Business
Column: The salmon industry faces extinction — not because of drought, but government policies and politics
Snapshots from an environmental and economic disaster:
Kenneth Brown, the owner of Bodega Tackle in Petaluma, reckons he has lost almost $450,000 in the last year.
“I haven’t taken a paycheck in seven or eight months,” he says. He has had to lay off all but one employee, leaving himself, his son and the one remaining worker to run the business.
James Stone, board president of the Nor-Cal Guides & Sportsmen’s Assn., says more than 120 guides who serve recreational fishing customers in and around the Sacramento River and San Francisco Bay have been all but put out of business, costing the economy as much as $3.5 million a year.
Salmon have survived droughts in California for millennia. But when on top of that you have incredible water diversions and temperature pollution, you’re killing these baby fish. And when you kill the baby fish, they don’t come back as adults.
— Scott Artis, Golden State Salmon Assn.
Sarah Bates, the owner of a commercial fishing boat in San Francisco, has seen 90% of her income washed away. She has watched a commercial fleet capacity of nearly 500 boats reduced nearly to zero.
The circumstance affecting all three is the shutdown of the crucial fall-run salmon fishing in California, which the Pacific Fishery Management Council, a governmental body, recently extended for 2024, the second year in a row.
The main reason is the decline of the salmon population in the Sacramento River to such an unsustainable level that there’s reason to fear that it may not recover for years, if ever — unless government policies are radically reconsidered.
Commercial fishers who relied on the fall-run salmon as their dominant source of income have struggled to find alternatives.
“Some people are bringing in black cod or rockfish or albacore,” Bates told me. Some land Dungeness crab. But prices for those products don’t match the value of Chinook salmon.
“That allows for some income, but doesn’t really make up the difference for what you lose,” Bates says. “There are members of the fleet who have taken land jobs, or are relying on household members to pay the bills.”
One can’t minimize the scale of the shutdown, which follows a long-term decline in the fishery and is the first such shutdown since 2008-2009, which was driven by a severe drought. In 2022, the last year of salmon fishing in California, the fleet consisted of 464 commercial vessels, down from 4,750 in 1980.
Private and chartered recreational trips in California, which reached 98,900 in 2022—down from 148,000 in 2012—have also been shut down.
The closing of both categories has rippled across the entire fishing economy, affecting hotels and restaurants that catered to recreational fishing customers as well as bait and tackle shops. For Brown’s Petaluma shop, there are no sales of bait or commercial gear — “no more boots, no more rain slickers, all that business is gone and there’s nothing to replace it.”
There’s more to the salmon crisis than the devastation of livelihoods of tens of thousands of Californians working in an industry valued at more than $1.4 billion annually.
The crisis underscores the utter failure of the state’s political leaders to balance the needs of stakeholders in its water supply. In this case, the conflict is between large-scale farms on one side and environmental and fishery interests on the other.
For decades, agribusiness has had the upper hand in this conflict. It’s not hard to discern why: The growers have more money and therefore more political influence. Westlands Water District, the vast irrigation district sprawled over Fresno and Kings counties in the Central Valley—the largest such district in the nation—spent more than $4.7 million on Sacramento lobbying over the last decade.
During the same period, Stewart Resnick, whose Roll International conglomerate owns the Central Valley almond orchards that are the largest growers of those nuts in the world and enormous consumers of water, donated $2.8 million to political campaigns in California, chiefly to Democratic candidates and in support of ballot box initiatives; among his contributions was $125,000 to oppose the 2021 recall of Gov. Gavin Newsom.
Officially valued at $1.4 billion a year, the salmon fishery can’t hope to compete with agriculture on a dollar-for-dollar basis. The market value of all agricultural products in California was $59 billion in 2022, according to state figures; salmon weren’t counted. The 10 most lucrative farm crops, led by dairy products, brought in some $35 billion that year.
The salmon fisheries are bellwethers for ecological health generally. “Fishermen are directly dependent on a healthy ecosystem,” says Barry Nelson, an advisor to the Golden State Salmon Assn. Their fortunes reflect not merely adequacy of water flows in California rivers and bays, but water quality. Any factor that falls outside a given range can produce a crash in fish populations, endangering whole species while putting men and women out of work.
As my colleague Ian James has reported, a key factor in the survival of the salmon population is water temperature. The diversion of ever more water from the federal government’s Shasta Dam for farm irrigation has driven temperatures in the Sacramento River to murderous levels.
That river, Nelson points out, is “the most important salmon-producing system south of the Columbia River.” But California authorities haven’t required the federal Bureau of Reclamation, which owns and manages the dam, to meet temperature standards downstream of the dam, even though it has the power to do so. “The state just hasn’t done its job,” Nelson says.
Talk to stakeholders in the salmon fishery, and one term keeps cropping up: “water management.” Their point is that drought isn’t the most important factor in the survival of the species — policy is, specifically the management of water supplies so that they’re balanced among users and serving irrigation demand from farmers doesn’t wipe out competing interests, especially during dry years.
To better understand the threats to salmon, it helps to know about their life cycle. Salmon live and breed on a three-year timeline. Adult fish swim in the ocean, but migrate upstream to lay eggs in the gravel beds of inland rivers. After they hatch, the baby fry and juveniles, called smolt, begin migrating downstream, typically via San Francisco Bay, and out to sea. Then the cycle begins again.
The critical period for the fall-run salmon in the Sacramento is while the eggs are incubating in their gravel beds. At water temperatures of 54 degrees, they start being cooked to death. Irrigation releases from Shasta suck down the reservoir’s cold water, leaving surface water heated by the sun; that’s what ends up in the Sacramento River at spawning season.
In recent years, water in the spawning beds has been measured at 70 degrees or higher. In 2021, state biologists reported, 99% of winter-run Chinook salmon failed to reach the San Francisco-San Joaquin River delta and the bay.
“Salmon have survived droughts in California for millennia,” says Scott Artis, executive director of the Golden State Salmon Assn. “But when on top of that you have incredible water diversions and temperature pollution, that’s what’s killing these baby fish. And when you kill the baby fish, they don’t come back as adults.”
The need for painstaking water management is the result of human interventions in California’s natural environment. Over the last 100 years, rivers across the Central Valley were dammed to provide irrigation for farms, blocking salmon from their natural habitats. The federal government opened salmon hatcheries to compensate, but they have not produced enough fish to make up for the losses from poor water management.
Meanwhile, the water demands of California growers became less flexible. Crops that could be fallowed during dry spells, leaving more water for the environment, were supplanted by almond and pistachio orchards, which require water in wet years and dry. California almond acreage rose to 1.38 million last year from 418,000 in 1995. In the same period, pistachio acreage rose to more than 461,000 from 60,300.
The crisis that has unfolded in 2023 and this year has its roots in actions taken during the Trump administration. In 2019, Trump installed David Bernhardt, a lobbyist for agricultural water users, as Interior secretary.
As an attorney in private practice, Bernhardt had sued the government on behalf of the giant Westlands Water District to challenge its enforcement of the Endangered Species Act, which conflicted with Westlands’ interests. As Interior secretary, Bernhardt advocated for loosening enforcement of the act.
In 2020, Bernhardt and Trump implemented an increase in water deliveries to big farmers under conditions that spelled disaster for the salmon fishery, among other ecological issues. California objected, asserting that Interior’s official biological opinions, which concluded that the increases wouldn’t adversely affect salmon and other species, bore no “rational connection [with] the facts.” The Natural Resources Defense Council labeled the opinions “a plan for extinction” of salmon and other endangered species.
They went through anyway. The demands from agribusinesses in the Central Valley for more water had received a friendly hearing from the Trump administration and Republicans in Congress, who recognized that the valley was perhaps the only strongly Republican part of California. They decried the passage of water from inland reservoirs to rivers and out to sea as wasteful; as I wrote at the time, their single-minded service for the growers deprived the salmon fishery of its lifeblood.
The impact of the Trump policies was destined to be felt three years on. Indeed, last year only 6,160 adult salmon were estimated to have spawned in the Sacramento River, the worst level since the drought year of 2017 and obviously well below the annual average of 175,000 spawning from 1996 to 2005, the best period for the health of the salmon fishery over the last four decades.
In January, Newsom responded to the salmon crisis with an action plan encompassing restoring salmon habitats, modernizing hatcheries, and removing impediments to salmons’ upstream migrations. The fishery community supports many of those initiatives, but also recognizes that the package is largely aspirational, for money hasn’t been appropriated to fulfill all its elements.
The Newsom administration also outlined plans in March 2022 to reach a series of voluntary agreements with agricultural water users over water sharing. Environmental and fishing groups, which weren’t part of the negotiations, weren’t impressed — a coalition of those groups, including the Sierra Club and the Golden State Salmon Assn., panned the proposal as “incomplete, unenforceable, inequitable, inadequate, and [lacking] a scientific foundation.”
Nor were the proposed voluntary agreements favored by two key federal agencies. The Environmental Protection Agency wrote in January that the absence of strong mandates for higher water flows in the Sacramento River meant that the plan would have only a “insignificant impact” on water temperature in the river. The National Marine Fisheries Service questioned whether the $740 million in state and federal funding needed to implement the voluntary agreements was realistic, since none of it had been appropriated.
In other words, Newsom’s approach involves a heaping helping of hand-waving. From the standpoint of the salmon industry, his other water policies, including a 45-mile water tunnel under the delta and fast-tracking construction of the Sites Reservoir in the western Sacramento Valley, will make things worse. The tunnel would turn the delta into “a deathtrap for salmon,” Nelson says, and the Sites Reservoir would degrade downstream waters, possibly increasing temperatures.
In many respects, the policies on the table are antiques. Some were developed without regard for the effects of global warming, and others reflect thinking that emerged in an era when California authorities thought the water supply was abundant, even unlimited.
That won’t do anymore. The federal government already lists Sacramento River winter-run Chinook salmon as an endangered species and the spring run as a threatened species. The all-important fall run might not be far behind.
California’s water policies need to be subjected to a thorough rethinking, and money to fix all that’s broken needs to be appropriated, not just put on somebody’s wish list.
Fishermen and -women are a constitutionally optimistic class. “There’s always hope that things will get better,” Artis told me. But hope is waning. “We have to educate the Legislature and the public so we get those water flow and temperature protections, or we’ll be here again year after year with fishery closures.”
If the U.S. Drug Enforcement Administration reclassified marijuana as a less dangerous drug, it wouldn’t eliminate the conflicts between the feds and states such as California that have legalized many uses of the substance.
But it would bring one significant shift that could give California’s licensed pot companies a badly needed boost: a lighter tax burden.
The Associated Press reported Tuesday that the Drug Enforcement Administration will propose moving marijuana from the list of Schedule I drugs, which includes heroin and cocaine, to Schedule III drugs, which include ketamine and anabolic steroids. The proposal would still have to be reviewed and endorsed by the White House as well as be made available for public comment.
Industry insiders say the move, if approved, could become a lifeline to California’s struggling cannabis industry. “We’ve been anticipating this,” said Meital Manzuri, an attorney whose firm specializes in the cannabis industry. “This is big for the industry.”
Lawful in California but illegal under federal law, the state’s cannabis industry has operated in a difficult legal limbo. Stores and farms operate in the open, but they’re cut off from benefits that other businesses enjoy, such as access to out-of-state markets.
Their murky legal standing has also meant that banking, credit card processing, insurance and other vital business services are out of reach for many marijuana businesses.
The tax burden, though, has been particularly onerous. Section 280E of the federal tax code bars businesses involved in “trafficking” of Schedule I or II substances from deducting the expenses they incur. As a result, they are taxed on every dollar they collect, not just their profits.
But if marijuana is reclassified as a Schedule III drug, “players in that industry for the first time will be able to take standard tax deductions that other businesses take,” said Paul Armentano, deputy director of the National Organization for the Reform of Marijuana Laws, also known as NORML, which advocates for cannabis consumers. “The biggest change is going to be how the industry does business.”
“The industry in California especially has been faltering in the last couple of years and this offers them a future,” Manzuri said. “It might be a lifeline that they need to continue operating.”
According to the California Department of Tax and Fee Administration, legal marijuana shops reported about $5.1 billion in revenue in 2023, less than the previous year and 11% less than in 2021.
For years, licensed businesses have struggled to compete with a burgeoning black market that, while avoiding licensing, fees and taxes, can sell its wares at a fraction of the price charged by legal outfits.
But Armentano hopes those in the industry don’t “jump the gun” and that, if marijuana is reclassified, it may still take some time for changes to become tangible.
If cannabis is reclassified, he said, it would nevertheless remain illegal under federal law for recreational uses. States that have legalized marijuana, he said, don’t operate under the federal standards.
Thirty-seven states have legalized cannabis for medicinal use, seven others have legalized CBD oil for medicinal use and 24 states have legalized cannabis for recreational use, according to DISA Global Solutions, a company that administers drug tests.
Some organizations that oppose marijuana legalization, including Smart Approaches to Marijuana, have announced their intent to challenge the final rescheduling decision.
“Crude marijuana has never passed safety and efficacy protocols,” said Dr. Kevin Sabet, president of Smart Approaches to Marijuana, calling it a political decision in an election year. “Politics and industry influence have loomed over this decision from the very beginning.”
If the reclassification is ultimately approved, it would recognize medicinal uses for marijuana and require the drug be sold and regulated on the federal level similar to how ketamine, some anabolic steroids and Tylenol with codeine are regulated. Products would need federal approval — which no cannabis product currently has.
“The majority of the states regulate cannabis in a way that’s inconsistent with federal law,” Armentano said.
That means other financial benefits, such as banking and insurance, would still be out of reach for many businesses, Manzuri said, especially for dispensaries that operate for recreational use.
That has remained an ongoing issue for dispensaries, which typically operate as cash-only businesses. Many of them are unable to obtain banking services for what has grown to be a billion-dollar industry, although the California Department of Cannabis Control has sought to help marijuana businesses set up bank accounts.
The major credit card companies, though, won’t process marijuana-related payments, and reclassifying the drug to Schedule III wouldn’t change this, experts said.
“The payments industry only processes legal products, and reclassification does not make cannabis legal,” said Scott Talbot, executive vice president of the Electronic Transactions Assn. “Reclassification moves the needle but doesn’t cross the goal line to making cannabis legal and thus acceptable to banks and the credit and debit card industry.”
Yet reclassifying could help address some of the stigma that has been associated with marijuana and the cannabis business, Armentano said. It will be part of a long process, especially for a service as important to the industry as banking.
“My presumption is that marijuana could be made legal tomorrow, and your Chases, JP Morgans, and Wells Fargos would still say, at least at first, that it doesn’t change our bottom line,” Armentano said.
But those who have been navigating the legal waters of the weed industry still welcome the potential benefits of reclassification.
“Rescheduling won’t legalize cannabis or let a doctor prescribe it, but it will allow existing marijuana companies to be taxed like any other business — essentially a huge investment in the overall sector by the way of tax relief,” said Adam Terry, chief executive of Cantrip, a THC-infused drink company based in Massachusetts. “[Reclassification] improves the overall economic health of the industry and continues to inch towards legitimization in the eyes of the public.”
“The California cannabis industry needs that right now,” said Amy Jenkins, legislative advocate for the California Cannabis Industry Assn. “The industry has a significant number of challenges with our existing taxation framework.”
Whitney Economics, a cannabis-focused research company, estimated last year that legal cannabis operators in the U.S. overpaid more than $1.8 billion in taxes in 2022 when compared with other businesses.
Reclassification, Jenkins said, “would provide greater stability to the legal cannabis industry.”
It could also allow more entities to conduct research, possibly opening the doors to industry innovation and greater medicinal benefits. “No one has been able to research it on a wide scale for a long time,” Manzuri said.
For Armentano, whose organization wants states to be allowed to regulate marijuana the way they can regulate alcohol, the possibility of reclassification doesn’t go far enough.
“It’s going to be a very long time after the fact before regulators at the FDA and DEA and other agencies acknowledge that this change isn’t sufficient,” he said.
Paramount Global’s sale talks with David Ellison’s Skydance Media face a milestone later this week, but the battered Redstone family-controlled media company has been scrambling to meet another deadline — one that also carries huge implications.
On Tuesday, Paramount and Charter Communications agreed to a deadline extension as the two sides worked to hammer out a new distribution agreement for Paramount’s channels, which would replace a three-year pact that was due to expire this week, according to knowledgeable people who are not authorized to comment publicly on the high-stakes talks.
Charter pays Paramount significant fees to carry its channels, including CBS, BET, Comedy Central and Nickelodeon, on Charter’s Spectrum television service. As Paramount‘s cable networks lose viewers and advertising revenue declines, the company must protect the affiliate fees it receives from distributors, including Charter. Paramount cannot afford to lose such a key source of revenue from one of its primary partners.
The outcome of the negotiations could weigh on Paramount’s valuation in the event of a sale.
While the length of the contract extension is not clear, it does give Paramount some breathing room in what has become a chaotic and difficult period.
Paramount’s Chief Executive Bob Bakish was bounced on Monday, amid increasing tensions with controlling shareholder Shari Redstone, who is pushing to sell her stake in her family’s media empire.
He was replaced by three senior entertainment executives who now make up an “office of the CEO.” The company also reported earnings that beat estimates, but executives refused to take questions during their customary conference call with Wall Street analysts.
The company’s stock is down 50% in the past year. Paramount fell 7.2% Tuesday to $11.37 a share.
Nonvoting B-class shareholders have fumed over the terms of the Skydance deal, concluding that it would bestow Redstone with a rich premium at the expense of other shareholders. Meanwhile, independent directors are weighing the Ellison group’s sweetened offer, which has been described as its “best and final.”
Paramount’s board will soon lose five directors, including Bakish.
Even before the boardroom and management turmoil, Paramount was seen as having a weak hand in its negotiations with Charter, which currently offers 25 Paramount-owned television channels to its 13.7 million Spectrum TV subscribers.
“The majority of Paramount’s current U.S. cable networks are at risk,” Bank of America media analyst Jessica Reif Ehrlich wrote in a research note for investors this week, adding that a bad result in the Charter talks could threaten Paramount’s financial foundation and potentially “impact the company’s ability to execute a sale under favorable terms.”
The reason: Paramount’s “TV media segment still generates an overwhelming percentage of the company’s earnings and cash flows,” Reif Ehrlich wrote. Investors and potential buyers have been watching the Charter talks closely as they consider how much Paramount is really worth.
Apollo Global Management has offered $26 billion, including the absorption of Paramount’s nearly $14 billion in debt, which some shareholders favor over the two-phase deal orchestrated by Ellison’s Skydance along with investment firms RedBird Capital Partners and KKR. Paramount had granted the Ellison group 30 days of exclusive negotiations. That period ends Friday, however, sources close to the sales process say they expect the talks to continue past this week.
Paramount and Charter representatives declined to comment.
Paramount Global, long known as Viacom, has struggled to adapt in the streaming era.
Broadcast network CBS has largely maintained its popularity — its February broadcast of the Super Bowl drew a record 123.4 million viewers — but the viewership shift has pummeled Paramount’s cable channels, including MTV, VH1 and Nickelodeon, putting the company in a tough spot.
At the same time, cable companies are losing pay TV customers at a rapid clip and don’t want to give subscribers another reason to flee by asking them to pay more for programming that they don’t necessarily watch.
Stamford, Conn.-based Charter has increasingly balked at paying high fees for cable channels that have been hemorrhaging viewers in recent years as consumers shift to streaming and other video-on-demand options.
Charter also has demanded concessions on carriage terms for streaming services, such as Disney+ or Paramount+, which compete with its Spectrum channel bundles.
Paramount Pictures studio, on Melrose Avenue in Hollywood, has long been a jewel in the Redstone family-controlled media empire.
(Al Seib/Los Angeles Times)
Last summer, Charter drew a hard line during its negotiations with Walt Disney Co., which led to a 10-day blackout of Disney-owned channels, including its ABC and ESPN networks. Charter threatened to permanently pull all the Disney channels from its Spectrum TV service unless Disney caved to some of its demands — a scenario that would have been unthinkable a decade ago.
In the end, Disney sacrificed carriage on Spectrum for several smaller channels, including Freeform.
Losing networks could be particularly painful for Paramount.
More than a decade ago, Paramount programmed nearly three dozen cable channels and collected handsome fees for the distribution rights. However, over the years, distributors including Dish Network and Charter have refused to continue to carry what they view as nonessential ones — and that wrangling was expected to be a key hurdle in the Charter talks.
For example, Charter offers its customers five MTV channels: the main network MTV and spinoffs MTV2, MTV Classic, MTV Live and MTVU. MTV‘s programming lineup relies heavily on “Awesomeness,” a twist on talent competitions. There are four Nickelodeon channels, the flagship kids network as well as Nick Jr., Nick Music and Nick Toons.
Charter is expected to push for the ability to drop channels with meager ratings.
“In our view, the critical carriage would be for Nickelodeon, MTV, BET, Comedy Central and Paramount Network,” Reif Ehrlich wrote.
One sticking point for distributors, including Charter, is that Paramount makes much of its content available to subscribers of Paramount+, the streaming service the company offers for $5.99 to $11.99 a month. That, in some cases, is less than what cable distributors pay for the same content.
The television programmers’ move to offer their own streaming services has rankled distributors, who feel that their longtime partners have turned into rivals. Charter Chief Executive Christopher Winfrey has said his company would take a tougher stance in its carriage negotiations.
“Our goals here are really to re-create a video ecosystem that works for everybody. Today, it doesn’t,” Winfrey said last week on the company’s earnings call. “It’s been broken, and it’s been broken for a while.”
Business
Campaign to erect new city on Solano County ranchland submits signatures for November ballot
A billionaire-backed vision to erect an idealistic new city on scrubby grassland in rural Solano County is one step closer to becoming reality.
On Tuesday, the Bay Area tech leaders behind the campaign, dubbed California Forever, held a news conference to announce that they had turned over more than 20,000 voter signatures to the Solano County registrar in support of putting the issue before local voters. If the county validates at least 13,062 of those signatures, the measure would go before voters in November, seeking to amend zoning codes to allow the residential project to be built on agricultural land.
“Solano voters have made their first decision, and they have made it loud and clear,” said Jan Sramek, a former Goldman Sachs trader who is chief executive of California Forever. “People from all walks of life, all parts of the county are all saying the same thing. They are saying, ‘Yes, we want to have a say in the future of this place that we love.’ ”
John Gardner, the county’s assistant registrar of voters, confirmed his office had received the California Forever signatures Tuesday morning.
Gardner said the endeavor marks the first citizens-led ballot initiative in Solano County in more than 30 years. His office has until June 11 to conduct a preliminary review to determine whether enough valid signatures were submitted to put the measure to a vote.
Along with Sramek, backers of the project include LinkedIn co-founder Reid Hoffman, venture capitalist Marc Andreessen, and Patrick and John Collison, who founded the payment-processing company Stripe. As part of their campaign, California Forever in March released an aerial view of the group’s plans for a community of tens of thousands of homes, surrounded by open space and trails, using renewable energy sources.
Backers tout the project as an innovative way to create more affordable housing in close proximity to the Bay Area. The designs call for transforming 18,000 acres now dedicated to ranching and wind farms into a community of 50,000 residents that grows, over time, to as many as 400,000. The project promises 15,000 higher-paying jobs in manufacturing and technology, as well as parks, bike lanes and a solar farm.
Even if the measure is certified for the November ballot and voters approve it, the project faces a number of challenges and regulatory hurdles. Chief among those are additional approvals, including from the federal government, and the specter of lawsuits from environmental groups that have signaled they intend to take the nascent effort to court.
The project’s development began years ago with a series of mysterious land purchases by a secretive LLC called Flannery Associates. The group bought thousands of acres of farmland, totaling more than $800 million, over several years, raising concerns it was a front for foreign actors seeking to spy on nearby Travis Air Force Base.
Instead, the group’s members were revealed not as spies but as titans of the tech industry laying the groundwork for a model city that California Forever and its supporters say will help recast California’s image. While environmentalists and other critics have questioned that claim, the outfit pledges that the city will be green, walkable and socioeconomically diverse.
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