Real Estate

Tuesday, Nov 12 2013 10:00 PM

LOIS HENRY: As deals trickle in, Tejon gets into the water biz

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    Californian columnist Lois Henry

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By LOIS HENRY, Californian columnist lhenry@bakersfield.com

The first question I had when I learned of Tejon Ranch's plans to build 12,000 homes at the foot of the Grapevine was, "Where are they getting the water?"

Turns out, they found it right here in Kern County.

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Lois Henry appears on "First Look with Scott Cox" every Wednesday on KERN 1180 AM from 9 to 10 a.m. The show is also broadcast live on www.bakersfield.com. You can get your two cents in by calling 842-KERN.

It's a circuitous route, but Tejon apparently will be watering that development, and possibly much more, with Kern River water owned by the Nickel Family LLC.

Tejon announced the nearly $19 million purchase (half cash, half stock shares) of 6,693 acre feet of water from DMB Pacific LLC in a Securities and Exchange Commission filing on Tuesday.

More importantly, the filing also reveals that Tejon is positioning itself as a potential purveyor of Californian water.

"This purchase of water is similar to other transactions the Company has completed over the last several years as the Company has been building its water assets for internal needs as well as for investment purposes due to the tight water environment within California." the filing states.

I asked Tejon spokesman Barry Zoeller for more details on that tidbit. Where else has Tejon purchased water from? How much? How much had it paid? Etc.

He directed me to Tejon's SEC filings.

I'll have to plow through those for more details, but here's what I know so far.

In 2009, Tejon calculated its annual water needs at about 3,000 acre feet a year once the 3,400-home Tejon Mountain Village and Grapevine industrial complex were fully built out.

The ranch contracts with the State Water Project for 5,300 acre feet a year, though it typically gets about half that allotment given the state's unreliable system. The ranch said it also had 30,000 acre feet of water stored in the Kern Water Bank and Pioneer Water bank.

In 2010 the ranch bought the rights to nearly 2,000 acre feet of water a year (for $12 million) from two Kings County farmers for its proposed 23,000-home Centennial development just south of the Kern County border.

And it bought the rights to more than 1,400 acre feet a year from the Tulare Lake Basin Water Storage District.

Now, Tejon has its hands on nearly 7,000 acre feet of water from the Nickel family. Assuming it gets its average allotment from all those sources, that means Tejon could be bringing in around 15,000 acre feet a year plus its more than 30,000 in storage.

Amassing that kind of water indicates to me that Tejon is interested in far more than sprinkling a few carrot fields.

Corporations buying, selling, storing and swaping our water for profit. What's next: the air we breathe?

Follow along as we take a look at the Nickel water and its round- about route to Tejon.

I've followed this water for several years now. And let me tell you, it's one active chunk of H20.

The Nickel family owned the Hacienda ranch up in Kings County. In extremely high water years, the Kern River made its way to the ranch, which the Nickels claimed gave them riparian rights.

In 2000, the Kern County Water Agency bought that water right from the Nickels for $10 million. The agency also promised to give the Nickels 10,000 acre feet of water a year, every year, no matter what local water conditions were.

Oh, and the agency used public bond money intended for Kern River restoration to do the deal, something that continues to stick in my craw.

The agency was only able to reap water from this high flow water right in three of the past 13 years.

Meanwhile, the Nickels have peddled that 10,000 acre feet all over California.

The agency has aided in those sales by moving the water using its access to state facilities. It gets 10 percent of every sale for its troubles, so far that's added up to $5 million since 2001.

So, you could conclude that the water agency ultimately will recoup its $10 million. But that's only the money. More important to me is the annual loss of 10,000 acre feet of public water into private hands, where it can be shopped around, at no benefit to the public.

The Nickels have sold about 1,600 acre feet to the controversial Newhall Development in the Santa Clarita area. Most of that water has been banked locally in the Semitropic Water bank as Newhall Ranch continues to grind through its own challenges.

Perhaps the most convoluted deal was when Nickel sold 8,400 acre feet to a company called DMB Associates, which tried to use it for a 12,000 home development in Redwood City in the Bay Area through a complicated series of water swaps and exchanges.

It raised so many eyebrows the Santa Clara Water District refused to be a party to all the swapping.

It's unclear if that killed the deal, but the development is essentially dormant for now, according to opposition leaders at Save the Bay.

This is the same DMB that has now sold the lion's share of its Nickel water back to Tejon. This is also the same DMB working with Tejon on the ranch's Tejon Mountain Village, by the by.

I suppose I should be glad the Nickel water is staying "home," sort of.

But the Nickel water has always troubled me.

First, of course, is how public bond money was used to, essentially, enrich a private family with little to no benefit to the general public. The agency has argued that buying the Nickels' high flow water right kept more water in Kern than would otherwise have stayed.

Eh, I don't buy that. The Nickels only got water in high flow years, meaning everyone else had water too.

Also, the Nickel water wasn't nearly as marketable as it has been made by the agency -- using our money.

And whatever water the agency did claim from that high flow right was socked away in groundwater banks for the exclusive use of private farming entities in dry years. At best, you can say there's been a "trickle down" benefit to the public from that water in the form of some farm jobs.

But that's pretty weak compared to what the public spent and what the Nickels, now Tejon Ranch, got -- an absolute certain amount of water for sale.

Which brings us face-to-face with the reality of corporate ownership of the most basic, necessary public resource, water.

Like I said, the Nickel water has always troubled me.

Opinions expressed in this column are those of Lois Henry, not The Bakersfield Californian. Her column appears Wednesdays and Sundays. Comment at http://www.bakersfield.com, call her at 395-7373 or e-mail lhenry@bakersfield.com

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