Whistleblowers Uncover Illegal Federal Payments to Valley Water Contractors

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Sacramento River by Ken Lund via Flickr Creative Commons

By Vic Bedoian

Four of the state’s water districts secretly received more than $100 million in federal funds to pay for their share of the environmental review of the Bay Delta tunnels project. The misappropriation of taxpayer money was uncovered by employees of the U.S. Bureau of Reclamation and others. State officials, including Governor Jerry Brown, have for years insisted that the entire funding of the tunnels project, known as the California WaterFix, would come from water contractors and not the general public. Whistleblowers inside the U.S. Bureau of Reclamation have revealed corruption from within the massive agency and its cozy relationship with the San Joaquin Valley’s water districts that will likely leave American taxpayers, including many farmers, on the hook.

Todd Peterson is a natural resource specialist for the U.S. Bureau of Reclamation. But it is as president of his union, Local 0951 of the National Federation of Federal Employees, that he became a whistleblower for a complicated scheme that will likely cost California taxpayers $84.8 million. It’s all about the Bay Delta tunnels designed to ship northern California water to Central Valley irrigators and southern California developers. “My original complaint was that the Bureau of Reclamation did not have the statutory authority to spend money as they were for the EIR/EIS and that $50 million grant and then the subsequent $17.5 million grant.”

California officials repeatedly have stated that the tunnels will be paid for entirely by its beneficiaries, including the required environmental studies. As it turns out, the Bureau of Reclamation used a secretive method to use federal funds instead. Doug Obegi of the Natural Resources Defense Council says the ruse was crafted nearly 10 years ago, “This began in 2008 during the Bush administration when there were discussions between the Westlands Water District and other CVP [Central Valley Project] contractors and the Bureau of Reclamation to create this scheme to basically have taxpayers subsidize the cost of the Bay Delta conservation plan instead of having the contractors pay for it as required by state and federal law.”

Money in the form of credit was made available to four of the state’s water contractors through the California Department of Water Resources: Westlands, San Luis, Panoche and Santa Clara Valley. Patricia Schifferle is an investigator for Pacific Advocates. She spent many hours digging through files in the offices of the Westlands Water District and other Valley water contractors. “They have created what the inspector general calls a hidden mechanism by which they received credit for existing costs under the Central Valley Project while it made the appearance that they were actually paying their required share of the Delta water export tunnels.”

Originally, the Bay Delta conservation plan was conceived to build the 35-mile-long twin tunnels and help restore 150,000 acres of the Delta’s damaged ecological habitat—damage that resulted mostly from water exports. But in 2015, the Brown administration decided to drop the restoration component and just build the tunnels. However, Peterson discovered that the bureau continued to use funds expressly earmarked for fish and wildlife restoration. That was a key factor when the Department of the Interior’s Office of Inspector General reviewed Peterson’s findings. “The OIG determined that they had the authority to spend money under the Fish and Wildlife Coordination Act as long as there was a habitat rehabilitation part associated with that. They specifically state that, through some magic accounting, that they turned reimbursable funds into non-reimbursable funds, which meant the taxpayer had to pay for it. And when asked why they did that it’s because the water contractors asked them to. Asked them to pay for it.”

Paula Dinerstein is an attorney with Public Employees for Environmental Responsibility, known as PEER. It serves as a protective shield for government workers who blow the whistle on unethical or illegal conduct by public institutions. PEER is the medium for which its reporting made this a national news story. She says the Bureau of Reclamation is in denial about the inspector general’s scathing appraisal of $84.8 million in unauthorized money the bureau has provided to Westlands and three other California water districts. “They have given some rationalizations for why they think this is okay, but we think those explanations are very weak and that’s what the inspector general and Office of Special Counsel found—that their explanations were not adequate.”

Not all Valley farmers are going along with the Delta tunnels project. Schifferle points out that some CVP contractors, who use 78% of the water, have told the bureau that they will not benefit from the California WaterFix and don’t intend to pay for it. “That creates almost an invisible tax on all irrigators in the Central Valley Project and others, because it created this false image that, in fact, they were paying their share of this project under state law and federal law, and yet they were not.”

Dinerstein says the inspector general’s report was sent to a deputy secretary of interior for further review and could also be looked at as a criminal matter. “We believe that there is a violation of what is called the Anti-Deficiency Act in the federal law, that essentially agencies can’t spend money that isn’t appropriated.”

According to observers over the years, the Bureau of Reclamation does not have a history of self-reflection or saying its sorry. That leads whistleblower Peterson to believe that not much, if anything, will be done to rectify the misspending of funds. “I’m very pessimistic that anything will come of this. I don’t think that any changes will occur within the Bureau of Reclamation and that is unfortunate, but that’s my speculation.”

Dinerstein underscores Peterson’s view that the Bureau, or the water districts, will be held to account for the questionable and potentially illegal transactions, “You know, when you talk to our clients who work for reclamation they will say the corruption in the agency is very deep, you know, and it goes very high and it goes down, it’s not to their level but it’s throughout the agency.”

Peterson wonders aloud: Can the bureau itself be reclaimed? “There’s a term called mission creep, and I think the Bureau of Reclamation has gone well beyond its mission and it really has a very strong relationship with the irrigation districts and they seem to be more catering to them than to the public.”

The Westlands Water District was contacted for comment and responded that its spokesperson, Tom Birmingham, would not be able to speak on this issue due to his schedule. Birmingham recently told the Washington Post that “reimbursing the federal government is a question that will have to be determined later.” The bureau’s second in command is David Bernhardt, who was a lobbyist for Westlands from 2011 through 2016. According to Pacific Advocates, he continued consulting for the district even after his lobbying activity ended.

The State of California was also contacted and an e-mail was received from Sam Chieu of the Resources Agency saying no one was available for an interview and stating that “this is a federal audit of a federal agency, so it’s really not a state issue. We don’t anticipate it having any material impact on WaterFix moving forward.”

The inspector general was also critical of $32 million in payments to Klamath Valley water users in northeastern California. That report was forwarded to the solicitor general to review the legality of those transactions.

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Vic Bedoian is an independent radio and print journalist working on environmental justice and natural resources issues in the San Joaquin Valley. Contact him at vicbedoian@gmail.com.