Wyden's Klamath Bill: More welfare for the Irrigation Elite

One would have thought that benefits conferred on federal irrigators - and their captured agency, the US Bureau of Reclamation - by the the two Klamath Water Deals (The older KBRA and newer Upper Basin Agreement) would have been enough. After all, not only has Reclamation already used taxpayer funds to implemented many of the costly "benefits" for federal irrigators included in the KBRA, but Congressional backing for the Deals would essentially insulate federal irrigation, the growers it serves and 40% of the total diversions from the Klamath River Basin from tribal water rights claims. Additionally, if Wyden's Bill were to become law, the Klamath Tribes' claim to flows in the Klamath River would be relinquished. That claim is the only practical path to achieving restoration flows in the Klamath River.

Senator Wyden apparently did not believe the Deals benefited the Irrigation Elite quite enough, however. And so he added a new special interest tax break to the legislation he authored. Tacked on at the end of Wyden's Senate Bill 2727, the Klamath Basin Water Recovery and Economic Restoration Act of 2014, is a section titled "MODIFICATION OF TAX EXEMPTION REQUIREMENTS FOR MUTUAL DITCH OR IRRIGATION COMPANIES." That part of the bill would amend Section 501 of the Internal Revenue Code; section 501 is the part of the Code which defines which organizations "shall be exempt from taxation under this subtitle."
Here the substance of the new tax break:
           "In the case of a mutual ditch or irrigation company or of a like organization to a mutual ditch or irrigation company, subparagraph (A) shall be applied without taking into account any income received or accrued (I) from the sale, lease, or exchange of fee or other interests in real property, including interests in water, (II) from the sale or exchange of stock in a mutual ditch or irrigation company (or in a like organization to a mutual ditch or irrigation company) or contract rights for the delivery or use of water, or (III) from the investment of proceeds from sales, leases, or exchanges under subclauses (I) and (II),..."

Wyden's Klamath Bill would apply this tax exemption "without taking into account whether its member shareholders have one vote on corporate governance matters per share held in the corporation." In other words, the irrigation districts would not have to be organized democratically in order to qualify for the tax break. Many irrigation districts provide for voting based on the number of acres an individual member owns or controls; that type of voting typically results in a few rich and powerful members of a district controlling the district. In the Klamath River Basin the Tulelake Irrigation District is an example of an irrigation district where those who control the most land control the district.

 Overview of the Tulelake Irrigation District which includes 

the Tule Lake NWR within its boundaries

Reclamation's Klamath Irrigation Project is composed of a number of "mutual ditch or irrigation companies" including the two largest and most powerful - the Tulelake Irrigation District and the Klamath Drainage District. It appears, however, that the new tax break Wyden wants for irrigation districts would apply nation-wide and not just within the Klamath River Basin.

Why Ron Wyden, who claims to be a Democrat, would seek a new special interest tax break at a time when President Obama is calling for cutting similar tax loopholes in order to lower the tax burden on working Americans is a good question. It is a question which reporters should be putting to Senator Wyden. But, as far as KlamBlog can tell, not only have reporters not asked the question, they have not even reported that the new tax break is in Wyden's Klamath legislation. That prompts KlamBlog to wonder once again what has become of the Fourth Estate: Why can't we count on reporters who cover the Klamath to keep us well informed? Furthermore, why can't the citizens of Oregon count on their media to inform them when their senator proposes a new tax loophole?

Farmers or water brokers?

The text of Wyden's tax loophole for the Irrigation Elite reveals why outfits like the Tulelake Irrigation District want it. Here's that text again:

           "In the case of a mutual ditch or irrigation company or of a like organization to a mutual ditch or irrigation company, subparagraph (A) shall be applied without taking into account any in come received or accrued (I) from the sale, lease, or exchange of fee or other interests in real property, including interests in water, (II) from the sale or exchange of stock in a mutual ditch or irrigation company (or in a like organization to a mutual ditch or irrigation company) or contract rights for the delivery or use of water " (emphasis added)

In other words, if this legislation becomes law, irrigation districts nation-wide would be able to lease and sell water and avoid paying taxes on the profits from those transactions.

Agricultural entities which control water want to be able to sell that water to whomever they please. To that end the Farm Bureau and other Ag groups have been working for decades to convert water rights from "use" rights tied to the land into unencumbered property rights. If it becomes a property right water can be commodified: bought, leased or sold without regard for the old western tradition of tying water rights to the land on which the water is being put to beneficial use. 

Big western irrigation districts already derive a sizable percentage of their profits from the sale and lease of water. In many cases that water - water which is supposed to belong to the citizens of the states - is purchased or leased with taxpayer funds.

The Klamath's Irrigation Elite have their sights set on selling and leasing water and they are already well down that path. The State of California gave those who control the Tulelake Irrigation District a big leg up in that regard back in 2001. As part of the California budget deal that year, Tulelake Irrigation District was gifted with nine deep irrigation wells along with massive pumps and related facilities. The nine groundwater extraction facilities are located just south of the Oregon Border in the Lower Lost River Basin. 

 One of the massive pumps paid for by California taxpayers 

which was gifted to the Tulelake Irrigation District in 2001

It is impossible to know how much water the Tulelake Irrigation District is selling or leasing. That is because, as reported by the Center for Investigative Reporting, the District has ignored a 2007 California law which requires all large irrigation districts "to closely track their water flow and make the largest districts charge farmers based on how much they use. The economic theory is simple: If you aren’t paying for how much water you actually use, you have little incentive to try to consume less."

Tulelake Irrigation District not only has failed to report its water use, the District has also refused to charge those to whom it delivers water based on water use. Instead the District defiantly continues to charge irrigators to whom it delivers water on a per acre basis. In 2013 KlamBlog reported on the mining of groundwater by Tulelake Irrigation District.

The nine groundwater extraction facilities which the Gray Davis Administration gifted to Tulelake Irrigation District were paid for by California taxpayers. They have been used to sell groundwater not just to farmers but also to the US Bureau of Reclamation. Reclamation purchases water in years when surface supplies are reduced in order to maintain full irrigation delivery while meeting minimum flows in the Klamath River required to prevent "jeopardy" to Klamath Coho Salmon. As a result, even during years of severe drought - like this year - most federal irrigators in Reclamation's Klamath Irrigation Project have received all the irrigation water they desire. Stated another way, Reclamation has used taxpayer funds to abolish drought for one select group of western irrigators - the Klamath River Basin's Irrigation Elite.

These facts cause KlamBlog to again ask: WHY ARE THOSE REPORTERS WHO REGULARLY COVER THE KLAMATH RIVER BASIN NOT REPORTING THESE THINGS? We suggest that KlamBlog readers direct that question to local and regional newspaper, radio and TV editors and news departments.