Farms face ruin as groundwater law takes its toll

SPECIAL REPORT: This is the second of two stories about the impact of California's Sustainable Groundwater Management Act on farmers in the San Joaquin Valley. Click here to read the first story.

By Caleb Hampton

Last month, on the final day of his almond harvest, Amrik Singh Basra sat outside his Madera County farmhouse, cradling a heavy folder. The documents, sent by his bank during the past several months, were an ultimatum: Pay up or lose the farm. 

Originally from India, Basra came to California in 1980. He worked in trucking for several years before using his savings to buy a small farm plot. In 1997, he bought the house in Madera and the surrounding ranch, where he has lived with his family ever since.   

About one-fifth of the San Joaquin Valley’s irrigated farmland—Basra’s land among it—lies in “white areas” that receive no surface water from an irrigation district. So, like other farmers, he pumped water from the ground to sustain his 100 acres of almonds and 200 acres of winegrapes.

Decades of unchecked groundwater pumping across the San Joaquin Valley yielded a bounty of fruits and nuts matched by few, if any, places on Earth. But it depleted the aquifers, drying up domestic wells and causing sections of land to sink. 

California’s Sustainable Groundwater Management Act, adopted in 2014, gives critically overdrafted groundwater basins such as those in the valley until 2040 to stabilize their aquifers. In 2020, the local groundwater agencies designated to implement the law submitted their sustainability plans, setting the process in motion. 

The pumping reductions needed to reach sustainability are expected to dry up as much as 20% of the valley’s farmland, according to a report published last year by the Public Policy Institute of California.

SGMA’s 2040 deadline was designed to provide a transition period, allowing farmers to see out the lifespan of orchards and vineyards, adjust their cropping or repurpose their land before pumping restrictions—phased in over 20 years—make it impossible to farm in some areas. 

But not everyone has the benefit of a long-term transition. Since 2020, local groundwater agencies have been required to curtail overdraft that causes “undesirable results” such as subsidence and water quality degradation.  

“The reality of the hydrogeology means there are some places where you’re going to have to pump less right away,” said Ellen Hanak, water policy expert at PPIC.

In the Madera Subbasin where Basra farms, “we, unfortunately, have tons of domestic wells that go dry,” said Stephanie Anagnoson, Madera County director of water and natural resources and manager of the county’s groundwater agency. Since 2014, more than 900 dry wells have been reported in the county. 

Pumping restrictions to keep more from going dry have left Basra without enough water to farm, undercutting his ability to pay off investments he made in his land. 

Between 2017 and 2021, Basra borrowed $3.5 million to improve his farming operation. The winegrapes had fallen out of favor, so he tore out the grapevines and planted more almonds. He had been told, erroneously, that SGMA would prohibit drilling new wells, so while he could, he drilled four—at a cost of $500,000 each—to ensure his trees would have water. 

Now, Basra is barred from using the wells to extract all the water he needs—an aspect of SGMA that blindsided him. This year, as his new trees finally came into production, he gave them 6 inches less water than usual. In doing so, he incurred penalties for over-pumping and left the trees parched, producing an undersized crop.

Already insufficient, Basra’s groundwater allocation will drop by more than half by 2040. The limits on his ranch’s farming potential have caused its value to decline from $9 million several years ago to less than $4 million. The entirety of his debt exceeds that amount. Suddenly overextended, Basra’s bank called on the loans, leaving him little choice but to file for bankruptcy. 

“I don’t know what we will do,” Basra said. “We were born and raised in farming. That’s all we know.”

Nick Sahota grows pistachios and table grapes in a white area in Tulare County. Near his farm, subsidence has caused hundreds of millions of dollars in damage to the Friant-Kern Canal, prompting the local groundwater agency to impose some of the valley’s steepest pumping restrictions. 

After planting new trees several years ago, Sahota is millions of dollars in debt, owing money to his mortgage lender, nursery and farm supply companies. With his water constrained, penalties piling up and the value of his land down by more than 70%, he said there is no way forward.  

“I can’t stay in business,” Sahota said. “The banks want their money.”

Arshdeep Singh, director of the Punjabi American Growers Group, said he has worked this year with 10 farmers facing the same fate. He suspects more will follow.

“When we started this organization, our mission was to help growers by providing technical knowledge, trainings and that kind of thing,” said Singh, who grows lemons and mandarins in Fresno County. “I never thought we would provide assistance filing bankruptcies, which we are doing right now.”

SGMA is not solely responsible. Tough economic conditions—high interest rates, rising input costs and low crop prices—have plagued farmers. And within the past decade, a surge in orchard plantings in the valley hardened water demand and limited farmers’ ability to adapt to constraints.

“The typical almond orchard debt is written off over 25 years,” said Richard Howitt, professor emeritus of agricultural and resource economics at the University of California, Davis. “If suddenly you are told you’ve got to clean up your act in the next two years, you’re looking at extremely high stranded costs.”

Pumping limits and a related plunge in land values, Singh said, are pushing indebted growers over the edge. Previously, they could “tap into the equity in their lands and get some money out to get through two or three hard years and get back on track,” he said. “What SGMA did was it took that equity out of the property.”

Policy experts have noted a gulf between the economic toll SGMA is expected to have and a lack, in their view, of resources for affected farms and communities. 

The state has funded some programs to pay farmers to convert land to other uses. But farmers said the available funds are dwarfed by the need.

“They haven’t taken into account the economic cost of implementing this,” Howitt said of regulators enforcing SGMA. 

The three state laws that make up SGMA do not ask the state to consider economic consequences. 

“It is up to the locals to determine those specific impacts,” said Keith Wallace, assistant deputy director of the California Department of Water Resources Sustainable Groundwater Management Office. He added that SGMA does not allow DWR to reject a local sustainability plan “based on the potential economic impacts of its implementation.”

“SGMA is locally driven to allow locals to balance many competing interests, including the economic impacts,” said Edward Ortiz, spokesperson for the California State Water Resources Control Board.

Local groundwater managers said they are doing what they can to soften the blow to their communities. But ultimately, they said, they must prioritize SGMA’s physical criteria or risk the state taking over and imposing its own measures, as it did this year in two subbasins. 

“We’re pretty actively trying to help,” said Anagnoson, the Madera County groundwater manager. “But this is a state law, not a county law.”

Implementation of the law, coupled with anticipated surface water reductions, could result in losses of $7 billion a year in farm revenue, according to a 2020 economic impact analysis by researchers at UC Berkeley. They estimated the region would lose 42,000 jobs and more than $1 billion a year in worker wages, with the impact being “disproportionately large in the valley’s lowest-income communities.”

“This is a freight train,” said Alexandra Biering, senior policy advocate for the California Farm Bureau. “When it hits, it’s going to be extremely painful.”  

Small farm bankruptcies in the San Joaquin Valley, while elevated, have not skyrocketed, though experts said farmers also file for bankruptcy under other categories, making them difficult to track. 

More striking, appraisers said, have been all the distressed properties they’ve seen on the market, such as those facing foreclosure or being sold to pay off debt.

“I’m dealing with that side of the industry much more this year than I have in my whole career,” said Janie Gatzman, owner of Gatzman Appraisal in Stanislaus County, who until last month served as president of the California chapter of the American Society of Farm Managers and Rural Appraisers. “It scares me.”

Facing the loss of his farm and his home, Basra said he has been unable to sleep and has watched the health of family members deteriorate due to stress. The house, the farm, the trees—each row along the lengthy driveway punctuated by a dusty pot of flowers—took decades to accomplish.  

“I worked for this all my life,” Basra said. “Today, I’m going to leave with nothing.”

(Caleb Hampton is an assistant editor of Ag Alert. He may be contacted at champton@cfbf.com.)