Water Firm Dips Toe Back in Desert

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Water Firm Dips Toe Back in Desert
Cadiz vineyard.

More than a decade after its first plan to create a Mojave Desert water storage project collapsed amid environmental uproar, Cadiz Inc. is gaining momentum with a second try that the company hopes doesn’t turn into another mirage.

The L.A. holding company has been trying for nearly two decades to develop a water storage and sales project for an aquifer under its 45,000-acre holdings east of the Twentynine Palms Marine Corps Air Station. The company plans to sell the water to distributors across Southern California.

Now, it seems to be making progress. In recent weeks, Cadiz has signed up a sixth water distributor to participate in the project. That gives the company buyers for 80 percent of the water it intends to sell.

Cadiz will draw the water from the underground aquifer, blended with Colorado River water that it would store there.

In another sign of progress, the company also released a draft environmental impact report on the water storage project.

In addition, the company last month obtained $11 million in outside investment, $6 million from Altima Partners LLP and $4.5 million from Water Asset Management LLC. News of these investments caused Cadiz’s share price to spike to $10.50 before settling back down to around $10 a share; recent lows were about $9. The company hasn’t made a profit in its 30 years. Its only income is from small-scale agricultural operations on its desert land.

But the same environmental groups that tanked the first plan are expected to remain vehemently opposed to this one, even though it has been scaled back. The groups say they will oppose any plan that involves drawing down the aquifer because it would threaten local wildlife. The company says it would only take water that would otherwise evaporate.

The environmentalists’ continued opposition guarantees a showdown in coming months as Cadiz seeks approvals from federal and state agencies.

Water search

So can Cadiz, with 10 employees at its downtown L.A. headquarters, overcome the environmental opposition this time?

The odds may be better. L.A. economic development consultant Larry Kosmont, who was on the Metropolitan Water District board when it rejected Cadiz’s first proposal, said several things have changed.

Most importantly, Kosmont said, a recent state law requires water agencies to certify that there’s a guaranteed source of water for any new development project with more than 500 residential units. As a result, developers will be calling on water agencies to boost supplies.

“Water purveyors up and down the state have been scrambling to ensure adequate water supplies,” he said. “There’s now more pressure than there was a decade ago to secure alternative water sources, like the Cadiz storage and transfer plan.”

The six water distributors that have signed on to the Cadiz plan include three municipal water districts and three private water utilities. The municipal water districts serve the Claremont area, part of the Inland Empire and southern Orange County. Among the water utilities: Golden State Water Co., a subsidiary of San Dimas-based American States Water Co., and the most recent signatory, California Water Service Co. of San Jose.

However, before any of these water distributors can get the water out of the Cadiz Valley region, Cadiz will have to reach an agreement with the MWD to use the wholesale agency’s pipeline.

Smaller deal

A decade ago, Cadiz called for the huge MWD wholesale provider, which distributes water to dozens of local water agencies, to pay up to $1 billion over 50 years to store water there and draw on it as needed. Shortly after the environmentalists persuaded Democratic U.S. Sen. Dianne Feinstein to oppose the project, the MWD board voted to reject the Cadiz plan.

This latest proposal is much smaller than the failed MWD deal. Under that proposal, the water wholesaler would have paid Cadiz to store up to 1.5 million acre-feet a year of Colorado River water not otherwise allocated to other agencies in the aquifer. Cadiz would have sold up to 1.5 million more acre-feet of native water from the aquifer to the MWD. (An acre-foot is 326,000 gallons, enough to supply a typical household of four for a year.)

The new proposal, as described in the draft environmental report, calls for Cadiz to store up to 1 million acre-feet of excess Colorado River water in the aquifer, but only sell up to 50,000 acre-feet of native water in any given year. Cadiz says in the EIR that only the water that would naturally migrate to dry lake beds and ultimately evaporate would be targeted for removal and that this would address the concern of a massive drawdown of the natural aquifer.

That doesn’t placate the environmentalists, however.

“We still have great concerns about the impact of any drawdown of water on nearby springs and seeps,” said Ileene Anderson, a biologist with the Center for Biological Diversity in Los Angeles, a group that advocates for wildlife protection. “If they make those go dry, it would have a horrible impact on species that rely on that water, especially the desert bighorn sheep.”

Anderson said she was also concerned about the storing of Colorado River water in the aquifer, adding that the river water is more saline and has more contamination than the aquifer water.

“The (Colorado River) water has to be treated before it can be consumed by humans or animals, and this water will not be treated,” she said

Reduced role

The comment period for the environmental impact report closes next month; a final EIR is expected to be released later this year. Then Cadiz must get the approval of numerous state and federal agencies, including the U.S. Fish and Wildlife Service, the California Department of Fish and Game and the state Regional Water Quality Control Board.

Unlike last time, company executives have tried to minimize the role of Cadiz’s controversial founder and chief executive, Keith Brackpool, in the approval process. Brackpool cultivated ties to politicians up and down the state, including Los Angeles Mayor Antonio Villaraigosa and former Govs. Gray Davis and Arnold Schwarzenegger. But his political contributions and alliances became a lightning rod for project opponents and media coverage. So now company President Scott Slater and board member Winston Hickox, who was secretary of the state’s Environmental Protection Agency in the Davis administration, have become the public faces for Cadiz.

Company executives declined a Business Journal request to interview Slater and would only answer questions via e-mail.

While the company was developing the second plan, Cadiz also started attempts at using its Mojave land for solar power. But no deals have come out of that effort to date.

“We continue to evaluate opportunities to develop portions of our properties for solar energy production,” a company spokeswoman said in an e-mail. “At this time, we are not directly engaged with any solar development companies while we focus on the permitting process for the water project.”

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