California lawmakers urge Justice Department to investigate ‘drought profit’ as water prices hit historic highs

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California lawmakers are mounting calls for “urgent action” from the US Department of Justice to investigate potential water crimes as the state battles supply shortages and drought.

The bipartisan group told U.S. Attorney General Merrick Garland that alongside continuing concerns about possible “drought profits” and water theft, concern is growing that “fraud and manipulation of the market” are already limiting the very limited availability of water.

“We believe this manipulation is causing water prices to spike and could soon cause food prices to spike,” four lawmakers, including Democratic Senator Melissa Hurtado and Republican Assemblywoman Suzette Valladares, wrote on Wednesday. , in a letter to Garland.

Lawmakers have not identified who might try to raise prices in markets where hedge funds, landowners and government agencies trade rights for water flowing to residential customers, commercial users and agricultural interests. In the letter, they raised concerns that big landowners could use questionable groundwater data from private consultancy firms to manipulate small farmers into selling their land.

The topic has enormous political resonance in a state whose water conflicts date back to the gold rush of the mid-1800s, especially with the Los Angeles area facing unprecedented supply cuts in the worst drought in the American West in 1,200 years.

Water prices in California hit an all-time high of $1,233 per acre-foot Wednesday on the Nasdaq Veles California Water Index, which tracks the average price of water rights transactions across five markets across the country. State.

More supply cuts are underway as policymakers scramble to come up with plans to avoid worst-case scenarios for cities, agriculture, industry and wildlife.

The drought is also taking its toll as water districts across the state begin setting the framework for new groundwater use rules. This effort is a potential boon for water consultants as local authorities try to master the crucial water data needed to frame regulations.

“California’s water story reminds us that it’s not just investors who are to blame for fraud or market manipulation and that we need to consider the role professional advisory firms play in our bottom line. on water,” lawmakers including Democrats Dave Cortese and Freddie Rodriguez said in the letter. .

The Justice Department did not immediately respond to requests for comment.

Three months ago, State Senators Hurtado and Cortese sent a letter to the Justice Department calling for an investigation into potential profits from drought in western states. Their letter of May 17 said that “hedge funds and monopolistic companies” are negotiating water rights in a detrimental way.

In April, federal prosecutors charged the former superintendent of a California water district with stealing more than $25 million worth of water over nearly a quarter century by diverting a leak in a canal from the central valley and then selling it.

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