Great Lakes Article:

By William Booth
Washington Post Staff Writer
Monday, August 13, 2002; Page A01

CADIZ, Calif. -- This is one big, dry state, and Keith Brackpool wants to slake its thirst.

The politically connected British wheeler-dealer is pressing ahead with an ingenious plan to sell billions of gallons of drinking water to Southern California from his company's aquifer, buried here beneath the broiling badlands of the Mojave Desert.

Contentious? They don't call them "water wars" for nothing.

Brackpool has both serious friends and committed opponents. He has steered $250,000 into the campaign coffers of Gov. Gray Davis (D) and secured the services of former interior secretary Bruce Babbitt as a consultant for dealings in Eygpt. Former Democratic congressman Tony Coelho serves as a board member. But Brackpool is now battling with the Sierra Club and Sen. Dianne Feinstein (D-Calif.), who fears CEO Brackpool's Cadiz Inc. will suck the aquifer dry and damage the fragile ecosystem of her beloved Mojave.

But the thirsty states are booming with growth, and, as one hydrologist put it, "God is not making any more water."

The challenges are not limited to California and the West. Water is increasingly seen as a limited commodity around the world, and now into the breach comes private enterprise -- to operate aging municipal water systems (in cities such as Atlanta and Indianapolis) and to sell water outright from farms to cities.

Whether that means consumers will pay more for what comes out of the tap remains to be seen, but entrepreneurs are betting they'll make money.

In Texas, oilman T. Boone Pickens wants to pump not crude but water out of the Ogallala aquifer and then pipeline it to Dallas. Another entrepreneur, Ric Davidge of Alaska Water Exports, envisions siphoning rivers in northern California, filling giant bladders with the runoff and then towing the jumbo balloons with tugboats down the coast to San Diego.

Far-fetched?

Not really, says Ron Gastelum, president and chief executive of Metropolitan Water District of Southern California, the largest wholesale water supplier in the nation, which provides drinking water to 17 million customers in Southern California through a network of local municipal systems.

The district is engaged in an almost perpetual search for new sources of drinking water and has agreed to a preliminary deal with Cadiz that could produce as much as $1 billion in revenue for Brackpool's company over the 50-year life of the project.

Gastelum says that farmers increasingly will sell water to city taps, and private companies will play new roles in storing, managing and transferring water.

Coastal cities, too, will likely begin to invest in costly desalination plants to turn seawater into tap water, he says, and recycled gray water will be employed to green lawns and agricultural lands. But this move toward privatization of water, naturally, has its critics.

"Water is too important to be left entirely in private hands," said Peter Gleick, a hydrologist and president of the Pacific Institute for Studies in Development, Environment and Security, based in Oakland.

Gleick sees a role for the private sector but says its drive for profits must be balanced against society's need to protect the environment and "third parties," such as the tractor salesman or the lettuce picker, or the endangered species left high and dry when farmers abandon crops to instead sell their water.

John Earl, with the group Public Citizen, which opposes privatization, is even more emphatic: "It's a boondoggle." Water is a basic human right, like air, Earl says, and it should be provided for the public good -- not for profits for stockholders.

Indeed, the trend toward privatization runs counter to the national mood that companies are the last entities to be trusted.

The three largest water companies in the nation -- USFilter, United Water and American Water Works -- are now owned by French and German conglomerates, by Vivendi, Suez and RWE. It doesn't help the boosters that one of the big players, until recently, was the water development company Azurix, a subsidiary of Enron Corp.

Yet there is no reason privatization cannot work, advocates say. France has distributed water through private companies for a century. The United Kingdom privatized its water delivery in 1989 under free-marketeer Margaret Thatcher, and the improved services have won high marks.

The battle over the Cadiz project comes as California is growing by a million people every 18 months. The state has long overdrawn its allocation from the Colorado River, which feeds seven states and Mexico. The federal government is threatening to turn off the tap at the end of the year and deny Southern California any extra water.

Still another looming problem: A $2 billion, 45-year deal to siphon water from the Imperial Valley, along the Mexican border, to parched San Diego is facing new hurdles. In the 1990s, the Bass brothers of Texas snapped up about 30,000 acres of farmland in the Imperial Valley, speculating not on crops, but on the value of the farmland's water rights. The Bass brothers sold the farmland to USFilter for millions in profits, but now the water sale to San Diego is endangered by concerns that routing the water to the city and away from the Salton Sea will kill the great inland lake, thereby robbing the flocks of migrating birds of their crucial habitat.

The Cadiz project is facing similar challenges. Brackpool's Cadiz would use the aquifer beneath its desert farms to store surplus water pumped in from the Colorado River by the Metropolitan Water District via a still-to-be-constructed $150 million, 35-mile pipeline during wet years and sell the water back to the district during dry ones. The company would also mine its own "native" water and sell it to the water district.

The Cadiz project didn't start out as a would-be water supplier. In the 1980s, Mark Liggett, a former minerals miner and one of Cadiz's founders, pored over detailed satellite images, searching for an isolated watershed with its own supply of groundwater.

The initial idea was to grow grapes and lemons on the land, with the hope that in coming years agricultural water would become more expensive and any farm with its own aquifer would be profitable.

Liggett found the property here, an undeveloped valley nestled between desert mountain ranges. It drains an area the size of Rhode Island into a pair of prehistoric dry lake beds that have been sources of table salt for generations. With the backing of investment banker Brackpool, the company acquired 55 square miles of creosote scrub from the railroads.

Unfortunately for Cadiz, the farms have been money losers. The company is in debt and has never shown a profit.

Then: eureka. Possible salvation came when the Metropolitan Water District called for proposals -- from anybody -- to increase its water supply. Brackpool and Cadiz realized they had something more valuable to sell than pitless plums: water and water storage.

Driving out to Cadiz farm is a geologist's holiday: There's a 6,000-year-old volcano cinder cone, jagged granite mountains and a pair of ancient dry lakes, alive with swirling mini-tornadoes called dust devils.

The biggest concern is the dispute between Cadiz, on one side, and the U.S. Geological Survey and environmental groups on the other over how much of the existing groundwater could be siphoned from the aquifer without drying up nearby springs or the dry lakes.

"The intent of Brackpool and company is to suck the aquifer dry and sell it," said Elden Hughes, chairman of the desert committee of the Sierra Club. A grand old man of Mojave conservation, Hughes has the ear of Feinstein, whose hallmark environmental achievement in the Senate was the creation of the Mojave National Preserve, which lies 20 miles north of the Cadiz project but drains into the Cadiz aquifer's watershed.

The operators of Cadiz estimate the recharge rate for their aquifer at 10 times what the USGS says it will be. Cadiz estimates it can sell the water district 1.5 million acre-feet over the next 50 years. That, and its ability to store Colorado River water, could equal total revenue of almost $1 billion. (An acre-foot of water, which is the standard measurement for buying and selling water, equals 325,851 gallons, or enough to supply the needs of three average households for a year.)

Feinstein has included an amendment to an appropriations bill that would stop the federal government from spending any money on the project, thereby killing it (because the federal government is responsible for monitoring possible environmental damages).

But Brackpool and officials with the Metropolitan Water District say they will install state-of-the-art monitoring systems and will stop selling groundwater if the aquifer is threatened.

The project will come to a vote before the water district board in the coming months. Gastelum, president of the water district, offers this as a cautionary tale to private water enterprises. These deals can take years and millions of dollars in investments, and the entrepreneurs will either strike it rich, or end up with a dry hole.