LOS ANGELES, CA Political Contributions by IndividualsMark A Liggett (Cadiz Inc./Geologist), (Zip code: 90026) $2000 to JIM COSTA ….. JULIO JR RAMIREZ (WETHERLY CAPITAL GROUP), (Zip code: 90025) $2000 to JOHN … More to come, but would it surprise you to find that Wetherly Captial gang would be involved in Cadiz, Inc. water project with Brackpool?
Do you remember over the past month I have been screaming about a “pay to play” meeting between US Filter (now Vivendi) and then CA Governor Gray Davis, arranged by Wetherly Capital. The “pay” part of “to play” was 40,000 acres of the Imperial Irrigation District.
LOOK AT WHAT THIS FLIER WAS ABOUT that I may as well show you at this time:
(Click to enlarge)
ANYWAY, now this Cadiz, Inc project is in the news again and their stock was the biggest gainer on the NASDAQ on Friday, and there are ties to Anotnio Villaraigosa. But this is bigger than the mayor. Anyway, here is some interesting reading, and there is no way I can sit here and explain the whole deal, I’ll try sometime soon in the near future, but meanwhile, read this:
Cadiz has proposed storing Colorado River water in an aquifer that …. US Filter, a subsidiary of French Vivendi, a mammoth conglomerate that also owns …
The Colorado River
The Colorado River, which provides water to seven states and Mexico, is a critical source for California. The state has been allowed to draw more than its allotment from the Colorado River because other states were not using their full quotas. However, as the demand from other states increased, California came under pressure to reduce its take.
A recent agreement among Colorado water users requires California to reduce its take from 5.5 million acre-feet per year to 4.4 million, putting the state in another tough position: having to look elsewhere to make up the difference. The “4.4 Plan” will hit Southern California especially hard because it is the region s primary source.
The Imperial Irrigation District (IID) and the Metropolitan Water District of Southern California (MWD or the “Met”) are the two biggest users of Colorado River water, receiving 70 percent and 12 percent, respectively.
As the largest wholesale water supplier in the country with 17 million customers, the Met is in a perpetual search for new sources, especially after agreeing to the 4.4 Plan. Among its initiatives is a controversial deal with Cadiz Inc., a Santa Monica-based agriculture corporation that owns land in the Mojave Desert. Cadiz has proposed storing Colorado River water in an aquifer that underlies both the Cadiz and federal lands during wet years and then extract it, together with native groundwater, for sale to the MWD in the dry years.
While the storage aspect has arguably beneficial features, pumping groundwater at unsustainable levels and profiting from overdrafts is not among them. Numerous environmental and public interest groups have argued that the extraction levels proposed by Cadiz exceed recharge levels, and that the desert ecosystem, which includes the federally protected desert tortoise, would suffer as a result. Even the U.S. Geological Survey says Cadiz s recharge estimates are 5 to 25 higher than reality.
Sustainable Water Resource Management
Plain and simple, conservation and efficiency are key to ensuring that California does not run out of water. Saving water can often eliminate the need for expensive and environmentally damaging water infrastructure, such as dams, reservoirs and canals, while freeing up additional water to meet the state s needs. Low-flow toilets, for example, reduce the amount of water used per flush by over two-thirds. Some cities have provided incentives to replace the old models with the newer ones, and they have seen reductions in per-capita use. More communities should follow suit. Similarly, technology can significantly reduce industrial water demand. Treatment and reuse of municipal water also carries a great potential to help conserve California’s water.
Over the last decade, the idea of agricultural-to-urban water transfers has become increasingly popular particularly in California, due to the state s large agricultural sector. Transferring water from one public agency to another poses fewer risks than does purchasing water from a private water right holder.
Farmers often purchase water at lower prices than do cities. For instance, Southern California s MWD sells treated water to urban users for $431 per acre-foot, a price representing capital, conveyance, treatment, and conservation costs. The IID, however, charges only $15 per acre-foot, a figure that does not include many expenses like treatment, but is, nevertheless, much cheaper than untreated water from many other sources.
Thus, it makes sense for the IID to sell “surplus” water to cities. In return, the cities pick up the cost of conservation measures that make this additional water available. The idea is attractive to urban users, because buying water allows them to increase or stabilize supplies without substantially increasing rates.
An agreement between the IID and San Diego County Water Authority provides for such water transfers for 45 years. San Diego will give Imperial Valley farmers incentives to conserve while paying for the conservation measures. Because San Diego believes the Met s water transportation charges are too high, San Diego may build its own pipeline, however, neither the costs nor the environmental impacts have yet been assessed.
Another solution is fallowing marginal agricultural land. This would make additional water available and help remedy the devastating environmental problems caused by farm runoff. Replacing water-intensive crops with crops that depend on less water would also reduce agricultural demand.
Taking water to market
The practice of selling water for profit is taking root in California. Over the past 25 years, there have been efforts to change California water law to promote the creation of water markets. Three major changes in California water law have been pursued over the past twenty-five years: (1) making it easier for water right holders as well as those who use large quantities of water (e.g., farms or industries) to sell, lease, or transfer their water entitlements to another on a long-term basis; (2) allowing transferors access to the unused capacity of existing conveyance facilities in order to move water around the state, commonly referred to as wheeling ; (3) promoting water transfers that would result in groundwater mining by overlying property owners.
Most of the recent legislative activity has focused on wheeling , attempting to more precisely define the circumstances under which the owner of a conveyance facility can deny access to a transferor; and to spell out how to calculate fair compensation which is to be paid by the transferor for the use of the conveyance facilities in those cases when access cannot be lawfully denied.
If California water law in all three areas described above is changed to promote water transfers and markets, privateers will be able to make handsome profits by acquiring water entitlements that were established by, and stored within, taxpayer-funded infrastructure. Furthermore, these privateers would also move these water entitlements around the state through taxpayer-funded conveyance facilities.
A farmer who starts selling surface water may turn to groundwater to satisfy his irrigation needs, instead of stepping up conservation or fallowing the land. Because aquifers usually extend beyond a single farmer s property, lower levels could force other farmers to pay more to pump groundwater, or even make water unavailable altogether. Lower levels could also dry out springs that support flora and fauna.
Over the past eight years, California has enjoyed high levels of precipitation. In 2001, however, these levels decreased, leading to concerns about another drought. Another major drought likely would make it even easier to market water, creating a favorable environment for private companies and individuals to profit from selling the resource. In fact, the Water Bank, California s first large-scale system to facilitate water transfers, was created in 1991 in response to the drought.
Private companies view California’s limited water resources as a profit opportunity. Several corporations have made overtures to acquire water rights and develop water resources. Azurix wants to mine water from an aquifer underlying its landholdings in Madera County. Feasibility studies are currently underway. Azurix, a former subsidiary of Enron, has been bought by U.S. market leader American Water Works, which itself is being acquired by German energy giant RWE parent of the British water giant Thames Water.
US Filter, a subsidiary of French Vivendi, a mammoth conglomerate that also owns Vivendi Universal, recently bought 43,000 acres of farmland and owns extensive water rights in the Imperial Valley.
Cadiz, Inc. wants to sell groundwater from an aquifer underlying its Mojave Desert landholdings as well as under federal lands, to the Metropolitan Water District of Southern California. The proposal also calls for storing “surplus” Colorado water in the aquifer. Cadiz, whose debt-to-equity ratio puts into question its financial stability, stands to bring in up to $1 billion if the deal goes through. (Cadiz s CEO Keith Brackpool, a British investment banker, is a significant and regular contributor to Governor Gray Davis and advises the governor on water issues, including making water policy speeches as Davis substitute.)
The storage component has arguably beneficial features. However, Cadiz s proposal to sell up to 60,000 acre-feet of native groundwater per year an amount that scientists and environmentalists believe would devastate groundwater resources is controversial. Overdrafts of this magnitude may dry out springs and wells fed by the aquifer, jeopardizing animal and plant species already on the brink of extinction. Building a 35-mile pipeline and an elaborate infrastructure to support the system may damage the habitat of these imperiled species, including the desert tortoise. Finally, lowered groundwater levels may result in massive dust storms, potentially turning the region into another Owens Valley.
Under its contract with MWD, Cadiz would also be allowed to sell a significant amount of groundwater directly to willing third-party buyers. Cadiz would reap handsome profits from this provision, under which MWD would permit Cadiz to use its infrastructure, built with taxpayer money, to convey this water.
Although high water demand projections have been challenged and are currently under review, it is clear that California must either develop more water sources or find better ways to manage its existing resources, or do both. California must focus its attention on sustainable solutions. By any standard, building more dams and exhausting aquifers is not sustainable.
Conservation is. It would prevent wasteful spending of taxpayer money and eliminate the need for more dams and diversions, while making more water available for municipal, industrial and agricultural uses and leaving more water for animal and plant life. Conservation should be a joint effort of both Southern and Northern California. It should be a priority not only for dry Los Angeles but for rainy San Francisco as well.
Conservation has many different faces. Older toilets and showerheads can be replaced with low-flow models. Water-efficient irrigation techniques can be introduced. Leaky water infrastructure can be fixed or upgraded. Water can be reused. Ascending block rate structures can be phased in. Water-efficient landscaping can be encouraged. And crops requiring less water can be planted in lieu of water-intensive varieties.
At the same time, California should not allow private water interests to convert a public good into a commodity for sale to the highest bidder. If water trading for profit flourishes, environmental consequences could be dire and groundwater resources would suffer most. Lowered groundwater levels mean higher pumping costs and sometimes new equipment. Many farmers, heavily reliant on groundwater, could not afford these measures.
A community that becomes dependent on water from a private entity may face the same risks that many of California s communities faced as a result of energy deregulation: higher rates and volatile service. As we saw in the electricity sector, privatization or deregulation means there is no incentive to conserve the resource. In order to maximize profit, private companies encourage consumption.
The State Constitution declares that water belongs to all Californians and is, in effect, free, in the sense that people pay only the cost of treatment and delivery. Allowing private companies to profit from this public resource would stand California s Constitution on its head.
Wisdom, patience and frugality should guide water resource management. Anything less will put California s environment at further risk, as well as its economy, its farming sector, and its rural population. Californians must demand that water remains a public trust under democratic control and should oppose turning water into just another commodity.