Last week, officials of Crestview and Calleguas separately told different Crestview shareholders that Calleguas cannot demand emergency water under the Well #8 contract if meeting the demand would diminish the amount of water Crestview is able to pump and distribute to shareholders.
They explained that Calleguas’s main motivation for funding Well #8 is to enable Calleguas to get access to 25,000 acre-feet of groundwater pumping rights it has in our basin. It acquired these rights years ago by inducing pumpers to pump less than their Fox Canyon GMA allocations and buy cheaper water from Calleguas. In those transactions, the unused pumping allocations were transferred to Calleguas, but Calleguas has no wells in the basin. The stranded water is worth tens of millions of dollars.
Another possibility, they say, is that in a regional outage Fox Canyon GMA might increase Crestview’s allocation to mitigate the Calleguas emergency. Either way, they say, there is no possibility that any of Crestview’s pumping allocation could be diverted away from 100% dedication to serving its shareholders.
There is no mention in the contract of allocation transfers or emergency increases, but Section 2.6.d. says Calleguas will reimburse Crestview for “charges from FCGMA for pumping groundwater in excess of its allocation.” Perhaps that is sufficient to protect Crestview’s ability to supply shareholders with as much water as if it were not also supplying Calleguas. However, if FCGMA imposes non-monetary penalties on over-pumping, such as reducing future allocations by some portion of the overdraft, there could be controversy.
Readers are reminded that there are other problems with the Calleguas contract, described here and here. One of them is that Crestview has all the risks of cost overruns and project failure. Crestview has established no budget for the Well #8 project and has no estimates for the costs of various contingencies. A newly-recognized contingency is that the City has asked Crestview to consider connecting near neighbors to the City sewer. If that becomes a condition of the Well #8 permit, project costs would probably increase more than $1 million.