EXHIBIT 10.17
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AGREEMENT BETWEEN METROPOLITAN WATER DISTRICT OF
SOUTHERN CALIFORNIA AND CADIZ LAND COMPANY, INC. TO DEVELOP
PRINCIPLES AND TERMS FOR AGREEMENT
AND TO VERIFY PROGRAM FEASIBILITY
THIS AGREEMENT TO DEVELOP PRINCIPLES AND TERMS FOR AGREEMENT
AND TO VERIFY PROGRAM FEASIBILITY (hereinafter "Agreement") is entered
into this 23rd day of December, 1997, by Cadiz Land Company, Inc.
("CLCI"), a Delaware corporation with its principal office in Santa
Monica, California, and Metropolitan Water District of Southern
California ("Metropolitan"), a public agency formed under the
Metropolitan Water District Act, 1969 Cal. Stat. 492, Ch. 209 et seq.,
as amended, Water Code Uncodified Act 9129 (b) (the "Act").
CLCI and Metropolitan are sometimes referred to individually
as a "Party" or collectively as the "Parties".
RECITALS
A. WHEREAS, CLCI is a publicly-held agricultural company
that owns and manages substantial land and water resources throughout
Central and Southern California, including more than 27,000 acres (43
square miles) of land located in the Cadiz and Fenner valleys of San
Bernardino County, California (the "Property");
B. WHEREAS, CLCI, as one of the largest United States
growers and marketers of table grapes, stone fruit, and specialty row
crops, has developed farming operations at the Property using water-
conserving irrigation techniques and has completed an Environmental
Impact Report certified by the County of San Bernardino, which approved
the development of up to 9,600 acres of irrigated agriculture and the
withdrawal of approximately 1,000,000 acre-feet of indigenous
groundwater;
C. WHEREAS, Metropolitan was created in 1928 under the Act
for the purpose of providing supplemental water supplies to the cities
and communities of Southern California within its 5,155 square-mile
service area, which includes portions of Los Angeles, Orange, San
Diego, Riverside, San Bernardino and Ventura Counties;
D. WHEREAS, Metropolitan has entitlements to Colorado River
water pursuant to the 1928 Boulder Canyon Project Act, the United
States Supreme Court 1983 opinion in Arizona v. California and
subsequent decrees, and contracts with the United States and others;
E. WHEREAS, Metropolitan owns and operates the Colorado
River Aqueduct ("CRA"), which imports water from the Colorado River for
use in Southern California;
F. WHEREAS, Metropolitan employs an Integrated Resources
Planning process which has identified a full CRA as an integral
component to achieving long-term supply reliability required for the
region;
G. WHEREAS, Metropolitan's Integrated Resources Plan,
California law and water policy all recognize the importance of
groundwater storage and conjunctive use programs in meeting the water
supply needs of the state;
H. WHEREAS, various studies and reports prepared by public
agencies and private companies indicate that the Property overlies a
large groundwater basin that has significant water recharge and storage
capabilities, and which can yield substantial amounts of high-quality
water in excess of the present and projected agricultural requirements
of CLCI;
I. WHEREAS, various hydrological, environmental, and
engineering studies and reports, together with empirical data acquired
by CLCI from more than ten years of groundwater pumping, support the
proposition that the Property is well suited technically and
economically for a conjunctive use and storage program, involving both
storage of Colorado River water and transfer of indigenous groundwater,
subject to Metropolitan's final review and verification of such
studies, reports, and empirical data;
J. WHEREAS, the Parties have discussed and are reviewing
the feasibility of such a program on the Property and therefore desire
to commence negotiating an appropriate water management strategy and
program that achieves reasonable and beneficial conjunctive use of
Colorado River water and CLCI's indigenous groundwater by the operation
of a conjunctive use and storage program that entails the delivery of
high quality, reliable, supplemental water supplies to Metropolitan on
a long-term basis for use within its service area, provided mutually
satisfactory terms and conditions for the storage and extraction of
Metropolitan's Colorado River water and transfer of CLCI's indigenous
groundwater can be reached by the Parties; and
K. WHEREAS, the Parties desire to document their
demonstrated commitment by entering into this Agreement.
NOW, THEREFORE, the Parties hereby enter into this Agreement
and agree to work jointly and cooperatively to complete the following
tasks by March 31, 1998: (i) verify the feasibility of such a program
in accordance with Section 1, (ii) negotiate the material terms of an
agreement for a conjunctive use and storage program as described in
Section 2 ("Principles and Terms For Agreement") and (iii) explore the
viability of implementing certain additions to the program identified
in Section 3. In negotiating the Principles and Terms For Agreement,
the Parties will have the responsibilities and will follow the
procedures set forth in Section 4.
SECTION 1: ISSUES FOR VERIFICATION.
CLCI has provided to Metropolitan a number of studies, reports,
and documents that support the feasibility of a conjunctive use and
storage program on the Property that would result in the ability to
deliver high-quality and reliable supplemental water supplies to
Metropolitan on a long-term basis for use in Metropolitan's service
area. Metropolitan has performed a preliminary review of these
studies, reports and documents and, based on this preliminary review,
believes that such a program is technically feasible and merits serious
consideration by Metropolitan. The Parties agree to cooperate in
verifying the findings in the studies, reports and documents, the
technical feasibility of such a program, the practical and financial
feasibility of such a program, and the Parties' relative legal rights
to enter into the proposed program as the first phase of work under
this Agreement.
SECTION 2: PRINCIPLES AND TERMS FOR AGREEMENT.
Assuming negotiations result in terms which are acceptable to both
Parties, the negotiated Principles and Terms For Agreement will be sent
to the respective governing Boards of both Parties for approval and for
direction for the Parties to then draft a comprehensive agreement based
on the Principles and Terms For Agreement and completion of all
environmental documentation. The Principles and Terms For Agreement
will set forth the significant terms and principles for a comprehensive
agreement for a conjunctive use and storage program at the Property
("Core Program") that would provide for the cost-effective and
beneficial storage of Metropolitan's Colorado River water, produce a
new and reliable dry-year source of significant water supplies, and
improve the quality of water conveyed through the CRA.
The Principles and Terms For Agreement would reflect certain
material terms negotiated between the Parties, including but not
limited to the following, which are described below in greater detail:
refinement and review of a Core Program proposal, the financing and
ownership of any Core Program facilities, the duration and appropriate
fee structure of a Core Program, a schedule for the implementation of
the water supply benefits available under a Core Program, and full and
complete compliance with applicable environmental laws.
2.1. CORE PROGRAM.
2.1.1. The Core Program would provide Metropolitan with a dry-
year source for up to 100,000 acre-feet/year of water having a low
concentration of total dissolved solids ("TDS"). This dry-year source
would be made up of a combination of stored imported water and
indigenous low-TDS groundwater. The storage operations of the Core
Program would involve conveyance of Colorado River water via a 35-mile
pipeline from the CRA to the Property during periods of available
supply. The imported water would be stored in the groundwater aquifers
underlying the Property. This water and indigenous groundwater would
be extracted by wells and conveyed to the CRA according to scheduled
delivery periods as agreed upon by the Parties.
2.1.2. The capabilities of the Core Program would be on the order
of the following:
* Put operations ("Put") refer to the conveyance of water from the
forebay of the Iron Mountain Pumping Plant ("IMPP") on the CRA to
the Property. Put capacity at 100,000 acre-feet/year.
* Storage operations ("Storage") refer to the storage of CRA water
in the aquifers underlying the Property. Storage capacity at
500,000 acre-feet.
* Take operations ("Take") refer to extraction of stored water and
conveyance back to the CRA. Take capacity for the Core Program
at 100,000 acre-feet/year.
* Transfer operations ("Transfer") refer to extraction and
conveyance of low-TDS indigenous groundwater to the CRA.
Transfer capacity for the Core Program at 100,000 acre-feet/year
(such transfers to be consistent with a comprehensive groundwater
management plan).
Operation of the Core Program would be conducted in accordance with a
comprehensive basin management program to ensure long-term protection
of the groundwater basin.
2.2. FINANCING.
CLCI is prepared to arrange to privately finance all costs,
maintain ownership of, and fully operate the Core Program.
Alternatively, the Principles and Terms For Agreement may include the
following:
* Financial participation and/or ownership by Metropolitan.
* Financial participation and/or ownership by other public water
agencies.
2.3. FEE STRUCTURE.
Metropolitan and CLCI agree to negotiate a fee structure for
the various Core Program elements, examples of which may include the
following:
* Put, Take, Storage, and Transfer fees.
* Minimum standby fees.
* Options to purchase indigenous groundwater.
* Fee escalation formulas.
2.4. CONSTRUCTION SCHEDULE.
The Principles and Terms For Agreement would reflect
construction needs and schedule for the Core Program.
2.5. TIMETABLE AND MILESTONES.
The Principles and Terms For Agreement would reflect the
Parties commitment to establish a timetable for completing the Core
Program on the Property prior to the year 2000.
2.6. ENVIRONMENTAL COMPLIANCE.
The Parties would cooperate to ensure compliance with all
federal and state environmental laws, including but not limited to the
California Environmental Quality Act ("CEQA"), upon the execution of a
final agreement, including the designation of an appropriate lead
agency under CEQA for implementing and operating the Core Program on
the Property and for the transportation of water supplies to the
service area.
SECTION 3: POTENTIAL FUTURE ADDITIONS TO CORE PROGRAM.
Several engineering additions ("Additions") have been
identified which could potentially be added to the Core Program in the
future, based on further investigations and evaluations. Potential
Additions include, but are not limited to, the following:
* "Danby Lake Addition"
CLCI controls approximately 7,000 acres (11 square
miles) near Danby Lake, approximately 10 miles north of
the IMPP. If this property were developed as an
addition to the Core Program, total Put, Storage, Take,
and Transfer capacities could be significantly increased.
* "Dual Pipeline Addition"
A second transmission pipeline from the CRA to the
Property could be employed to increase Put, Take, and
Transfer capacities or to allow continuous cycling for
increased water quality benefits to Metropolitan's
service area.
SECTION 4: RESPONSIBILITIES OF THE PARTIES UNDER THE AGREEMENT.
4.1. REVIEW PROCEDURES.
The Parties acknowledge that Metropolitan is developing a
process for the uniform evaluation of potential storage and water
supply programs that will coincide with the activities contemplated by
this Agreement. This process will include analysis of potential
programs by a review committee established by Metropolitan. The
Parties desire to move forward expeditiously with evaluation of the
Core Program as part of Metropolitan's review process. Accordingly,
the review committee will be regularly briefed on the progress made in
the activities contemplated by this Agreement and any completed
Principles and Terms For Agreement will be brought to the review
committee for its consideration. Subject to this process, the Parties
agree to complete their respective review and evaluation procedures
with respect to the Core Program and, as appropriate, negotiate the
Principles and Terms For Agreement by March 31, 1998.
4.2. NEGOTIATION OF THE PRINCIPLES AND TERMS FOR AGREEMENT.
The Parties agree to negotiate and, as appropriate, draft the
Principles and Terms For Agreement by March 31, 1998, to be brought to
Metropolitan's governing Board for direction at the next appropriate
Board meeting. The Principles and Terms For Agreement shall be used as
the basis for drafting a comprehensive agreement.
4.3. MUTUAL UNDERSTANDING.
The Parties, by execution of this Agreement, confirm their
mutual understanding and desire to enter into good faith negotiations
toward preparation of the Principles and Terms For Agreement as soon as
reasonably practicable for the performance of the responsibilities
identified in this Agreement, including those pertaining to the
refinement and review of the Core Program proposal, the financing and
ownership of Core Program facilities, the duration and appropriate fee
structure of the Core Program, a schedule for the implementation for
the water supply benefits available under the Core Program, and full
and complete compliance with applicable environmental laws.
4.4. APPROVAL OF AGREEMENT.
This Agreement has been approved by the management of each
Party.
4.5. CONFIDENTIAL INFORMATION.
To promote the open exchange of information between the
Parties necessary to negotiate the Principles and Terms For Agreement
and investigate the Additions, each of the Parties will, to the extent
allowed by applicable law, execute concurrently with this Agreement a
Confidentiality Agreement to preserve the Parties' protected trade
secrets, proprietary information, and confidential business plans.
4.6. NOTICE.
Any notice to a Party shall be in writing and effective when
delivered to:
METROPOLITAN:
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John R. Wodraska
General Manager
Metropolitan Water District of
Southern California
350 South Grand Avenue
Los Angeles, California 90071
CLCI:
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Keith Brackpool
Chief Executive Officer
Cadiz Land Company, Inc.
100 Wilshire Boulevard, 16th Floor
Santa Monica, California 90401
IN WITNESS WHEREOF, The Parties hereto have executed this
Agreement as of the day and year first above written.
Metropolitan Water District of Southern California
By: /s/ John R. Wodraska
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John R. Wodraska
General Manager
Approved as to form:
By: /s/ N. Gregory
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N. Gregory Taylor
General Counsel
Cadiz Land Company, Inc.
By: /s/ Keith Brackpool
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Keith Brackpool
Chief Executive Officer