Nestlé's despicable water-crisis profiteering: How it's making a killing — while California is dying of thirst

While California suffers through a historic 4-year drought, the corporate giant has made billions on bottled water

Published April 7, 2015 6:36PM (EDT)

  (Reuters/Mohamed Azakir/Salon)
(Reuters/Mohamed Azakir/Salon)

California Gov. Jerry Brown has taken a lot of heat for announcing mandatory water reductions to cope with the state’s historic drought -- even while exempting agriculture, which uses 80 percent of the available water supply, while accounting for just 2 percent of the state’s economy. On ABC’s "This Week," Brown countered that many farmers lost state and federal water allocations, forcing them to sacrifice hundreds of thousands of acres of farmland. He even added, “some people have more of a right to water than others.

In a technical sense, that’s true. Some farmers have “senior water rights,” dating back to the Water Commission Act of 1914, which puts them at the front of the line for allocations. But unlike the individual apartment dweller, farmers aren’t limited to “surface water" found in reservoirs and canals and streams. They can also extract groundwater virtually unimpeded; until last year there were basically no regulations against anyone sticking a drill in the ground and pumping the water under the Earth -- which has drained long-term water resources almost dry and contributed to the land actually sinking in some parts of the Central Valley. This safety valve, the ability to go underground, has led to the perpetuation of wasteful irrigation systems and unsustainable plantings. (Enough with the almonds and rice!) And even the aforementioned new rules, which Brown pushed for, are woefully inadequate and in some cases don’t kick in until 2022, thanks to industry lobbying.

As a political matter, saying that some people have more of a right to water than others is a deadly epigram, calling attention to the serious inequality in California, between farmers as well as individuals. People need only to look at the perfectly manicured lawns in Malibu, a city that uses five times as much water as poor neighborhoods in South Los Angeles, to feel the power distribution problem. And farmers paying far less for the water they hog contributes to that perception. Brown’s headed for serious trouble if he punishes residents while taking it easy on an influential industry like agriculture – or worse, oil, which uses millions of gallons a day fracking the state for climate-destroying hydrocarbons, and which is similarly exempt from water restrictions.

If Brown wants to survive what will become a major headache hanging over his fourth term, and if the state wants to survive and remain habitable for the future, the special rights and corrupt deals have got to end. And there’s no bigger example of that than Nestlé, one of the world’s biggest corporations, actually pumping California water, when the state is bone dry, to sell in plastic bottles.

That’s right, if you purchase an Arrowhead or Pure Life bottled water, you may be drinking from California’s dwindling tap, which Nestlé has been monetizing for over a decade. And they get away with it through an increasingly common corporate gambit, by partnering with Native American tribes to conduct the water raid in sovereign territory.

In particular, Nestlé has a 25-year contract with the Morongo Band of Cahuila Mission Indians to draw water from wells in Millard Canyon, in the desert city of Cabazon. The plant is one of the largest in North America. Morongo, which also has a casino that features entertainment from the likes of REO Speedwagon and Australian male revue “Thunder From Down Under,” no longer provides statistics on how much water Nestlé pumps out of the underground spring. But independent statistics put the total anywhere between 200 and 250 million gallons a year.

This is a small number in the grand scheme of things: the water restrictions announced by Gov. Brown would save 500 billion gallons a year, or 2,000 times as much as what Nestlé pumps out. But Nestlé has at least a dozen such operations statewide, many in severely dry regions. And the fact that they’ve turned exporting groundwater during a drought into a moneymaking enterprise is absurd. The Morongo plant alone produces over 1 billion bottles of water per year, and the parent company, Nestlé Waters North America, earned annual revenues of $4 billion from its 29 facilities in 2012. Plus, pulling water from an oasis magnifies the environmental impact on the desert ecosystem. The water taken out would normally recharge the local underground aquifer or increase flow along a surface stream.

Morongo told the Palm Springs Desert Sun that the water plant creates 250 local jobs, and that they control the resources as part of their sovereign nation. And, given the history of American brutalization of native people, it’s hard to get too agitated about how tribal nations use their own land, which represents a tiny fraction of what they actually deserve. But the water actually belonged to the Cabazon Water District as recently as they early 2000s. They sold it to the Morongo tribe in a quick-cash privatization deal for just $3 million, enabling them to temporarily reduce water rates to customers. Morongo almost immediately struck the agreement with Nestlé, for access to a canyon that gushes 3,000 gallons of water per minute at full strength. Nestlé pays Morongo an undisclosed fee for every gallon they pump.

This has become a familiar corporate tactic in recent years -- partnering with tribal nations to evade federal laws or restrictions. To use another, even savory example, an online payday-lending service located on Otoe-Missouria tribal lands in Oklahoma charges 448 percent interest to borrowers nationwide, even those living in states that have banned payday lending. The conservative Institute for Liberty, run by an ex-lobbyist for the National Federation for Independent Business, recently put up billboards in Connecticut, where the state banking department has tried to block the tribal lender, featuring a native child and the caption “Don’t take away my future.” The Institute for Liberty doesn’t have to disclose funders, but they are clearly running interference for the payday lending industry, using tribal members as a shield. Corporations routinely play on their association with tribes to keep profits rolling.

California actually tried to revoke a portion of Morongo’s license to use water from Millard Canyon starting in 2003; the tribe successfully fought that action. But with the drought and the water restrictions, the debate has restarted. Last week, the Courage Campaign, an online progressive group with 900,000 members, petitioned the state Water Resources Control Board to stop Nestlé’s bottling operations statewide.

We should criticize the local water district’s stupid privatization deal as much as anything else in this story. And that’s one major point: With water a scarce commodity in California, its usage has been dictated and governed by those with power and resources. Only the state, acting in the public interest, has the ability to curtail that.

What makes Gov. Brown’s responses to the drought so dangerous is that he has in no way tried to upset those power imbalances, instead uncomfortably working within them. In the fourth year without much rain, that will no longer work without revealing stark differences between winners and losers. And those special interests are largely the same ones whose profligate, profit-chasing use of water resources helped create the problem.

One things is clear: If the governor can’t stop even a relatively small player like Nestlé from monetizing the same water every Californian must conserve, he loses the moral authority to do virtually anything else.

By David Dayen

David Dayen is a journalist who writes about economics and finance. He is the author of "Chain of Title: How Three Ordinary Americans Uncovered Wall Street’s Great Foreclosure Fraud," winner of the Studs and Ida Terkel Prize, and coauthor of the book "Fat Cat: The Steve Mnuchin Story." He is an investigative fellow with In These Times and contributes to the Intercept, the New Republic and the Los Angeles Times. His work has also appeared in the Nation, the American Prospect, Vice, the Huffington Post and more. He has been a guest on MSNBC, CNN, Bloomberg, Al Jazeera, CNBC, NPR and Pacifica Radio. He lives in Los Angeles.

MORE FROM David Dayen

Related Topics ------------------------------------------

Business California Climate Change Corporate Welfare Drought Global Warming Jerry Brown Nestle Water Crisis