BEC Byline: Cadiz Groundwater Mining Project Stuck in Limbo

Ceo Buffeted by Series of Critical Press Articles

by David Czamanske, Angeles Chapter-Sierra Club Water Resources Consultant

The Cadiz Groundwater Mining Project, a costly scheme to extract and sell virgin groundwater from the Cadiz Basin in the Mojave Desert near Mojave National Preserve to the Metropolitan Water District of Southern California, all to the benefit of Santa Monica-based agricultural conglomerate Cadiz, Inc., has become stuck in an unfathomable bureaucratic limbo.

Although it was expected that a Record of Decision (ROD) approving the project would be issued by the Bureau of Land Management soon after the project's Final EIS/EIR was issued on October 5 of last year, eight months later the ROD has not yet been issued, for reasons which remain murky. BLM has jurisdiction over the project because it includes a Colorado River water storage component which requires construction of a 35-mile pipeline to the Cadiz Basin from MWD's Colorado River Aqueduct through lands under the agency's control.

At least part of the delay appears to have resulted from the active intervention of US Senator Dianne Feinstein, sponsor of the 1994 California Desert Protection Act which created the Mojave National Preserve.

In several letters to Secretary of Interior Gale Norton she has expressed concern that withdrawal of groundwater at a rate that exceeds natural recharge will have major and perhaps irretrievable impacts on the Preserve's ecosystem. Rumors surfaced that an early administrative draft of the ROD included a condition limiting extraction of groundwater to the 6000 acre-feet per year presently used for agricultural purposes at the Cadiz site, far less than the 50,000 acre-feet per year Cadiz's CEO Keith Brackpool is counting on to enrich himself in his proposed 50-year, $1 billion contract with MWD.

This rumor was soon countered by another that Bush Administration operatives in the top echelons of BLM in Washington had deleted the limit, infuriating Feinstein. In response Feinstein, a member of the Senate Interior Dept Appropriations Subcommittee, stated in a public hearing before Secretary of Interior Gale Norton on June 13 that she intended to introduce legislation during the appropriations process that would prohibit the Department from expending any funds implementing the Cadiz Project until the United States Geological Survey has determined the sustainable groundwater recharge rate in the Cadiz Basin.

The active intervention last autumn of the national grassroots organization Public Citizen may also have contributed to the delay. Public Citizen aggressively joined the coalition of environmental groups, headed by the Sierra Club and the National Parks Conservation Association, opposing the project, and has kept up a steady stream of communications to MWD directors and the media ever since. These efforts have significantly raised public consciousness about the dangers of privatization schemes such as the Cadiz Project that take policy decisions about water, a resource needed by all human beings, out of the hands of the public and instead treat water as a commodity to be bought and sold wherever the market price is highest.

Regardless of the cause of the protracted ROD approval process, MWD has said it will not schedule its final consideration of the project until after BLM issues the ROD. Then MWD will schedule two public meetings: a public workshop devoted to the project's environmental impacts, at which environmental organizations will be invited to testify, and a meeting of the Board's Legal and Claims Committee at which the agency's proposed contract with Cadiz will be considered. After these two meetings, which could take place in July, the Board will take a final vote on whether or not to certify the EIR and whether or not to approve the proposed contract with Cadiz.

Meanwhile, as the government's administrative gears grind slowly, Cadiz CEO Keith Brackpool has come under heavy attack in a number of highly critical articles published throughout California during the second half of May and early June.

Opening the attack was a major article on the front page of the Los Angeles Times Business Section on Sunday, May 19, "Critics Raising Concerns about Cadiz Water Project: Project Would Pump Desert Aquifer's Water". The article not only questioned the project's economic viability, it also included little-known facts about Brackpool's personal background, including the fact that in 1983 he pled guilty in London to criminal charges that included dealing in securities without a license, and that he was forced to resign as chief executive officer for the North American division of a British food company as a result of his personal guarantee of a $10 million loan to him and several partners to enable them to buy out the subsidiary of a competitor.

That same day the San Francisco Chronicle carried a major political article "Davis' Nonstop Cash Machine: Many big donors have interests in Governor's decisions" which revealed that, among other things, Brackpool had hosted a Los Angeles fund-raiser for Governor Davis at his Manhattan Beach country club on September 20, only a few days after the devastation of New York's World Trade Center.

The next Sunday, May 26, the front page of the San Jose Mercury News prominently displayed as it's Top Story of the Day a Mercury News Special Report entitled "The Davis Connection: Powerful friends not bound by paid staff rules". Highlighting Keith Brackpool and two other well-connected business friends of Governor Gray Davis, the article focused on the manner in which the Governor has allowed large campaign contributors to play major roles in California's state government. Brackpool, who has contributed over $235,000 to the Governor's political campaigns since 1998, was exhibited as "the single most important advisor to Davis on the complicated and controversial subject of water" despite the fact that he is a British, not a US citizen; that he is a financier, not an engineer, lawyer, or economist; and that he has an overwhelming conflict of interest in functioning as the Governor's key water advisor while seeking approvals for a controversial water project that would enrich himself and his colleagues.

The Mercury News article also provided interesting insights into Brackpool's personal life, including such tidbits as: he smokes cigars; he owns race horses; he owns a Manhattan Beach country club at which he entertains elected officials and heads of state agencies; he also owns a corporate jet, which he has used to ferry the Governor around the state on campaign business and Resources Secretary Mary Nichols & other state officials on state business.

This article was followed a few days later by an Associated Press wire story from Sacramento further elaborating on the close political connection between Brackpool and the Governor, the conflict of interest it represents, and the questionable ethics of this relationship.

Perhaps not surprisingly, Cadiz stock nose-dived on the cascade of bad pubicity. From a 52-week high of $11.00 a share at the end of April, the stock fell to $8.42 on May 22, three days after the first negative articles appeared in the press, recovered slightly by the end of the week, but then fell to $8.23 on high sales volume by June 3, a 25% loss in one month.

The speculative nature of Brackpool's attempted market entry into California's water world is immediately apparent by a quick look at the Cadiz's financial condition. The company's debt at the end of 2001 - much of it at high junk-bond interest rates - totaled $141.5 million, while its equity was a mere $17.7 million. Its main agricultural subsidiary, Sunworld, Inc., which it bought out of bankruptcy and whose debts it assumed, has lost millions of dollars for five years straight. Without the prospect of earning $500 million from the proposed long-term water sale contract with MWD, Cadiz itself is likely to collapse into bankruptcy.

This column originally appeared in June 2002 in the Chico Examiner.