By Amanda Frye and Mark Gutglueck
The California State Water Resources Control Board today acted to curtail the Arrowhead Spring Water Company’s drafting of prodigious quantities of water from an ecologically sensitive canyon high in the San Bernardino Mountains.
The state has told the company that it must reduce the 62.56 million gallons of water it has been taking out of the San Bernardino Forest annually in recent years to 2.365 million gallons.
The action, which came less than a month after Nestlé Waters of North America divested itself of all of its American water holdings including the Arrowhead brand, recognizes the long-held contention of environmentalists that the water bottling company has for more than three decades been overdrafting water from a spring complex to which its rights are non-existent, disputed or overstated.
Nestlé Waters of North America was until last month owned by Nestlé S.A., a Swiss multinational food and drink processing conglomerate corporation headquartered in Vevey, Vaud, Switzerland.
The State Water Resources Control Board made its determination in the face of a two-year running drought in the Golden State and following numerous complaints of profligate water use by the bottler, which led to a multi-year investigation into Nestle’s unauthorized spring water diversions at the 5,000 foot elevation level in the San Bernardino National Forest.
For 29 years, as the owner of the Arrowhead Drinking Water Company since 1992, Nestlé Waters of North America had been drawing on the order of 60 million gallons of water from Strawberry Canyon on average per year pursuant to a permit issued in 1978 to the former operator of the water bottling concern.
Nestlé extracted the water from the Strawberry Canyon watershed, selling it under the Arrowhead 100% Mountain Spring Water brand name. Nestlé acquired the Strawberry Creek water diversion system from Perrier in 1992. The permits for the water extraction system, consisting of borings, horizontal wells, tunnels, pipelines and other appurtenances, expired in 1987. Nestlé, as did Perrier, maintained its operation in Strawberry Canyon by continuing to pay a $524 annual fee while the Forest Service delayed carrying out the environmental review for the renewal of the permits. The current U.S. Forest Service pipeline permit is around $2,000, and expires in August 2021.
Nestlé’s activity, which has long been decried by environmentalists, came under increasing fire as a statewide drought which lasted for more than five years after it 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 28 years after its permit expired. At that point, the Forest Service moved to make an environmental review. In the meantime, Nestlé continued its water extraction, pumping an average of 62.56 million gallons of water annually from the San Bernardino Mountains. Environmentalists 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 or make an accurate accounting of the water it was taking, and wreaking environmental damage by its action.
Following a two-year investigation, state officials arrived at a tentative determination that Nestlé had the right to divert up to 26 acre-feet of water (8.47 million gallons) per year. Nestlé had gone far beyond the water drafting limit the company was entitled to, the State Water Resources Control Board said, and was actually drafting 192 acre-feet (62.56 million gallons), such that 166 acre-feet (54.09 million gallons) the company was taking was unauthorized, according to a report released on December 21, 2017.
The water rights division recommended that Nestlé immediately end its diversions beyond the 26 acre-foot threshold or otherwise marshal evidence supporting its current level of diversion within 30 days.
While Nestlé continued to maintain it had established rights to roughly 190 acre-feet of water per year in Strawberry Canyon, it was unable to produce any historical record of water rights approaching the volume of its diversion.
On April 23, 2021, the State Water Resources Control board issued a revised report of its investigation and a draft cease and desist order directing the company which now owns the Arrowhead Spring Water Brand bottling company to stop its unlawful activities, which was defined in the cease and desist order as taking any more than 7.26 acre-feet (2.342 million gallons) of water annually out of Strawberry Canyon.
Nestlé Waters of North America’s successor/parent company, BlueTriton, has 20 days to respond to the draft order and request a hearing, or the State Water Board will issue a final order.
The action comes as state agencies are ramping up their efforts to build California’s water resilience amid a second consecutive dry year. At the direction of Governor Gavin Newsom, state agencies are coordinating closely with local water districts and municipalities to track and actively respond to changing conditions and issues that impact public health, safety and the environment.
During the historic December 2011-to-March 2017 drought, the State Water Board’s Division of Water Rights received multiple complaints alleging that Nestlé’s continual water diversions depleted Strawberry Creek, resulting in reduced downstream drinking water supply and impacts on vulnerable environmental resources. The division conducted a field investigation, which led to the tentative quantification of Nestlé’s water rights at 26 acre-feet (8.47 million gallons) annually with recommendations that Nestle only take amounts within its established water rights. Afterward, the State Water Board received an additional 4,000 comments and thousands of pages of information from the public alleging continued excessive water diversions, including that it had utilized 180 acre-feet (58,680,000 gallons) taken from Strawberry Canyon in 2020, which significantly expanded the investigation that culminated with today’s proposed enforcement action.
“It is concerning that these diversions are continuing despite recommendations from the initial report, and while the state is heading into a second dry year,” said Jule Rizzardo, the California State Water Resources Board’s assistant deputy director for the Division of Water Rights. “The state will use its enforcement authority to protect water and other natural resources as we step up our efforts to further build California’s drought resilience.”
The Sentinel’s examination of documentation that Nestlé relied upon in justifying its intensive drafting of water out of Strawberry Canyon illustrates that the Swiss company’s assumption of water rights there relied 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 26 acre-feet or 8.47 million gallons of annual extraction rights credited to it in December 2017, and may not be entitled to the 7.26 acre-feet or 2.365 million gallons the State Water Control Board has now allotted to Arrowhead.
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, then 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. Other than renewing the pipeline permit, none of the companies or their corporate predecessors has paid for the forest water it has taken.
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 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 2017.
The state groundwater recordation relating to the Nestlé/Arrowhead water activity, which is now under the control of BlueTrion, is yet listed under Beatrice’s “Arrowhead Drinking Water Co.”
This is a matter of contractual agreements versus water rights holders. The “Arrowhead Springs Water Company” incorporated in Los Angeles had an agreement with the Arrowhead Hot Springs Company (the water rights holder and property owner) extending only to obtaining water from Cold Water Canyon, which was then transported to Los Angeles, bottled, sold and distributed. The water bottler obtained no water rights. It only had a water contract.
Nevertheless, the State Water Board appears to have created a 7.26 annual acre-foot water right for Nestlé from this early water diversion on the private property, even though there is no evidence water rights were transferred from the hotel property to the water bottling entity.
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 made an inappropriate claim. The company has conflated physical springs with spring water, as defined in bottling regulations for food labeling purposes. A foreign entity, Nestlé was never a landowner of, nor in, the National Forest.
There is no documentation that Nestlé or its predecessors-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 was drawn prior to 1893, nor pre-1914 water rights, as it claimed. 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 Hotel 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 Hotel and Arrowhead Hot Springs 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 its creek are on the Arrowhead Hotel 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, the Arrowhead Hot Springs Company, which caused deteriorated relationships.
In 1912/1913 the Arrowhead Hot Springs Company resolved to build a water bottling facility near the Arrowhead Springs 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 was also referred to as “Indian Springs” in 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 the 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 the Fuento Frio cold spring up the canyon from Penyugal. Among the products the company offered were soda and 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 was then 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 1929 with an addition at tunnel 2, at which time the Arrowhead Springs Corporation (Ltd.) sold false rights on forest lands to water bottler and distributor California Consolidated Waters in what appears to have been an attempt to raise funds for a bond debt and use water sources other than those on the hotel property. The Arrowhead Springs Corporation admitted no “warranty” rights above section 12 in T1N R4W, located at the base of the Arrowhead, in an agreement which would have included Indian Springs’ two tunnels 1,000 feet north of the Arrowhead Springs Property boundaries and west of the landmark Arrowhead and the Strawberry Canyon wells/springs and tunnels, at the approximate 5,200 foot elevation.
It was the dubious claims by then-Arrowhead Springs Hotel property owner Charles Anthony that Consolidated Water could could obtain water from the undisclosed forest lands and run a pipeline to the hotel property. Anthony had no right to authorize the water extractions nor the two-mile pipeline.
False claims were acknowledged in some documents. Basically, the false claims made by Arrowhead Springs Corporation to the California Consolidated Waters Company involved false water rights and easements on San Bernardino National Forest lands leading to the unwarranted water withdrawals from the National Forest since 1929.
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 in a 1929 letter by San Bernardino lawyer Byron Waters 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 the appropriation of Section 30, where most of the wells are located.
Nonetheless, these “Indian Springs tunnels” and upper Strawberry Canyon water rights, located at the 2,700-foot and 5,000-foot elevations, respectively, were not claimed as reserved at the time of the forest’s founding in 1893. There is no historical record that the 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 an adverse possession suit that purports 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 a 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 claims to water and property based on these official topographical and quadrangle maps and reflected boundaries. Rights reserved under federal law and overlaying landowner groundwater rights thus apply to this case.
An examination of the historical record indicates that Nestlé had and BlueTriton 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/BlueTriton and their 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/BlueTriton claimed and 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-interest, BlueTriton.
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.
There is evidence to suggest that Nestlé had come to recognize some time ago the dubious nature of its water rights claim in Strawberry Canyon, where the spring complex it used in its Arrowhead Pure Spring Water bottling operation was located, and that the water rights it actually owned pertained to water at the 2,000 level near the grounds of the Arrowhead Springs Hotel, which is reportedly tainted with radiation as a consequence of the uranium in the bedrock there. Nestlé Waters of North America was beset with other challenges, legal and otherwise, relating to its water holdings throughout the United States, including those in California, Colorado and Maine. Last year, Nestlé made known its North American water holdings were up for sale.
Late last month, Nestlé shed its Nestlé Waters North America division, selling that portion of its operations pertaining to bottling drinking water in the United States and Canada to One Rock Capital Partners, LLC, in partnership with Metropoulos & Company in what was represented as a $4.3 billion transaction.
One Rock and Metropoulos obtained from Nestlé Waters North America its American/Canadian water portfolio including everything but the North American marketing rights to Perrier. Now in the possession of Poland Spring® Brand 100% Natural Spring Water, Deer Park® Brand 100% Natural Spring Water, Ozarka® Brand 100% Natural Spring Water, Ice Mountain® Brand 100% Natural Spring Water, Zephyrhills® Brand 100% Natural Spring Water, Arrowhead® Brand Mountain Spring Water, Pure Life® and Splash, One Rock and Metropoulos have consolidated those holding under the name BlueTriton Brands.
The Sentinel’s effort this afternoon to reach C. Dean Metropoulos, the CEO of Metropoulos & Company, at his headquarters in the Playboy Mansion, was unsuccessful. Given the time differential between the West Coast and the East Coast, the Sentinel’s effort this afternoon to reach Metropoulos & Company spokeswoman Hannah Arnold, was made too late to reach her at her Washington, D.C.
By Amanda Frye and Mark Gutglueck