Federal Judge Rules Against Cadiz, Inc.’s Use Of RR Right-Of-Way For H2O Conveyance

U.S. District Judge George Wu a week ago countermanded action taken relatively early in the Donald Trump administration which was widely perceived as advancing the prospects of the controversial Cadiz water project.
An outgrowth of an earlier failed effort to divert Colorado River water into the East Mojave water table for storage before being pumped to the greater Los Angeles area to augment the water supply there, the Cadiz, Inc. undertaking morphed into a plan to withdraw billions of gallons of water from the water table below the East Mojave Desert and convey it by pipeline for use elsewhere in California. After that project was given go-ahead through a somewhat irregular approval process that involved oversight of the project being removed from local control and a water agency more than 200 miles distant from the wells to be sunk signing off on their drilling, a firestorm of protest and opposition from environmental groups erupted.  In 2015, a decision was made by the Obama Administration-era U.S. Bureau of Land Management threw a wrench into the machinery when it denied Cadiz, Inc. use of the railroad right-of-way along which the company intended to run its pipeline to meet up with the Metropolitan Water District’s existing water conveyance system some 65 miles distant from the water wells it intended to dig.
At issue was the degree to which railroads are at liberty to allow their rights-of-way to be used for non-railroad purposes. A railroad right-of-way can accommodate a water pipeline if the water is to be used by the railroad, but the use of steam engines went out of vogue last century. In 1989, an Interior Department solicitor concluded that an 1875 railroad law allowed railroads to authorize other uses for that right-of-way without Department of the Interior approval. A subsequent solicitor’s opinion altered that conclusion to state other uses had to “derive from or further” a railroad purpose. The Bureau of Land Management office for California later found that “conveyance of water for public consumption is not a railroad purpose.” Anticipating such a contretemps over the right-of-way use issue, Cadiz, Inc. had previously proposed operating an “historic” locomotive on the railroad line along the water conveyance route for its entertainment and historically-informative value as an amenity to the project. Both federal and state government officials within the Obama Administration saw this as a gimmick and illegitimate ploy by Cadiz, Inc. to game federal regulations and stood firm against using the railroad right-of-way for the pipeline.
Just two months after Donald Trump came into office, however, an order was given in March 2017 to Timothy Spisak, the acting assistant director for the Bureau of Land Management’s Division of Energy, Minerals, and Realty Management, to undo any federal roadblocks to the project. Spisak complied, and in very short order he issued a blanket memo revoking the Bureau of Land Management’s 2015 decision to disallow the use of the existing federal railroad right-of-way for the water pipeline Cadiz, Inc. intends to construct. The Donald Trump Administration, for its part, saw the effort to prohibit the use of the span of land paralleling the railroad line for the aqueduct as a gaming of the system by environmentalists, which led it to use its authority to bring about Spisak’s blanket memo.
The Bureau of Land Management reacted to the memo by providing clearance for Cadiz, Inc. to begin construction of the pipeline within the railroad right-of-way. At that point, a coalition of environmental groups resolved to remove the issue into the federal court system, and challenged the agency’s action in a series of lawsuits.  In those suits which were consolidated in 2018, Earthjustice, the Center for Biological Diversity, the Center for Food Safety and the National Parks Conservation Association contended that if the Cadiz water-mining project were allowed to go forward it would drain life-giving springs in the Mojave Trails National Monument and surrounding public lands, killing vegetation and destroying key habitat for a host of desert wildlife, including the threatened desert tortoises, bighorn sheep, Mojave fringe-toed lizards and kit foxes. In the course of the suit, in addition to contesting the misuse of the railroad right-of-way, they cited analyses made by hydrologists from the U.S. Geological Survey which showed that the environmental impact report Cadiz, Inc. commissioned and submitted to the Santa Margarita Water District to obtain project go-ahead vastly overstated the aquifer’s recharge rate and that the project was unsustainable in that it would deplete the area’s water table.
Over the last two years, the pipeline aspect of the project has hung in limbo as litigation, primarily in the form of briefs filed with the court, proceeded. In a decision released Friday, U.S. District Judge George Wu, who sits in the Central District of California, took issue with two elements of the Bureau of Land Management’s 2017 action. The 1875 railroad law, Wu ruled, required that uses of railroad rights-of-way had to be related to railroad purposes and further the operation of the railroad specifically. As such, Wu found, the Bureau of Land Management’s argument that it had the authority to approve any use of the right-of-way if the use did not interfere with the railroad to be inconsistent with the law and previous interpretations of it.
Wu further determined that the Bureau of Land Management offered no legal rationale upon which it made its 2017 reversal of its 2015 finding the water pipeline would not further a railroad purpose and therefore could not be located within the railroad right of way.
“The Court would hold that the BLM had the duty to provide a reasoned explanation for why it disregarded certain facts from the 2015 determination in its conclusion that the component parts of the Cadiz pipeline furthered railroad purposes. Because the 2017 determination provided no explanation for reversal, the Court would find it arbitrary and capricious,” the ruling says.
Federal officials have not commented on Wu’s ruling.
“We’re grateful the court decision will stop the Trump administration’s blatant attempt to do a favor for their corporate friends. The court found that the reversal of Obama-era policies was unjustified and unexplained,” said Lisa Belenky, a senior attorney with the Center for Biological Diversity. “This massive water-privatization scheme is not sustainable. [The] Cadiz [project] will devastate the entire Mojave Desert ecosystem that relies on that water for survival.”
“The court saw right through the Trump administration’s attempt to shoehorn the massive Cadiz pipeline into a railroad easement through Mojave Trails National Monument,” said Greg Loarie, an attorney at Earthjustice who represented the Center for Biological Diversity and Center for Food Safety. “The Cadiz pipeline is designed to facilitate an ill-conceived corporate plan to profit from a public necessity. It has nothing to do with the railroad.”
Cadiz, Inc. Chief Executive Officer Scott Slater shook off the setback Wu’s ruling represented, and confidently stated he “expects no delays to project implementation as a result of Friday’s ruling.”
Slater then went on the offensive, saying the 2015 decision by the Obama Administration’s Bureau of Land Management denying Cadiz, Inc. use of the railroad right-of-way “was marred by controversy. In response to Freedom of Information Act requests, it was disclosed that the principal author of the 2015 BLM position was communicating with project opponents and short sellers in the company’s public securities while the evaluation was ongoing. Several railroad, infrastructure, agriculture and labor organizations, as well as members of Congress from both sides of the aisle, called for a reversal of BLM’s 2015 position, asserting it did not comply with the agency’s own internal review standards and was contrary to 100 years of federal precedent that encouraged the co-location of infrastructure in railroad rights-of-way in order to protect adjoining federal lands from environmental impacts.”
Slater, himself an attorney, said, “The judge’s decision to remand the 2017 BLM evaluation of the pipeline back to agency was based on purely procedural grounds. The decision does not call into question the facts upon which BLM relied in 2017 to conclude the pipeline sufficiently furthered railroad purposes and therefore did not require additional permits from the BLM, nor does it trigger any new environmental review. Although the court believed that BLM applied the correct legal standard in making its 2017 evaluation, Judge Wu sent the evaluation back to BLM to provide the explanation he desired concerning the change in position. While the federal government argued, and the company believes, that the record fully supported the BLM’s 2017 findings “as is,” we are confident that BLM will swiftly prepare an amended evaluation completely compliant with the court’s direction.”
In pursuing the project, Cadiz, Inc. has embittered a cross section of San Bernardino County residents, not just simply because of its effort to commandeer the East Mojave region’s water supply for use elsewhere but by the manner in which it did so.
In the 1990s, Cadiz, Inc. then known as The Cadiz Land Company, sought to interest the Metropolitan Water District in a proposal to convey up to 1.5 million acre-feet of what was referenced as “surplus” Colorado River water to the Cadiz Valley and “store” that water by pumping it into the water table and then extracting the water and conveying it to Greater Los Angeles during “dry years.” Ultimately, however, the Metropolitan Water District rejected that proposal. Litigation ensued, in which the Cadiz Land Company alleged the Metropolitan Water District had backed out of the deal.
A decade later, the Cadiz Land Company had reinvented itself as Cadiz, Inc. and reconstituted its water sale scheme to one that involved drafting the water from the Cadiz and Fenner valleys in the East Mojave Desert and selling it to a host of water purveyors in Los Angeles, Orange and Riverside counties.
Cadiz, Inc. plied then-First District Supervisor Brad Mitzelfelt, who in 2012 was vying for Congress, with $48,100 in political donations to finesse him into having San Bernardino County surrender its authority to consider the project application and determine if it were to be allowed to proceed, and if so, pursuant to what conditions, including the scale of the water diversion. Mitzelfelt, in whose district the entirely of the East Mojave was then located, in contrivance with Cadiz, Inc. prevailed upon his board colleagues to let the board of directors of the Santa Margarita Water District in Orange County, located 217 miles away from the Cadiz Valley, to carry out the environmental certification and approval of the controversial water extraction project in the East Mojave. The Santa Margarita Water District serves the affluent Orange County communities of Rancho Santa Margarita, Mission Viejo, Coto de Caza, Las Flores, Ladera Ranch and Talega. That agency evaluated the environmental impact report for the project, despite the consideration that the water district was entangled in something of a conflict of interest relating to the project since it was to be the largest consumer of the 75,000 acre feet of water the company was proposing to draft annually from the project’s 34 wells which were to be sunk in the Cadiz and Fenner valleys.
The unorthodox approval process for the plan to draft billions of gallons of water from the East Mojave Desert’s pristine aquifer for use in Los Angeles, Orange and Riverside counties, utilizing a governmental entity more than 200 miles removed from the property to be impacted which simultaneously had a financial and operational interest in the project, fueled questions about the integrity and legitimacy of the environmental certification of the project. Ultimately, those questions formed the basis of several of eleven lawsuits which kept Cadiz, Inc. tied up in court for years. Though the company was able to prevail in most of those suits, which it succeeded in having removed to Orange County Superior Court, appeals on some of those suits are yet proceeding, even as Cadiz, Inc. is hoping to at last put those challenges behind it and get on with the project. The company, in both its Cadiz Land Company and Cadiz, Inc. manifestations, has never operated at a profit in its 31 years of existence. It has sustained itself with capital provided by wave after wave of investors. With each successive infusion of capital, the company has intensified its promotion of the project, accompanied by an immediate or gradual rise in stock price. But as the project has continued to languish, the stock price has periodically fallen, only to be revived by further rounds of investment. This perpetual rise and fall of the company’s stock price has sparked comparisons to a Ponzi scheme. With investors becoming increasingly nervous, the company has embarked on an ambitious effort to clear the way for the project to proceed once all of the legal and procedural issues are resolved, and has striven to line up purchasers for the water so it can begin generating revenue to satisfy its stockholders at the earliest opportunity.
Faced with a multitude of both legal and procedural challenges, Cadiz, Inc. at every turn has sought to move the project forward on the basis of whatever means possible, quite often by political means, which has included seeking to bankroll politicians in San Bernardino County, despite its decision nearly a decade ago to bypass having the San Bernardino County Board of Supervisors oversee the project approval. More often than not, those efforts to purchase political support have not only failed, but boomeranged to further retard the project. A case-in-point was the company’s backing of Mitzelfelt. While the provision of money to Mitzelfelt did produce the outcome of removing the project consideration and environmental impact approval process to Orange County, Mitzelfelt’s support of the company severely undercut him politically. Because his term as First District supervisor was set to expire in 2012, he made a choice, buoyed by the infusion of campaign cash from Cadiz, Inc. to run instead for Congress. That choice meant that he did not seek reelection as supervisor. In the 2012 primary election, in which seven other hopefuls along with Mitzelfelt were vying to replace outgoing Congressman Jerry Lewis, his support of the Cadiz project transformed him into ballot box poison and he was able to place no better than fifth in the primary contest, an outcome which effectively ended his political career. The eventual winner in that contest was Paul Cook, who at that time pronounced his opposition to the Cadiz water project. Subsequently, Cadiz, Inc. took to providing Cook with hefty political donations, which in time diluted the Congressman’s opposition to the project. Yet in buying Cook’s support, the company further eroded its reputation with the populace in San Bernardino County and galvanized its opposition.
Dianne Feinstein has proven to be the most prolific and effective opponent to Cadiz, Inc.’s designs on the East Mojave’s water supply. She was the lead sponsor of the 1994 California Desert Protection Act signed into law by President Bill Clinton and she was the sponsor of the California Desert Protection Act of 2011, both of which feature provisions that have been wielded against the Cadiz Water Project. She was the author and sponsor of the California Desert Conservation and Recreation Act of 2015 and the California Desert Protection and Recreation Act of 2017. With Feinstein due to seek reelection in 2018, Cadiz signed on to support California State Senator Kevin de León. D-Los Angeles, one of the foremost of the Young Turks in the Democratic Party in California, in his effort to unseat Feinstein. de León  was from 2014 until March 2018 the California Senate President Pro Tem. At the same time, Cadiz, Inc. moved to support a coterie of politicians close to de León, including Toni Atkins, D-San Diego, the former California Assembly Speaker and currently the California Senate President Pro Tem, and former Assemblyman and former State Senator Richard Lara, who is currently California’s Insurance Commissioner. de León’s U.S. Senatorial bid was ultimately met with defeat in the November race against Feinstein.  As a consequence, the Blue Dog establishment wing of the Democratic Party in California, of which Feinstein is a leading member, is in ascendancy.  The Democrats are in firm control in Sacramento. As such, Feinstein was able earlier this year to call upon two of her allies, State Senator Richard Roth and Assemblywoman Laura Friedman, to introduce Senate Bill 307, an amalgamation of the two legislators’ previous efforts to safeguard desert water, which they had likewise worked with Feinstein on drafting. Friedman’s Assembly Bill 1000, introduced in July 2017, and Roth’s Senate Bill 120, introduced in August 2018, both encountered stiff and ultimately effective opposition as a consequence of Atkin’s, Lara’s and de León’s efforts, together with a program put together by a lobbying firm headed by Greg Campbell, Toni Atkins’ former chief of staff, another lobbying firm headed by Justin Fanslau, who was Atkins’ former legislative director, and Mercury Public Affairs, which employs former Assembly Speaker Fabián Nuñez. With Lara and de León now absent from the California Senate, the prospects for Senate Bill 307 are bright, and even if it does not pass, a determined effort to replace it with another similar bill will be launched.
-Mark Gutglueck

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