Department of Water Resources Must Reopen Environmental Review on the Kern Water Bank

In State Water Project by c-win0 Comments

http://www.cp-dr.com/node/3597
DWR must reopen environmental review on the Kern Water Bank
California Planning and Development Report
By Martha Bridegam
October 15, 2014

About 20 years after the Monterey Agreement sewed up disputes among contractors of the State Water Project (SWP), opponents of the deal have come as close to unstitching it as they’ve been in many years.

In an October 2 ruling on the Kern Water Bank cases, Judge Timothy Frawley ordered the EIR on the “Monterey Plus Project” settlement to be revised and submitted for recertification, but with the revisions to focus only on the environmental impact of the “use and operation” of the Kern Water Bank.

The “Monterey Plus Project” is the current implementation of the much-litigated 1994 Monterey Agreement. Named for the site of the negotiations, the agreement settled disputes between the Department of Water Resources (DWR) and SWP water contractors about water deliveries, mainly in Southern California. Disputed effects of the agreement included eliminating the “urban preference,” which favored urban populations over agriculture in times of shortage, and transferring the Kern Water Bank to a local joint powers authority, the Kern Water Bank Authority (KWBA).

Frawley refused to reopen the question of whether the Kern Water Bank was correctly transferred to the KWBA in 1995-6. Environmental and community groups in the dispute contend the transfer effectively privatized a public resource for the benefit of large landowners – especially Roll Global’s Paramount Farms, known for its thousands of acres of almond and pistachio trees.

Adam Keats, lead counsel with the Center for Biological Diversity (CBD), an important petitioner in the matter, wrote after the decision: “At this point petitioners are planning on appealing Judge Frawley’s ruling, both because we disagree with his remedy that has left the approvals of the transfer in place and because we disagree with other parts of his ruling related to the rest of the Monterey Amendments. It is possible that the new EIR process could proceed alongside any appeal.”

Although everyone got something in the decision, Frawley ruled petitioners were the prevailing parties for purposes of attorneys’ fees.

Previously on March 5, Frawley issued a more sweeping decision in the matter, as reported athttp://www.cp-dr.com/node/3456. That decision – really, two rulings in parallel consolidated cases – upheld most aspects of the EIR on the Monterey Plus Project but found the EIR’s analysis was deficient as to the Kern Water Bank component of the deal.

Per the limits of the March ruling, this month’s order did not reopen the broader question of whether the Monterey Agreement itself (and the resulting Monterey Amendments to the SWP’s contracts) served the public interest.

Located at the foot of the Central Valley south of Bakersfield, the Kern Water Bank is the largest of several area water banks: a system of pipes, wells and recharge ponds that allow massive quantities of water – potentially up to 1.5 million acre-feet – to be stored in the loose sandy ground of the Kern Fan Element and drawn out again at need. The water bank’s Web site says it now has “about 0.8 million acre-feet in storage.”

The KWBA issued a statement on Judge Frawley’s ruling saying “the Court appropriately rejected the extreme remedy of shut down of the Kern Water Bank as advocated by the Center for Biological Diversity (CBD) and other petitioners in the Central Delta case.” It quoted Frawley’s statements that “shutting down the Bank would result in more environmental harm than allowing it to remain operational” and noted he “ruled it would be ‘contrary to the public interest’ and ‘reckless and irresponsible to suspend Kern Water Bank operations particularly under current severe drought conditions. As the Court’s ruling also states, the ‘point of having a water bank is primarily to provide water in times of shortage’.”

On the shutdown issue, Keats wrote: “Petitioners argued that the transfer needed to be reversed and the water bank returned to the state, and we intend to take that  argument up on appeal.  We also argued that the judge should – but was not absolutely required to – shut the water bank down pending future environmental review. As an alternative, recognizing the economic factors that the judge may consider, we argued that while the law required the judge to return the water bank to the state, it allowed him to permit continued operation and use of the water bank pending future environmental review. He kind of did this, stating that the bank can continue to operate pending future environmental review while also not disturbing the transfer.”

Frawley wrote in his ruling that the court faced “the fulcrum of a pointed dilemma” created “because DWR approved and completed transfer of the Kern Water Bank lands to KWBA in 1995-96, but did not complete its environmental review of the transfer until approximately fifteen years later, in 2010.”

The initial transfer of the Kern Water Bank was made under the terms of the original Monterey Agreement; its terms were modified by a 2003 settlement of litigation brought by a prior, separate group of environmental plaintiffs, led by the Planning and Conservation League (PCL). A major question in the current phase of litigation has been what latitude remains to the current set of petitioners since, as Frawley’s opinion puts it, they have “arrived late to the party.”

In the two cases that Frawley considered together, the two sets of petitioners had sought different levels of reopened review. The neighboring water districts that were petitioners in Rosedale-Rio Bravo Water Storage District v. DWR, Case No. 34-2010-80000703, had offered to accept an order changing much less of the status quo. Their proposed order would have limited EIR decertification to the Kern Water Bank portion of the Monterey Plus Project while providing for only a “supplemental, geographically-limited EIR focused on the potential impacts (particularly as to groundwater and water quality)… in the immediate vicinity of the Kern Water Bank lands.”

But CBD and other activist petitioners held out for more in the larger, more political case of Central Delta Water Agency v. DWR, Sacramento Superior Court Case No. 34-2010-80000561. In his decision, to the environmental groups’ delight, Frawley went farther than the Rosedale group had asked.

KWBA recounted Frawley’s order that operation continue during DWR’s work to revise the EIR, “subject to certain conditions including the interim operating plan jointly developed by and between KWBA and neighboring Rosedale-Rio Bravo and Buena Vista Water Storage Districts for protection of local groundwater. KWBA is committed as a responsible agency to diligently assisting DWR with timely completion of its supplemental review as required by CEQA and the Court and bringing closure to 19 years of litigation.”

EIR could need to consider far-flung effects

The new EIR review is limited only by subject matter, not geography, so arguably the analysis could extend to any site served by the SWP if the Kern Water Bank is involved. Keats wrote: “Anything in the EIR that deals with the Kern Water Bank in any way needs to be revisited in the new EIR. At this point it is hard to say how much the analysis will change, but anything related to the KWB is on the table.”

Carolee Krieger of the California Water Impact Network (C-WIN), which was also a petitioner, praised Frawley’s decision not to limit the new EIR review geographically.

Krieger cited her own home town of Montecito as an example of physically distant effects from current priorities at the Kern Water Bank. She said on joining the State Water Project, Santa Barbara County agreed to build 144 miles of pipeline and pumping facilities from the main State Water Project line in Kettleman City over the hills to Lake Cachuma. She said the county was paying down $1.76 billion in costs for the pipeline, far more than voters had been led to expect, and Montecito’s share of that came close to $6 million out of an $11.4 million revenue stream, “whether we get any water or not.” And she noted the State Water Project is delivering only 5% of the amounts in its contracts this year.

“Now what galls me,” she said, “is, if the Kern Water Bank were a public asset as DWR had planned and if the urban preference were in place as DWR had planned, Montecito would never have gotten to this place.”

Montecito’s water shortage has been especially severe. Krieger said city water users have cut back by 45% and the city has had to purchase water on the open market. As she noted, Politico reported in August that celebrities in the area, including Oprah Winfrey, were hauling water by tanker truck to their estates.

Allegations of private benefit

As of 1995, the future Kern Water Bank, which DWR had begun to create but had not finished, was transferred in exchange for the receiving entities’ retirement of 45,000 acre-feet in annual water rights.

The Kern Water Bank writes on its Web site, “The KWBA had to construct significant infrastructure to turn the [Kern Fan Element] lands into a functioning water bank” including “approximately 7,000 acres of recharge ponds, 85 recovery wells, 36 miles of pipeline, and a six-mile-long canal.” But AP’s Garance Burke writes that the Department of Water Resources previously put $74 million of its own and $23 milllion of bond proceeds into earlier stages of the project.

Critics have focused on benefits to Paramount Farming Co., a company in the Roll Global holding company of investors Stewart and Lynda Resnick. Paramount reportedly owns the Westside Mutual Water Co., which as of 2011 owned 48.06% of the base shares in the KWBA. Critics say Paramount and the neighboring Tejon Ranch Co. also have significant influence with other large shareholders in the KWBA.

Krieger noted the judge’s words that the water bank exists “to provide water in times of shortage,” but said, “the way the Kern water bank is operated with the Resnicks controlling 58%, they do not sell to the public without getting a huge profit. They are a private company.” She said it was the DWR’s intention “to have a place to store surplus water” south of the Delta, with the urban preference in place, to serve the public. “It’s people who need the water in times of severe drought. Crops can be fallowed.”

She said Frawley “just doesn’t get it” when it comes to objections about private profit from the sale of Kern Water Bank water and about the loss of the urban preference in the Monterey Agreements.

Potential effects on both sides of the Tehachapis

Although the Kern Water Bank case is discussed most frequently as benefiting Paramount, it also affects water districts that work with the Tejon Ranch Company on both sides of the Tejon Pass, and even the Newhall Land and Farming Company, whose proposed Newhall Ranch development at the north edge of Los Angeles suburbia is currently before the State Supreme Court.

The Newhall Land and Farming Company holds a right to store 55,000 acre feet of water with the Semitropic Water Storage District, which in turn owns 6.67% of the Kern Water Bank. The Semitropic Water Storage District has been named as a real party in interest in the Kern Water Bank suit.

As for the Tejon Ranch Co., a detailed 2011 California Lawyer article on the litigation reported CBD’s Adam Keats first turned his attention to the Kern Water Bank because it was listed as a possible water source for the company’s upscale Tejon Mountain Village development in the Tejon Pass highlands, which has since won initial approvals.

Bakersfield Californian columnist Lois Henry tangled with the Tejon Ranch Co. in March 2014 when she suggested Judge Frawley’s initial ruling might affect the Tejon Mountain Village project; she reported that the company’s Barry Zoeller wrote to her then, “It’s not a concern” and that the project also had other water sources.

Henry has also reported that the Tejon Ranch Co. has been making purchases of water rights in recent years. She reported based on a November 2013 SEC filing that Tejon Ranch has contracted for a right to purchase Kern River water from Nickel Family LLC.

(Henry’s local water coverage also includes a more recent comment on the impending Kern Water Bank decision as of this September that offers some insights into the Rosedale-Rio Bravo water district parties’ perspectives.)

It is uncertain how or whether the Kern Water Bank decision may affect the proposed planned town of Centennial, whose proponent is a joint venture by the Tejon Ranch Co. and others, known as Centennial Founders, LLC.

Centennial would place some 23,000 units of housing on land at the south edge of Tejon Ranch, around Quail Lake on Highway 138 east of I-5, in unincorporated Los Angeles County. The west branch of the California Aqueduct runs through the proposed site. But in a recent public comment on the Draft EIR for the Antelope Valley Area Plan, which affects the Centennial site’s zoning, the Tri-County Watchdogs activist group mentioned the Kern Water Bank decision in calling on Los Angeles County planners to scrutinize water sources for new Antelope Valley development.

It’s likewise unclear how the Kern Water Bank might affect the portion of Tejon Ranch real estate development that is physically closest to the water bank area: the existing industrial, travel and outlet-mall complex near the junction of the I-5 and 99 highways south of Bakersfield, and, next to it,a proposed new development with 12,000 residential units to be known as Grapevine. Henry’s reporting has suggested the purchase of the “Nickel water” may have been with Grapevine in mind.

The Tejon Ranch Company, Tejon-Castac Water District (TCWD), and, on some court papers, the Wheeler Ridge – Maricopa Water Storage District (WRMWSD), have been described as real parties in interest in the Kern Water Bank case. The Tejon Ranch Company has large water delivery contracts with TCWD, which as of 2011 owned 2% of the Kern Water Bank, and WRMWSD, which as of then owned 24.03% of the Kern Water Bank. The company’s profile of Dennis Atkinson, Senior Vice President, Agriculture and Water Resources, states he is “president of the Tejon Castac Water Agency, vice president of the Wheeler Ridge Water Agency and is also a member of the Kern County Water Bank Authority board of directors.”

The Tejon Ranch Co. gives its own accounts of its real estate projects and water holdings in its initialand amended 10-K reports for 2013.

An old public argument

The Monterey Agreements, the Kern Water Bank, and land development between Bakersfield and Los Angeles are long-established matters of entrenched political conflict.

The Kern Water Bank’s 1995 transfer from the Department of Water Resources to the Kern County Water Agency, and thence within days to the Kern Water Bank Authority, can be viewed either as privatization or as devolution to local control. The question whether the water became privatized depends on the view taken of water districts that are public entities but governed by and for large private water users, i.e. major landowners. Background on the arguments that a public resource was transferred for private enrichment appears in the 2011 California Lawyer article and in a paper titled, “Water Heist” published in 2003 by Public Citizen athttp://www.citizen.org/documents/water_heist_lo-res.pdf.

The Public Policy Institute of California has taken a more favorable view. Key papers by senior water scholar Ellen Hanak and others include Hanak’s 2003 “Who Should Be Allowed To Sell Water in California?…” at http://www.ppic.org/content/pubs/report/r_703ehr.pdf and its 2012 update athttp://www.ppic.org/content/pubs/report/r_1112ehr.pdf.

The 2012 PPIC report, in characterizing effects of the 1994 Monterey Agreement, wrote, “This agreement also led to the transfer from state to local ownership of a part of the Kern Fan, near Bakersfield, where the state had unsuccessfully attempted to launch a groundwater bank. This area, now known as the Kern Water Bank, has become one of the leading examples of groundwater banking.”

The Kern Water Bank’s own account of its history is athttp://www.kwb.org/index.cfm/fuseaction/Pages.Page/id/360 . It maintains a “Myth and Reality” pageoffering rebuttals to the Center for Biological Diversity’s allegations as of a time when the lawsuit’s filing was “recent”.

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