Look to Make Bucks From Seeling Water Resources
Thirsty, Growing States Turn
to New Sources to Meet Demand
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
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.
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
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
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
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.