Cadiz Inc.’s 34,000-acre property is located just south of the old Santa Fe railroad line between one of the last undeveloped stretches of historic Route 66. Here, a string of alphabetically named desert towns of Amboy, Bolo, Cadiz, Danby, Essex, Fenner and others were first established as eastern Mojave railroad water stops. Below Cadiz Inc.’s holdings lies the Fenner Basin, an ancient aquifer estimated to hold between seventeen million and thirty-four million acre-feet of water, slowly replenished by infrequent rainfall events occurring in the surrounding federally protected desert mountain ranges. The scarce surface water that seeps into the aquifer through gravitational forces is part of an unfathomable aqueous process that has occurred, largely uninterrupted, for thousands of years. A contentious public-private water grab may change that.

Cadiz Inc.’s two founders are Keith Brackpool a controversial British investor who had previously pleaded guilty to “criminal charges that included dealing in securities without a license” in the U.K., and Mark Liggett, a corporate mining hydrologist. The two snatched up the bulk of their landholdings in 1983, including all associated water rights, after scouring Landsat imagery of the eastern Mojave Desert in their quest for a hydrologically isolated region that could yield a potential waterborne financial bonanza.[1, 2] Studies conducted by Liggett confirmed their suspicion—the Cadiz and Fenner Valleys sat upon a vast, untapped groundwater resource. Because this groundwater was far from demand and prohibitively expensive to ship, the federal government never apportioned the water out to would-be users. Instead, it was seemingly there for Cadiz’s taking.

Over time, Cadiz Inc. amassed additional properties, including remnant checkerboarded parcels previously owned by the railroad. In addition, the entity has operated an agricultural “front” growing lemons, grapes and other seasonal crops on 9,600 acres at its Cadiz Valley property. Cadiz will likely continue with its modest farming enterprise until its ultimate goal, mining and exporting the water below them to distant coastal Southern California municipalities, is fully realized.

Thirty-five years after its initial investment—set against a perplexing backdrop of ongoing setbacks, including embattled public relations, shareholder rebellion and constant legal wrangling—it seems that Cadiz Inc.’s land speculation may just pay off if certain political twists of fate continue to work in itsfavor. And so far, that’s been the case; the Trump administration lists the Cadiz project as number fifteen of fifty national emergency and security projects earmarked for federal support as key infrastructure priorities. Additionally, several affluent California State Democrats showing support for Cadiz Inc., including former Governor Gray Davis and former Los Angeles Mayor Antonio Villaraigosa, who have in the past received substantial campaign contributions from the company.[3][4][5]

But politics aside, more paramount to this conversation is whether or not it is ethical to mine and export water from a distant, arid landscape to an affluent coastal population whose customers, for the most part, will not use this invaluable resource sustainably. We must also carefully reflect on the long-term repercussions of draining a desert aquifer for short-term use that may permanently destroy a delicate and rare spring complex supporting various flora and fauna, including bighorn sheep. The spring in question is the only water source of its size in over 1,000 square miles of desert.

To grasp the underpinnings of the modern Cadiz Inc. controversy, we need to backtrack into California statehood’s earliest accounts of collusion, money and politics in water and land speculation. Marc Reisner’s Cadillac Desert (1986) and William Kahrl’s Water and Power (1983) illustrate in detail how the willful Los Angeles Department of Water and Power (LADWP) drained the Owens Valley to build Los Angeles. However, less is known about powerful public-private partnerships that govern and control water throughout the state.

Reflecting the nineteenth-century transcontinental railroad’s public-private model that relied on government support and subsidies, the “Iron Triangle,” composed of California state water agencies, local government officials and Congress, gained popularity throughout the twentieth century. By doing so, it ensured that large-scale water development projects were understood as an unquestionable public good.

When the California State Water Project (SWP) was first proposed during Governor Pat Brown’s tenure, public support for the project remained high. However, by the 1970s, voters began to reconsider water provision not as a technical problem but as a political and ethical one. Rather than continuing to greenlight all public-private water projects, public opposition grew. More and more Californians protested the most egregious water-grabbing because their view of water as a shared natural resource had changed.

Hungry land speculators began purchasing agricultural land for the water underneath it as the SWP was underway. After the 1977-1978 drought, it became apparent to investors that municipal access to public water could diminish, so California’s groundwater might be their next best investment.

In times of surface water shortage, Californians almost always turn to groundwater. In contrast to the highly regulated appropriative water rights—the “first in time, first in right” system that rules Colorado River water consumption—California groundwater use remained largely unregulated at the state level until 2014 with the passage of the Sustainable Groundwater Management Act (SGMA). Before regulation, the standard practice was to drill a well and start pumping until your locality created a water management district or your neighbor sued you for stealing their water. As a result, California groundwater law has been piecemeal, determined by local court cases between feuding neighbors instead of by a cohesive statewide law similar to those in other Western states such as Arizona and Nevada.

Understandably, land with ample groundwater and associated extraction rights makes a good investment in a state perpetually in and out of drought. Laws passed in the early 1980s made it easier for investors to buy land and sell the underlying groundwater at a profit. California State Assemblyman Richard Katz (D-Sylmar) sponsored a bill that made selling groundwater to another user or municipal water district effortless. Economist Mason Gaffney argues that this created two classes of landowners—those committed to keeping their water and those who envisioned commercializing the water and sending it elsewhere.

The geography of the property speaks of Cadiz’s intentions. It was always a water project. —David Lamfrom, National Parks Conservation Association

By the 1990s, it was clear that Cadiz Inc. was not an agricultural company but instead a natural resource company with a farming business on the side. In 1996, Cadiz Inc. purchased Sun World, a Coachella Valley and Bakersfield producer of watermelon and raisins. Its filings with the government’s Securities and Exchange Commission say as much about their intentions. Under “Transaction Rationale,” Cadiz lists the value of Sun World’s water rights before even discussing the agricultural value of the lands: “Sun World owns approximately 20,000 acres of developed farmland with prime senior water rights primarily in the Central Valley of California. The Company believes that with ever-increasing pressure to relieve the water shortages in the state and with agriculture consuming in excess of 80 percent of the water used, established acreage with prime water rights will increase in value substantially over the next several years.”

As Cadiz Inc. bought out Sun World, it schemed to profit from the water underneath its landholdings. In a nearly done deal with the Metropolitan Water District of Southern California (MWD), Cadiz Inc. proposed that the MWD use the Fenner Basin aquifer as storage or “water bank” for surplus water from the Colorado River and then draw from it in years of drought. Like other similar projects, this private-public relationship promised a hefty profit from sales of state-subsidized agricultural water bought and resold above its original subsidized purchase cost to municipal customers. Water banking became enormously popular in the 1990s when private-public groundwater storage projects began popping up across California.

For instance, the Kern Valley Water Bank (KWB), capable of holding one million acre-feet of water, is the most controversial water storage project to date. The KWB’s primary owners, the Resnicks, are infamous water barons who have “shrewdly maneuvered the backroom politics of California’s byzantine water rules.” Shady, behind-the-scenes arrangements such as the 1994 Monterey Amendments have allowed the Resnicks, and other members of the privately-controlled Kern Water Bank Authority, to gain ownership of this previous state-owned entity. Today, the Resnicks own nearly 60 percent of the KWB, which Forbes Magazine estimates alone is worth at least $250 million. Their combined agricultural holdings in California suck up 450 million cubic meters of water—enough water to supply all Los Angeles’ homes for a year.[6] A 2014 lawsuit forced the KWB to undergo a new environmental review.

In 2002, the MWD/Cadiz Inc. water bank scheme deal fell apart from fears that the project would begin depleting the aquifer, causing the water table to drop significantly and thus prompting pump shutdowns. The MWD would lose money in the long run because their investment would bring in far less water than expected.

Senator Dianne Feinstein—who has long opposed development in the Mojave Desert and championed the 1994 Desert Protection Act—pressured Cadiz Inc. to stop moving forward with the water bank and has consistently opposed all of its water-mining and extraction plans to date. As a result, little was heard about Cadiz Inc. for the next couple of years, except when its subsidiary, Sun World, filed for Chapter 11 bankruptcy in 2003 or when Cadiz Inc. was subsequently sold to Black Diamond Capital Management in 2005.

According to a 2017 L.A. Weekly feature, SEC filings show that Cadiz Inc. has lost $430 million over its thirty-four-year history. Brackpool continued his association with Cadiz as a minority shareholder and its CEO from 1991 to 2013. From 2013 onward, he was company chairman. In addition, he began to dabble in California horse racing and eventually would achieve prominence as chairman of a board that manages both Golden Gate Fields and Santa Anita Park. However, by 2008 Brackpool had faded from public view. That same year, media-savvy water lawyer Scott Slater was named CEO and president of Cadiz Inc.

If water speculation has one rule, it is this: waiting pays off. The droughts in 2006-2010 and 2012-2017 exacerbated pressures on local water supplies to the point that municipal water agencies began turning elsewhere to quench their thirst.

Orange County’s Santa Margarita Water District has long been dependent on imported water supplies. In fact, most of coastal Southern California lacks substantial groundwater sources. So, the district jumped at Cadiz Inc.’s newest water mining scheme, which would transport 50,000 acre-feet per year of Mojave Desert water to Orange County via a proposed pipeline from Cadiz to the MWD’s Colorado River Aqueduct. Cadiz would dump water into the MWD aqueduct to flow downstream to Southern California water districts.

Although the Santa Margarita Water District has fully endorsed the project, it has been plagued by opposition, mainly by environmental organizations and desert locals afraid that draining a desert aquifer will take a toll on their lands. Those opposing the project cite Cadiz Inc.’s faulty science and agencies’ lax enforcement of regulations as the reasons why this Cadiz water grab has gotten this far.

Cadiz Inc.’s press releases promote its enterprise as a “water conservation, recovery and storage project,” claiming that exported water would be otherwise “lost” to evaporation. Cadiz Inc. has paid for environmental studies in its effort to show that pumping water from the Fenner Basin will not pose a threat to the fragile ecosystem now protected by the Mojave Trails National Monument, where their water extraction project lies. Cadiz Inc. additionally claims that the recharge rate for the aquifer is about 32,000 acre-feet a year. Independent scientific analyses, including a well-regarded U.S. Geological Survey (USGS) report, question Cadiz’s figures, which appear to be between two and five times higher than all other estimates for recharge rates conducted by independent scientists, closer to 8,000 acre-feet/year. Without federal review, Cadiz’s scientific data will remain largely unquestioned, and no qualified independent scientific study of groundwater in the area will be conducted.[7]

In addition, questions about the scientific basis of Cadiz Inc’s claims have extended to the environmental review process approved in 2014. During the review, the Santa Margarita Water District acted as the lead agency—seen by many as a blatant conflict of interest since Orange County would benefit from receiving the water, not San Bernardino locals. As a result, environmental groups sued, requesting that San Bernardino County review the project, but those suits did not prevail.

San Bernardino County supervisors additionally exempted the Cadiz project from specific stringent County regulations that would have prevented it from drawing down more water than is replenished each year. Essentially, the supervisors disregarded the county’s established desert groundwater management ordinance to support Cadiz. A 2017 bill in the California State Legislature (AB 1000) required the project to be reviewed by the State Lands Commission and Department of Fish and Wildlife but never made it out of committee.

Nearly all environmentalists concerned with the project warn of direct and devastating impacts to the regional watershed if Cadiz Inc. goes forward with pumping based on its recharge assumptions. They argue that the fragile Bonanza Spring, located about fifteen miles northeast on federal land, will be ravaged. “Just looking at the rainfall catchment area for Bonanza Spring,” said Chris Clarke, the California Desert Program Manager for the National Parks Conservation Association, “you can tell that the spring isn’t fed by local rainfall alone. There’s too much water for that.” Clarke believes that Bonanza Spring is not a “perched” aquifer but instead connected to the underground network of water linking to the Cadiz and Fenner Valleys. As a result, he and other environmentalists argue that the spring will suffer and, with it, the bighorn sheep along with other animals and plants that depend on it.

One of the many challenges for those opposing the Cadiz project is communicating to the public and decision-makers that groundwater extraction comes with a time lag: impacts of pumping show up long after irreversible damage occurs. For example, subsidence can take up to one hundred years to appear as the ground slowly sinks from over-pumping. In some cases, an aquifer can recover if extracted water is replenished, but the damage may last forever if materials underneath compact, likely in this particular scenario.

Other impacts would be more immediate, such as displacing desert tortoises from prime habitats during the project’s construction. Cadiz Inc. has planned to compensate by creating the Fenner Valley Tortoise Bank in partnership with the San Diego Zoo. However, as of late 2017, the Fenner Valley Tortoise Bank has not opened, nor does it contain tortoises.

With the blessing of the Trump administration, the project seems poised to move forward despite heavy opposition from locals and environmental groups across the state, multiple lawsuits, the recent California Legislature effort and accusations that high levels of chromium-6 are present within the Fenner Basin aquifer.

The Obama administration ruled in 2015 that Cadiz Inc.’s proposed conveyance pipeline was subject to federal approval despite using a railroad right-of-way. However, the Trump administration reversed that guidance. Deputy Secretary of the Interior David Bernhardt, a former lobbyist for the Central Valley’s Westlands Water District and Cadiz CEO Scott Slater’s former partner at the law firm Brownstein Hyatt Farber Schreck (BHFS), likely influenced this outcome.[8][9] This chain of events should not be surprising if one notes BHFS’ motto, “Where business, law and politics converge.” According to the Los Angeles Times, BHFS has collected at least $2.75 million in fees from Cadiz Inc., along with 200,000 shares of company stock that will double in value if the project goes through as planned.

The Trump administration’s support couldn’t have come at a better time for the company. Cadiz Inc.’s stock jumped in price during December 2016 when the new administration’s preliminary infrastructure projects were made public. Shareholder lawsuits seemed to take a back seat as well. One, in 2015, later settled, alleged that the company had deliberately issued misleading statements about the permitting process. Cadiz Inc. had stated that a railroad right-of-way permit was not necessary to begin construction. Future shareholder suits could result from other regulatory hurdles Cadiz Inc. has not shared with its stockholders.

Additionally, the Trump administration has rolled back regulations that make projects like Cadiz subject to less environmental review. To avoid this issue altogether, Congressman Paul Cook (R), who oversees California’s Mojave Desert region, asked Interior Secretary Ryan Zinke to remove the Cadiz Valley entirely from the Mojave Trails National Monument proposal. The Interior’s much-anticipated announcement for the new monument did not include Cook’s suggestion.

Even Cadiz Inc’s public relations ploy, a desert steam train, seems more appropriate under a presidency that wants to return to coal-fired power plants and encourage extraction leases on public lands. The train, evoking days of yore, would travel parts of the Santa Fe Pacific Railroad line between Cadiz and Parker, Arizona, constructed in 1910.

Of course, this charade hearkens back to earlier days, when the Iron Triangle was still intact and providing water was merely an engineering problem rather than an ethical one. Before environmental reviews or protection of local plants and animals through federally reserved water rights were even considered. It comes from the early days of California groundwater law, when how much you took was a matter of desire, not need.

The KCET Artbound version of this dispatch was nominated for a 2019 LA Press Club award in the Online Non-Political Commentary category. The opening image is a view of the Cadiz and Fenner Valleys photographed by Kim Stringfellow from the Cadiz Summit on historic Route 66 in the Mojave Trails National Monument.

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