It was obvious even during the presidential campaign that Donald Trump didn’t know much about water policy and didn’t have much inclination to learn.
Now we have some hard evidence that his ignorance won’t keep him from stepping into a water policy quagmire. The evidence comes from an Interior Department ruling that appears to be aimed at clearing the way for a controversial, environmentally dangerous and largely pointless private water project out in the Mojave Desert.
As my colleague Bettina Boxall reported Wednesday, that agency on March 29 reversed two earlier rulings that had effectively blocked the 43-mile pipeline that Cadiz Inc. would have to build to carry water from its desert landholdings to Southern California users. The action also shifts all further decisions on the matter from local officials of Interior’s Bureau of Land Management, who long have blocked the project, to headquarters in Washington.
That’s a boon for backers of Cadiz, who have been waiting for years for an administration in Washington willing to overlook all the drawbacks to its project. Finally, they may have one.
It isn’t entirely clear that the Interior Department’s reversal actually will get the Cadiz pipeline built. The company’s CEO, Scott Slater, said he’s now “cautiously optimistic,” but more enthusiasm is reflected in the action in the company’s cheap, thinly traded stock. In the three trading days after the Interior Department ruling, the shares gained more than 5% to $15.40, reaching a level they haven’t even smelled since late 2008.
There are still plenty of roadblocks in Cadiz’s way. The recent Interior ruling rescinds 2014 and 2011 agency memoranda that said Cadiz couldn’t use an existing railroad right-of-way for its pipeline without completing a federal environmental impact study. That’s because the railroad crosses federal land. But the new ruling doesn’t overturn a 2011 analysis by the agency’s solicitor’s office, which explains why the environmental study would be legally necessary. So that analysis may still stand. Cadiz would dearly love to avoid federal review, possibly because federal hydrological statistics would underscore the ecological risks of the project.
Nor does the ruling quell strong opposition to the project from Sen. Dianne Feinstein (D-Calif.). Feinstein called the Interior Department’s action “a blatant attempt to muscle the Cadiz water project through,” and “an effort to circumvent an environmental review that any project of this magnitude on federal land would normally undergo.” She stated, “The Trump administration has once again put corporate profits ahead of the public’s interest.”
But there are other reasons why the Cadiz project may never be built. They have more to do with the project itself, especially its shadowy history, which I’ve been following for nearly 15 years.
Let’s take a look.
The Cadiz project was the brainchild of Keith Brackpool, the company’s co-founder and, until 2013, its chief executive. The British-born promoter, who came to the U.S. after pleading guilty in 1983 to criminal charges relating to securities trading in Britain, managed to keep the project alive for years in part through a combination of political influence and PR blather.
Brackpool has received cash and stock-based compensation valued in the neighborhood of $20 million since the turn of the century alone, according to the company’s public disclosures. But Cadiz hasn’t reported a single profitable year since at least 1994; typically, its revenue is measured in the thousands and its losses in the millions. That was the case in 2016, when it reported revenue of $412,000 and a loss of $26.3 million. Some of these losses are accounting artifacts, related to the management of the debt and convertible securities issues on which the company survives while its lenders keep it on life support in the hope that someday, somehow, the water project will actually happen and they’ll be able to cash in.
Doubts about the company’s ability to bring that project to fruition helped kill it in 2002, when the giant Metropolitan Water District nixed a would-be partnership with Cadiz. The idea then was to bank the MWD’s surplus Colorado River water by pumping it into the aquifer underlying the company’s Mojave desert acreage. During droughts, the stored water, along with some indigenous groundwater, would be pumped out for delivery via an aqueduct to a parched Southern California.
As I wrote a few years later, the plan "had a sort of shimmering authenticity, like a desert mirage." But it didn’t bear close inspection. First, there isn't any surplus water in the Colorado; the MWD gets about as much from the river as it can use.
Second, due to Cadiz’s parlous financial condition, the MWD realized that it would not only pay half the $150-million cost of the project, but would front much of Cadiz’s half.
Finally, there was and remains considerable disagreement over how much groundwater really underlies the Cadiz parcel, not to mention how much the company is legally permitted to pump out and how much could be pumped before the aquifer becomes contaminated with carcinogenic minerals.
Cadiz contends that there’s more than enough water available in the watershed to accommodate vast withdrawals, but federal agencies disagree.
The National Parks Service, in a comment for the project’s state environmental impact report, cited U.S. Geological Survey data indicating that the company’s estimates of the available water for pumping were roughly seven times as high as what was reasonable. The company’s estimates, the service said, were “not reasonable and should not even be considered.” It observed, pointedly, that the USGS data were “computed by a scientific agency with no financial stake in the proposed project.”
What Cadiz has had to offer more than any economic rationale is political pull. Originally, the MWD felt pressured into giving Brackpool’s project a hearing because he was a big contributor and fundraiser for then-Gov. Gray Davis. The governor was a political adversary of the MWD, which hoped to get on his good side by making nice with Brackpool.
In 2005, Cadiz paid then-Public Utilities Commissioner Susan Kennedy, soon to become Gov. Arnold Schwarzenegger's chief of staff, a $120,000 consulting fee. In 2009, while she was working for Schwarzenegger, he endorsed the Cadiz scheme as "a path-breaking, new, sustainable groundwater conservation and storage project."
Today, the project’s backers tout it as a way bring water to 400,000 people in Southern California, “create and support 5,900 jobs and generate billions of dollars of economic activity,” as Cadiz board member Winston Hickox said in an op-ed for the Riverside Press-Enterprise.
These figures are as incorporeal as the mists evaporating from the Cadiz acreage in the Mojave. The whole scheme has the smell of water left too long in a stagnant pool. Is there any wonder why the Trump administration would think it’s a good deal?