Billionaires Seize Critical Water Source
Water prices are soaring in California’s Central Valley, where a quarter of the nation’s food is grown. As the West Coast’s megadrought worsens, one farming company has long been scrutinized for its outsized role in the arid region’s water supply.
Wonderful, the closely held company owned by billionaires Stewart and Lynda Resnick, can buy up huge amounts of water whenever it needs more. Most of the Resnicks’ water comes from long-term contracts and other water from land rights they have from the farms they own. Around 9% of the total water used by Wonderful is bought out on the open water market. While that’s not a huge amount of the water it uses, the company can outspend pretty much every other farmer in the region, and can influence water prices.
“Like all farmers, we occasionally need to purchase water for our crops,” a spokesperson for the Wonderful Company said. “However, we prioritize water rights when purchasing farmland, thus most of our supply is not purchased on the water market. Based on this, we do not believe we have enough purchasing power to impact water prices.”
The water that the Resnicks use gets stored underground initially before the water is delivered to the roots of the Resnicks’ pistachios, almonds and pomegranate orchards. Specifically, it is stored in the Kern Water Bank, the most valuable water resource in a region critical to America’s fresh food supply. The water bank, which is a public-private partnership in which the Resnicks own a 57% stake, is a 32-square-mile recharge basin — which looks like floodlands from the street — that essentially stores up to 1.5 million acre-feet of water or 500 billion gallons, underground.
The Resnicks’ storage arrangement is controversial. “They have been banking water by using public and private dollars to corral a public resource. Because of their water rights and their wealth, they are insulating themselves from the drought,” says Char Miller, the director of environmental analysis at Pomona College. “Private capital has no problem with the drought, while the rest of us do. That’s one of the deep social divides.”
Miller points out that in the same counties where the Resnicks have banked water underground, there are marginalized communities, often made up of migrant farmworkers and immigrants, with little access to public water. “Water has to be brought in on trucks,” adds Miller, who wrote a book on a 1921 flood in San Antonio that spotlighted social inequality. “The power dynamics are essential to this story. The Resnicks are so dominant, and the disempowered communities are at the other end a scale that is tipped mightily against them. When we put the food on our plate, we rarely think about the hands that make it and the situation they are in. That’s an injustice of unparalleled proportion.”
The Resnicks, who became wealthy after setting up a string of businesses in Los Angeles, such as a janitorial cleaning service, bought their first farmland in the Central Valley four decades ago as a hedge against inflation. They eventually transformed those acres into what’s now one of the biggest private farming operations in America, producing seedless lemons, Halo mandarins and wine. Wonderful says it’s the world’s largest producer of tree nuts, America’s largest citrus grower and biggest floral delivery service via Teleflora. It also sells Fiji Water and citrus pomegranate drink Pom. Altogether the company has about $5 billion in sales, and the Resnicks, who split time between Beverly Hills and Aspen, are now worth a combined $8 billion.
Half of American households now purchase Wonderful Company products. The Resnicks own 175,000 farmland acres with nearly 130,000 planted in California alone. Those crops consume an estimated 150 billion gallons of water a year, two-thirds of that on nuts, which would be enough to supply San Francisco’s 875,000 residents for a decade. The Wonderful Company says the estimate is high, but declined to comment further. For comparison, San Francisco uses about 70 billion gallons annually.
They wouldn’t have been able to create such an expansive farming operation without a sweetheart deal that gave them access to the Kern Bank. In 1994, some of Stewart Resnick’s most trusted advisors met with several leaders from southern California water districts and state water officials to broker negotiations, in what some critics have called secret meetings. In exchange for giving up some state water deliveries — which were already vulnerable to not getting delivered in drought times — the Resnicks’ Westside Mutual Water Co. and a group of five public water districts got public land and former farmland and oilfields with major water storage capacity.
The Resnicks’ response to criticism of their majority control of the bank is that they obtained it legally. They also say they have reinvested tens of millions back in programs for their workers in the Central Valley and the broader community, as well as environmental research. The Resnicks pledged $750 million to the California Institute of Technology for climate crisis projects in 2019.
As an asset, the water bank, theoretically, could be one of the hottest auction items of the next decade, one that only increases in value with temperature rise and climate change. Precipitation to the Sierra Nevada mountains, which Californians like the Resnicks rely on for water, is expected to drop by 40% over the next century. Some experts say it’s invaluable.
But let’s put a price tag on it.
In California’s Central Valley, where residential wells have been running dry for months and other producers are debating whether they should rip out nut trees, water prices have risen to as high as $2,000 an acre-foot. (That’s the standard measure for water: the same as the amount of water it would take to flood one acre with one foot of water. It’s the equivalent of 326,000 gallons of water.) As a price comparison, in non-drought times, water can sell for as low as $250 per acre-foot. On the high end, other farmers have sold their future water rights for $5,000 per acre-foot.
The Kern bank says about one million acre feet of water is currently stored, or roughly two-thirds of its capacity, but water recovery is limited to about half of what can be added each year, or 240,000 acre feet per year. In gallon terms, that’s 78 billion, and the Wonderful company doesn’t own all of it.
The range of what the bank could be worth is wide — at $250 per acre-foot, the value of the bank would be roughly $375 million, or about $200 million for the Resnicks’ 57% stake. At $2,000 per acre-foot, the value would be worth as much as $3 billion. That would mean a $1.5 billion water bank for the Resnicks’ controlling stake.
“The Kern Bank continues to be the absolute jewel of banking and recharge in California, bar none,” says Lois Henry, a Central Valley born and bred journalist who founded the nonprofit California water publication, SJV Water.
California recognizes water as a public trust resource, but it has also allowed deep-pocketed corporate interests to commandeer a lot of its water. Alexandra Nagy, California director of advocacy organization Food and Water Watch, says she is keeping an eye out for policies that could favor the Resnicks coming out of California Governor Gavin Newsom’s office. Newsom survived his recall with the Resnicks as a top donor, but he still has the potential to lose his re-election next year. He will have to deliver before then.
“Assets like this that were once in public control and now are in private control need to be returned to the public,” Nagy says. “Especially with climate change and in moments of drought, we need to see trends towards transparency. When we’re having a crisis, that’s when corporate interests take advantage and push their agenda the hardest.”
The water bank, the largest underground water storage facility in California, has been a critical asset for Wonderful over the decades. Climate change makes the Resnicks’ majority ownership of key water conservation infrastructure even more contentious. At this point, who else might be able to control this kind of asset, other than a billionaire?