Legislative Panel Kills Bill for Purchase of Water Company : Santa Clarita Valley: Proposal would have let the publicly funded Castaic Lake agency buy a private firm. Opponents said the transaction would benefit an area developer.

A Senate committee on Monday killed a bill that would have allowed the publicly funded Castaic Lake Water Agency to buy a private water company, a proposal opponents say was intended to benefit the Santa Clarita Valley’s biggest developer.

Backers denied its benefit to developers, saying it simply makes good planning sense to acquire water supplies at a time of lingering drought.

But opponents feared the bill would be used to shift huge quantities of water from existing Santa Clarita Valley users to 70,000 future residents of a housing development proposed there.

At stake is the attempt by the Castaic Lake Water Agency to buy the private Santa Clarita Water Co. The acquisition would also settle a pending lawsuit between the two water suppliers.

The Castaic Lake agency is a public wholesaler that buys State Water Project water and sells it to 150,000 people in the Santa Clarita Valley. And although the taxpayer-supported Castaic Lake agency can purchase the smaller, private company, a change in the law is needed before it can legally operate it as a retailer.

Now public water agencies, such as Castaic, can only sell to retailers, who in turn provide water to household and business customers.

Assemblyman Dominic L. Cortese (D-San Jose), an expert on water issues in the Legislature, said he had agreed to author the bill after Castaic Lake Water Agency officials told him residents backed the idea.

Consequently, Cortese said, he was surprised at how vehement local critics were in demanding safeguards to prevent the Castaic Lake Water Agency from diverting Santa Clarita Water Co. resources to the area’s influential developer, Newhall Land & Farming Co. He said he understood that the acquisition would play a key role in the company’s development plans.

The Newhall company through a spokeswoman denied any connection between their development plans and the Castaic Lake agency’s desire to own and operate the Santa Clarita Water Co.

But local critics said they believe the Castaic Lake Water Agency, a small outfit with a lot of lobbying muscle, was at least partly interested in benefiting the Newhall firm, which transformed the Santa Clarita Valley from onion farms to fields of suburban homes.

So Cortese said he attempted to address the concerns by linking the Castaic Lake Water Agency bill to broader legislation he authored to improve water use planning in California. The landmark bill would have required that ample water supplies be available before new subdivisions are approved, a common-sense but controversial departure from past policies.

Together, Cortese said, the legislation would have provided protection for Santa Clarita Valley residents, as well as others statewide.

Ironically, it was the splicing of Castaic Lake’s measure to the bigger bill that seemed to diminish its chances on Monday, as a parade of building industry lobbyists registered their objections before the Senate Rules Committee.

In snuffing out both bills Monday, Senate President Pro Tem Bill Lockyer (D-Hayward) insisted he was not ruling on their merits, but on the timing: the Legislature is due to shut down for the year in one month. Lockyer said it was too late in the session to consider complex water issues.

Even after Monday’s action, mistrust persisted among some Santa Clarita residents.

“Where there is lobbying smoke, there’s all kinds of special interest fire,” said Allan Cameron, a community activist and co-founder of SCOPE, or the Santa Clarita Organization for Planning the Environment. “Now they will run around town trying to find another lawmaker to carry it.”

Cameron said he believes that Newhall Land & Farming Co. would obtain valuable new water supplies if the Castaic Lake agency is permitted to take over the Santa Clarita Water Co. and its ground water rights.

Cameron, and others in the community, see links between Castaic Lake’s elected and appointed board and the powerful development company. One of the appointed members of Castaic Lake’s 11-member board, for example, is a representative from the Valencia Water Co., a wholly owned subsidiary of Newhall Land & Farming.

While the Santa Clarita Water Co. serves the eastern portion of the Valley, the Valencia Water Co. supplies water to the western Valley and will serve the future Newhall Ranch, a massive planned development that will cover 19 square miles and house 70,000 residents by the year 2020.

In good years, both private companies get state water project water from the Castaic Lake Water Agency--as well as from their own ground-water supplies.

“The Valencia Water Co. could very easily obtain the ground-water rights of the Santa Clarita Water Co. if the Castaic Lake Water Agency became the retailer,” said Cameron.

Although Castaic Lake Water Agency officials did not return calls Monday, Cortese--who worked closely with the agency in developing the legislation--seemed to affirm a tie-in with Newhall Ranch.

“Apparently there is a pending proposal in the Santa Clarita area to build a substantial number of homes,” Cortese said after the committee meeting. “It’s my understanding that in the minds of a lot of people, the question of whether Newhall Ranch goes forward is the question of whether enough water is there and who will provide it . . . that if Castaic could buy the Santa Clarita Water Co., that would provide the water for Newhall Ranch.”

But Newhall spokeswoman Marlee Lauffer said there was no connection between the water agency’s plans and Newhall Ranch, although the firm sent a July 1 letter to a Senate consultant in support of the measure.

“We have just started the process of getting Newhall Ranch approved. The decision-making is now in the hands of Los Angeles County,” Lauffer said Monday. “The Castaic Lake Water Agency’s role is simply to make sure there’s water available after whatever approval comes from the county planning agencies.”

Backers of the bill insist the acquisition is needed to settle a longstanding lawsuit filed against the wholesaler by the Santa Clarita Water Co. four years ago when the smaller outfit was cut off from its state water supply at the height of the drought.

The suit alleges the Castaic Lake agency was not providing Santa Clarita with its due share of the state water project water. Presumably the action would die after the proposed purchase.

Although the Santa Clarita Water Co. says it is a willing seller--and in fact has narrowed its search for a buyer down to the Castaic Lake Water Agency--a price tag has not been disclosed.