Unquenchable Thirst: Groundwater Bill Could Shift State’s Water Management Approach

The Colorado River Aqueduct looking east. | Bruindon/Creative Commons

Char Miller
KCET.org

The latest salvo is California’s long-running water wars, SB307, has the potential to emerge as one of the most important pieces of water regulation in recent years. Although its target was narrow — it was designed to undercut the capacity of Cadiz, Inc. to pump annually upwards of 16 billion gallons of groundwater in eastern San Bernardino County and sell it to ever-thirsty Southern California — the legislation may prove to be far-reaching in its consequences.

Gov. Gavin Newsom signed the bill into law on July 31, requiring independent review from the State Lands Commission, Department of Fish and Wildlife and the Department of Water Resources to ensure that pumping from the groundwater basin doesn’t harm the natural or cultural resources at the site and in the surrounding watersheds. Focused on short-term impact, columnist at the Desert Sun, decried the bill as a job-killer and legislative overreach. The Los Angeles Times and the Sacramento Bee read the law as yet another Golden State rebuke of the Trump administration and made much of the legislation’s protection of imperiled Mojave Desert springs and species. The environmental impact of the law was a point that Sen. Dianne Feinstein confirmed: “If Cadiz were allowed to drain a vital desert aquifer,“ she declared, “everything that makes our desert special — from bighorn sheep and desert tortoises to Joshua trees and breathtaking wildflower blooms—would have been endangered.“

These are all important considerations to be sure. But the new law is actually more expansive in reality and reach. Although the enduring battle over the control and distribution of white gold dates back to the Spanish conquest of Alta California in the late 18th century, this particular piece of 21st century legislation offers an important twist in the state’s longstanding struggle to secure a sustainable supply of this most-essential resource.

In this case, the play has been for desert groundwater. That unusual wellspring is a bit of a shock, not least because ever since the Gold Rush it has been Sierran snowmelt that has dominated the state’s mirage-like fantasies of an unending stream of water that would blast open mineral riches, fill reservoirs, irrigate farms and lawns, drive industrial production, and wash windows, cars, and sidewalks. This natural tap would forever boom the state’s economy. But could the desert, specifically the Mojave Desert, one of the most arid regions on this blue planet, become a rich repository of water? That has seemed a contradiction in terms.

Adding to the confusion is that the main actors in this most-recent drama are not the usual suspects. This story isn’t about water grabs devised by big ag in the Central Valley. It isn’t about a scheming Metropolitan Water District (though it would surely benefit from the deal). Neither the City of Los Angeles nor the State of California, each of which in the past has diverted vast amounts of other region’s water for its own ends (and ticked off a lot of people in the process), are the creators of this particular narrative.

Taking center stage instead is a clutch of venture capitalists who have invested in the Cadiz Project, and whose investment has underwritten the purchase of 34,000 desert acres and associated water rights in San Bernardino County. Theirs is a supply-side operation, a tantalizing pool of water that has not yet been integrated into California’s highly complex water-market. Should it ever be so — and you can be certain that Cadiz will do everything in its power to make that happen, SB307 notwithstanding — then its privately owned groundwater will become a cash cow for Wall Street profiteers.

Standing in their way is this new law, the promise of which is that it unflinchingly calls the question on water agencies and consumers: why are we still fixated on securing new supplies of hitherto unexploited water, by hook or by crook? Cadiz, after all, is one more shimmering proposal, in a long line of such illusions, that ever-dry Southern California can solve its water crises by pumping out the Owens River Valley, the Colorado River, or that trio of NorCal rivers, the Feather, Sacramento, or the San Joaquin. Absent this law, and the Mojave would be yet another victim of our unquenchable thirst.

The adoption of this law sheds light on a new approach to water management: the smartest, least expensive, and most efficient method of building a more water-resilient state is to tackle the demand side of the equation. That’s at the heart of an argument by Peter Gleick, president Emeritus of the Pacific Institute, in a 2018 article in the Proceedings of the National Academy of Sciences. In it, he probes the new water-management paradigm that he dubs the "soft water path,“ a refocusing on the “multiple benefits water provides, improving water use efficiency, integrating new technology for decentralized water sources, modernizing management systems, committing to ecological restoration, and adopting more effective economic approaches.“ By rigorous conservation we can do more with less.

That prospect isn’t new. It has been demonstrated in the implementation and constant improvement of low-flow technologies that are required features in building codes across California. It was strikingly manifest, amid a punishing four-year drought, in the rapid decrease in urban water use following Gov. Jerry Brown’s April 2015 declaration of mandatory emergency restrictions to cut consumption by 25%. It is evident as well in Orange County’s highly successful groundwater replenishment operation — to date, the world’s largest — that captures and treats stormwater and effluent to the EPA’s highest standard for potable water; the project currently serves more than 500,000 people a year (with an expansion underway to increase its capacity to an estimated 850,00 consumers by 2020).

This system is making a critical contribution to the county’s ambition to become water independent by 2050, an ambition that the UCLA Institute of the Environment and Sustainability believes Los Angeles County could replicate. In its 2018 report, the center highlighted “potential pathways to a transformation of the city’s historical reliance on imported water to an integrated, green infrastructure, water management approach that provides water quality, supply, flood control, habitat, open space and other benefits.”

Although galvanizing policymakers, politicians, and taxpayers to invest in these proven, real-world outcomes will not be easy, UCLA researchers believe “the recent extreme drought on water supplies throughout California has created a new urgency to increase the city’s ability to provide a secure, resilient water supply through local sources.“ SB307 might accelerate that transition by helping break our bad habit of relying on Cadiz-like pipe dreams, which the late historian Norris Hundley argues in “The Great Thirst“ was “born of an earlier era when abundance encouraged abuse.“ If it does so, then it will mark a significant turning point in the state’s contentious water history.

Char Miller is the W.M. Keck Professor of Environmental Analysis and History at Pomona College, and among his most recent books are "Not So Golden State: Sustainability vs. the California Dream," "The Nature of Hope: Grassroots Organizing, Environmental Justice, and Political Change," "Public Lands, Public Debates: A Century of Controversy," and "Death Valley National Park: A History."

Feinstein fumes as Trump team waives environmental review for Mojave water project

Scott Slater, CEO of the Cadiz water project, stands near a basin at the project site near Needles, California, Slater and Cadiz have recently gotten a big boost by a Trump administration decision that relieves the project of a federal environmental review requirement. (Noaki Schwartz AP)

BY STUART LEAVENWORTH
Sacramento Bee

WASHINGTON -- The Trump administration has handed a big boost to a private water venture in Southern California, angering California’s senior senator, Democrat Dianne Feinstein, who said the decision could “destroy pristine public land” in the Mojave Desert.

In a little-noticed memorandum issued last month, the Department of Interior’s Bureau of Land Management effectively relieved the Cadiz water project of the requirement to undergo a federal environmental review, which the company had sought to avoid. The decision greatly boosts the prospects for Cadiz, which wants to tap water from under the Mojave and sell it to thirsty water districts in Southern California.

“The detrimental impact this project would have on the California desert is irreversible,” Feinstein said in a statement. “Rather than allow a proper environmental review, the Trump administration wants to open the door for a private company to exploit a natural desert aquifer and destroy pristine public land purely for profit.”

Cadiz responded that its project has undergone multiple environmental reviews, including a California Environmental Quality Act review that survived court challenges.

Feinstein’s “opposition has done a disservice to thousands of Californians who will benefit from this public-private partnership – a project which will deliver new, reliable water without any adverse environmental impacts,” Cadiz CEO Scott Slater said in a statement.

As noted in a Feb. 8 story by McClatchy, Cadiz has seen its fortunes rise since Trump was elected. Its stock price has more than doubled since Trump’s victory, apparently because investors believe the venture will fare better now than it did when Barack Obama was in office. Slater, the company’s CEO, is a water lawyer affiliated with the Denver-based firm Brownstein, Hyatt, Farber, Schreck, an influential lobbying force in Washington.

One remaining hurdle for Cadiz is building a 43-mile pipeline necessary for shipping its water to potential customers. Prior to 2015, Cadiz assumed it could use an existing railroad right-of-way for the pipeline and do so without a costly and time-consuming federal review. Yet two years ago, the California office of the U.S. Bureau of Land Management reversed a 2009 determination and required Cadiz to seek a permit to build the pipeline.

Over the last two years, Cadiz has been lobbying Congress to overturn the BLM decision and pass legislation that would relieve it and other companies of permitting requirements on railroad right of ways. On March 1, two California lawmakers – Democrat Tony Cardenas and Republican Tom McClintock – joined 16 other congressional representatives in a letter to Interior Secretary Ryan Zinke, asking him to rescind the BLM decision and relieve the project of a federal review.

In a March 29 memorandum, Zinke’s Interior Department did just that, rescinding the 2015 decision signed by Timothy Spisak, acting assistant director for BLM’s Division of Energy, Minerals, and Realty Management.

Feinstein is the author of the 1994 California Desert Protection Act, which established the Death Valley and Joshua Tree national parks and the Mojave National Preserve. She has long opposed Cadiz, which has struggled for 15 years to get traction on different versions of its water project.

Feinstein points to analyses by the National Park Service and U.S. Geological Survey to argue that Cadiz would withdraw more water – 50,000 acre feet each year – than nature could provide to recharge the desert aquifer.

“The Trump administration has once again put corporate profits ahead of the public’s interest,” Feinstein said in her statement. “In a blatant attempt to muscle the Cadiz water project through, the administration is completely undermining federal oversight of railroad rights-of-way.”

Cadiz rejects those claims, asserting that more recent analyzes have found that the company’s proposed groundwater withdrawals pose no threat to the desert’s flora and faunta.

“Senator Feinstein regrettably relies on outdated, 17-year old data inconsistent with presently known facts as foundation to oppose a project which will safely and sustainably create new water for 400,000 people, has broad bipartisan community support, will generate 5,900 new jobs, and will drive nearly $1 billion in economic growth,” Slater said late Tuesday.

Feinstein, who sits on the Senate Appropriations Committee, has used her position before to block Cadiz and other developments she has deemed detrimental to the Mojave Desert. Whether she can again is not clear, but she pledged Tuesday to “fight this latest effort to push the Cadiz water project through.”

Trump administration boosts huge Mojave Desert water-pumping project

Environmentalists say the Cadiz project would rob the desert of the water that plants and wildlife need to survive.

A pumping station designed to help Cadiz project researchers understand how quickly water seeps into the earth is shown in this June 2015 file photo. (JOSHUA SUDOCK, STAFF FILE PHOTO)

By DAVID DANELSKI
Riverside Press-Enterprise

The Trump administration has removed a major roadblock to plans by a Santa Monica company to pump ancient groundwater from below the Mojave Desert and sell it to urban areas of Southern California.

The federal Bureau of Land Management has rescinded a 2015 administrative finding that Cadiz, Inc. needed to obtain a federal right of way permit and thus had to complete comprehensive environmental studies before it could build a water pipeline within 43 miles of railroad right of way owned by the Arizona & California Railroad.

The move follows a January decision by the Trump transition team to put Cadiz on a list of priority infrastructure projects, and a state appellate court’s rejection last year of a lawsuit filed by environmental groups challenging the project.

The $225 million Cadiz Valley Water Conservation, Recovery and Storage Project still needs approval from the powerful Metropolitan Water District to use the Colorado River Aqueduct to ferry the water to urban Southern California.

Cadiz company officials said in statement that they are pleased with the Trump administration’s decision. The statement said they have always believed “the BLM’s 2015 evaluation was contrary to law and policy.”

In 2008, Cadiz entered into a lease agreement with the railroad company to build a pipeline in between the wells it owns in the Mojave Desert area, west of Needles and south of Interstate 40, to the Colorado River, using the railroad’s right of way over federal land.

From the river area, the water could be ferried to urban Southern California using the aqueduct and reservoir system operated by the Metropolitan Water District.

“Our discussions are continuing about what would be required before they can put water in the Colorado River Aqueduct,” said water district spokesman Bob Muir.

In 2002, the water district’s board voted down an earlier version of the Cadiz project that also needed to use the aqueduct.
The project is staunchly opposed by environmental and desert advocates, who say it would rob the desert of the water that plants and wildlife need to survive.

“Many of the springs and seeps are going to dry up because of groundwater extraction,” said Ileene Anderson, a biologist with the Center for Biological Diversity.

She is particularly concerned that the pumping would harm the Mojave National Preserve and recently created Mojave Trails National Preserve [sic].

Sen. Dianne Feinstein, D-Calif., said in a statement that the new administration was muscling through the project without proper reviews. Feinstein is an ardent desert supporter who authored the California Desert Protection Act that created the preserve and other protections more than 20 years ago.

“The Trump administration wants to open the door for a private company to exploit a natural desert aquifer and destroy pristine public land purely for profit,” her statement said.

“The administration is completely undermining federal oversight of railroad rights-of-way. “

California water venture tied to Trump sees prospects rise after years of setbacks

BY STUART LEAVENWORTH
Sacramento Bee

WASHINGTON -- Until Donald Trump won the presidency, prospects looked bleak for Cadiz, a California company that has struggled for years to secure federal permits to transform Mojave Desert groundwater into liquid gold.

With the change of administration, a new day is dawning. In December, the National Governors Association circulated a preliminary list of infrastructure projects provided by the Trump transition team, and Cadiz’s was on the list. The company’s stock price rose on that news, part of a trend that has seen Cadiz’s valuation more than double – to roughly $14 a share – since the election.

Cadiz has worked hard to raise its profile among consultants compiling lists of possible infrastructure projects, says Scott Slater, CEO for the company.

But what has really helped Cadiz is its deep connections to Washington. Slater is part of a Denver law firm – Brownstein, Hyatt, Farber, Schreck – whose attorneys have long lobbied the Interior Department, with some serving inside of it. One of those is Brownstein’s David Bernhardt, who served as Interior’s solicitor during George W. Bush’s presidency, helped Trump during the transition and is a candidate to return to Interior in a top job. He’s also been a lobbyist for the powerful Westlands Water District in California’s Central Valley.

In an interview, Slater said Cadiz still faced hurdles but the project’s future looked brighter than it did a few months ago. “The dynamics have changed,” said Slater, noting that Republicans now control the White House in addition to both houses of Congress.

Slater and his law firm have a lot riding on Cadiz’s success. According to an SEC filing last year, the Brownstein firm stands to earn 200,000 shares of Cadiz stock if the company meets milestones for completing the project and selling water. Brownstein has already earned 200,000 shares for its involvement with the company — a stock portfolio that is sure to appreciate in value if Cadiz can overcome permitting obstacles.

Numerous businesses are hoping to cash in on Trump’s interest in infrastructure. Two weeks ago, McClatchy was the first to report on a list of infrastructure projects that, according to the National Governors Association, the Trump transition team had given the group. Cadiz’s was one of two private California water projects on the list; the other was a desalination project south of Los Angeles.

While Trump is a supporter of traditional public works – touting the need for “new roads, highways, bridges, airports, tunnels and railways” during his inaugural address – fiscal hawks and some GOP leaders are leery of new federal funding for infrastructure. That political calculus has created openings for private infrastructure projects seeking regulatory relief, especially if they have connections. Cadiz’s project falls into both of those categories.

The brainchild of a British financier, Keith Brackpool, Cadiz is a publicly traded company with a stock price that has gyrated for a decade and a half. The company owns 45,000 acres in the Mojave Desert, where it hopes to extract water from an aquifer to sell to thirsty water districts in Southern California.

Fifteen years ago, the company’s stock price approached $200 a share, in part because Brackpool was close to then-Gov. Gray Davis of California, and investors apparently assumed that Cadiz had the political juice to make its project a reality. Yet Cadiz ran into opposition from the Metropolitan Water District of Southern California, which started questioning the company’s financial resources, and also from environmentalists, who feared the project could further dry up the Mojave, a national preserve. By 2011, Cadiz’s stock price had dropped below $10.

That’s when Slater came aboard. An expert in California water law, he became president of Cadiz in 2011 and rose to become CEO two years later. Through Slater’s Brownstein firm and other firms, Cadiz also stepped up its advocacy efforts on Capitol Hill, spending $3.4 million in lobbying from 2011 to 2016, according to a tabulation by the Center for Responsive Politics.

Slater has helped the company win several legal victories. In 2016, California’s 4th District Court of Appeal upheld six lower-court decisions in favor of Cadiz, putting to rest further state court litigation against the company’s environmental impact report.

Yet the company remains blocked by an unexpected 2015 Interior Department decision. That year, the California office of the U.S. Bureau of Land Management, an Interior agency, reversed a 2009 determination that the Cadiz project needed no federal permits. Cadiz had long believed that it could use an existing railroad right of way to build a 43-mile pipeline to transfer its water to potential buyers, and do so without a federal permit.

The BLM ruling opened up the possibility of an uncertain multi-year federal review, frightening potential investors and sending the company’s stock price down to the $4 range.

Slater said in an interview that Cadiz was urging the new administration to rescind the BLM decision, “accelerating our path by removing some of the underbrush.” Cadiz also wants Congress to pass legislation to make clear its intent on how the BLM should handle decisions involving railroad rights of way. The issue is of concern to legislators outside of California, said Slater, because the 2015 BLM decision potentially could affect use of all railroad rights of way in the West.

Matt Lee-Ashley, a former Interior Department official, said that what Cadiz was doing was typical during a White House transition. “Anytime an administration turns over, anyone who had a project with an unfavorable ruling will try to make another run at it,” said Lee-Ashley, who worked in Interior during the Obama administration and now is public lands director at the Center for American Progress, a liberal advocacy group.

Yet even though Cadiz has new friends in a Trump administration, it may not be enough to counter the company’s most formidable foe: U.S. Sen. Dianne Feinstein, the California Democrat who wrote the Desert Protection Act of 1994 and has long been the Mojave’s guardian. She has the ear of ranchers and conservationists who fear that Cadiz’s pumping project could damage the desert’s range lands and ecosystems.

Cadiz disputes those claims, arguing that it will be withdrawing only water – enough to supply 100,000 homes yearly – that would otherwise evaporate from lake beds in the desert. So far, however, Cadiz has been unable to win over California’s senior senator, who succeeded this year in persuading President Barack Obama to create three new national monuments in the Mojave, totaling more than 1.3 million acres.

Things could also get complicated if David Bernhardt, Slater’s colleague at the Brownstein firm, takes a top job at Interior. Brownstein’s 250 lawyers represent scores of clients, and the firm runs a political action committee that has given more than $513,000 to federal candidates and members of Congress since 2014.

According to a recent report in Energy and Environmental News, Bernhardt is a front-runner to serve as deputy to Ryan Zinke, a Montana congressman who is Trump’s interior secretary nominee.

Late last year, Bernhardt withdrew his registration as a lobbyist. If he moved back to Interior, Bernhardt would have to recuse himself from Interior issues involving his former clients, including Westlands.

But it’s less clear whether he’d have to recuse himself from matters involving other Brownstein clients, of which there are many. Attempts by McClatchy to obtain White House clarification were unsuccessful.

Also unclear is how Cadiz’s project ended up on a list of “emergency and national security priority projects” distributed to the National Governors Association and reported by McClatchy. Slater suspects that Cadiz rose on someone’s radar after he made several presentations at infrastructure conferences last year, including one hosted by CG/LA Infrastructure Inc., a national consulting firm. CG/LA is headed by Norman F. Anderson, an infrastructure expert who has ties to Dan Slane, a real estate developer from Ohio who has been helping the Trump administration with transition work.

Anderson couldn’t be reached for comment, but in a telephone interview on Tuesday, Slane said he had met with Cadiz’s CEO and thought it had a worthy project.

“That’s one where they just need some help from us on the permitting side,” said Slane, adding that he thought the Trump administration “could help with expediting permitting.”

The Pipeline and the Short Seller

Emails show a federal regulator shared non-public information with an investor.

Water gushes into a pilot spreading basin on Cadiz Inc. property in California's Mojave Desert in 2002. (PHOTO: ZUMA PRESS)

OPINION
Wall Street Journal

Trust in Washington has hit a historic low, and one reason is the sense that government regulators favor some people over others. Consider an email trail that reveals how a federal employee shared inside information about regulatory approval with a short seller.

The emails concern a water pipeline in California that is stuck in regulatory limbo. The story begins in 1998, when the Los Angeles-based land management company Cadiz Inc. began plans to develop a groundwater bank on private land overlying a watershed in the Mojave Desert. Cadiz proposed building an underground pipeline along the Arizona & California Railroad’s right-of-way to transport 50,000 acre-feet of water annually to Southern California.

The Department of Interior’s longstanding policy allowed railroads to run power, telephone and fiber optics lines along their rights-of-way without a federal permit, thus expediting environmental review. However, in November 2011, after Cadiz had modified its plan to reduce environmental opposition, Interior at the insistence of California Sen. Dianne Feinstein revised its policy to limit the use of railroad rights-of-way granted in 1875 to “activities that derive from or further a railroad purpose.”

The Cadiz pipeline was the only project subject to the new rules. Cadiz spent several years and $12 million reconfiguring the pipeline to “further a railroad purpose,” proposing the likes of hydro-turbines, power safety systems and automated fire suppression. None of Cadiz’s compromises satisfied regulators.

On Oct. 2, 2015, the Bureau of Land Management (BLM) informed congressional staff—who tipped off Cadiz—of an imminent adverse ruling. A letter circulated by the bureau noted that the pipeline “does not derive from or further a railroad purpose” because the fire suppression system was “an uncommon industry practice,” among other complaints. The kicker was that the ruling could not be appealed because it “is not a final agency decision.” Thus the pipeline would have to undergo a formal environmental review. Ms. Feinstein has attached riders to every Interior appropriations bill since 2008 barring a review.

Within a week of the BLM ruling, Cadiz’s stock plummeted 65%. Yet one Cadiz investor had inside information that could have allowed him to make a killing. Emails obtained through a Freedom of Information Act request by Cadiz reveal that BLM realty specialist Erik Pignata (who oversaw the Cadiz review from the Sacramento bureau) shared non-public information with Cadiz investor Thomas McGannon of Whetstone Capital Advisors. Cadiz provided the emails to us.

***

Whetstone, based in Mission Woods, Kansas, describes itself as “a value oriented long/short investment fund.” Mr. McGannon told the Kansas City Business Journal in May 2014 that “when we put a short into the Whetstone portfolio, it’s because we’ve done research on a specific company and think that for one reason or another the value of that company is declining and the stock price is likely to decline over time as well.” That strategy would certainly fit with Mr. McGannon’s research into Cadiz with the help of the BLM’s Mr. Pignata.

Mr. McGannon declined to say if or how he traded Cadiz shares and sent us this statement: “Our research over a five year period led us to believe that there was an investment opportunity presented by Cadiz’s stated business plan, which appeared contrary to information that was publicly available. We did not seek nor obtain any material non-public information regarding the Cadiz Water Project.”

Yet the emails suggest that Mr. McGannon sure was interested in regulatory decisions about Cadiz. The Pignata-McGannon email trail that we’ve seen begins with Mr. McGannon following up on a FOIA request in September 2014 soliciting information about the bureau’s review. Mr. Pignata referred documents related to the request to the bureau’s FOIA officer. This should have closed their communication since government employees aren’t supposed to disclose non-public information to third parties outside of the FOIA process that could benefit private interests.

***

Mr. McGannon continued to probe Mr. Pignata about the project’s regulatory prospects. “Does the green line go through BLM lands?” Mr. McGannon asked in a Sept. 9, 2014 email, referring to a map of the Cadiz project. “I was mostly just curious if an alternate route along the green line would require BLM approval.” Mr. Pignata responded later that day that the alternative route “almost certainly” does.

On Feb. 19, 2015, Mr. McGannon inquired if there has been “any movement on the project discussions since we last spoke?” Mr. Pignata replied: “No, we are formulating our evaluation with DOI legal staff.” The emails suggest the two chatted repeatedly over the phone.

On June 4 Mr. McGannon emailed “great to catch up” along with a link to a blog post “Strong Sell On Project Failure, Insider Enrichment, And Bankruptcy, Price Target $0” that eviscerated Cadiz. On September 23 Mr. McGannon asked if there was “any news likely this week?” Mr. Pignata replied: “I have a briefing w/ the almost-highest people in my agency tomorrow . . . No pressure or anything.” Mr. McGannon cheered him on: “You got it man!”

A week later, Mr. McGannon inquired into when an adverse ruling would be finalized: “Wont [sic] it be great when I don’t bother you anymore.” Mr. Pignata replied: “I have a feeling Cadiz, Inc. isn’t going anywhere . . . so you’ll get to keep bugging me.” Several of Mr. Pignata’s emails suggest an animus toward the Cadiz project.

On October 1, Mr. Pignata assured his hedge-fund pen pal that the BLM determination would “for sure” be “signed tomorrow.” Mr. McGannon rejoiced: “Maybe one of these days ill [sic] get to buy you a beer or something as a thank you.” BLM made its ruling the next day.

Cadiz disclosed on October 5 that it had been briefed by a congressional office that an adverse ruling might be imminent. The company says the bureau did not respond to its email requests for confirmation. Cadiz’s share price tumbled by nearly two-thirds. A short seller who bet against the stock and had advance knowledge of the outcome could have made significant gains.

There are numerous chronological gaps in the emails between Messrs. Pignata and McGannon, which suggests there may be more documents the government hasn’t turned over. Mr. Pignata declined comment beyond an email saying he had complied with the FOIA request. A spokesperson for the Bureau of Land Management says the agency recently became aware of the Pignata-McGannon communications and has referred the matter to the Department of Interior’s Office of the Inspector General.

House Oversight Committee Chairman Jason Chaffetz has sent a letter to the Bureau of Land Management soliciting more information about the correspondence. The bureau should explain whether Mr. Pignata’s communications comport with a 1990 executive order forbidding government employees from improperly using non-public government information to further a private interest.

Forget it, Jake: It's Cadiz

The entrance to the Cadiz property | Photo: Chris Clarke

Emily Green
KCET.com

Commentary: Just when it seems that a water grab with the shorthand name of “Cadiz” can’t get any stranger, it can. In May, an appellate court in Orange County affirmed that a suburban water company in Orange County is the rightful municipal steward for a privately run groundwater mining operation 200 miles away in the Mojave, and that its central purpose of exporting desert water for sale to Southern California cities qualifies as “conservation.”

The court might as well have told us that, yes, it's checked, the wolf in the bonnet is our grandmother.

If there is good news in the down-is-up and up-is-down world of what is now known as the "Cadiz Valley Conservation, Recovery and Storage Project," it’s that late last year, public land managers rejected the speculators’ claim to exemption from federal environmental review. Adding to this, an edgy blog run by hedge fund managers argues the company is on the brink of collapse. Those bloggers say they’re “shorting” Cadiz, market speak for betting on its collapse. In the course of what is now Cadiz’s 22-year-bid for water, not a drop has been exported from the desert, but millions of dollars raised by the company still flowed back to the founder — who can now be found running the racetrack at Santa Anita Park.

My, what sharp teeth he has.

It's fitting, somehow, that for many years the public face of Cadiz was a British bon vivant with a history of hoarding politicians so compulsively that House of Cards might reject the script for a Cadiz episode as too improbable. Various accounts in the Wall Street Journal, New York Times and London Guardian have Keith Brackpool arriving in the US while still in his twenties in 1988 or '89, as head of the North American operations of a British food multinational Albert Fisher PLC. Big title, short tenure. Brackpool quit in 1992 after it was discovered that he had what the Guardian described as a multi-million dollar share in a direct competitor. It wasn't just any competitor, either, but a subsidiary of Polly Peck, Britain's answer to Enron.

It was all completely innocent according to representatives for Fisher, but the CEO who sent Brackpool to the US soon lost his job and the company that had once been a profitable if modest British greengrocery firm became the very poster company for 80s overexpansion. As Fisher reversed trajectory into a decade-long plummet toward bankruptcy, its share price reportedly dropping from roughly $2 to 4 cents, Brackpool turned west, toward California, lured by rumors of an ocean of untapped groundwater roughly 180 miles east of Los Angeles in California’s Mojave Desert. What one of his company's annual reports would soon describe as a mother lode of water lying in a 1,400-square-mile "horseshoe-shaped mountainous catchment area known as the Cadiz Valley" had already attracted speculators, but no one with Brackpool's brio and recklessness.

Sure enough, NASA satellite images did suggest that water briefly pooled in the Cadiz Valley during scant winter rains. Moreover, as was long understood by hydrologists and pretty much anyone familiar with the place, the ground underneath the Mojave can indeed be full of water. Only pressure from desert aquifers keeps the Mojave's seeps and springs flowing. And these startling fonts of water in such a dry place support such an astonishing array of plants and animals that in the early 1990s, almost simultaneously as Brackpool began buying acres in the Cadiz Valley, Senator Dianne Feinstein shepherded the California Desert Protection Act through Congress and to Bill Clinton’s desk. This act created the Mojave National Preserve, granting greater legal protection to the plants and animals very near Brackpool's horseshoe.

Wait a second. He was growing grapes for the prince?

Cadiz's water right was agricultural, so Brackpool’s young company began leasing a small patch of its holdings in the Mojave to citrus and table grape operation. Then, to the amazement of onlookers, it bought up the biggest ag operation in Riverside County. The New York Times described Cadiz's purchase of Sun World International farms and packing operations as a “mouse-swallowing-the-elephant sort of deal.”

The acquisition gave him such unlikely ag-cred that, in 1999, Brackpool was in talks with a Saudi royal, Alwaleed Bin Talal, about Cadiz running a grape farm in Egypt’s Nile delta. Behind lavish showmanship, however, nothing had changed from 1996, when, after the New York Times observed that Cadiz's farm side lost money, Brackpool replied, “The real long-term play is water."

Only the location of the Cadiz Valley, 40 miles from the Colorado River Aqueduct, made a "long play" plausible. To get his water to the canal operated by the Metropolitan Water District of Southern California and carrying Southern California's municipal water supply from the Colorado River to cities such as Los Angeles, Brackpool needed two key things: A pipeline to carry water from his wells and clearance to blend that water with the rest of the water in the aqueduct.

By 2000, environmental impact reviews were in process for what had evolved on the drawing board into plans for The Cadiz Valley Groundwater Storage Project. The pump-and-dump logic of getting water out of the ground and into the So Cal municipal supply was still the heart of the project, but the scope had come to include a savings bank side. Under this, Metropolitan could wheel in any surplus it might have from the Colorado, infiltrate it into Cadiz ground where it would be safe from evaporation, then pull it out when needed. This “aquifer storage and recovery” side was intensely fashionable at the time, and would give the project a high conservation-value sheen as it approached environmental review.

Because Cadiz’s pipeline would cross Department of Interior land, the project triggered not only state but also federal scrutiny. Metropolitan would be the lead agency for the state review, the Bureau of Land Management lead for the federal environmental impact statement. Federal participation meant Cadiz sustainability claims would be reviewed by the best desert hydrologists in the country, the US Geological Survey.

The local water might kill you and there's not enough of it.

Among the USGS observations about Cadiz’s storage and export project as proposed to Metropolitan: Mojave groundwater is prone to high levels of the carcinogen Chromium VI. Beyond a now "Erin Brockovich"-sized question suddenly hanging over the idea that a Cadiz Valley was a good place to store drinking water, the USGS suspected that it could take 15 times longer than Cadiz claimed for desert rains to replenish the groundwater the company pumped.

Pumping too much groundwater too fast might dry out the springs of what, since 1994, had become part of America's revered National Park system. The USGS proffered a pumping plan that would protect the Mojave National Preserve, but this time Metropolitan balked. What if damage from pumping was detected before it had even paid off the tens of millions it would cost to build Brackpool’s pipeline?

This is the juncture when friends with influence should have helped Keith Brackpool. Nobody greased more palms than Cadiz. Gray Davis received hundreds of thousands of dollars and rides in airplanes. Former speaker of the Assembly Antonio Villaraigosa got tens of thousands, and Cadiz never neglected the bottomless wants of San Bernardino County Supervisors. But when Cadiz needed their clout the most, there was the LA Times giving over its premier slot, the Sunday Report, to diagramming his generosity.

In 2002, Metropolitan left Cadiz at the altar.

Cadiz scrambled for new financing as Sun World went bankrupt. So much for growing grapes for the prince. As if to reassure shareholders, Cadiz filed a breach of promise suit against Metropolitan that would cost the water district’s ratepayers another $1 million. A pincer movement attempt to take over Met from within by seating an ally as general manager failed. The “long play” looked played out when up popped Susan Kennedy, a former Public Utilities Commissioner whom Cadiz had paid $10,000 a month for “consulting” the previous year.

Behold Arnold Schwarzenegger's new chief of staff.

With Kennedy’s help and ex-officio endorsements of the project from the governor, Cadiz stock roared back on the NASDAQ.

"I miss that English guy."

-- KPCC radio host Larry Mantle, after interviewing Keith Brackpool's replacement, lawyer Scott Slater, for the first time.

Bruised by yet more LA Times articles dwelling on his cash trails to politicians and even a guilty plea for security trading fraud back in London, Brackpool became a silent chairman. Late in 2008, a disarmingly boyish-looking water lawyer named Scott Slater stepped forward as the face of Cadiz 2.0.

The new, Slater-era strategy: don't argue with the USGS about safe yield estimates. Rather, lock them out. Then repeat unchallenged rent-a-science that Cadiz had paid private consultants to put on charts and graphs. This went, roughly, Cadiz pumps will not harm the basin. Nay, they’ll be good for it, yes good for it! Cadiz will capture water that would otherwise just evaporate!

Moreover, this time around, the company would be running a pipeline to the aqueduct along a railroad easement held by the Arizona & California Railroad and would not need a federal right of way, or to waste taxpayer money on a federal environmental review. Rather than frame it as Cadiz ducking the best expert scrutiny, the company emphasized efficiency. Think of all the money that Cadiz could save the taxpayer by eliminating US Geological Survey review! As for a new state environmental review, there was no getting around it. Cadiz needed a new lead public agency for to get its water into municipal infrastructure. Replacing the former “lead agency” Metropolitan would be tough. If the largest water wholesaler outside of Reclamation thought the project too expensive and fraught, who could replace it?

San Bernardino County was the obvious lead agency. It’s home to the Cadiz Valley and its supervisors were already well lubed with campaign donations by the company. A Cadiz press release even flirted with the notion. Only Slater knows if he passed on the County because he sensed a coming public corruption scandal that would embroil the county assessor and two supes and put a stink over all of California east of Interstate 5. For whatever reason, Slater kept looking.

Huntington Beach-based environment lawyer Debbie Cook thinks she knows how Cadiz ultimately lighted on Santa Margarita Water District, a south Orange County water company serving 150,000 people compared to Metropolitan’s 19 million. It was led by one of Slater’s cronies, she argued in a scathing Voice of OC commentary. With generous help from Slater’s team, the Santa Margarita Water District conducted a new environmental impact report, reviewed the report, then certified the report. And so it became lead agency of a water project 200 miles away with no other qualification to tackle a project of this scope other than its general manager knew Scott Slater. As icing, an Orange County judge affirmed the water district’s standing as lead agency in May.

Put my 401K on No Regrets in the third.

Slater and Cadiz were on a roll until April 2015, when a little known hedge fund blog called Seeking Alpha argued that federal review was inevitable and put a “strong sell” on Cadiz. So began a shareholder lawsuit against Cadiz. Call it ankle biting by a pseudonymous blogger, or insight by the rare, sharp financial analyst who does his or her homework. Either way, six months later, Seeking Alpha was proved right about one thing: The Bureau of Land Management wrote Cadiz rejecting the railroad gambit. The Santa Margarita self-certification under state review would not be enough. The project would have to undergo a federal review if Cadiz wanted to run a pipeline across federal land. Then, last February, the screws tightened yet again when the president declared yet more land around Cadiz to be part of a new Mojave Trails National Monument.

After issuing an indignant barrage of tweets condemning the BLM decision, then marshaling a stage army of outraged congressional reps, Slater is currently circling in protest mode. Time will tell if he can muster some kind of congressional exemption or if he’ll sue the federal government. Whatever he does, again it’s hail Mary time for Cadiz as Seeking Alpha doubled down on its junk rating, calling the company “worth $0 intrinsically.”

If Cadiz goes bankrupt, the shareholders already made poorer by repeated stock dilutions may be hit hard. (Cue to check where any mutual funds might have parked your 401K). But, as far as the directors stand, going bust could scarcely happen to a bunch of richer, better remunerated players. Seeking Alpha calculates that over the years more than $47 million of hundreds of millions raised for the company went to compensating insiders. Brackpool came out of the shadows after parlaying a 2009 appointment by Schwarzenegger to California Horse Racing Board into part ownership and a management post at Santa Anita Park in LA County. He’s now most often found in the sports pages commenting, say, on a recent redesign of the “Chandelier Room.”

One of the major companies buying up Cadiz debt is a Wall Street investment firm Water Asset Management. A ProPublica profile earlier this year found it systematically buying up agricultural water rights around the West to redirect the flows to cities. This is chastening for anyone who imagines that a Cadiz bankruptcy alone would protect the Mojave National Preserve from dewatering by the project, or keep the Cadiz Valley’s Chromium VI out of public drinking water.

“Let's say Cadiz does go bankrupt,” said one of three analysts interviewed on the condition of anonymity for this piece. “What’s to stop Water Asset Management from hiring Scott Slater? Or what's to stop President Trump from appointing Scott Slater Secretary of the Interior?”

Forget it, Jake. It’s Cadiz.

Trying to Get Water to California but Torpedoed by Regulators

The Obama administration and Dianne Feinstein keep blocking a private project to aid the still-parched state.

Well water bubbles into a pilot pool in Cadiz, Calif, in 2002. (AP)

By ALLYSIA FINLEY
Wall Street Journal

Although El Niño has increased the snowpack in the Sierra Nevadas, the Golden State’s historic drought isn’t over. Yet the Obama administration has decided to block a privately financed project that could supply water to 400,000 Californians, even though the project has been approved by an alphabet soup of state and local agencies. The result will be to trap vast amounts of a precious resource beneath the Mojave Desert. Is water the new fossil fuel?

This tale of political and regulatory obstructionism begins in 1998, when Cadiz Inc., a Los Angeles-based company, developed plans for a groundwater bank and well-field on 70 square miles of private land overlying the base of the Mojave’s massive Fenner Valley and Orange Blossom Wash watersheds. Over centuries the aquifers there have amassed as much as 34 million acre feet of water, enough to sustain all of California’s households for several years.

However, tens of thousands of acre feet percolate into salty dry lakes and evaporate each year. Cadiz proposed capturing and exporting the groundwater to Southern California residents. The Cadiz Valley Water Conservation, Recovery and Storage Project could also help store occasional excess flows from the Colorado River that would otherwise drain to the Pacific Ocean.

Water experts such as those at the Public Policy Institute of California have recommended using groundwater banks to recharge aquifers during wet years and expand the state’s storage capacity. Relative to dams, storing water underground reduces evaporation and environmental harm.

None of this mattered to various green lobbies and California Sen. Dianne Feinstein, who complained that the water project would deplete mountain springs and harm wildlife. But environmental reviews by hydrogeologists confirm that the nearest spring—located 11 miles away and 1,000 feet above the aquifer—would not be affected. Nor would fauna, which don’t rely on groundwater. After an exhaustive review, the U.S. Interior Department approved the project in 2002, but Sen. Feinstein maintained her opposition.

Cadiz sought to assuage her in 2008 by reducing the planned annual water exports to 50,000 acre-feet from 150,000. It also negotiated to use the Arizona & California Railroad’s (ARZC) right of way to build a 43-mile underground pipeline to the Colorado River Aqueduct (which feeds water to Southern California). But a few days after Cadiz announced its agreement with ARZC, Ms. Feinstein launched another attack, demanding that the Interior Department “conduct a detailed analysis” of “permissible uses” of railroad rights of way.

The department’s long-standing policy allowed railroads without federal permitting to run power, telephone and fiber optic lines on their rights of way, streamlining environmental review for public works, including wind and solar farms. But in 2011, Interior revised its policy to limit railroad rights of way that were granted in 1875—such as ARZC’s—to “activities that derive from or further a railroad purpose.”

Curiously, the new rules apply only to projects like the Cadiz pipeline. Telephone wires and fiber optic lines, maintenance yards and “related improvements,” could be permitted “on a case-by-case basis” if they helped the railroad operate.

Cadiz would go on to spend $12 million on capital improvements to benefit the railroad, such as a maintenance access road, turbines to power safety equipment and information systems, as well as state-of-the-art automated fire suppression. No matter. Last October the Bureau of Land Management ruled that the Cadiz pipeline “does not derive from or further a railroad purpose.” The innovative fire-suppression system “is an uncommon industry practice,” the agency caviled, and the “origin of the access road is to support the non-railroad purpose of water conveyance.” Building the pipeline without authorization, it warned, “could result in the BLM instituting trespass proceedings.”

The BLM added that its ruling cannot be appealed because “it is not a final agency decision.” A final decision would require a formal regulatory review. But Ms. Feinstein has attached riders to every Interior Department spending bill since 2008 that bar the agency from reviewing Cadiz.

Amid this regulatory hustle, a California state appellate court last month heard six challenges to the project, all of which had been rejected by a trial court two years ago. In 2012, the Santa Margarita Water District’s final environmental impact report noted that the project’s only significant effects would be temporary dust from construction and the hazard of population and employment growth from a larger water supply, which has driven opposition from green groups. While trumpeting the BLM’s decision in October, the Center for Biological Diversity complained that the Cadiz project would “increase urban sprawl in coastal Southern California.”

So the water storage project, long overdue, remains stuck in regulatory purgatory. Without a Hail Mary attempt by Congress to unplug the Obama water blockage, thirsty Californians can only pray for a Republican president who views economic development as a blessing rather than curse.

How one man plans to make billions selling Mojave desert water

Scott Slater wants to pump billions of gallons to LA and other drought-hit cities - and make $2.4bn in the process

Scott Slater’s Cadiz Inc plans to tap the eastern Mojave aquifer of water he says would otherwise evaporate. (Cadiz Inc.)

Rupert Neate
The Guardian

Scott Slater has a plan. It is not a popular plan, but he wants to pump 814bn gallons of water from under the Mojave desert to Los Angeles and other drought-stricken communities in southern California, and make more than $2bn (£1.3bn) doing so.

“Yes, it’s quite a lot of money,” Slater, the 57-year-old chief executive of Cadiz Inc, says as he stands in front of a scale model of the project in the foyer of the company’s office on the 28th and top floor of a LA city center office block. “It’s worth whatever the community who wants the water is willing to pay for it to meet their demands.”

Cadiz owns water rights associated with 45,000 acres of land along Route 66, about 75 miles north-east of Palm Springs. The holdings were built up by the company’s founder, Keith Brackpool, a British horseracing impresario, who came to the US after admitting having breached financial disclosure laws in the UK in the 1980s.

The company biggest investors, some of whom have been waiting for Cadiz’s water to flow to LA for more than a decade, include the New York hedge fund Water Asset Management and Crispin Odey’s Odey Asset Management in London.

Slater has already got contracts to sell the water for $960 an acre ft (the amount of water it takes to cover an acre of land in a foot of water). That works out at $2.4bn over the 50 years of the company’s water extraction deal with San Bernardino County. His problem, however, is convincing politicians, regulators and the public that pumping water 200 miles from the desert aquifer to LA is a good idea.

Scott Slater, CEO Cadiz Inc

“People see this development as a private sector initiative and they have a very visceral, negative reaction to that,” Slater says.

The price of water in California has been steadily rising, as has demand from a growing population, while the state struggles with four years of severe drought. Slater says water is worth as much as $2,200 an acre ft in San Diego, where it is shortest supply. A decade ago the price was less than $100, he says.

Drought is good news for Slater and Cadiz. “In a condition of scarcity, all water, all water that’s reliable, becomes more valuable,” Slater says. The company’s share price spikes every time a drought emergency is declared, but the shares have still lost more than 80% of their value since 2007 because of repeated regulatory setbacks in Cadiz’s quest to tap the eastern Mojave aquifer.

In the latest setback, the US Bureau of Land Management (BLM) ruled that the company cannot lay a 43-mile pipeline alongside an existing railway line to transport water to the Colorado river aqueduct and on to the cities of the Californian coast. It means Cadiz will have to seek federal approval for the pipeline, which will trigger a long and expensive environmental impact review.

Slater, who was a water rights lawyer for 30 years before taking over as Cadiz’s CEO in 2013, is not giving up on the railway pipeline without a fight. He accuses the BLM of misinterpreting 19th century railway law, and says: “If we can’t get them to follow the law, we’ll do what we need to do, pursue administrative and judicial remedies.”

He says the logistics of the project are pretty simple, and that the company could start pumping enough water to supply 400,000 people by 2017. “I know it will work,” he says, dressed in an purple open-collar Burberry shirt and jeans.

Cadiz has plenty of enemies - environmentalists, local ranchers, protectionists and Native American tribes - but none more fierce than Senator Dianne Feinstein.

“I remain concerned the Cadiz project could damage the Mojave desert beyond repair and believe the BLM decision to deny the right of way is the right one,” said the veteran Democrat, who in 1994 help create the Mojave national preserve. She believes it could be threatened by the Cadiz project. “The bottom line is that right now we need more responsibility in how we use our water, not less.”

David Lamfrom, the director of the National Parks Conservation Association’s California desert and wildlife program, said he believed that “full examination of the Cadiz Inc proposal will once again prove that it is unsustainable and that it will harm our desert national parks, communities, businesses, and wildlife”.

Slater says his plan is environmentally “benign” and will conserve water that at present is lost from the aquifer via evaporation from dry lakes. He says the 50,000 acre ft of water a year the company would extract would “otherwise evaporate, which is far more of a waste than people drinking it”.

“None of the water we are going to take fell on the earth in the last 100 years. This is millennial water. It takes centuries from the water falling at the upper end of our watershed and then follow a migratory path to down where we are,” he says.

“Our project hypothesis is that we construct a well field here,” he says, pointing at a point on the scale model. “And intercept the water as it goes down the hill before it can become hyper-saline and evaporates. We are substituting our wells for the natural evaporation process that sends the water into the atmosphere and wastes it.”

In addition to environmental concerns, others object to a private company being able to make billions from water. Slater says they do not understand the law, which in California states no entity can own water but they can buy, sell and trade the right to use it.

“There are people that think water is a human right and confuse privatization with the right to get water under economic terms,” Slater says.

“This is the United States of America and we have private property here. This is not a communist country. We own land, and land use is an attribute of property ownership,” he says. “Food doesn’t stay on the farm it was grown on. We share our food, we share our energy, we share our oil and gas. I can sell land to anybody. Why would I treat water any differently?

“The use of water is owned. It’s not like someone is calling up God and saying ‘make it rain’. It is sold as a right, just like you sell a house.”

Water Agency's Land Purchase Rattles California Farmers

Bart Fisher, farmer and president of the Palo Verde Irrigation District, looks at the Colorado River. The third-generation farmer who was born in Blythe, left 29 percent of his farmland fallow this year. The Metropolitan Water District of Southern California, the nation’s largest distributor of treated drinking water, became the largest landowner in the region including Blythe for good reason: The alfalfa-growing area sits at the top of the legal pecking order to Colorado River water, a lifeline for seven Western states and northern Mexico.(AP Photo/Jae C. Hong)

By Elliot Spagat and Jae Hong
Associated Press

BLYTHE, Calif. (AP) -- The nation's largest distributor of treated drinking water became the largest landowner in a remote California farming region for good reason: The alfalfa-growing area is first in line to get Colorado River water.

Metropolitan Water District of Southern California's play in Palo Verde Valley, along the Arizona line, tapped a deep distrust between farm and city that pervades the West over a river that's a lifeline for seven states and northern Mexico.

Farmers recall how Los Angeles' modern founders built an aqueduct a century ago to bring water hundreds of miles from rural Owens Valley, a story that was fictionally portrayed in Roman Polanski's 1974 film, "Chinatown."

"Are we going to dry up our rural, agricultural communities just to keep Los Angeles, San Francisco and San Diego growing? I think it would be a sad state of affairs," said Bart Fisher, a melon and broccoli farmer who is board president of the Palo Verde Irrigation District.

Metropolitan tried to calm nerves by sending its chairman in September to a public forum in Blythe, 225 miles east of its Los Angeles headquarters. It pledged to honor a 2004 agreement that caps the amount of land it pays farmers to idle at 28 percent of the valley.

That agreement, which expires in 2040, is hailed as a model for farms and cities to cooperate. Metropolitan pays farmers about as much as they would profit to harvest - $771 an acre this year - to bring foregone Colorado River water on its 242-mile aqueduct to 19 million people in the coastal megalopolis it serves.

Palo Verde enjoys California's highest rights to the river, making their immune to drought.

The dynamic changed when Metropolitan paid $256 million in July to nearly double its Palo Verde holdings to 29,000 acres, or about 30 percent of the valley. The agency denied its purchase from Verbena LLC, a company that bought the land several years earlier from the Mormon church, was part of an orchestrated plan.

"It's made the farmers out there nervous that we are the largest owner but there was a strategic opportunity that came up," Metropolitan's general manager Jeffrey Kightlinger said.

Metropolitan stirred similar angst this month in Northern California when its board expressed interest in buying farms on several islands in the Sacramento-San Joaquin River Delta. Its staff said the land could provide water storage and wildlife habitat.

Blythe, a riverside town of about 13,000 people in the Mojave Desert with two state prisons, is an oasis of gas stations, motels and fast-food restaurants on Interstate 10 between Los Angeles and Phoenix. Thomas Blythe staked claim to the river in 1877, beating Southern California cities under a Gold Rush-era doctrine called 'first in time, first in right.'

Los Angeles and its suburbs founded Metropolitan in 1928 to build the remarkably durable Colorado River Aqueduct. Parker Dam and the reservoir it created in Lake Havasu empties into a gray Art Deco-style building with nine pumps that quietly pipe water 300 feet up a steep slope. Teal metal cases that cover the pumps vibrate so little that a nickel placed on top stands on its side.

The water goes uphill through four more pump stations and through tunnels, canals and pipelines before reaching Southern California's coastal plain two days later.

The Colorado's huge man-made reservoirs have made the river an unheralded savior in California's four-year drought. Last year, the river supplied two-thirds of the 1.7 billion gallons of drinking water that Metropolitan delivers daily, up from a third three years earlier.

The river sustains 40 million people and farms 5½ million acres, but white "bathtub rings" lining walls of the nation's largest reservoir in Lake Mead, near Las Vegas, are evidence of shrinking supplies. California took more than it was entitled to until Sunbelt cities like Phoenix and Las Vegas clamored for their share and forced the nation's most populous state to go on a diet in 2003.

"It's really the only supply of water to this otherwise bone-dry region," said Bill Hasencamp, Metropolitan's manager of Colorado River resources.

Metropolitan has diverted up to 118,000 acre feet of water a year from Palo Verde since 2005, enough for about 250,000 households. It paid $3,170 an acre to farmers who committed for 35 years, plus an annual fee for fallowed land. It idles 7 percent to 28 percent of the valley each year, depending on its needs.

Jack Seiler, a grower who volunteered 900 acres, calls the agreement a "poster child" for farms and cities to cooperate but Metropolitan's July purchase of nearly 13,000 acres unsettled him. It gave Metropolitan the largest voting bloc on Palo Verde's water board.

Metropolitan says it won't have to pay someone else to idle the land it now owns and will lease it to farmers, cutting its net cost to about $50 million. It voted for incumbents in a September election to Palo Verde's seven-member board, which includes Seiler.

"I obviously don't know why they bought all this land," Seiler said. "It puts us a little bit at odds."

Riders on the Storm

Democrats also use appropriations riders, despite recent protest.

Cadiz agricultural well head and pond in the Mojave Desert.

By Jim Swift
The Weekly Standard

A chorus of Democrats and activists are raising hackles about the potential of Republican policy riders being added to a year-end omnibus spending bill. Policy riders (or “limitation riders”) are the opposite of earmarks. Where the now-extinct earmark required money to be used on a certain project, a rider is a paragraph or two in an appropriations bill dictating what the money cannot be used for.

Senate Minority Leader Harry Reid told Roll Call:

"The president, Pelosi, Reid, my entire caucus has agreed to hold hands. We are not going to approve anything that has all these ideological, short-sighted, crazy ideas; to do away with women’s health, to do away with clean air, to attack Dodd-Frank and all these.”

David Goldston, director of government affairs at the environmental group National Resources Defense Council told E & E News in an interview: “on riders there’s going to be a very private, intense tussle between Democrats and Republican leaders on whether spending bills will be used to block environmental progress.”

This, Majority Leader McConnell has said, is the likely outcome: “Both sides will get into a negotiation here at the Appropriations Committee level, and at the end of the day, there will be some riders.” Reid, however, has claimed “We don’t have any riders.”

The sudden about-face on riders from Democrats may seem strange, since in recent years Democrats have repeatedly sought and successfully secured policy riders. But, this is the first appropriations season during the Obama presidency where Republicans control both chambers, so now policy riders are a bad thing, of course.

It remains to be seen how far Democrats will go in their newfound opposition to riders. Just last week, 25 Democratic senators, a majority of that caucus, wrote to the president, urging him to “reject all spending bill riders that would undermine Endangered Species Act protections…” If Reid, Pelosi, and the President insist they’re quitting policy riders cold turkey, there are likely to be some Democratic casualties.

One of the biggest winners (and perhaps hypocrites) has been California senator Dianne Feinstein, who has used her position on the Appropriations Committee to stop a planned water project in her state. Feinstein has fought the project for 15 years.

The project is called the Cadiz Valley Water Conservation, Recovery, and Storage Project. Cadiz owns 34,000 acres of land in the Fenner Valley in San Bernadino County, and below it are millions of acre-feet of water. With an acre-foot clocking in at 326,000 gallons, that’s hundreds of billions of gallons of water. Currently, the project is a combined effort by Cadiz, the Arizona & California Railroad, and a handful of water districts, like the Santa Margarita Water District.

California, as most know, is experiencing severe drought, and the project’s backers say 400,000 Californians could benefit from this water, some of which would otherwise evaporate into the thin desert air. An Environmental Impact Report, required by California’s stringent Environmental Quality Act of 1970 observes the following about the Cadiz project:

"California’s Constitution mandates maximizing the reasonable and beneficial use of water and avoidance of waste. The fundamental purpose of the Project is to save substantial quantities of groundwater that are present wasted and lost to evaporation by natural processes. In the absence of this Project, approximately 3 million acre-feet of groundwater presently held in storage between the proposed wellfield and the Dry Lakes would become saline and evaporate over the next 100 years. By strategically managing groundwater levels, the Project would conserve up to 2 million acre-feet of this water, retrieving it from storage before it is lost to evaporation.”

But even given the water emergency, Feinstein and other opponents of the project aren’t relenting.

The project was tried once before, in the early 2000s, but with a different partner: the Metropolitan Water District of Southern California. Feinstein and two House colleagues wrote to the Bush-era Interior Department to express their concerns about such use of the aquifer and its potential impact on the desert, which Feinstein, as author of the California Desert Protection Act, has taken a special interest in.

The Bush Interior Department signed off on the project, which needed government approval to “wheel” the water across a Bureau of Land Management “right of way” via a 35-mile pipeline. Feinstein and environmental allies convinced the board of the Metropolitan Water District to reject the proposal, which it narrowly did, as the LA Times reported: “with 50.25% of the board’s weighted votes in favor.”

The environmental and anti-development activists at Public Citizen crowed: "Cadiz Water Privatization Project Permanently Stopped!"

Feinstein knew the truth, though: The Cadiz project and its backers weren't going to go quietly, which is why she inserted a policy rider into the FY07 continuing resolution that blocked any funding for the project.

Only when Cadiz revised and revived the project and began to make progress with its new partners, the Santa Margarita Water District and the Arizona & California Railroad, did Feinstein expand the rider— inserted into the FY10 Interior Appropriations Bill, which became law in 2009 — to tighten the noose with this clause:

“Sec. 110. (a) Any proposed new use of the Arizona & California Railroad Company's Right of Way for conveyance of water shall not proceed unless the Secretary of the Interior certifies that the proposed new use is within the scope of the Right of Way.”

The Feinstein rider, due to her clout in Congress, has remained in effect ever since. But now, with the clarion call of the Democratic leaders for Republicans to eschew policy riders in the year-end omnibus bill, the rider is at risk.

At an Appropriations Committee hearing in July, Feinstein complained at length about policy riders. E & E News reported it this way:

"Sen. Dianne Feinstein (D-Calif.) in turn lectured Republicans for using the spending bill to block environmental policies they oppose, arguing that doing so would result in a continuing resolution or omnibus package to fund the federal government come September.”

Feinstein argued that riders were just “a member really trying to impose their will to change a law on this bill, which is essentially a numbers bill of appropriations.” She further denounced the practice writ large:

“You shouldn’t do these on appropriations bills, if you want the appropriation bills to pass in regular order. Instead, there is no change for six years. It’s either a CR or an Omnibus, maybe a few things get stuck into an Omnibus, but what kind of progress is that for the people we serve in this nation? I don’t think it’s any real progress, and so, you’ve got this enormous conflict now between both sides. And I don’t know where this takes us, because we’re not going to let an appropriations bill succeed. What kind of long term sense does it make to continue in this way? So, I want to make a call for some sanity.”

Yet, despite this impassioned plea, her rider to block the Cadiz project had been included in the Interior Appropriations bill.

When asked whether Feinstein’s Cadiz rider would make it into yet another omnibus bill, a GOP aide on the Appropriations Committee responded: “We cannot offer any insight as to the ultimate fate of this provision, but it certainly illustrates that Democrats are plenty capable of using appropriations riders to pursue policy outcomes.”

When Feinstein complained about using policy riders as leverage for Senators to “impose their will to change a law,” she spoke from experience. That’s because her rider preventing the Cadiz project helped do just that.

To get the water to its new partners, Cadiz signed an agreement with the Arizona & California Railroad (ARZC), which has a right-of-way granted pursuant to the General Right-of-Way Act of 1875. This would enable Cadiz to deposit the water into the Colorado River Aqueduct, which services numerous water districts, including that of its new main partner, the Santa Margarita Water District.

In the case of railroads on public land, many rights-of-way are governed by the 1875 act, as is the case here. The 1875 Act is also subject to the interpretation by the courts, and by the legal opinions of the solicitor of the Department of the Interior, which oversees BLM. The solicitor issues “M opinions” that are intended to provide guidance to enforcement of public laws, and one, issued in 1989 (M-36964) effectively gave the green light to the Cadiz.

Back in the 1980s, MCI (a telecom that would later become Verizon), wanted to install fiber optic communications lines on a railroad right-of-way controlled by Southern Pacific Transportation Company. The decision clarified that Southern Pacific did not need to seek BLM’s approval to allow MCI to install the cable because it, even though a commercial venture, was “not inconsistent with railroad operations" because it benefited the railroad's operations.

The prospect of this M-Opinion, which Cadiz and the railroad believe they are in compliance with, horrified Feinstein. After securing the rider in the FY10 Interior Appropriations bill, she trumpeted the achievement in a letter to former Senate colleague and then-Interior Secretary Ken Salazar.

“I write to bring to your attention language included in the FY10 Interior Appropriations bill regarding Cadiz LLC’s proposed use of the Arizona & California Railroad Right-of-Way (ROW) for a water conveyance pipeline in the Mojave Desert. I request that the Department start now to reexamine the previous administration’s position that the proposed pipeline does not require federal authorization.”

Feinstein wrote about a 2005 federal court opinion, Home on the Range v. AT&T Corp., which she claims the court “found that easements under the 1875 General Railroad Right-of-Way Act are limited to uses for railroad purposes, excluding non-rail activities analogous to the water pipeline here.”

The letter’s conclusion reinforced the ask: “I would like to request that the Department now initiate a review of its right-of-way policy regarding this project, as well as the Solicitor’s Opinion it is premised on, rather than waiting until the legislation is ultimately signed into law. It is my hope that by acting now, the Department can resolve the scope of the right-of-way promptly, rather than allowing legal questions and uncertainty to linger.”

Put another way, Feinstein went on record to say she’d hold up the project until BLM changed how it interpreted the law to her liking.

Two years after the letter was sent, the Interior Department did just what she asked, and issued M-37025, an M-Opinion from the Solicitor that withdrew the guidance provided by the 1989 M-Opinion that BLM approval was not required for activity not inconsistent with railroad operations.

The new M-Opinion provided that, in order to be within the scope of the Right-of-Way, “a railroad’s authority to undertake or authorize activities is limited to those activities that derives from or further a railroad purpose…” Only now, each activity “requires a fact specific case-by-case inquiry.”

The new M-Opinion was a setback, but still found that, in the case of MCI, its activity “furthered, at least in part, a railroad purpose…” and even that “…MCI’s line was primarily a commercial trunk line, a portion of its capacity was dedicated to the railroad.” Under the new guidance, Cadiz and the Arizona & California Railroad made their case to BLM as to why the water pipeline not only would further a railroad purpose, but would do so in a way that satisfies the underlying 1875 act itself.

In a 2013 staff memorandum to the Interior secretary, Jim Kenna, the director of the BLM in California, highlighted the design features in the water project that Cadiz and the railroad argued would further railroad purposes:

• Fire hydrants placed along railroad tracks for fire suppression.

• Access road to be constructed on leased area for railroad company for maintenance purposes or in case of emergencies such as rail car derailment;

• Access to 10,000 gallons of water per day for vegetation control, washing rail cars, offices, and other contemplated improvements;

• Access to power at meters located along the railroad tracks and emergency access to power at any location;

• Water service for steam powered locomotives, to be used as excursion trains.

• Right to connect and deliver water to any future water production facilities within the ROW to the pipeline and facilities.

The original 1875 act provides that the right of way is also granted for “ground adjacent to such right of way for station buildings, depots, machine shops, side tracks, turnouts, and water stations…”

The water stations Cadiz would supply are right there in the actual law. However, in a formal letter, BLM disagreed that the pipeline furthers railroad purposes. The letter is sadly comical, a Rube Goldberg exercise in futile bureaucratese.

The planned water suppression system, designed to remotely stop a disastrous trestle fire that could cripple the railroad for weeks?

“Use of water for fire suppression on creosote-treated timber is an uncommon industry practice, with dry sand being the preferred method, and thus the water-based hydrants and sprinklers, and fiber optic telemetry used to operate them do not derive from or further a railroad purpose. A BLM authorization is needed for use of fire suppression facilities along the 43 mile stretch of the ROWs that runs across BLM administered public land.”

The water stations for a steam-based tourism train? “may derive from or further a railroad purpose (emphasis added)…” but “…the excursion train’s prospective use of a small portion of the pipeline’s water does not convert the excursion train, the pipeline, or the water that runs through the pipeline into a legitimate railroad purpose.”

In other words, no, no, and… no: You have to get BLM approval now.

Except, BLM can’t even process an application from Cadiz and the ARZC even if it wanted to, as noted in a BLM memo:

“If a decision is made that the proposed use is not within the scope of the 1875 railroad ROW, such a pipeline would require a FLPMA ROW authorization from the BLM as it crosses BLM-managed lands. However, the processing of such a ROW would be prohibited this year, given the language in the 2012 Consolidated Appropriations Act H.R. 2055 118(b).”

The Cadiz project has bipartisan support in the House, as numerous Democrats and Republicans have written letters of support, and perhaps explains why the House Interior Appropriations bill does not contain the Feinstein rider.

While the BLM has shut the door to Cadiz and the ARZC’s quest to build the pipeline without their approval via an er, novel, interpretation of the law, if Feinstein’s anti-Cadiz rider isn’t included in the year-end omnibus, the project’s backers could apply for formal BLM approval. Other legal recourse, such as a lawsuit challenging BLM’s determination, is still on the table.

The question for Feinstein and Democrats is: How willing are they to part with policy riders on appropriations bills? In the coming weeks, we’ll find out, I guess, because Senator Feinstein’s office did not respond to a request for comment.

Why the BLM’s decision on the Cadiz project was the right one

In this undated file photo provided by the Metropolitan Water District of Southern California, water flows through the Southern California desert in the Metropolitan Water District's Colorado River Aqueduct from the Colorado River to the Los Angeles area. A different water conveyance project by Cadiz continues to meet resistance. (AP Photo)

Guest commentary

By Adell L. Amos and Sam Kalen
San Bernardino County Sun

Officials at the Bureau of Land Management have to make a lot of sensitive decisions. But their recent decision that a 43-mile, 7-foot diameter groundwater pipeline does not further the purpose of an 1875 railroad right-of-way should not be controversial. It is as simple as this — a water pipeline project is something different than a railroad.

Despite tremendous pressure to shoehorn a massive groundwater pipeline into a century-old railroad right-of-way, the BLM made a rational decision that the proposal was not in furtherance of the railroad’s purpose. Scott Slater, president and General Counsel of Cadiz Inc., asserts that BLM should rescind that decision.

Cadiz Inc., a Los-Angeles based company, wants to build a pipeline to carry groundwater from a fragile Mojave Desert aquifer to southern California. It’s the kind of project that calls out for careful and considered decision-making by public officials. The project could have a significant impact on sensitive desert habitat and the interests of tribes, local communities and national parks nearby. In fact, such careful review was completed under state law, though it is now undergoing appeal by project opponents.

If BLM had sided with Cadiz and determined that this new water project furthered a railroad purpose, then the project could proceed without federal environmental reviews, tribal consultations and interagency coordination that would otherwise be required.

Not surprisingly, Cadiz had a profound interest in trying to convince the BLM that its proposal — which is about transporting valuable water to thirsty urban areas in southern California — was actually about advancing the railroad’s purpose.

Ultimately, the BLM made a straightforward and common-sense determination that the water pipeline does not further a railroad purpose. This decision ensures, if the project goes forward, it will be subject to appropriate public review. Instead of criticism, the BLM ought to be commended for its responsible management of public resources in the face of tremendous pressure from private interests.

To move forward now, Cadiz will be asked to do what any private developer on federal public land is asked to do — participate in an open, public process under federal law that evaluates the various impacts of the project. That is not a controversial notion in the least. Developers on public lands, though they might prefer to avoid it, engage in this kind of review all the time.

Many opponents of the Cadiz Project worry that this attempt to locate the project in an existing railroad right-of-way was a clever sleight of hand designed to circumvent an open and public evaluation of the impacts and consequences of this project under federal law. To the extent that these concerns about the impacts are unfounded, the federal review process will bear that out.

Perhaps Cadiz worries that the federal review will shed light on what some believe to be faulty scientific assumptions about the recharge rate of the aquifer, or the irreversible environmental harm that could come from pumping 1-2 million acre feet of precious desert groundwater for 50 years, or the impact to historic, natural and cultural resources including the Mojave National Preserve, the lower 48’s third-largest national park unit. More than a decade ago Cadiz proposed a very similar project and the federal environmental review process revealed many of these concerns. Many of these concerns are also at issue in the appeal challenging the state review process.

In the end, BLM exercised sound professional judgment in a climate where water is becoming increasingly scarce and highly valuable. Some estimates put the price of the water associated with the Cadiz project at $1-2 billion. BLM is not required to advance private interests to achieve maximum profit for their investors. Rather, BLM exists to manage, for multiple and often competing purposes, the public lands consistent with all applicable laws. In choosing this course, the BLM carried out its mandate with integrity toward the process and acted as a responsible steward of the public resources it is entrusted to manage.

Adell L. Amos is Associate Dean for Academic Affairs at the University of Oregon School of Law. She is a former Deputy Solicitor for Land and Water Resources at the Department of Interior.

Sam Kalen is co-director of the Center for Law and Energy Resources in the Rockies at the University of Wyoming School of Law. He is a former Special Assistant for the Solicitor’s Office at the Department of the Interior.

Cadiz chief to tackle desert water transfer project roadblock

Scott Slater, president and CEO of Cadiz Inc. explains the company's position that they believe the groundwater they would harvest would be lost to evaporation if left to its natural processes. (Jay Calderon/The Desert Sun)

By Jim Steinberg
San Bernardino Sun

LOS ANGELES – The CEO for embattled Cadiz Inc. has a plan to keep alive a controversial project to transfer ancient groundwater in a remote part of San Bernardino County’s Mojave Desert to parts of Orange County and other locations, where it could serve as many as 400,000 people.

In an interview late last week, Cadiz CEO Scott Slater said he would be seeking a review of the decision by the U.S. Bureau of Land Management to reject Cadiz’s proposed use of an 1875 railway right-of-way to build a critical 43-mile pipeline from the Fenner Valley — about 40 miles northeast of Twentynine Palms — to the Colorado River Aqueduct, where it could be delivered to future customers.

If that fails, he will take his battle to court, he said.

“This is pure politics,” said Slater, who is considered by many to be an expert in groundwater law and water policy.

According to a letter from the BLM, the proposed use of the railroad right-of-way for the pipeline is outside the scope of the Arizona and California Railroad’s use of right-of-way grants held under the General Railroad Right-of-Way Act of March 3, 1875.

The letter to Cadiz warns that “proceeding with new activities or continued activities ... without authorization from the BLM could result in the BLM instituting trespass proceedings.”

The ARZC, as the short-line railroad is called, has agreed to let Cadiz use its right-of-way. The railroad moves primarily petroleum across its 190 miles of track.

As part of its water project, Cadiz planned to build fire-suppression and power-generation capabilities for the railroad.

“BLM has determined that the project does not derive or further a railroad purpose,” said the letter signed by James Kenna, California BLM director, who has since retired.

For that reason, in order for the pipeline to proceed along the right-of-way, the BLM must approve that use. And for that to happen, a full federal environmental review must be completed.

Slater called the BLM’s decision an “outrage” that ignores key precedent set forth in a memorandum written in November 2011 by the top attorney for the Department of Interior, which liberalizes the definition of railroad purpose to mean that BLM permission is not needed if the purpose benefits the railroad in some way.

“Every American should be infuriated” at the way the BLM has deliberately ignored the evolution, determined by a top federal lawyer, of a law written more than 100 years before, said Slater, who is author of “California Water Law and Policy,” a two-volume treatise, and has taught law and graduate classes at Pepperdine University, UC Santa Barbara and the University of Western Australia, He also revised the water code for Western Australia.

On the other hand, David Lamfrom, director of the California Desert and Wildlife Program for the National Parks Conservation Service, said: “The Bureau of Land Management’s decision is supported law, policy and common sense and prevents a clear attempt by Cadiz Inc. to create a loophole to avoid federal review.

“The BLM has a responsibility to all Americans to fully understand the impacts this project proposes on public lands, including impacts on our water resources and national parks. This decision opens the door for good science and objective decision-makers to participate.”

Also agreeing with the BLM decision is Sen. Dianne Feinstein, D-Calif.

“I remain concerned the Cadiz project could damage the Mojave Desert beyond repair,” she said in a statement, “and believe the BLM decision to deny the right-of-way is the right one.”

“We need to use water more responsibly, not less, and the Cadiz project is a bad idea,” said Feinstein, who is attempting to include the Cadiz Valley in her proposed Mojave Trails National Monument, one of three proposed for the region.

Rep. Ken Calvert, R-Corona, said, “I have looked at the Cadiz Water Project carefully and I believe it has merit. ... I have concerns about what kind of precedent this sets for railroads across the country and the ability of an agency to deny historically protected property rights.”

Calvert is chairman of the House Interior and Environmental Appropriations Subcommittee.

The project has been approved by the San Bernardino County Board of Supervisors.

When asked about the BLM decision, 1st District Supervisor Robert A. Lovingood said, “The BLM decision will be a roadblock for the project. But this is a matter between the BLM and the company. ...”

For the past eight years, Feinstein has attached a rider to the legislation that funds the Department of the Interior, the umbrella agency for the BLM, that effectively blocks the Cadiz Valley aquifer from being drained, her office said.

Last week, Cadiz said it found out about the BLM decision through a third party.

Before the decision, Cadiz had been saying it and its public agency partner, the Santa Margarita Water District in Orange County, were on track to begin construction of the pipeline this year or early next year.