterville is ground zero in the California drought.

A 21st century dust bowl.

♪♪ RUBEN: Okay, right there.

♪♪

♪♪ That's good.

DONNA JOHNSON: Thank you.

♪♪

♪♪

♪♪ Where we're going on this street is close to the main river, which is called Tule River.

And if you go down the streets and you see tanks or boxed water to the house they're out of water.

And I thought I'd be doing this for three months.

But, um, it's been almost three years now, and Ruben's been helping me for the last year and a half.

Ruben's also out of water.

♪♪

♪♪

♪♪ DONNA: Hello!

RUBEN: Hola, Como esta?

GUILLERMINA: Bien, bien. (speaking Spanish)

DONNA: She has been without water ever since I've been doing this, for three and a half years.

This is what they had.

And they have to haul their water from the fire station over here, and other places where they can get the water.

(sighs)

GUILLERMINA: Thank you so much.

Donna is an angel.

If she hadn't started bringing us water I don't know what we would have done.

♪♪

♪♪ MICHAEL LUNSFORD: Any kind of water you want to drink around here is gonna be bottled water.

I mean it's a battle every day, how you're going to wash your hands.

How are you going to wash your face?

How you gonna take a shower? How you gonna cook?

How you gonna drink?

How you gonna do dishes?

That's another big thing too.

You'd have to load up tubs to take them over around the corner to wash them and then bring them back, and then they get dirty, and bacteria just builds up, so paper plates, that's the bottom line.

Yeah.

GUILLERMINA: We came from a poor country, Mexico. where there isn't enough to live.

There's a lot of violence and a lot of murders.

We came here for the American Dream.

But really, it's a nightmare to live like this.

And in a supposedly rich country?

But, honestly, it's not.

It's worse than Mexico.

There's plenty of water in Mexico.

But here? None.

MICHAEL LUNSFORD: This is where we catch our water, so we can flush toilets.

Get up in the morning, take two bottles of rainwater, put it in the coffee pot.

My fiancée will come in.

She'll help me wash my hands.

Then we'll take this water, recycle it, put it in a bucket out there, until it gets enough 'til we can flush the toilet.

MARINA ZENOVICH: What about showering?

MICHAEL LUNSFORD: Well, usually, we have to go into town, uh, to one of my friend's house, and if I can't go to my friend's house, you'll see some guys, that, there's ads, even on Craigslist, to be able to take a shower, five bucks to take a shower, that kind of stuff.

That's what kind of place it is around here.

SARAH ERVIN: It's been really rough.

Um, when you have to go places to take showers or wash your hands with bottled water.

It gets -- it's draining.

(chuckles)

MICHAEL LUNSFORD: People are oblivious to the way we have to live out here.

And my fiancée and I, we haven't even thought about starting a family, because of no water.

I mean if you can't barely take care of your home, how can you take care of a family?

The struggle is real.

We all can relate.

And you might not have known your neighbor's name before.

Now you do because you have to go borrow a cup of water instead of a cup of sugar.

I don't really know if there is a bad guy.

Mother Nature's dry, but there's so much agriculture going on.

I mean, when your next-door neighbor has orange groves for miles, how much water do you think he's using to grow his oranges?

That's it, really.

♪♪

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♪♪ MARK ARAX: For the last four years, everybody has been very desperate in California for water.

And the image that has been projected to the world is that California has become dry.

That the land has turned to sand.

That we're parched.

But this is not true, because for the past four years in the midst of this drought, agriculture has recorded record crops each and every year.

(overlapping reporters)

So the question becomes how they manage to do that.

♪♪

♪♪ MAN: The great valley of central California lies almost in the center of the state.

A long time ago, this whole area was a great gulf.

This soil is rich.

Given enough water, it could produce bountiful harvests.

Millions of acres would have remained a barren waste if the men who settled this part of the great valley had not used their knowledge and strength to irrigate the land.

(explosion)

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♪♪ JONAS MINTON: In California, dirty water deals have been part of its history since before its statehood.

WOODY WODRASKA: In the 1860s, the United States sent John Wesley Powell a famous surveyor, to survey the West.

And he uttered the words, "whoever controls water will control the West."

JONAS MINTON: And there's an iconic movie, "Chinatown," about Los Angeles's appropriation of water for its uses.

And the nefarious things it did to obtain it.

JJ GITTES: Gonna be a lot of irate citizens when they find out that they're paying for water they're not gonna get.

NOAH CROSS: Oh, that's all taken care of.

LOIS HENRY: Water is power.

Water is power and water is money.

You don't have an industry, you don't have a town, you don't have agriculture unless you have water.

MARK ARAX: That's why we're having these water wars between urban, agriculture, and environmentalists.

I call them the tribes of California, the tribes of the north, the tribes of the middle, the tribes of the south.

MAN: What do we want?

AUDIENCE: Water!

MAN: What do we want?

AUDIENCE: Water!

JERRY MERAL: Southern Californians have always felt that they are part of overall state.

Just the state of California we're all working together as one state, as Pat Brown said many times.

Northern Californians feel like those in the south are just trying to take their water, damage their economy, and ruin their environment.

MARK ARAX: We have this fundamental disparity, because more than two-thirds of the rain falls in the north and almost two-thirds of the population resides south of the rain.

And so we have this great middle of California, the great fertile middle, except for it does not have consistent water.

How do we get the water on a consistent basis to the middle?

PAT BROWN: How do we move California ahead?

How do we make the challenges, seize the opportunities of California's growth?

JERRY BROWN: The State Water Project was an idea that had been kicking around for quite some time.

And the Democrats held off from doing anything until my father became governor.

JERRY MERAL: The State Water Project was Pat Brown's pet project.

Maybe even more than the university or the highway system, and those were big deals.

Pat Brown wanted to tie the state together with an aqueduct, making the whole state interdependent.

PRESIDENT KENNEDY: It is a pleasure for me to come out here and help blow up this valley in the cause of progress.

(laughter)

(explosion and applause)

♪♪ PAT BROWN: Today the dirt is flying, a river 700 miles long -- the largest project ever undertaken by an American state.

I don't think you have any idea of how proud I am of this great dam.

MARK ARAX: We ended up building major dams on the Sacramento River and taking that flow, part of the flow of the Sacramento River and moving it to the interior of California so that land could blossom into garden.

MAN: The valley supplies 25% of all the food eaten in the United States.

It's the richest agricultural valley in the world.

MARK ARAX: This is a land of agricultural giants that depends on water, a public commodity, to grow their crops.

50% of the state water flow basically goes to Los Angeles.

25% goes to the west side of Kern County.

JERRY MERAL: Those are the two big contractors for the State Water Project, so they had had a long history of working together and fighting!

They were always fighting because who's going to pay what and when and what their rates are and so on.

MARK ARAX: That State Water Project, as those waters flowed in the '60s and '70s, you saw basic desert land, scrub land on the west side of Kern County turn into prime agriculture land.

But that farmland was all in western Kern, where there was no groundwater.

So then that land becomes wholly dependent on the State Water System.

ROGER MOORE: We had a pretty wet period through the 1980s, but then we had several years of drought, taking us into the early '90s, that increased the tension between agricultural and urban state water contractors, over the shortages that inevitably developed.

MAN: In California, the snow pack is way below normal.

Runoff down drastically.

Many reservoirs are half full.

CONNIE CHUNG: This is the second year of low rainfall.

NEWSCASTER: California is in the fifth year.

TOM BROKAW: The worst drought in 50 years.

MAN: It's definitely a crisis mode.

It's an emergency mode.

MARK COWIN: We were facing a crisis within the State Water Project.

Water supplies had been reduced to all State Water Project contractors.

And the original contracts required us to cut deliveries to agricultural water contractors first.

JERRY MERAL: Farmers did not like that because when a drought year came along they got a cut, and the cities continued on with their water supply.

MAN: Water is power in the American West.

And arguments about sharing it are not easily settled.

TOM CLARK: The fight over water in this county started more than 100 years ago, that's for sure.

JONAS MINTON: Tom Clark was a legendary ram rod in California water politics.

The term actually comes from the tool used to pack powder into muzzle loaders.

It's called the ram rod.

And he would use every technique to advance Kern's interests.

TOM CLARK: In 1991, our allocation for the State Project was zero.

The impacts locally were more than $250 million, 12,000 jobs lost.

JONAS MINTON: Kern County Water Agency threatened to sue the State of California to recover millions and millions of dollars unless there were some changes in the contracts.

So they, uh, pressured, some might almost say extorted, the state for these changes.

TONY ROSSMANN: The Monterey Agreements were conducted with most people not even realizing that they were going on.

In a sense that was the fundamental, in my view, flaw of the process -- it was done in secret.

Those who participated can be, I think, divided into two categories, those who sincerely felt they were serving the people of California, and those who were serving for themselves.

MARK ARAX: The group was split between representatives of big agriculture, led by Tom Clark, and urban water users represented by Tim Quinn and Woody Wodraska.

The Department of Water resources represented the state.

TIM QUINN: For all of my metropolitan water district years and my years at ACWA, I've told my staff, war is easy, collaboration is hell.

WOODY WODRASKA: Every one of these meetings felt like maybe we'd take two steps forward at one of these meetings and then we go back to square one.

Finally I was -- said, "Look, I know I'm the new guy here, why don't we look at bringing in a third party, mediator, facilitator?

Let somebody else see if they can get us off of the square we seem to be stuck on."

(muffled arguing)

JIM WALDO: The first meeting, everyone took turns insulting each other, I'd like to talk to you about your mother and her behavior, or, you know, your dad was a loser.

You're a son of a bitch, but, ya know, I do wanna hear what you have to say.

And so at the second meeting, Tom Clark, who was the general manager from Kern County Water Agency, had been to a rummage sale, and he said "Here, I think you're gonna need these."

(clangs cymbals)

TIM QUINN: And it was amazing, we were like pavlovian dogs, we immediately changed our behavior.

JIM WALDO: That meeting I had to use the cymbals 15 times.

TIM QUINN: He knew we could never agree, because the project only has so much water to allocate.

And if Kern wanted more in dry periods, uh, that would mean someone else got less.

And, by the way, we didn't know we were about to rewrite the entire state water contract.

We thought we were trying to solve an allocation problem.

MARINA ZENOVICH: Was the Kern Water Bank part of that meeting in December of 1994?

JIM WALDO: It had been -- it had been discussed leading up to that.

MARINA ZENOVICH: How did it first come up?

JIM WALDO: Uh...

JONAS MINTON: During the Monterey Amendments, Kern had one other leverage point in the deal.

In the 1980s, the State of California started looking for opportunities, places, where water could be put in the wet periods to be drawn out in the dry periods.

JERRY MERAL: The concept was that when you had high flows in the delta, you would pump them down to Kern County because there's huge empty groundwater reservoirs there because the water has been pulled out of there for decades and it left a hole, basically, underground.

So we said, "Let's store it underground, and then when a drought comes, pump it back out, just like a piggy bank."

JONAS MINTON: Farmers in Kern County said, "Wait a minute.

This could be a really good thing.

It's called a groundwater bank.

Well, it's good to own banks.

Banks make money for people."

Under a particular state law, in order to operate that kind of reservoir, a groundwater reservoir, it requires approval of the locals.

And Kern County said, "We're not going to ever approve you operating that project."

So even after the Department of Water resources had spent over $70 million to develop it, Kern County Water Agency held the project hostage.

ROGER MOORE: The original vision of water banking that the state had developed was cast aside in favor of giving this major state asset to the local water contractor who then turned it over to a nominally public but privately dominated joint powers authority.

TIM QUINN: So this was truly historic and we knew it.

We knew all of us had a better future.

JIM WALDO: Tom Clark said, "Well, my mama didn't raise a fool."

(laughter)

Take it.

MAN: All right people, to California!

♪♪

(printer printing)

♪♪ JOHN GIBLER: Some people gave a tip to Public Citizen, a Washington DC-based non-profit organization about what appeared to be some shady water deals going on in -- in central valley of California.

You know, the first thing I did was I looked up the Kern Water Bank online.

Google was in its early years more or less -- 2003.

Well, it turns out it's largely controlled by something called Roll International.

And when I called their headquarters and asked to speak to a public relations person, they said they didn't have one.

And I said, "Well, to whom should I address any research questions?

They said, "We don't give information to the public, we suggest you don't research us," and hung up.

So I drive down to Bakersfield and then follow the directions out to the address.

And I'm a little bit confused because the sign outside says Paramount Farming Company, not Kern Water Bank Authority.

Walk in the front door and ask the receptionist, "Um, is the Kern water bank -- do you know where that office is?"

"Oh, yeah, they're just down the hall," they said.

It's like, "Okay."

The Kern Water Bank is a supposedly public entity.

And the members are a number of different water districts, water agencies, water storage districts, and also a private company called Westside Mutual Water Company, LLC.

And I remember asking, "Who are they?"

"Well, they're landowners."

"Well, what land do they own?"

"Well, they represent their own land."

They didn't want to mention the name Paramount Farming, which was notable considering where we were sitting, which was inside Paramount's office building.

It seemed as if this was a case of extremely valuable public property, um, an essential element of the State Public Water System, which had essentially been given to a very wealthy private, uh, company.

But really just one landowner, one corporate farmer.

♪♪

♪♪ MARK ARAX: Rafaela, this is Mark Arax.

How you doing?

RAFAELA: Fine, thank you.

MARK ARAX: Uh, so I'm headed to Lost Hills, and I'm hoping you can join us to start trying to figure out a little bit about the town. -RAFAELA: Fine.

MARK ARAX: Oh, wonderful.

Okay, well we'll be at Gabby's I would think in about 45 minutes.

RAFAELA: 45 more minutes? Okay.

MARK ARAX: Okay, bye-bye.

She's an activist in town.

Really a good, good, good source.

She's in Lost Hills.

And that's the company town of Stewart Resnick and Paramount Farms.

It's a Latino town, very impoverished.

It's an example of the haves and have-nots of -- of -- of California.

That's the California Aqueduct right there.

And these are the fields of Resnick's right here.

Almonds, real pretty right now.

All the petals have dropped.

It looks like snow has fallen.

♪♪ In the early 2000s, I was working for the Los Angeles Times and Kern County was part of my beat.

And as John Gibler was finishing his study for Public Citizen, I started pursuing my own story about the Kern Water Bank and how water, a public commodity, had been privatized.

Stewart Resnick, the owner of Paramount Farms, was at that time the biggest grower in the valley, but no one really knew who he was.

And in a series of interviews with me six, seven years back, he described himself as a carpetbagger.

STEWART RESNICK: Look, you're the only person I've ever given an interview to. MARK ARAX: Yeah.

STEWART RESNICK: And I've gotten plenty of calls from Forbes and Business Week and Fortune.

I say, "No, I don't give interviews."

MARK ARAX: Yeah.


The way he had done it was leveraging profits from the Franklin Mint, which he owned.

COMMERCIAL: No one captures Princess Diana like the Franklin Mint.

Mint the moment.

MARK ARAX: And he started purchasing these large swaths of land in West Kern in the late 1970s.

And remember, Western Kern has no groundwater, so it should have never been developed as farmland.

But Resnick's a gambler, and he had a vision to move California's water from where it was to where it wasn't.

Resnick wasn't in the room at the Monterey Agreements, but Resnick's main water man, Bill Phillimore, had a major, major role.

And the Water Bank was identified, and smartly so, by the Resnick people as something that they wanted.

This was one of the prizes of that negotiation.

TONY ROSSMANN: Paramount Farms got a 58% control of the Kern Water Bank -- one of the world's largest groundwater banks, that the state of California could operate at its discretion to relieve drought.

So it was really a gift from the people of California to Stewart Resnick.

JOHN VIDOVICH: The people who were involved in the Bank, they shouldn't have allowed it to concentrate so much with one person.

This was a government-owned asset, and they were privatizing it.

But I do not blame Stewart for being able to grab a big part of the water bank.

I don't blame him.

The issue is proper distribution of the water that benefits the state as a whole.

That's the issue.

JOHN GIBLER: Since the Monterey Amendments, the Resnicks doubled their acreage in production.

MARK ARAX: Now they're the biggest grower of almonds, pistachios, and pomegranates in the country.

LYNDA RESNICK: People didn't know what a pomegranate was, but once they found out, they sure wanted it.

MARTHA STEWART: Cheers! LYNDA RESNICK: Cheers, darling.

JOHN GIBLER: Today, Stewart and Lynda Resnick are number 129 on the Forbes list, with a net worth of $4.2 billion.

And politicians love the Resnicks, who hand out $50,000 checks.

Democrats, Republicans, Gray Davis, Arnold Schwarzenegger.

Like, you know, they gave to everybody.

MARK ARAX: Resnick has now emerged as the new King of California.

COMMERCIAL: Pom Wonderful, pure pomegranate juice is.

MARK ARAX: The marketing is unique.

He's not a farmer.

He's a capitalist.

COMMERCIAL: On command.

MARK ARAX: In a way Resnick also owns the word wonderful, not to mention Fiji Water and some other concerns.

♪♪ The taxpayers had put a lot of money into this, and without that water bank, that land would continue to be scrub land, desert.

So, Resnick has been able to extract millions and millions of pounds and tens of millions of dollars off the fields of, uh, Lost Hills.

And you wonder how much of that is going back to the workers.

♪♪ What I'm trying to do is get all these big guys and lift the veil on what they're doing.

Because to me this is really ground zero of the drought.

And when I first wrote about Paramount and the Resnicks, they got some bad publicity for this being like a third world company town, and that affected them and Lynda Resnick decided that she was going to do something about it.

LYNDA RESNICK: I had no idea what I wanted to do.

But I had reached a moment in my life where I had to give back in a meaningful way.

MAN: Welcome, everybody, to your new park.

STEWART RESNICK: We have a lot of things here to celebrate today.

But I think we're going to get off of here and let you have a little fun.

WOMAN: Companies don't do things like this.

Why would a company want to invest so much money in a town?

It's a huge deal.

MARK ARAX: Rafaela, I know you feel grateful to the Wonderful Company and they have done things that no farmer will do.

RAFAELA: Yes. MARK ARAX: There's a park now.

RAFAELA: Yes, I know. MARK ARAX: The roads are better, there are some houses.

But the wages are still minimum, and the water is still a problem.

We don't drink the water from here.

We don't even like it for the dishes.

Sometimes it comes with arsenic.

MAN: Arsenic. RAFAELA: Arsenic, si.

MARK ARAX: So the farm workers don't have water to drink, but the trees have plenty of water to drink.

Oh, I know where you're going. Yeah.

So the water you do get to shower.

How much does the irri-- is it -- is it -- how much does the water district charge you a month for the water that's no good to drink?

$69, it cost $69.

A month? RAFAELA: Yeah.

MARK ARAX: Wow.

ROSANNA ESPARZA: Hola, Como estan?

MARK ARAX: Hello. (Rosanna speaks in Spanish)

Tell me are you drinking the water here?

Do you drink the water?

(Rosanna translates in Spanish)

(Father speaks in Spanish)

(Rosanna translates in Spanish)

ROSANNA ESPARZA: Uh-uh, they take their five-gallon down to the store.

MARK ARAX: How come you don't drink the water from the tap here?

(Mother speaks in Spanish)

ROSANNA ESPARZA: Um, it's chlorine.

MARK ARAX: A lot of chlorine? ROSANNA ESPARZA: And and they put some kind of bleach, uh, Clorox into the water.

(Mother speaks in Spanish)

ROSANNA ESPARZA: And when you shower it, you can smell the chlorine.

♪♪ JOHN GIBLER: The myth is that as the agribusiness benefit, the communities benefit.

MARK ARAX: How's the water at the school?

Do you guys drink the water at the school?

GIRLS: Nooooo, it's nasty! MARK ARAX: It tastes like mud?

GIRLS: It tastes nasty, nasty, it tastes like...

JOHN GIBLER: But in the case of the Resnicks even with their slide-show-ready charity, no, you see that the Resnicks jump up the Forbes list of billionaires and the workers can't even drink their tap water.

♪♪ And the ironies couldn't be sharper because the California Aqueduct literally flows through town, delivering high quality, dirt-cheap, subsidized, Northern California rain water to the fields of Paramount Farming.

♪♪

♪♪ But it's not an aberration in the system, it's the whole model.

It's not designed or geared to build communities and to treat people well, it's designed and geared to make money.

♪♪

♪♪ GARY PATTON: It was near the end of the year in 1995, and I get a phone call.

It's a woman, I've never met her before, says she works for the Department of Water Resources.

She says, "Are you aware that this terrible thing is happening?"

And so she was a few blocks away, she walked right over.

And we found out about what was going on.

♪♪

♪♪

♪♪ The woman from DWR felt that the state had betrayed a sacred trust to the people.

She said, "Look, this isn't right.

Shouldn't somebody challenge this?"

The key violation that I immediately saw was the California Environmental Quality CCT, CEQUA, it requires environmental analysis for anything if it even "might" have an impact on the environment.

TONY ROSSMANN: Under California law, the environmental impact report should have been written by the Department of Water Resources since they were the ones who for the previous 35 years had been running the State Water Project.

But in fact, it was parceled out to a parochial water district on the coast near Santa Barbara.

And as it later turned out, done so because the water contractors did not trust the staff of the Department of Water Resources to go along with the shell game.

It took us four years because there was what I'll call some

"big tobacco litigation techniques" carried out by the state and by the contractors.

ROGER MOORE: It doubled our resolve to make sure that the public would never, ever be left in the dark the way they were when the Monterey Amendments were originally executed and implemented.

♪♪

♪♪

♪♪ ADAM KEATS: Unfortunately it's more of the same, right?

They checked the boxes and they're moving on with their decision they made 20 years ago.

But what do you expect?

Great, yeah, we'll see you there, thanks, bye.

I love the underdog, I love the fight.

Fighting corporate power, fighting big money.

But water law, especially in California, is an absolute nightmare.

And only the sickest and most depraved lawyer would want to do this. I really believe that.

Because it's like a priesthood.

This is like the, you know, middle ages in the Catholic church.

They have made this as complicated as they possibly can in order to keep people like me from messing with their golden goose.

♪♪

♪♪

♪♪ I watched the movie "Chinatown" a long time ago.

And in "Chinatown," I mean. there's the whole film noir plot that goes along with the theft of water up in the Owens Valley.

It's about destroying the farming economy, destroying the environment.

Just to fuel speculative real estate growth down in Los Angeles.

And I realize, it's the same fight that's been going on since the '20s.

What we're talking about is -- people with power, people with money, getting what they want in terms of public resources, while people without power are cut out of the conversation.

The folks who run this, the big power brokers and the state, they regard the Monterey Amendments as being this crowning achievement -- this great, wonderful, negotiated truce between these conflicting interests.

But what it really is is taking water for private use.

But one of the cardinal sins committed by this gang, was they tried to squeak through this environmental review by this, not even, I wouldn't even say obscure, like an unknown water agency.

And for a project this big, it's inconceivable to me that they did that.

I mean this is a massive project.

It affected how much water is in the delta, how much water goes to almond trees, how much water goes to subdivisions.

I mean, I guess the state was hoping there was going to be no sucker that was going to file a lawsuit to try to figure that out.

Because doing a fake sham environmental review is breaking the law.

So this is where their weakness is.

This is the bread crumb.

♪♪ Monterey Plus is a lawsuit that I've been litigating now for the last past five-plus years.

And the only thing stopping us from being able to reverse the transfer of the Kern Water Bank and reverse the Monterey Amendments is just getting judges to recognize their role.

Because the law was broken.

And we're not talking about family farms.

We're talking about massive scale industrial agriculture.

2% of the economy in the state, 80% of the water.

Um, there's a reason for that.

Consolidation of power, big money, how do I convert water into money?

♪♪ LOIS HENRY: Water is a very complicated issue --

The rights and the deals that people make.

People call me up and they just have this sense that, somebody's getting rich off of our water and it ain't us.

♪♪ In 2001, I started seeing sales of excess water from this agency or that agency, or to this thing, you know, environmental water account, never heard of it.

♪♪

♪♪ DOUG OBEGI: In the early 2000s, the government came up with the Environmental Water Account, where they would pay water districts not to divert water.

LOIS HENRY: So, they put out a call to various agencies --

"Do you have any excess to sell?"

So, the Kern County Water Agency said, "Sure we do.

How about if you pay us $200 an acre foot for that."

DOUG OBEGI: The Kern County Water Agency was one of the big beneficiaries of this basically scam to get paid to sell water back to the government at three or four times the price that they bought it for.

MAN: State taxpayers paid nearly $200 per acre foot for water from Kern County that was purchased for the environmental account, the same water local water agencies initially paid $86 for from the state water project.

LOIS HENRY: They were trying to say, "well, pumping costs, pumping costs."

And I'm like, well, there wouldn't be any pumping costs!

JONAS MINTON: None of it actually moved, it just stayed right where it was.

But they got the money.

MAN: According to the Times, no one benefited more than the companies owned and controlled by Beverly Hills billionaire Stewart Resnick, who owns Paramount Farms.

Some $50 million, all told.

JONAS MINTON: But there was nothing illegal about what they did.

Because most of what they do is legal because they write the rules.

♪♪

(sirens wailing in distance)

REPORTER: This morning the starkest water restrictions in the history of the state are being implemented.

REPORTER #2: Californians now ordered to reduce water consumption by 25% or face hefty fines, but critics point out the agricultural industry, responsible for 80% of California's water consumption, left mostly spared by the new restrictions.

NEWSCASTER: Governor, one of the criticisms of this executive order has been that you did not make the same demands on the agricultural industry, which certainly has enormous political clout.

80% of the water used by agriculture, but accounts for less than 2% of the economy. Is that true?

JERRY BROWN: Uh, yeah, you bet it's true.

But by the way, they're not watering their lawn, or taking long showers.

They're providing most of the fruits and vegetables of America.

Now, if you don't want to produce any food, and import it from some other place, uh, theoretically you could do that.

But that would displace hundreds of thousands of people, and I don't think it's needed.

♪♪ JAY FAMIGLIETTI: We use most of our water for agriculture, absolutely --

80% around the world.

And if you're a farmer and you have a free resource, water, you're going to plant the crop that's going to bring you the most money, even if it's incredibly water intensive, it doesn't matter because you're basically getting the water for -- for free.

MAN: Scientists agree, it takes about one gallon of water to make just one almond.

And last year central California almond growers produced 1.8 billion pounds of almonds.

That's more than three times the amount of water used in Los Angeles every year.

ADAM KEATS: We've heard a lot about almonds in California.

An almond is admittedly a convenient boogeyman, because it's a remarkably inefficient use of our scarce water supplies.

Why is San Joaquin farming growing a bunch of stuff that we don't need to grow?

We don't need to grow almonds.

They're all for export -- a vast majority of them are. They're not essential.

They shouldn't be grown here in California, and yet they are because these guys control the water, and they're seeking the most profit they possibly can out of the resource that they control.

♪♪

♪♪ JERRY BROWN: We have a whole society that is drenched in unsustainable activity.

Because modern capitalism operates on more, on growth, on never-ending abundance.

But with water, we don't manufacture it.

So it's gonna have to be used, uh, carefully, wisely.

JOHN VIDOVICH: We are over-planted.

We're definitely over-planted.

And that includes Stewart Resnick.

He's probably gone down to 40% of what he had in a water supply.

And that's why anywhere where I have groundwater, I pump groundwater.

Groundwater is a huge resource for farmers in California.

♪♪

♪♪ JAY FAMIGLIETTI: In California, groundwater rights are based on whether you own the property.

If you own the property, at least for now, uh, you can drill a well and pump as much as you want, even if it means you're drawing in water from beneath your neighbor's property.

JOHN VIDOVICH: Remember right now, groundwater is still not regulated.

And so everybody is pumping as much as the ground will yield.

♪♪ JAY FAMIGLIETTI: One of the consequences of large amounts of groundwater pumping is we call it subsidence.

The ground literally sinks.

And the reason it sinks is because the water that's in the aquifer actually provides support at the surface, keeping the structure of the aquifer intact.

And when you pull the water out, the actual rock layer compresses.

And at the surface then what you see is the ground sinking.

In many places in the central valley, we see that the ground actually sinks as much as a foot and a half to two feet per year.

Think about the infrastructure that's sitting on top of that.

Roads, bridges, homes, they're all at risk.

And that's what's happening in many parts of the world.

Over half of our major aquifers are being depleted.

It's crazy, and no one is talking about that.

♪♪

♪♪

♪♪ CAROL ROWLAND: Oh, my God.

Look at how far up that thing is.

HAROLD ROWLAND: Yeah, the higher it is the less water you have in the tank.

I mean, if it ever goes up to half way.

We don't use any water at all. No water.

You can usually tell how much water is in here... by running your hand up.

That's hot right there.

That means there's no water in there.

It cools off right in here.

Somehow, we used a lot of water today.

Anyway... that's all I can do.

♪♪

♪♪

♪♪ CAROL ROWLAND: My name is Carol Rowland, and my husband and I, we've been here since 1974.

We've gone through all the droughts that have been around.

And we had never had trouble with any of the other droughts that we lived through.

In May of 2013, my husband came up from our water tanks, and he said, "We're in trouble."

It was obvious there wasn't water in there, and it seemed to be that it was slowly seeping in.

This was at the start of the dry season.

So, we thought, well, let's just see.

Let's just try and get through the summer and see where we're at.

So we immediately cut back on a lot of our water use.

We lost our lawns, we lost our garden.

I took much shorter baths, not every day.

We extended our period for washing our clothes, we wore them a lot longer.

And we were in a real bind.

We couldn't afford to drill a new well.

I think, at the time it was like, would have maybe been, $30,000.

My husband and I, we're retired. This is -- this is it.

We don't have stocks and bonds and thousands of dollars, you know, we're just people.

And then we thought, well, maybe we'll just move.

But then how do you sell your property if your well's gone dry?

It's really upsetting because these big companies, they're not connected to the land.

It's an investment for them.

They're looking at water as a commodity.

And, you know, it's not a commodity, it's a human right.

It should be a -- humans should have a human right to safe water.

REPORTER: Paso Robles sits atop a huge underground aquifer residents thought would keep wells flowing forever.

But growing grapes and growing population are stressing the aquifer.

WOMAN: They're having to drill a lot more wells to deeper depths in order to get the water they need to irrigate the crops.

REPORTER: Your well has run dry? MAN: Yes, it's completely dry.

REPORTER: He says it started when a big vineyard was planted at the end of his street a year ago.

MAN: When they started drilling, we could see the changes.

The water pump would just shut off.

We all draw water from the same basin.

LOIS HENRY: Regionally, I mean, we're all one aquifer.

So those straws are all sucking out of the same milkshake.

♪♪ ADAM KEATS: I've been watching the battle here in Paso Robles develop, but not having any actual connection to it.

And out of the blue, I got a phone call from an activist down here, who said, "Hey, you know, we saw your name on a lawsuit, that's associated with, you know, this guy Stewart Resnick, who's buying land out here and we want to know what's going on.

Can you tell us what's happening?"

What I've been hearing is that the water banking community seems to have a very big interest in Paso Robles.

And based on our experience with the Kern Water Bank, I mean, you gotta understand, 1995, '96, '97...

Kern Water Bank is actively being developed and privatized with no one having any idea that it was happening.

No one admitting it, no one talking about it.

All closed doors.

And so we're not going to get burned a second time.

GPS VOICE: Right turn at the end of the road.

You have arrived at your destination.

GREG McMILLAN: Welcome!

ADAM KEATS: How's it going, Greg?

GREG MCMILLAN: All right, good to meet ya.

ADAM KEATS: Good to meet you.

I'm looking forward to this tour.

This is all new for me, so I'm looking for you to show me around and show me what's up.

GREG MCMILLAN: I can probably do that.

ADAM KEATS: All right.

GREG MCMILLAN: My mother came here in 1928.

She came across the San Joaquin Valley from Arkansas with her family.

And when they got to Shandon, they thought that they had gone to heaven.

Because everywhere you looked it was a pipe coming out of the ground with water flowing out of it.

And she, you know, they had just come up across the desert and to see that was just mind boggling.

So this is the first evidence you'll see of the California aqueduct.

This concrete thing sticking out of the ground down here.

ADAM KEATS: All right. GREG MCMILLAN: That's a vent.

And then it follows the road and goes right up here.

ADAM KEATS: So this is all state water, this is all the spur-line property right over here.

GREG MCMILLAN: This-this-this property now is Harvard land.

ADAM KEATS: Oh, they bought the land on top of this thing?

GREG MCMILLAN: Yeah, Harvard offered millions for this property. ADAM KEATS: No kidding.

GREG MCMILLAN: They tried to buy everything.

ADAM KEATS: But how do we know that Harvard's not just in it for the grapes?

GREG MCMILLAN: Well, we don't.

But I don't see the money to be made on wine itself that will pay for the infrastructure they're putting in. ADAM KEATS: Yeah.

GREG MCMILLAN: They're in it for the wine now, and they're using the wine as an excuse to drill all these wells and do all this stuff.

And that's what we're running into now all over the world, is, ya know, big corporations are buying the rights to all these quote, quote commodities.

And the fact remains that legally, what's irrigating those plants and what is underground, belongs to all the people. ADAM KEATS: Yeah, yeah.

GREG MCMILLAN: Because everyone depends upon it.

ADAM KEATS: Right.

GREG MCMILLAN: And Mark Twain hit it years and years ago.

You know, he said, whiskey's for drinking and water's for fightin'. ADAM KEATS: Yeah.

GREG MCMILLAN: And it's just, I mean, there's just not, not enough water left. ADAM KEATS: Yeah.

♪♪

♪♪

♪♪ GREG MCMILLAN: This is just the easiest place to see the quantity of water that they need to make all this thing happen for them.

For a period of time, they'll get all the water they want.

Sucking it out at that level, it's going to deplete sooner or later.

ADAM KEATS: Right, wow, it's as clear as day coming out here looking at it. GREG MCMILLAN: Yeah.

♪♪ ADAM KEATS: What I find so fascinating about Paso Robles is this is not just about the use of the water itself.

My theory is is that this is being engineered as the backbone of a securities industry, based on water.

And what we see happening right now, we see Wall Street investment groups going in, we see hedge funds going in.

We see the big players, the Resnicks, Roll International, Harvard.

We see them all going in and acquiring mom and pop, and family wineries, that are strategically located at specific spots, over the aquifer.

Because they're in the deepest part of the aquifer so they get the longest straw, they get the most water, and then they can take it out and they can sell it on the marketplace.

Just like Enron was doing with energy.

That's what the game is.

And I heard it said that one of the major buyers of land in the Paso area, when asked why he bought one of the wineries, said, "You know, we're not in the wine industry.

The wine's the cover crop.

The water's the valuable thing in Paso."

And people who live there now I think are starting to realize, they might have a chance of stopping it from happening.

CAROL ROWLAND: I hope people wake up in time, because all over the world this is happening.

We need to realize, you know, we can't keep doing this because there's consequences.

And this is just our version of it in one little corner of the world, so.

♪♪ SCOTT SLATER: Is water the new oil?

It is as important or more important than oil.

And there is unbounded enthusiasm from Wall Street to be invested in finding the solutions to the nation's water problems, in fact the world's water problems.

MCKENZIE FUNK: What happens when you put the free market on something?

It flows to the highest bidder.

And and in a market like that, the poor never are the highest bidder.

The little guy is never the one who can buy the water.

But the biggest banks, haven't figure out how to directly invest in water rights.

So they invested in farmland all over the world.

Because water is heavy and if you can just buy the land and grow the food there and then ship the food around the world, you've solved the problem in another way.

SCOTT SLATER: There are people who are suspicious of that conduct, wondering whether that agricultural investment is really a beard to trying to take water for an urban use at a later date.

The view is that a private company cannot be a steward of a public resource.

I believe this is false.

I went to Australia in 1997, and Australia as a nation had decided that they needed to revamp their country's water laws.

They wanted to put together markets.

They wanted to be more efficient.

MCKENZIE FUNK: After Australia copied the Californian water system, they took it further, and they made what is probably the freest market for water rights anywhere in the world.

I visited this stock market room where there were bank of computers and traders looking at satellite images on Google Maps and doing these spot trades of one rancher's water to another very quickly, just like you could imagine Wall Street wanting to have happen in California.

SCOTT SLATER: What a market does is I can find somebody who's using water for a less economic use who is willing to sell that water to me, or that right to me, so I can continue my business.

MCKENZIE FUNK: It worked. On one level.

And what happened in Australia's drought?

Water trading made it so that those who could pay the most were able to buy water from the poor people who were selling it.

And it was the little farmers, the small towns, that suffered.

You could see "for sale" signs at every house.

It was unbelievable.

Suicide rates were very high.

There were psychologists sent out to treat what they called

"solastalgia," which is missing a sense of place.

It's the shrinkage of these -- these towns.

SCOTT SLATER: You have the haves and have nots.

And that's the story of the three little pigs.

The party who made the investment in the brick house wants the benefit of living in the brick house.

And the house made of straw which developed on water rights and didn't pay for 'em, um, has to take what they get.

And that is what we call the misery index.

Who will bear the risk of the shortage?

♪♪

♪♪

♪♪ NEWSCASTER: From drought to floods, our planet is changing.

And the forecast calls for another hot year.

NEWSCASTER: Governor Brown has said the State Water System won't be providing water to farms this year.

NEWSCASTER: Farmers in the San Joaquin valley are worried.

MAN: There will be a lot of guys that go broke this year.

NEWSCASTER: And a lot of farm workers who will be out of work.

♪♪

♪♪

♪♪ MARK ARAX: So we're just south of Lost Hills, and we're in the middle of an almond orchard owned by the Wonderful Company.

And they've decided that they need to get rid of some of their almond orchards.

And so they're going to be pulling out

10,000 acres of almonds and fallow the land because as much water as they have, they don't have enough to sustain all the agriculture they're doing.

♪♪

♪♪ Hey, sorry to bother you. How's it going?

So what are you doing?

Are you stacking these all up for the shredder?

WORKER: Yes.

MARK ARAX: So this, is this the biggest job you've ever been on?

MARK ARAX: So this is the first time you've taken out live healthy, green trees.

MARK ARAX: Doesn't seem to make sense, huh?

MARK ARAX: Yeah.

♪♪

♪♪ What's remarkable is, up until just a few weeks ago, the Resnicks, they were able to essentially defy the drought.

Hook, crook, borrowing from the water bank, squeezing out all they could, pushing this system to its ultimate limits and keeping this agricultural machine unlike any in the world going.

But there's a transformation going on, and it's starting small, taking out 10,000 acres of almonds.

Farmers in other parts of the valley have gone to the groundwater and sucked up massive amounts...

...but they're not in a sustainable situation.

They're farming probably triple the land that they should. over-drafting the water.

And at some point big agriculture has to ask itself, how big can it get?

♪♪

♪♪

♪♪

(inaudible chatter)

MAN: (indistinct)

♪♪

♪♪

♪♪ TIM QUINN: So let me start with the fact that SGMA really is just a big deal.

It's been argued that it's the most important legislation related to water in a century.

With the power to measure, the power to regulate, the power to tell you to reduce pumping, the power to put a fee on your pump, uh, these are scary things to a lot of water users, but our intention was to change the dynamic.

♪♪ MARK COWIN: Landowners knew that the game was up.

We can't keep on the track we're on.

And it really did take I think this four years of historic drought to sort of change the mentality.

ADAM KEATS: It's great that we have groundwater legislation in California finally.

Um, there's a lot of good I think in -- in -- in the statute.

But the great tragedy, the absolute great tragedy with SGMA, is its incredibly long lead in.

Uh, the fact that it doesn't really get implemented for

20 years.

DOUG OBEGI: There is certainly a fear that we're closing the barn door after the horses left the farm.

20 years is very difficult to swallow.

We're gonna have far worse problems.

And we're seeing, even today during the drought, we're seeing new businesses come in.

Hedge funds, insurance companies, large agribusinesses, buying land that's never been irrigated, planting new crops entirely dependent on groundwater, knowing that they have a 20-year window to get a return on investment.

JAY FAMIGLIETTI: Look, in some places it's literally a race to the bottom because there are many farmers that are trying to do things now, right, before the management kicks in.

♪♪

♪♪ TONY ROSSMANN: On more than once in my career I've been advised that you simply are underestimating the motivating power of greed.

And, uh, you know, we like to think of, you know, "Chinatown" as part of the historic past, that we've somehow grown up and we look on our resources more responsibly.

But the power of greed and the fact that control of water represents political control and financial control almost require their proponents to find a way to fudge the truth or conceal the truth.

(crickets chirping)

(gunfire)

♪♪

♪♪

♪♪

♪♪

♪♪ MARK ARAX: A week ago, a source told me about a secret transfer of water going on out here.

Somebody moving water miles and miles across county lines.

The pipeline apparently extends underneath the county road and moves from Kings County to Kern County, from the Dudley Ridge irrigation district to the land of Resnick.

And, in a sense, this is the further privatization of water.

And it's controversial because California is gonna start regulating groundwater.

So, not sure it's legal yet, but I gotta find it to make sure that it's there.

Son of a (bleep), that's it right there.

♪♪

♪♪

(laughs) This is classic, man.

(pipe clangs)

This is called "Lake Pipe," from "Rain for Rent."

Gotta love the irony.

(hitting pipe)

I don't hear anything in there right now, but this is here, extending all the way from Dudley Ridge through Resnick pomegranates.

You gotta give 'em credit.

How do you prop up a 150,000, 200,000 acres of farmland?

You gotta find inventive ways to move the rain.

This is a method to pump more groundwater and move it across county lines into here.

And it's following the meander of the California Aqueduct.

My source had told me this was moving water this winter from Mr. Vidovich's farm to Mr. Resnick's farms.

And I think this is all set up to continue to move water through this next year and probably beyond.

So he's selling the water.

And it's desperate. This is a desperate measure.

It's quite something.

♪♪ Vidovich has a lot of farmland here in the valley.

He's purchased a lot, but he really isn't a farmer.

He's a water broker. A water developer.

And he's buying all these parcels to really pump that water out of the ground, which has a real effect on the farmers in each of those areas.

♪♪ Oh, that's a lot of water.

CHARLES: Yeah, right above it.

MARK ARAX: Okay!

That's how these trees are staying alive.

Right there.

Just the water coming out of that pipe.

Is it greed?

Yeah, it's greed.

All in the name of moving that water for agriculture.

Where it's coming from it's probably 15, 20 miles further.

Now we've gotta find out if it's just crazily audacious or if it's illegal.

♪♪ JOHN VIDOVICH: I am moving well water to Dudley Ridge.

Now, I know one of the recipients of that water is Paramount.

Uh, where it goes from there?

I don't know.

If you mix water, you can't say that mixed water can't go somewhere else.

But that is a temporary pipe, and I believe Resnick put that out of desperation to keep some of the trees alive.

These are doing pretty good.

It's painful to watch somebody who's worked hard and built a very great empire decrease it.

He was somebody that was riding on the top, but now it's -- it's tough for him.

He depended on the state system having surpluses.

He invested in the Kern Water Bank so he could put the surpluses in there.

But the real problem now is there's no water to put in it.

That's a tough deal.

♪♪

♪♪ My business approach right now is to... acquire as much water as I can to be diversified in water.

And, you know, at some point, in time that water is in risk of going to an urban area because the urban places would pay a hell of a lot of money for it.

So if I can't make that money on that water farming, I will sell it eventually to an urban area.

And that's a right I have.

If they pass a law saying I can't sell it, then I can't sell it.

But that's, that's the way it is.

That's business.

♪♪

♪♪

♪♪

♪♪ ADAM KEATS: About a month ago, the draft environmental review for the Kern Water Bank came out.

That's the environmental review that we fought so hard to get with our lawsuit.

And we're currently in the 45-day comment period.

And at the end of that process, DWR will be supposedly reviewing the comments and considering the testimony of people.

Thank you for having the hearing.

I appreciate, the folks here who are here to witness democracy in action.

We believe that the Kern Water Bank was the...

They are trying desperately to dodge responsibility for the, I mean, really significant environmental impacts.

But they can't avoid the facts -- that the transfer of the Kern Water Bank is related to the obscene growth of nut farms and almonds, pistachios in California.

We don't know how DWR is going to react to this document, but we're going to be fighting this thing.

♪♪

♪♪

♪♪

♪♪

♪♪

♪♪

♪♪

♪♪

♪♪ MICHAEL LUNSFORD: We are getting running water today.

Yeah, we are finally getting running water today.

♪♪

♪♪ MAN: This is a tank one indicator.

It'll let you know how much water is in your tank.

MICHAEL LUNSFORD: Okay. MAN: And so if a pipe or anything busted, you notice any water or something, you shut your main line right here, shut these guys off.

MICHAEL LUNSFORD: Okay, how long till we can flush?

MAN: You can go check right now.

MICHAEL LUNSFORD: Go check it right now?

Let's do it!

(toilet flushes)

I'm surprised the guts still work.

It's been so long since they worked.

(shower hisses, sputters)

As you can tell, the lines are so clogged up that I have two mists coming out of here.

I gotta get a whole new shower head.

Yeah, we have water!

I'm gonna wash my hands, how about that?

This is amazing.

It really is, and I got lucky, but you got a lot of people here that don't have water still, so the only thing I could say to everybody out there --

Don't take it for granted.

It will be gone and won't be here forever.

You're going to be next, just watch, you're going to be next.

♪♪

♪♪

♪♪

♪♪

♪♪ OTIS REDDING: ♪ In the beginning ♪

♪ You really loved me, oh ♪

♪ I was too blind ♪

♪ I could not see, now ♪

♪ But now that you left me ♪

♪ Oh, how I cried, I keep crying ♪

♪ You don't miss your water... ♪

♪ 'Till your well runs dry ♪

♪ I kept you crying ♪

♪ Sad and blue, oh, my, oh ♪

-- Captions by VITAC --