Episode 640: The Bottom Of The Well : Planet Money On today's show: the screwed-up economics of drought, and why the rational thing to do in California right now is use more water.

Episode 640: The Bottom Of The Well

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The drought in California has made life inconvenient for a lot of people there in a lot of ways. You hear about people not being able to wash their cars and the brown lawns, people taking slightly shorter showers, sure. But there are places where people's taps, where they get their water, are actually running dry, where you go to the faucet, turn it on and nothing comes out.


And that is happening in a city called Porterville, Calif. It's about an hour south of Fresno. They used to get their water from wells, wells that supplied their homes. And the wells aren't deep enough to reach the water anymore, and their taps actually went dry. They have no water in their house.

SMITH: So what do they do? How do they get water just to live their daily lives?

VANEK SMITH: The city has set up these kind of temporary facilities - portable showers and sinks. I went and visited one. It was in the parking lot of a church. And they kind of look like an airplane bathroom. They had little benches and showerheads and a curtain. And out in the blazing hot afternoon sun were rows of sinks with mirrors. And people come there in the morning and shave before work. It was really grim. And while I was walking around, a car pulled up and Karen Hendrickson rolled her window down.

So what were you hoping to get today?

KAREN HENDRICKSON: Water, today, for our house - the drinking water - 'cause our well is dry, so we come here for support on drinking water.

VANEK SMITH: How long ago did your well go dry?

HENDRICKSON: It's been a year already.


HENDRICKSON: Yeah, it's been a year.

VANEK SMITH: The city is helping Karen out. It dropped a big tank of water off at her house. It sits right next to her house on this little stand, and they fill it up a couple times a month. So Karen can take showers, but the water is not drinkable. Karen can't wash her dishes with it. So she has to come here a few times a week to pick up bottled water - whatever's been donated - for her household.

HENDRICKSON: My daughter, she has twins.

VANEK SMITH: Oh, baby twins?

HENDRICKSON: Yes, a boy and a girl. (Laughter) Yeah.

VANEK SMITH: That must be hard with no water.

HENDRICKSON: Yeah (laughter) it is. It's kind of hard.

VANEK SMITH: How often do you come here?

HENDRICKSON: At least - what? - a couple times a week - me and my daughter. She comes, and then I come, so - 'cause we drink a lot of water - a lot.

VANEK SMITH: Karen asks the security guard, do you have any water today? The security guard says, no, we're out, got to come back tomorrow.

SMITH: The thing that's heartbreaking about all of this is that there is actually water still left in the valley. There is water literally below Karen's home. There's a giant aquifer, and Karen used to tap into it with her well. But the level is getting lower and lower and lower, so she and her neighbors can't reach it anymore. It's like this race to get the water. Karen and the people here lost out on the race.

VANEK SMITH: But there are people still getting this water, people who are still in this race. Not that far away from Karen's house, you see it - acres and acres of lush farmland, corn, cotton, tomatoes, pistachio trees, walnuts, almonds. This is where Karen's water went. Hello, and welcome to PLANET MONEY. I'm Stacey Vanek Smith.

SMITH: And I'm Robert Smith. Today on the show - the screwed-up economics of drought, why the most lucrative thing you can do right now in California is to use more and more and more of the scarce resource, water.

VANEK SMITH: Grow more almonds, grow more pistachios and beat out your competitors to the sweet, sweet water at the bottom of the well.

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VANEK SMITH: Mark Watte farms 3,000 acres in California's Central Valley. And Mark is a very energetic guy, super organized. He likes to tape lists to the steering wheel of his truck.

So is that a to-do list on your steering wheel?

MARK WATTE: It is. It is. Yeah, it certainly is.

VANEK SMITH: We're in Mark's truck, and we're driving across his farm. His fields stretch as far as the eye can see, these beautiful black-eyed peas and corn and pistachio trees, and it's incredibly lush and green. And the reason for this is that Mark's farm sits on top of that aquifer, the same aquifer that Karen's house well used to tap.

SMITH: Except he's better at getting to the water.

VANEK SMITH: He is better at getting to the water. But it's getting harder and harder, even for Mark. The level of the aquifer has been dropping really fast. It's been dropping 10 feet a week.

SMITH: Which is amazing - 10 feet a week.

VANEK SMITH: Ten feet a week. In fact, half of the wells on his 3,000 acres have dried up. He shows me one.

WATTE: That's should be producing water. It's not. Let's see if there's any water in it. This is a good sound. You'll like this.

VANEK SMITH: Mark picks a rock up off the ground, and he throws it into the well, just this little pipe sticking out of the ground. He was right. I liked the sound.


WATTE: Water.

VANEK SMITH: Oh, is that - was there...

WATTE: That was water, yeah. Yeah, so there's water down there, but the pump that was here wouldn't reach that water anymore. We have to deepen it.

VANEK SMITH: Mark is deepening wells as fast as he can, and he's also putting in new wells. He's put in eight at a cost of around $2 million. And the reason for this is all around us - pistachio trees. There are little baby ones he's just planted. They're, like, up to your hip, tied to these little stakes. And there are bigger ones in the next field with big clusters of pistachios almost ready to pick.

These are the pistachios?

WATTE: Yep. Yeah, they are. There you can see it's about half developed.

VANEK SMITH: It's so green.

These little pistachios are very thirsty. It takes almost a gallon of water to grow one pistachio and a gallon of water to grow an almond. Nut trees are some of the thirstiest crops around. And yet, here we are in the middle of a drought and Mark is planting pistachio trees as fast as he can.

Why are you planting so many new trees right now?

WATTE: We just think it's - financially, it's the right decision to make. Once they get up into production, we hope to make good money.

VANEK SMITH: So they're - are they pretty profitable, pistachios?

WATTE: Extremely profitable today. I mean, wildly profitable.



VANEK SMITH: Actually, 10 times more profitable than most other crops. For pistachios, Mark can make $10,000 an acre, for most other crops, $1,000 an acre.

SMITH: The reason for this is both supply and demand. The demand part is that people are eating more nuts. People in China and India are discovering them, and so there's a much bigger market for nuts. But the supply side is also important. The reason why they can make so much money off of these crops is because of the drought. The drought has made pistachios and almonds harder to grow - rarer. And as a result, the price has naturally shot up.

VANEK SMITH: So everyone is planting them. And when you drive through California's Central Valley, it's striking. All of the fields are these new trees. Farmers are ripping out their old crops and putting in nut trees.

SMITH: And they've become so profitable, you hear these stories about hedge funds and big banks buying California farmland and planting almond and pistachio trees because hedge funds and banks have plenty of cash upfront to drill these really deep wells, tap the aquifer, get the water first. And the payoff for them could be huge.

VANEK SMITH: Yeah, it's kind of funny to imagine these bankers looking over maps of California farmland and deciding what crops to plant, but apparently that's what's happening. I talked to a scientist at NASA, a water scientist. His name is James Famiglietti. And he told me he's getting calls all the time from bankers and business people asking him, is this a good time to get into the nut growing business?

JAMES FAMIGLIETTI: People ask me about it all the time, and I do feel a conflict. I generally don't respond (laughter). I don't want to encourage someone to go make a short-term investment that would use up a lot of water. That's just my own personal bias.

VANEK SMITH: So it is a smart short-term investment?

FAMIGLIETTI: Yeah, of course. I mean, anytime there's a dwindling resource - right? - if you can get into the market, sure, of course.

SMITH: And this right here is the problem in California right now. When you have a scarce resource like water, the right thing to do from a public policy perspective is to find ways to conserve it - right? - to make sure there is enough water for everyone. That's the right thing to do. But the market incentive is to use as much water as possible before your neighbors do. You should plant nuts while nut prices are high. That's basic economic logic - go, go, go.

VANEK SMITH: And this is being reinforced by the market right now because crops that do well in droughts, they do not bring in that much money. And if you're running a farm and spending hundreds of thousands of dollars to drill new wells, you're not going to make that money back planting drought-friendly crops. I ran this by Mark Watte, pistachio farmer.

I mean, should you be planting something like flaxseed or safflower here instead of pistachio trees?

WATTE: Oh, I suppose... Should I be planting it? I don't know. I mean, we're trying to make money here.

SMITH: Economists have a term for this race for a scarce resource, this dilemma. And you've probably heard it, even if you haven't taken economics class. It's called the tragedy of the commons. If you have a shared resource - say, a meadow where your cows graze or an underground - people will use as much of it as they can. They will use a public resource until it's gone.

VANEK SMITH: And the reason that they call this a tragedy is not that there are any bad guys in the scenario. It's that actually everybody is acting rationally. It's just that what is good for the individual and what is good for the group are totally different. Take Mark Watte, the pistachio farmer. If he were to cut back his water use, he would just lose out. His neighbors would use the water. Hedge funds would use the water. They would make the $10,000 an acre. And he would be stuck with a bunch of safflower that's not worth very much.

SMITH: Yeah, so Mark keeps drilling deeper. And his neighbors look at that, and they drill deeper too. And this race, this race we're talking about, becomes frantic.

VANEK SMITH: And to stay in this race, you've got to pick up the phone and call somebody like Steve Arthur.

So do you mind reading the back of your truck?

STEVE ARTHUR: Yeah, it just says, Arthur & Orum Well Drilling, Fresno; we leave you wet.

VANEK SMITH: (Laughter) That's amazing.

That's amazing is always what I say when I don't know what to say.

SMITH: (Laughter) I can understand that.

VANEK SMITH: Steve Arthur runs one of the biggest drilling companies in the area. And he actually mostly works out of this truck. He drives it from drill site to drill site all day.

ARTHUR: I get 40 or 50 calls a day easy. I can't even keep track of what the office gets. All the farmers are completely running out of water.

VANEK SMITH: So how long is a wait to get a well drilled?

ARTHUR: Realistically, at least a year.

VANEK SMITH: Wells around here used to be about 200 feet deep. But these days, Steve is drilling wells that are as much as 2,000 feet deep. His company has started buying equipment off of oil drilling companies, like fracking companies, in order to get deep enough to get to the water.

ARTHUR: Years ago, nobody had equipment in the area to go that deep. And modern technology's taking care of that now. So we started drilling deeper up there. And that's when we found aquifers nobody had ever touched.

SMITH: And you know how this ends. You go deeper and deeper. You take more and more water out of an aquifer. Eventually, it is going to go away. And when we talked to the water scientist, we asked him how much is left at this pace. And he said maybe 50 years, 50 years' worth of water in the aquifer - at the outside, a hundred years.

VANEK SMITH: And when I asked him what would happen when the water ran out, what that would look like, he actually referenced the movie "Mad Max."

SMITH: As in people driving around the desert, fighting each other for water.

VANEK SMITH: Thunderdome, yeah.

SMITH: Because that is one of the logical ways that this ends. The water goes away. The wells go dry. And all of a sudden, no one grows pistachios anymore. No one grows anything anymore. We're talking about functionally a dust bowl happening in the Central Valley.

VANEK SMITH: Another ending could be regulation. The government steps in and says, hey, you have to limit your water use. You can only drill this deep. But so far, the state has been reluctant to do that.

SMITH: There is one other option though, one solution to the tragedy of the commons. In fact, there's an economist named Eleanor Ostrom. We've talked about her here before on PLANET MONEY. She won a Nobel Prize for her work on the tragedy of the commons in 2009. And her work showed that sometimes this does not end badly, and sometimes it doesn't end in the government coming in, putting all these rules and regulations in place. She said that people can come together and work out a solution for themselves. They can basically put the interests of their group ahead of their immediate interests, sort of decide not to race.

VANEK SMITH: But this is not easy, as you can imagine, because basically you have to convince people to give up their personal, short-term interests for the long-term interests of the group. And this is not exactly how humans are built. This is not what we tend to do naturally. But I did manage to find some people who are trying it north of Mark Watte's pistachio farm in a town near Sacramento.

GEORGE HARTMAN: Hi, My name is George Hartman. I'm an attorney, lawyer. In Texas, they call us liars.

VANEK SMITH: George has been working with farmers in this area his whole career. And when he looked around, he saw the same thing was happening there as was happening down South. The community was running out of water. Everyone was using as much as they could, as fast as they could. And he thought to himself, this race that's happening is going to end badly. We should get together and try to stop it because sooner or later, the government will come in and limit our water use. We don't when, and we don't know how much. So he got a group of farmers together, about 500 of them, in Stockton, Calif. And he said, listen; I have a proposal. Why don't we voluntarily cut our water use by 25 percent? And if we do that, the government has said it will not come in later and cut our water.

HARTMAN: This way, you get certainty. You know what you can do. You can plan your survival.

SMITH: Which must've been hard for the farmers there because basically, in this community, water is money. Water means crops. Crops mean money. And he's basically coming in and saying to them, I want you to take a 25 percent pay cut.

VANEK SMITH: And a lot of the farmers really didn't want to do that.

HARTMAN: There were a lot of folks who thought it was extortion. They didn't like it.

VANEK SMITH: But in the end, half of the farmers signed up to do this. And Paula Desneyer was one of them.

PAULA DESNEYER: It's costly. And it's not ideal 'cause this is your livelihood.

VANEK SMITH: Paula owns a dairy farm in Lodi, Calif. And she grows a lot of corn for her cows - or her girls, as she calls them. Using 25 percent less water will mean Paula will have to buy a lot of the food for her cows. And that is a lot more expensive. And that means the best Paula's going to be able to do this year is break even. But Paula took the deal because she's been hearing all these horror stories about her neighbors getting their water cut off entirely - as in, the government coming and saying, no more water for you. And the farmers are stuck. Their crops are halfway grown. They have no water to finish them. Still, the decision weighs on her.

Is there a feeling of, like, we're all in this together? I don't know. Is there that feeling at all?

DESNEYER: I think I've felt that way, that I want to do what I - you want to do what you - your part. But you want to make - I hope that everyone is doing their part (laughter) 'cause it is - it is a financial burden.

SMITH: You can hear her anxiety in that laugh because this particular solution to the tragedy of the commons can be brutal. If it turns out that the government does not put any new rules in place, that the government does not make you cut back on your water, then you've just given up your profits for nothing. Like, you will feel like a chump. You cut back, and perhaps your neighbors didn't do it at the same time. Perhaps they kept drinking water while you alone cut back.

VANEK SMITH: And maybe they get to drink more water because you gave up a big portion of yours. George Hartman, the water lawyer, told me this is his biggest fear.

HARTMAN: What are you going to say to the folks who took the hit? And I don't know. I think the answer is, you pays your money; you takes your chances. That's really what it is. And if it turns out that you would've done better not being in the program, OK. But do you want to bet the farm on it?

VANEK SMITH: The farmers started cutting back last month. And so far, people seem to be sticking to it. And it's gotten a lot of people asking, could this work in other parts of California? Is this possibly a solution to the drought? I put this question to Mark Watte, the pistachio farmer with the dry wells. I asked if farmer sin his area might come together in the same way.

Would something like that work here if, like, everybody got together and agreed to use less?

WATTE: You mean as far as don't pump as much or something like that? Yeah...


WATTE: No, I don't see that. I just - that - no, I don't see that. >>VANEK SMITH: How come?

WATTE: I don't know. I just - a group of - number one, you couldn't get consensus. If you had only five farmers, I don't think you could get consensus. If you got 500 farmers, I know you couldn't get consensus. So I just don't think it would be a practical thing to try. I mean, right now, you know, you just - there is water down there. And you've got haves and have-nots, and the haves I don't think will be in a mood to share with the have-nots, so yeah.

SMITH: This was another thing that Elinor Ostrom, the Nobel Prize winner, discovered in her work on the tragic of the commons. For a group to solve this problem on its own, the group needs to be small. That group upstate with the dairy farms, they were fighting over surface water - local rivers and dams. It was a smaller community. The aquifer has thousands and thousands of farmers with their wells sticking down into it. Imagine trusting them all not to take an extra sip from the aquifer - just a little bit - in the middle of the night - no one will notice.

VANEK SMITH: And the government has been making some moves to regulate the drilling and the groundwater, but those regulations won't be in place until 2025. And until then, the water level in the aquifer is expected to keep dropping. Wells will keep drying up. Mark Watte, the pistachio farmer, drove me to one of his wells that is just about to go dry.

WATTE: Well, this is a pump that has - was put into service in 1946. It has faithfully produced water. And it is now surging, which means the equipment that's lifting the water is right at the level of where the pumping water level is. And I expect a week from now, it will not be functioning anymore and it'll be dry. So it's just another one that has - is going to go by the wayside here quickly.

VANEK SMITH: What does it feel like to see it doing that?

WATTE: I purposely don't drive by it. And when I do, I look the other way.

VANEK SMITH: As I was driving around the farm with Mark, I kept asking him over and over why he's doing what he's doing. Why he keeps drilling deeper and deeper wells and why he keeps, at the same time, planting crops that need so much water. What is the future here? And he told me there is still a lot of water left in this aquifer, and he thinks things will turn around. He kept telling me, it's going to rain next year, it's going to rain next year.

SMITH: And it might very well rain next year. Not that that's going to replenish the aquifer, but it could make things slightly better. I think in order to be a farmer anywhere at any time, you have to have this optimism that maybe things will be better next year, maybe there will be more water. And maybe, there's a small chance he's right.

VANEK SMITH: Or maybe that's just what you tell yourself while the tragedy plays out.


VANCE JOY: (Singing) Lady, running down to the riptide, taken away to the dark side, I want to be your left-hand man.

SMITH: As always, we love to hear what you think of the program. Email us - planetmoney@npr.org. Or you could tweet us at @planetmoney. I'm personally @radiosmith.

VANEK SMITH: And I'm @svaneksmith. Our episode today was produced by Frances Harlow and Jess Jiang.

SMITH: And NPR recommends that you listen to Alt.Latino. Alt.Latino is a weekly introduction to the latest Latin alternative music. Their most recent episode looks at popular songs chronicling the escape of Mexican drug kingpin El Chapo - sounds awesome. You can find Alt.Latino at npr.org/podcasts and on the NPR One app. I'm Robert Smith.

VANEK SMITH: And I'm Stacey Vanek Smith. Thanks for listening.


JOY: (Singing) I just want to, I just want to know if you're going, if you're going to stay. I just got to, I just got to know. I can't have it, I can't have it any other way. I swear she's destined for the screen, closest thing to Michelle Pfeiffer that you've ever seen, oh. Lady, running down to the riptide, taken away to the dark side...

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