A state commission is throwing a new hurdle in front of Cadiz Inc.'s plans to turn a remote desert valley into a lucrative water source for Southern California.
In a Sept. 20 letter to Cadiz, the State Lands Commission informed the company that its proposed water pipeline crosses a strip of state-owned land and therefore requires a state lease.
The letter is the latest twist in the long, convoluted history of the politically connected company's attempts to pump groundwater from its desert holdings 200 miles east of Los Angeles and sell it to Southern California cities.
The state action comes in the wake of moves by President Trump's administration to clear a major obstacle from Cadiz's path that was erected by the Obama administration.
Both the state and federal efforts revolve around the company's plans to construct a 43-mile water pipeline in an existing railroad right-of-way that crosses mostly federal land.
In 2015, the U.S. Bureau of Land Management said Cadiz couldn't use the right-of-way because the proposed water infrastructure didn't further a railroad purpose.
That meant the company would have to obtain U.S. permission to run the pipeline across surrounding public land. Cadiz has long tried to avoid that because it would trigger a lengthy federal environmental review that could add to the restrictions contained in the project's 2012 approval under state environmental law.
Cadiz, founded by Keith Brackpool, an investor with extensive political connections, fought back.
The company's high-powered law firm lobbied the Interior Department. Cadiz rounded up support from 18 members of Congress, most of them Republicans from California and the West. In March they wrote Interior Secretary Ryan Zinke, asking him to reverse the BLM decision and "create thousands of much needed jobs and a desperately-needed new water supply in California."
On Sept. 1, Interior's Office of the Solicitor withdrew the 2011 opinion that underpinned BLM's denial and replaced it with a much more liberal interpretation of what railroads can allow on their federal rights-of-way.
Now Cadiz is waiting for regional BLM officials to rescind the 2015 decision.
But if BLM does that, conservation groups are likely to sue. And the lands commission could still stand in the way.
The issue of state-owned lands in the Cadiz area arose in 2000, during review of the company's proposal to partner with the Metropolitan Water District of Southern California on a previous version of the groundwater project that MWD ultimately voted down.
At that time, Cadiz said the parcel in question was privately owned but the state retained mineral rights, according to the commission.
In the his letter, Brian Bugsch, chief of the commission's land management division, told Cadiz that when staff recently re-analyzed ownership in the area, it determined that the state owns the tract.
The parcel is a tiny piece of the millions of acres that Congress in 1853 granted to California for the benefit of public education. The state sold most of the so-called schools lands but still owns desert tracts controlled by the commission.
Commission spokeswoman Sheri Pemberton said the state never sold the 200-foot-wide strip because in 1910 California granted a railroad right-of-way over it. Now, the commission says Cadiz needs a state lease to use that portion of the right-of-way for the water pipeline.
"We have high confidence that the project would cross this state land," she said.
Cadiz spokeswoman Courtney Degener dismissed suggestions that the commission's position posed a problem.
"We don't see anything in the state letter that impacts our ability to complete the project," she said in an email. "The statute of limitations to challenge [the 2012 approval] is long past."
Whether to issue a lease would be up to the three members of the lands commission, who include Lt. Gov. Gavin Newsom.
Newsom and Gov. Jerry Brown both urged the state legislature to pass a bill that could have blocked the Cadiz project by requiring the lands commission to certify that any groundwater transfer from desert basins didn't harm natural resources on nearby federal or state lands.
That the bill never got out of the Senate Appropriations Committee in the Democrat controlled legislature despite the support of two top Democrats illustrates Cadiz's political clout.
When Senate President Pro Tem Kevin de León (D-Los Angeles) went along with shelving the legislation last month, Cadiz paid for robo-calls to Southern California voters, thanking De León and Sen. Ricardo Lara (D-Bell Gardens), the Appropriations Committee chairman, for stopping the bill.
In June, Cadiz donated $5,000 to a De León campaign fund, according to state records. Cadiz and Brackpool, a long-time friend of former L.A. Mayor Antonio Villaraigosa, have together contributed nearly $85,000 to Villaraigosa's gubernatorial campaign.
Villaraigosa supports the Cadiz project. His chief rival in next year's race for governor is Newsom.
In Washington, the new deputy Interior secretary is David Bernhardt, a former partner at Brownstein Hyatt Farber Schreck, the lobbying and law firm that over the years has collected millions of dollars in fees, as well as Cadiz stock, representing the company.
Russell Newell, Interior's deputy director of communications, said Bernhardt recused himself from involvement in the department's recent, Cadiz-friendly opinion on railroad right-of-ways.
Also in Washington is Cadiz's staunchest opponent, Sen. Dianne Feinstein (D-Calif.). She won federal protections for many of the desert lands surrounding the Cadiz project and has repeatedly voiced concerns about the groundwater project's impact on the fragile desert ecosystem.
When the Interior Department started to clear the way for Cadiz, she turned to the state. Political observers credit Feinstein — who officiated over Brown's 2005 wedding — with getting the governor to take the unusual step of weighing in on the legislative proposal.
The bill was placed in the suspense file, which means it could be revived next year.