“Grumpy” Environmentalists Appeal Decision to Ship Mojave Water to Orange County Suburbanites

Tuesday, May 05, 2015

One year after an Orange County Superior Court judge shot down multiple lawsuits trying to block a plan by Cadiz, Inc. to ship water from a Mojave aquifer 43 miles west to suburban Orange County, conservationists filed their appellate court arguments and an anonymous blogger rocked the company stock. 

The Cadiz plan, in play for more than decade, is ostensibly to divert surplus water from the Colorado River to an aquifer beneath 35,000 acres of land it owns, augment that supply by capturing water otherwise lost to nature, pump 16 billion gallons of water a year out of the aquifer and ship it via a 43-mile pipeline that hasn’t been built yet to the Colorado River Aqueduct and on to Orange County.

Critics say there is no surplus water, the aquifer will be drained, the pipeline will cut across sensitive federal property and the ecosystem will take a big hit. Conservationists lost their initial court cases that argued the environmental impact report and groundwater management plan were deficient and challenged the role of the Santa Margarita Water District in Orange County in approving them.

The unidentified blogger, who posted his piece at Pump Stopper and Seeking Alpha, wrote an exhaustingly long takedown of the company (“Price target $0”) that triggered a steep drop in Cadiz stock last month, which inspired a class-action filing on behalf of battered shareholders, setting off a feeding frenzy among law firms seeking to represent them and fueling talk of short-selling.

“I believe Cadiz (NASDAQ:CDZI) is worthless while facing imminent project failure, collapse and bankruptcy,” the blogger wrote, while weighing which of the company’s misdeeds would ultimately defeat it. He said: the stock is overvalued; the Metropolitan Water District has not agreed to allow the water in its aqueduct; insiders have collected millions while diluting shareholder stakes; and the one that seemed to gain traction in the blogosphere and among investors—federal disapproval.

He wrote that a Freedom of Information Act (FOIA) request turned up documentation that the U.S. Bureau of Land Management (BLM) told company officials as far back as 2012 that the pipeline would be subject to federal review, which it could not pass. The blogger also pointed out that, although the judge approved the project, she questioned whether Santa Margarita was entitled to be the lead agency.

He echoed some of the more skeptical longtime critics who suspect Cadiz doesn’t care as much about pumping water out of the desert as the appearance of a plan to deliver water in drought-stricken California to keep the company afloat. “I have never before seen such a leveraged stock with so many separate, uncorrelated, demonstrable reasons why it is worthless. The fact CDZI has no material revenue, insufficient cash and $106m of near-term debt makes the company even more hopeless,” he wrote.

Cadiz estimates the project would cost between $225 million and $275 million. Santa Margarita, which currently contracts for water with the MWD, would buy 20% of the estimated $16 billion gallons of water pumped annually for Coto de Caza, Ladera Ranch, Rancho Santa Margarita and parts of Mission Viejo and San Clemente. 

The company was co-founded in 1983 by British-born Keith Brackpool, a politically-connected entrepreneur who was appointed to the California Horse Racing Board in 2009 by Governor Arnold Schwarzenegger. Brackpool was elected chairman in 2009 and resigned in 2013. He owns the Manhattan Country Club in Manhattan Beach.

Democrat Tony Coelho, a former California congressman, served on the Cadiz board from 1999 to 2003. Former Arizona Governor and Interior Secretary Bruce Babbitt, a Democrat, joined the board to work on international deals. Former Los Angeles Mayor Antonio Villaraigosa signed on as a consultant for two years before becoming mayor and former state Assemblyman Richard Katz, a Democrat, was another consultant.

Cadiz CEO Scott Slater responded to the conservationists’ court filings in the San Bernardino Sun:

“In the USA, they are entitled to pursue their relief in court. . . . We understand they may be disgruntled and grumpy and doing something that they passionate about. . . . We will continue doing things the right way and soldier on.”

The three groups are: San Gorgonio Chapter of the Sierra Club, the Center for Biological Diversity and the San Bernardino Valley Audubon Society. The National Parks Conservation Association and a local salt-mining operation filed separate appeals.

 “Let’s call this what it is: a water-privatization scheme that will ship San Bernardino’s water resources, essential to the health of the Mojave Desert ecosystem, off to fuel suburban sprawl in Orange County,” said Adam Keats, head of the Center for Biological Diversity’s California Water Law Project.

–Ken Broder


To Learn More:

Environmental Groups File Briefs to Appeal Cadiz Water Project (by Jim Steinberg, San Bernardino Sun)

Appeal Filed Against Mojave Desert's Cadiz Water Project (Center for Biological Diversity)

Cadiz: Strong Sell on Project Failure, Insider Enrichment, and Bankruptcy, Price Target $0 (The Pump Stopper)

SMWD Establishes Agency to Oversee Cadiz Groundwater Project (by Tomoya Shimura, Orange County Register)

Court OKs Dicey Cadiz Groundwater Pumping Project in the Mojave Desert (by Ken Broder, AllGov California)

Will Congressman's Call Kill the Cadiz Water Project? by Chris Clarke, KCET)

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