The Indian Wells Valley Groundwater Authority (GA) recently announced they had signed a “letter of Intent” (LOI) to purchase approximately 750-acre feet (AF) of state water from the California Aqueduct from Jackson Ranch, a fully entitled, master planned development in Kings County. The water would be imported to the Indian Wells Valley and sold to residents and businesses, but only after costly pipeline infrastructure is permitted and constructed.
To be clear, a LOI is not a binding legal document. On the contrary, a LOI simply states the parties have reached an agreement on basic terms. A future document, usually a ‘Purchase and Sale Agreement,’ spells out terms and conditions, and once signed, makes the agreement legally binding on both parties.
The thing is, the LOI was not signed by any of the members of the current owners of Jackson Ranch, but by Jon Lash whose entity – reportedly Utica J.L.J. LLC – has an option to buy a portion of the Jackson Ranch. This option has not yet been exercised and expires November 20, 2022.
A few things immediately jump out as we dive into this potential deal.
Uncertainty. Will this deal actually go through? When will this deal go through? If the deal goes through, how will water be delivered given the fact there is no infrastructure in place? If a deal is done and the infrastructure built, how much water will ultimately be delivered?
The actual amount of yearly water available to the owner of this water entitlement (WE)—Jackson Ranch—and its cost varies widely. It is the Department of Water Resources (DWR) that determines the percentage of WE to be delivered based on each year’s hydrology in the Feather River Watershed in Northern California behind Oroville Dam. The last three years of drought have resulted in yearly allocations of WE of:
2020 --> 20%
2021 --> 5%
2022 --> 5%
Consequently, the water available to the GA in each of the last three years from the purchase of 750 AF WE would be only:
2020 --> 150.5 AF
2021 --> 37.5 AF
2022 --> 37.5 AF
Incredible cost. The costs and benefits of this potential acquisition just don’t pencil out.
Annual payments for 100% of each year’s total WE allocation are required, even in years like 2020-2022 when less is delivered. Additionally, according to The Bakersfield California, the GA’s purchase price for acquisition of the Jackson Ranch entitlement is 55% higher than similar prior sales. There is also studying to be done, permits to be acquired and the infrastructure to be constructed. All of this costs money. A lot of money.
And remember, all of this money is being spent on just 7.5% of the WE the GA has stated it intends to purchase (750 AF of the 10,000 AF of WE).
The bottom line is that the GA needs to have a full-scale study done of all activities, facilities, agreements, etc. for the whole water import program to determine the assumed basics of a total program, likely timeline and most importantly the permanent investment amount as well as yearly costs. This complete program needs to be presented to all water users in the Indian Wells Valley. It is likely that these costs will be more than water users can afford, and they have a right to understand the program costs and how much individual users’ water costs will increase before the GA starts committing serious monies to start parts of the total program.
Every major public works program proceeds in this manner. The GA needs to justify in advance the scope of additional costs their actions will cause the water uses in the Indian Wells Valley to incur.