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Massive Farm Owned by L.A. Man Uses Water Bank Conceived for State Needs

December 19, 2003|Mark Arax | Times Staff Writer

A seven-year drought ending in the early 1990s pitted Southern California water contractors, such as the Metropolitan Water District, against agricultural contractors, such as the Kern County Water Agency. Each region made its case to the state, telling why it deserved to receive the water guaranteed by long-standing contracts. In the drought's worst years, urban users got 30% of the draw, while Kern farmers received less than 5%.

In 1994, agricultural and urban interests threatened to sue the state for nondelivery. The main parties gathered in a closed-door meeting in Monterey to hash out a settlement. Public interest groups, environmentalists and smaller water contractors -- locked out of the meeting -- cried foul.

When it was over, the very flow of California water had been redirected.

The state Department of Water Resources set the stage for water banking and marketing on a larger scale. Water marketing became more important because the State Water Project had never been fully built out. As a result, Water Resources couldn't live up to its yearly contractual obligation to deliver 4.2 million acre-feet of water to cities and farms statewide.

To create more water, the department agreed to turn over its fledgling water bank to the Kern County Water Agency and let area farmers capture more water in wet years. In return for the water bank, Kern agreed to amend its contract with the state by reducing its draw of 1.1 million acre-feet by 45,000 acre-feet.

"At the time we took over the water bank, it was the biggest white elephant boondoggle that DWR had ever wasted its money on. There were no recharge ponds, no new wells," said Scott Hamilton, Paramount's resource planning manager.

"We gave up 45,000 acre-feet of water to get it, and then we spent $30 million on infrastructure. It's the locals here who built the water bank."

Public Citizen, in a report by Gibler titled "Water Heist" to be released today, contends that the state's transfer of the bank led to a water grab by Resnick and other big corporate farmers.

"The state invested a lot of money and created a bank that could store 1 million acre-feet -- for the benefit of the entire state," Gibler said. "It was absurd to then trade that away to a privileged few."

Gibler argues that the 45,000 acre-foot entitlement that Kern County gave up was really "paper water." It existed only as a promise on a contract between the Kern County Water Agency and the Department of Water Resources. Because the state consistently fell short on those contracts, Gibler said, the 45,000 acre feet wasn't real water actually shipped from the Sacramento-San Joaquin Delta.

"Kern County gave up a pittance at best and got an invaluable water storage facility in return," he said.

Current and former staff at Water Resources say both sides are partly right. Yes, the 45,000 acre-feet could be considered an illusion in most years. But the water bank itself was nowhere near to being in working order when the state handed it over to Kern.

"We bought the land and put in the money, but we couldn't make it work," said Steve Macaulay, the department's former chief deputy director.

With the bank in hand, the Kern County Water Agency signed a joint powers agreement in 1995 with four other local water districts and one private water company. The agreement divided up the ownership of the water bank, with the largest share, about 48%, going to Westside Mutual Water, a subsidiary of Paramount Farming.

Dudley Ridge Water District, whose president, Joseph C. MacIlvane, is also the president of Paramount Farming, got 10%.

As a result, Resnick now controlled a water bank capable of extracting 240,000 acre-feet each year -- enough water to furnish the needs of 500,000 households.

"He's got some 5 million almond trees planted in the desert. Most of the water has gone to create a nut empire," Gibler said. "By controlling the water bank, they are now poised to profit from water sales to urban development.

"And don't think it won't happen. Look at Newhall and Tejon ranches. Big Ag is becoming Big Sprawl through water trading."

Resnick, a major philanthropist and art collector who has donated hundreds of thousands of dollars to Democratic political candidates, including personal friends Bill and Hillary Clinton, has put his farming empire in the hands of experts, locals say.

Paramount's vice president, Phillimore, declined to answer questions about the company's holdings or plans to sell water for urban growth. "We honestly don't like to share information with people," he said. "It's one of the advantages of being a private company."

Other Paramount managers took issue with the notion that the water bank was purely a vehicle to enrich Resnick. When the Delta has needed more water during heavy pumping months to spare fish, the Kern Water Bank has been a willing seller, they said.

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