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In The News

Getting Nickel and dimed in the water world
By Loil Henry, The Bakersfield Californian, 11/19/11

It seems Kern River water is causing a bit of mischief up and down the state. Specifically, I'm talking about the Nickel water, so named because it is owned by the Nickel Family LLC, which has sold it hither and yon over the years.

To follow along, you really have to understand how the Nickel family came to own this 10,000 acre feet per year.

So, I'm sorry, but here's your spoonful of background.

The Nickel family owned the Hacienda ranch up in Kings County. In extremely high water years,the Kern River made its way to the ranch giving the Nickels riparian rights. In 1964 that right was solidified through agreement from the other river owners.

Under a very specific formula, the Nickels were given a portion of high flow water during flood years, estimated to average 50,000 acre feet a year.

Many years it was 0 acre feet and some years it was far more.

The Nickel family marketed that water, but it was a crap shoot since high water years typically meant everyone else was flush too.

Then in 2000 the Kern County Water Agency -- using public bond money -- paid the Nickels $10 million for the Hacienda right.

They also promised to give the Nickels 10,000 acre feet a year no matter what, rain or shine.

That was quite a golden egg.

One which the Nickels have successfully peddled all over California.

The Agency has aided the Nickels by moving the water using its access to state facilities for which it earns 10 percent of each sale, nearly $4 million since 2001.

Meanwhile, the Agency has been able to harvest its Hacienda right during three high flow years since 2001. Most of that water was socked away in groundwater banks.

Scorecard: The Nickels got $10 million in public money and access to public facilities to sell water the Agency must hand over year after year, even in times when local farmers have to consider fallowing fields because the state can't deliver Kern's full complement of water.

The Agency has told me over and over this was a good deal for locals, but unless your last name is Nickel, I just don't see it.


Anyhoo, back to what that rascally Nickel water has been up to lately.

A portion of the Nickel water was being dangled as the water source for a 12,000 home development in Redwood City proposed by developer DMB Associates.

DMB bought 8,900 acre feet of Nickel's water under a 70-year agreement.

Their plan was to get the water to Redwood City through a series of swaps with several northern California water agencies.

Last summer, however, one of those agencies, the Santa Clara Valley Water District, got hinky and changed its policies so any such transfers would have to undergo a full board vote, which would bring public scrutiny.

"I believe we can't get in the middle of such a controversial or political fight over a development," Santa Clara Board member Linda LeZotee was quoted in the San Francisco Chronicle. "It amounts to inadvertent, tacit approval."

Eh, DMB shrugged. Santa Clara was just one option.

In fact in a video made by DMB officials just last month, they boast that the company will become a water seller.

Couple of things.

Neither the Nickels, the Agency, nor any of the Nickel water buyers have ever done an environmental impact report on the benefits and drawbacks of that water leaving Kern County.

They've relied on one blanket negative declaration since 2001. The statute of limitations has passed on being able to sue over that negative dec.

But opponents of the DMB project (and others dependent on Nickel water) might be able to force a more thorough environmental accounting of the effects of permanently depriving Kern of this water, which could gum up the works.

Oh, and then there's the little issue of using publicly owned facilities to wheel water for private gain.

In fact, I think DMB may have gotten a little ahead of itself on that front.

According to that 2007 purchase agreement with the Nickels, DMB -- or any of its assignees -- assumes all of Nickel's rights including "the assistance and cooperation of the (Kern County Water) Agency in entering into contracts for the sale or transfer of the Acquired Water to third parties ... and efforts to obtain the approval and cooperation and assistance of the California Department of Water Resources and the State Water contractors in obtaining any necessary approvals from regulatory agencies to effect such sales or transfers."

Not so fast there, hoss.

I asked the Agency about that and they said no, DMB can't just make an agreement with Nickel and expect the Agency to hop to.

"From the Agency's point of view, our agreement is with Nickel and any assignment of that right to a third party requires our consent," said Agency attorney Amelia Minaberrigarai.

The Nickel/DMB agreement has "no legal weight" with the Agency, Minaberrigarai told me.

I agree. The Agency is, after all, a public agency.

Beyond that, it should mull over each request to wheel water individually, preferably via a public hearing so we can all understand more about how our water and our publicly owned water facilities are being used.


And now, turning south, the Nickel water is mixed up in yet another development fracas in the Santa Clarita Valley.

Newhall Land and Development was an early Nickel water buyer, grabbing 1,600 acre feet a year starting in 2001 under a 35-year contract with an option to renew for another 35. They've been banking most of that in the Semitropic Water Bank all these years.

Newhall has used that Nickel water, in part, to gain approval for its planned 21,000 home development.

At the same time, a plume of perchlorate has tainted groundwater and closed several wells in Santa Clarita, wells owned and operated by Valencia Water Company.

Valencia Water is a wholly owned subsidiary of Newhall Land.

Local residents and opponents to the Newhall development have complained that Newhall should not be allowed to hold on to the Nickel water for future residents of homes not yet built, when current residents are being served polluted water.

Newhall spokeswoman Marlee Lauffer dismissed the arguments, saying the water is being treated and no one is getting bad water.

Beyond that, Newhall has more than adequate groundwater supplies for the first 15 to 20 years of its planned buildout.

"There is no supply problem," she said.

Dan Masnada, general manager for Castaic Lake Water Agency, echoed Lauffer's confidence. Castaic is a state water contractor and will be the one to move the Nickel water when the time comes.

"The Nickel water belongs to Newhall, they paid for it," he said. "There isn't a need for Newhall to give it to the public, but if they did, they would want to realize the value from it."

In other words, they would have to pay extra for it.

Meanwhile, opponents are discussing the legalities of designating a necessary public resource to be used by specific residents for private gain.

"This is an example of the slow move toward privatization of our water supply," said activist Lynne Plambeck.

Neither of these are Bakersfield's fights. But they do make me wonder about the bigger picture of how Kern River water is being used.

Frankly, I'm not seeing a greater benefit here or elsewhere when our water goes on the road. Maybe we'd all be better served if it just stayed home.

Opinions expressed in this column are those of Lois Henry, not necessarily The Bakersfield Californian. Her column appears Wednesdays and Sundays. Comment at, call her at 395-7373 or e-mail Lois Henry Online


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