Posted on | June 5, 2009 | 7 Comments
CALIFORNIA Governor Arnold Schwarzenegger has endorsed plans by private speculator Cadiz, Inc to tap Mojave ground water, reports the Los Angeles Business Journal. The Cadiz plan, according to a statement from the governor, “will sustainably recover more than one million acre feet of water that would otherwise be lost to evaporation and make it available to help provide a reliable source of water for Southern California.”
The Cadiz project proposes storing Colorado River Water in a Mojave aquifer in wet years and pumping it to Southern Californian communities in dry ones. Among its problems are that it involves taking out far more water from the desert than naturally refills every year and that, cost-wise, experts say it’s a boondoggle.
The Cadiz self-styled “dry year supply project” is best known, however, as a synonym for croneyism. As a succession of Los Angeles Times stories during the last nine years has illustrated, Gov. Schwarzenegger’s chief of staff, Susan Kennedy, used to work for Cadiz, as did a host of prominent politicians including former US Secretary of Interior Bruce Babbitt and Los Angeles Mayor Antonio Villaraigosa.
The man behind Cadiz is Keith Brackpool, a 50-something British financier, who in the late 1980s was appointed director of North American operations for the British food distributor Albert Fisher PLC. According to a report in the Guardian, within three years of getting the job, he was forced to resign when it was revealed that he had a massive investment in Polly Peck, a direct competitor of Fisher’s that imploded in the British equivalent of Enron.
By that point, out in California, Brackpool had formed Cadiz, Inc, and was in the process of buying up tens of thousands of acres in the Cadiz and Piute valleys in the San Bernardino County stretch of the Mojave. Notionally an agricultural company, Cadiz began a table grape operation, then it expanded to citrus, but the ultimate commodity was water. Underlying Cadiz land is a vast aquifer that has been there since the last Ice Age.
No private speculator could afford the cost of the pipelines needed to ship that water from Cadiz’s farm to Southern Californian cities. It cost Southern Californian tax payers $220 million Depression-era dollars to build the nearby Colorado River Aqueduct.
But Cadiz saw a way to catch its water a free ride. It would channel it through the rate-payer built and funded Colorado River Aqueduct. This way, all it would have to build was a 35-mile hook-up from Cadiz to the Aqueduct.
But first, it had to sell the idea to The Metropolitan Water District of Southern California.
Metropolitan, a consortium of local water agencies including the LA Department of Water and Power, was formed expressly to build the aqueduct and then manage Southern California’s Colorado River water.
What was in the Cadiz deal for Metropolitan, aka us ratepayers? Storage space. Under the partnership proposed by Brackpool in 1998, in wet years on the Colorado River, Metropolitan would have been able to infuse unused portions of its allocation of water from the river into the aquifer underlying Cadiz’s 45,000 acres. Metropolitan would pay to pump the water in and pay again to pump the water out when it was needed in dry years.
Metropolitan was intrigued. Evaporation is a huge problem with water stored in open-air desert reservoirs and the idea of preventing it by infusing water into the ground was attractive. But as soon as Metropolitan began looking at the Cadiz plan, flaws emerged.
Colorado River water is loaded with salt that it picks up as it courses out of the Colorado Rockies. Infusing salty water into the pure groundwater could have devastating consequences on desert flora and fauna.
Meanwhile, USGS studies had been showing that the Mojave aquifer is widely laced with Chromium VI, the carcinogen that might have strong native levels in the Mojave but was certainly introduced in quantity into the desert’s aquifers by PG&E gas compressor plants, including the one made famous by Erin Brockovich.
Ignoring water quality issues for a moment, quantity of water was also a challenge. In 2002, the Colorado River entered what the US Bureau of Reclamation river masters now call the worst drought of the last 100 years. There was no extra river water to bank in Cadiz’s private aquifer.
This left the option of pumping Mojave ground water out from under Cadiz land and selling it to Metropolitan and its agencies. Except that so little water flows into the Mojave through rain and snowmelt every year, this option would mean swift collapse of delicate desert ecosystems.
Finally, there was cost. Cadiz seemed to think that Metropolitan should foot the bill for its roughly 35-mile-long hook-up to the aqueduct. Estimated cost: $100m.
The water Brackpool proposed to sell to Metropolitan was also pricey. In a July 16, 2001 report, Gary Wolff, principal economist and engineer at the Pacific Institute, calculated, “The most likely cost for this water is around $850 per acre-foot … Since the Metropolitan Water District’s customers currently pay around $400 per acre-foot for wholesale water, and alternative dry-year water supply and storage projects have much lower costs, the Cadiz project doesn’t make much economic sense. Unless, of course, you are a stockholder in Cadiz, Inc.”
But as far as Brackpool was concerned, the opinions that mattered were those of the Metropolitan Water District’s board of directors. On that board, no delegation has more influence than the members appointed by the Mayor of Los Angeles to represent the Los Angeles Department of Water and Power.
It’s safe to bet that as the Cadiz scheme grew, Keith Brackpool was working on the mayor part of the puzzle.
In 2001, Antonio Villaraigosa took a shot at the Los Angeles mayor ship, heavily backed by then Governor Gray Davis and Brackpool. He lost in a run-off, and the defeat was swiftly followed by the political storm that led to Davis’s recall. In the midst of this, in October 2002, Metropolitan voted against accepting right of way across Bureau of Land Management desert to run a pipeline to the Colorado River Aqueduct. In other words, it killed the deal.
The Cadiz share price plummeted, but within weeks, Brackpool got a $35 million credit facility. As it turned out, 2002 was the worst drought year on record for the Colorado River and Brackpool was still sitting on something tantalizing, especially in a drought: a source of new water.
As Villaraigosa planned a bid for city council, Brackpool put Villaraigosa on the Cadiz payroll as a consultant. Five months after Villaraigosa was elected Mayor in May 2005, the pressure was on to revive the Cadiz project.
On November 2nd, Metropolitan’s CEO and general manager, Dennis Underwood died suddenly, opening a leadership vacuum. The ink of his obituary was barely dry when on November 17, 2005, Brackpool filed suit in LA Superior Court against Metropolitan for not taking up right of way that had been granted to build the Aqueduct hook-up. Brackpool’s lawyers estimated Cadiz losses in the hundreds of millions of dollars.
By the end of November, Gray Davis’s successor, Arnold Schwarzenegger, appointed Susan Kennedy his chief of staff. According to the LA Times, in 2005 alone, Kennedy had received $120,000 or $10,000 a month in consultancy fees from Brackpool. By January, Villaraigosa had appointed his deputy, Nancy Sutley, to the Metropolitan board.
A battle for Underwood’s job at Metropolitan waged throughout January 2006. The LA Times reported Metropolitan board members receiving an unprecedented blitz of phone calls from Villaraigosa, Sutley and Brackpool surrogates pushing the Mayor’s candidate, former State Assemblyman Richard Katz. Katz, a friend of the mayor’s, was also a recipient of Brackpool donations going back to the 1980s.
The Metropolitan board elected the district’s general counsel, Jeff Kightlinger, as its new CEO instead.
Again Cadiz share prices tumbled. Brackpool pressed on with the lawsuit against Metropolitan.
A month after the Metropolitan board approved more than a million dollars in rate-payer money to defend itself against the Brackpool suit, in October 2006 Villaraigosa saw nothing amiss about setting off on a pan-Asian trade mission with Brackpool in tow.
After a LA Times reporter spotted Brackpool routinely sharing a chauffeured limousine with Villaraigosa, slipping off to wine bars with him and rolling his eyes with boredom during state meals, he asked Brackpool what he was doing there. Brackpool replied, “It’s good to have a friend on a trip like this.”
In September 2008, Cadiz announced that it had secured private access for its pipeline to Metropolitan’s Colorado River Aqueduct in a new, 99-year partnership with the Arizona & California Railroad Co. It even appeared ready to pay for the cost of building the hook-up this time.
By the end of 2008, the legal cost to Southern California water customers from Brackpool’s suit against Metropolitan exceeded $2 million and the Cadiz case hadn’t even gone to a jury yet. Then, last February, Cadiz dropped the case.
The financial press speculated that if Cadiz got its hook up built and pumps going, it would need Metropolitan’s agencies to buy its water.
In April 2009, Cadiz, Inc sent a cheery letter to shareholders saying that the crisis in the Bay Delta compounded by region-wide drought was proving a boon for the company. Cadiz also appears to have broadened its mission to renewable energy and sprouted a solar business. It’s a safe bet that where you find Keith Brackpool with sun and cheap land, you will find federal “green technology” stimulus money.
Nancy Sutley, widely thought to be a Cadiz proxy when working for Villaraigosa as a Metropolitan Director, is now Chair of the White House Council on Environmental Quality.
Meanwhile, in Sacramento, after a week of withering criticism concerning California’s chronic mismanagement of the Bay-Delta, the Governor loves the idea of mining Mojave ground water.
His remarks helped drive Cadiz’s share price up 45%.
Los Angeles Business Journal story via LA Observed
The Cadiz, Inc press release behind the LA Business Journal and AP stories. Editor’s note: Earlier assessments had the hook-up length between Cadiz, Inc property and the Colorado River Aqueduct at 35 miles. The latest press release estimates 44 miles. Additionally, earlier estimates from 2001-2008 as to cost ranged from $100-$150m. Last Friday’s Cadiz press release now projects more like $200m. From the press release:”The $200 million project features the construction of a 44-mile underground conveyance pipeline and will create an estimated 1,200 construction jobs. Cadiz has pledged to hire Inland Empire companies for materials and services, wherever possible, and to reserve up to ten percent of conserved water and storage for beneficial uses in San Bernardino County.”