CADIZ INC (Form: 10-Q, Received: 11/08/2012 17:02:25)

NOTE 4 – COMMON STOCK

In October 2007, the Company agreed to the conditional issuance of up to 300,000 shares to the former sole shareholder and successor in interest to Exploration Research Associates, Inc. (“ERA”), who is now an employee of the Company. The agreement settled certain claims by ERA against the Company and provided that the 300,000 shares will be issued if and when certain significant milestones in the development of the Company’s properties are achieved.

In November 2008, the Company entered into an agreement with the law firm of Brownstein Hyatt Farber Schreck LLP to provide legal and advisory services. The primary services being provided are advising the Company as to the Water Project design and implementation, permit approvals, environmental compliance, negotiation and drafting of agreements related to the Water Project. The agreement provides for interim payments due upon completion of specified milestones with respect to the Water Project, with the fee payable in cash and/or stock. The first such milestone was satisfied on June 4, 2009, resulting in an obligation by the Company to pay a fee of $500,000, for which the parties agreed to payment in the form of 59,312 shares of the Company’s common stock valued at $8.43 per share, reflecting the fair market value of the stock on June 4, 2009.

NOTE 5 – STOCK-BASED COMPENSATION PLANS AND WARRANTS

The Company has issued options and has granted stock awards pursuant to its 2003 Management Equity Incentive Plan, 2007 Management Equity Incentive Plan, and 2009 Equity Incentive Plan. The Company has also granted stock awards pursuant to its Outside Director Compensation Plan.

2003 Management Equity Incentive Plan

In December 2003, concurrently with the completion of the Company’s then current financing arrangements with ING, the Company’s board of directors authorized the adoption of a Management Equity Incentive Plan. As of September 30, 2012, a total of 315,000 common stock options remain outstanding under this plan.

Outside Director Compensation Plan

The Cadiz Inc. Outside Director Compensation Plan was approved by Cadiz shareholders in November 2006. Under the plan, each outside director receives $30,000 of cash compensation and receives a deferred stock award consisting of shares of the Company’s common stock with a value equal to $20,000 on June 30th of each year. The award accrues on a quarterly basis, with $7,500 of cash compensation and $5,000 of stock earned for each fiscal quarter in which a director serves. The deferred stock award vests automatically on the January 31 st which first follows the award date.

2007 Management Equity Incentive Plan

The 2007 Management Equity Incentive Plan was approved by stockholders at the 2007 Annual Meeting. As of September 30, 2012, a total of 10,000 common stock options remain outstanding under this plan.

2009 Equity Incentive Plan

The 2009 Equity Incentive Plan was approved by stockholders at the 2009 Annual Meeting. The plan provides for the grant and issuance of up to 850,000 shares and options to the Company’s employees and consultants. The plan became effective when the Company filed a registration statement on Form S-8 on December 18, 2009. All options issued under the 2009 Equity Incentive Plan have a ten year term with vesting periods ranging from issuance date to 24 months. To date, 537,500 common stock purchase options have been issued under this plan and all remained outstanding as of September 30, 2012.

All options that have been issued under the above plans have been issued to officers, employees and consultants of the Company. In total, options to purchase 862,500 shares were unexercised and outstanding on September 30, 2012, under the three equity incentive plans.

The Company recognized stock option related compensation costs of $239,000 and $964,000 in the nine months ended September 30, 2012 and 2011, respectively. On September 30, 2012, there was $112,000 of unamortized compensation expense relating to option awards. This unamortized compensation expense is expected to be recognized through December 2013. No options were exercised during the nine months ended September 30, 2012.

Stock Awards to Directors, Officers, and Consultants

The Company has granted stock awards pursuant to its 2007 Management Equity Incentive Plan, 2009 Equity Incentive Plan and Outside Director Compensation Plan.

250,000 shares were issued under the 2007 Management Equity Incentive Plan. A 150,000 share award was issued that vested in three equal installments on January 1, 2008, January 1, 2009, and January 1, 2010. Of the remaining 100,000 shares reserved under the 2007 Management Equity Incentive Plan, 10,000 were issued as options as described above, and 90,000 were issued as shares that vested in May 2009 consistent with the terms of the agreements pursuant to which those executives provide services to the Company.

Of the total 850,000 shares reserved under the 2009 Equity Incentive Plan, a grant of 115,000 restricted shares of common stock became effective on January 14, 2010, and a grant of 140,000 restricted shares of common stock became effective on January 10, 2011, consistent with the terms of the agreements pursuant to which those executives provide services to the Company and which contemplate that such executives will participate in the Company’s long-term incentive plans. The recipients of these restricted shares have a contractual agreement not to sell any of these shares for a period of three years following the effective date. Of the remaining 595,000 shares reserved under the 2009 Equity Incentive Plan, 22,782 shares of common stock were awarded to directors, 537,500 were issued as options as described above and 34,718 are available for future distribution as of September 30, 2012.

Under the Outside Director Compensation Plan, 72,782 shares have been awarded for the plan years ended June 30, 2003, through June 30, 2012. Of the 72,782 shares awarded, 58,987 shares have vested and been issued. The remaining 13,795 shares will vest on January 31, 2013.

The Company recognized stock based compensation costs related to stock based awards of $74,000 and $1,105,000 in the nine months ended September 30, 2012 and 2011, respectively.

Stock Purchase Warrants Issued to Non-Employees

The Company accounts for equity securities issued to non-employees in accordance with the provisions of ASC 718 and ASC 505.

In October and November 2009, the Company raised $7.1 million with a private placement of 226,200 Units at $31.50 per Unit. This includes 20,880 Units purchased by the Lenders of the Term Loan pursuant to the Lenders’ Participation Rights under the Term Loan. Each Unit consists of three (3) shares of the Company’s common stock and one (1) stock purchase warrant. The warrant entitles the holder to purchase one (1) share of common stock at an exercise price of $15 per share. The warrant has a term of three (3) years, but is callable by the Company at any time following November 1, 2010, if the closing market price of the Company’s common stock exceeds $22.50 for 10 consecutive trading days.

On November 30, 2011, the Company raised $6 million in a private placement of 666,667 shares of Common Stock at a price of $9 per share. For every three (3) shares of Common Stock issued, the Company issued (1) Common Stock purchase warrant (collectively, the “Warrants”) entitling the holder to purchase, commencing 90 days from the date of the issuance and prior to December 8, 2014, one (1) share of Common Stock at an exercise price of $13 per share.

448,423 warrants remain outstanding as of September 30, 2012.

NOTE 6 – INCOME TAXES

As of September 30, 2012, the Company had net operating loss (“NOL”) carryforwards of approximately $125 million for federal income tax purposes and $86 million for California state income tax purposes. Such carryforwards expire in varying amounts through the year 2032. Use of the carryforward amounts is subject to an annual limitation as a result of ownership changes.

In addition, on August 26, 2005, a Settlement Agreement between Cadiz, on one hand, and Sun World and three of Sun World’s subsidiaries, on the other hand, was approved by the U.S. Bankruptcy Court, concurrently with the Court’s confirmation of the amended Plan. The Settlement Agreement provides that following the September 6, 2005, effective date of Sun World’s plan of reorganization, Cadiz will retain the right to utilize the Sun World net operating loss carryovers (“NOLs”). Sun World’s Federal NOLs are estimated to be approximately $58 million.

As of September 30, 2012, the Company possessed unrecognized tax benefits totaling approximately $3.3 million. None of these, if recognized, would affect the Company's effective tax rate because the Company has recorded a full valuation allowance against these assets. Additionally, as of that date the Company had accrued approximately $321,000 for state taxes, interest and penalties related to income tax positions in prior returns. Income tax penalties and interest are classified as general and administrative expenses. The Company was not subject to any income tax penalties and interest during the nine months ended September 30, 2012.

The Company expects that the unrecognized tax benefits will decrease in the next 12 months by approximately $300,000 as a result of the expiration of statutes of limitation on December 31, 2012.

The Company's tax years 2009 through 2011 remain subject to examination by the Internal Revenue Service, and tax years 2008 through 2011 remain subject to examination by California tax jurisdictions. In addition, the Company's loss carryforward amounts are generally subject to examination and adjustment for a period of three years for federal tax purposes and four years for California purposes, beginning when such carryovers are utilized to reduce taxes in a future tax year.

Because it is more likely than not that the Company will not realize its net deferred tax assets, it has recorded a full valuation allowance against these assets. Accordingly, no deferred tax asset has been reflected in the accompanying balance sheet.

NOTE 7 – NET LOSS PER COMMON SHARE

Basic earnings per share (“EPS”) is computed by dividing the net loss by the weighted-average common shares outstanding. Options, deferred stock units, warrants and the zero coupon term loan convertible into or exercisable for certain shares of the Company’s common stock were not considered in the computation of diluted EPS because their inclusion would have been antidilutive. Had these instruments been included, the fully diluted weighted average shares outstanding would have increased by approximately 3,194,000 and 2,852,000 for the three months ended September 30, 2012 and 2011, respectively, and 3,170,000 and 2,778,000 for the nine months ended September 30, 2012 and 2011, respectively.

NOTE 8 - CONTINGENCIES

In California, third parties have the ability to file litigation challenging the approval of a project. As a result, the Company is and expects to continue to be party to various legal proceedings arising in the general course of its business, including, in particular, the development of the Water Project.

Following certification of the Water Project’s Environmental Impact Report ("EIR") in July 2012, the Company was named as a real party in interest in five lawsuits challenging the adequacy of the EIR, including four cases in California State Court and one in Federal Court. The State Court cases have since been consolidated and will be heard by one State Court judge. The Federal Court proceeding was dismissed in October 2012.

The Company cannot predict the outcome of any such proceedings, however, at present the Company does not believe that the ultimate resolution of these proceedings will have a material adverse effect on its business.

NOTE 9 – SUBSEQUENT EVENTS

On October 30, 2012 (the “Closing Date”), the Company increased the capacity of its existing Term Loan facility with an additional $5 million facility.

Under the terms of the additional facility, the Company drew $5 million on the Closing Date. All interest on the outstanding balance will accrue at 6%, with no principal or interest payments required before the maturity, which is identical to the maturity of the existing facility as it may be established from time to time (currently June 29, 2013 but subject to extension to November 1, 2013 pursuant to the Fifth Amendment to the Credit Agreement). Additionally, concurrently with the funding of the facility, the Company issued warrants to the lenders to purchase an aggregate of 250,000 shares of its common stock (“Warrants”). The Warrants have an exercise price of $10 per Warrant and must be exercised not later than two years from the date of issuance.

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the following discussion contains trend analysis and other forward-looking statements. Forward-looking statements can be identified by the use of words such as "intends", "anticipates", "believes", "estimates", "projects", "forecasts", "expects", "plans" and "proposes". Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. These include, among others, our ability to maximize value from our Cadiz, California land and water resources; and our ability to obtain new financings as needed to meet our ongoing working capital needs. See additional discussion under the heading “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2011.

Overview

Our primary asset consists of 45,000 acres of land in three areas of eastern San Bernardino County, California. Virtually all of this land is underlain by high-quality, naturally recharging groundwater resources, and is situated in proximity to the Colorado River and the Colorado River Aqueduct (“CRA”), the major source of imported water for Southern California. Our main objective is to realize the highest and best use of these land and water resources in an environmentally responsible way.

For more than 20 years, we have maintained an agricultural development at our property in the Cadiz Valley, relying upon groundwater from the underlying aquifer system for irrigation. In 1993, we secured permits for agricultural production on up to 9,600 acres of the 34,000-acre Cadiz Valley property and the withdrawal of more than one million acre-feet of groundwater from the underlying aquifer system. Since that time, we have maintained various levels of agricultural development at the property and this development has provided our principal source of revenue. Although sustainable agricultural development is an important and enduring component of our business, we believe that the long-term value of our assets can best be derived through the development of a combination of water supply and storage projects at our properties.

The primary factors that drive the value of water supply and storage projects are continued population growth and sustained pressure on water supplies throughout California, including environmental restrictions and regulatory shortages on each of the State’s three primary water sources: the State Water Project, the Colorado River and the Los Angeles Aqueduct. Southern California’s water providers rely on these imported sources for a majority of their water supplies. State Water Project deliveries are presently limited to just 60% of capacity for the year. Availability of supplies in California also differs greatly from year to year due to natural hydrological variability. For example, an historic drought from 2007 – 2009 was followed by above-average rainfall in 2010 and average rainfall in 2011 and 2012. With the region’s population expected to continue to grow, Southern California water providers are presently seeking new, reliable supply solutions to address anticipated fluctuations in traditional supplies and to plan for long-term water needs.

At present, our development efforts are primarily focused on the Cadiz Valley Water Conservation, Recovery and Storage Project (“Water Project” or “Project”), which proposes to capture and conserve millions of acre-feet of native groundwater currently being lost to evaporation from the aquifer system beneath our Cadiz Valley property and deliver it to water providers throughout Southern California (see “Water Resource Development”) . We believe that the ultimate implementation of this Water Project will create the primary source of our future cash flow and, accordingly, our working capital requirements relate largely to the development activities associated with this Water Project.

Additionally, we are currently exploring opportunities to enter the water transportation market, and have executed two separate option agreements that, if exercised, would allow us to purchase a total of approximately 300 miles of existing, idle underground natural gas pipelines in Southern California for conversion to water transmission (see “Other Development Opportunities”). Initial feasibility studies indicate that the pipelines have excellent potential to be utilized by the Water Project and/or to move water into other areas of the region that currently lack access to water transportation infrastructure.

Further, we continue to explore additional uses of our land and water resource assets, including siting solar energy facilities and the development of a habitat mitigation bank. We plan to continue our current development efforts and also pursue strategic investments in complementary business or infrastructure to meet our objectives. We cannot predict with certainty when or if these objectives will be realized.

Water Resource Development

The Water Project is designed to capture and conserve billions of gallons of renewable native groundwater currently being lost annually to evaporation from the aquifer system underlying our Cadiz/Fenner Property and provide a reliable water supply to water users in Southern California. By implementing established groundwater management practices, the Water Project will create a new, sustainable water supply for Project participants without adversely impacting the aquifer system or the desert environment. The total quantity of groundwater to be recovered and conveyed to Project participants will not exceed a long-term annual average of 50,000 acre-feet per year. The Project also offers participants the ability to carry-over their annual supply, and store it in the groundwater basin from year to year, as well as approximately one million acre-feet of storage capacity that can be used to store imported water.

Water Project facilities would include, among other things:

·	High yield wells designed to efficiently recover available native groundwater from beneath the Water Project area;

·	A 43-mile conveyance pipeline to connect the well field to the CRA;

·	A pumping plant to pump water through the conveyance pipeline from the CRA to the Project well-field, if an imported water storage component of the project is ultimately implemented;

·	An energy source to provide power to the well-field, pipeline and pumping plant; and

·	Spreading basins, which are shallow settling ponds that will be configured to efficiently percolate water from the ground surface down to the water table using subsurface storage capacity for the storage of water, if an imported water storage component of the project is ultimately implemented.

In general, several elements are needed to implement such a project: (1) a water conveyance right-of-way or pipeline from the Water Project area to a delivery system; (2) storage and supply agreements with one or more public water agencies or private water utilities; (3) environmental permits; and (4) construction and working capital financing. As described below, the first three elements have been progressed on a concurrent basis. The fourth is dependent on actions arising from the completion of the first three.

(1)	A Water Conveyance Right-of-Way or Pipeline from the Water Project Area to a Delivery System

In September 2008, we secured a right-of-way for the Water Project’s water conveyance pipeline by entering into a lease agreement with the Arizona & California Railroad Company (“ARZC”). The agreement allows for the use of a portion of the railroad’s right-of-way to construct and operate a water conveyance pipeline for a period up to 99 years. The pipeline would be used to convey water between our Cadiz Valley property and the CRA. As part of the lease agreement, the ARZC would also receive water from the Project for fire suppression and other railroad purposes.

We are also exploring the potential to utilize one of the unused natural gas pipelines (as described in “Overview” above) that exist in the Project area, to which we hold an option right, as a means to access additional distribution systems. Initial feasibility studies indicate that this pipeline could be used as a component of the Project to distribute water to Project participants in Phase I or import water for storage at the Project area in Phase II. The potential use of this pipeline by the Project has been analyzed as part of the Project’s California Environmental Quality Act (“CEQA”) process (see “Other Development Opportunities”).

(2)	Storage and Supply Agreements with One or More Public Water Agencies or Private Water Utilities

In 2010 and 2011, we entered into option and environmental cost sharing agreements with six water providers: Santa Margarita Water District (“SMWD”), Golden State Water Company (a wholly-owned subsidiary of American States Water [NYSE: AWR]), Three Valleys Municipal Water District, Suburban Water Systems (a wholly owned subsidiary of SouthWest Water Company), Jurupa Community Services District and California Water Service Company, the third largest investor-owned American water utility. The six water providers serve more than one million customers in cities throughout California’s San Bernardino, Riverside, Los Angeles, Orange and Ventura Counties.

Under the terms of the agreements with the six water providers, upon completion of the Water Project’s CEQA review and certification of the Final Environmental Impact Report (“Final EIR”), which occurred on July 31, 2012, each agency has the right to acquire an annual supply of 5,000 acre-feet of water at a pre-determined formula competitive with their incremental cost of new water. In addition, the agencies have options to acquire storage rights in the Water Project to allow them to manage their supplies to complement their other water resources.

Following CEQA certification, SMWD was the first participant to adopt resolutions approving a Water Purchase and Sale Agreement for 5,000 acre-fee of water. The structure of the SMWD purchase agreement calls for an annually adjusted water supply payment of up to $500/AF including identified income streams, plus their pro rata portion of the capital recovery charge and operating and maintenance costs. The capital recovery charge is calculated by amortizing the total capital investment by the Company over a 30 year term.

Approximately 80% of the water to be conserved annually by the Project is now either under a Purchase and Sale Agreement or remains under option. We are currently working with the other participating agencies to convert their option agreements to definitive economic agreements and also continue to work with additional water providers interested in acquiring rights to the remaining available Project supplies. We are also in discussions with third parties regarding the imported storage aspect of this Project.

(3)	Environmental Permits

In order to properly develop and quantify the sustainability of the Water Project, and prior to initiating the formal permitting process for the Water Project, we commissioned internationally recognized environmental consulting firm CH2M HILL to complete a comprehensive study of the water resources at the Project area. Following more than a year of analysis, CH2M HILL released its study of the aquifer system in February 2010. Utilizing new models produced by the U.S. Geological Survey in 2006 and 2008, the study estimated the total groundwater in storage in the aquifer system to be between 17 and 34 million acre-feet, a quantity on par with Lake Mead, the nation’s largest surface reservoir. The study also identified a renewable annual supply of native groundwater in the aquifer system currently being lost to evaporation. CH2M HILL’s findings, which were peer reviewed by leading groundwater experts, confirmed that the aquifer system could sustainably support the Water Project.

Prior to beginning the formal environmental permitting process, we entered into a Memorandum of Understanding with the Natural Heritage Institute (“NHI”), a leading global environmental organization committed to protecting aquatic ecosystems, to assist with our efforts to sustainably manage the development of our Cadiz/Fenner Property. As part of this “Green Compact”, we will follow stringent plans for groundwater management and habitat conservation, and create a groundwater monitoring plan for the Water Project.

As discussed in (2), above, we have entered into environmental cost sharing agreements with all participating water providers. The environmental cost sharing agreements created a framework for funds to be committed by each participant to share in the costs associated with the CEQA review work. SMWD served as the lead agency for the review process. ESA Associates, a leading environmental consulting firm, was retained to prepare the Water Project’s environmental review documentation.

The CEQA process began in February 2011 with the issuance of a Notice of Preparation (“NOP”) of a Draft Environmental Impact Report (“Draft EIR”) by SMWD. SMWD held two public scoping meetings in March 2011 and released the Draft EIR in December 2011. The Draft EIR analyzed potential impacts to environmental resources at the Project area, including critical resources of the desert environment such as vegetation, mountain springs, and water and air quality. The analysis of the Project considered peer-reviewed technical reports, independently collected data, existing reports and the Project’s state of the art Groundwater Management, Monitoring and Mitigation Plan (“GMMMP”).

SMWD conducted a 100-day public comment period for the Draft EIR, hosting two public comment meetings and an informational workshop in January and February 2012. The public comment period concluded in March 2012.

On July 13, 2012, SMWD released the Final EIR and responses to comments. The Final EIR summarized that, with the exception of unavoidable short-term construction emissions, by implementing the measures developed in the GMMMP, the Project will avoid significant impacts to desert resources. A public hearing was held on July 25, 2012 by the SMWD Board of Directors to take public testimony and consider certification of the Final EIR. On July 31, 2012, the SMWD Board of Directors certified the Final EIR.

Following SMWD’s certification of the Final EIR, the San Bernardino County Board of Supervisors voted on October 1, 2012 to approve the GMMMP for the Project and adopted certain findings under CEQA, becoming the first Responsible Agency to take an approving action pursuant to the certified EIR. San Bernardino County served as a Responsible Agency in the CEQA review process as the local government entity responsible for oversight over groundwater resources in the Cadiz Valley. Earlier this year, the Company entered into a Memorandum of Understanding with the County and SMWD, creating the framework for finalizing the GMMMP in accordance with the County’s desert groundwater ordinance.

The remaining Responsible Agencies, including the Metropolitan Water District of Southern California (“Metropolitan”), will also take action as part of the CEQA process prior to construction. Project water supplies will enter Metropolitan’s CRA in accordance with its published engineering and design standards and subject to all applicable fees and charges routinely established by Metropolitan for the conveyance of water within its service territory.

(4)	Construction and Working Capital

Within the Purchase and Sale Agreement with SMWD referred to in (2), above, SMWD is further authorized to continue next steps with the Company, which includes final permitting, design, and construction.

As described above, construction would primarily consist of well-field facilities at the Water Project site, a conveyance pipeline extending approximately 43 miles along the right-of-way described in (1), above, from the well-field to the CRA, and an energy source to pump water through the conveyance pipeline between the Project well-field and the CRA. Construction financing is expected to be entirely provided with lower-cost senior debt, secured by the new facility assets.

Should the Water Project ultimately include the use of an existing natural gas pipeline as to which we hold option rights, then we will also incur costs associated with the exercise of this option and the conversion of the pipeline (see “Other Development Opportunities”, below).

Agricultural Development

Within the Cadiz Valley property, 9,600 acres have been zoned for agriculture. The infrastructure includes seven wells that are interconnected within this acreage, with total annual production capacity of approximately 13,000 acre-feet of water. Additionally, there are housing and kitchen facilities that support up to 300 employees. The underlying groundwater, fertile soil, and desert temperatures are well suited for a wide variety of fruits and vegetables.

Permanent crops currently in commercial production include certified-organic, dried-on-the-vine raisins and lemons on a total of approximately 500 acres. Both of these crops are farmed using sustainable agricultural practices.

We currently derive our agricultural revenues through the sale of our products in bulk or through independent packing facilities. We incur all of the costs necessary to produce and harvest our organic raisin crop. These raisins are then sold in bulk to a raisin processing facility. We also incur all of the costs necessary to produce our lemon crop. Once harvested, the lemons are shipped in bulk to a packing and sales facility.

In 2009, we entered into a lease agreement with a third party to develop 500 additional acres of lemon orchards; approximately one-third of the new orchard acreage has been planted to date. We expect to receive lease income once the new lemon orchards reach commercial production through a profit sharing agreement within the lease.

Although we plan to maintain our agricultural development, revenues will continue to vary from year to year based on acres in development, crop yields, and prices. Further, we do not believe that our agricultural revenues are likely to be material to our overall results of operations once we begin to receive revenues from the Water Project.

Other Development Opportunities

Water Transportation

As described above (see “Overview”), we are currently evaluating the feasibility of converting existing idle natural gas pipelines for the transportation of water, either exclusively for the distribution of third party water or, in certain segments, in conjunction with the Water Project. In September 2011, we entered into two separate agreements with El Paso Natural Gas (“EPNG”) and Questar Corporation (“Questar”) providing us with options to purchase two separate underground natural gas pipelines. In February 2012, we made a $1,000,000 payment to extend our option agreement with EPNG to April 2013. In June 2012, the option agreement with Questar was amended to extend the option period to continue through April 2013. If both purchase options are exercised they would require payments totaling $50.5 million. Initial feasibility studies indicate that, upon conversion, the two pipelines would have a combined average capacity to distribute up to 40,000 acre-feet of water per year per segment in markets that currently lack multiple pick-up and delivery water distribution segments.

Currently, the vast majority of potential water transfers in Southern California are difficult to implement because of location or the lack of space available in the existing distribution system, thereby creating a demand for additional water transfer capacity. If we are ultimately able to utilize the natural gas pipelines to provide new water transmission lines in key markets, we intend to access existing demand for water transfers and allow agencies to do so outside of the few existing systems. Further, we believe a conversion of the pipelines for water transfer use, if feasible, will allow remote water supplies to reach the urban market and could also help link Southern California groundwater systems that have been historically inaccessible.

The EPNG line, which originates in Cadiz, California, and extends 220 miles into the Central Valley, could potentially be used in conjunction with the Water Project. This potential use was evaluated in the Project’s CEQA environmental documents described above (see “Water Resource Development ” ).

Solar Energy Production

In addition to the development projects described above, we believe that our landholdings are suitable for other types of development, including solar energy production. Located in an area with strong solar irradiation, proximity to existing utility corridors, appropriate topography, and access to water supplies, our properties could provide an ideal setting for solar energy generation. State, federal and local government entities, along with environmental organizations, have issued compelling calls to increase the production of renewable energy to reduce greenhouse gas emissions and the consumption of imported fossil fuels. Solar energy development on private land, particularly in the Mojave Desert region where our properties are located, is being encouraged as an alternative to the use of federal desert lands.

We believe that our significant, contiguous private landholdings in the Mojave Desert could provide an alternative to the use of federal lands for new solar facilities in the region. Up to 20,000 acres at our Cadiz Valley property could potentially be made available for solar energy projects.

Other Property Development

Approximately 15,000 acres of our properties not currently being developed are located within areas designated by the federal government as Critical Desert Tortoise Habitat and/or Desert Wilderness Areas. We are currently exploring the potential to make certain of these properties available in a mitigation bank, which provides credits that can be acquired by entities that must acquire land to mitigate or offset development in other areas. For example, this bank could potentially service the mitigation requirements of numerous utility-scale solar development projects being considered throughout Riverside and San Bernardino County, including projects within the recently approved federal Riverside-East Solar Energy Zone.

Over the longer-term, we believe the population of Southern California, Nevada and Arizona will continue to grow, and that, in time, the economics of commercial and residential development of our properties may become attractive. Moreover, other opportunities in business or infrastructure complementary to our current objectives could provide new opportunities for our business.

We remain committed to the sustainable use of our land and water assets, and will continue to explore all opportunities for environmentally-responsible development of these assets. We cannot predict with certainty which of these various opportunities will ultimately be realized.

Results of Operations

Three Months Ended September 30, 2012, Compared to Three Months Ended September 30, 2011

We have not received significant revenues from our water resource and real estate development activity to date. As a result, we have historically incurred a net loss from operations. We had revenues of $287 thousand for the three months ended September 30, 2012, and $121 thousand for the three months ended September 30, 2011. We incurred a net loss of $4.7 million in the three months ended September 30, 2012, compared with a $4.1 million net loss during the three months ended September 30, 2011.

Our primary expenses are our ongoing overhead costs associated with the development of the Water Project (i.e. general and administrative expense) and our interest expense. We will continue to incur non-cash expenses in connection with our management and director equity incentive compensation plans.

Revenues We had revenues of $287 thousand for the three months ended September 30, 2012, and $121 thousand for the three months ended September 30, 2011. The increase in revenue in 2012 was primarily due to a larger raisin crop in 2012 in comparison to the 2011 raisin crop.

Cost of Sales Cost of sales was $293 thousand for the three months ended September 30, 2012, and $266 thousand for the three months ended September 30, 2011. The higher cost of sales reflects the higher raisin harvesting costs due to a larger raisin crop in 2012 in comparison to the 2011 raisin crop.

General and Administrative Expenses General and administrative expenses were $3.0 million during the three months ended September 30, 2012, and $2.5 million during the three months ended September 30, 2011. Non-cash compensation costs for stock and option awards are included in General and Administrative Expenses.

General and Administrative Expenses, exclusive of stock based compensation costs, totaled $2.9 million and $2.2 million for the three months ended September 30, 2012 and 2011, respectively. The higher 2012 expenses were primarily due to additional legal and consulting fees related to water development efforts in connection with the certification of the Final Environmental Impact Report, litigation costs and due diligence costs associated with the feasibility of converting the natural gas pipelines, which we currently have an option to purchase, to water transportation facilities (see “Other Development Opportunities”).

Compensation costs from stock and option awards for the three months ended September 30, 2012, were $82 thousand, compared with $276 thousand for the three months ended September 30, 2011. The expense reflects the vesting schedules of the stock and option awards under the 2009 Equity Incentive Plan. The lower 2012 expense was primarily due to lower stock based non-cash compensation costs related to stock and options issued in 2011 under the 2009 Equity Incentive Plan.

Depreciation Depreciation expense totaled $97 thousand for the three months ended September 30, 2012, and $92 thousand for the three months ended September 30, 2011.

Interest Expense, net Net interest expense totaled $1.7 million during the three months ended September 30, 2012, compared to $1.5 million during the same period in 2011. The following table summarizes the components of net interest expense for the two periods (in thousands):

	Three Months Ended
	September 30,
	2012				2011

Interest on outstanding debt		$	895			$	843
Amortization of financing costs			23				13
Amortization of debt discount			748				595
Interest income			(1	)			-

		$	1,665			$	1,451

See Notes to the Consolidated Financial Statements: Note 3 – Long-term Debt.

Other Income, net Net other income for the three months ended September 30, 2012 was $0 and $52 thousand for the three months ended September 30, 2011. The amount recorded in 2011 relates to the derivative liability associated with certain of the Term Loan’s conversion options. See Notes to the Consolidated Financial Statements: Note 3 – Long-term Debt.

Income Taxes Income tax expense for the three months ended September 30, 2012 was $3 thousand and $2 thousand for the three months ended September 30, 2011. See Notes to the Consolidated Financial Statements: Note 6 – Income Taxes.

Nine Months Ended September 30, 2012, Compared to Nine Months Ended September 30, 2011

We had revenues of $324 thousand for the nine months ended September 30, 2012, and $618 thousand for the nine months ended September 30, 2011. We incurred a net loss of $13.8 million in the nine months ended September 30, 2012, compared with a $12.1 million net loss during the nine months ended September 30, 2011.

Revenues We had revenues of $324 thousand for the nine months ended September 30, 2012, and $618 thousand for the nine months ended September 30, 2011. The decrease in revenue in 2012 was primarily due to a smaller and shorter 2011-2012 lemon harvest season in comparison to the 2010-2011 lemon harvest year, and was partially off-set by a larger 2012 raisin crop in comparison to the 2011 raisin crop.

Cost of Sales Cost of sales totaled $295 thousand during the nine months ended September 30, 2012, and $716 thousand during the nine months ended September 30, 2011. The lower cost of sales in 2012 primarily reflects the lower lemon harvesting and marketing costs due to the shorter harvest season and smaller size of the 2011-2012 lemon crop.

General and Administrative Expenses General and administrative expenses during the nine months ended September 30, 2012, totaled $8.7 million compared to $7.7 million for the nine months ended September 30, 2011. Non-cash compensation costs for stock and option awards are included in General and Administrative Expenses.

General and Administrative Expenses, exclusive of stock based compensation costs, totaled $8.4 million in the nine months ended September 30, 2012, compared with $5.6 million for the nine months ended September 30, 2011. The higher 2012 expenses were primarily due to additional legal and consulting fees related to water development efforts in connection with the certification of the Final Environmental Impact Report, litigation costs and due diligence costs associated with the feasibility of converting the natural gas pipelines, which we currently have an option to purchase, to water transportation facilities (see “Other Development Opportunities”).

Compensation costs from stock and option awards for the nine months ended September 30, 2012, were $314 thousand compared with $2.1 million for the nine months ended September 30, 2011. The expense reflects the vesting schedules of the stock and option awards under the 2009 Equity Incentive Plan. The lower 2012 expense was primarily due to lower stock based non-cash compensation costs related to stock and options issued in 2011 under the 2009 Equity Incentive Plan.

Depreciation Depreciation expense totaled $285 thousand for the nine months ended September 30, 2012, and $273 thousand for the nine months ended September 30, 2011.

Interest Expense, net Net interest expense totaled $4.8 million during the nine months ended September 30, 2012, compared to $4.2 million during the same period in 2011. The following table summarizes the components of net interest expense for the two periods (in thousands):

	Nine Months Ended
	September 30,
	2012				2011

Interest on outstanding debt		$	2,628		$	2,406
Amortization of financing costs			67			52
Amortization of debt discount			2,129			1,713
Interest income			(3	)		(2	)

		$	4,821		$	4,169

See Notes to the Consolidated Financial Statements: Note 3 – Long-term Debt.

Other Income, net Net other income for the nine months ended September 30, 2012, was $0 and $108 thousand for the nine months ended September 30, 2011. The amount recorded in 2011 is in connection to the derivative liability related to certain of the Term Loan’s conversion options. See Notes to the Consolidated Financial Statements: Note 3 – Long-term Debt.

Income Taxes Income tax expense was $8 thousand for the nine months ended September 30, 2012, and $5 thousand for the nine months ended September 30, 2011. See Notes to the Consolidated Financial Statements: Note 6 – Income Taxes.

Liquidity and Capital Resources

Current Financing Arrangements

As we have not received significant revenues from our development activities to date, we have been required to obtain financing to bridge the gap between the time water resource and other development expenses are incurred, and the time that revenue will commence. Historically, we have addressed these needs primarily through secured debt financing arrangements, private equity placements and the exercise of outstanding stock options and warrants.

Based upon our current and anticipated usage of cash resources, in connection with pre-construction activities following approval of the Final Environmental Impact Report, we will require additional working capital commencing during the first quarter of 2013 to meet our cash resource needs from that point forward and to continue to finance our operations until such time as our asset development programs produce revenues. To meet working capital requirements, we will need to seek additional debt or equity financing in the capital markets. Furthermore, to the extent the Term Loan is not converted into common stock by the lenders prior to the final maturity date, we will be required to refinance, extend or otherwise restructure the Term Loan.

We have worked with our secured lenders to structure our debt in a way which allows us to continue our development of the Water Project and minimize the dilution of the ownership interests of common stockholders. In June 2006, we entered into a $36.4 million five year zero coupon senior secured convertible term loan with Peloton Partners LLP (through an affiliate) and another lender (the “Term Loan”). On April 16, 2008, we were advised that Peloton had assigned its interest in the Term Loan to an affiliate of Lampe Conway & Company LLC (“Lampe Conway”), and Lampe Conway subsequently replaced Peloton as administrative agent of the loan. On June 4, 2009, we completed arrangements to amend the Term Loan with Lampe Conway which modified certain of the conversion features and extended the maturity date to June 29, 2013, with interest continuing to accrue at 6% per annum though maturity. Further, the conversion feature was modified to allow up to $4.55 million of principal to be converted into 650,000 shares of our Common Stock (“Common Stock”) at a conversion price of $7 per share, and the remaining principal and interest to be converted into shares of Common Stock at a conversion price of $35 per share.

On October 19, 2010, we closed a new $10 million working capital facility with Lampe Conway and our other participating lender (“the Lenders”). Under the terms of the new $10 million facility, we drew the first $5 million at closing (“First Tranche”). Also upon closing, we were granted the option to draw up to an additional $5 million over the subsequent 12 months (“Second Tranche”). We drew a total of $2 million on the Second Tranche prior to its expiration. All interest on outstanding balances accrues at 6%, with no principal or interest payments required before the new facility’s maturity date, consistent with our existing term loan facility.

The First Tranche (including accrued interest) is convertible at any time Common Stock at a price of $13.50 per share, and the Second Tranche (including accrued interest) is convertible Common Stock at $12.50 per share.

Also on October 19, 2010, our existing debt facility with the Lenders was modified as to certain of its conversion features. $20.62 million of the existing convertible debt was changed to allow for up to $2.5 million of this amount to be converted at any time into Common Stock at the price of $13.50 per share, with the remaining amount becoming non-convertible. On June 30, 2011, $2 million of the $5 million available Second Tranche was drawn. As a result of the Second Tranche draw, $4 million of the outstanding loan became convertible into 320,000 shares of Common Stock. Further, approximately $10 million of the loan that was previously convertible into approximately 290,000 shares of Cadiz common stock is no longer convertible.

In order to provide additional alternatives in connection with our structuring of financing for pre-construction activities, on August 8, 2012, we entered into an agreement with our existing Lenders providing the Company an option to extend the maturity date of our Term Loan from June 29, 2013, to November 1, 2013. As it is our intent to refinance the existing debt facility on a long-term basis, the debt continues to be classified as non-current in the consolidated balance sheet.

On October 30, 2012, we increased the capacity of our existing Term Loan facility with an additional $5 million facility. See Notes to the Consolidated Financial Statements: Note 9 – Subsequent Event.

The Term Loan is collateralized by substantially all of the assets of the Company, and contains representations, warranties and covenants that are typical for agreements of this type, including restrictions that would limit our ability to incur additional indebtedness, incur liens, pay dividends or make restricted payments, dispose of assets, make investments and merge or consolidate with another person. However, while there are affirmative covenants, there are no financial maintenance covenants and no restrictions on our ability to issue additional common stock to fund future working capital needs. The debt covenants associated with the loan were negotiated by the parties with a view towards our operating and financial condition as it existed at the time the agreements were executed. At September 30, 2012, we were in compliance with its debt covenants.

On July 8, 2011, we sold 363,636 shares of Common Stock at a price of $11 per share for total proceeds of $4 million. The proceeds were used to replace the unutilized portion of our working capital facility and for general corporate purposes.

On November 30, 2011, we raised $6 million in a private placement of 666,667 shares of Common Stock at a price of $9 per share. For every three (3) shares of Common Stock issued, we issued (1) Common Stock purchase warrant (collectively, the “Warrants”) entitling the holder to purchase, commencing 90 days from the date of the issuance and prior to December 8, 2014, one (1) share of Common Stock at an exercise price of $13 per share.

On December 14, 2011, we sold 570,000 shares of Common Stock at a price of $9 per share for total proceeds of $5.1 million.

As we continue to actively pursue our business strategy, additional financing will be required. See “Outlook”, below. The covenants in the Term Loan do not prohibit our use of additional equity financing and allow us to retain 100% of the proceeds of any equity financing. We do not expect the loan covenants to materially limit our ability to finance our water development activities.

At September 30, 2012, we had no outstanding credit facilities other than the Convertible Term Loan.

Cash Used for Operating Activities . Cash used for operating activities totaled $8.2 million and $5.3 million for the nine months ended September 30, 2012 and 2011, respectively. The cash was primarily used to fund: (i) general and administrative expenses related to our water development efforts including the certification of the Final Environmental Impact Report; (ii) litigation costs; (iii) due diligence costs associated with exploring the feasibility of converting the natural gas pipelines, which we currently have an option to purchase, to water transportation facilities; and (iv) $1.0 million in cash payments related to the extension of an option agreement with El Paso Natural Gas (see “Other Development Opportunities”).

Cash Used for Investing Activities . Cash used for investing activities during the nine months ended September 30, 2012 was $1.9 million compared with $3.1 million during the same period in 2011. The 2011 period included additional investments in well-field and environmental work related to progressing the Water Project.

Cash Provided by Financing Activities . Cash provided by financing activities for the nine months ended September 30, 2012 was $49 thousand compared with $6.0 million during the same period in 2011. The 2011 period included $4 million of proceeds by way of takedown from the Company’s shelf registration, and $2 million drawn by the Company on the second tranche of its Term Loan.

Outlook

Short Term Outlook. Based on our current and anticipated usage of cash resources, in connection with pre-construction activities following the certification of the Final Environmental Impact Report, we will require additional working capital commencing during the first quarter of 2013 to meet our cash resource needs from that point forward and to continue to finance our operations until such time as our asset development programs produce revenues. To meet working capital requirements, we will need to seek additional debt or equity financing in the capital markets. Furthermore, payments will be due under the Term Loan only to the extent that the Lenders elect not to exercise equity conversion rights prior to the Term Loan’s final maturity date. We currently expect to satisfy amounts due under the Term Loan through one or more of (a) equity conversion pursuant to the terms outlined in Note 3 to the Consolidated Financial Statements - Long-Term Debt; (b) construction financing associated with the Water Project; (c) cash generated from further development of our other properties, such as a mitigation bank; and (d) debt or equity financing in the capital markets. As previously announced by the Company in February 2012, we have engaged an investment bank specializing in infrastructure financing to lead the Company through the construction financing process for the Water Project.

We expect to continue our historical practice of structuring our financing arrangements to match the anticipated needs of our development activities. See "Long Term Outlook", below. No assurances can be given, however, as to the availability or terms of any new financing.

Long Term Outlook . In the longer term, we will need to raise additional capital to finance working capital needs, capital expenditures and any payments due under our senior secured convertible term loan at maturity. See “Current Financing Arrangements” above. Our future working capital needs will depend upon the specific measures we pursue in the development of our water resources and other development. Future capital expenditures will depend primarily on the progress of the Water Project.

We will evaluate the amount of cash needed, and the manner in which such cash will be raised, on an ongoing basis. We may meet any future cash requirements through a variety of means, including debt or equity placements, or through the sale or other disposition of assets. Equity placements would be undertaken only to the extent necessary, so as to minimize the dilutive effect of any such placements upon our existing stockholders. Limitations on our liquidity and ability to raise capital may adversely affect us. Sufficient liquidity is critical to meet our resource development activities. Although we currently expect our sources of capital to be sufficient to meet our near term liquidity needs, there can be no assurance that our liquidity requirements will continue to be satisfied. If we cannot raise needed funds, we might be forced to make substantial reductions in our operating expenses and/or sell certain of our real estate assets, which could adversely affect our ability to implement our current business plan and ultimately our viability as a company.

Recent Accounting Pronouncements

See Notes to the Consolidated Financial Statements: Note 1 - Description of Business and Summary of Significant Accounting Policies.

Certain Known Contractual Obligations

	Payments Due by Period
Contractual Obligations	Total		1 year or less		2-3 years		4-5 years		After 5 years
(in thousands)
Long-term debt obligations	$	59,354	$	59,312	$	22	$	20	$	-
Interest Expense		2,729		2,729		-		-		-
Operating leases		799		250		368		181		-
	$	62,882	$	62,291	$	390	$	201	$	-

* The above table does not reflect unrecognized tax benefits of $3.3 million, the timing of which is uncertain. Refer to Note 7 to our Annual Report on Form 10-K for the year ended December 31, 2011.

Not included in the table above is a potential obligation to pay an amount of up to 1% of the net present value of the Water Project in consideration of certain legal and advisory services to be provided to us by Brownstein Hyatt Farber Schreck LLP. The primary services being provided are advising us as to Water Project design and implementation, permit approvals, environmental compliance, negotiation and drafting of agreements related to the Water Project. This fee would be payable upon receipt of all environmental approvals and permits and the execution of binding agreements for at least 51% of the Water Project’s annual capacity. A portion of this fee may be payable in stock. Interim payments of up to $1.5 million, to be credited against the final total, would be made upon the achievement of certain specified milestones. $500 thousand of these interim payments was earned and paid in June 2009 in consideration for the legal and advisory services previously provided. This arrangement may be terminated by either party upon 60 days notice, with any compensation earned but unpaid prior to termination payable following termination.

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

As of September 30, 2012, all of the Company's indebtedness bore interest at fixed rates; therefore, the Company is not exposed to market risk from changes in interest rates on long-term debt obligations.

ITEM 4.

Controls and Procedures

Disclosure Controls and Procedures

The Company established disclosure controls and procedures to ensure that material information related to the Company, including its consolidated entities, is accumulated and communicated to senior management, including the Chairman and Chief Executive Officer (the “Principal Executive Officer”) and Chief Financial Officer (the “Principal Financial Officer”) and to its Board of Directors. Based on their evaluation as of September 30, 2012, the Company's Principal Executive Officer and Principal Financial Officer have concluded that the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and such information is accumulated and communicated to management, including the principal executive and principal financial officers as appropriate, to allow timely decisions regarding required disclosures.

Changes in Internal Controls Over Financial Reporting

In connection with the evaluation required by paragraph (d) of Rule 13a-15 under the Exchange Act, there was no change identified in the Company's internal controls over financial reporting that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal controls over financial reporting.

PART II - OTHER INFORMATION

ITEM 1.

Legal Proceedings

As noted under Item 1A, Risk Factors in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, third parties have the ability in California to file litigation challenging the approval of a project. As a result we are and expect to continue to be party to various legal proceedings arising in the general course of our business, including, in particular, the development of the Water Project.

Following certification of the Water Project’s Environmental Impact Report ("EIR") in July 2012, we were named as a real party in interest in five lawsuits challenging the adequacy of the EIR, including four cases in California State Court and one in Federal Court. The State Court cases have since been consolidated and will be heard by one State Court judge. The Federal Court proceeding was dismissed in October 2012.

We cannot predict the outcome of any such proceedings, however, at present we do not believe that the ultimate resolution of these proceedings will have a material adverse effect on our business.

ITEM 1A.

Risk Factors

There have been no material changes to the factors disclosed in Item 1A. Risk Factors in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

ITEM 3.

Defaults Upon Senior Securities

Not applicable.

ITEM 4.

Mine Safety Disclosures

Not applicable.

ITEM 5.

Other Information

On November 5, 2012, the Company held its 2012 Annual Meeting of Stockholders (the “2012 Annual Meeting”).

The Company’s stockholders elected the following directors at the 2012 Annual Meeting:

NOMINEE	VOTES FOR	VOTES WITHHELD	BROKER NON-VOTES
Keith Brackpool	7,664,458	760,514	2,270,885
Stephen E. Courter	8,035,281	389,731	2,270,885
Geoffrey Grant	8,222,408	202,604	2,270,885
Winston Hickox	8,035,101	389,911	2,270,885
Murray H. Hutchison	8,029,141	395,871	2,270,885
Raymond J. Pacini	8,035,581	389,431	2,270,885
Timothy J. Shaheen	7,729,025	695,987	2,270,885
Scott S. Slater	7,918,374	506,638	2,270,885

At the 2012 Annual Meeting, the Company’s stockholders ratified the selection by the Company's Board of Directors of PricewaterhouseCoopers LLP to continue as the Company’s independent registered public accounting firm for the fiscal year 2012 by the following vote:

	VOTES
FOR :	10,686,259
AGAINST :	9,617
ABSTAIN :	21

The Company’s stockholders approved at the 2012 Annual Meeting, on an advisory basis, the compensation of the Company’s named executive officers by the following vote:

	VOTES
FOR :	6,450,405
AGAINST :	1,431,588
ABSTAIN :	543,019
BROKER NON-VOTES:	2,270,885

ITEM 6.

Exhibits

The following exhibits are filed or incorporated by reference as part of this Quarterly Report on Form 10-Q.

10.1

Water Purchase and Sale Agreement among Cadiz Inc., Cadiz Real Estate LLC, Fenner Valley Mutual Water Company and Santa Margarita Water District dated July 31, 2012

10.2

Groundwater Management, Monitoring, and Mitigation Plan for The Cadiz Valley Groundwater Conservation, Recovery and Storage Project approved by the Santa Margarita Water District and the County of San Bernardino Board of Supervisors effective October 1, 2012

10.3

Amendment No. 6 to Credit Agreement and Amendment No. 4 to the Registration Rights Agreement among Cadiz Inc. and Cadiz Real Estate LLC, as Borrowers, the Several Lenders from time to time parties thereto, and LC Capital Master Fund Ltd., as Administrative Agent, dated as of October 30, 2012

31.1

Certification of Keith Brackpool, Chairman and Chief Executive Officer of Cadiz Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Timothy J. Shaheen, Chief Financial Officer and Secretary of Cadiz Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of Keith Brackpool, Chairman and Chief Executive Officer of Cadiz Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of Timothy J. Shaheen, Chief Financial Officer and Secretary of Cadiz Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Cadiz Inc.

By:	/s/ Keith Brackpool	November 8, 2012
	Keith Brackpool	Date
	Chairman of the Board and Chief Executive Officer
	(Principal Executive Officer)

By:	/s/ Timothy J. Shaheen	November 8, 2012
	Timothy J. Shaheen	Date
	Chief Financial Officer and Secretary
	(Principal Financial Officer)

Proposed monitoring in this Management Plan only addresses Phase I of the Cadiz Valley Groundwater Conservation, Recovery, and Storage Project. The potential storage and recovery of up to one million acre-feet of imported water was previously analyzed in 2000-2002 by the United States Bureau of Land Management in connection with its grant of a right-of-way for a project then proposed by the Metropolitan Water District of Southern California. This Management Plan will be updated and revised prior to any implementation of Phase II in order to integrate additional monitoring and mitigation requirements that may result from additional CEQA analysis and review associated with the proposed conjunctive use operations taking into account variables such as the identity of Phase II Project participants, the source of supply, volumes, and timing of deliveries.

1.2	Overview of the Management Plan

This Management Plan governs water extraction for the Project and is designed to ensure that Project operations and future irrigation under the Cadiz agricultural development will be conducted without significant adverse impacts to critical resources. While Cadiz may continue production of groundwater to irrigate agriculture within the Project area, such agricultural irrigation will be commensurately phased out as Project production increases in order to ensure that the initial average annual extraction rate of 50,000 afy is not exceeded. Under no circumstance shall combined Project production and the Cadiz agricultural operations exceed the average rate of 50,000 afy as measured over any 10-year period.

This Management Plan is designed to prevent significant adverse impacts to critical resources and to avoid Undesirable Results by collecting data and determining if observed changes in groundwater levels, groundwater quality, and land subsidence are consistent with changes projected in groundwater modeling, as described in this Management Plan and references cited herein. Critical resources identified in this Management Plan are as follows:

·	The basin aquifers tapped by the Project;

·	Springs within the Fenner Watershed, including springs of the Mojave National Preserve and BLM-managed lands;

·	Brine resources of Bristol and Cadiz Dry Lakes;

·	Air quality in the Mojave Desert region;

·	Project area vegetation; and

·	Adjacent groundwater basins, including the Colorado River and its tributary sources of water. 6

This Management Plan establishes a comprehensive network of monitoring and data collection facilities combined with procedures for comprehensive scientific review of all actions and decisions. The Management Plan includes action criteria prior to the occurrence of adverse impacts on critical resources resulting from Project operations. Implementation of specific corrective actions are meant to ensure that the adverse effects to critical resources are avoided or reduced to below specific objective standards designed to safeguard the critical resources. For example, third-party well owners can participate in a monitoring program that will trigger corrective action (e.g., provision of replacement water) if static groundwater levels in their wells drop due to Project operations. Third-party well owners not participating in the monitoring program can trigger corrective action by providing a written complaint to FVMWC. See Chapter 6 for full details of the action criteria and corrective measures. For several critical resources, including local springs, air quality, and the groundwater resources of neighboring basins, the Management Plan provides for monitoring of such critical resources even though technical research and available scientific data demonstrate that the Project is not anticipated to impact these critical resources. The monitoring is being undertaken to comport with the County’s Ordinance and the recommendations of the Groundwater Stewardship Committee, a multi-disciplinary panel of earth science and water professionals assembled by Cadiz and SMWD to provide advice and comment on the Project (see Appendix A Groundwater Stewardship Committee, Current Summary of Findings and Recommendations, Cadiz Valley Groundwater Conservation, Recovery, and Storage Project).

This Management Plan mandates specific action criteria (triggering levels) for impacts to critical resources and specified responses if an action criterion is reached. It establishes a defined process for scientific and objective review of groundwater management and a decision-making process to protect critical resources. Refinements to this Management Plan may occur during the life of the Project as more data and understanding becomes available. Such refinements will be developed in consultation with the TRP and subject to County and SMWD review and approval. Management Plan reports will be of public record. This Management Plan is intended to comply with the County's Guidelines for Preparation of a Groundwater Monitoring Plan and its Desert Groundwater Ordinance, which provides, in part, that installation of groundwater extraction wells may be excluded from the Ordinance’s permitting provisions if the Project is subject to an enforceable agreement with the County and will be managed consistent with a County-approved groundwater management plan (San Bernardino County Code §33.06552).

The Project will be comprised of three time periods: a pre-operational period, an operational period of 50 years, and a post-operational/closure period that will span a minimum of 10 years, subject to review by the TRP, FVMWC, SMWD, and the County and as necessary to address any potential effects of the Project during the post-operational period. The pre-operational phase will commence upon start of construction and will last a minimum of 12 months. Cadiz will complete and deliver all needed permits for monitoring facilities prior to the pre-operational phase. Cadiz will construct all facilities that are agreed to in this Management Plan and for which permits have been received.

This Management Plan and the MOU are not subject to extension by the parties. At the end of the Project’s operational life, however, Cadiz, FVMWC, and SMWD may seek a new authorization from the County for the extraction and conveyance of groundwater from the aquifer. Any new authorization will be subject to County review and approval and further environmental review, as well as new agreement(s) and a new groundwater management plan. The quantity of recoverable groundwater that might be available at that time would have to be re-evaluated based on operational and other data on the rates of recharge, safe yield of the aquifer, and appropriate groundwater levels.

1.3	The Project Area

The Project area is located in the eastern Mojave Desert of San Bernardino County, California approximately 200 miles east of Los Angeles, 60 miles southwest of Needles, and 40 miles northeast of Twentynine Palms. The Project wellfield is located within and south/southwest of the Fenner Gap which is centered between the Marble and Ship Mountains east of Cadiz.

The Project area can be divided into four areas for discussion purposes. The first and largest is the area encompassed by the totality of Bristol, Cadiz, and Fenner Watersheds as shown in Figure 1-3 and referred to herein as the “larger watershed area.” Orange Blossom Wash is within the Bristol Watershed. The second area is the region beyond the larger watershed area which includes adjacent areas that are tributary to the Colorado River, such as the Piute Watershed. This second area is referred to herein as “adjacent regions.” All precipitation within the larger watershed area that infiltrates to the groundwater table or runs off as surface flow, ultimately discharges to Bristol or Cadiz Dry Lakes. Groundwater flow from the Fenner Watershed converges and flows through Fenner Gap ultimately making its way to Bristol and Cadiz Dry Lakes. Similarly, groundwater flow in the Orange Blossom Wash area moves downgradient to Bristol Dry Lake. The third area is the freshwater zone located between the Fenner Gap and Bristol Dry Lake, as mapped by Shafer (1964), and is referred to herein as the northern Bristol/Cadiz Sub Basin (Figure 1-3). The fourth area is the area of the proposed wellfield, which is in the vicinity of the Fenner Gap and referred to herein as the wellfield area (Figure 1-3).

The total area of the Bristol (which includes Orange Blossom Wash), Cadiz, and Fenner Watersheds is approximately 2,320 square miles. The Bristol Watershed is approximately 640 square miles, the Cadiz Watershed is 590 square miles, and the Fenner Watershed is approximately 1,090 square miles.

These Watersheds are considered to be a single closed drainage system because all surface and groundwater drains to central lowland areas of the Bristol and Cadiz Dry Lakes. The Bristol, Cadiz, and Fenner Watersheds are separated from the surrounding watersheds within the adjacent regions by topographic divides (generally mountain ranges).

A map of key current and future Project facilities is shown in Figure 1-4.

1.4	The Parties

The Project and the Management Plan are the joint efforts of SMWD, Cadiz, FVMWC, and the County in accordance with the County’s Guidelines for Preparation of a Groundwater Monitoring Plan.

1.4.1 Santa Margarita Water District

SMWD was initially formed in 1964 by landowners seeking a reliable water supply, and it has grown into the second largest retail water agency in Orange County. It supplies clean, affordable, reliable water and wastewater services to over 155,000 residents and businesses in Mission Viejo, Rancho Santa Margarita, and the unincorporated areas of Coto de Caza, Las Flores, Ladera Ranch, and Talega. When implemented, the Project will diversify SMWD’s water portfolio and help drought-proof the District to ensure its water demands are met regardless of variability in State Water Project supplies. As part of a public-private partnership with Cadiz Inc., SMWD will be the public agency carrying out the Project and will also be the public agency with the greatest responsibility for supervising the Project. Specifically, SMWD will carry out and supervise the Project through its participation in a Joint Powers Authority with FVMWC and through its role as a shareholder in FVMWC. SMWD will be responsible for management and control of Project operations and will act as the approving authority for the design and construction of the Project. SMWD (through the JPA), FVMWC, and SMWD will lease-to-own all Project facilities and control and operate the Project during its entire duration. Accordingly, SMWD is the agency most responsible for carrying out the Project.

As the Lead Agency for the Project’s California Environmental Quality Act (CEQA, Cal. Pub. Res. Code §§ 21000 et seq .) review process, SMWD is responsible for evaluating the Project’s alternatives, environmental impacts, and potential mitigation measures. A draft of the Management Plan was included as an appendix to the EIR for the Project, and its provisions were evaluated in the EIR. Prior to approval of the Management Plan, SMWD as the lead agency and the County as a responsible agency will be required to determine whether the Project, including the Management Plan, were adequately evaluated in the EIR and to make any required findings under CEQA.

SMWD shall enforce the implementation of all adopted mitigation measures, including those measures which correspond to provisions of the Management Plan, as conditions of Project approval. SMWD will, pursuant to CEQA Guideline section 15097(a), delegate to the County the reporting and monitoring responsibilities for those mitigation measures and conditions of approval that are subject to County jurisdiction under its Ordinance and the MOU. SMWD shall review and consider the County’s on-going determination of compliance with those mitigation measures which are also provisions of the Management Plan in assessing compliance with the Mitigation Monitoring and Reporting Program and with the conditions of Project approval.

1.4.2 Cadiz Inc.

Founded in 1983, Cadiz Inc. (Cadiz) is a renewable resources company based in Los Angeles. Using integrated satellite imagery and geological, geophysical, and geochemical survey methods, the company has identified and acquired 34,000 acres of land in Cadiz Valley situated over a large, naturally recharging basin. Cadiz's goal is for this basin to provide a high-quality, reliable water supply to Southern Californians, as well as much-needed underground storage for surplus water, all without causing material adverse impacts to the local environment.

1.4.3 County of San Bernardino

The proposed Project lies within the unincorporated desert area of eastern San Bernardino County, where groundwater production is regulated under the County’s Desert Groundwater Management Ordinance (Ordinance) (San Bernardino Code §§ 33.06551 et seq .). A project may qualify for exclusion from the Ordinance’s permitting procedures where the operator has developed a groundwater management, monitoring and mitigation plan approved by the County that is consistent with guidelines developed by the County 7 and the County and the operator have executed a memorandum of understanding that complies with the provisions of the Ordinance (San Bernardino Code §33.06552(b)(1)). This Management Plan and the MOU amongst FVMWC, SMWD, the County, and Cadiz together are designed to serve as the Project’s compliance with the County Groundwater Management Ordinance and ensure the Project is operated to avoid significant adverse impacts to critical resources and Undesirable Results. Because approval of the Management Plan is necessary to qualify the Project for exclusion from the Ordinance and is a discretionary action, Santa Bernardino County's decision is subject to CEQA and the County is acting as a responsible agency.

1.4.4 Fenner Valley Mutual Water Company

FVMWC is a California mutual water company formed for the purpose of delivering water from the Project to its members at cost under the supervision of SMWD. Outstanding membership shares are available for issuance to Project participants, including SMWD. Cadiz will not own shares in FVMWC. FVMWC intends to contract with public agencies, including SMWD, for the purpose of forming a JPA (see California Government Code, § 6525). In the formation of this JPA, SMWD will be the designated agency in the joint powers agreement pursuant to Government Code section 6509. The Project will be operated by FVMWC (all memberships of which will be owned by SMWD and other Project participants) under the management and supervision of SMWD through a joint powers agreement between FVMWC and SMWD. FVMWC will lease all Project facilities and control and operate the Project during its entire duration. As a mutual water company, FVMWC will be controlled by the Project participants, with SMWD being the lead participant, during both the Project development and operations periods. Pursuant to this Management Plan, FVMWC shall assess technical data and responsive actions, propose refinements to the Management Plan, and corrective measures regarding compliance with the provisions of the Management Plan, and prepare and submit various annual and periodic technical reports, all in consultation with SMWD and the TRP and subject to the oversight of the County, as specified further in Chapters 6, 7, 8, and 9.

1.4.5 Other Anticipated Project Participants

In addition to the three Project parties listed above, other water service providers and additional users are expected to participate in the Project. These participants include:

·	Three Valleys Municipal Water District, which serves 133 square miles in Los Angeles County, California and includes Azusa, City of Industry, Covina, Claremont, Diamond Bar, Glendora, Hacienda Heights, La Puente, La Verne, Pomona, Rowland Heights, San Dimas, Walnut, and West Covina.

Golden State Water Company, which provides service to three water service regions across 10 California counties. Region I consists of 7 customer service areas in northern and central California and Ventura County; Region II consists of 4 customer service areas located in Los Angeles and Orange County; and Region III consists of 10 customer service areas in eastern Los Angeles County and in Orange, San Bernardino, and Imperial Counties.

Suburban Water Systems, which serves an area covering approximately 42 square miles, including all or portions of Glendora, Covina, West Covina, La Puente, Hacienda Heights, City of Industry, Whittier, La Mirada, La Habra, Buena Park, and unincorporated portions of California's Los Angeles and Orange Counties.

Jurupa Community Services District (JCSD), which provides potable water, sewer, and street lighting services to over 101,000 people located throughout 48 square miles in the Jurupa area of Riverside County. JCSD serves unincorporated areas of Riverside County as well as the communities of Jurupa Valley and Eastvale.

·	California Water Service Company (Cal Water) distributes and sells water to 1.7 million Californians through 435,000 connections. Its 24 separate water systems serve 63 communities from Chico in Northern California to the Palos Verdes Peninsula in Southern California.

·	The Arizona and California Railroad Company (ARCZ) owns and operates a railway line in a right-of-way that runs between the Cadiz property and the Colorado River. Its parent company is RailAmerica.

1.5	Project Description

The Project will include two phases:

1.5.1 Phase I

Phase I will provide for initial extraction and delivery to the CRA of up to an annual average of 50,000 afy for delivery to Project participants in compliance with this Management Plan to avoid adverse impacts to critical resources and Undesirable Results. Extraction in any given year may range from 25,000 to 75,000 afy to accommodate carryover, but shall not exceed more than an average of 50,000 afy measured over a 10-year period, inclusive of agricultural production by Cadiz. Project participants can carry over their annual allocations by storing their water in the basin for later extraction and delivery during drought or emergency conditions within the 50-year operation period.

The Project involves construction and operation of the facilities shown on Figures 1-3 and 1-4 and as described below:

·	A wellfield of up to approximately 34 extraction wells and appurtenant facilities;

·	An approximately 43-mile long conveyance pipeline and appurtenant facilities from the CRA to the wellfield, including power, generally parallel to the conveyance;

·	Instrumentation and control systems to monitor all Project operations; and

·	Observation wells, cluster wells, land survey benchmarks, extensometers, weather stations, and other appurtenant facilities necessary for this Management Plan.

The conveyance and power distribution facilities, observation wells, land survey benchmarks, and other monitoring features, along with all Project facilities, will be located on land owned by Cadiz or on easements obtained from other landowners.

1.5.2 Phase II

Phase II, subject to approval of appropriate environmental documentation, would provide conjunctive-use storage, up to a total of one million acre-feet of storage at any given time, in compliance with an updated version of the Management Plan. The County’s and SMWD’s approval of the MOU and this Management Plan does not include approval of Phase II. There are no agencies currently committed to participate in Phase II. Phase II requires potential future approvals by agencies not yet identified under terms not yet negotiated. Because of this, Phase II is still in the conceptual stage and is analyzed in the Environmental Impact Report programmatically. Subsequent CEQA review and updates to this Management Plan will be required prior to implementation of Phase II.

1.6	Project Objectives

The Project objectives are as follows:

·	Maximize beneficial use of groundwater in the Bristol, Cadiz, and Fenner Valleys by conserving and using water that would otherwise be lost to brine and evaporation;

·	Improve water supply reliability for SMWD and other Southern California water providers by developing a source of water that is not significantly affected by drought;

·	Reduce dependence on imported water by utilizing a source of water that is not dependent upon surface water resources from the Colorado River or the Sacramento-San Joaquin Delta;

·	Enhance dry-year water supply reliability within SMWD and other Southern California water provider Project participants;

·	Enhance water supply opportunities and delivery flexibility for SMWD and other participating water providers through the provision of carry-over storage and, for Phase II, imported water storage;

·	Support operational water needs of the ARZC in the Project area;

·	Create additional water storage capacity in Southern California to enhance water supply reliability;

·	Locate and design the Project in a manner that minimizes significant environmental effects and provides for sustainable operations.

1.7	Existing Groundwater Management

Cadiz owns 34,000 acres of largely contiguous land in the Cadiz and Fenner Valleys of eastern San Bernardino County, where it has farmed successfully for more than 15 years, as shown in Figure 1-3. Approximately 1,600 acres of this land has been cultivated for citrus and stone fruit orchards, vineyards, and specialty row crops.

In 1993, San Bernardino County certified an Environmental Impact Report (EIR), and granted various land use approvals for expansion of agricultural operations up to 9,600 acres on this property (referred to as the Cadiz Agricultural Program). The 1993 EIR indicated that there was, at the time, up to 1,440 acres in cultivation and that the Program would expand agricultural production in phases over a 10- to 15-year period at a rate of approximately one section (640 acres) per year. The Agricultural Program contemplated groundwater withdrawals to reach a maximum of 30,000 afy within a 40-year production period, ending in 2030. The 1993 approvals also required Cadiz to comply with a Mitigation Monitoring Program (MMP) to address the potentially significant impacts of the Agricultural Program on the environment, including groundwater resources.

As a component of the earlier approvals, the County identified specific groundwater monitoring activities to be undertaken by Cadiz. To comply with these monitoring requirements, Cadiz developed the Cadiz Valley Agricultural Development Ground Water Monitoring Plan (GWMP) to monitor water use, storage, and extraction under the proposed agricultural operations. The GWMP and MMP together were meant to ensure that Project operations and future irrigation under the Cadiz Valley agricultural development would be conducted without adverse impacts to critical resources.

In 2002, the County and Cadiz entered a Memorandum of Understanding (MOU) which granted Cadiz an exclusion from the County’s newly enacted Desert Groundwater Management Ordinance for implementation of the Cadiz Agricultural Program. The 2002 MOU required Cadiz to implement and comply with the Agricultural Program MMP and GWMP. While Cadiz may continue production of groundwater to irrigate agriculture within the Project area, the County in its consideration of this Management Plan is expected to adopt the following conditions of approval: 1) production under the Agricultural Program shall remain subject to the Agricultural Program MMP and GWMP, 2) agricultural production cannot exceed 30,000 afy, and 3) will be phased out by 2030. Groundwater production that occurs after 2030 for agricultural purposes will be conducted under this Management Plan or a separate approval secured pursuant to the County’s Desert Groundwater Management Ordinance. In addition, FVMWC shall ensure proper closure of any agricultural wells that will be taken out of production or used with the new Project. Regardless of any phasing, the average annual extraction over the 50 years of Project operations will not exceed 50,000 afy from all combined Cadiz Agricultural Program and Project pumping.

1.8	Purpose and Scope of Management Plan

The Management Plan is prepared to comply with the County Desert Groundwater Management Ordinance and the MOU by and between SMWD, FVMWC, Cadiz, and the County. The Management Plan requires monitoring of aquifer health and safe yield, groundwater levels, groundwater quality, subsidence, surface vegetation, air quality, third-party wells, and springs and to address, through corrective measures, potential significant adverse impacts to critical resources and Undesirable Results attributable to the Project. The Management Plan sets forth the plan of action to optimally manage groundwater resources, monitor and mitigate physical effects of the Project, and ensures that Project operations will be conducted without significant adverse impacts to critical resources.

This Management Plan includes the following:

1)	Description of the Project location and objectives;

2)	Description of physical characteristics of the groundwater basin;

3)	Identification of the critical resources and assessment of potential impacts in and surrounding the Project area due to Project groundwater extraction;

4)	Description of the modeling tools that will be used to refine the monitoring network and that will be used in the future to refine impact assessments and action criteria;

5)	Description of the monitoring network and identification of the locations of the features of the monitoring network;

6)	Description of the monitoring, testing, and reporting procedures that will be used to collect and analyze data;

7)	Description of the action criteria established to avoid potential significant adverse impacts to critical resources;

8)	Description of the decision-making process to be used once the action criteria are met or when the County considers refinements to this Management Plan;

9)	Description of corrective measures that may be implemented to minimize potential significant adverse impacts to critical resources;

10)	Description of objectives and requirements for a Closure Plan; and

11)	Description of the TRP and its responsibilities and procedures.

CHAPTER 2

DESCRIPTION AND CHARACTERISTICS OF GROUNDWATER BASINS AND PRESENT USES

2.1	Geologic Setting

As shown above in Figure 1-3, the study area includes the Fenner, Bristol, and Cadiz Watersheds. These watersheds are located in the Eastern Mojave Desert, which is a part of the Basin and Range Province of the western United States. The Basin and Range Province is characterized by a series of northwest/southeast trending mountains and valleys formed largely by faulting. One of the prominent features of the area is the Bristol Trough, a major structural depression caused by faulting. The Bristol Trough encompasses the Bristol and Cadiz Watersheds that together form a relatively low-land area that extends from just south of Ludlow, California on the northwest to a topographic and surface drainage divide between the Coxcomb and Iron mountains on the southwest. The Bristol and Cadiz Valleys are bounded on the southwest by the Bullion, Sheep Hole, Calumet, and Coxcomb mountains and on the northeast by the Bristol, Marble, Ship, Old Woman, and Iron mountains. The Cadiz and Bristol Dry Lakes are separated by a low topographic and surface drainage divide. The Fenner Watershed is located north of the Bristol Trough. This watershed encompasses approximately 1,100 square miles (mi2). It is bounded by the Granite, Providence, and New York mountains on the west and north and the Piute, Ship, and Marble mountains on the east and south. Fenner Gap occurs between the Marble and Ship mountains, where the surface drainage exits Fenner Watershed and enters the Bristol and Cadiz Watersheds. The Clipper Mountains rise from the southern portion of the watershed, just northwest of Fenner Gap (CH2M Hill, July 2010).

The Orange Blossom Wash Watershed is a subarea of the Bristol Watershed, that is located in the western portion of the Project area between the Marble and Bristol mountains. The Orange Blossom Wash Watershed is bounded on the west by the Granite Mountains and drains to the southeast into the Bristol Dry Lake. The Bristol and Cadiz Watersheds are located in the southern portion of the Project area. The proposed Project wellfield is located in the northern Bristol and Cadiz valleys, within and south/southwest of the Fenner Gap (CH2M HILL, July 2010).

The total area of the Bristol, Cadiz, and Fenner Watersheds is approximately 2,330 square miles and consists of the Fenner Watershed (1,090 square miles), Bristol Watershed (including the Orange Blossom Wash) (640 square miles), and Cadiz Watershed (590 square miles). The surface water drainage and groundwater flow from all four of the watersheds in this Project area drain into the Bristol and Cadiz Dry Lakes, where it joins the brine water underlying the Dry Lakes and evaporates (CH2M HILL, July 2010).

The alluvial sediments of the Fenner Valley are underlain by carbonate, granitic, and metamorphic rocks, forming a rock-bounded basin overlain with sands and gravels hundreds of feet thick. Groundwater ranges from approximately 270 to 400 feet bgs in the northeastern portion of the Project area to 140 feet bgs in the southwest, becoming shallower with increasing proximity to the Dry Lakes. Groundwater in storage has been estimated at between 17 and 34 million acre-feet. Of this amount, 4 to 10 million acre-feet is estimated to exist in the fresh water zone south of the Fenner Gap (CH2M HILL, July 2010).

2.2	Surface Water Resources

Native springs and localized wet areas associated with these springs are present in the mountain ranges in the Project vicinity, as shown in Figure 2-15 of CH2M Hill’s July 2010 Report. The closest native springs to the Project site are located to the north, in the Granite, Clipper, and Old Woman Mountains. The nearest spring is Bonanza Spring (Spring 007N015E22DS01S), which is located in the Clipper Mountains, approximately 11 miles north of the center of Fenner Gap. These springs are located in hard rock (volcanic, granitic and metamorphic rocks) formations substantially higher in elevation than the carbonate and alluvial aquifers of the groundwater basin, such that they are not in hydraulic communication with the proposed wellfield and spreading basin areas. Therefore, pumping in the carbonate aquifer and alluvial aquifer in the Project wellfield should not affect groundwater levels in the hard rock formations that supply water to the vicinity springs. Nonetheless, this Management Plan provides for monitoring of the springs to confirm that Project operations have no impact on the spring flow from these springs consistent with recommendations of the Groundwater Stewardship Committee.

The Bristol and Cadiz Dry Lake playas are the lowest points in the Project area and are separated by a low topographic and surface drainage divide. Since the four Watersheds are part of a closed drainage system, the only natural outlet for surface water and groundwater is through evaporation at the Dry Lake surfaces.

2.3	Natural Recharge

The natural recharge in the Project area watersheds has been the subject of several studies since 1970 (see Appendix D to Geoscience, September 1, 2011). The most recent study, based on data obtained from field investigations in the Fenner Gap, use of INFIL3.0 watershed soil-moisture budget model released in 2008, and three-dimensional groundwater flow model simulations for the Fenner Gap, estimated the long-term average annual natural recharge of 32,000 afy (CH2M Hill, July 2010).

The primary sources of replenishment to the groundwater system within the larger watershed area include direct infiltration of precipitation (both rainfall and snowfall) in fractured bedrock exposed in mountainous terrain and infiltration of ephemeral stream flow in sand-bottomed washes, particularly in the higher elevations of the watershed. The source of much of the groundwater recharge within the larger watershed area occurs in the higher elevations, including Bristol Mountains, Granite Mountains, Providence Mountains, Marble Mountains, New York Mountains, Piute Mountains, Old Woman Mountains, Ship Mountains, Clipper Mountains, Wood Mountains, and Hackberry Mountains (CH2M Hill, July 2010).

Most of the precipitation in the Eastern Mojave Desert accumulates during the winter months from November through March. Early summer and late fall are typically periods of little rainfall. The amount of precipitation in the Bristol, Cadiz, and Fenner Watersheds vary with differences in altitude. Average annual precipitation ranges from approximately 3 inches on the Cadiz and Bristol Dry Lakes (elevations of 545 to 595 ft amsl) to over 12 inches in the Providence and New York mountains (elevations over 7,000 ft amsl). However, most of the larger watershed area receives, on the average, 4 to 6 inches of rain annually (Geoscience, September 2011). A conceptualized model of groundwater recharge in the area is shown in Figure 2-13.

2.4	Hydrogeology

Based on available geologic and geophysical data, the principal geologic deposits in the Project area that can store and transmit groundwater (i.e., aquifers) can be divided into three units: an upper alluvial aquifer, a lower alluvial aquifer, and a bedrock aquifer consisting of Tertiary fanglomerate, Paleozoic carbonates, and fractured and faulted granitic rock. In general, these three units are in hydraulic continuity with each other and the separation is primarily due to stratigraphic differences (Geoscience, September 2011).

The alluvial aquifer system consists mainly of Quaternary alluvial sediments which consist of stream-deposited sand and gravel with lesser amounts of silt. The thickness of the alluvial aquifer varies between 200 and 800 feet. To the west of Fenner Gap, the upper aquifer is separated from the lower aquifer system by discontinuous layers of silt and clay. The average thickness of the upper aquifer in Fenner Gap is approximately 500 feet. The upper aquifer is very permeable in places and can yield 3,000 gallons per minute (gpm) or more to wells with less than 20 feet of drawdown (Geoscience, September 2011).

The lower alluvial aquifer consists of older sediments, including interbedded sand, gravel, silt, and clay. The maximum thickness of the lower aquifer is unknown but may reach over 6,000 feet in the vicinity of Bristol Dry Lake. Where these materials extend below the water table, they yield water freely to wells but are generally less permeable than the upper aquifer sediments. The Cadiz agricultural wells are screened primarily in the lower alluvial aquifer and typically yield 1,000 to 2,000 gpm (Geoscience, September 2011).

Based on findings from recent drilling in the Fenner Gap area, Tertiary fanglomerate, fractured and faulted granitic rock, and Paleozoic carbonates located beneath the lower alluvial aquifer contain groundwater and are considered a third aquifer unit. Groundwater movement and storage within the carbonate bedrock aquifer primarily occurs within secondary porosity features (i.e., fracture zones associated with faulting and cracks and cavities developed within the rocks over time) (Geoscience, September 2011).

1.5	Groundwater Storage

The volume of groundwater in storage was estimated to be about 17 million to 34 million acre-feet in the alluvium of the Fenner Valley, Orange Blossom Wash, and northern Bristol/Cadiz area, where the conservation and storage Project will be sited. Four to ten million acre-feet of groundwater lie to the west and southwest of the proposed wellfield location (Geoscience Tech Memo September 20, 2011). Estimates of groundwater in storage in various zones within the general Project area are listed in Table 2-1, which also includes estimates of the following variables: volume of aquifer, determined as the volume between the groundwater table and the base of the alluvium (saturated thickness), percent of aquifer saturated thickness that is expected to be an aquifer (to exclude clay and silt intervals that do not yield water readily), and estimated specific yield. Low and high ranges are provided for each of these variables based on previous estimates (CH2M Hill, July 2010).

Table 2-1

This storage estimate does not include water contained within the carbonate and fractured portion of the bedrock beneath the alluvial units. Recent drilling has revealed that these units also store groundwater. As such, the estimated volume of groundwater in storage is a conservative underestimate; the actual volume of groundwater in storage is larger by some unknown amount (Geoscience, September 2011). Figure 2-2 shows the storage zones used in the calculations of groundwater in storage.

2.6	Groundwater Quality

With the exception of the areas underlying and immediately adjacent to the Bristol and Cadiz Dry Lakes, the quality of the groundwater in the northern Bristol, Cadiz, and Fenner Gap area is relatively good, with total dissolved solids (TDS) concentrations typically in the range of 300 to 400 milligrams per liter (mg/L). Table 2-2 summarizes water quality data collected from an existing well on the Cadiz agricultural operations property, south/southwest of the Fenner Gap. The State of California guideline for drinking water is a maximum TDS of 1,000 mg/L. However, all groundwater having a TDS below 3,000 mg/L is considered by the State to be a potential domestic or municipal source of water supply.

TABLE 2-2: GROUNDWATER CHEMISTRY AT CADIZ ALLUVIAL AQUIFER

	CA MCL	CA SMCL	CADIZ GROUNDWATER
TDS		500-1000 mg/L	260 mg/L
Arsenic	10 μg/L		3.1 μg/L
Chloride		250‐500 mg/L	34 mg/L
Total Chromium	50 μg/L		16 μg/L
Fluoride	2.0 mg/L		1.6 mg/L
Manganese		50 μg/L	Not Detected (< 20 μg/L)
Nitrate as NO3	45 mg/L		12 mg/L
Sulfate		250‐500 mg/L	11 mg/L

CA MCL: California primary maximum contaminant levels for drinking water (chemicals affecting health and safety)

CA SMCL: California secondary maximum contaminant level for drinking water (chemicals affecting taste and odor)

mg/L = milligrams per liter

μg/L = micrograms per liter

Not Detected = not detected at or above the reportable detection limit

Source: 22 CCR §§ 64431, 64449

Table 2-3 shows water quality data obtained from recent hydrogeologic investigations in the Fenner Gap area. Overall, groundwater quality in the alluvial and carbonate aquifers is of very high quality, with low total dissolved solids. Chromium, and in particular hexavalent chromium, is a constituent of potential concern given the recently adopted California Public Health Goal for hexavalent chromium of 0.02 ug/l. Groundwater containing hexavalent chromium and/or chromium (III) could require treatment depending on the water quality standard developed by the State. Groundwater in the deeper section of the bedrock shows elevated concentrations of iron and manganese; however, the relative contribution of groundwater from these deeper bedrock units is expected to be small, such that the quality of groundwater in production is expected to be representative of the water quality of the alluvial and carbonate aquifers.

Table 2-3

At the Bristol and Cadiz Dry Lakes, surface water and shallow groundwater evaporation has concentrated dissolved salts resulting in TDS concentrations as high as 298,000 mg/L (Shafer, R. A., Report on Investigations of Conditions which Determine the Potentials for Development in the Desert Valleys of Eastern San Bernardino County, California (1964); Engineering Department Southern California Edison Company, Unpublished Report at 172, pp 12 plates; cited in Metropolitan and Cadiz Inc., Environmental Impact Report/Environmental Impact Statement (EIR/EIS) for the Cadiz Groundwater Storage and Dry-Year Supply Program (Cadiz Project) , pages 5-72, 5-80, and 5-81 (September 2001)). The location of the interface between the low-TDS “fresh” groundwater (i.e., TDS concentrations less than 1,000 mg/L) and high-TDS “saline” groundwater underlying the Dry Lakes has been mapped on the basis of data from observation wells in the area, and is shown in Figure 2-3.

2.7	Present Groundwater Production and Uses

Land use in the area consists primarily of desert conservation open space and agriculture, with limited chloride mining of the brine from the Dry Lakes and other mining, military uses, recreation, railroad, and electrical, gas, and oil utility corridors. Cadiz used, on average, 5,000 to 6,000 afy of groundwater between 1994 and 2007 for its agricultural operations. This annual usage was reduced beginning in 2007 in connection with the removal of approximately 500 acres of vineyard that had reached the end of its commercial life. Based on the current crop mix (lemons on 370 acres and grapes on 160 acres and seasonal row crops), the agricultural operations are using approximately 1800-1900 acre-feet of water per year. Another 1,070 acres are fallow and currently not irrigated.

There are also two existing salt mining operations at the Bristol and Cadiz Dry Lakes. These operations involve evaporation of the hyper-saline groundwater from the Dry Lakes to obtain remaining salts (calcium chloride and sodium chloride). One operation uses approximately 500 afy of the hyper-saline groundwater based upon recorded water extractions pursuant to California Water Code Section 4999 et seq., while it is estimated that the other operation, being approximately one-half of the size, uses approximately 250 afy for a total of 750 afy of hyper-saline groundwater.

CHAPTER 3

GROUNDWATER CONSERVATION

The Project is designed to operate consistent with California’s constitutional requirement that all waters of the state not be wasted, but rather put to fullest beneficial use. By lowering water levels in the northern Bristol/Cadiz Sub-Basin, the Project will intercept natural recharge flowing through the Fenner Gap and from Orange Blossom Wash and, during Project pumping, reverse existing groundwater gradients and retrieve water stored in alluvial aquifers to the immediate southwest and southeast of the Fenner Gap back to the Project wellfield (Geoscience, September, 20 2011). Existing groundwater gradients cause water within these alluvial aquifers to flow towards the Bristol and Cadiz Dry Lakes, where it blends with brine beneath the Dry Lakes and ultimately evaporates. Thus, the Project’s goal of lowering the water table will facilitate the recovery and conservation of this water before it is lost to the Dry Lakes where it evaporates.

This premise was studied and reported on in a technical memorandum issued by Project consultant Geoscience Support Services Inc. (Geoscience), titled Supplemental Assessment of Pumping Required for the Cadiz Valley Groundwater Conservation, Storage and Recovery Project, dated September 20, 2011. Geoscience used a variable density groundwater flow and transport model that it developed for the Project (see discussion of groundwater flow models in Chapter 4) to evaluate the savings of fresh groundwater as a result of the Project, water that would otherwise evaporate from the Dry Lakes absent the Project.

Table 3-1: Summary of Net Savings from Proposed Project Production (Average 50,000 afy/50 Years)

Natural Recharge	Time	Cumulative Reduction of Evaporative Losses [acre-feet]	Cumulative Depletion of Storage [acre-feet]	Fresh Groundwater Storage Impacted by Saline Migrations [acre-feet]	Cumulative Net Water Saving 8 from Project [acre-feet]
32,000 acre-ft/yr	At the End of 100 Years	2,210,000	220,000	173,000	1,817,000
	At the End of 50 years	1,360,000	1,090,000	177,000	93,000
16,000 acre-ft/yr	At the End of 100 Years	1,544,000	870,000	215,000	459,000
	At the End of 50 Years	745,000	1,684,000	175,000	-1,114,000
5,000 acre-ft/yr	At the End of 100 Years	470,000	1,870,000	183,000	-1,583,000
	At the End of 50 Years	221,000	2,155,000	126,000	-2,060,000

By lowering groundwater levels in the alluvial aquifers, the Project will also create space in the Sub-Basin to store imported water as part of the potential future water banking project use that may occur for the second phase of the Project. In sum, the Project will capture natural recharge, optimize conservation by retrieving groundwater presently in storage before it can evaporate, allow for the carryover of native water in storage, and set the stage of a new water bank storage opportunity that does not presently exist. As explained below in Chapters 5 and 6, this Management Plan provides for comprehensive monitoring of potential significant adverse impacts to critical resources, together with a series of action criteria and potential corrective measures, to ensure that the Project does not cause significant adverse environmental impacts to critical resources or Undesirable Results.

CHAPTER 4

ASSESSMENTS OF POTENTIAL SIGNIFICANT ADVERSE IMPACTS TO CRITICAL RESOURCES IN OR ADJACENT TO THE PROJECT AREA

As discussed above, the objectives of this Management Plan are to ensure compliance with the County Groundwater Management Ordinance and MOU and avoid material adverse impacts to critical resources or Undesirable Results. This Management Plan addresses the following critical resources:

·	The basin aquifers tapped by the Project;

·	Brine resources of Bristol and Cadiz Dry Lakes;

·	Springs within the Fenner Watershed including springs of the Mojave National Preserve and BLM-managed lands;

·	Air quality in the Mojave Desert region;

·	Project area vegetation; and

·	Adjacent groundwater basins, including the Colorado River and its tributary sources of water.

This chapter takes a conservative approach in its technical analysis of the potential adverse impacts to these critical resources as a result of the Project operations.

4.1	Potential Significant Adverse Impacts to Critical Resources Related to Basin Aquifers

For the purposes of this Management Plan, the basin aquifers include aquifers of the Fenner, Bristol, and Cadiz Watersheds as described in Section 2.4 . However, emphasis is placed on the aquifers in the vicinity of the northern Bristol/Cadiz Sub-Basin and Fenner Valley Watershed along with any aquifers that extend toward the Bristol and Cadiz Dry Lakes where analysis has shown that Project operations may have an effect. Potential impacts to critical resources or Undesirable Results include:

·	Progressive decline in groundwater levels and freshwater storage below the floor established in Section 6.9 of this Management Plan;

·	Impacts to wells owned by neighboring landowners (including wells operated in the larger Fenner Watershed area) due to Project operations;

·	Land subsidence and loss of groundwater storage capacity due to groundwater withdrawal; and

·	Induced flow of lower quality water from Bristol and Cadiz Dry Lakes.

Water resources models were developed and applied to assess these potential impacts. The specific models and their application are described below in Sections 4.1.1.1 and 4.1.1.2 .

4.1.1 Water Resources Modeling

Water resources models developed during the pre-operational phase of the Project have been, and are planned to be, used to simulate the impacts of planned Project operations. These models include the INFIL3.0 soil-moisture budget model, MODFLOW-2000/MT3D groundwater flow and solute transport model, and SEAWAT-2000 model (note that selection of models may change subject to concurrence with the TRP, SMWD, and the County based on either updates to these models or availability of comparable models). The results of simulations using these models have been used to assess potential impacts during Project operations. Results of these simulations are used to identify monitoring features and conditions to be monitored and locations and frequency of monitoring during Project operations in order to verify these model projections. During Project operations, the results of monitoring will be used to evaluate whether any action criteria are triggered and to verify simulations. Evaluation of monitoring results could result in refinements to action criteria as well as identifying areas where collection of additional data may be needed to improve the monitoring network and accuracy of simulations. Any refinements to models that monitoring data indicate may be needed will be made in accordance with the decision-making process described in Chapters 6 and 8. The specific attributes of, and simulation results from, each of the models is discussed next.

4.1.1.1

INFIL3.0

INFIL3.0 is a grid-based, distributed–parameter, deterministic water-balance watershed model, released for public use by the USGS in 2008, which is used to estimate the areal and temporal net infiltration of precipitation below the root zone (USGS, 2008). This model was used to estimate potential recoverable water for the Project. The model is based on earlier versions of INFIL code that were developed by the USGS in cooperation with the Department of Energy to estimate net infiltration and groundwater recharge at the Yucca Mountain high-level nuclear-waste repository site in Nevada. Net infiltration is the downward movement of water that escapes below the root zone, is no longer affected by evapotranspiration, and is capable of percolating to and recharging groundwater. Net infiltration may originate as three sources: rainfall, snow melt, and surface water runon (runoff and streamflow). Application of INFIL3.0 to the Fenner and Orange Blossom Wash Watersheds produced long-term average annual natural recharge estimates of approximately 32,000 afy.

This model will be updated and refined during Project operations based on data obtained from the monitoring features.

4.1.1.2

MODFLOW-2000/MT3D - Groundwater Flow and Transport Model

Geoscience Support Services, Inc. (Geoscience) developed a numerical groundwater flow and solute transport simulation of a large portion of the larger watershed area, utilizing MODFLOW2000 and MT3D. This model provides the basis for developing the variable density model described in the next section. This model, along with other identified models in Section 4.1.1.1 , will be updated and refined during Project operations based on monitoring data, and the monitoring network and action criteria refined during the Project. MODFLOW-2000 is a modular finite-difference flow model developed by the USGS to solve the groundwater flow equation.

The numerical groundwater flow and solute transport model was developed based on a conceptual model developed during the pre-operations stage incorporating the area of interest, aquifer systems, and boundary conditions. This conceptual model of hydrogeology and groundwater flow conditions in the larger watershed area will be further refined based upon a thorough analysis of the available hydrogeologic data for the modeled area, as additional information is collected from installation of the monitoring wells and extraction wells, and as monitoring data are compiled during the operations stage. The groundwater flow model will integrate quantities and distribution of recharge and discharge estimated from updates to INFIL3.0 and Project extractions. INFIL3.0 was released for public use by USGS in 2008.

4.1.1.3

Variable Density Groundwater Flow And Transport Model, Including Subsidence

A variable density flow and transport simulation utilizing SEAWAT-2000 Version 4 was also developed by Geoscience. SEAWAT-2000 Version 4 was developed by the USGS in 2008. This model simulates the transport of solute mass through a numerical solution of a mass balance equation involving fluid density, and was specifically designed to estimate the likely effects of Project operations on the projected saline/freshwater interface (northerly of the margins of the Dry Lakes). The single solute species, total dissolved solids (TDS) is transported conservatively (i.e., there is no absorption or any other losses of TDS) in the model. Sources and boundary conditions of solutes are specified as sources of salts, such as the Dry Lakes.

The model domain extends over the same area as the flow and solute transport model domain. The height and horizontal and vertical grid spacing was selected based on available data and the intended use of the model. These models include hydraulic conductivity, specific storage, effective porosity, and dispersion coefficients for each model element. Specified flux and chloride mass fraction was provided by the regional groundwater flow and solute transport model described previously.

In addition, in order to simulate subsidence potential, the variable density flow and transport model was augmented by incorporating the Subsidence and Aquifer-System Compaction (SUB) Package (Hoffmann, et. al, 2003). The SUB Package is used in conjunction with SEAWAT-2000 to simulate the elastic (recoverable) compaction and expansion and inelastic (permanent) compaction of compressible fine-grained beds (interbeds) within the aquifers. The deformation of interbeds is caused by changes in effective stress as a result of groundwater level changes. If the stress is less than the preconsolidation stress of the sediments, the deformation is elastic (i.e., recoverable). If the stress is greater than the preconsolidation stress, the deformation is inelastic (i.e., permanent).

If necessary, this model will be updated and refined during Project operations based on data obtained from the monitoring features.

4.1.2 Application of Water Resources Models

Building on prior technical investigations of area groundwater resources, geologic mapping, and recent exploratory drilling and testing, Geoscience developed a three-dimensional variable density groundwater flow and solute transport model of a portion of the total watershed area tributary to the Fenner, Bristol, and Cadiz Valleys to simulate the operation of the proposed wellfield and its effects on groundwater levels, groundwater in storage, the freshwater/saltwater interface near the Dry Lakes, and potential land subsidence. The results of Geoscience’s investigation and modeling are set forth in its report titled Cadiz Groundwater Modeling and Impact Analysis, dated September 1, 2011.

Geoscience’s groundwater model consists of a six-layer variable density flow and solute transport model constructed to simulate the groundwater conditions that underlie Fenner Valley, Fenner Gap, and a portion of the Bristol and Cadiz Dry Lakes. Recent geologic mapping, interpretive geologic cross-sections, and lithologic logs from exploratory borings and water wells, along with geologic and hydrologic data available in the literature, are used to develop the six model layers. The model layers consist of the following:

·	Layer 1 - Upper Alluvium

·	Layer 2 - Alluvium beneath the Upper Alluvium to a depth of approximately 1,200 ft

·	Layer 3 - Alluvium beneath a depth of 1,200 ft

·	Layer 4 - Fanglomerate, carbonate, lower Paleozoic sequence, and weathered granitic rocks

·	Layer 5 - Carbonate, lower Paleozoic sequence, and weathered granitic rocks

·	Layer 6 - A Detachment Fault Zone (approximately 200 ft thick) in the Fenner Gap area and weathered granitic rocks.

(Geoscience, September 1, 2011).

Geoscience simulated two wellfield configurations as shown in Figures 4-1 and 4-2. The first simulation (Configuration A) modeled a wellfield configuration of two large-capacity wells in the carbonate units encountered in the Fenner Gap area, which results in a more tightly clustered wellfield in the Fenner Gap area. The second simulation (Configuration B) assumed a more dispersed wellfield with pumping more evenly distributed among the wells.

The groundwater model developed by Geoscience assumed horizontal groundwater flow through each model layer, with vertical leakage providing hydraulic connection between the layers. The model accounted for both natural and artificial recharge, as well as discharge via evaporation at the Dry Lakes and agricultural pumping. Geoscience applied the industry standard “history matching” technique to both steady state and transient calibration. For each calibration run, the relative error was 0.15 percent for the steady-state model and 1.7 percent for the transient model, both well below the recommended relative error of 10 percent.

Geoscience simulated three recharge scenarios, including 5,000 afy, 16,000 afy, and 32,000 afy to assess effects on groundwater levels, the movement of the freshwater/saltwater interface near the Dry Lakes, and land subsidence. The 32,000 afy recharge scenario is based on USGS INFIL3.0 modeling of the soil-moisture water budget for the Fenner and Orange Blossom Wash Watershed areas. Geoscience simulated this large range in long-term average annual recharge by reducing the projected recharge by 50 percent (16,000 afy) and then to an amount that is generally equivalent to Cadiz historical agricultural pumping (5,000 afy) in order to increase the conservatism of the analysis (identify potential worst-case impacts).

After the model was calibrated, Geoscience simulated 100-year predictive runs for each of the three ranges of recharge scenarios, including 32,000 afy, 16,000 afy, and 5,000 afy. The Project Scenario assumed 32,000 afy of natural recharge and a Project wellfield clustered around Fenner Gap (Configuration A). The 32,000 afy recharge scenario was based on USGS INFIL3.0 modeling of the soil-moisture water budget for the Fenner and Orange Blossom Wash Watersheds. The two Sensitivity Scenarios, which assumed less natural recharge and a Project wellfield spread out from the Fenner Gap (Configuration B), allowed Geoscience to evaluate the potential range of worst-case impacts on groundwater levels, migration of the saline-freshwater interface, and subsidence. 9 Configuration A was utilized for the Project Scenario to account for higher transmissivity values allowing for use of fewer high capacity wells installed in the carbonate aquifer with less drawdown than comparable wells in the alluvial aquifer. Configuration B was used under the two Sensitivity Scenarios due to lower transmissivity values and the corresponding need for a greater number of wells spread out over the wellfield to limit drawdown. The model scenarios and assumptions used in each are summarized in Table 4-1.

TABLE 4-1: GEOSCIENCE GROUNDWATER MODEL ASSUMPTIONS

Model Scenario	Model Assumptions
Model Scenario	Natural Recharge (afy)	Wellfield Configuration	Groundwater Pumping Years 1 to 50 (afy)	Groundwater Pumping Years 50 to 100 (afy)
Project Scenario	32,000	Configuration A	50,000	0
Sensitivity Scenario 1	16,000	Configuration B	50,000	0
Sensitivity Scenario 2	5,000	Configuration B	50,000	0

4.1.2.2

Project Impact Findings from Groundwater Flow Model

Based on the results of its groundwater model, Geoscience made the determinations about the impact of the Project discussed in this section below. As the Project is implemented, data will be obtained from drilling and testing of Project production and monitoring wells, and monitoring data will be obtained as a part of the monitoring plan described in Chapter 5. As data are obtained, these water resources models will be periodically updated, at minimum annually during development of the Project, to continuously assess effects on critical resources and, if necessary, to revise the monitoring program, action triggers, and mitigation responses as described in Chapter 6.

4.1.2.3

Groundwater Elevations

Table 4-2 below shows the change in groundwater elevations at the end of Year 50 under each model-calculated scenario. The lowest groundwater levels (i.e., greatest impact) would occur at the center of the Project wellfield. The pumping would create a cone of depression and groundwater would flow toward the proposed wellfield from Fenner, Bristol, and Cadiz Valleys. At the end of 100 years, groundwater levels in the wellfield approach pre-Project levels for the Project scenario (full recovery in Year 117 or 67 years after cessation of pumping) (Geoscience, September 1, 2011). For the two scenarios simulating lower recharge values, the water table would return to pre-pumping levels with most of the recovery occurring near the wellfield within the first 10 years and full recovery to pre-Project levels to occur approximately 100 to almost 400 years after pumping stops. The groundwater flow model simulations show that groundwater levels are drawn down to effect capture of water that would otherwise evaporate to the Dry Lakes, and then groundwater levels recover upon cessation of pumping after Year 50. During the 50-year span of the Project, the groundwater flow model simulations show that the Project’s operation will cause a decline of groundwater levels.

TABLE 4-2: GROUNDWATER DRAWDOWN IMPACTS

Model Scenario	End of 50 Years (End of Project Pumping)		End of 100 Years (End of Model Simulation or 50 Years After Pumping Stops)
Model Scenario	Drawdown at Wellfield (feet)	Drawdown at Bristol Dry Lake (feet)	Drawdown at Wellfield (feet)	Drawdown at Bristol Dry Lake (feet)
Project Scenario	70 – 80	10 – 30	0 – 10	10 – 20
Sensitivity Scenario 1	120 – 130	10 – 60	10 – 20	30 – 40
Sensitivity Scenario 2	260 – 270	0 – 80	50 – 60	10 – 70

Figures 4-3 through 4-8 show groundwater-level drawdown for those various recharge scenarios simulated, both at the end of 50 years of pumping and then for the 50 years following the cessation of Project pumping (for a total of simulated period of 100 years). Groundwater-level drawdown decreases northward into Fenner Valley, such that drawdown effects near Danby decrease to about 15 feet, and at Interstate 40 (and certainly at Goffs) are negligible.

4.1.2.4

Depth to Groundwater

Table 4-3 shows the predicted depth to groundwater during the 50-year and 100-year model simulation period at selected locations including the center of the Project wellfield, the existing Cadiz Inc. wells, the edge of the Bristol Dry Lake, the center of Bristol Dry Lake, and the edge of Cadiz Dry Lake (Geoscience, September 1, 2011). Groundwater levels decline during the limited term of the Project (50 years) to satisfy the Project’s intended goal of capturing groundwater that is flowing to the Dry Lakes.

Pursuant to the MOU, the parties agreed to work in good faith to (i) identify the groundwater levels that will serve as monitoring targets and a “floor” for the maximum groundwater drawdown level in the Project wellfield, and (ii) establish a Projected rate of decline in the groundwater table. The floor and rate of decline are to be designed to help assess trends and operate the Project in a manner that avoids Undesirable Results or other potential significant adverse impacts to critical resources enumerated in the MOU (including saline water migration).

TABLE 4-3: GROUNDWATER MODEL DEPTH IMPACTS

Location	Time	Depth to Groundwater (feet)
Location	Time	Existing	Project Scenario	Sensitivity Scenario 1	Sensitivity Scenario 2
Center of Wellfield	End of 50 Years	354	435	486	627
Center of Wellfield	End of 100 Years	354	351	371	412
Existing Cadiz Inc. Wells	End of 50 Years	156	197	241	315
Existing Cadiz Inc. Wells	End of 100 Years	156	154	181	219
Edge of Bristol Dry Lake	End of 50 Years	33	68	95	118
Edge of Bristol Dry Lake	End of 100 Years	33	42	74	108
Center of Bristol Dry Lake	End of 50 Years	18	50	63	54
Center of Bristol Dry Lake	End of 100 Years	18	33	62	79
Edge of Cadiz Dry Lake	End of 50 Years	7	21	59	72
Edge of Cadiz Dry Lake	End of 100 Years	7	10	17	68

4.1.2.5

Saline-Freshwater Interface

Geoscience used the SEAWAT-2000 variable density groundwater flow and solute transport model to predict the movement of the saline-freshwater interface as a result of Project pumping. The location of the current saline-freshwater interface is defined by the location of the 1,000 mg/L total dissolved solids (TDS) concentration contour, which is based on groundwater quality data from historical data from wells in the area.

Results of the modeling indicate that the saline-freshwater interface in the Bristol Dry Lake area would move up to 10,400 feet northeast during Years 1 to 50 under the Project Scenario, up to 9,700 feet under Sensitivity Scenario 1, and up to 6,300 feet under Sensitivity Scenario 2. During years 50 to 100, after Project pumping has ceased and without any physical measures to impede migration, the saline-freshwater interface would continue to move northeast, reaching a total distance of 11,500 feet, 11,100 feet, and 9,200 feet under the Project Scenario, Sensitivity Scenario 1, and Sensitivity Scenario 2, respectively. Table 4-4 summarizes the maximum migration distance of the saline-freshwater boundary (Geoscience, September 1, 2011). As a precautionary measure to limit the migration of hyper-saline groundwater and protect the health of the aquifer under the County Ordinance, the saline-freshwater boundary shall be monitored and its migration limited to 6,000 ft northeast of the Dry Lakes through physical measures (e.g., injection or extraction wells) or pumping restrictions if physical measures prove ineffective.

TABLE 4-4: SALINE/FRESHWATER BOUNDARY MIGRATION

Model Scenario	Maximum Migration of Saline-Freshwater Boundary at Year 50	Maximum Migration of Saline-Freshwater Boundary at Year 100
Project Scenario	10,400 ft Northeast	11,500 ft Northeast
Sensitivity Scenario 1	9,700 ft Northeast	11,100 ft Northeast
Sensitivity Scenario 2	6,300 ft Northeast	9,200 ft Northeast

4.1.2.6

Groundwater in Storage

Based on its groundwater model, Geoscience determined that the cumulative annual change in groundwater storage would reach a maximum of -1,090,000 acre-feet (a negative sign represents a decline in groundwater storage) in Year 50 under the Project Scenario conditions. This change in storage reflects ongoing evaporation from the Dry Lakes of approximately 244,000 acre-feet and about 33,000 acre-feet of water contributed from interbed storage (“squeezing” of water out of fine-grained units, which results in the compaction as discussed below), thus resulting in an additional net loss of about 211,000 acre-feet of groundwater storage during the initial 50 years, in addition to pumping beyond the natural recharge rate. This decline in storage is approximately 3 percent to 6 percent of the total groundwater in storage in the entire watershed area, which is estimated to be 17 to 34 million acre-feet. Upon cessation of pumping after Year 50, groundwater in storage would begin to recover and the cumulative annual change in groundwater storage would be approximately -220,000 acre-feet in Year 100 under the Project Scenario. Evaporative losses to the Dry Lakes accelerate through time as groundwater levels recover between Years 50 and 100. Based on the rate of recovery projected for Years 51 to 100, the groundwater in storage would fully recover in Year 117 (67 years after Project pumping stopped). The contribution of water from interbed storage increases and the losses due to evaporation from the Dry Lakes decreases in the sensitivity scenarios, thereby resulting in conservation benefits. Table 4-5 summarizes the cumulative annual changes in groundwater storage as calculated from Geoscience’s model simulations of the three scenarios (Geoscience, September 1, 2011). The Project’s operation establishes drawdown in groundwater levels for the purposes of capturing water that would otherwise discharge to the Dry Lakes and evaporate.

TABLE 4-5: REDUCTION IN ALLUVIAL GROUNDWATER IN STORAGE

Model Scenario	Cumulative Annual Changes in Groundwater Storage at Year 50		Cumulative Annual Changes in Groundwater Storage at Year 100		Time to Full Recovery after Pumping Ceases in Year 50
Model Scenario	Volume (acre-feet)	% of Total Groundwater Storage	Volume (acre-feet)	% of Total Groundwater Storage	Time to Full Recovery after Pumping Ceases in Year 50
Project Scenario	-1,090,000	3% - 6%	-220,000	1%	67 (year 117)
Sensitivity Scenario 1	-1,680,000	5% - 10%	-870,000	3% - 5%	103 (year 153)
Sensitivity Scenario 2	-2,160,000	6% - 13%	-1,870,000	6% - 11%	390 (year 440)

4.1.2.7

Potential Land Subsidence

Because the Project involves a lowering of groundwater levels as discussed above in Chapter 3, potential land subsidence is a concern that must be evaluated and monitored. In general, the potential for land subsidence corresponds to the magnitude of groundwater level decline and the thickness of the fine-grained layers in the aquifer. Based on the results of the Geoscience groundwater model, any predicted subsidence would occur gradually and be dispersed laterally over a large area from the Fenner Gap to the Bristol and Cadiz Dry Lakes. Table 4-6 summarizes the model-predicted land subsidence over time at selected locations including the center of the wellfield, existing Cadiz wells, the edge of Bristol Dry Lake, the center of Bristol Dry Lake, and the edge of Cadiz Dry Lake (Geoscience, September 1, 2011). This degree of potential land subsidence is not expected to significantly impact the alluvial aquifer’s storage capacity because consolidation of the aquifer will occur in clay and silt intervals, which do not contribute to the useable storage capacity. Potential subsidence in the range projected is also unlikely to harm any surface structures (for example, subsidence is not expected to exceed thresholds established for railroad tracks by the Federal Railroad Administration Track Safety Standards Compliance Manual, April 1, 2007). This Management Plan provides in Chapter 6 monitoring and action criteria triggers and corrective actions that may be taken in response to the triggering of those action criteria in order to prevent significant adverse impacts to critical resources or the occurrence of Undesirable Results (including progressive subsidence).

TABLE 4-6: MAXIMUM POTENTIAL LAND SUBSIDENCE

Location	Time	Maximum Potential Land Subsidence (feet)
Location	Time	Project Scenario	Sensitivity Scenario 1	Sensitivity Scenario 2
Center of Wellfield	End of 50 Years	0.2	0.4	0.7
Center of Wellfield	End of 100 Years	0.2	0.4	0.7
Existing Cadiz Wells	End of 50 Years	0.6	1.0	1.5
Existing Cadiz Wells	End of 100 Years	0.6	1.0	1.5
Edge of Bristol Dry Lake	End of 50 Years	0.5	1.0	1.4
Edge of Bristol Dry Lake	End of 100 Years	0.5	1.0	1.7
Center of Bristol Dry Lake	End of 50 Years	0.9	1.7	1.2
Center of Bristol Dry Lake	End of 100 Years	0.9	2.1	2.7
Edge of Cadiz Dry Lake	End of 50 Years	0.1	0.4	0.5
Edge of Cadiz Dry Lake	End of 100 Years	0.1	0.4	0.6

4.2	Potential Significant Adverse Impacts to Critical Resources: Springs Within the Fenner Watershed

As discussed in the EIR, a potential adverse environmental impact that, depending on physical conditions, can result from the lowering of regional groundwater levels is the cessation or reduction of flow from area springs. Native springs are present in the vicinity of the Project within the Fenner Watershed, as shown in Figure 4-9 (CH2M Hill, August 2011). These springs support habitat of the desert environment, and some are located within the Mojave National Preserve and BLM-managed lands. However, for the reasons discussed below, the EIR concluded that the lowering of groundwater levels with the proposed Project would not impact the flow from Fenner Watershed springs.

The springs closest to the proposed Project extraction wellfield are located in the adjacent mountains and include: Bonanza Spring, Hummingbird Spring, and Chuckwalla Spring in the Clipper Mountains to the north; Willow Spring, Honeymoon Spring, Barrel Spring, and Fenner Spring in the Old Woman and Piute Mountains on the east; and Van Winkle Spring, Dripping Spring, Unnamed-17BS1, Unnamed-17GS1, Granite Cove Spring, Cove Spring, and BLM-1 and BLM-2 springs at the Southern End of the Providence Mountains. ( Id. ) The Bonanza Spring in the Clipper Mountains, which is the closest spring to the proposed extraction wellfield, is over 11 miles from the center of the Fenner Gap. ( Id. ) All Fenner Watershed springs, including Bonanza Spring, are located in crystalline hard rock formations substantially higher in elevation than the alluvial aquifer. ( Id. )

CH2M HILL was retained to evaluate the potential that the lowering of groundwater levels, as proposed by the Project, could impact the flow from Fenner Watershed springs. The results of CH2M HILL’s analysis are set forth in a report titled “Assessment of Effects of the Cadiz Groundwater Conservation Recovery and Storage Project Operations on Springs,” dated August 3, 2011. CH2M HILL reviewed the groundwater flow modeling results reported by Geoscience (Geoscience, September 1, 2011), and developed two conceptual models of the Bonanza Spring, which was chosen as an appropriate indicator spring of all springs in the Fenner Watershed because it is the closest spring to the Project’s proposed wellfield, and thus would be the most likely to experience any effect from the Project.

In the first conceptual model (Concept-1), the model assumes that there is no physical connection of the springs to a regional groundwater table. This model is based on the absence of data of a physical connection of the springs to a regional groundwater table, the elevation differences between the groundwater in the alluvial aquifer and elevation of the springs, and the distance between the saturated alluvial aquifer and springs. Under this conceptual model, the spring is fed by upstream fracture flows that are not hydraulically connected to the regional water table, and thus flow rates at the spring are independent of groundwater levels in the alluvium, and no impacts would occur to the spring as a result of Project operations.

Although there has been no data developed to date that demonstrates a direct hydraulic connection between the springs and a regional groundwater table, the second conceptual model (Concept-2) hypothetically assumed that such a connection exists to address any outstanding uncertainty. A simple numerical groundwater flow model was developed for this conceptual model to evaluate potential impacts under Concept-2, where hydraulic continuity is assumed and the regional water table forms the source of water to the springs. The model was a simple representation of a generic mountain system with similar characteristics to the Clipper Mountains, and was intended to evaluate the general response of a water table in fractured bedrock of mountains under various assumptions that are specific to the Bonanza Spring hydrogeologic conditions. The results of the Concept-2 model suggest that a ten-foot decline in groundwater levels in the alluvium adjacent to the bedrock of Bonanza Spring (an assumption derived from simulations by Geoscience discussed above) could result in about one foot of drawdown at the springs after 50 years and six to seven feet of drawdown at the springs after hundreds of years and assuming that the decline in the adjacent alluvial aquifer was maintained at ten feet of drawdown indefinitely. For example, CH2M HILL explains that after about 50 years, the drawdown would be about 10 percent of the potential maximum drawdown in the alluvial aquifer. Similarly, after about 100 years, the drawdown would be about 25 percent of the potential maximum drawdown in the alluvial aquifer. In addition, it is possible that, depending on how muted the water table response is to annual changes in precipitation, natural fluctuations of groundwater levels at the spring due to climate variability could be of a similar order of magnitude to potential Project-induced drawdown at the springs.

CH2M HILL further determined, under CEQA, that potential impacts to other springs in the southern part of Fenner Watershed are expected to be less than significant and even more remote than hypothetical potential impacts on the Bonanza Spring because those springs are at higher elevations and greater distances from the adjacent alluvial aquifer compared to Bonanza Spring. Consequently, CH2M HILL determined that any Project effect on other springs in the Fenner Watershed, assuming hydraulic continuity, should be less than significant.

In sum, because of the distance, change in elevation, and lack of hydraulic connection between the fractured crystalline bedrock and groundwater feeding the Fenner Watershed springs and the alluvial groundwater developed by the Project, there is no anticipated impact of the Project on Fenner Watershed springs. Hypothetically assuming that a hydraulic connection exists (as CH2M HILL modeled in Concept-2), impacts would be less than significant. Nonetheless, consistent with the recommendations of the Groundwater Stewardship Committee and as discussed in Chapters 5 and 6, this Management Plan provides for visual, monitoring of spring flows from Bonanza Spring, Whiskey Spring, and Vontrigger Spring. As a further precautionary management measure consistent with the County Ordinance, Project induced reductions to spring flows will be mitigated.

4.3	Potential Significant Adverse Impacts to Critical Resources: Brine Resources at Bristol and Cadiz Dry Lakes

The brine groundwater at the Bristol and Cadiz Dry Lakes support two existing salt mining operations. These operations involve evaporation of the hyper-saline groundwater from the Dry Lakes to obtain remaining salts. Potential significant adverse impacts to brine resources on Bristol and Cadiz Dry Lakes include lowering of the groundwater or brine water levels within wells and brine supply trenches used by the salt mining operations, as well as Project impacts to the chemistry of the hyper-saline groundwater evaporated by the salt mining operators (e.g., reduced calcium chloride or sodium chloride within the brine).

4.4	Potential Significant Adverse Impacts to Critical Resources: Air Quality

The Project is in the Mojave Desert Air Basin (MDAB). The MDAB is an assemblage of mountain ranges interspersed with long broad valleys that often contain Dry Lakes. Many of the lower mountains which dot the vast terrain rise from 1,000 to 4,000 feet above the valley floor. Prevailing winds in the MDAB are out of the west and southwest. These prevailing winds are due to the proximity of the MDAB to coastal and central regions and the blocking nature of the Sierra Nevada Mountains to the north; air masses pushed onshore in Southern California by differential heating are channeled through the MDAB. The MDAB is separated from the Southern California coastal and Central California valley regions by mountains where the highest elevation reaches approximately 10,000 feet, and whose passes form the main channels for these air masses.

The Mojave Desert is bordered on the southwest by the San Bernardino Mountains, which are separated from the San Gabriel Mountains by the Cajon Pass (4,200 feet). A lesser channel, the Morongo Valley, lies between the San Bernardino Mountains and the Little San Bernardino Mountains.

One potential significant adverse impact to critical resources related to air quality that, depending on physical conditions, can result from dewatering of aquifers in the vicinity of Dry Lakes is the potential to materially increase fugitive dust from the playa surface, thereby increasing the severity of area dust storms. Examples of this problem have been documented in the Mojave Desert at the Owens and Franklin Playas. To evaluate the potential for increased fugitive dust resulting from the Project, the consulting firm HydroBio was retained to evaluate whether the Project’s intended groundwater production would have an adverse effect on the generation of dust from the surface playas of the Bristol and Cadiz Dry Lakes. The results of HydroBio’s investigation are set forth in a report titled Fugitive Dust and Effects from Changing Water Table at Bristol and Cadiz Playas, San Bernardino County, California, dated August 30, 2011.

Based on sampling, HydroBio’s investigation characterized the soil chemistry and structure on the Bristol and Cadiz Playas and their immediate margins to evaluate the relationship between groundwater and surface soils (HydroBio, Fugitive Dust and Effects from Changing Water Table at Bristol and Cadiz Playas, San Bernardino, California, August 30, 2011). HydroBio’s study found that the soil and water chemistry of both Cadiz and Bristol Playas have very low quantities of the sodium salts of carbonate, bicarbonate, and sulfate that are known to cause severe fugitive dust storms from Owens and Franklin Playas. ( Id. ) The study explains that Bristol Playa does produce fugitive dust from erosion by sand grains driven by high wind across the playa surface. In this process, the quantity of sand available on the playa margin is responsible for the magnitude of the dust release. The available sand appears to have diminished over time and this is hypothesized to be due to the action of a mix of weedy species that have grown increasingly dominant over the past 50 years. As a result, the severity of Bristol Playa fugitive dust is believed to be diminishing with time. ( Id. ) Importantly, the HydroBio study concluded that changes in groundwater level, which may result from the Project’s groundwater production, will likely have no impact upon the amount of dust production from the playas or the severity of area dust storms. ( Id. )

With respect to the Cadiz Playa, the study concluded that the Cadiz Playa appears to be the sink for the sand blown from the region of the Bristol Playa directly upwind to the northwest. ( Id. ) This sand tends to be stabilized by the growth of Russian thistle (tumbleweed). While the Cadiz Playa has the same soil and water chemistry as the Bristol Playa, the copious sand dunes around the shore, particularly in the north to northeast regions result in large amounts of available sand to erode the playa surface, thereby adding dust to area dust storms. ( Id. ) However, the HydroBio study concluded that the potential lowering of groundwater levels within the Cadiz Dry Lake will not affect the amount of dust or severity of dust storms emanating from the Playa. ( Id. )

The HydroBio study explains that the reason that the potential lowering of water levels in the Bristol and Cadiz Playas will not affect fugitive dust concentrations and occurrence is that the chemistry of the soil comprising the central portions of the Playas is not of the type that causes an increase in fugitive dust as a result of lowered groundwater levels. Specifically, the study explains that the chemistry of the Bristol and Cadiz Playas is low in carbonate, bicarbonate and sulfate ions that are implicated in other playas that produce major dust storms (such as Owens and Franklin Playas). Instead, the Bristol and Cadiz Dry Lakes playa contains chemistry that has been noted to induce surface stability (Ca, Na and Cl). For these reasons, the EIR and HydroBio study concluded that the Project is not anticipated to have any material effect on the concentration of dust emanating from the Bristol and Cadiz Playas nor the severity of area dust storms. Nonetheless, consistent with the County’s anticipated conditions under its Ordinance, the recommendations of the Groundwater Stewardship Committee, and as discussed in Chapters 5 and 6, this Management Plan provides for the installation and monitoring of four nephelometers to confirm these technical conclusions and institute corrective actions if necessary.

4.5	Potential Significant Adverse Impacts to Critical Resources: Project Area Vegetation

Another potential significant adverse impact to critical resources that, depending on physical conditions, can result from lowering of groundwater levels is the lowering of groundwater tables that are accessed by area vegetation, thereby causing the stress or death of that vegetation. Vegetation in environments like that found in the Project area provides important stabilization of soils against the action of wind erosion. The consulting firm HydroBio was retained to evaluate whether the Project’s intended groundwater production would have an adverse effect on the occurrence and health of area vegetation. The results of HydroBio’s investigation are set forth in a report titled, Vegetation, Groundwater Levels and Potential Impacts from Groundwater Pumping Near Bristol and Cadiz Playas, San Bernardino, California, dated September 1, 2011. The HydroBio study concludes that there is no connection of vegetation to groundwater in the Project area, and hence, no vegetation will be affected by changes in water table elevation (HydroBio, September 1, 2011).

HydroBio began its investigation by locating the most likely vegetation in the area potentially affected by the planned groundwater pumping. This “most likely” cover was identified by its higher activity (denser growth, larger plants) than all other locations around the Bristol Playa. Observations of the Cadiz Playa indicated that this region could be eliminated from concern because the vegetation around the playa is generally no more verdant than the surrounding area, hence obviously receiving no promotion from groundwater. HydroBio observed that the lowermost edge of the higher shrub zone was the region with higher vegetation activity that appeared to have the highest potential for connection of vegetation to groundwater. ( Id. )

The HydroBio study explains that there are three shrub species that grow around the Bristol Playa: creosote bush [Larrea tridentata], cattle saltbush [Atriplex polycarpa] and four-wing saltbush [Atriplex canescens]. Of these, the only species that may act as a phreatophyte (a plant species that uses groundwater), is the four-wing saltbush, and this species is specifically a facultative phreatophyte, meaning it can benefit from but does not require shallow groundwater. ( Id. ) To determine whether any of the four-wing salt brush in the area are presently accessing groundwater, HydroBio reconstructed a curve for depth to water (DTW) versus elevation based on hydrographic data collected in the region of the Cadiz Ranch. A DTW point was added on the Bristol Playa that was reconstructed using photogrammetry. The study found that together, these points describe a highly linear relationship of DTW versus elevation above sea level (r2 = 99.9%). ( Id. ) Based on the robust and accurate relationship of the DTW curve, HydroBio estimated the DTW at the lowermost edge of the higher vegetation cover – the location most likely to have a vegetation/groundwater connection was 65 feet. Root excavations of four-wing saltbush have been measured to reach a maximum of 25 feet on only rare occasions when soils and hydrology permit, while typical root depths for the species average about 13 feet. Thus, based on measured and estimated DTW, the HydroBio study concluded that the shallowest water table position is 40 feet below the record rooting depth for the four-wing salt brush – the only species that could be potentially affected by groundwater decline. HydroBio therefore concluded that there is no connection of vegetation to groundwater in the Project area. ( Id. ) HydroBio further hypothesized that the promotional effect of periodic surface flows from the upstream catchments is the reason for the apparent promotion of this vegetation. ( Id. ) For these reasons, the EIR and HydroBio study concluded that the Project is not anticipated to have any material effect on surface vegetation in the Project area. Nonetheless, consistent with the County’s anticipated conditions under its Ordinance and as discussed in Chapters 5 and 6, this Management Plan provides for monitoring to confirm these technical conclusions and corrective actions if necessary.

4.6	Potential Significant Adverse Impacts to Critical Resources: the Colorado River and its Tributary Sources of Water

It is assumed that the groundwater that would be extracted by the Project at the Fenner Gap is not tributary to the Colorado River because the aquifer systems within the Fenner, Bristol and Cadiz Watersheds are believed to be a closed basin, isolated from aquifer systems to the east that are tributary to the Colorado River by bedrock and groundwater divides . It is important to ensure that the Project groundwater is not tributary to the Colorado River for several reasons. First, the Colorado River is fully appropriated and rights to divert water therefrom are governed by a complex set of federal and state laws. Material extractions of tributary groundwater could reduce flows in the Colorado River, thus frustrating the administration of the Colorado River and affected environmental resources.

It is also important to confirm that the Project groundwater is not tributary to the Colorado River for purposes of satisfying the provisions of the Colorado River Interim Guidelines for Lower Basin Shortages and the Coordinated Operations for Lake Powell and Lake Mead (Guidelines) administered by the U.S. Bureau of Reclamation (Reclamation), for purposes of establishing Intentionally Created Surplus (ICS) credits under the Guidelines for potential Project participants that have contracts with Reclamation for diversions from the Colorado River . Under the Conservation Component of the Project, groundwater that is non-tributary to the Colorado River would be introduced into the Colorado River Aqueduct as “new,” non-tributary water. For potential participants who have contracts with Reclamation for Colorado River water, the receipt of Project water creates the opportunity to establish ICS Credits based on the use of non-tributary water supplies in lieu of Colorado River diversions pursuant to Reclamation contracts. This opportunity could allow a participant to further augment its water supplies and improve overall water supply reliability. To qualify for ICS credits under the Guidelines, the surplus water used in lieu of Colorado River diversions must be non-tributary to the Colorado River.

While the assumption that the Project groundwater is non-tributary to the Colorado River is supported by substantial physical evidence (e.g., bedrock and groundwater divides), two monitoring wells (one existing and another to be installed) on property owned by Cadiz within the adjacent Piute Watershed that is tributary to the Colorado River will be monitored.

CHAPTER 2

MONITORING NETWORK

To ensure continued protection of the watershed and other resources, a comprehensive monitoring network has been developed to assess and continually evaluate the technical aspects of the Project, and any potential impacts to critical resources during the life of the Project, as designated in Chapter 4. The development of the monitoring network was based on the groundwater flow model that has been developed to better understand the hydrogeologic impacts of the Project’s proposed groundwater production. The groundwater flow model will be continuously refined as additional monitoring data are obtained (see discussion of groundwater flow model in Chapter 4).

This Management Plan will be implemented with a set of monitoring features and parameters as discussed in this Chapter 5. The term “feature” refers to any fixed object, either natural or man-made, from which data will be collected. Man-made features include wells from which water level measurements and water quality samples could be retrieved, weather stations, bench marks, etc. A detailed list of monitoring features is given in this Chapter 5. As new data become available during Project operations, these monitoring features, monitored parameters, and monitoring frequency may be refined to protect critical resources in and adjacent to the Project area. Refinements to monitoring features will be made in accordance with the decision-making process described in Chapters 6 and 8.

A total of thirteen different types of monitoring features have been identified for assessing potential impacts to critical resources during the term of the Project, as identified in Chapter 4. A summary of these thirteen types of monitoring features, as well as monitoring frequencies and parameters to be monitored, is provided in Tables 5-1 and 5-2. Locations are shown in Figures 5-1 and 5-2.

Installation of certain monitoring features, where construction of facilities is required, will be subject to site-specific approval and permitting by applicable regulatory agencies. Cadiz will complete and deliver all needed permits for monitoring facilities as soon as practicable prior to the 12-month pre-operational phase. Cadiz will construct all facilities that are agreed to in this Management Plan and for which permits have been received. Construction of these facilities will be completed within one year of receipt of permits. If the implementation of monitoring features currently contained in this Management Plan is not approved, Cadiz will evaluate and implement alternate monitoring sites subject to approval by SMWD and the County and the applicable regulatory agencies.

The following text describes in detail the various proposed monitoring features.

5.1	Springs (Feature 1)

An inventory of 28 known springs within the Fenner Watershed was completed by the USGS (USGS, 1984). Locations of these springs are shown on Figure 5-3. As discussed in detail in Chapter 4, the potential significant adverse impacts to these critical spring resources has been evaluated. It is not anticipated that the Project will have any impact on the springs. Nonetheless, this Management Plan provides for quarterly monitoring of the Bonanza Spring as an “indicator spring” because it is the spring that is in closest proximity to the Project wellfield (approximately 11 miles from the center of Fenner Gap), and, of all springs within the Fenner Watershed, this one would be the first one to be affected by the Project, if it were somehow possible to be in hydraulic connection with the alluvial aquifers, which appears unlikely. The Whiskey and Vontrigger Springs, which are located beyond the Project’s projected effects on groundwater levels in the alluvial aquifers of the Fenner Watershed, will also be monitored quarterly to compare variations in spring flow from those springs to variations in spring flow from the Bonanza Spring to assist in determining whether any material reduction of flow at the Bonanza Spring is attributable to the Project operation, or instead, is attributable to regional climate conditions.

The springs will be monitored on a quarterly basis by visual observations and flow measurements described in more detail in Section 6.7.2 , below. Visual observations will include starting and ending points of observed ponded or flowing water, estimated depth of ponded water and flow rate of flowing water, conductivity, pH and temperature of water, any colorations of water, and general type and extent of adjacent vegetation.

5.2	Observation Wells (Feature 2)

A total of 14 existing observation wells and 2 new observation wells will be used to monitor groundwater levels during the Project (see Tables 5-1 and 5-2). Locations of these wells are shown on Figures 5-1 and 5-2. Six of these wells were installed in the 1960’s by Southern California Edison as part of a regional investigation (wells whose designation begins with “SCE”). Four of the observation wells (Labor Camp, Dormitory, 6/15-29, 6/15-1) are owned and monitored by Cadiz as part of their agricultural operation. Existing well CI-3 was installed in Fenner Gap during the pilot spreading basin test for the Project. Existing wells at Essex, Fenner, Goffs, and Archer Siding #1 are related to railroad operations or municipal supply. All of these existing wells will be inspected to assess their ability to be utilized as observation wells, provided that appropriate permission and approval is obtained. If they are not in a condition to be utilized as observation wells, replacement wells will be constructed in the vicinity of each well deemed unusable.

One new well, Piute-1, will be installed in the Piute Watershed, north of the Fenner Watershed, and is tributary to the Colorado River. This well will be installed on property owned by Cadiz and will be used as a “background” monitoring well to monitor undisturbed groundwater levels in an adjacent watershed, to provide information on groundwater level variations due to climatic changes only. In addition, this will serve to demonstrate that the Project will not impact groundwater that is tributary to the Colorado River.

Another new well, Danby-1, will be installed in the Danby Watershed to the east. Similar to Piute-1, this Danby-1 observation well will be used to demonstrate that impacts on groundwater levels do not extend beyond the Cadiz Watershed on the west. This well will also provide information on regional groundwater level conditions and is expected to provide additional background monitoring and information concerning groundwater level changes that may be due to climatic variations as well.

In addition to the observation wells, new monitoring facilities, each composed of well clusters will be located between Cadiz and Bristol Dry Lakes on the freshwater side of the saline-freshwater interface to monitor the potential migration of saline water in an area in which historical data on subsurface conditions is limited and a greater degree of certainty on geologic conditions and saline water migration is necessary. These new well clusters are set forth in Features 3, 8 and 9 and are depicted in Figures 5-1 and 5-2 as Proposed Induced Flow and Brine Migration Cluster Wells.

Groundwater levels will be measured in accordance with the monitoring procedure presented in Appendix B. All water samples would be collected according to the protocol described in Appendix C. Field parameters such as groundwater temperature, pH, electrical conductivity, and total dissolved solids (TDS) will be collected at each well during well purging and prior to sampling. Samples from each well will be analyzed for the general mineral and physical parameters specified in Appendix D. In addition, all samples collected during the pre-operational phase will also be analyzed for bromide, boron, iodide barium, arsenic, hexavalent chromium, total chromium, nitrate, and perchlorate. The sample analytical protocol is presented in Appendix D.

Groundwater monitoring frequency will be revisited as determined appropriate by the decision-making process should any of the action criteria be exceeded, as discussed in Chapter 6.

5.3	Proposed Observation Well Clusters in Project Vicinity (Feature 3)

Two well clusters will be established in the immediate vicinity of the Project wellfield (see Figure 5-2). These cluster wells will provide a basis to compare groundwater level and water quality changes in both the shallow and deep portions of the alluvial and bedrock aquifer systems. The well clusters will consist of existing monitoring wells. One well cluster will include monitoring wells MW-7, MW-7a, and TW-1, and the second cluster will use TW-2 and TW-2MW. Bother well clusters will allow for monitoring in the immediate vicinity of the Project. Selected wells have screened intervals in either the upper alluvial, carbonate aquifer, and bedrock. TW-1 and MW-7 will monitor depths in the carbonate aquifer in their clusters respectively.

In addition, three new Proposed Induced Flow and Brine Migration Cluster Wells will be installed on the freshwater side of the interface between Bristol Dry Lake and the Project wellfield to monitor groundwater elevations and water quality (the locations of the wells are depicted in Figure 5-2). All new Project monitoring wells shall be designed, installed, and completed in manner consistent with all applicable state and local regulations and industry standards. Monitoring will occur as presented in Tables 5-1 and 5-2.

5.4	Project Production Wells (Feature 4)

Data from the wellfield (new Project wells and existing Cadiz agricultural wells) will be collected to provide information on the groundwater levels and discharge rates. Each well will be equipped with a flow meter to monitor well discharge and a sounding tube for obtaining groundwater level measurements. Production data from the Project wells will also be collected using totaled readings of flow at the CRA.

5.4.1 Existing Cadiz Agricultural Wells

The Cadiz agricultural operation owns and operates seven agricultural wells used for irrigation, which are located west and southwest of Fenner Gap (see Figure 1-3). Five of the seven Cadiz irrigation wells could be incorporated into the Project wellfield (Wells 21S, 27N, 27S, 28, and 33). The remaining two wells (21N and 22) could used as standby pumping or monitoring wells.

5.4.2 New Production Wells

The Project wellfield would consist of between approximately 17 and 29 additional production wells (depending on Configuration) to be located as shown on Figure 5-2. Each new well would be completed to a depth of about 1,000 feet (see Figure 5-4). This well design may be modified based on observations in the field and expectations of drawdown that may be encountered during Project operations. The total capacity of the wellfield would allow for a pumping range of 25,000 afy to 75,000 afy. All new Project production wells shall be designed, installed, and completed in manner consistent with all applicable state and local regulations, and industry standards, and shall be equipped with flow meters. 10

5.5	Land Surface Monitoring (Feature 5)

A network of approximately 23 land survey benchmarks will be installed at the approximate locations shown on Figure 5-2 to monitor changes in land surface elevation should they occur. Horizontal and vertical accuracy will be established in accordance with a second order Class I survey standard (1:50,000). Each benchmark will be established and surveyed by a California licensed land surveyor. All locations will be dependent upon permitting from the appropriate agencies. Benchmark surveys will be conducted on an annual basis during the term of the Project (see Table 5-1).

Pre-operational baseline Interferometric Synthetic Aperture Radar (InSAR) will be used to evaluate potential impacts in conjunction with the benchmarks. Cadiz will obtain surveyed baseline land surface elevations which then will be compared to each other along with any InSAR data collected by FVMWC during the course of the Project. The InSAR data would be used to monitor relative changes of land surface elevation that could be related to aquifer system deformation in the Project area. This pre-operational InSAR data (collected at two separate times during the year prior to the operational phase of the Project) will complement the land survey data to establish changes in land surface elevations. During the operational phase, annual benchmark surveys will be conducted and InSAR images will be obtained and evaluated every 5 years to evaluate potential impacts. During the post-operational phase, InSAR data and benchmark survey will be obtained every 5 years (Table 5-1).

5.6	Extensometers (Feature 6)

To evaluate potential impacts during the operational phase, FVMWC will construct three extensometers in the area of the highest probability of subsidence (see Figure 5-2). One extensometer will be located north of existing Cadiz agricultural supply well 21S. Another extensometer will be located at the eastern margin of Bristol Dry Lake near the location of a planned monitoring well cluster described in Section 5.8 below. Another extensometer will be located near well TW-2 within the wellfield. The extensometers will be constructed to continuously measure non-recoverable compaction of fine-grained materials interbedded within the alluvial aquifer systems.

5.7	Flowmeter Surveys (Feature 7)

Downhole static and dynamic flowmeter surveys will be generated in five selected new extraction wells. This is expected to occur during the initial period of operation and also after 10 years to assess whether flow conditions have changed as a result of Project operations. The flowmeter surveys will provide data regarding vertical variation in groundwater flow to the well screens. Depth-specific water quality samples will also be collected to assess vertical variation of groundwater quality in the Project wellfield area. Data will be used to help refine geohydrologic parameters regarding layer boundaries used in the groundwater models.

5.8	Proposed Observation Well Clusters At Bristol Dry Lake (Feature 8)

A total of three new observation well clusters will be installed and monitored in the vicinity of Bristol Dry Lake during the initial phases of the Project (see Table 5-1 and Figure 5-2). Two well clusters will be located along the eastern margin of Bristol Dry Lake to monitor the effects of Project operations on the movement of the saline-freshwater interface on the saline side of the interface as shown (see Figure 5-2). One additional well cluster will be installed on the Bristol Dry Lake playa to monitor brine levels and chemistry at different depths beneath the Dry Lake surface. This well cluster will be positioned in relation to the well clusters at the margin of the Dry Lake so as to provide optimum data for the variable density transport model.

A typical observation well cluster completion is illustrated on Figure 5-5. Screened intervals for each of the wells within each cluster will be determined from the logging of cuttings and geophysical logging of the deep borehole which will be drilled first. Each deep well will be completed with PVC or other suitable well casings and screens to allow for dual induction geophysical logging. Shallow wells will be completed with PVC or other suitable well casings and screens.

During the pre-operational phase, static groundwater levels will be monitored on a continuous basis from each well cluster using downhole pressure transducers. Project monitoring will begin immediately following well installation and development.

5.9	Proposed Observation Well Clusters At Cadiz Dry Lake (Feature 9)

At least two well clusters will be located along the northern margin of Cadiz Dry Lake to monitor the migration of the saline water on the freshwater side of the interface (proximate locations are illustrated on Figure 5-1). The final precise locations of these well clusters will be identified in consultation with the TRP and County. The third well cluster will monitor brine levels and depth distribution of water quality on the Cadiz Dry Lake, similar in nature to Bristol Dry Lake. This well cluster will be positioned in relation to the well clusters at the margin of the Dry Lake so as to provide optimum data for the variable density transport model. During the pre-operational phase, static groundwater levels will be monitored on a continuous basis from the well clusters using downhole transducers. Project monitoring will begin immediately following well installation and development and continue through the post-operational period (Gamma-Ray/Dual Induction Downhole Geophysical Logs (Feature 10)).

5.10	Gamma Ray/Dual Induction Logging (Feature 10)

Gamma-Ray and Dual Induction electric logs will be run for the deepest observation wells of each well cluster to be installed at the Dry Lakes (four total). These Downhole geophysical techniques allow for the measurement of groundwater electrical conductivity with depth and could be conducted in observation wells constructed of PVC casings and screens.

Gamma-Ray/Dual Induction geophysical logs will be run as a one-time measurement to be conducted during observation well cluster installation during the pre-operational phase of the Project.

5.11	Weather Stations (Feature 11)

Data from four existing weather stations will be collected over the course of the Project (see Figures 5-1). Existing weather stations include the Mitchell Caverns weather station (located in the Providence Mountains), the Project weather station (located in Fenner Gap adjacent to the spreading basins), the Cadiz CIMIS station (operated by/for CDWR at the Cadiz Field Office), and the Amboy weather station (located near Bristol Dry Lake in the town of Amboy).

The Mitchell Caverns weather station would provide precipitation, temperature, and other climatic data for the mountain regions of the Fenner Watershed. The Fenner Gap weather station would provide climatic data in the immediate vicinity of the Project area. The Amboy and Cadiz Field Office weather stations would provide climatic data representative of the lowest area of the regional watershed. Data obtained from the weather stations will be incorporated into the water resource models described in Chapter 4, along with complementing data analysis of Feature 12.

5.12	Air Quality Monitoring (Feature 12)

5.12.1 Monitoring at Bristol and Cadiz Dry Lakes

The relationship between groundwater and the surface of Bristol and Cadiz Dry Lakes has been evaluated in a technical study conducted by HydroBio. 11 The technical study concludes that unlike some other playas in the arid southwest such as Owens and Franklin Playas, the soil and water chemistry of both Cadiz and Bristol Dry Lakes has very low quantities of the sodium salts of carbonate, bicarbonate and sulfate that are known to generate excessive fugitive dust in high wind storms. Rather, the Bristol and Cadiz Dry Lakes are characterized by sodium and calcium chlorides that maintain a rigid structure when desiccated, reducing the amount of loose dust on the ground surface that can be lofted by the wind. This surface crust is not aided or maintained by direct contact or indirect contact with the groundwater through capillary action.

Under current conditions, dust storms are not uncommon in the valley as sand particles saltate across the desert floor, dislodging other sand particles and lofting dust into the air. 12 Under current conditions, depth to groundwater in some areas beneath the Dry Lakes is over 60 feet below ground surface, and the surface soils in these areas exhibit the same crusty surface as areas with shallow groundwater. This crusty surface soil provides some resistance to wind erosion and limits dust emissions. It is not reliant on groundwater for maintenance of its crust integrity. Therefore, drawdown of the groundwater beneath the Dry Lakes is not expected to have an effect on surface soils or dust emissions in the valley.

To monitor the condition of the Dry Lakes consistent with recommendations of the Groundwater Stewardship Committee and to provide additional data on the environment of the area, four nephelometers will be installed, including one downwind and one upwind of Bristol Dry Lake and one downwind and one upwind of Cadiz Dry Lake. These nephelometers will be placed on privately-owned property and outside the wind shadow of the agricultural properties.

In addition, FVMWC will conduct annual visual observations at four points on each of the Dry Lakes to record surface soil conditions. The visual observations will note soil texture and record susceptibility to wind erosion. Photographs of the soil will be taken. This data will record conditions over time on the two Dry Lake surfaces at the same locations each time.

These nephelometers will provide data on a daily basis that records opacity of the air, measuring the effect of dust on visibility. Data will be collected in the pre-operational phase of the Project and in the early years of the Project, establishing a baseline before groundwater levels beneath the Dry Lakes are affected. Since wind velocity and dust storms are highly variable, the data will record trends over time. Data will also be collected during the operational and post-operational phase of the Project and compared to baseline data to evaluate whether Project operations result in a significant adverse impact to critical air quality resources.

5.13	Project Area Vegetation (Feature 13)

As discussed in Chapter 4, above, it is not anticipated that the Project will have any impact on surface vegetation. Nonetheless, this Management Plan provides for baseline and annual monitoring of surface vegetation in the Project area to verify whether any material reduction in the extent or character of vegetation is attributable to Project operations or, instead, to seasonal or regional climatic conditions.

CHAPTER 6

MONITORING AND MITIGATION OF SIGNIFICANT ADVERSE IMPACTS TO CRITICAL RESOURCES (ACTION CRITERIA, DECISION-MAKING PROCESS AND CORRECTIVE MEASURES)

This Management Plan identifies specific quantitative criteria or trends (action criteria) that will “trigger” review and corrective actions where necessary to protect critical resources or otherwise avoid Undesirable Results. When action criterion are triggered, a review of the triggering event will be conducted to determine whether the event is attributable to or exacerbated by Project operations, and if so, which specific corrective measures should be implemented to avoid adverse impacts to critical resources or Undesirable Results. It is the intent of this Management Plan to identify deviations from baseline conditions, along with deviations from groundwater model projections, at monitoring features as early as possible in order to identify and prevent the occurrence of adverse impacts to critical resources or Undesirable Results as a result of Project operations. 13 Triggering events may, in some circumstances, necessitate immediate corrective actions and subsequent review to ensure that the triggering event resulted from Project operations.

6.1	Decision-Making Process

A decision-making process has been developed which outlines the process to be followed in the event an action criterion is triggered, or when refinements to the Management Plan are considered. Potential corrective measures to be implemented, if appropriate, are identified. Critical resources and Undesirable Results, action criteria, the decision-making process, and potential corrective measures are discussed in Chapter 6 and summarized in Table 6-1.

The initial action criteria and corrective measures presented in this Management Plan are considered conservative. Refinements to the action criteria and monitoring network may be proposed after additional data has been accumulated. However, any such refinement would occur in accordance with the terms of this Management Plan. If FVMWC proposes a refinement to action criteria or monitoring features, it will submit a written proposal describing the refinement along with supporting data and materials to the TRP. The TRP will then issue a recommendation concerning the proposed refinement to the County and SMWD, which will determine whether the refinement is warranted, based on all available technical data, all Project conditions of approval, the analysis set forth in the Project EIR, and adopted CEQA findings. Before any refinement to an action criteria or monitoring feature which is also a mitigation measure adopted by SMWD as part of its approval of the Project may occur, SMWD must first determine that substantial evidence supports a finding that the refined action criteria or monitoring feature will continue to mitigate the impact identified in the Project EIR. The County and SMWD will make a decision regarding the proposed refinement in accordance with the decision-making process presented here, and further described in Chapter 8.

Action criteria are intended to be used as predictors of potential adverse impacts to critical resources, and these criteria as applied are meant to help avoid material adverse impacts to critical resources and Undesirable Results.

The decision-making process followed in this Management Plan, if an action criterion is triggered or when the County considers refinements to the Management Plan, is described in detail as follows.

Initial Notification – 10 Business Days

If an action criterion (as defined in this Chapter 6) is triggered, FVMWC will, within ten (10) business days of the triggering event, inform SMWD, the County Representative (Chief Executive Officer), and the members of TRP that an action criterion has been triggered and commence the decision-making process described herein. If the action criterion threatens an immediate or irreparable injury to a critical resource or other immediate Undesirable Result, FVMWC will promptly implement appropriate corrective action(s) or the County may promptly issue an administrative order as set forth in Section 8.2 , below.

Initial Assessment and Recommendation – 60 Calendar Days

Within sixty (60) calendar days of issuing notice that an action criterion is triggered, FVMWC will undertake a three-step assessment process. First, FVMWC will assess whether the triggering of any action criterion is attributable to Project operations. Second, for any triggering of an action criterion attributable to Project operations, FVMWC will assess whether the triggering of the action criterion constitutes a potential adverse impact. Third, for any triggering of an action criterion that is attributable to the Project and constitutes a potential adverse impact or threatens to cause an Undesirable Result, FVMWC will assess, recommend, and implement corrective measure(s) (including refinements in monitoring or to this Management Plan) necessary to avoid or mitigate the potential adverse impact or Undesirable Result.

FVMWC shall provide its written assessment and recommendation, along with supporting and any conflicting data, to SMWD, the County Representative, and the members of TRP within the sixty (60) day assessment period.

TRP Review and Recommendation – 90 Calendar Days

Upon receiving FVMWC’s written assessment and recommendation, the TRP will have ninety (90) calendar days to determine whether it concurs with the assessment and recommendation (including but not limited to modifications to the monitoring network, corrective actions, etc.). During the TRP review period, the TRP may request additional data and analysis from FVMWC and will have access to all monitoring data. Within the ninety (90)-day TRP review period, the TRP will issue a written report of its review of FVMWC’s assessment and recommendation, including whether it concurs with the assessment and recommendation, to the County Representative, FVMWC, and SMWD, and if it does not concur, the basis of its disagreement and any alternative recommended actions. The TRP’s written report shall state whether or not the report reflects a consensus of the TRP members. If the TRP members cannot reach a consensus, the members’ differing opinions and recommendations shall be set forth in the written report.

County Review and Determination

The County Representative will consider the findings and actions taken or recommended by FVMWC and the TRP, but will exercise his or her own independent judgment concerning whether the triggering of the action criterion is attributable to Project operations, whether the triggering of the action criterion involves a potential adverse impact or Undesirable Result, and to determine the appropriate corrective measure(s) necessary to avoid or mitigate the potential adverse impact or Undesirable Result. The County will issue its determination in writing to FVMWC, SMWD, and to each member of the TRP. FVMWC shall promptly comply with the determination and instructions set forth in the County’s written correspondence concerning the matter. With the exception of corrective actions necessary to address an immediate or irreparable threat of harm, the oversight, management, and enforcement actions concerning assessment, application, and refinement of action criteria and corrective measures shall be made by the County subject to the dispute resolution provisions of the MOU set forth in Chapter 8.

As lead agency for the Project, SMWD shall enforce the implementation of all adopted mitigation measures as conditions of Project approval. SMWD will, pursuant to CEQA Guideline section 15097(a), delegate oversight responsibilities for those mitigation measures which correspond to provisions of the Management Plan to the County. SMWD shall review and consider the County’s ongoing determination of compliance with those mitigation measures in assessing the Project’s overall compliance with the Mitigation Monitoring and Reporting Program and the Project’s conditions of approval.

Because compliance with the Management Plan is a condition of SMWD’s approval of the Project, SMWD in its discretion, will also consider the findings and actions taken or recommended by FVMWC and the TRP, and will exercise its own independent judgment concerning whether the triggering of the action criterion is attributable to Project operations, whether the triggering of the action criterion involves a potential adverse impact or Undesirable Result, and to determine the appropriate corrective measure(s) necessary to avoid or mitigate the potential adverse impact or Undesirable Result. If SMWD determines that appropriate corrective measure(s) are necessary to avoid or mitigate the potential adverse impact or Undesirable Result, but the County does not, SMWD will independently impose those corrective measures it determines necessary to avoid adverse impacts to critical resources or Undesirable Results, provided that independent enforcement by SMWD shall be subject to the same procedural requirements and remedies applicable as if the County were enforcing the Management Plan, including the dispute resolution procedure in Section 8.3 .

Communications by and to FVMWC, the TRP, SMWD and the County, as provided in this chapter, shall be made by and to, respectively, a point of contact for the FVMWC designated by the FVMWC Board of Directors (FVMWC Representative), a member of the TRP designated by the TRP as its point of contact (TRP Chair), the SMWD General Manager and a point of contact for the County designated by the County (County Representative).

6.2	Third-Party Wells

It is the intent of the Project to operate without adverse material impacts to wells owned by neighboring landowners in the vicinity of the Project area, and those operated in conjunction with salt mining operations on the Bristol or Cadiz Dry Lakes. To avoid such potential impacts, the groundwater monitoring network will include monitoring wells located in and around the wellfield, near neighboring landholdings, and on and adjacent to the Dry Lakes (see Figures 5-1 and 5-2). Groundwater levels will be monitored on a continuous to semi-annual basis (see Table 5-1) during the pre-operational and operational periods, then annually during the post-operational period. Water quality will be monitored on a quarterly to annual basis during the pre-operational period, annually during the operational period of the Project, and triennially during the post-operational period (see Table 5-1). Further, FVMWC shall monitor static (non-pumping) water levels within any third-party wells that are representative of the local groundwater impacts and located within the northern Bristol/Cadiz Sub-Basin or elsewhere in the Fenner Watershed. Such monitoring of third-party wells will be performed on a semi-annual basis during the pre-operational and operational periods, then annually during the post-operational period as established in the Closure Plan.

6.2.1 Action Criteria

The decision-making process will be initiated if any of the action criteria are triggered. The action criteria are: 1) a decline of static water levels of more than twenty feet from pre-Project static water levels or to a degree in which the reduction in static water levels results in an inability to meet existing production of any third-party well drawing water from the northern Bristol/Cadiz Sub-Basin or elsewhere in the Fenner Watershed; or 2) the receipt of a written complaint from one or more well owner(s) regarding decreased groundwater production yield, degraded water quality, or increased pumping costs submitted by neighboring landowners or the salt mining operators on the Bristol and Cadiz Dry Lakes. Any written complaint by a well owner in accordance with this action criterion shall be directed to FVMWC.

6.2.2 Decision-Making Process

If any of the action criteria are triggered, the decision-making process will include:

·	If a written complaint with a documented change in water level as provided for in Section 6.2.1 is received from a third-party well owner located within the Limits of the Maximum Projected 20 ft Drawdown (see Figure 5-1), FVMWC will immediately implement Corrective Measure 6.2.3.1, below;

·	Assessment of whether water level changes, decreased yields, increased pumping costs, and/or degraded water quality in the third-party wells are attributable to Project operations or other causes;

If such water level changes, decreased yields, increased pumping costs and/or degraded water quality are determined to not be attributable to Project operations in conformance with the decision-making process in Section 6.1 , then FVMWC would discontinue any interim arrangement to provide water as set forth in Section 6.2.3.1 ;

·	If such water level changes, decreased yields, increased pumping costs and/or degraded water quality are determined to be attributable to Project operations, then one or more of the corrective measures set forth in Section 6.2.3 shall be implemented.

6.2.3 Corrective Measures

6.2.3.1

Interim Water Supply . If a written complaint as provided for in Section 6.2.1 is received from a third-party well owner located within the area described above (see Figure 5-1), FVMWC will arrange for an immediate interim supply of water to the third-party well owner until the decision-making process is complete in an amount necessary to fully offset any reduced yield to the third-party well owner, as compared to the yield from the impacted well prior to Project operations or, if the impacted well was installed after Project operations commenced, then as compared to the yield of the well immediately after installation.

6.2.3.2

Further Corrective Measures . If any of the Action Criteria set forth in 6.2.1 are triggered and the impacts are determined to be attributable to Project operations, one or more of the following further corrective measures shall be implemented to correct the impairment to the beneficial use of the groundwater:

·	Continued provision of substitute water supplies;

·	Deepening or otherwise improving the efficiency of the impacted well(s);

·	Blending of impacted well water with another local source;

·	Constructing replacement well(s) on disturbed land subject to the same mitigation measures imposed on the Project wellfield as set forth in the SMWD’s Mitigation Monitoring and Reporting Program;

·	Paying the impacted third-party well owner for any increased material pumping costs incurred by the well owner; or

·	Entering into a mitigation agreement with the impacted third-party well owner.

6.2.3.3

Alternative Corrective Measures . If the preceding corrective measures are ineffective or infeasible, Project operations shall be modified to address the adverse impacts on third-party wells. For the purposes of these action criteria, “ineffective” shall be defined as a corrective measure that when put into place did not meet the objective set forth in the corrective action. “Infeasible” is a corrective measure which cannot be implemented due to cost, technical challenges, or legal restraints. Modifications to Project operations shall include one or more of the following:

·	Reduction in pumping from Project well(s);

·	Revision or reconfiguration of pumping locations within the Project wellfield; or

·	Stoppage of groundwater extraction for a duration necessary to correct the adverse impact.

6.3	Land Subsidence

Twenty three land survey benchmarks will be established and surveyed by a licensed land surveyor on an annual basis to identify and quantify potential subsidence within the Project area (see Figures 5-1 and 5-2). Three extensometers will be constructed in areas of projected subsidence (see Figure 5-2). The extensometers, which would be monitored continuously from installation through the post-operational period, would verify if the land surface changes (also potentially identified from land surveys and InSAR satellite data obtained and analyzed every 5 years through the post-operational period) are due to (1) subsidence due to groundwater withdrawal; or (2) other mechanisms (e.g. regional tectonic movement).

6.3.1 Action Criteria

The decision-making process will be initiated if either of the action criteria is triggered. The action criteria are: 1) subsidence that would result in a decline in the ground surface elevation of more than 0.3 feet when compared to baseline data collected from the extensometers and corroborated by the land survey benchmarks or InSAR data and analysis; or 2) a trend in subsidence which, if continued, would be of a magnitude within 10 years that impacts existing infrastructure within the Project area. The magnitude for the railroad tracks is more than one inch vertically over 62 feet linearly along the existing railroad tracks.

6.3.2 Decision-Making Process

If either of the action criteria is triggered, the decision-making process will include:

·	Assessment as to whether the subsidence is attributable to Project operations;

If the subsidence is determined to be attributable to Project operations, then an assessment will be made to update trends and projections in subsidence over the remaining Project life and to determine whether the subsidence constitutes a potential adverse impact to aquifer health or surface uses. Potential adverse impacts include potential damage to surface structures as a result of differential settlement or fissuring, general subsidence sufficient to alter natural drainage patterns or cause damage to structures, or adverse changes to the geologic integrity of the aquifer, its storage capacity, or its water quality;

·	If no such significant adverse impacts to critical resources are identified, potential actions may include:

o	No action;

o	Proposed refinements to the action criteria;

o	Additional verification monitoring, including a field reconnaissance to assess and detect any differential settlement; or

o	Proposed revisions to the benchmark survey and/or InSAR monitoring frequency.

If the subsidence is determined to be attributable to Project operations and the subsidence is determined to constitute a potential adverse impact to surface drainage, aquifer health, surface uses or infrastructure, then one or more of the corrective measures set forth in Section 6.3.4 shall be implemented.

6.3.3 Criteria for Subsequent Review of Subsidence and Overdraft

As an additional management feature, if during the decision-making process in Section 6.3.2 , above, it is determined that permanent subsidence is anticipated to exceed the predicted subsidence by fifty percent under Sensitivity Scenario 1 at the locations monitored and shown on Table 4.6 within 50 years as measured by at least two extensometers and corroborated by benchmark surveys and InSAR data and analysis, then the County in consultation with the TRP shall conduct a comprehensive review and analysis of subsidence. The comprehensive review will evaluate whether, notwithstanding post-project replenishment, the imposed floor on groundwater levels, and prior and planned corrective actions, the subsidence involves a progressive, long-term, and permanent decline in ground surface elevations over the pumping period of the Project and, if so, whether that subsidence evidences the occurrence of Overdraft as defined in this Management Plan. If the County or SMWD reasonably determines that the levels of subsidence indicate that Overdraft will occur, then Project operations shall be modified by one or more of the following corrective measures:

·	Reduction in pumping from Project well(s);

·	Revision or reconfiguration of pumping locations within the Project wellfield; or

·	Stoppage of groundwater extraction for a duration necessary to arrest the subsidence.

6.3.4 Corrective Measures

Corrective measures that shall be implemented to repair damaged structures and/or arrest the subsidence shall include one or more of the following:

·	Repairing any structures damaged as a result of subsidence attributable to Project operations;

·	Entering into a mitigation agreement with any impacted party(s).

If the forgoing corrective measures are ineffective or infeasible or if subsidence would potentially alter natural drainage patterns or result in adverse changes to the geologic integrity of the aquifer, its storage capacity, or its water quality, Project operations shall be modified to arrest the subsidence. For the purposes of these action criteria, “ineffective” shall be defined as a corrective measure that when put into place will not meet the objective set forth in the corrective action (e.g., it will not protect aquifer health or repair damaged structures and arrest the subsidence). “Infeasible” is a corrective measure which cannot be implemented due to cost, technical challenges, or legal restraints. Modifications to Project operations shall include one or more of the following :

·	Reduction in pumping from Project well(s);

·	Revision or reconfiguration of pumping locations within the Project wellfield; or

·	Stoppage of groundwater extraction for a duration necessary to correct the adverse impact.

6.4	Induced Flow of Lower-Quality Water from Bristol and Cadiz Dry Lakes

Saline water migration is allowed up to and not to exceed 6,000 feet from the baseline location of the saline-freshwater interface. To prevent migration of saline groundwater beyond 6,000 feet, FVMWC will implement mitigation measures that may include injection or extraction wells or other physical means to maintain the saline-freshwater interface. If these physical measures prove ineffective, reductions in Project pumping will be required (see Section 6.4.4 , below).

6.4.1 Monitoring

To monitor the influence of the Project’s operation on the migration of the saline-freshwater interface located between the Project wellfield and the Bristol and Cadiz Dry Lakes, a network of “cluster type” observation wells will be established between the Project wellfield and the saline-freshwater interface. Groundwater TDS concentrations in the well clusters will be monitored on a quarterly basis during the pre-operational period of the Project, semi-annually throughout the operational period, and annually during the post-operational period of the Project. Of the monitoring well network, SCE Well no. 5 and SCE Well no. 11, along with other newly installed well clusters located between the interface and the Project wellfield will be located such that that they are appropriate to serve as “sentinel” wells to determine whether there is a progressive migration of the saline-freshwater interface. The locations of SCE Well no. 5, SCE Well no. 11, and the other sentinel well clusters are shown in Figures 5-1 and 5-2. As an additional management feature, an analysis shall be conducted of Project operations as part of the first Five Year Report to locate at least two additional monitoring well clusters along the saline-freshwater interface (and on Cadiz owned lands). The location of new monitoring well clusters shall be approved by the County representative and SMWD representative in consultation with the TRP and new wells will be placed by FVMWC within 10 years of commencement.

6.4.2 Action Criteria

The decision-making process will be initiated if the action criterion is triggered. The action criterion is a migration of the interface, as measured by an increase in TDS concentration in excess of 600 mg/L in any cluster or observation well located within a distance of 6,000 feet from pre-Project locations of the interface.

6.4.3 Decision-Making Process

If the action criterion is triggered, the decision-making process will include:

·	Assessment of whether the increased TDS concentration or migration of the saline-freshwater interface is attributable to Project operations;

·	Assessment of trends and updated projections of whether and when the saline-freshwater interface is expected to migrate 6,000 feet from its baseline location;

If the increased TDS concentration within the monitoring wells is determined to be attributable to the Project and the saline-freshwater interface is expected to migrate more than 6,000 feet from its baseline location within 10 years and at any time during the Project’s operation or post-operation periods, then one or more of the corrective measures set forth in Section 6.4.4 shall be implemented.

6.4.4 Corrective Measures

Corrective measures that will be implemented to eliminate the further migration of saline groundwater towards the Project wellfield may include the following:

Installing one or more extraction well(s) or injection well(s) at the northeastern edge of Bristol Playa and/or north of Cadiz Playa where the salt mining source wells are located to maintain the saline-freshwater interface within its 6,000-foot limit subject to the same mitigation measures imposed on the Project well-field as set forth in the SMWD Mitigation Monitoring and Reporting Program (see Figures 5-1 and 5-2).

If the forgoing corrective measures are ineffective or infeasible, Project operations shall be modified to eliminate the further migration of saline groundwater towards the Project wellfield. Modifications to Project operations will include one or more of the following:

·	Reduction in pumping from Project wells;

·	Revision of pumping locations within the Project wellfield; or

·	Stoppage of groundwater extraction for a duration necessary to correct the predicted impact.

6.5	Brine Resources Underlying Bristol and Cadiz Dry Lakes

To monitor potential Project impacts on the salt mining operations on the Bristol and Cadiz Dry Lakes, a network of “cluster type” monitoring wells will be established between the Project wellfield and the margins of the Dry Lakes (see Figures 5-1 and 5-2). Groundwater levels will be monitored on a continuous basis throughout the operational and post-operational term of the Project.

6.5.1 Action Criteria

The decision-making process will be initiated if either of the action criteria is triggered. The action criteria are:

A declining trend in groundwater or brine water levels of greater than 50 percent of either (a) the water column above the intake of any of the salt mining operators’ wells, or (b) the average depth of brine water level within the brine supply trenches operated by the salt mining operators. Changes in such groundwater or brine water levels, shall be determined by monitoring changes in the static water levels within the network of clustered monitoring wells identified above, as changes in the static water levels within these monitoring wells are correlated with the groundwater or brine water levels within the salt mining operator’s wells and brine supply trenches; or

The receipt of a written complaint from a salt mining operator regarding decreased groundwater production yield or increased pumping costs from one or more of its wells, or decreased water levels within its brine supply trenches. Any written complaint by a salt mining operator in accordance with this action criteria shall be directed to FVMWC.

6.5.2 Decision-Making Process

If either of the action criteria is triggered, the decision-making process will include:

·	Assessment of whether the change in groundwater/brine level in excess of the action criteria is attributable to Project operations;

If the change in groundwater/brine water level in excess of the action criteria is determined to be attributable to Project operations, then an assessment will be made to determine whether the groundwater/brine level change constitutes a potential adverse impact to one or more of the salt mining operations on the Dry Lakes. Adverse impacts include changes to brine chemistry or yields from existing brine production wells or brine supply trenches attributable to Project operations. If no such impacts are identified, potential actions may include:

o	Continued or additional verification monitoring;

o	Proposed refinements to the action criteria;

o	Proposed revision to the monitoring frequency at the observation well clusters at the margins of the Dry Lakes;

If the decline in groundwater/brine water level(s) approaching the action criteria is determined to be attributable to Project operations, and the changes constitute a potential adverse impact to one or more of the salt mining operations on the Dry Lakes, then one or more of the corrective measures set forth in Section 6.5.3 shall be implemented.

6.5.3 Corrective Measures

Action(s) necessary to mitigate changes to brine chemistry or yields from existing brine production wells or brine supply trenches attributable to Project operations, and thereby maintain or restore the beneficial use of the groundwater/brine water by the salt mining operations, shall include one or more of the following:

·	Compensating the mining operator(s) for the additional costs of pumping;

·	Installing one or more brine extraction well(s) and/or injection well(s) where the salt mining source wells are located subject to the same mitigation measures imposed on the Project well-field as set forth in the SMWD Mitigation Monitoring and Reporting Program (see Figure 5-1); or

·	Entering into a mitigation agreement with the salt mining operator(s).

If the forgoing corrective measures are ineffective or infeasible, Project operations shall be modified until adverse impacts to the salt mining operations are eliminated. For the purposes of these action criteria, “ineffective” shall be defined as a corrective measure that when put into place did not meet the objective set forth in the corrective action, i.e., to maintain or restore the beneficial use of the groundwater/brine water by the salt mining operations. “Infeasible” is a corrective measure which cannot be implemented due to cost, technical challenges, or environmental and permitting issues as defined under CEQA. Modifications to Project operations shall include one or more of the following:

·	Reduction in pumping from Project wells;

·	Revision of pumping locations within the Project wellfield; or

·	Stoppage of groundwater extraction for a duration necessary to correct the predicted impact.

6.6	Adjacent Basins, Including The Colorado River and its Tributary Sources of Water

Adjacent basins will be monitored to provide verification that the Project does not impact groundwater levels in these adjacent basins. Because the Bristol, Cadiz, and Fenner Watersheds are assumed to be closed watersheds, it is expected that the observation wells will demonstrate no Project impact. Baseline groundwater conditions observed in these adjacent basins will also provide information on climatic change effects on groundwater levels on a regional basis.

The Piute Watershed is tributary to the Colorado River. Groundwater flow from this watershed ultimately discharges to the Colorado River, so it is a part of the water resource of the Colorado River. As discussed above, it would be an adverse impact if this groundwater flow was impacted by Project operations. The Piute-1 observation well will provide data on groundwater levels in this basin. In addition, the Piute-1 well is located approximately equi-distant from the next southerly well from the proposed Goffs observation well, so this well can be compared to these observation wells to assess groundwater level differences between them, if any.

The Danby basin is located immediately to the east. A new observation well, Danby-1, will provide information on groundwater conditions in this adjacent basin.

6.6.1 Monitoring

Because the Bristol, Cadiz, and Fenner Watersheds are assumed to be closed watersheds that are isolated from aquifer systems in neighboring basins by bedrock and groundwater divides, no action criteria are necessary to protect these critical resources. However, to accommodate requests of stakeholders in the Danby area, and to demonstrate the lack of any hydrogeologic connectivity between the alluvial groundwater developed by the Project and the Piute Basin, the monitoring wells in these adjacent basins, along with all the other Project observation wells, will be monitored to verify these factual conclusions.

6.7

Springs

As discussed at Section 4.2 of Chapter 4 above, because of the distance, change in elevation, and lack of hydraulic connection between the fractured bedrock groundwater feeding the Fenner Watershed springs and the alluvial groundwater developed by the Project, the Project is not anticipated to affect the spring flows within any of the Fenner Watershed springs.

6.7.1 Monitoring

The Project is not anticipated to have an effect on the spring flows in any of the Fenner Watershed springs. However, consistent with the recommendations of the Groundwater Stewardship Committee and as a conservative monitoring protocol conditioned under the County’s Groundwater Management Ordinance, baseline and periodic visual observation and flow estimates shall be performed at the Bonanza Spring in the Clipper Mountains, the Whiskey Springs in the Providence Mountains (near Colton Hills), and Vontrigger Spring in the Vontrigger Hills east of the Hackberry Mountains no less often than quarterly during the pre-operational and operational period of the Project and annually during the post-operational period. The Bonanza Spring will be monitored as an “indicator spring” because it is the spring that is in closest proximity to the Project wellfield (approximately 11 miles from the center of Fenner Gap). The Whiskey and Vontrigger Springs will be monitored to compare variations in spring flow and other spring characteristics (e.g., location and elevation, spring type, discharge, spring length, water depth and width, water quality measurements, vegetative bank and emergent cover, substrate composition, photographic records, etc.) 14 from those springs to variations in spring flow and characteristics from the Bonanza Spring to determine whether reductions of flow at the Bonanza Spring are attributable to the Project operations, or instead, are attributable to annual precipitation. Monitoring of groundwater levels in monitoring wells located between Bonanza Spring and the wellfield will also be conducted to provide data which could be used to correlate changes in groundwater levels attributed to the Project to changes in flow in the Bonanza Spring.

6.7.2 Action Criteria

The decision-making process will be initiated if the action criterion is triggered. The action criterion is a reduction in the average annual or seasonal flows or degradation in the average annual or seasonal characteristics at Bonanza Spring that exceed the baseline annual (or seasonal) flow fluctuations or that deviate from annual baseline conditions established during the first 10 years of monitoring. If such a reduction of flow or spring condition is observed, the decision-making process will be initiated.

6.7.3 Decision-Making Process

If the action criteria is triggered, the decision-making process will include:

·	Assessment of whether the reduction in flow or spring condition is attributable to Project operations and not the result of changes in annual precipitation, climatic conditions, or other conditions unrelated to the Project (e.g., fire, disease, etc.);

·	If the reduction in flow or spring condition is determined to be attributable to Project operations, one or more of the corrective measures shall be implemented.

6.7.4 Corrective Measures

Action(s) necessary to re-establish baseline spring conditions and flows shall include one or more of the following in addition to a reevaluation of the relationship between the aquifer and the springs within the watershed:

·	Reduction in pumping from Project wells;

·	Revision of pumping locations within the Project wellfield;

·	Stoppage of groundwater extraction for a duration necessary to correct the predicted impact.

6.8	Air Quality

The EIR concludes that groundwater is not connected to the erosion potential of the Dry Lake surface soils and therefore the lowering groundwater levels beneath the Dry Lakes is not expected to increase dust generation from the Dry Lakes or otherwise affect regional air quality. Consistent with the recommendations of the Groundwater Stewardship Committee and as a conservative monitoring protocol to be conditioned by the County under its Ordinance, Cadiz will prepare a monitoring plan in consultation with the TRP to address possible sources of fugitive dust emissions (depth to groundwater, surface vegetation, surface soil chemistry) and local air quality over time (nephelometers and weather stations) to verify that the Project does not increase dust generation (i.e., particulate matter) from the Dry Lakes. The monitoring plan, at a minimum, shall set forth specific performance criteria and identify monitoring methods, the location of weather stations and nephelometers, measures to protect quality assurance and quality control, and reporting parameters. The monitoring plan shall be reviewed and approved by the County Representative before the Project commences construction.

6.8.1 Monitoring

As described in Section 5.2 , above, a network of observation wells will be established between the Project wellfield and Bristol and Cadiz Dry Lakes (see Figures 5-1 and 5-2). Groundwater levels will be monitored in many wells on a continuous basis throughout the term of the Project, which can help identify specific depths to groundwater and hydrological connections to surface soils and vegetation.

Furthermore, Cadiz will install weather stations and four nephelometers—upwind and downwind of the Bristol and Cadiz Dry Lakes—to establish baseline data of visibility in the valley, along with providing air quality data throughout the duration of Project operations. In addition, FVMWC will conduct annual visual observations at four points on each of the Dry Lakes to record surface soil conditions. The visual observations will note soil texture and record susceptibility to wind erosion. Photographs of the soil will be taken. This data will record conditions over time at the same locations on each of these Dry Lake surfaces.

These nephelometers will provide data on a daily basis that records opacity of the air, measuring the effect of dust on visibility. Data will be collected in the early years of the Project, establishing a baseline before groundwater levels beneath the Dry Lake are affected and will continue during Project operations. Since wind velocity and dust storms are highly variable, the data will record trends over time. Data from the nephelometers will be analyzed by FVMWC, with the results of the analysis and associated data summaries submitted annually to the TRP. This data will inform the TRP on the environmental setting, augmenting the weather station data, and provide information for the long term management of the facilities in the valley. The TRP will provide recommendations over time regarding modifications to the verification data collection activities if needed.

6.8.2 Action Criteria

The decision-making process will be initiated if the action criteria are triggered. The action criteria are (1) changes in annual average or peak concentrations of airborne particulate matter as measured by nephelometers that exceed average annual or peak baseline conditions by 5 percent or more, or (2) changes in surface soil conditions on the Dry Lakes that show a degradation of soil structure and increased susceptibility to wind erosion compared to baseline conditions established through monitoring prior to Project pumping. If such changes are measured, the decision-making process will be initiated.

6.8.3 Decision-Making Process

If the action criteria is triggered, the decision-making process will include:

·	Assessment of whether the change in air quality or soil conditions are attributable to Project operations;

·	If air quality changes are determined to be attributable to Project operations or if degradation of soil structure and increased susceptibility of wind erosion are determined to be attributable to Project operations, one or more of the corrective measures shall be implemented.

6.8.4 Corrective Measures

Action(s) necessary to re-establish baseline airborne particulate levels and soil structure shall include one or more of the following:

·	Reduction in pumping from Project wells;

·	Revision of pumping locations within the Project wellfield;

·	Stoppage of groundwater extraction for a duration necessary to restore baseline air quality conditions to correct for Project impacts.

6.9	Management of Groundwater Floor

Pursuant to the MOU, the parties agreed to (i) identify the groundwater levels that will serve as monitoring targets and a “floor” for the maximum groundwater drawdown level in the Project wellfield, and (ii) establish a projected rate of decline in the groundwater table. The floor and rate of decline are designed to, among other things, set a designated maximum drawdown elevation in the Project wellfield and help assess trends and operate the Project in a manner that avoids Undesirable Results or other physical impacts enumerated in the MOU (including saline water migration).

6.9.1 Groundwater Management Level

The Project may drawdown the aquifer in the center of the Project wellfield area to a maximum drawdown level (the “floor”) of elevation 530 feet (80 feet below baseline elevations). The floor will be calculated as an average groundwater elevation within a 2-mile radius from the center of the Project wellfield area. The rate of decline in groundwater elevation can be expected to vary, being higher initially and gradually stabilizing to a lower long-term rate. With the 80-foot floor, the projected rate of decline is approximately 1.6 feet per year averaged over the Project’s 50-year lifespan. Once the floor is reached, and absent approval of a new floor by the County, pumping must be reduced to a quantity at or below the amount that will maintain water levels at or above the 80-foot floor. The floor is a management level, meaning annual, short-term incursions below the floor (3 consecutive years or less) are acceptable under the following conditions:

(a)

No management criteria or corrective actions under this Management Plan have been triggered as necessary to avoid the threat of Undesirable Results; and

(b)

Average groundwater levels must remain at or above the floor as measured on a 10-year average.

6.9.2 Monitoring

As described above, monitoring wells within a two-mile radius from the center of the Project wellfield will be used to monitor declines in groundwater levels and to develop data to evaluate actual rates of recharge. Monitoring wells will be selected from the following existing wells located in the Project wellfield area: CI-1, CI-2, CI-3, MW-1, MW-2, MW-3, MW-4, MW-5, MW-6, MW-7, MW-7A, PW-1, TW-1, TW-2, TW2-MW, TW-3, CH-5 (the locations of these existing wells are depicted in Figure 5-2). Selected monitoring wells within the set may be substituted, if necessary, after the 5-Year project review period. Additional monitoring wells may be added within the 2-mile radius, if necessary, after the 5-Year project review period. Groundwater levels will be monitored on a continuous basis throughout the term of the Project.

6.9.3 Adaptive Management

Any time after 15 years of operation, FVMWC or SMWD may apply to the County to lower the floor below elevation 530 feet (80 feet below baseline) to elevation 510 feet (100 feet below baseline), on the following conditions:

(a)

FVMWC or SMWD shall first consult with and obtain a recommendation from the TRP on whether the following requirements can be satisfied:

(i)

Sufficient operational data exists to support a decision concerning the floor or whether additional operational data is needed;

(ii)

The Project will achieve additional conservation benefits at the proposed floor; and

(iii)

The lowering of the floor will not trigger either the management criteria or the corrective actions under this Management Plan (other than the floor itself) in order to avoid the threat of Undesirable Results.

(b)

The County must approve a lowering in the floor if it can make the following findings:

(i)

Sufficient operational data exists to support a decision to lower the floor and avoid Undesirable Results;

(ii)

The urban water management plans for each of the municipal water agencies and purveyors receiving water from the Project have disclosed the 50-year limit on the Cadiz water supply;

(iii)

Additional conservation benefits will be realized at the proposed floor;

(iv)

Lowering the floor would not result in the triggering of either the action criteria or the corrective actions under this Management Plan as necessary to avoid the occurrence of Undesirable Results; and

(v)

There is no other threat of adverse environmental consequences that may arise due to changed or unforeseen circumstances.

(c)

The new 510-foot (100-foot) floor would operate as a new management level, meaning annual, short-term incursions below the floor would be acceptable under the conditions set forth in Sections 6.9.1 (a)-(b), above.

6.9.4 Action Criteria

The decision-making process will be initiated if the action criteria are triggered. The action criteria are trends in groundwater levels (rate of decline) that demonstrate that the designated floor elevation will be exceeded within 10 years. If such changes are measured, the decision-making process will be initiated.

6.9.5 Decision-Making Process

If the action criteria is triggered, the decision-making process will be include:

·	Assessment of trends and updated projections of whether and when the Project is anticipated to reach the designated floor;

·	If it is determined that the groundwater levels may drop below the designated floor within 10 years, one or more of the corrective measures shall be implemented.

6.9.6 Corrective Measures

Action(s) necessary to manage or avoid incurring below the designated floor shall include one or more of the following.

·	Reduction in pumping from Project wells;

·	Revision of pumping locations within the Project wellfield;

·	Stoppage of groundwater extraction for a duration necessary to correct the predicted impact.

6.10	Project Area Vegetation

As discussed at Section 4.5 of Chapter 4 above, the Project is not anticipated to affect surface vegetation surrounding the wellfields, at the Playas, or within the surrounding Playa margins.

6.10.1 Monitoring

The Project is not anticipated to affect surface vegetation in the Project Area. However, as a conservative monitoring protocol conditioned under the County’s Groundwater Management Ordinance and MOU, baseline and periodic visual observations shall be performed around the wellfields and at the Playas and surrounding Playa margins annually during the pre-operational and operational periods of the Project. Monitoring of groundwater levels will also be conducted to provide data which could be used to correlate changes in groundwater levels attributed to Project operations to changes in surface vegetation.

6.10.2 Action Criteria

The decision-making process will be initiated if the action criterion is triggered. The action criterion is a reduction in the extent or character of Project area vegetation from the baseline established in the first 10 years of monitoring. If such changes are observed, the decision-making process will be initiated.

6.10.3 Decision-Making Process

If the action criteria is triggered, the decision-making process will include:

·	Assessment of whether the reduction in extent or character of surrounding surface vegetation is attributable to Project operations and not the result of changes in annual precipitation or climatic conditions;

·	If the reduction in the extent or character of surface vegetation is determined to be attributable to Project operations, one or more of the corrective measures shall be implemented.

6.10.4 Corrective Measures

Action(s) necessary to re-establish baseline vegetation shall include one or more of the following in addition to a reevaluation of the relationship between the aquifer and surface vegetation within the watershed:

·	Reduction in pumping from Project wells;

·	Revision of pumping locations within the Project wellfield;

·	Stoppage of groundwater extraction for a duration necessary to correct the predicted impact.

CHAPTER 7

CLOSURE PLAN AND POST-OPERATIONAL REPORTING

A Closure Plan will be developed as part of this Management Plan to ensure that no residual effects of Project operations after 50 years will result in adverse impacts to the groundwater system and environment (as defined in Chapter 4) in or adjacent to the Project wellfield area and outlying areas that monitoring has determined have been influenced by Project operations.

7.1	Closure Plan Approval

A draft Closure Plan will be prepared by FVMWC and submitted to SMWD, the TRP, and the County no later than December 31 of the 25th year of Project operations. FVMWC will consult with the TRP to provide input and guidance throughout the development and refinement of the draft Closure Plan. The TRP shall submit a formal written recommendation to the County within one year of its receipt of the draft Closure Plan from FVMWC. A final Closure Plan will be approved by the County, as it determines appropriate in its discretion after consideration of the draft Closure Plan and any recommendations of the TRP.

Once prepared, the Closure Plan will be reevaluated every 5 years in consultation with the TRP. Such reevaluation may include refinements to the Closure Plan. Any modification to the Closure Plan must be reviewed and approved by the County.

7.2	Closure Criteria

Subject to additional or alternative terms and conditions that may be developed as part of the Phase II Imported Water Storage Component, the Closure Plan shall, at a minimum, include the following conditions:

·	Monitor groundwater levels and groundwater quality for a minimum period of 10 years to confirm no significant environmental effects or Undesirable Results may occur and to protect critical resources and groundwater quality;

·	All Project wells that are abandoned shall be destroyed in manner consistent with all applicable state and local regulations and industry standards;

·	Injection wells or other mitigation to address saline water migration shall continue unless and until stable groundwater flow gradients from the wellfield toward the Dry Lake playas are restored such that the saline-freshwater boundary can be maintained naturally at 6,000’ (or less);

The Project as proposed and approved is a 50-year project. Any proposal to pump water after Year 50 will require new discretionary approvals and subsequent environmental review. Post-closure groundwater pumping by the Project, if approved, would be expected to be limited to average rates at or less than the rate of recharge and as necessary to avoid Undesirable Results;

·	The provisions and mitigation obligations under this Management Plan will remain in effect and run concurrently with the term of the Closure Plan; and

·	To ensure that the Closure Plan can be fully implemented, FVMWC will establish and maintain an escrow account or other equivalent financial assurances mechanism for post-closure operations.

Under this Management Plan, FVMWC will collect data and review and analyze groundwater levels, water quality information, air quality, and other monitoring data, as well as prepare the annual reports for review by TRP and approval by the County. One purpose of the annual reports is to identify any actions that may be taken to ensure that any decline in groundwater levels would recover to levels necessary to protect critical resources and avoid Undesirable Results during or after the post-operational phases of the Project.

CHAPTER 8

PROJECT OVERSIGHT, MANAGEMENT, AND ENFORCEMENT

8.1	Technical Review Panel

An integral part of this Management Plan involves regular and ongoing review of data collected during the term of the Project. The understanding and analysis of the data will require technical expertise. For this reason, a Technical Review Panel (TRP) will be organized for the purpose of data review and analysis, report preparation, and advising the parties on technical aspects of the Project as set forth in Chapter 8. TRP Operating Procedures will be developed by the parties before the TRP is constituted to aid the TRP in fulfilling its roles under this Management Plan.

8.1.1 Members

The TRP shall consist of one technical representative appointed by the SMWD and one technical representative appointed by the County. Each of these individual appointments shall be in the discretion of the SMWD and the County, respectively. A third technical representative shall be jointly selected by the technical representatives from SMWD and the County, subject to review and approval by the County and SMWD. All three members of the TRP shall possess professional technical qualifications appropriate to the tasks of the TRP (e.g., state certifications in engineering, hydrology, or geology) and must have a minimum of 10 years professional experience working in the groundwater field. In the event the County and SMWD representatives cannot agree on the designation of the third representative, they may petition the San Bernardino Superior Court for the appointment of the third technical representative.

8.1.2 Responsibilities

The TRP is responsible for critical review and analysis of protocols for monitoring (including quality assurance and quality control) and methods of data collection and processing; data analysis, the rate of decline in the groundwater elevations; groundwater levels and quality; and the Project’s potential to cause Undesirable Results. The TRP may make recommendations to SMWD and/or the County or SMWD and/or the County may request recommendations from the TRP on additional monitoring, mitigation, and modification to Project operations as set forth in Chapter 8.

As discussed above in Chapter 6, the TRP shall be responsible for data review and analysis along with advising SMWD and the County with respect to FVMWC’s assessment of any triggering of an action criterion, corrective measures proposed or adopted, and any proposed refinements to the Management Plan. Determinations and recommendations from the TRP are to be provided to SMWD and the County for final oversight decisions. Whenever there are differing views among the TRP, those views will be provided, and the views of all members of the TRP shall be considered.

The TRP shall coordinate with FVMWC to review and monitor Project data and conditions in the northern Bristol/Cadiz Sub-Basin, as well as in the larger watershed area and adjacent region, including all information set forth for monitoring and reporting pursuant to Chapter 9 below, and shall issue recommendations to the County concerning monitoring and reporting efforts for the Project. The TRP may also undertake or cause to be made studies which may assist in determining the following: (i) status and trends in the progressive decline in groundwater levels and freshwater storage below the “floor” established in this Management Plan; (ii) the progressive decline in groundwater levels and freshwater storage at a rate greater than the established rate in this Management Plan; (iii) land subsidence; (iv) the progressive migration of hyper-saline water from beneath the Cadiz or Bristol Dry Lakes toward the Project wellsites; (v) increases in air quality particulate matter; (vi) loss of surface vegetation; or (vii) decreases in spring flows. FVMWC shall have the preliminary responsibility for collecting, collating, and verifying the data required under the monitoring program, and shall present the results thereof in annual monitoring reports provided to the TRP. FVMWC shall also make all raw data available to the TRP via an electronic network (e.g., a web page or FTP site within 90 days of its collection) or other appropriate means to enable regular updates on Project operation and management activities and to allow the TRP to verify the data and any results therefrom.

The TRP shall also review and comment to the County on annual reports developed by FVMWC as provided for in Chapter 9 below.

TRP’s costs will be borne by FVMWC, including those of the technical representatives, provided that annual costs do not exceed $60,000 per year, escalated by 2 percent per year. Special reports recommended or prepared by the TRP may necessitate additional funding if so ordered by the County or SMWD or accepted by FVMWC.

8.1.3 TRP Convening, Determinations, and Reporting

As discussed above in Chapter 6, the TRP shall convene as necessary to review and advise the County with respect to any monitoring data or other assessments provided by FVMWC concerning the triggering of action criterion and any associated impacts to a critical resource, corrective measures adopted, and any proposed refinements to the Management Plan. The TRP shall also convene at least once every year to discuss and take action with respect to its other responsibilities set forth in Chapter 8. Convening of the TRP may occur by face-to-face meetings, telephone conferencing, or video conferencing.

The TRP shall designate one of its members as the Chair and this position shall shift among the members annually such that each member shall be the Chair every third year. The Chair shall take minutes of all convening meetings of the TRP, which shall be submitted to the County Representative and the SMWD Representative within 10 days of the TRP convening. The minutes shall also be submitted to the General Manager of SMWD within ten days of the TRP convening in order to facilitate SMWD’s monitoring of compliance with those mitigation measures which correspond to provisions of the Management Plan.

Determinations and recommendations of the TRP shall require the affirmative agreement of at least two of the TRP Members, and the Chair shall notify the County Representative and SMWD’s Representative in writing within 10 days of any determination by the TRP. In the event a determination or recommendation does not reach a consensus, the views and opinions of the dissenting member shall also be submitted.

8.2	Oversight and Enforcement by The County

The MOU and this Management Plan provide for the County to exercise oversight and enforcement of the Management Plan subject to the dispute resolution process referenced in Section 8.3 , below. The County exercises its management authority over County groundwater resources through its Desert Groundwater Management Ordinance (Ordinance). Through the MOU and Management Plan, the County is responsible for ensuring that the Project is operated to avoid Overdraft 15 and Undesirable Results as set forth in the MOU. The County must separately fulfill its duties as a Responsible Agency under CEQA to ensure compliance with those measures in the MMRP that are within the County’s jurisdiction.

The County Representative (Chief Executive Officer) will consider written reports submitted by the TRP and will review actions taken or recommended by FVMWC and the TRP. The County, in its sole determination, will issue any final determination of whether FVMWC’s assessment of the triggering of action criteria and recommended responsive actions are appropriate based on all available technical data and are otherwise consistent with the EIR and its MMRP, the MOU, and the County Ordinance. If the County determines that FVMWC’s assessment or recommended responsive actions are not appropriate, the County may order FVMWC to take alternative corrective actions as set forth in Chapter 6, above. If it is concluded by the County that corrective action or alternative corrective action is necessary, the County will provide notice of its determination and any administrative order in writing to FVMWC, SMWD, and to each member of the TRP. FVMWC shall, within a time period reasonable to the applicable circumstances, comply with the determination and instructions set forth in SMWD’s or the County’s written administrative order. The County in its administrative order may specify the time period that it deems reasonable for FVMWC to implement any corrective actions under the given circumstances. With the exception of enforcement actions concerning the threat of immediate or irreparable injury, including actions necessary to avoid Overdraft or Undesirable Results, the County’s written determinations and administrative orders will be subject to the dispute resolution provisions of the MOU as referenced in Section 8.3 . Likewise, certain administrative actions are subject to direct judicial review, as set forth in Paragraph 8 of the MOU.

Nothing in this process is intended to alter or supersede SMWD’s responsibility, as the lead agency for the Project, to enforce, as a condition of Project approval, the implementation of all adopted mitigation measures, including those measures which correspond to provisions of the Management Plan.

8.3	Dispute Resolution

The County, SMWD, FVMWC, and Cadiz will exercise good faith and reasonable efforts to implement the Management Plan and to make any required determinations and resolve any issues, claims, or disputes that arise under the oversight and enforcement of the Management Plan, including without limitations matters concerning implementation and funding, the triggering of action criterion pertaining to critical resources, corrective measures, proposed refinements to action criteria or corrective measures, development and approval of the Closure Plan provided for in Chapter 7, edits to and completion of the reports provided for in Chapter 9, and any necessary actions to enforce the provisions of this Management Plan. As set forth in the MOU, in the event a dispute arises between the County, SMWD, FVMWC, and/or Cadiz relating to an action taken by FVMWC or a decision or determination concerning the County’s and SMWD’s management and enforcement responsibility under this Management Plan, the parties shall first attempt in good faith to resolve the dispute through informal means. In the event that such efforts are unsuccessful, any party may invoke the dispute resolution provisions set forth in Paragraph 8 of the MOU except where dispute resolution is excused due to the threat of immediate or irreparable injury (see MOU and Section 8.2 , above).

CHAPTER 9

MONITORING AND REPORTING

9.1	Project Data Monitoring

Monitoring is essential to making informed decisions regarding Project operations. FVMWC will be responsible for preparation of the annual reports beginning one year after agreements for delivery of Project water are entered into or commencement of Project construction, whichever occurs first. Five Year Reports shall be prepared beginning 5 years from commencement of Project construction. The annual and 5 Year Reports will be prepared by a California Professional Geologist, Certified Hydrogeologist, or Professional Engineer with a minimum of 10 years professional experience in groundwater.

9.2	Project Reports

9.2.1 Annual Reports

Each year during the operational and post-operational periods of the Project, an annual report shall be prepared by FVMWC that shall include a summary, interpretation, and analysis of all Project data obtained through the monitoring described in Chapters 5 and 6, above. The report shall also include any requested or suggested changes in the monitoring proposed to occur in successive years. In addition to the components required under Section 2.5.1 of the County Guidelines for Preparation of a Groundwater Management Plan (June 2000), annual monitoring reports will include the following components:

·	Summary of precipitation from climate stations;

·	Baseline groundwater level and water quality conditions (as referenced in the EIR). Presentation of baseline conditions will include groundwater level elevation contours, water quality contours, and a figure showing the results of the initial land survey;

·	Tables summarizing annual groundwater production for each Project extraction well and cumulative extraction from the Project;

·	Tables summarizing depth to static water level and groundwater elevation measurements for all observation wells;

Report on Bonanza, Whiskey and Vontrigger Springs, including visual observations such as starting and ending points of observed ponded or flowing water, estimated depth of ponded water and flow rate of flowing water, conductivity, pH and temperature of water, any colorations of water, and general type and extent of vegetation;

·	Hydrographs for all production and observation wells;

·	Groundwater elevation contours;

·	Summary and results of surface vegetation monitoring;

·	Tables summarizing water quality analyses for the observation wells;

·	Results of land subsidence monitoring surveys and any changes relative to baseline;

·	Summary tables of any data collected from wells owned by neighboring landowners in proximity to the Project area (provided that permission was granted for such data collection);

·	Summary of Project developments, such as changes in storage or extraction operations or construction of new production wells;

·	Discussion of Project storage and extraction operations, and trends in groundwater levels and groundwater quality as compared to the baseline conditions;

·	Updated groundwater flow, transport and variable density model results;

·	Tables summarizing changes in frequency and severity of dust mobilization recorded on Bristol and Cadiz Dry Lakes and analysis correlating dust emissions with wind speed and direction, groundwater levels underlying the Dry Lakebeds and soil surface chemistry;

Tables and figures (wind roses) summarizing wind data from regional meteorological towers addressing wind speed and direction, and stability frequency distributions. This data shall be collected during the operation phase of the Project, and may be extended if required by the County to address the post-operational (closure) period;

·	Summary of FVMWC and TRP assessments, proposed refinements to the Management Plan, and corrective measures.

9.2.2 Five-Year Reports

As discussed in Chapters 2 and 4 above, it is anticipated that as the Project proceeds, new data and analysis as well as any new Project operational considerations will be used to refine the calibration of the Project’s various water resources models. It is also appropriate to periodically report on observed trends in data from the monitoring features and on predictions of future trends. Thus, a “Five-Year Report” shall be prepared 5 years from commencement of construction, and on every five-year anniversary thereafter. In addition to the report components required under Section 2.5.2 of the County’s Guidelines for Preparation of a Groundwater Monitoring Report, the Five-Year Report shall report on the following matters in addition to the contents of previous annual reports:

·	Changes to the number or locations of monitoring features;

·	Changes in monitoring frequency;

·	Changes in monitoring technology;

·	Refinements in the action criteria for critical resources;

·	Refinements in the models;

·	Modifications of this Management Plan;

·	Summary of total Project storage and extraction operations;

·	Documentation of any trends in groundwater levels evident from the monitoring data;

·	Hydrogeologic analysis and interpretation of all Project storage and extraction operations during the previous five-year period;

·	Hydrogeologic analysis and interpretation of all water level elevation, water quality, and land survey data collected during the previous five-year period;

·	Results of refined model output from the INFIL3.0 (or updated) model, saturated groundwater flow and solute transport models, the variable density groundwater flow model and the solute transport model;

·	Detailed evaluation of impacts (if any) of Project operations on surface or groundwater resources;

·	Proposed refinements to the Management Plan to address any identified gaps or inadequacies in the monitoring regimes or operational data;

Summary of projections and trends associated with groundwater elevations and description of any Project operations designed to prevent declines in static groundwater levels in excess of the designated floor and projected rates of decline both during the operation and post-operational phases of the Project;

·	Documentation of any trends in water quality measurements or migration in the saline boundary evident from the monitoring data;

·	Aquifer specific contours of the most recent static groundwater level elevations and groundwater level elevation changes over the previous 5 years;

·	Documentation of any complaints or possible impacts to wells owned by neighboring landowners recorded for the period;

Tables summarizing changes in frequency and magnitude (to the extent that can be determined from the data) of dust mobilization recorded on Bristol and Cadiz Dry Lakes, and analysis correlating wind-mobilized particulate matter with wind speed and direction, groundwater levels underlying the Dry Lakebeds, and soil moisture on the lakebed surfaces;

·	Summary and trends of regional wind and air quality data with conclusions for potential for Project-mobilized lakebed dust to be transported throughout the Mojave Desert region; and

·	Once the draft Closure Plan is developed on or before Year 25 of operations, recommended revisions to the Closure Plan.

All Five-Year Reports will include electronic data files and model input and output files. The annual reports will be available to agencies, organizations, interest groups, and the general public upon written notification to the County. All Five-Year Reports shall be distributed to the lead and responsible agencies and made available to the public electronically.

9.2.3 Report Preparation Process

The draft reports and supporting data as provided for in this chapter shall be prepared by FVMWC and submitted to the TRP, General Manager of SMWD, and the County Representative on or before April 1 of each year for Annual Reports, and on or before December 31 for Five-Year Reports. Annual reports prepared for any continuing agricultural operations by Cadiz shall also be provided. The TRP shall then review the report and determine whether any recommended edits or additions are appropriate, which it shall provide to the County Representative, FVMWC, and the General Manager of SMWD within 45 days of receipt from FVMWC.

Within 60 days of receipt of the TRP’s recommendation, the County Representative shall then consider the report and any recommended edits or additions by the TRP, and determine whether the report is complete or requires revisions or additions. If complete, the County shall accept and file the report as complete and provide written notice of its determination to FVMWC, SMWD, and the TRP. If questions arise and revisions are required, however, FVMWC shall submit a revised report to the TRP, the General Manager of SMWD, and the County Representative within 45 days of notice of the County Representative’s request for revisions or clarifications. If, upon receipt of the revised report, questions or disputes over the content of the report remain, any party may either meet and confer on a mutual resolution of the final report or invoke the Dispute Resolution provisions in Section 8.3 of this Management Plan.

Table 5-1

Critical Resource Area	Feature No.	Monitoring Features		No.	Pre-Operational Monitoring Frequency			Operational Monitoring Frequency			Post-Operational Monitoring Frequency
					Pre-Operational Monitoring Frequency			Extraction			Post-Operational Monitoring Frequency
					Water Level	Water Quality	Other Monitoring	Water Level	Water Quality	Other Monitoring	Water Level	Water Quality	Other Monitoring
Springs	1	Springs, Monitoring	Existing	3	Quarterly	Quarterly	Quarterly, Visual Observations and Flow at 3 Springs	Quarterly	Quarterly	Quarterly, Visual Observations and Flow at 3 Springs	Annual	Annual	Annual, Visual Observations and Flow 3 Springs
Aquifer System	2	Observation Wells (16 total)	Existing	12	Monthly	4 Quarterly, 8 Annually	-	Monthly for First 3 Months of Cycle, then Semi-Annually	Annually	-	Annually	Triannually	-
			Existing	2	Continuous	Annually	-	-	Annually	-	Annually	Triannually	-
			New	2	Monthly	Quarterly	-	Monthly for First 3 Months of Cycle, then Semi-Annually	Annually	-	Annually	Triannually	-
	3	Project Area Well Clusters - Saturated Zone Only (1 x 3 well cluster + 2 x 2 well cluster = 2 existing and 3x2 new well cluster for 5 total Clusters)	Existing	5 wells	Continuous	Quarterly	-	Continuous	Semi-Annually	-	Continuous (Until No Longer Deemed Necessary)	Annually	-
	3		New	6 wells	Continuous	Quarterly	-	Continuous	Semi-Annually		Continuous (Until No Long Deemed Necessary)	-Annually	-
	4	Production Wells (34 total)	Existing	5	Depth to Water Upon Completion	Sample after completion	-	Continuous	Composite Quarterly	Summarize Data Monthly	Annually	-	-
	4	Production Wells (34 total)	New	29	Depth to Water Upon Completion	Sample after completion	-	Continuous	Composite Quarterly	Summarize Data Monthly	Annually	-	-
	5	Land Surface Elevation Surveys (20 total)	New Benchmark	23	-	-	Annually, reduce if warranted	-	-	Annually, reduce if warranted	-	-	Annually, reduce if warranted
	5	Land Surface Elevation Surveys (20 total)	InSAR (New)	2/yr (If Warranted)	-	-	Once	-	-	Every 5 years	-	-	Twice at 5-year interval
	6	Extensometer (3 total)	New	3	-	-	Establish baseline	-	-	Records Daily	-	-	Summarize data annually
Aquifer System	7	Flowmeter Surveys (5 total)	New	5	-	One Time	One Time	-	-	-	-	-	-
Bristol and Cadiz Dry Lakes	8	Bristol Dry Lake Well Clusters (2 per Cluster x 3 total Clusters)	New	3 clusters 6 wells	Continuous	Quarterly	-	Continuous	Semi-Annually	-	Continuous (until no longer deemed necessary)	Annually as necessary	-
Bristol and Cadiz Dry Lakes	9	Cadiz Dry Lake Well Clusters (2 per Cluster x 3 total Clusters)	New	3 clusters 6 wells	Continuous	Quarterly	-	Continuous	Semi-Annually	-	Continuous (until no longer deemed necessary)	Annually as necessary	-
	10	Gamma / EM Logs (up to 6 total)	New	6	-	-	One Time	-	-	-	-	-	-
Other (Regional)	11	Weather Stations (4 total)	Existing	3	-	-	Records Daily	-	-	Records Daily	-	-	-
Other (Regional)	11	Weather Stations (4 total)	Cadiz Field Office	1	-	-	Records Hourly	-	-	Records Hourly	-	-	-
Air Quality	12	Nephelometers	New	4	-	-	Hourly	-	-	Hourly	-	-	-

NOTES:
a - See Table 5-2 for details of monitoring features.
b - Monitoring frequencies pertain to the initial monitoring period of each program operational phase. Monitoring frequency may be increased or decreased based on the initial monitoring results.

Table 5-2

Critical Resource Area	Feature No.	Feature Type	When Monitored	Name	State Well Number	Location Coordinates	Monitoring Protocol
Critical Resource Area	Feature No.	Feature Type	When Monitored	Name	State Well Number	Location Coordinates	Water Level	Water Quality	Other Monitoring
Springs in the Mojave National Preserve and BLM Wilderness Area	1	Springs, Monitoring	Pre-Operational Operational Post-Operational	Bonanza Spring	NA	34° 41' 08" N 115° 24' 20" W	-	-	See Sections 5.1 and 6.1
		Springs, Monitoring	Pre-Operational Operational Post-Operational	Whiskey Spring	NA	34° 59' 52" N 115° 26' 59" W	-	-	See Sections 5.1 and 6.1
		Springs, Monitoring	Pre-Operational Operational Post-Operational	Vontrigger Spring	NA	35° 03' 20" N 115° 08' 52" W	-	-	See Sections 5.1 and 6.1
Aquifer System	2	Observation Well	Pre-Operational Operational Post-Operational	Dormitory	5N/14E-5F1	34° 32' 38" N 115° 31' 57" W	Transducer, See Sections 5.2 and 6.3	See Appendices B, C & D	-
		Observation Well	Pre-Operational Operational Post-Operational	6/15-1	6N/15E-01H	34° 38' 23" N 115° 21' 22" W	Transducer, See Sections 5.2 and 6.4	See Appendices B, C & D	-
		Observation Well	Pre-Operational Operational Post-Operational	6/15-29	6N/15E-29P1	34° 34' 20" N 115° 26' 04" W	Transducer, See Sections 5.2 and 6.4	See Appendices B, C & D	-
		Observation Well	Pre-Operational Operational Post-Operational	SCE-11	4N/14E-13J1	34° 25' 51 N 115° 27' 25" W	Transducer, See Sections 5.2 and 6.5	See Appendices B, C & D	-
		Observation Well	Pre-Operational Operational Post-Operational	CI-3	5N/14E-24D2	34° 30' 40" N 115° 28' 01" W	Transducer, See Sections 5.2 and 6.6	See Appendices B, C & D	-
		Observation Well	Pre-Operational Operational Post-Operational	Archer Siding #1	4N/15E-24E1	34° 25' 11" N 115° 21' 57" W	Manual, See Appendix B	See Appendices C & D	-
Aquifer System	2	Observation Well	Pre-Operational Operational Post-Operational	Essex	8N/17E-31	34° 43' 49" N 115° 14' 53" W	Manual, See Appendix B	See Appendices C & D	-
		Observation Well	Pre-Operational Operational Post-Operational	Fenner	8N/17E-2	34° 48' 59" N 115° 10' 40" W	Manual, See Appendix B	See Appendices C & D	-
		Observation Well	Pre-Operational Operational Post-Operational	Goffs	10N/18E-26	34° 54' 57" N 115° 03' 44" W	Manual, See Appendix B	See Appendices C & D	-
		Observation Well	Pre-Operational Operational Post-Operational	Labor Camp	5N14E-16H1	34° 31' 22" N 115° 30' 46" W	Transducer, See Sections 5.2 and 6.6	See Appendices B, C & D	-
		Observation Well	Pre-Operational Operational Post-Operational	SCE-5	5N/14E-32N1	34° 28' 17" N 115° 32' 37" W	Manual, See Appendix B	See Appendices C & D	-
		Observation Well	Pre-Operational Operational Post-Operational	SCE-10	5N/14E-34Q1	34° 28' 22" N 115° 29' 59" W	Manual, See Appendix B	See Appendices C & D	-
		Observation Well	Pre-Operational Operational Post-Operational	SCE-17	5N/14E-29B1	34° 29' 54" N 115° 31' 58" W	Manual, See Appendix B	See Appendices C & D	-
		Observation Well	Pre-Operational Operational Post-Operational	SCE-18	5N/13E-11R1	34° 26' 37" N 115° 34' 59" W	Manual, See Appendix B	See Appendices C & D	-
Aquifer System	2	Observation Well	Pre-Operational Operational Post-Operational	Danby-1	5N/13E-11R1	34° 26' 37" N 115° 34' 59" W	Manual, See Appendix B	See Appendices C & D	-
	2	Observation Well	Pre-Operational Operational Post-Operational	Piute-1	TBD	34° 57' 22" N 114° 48' 16 W	Manual, See Appendix B	See Appendices C & D	-
	3	Project Area Well Cluster- Groundwater (3 well Cluster)	Pre-Operational Operational Post-Operational	MW-7a MW-7 TW-1	TBD	34° 31' 39" N 115° 26' 55" W	Transducer, See Sections 5.3 and 6.4	See Appendices C & D	Monitor Alluvium/Carbonates/Bedrock
		Project Area Well Cluster- Groundwater (2 well Cluster)	Pre-Operational Operational Post-Operational	TW-2MW TW-2	TBD	34° 31' 13" N 115° 26' 57" W	Transducer, See Sections 5.3 and 6.4	See Appendices C & D	Monitor Alluvium//Bedrock
		Project Area Well Cluster- Groundwater (2 well Cluster)	Pre-Operational Operational Post-Operational	New Cluster Well	TBD	TBD	Transducer, See Sections 5.3 and 6.4	See Appendices C & D	Monitor Alluvium//Bedrock
		Project Area Well Cluster- Groundwater (2 well Cluster)	Pre-Operational Operational Post-Operational	New Cluster Well	TBD	TBD	Transducer, See Sections 5.3 and 6.4	See Appendices C & D	Monitor Alluvium/Bedrock
		Project Area Well Cluster- Groundwater (2 well Cluster)	Pre-Operational Operational Post-Operational	New Cluster Well	TBD	TBD	Transducer, See Sections 5.3 and 6.4	See Appendices C & D	Monitor Alluvium/Bedrock
	4		Operational	28	5N/14E-28Q1	34° 31' 05" N 115° 29' 59" W	-	-	See Section 5.4
			Operational	27N	5N/14E-27B1	34° 29' 54" N 115° 29' 59" W	-	-	See Section 5.4
			Operational	27S	5N/14E-27Q1	34° 28' 14" N 115° 29' 59" W	-	-	See Section 5.4
Project Area Aquifer	4		Operational	21S	5N/14E-21P1	34° 30' 08" N 115° 31' 12" W	-	-	See Section 5.4
			Operational	33	5N/14E-33K1	34° 28' 32" N 115° 31' 07" W	-	-	See Section 5.4
		New Production Wells (29 total)	Operational	TBD (see Figure 5-2)	TBD	TBD	-	-	See Section 5.4
	5	Benchmark Stations (23 total)	Pre-Operational Operational Post-Operational	TBD	NA	Figure 5-2	-	-	See Sections 5.5 and 6.3
	5	InSAR (2 per year)	Pre-Operational Operational Post-Operational	NA	NA	NA	-	-	See Sections 5.5 and 6.3
	6	Extensometer (3 total)	Pre-Operational Operational Post-Operational	TBD	NA	Figure 5-2	-	-	See Sections 5.5 and 6.3
	7	Flowmeter Surveys (5 total)	Pre-Operational	TBD	TBD	TBD	-	-	See Section 5.7
Bristol and Cadiz Dry Lakes	8	Bristol Dry Lake Well Cluster b	Pre-Operational Operational Post-Operational	TBD	TBD	Figure 5-2	Transducer, See Sections 5.8 , 5.9 , 6.4 and 6.5	See Appendices C & D	-
		Bristol Dry Lake Well Cluster b	Pre-Operational Operational Post-Operational	TBD	TBD	Figure 5-2	Transducer, See Sections 5.8 , 5.9 , 6.4 and 6.5	See Appendices C & D	-
		Bristol Dry Lake Well Cluster c	Pre-Operational Operational Post-Operational	TBD	TBD	Figure 5-2	Transducer, See Sections 5.8 , 5.9 , 6.4 and 6.5	See Appendices C & D	-
	9	Cadiz Dry Lake Well Cluster d	Pre-Operational Operational Post-Operational	TBD	TBD	Figure 5-2	Transducer, See Sections 5.8 , 5.9 , 6.4 and 6.5	See Appendices C & D	-
		Cadiz Dry Lake Well Cluster d	Pre-Operational Operational Post-Operational	TBD	TBD	Figure 5-2	Transducer, See Sections 5.8 , 5.9 , 6.4 and 6.5	See Appendices C & D	-
		Cadiz Dry Lake Well Cluster e	Pre-Operational Operational Post-Operational	TBD	TBD	Figure 5-2	Transducer, See Sections 5.8 , 5.9 , 6.4 and 6.5	See Appendices C & D	-
	10	Gamma/EM Logs (up to 6 total)	Pre-Operational	TBD	TBD	TBD	-	-	See Section 5.10
Other (Basin-wide)	11	Weather Station	Pre-Operational Operational Post-Operational	Amboy	NA	34° 31' 52" N 115° 41' 42" W	-	-	See Section 5.11
		Weather Station	Pre-Operational Operational Post-Operational	Mitchell Caverns	NA	34° 56' 06" N 115° 30' 58" W	-	-	See Section 5.11
		Weather Station	Pre-Operational Operational	Fenner Gap	NA	34° 30' 57" N 115° 27' 45" W	-	-	See Section 5.11
		Weather Station	Pre-Operational Operational Post-Operational	Cadiz Field Office (CIMIS Station)	NA	34° 30' 49" N 115° 30' 39" W	-	-	See Section 5.11
Air Quality	12	Nephelometers	Pre-Operational Operational Post-Operational	TBD	NA	TBD	-	-	See Section 5.12
Vegetation	13	Vegetation Monitoring	Pre-operation Operational Post-Operational	NA	NA	Wellfields and Surrounding Bristol and Cadiz Playas	-	-	See Section 5.13
NOTES:
a - Location coordinates to be verified in the field during initial Pre-Operational activity.
b - Two new well clusters to be installed at eastern margin of Bristol Dry Lake (see Figure 5-1).
c - One new well cluster to be installed on Bristol Dry Lake (see Figure 5-1).
d - Two new well clusters to be installed north of Cadiz Dry Lake (see Figure 5-1). e- One new well cluster to be installed on Cadiz Dry Lake (see Figure 5-1).
Also see Table 5-1 for details of proposed monitoring features and frequencies.

Table 6-1

Cadiz Groundwater Conservation Recovery and Storage Project

Summary of Action Criteria, Impacts and Corrective Measures

Potential Impact	Method of Measurement	Triggers (Action Criteria)	"Close Watch" Measures	Corrective Measures

Third-Party Wells	Groundwater observation wells; voluntary third-party well monitoring	A decline of static water levels of more than twenty (20) feet from pre-Project static water levels or to a degree in which the reduction in static water levels results in an inability to meet existing production of any third-party well drawing water from the northern Bristol/Cadiz Sub-Basin or elsewhere in the Fenner Watershed Receipt of a written complaint by from one or more well owner(s) regarding documented decreased groundwater production yield, degraded water quality, or increased pumping costs submitted by neighboring landowners or the salt mining operators on the Bristol and Cadiz Dry Lakes	Investigation to determine if caused by Project operations, and significance of impact Provision of substitute water to impacted party	Continued provision of substitute water supplies Deepen or otherwise improve the efficiency of the impacted well(s) Blend impacted well water with another local source Construct replacement well(s) Compensation Enter into a mitigation agreement Modification of Project wellfield operations
Land subsidence	Benchmark stations; InSAR; extensometers	Land surface elevation decline of greater than 0.3 ft when compared to baseline conditions A declining trend which if continued would be of a magnitude within ten years which impacts existing infrastructure in the Project area. The magnitude for railroad tracks is more one inch vertically over 62 feet linearly along the existing railroad tracks	Determine if elevation changes were directly attributable to Project operations Conduct ground surveys to look for evidence of differential compaction	Repair damaged structures Enter into a mitigation agreement Modification of Project wellfield operations to arrest subsidence
Land subsidence	Benchmark stations; InSAR; extensometers	A land surface elevation decline greater than predicted by fifty percent over Sensitivity Scenario 1 when compared to baseline conditions to trigger comprehensive review	Comprehensive review includes examination of effects of subsidence on permanent overdraft	Modification of Project wellfield operations to arrest subsidence
Induced flow of lower-quality water from Bristol and Cadiz Dry Lakes	Groundwater observation wells and cluster wells at Dry Lakes; cluster wells and sentinel wells between Dry Lakes and well-field	TDS concentration changes in excess of 600 mg/L at cluster wells located within a distance of 6,000 feet from pre-Project locations of the interface	Determine if concentration changes are directly attributable to Project operations Determine saline-freshwater interface is expected to migrate more than 6,000 feet within ten years Install additional observation wells to further assess saline water migration	Compensation Installation of injection and/or extraction well(s) to maintain saline-freshwater interface within its 6,000-foot limit Modification of Project operations to maintain beneficial use
Brine resources underlying Bristol and Cadiz Dry Lakes	Groundwater observation wells and cluster wells at Dry Lakes	Changes in brine water levels of greater than 50 percent above water column of the brine company’s pump intake in comparison to pre-operational static levels in cluster wells at the margins of the Dry Lakes Receipt of a written complaint from salt mining company	Determine if brine water level changes are directly attributable to Project operations	Compensation Installation of injection and/or extraction well(s) Enter into a mitigation agreement Modification of Project operations to maintain beneficial use
Adjacent groundwater basins	Groundwater observation wells	No action criteria necessary; verification monitoring only	None	None
Springs	Visual observation and manual flow measurements and spring characteristics annually of bonanza, whiskey, and Vontrigger springs and groundwater levels measurements in observation wells	Reduction in average annual or seasonal flow or degradation in characteristics at Bonanza Spring as correlated to precipitation	Determine if reduction in flow or degradation in characteristics is attributable to Project operations	Modification of Project operations to re-establish baseline flow and spring characteristics
Air quality	Groundwater observation wells (cluster wells at Dry Lakes), open-air nephelometers Soil testing	Changes in air quality that exceed baseline conditions by 5 percent Changes in soil conditions showing degradation of soil structure	Determine if change is air quality or soil structure is attributable to Project operations	Modification of Project operations to re-establish baseline air quality levels
Management of groundwater drawdown	Well monitoring within 2-mile radius of center of Project wellfield	Lowering of groundwater level in Project wellfield area below management “floor”	None	Modification of Project operations to avoid drawdown below management “floor.”
Vegetation	Visual observation and correlation with groundwater levels	Reduction in the extent or character of Project area baseline vegetation	None	Modification of Project operations to re-establish baseline vegetation

__________________________________________________________

1 This Management Plan shall not become final or effective until approved by the Santa Margarita Water District and the County of San Bernardino Board of Supervisors.

2 Actual total pumping would vary depending on Project participant supply needs. The maximum extraction rate in any given year would be limited to 75,000 afy with the long-term average of up to 50,000 afy as measured over a rolling 10-year period.

DELAWARE	77-0313235
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

550 South Hope Street, Suite 2850
Los Angeles, California	90071
(Address of principal executive offices)	(Zip Code)

	For the Three Months
	Ended September 30,
($ in thousands except per share data)	2012			2011

Revenues	$	287		$	121

Costs and expenses:
Cost of sales		293			266
General and administrative		2,965			2, 467
Depreciation		97			92

Total costs and expenses		3,355			2,825

Operating loss		(3,068	)		(2,704	)

Interest expense, net		(1,665	)		(1,451	)
Other income, net		-			52

Loss before income taxes		(4,733	)		(4,103	)
Income tax provision		3			2

Net loss applicable to common stock	$	(4,736	)	$	(4,105	)

Basic and diluted net loss per common share	$	(0.31	)	$	(0.29	)

Basic and diluted weighted average shares outstanding		15,439			14,161

	For the Nine Months
	Ended September 30,
($ in thousands except per share data)	2012			2011

Revenues	$	324		$	618

Costs and expenses:
Cost of sales		295			716
General and administrative		8,683			7,650
Depreciation		285			273

Total costs and expenses		9,263			8,639

Operating loss		(8,939	)		(8,021	)

Interest expense, net		(4,821	)		(4,169	)
Other income, net		-			108

Loss before income taxes		(13,760	)		(12,082	)
Income tax provision		8			5

Net loss applicable to common stock	$	(13,768	)	$	(12,087	)

Basic and diluted net loss per common share	$	(0.89	)	$	(0.87	)

Basic and diluted weighted average shares outstanding		15,438			13,934

	September 30,			December 31,
($ in thousands)	2012			2011

ASSETS

Current assets:
Cash and cash equivalents	$	1,373		$	11,370
Accounts receivable		372			139
Inventories		316			-
Prepaid expenses and other		1,210			604

Total current assets		3,271			12,113

Property, plant, equipment and water programs, net		44,196			41,886
Goodwill		3,813			3,813
Other assets		213			186

Total Assets	$	51,493		$	57,998

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	2,092		$	1,069
Accrued liabilities		2,126			1,049
Tax liability		321			321
Current portion of long-term debt		11			4
Other liabilities		923			-

Total current liabilities		5,473			2,443

Long-term debt, net		56,831			52,032
Deferred revenue		750			670
Other long-term liabilities		-			923

Total Liabilities		63,054			56,068

Stockholders’ equity:
Common stock - $.01 par value; 70,000,000 shares
authorized; shares issued and outstanding – 15,438,961 at
September 30, 2012 and 15,429,541 at December 31, 2011		154			154
Additional paid-in capital		300,440			300,163
Accumulated deficit		(312,155	)		(298,387	)
Total stockholders’ (deficit) equity		(11,561	)		1,930

Total Liabilities and Stockholders’ equity	$	51,493		$	57,998

For the Nine Months ended September 30, 2012	Page


PART I – FINANCIAL INFORMATION

ITEM 1. Financial Statements

Cadiz Inc. Consolidated Financial Statements

Unaudited Statements of Operations for the three months ended September 30, 2012 and 2011	1

Unaudited Statements of Operations for the nine months ended September 30, 2012 and 2011	2

Unaudited Balance Sheets as of September 30, 2012 and December 31, 2011	3

Unaudited Statements of Cash Flows for the nine months ended September 30, 2012 and 2011	4

Unaudited Statement of Stockholders’ Equity for the nine months ended September 30, 2012	5

Unaudited Notes to the Consolidated Financial Statements	6

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk	32

ITEM 4. Controls and Procedures	32

PART II – OTHER INFORMATION	33

ITEM 1. Legal Proceedings	33

ITEM 1A. Risk Factors	33

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	33

ITEM 3. Defaults Upon Senior Securities	33

ITEM 4. Mine Safety Disclosures	33

ITEM 5. Other Information	33

ITEM 6. Exhibits	35

					Additional					Total
	Common Stock				Paid-in		Accumulated			Stockholders’
	Shares		Amount		Capital		Deficit			Equity (Deficit)

Balance as of December 31, 2011		15,429,541	$	154	$	300,163	$	(298,387	)	$	1,930

Stock awards		9,420		-		-		-			-

Stock based compensation expense		-		-		277		-			277

Net loss		-		-		-		(13,768	)		(13,768	)

Balance as of September 30, 2012		15,438,961	$	154	$	300,440	$	(312,155	)	$	(11,561	)

12 Months Ending September 30	(in thousands)

2013		59,312
2014		11
2015		11
2016		11
2017		9
	$	59,354

If to SMWD:	Santa Margarita Water District 26111 Antonio Parkway Rancho Santa Margarita, CA 92688 Attn: General Manager
If to Cadiz:	Cadiz, Inc. 550 South Hope Street, Suite 2850 Los Angeles, CA 90017 Attn: President
If to FVMWD:	Fenner Valleny Mutual Water Company 550 South Hope Street, Suite 2850 Los Angeles, CA 90017 Attn: President

Project Participant	Project Allotment (acre-feet per yeat)

Santa Margarita Water District	15,000
Three Valleys Municipal Water District	5,000
Golden State Water Company	5,000
Suburban Water Systems	5,000
Jurupa Community Services Distrcit	5,000
Arizona California Railroad	100
California Water Service Company	5,000

Total Project Allotment Subscribed
Project Allotment Available	40,100
Total Annual Project Allotment	9,900
	50,000

Name	Title	Signature
Keith Brackpool	Chief Executive Officer
Timothy J. Shaheen	Chief Financial Officer

Lender	Tranche A Term Commitment	Tranche B Term Commitment	Tranche C-1 Term Commitment	Tranche C-2 Term Commitment	Tranche D Term Commitment
LC CAPITAL MASTER FUND, LTD. c/o Lampe, Conway & Company LLC 680 Fifth Avenue, Suite 1202 New York, NY 10019 Attention: Steven G. Lampe Telecopy: (212) 581-8999 with a copy to: Manatt, Phelps & Phillips, LLP 700 12th Street NW, Suite 1100 Washington, DC 20006 Attention: Debra Alligood White Telecopy: (202) 637-1516	$9,000,000.00	$23,737,500.00	$4,500,000.00	$0.00	$1,000,000.00
MILFAM II L.P. 222 Lakeview Avenue, Suite 160-365 West Palm Beach, Florida 33401 Attention: Eric Fangmann Telecopy: (619) 923-2908 with a copy to: O’Melveny & Myers LLP 400 South Hope Street Los Angeles, CA 90071 Attention: Steve Warren Telecopy: (213) 430-6407	$1,000,000.00	$2,637,500.00	$500,000.00	$2,000,000.00	$1,500,000.00
WATER ASSET MANAGEMENT—MANAGED ACCOUNT #1, L.L.C. c/o Water Asset Management, LLC 509 Madison Avenue, Suite 804 New York, NY 10022 Attention: Joe Kirincich Telecopy: (212) 754-5101 with a copy to: Makers Capital Corporation 9601 Wilshire Blvd., Suite #1132 Beverly Hills, California 90210 Attn: Stacy Kincaid Telephone: +1 310 666 8877	$0	$0	$0	$0	$2,500,000.00
AGGREGATE COMMITMENT	$10,000,000.00	$26,375,000.00	$5,000,000.00	$2,000,000.00	$5,000,000.00

Facility Designation	Conversion Price
Tranche A-1 Term Loans	$7.00 per common share
Tranche A-2a Term Loans	$35.00 per common share
Tranche A-2b Term Loans	NONE (not convertible)
Tranche B-1 Term Loans	$13.50 per common share
Tranche B-2 Term Loans	$12.50 per common share
Tranche B-3a Term Loans	$35.00 per common share
Tranche B-3b Term Loans	NONE (not convertible)
Tranche C-1 Term Loans	$13.50 per common share
Tranche C-2 Term Loans	$12.50 per common share
Tranche D Term Loans	NONE (not convertible)

	September 30,			December 31,
	2012			2011

Land and land improvements	$	24,192		$	24,188
Water programs		21,380			18,914
Buildings		1,187			1,187
Leasehold improvements		570			570
Furniture and fixtures		458			458
Machinery and equipment		1,122			997
Construction in progress		103			103
		49,012			46,417

Less accumulated depreciation		(4,816	)		(4,531	)

	$	44,196		$	41,886