An article in The New York Times over the weekend gave a frightening account of the ongoing severe drought across California that is now threatening the state’s water supply.

As farmers, ranchers and homeowners brace for what could be the state’s worst drought in 500 years, The NYT reports that the snowpack in the Sierra Nevada, which supplies much of California with water during the dry season, was at just 12 percent of normal last week, reflecting the lack of rain or snow in December and January.

The NYT quotes Tim Quinn, executive director of the Association of California Water Agencies, saying:

We are talking historical drought conditions, no supplies of water in many parts of the state. My industry’s job is to try to make sure that these kind of things never happen. And they are happening.”

The latest U.S. Drought Monitor, published last Thursday, put 9 percent of the state of California into “Exceptional Drought” – the worst possible category of drought. According to Dr. Jeff Masters’ WunderBlog this is the first time since the Drought Monitor product began in 2000 that a portion of California was put into “Exceptional Drought.”

Meanwhile, parts of the state experiencing “Extreme Drought,” the second worst category of drought, increased to 67 percent.

The U.S. Drought Monitor notes that a few of the impacts within the “Exceptional Drought” areas include fallowing of land, wells running dry, municipalities considering drilling deeper wells, and little to no rangeland grasses for cattle to graze on, prompting significant livestock sell off.

Over at Slate.com Eric Holthaus says that puts the current California drought on par with recent major droughts in Texas (2010-11) and the Midwest (2012), both of which were multibillion-dollar disasters.

For insurers, droughts can be costly too. According to analysis by Munich Re, drought in various parts of the U.S. in 2012 caused $15 billion to $17 billion in insured losses, making it the second costliest disaster after Hurricane Sandy.

Check out I.I.I. information on crop insurance.