Nestlé Fixed For Fierce & Prolonged Confrontation Over Mountain Water

By Mark Gutglueck and Amanda Frye
The Swiss-owned Nestlé Corporation appears to be poised for a battle royale with the State of California, environmentalists and potentially the U.S. Forest Service as well as Arrowhead Springs Hotel property owners over its continuing extraction of more than 54 million gallons of water from the San Bernardino National Forest the California Department of Resources maintains it has no rights to.
Nestlé, which bottles water it takes from Strawberry Canyon at the 5,200-foot elevation level in the San Bernardino Mountains under the Arrowhead Mountain Spring Water brand, today went public with a response disputing the findings of the California Water Resources Control Board issued on December 21, 2017 pertaining to an investigation the state had conducted with regard to Nestlé’s San Bernardino Mountain water use. The state board’s conclusion was 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). Thus, the California Water Resources Control Board determined, Nestlé is extracting on a yearly basis 166 acre-feet (54.09 million gallons) of water it does not have a right to take.
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 located in Strawberry Canyon in the San Bernardino Mountains. In 1978, Arrowhead Puritas, had renewed that permit for transporting the harvested water from Strawberry Canyon extracted by means of boreholes and horizontal wells, for ten years. Under that permit, Arrowhead Puritas was 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. That assumption was based on a tangle of asserted water extraction rights, some of which are documented, others of which were presumed upon a dubitable basis, including some of which have no basis in the public record. In 1987, Arrowhead Puritas was purchased by Perrier. In 1988, the water extraction permit expired and was not renewed. Pending a U.S. Forest Service review of the water drafting arrangement, Perrier was allowed to continue to operate in Strawberry Canyon, and continued to pay the $524 per year fee. In 1992, when Nestlé acquired the Arrowhead brand from Perrier, it inherited the Strawberry Canyon operation and continued to pay the $524 annual fee without renewing the permit. In 2015, United States Department of Agriculture Secretary Thomas Vilsack ordered the expired permit review through the National Environmental Policy Act process. The U.S. Forest Service review of the operation has yet to be completed, and Nestlé continues the water extraction in Strawberry Canyon under the expired permit.
A major portion of the water rights Nestlé inherited appear to be based upon prescription, an assertion of rights founded upon custom or long continued use. Such a claim, while recognized under state law, is inapplicable to water or water rights on federal property.
Nestlé’s activity, which was never favored by environmentalists, came under increasing fire as the statewide drought, which first manifested in 2011, advanced. In 2015, environmental groups were gearing up to file a lawsuit claiming the U.S. Forest Service had violated protocols and harmed the ecology of the mountain by allowing Nestlé Waters North America to continue its operations in Strawberry Canyon for 27 years after its permit expired. In the meantime, with the Forest Service initiating its environmental review, Nestlé continued its water extraction, pumping in excess of 62 million gallons of water annually from the San Bernardino Mountains. Environmentalists then lodged protests with the water rights division of the California Water Resources Control Board, alleging Nestlé was diverting water without rights, making unreasonable use of the water it was taking, failing to monitor the amount drawn, making inaccurate reports of the water it was taking, and wreaking environmental damage by its action.
State officials undertook an investigation, which after two years resulted in the conclusions released in the December 21 report. According to the California Department of Water Resources, while Nestlé could lay claim to the right to divert up to 26 acre-feet of water (8.47 million gallons) per year, it was actually drafting and diverting to its corporate use more than seven times the amount of water it is entitled to, quantified at 192 acre-feet (62.56 million gallons). “While Nestlé may be able to claim a valid basis of right to some water in Strawberry Canyon, a significant portion of the water currently diverted by Nestlé appears to be diverted without a valid basis of right,” the California Water Resources Control Board stated, while further asserting that Nestlé’s use of water for Arrowhead bottling “could be unreasonable if it injures public trust resources, such as instream habitat for certain species, in such a way that it outweighs the beneficial use.” The California Water Resources Control Board’s water rights division recommended that Nestlé immediately end its 166 acre-feet (54.09 million gallons) of unauthorized diversions.
Nestlé officials said they would prepare a response, which upon completion was released today.
In that response, Nestlé referenced “citizen complaints concerning Nestlé Waters North America Inc.’s collection of water in Strawberry Canyon in the San Bernardino National Forest,” which sparked the study and its report. “The complaints alleged diversion of water without a valid basis of right, unreasonable use of water, injury to public trust resources, and incorrect or missing reporting,” according to Nestlé’s response. “The report of investigation did not find any basis for the complaints concerning unreasonable use of water and incorrect or missing reporting and deferred any review of injury to public trust resources until the San Bernardino National Forest completes the renewal process for Nestlé Waters North America Inc.’s special use permit. Nestlé Waters North America Inc. disagrees with one or more of the analyses and preliminary conclusions contained in the report.”
Nestlé makes the assertion that its water rights claims have a lineage back to pre-1914 water rights as well as to water rights asserted by one of its corporate predecessors in a 1931 court action, Del Rosa Mutual Water Company v. D.J. Carpenter, et al., referred to as the Del Rosa Judgment, which through an adverse appropriation process, gave water rights reserved for the National Forest to the California Consolidated Waters Company, a now defunct entity, which took water out of the National Forest in the 1920s and 1930s.
Nestlé asserts in its response to the California Water Resources Control Board’s report that it “will demonstrate the quantification of Nestlé Waters Of North America Inc.’s pre-1914 surface water rights was undercounted, that the Del Rosa Judgment is persuasive historical evidence of water use and relative water rights, that the Del Rosa Judgment gave Nestlé Waters Of North America Inc.’s predecessor-in-interest pre-1914 prescriptive rights to the flows in Strawberry Canyon, and that the hydrogeology of Strawberry Canyon supports the conclusion that a significant amount of the water collected by Nestlé Waters Of North America Inc. is percolating groundwater.”
Nestlé makes reference to the “East Twin Creek Watershed,” which refers to the network of tributaries rising in the San Bernardino Mountains essentially north of San Bernardino and proximate to and below what is now Lake Arrowhead.
Noting that the California Water Resources Control Board report of its investigation concludes that Nestlé Waters Of North America Inc. has valid pre-1914 surface water rights by appropriation to 26 acre-feet per year from Strawberry Canyon, Nestlé asserts that its corporate predecessors established rights to draw water further down the mountain at the approximate 2,200-foot elevation level. Those rights related to bottling operations affiliated with various companies, including ones based in Los Angeles as well as one associated with the Arrowhead Springs Resort.
Nestlé propounds that “based upon additional historical information we have located, Nestlé Waters Of North America Inc. believes that both the LA Plant and the Old Arrowhead Factory adjacent to the Arrowhead Springs Hotel were appropriating additional flows prior to 1914 from the tributaries of East Twin Creek, which were not accounted for in the California Water Resources Control Board report and should be added to the total acre-feet per year calculated by the California Water Resources Control Board. In addition, the Arrowhead Hot Springs Company had entered into a 10-year contract in 1909 with a third party for the bulk delivery of spring water from Indian Springs. The additional volumes from each of these activities necessarily increases the total pre-1914 water rights held by Nestlé Waters Of North America Inc. today.”
Nestlé further asserts that the drawing of water at the lower level, where the Arrowhead Hot Springs Hotel was located, entitled Nestlé’s predecessor’s in interest to water further up the mountain, at the 5,100 foot elevation level in Strawberry Canyon because, at one point prior to the formation of the National Forest, water from Strawberry Canyon was being used by the hotel. “Notices of Appropriation were filed by B.F. Coulter, President of Arrowhead Hot Springs Hotel Company, on May 9, 1887, ‘to the water flowing or to flow in this Strawberry Canyon’ which will be ‘conveyed from its point of diversion through a flume twelve by twelve inches for the first 30-40 feet and thence by iron pipe diameter 10 inches to seven inches diameter at the point of use,” Nestlé asserts.
Nestlé maintains that in 1912, the Arrowhead Hot Springs Company undertook to construct a spring water bottling plant, on a parcel of land adjacent to the Arrowhead Springs Hotel. Nestlé further notes that the spring sources for that bottling plant were located on land not owned by the Arrowhead Hot Springs Company, known as Indian Springs, which is located in the San Bernardino National Forest at the approximate 2,200 foot elevation, and Strawberry Springs.
This is problematic for Nestlé in that a finding of fact in a 1913 lawsuit, Arrowhead Hot Springs Company v. Arrowhead Cold Springs Company, demonstrates through legal description that all water for bottling was from within property boundaries.
Nestlé also marshals evidence in the form of a letter written by Byron Waters, a member of the California Assembly representing San Bernardino County in the 1870s, the founder and organizer, in 1881, of the Farmers Exchange Bank of San Bernardino, and one of the most active attorneys in the San Bernardino District throughout a law career that lasted nearly 60 years, from his admission to the bar in 1871 until 1930. Waters was at one time the legal counsel for the Arrowhead Springs Corporation. In a letter dated February 14, 1929, Waters asserted that a tunnel used by his client to convey water was constructed by his client’s predecessor around 1899.
It is unclear whether Waters was referencing a tunnel and/or boreholes and horizontal wells dug into the mountain or a flume conveying water from Coldwater Creek.
In 1929, the 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, 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 authorization from the U.S. Forest Service, 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. Nevertheless, the Arrowhead Springs Company at one point gave notice in one agreement that it had no water rights above Section 12, meaning, essentially, that any water rights in Strawberry Canyon did not descend from it.
In its response to the California Water Resources Control Board’s December 21 report, Nestlé asserts that Nestlé’s corporate predecessors utilized a substantial amount of water from “Coldwater Canyon (sometimes referred to as “Cold Water” Canyon) for bottling and distribution purposes. Although Coldwater Canyon was referenced, the spring water actually came from Indian Springs, which is located immediately west of Coldwater Canyon.”
The Sentinel’s examination of available document from this era shows the 1909 pipeline head was described via legal description as being on Arrowhead Springs Property in Coldwater Canyon, which was repeatedly confirmed in testimony during a 1910 lawsuit.
Central to Nestlé’s assertion of water rights is the Del Rosa Judgment. “The case of Del Rosa Mutual Water Company v. D.J. Carpenter, et al., (1931) is persuasive evidence of historical water use and the relative water rights in the East Twin Creek watershed,” Nestlé asserts. “Del Rosa was an adjudication of all the water rights in the East Twin Creek watershed, including all of the tributaries, above Del Rosa Mutual Water Company’s point of diversion. The California Water Resources Control Board investigation report states that because the California Water Resources Control Board has ‘concurrent jurisdiction over water,’ the outcome of this judicial proceeding is not binding on the California Water Resources Control Board and it may draw its own, different conclusions. However, the California Court of Appeal in Pleasant Valley Canal Co. v. Borror (61 Cal.App.4th 742, 778 (1998)), in holding that a trial court judgment can be ‘the best available evidence of . . . relative water rights,’ suggests that the California Water Resources Control Board should defer to these prior judicial findings of fact in cases such as Del Rosa. The Del Rosa Judgment expressly found all of the required elements of a prescriptive right with a pre-1914 priority date. Under California law, prescriptive water rights (i.e., water rights acquired by adverse possession of someone else’s water right) permit a private party to acquire the water rights of another private party.”
Neither U.S. Forest Service land nor reserved rights were ever mentioned in the Del Rosa Lawsuit. Adverse possession is not applicable to federal lands. Of note is that in the Del Rosa lawsuit, Arrowhead Springs Corp and California Consolidated Water stated they had no previous water rights.
In contrast to the California Water Resources Control Board’s finding that Nestlé/Arrowhead is entitled to withdraw 26 acre-feet of water (8.47 million gallons) of water annually from the San Bernardino Mountains, Nestlé asserts it has rights to ten times that much, at 271 acre-feet (88,306,266 gallons) of water per year, consisting of 58.2 acre-feet of pre-1914 appropriative rights from normal pre-development flows from Strawberry Creek and Indian Springs, another 86.8 in prescriptive rights from normal pre-development flows from Strawberry Creek and Indian Springs, along with 126 acre-feet of groundwater rights to percolating groundwater from Strawberry Canyon.
In conclusion, Nestlé asserts, “Based on the volume of pre-1914 water rights affirmed by the California Water Resources Control Board’s investigation report and the additional pre-1914 volumes identified by Nestlé Waters North America, Inc. the additional water acquired by the California Consolidated Waters Company pursuant to the Del Rosa Judgment, and the right to withdraw groundwater from Nestlé Waters North America, Inc.’s spring sites in an unadjudicated basin, Nestlé Waters North America, Inc. is not making any unauthorized diversions from Strawberry Canyon.”
Where things will proceed from this point – with the California Water Resources Control Board saying Nestlé is entitled to no more than 26 acre-feet of water from the San Bernardino Mountains, Nestlé drafting 192 acre-feet and claiming it is actually entitled to 271 acre-feet – depends on how spiritedly the California Water Resources Control Board and Nestlé will adhere to their conflicting contentions. Perhaps the most powerful player in the matter is the U.S. Government, in the form of the U.S. Forest Service, which for almost nine decades has indulged Nestlé and its corporate predecessors-in-interest in removing substantial amounts of water out of the National Forest for commercial purposes. Since 1988 it has held off on carrying out the examination for the environmental certification for the renewal of the Strawberry Canyon water extraction permit. Drought and other degradations of the San Bernardino National Forest have created a situation in which the continuing largesse toward Nestlé – a foreign-owned corporation exploiting a precious national resource for profit – has created a burgeoning controversy.
Several elements of Nestlé’s claims are open to challenge. The Coulter water right appropriation Nestlé referenced is applicable to the Arrowhead Springs Property and not the water bottler.
Contract water agreements do not equate to water rights by a third party. Federal reserve rights are fully applicable to all federally-owned property, and appropriation through adverse possession by the assertion of prescriptive rights is not applicable to U.S. Forest lands.
A legalistic rallying point for environmentalists opposing Nestlé’s continuing diversion of water from Strawberry Canyon is the consideration that Nestlé has conceded that much of the historic water use it is citing as the basis for its water rights consisted of extraction not in Strawberry Canyon but at a much lower elevation level, at Indian Springs and in Coldwater Canyon. Neither Nestlé nor any of its corporate predecessors in interest over the last 30 years has utilized those sources, and thus, the environmentalists are contending, those prescriptive rights to that water, if indeed they ever existed, have been abandoned, and Nestlé cannot assert those rights further up the Mountain at the 5,200-foot elevation level.
Today, Friday February 9, on the same day that Nestlé released its response to the California Water Resource Control Board’s December 21 report, San Bernardino National Forest Spokesman Zachary Behrens responded to the Sentinel’s inquires made in January with regard to the San Bernardino National Forest management’s stance with regard to the California Water Resources Control Board’s December 21, 2017 report.
The Sentinel had asked if the Forest Service was monitoring Nestlé’s Arrowhead Water bottling-related operation in Strawberry Canyon on a continuous basis. “Nestlé monitors the water extraction on a continuous basis and submits daily summaries, by well, in monthly reports to the Forest Service,” Behrens said.
Asked if the Forest Service installed, or already had in place, meters to allow that water drafting to be quantified, Behrens said, “The Forest Service required Nestlé to provide daily well data on a monthly basis on August 5, 2016. Nestlé requested approval to upgrade their monitoring equipment, and the Forest Service approved their request on January 31. 2017. The new equipment was installed during 2017 and operational by the October 2017 report.”
To the Sentinel’s inquiry as to the current figures on the amount of water being conveyed out of Strawberry Canyon, Behrens said, “The Forest Service has the monthly reports submitted by Nestlé, but detailed flow data on wells is exempt from disclosure under the Freedom of Information Act.” Thus, Behrens said, he was not prepared to disclose how much water Nestlé took in 2017 and how much water Nestlé has taken so far this year.
With regard to how the Forest Service will enforce the cessation of water drafting once Nestlé has reached the 26 acre-foot annual threshold, Behrens said, “The California Water Resources Control Board has full authority to enforce their own orders and would have to make any determinations of violation. If Nestlé were to ignore the state orders, the Forest Service could take action through the special use permit non-compliance process. Until the state actually issues an order, rather than staff recommendations, Nestlé is considered to be in compliance with their permit.”
The response of environmentalists and their efforts in pressing both California state water authorities and the U.S. Forest Service to restrict Nestlé from engaging in any further conveyances out of the San Bernardino Mountains could impact the circumstance.
On February 9, Rachel S. Doughty of the Berkeley-based Greenfire Law Firm wrote to Victor Vasquez of the State Water Resources Control Board’s water rights division, propounding that Nestlé is not entitled to any water out of the National Forest, including the 26 acre-foot pumping right the December 21 report says the company is allotted.
“To meaningfully consider whether valid water rights support any of Nestlé’s diversions for Arrowhead, the board must first analyze how they affect communities and natural resources served by the watershed, both under current conditions and in a wide range of Twenty-First Century hydrologic conditions that includes a potential multi-year drought,” Doughty wrote. “If left uncorrected in the report of its investigation, this omitted analysis would fatally compromise the board’s ability to fulfill its cornerstone duties to protect against injury to other legal users of water, protect public trust resources, and enforce the prohibition of waste and unreasonable use of water in Article X, Section 2 of the California Constitution. These duties belong to the State Board, and cannot be finessed by waiting for the outcome of federal environmental review or permitting decisions.”
Doughty continued, “Nestlé has failed to demonstrate, and is highly unlikely to establish, any enforceable pre-1914 appropriative right to divert water out of the affected watersheds, even for the estimated 26 annual acre-feet portion noted as a likely prospect for such rights from Indian Springs. Nestlé has also failed to establish enforceable rights to groundwater to support its appropriations for Arrowhead bottling. Nestlé’s points of diversion are located on federal land. Any water rights analysis must account for federal government rights, including federally reserved rights and any state-protected rights associated with overlying ownership, as well as the rights of [Native American] tribes and other water users.”
Doughty took aim at Nestlé’s reliance on the Del Rosa Judgment in asserting its water rights in the San Bernardino Mountains.
She noted that the California Water Resources Control Board has already determined “Nestlé cannot extrapolate rights to divert water for offsite bottling from the 1931 judgment confirming a settlement between private parties in Del Rosa Mutual Water Company v. Carpenter, et al. The perfunctory analysis of water rights in Del Rosa was “not binding” on the board’s own exercise of concurrent jurisdiction. The settling parties may have achieved ‘different outcomes’ through that judgment than those of a ‘full judicial proceeding,’ and the judgment occurred at a time when courts were ‘still absorbing’ then-recent significant change in water law, including the California Constitution’s restrictions on waste and unreasonable use of water. That judgment, which may not even have fully applied the water law of 1931, can neither supersede legislative requirements for post-1914 appropriative rights nor hamstring the board’s fulfillment of its own duties in 2018.” Further, according to Doughty, “Nestlé’s claim to “all the water in Strawberry Canyon” is baseless, resting on unproven and implausible assumptions about its predecessors’ physical possession of the water, and ignoring the actions of other appropriators in the watershed. Nestlé has no credible basis to anchor its pre-1914 water rights claim on other documents furnished to the State Board, such as a 1930 title report, a 1929 deed, and private agreements from 1930 and 1931.”

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