By Amanda Frye and Mark Gutglueck
In December, after years of controversy over Nestlé’s drafting of water from the San Bernardino Mountains which it bottles under the Arrowhead 100% Mountain Spring Water brand name, the California Water Resources Control Board released a report indicating Nestlé has been extracting annually on average over 54 million gallons of water from Strawberry Canyon in the San Bernardino Mountains to which it was not entitled.
The State Water Board’s conclusion was based upon a study that found Nestlé had asserted it had water rights and was able to marshal evidence that it had the right to divert up to 26 acre-feet of water (8.47 million gallons) per year, while it was actually drafting 192 acre-feet (62.56 million gallons), such that it is extracting on a yearly basis 166 acre-feet (54.09 million gallons) of water it does not have a right to take.
Nestlé’s assertions hinge around the Swiss company’s claim that its inviolable pre-1914 water rights trace back to either a possessory claim by David Noble Smith of pre-1914 water bottling operations or rights connected to the property from which the company continues to draw water.
The Sentinel’s examination of documentation that Nestlé is relying upon in making those claims demonstrates that the Swiss company’s assumption of those rights relies on inapplicable case law and the substitution of property outside of the National Forest which was misrepresented as being within the National Forest. It thus appears Nestlé is not entitled to the 8.47 million gallons credited to it.
Nestlé Waters of North America, Inc., a corporate subsidiary of the Swiss-owned Nestlé Corporation, acquired an expired permit for a pipeline right-of-way to transport water through the San Bernardino National Forest in the San Bernardino Mountains when it bought out Perrier in 1992. Perrier had acquired the permit when it purchased the BCI-Arrowhead Drinking Water Company, formerly called Arrowhead Puritas, in 1987, at which time the permit was yet active. That permit, which expired in 1988, allowed a pipeline across the forest which transported water extracted from a significant below-ground source in the San Bernardino Mountains. In 1978, Arrowhead Puritas, without renewing the permit for transporting the harvested water from Strawberry Canyon extracted by means of boreholes and horizontal wells, applied to be allowed to continue that activity, for which it paid the U.S. Government $524 per year, a standard fee for such uses in all National Forests. The Arrowhead Drinking Water Company had assumed water drafting operations from a series of predecessors. But that assumption was based on a dubitable assertion of water extraction rights, for which no basis in the public record exists. None of the companies or their corporate predecessors has paid for the forest water it has taken.
In 1929, California Consolidated Waters Company was formed to merge Los Angeles’ three largest water bottlers and distributors of “Arrowhead Water,” “Puritas Water” and “Liquid Steam.” The property, bottling operations, water distribution and administration of Arrowhead Springs Company, Puritas of California Consumers Company and the water bottling division of Merchants Ice and Storage were all administered by California Consolidated Waters Company. Soon after, California Consolidated Waters, without having obtained any valid authorization or rights, put in place tunnels, boreholes and horizontal wells at the higher elevation of 5,200 feet at the headwaters to Strawberry Creek in Strawberry Canyon.
Charles Anthony, acting president of the Arrowhead Springs resort property and Arrowhead Springs Corporation, sold upper Strawberry Canyon water rights he did not own in the National Forest to California Consolidated Waters Company.
When Nestlé inherited the operation in Strawberry Canyon from Perrier in 1992, it continued to operate under the “Arrowhead Mountain Spring Water Company” shell and the United States Forest Service allowed Nestlé to continue to utilize the expired permit, sending its invoices for the $524 annual charge to use the “irrigation” transmission pipeline in Strawberry Canyon to the Arrowhead Mountain Spring Water Company. It was concern over the ecological devastation this continued water extraction was having that grew into outrage, which resulted in calls for action by the National Forest Service that led to the report released in December.
Of crucial importance is that Nestlé’s water withdrawals are taking place on San Bernardino National Forest lands where water has been reserved since its founding on February 25, 1893.
Federal reserve rights and overlaying landowner groundwater rights should apply in this case. Appropriation through adverse possession, known as prescriptive rights, is not applicable to U.S. Forest lands. On record is a single adverse possession case pertaining to the San Bernardino Mountains, what is referred to as the Del Rosa Judgment, which through an adverse appropriation process, gave water rights reserved for the National Forest to the Consolidated Waters Company, a now defunct entity, to which Nestlé has now made an inappropriate claim. The company has conflated physical springs with spring water bottling law for food labeling purposes. A foreign entity, Nestlé is not a landowner of, nor in, the National Forest.
There is no documentation that Nestlé or its predecessor-in-interest had any valid water rights in the San Bernardino National Forest for Upper Strawberry Canyon or “Indian Springs” tunnels, from where the water bottled as Arrowhead Spring Water is drawn, prior to 1893, nor pre-1914 water rights. The early water bottlers associated with the Arrowhead name drew their water from sources other than Strawberry Creek or Strawberry Canyon. Some contracted water from the Arrowhead Property owners. Some bottlers of “Arrowhead water” were said to use “Los Angeles city” and “hydrant” water. There were multiple companies bottling “Arrowhead water” starting in 1909. The water bottlers and the water rights owners functioned as separate entities pre-1914, which is well-documented by archived lawsuit testimony, judgments and other sources. There is a difference between the water bottling company and the Arrowhead Property and water rights owner. This is a matter of contractual agreements versus water rights holders.
The “Arrowhead Springs Water Company” incorporated in Los Angeles had only an agreement with the Arrowhead Hot Springs Company (the water rights holder and property owner) to obtain water from Cold Water Canyon, which was then transported to Los Angeles, bottled, sold and distributed. The water bottlers obtained no water rights. They only had a water contract.
The San Bernardino National Forest was established February 25, 1893, thus any claims for water or land within the forest boundaries were required as publicly noticed in 1894. The water rights associated with the Arrowhead Springs Property ultimately stayed with the property as documented in recorded deeds at the San Bernardino County Recorders Office.
Arrowhead Springs Water Company water was from Cold Water Canyon, known as “Agua Fria,” located at the base of Arrowhead Mountain on the NW quarter of Section 12 T1N R4W of the Arrowhead Property. Portions of Cold Water Canyon and Creek are on the Arrowhead Property. Cold water from fissures from stratum on precipices were said to feed Cold Water Creek at this location. A pipeline on the high mesa in this location was run to capture some of this water for bottling. This 1909-1913 water use for bottling is well documented in repeated testimony from the court cases 11399 and 12532 in 1910 and 1913.
There were broken contracts, injunctions and lawsuits between the bottler Arrowhead Springs Water Company and the water rights and property owners Arrowhead Hot Springs Company, which caused deteriorated relationships.
In 1912/1913 Arrowhead Hot Springs Company resolved to build a water bottling facility near the hotel to bottle and distribute Arrowhead Springs water. The hotel stood at an elevation of roughly 2,000 feet. The water bottling enterprise was then named Arrowhead Springs Company. In 1917, Arrowhead Springs Company moved its water bottling works to a new facility in Los Angeles at Washington and Compton avenues. However, the water rights remained with the property, not the water bottling works.
The Cold Water Canyon creek water was captured in a pipe to transport water for bottling. “Agua Fria” was the name for the water of Cold Water Canyon, which is also referred to as “Indian Springs” by Bailey (1917). The spring “Fuente Frio” was also used for water bottling in 1909 according to several sources, as this was listed as Penyugal Cold Springs. Fuente Frio is located in Arrowhead Canyon on the Arrowhead Spring Property in a ravine north of the hot El Penyugal Spring. The Arrowhead Water Company of Los Angeles bottled the contracted water from Cold Water Canyon. Reportedly the company switched to using water from Fuente Frio during the winter when Cold Water Creek turned muddy. The 1910 lawsuits and fraud charges against Arrowhead Springs Water Company later put the LA Arrowhead Springs Water Company out of business. However, shareholders recapitalized another bottling company, Arrowhead Cold Springs Company, which filed for bankruptcy in 1912.
When Arrowhead Hot Springs Company started its own water bottling company, Arrowhead Springs Company, next to the hotel, it bottled water from 1,900 foot elevation Penyugal Springs, the hottest spring below the hotel, along with other springs such as 2,022 elevation Granite Hot Springs on the west mesa near Penyugal and Fuento Frio cold spring up the canyon from Penyugal. Among the products the company offered were soda ginger ale, as well as water containing substances that today would be difficult to market. Arrowhead, for example, advertised one bottled water product under the Penyugal Springs label as being high in arsenic and “Arrolax” meant to serve as an aperient or laxative. In very minute quantities, arsenic is considered a nutrient. Arrowhead Springs water was marketed as high in radiation content.
So, two water companies – Arrowhead Springs Water Company and Arrowhead Hot Springs Water Company – were bottling water and competing to sell and distribute water and products after the relationship between them deteriorated, with lawsuits and injunctions filed. Ads show Arrowhead Springs Water Company’s Arrowhead springs water was also called Indian medicine water with an American Indian featured on the Arrowhead Water label. The Arrowhead Hot Springs Company was the owner of the Arrowhead Springs Property, and retained the water rights. The business was later Arrowhead Springs Corporation.
The bottled water withdrawals on San Bernardino National Forest lands seem to have started around 1928 when Arrowhead Springs Corporation (Ltd.) sold false rights on forest lands to water bottler and distributor California Consolidated Waters in what appears to be an attempt to raise funds for a bond debt and use water sources other than the hotel property. Even Arrowhead Springs Corporation admitted no “warranty” rights above section12 in T1N R4W, located at the base of the Arrowhead, in an agreement which would have included Indian Spring’s two tunnels 1,000 feet north of the Arrowhead Springs Property boundaries and west of the landmark Arrowhead and Strawberry Canyon wells/springs and tunnels, at the approximate 5,200 foot elevation.
False claims were acknowledged in some documents. Basically, the false claims made by Arrowhead Springs Corporation to California Consolidated Waters Company involved false water rights and easements on San Bernardino National Forest lands leading to the unwarranted water withdrawal from the National Forest since 1928.
Arrowhead Springs Corporation didn’t transfer water rights to Consolidated Waters, but rather made up new ones in the San Bernardino National Forest so Consolidated Waters could develop more water sources, give Arrowhead Springs Property more water and promote the Arrowhead name by bottling and selling the water while Arrowhead Springs Corporation profited. The appropriation of non-existent rights became the basis for the adverse possession case involved in the Del Rosa lawsuit.
Federal property is immune from adverse possession; a county court ruling which awarded adversarial rights to a claimant on federal property therefore would not be deemed valid under any circumstances. The federal government was not party to the Del Rosa suit and the San Bernardino National Forest land was not mentioned in the suit. Title insurance clauses exempted water rights title on federal lands, which would have invalidated legal water rights on Forest Service lands to Nestlé’s predecessors-in-interest.
These facts can become confusing if location is not the focus. The “1929 Indian Springs tunnels” referenced by San Bernardino lawyer Byron Waters’ 1929 letter have been documented in survey plat maps filed in Map book 2 pages 18 and 19. According to the 1929 pipeline survey plat map, these tunnels are located in T1N R4W, which when plotted on USGS/USFS maps are located 1,000 feet north and 200 feet west of the NE corner marker of Section 11, placing these tunnels directly on the E ½ of Sec 2 T1N R4W, which is San Bernardino National Forest land. Nestlé’s upper Strawberry Canyon wells/tunnels/springs are also on National Forest lands T2N R3W. Moreover, the Del Rosa Suit never authorized for the appropriation of Section 30, where most of the wells are located.
Nonetheless, these “Indian Springs tunnels” and upper Strawberry Canyon water rights were not claimed pre-forest reserve founding in 1893, located at the 2,700 foot and 5,000 foot elevations, respectively. There is never any indication that Arrowhead Property owners were using these areas in the National Forest for water. Thus, the Indian Springs tunnels like the upper Strawberry Canyon sites appear to be a “taking” of forest land ecosystems and water starting in the 1920s. “Indian Springs” tunnels on the San Bernardino National Forest land T1N R4W E1/2 of Section 2 and the Upper Strawberry Canyon water withdrawal sites T2N R3W were not the site of the water used for the first water bottling and therefore no pre-1914 rights can be conferred in any way.
Moreover, in 1930, Consolidated Waters quitclaimed water rights of these “Indian Springs” tunnels to Arrowhead Springs Corporation on page 125 of Book 648 pg 122. Archived documents indicate that there is an “Indian Springs” tunnel pipeline running under U.S. Forest land. Nestlé has no valid pre-1914 water rights in the San Bernardino National Forest. The Del Rosa lawsuit was really an adverse possession suit that should have no valid claim of forest water or land for Nestlé’s predecessor-in interest within the San Bernardino National Forest boundaries.
The 1929 letter from Byron Waters appears to be an attempt to build the adverse possession case for California Consolidated Waters and Arrowhead Springs Corporation. Byron Waters’ letter is an admission that these “Indian Springs tunnels” are man made tunnels by appropriation without permission and on federal lands with a legal description that confirms their location on San Bernardino National Forest land. Federal property is immune from adverse possession. These Indian Spring tunnels are not the water source for pre-1914 water bottling which took place on private land contained on the Arrowhead Springs Property.
Federal and State property adverse possession immunity was never considered in the Del Rosa lawsuit or by the State Water Resource Control Board. The San Bernardino National Forest was founded on February 25, 1893 and public notice to stake claim within the boundaries was given for a 90 day period in 1894. Thus, any claim of water within the San Bernardino National Forest would be subject to the 1894 rule and not the 1914 rule.
Boundaries and surveys are highly relevant in this case. The United States Geological Service’s and the United States Forest Service’s topographical maps of the San Bernardino Mountains are properly used as base maps to establish forest service versus private property boundaries. It is clearly evident from the historical record that private owners did stake claim to water and property based on these official topographical and quadrangle maps and reflected boundaries. Federal reserve rights and overlaying landowner groundwater rights thus apply to this case.
An examination of the historical record indicates that Nestlé has no rights of water withdrawal for surface or groundwater in the San Bernardino National Forest. While there is indeed a corporation chain of title for Nestlé and its predecessors-in-interest, there is no documentary proof of chain of title for the “real property” water rights filed at the San Bernardino County Recorder’s Office.
There is a lack of clarity as to which 1909 Arrowhead Water bottling company Nestlé is claiming as a predecessor-in-interest, between the Los Angeles-based Arrowhead Spring Water Company and the Arrowhead Hot Springs Company or Arrowhead Springs Company or Arrowhead Cold Springs Company.
Nestlé’s corporate chain of title is essential for its successor-in-liability.
Over the last generation, there have been billions of gallons of water withdrawn from public land in the San Bernardino Mountains within the National Forest which has negatively impacted the endangered and threatened species habitat, the forest ecosystem and deprived the valleys below with groundwater recharge. Dried creek beds and diminished damp headwater springs offer visual evidence, and the ecological travail to the National Forest has been extensively documented in reports by the Forest Service.
While environmentalists are importuning the Forest Service and the California Water Resources Board to immediately foreclose Nestlé’s water drawing activity in Strawberry Canyon, Anthony Kusich, a spokesman for Nestlé Waters of North America this week told the Sentinel, “Arrowhead Brand Mountain Spring Water has been sustainably sourced and bottled from the springs in Strawberry Canyon, in what is now the San Bernardino National Forest, for more than 120 years. We take our responsibility as a California water steward seriously, and our ability to operate for more than a century points to our commitment to sustainability.”
Kusich said, “In its initial report, the State Water Resources Control Board staff has acknowledged that Nestlé Waters North America has valid, pre-1914 surface water rights for 26 acre-feet per year, as well as long-standing groundwater rights for 126 acre-feet per year–for a total of 152 acre-feet (or 49.5 million gallons) of water per year. In addition to having rights to 152 acre-feet per year, we believe we have valid rights to additional water in Strawberry Canyon. We are talking with the State Water Resources Control Board and anticipate sending them further historical data to validate our additional water rights, including century-old documents to the extent they are available.”
Kusich was unable to delineate which bottling company – Los Angeles-based Arrowhead Spring Water Company, the Arrowhead Hot Springs Company, Arrowhead Springs Company or Arrowhead Cold Springs Company – Nestlé is claiming as a predecessor-in-interest to the water rights it claims to hold.
By Amanda Frye and Mark Gutglueck