Claim of Blackmail Seeps Into Water District’s Bid to Halt Housing Project : Development: A threatened lawsuit is seen as an attempt to force Irvine Co. to buy a water-treatment plant to serve its proposed 12,000-home addition.

The top elected official of a water district said Wednesday that the Serrano Irrigation District’s attempt to block a plan to build 12,000 homes in East Orange is a blatant scheme to force the Irvine Co. to buy a water-treatment facility.

Peer Swan, board president for the Irvine Ranch Water District, which is not associated with the Irvine Co., called the Serrano District’s concern about upstream development part of a scheme to “blackmail” the development company.

“I’m concerned that (Serrano Irrigation District) is making this a water-quality issue when it’s not,” Swan said. “They’re poised to sue the Irvine Co., then hold out for a settlement down the road. All this can cost taxpayers a big waste of money.”

The accusations by Swan, which were rejected by Serrano’s general manager, were made the day after the Orange City Council unanimously approved the Irvine Co.’s environmental impact report and endorsed an amendment to the city’s General Plan that would allow the developer to build 12,300 housing units, a hotel, golf course and recreational facilities on more than 7,000 acres of unincorporated territory east of the city during the next 15 to 20 years.

While Orange Mayor Don E. Smith and other City Council members joined with the Irvine Co. and praised the plan as a major and “historic compromise,” the Serrano district has maintained that the environmental impact report is deficient on the issue of water quality.

“Unless something is resolved, we’re headed for a lawsuit,” said David Noyes, Serrano’s general manager.

In a telephone interview Wednesday, Noyes angrily rejected Swan’s comments and accused him of political grandstanding, noting Swan’s candidacy for county Supervisor Thomas F. Riley’sseat.

“We’re not opposing the (Irvine Co.) project,” Noyes said. “We’re just saying that the EIR submitted to the city of Orange only gives vague statements about water quality and does not address the issue.”

The environmental impact report states that oil, grease, fertilizers and pesticides are likely to pollute the lake as a result of development. The report, Noyes said, does not indicate how planners and the developer will deal with the pollutants. “We’re protecting a water resource that is in fact the very last water resource in the county,” said Noyes, referring to Irvine Lake, the naturally fed reservoir jointly owned by the Serrano Irrigation District and the Irvine Ranch Water District. “We’re not asking to blackmail anybody.”

At several public hearings on the East Orange development, Serrano’s attorney, Joel Kuperberg, claimed that the Irvine Co.’s massive development--which is projected to increase the city’s population by at least 34,000--”would poison” the district’s water supply, forcing the small, 9,000-customer district to build a major water-treatment plant it says it cannot afford. Serrano serves about 7,000 customers in Villa Park and nearly 200 in Orange.

According to a study commissioned by Serrano, the district’s plant can be retrofitted to handle the U.S. Environmental Protection Agency’s new federal standards expected in 1992 for an estimated $1.5 million--a sum the district is willing to pay, Noyes said.

“However, the state Department of Health Services has told us that when this new development around the lake is completed, then a full conventional treatment plant would be required,” Noyes said.

“We’ve asked the Irvine Co. that they need to provide that,” Noyes said. “Why have our customers pay for that when the development belongs to the Irvine Co.?”

A spokeswoman for the Irvine Co. said the developer “is ready to sit down immediately” with Serrano Irrigation District and develop a water-quality management plan for East Orange.

But according to the spokeswoman, Dawn L. McCormick, it will be at least five years before any development is proposed that could affect Irvine Lake.

“On the subject of water quality, the company believes, as do the city’s consultants, and other public agency water officials that it is best to deal with that at the Specific Plan level,” McCormick said.

Swan also suggested that Serrano consider alternatives such as tying into the Metropolitan Water District of Southern California as a water source.

Noyes disagreed and said the Irvine Ranch Water District has been “trying for years” to stop Serrano’s use of Irvine Lake.

“We’ve been here longer than they have,” Noyes said. “We’ve been providing water for more than 50 years and we intend to continue.”