Western Water Co. completes market-based water transfer

Western Water Co. announced today the completion of an historic market-based water transfer.

POINT RICHMOND, Calif., Feb. 21, 2001 (BUSINESS WIRE)—Western Water Co. (OTCBB:WWTR) announced today the completion of an historic market-based water transfer.

Successful completion of this first-of-its-kind transfer demonstrates both the complexity and the ultimate feasibility of managing long-distance, farm-to-city, cross-Delta water transfers. The sale of approximately 650 acre-feet (a little over 200 million gallons) of treated water to the Santa Margarita Water District capped a two-year regulatory process initiated by the company. More importantly, the completion of the transaction demonstrates that water conservation by agricultural water rights holders can generate sales revenue that is consistent with their core farming business and compatible with their environmental responsibilities.

The water involved in the transfer was made available through agricultural conservation by the Natomas Central Mutual Water Co. in Sacramento and Sutter Counties (Northern California). Western Water Co. and Natomas created a partnership to prove that the reduced consumption could be quantified and qualified for transfer under California's water laws and regulatory regime. That first step, demonstrating legal transferability of the water, was accomplished through an order of the State Water Resources Control Board issued in late 1999. Since then, the State Board has approved two similar transfers initiated by the company.

Conforming to the conditions of approval from the State Board, Western Water Company managed the painstaking process of arranging conveyance for the water from its origin in the Sacramento River, through the Delta, through the State Water Project, through distribution and treatment facilities controlled by the Metropolitan Water District of Southern California, for ultimate delivery to Santa Margarita in Orange County (Southern California).

Completion of the transfer required cooperation and approval from (1) the State Water Resources Control Board, (2) the United States Bureau of Reclamation, (3) the California Department of Water Resources, (4) the Metropolitan Water District of Southern California, (5) the Municipal Water District of Orange County and (6) weather and hydrologic conditions. The water was physically delivered between Oct. 27 and Nov. 8, 2000, but completion of final legal agreements and transaction accounting delayed closing until last week.

The company's Chief Executive Officer, Michael George, said, "This transfer could not have been accomplished without the support and perseverance of our clients Natomas Central Mutual Water Company, the source of the conserved water, and Santa Margarita Water District, the end user. The complexity of the process and the hostility of some parties to private, market-based transfers would have discouraged less committed partners. Through this process, however, we established two critical points: first, that voluntary, seller-initiated water transfers hold promise of a fair price for senior water rights holders who reduce their water consumption through conservation; and, second, that long-distance, ag-to-urban transfers hold promise for retail water districts seeking security and diversity of supply. Our challenge now is to make such transfers more routine, less contentious and more profitable for our partners and shareholders. We observe in other realms, however, that the benefits of a market are difficult to contain; consumer choice is a powerful inducement to regulatory and legislative change."

Completion of this transfer is critical to California's water future because long-distance, ag-to-urban water transfers through spare capacity in publicly-owned water conveyance systems are a critical element of the State's water plans. Such transfers are embedded in the CALFED Bay-Delta Program, in the State's plan for reducing its consumption of Colorado River water (the so-called 4.4 Plan), and in state statute and policy. Notwithstanding the necessity of such water transfers, they have been strongly resisted by public agencies who control the network of pumps, pipes, canals, reservoirs and dams that facilitate water distribution throughout the State. The company believes that this transfer will help to open a wider market, assuring greater choice and lower prices for consumers as well as a profitable market for farmers who invest in water conservation.

Western Water is engaged in the identification, development, transportation, sale and lease of water rights and water to municipalities and other end users in the western United States and owns water rights and real estate in California and Colorado.

More in Drinking Water