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<DIV><![if !supportLists]><![endif]><B><FONT face=Tahoma color=black
size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: Tahoma"><o:p> </o:p></SPAN></FONT></B></DIV>
<DIV class=Section1>
<H1 style="MARGIN: 0pt"><B><FONT face=Tahoma color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: Tahoma">Pumping water and
cash from Delta<o:p></o:p></SPAN></FONT></B></H1>
<H1 style="MARGIN: 0pt"><B><FONT face=Tahoma color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: Tahoma">Contra Costa
Times<o:p></o:p></SPAN></FONT></B></H1>
<H1 style="MARGIN: 0pt"><B><FONT face=Tahoma color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: Tahoma"><o:p> </o:p></SPAN></FONT></B></H1>
<H1 style="MARGIN: 0pt"><B><FONT face=Tahoma color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: Tahoma">Gaming the water
system<o:p></o:p></SPAN></FONT></B></H1>
<H1 style="MARGIN: 0pt"><B><FONT face=Tahoma color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: Tahoma">Contra Costa
Times<o:p></o:p></SPAN></FONT></B></H1>
<H1 style="MARGIN: 0pt"><B><FONT face=Tahoma color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: Tahoma"><o:p> </o:p></SPAN></FONT></B></H1>
<H1 style="MARGIN: 0pt"><B><FONT face=Tahoma color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: Tahoma">Water ownership
murky, complicated<o:p></o:p></SPAN></FONT></B></H1>
<H1 style="MARGIN: 0pt"><B><FONT face=Tahoma color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: Tahoma">Contra Costa
Times<o:p></o:p></SPAN></FONT></B></H1>
<H1 style="MARGIN: 0pt"><B><FONT face=Tahoma color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: Tahoma"><o:p> </o:p></SPAN></FONT></B></H1>
<H1 style="MARGIN: 0pt"><B><FONT face=Tahoma color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: Tahoma">Paper shuffle allows
for vast supply of easy money<o:p></o:p></SPAN></FONT></B></H1>
<H1 style="MARGIN: 0pt"><B><FONT face=Tahoma color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: Tahoma">Contra Costa
Times<o:p></o:p></SPAN></FONT></B></H1>
<H1 style="MARGIN: 0pt"><B><FONT face=Tahoma color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: Tahoma"><o:p> </o:p></SPAN></FONT></B></H1>
<H1 style="MARGIN: 0pt"><B><FONT face=Tahoma color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: Tahoma">+++++++++++++++++++++++++++++++++++++++<o:p></o:p></SPAN></FONT></B></H1>
<H1 style="MARGIN: 0pt"><B><FONT face=Tahoma color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: Tahoma"><o:p> </o:p></SPAN></FONT></B></H1>
<H1 style="MARGIN: 0pt"><B><FONT face=Tahoma color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: Tahoma"><o:p> </o:p></SPAN></FONT></B></H1>
<H1 style="MARGIN: 0pt"><B><FONT face=Tahoma color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: Tahoma">Pumping water and
cash from Delta<o:p></o:p></SPAN></FONT></B></H1>
<H1 style="MARGIN: 0pt"><B><FONT face=Tahoma color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: Tahoma">Contra Costa Times
5/23/09<o:p></o:p></SPAN></FONT></B></H1>
<H1 style="MARGIN: 0pt"><B><FONT face=Tahoma color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: Tahoma">By <st1:PersonName
w:st="on">Mike Taugher</st1:PersonName><o:p></o:p></SPAN></FONT></B></H1>
<P class=dropcap3lines style="MARGIN: 0pt"><FONT face="Times New Roman"
color=#0e347f size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: #0e347f"><o:p> </o:p></SPAN></FONT></P><!--subtitle--><!--byline-->
<P class=dropcap3lines style="MARGIN: 0pt"><FONT face="Times New Roman"
color=black size=4><SPAN style="FONT-SIZE: 14pt; COLOR: black">As the West
Coast's largest estuary plunged to the brink of collapse from 2000 to 2007,
state water officials pumped unprecedented amounts of water out of the Delta
only to effectively buy some of it back at taxpayer expense for a failed
environmental protection plan, a MediaNews investigation has
found.<o:p></o:p></SPAN></FONT></P>
<P class=dropcap3lines style="MARGIN: 0pt"><FONT face="Times New Roman"
color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P class=bodytext style="MARGIN: 0pt"><FONT face="Times New Roman" color=black
size=4><SPAN style="FONT-SIZE: 14pt; COLOR: black">The "environmental water
account" set up in 2000 to improve the Delta ecosystem spent nearly $200 million
mostly to benefit water users while also creating a cash stream for private
landowners and water agencies in the <st1:City w:st="on"><st1:place
w:st="on">Bakersfield</st1:place></st1:City> area.<o:p></o:p></SPAN></FONT></P>
<P class=bodytext style="MARGIN: 0pt"><FONT face="Times New Roman" color=black
size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P class=MsoNormal><FONT face="Times New Roman" size=4><SPAN
style="FONT-SIZE: 14pt; FONT-FAMILY: 'Times New Roman'">Financed with
taxpayer-backed environment and water bonds, the program spent most of its money
in <st1:PlaceName w:st="on">Kern</st1:PlaceName> <st1:PlaceType
w:st="on">County</st1:PlaceType>, a largely agricultural region at the southern
<FONT color=black><SPAN style="COLOR: black">end of the <st1:place
w:st="on"><st1:PlaceName w:st="on">San Joaquin</st1:PlaceName> <st1:PlaceType
w:st="on">Valley</st1:PlaceType></st1:place>. There, water was purchased from
the state and then traded back to the account for a higher price.
</SPAN></FONT>The proceeds were used to fund an employee retirement plan, buy
land and groundwater storage facilities and pay miscellaneous costs to keep
water bills low, documents and interviews show.<o:p></o:p></SPAN></FONT></P>
<P class=MsoNormal><FONT face="Times New Roman" size=4><SPAN
style="FONT-SIZE: 14pt; FONT-FAMILY: 'Times New Roman'"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Revenues from those sales also might have
helped finance a lawsuit against the Department of Water Resources, the same
agency that wrote the checks, documents show.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">No one appears to have benefitted more
than companies owned or controlled by Stewart Resnick, a Beverly Hills
billionaire, philanthropist and major political donor whose companies, including
Paramount Farms, own more than 115,000 acres in Kern County.
<o:p></o:p></SPAN></FONT></P>
<P class=MsoNormal><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: 'Times New Roman'"><o:p> </o:p></SPAN></FONT></P>
<P class=MsoNormal><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: 'Times New Roman'">Resnick's
water and farm companies collected about 20 cents of every dollar spent by the
program. <o:p></o:p></SPAN></FONT></P>
<P class=MsoNormal><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: 'Times New Roman'"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Those companies sold $30.6 million of
water to the state program, participated as a partner in an additional $16
million in sales and received an additional $3.8 million in checks and credits
for sales through public water agencies, documents
show.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">"For a program that was supposed to
benefit the environment, it apparently did two things it didn't benefit the
environment and it appears to have enriched private individuals using public
money," said Jonas Minton, a water policy adviser to the Planning and
Conservation League, a <st1:place w:st="on"><st1:State
w:st="on">California</st1:State></st1:place> environmental advocacy
group.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Representatives of Resnick's farm and
water companies did not respond to repeated requests for interviews. A woman who
answered the phone at the Resnick's holding company last week said, "We don't
talk to the press. It's company policy." She transferred the call to a company
official who did not respond for an interview
request.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The state Department of Water Resources
also declined to comment for this story.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><U><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p><SPAN
style="TEXT-DECORATION: none"> </SPAN></o:p></SPAN></FONT></U></P>
<P class=subhead style="MARGIN: 0pt"><U><FONT face="Times New Roman" color=black
size=4><SPAN style="FONT-SIZE: 14pt; COLOR: black">A paper accounting
thing<o:p></o:p></SPAN></FONT></U></P>
<P class=bodytext style="MARGIN: 0pt"><FONT face="Times New Roman" color=black
size=4><SPAN style="FONT-SIZE: 14pt; COLOR: black">The idea behind the
environmental water account was to protect the Delta ecosystem without taking
water away from people, farms and agencies that held growing expectations and
contracts for water. By setting aside water that could supplement flows from
the Delta, biologists would be able to slow Delta pumps at sensitive times,
thereby protecting imperiled fish such as Delta
smelt.<o:p></o:p></SPAN></FONT></P>
<P class=bodytext style="MARGIN: 0pt"><FONT face="Times New Roman" color=black
size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The water account was meant to enhance
existing environmental protections and protect water users from the possibility
that regulators might force them to give up more water to protect
fish.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Despite good intentions, however, the
program lacked the resources to provide the environmental benefits it promised.
Traditional users got their water, but the environment suffered. Delta smelt
dropped to levels near extinction. Even the backbone of the state's commercial
salmon industry, <st1:place w:st="on">Sacramento River</st1:place> fall-run
chinook salmon, broke under the combined strain of ocean fluctuations and a
variety of Delta-related problems, possibly including water management. That
salmon fishery, which had never before been closed, is now off-limits to anglers
for the second consecutive year, leaving supermarkets temporarily devoid of wild
<st1:State w:st="on"><st1:place w:st="on">California</st1:place></st1:State>
salmon.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The way it was supposed to work was novel.
If fish were in danger of being sucked into massive Delta pumping stations, for
example, biologists could invoke the account to slow the pumps down. Then,
contractors who would otherwise be deprived of water from the slowdown would be
made whole with water from the account.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">In order to provide that replacement water
to contractors, the water account needed water stored south of Delta pumps. The
underground water storage facilities in <st1:place w:st="on"><st1:PlaceName
w:st="on">Kern</st1:PlaceName> <st1:PlaceType
w:st="on">County</st1:PlaceType></st1:place>'s aquifers and ancient river
formations proved to be its most important source. <o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">But the location at the southern end of
the <st1:place w:st="on"><st1:PlaceName w:st="on">San Joaquin</st1:PlaceName>
<st1:PlaceType w:st="on">Valley</st1:PlaceType></st1:place> was not ideal. It
made more sense to store the water closer to the Delta, where distribution would
be easier to a wider variety of places.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">So the water in <st1:place
w:st="on"><st1:PlaceName w:st="on">Kern</st1:PlaceName> <st1:PlaceType
w:st="on">County</st1:PlaceType></st1:place> was "exchanged" for Delta water
that was being pumped at record high and environmentally damaging rates. The
Delta water was then deposited in the environmental water account at San Luis
Reservoir near <st1:place w:st="on"><st1:City
w:st="on">Gilroy</st1:City></st1:place>.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The exchange legally moved the water that
was stored underground in <st1:place w:st="on"><st1:PlaceName
w:st="on">Kern</st1:PlaceName> <st1:PlaceType
w:st="on">County</st1:PlaceType></st1:place> to San Luis, but the water was
still there. To complete the trade, then, the underground water had to be
treated as if it were being delivered from the
Delta.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Sometimes, <st1:place
w:st="on"><st1:PlaceName w:st="on">Kern</st1:PlaceName> <st1:PlaceType
w:st="on">County</st1:PlaceType></st1:place> water agencies retrieved the
"Delta" water from underground for irrigation, but in most cases, the state was
delivering so much water they did not need to.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Instead, most of the time all they had to
do was simply forego storing the excess Delta water and pocket the difference
between the low rates they paid to the state and the higher market rates they
collected from the sale to the water account.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">"I wouldn't pump that water to sell the
(environmental water account)," said Dennis Atkinson, general manager of the
Tejon Castaic Water District, which sold about $2 million worth of water to the
account. "How are you going to make any money? ... It's a paper accounting
thing. We never turned on a pump."<o:p></o:p></SPAN></FONT></P>
<P class=subhead style="MARGIN: 0pt"><U><FONT face="Times New Roman" color=black
size=4><SPAN style="FONT-SIZE: 14pt; COLOR: black"><o:p><SPAN
style="TEXT-DECORATION: none"> </SPAN></o:p></SPAN></FONT></U></P>
<P class=subhead style="MARGIN: 0pt"><U><FONT face="Times New Roman" color=black
size=4><SPAN style="FONT-SIZE: 14pt; COLOR: black">The price of
water<o:p></o:p></SPAN></FONT></U></P>
<P class=subhead style="MARGIN: 0pt"><FONT face="Times New Roman" color=black
size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P class=bodytext style="MARGIN: 0pt"><FONT face="Times New Roman" color=black
size=4><SPAN style="FONT-SIZE: 14pt; COLOR: black">The cost to taxpayers for
<st1:place w:st="on"><st1:PlaceName w:st="on">Kern</st1:PlaceName>
<st1:PlaceType w:st="on">County</st1:PlaceType></st1:place> water averaged $196
per acre-foot. The price Kern County paid for Delta water varied, but in 2007,
the last year the environmental water account was operating, Kern County water
users paid an average of $86 for Delta water. Some of that water was purchased
for as little as $28 from a discount program. <o:p></o:p></SPAN></FONT></P>
<P class=bodytext style="MARGIN: 0pt"><FONT face="Times New Roman" color=black
size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The environmental water account was
administered by the state Department of Water Resources, which also operates the
state-owned pumps near <st1:place w:st="on"><st1:City
w:st="on">Tracy</st1:City></st1:place>. It bought most of its water from the
Kern County Water Agency, whose general manager insisted the prices charged to
taxpayers were fair and necessary to offset the cost of buying, storing and
managing the water.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">"The prices were in line with what we felt
were the appropriate costs," said general manager James
Beck.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Still, Beck acknowledged, there was
nothing in contracts to prevent sellers from making
money.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Of course, selling reserves can be risky,
and Beck said market prices this year are $350 per acre-foot or more. Given this
year's water shortages, he said that if <st1:place w:st="on"><st1:PlaceName
w:st="on">Kern</st1:PlaceName> <st1:PlaceType
w:st="on">County</st1:PlaceType></st1:place> landowners could go back in time
and undo those sales, they would "in a heartbeat."<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">To Atkinson, of the Tejon-Castaic Water
District, it made sense for water districts to reap a return on the sales
because water contractors have been paying for the state's dams, pumps and
canals since the 1960s, while the demand that more Delta water be dedicated to
the environment is more recent.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">"These guys have showed up lately and want
something someone else has," Atkinson said. "Since they don't have
infrastructure, they have to get it from the people who made the
investment."<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The vast majority of the financing for the
nearly $200 million program came from state environment and water bonds that
will be repaid with interest over the coming years.
<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Of that total, about 70 percent was used
to buy water from entities in <st1:place w:st="on"><st1:PlaceName
w:st="on">Kern</st1:PlaceName> <st1:PlaceType
w:st="on">County</st1:PlaceType></st1:place>.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">And of the <st1:place
w:st="on"><st1:PlaceName w:st="on">Kern</st1:PlaceName> <st1:PlaceType
w:st="on">County</st1:PlaceType></st1:place> sales, the $30.6 million sold
directly by Resnick's Westside Mutual Water Company was more than twice the
sales of any other entity, records show.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P class=subhead style="MARGIN: 0pt"><U><FONT face="Times New Roman" color=black
size=4><SPAN style="FONT-SIZE: 14pt; COLOR: black">Open
spigot<o:p></o:p></SPAN></FONT></U></P>
<P class=bodytext style="MARGIN: 0pt"><FONT face="Times New Roman" color=black
size=4><SPAN style="FONT-SIZE: 14pt; COLOR: black">The environmental water
account's effectiveness was hampered by the fact it was perpetually short of the
380,000 acre-feet a year envisioned when it was set up. In addition, a 2002
court decision favorable to water users reduced a separate source of
environmental water, a cut that had to be made up by the environmental account,
according to a 2005 report by the Environmental Defense
Fund.<o:p></o:p></SPAN></FONT></P>
<P class=bodytext style="MARGIN: 0pt"><FONT face="Times New Roman" color=black
size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Also in 2005, three years into the fish
collapse but the first year scientists could be sure that what they were seeing
was a statistically valid plunge, the Contra Costa Times detailed how biologists
worried about Delta smelt near the pumps were unable to get water managers to
fully accept recommendations to slow the pumps because of concerns about driving
the environmental water account into debt.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">A study published last fall in the
scientific journal Environmental Management concluded the account improved the
reliability of water supplies for Delta water users but it was unclear whether
it provided any meaningful environmental benefit.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Meanwhile, while the water account was
meant to offset the environmental damage done by pumping water out of the Delta,
it was being relied upon during a period when the state Department of Water
Resources was ramping Delta water deliveries up to record levels. The
environmental water account went into effect in 2000, and the five highest water
deliveries from the Delta were 2000, 2003, 2004, 2005 and 2006, years in which,
along with 2007, state water officials also sold large volumes of discount water
that <st1:place w:st="on"><st1:PlaceName w:st="on">Kern</st1:PlaceName>
<st1:PlaceType w:st="on">County</st1:PlaceType></st1:place> agencies would buy
in 2007 for $28 per acre-foot. <o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The sharp decline in fish populations
began around the same time, starting in about 2002. And while there are likely
numerous factors that caused the collapse, most scientists studying the problem
believe pumping patterns contributed.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Water officials have argued that the
increase in discount water deliveries through a program known as Article 21 made
no difference, since the price of water has no biological effect and because the
amount of water pumped annually was below the maximum authorized by the U.S.
Fish and Wildlife Service. <o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">But regulators
disagree.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">A permit from the Fish and Wildlife
Service, first issued in 2004, contained restrictions that were supposed to
protect Delta smelt from going extinct due to water pumping. It was issued based
on regulators' understanding that the use of Article 21 would be much less than
it turned out to be.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">In a 400-page analysis accompanying a
replacement permit issued in December, the service's biologists noted that the
Article 21 program was used far more extensively than they had been told when
they issued the 2004 permit.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">And that, in turn, helped drive up overall
pumping rates from the Delta, which regulators tied to the environmental
decline.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P class=subhead style="MARGIN: 0pt"><U><FONT face="Times New Roman" color=black
size=4><SPAN style="FONT-SIZE: 14pt; COLOR: black">A coalition points
elsewhere<o:p></o:p></SPAN></FONT></U></P>
<P class=bodytext style="MARGIN: 0pt"><FONT face="Times New Roman" color=black
size=4><SPAN style="FONT-SIZE: 14pt; COLOR: black">Most of the water sold
through the Kern County Water Agency originated with about a dozen smaller
public water district "member units" and a handful of private interests who
previously stored water, mostly from the Delta, in underground reservoirs.
<o:p></o:p></SPAN></FONT></P>
<P class=bodytext style="MARGIN: 0pt"><FONT face="Times New Roman" color=black
size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Several of those entities are members of
the Coalition for a Sustainable Delta, a group that banded together to fight
back against pumping restrictions imposed in late 2007 by courts and
regulators.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The coalition has filed three lawsuits and
threatened to file several more to shift blame away from water pumping's role in
the Delta's collapse. The group contends other environmental threats are also to
blame for the Delta's demise, including housing development in Delta
floodplains, pesticide use, dredging, power plants, sportfishing and pollution
from mothballed ships near <st1:place w:st="on"><st1:City
w:st="on">Benicia</st1:City></st1:place>.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The Coalition for a Sustainable Delta's
phone number is the same as Paramount Farms, and of the four coalition officers
listed on tax documents, three are Resnick employees: William Phillimore, chief
financial officer and executive vice president for Westside Mutual and Paramount
Farming; Scott Hamilton, resource planning manager for Paramount Farming; and
Craig B. Cooper, chief legal officer for Roll International, Resnick's holding
company.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">A spokesman for the coalition said that
although it has an employee working out of the Paramount Farms office, the group
is governed by dues paying members and not Resnick. He attributed the heavy
presence of Resnick's companies on the group's tax returns to issues associated
with getting the new coalition up and running. <o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">"It's an ad hoc coalition. You have to
organize that way," said spokesman Michael
Boccadoro.#<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" size=4><SPAN
style="FONT-SIZE: 14pt"><A
href="http://www.contracostatimes.com/search/ci_12439808?IADID=Search-www.contracostatimes.com-www.contracostatimes.com">http://www.contracostatimes.com/search/ci_12439808?IADID=Search-www.contracostatimes.com-www..contracostatimes.com</A><o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face=Tahoma size=4><SPAN
style="FONT-SIZE: 14pt; FONT-FAMILY: Tahoma"><o:p> </o:p></SPAN></FONT></P>
<H1 style="MARGIN: 0pt"><B><FONT face=Tahoma color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: Tahoma">Gaming the water
system<o:p></o:p></SPAN></FONT></B></H1>
<H1 style="MARGIN: 0pt"><B><FONT face=Tahoma color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: Tahoma">Contra Costa Times
5/25/09<o:p></o:p></SPAN></FONT></B></H1>
<H1 style="MARGIN: 0pt"><B><FONT face=Tahoma color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: Tahoma">By <st1:PersonName
w:st="on">Mike Taugher</st1:PersonName><o:p></o:p></SPAN></FONT></B></H1>
<P class=bodytext style="MARGIN: 0pt"><FONT face="Times New Roman" color=#0e347f
size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: #0e347f"><o:p> </o:p></SPAN></FONT></P><!--subtitle--><!--byline-->
<P class=bodytext style="MARGIN: 0pt"><FONT face="Times New Roman" color=black
size=4><SPAN style="FONT-SIZE: 14pt; COLOR: black">Just before Interstate 5
climbs the Grapevine out of the <st1:place w:st="on"><st1:PlaceName
w:st="on">San Joaquin</st1:PlaceName> <st1:PlaceType
w:st="on">Valley</st1:PlaceType></st1:place> is a massive underground reservoir
that its owners say is the largest water banking project of its kind in the
world.<o:p></o:p></SPAN></FONT></P>
<P class=bodytext style="MARGIN: 0pt"><FONT face="Times New Roman" color=black
size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Here among the tumbleweeds, sand and
scrub, 15 miles west of <st1:City w:st="on"><st1:place
w:st="on">Bakersfield</st1:place></st1:City>, the gush of crystal-clear water
appears as curiously out of place as the great blue herons cruising along the
bank's six-mile canal. <o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The Kern Water Bank, which was owned by
the state Department of Water Resources from 1988 to 1995, is now in the hands
of <st1:PlaceName w:st="on">Kern</st1:PlaceName> <st1:PlaceType
w:st="on">County</st1:PlaceType> interests and is 48 percent owned by Westside
Mutual Water Company, a private water company controlled by <st1:City
w:st="on"><st1:place w:st="on">Beverly Hills</st1:place></st1:City> billionaire
Stewart Resnick. <o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">It is 32 square miles of desert where one
natural river and two artificial ones pass: the Kern River, which originates in
the southern Sierra Nevada; the California Aqueduct, which carries Delta water
more than 400 miles to a reservoir in Riverside County; and the Friant-Kern
Canal, which takes water to valley farmers from behind a dam on the San Joaquin
River.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">"We have lots of water conveyance
facilities that bring water past the Kern Water Bank," said Jonathan Parker,
general manager of the Kern Water Bank Authority. "That makes this location
pretty unique."<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">In wet years, the water bankers deposit
water from the rivers into ponds where it percolates into the <st1:place
w:st="on">Kern River</st1:place>'s alluvial fan. <o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" size=4><SPAN
style="FONT-SIZE: 14pt">In dry years, they make withdrawals, which is why on a
tour of the bank earlier this year water was gushing out of the ground from
pipes and bubbling up into the canal from underground structures.
<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" size=4><SPAN
style="FONT-SIZE: 14pt"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><st1:place w:st="on"><st1:PlaceName w:st="on"><FONT
face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Kern</SPAN></FONT></st1:PlaceName><FONT
color=black size=4><SPAN style="FONT-SIZE: 14pt; COLOR: black"> <st1:PlaceType
w:st="on">County</st1:PlaceType></SPAN></FONT></st1:place><FONT color=black
size=4><SPAN style="FONT-SIZE: 14pt; COLOR: black"> water users, thanks in part
to local ownership of the Kern Water Bank, became the biggest source of water
for CalFed's "environmental water account" that cost taxpayers nearly $200
million. <o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The account was in effect during a period
when record amounts of water were pumped out of the Delta and fish populations
staggered to record lows. One species, Delta smelt, could be near extinction in
large part because of Delta water pumping. <o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Roughly one-fifth of all the money spent
to buy water for the program went to companies owned or controlled by Resnick,
one of the state's largest farmers.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">More than half of <st1:place
w:st="on"><st1:PlaceName w:st="on">Kern</st1:PlaceName> <st1:PlaceType
w:st="on">County</st1:PlaceType></st1:place>'s water sales to the environmental
water account and all of Westside Mutual's sales came from the Kern Water
Bank.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">And thanks to the magic of paper water
trades, less than half of the water sold from here was actually pumped out of
the ground.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Representatives of Resnick's farm and
water companies did not respond to repeated requests for interviews over a
two-month period.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The state Department of Water Resources
also declined to comment.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P class=subhead style="MARGIN: 0pt"><U><FONT face="Times New Roman" color=black
size=4><SPAN style="FONT-SIZE: 14pt; COLOR: black">Deal's
'linchpin'<o:p></o:p></SPAN></FONT></U></P>
<P class=bodytext style="MARGIN: 0pt"><FONT face="Times New Roman" color=black
size=4><SPAN style="FONT-SIZE: 14pt; COLOR: black">The deals worked by letting
sellers trade the underground water they were selling at market prices for water
the state was delivering to them at much lower
prices.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Instead of going to <st1:PlaceName
w:st="on">Kern</st1:PlaceName> <st1:PlaceType w:st="on">County</st1:PlaceType>,
then, Delta water went to San Luis Reservoir east of <st1:place
w:st="on"><st1:City
w:st="on">Gilroy</st1:City></st1:place>.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The state got the Delta water at the
reservoir, while in <st1:place w:st="on"><st1:PlaceName
w:st="on">Kern</st1:PlaceName> <st1:PlaceType
w:st="on">County</st1:PlaceType></st1:place> the water was either pumped out of
the ground for farmers' use or, more often, simply reclassified as if it were
delivered from the Delta. The sellers then pocketed the price
difference.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The exchanges made some sense because, by
taking delivery of the water upstream, the state could deliver it almost
anywhere it would want to without unnecessary
pumping.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">But it also meant that at a time when the
state Department of Water Resources was pumping record amounts of water out of
the Delta in some cases exceeding conditions regulators had approved as safe
for Delta fish it was delivering some of that water to itself for a program
that was supposed to protect the same fish populations that were damaged by the
high pumping levels. <o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">And it paid <st1:place
w:st="on"><st1:PlaceName w:st="on">Kern</st1:PlaceName> <st1:PlaceType
w:st="on">County</st1:PlaceType></st1:place> interests with taxpayer money for
the ability to do so.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The general manager of the Kern County
Water Agency, James Beck, said the program was a way for the state to ensure
those buying water in <st1:place w:st="on"><st1:PlaceName
w:st="on">Kern</st1:PlaceName> <st1:PlaceType
w:st="on">County</st1:PlaceType></st1:place> got the water to which they were
entitled.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">"The environmental water account was a
good example where water was provided to the state at a reasonable price .... to
assist the state to meet its contractual obligations to its contractors," Beck
said.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">For many sellers to the environmental
water account, including Resnick's companies, the key was ownership of the Kern
Water Bank.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The deal that transferred the Kern Water
Bank from state ownership to <st1:PlaceName w:st="on">Kern</st1:PlaceName>
<st1:PlaceType w:st="on">County</st1:PlaceType> interests has its roots in the
last big <st1:place w:st="on"><st1:State
w:st="on">California</st1:State></st1:place> <st1:PersonName
w:st="on">drought</st1:PersonName>, from 1987 to 1992. As have been the past
three dry years, the last <st1:PersonName w:st="on">drought</st1:PersonName>
featured water cutbacks and severe environmental strains in the Delta, where
fish were being added to the lists of threatened and endangered
species.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">In <st1:PlaceName
w:st="on">Kern</st1:PlaceName> <st1:PlaceType w:st="on">County</st1:PlaceType>,
the last <st1:PersonName w:st="on">drought</st1:PersonName> was particularly
acute because contract rules at the time required <st1:PlaceName
w:st="on">Kern</st1:PlaceName> <st1:PlaceType w:st="on">County</st1:PlaceType>'s
farmers to take deeper cuts to their Delta water supply than <st1:place
w:st="on">Southern California</st1:place> cities.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">To avoid a court fight, water officials
representing the state, <st1:PlaceName w:st="on">Kern</st1:PlaceName>
<st1:PlaceType w:st="on">County</st1:PlaceType> and <st1:place
w:st="on">Southern California</st1:place> reached a deal with ramifications that
linger today. Among other things, the deal transferred the Kern Water Bank from
the state to local interests.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The "Monterey Agreement," named for the
city where the negotiations took place, along with the CalFed plan that
followed, laid much of the groundwork for how the state's water supplies would
be managed and how the Delta environment would be
protected.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The results were mostly good for big water
users, and almost entirely bad for taxpayers and the
environment.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">"The environmental water account was in
some respects the linchpin to close the deal for the CalFed plan," said Spreck
Rosekrans, a co-author of a 2005 Environmental Defense Fund study that showed
how the account lacked the resources it was expected to get while it also was
required to do more than planned.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">"It involved buying some of the water that
had been overpromised. It allowed folks to game the system and gain profits that
were unwarranted," Rosekrans said.<o:p></o:p></SPAN></FONT></P>
<P class=subhead style="MARGIN: 0pt"><FONT face="Times New Roman" color=black
size=4><SPAN style="FONT-SIZE: 14pt; COLOR: black">State
denied<o:p></o:p></SPAN></FONT></P>
<P class=subhead style="MARGIN: 0pt"><FONT face="Times New Roman" color=black
size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P class=bodytext style="MARGIN: 0pt"><FONT face="Times New Roman" color=black
size=4><SPAN style="FONT-SIZE: 14pt; COLOR: black">At the time of the last
<st1:PersonName w:st="on">drought</st1:PersonName>, Resnick was expanding his
farm holdings near <st1:place w:st="on"><st1:City
w:st="on">Bakersfield</st1:City></st1:place>. Kern County property tax records
show his companies appear to own more than 115,000 acres nearly four times the
size of San Francisco and more than all the parks in the East Bay Regional Park
District combined.<o:p></o:p></SPAN></FONT></P>
<P class=bodytext style="MARGIN: 0pt"><FONT face="Times New Roman" color=black
size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The water supply for those farms and
orchards, which his companies boast include the largest pistachio and almond
growing and processing operations in the world, was secured in part by the Kern
Water Bank.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">With a capacity of at least 1 million
acre-feet, it is like having a reservoir the size of Folsom Lake, near <st1:City
w:st="on">Sacramento</st1:City>, or 10 reservoirs the size of Los Vaqueros, near
<st1:place w:st="on">Brentwood</st1:place>. <o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">There are other advantages too. Little
water is lost to evaporation. Terrestrial habitat is not
flooded.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The water is easy to get out of the
ground: It only costs $35 to $40 to pump an acre-foot nearly 326,000 gallons,
Parker said.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Though the state invested a total of $74
million in buying and developing the Kern Water Bank, it could never get the
groundwater storage operations up and running, partly because of a state law
that requires the Department of Water Resources to receive local approval for
groundwater projects. <o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><st1:place w:st="on"><st1:PlaceName w:st="on"><FONT
face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Kern</SPAN></FONT></st1:PlaceName><FONT
color=black size=4><SPAN style="FONT-SIZE: 14pt; COLOR: black"> <st1:PlaceType
w:st="on">County</st1:PlaceType></SPAN></FONT></st1:place><FONT color=black
size=4><SPAN style="FONT-SIZE: 14pt; COLOR: black"> never granted that
approval.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">As a result of the negotiations in
<st1:City w:st="on">Monterey</st1:City>, the bank was transferred from the state
to the Kern County Water Agency in exchange for <st1:place
w:st="on"><st1:PlaceName w:st="on">Kern</st1:PlaceName> <st1:PlaceType
w:st="on">County</st1:PlaceType></st1:place> interests giving up a small portion
of their claim to water. The agency immediately turned the bank over to a joint
powers authority made up of a handful of water districts and Westside Mutual
Water Company, which has a 48 percent stake.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Another 10 percent is owned by Dudley
Ridge Water District, where Resnick's farming company, which owns more than 40
percent of the district's irrigated acreage, is the largest landowner.
<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Dudley Ridge's board president, Joseph
MacIlvaine, is also president of Resnick's farm company, Paramount
Farms.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The agreement made in <st1:City
w:st="on">Monterey</st1:City> also forced Southern <st1:State
w:st="on">California</st1:State> cities to share equally with <st1:place
w:st="on"><st1:PlaceName w:st="on">Kern</st1:PlaceName> <st1:PlaceType
w:st="on">County</st1:PlaceType></st1:place> farmers in the pain of
<st1:PersonName w:st="on">drought</st1:PersonName>.
<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">And it created a new program that allowed
agencies in Kern County, Southern California and elsewhere to buy so-called
surplus water for cheap discount water that flowed so freely that, until the
Delta ecosystem hit the skids, it amounted to more than the cut they took in
their water contracts to obtain the water bank. <o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The U.S. Fish and Wildlife Service, in a
December analysis, said delivery of "Article 21" water was also much more than
what they approved when they issued a permit in 2004 meant to protect Delta
smelt from the effects of Delta water pumping.#<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><A
href="http://www.contracostatimes.com/news/ci_12443070">http://www.contracostatimes.com/news/ci_12443070</A></SPAN></FONT><FONT
size=4><SPAN style="FONT-SIZE: 14pt"><o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" size=4><SPAN
style="FONT-SIZE: 14pt"><o:p> </o:p></SPAN></FONT></P>
<H1 style="MARGIN: 0pt"><B><FONT face=Tahoma color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: Tahoma">Water ownership
murky, complicated<o:p></o:p></SPAN></FONT></B></H1>
<H1 style="MARGIN: 0pt"><B><FONT face=Tahoma color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: Tahoma">Contra Costa Times
5/23/09<o:p></o:p></SPAN></FONT></B></H1>
<H1 style="MARGIN: 0pt"><B><FONT face=Tahoma color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: Tahoma">By <st1:PersonName
w:st="on">Mike Taugher</st1:PersonName><o:p></o:p></SPAN></FONT></B></H1>
<P class=bodytext style="MARGIN: 0pt"><FONT face="Times New Roman" color=#0e347f
size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: #0e347f"><o:p> </o:p></SPAN></FONT></P><!--subtitle--><!--byline-->
<P class=bodytext style="MARGIN: 0pt"><st1:place w:st="on"><st1:PlaceName
w:st="on"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Kern</SPAN></FONT></st1:PlaceName><FONT
color=black size=4><SPAN style="FONT-SIZE: 14pt; COLOR: black"> <st1:PlaceType
w:st="on">County</st1:PlaceType></SPAN></FONT></st1:place><FONT color=black
size=4><SPAN style="FONT-SIZE: 14pt; COLOR: black"> water users who sold
millions of dollars worth of water to a program meant to help the environment
said the arrangement made sense because the water was rightfully
theirs.<o:p></o:p></SPAN></FONT></P>
<P class=bodytext style="MARGIN: 0pt"><FONT face="Times New Roman" color=black
size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Few would dispute that water that was
purchased and stored in <st1:place w:st="on"><st1:PlaceName
w:st="on">Kern</st1:PlaceName> <st1:PlaceType
w:st="on">County</st1:PlaceType></st1:place> could be sold to the environmental
water account.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">But the sales were made easier by the fact
that the state Department of Water Resources was cranking up water deliveries to
unprecedented heights at the same time it was buying water back for the
environment. <o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The general manager of one of the agencies
that sold water through the program, Dennis Atkinson of the Tejon-Castaic Water
District, acknowledged that the sales only made sense to him if state pumps were
delivering more water than his district could immediately
use.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">In other words, the higher pumping levels
not only took an environmental toll on the Delta, they also made water available
to buy back to protect the Delta.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Was the state required to deliver all that
water or could it have pumped less and potentially saved the cost of buying it
back? Put another way, does Delta water belong to contractors or do
environmental needs have priority?<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The answer is
unclear.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><st1:place w:st="on"><st1:PlaceName w:st="on"><FONT
face="Times New Roman" size=4><SPAN
style="FONT-SIZE: 14pt">Kern</SPAN></FONT></st1:PlaceName><FONT size=4><SPAN
style="FONT-SIZE: 14pt"> <st1:PlaceType
w:st="on">County</st1:PlaceType></SPAN></FONT></st1:place><FONT size=4><SPAN
style="FONT-SIZE: 14pt"> water districts have a contract that awards them about
1 million acre-feet of water a year. And as customers of the State Water
Project, they have to make the same payments on the project's dams, pumps and
canals <FONT color=black><SPAN style="COLOR: black">no matter how much water
they get. <o:p></o:p></SPAN></FONT></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The state's water customers contend the
contract obligates the state to make water available, and the contracts and
simple fairness support that, at least to some
degree.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">On the other hand, a consolidated version
of the full contract which runs 348 pages and has nearly 40 amendments
appears to recognize that water shortages can develop "due to <st1:PersonName
w:st="on">drought</st1:PersonName> or any other cause
whatsoever."<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">And the right to water in arid states is
always conditional. The government can promise all the water it wants, but it
can't make it rain. <o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Environmental laws, a constitutional
requirement that water use be reasonable and beneficial and an ancient legal
doctrine that ensures water is used in a way that considers public trust values
including the health of natural resources such as the Delta further limit
the use of water, making the question of who "owns" water
complicated.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">"Because it's called a right, people tend
to think of it like the First Amendment," said Phil Isenberg, a former
legislative leader and chairman of a Delta Vision task force appointed in 2007
by Gov. Arnold Schwarzenegger to figure out how to fix the
Delta.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">"The water rights system is a way of
figuring out who is first in line when supplies aren't enough to satisfy all of
the water needs."<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">One of the state's biggest difficulties in
delivering water to users while protecting the environment is the fact that
water has been dramatically overpromised, Isenberg
said.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">As the Delta Vision committee was wrapping
up its work last year, a memo arrived that members had requested from the state
agency that administers water rights.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">It carried this sobering comparison: The
average natural flow of water in the Delta watershed is 29 million acre-feet per
year, while the face value of water rights in the same watershed is 245 million
acre-feet, or more than eight times the average
flow.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">"I was dumbfounded," Isenberg
said.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Not all of the water in those rights is
actually used, some of the rights are double-counted and much of the water that
is used finds its way back into rivers where it can be used
again.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Nevertheless, the figures are convincing
evidence to Isenberg and others that the state has promised far more water than
it can deliver. <o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Further complicating matters, the State
Water Project signed contracts with <st1:PlaceName
w:st="on">Kern</st1:PlaceName> <st1:PlaceType w:st="on">County</st1:PlaceType>,
Southern California and others at a time when plans called for dams to be built
on <st1:place w:st="on"><st1:PlaceName w:st="on">North</st1:PlaceName>
<st1:PlaceType w:st="on">Coast</st1:PlaceType></st1:place> rivers that would
produce millions of additional acre-feet a year to spill into the Delta for
contractors to use. Those dams were never built.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Faced with overpromised water, population
growth, a sensitive environment and periodic <st1:PersonName
w:st="on">drought</st1:PersonName>s, it is no surprise <st1:State
w:st="on"><st1:place w:st="on">California</st1:place></st1:State> has
difficulties managing water.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Those difficulties also are not
new.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">After the last major <st1:PersonName
w:st="on">drought</st1:PersonName> ended in 1992 a series of deals were struck
to fix the system, culminating in 2000 with a plan known as
"CalFed."<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">There may not have been enough water to
satisfy farmers, cities and the environment, but when the deal was signed in
2000, the state was awash in money thanks to soaring real estate, stocks and
dot-com enterprises. <o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">One of the keys to the CalFed deal was the
environmental water account. <o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The idea was to use the market to strike a
new balance between the needs of the environment and people. The account would
be used by regulators to enhance the environment by buying water from willing
sellers, thereby reducing conflicts that arise when regulators take it away from
water users. <o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">In the absence of an environmental water
account, water users faced the possibility of additional environmental
restrictions, according to a 2001 report by the Legislative Analyst's Office.
For that reason, the LAO said water users should help pay for the
program.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">"Since compliance with endangered species
laws is a responsibility of the state and federal water projects, (the
environmental water account) in effect reduces the compliance burden for these
projects," the LAO found.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Instead, the environmental water account
ended up relying almost exclusively on taxpayer-backed bond funds, and most of
that money was spent to buy water stored in Kern
County.#<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><A
href="http://www.contracostatimes.com/news/ci_12437097">http://www.contracostatimes.com/news/ci_12437097</A></SPAN></FONT><FONT
size=4><SPAN style="FONT-SIZE: 14pt"><o:p></o:p></SPAN></FONT></P>
<H1 style="MARGIN: 0pt"><B><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></B></H1>
<H1 style="MARGIN: 0pt"><B><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></B></H1>
<H1 style="MARGIN: 0pt"><B><FONT face=Tahoma color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: Tahoma">Paper shuffle allows
for vast supply of easy money<o:p></o:p></SPAN></FONT></B></H1>
<H1 style="MARGIN: 0pt"><B><FONT face=Tahoma color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: Tahoma">Contra Costa Times
5/23/09<o:p></o:p></SPAN></FONT></B></H1>
<H1 style="MARGIN: 0pt"><B><FONT face=Tahoma color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black; FONT-FAMILY: Tahoma">By <st1:PersonName
w:st="on">Mike Taugher</st1:PersonName><o:p></o:p></SPAN></FONT></B></H1>
<P class=bodytext style="MARGIN: 0pt"><FONT face="Times New Roman" color=#0e347f
size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: #0e347f"><o:p> </o:p></SPAN></FONT></P><!--subtitle--><!--byline-->
<P class=bodytext style="MARGIN: 0pt"><FONT face="Times New Roman" color=black
size=4><SPAN style="FONT-SIZE: 14pt; COLOR: black">It must have seemed like easy
money.<o:p></o:p></SPAN></FONT></P>
<P class=bodytext style="MARGIN: 0pt"><FONT face="Times New Roman" color=black
size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The state was delivering more water than
ever to its customers, and in <st1:place w:st="on"><st1:PlaceName
w:st="on">Kern</st1:PlaceName> <st1:PlaceType
w:st="on">County</st1:PlaceType></st1:place> some of those customers sold some
of it back, through a simple trade, at a higher
price.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Tens of millions of dollars in sales to
the "environmental water account" were little more than paper shuffles. It was
all perfectly legal.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">But the environment lost while <st1:place
w:st="on"><st1:PlaceName w:st="on">Kern</st1:PlaceName> <st1:PlaceType
w:st="on">County</st1:PlaceType></st1:place> water agencies collected $138
million in sales to the program, the vast majority of which was paid for with
the proceeds from taxpayer backed environment and water bonds.
<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Public water agencies in <st1:place
w:st="on"><st1:PlaceName w:st="on">Kern</st1:PlaceName> <st1:PlaceType
w:st="on">County</st1:PlaceType></st1:place> used money from sales to an
environmental water account to fund an employee retirement plan, buy land and
pay for miscellaneous repairs, documents and interviews show.
<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">One document shows that the Kern County
Water Agency used revenue from the sales to help finance a lawsuit against the
Department of Water Resources the same agency that wrote the taxpayer-backed
check to the agency to lower its water bills.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The head of the Kern County Water Agency,
James Beck, denied the lawsuit was funded with the sales revenue, but he could
not explain why the general manager of one of his agency's member districts
recounted that version of events to his board of
directors.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" size=4><SPAN
style="FONT-SIZE: 14pt">Beck said revenues from the sales were used to cover the
cost districts paid to buy, store and deliver the water. He also <FONT
color=black><SPAN style="COLOR: black">said funds were set aside to cover the
cost of future purchases to replace water that was sold.
<o:p></o:p></SPAN></FONT></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">But documents and interviews show the
sales were seen by the water agency's "member units," at least in some cases, as
a source of revenue that could be used for a wide variety of
purposes:<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">In 2003, the Buena Vista Water Storage
District, based in Buttonwillow, put $500,000 in revenues from the environmental
water account sales into its employee retirement plan, documents
show.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Water districts put environmental water
account revenues into their coffers to offset miscellaneous repairs and other
costs in order to keep customers' water bills down, said Dennis Atkinson,
general manager of the Tejon Castaic Water District. "We take that money and
apply it against our bills," Atkinson said. <o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">One district participated only marginally
selling small amounts of water at a relatively low price to the account's
precursor one year and participating as a partner to help other water districts
complete their sales in another. The Rosedale-Rio Bravo Water Storage District,
based in <st1:City w:st="on"><st1:place
w:st="on">Bakersfield</st1:place></st1:City>, still was able to buy land to
expand its groundwater storage capacity and build facilities with the proceeds,
said general manager Eric Averett. Increasing the groundwater banking capacity
is arguably consistent with managing water for the account, although the
district did not sell any water to the account after
2001.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">MediaNews identified $8.6 million worth of
checks, refunds and credits, presumably to offset water purchases and pumping
costs, including more than $3 million to Paramount Farms, that were paid to
landowners in public water districts that sold to the water account. Blackwell
Land LLC also received more than $3 million in refunds from the sales, while the
remainder went to fewer than 10 other private
landowners.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">In 2003, Westside Mutual Water Company and
the Wheeler Ridge-Maricopa Water Storage District negotiated a $600,000 payment
to the water company, controlled by <st1:place w:st="on"><st1:City
w:st="on">Beverly Hills</st1:City></st1:place> billionaire Stewart Resnick,
after a change in circumstances shifted a portion of the sales from Westside
Mutual to the water district. At a meeting of sellers to the account, there was
"a plea from Westside MWC that some compromise be worked out to adjust for the
windfall" to the Wheeler Ridge-Maricopa district, which gained a greater share
of the sales at Westside's expense, according to a memorandum from the water
district's general manager, William Taube. <o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Wheeler Ridge, which serves water to about
90,000 acres of farmland south of <st1:place w:st="on"><st1:City
w:st="on">Bakersfield</st1:City></st1:place>, shifted $600,000 in sales to
Westside Mutual, which still left the district with $1.4 million in "net
revenue."<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The most unusual use of environmental
water account money may have been its apparent use to sue the state Department
of Water Resources the agency that wrote the check for the purchases to
lower Kern County's water bills.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Beck denied that happened, but that is
what Taube told his board of directors in May 2007.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">In an interview, Taube said that while it
was possible he was mistaken, the point he made was that Kern's "member units"
would not have to contribute attorneys' fees because enough revenue had been
generated from the water sales.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The lawsuit, known as the
"Hyatt-Thermalito litigation," is a dispute over how the state prices power from
turbines at <st1:place w:st="on"><st1:PlaceType w:st="on">Lake</st1:PlaceType>
<st1:PlaceName w:st="on">Oroville</st1:PlaceName></st1:place>. Kern County Water
Agency and other water districts north of the Tehachapis, including Bay Area
districts, want the prices to reflect market rates, which would increase the
cost of water in <st1:place w:st="on">Southern California</st1:place> where it
takes more electricity to deliver Delta water because of the greater distance
and the need to pump the water over the Tehachapis.
<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">The power sales are applied to
contractors' debt for the State Water Project's dams, pumps and aqueducts, so
raising the price of the electricity would reduce debt for contractors north of
the Tehachapis at <st1:place w:st="on">Southern California</st1:place>'s
expense.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">In May 2007, Taube told his board that at
the Kern agency's April board meeting he attended, the Kern board "directed that
2007 EWA sale proceeds accruing to the Agency would be used to fund the
Hyatt-Thermalito litigation. This will reduce the litigation cost borne by
Member Units and delay the time when Member Unit contributions to this
litigation will be necessary," according to minutes of the Wheeler
Ridge-Maricopa district's meeting.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Beck said that was incorrect but did not
offer an explanation for how a misunderstanding might have
occurred.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">"That was my understanding at the time,"
Taube said. "If he (Beck) disagrees, maybe I misunderstood
something."<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Asked to clarify what his understanding
was at the time, Taube said it was that, "They weren't going to need to call on
member units ... because of the EWA."<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">Department of Water Resources Director
Lester Snow, through a spokesman, declined to comment on the possibility that
the proceeds from taxpayer-financed water sales to his agency may have been used
to sue his agency.<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black">In response to a formal request under the
state Public Records Act, the Kern agency said it had no records showing
environmental water account revenues being used to pay for lawyers. The official
minutes of the Kern agency's April 2007 meeting contain no mention of the
Hyatt-Thermalito lawsuit and its meetings are not
recorded.#<o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><A
href="http://www.contracostatimes.com/news/ci_12437335">http://www.contracostatimes.com/news/ci_12437335</A><o:p></o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
<P style="MARGIN: 0pt"><FONT face="Times New Roman" color=black size=4><SPAN
style="FONT-SIZE: 14pt; COLOR: black"><o:p> </o:p></SPAN></FONT></P>
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style="FONT-SIZE: 12pt; COLOR: black">++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++<o:p></o:p></SPAN></FONT></P>
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