News

$1000 Acre Foot Water in Mojave

Shaheen and Slater declined to say how much revenue they expect the water to generate. Cadiz probably will be able to sell the water for at least $1,000 an acre-foot, or a total of $50 million a year

Feb 08, 2010

February 08, 2010, 06:44 AM EST

By Daniel Taub

Feb. 8 (Bloomberg) -- Cadiz Inc., the owner of thousands of acres of California desert, said a study shows there’s more water under its land than the company previously estimated, giving it enough to supply 400,000 people.

A study conducted by engineering company CH2M Hill shows the aquifer under the Mojave Desert land ranges in size from 17 million to 34 million acre-feet, potentially larger than the Lake Mead reservoir near Las Vegas, according to Cadiz. The data will be presented today at a water-resources conference in Ontario, California.

“It’s as close to a lake as you’re going to find in sub- surface geology,” Scott Slater, general counsel for Los Angeles-based Cadiz, said in an interview. “I don’t think there’s new water like this anywhere.”

Cadiz, founded in 1983 by British-born entrepreneur Keith Brackpool, owns 70 square miles (181 square kilometers) of land in eastern San Bernardino County. The company wants to supply water to Southern California to become profitable for the first time since 1990. A water shortage in the western U.S. has spurred suppliers to consider desalination of ocean water and other alternatives for meeting the state’s demands.

With the amount of water now believed available to Cadiz in the aquifer system, the company would be able to ship 50,000 acre-feet south each year, enough for 400,000 Californians, Chief Financial Officer Tim Shaheen said. That’s about twice the population of Irvine, California, or a third of the inhabitants of San Diego.

More Water

Before the CH2M Hill study, peer-reviewed by geologists from the University of Texas and the University of Southern California, Cadiz officials expected they might have enough groundwater to pump as little as 20,000 acre-feet a year.

CH2M Hill, based in Englewood, Colorado, does engineering and construction work for energy companies and government agencies. The closely held company has $6.4 billion in revenue and 25,000 employees.

Shaheen and Slater declined to say how much revenue they expect the water to generate. Cadiz probably will be able to sell the water for at least $1,000 an acre-foot, or a total of $50 million a year, said Disque Deane, chief investment officer at New York-based Water Asset Management LLC, an investor in water companies that owns Cadiz shares.

“Could it be a lot more? It could be,” Deane said. “But I don’t think it will be a lot less.”

Feinstein Opposition

Cadiz’s project has won the support of Republican Governor Arnold Schwarzenegger and has been opposed by U.S. Democratic Senator Dianne Feinstein, who said in June that should Cadiz plan to “drain the water from under the desert, destroying the Mojave ecosystem, I will do everything I can to stop it.”

Cadiz plans to send water from the aquifer south through pipelines built along railroad tracks. The company said in June that it signed preliminary agreements with four municipal water agencies and Golden State Water Co., a unit of American States Water Co. Cadiz would replenish the supply by adding rainwater and melted snowpack from the New York Mountains to the aquifer. The water otherwise would be lost to evaporation.

Cadiz shares have gained 30 percent since the June announcement. The company is in talks with five more municipal water suppliers, which Slater wouldn’t identify, to participate in the project. The 10 water suppliers combined supply more than 10 million customers, he said.

Environmental Review

The project would take one to two years to build following a review to comply with California Environmental Quality Act guidelines, Slater said. That review may be completed by the end of this year.

“That’s optimistic, but we are optimistic given the significant work that’s gone on to this point,” he said.

The work will cost about $260 million, in addition to about $200 million spent over the years to purchase all the land and develop the water plan, Shaheen said. Cadiz has been growing lemons on 260 acres (105 hectares) of desert land and dried-on- the-vine raisins on 160 acres while developing the plan.

Slater said he hopes Senator Feinstein will change her position once she sees the results of the CH2M Hill study.

“We can’t speak for the senator,” Slater said. “The science speaks volumes, and what we’re trying to accomplish here is good for all of California.”

--Editors: Anne Pollak, Kara Wetzel

To contact the reporter on this story: Daniel Taub in Los Angeles at +1-323-782-4229 or dtaub@bloomberg.net.

To contact the editor responsible for this story: Kara Wetzel at 1-212-617-5735 or kwetzel@bloomberg.net.