By Amanda Frye & Mark Gutglueck
Amid unresolved questions over the legality and propriety of the Arrowhead Spring Water Bottling Company’s use of water taken from the San Bernardino Forest, the United States Forest Service is, at least temporarily, refusing to renew the water drafting permit that has provided the procedural basis for allowing those diversions to take place for the last 36 years.
Over the last several decades, environmentalists and local activists concerned about the preservation of the San Bernardino National Forest have challenged the massive scale removal of water from Strawberry Canyon, located within the National Forest primarily above the 5,000-foot elevation in the San Bernardino Mountains.
For more than nine decades, several companies bottling water under brands incorporating the Arrowhead name have taken water out of Strawberry Canyon without any validly established rights to that water.
In the late 1920s, Charles Anthony, then the general manager and vice president of Arrowhead Springs Corporation and the acting president of the Arrowhead Springs resort property and its associated water bottling company, entered into talks with California Consumers Co., the parent company of California Consolidated Waters Co., regarding the sale of the Arrowhead water bottling operations. The California Consolidated Waters Company was formed in 1929 for the purpose of purchasing the Arrowhead Water bottling operation from the Arrowhead Springs Hotel. The purchase merged three Los Angeles-based companies that bottled and distributed “Arrowhead Water,” “Puritas Water” and “Liquid Steam.”
At that point, the Arrowhead Springs Corporation’s legitimate water rights extended only to water that company drew from a spring near the privately-owned historic Arrowhead Hotel as well as from the Arrowhead Springs on the east side of Arrowhead Mountain and in Coldwater Canyon at the 2,000-foot elevation below the San Bernardino National Forest. In exchange for a $100,000 commission, Anthony executed a deal with California Consolidated Waters Co. relinquishing those rights along with further rights to water the Arrowhead Springs Corporation had no claim or legal title nor any right under state or federal law to. In supplying to California Consolidated Waters Co. a warranty title of water rights, Anthony relied upon Arrowhead Springs’ attorney, former California Assemblyman Byron Waters.In a letter dated February 14, 1929, Waters inventoried the water-producing assets that the Arrowhead Hotel and existing bottling operation possessed in the form of the Arrowhead Springs on the east side of Arrowhead Mountain and in Coldwater Canyon, while using sleight-of-hand to out-and-out manufacture further water rights he asserted as “belonging to the company” without providing any documentary proof of their actual existence or Arrowhead Hot Springs Resort’s ownership of them, and made them part of the deal.
California Consolidated Waters, on the basis of a single pipeline permit that was not based on any water rights and without having obtained a diversion permit, in August 1930 started diverting spring water from a single “bedrock crevice” spring in the San Bernardino National Forest along Strawberry Creek at an elevation of 5,600 feet. Subsequently, in 1933 and 1934, the company put in place tunnels, ultimately accompanied by holes and horizontal wells at or near the headwaters of Strawberry Creek in Strawberry Canyon. Strawberry Creek was noted in maps and springs studies prior to the diversion to be a perennial stream which was fed by abundant flowing headwaters springs.
It was the seller Arrowhead Springs Corporation, not the United States Forest Service nor the State Water Resources Board, that granted California Consolidated Waters Co. the unwarranted right to develop the springs and divert the water from the Strawberry Creek headwaters. By 1934, California Consolidated Waters, had developed three springs using adits – horizontal passages bored into rock for drainage purposes – and then added 10 horizontal borehole wells to tap spring water aquifers in the mountainside, thereby diverting the forest spring water through a pipeline down the mountain, giving twenty percent to half of the water thus obtained to the hotel and then bottling and selling the rest. This unauthorized twenty percent giveaway to the Arrowhead Springs owners is still ongoing.
Over the years, water from Strawberry Canyon has been bottled under various names, including Arrowhead, Puritas, Arrowhead and Puritas, Arrowhead Puritas, Arrowhead Spring Water and Arrowhead Mountain Spring Water among them, all under the aegises of the Arrowhead Hot Springs Company, Arrowhead Springs Corporation, Arrowhead Water Corp, Arrowhead Mountain Spring Water Company, Coca-Cola Bottling of Los Angeles, Rheem, California Consolidated Water Company, Beatrice Foods, BCI-Arrowhead Drinking Water Company, Perrier, Nestlé, Nestlé Waters of North America, Inc. and now BlueTriton Brands.
Water rights cannot be awarded on U.S. Forest Service land. Nor is it possible for an entity to assert prescriptive rights to water on U.S. Forest Service land. Prescriptive water rights are created when a water user infringes upon the established water rights of another entity by means of trespass or unauthorized taking of that water. Upon making what would otherwise be illegal or illicit use of a given quantity of water openly and without the use of force for a period of five or more consecutive years, under California law, the interloper who took the water can then claim an annual right to the minimum amount of water taken during each of all of the five years. While the prescriptive rights are granted to anyone making such a showing of use of another private citizen’s or local or state agency’s water, federal law supersedes state law, and federal law does not permit the federal government’s water rights to be taken away or stepped upon by prescription.
In 1931, the Del Rosa Mutual Water Company, an appropriator of water on East Twin Creek downstream of the Arrowhead Springs Hotel (and downstream of the confluence of Strawberry Creek and East Twin Creek), filed a lawsuit to enjoin the taking of any water either by Arrowhead Springs Corporation or California Consolidated Water Company from East Twin Creek or Strawberry Creek.
The Del Rosa suit did not involve the San Bernardino National Forest nor the State of California. A finding in that case was that neither Arrowhead Springs Corp nor California Consumers Co. had previous water rights which extended back to the founding of the San Bernardino National Forest on February 25, 1893.
The Arrowhead Water Bottling Company, under various names and corporate configurations, including divisions of Standard Oil of California and Rheem Manufacturing, continued to operate, drawing water from Strawberry Canyon throughout the 20th Century. In 1969, the Arrowhead Water Bottling Company was acquired by the Coca Cola Bottling Company of Los Angeles and in 1978, Chicago-based Northwest Industries acquired Arrowhead Puritas when it bought Coca Cola Bottling of Los Angeles. In 1982, Northwest Industries unloaded Coca-Cola Bottling to Beatrice Foods. BCI subsequently acquired Beatrice in a leveraged buyout. While under BCI’s control, the Arrowhead Puritas water drafting permit in Strawberry Canyon expired, at which point the BCI-Arrowhead Drinking Water Company applied to extend the permit. In 1987, while that application was still pending, Perrier purchased the BCI-Arrowhead Drinking Water Company. Later the name “Arrowhead Mountain Spring Water Company” was handwritten on the permit.
The name “Arrowhead Mountain Spring Water Company” is not in BlueTriton’s chain of title. Nevertheless, it was used during the 1990s in United States Forest Service correspondence, including on invoices and in spring site records for the water pipeline system in Strawberry Canyon. At that time, newspaper articles show the company using that name was bottling and shipping Arrowhead water to Japan. This was water extracted from public land – Strawberry Canyon in the San Bernardino National Forest. The diversion of that water left a parched and dewatered forest canyon below, which burnt in the “Old Fire” in 2003.
The water pipeline conveyance extraction special use permit renewal process entailed a U.S. Forest Service review of the water drafting arrangement and its environmental/ecological impact, which in the late 1980s and 1990s the U.S. Forest Service did not have the immediately available resources to carry out. In a gesture of compromise, Perrier was allowed, pending the eventual U.S. Forest Service review, to continue to operate in Strawberry Canyon by simply continuing to pay the $524-per year fee to perpetuate the water extraction under the terms of the expired permit. In 1992, when Nestlé acquired the Arrowhead brand bottling operations from Perrier, it inherited the Strawberry Canyon operation and continued to pay the $524 annual fee without renewing the permit, which at that time existed under the name of the “Arrowhead Mountain Spring Water Co,” one that was never listed legally in corporate filings, but which operated under Nestlé Waters of North America, Inc. until it was acquired by BlueTriton Brands.
Nestlé’s intensive water-drafting 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 in late 2017 arrived at a tentative determination that Nestlé could continue 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 annually was unauthorized, according to a report released on December 21, 2017.
The Water Rights Division of the State Water Resources Control Board called upon Nestlé to immediately end its diversions beyond the 26-acre-foot threshold or otherwise marshal evidence supporting its level of diversion.
Nestlé, despite being unable to produce any historical record of water rights approaching the volume of its diversion, continued to maintain it had established rights to roughly 190 acre-feet of water per year in Strawberry Canyon. The company refused to comply with the State Water Resources Control Board’s mandate, continuing to take 144 acre-feet in 2017, 141 acre-feet in 2018, 210 acre-feet in 2019, and 180-acre feet in 2020. By 2020, Nestlé was in negotiations with One Rock Capital Partners, LLC and Metropoulos & Company for the sale of Nestlé Waters North America. In late March 2021, in what was represented as a $4.3 billion transaction, that deal was closed.
A month later, on April 23, 2021, the State Water Resources Control Board’s Division of Water Rights, through its permitting and enforcement branch, issued a cease-and-desist order relating to the Strawberry Canyon water diversion activity. Initially, that cease-and-desist order went to Nestlé Waters North America, as the State Water Resources Control Board had not been informed of the buyout of Nestlé Waters North America, including the Arrowhead Spring Water bottling operation, by One Rock Capital Partners, LLC and Metropoulos & Company.
By that point, the State Water Board had revised the maximum amount of water to be diverted from Strawberry Canyon to 7.26 acre-feet per year.
BlueTriton, through the law firm of Ellison Schneider Harris & Donlan, on August 5, 2021 made a motion to dismiss the State Water Board prosecution team’s draft cease-and-desist order.
In 2021, BlueTriton, under the aegis of the Arrowhead Spring Water Bottling Company, diverted 143 acre-feet of water from Strawberry Creek.
Also in 2021, the U.S. Forest Service granted BlueTriton a new pipeline permit, despite the ongoing water rights case and a change in ownership. The permit required a “valid proof of water rights.” The draft cease and desist order, which has now been confirmed by the tentative State Water Resources Control Board and the California Environmental Protection Agency ruling, maintains that BlueTrition holds no valid water rights in the canyon or anywhere in the forest. The determination that the company does not have water rights, however, has not yet fully precluded the company from being able to draw water out of Strawberry Canyon.
Blue Triton’s motion to dismiss the draft cease-and-desist order was overridden and extensive hearings were held last year under the direction of Administrative Hearing Officer Alan Lilly, focusing on multiple issues, including whether BlueTriton was making unauthorized diversions of water and if a cease-and-desist order should be issued. After more than seven months during which Lilly examined evidence and testimony presented and the issuance of a tentative draft order that was publicly reviewed in April and part of May 2023, Lilly made a yet-to-be-fully-confirmed finding that BlueTriton does not possess any water rights that authorize such diversions or beneficial uses.
Lilly issued a further tentative finding that the state board issue an order which in its current form directs the respondent, BlueTriton Brands, Inc., to cease its diversions through ten sources of water in Strawberry Canyon, those being tunnels 2, 3 and 7, and boreholes 1, 1A, 7, 7A, 7B, 7C and 8 in the Strawberry Creek watershed in San Bernardino County for its water-bottling operations because BlueTriton does not have any water rights that authorize those diversions and uses. Tunnels 2, 3 and 7, and boreholes 1, 1A, 7, 7A, 7B, 7C and 8 are located roughly between an elevation of 5,400-feet and 5,700 feet in upper Strawberry Canyon.
Lilly’s tentative order, however, does not prohibit BlueTriton from continuing to divert water through those ten facilities for deliveries to the San Manuel Band of Mission Indians for use at the Arrowhead Springs Hotel property under BlueTriton’s contractual obligations to the San Manuel Band, subject to BlueTriton’s special use permit, inherited from Nestlé, issued by the San Bernardino National Forest under applicable federal law.
Lilly’s order does not prohibit BlueTriton from continuing to divert water through designated boreholes 10, 11 and 12 in lower Strawberry Canyon for its water-bottling operations or deliveries to the San Manuel Band.
Neither side in the dispute over BlueTriton’s drafting of water in the San Bernardino Mountains was satisfied with Lilly’s findings.
BlueTriton is yet contesting the validity of the effort to impose any form of water-drafting limitation on it whatsoever, asserting its water rights in Strawberry Canyon are well-established.
Environmentalists, conversely, have given indication that they will at a future date challenge BlueTriton with regard to the water diversion from boreholes 10, 11 and 12, as the historical record does not reflect that it, Nestlé or any of their corporate predecessors have or had an established right to that water. Lilly’s order did not extend to boreholes 10, 11 or 12 because the challenge of what was then Nestlé’s water use in Strawberry Canyon did not include the drafting of water from those boreholes.
The California State Water Resources Control Board, in consultation with the California Environmental Protection Agency, is considering responses from the public at large to Lilly’s tentative ruling along with the input from both the environmentalists whose importuning of the State Water Resources Control Board led to the hearings for the cease-and-desist order, input from BlueTriton and input from attorneys representing all parties while formulating what is intended as a final determination.
On July 21, Michael Nobles, the district ranger with the San Bernardino National Forest, wrote to David Feckley, BlueTriton Brands’ director of natural resources at the company’s corporate office in Wylie, Texas.
“The U.S. Forest Service (USFS) recognizes the long working relationship between BlueTriton Brands, Inc. and the USFS. We acknowledge that the permitting process is complex and appreciate BlueTriton’s patience during the application review,” Nobles’ letter begins. “The USFS has accepted BlueTriton’s application dated 21-Feb-2023 for the continued use and occupancy of National Forest System lands within the San Bernardino National Forest. However, the requested use cannot be re-authorized at this time due to the uncertainty surrounding the water rights utilized by BlueTriton’s activities. As you know the California State Water Resource Control Board is completing a hearing regarding a draft cease and desist order concerning Blue Triton’s water rights. USFS regulations speak directly to this circumstance. 36 Code of Federal Regulations 9.8 (Use of Water) states: ‘(a) No operator may use for operations any water from a point of diversion which is within the boundaries of any unit unless authorized in writing by the regional director. The regional director shall not approve a plan of operations requiring the use of water from such source unless the right to the water has been perfected under applicable State law, has a priority date prior to the establishment of the unit and there has been a continued beneficial use of that water right.’ Because of this, the USFS will not be in a position to issue a final response to your application until the board renders its decision. The existing use may continue, and your current permit continues in effect under operation of law until the USFS renders its final decision. You are bound by all terms and conditions of the permit, including the 2019 version of the adaptive management plan. All outstanding noncompliance issues shall be cured within 90 days of the receipt of this this letter, and any outstanding reports, studies, or other required documentation shall be submitted to the Forest [i.e., the San Bernardino National Forest management] within 4 weeks of the receipt of this letter.”
Nobles added, “Should BlueTriton choose to end its use of USFS lands rather than continue under the terms of the current permit, please notify me at your earliest possible convenience and submit a written plan for removal of all infrastructure. We look forward to resolving the issues of water usage and transmission on Forest lands once the final ruling is made by the State Board. Blue Triton may at that time choose to submit an application that is consistent with both State law and the forest land management plan or a plan to remove their infrastructure from forest lands.”