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Kern County a hub of the water Bakersfield-area rancher

trade Jim Nickel is a great-great-
grandson of Henry Miller, a
legendary California land
By Dale Kasler -- Bee Staff Writer
baron who also was one of An occasional series
Published 2:15 a.m. PDT Sunday, July 14, 2002
the region's first wheelers
and dealers in a commodity Photo Gallery
BAKERSFIELD -- He was known as the cattle king of sometimes more precious
California, a legendary speculator who became the than gold: water.
largest private landowner in the United States more October 6, 2002
than a century ago. Thirsty cities look to sea
Sacramento Bee/Dick for drinking water
Schmidt
But Henry Miller was one of California's original water
barons as well, and today his descendants are wheeling September 28, 2002
and dealing in water with style and gusto. Just last year they pulled off a trade that The call for water
brought them millions of dollars' worth of water on the California Aqueduct -- the state's
main waterway and an ideal trading post. September 22, 2002
Private water sales are
"We consider ourselves farmers," said Miller descendant Jim Nickel, who runs a 10,000- paving way for growth
acre ranch east of Bakersfield. "But we have to admit the water marketing has become a
bigger part of our balance sheet than it used to be. It's significant now." August 25, 2002
Water deals: A trickle in
The family's acumen has rubbed off on its neighbors -- and helped make Kern County a thirsty state
hub in an infant industry.
Aug. 19, 2002
Kern agricultural water districts have sold tens of millions of dollars' worth of water to Precious drops: Despite
California cities and a government-run environmental program. They've also entered into criticism, a deal takes
lucrative contracts with the Metropolitan Water District of Southern California and other shape to collect water
urban agencies to store their water in underground reservoirs. under the Mojave

Take the Semitropic Water Storage District, which delivers water to farmers northwest of Would-be water king
Bakersfield. Named for a fruit company that once operated in the area, Semitropic runs awash in controversy
an underground aquifer, one-and-a-half times the size of Folsom Lake that stores water
for clients from Los Angeles to the Silicon Valley. July 14, 2002
The water's hot: State's
Revenue has totaled $80 million since the facility opened in 1995, and there's more to farmers find avid market
come. The district -- known jokingly as "the Bank of Semitropic" -- is planning a $130 for what they've opted not
million reservoir expansion, to be funded by a Los Angeles company jockeying to get into to use.
the water business.
Kern County a hub of the
Kern's success hasn't been without controversy. water trade
In 1994 state officials, seeking to settle disputes arising during droughts, negotiated an Island-into-reservoir plan
overhaul of the State Water Project. As part of the deal, Kern water districts were given struggles to be born
title to the Kern Water Bank, a state-owned reservoir in Bakersfield with strategic value
for making deals. In return, the Kern districts permanently surrendered some of their Graphic: Who's wheeling
water rights to the state and agreed to sell certain other water rights to cities up and and dealing in California
down the state. water market (109k PDF)

Environmentalists blasted the transfer of the water bank as a giveaway and won a court
ruling invalidating the agreement. But in the meantime, the Kern districts have been
selling water, more than $100 million worth, to cities throughout the state.

What's more, the Kern districts have made hay from a state-funded program that
delivers water to the environment.

Last year the county Water Agency and a half-dozen Kern water districts, which pay the
state about $161 an acre-foot, sold water to the state's Environmental Water Account for
$250 an acre-foot, or $29 million. The account devotes water to fish and rivers.

State officials said they're not troubled by the sellers' profits.

"This is an example of a market remedy to help the environment," said Jerry Johns, chief
of water transfers at the state Department of Water Resources.

Kern is well positioned to be a water-industry mecca. The steep drop of the Kern River
as it leaves the Sierra has created a thick, fan-shaped wedge of gravel and sand that
acts as a sponge for underground storage.

But the county's business savvy is a purely man-made trait -- inspired, many say, by
Miller's descendants.

Miller amassed a vast 19th-century land empire and was a party to one of California's
first big water wars, settled when he and a rival split the rights to the Kern River in 1888.

Long after his death, the state was building the California Aqueduct in the early 1960s
and needed a water supply in Kern for construction purposes. Miller's great-grandson
George Nickel Jr. obliged by piping in water from a nearby ranch.

After the aqueduct was done, the state repaid him with three times as much water. He
banked it in an aquifer and years later sold it to Chevron and Union Oil for drilling.

Totalling $8 million, these were among the first farm water sales, said Gene McMurtrey,
a Bakersfield lawyer and historian.

"It was so important to make use of what rights you had," said Nickel, 84.

Said Jim Nickel: "My father was marketing water way before anybody else, before it was
cool."

Last year Jim Nickel swapped some family water with the county Water Agency for $10
million and some water on the California Aqueduct. He got less water than he had, but
the location was worth it.

A few months later he sold every drop of the year's allotment to the state's
environmental account for an eye-popping $460 an acre-foot, or $4.6 million.

More deals are coming. "I believe the real money is in long-term contracts," Nickel said.

About the Writer

---------------------------

The Bee's Dale Kasler can be reached at (916) 321-1066 or dkasler@sacbee.com.