First Electronic Water Auction

Chino Basin to auction four blocks of 9,000 acre-feet each.

Published on: Sep 28, 2009
In an innovative effort to ensure an adequate supply of water now and in the future, Chino Basin Watermaster Rancho Cucamonga will sell 36,000 acre-feet by elelectronic auction on Wednesday, Nov. 4. It is the first use of electronic auction to sell wwater as a commodity.

The water, which is currently in underground storage, will be auctioned as four blocks of 9,000 acre-feet each. "Each block will come with rights to continue its storage, or replenishment, for up to 30 years," says Ken Manning, chief executive officer of CBWM.

CBWM was established 31 years ago by San Bernardino County Superior Court. It is a massive underground reservoir that stretches more than 220 square miles and stores approximately six million acre-feet (two trillion gallons) of water. More than 190,000 acre-feet of water are pumped from the basin every year from more than 800 wells, serving a population of more than a million in three counties: San Bernardino, Riverside and Los Angeles.

The basin is within the boundaries of the Metropolitan Water District of Southern California.

Scott Slater, CBWM's general counsel and a partner of the Brownstein Hyatt Farber Schreck law firm, called the auction "an innovative way to help ensure that future generations will have not only the means to purchase and store water but have the water itself.

"It's likely," Slater continues, "that someone will ask, 'Why is this agency selling water in a time of drought?' The answer is that the basin's water, by law, isn't available to anyone except a specific group of agriculture, business and retail interests, all of which can only sell it among themselves. If those parties don't use the water, it's stranded."

CBWM's Manning adds, "By selling the 36,000 acre-feet to the highest bidder or bidders, the basin will be able to raise and invest enough money to provide funding for future capital improvement projects — projects that will serve a much broader population. We're hoping to use the water to create a revenue stream — for the replenishment and recharge of water for the next 40-50 years."

Slater called the auction "fiscally responsible." Given the present estimates of the value of water in California, he says, "The water being auctioned could fetch more than $30 million with another $30 million for storage. Sixty million dollars is a great down payment on infrastructure in times when municipalities are cash strapped.

While CBWM has 40,000 acre-feet available, 4,000 acre-feet are being dedicated to offset production from a regional de-salter, Manning adds

FTI Consulting, a Baltimore-based, international business advisory firm, is managing the auction. "We'll be pre-qualifying all bidders," says Harold Lea, senior managing director for FTI. "The auction itself, which we expect to take only a few hours, will be conducted in 'real time.' By the end of the day, the winning bid or bids will be made public." Lea said the bidding will begin at $550-600 per acre-foot.

Details on the auction are at www.cbwm.org. or call 909-484-3888.