Review of Nestle water permit neglected for decades

High in the San Bernardino Mountains, on a steep slope covered with brush and ferns, a bunker-like stone structure protrudes from the mountainside. Behind its locked metal doors, water is collected from wells and flows into a pipe to fill bottles of Arrowhead 100% Mountain Spring Water.

The U.S. Forest Service has long been allowing Nestle to pipe water out of the national forest from a collection of wells using a permit that lists an expiration date of 1988. The company has been paying the San Bernardino National Forest an annual permit fee of $524, and the water has continued to flow, even as the drought has prompted questions about the potential impacts on a stream and wildlife in the national forest.

Documents obtained by The Desert Sun reveal that in the 1990s and early 2000s, there were discussions about conducting a review of the permit and carrying out environmental studies, but those steps didn’t lead to action. The records also show that at times, Forest Service officials turned down requests by Nestle and by Arrowhead’s previous owner to tap more water sources in the forest.

The documents — including letters, emails, an audit presentation, and notes of meetings — reveal that officials failed to follow through on plans for a permit review that would have involved assessing the environmental impacts of drawing water from the national forest. During one meeting, some in the agency questioned the legal basis for the company’s use of water from the forest. But the Forest Service ultimately authorized Nestle to keep using its wells and water lines, and also permitted the company to rebuild flood-damaged pipelines — even as the permit issue was left unresolved.

In explaining the nearly three decades of inaction on the permit, Forest Service officials have cited a heavy workload of other priorities, wildfires and floods, a tight budget and limited staffing. But the agency’s records clearly show that efforts to review the permit were initiated between 1999 and 2003. Then those efforts suddenly stopped, and nothing in the records indicates exactly why.

Gene Zimmerman, the forest supervisor who was in charge at the time, retired in 2005. He now does paid consulting work for Nestle.

Zimmerman has said he doesn’t see any conflict in working for Nestle in his retirement. And he has cited some of the same reasons the Forest Service has given for not reviewing the permit.

“The whole process of reauthorizing a permit can be pretty rigorous, and we just didn’t have the money or the budget or the staff to do that,” Zimmerman said in an interview in April. “We were never able to budget to do that kind of work on the scale it needed to be done.”

The Forest Service, however, came close to studying the impacts of the bottling operation in 2003, when a team was formed to look at the permit. Six Forest Service officials met for an initial internal meeting at a ranger station on March 24, 2003, to discuss the “Arrowhead Water Project,” according to draft notes of the meeting. They discussed plans to go over documents provided by the company and to send back a response.

They also agreed to “shoot for a work plan” for the coming fiscal year, the notes say. One person was listed as the contact with the Washington office. Fisheries biologist Lisa Mizuno was assigned to lead the team. Subsequently, Mizuno was transferred to a different national forest, and no one was assigned to take her place.

The group didn’t meet again, said Steve Loe, a biologist who attended the 2003 meeting.

“It should have been dealt with then,” said Loe, who was later assigned other tasks and retired in 2007. “I think it was convenient for Nestle and the Forest Service to not take action on that permit.”

Up until that meeting, Loe said, Nestle had been asking about renewing the permit. But he said the officials at the meeting “made a big deal of it,” and discussed carrying out extensive studies and monitoring. It became clear, he said, that renewing the permit was going to be a big, expensive process.

After that, the company’s managers “didn’t continue to ask for that, and the Forest Service didn’t push them,” Loe said. “It just died after that meeting.”

Nestle, based in Vevey, Switzerland, is the world's largest food and beverage company, and Nestle Waters North America is the biggest producer of bottled water in the United States.

Nestle runs five bottling plants in California out of a total of 111 bottled water plants that are licensed by the state’s Department of Public Health. Nestle says its business in California uses about 700 million gallons of water a year, some of that drawn from springs. There’s only one place where the company holds a permit to pipe water across a national forest: in the rocky canyon along Strawberry Creek, north of San Bernardino.

Water from Arrowhead Springs has been tapped and sold for more than a century. Nestle’s permit — the latest in a series of permits dating back to the 1930s — was issued to Arrowhead Puritas Waters, Inc., in 1978 for the purpose of maintaining more than four miles of water pipelines, water collection tunnels, horizontal wells and other infrastructure in the national forest.

The water is drawn from about a dozen wells on the mountainside and flows through separate pipes before coming together in the single pipe that runs along Strawberry Creek.

The permit is one of hundreds the Forest Service has allowed to fall out-of-date in California. In fact, Regional Forester Randy Moore said earlier this year that out of about 15,000 “special use” permits in the state — for all sorts of uses ranging from cabins to pipes for city water supplies — about 4,500 permits are past their expiration dates and have yet to be reviewed. The Desert Sun obtained records for 1,108 water-related permits, and found 616 permits, or 56 percent of the total, were past their expiration dates.

On average, the records show those permits were to have expired 12 years ago. The backlog has grown after repeated budget cuts left the Forest Service with less staff for such tasks.

In an emailed response to questions, the Forest Service’s regional office said there was nothing in the records “to indicate why the San Bernardino National Forest has not acted” on Nestle’s permit since 1988. Officials cited priorities such as dealing with wildfires and assessing permits for railroad lines, power lines, wind power projects, expansion of an oil pipeline, and water tunnels for the Metropolitan Water District, among other things.

The agency, however, has reassessed some other water permits in the national forest. In the mid-2000s, for instance, the Forest Service went through the permits of hundreds of cabins and reexamined their use of water from creeks. In Barton Flats, dozens of cabin owners were told they could no longer draw water from a creek and instead would have to use wells or install tanks and truck in water. Cabin owners spent thousands of dollars putting in tanks.

Late last year, Loe and other critics began writing to the Forest Service, expressing concern about Nestle’s bottling of water from the forest during the drought. Loe urged the agency to review the permit. After a Desert Sun investigation detailed those concerns and the agency’s neglect of the permit, Forest Service officials announced plans to take up the issue and carry out an environmental analysis.

Forest Supervisor Jody Noiron said in an interview in April that since she became aware of the issue, “I have made it a priority to work on this reissuance project."

She also said the agency would examine another permit that the Cucamonga Valley Water District uses to draw water from nearby Deer Canyon. That permit lists an expiration date of 1994, and the water agency has been selling water to Nestle under a contract.

Earlier this month, the Forest Service said in a statement that it’s working with Nestle on the renewal process and is “continuing to gather information that will be needed in the environmental analysis.” The agency also has said it will be looking at water-related permits in particular given the drought, and is working with the state “to determine how best to manage the impacts of the current drought on water uses.”

Asked why he thinks the company’s permit hasn’t been looked at for so long, Nestle Waters North America Chairman, CEO and President Tim Brown said it comes down to resources.

“Pure and simple, is how well resourced is that department of our government? You know, it’s all resources and priorities,” Brown said at a dinner with water experts in Beverly Hills earlier this month. “Now this is a higher priority and I believe it’s going to get the attention it deserves.”

He reiterated that Nestle is working with the Forest Service on the renewal process.

“As the permit’s under review, right now the groups are working in literally defining how the review process will work,” Brown said, describing it as an “active, constructive dialogue, respectful dialogue.”

“The spirit of it is that we both have a vested interest in getting some sort of conclusion out of the process after a very long time, that it’s not good for either party to have an open situation,” Brown said. “And what will be good for the Forest Service is to build process improvement and speed into their governing processes so that … we’re not living with that problem, we’re meeting the community’s expectations of review periods of transparency, of fairness.”

Arrowhead water was first bottled for sale more than a century ago. It’s named after the famed arrowhead-shaped natural rock formation on a mountainside north of San Bernardino and the springs near it — both hot and cold springs — that were long the central attraction of a now-closed resort.

Nestle says water has been sold under the Arrowhead brand since 1894. By 1913, a bottling plant was built in Los Angeles.

In 1931, the Forest Service issued the first of various permits to the company for transporting water across the national forest, according to the agency’s documents.

In 1978, a new permit was signed authorizing Arrowhead Puritas Waters, Inc., to maintain its water pipelines and other infrastructure. The document included a list of boilerplate conditions, including that the permit holder should take precautions to prevent forest fires and “shall fully repair all damage, other than ordinary wear and tear, to national forest roads and trails.” The permit didn’t mention monitoring the effects of the bottling operation on water supplies.

More than a year before the permit was set to expire in 1988, the company sent a letter requesting to renew the permit. It was among several letters and emails the Forest Service provided to The Desert Sun in response to a request under the Freedom of Information Act.

In that May 1987 letter, Frank Schiller of Beatrice Companies, Inc., which then owned Arrowhead, asked District Ranger Richard Stauber to “send to my attention any documents, forms and instructions” needed to renew the permit.

The agency apparently didn’t send a response right away. The following month, in June 1987, Beatrice sold its Arrowhead unit to Perrier Group of America Inc.

In 1991, the company applied to tap more water sources by drilling new wells in the nearby west fork of Strawberry Creek, but District Ranger Elliott Graham denied the request. He wrote that in his staff’s opinion, drawing water from that area would harm the habitat.

Perrier was taken over by Nestle in 1992, forming the Nestle Waters SA group.

The following year, floods and rockslides washed out about 3,000 feet of water pipe, and the Forest Service granted permission for the company to make repairs.

The agency also authorized maintenance work such as replacing deteriorating valves and pipes, but said that no new wells could be drilled. Graham detailed the existing wells in a 1993 letter, saying they ranged from 83 feet deep to 495 feet deep. He told the company that because it had complied with regulations and continued to pay the annual permit fee, which was then $401, “the permit is deemed valid until a new Special Use Permit is reissued."

In 1994, the Forest Service announced a proposed plan to charge for the water Arrowhead was taking from federal land. But that proposal apparently was never adopted; the water kept flowing, and the Forest Service charged only the annual permit fee.

When the company asked to drill a new well in 1994, the Forest Service denied the request.

Then, during a 1997 meeting, Forest Service officials told David Palais of Nestle that they were seeking information from the state water board about the company’s water rights, according to typed notes of the meeting. The notes were prepared by Gary Earney, who administered permits, and he wrote that Forest Lands Officer Ernie Dierking “had advised me that we first needed to determine whether or not (Arrowhead) had proper water rights in the area.”

Earney said he explained to Palais that by later that year, they planned to have determined whether there was proof of water rights, and if not, “we would be significantly down the road in an environmental process that would eventually determine whether we would either re-issue the permit (with take limits) or would deny such use and force removal of all current improvements.”

The company has maintained it has valid water rights, and the forest supervisor Zimmerman agreed.

Earney recalled in an interview that “the issue of removing water without proper monitoring bothered me.” But he said a lack of adequate staffing prevented a review of the permit, and he and others had a list of other priorities.

Nevertheless, records show some efforts were initiated. In 1999, studies that were to be part of an environmental analysis were begun with the aim of eventually renewing the permit.

Meanwhile, environmentalist Russell Long in 2000 sued Nestle, Arrowhead, and the State Water Resources Control Board in Superior Court, challenging the company’s “illegal extraction” of water from the national forest, alleging “acts of unfair competition,” and arguing the company had laid pipe and dug trenches beyond the dimensions allowed under the permit. The trial court dismissed the case in 2001, and Long appealed.

By late 2002, Palais was asking Zimmerman about potential dates for a meeting so that the company could present its reports on environmental studies. In a Dec. 3 email, Palais mentioned the lawsuit and noted that a trial court had dismissed the central claims. But in order to clarify a remaining issue before the appeals court, Palais asked whether Zimmerman would “sign a statement or Declaration basically acknowledging that you know about our water collection facilities, that we are not doing anything ‘clandestinely’… that we have and continue to act within the spirit and intent of the (special use permit) and that we both acknowledge that Arrowhead is in the process of renewing the (permit).”

Zimmerman agreed. On Jan. 9, 2003, he signed a letter to Palais saying that although the 1976 permit “expired on Aug. 2, 1988, I have allowed Arrowhead’s occupancy of National Forest land to continue until the permit can be re-issued, based on its continued adherence to the terms of that permit, and its payment of the required annual fee.”

By that time, the appeals court had issued a ruling reversing a portion of the decision in Long’s lawsuit. The case continued, but it was eventually dropped.

On March 24, 2003, Earney and Loe were among six officials who met in a conference room at the Lytle Creek Ranger Station to hash out plans for the “Arrowhead Water Project.” But the studies of groundwater and habitats that the group proposed weren’t carried out.

Loe was assigned soon after to work on a land management plan for national forests in Southern California.

Then, in October 2003, the Old Fire swept through the forest. It destroyed portions of Nestle’s pipes, and deadly floods and mudslides roared down from the mountains. Afterward, Nestle rebuilt the pipeline, with Forest Service officials overseeing the work.

Among other documents, the Forest Service released a partially redacted presentation about a 2008 audit by the Office of Inspector General, which detailed the history of the permit up until 2003. It’s unclear what prompted the review, and no completed audit was ever released.

Zimmerman recalled that during his time as supervisor, Nestle managers talked with him about renewing the permit.

“We just said we couldn’t get to it with our workload and our budget and our staff that we had, especially when they were being what all of us agreed were pretty darn good stewards of the land,” Zimmerman said.

Nestle and the San Bernardino National Forest have had a cooperative relationship over the years, and it has extended beyond the permit.

Nestle, for instance, has been a donor of the nonprofit Southern California Mountains Foundation, which runs a variety of youth initiatives and programs that support the national forest.

Zimmerman was instrumental in helping to launch the organization — previously known as the San Bernardino National Forest Association — more than two decades ago. Zimmerman has long been a board member of the nonprofit along with Larry Lawrence, Nestle's natural resource manager.

In 2013, on the foundation’s 20th anniversary, the nonprofit presented Arrowhead with the Zimmerman Community Partnership Award, named in honor of Zimmerman’s efforts “to create a public/private partnership for resource development and community engagement.”

Loe and Earney, who are both retired, have been calling for a thorough study of the ecological impacts of piping water out of the forest for bottling.

Loe has also been demanding that the Forest Service order a halt to Nestle's water extraction until the impacts can be studied. He's worried about effects on animals that rely on Strawberry Creek, such as frogs, salamanders and fish.

“This national forest was set up to protect watersheds,” Loe said. “We know this is an epic drought and we need to keep water in streams. These are probably the most severe environmental conditions Strawberry Creek and its species will face in our lifetimes.”

On a recent morning, Loe and Earney hiked down the mountainside among California bay laurel trees and bracken ferns. They reached a stone structure with a pipe protruding from it. The sound of flowing water hissed in the 4-inch pipeline, which was cold to the touch.

“That’s the well cluster right there,” Earney said of the bunker-like structure, looking at a map. On one of the locked metal doors was painted an arrowhead-shaped design.

Behind those doors, Earney said, water is collected through four wells that were drilled horizontally into the mountainside.

“That’s their goal, is capturing all the groundwater,” Loe said, sitting near the pipe.

“There may have been a spring here, but not four separate springs all coming together,” Loe added, shaking his head.

Representatives of several environmental groups have demanded that the Forest Service promptly take action on Nestle’s permit and on many other permits that haven’t been reviewed in years.

Steven Farrell, conservation chair of the San Bernardino Mountains Group of the Sierra Club, expressed concern about the health of the creek in a letter. “The Forest Service should not wait for the permit review to be completed before taking action to protect the Creek,” he wrote.

Drew Feldmann, conservation chair of the San Bernardino Valley Audubon Society, said his group doesn’t think it’s fair that Nestle has been able to take water for so long without an up-to-date permit, “and pay so little for what they’re getting.”

He said he hopes the Forest Service resolves the issue promptly. “Given the fact that this is a drought, given the fact that this has become such a public issue, I think it behooves them to deal with this issue with all deliberate speed,” Feldmann said.

When the Forest Service approved the last Arrowhead permit in 1978, the conditions didn’t include monitoring impacts on groundwater and the environment. But the rules have changed. The agency said in an emailed statement that in the process of reissuing the permit, “groundwater usage and ecological impacts from use will be assessed using the best science available.”

That’s based on the Forest Service’s 2007 Technical Guide to Managing Groundwater Resources. The document says granting permits for wells and pipelines “is a discretionary activity,” and the agency may deny a permit if it finds that water resources “will not be adequately protected.”

At a hotel in Beverly Hills earlier this month, Brown and Nestle USA Chairman and CEO Paul Grimwood joined a dinner discussion with two dozen water scientists and experts, discussing the drought and ways to address California’s water problems.

“More of these conversations need to happen around the state,” Brown said during the dinner, which was hosted by The Atlantic and underwritten by Nestle. The experts discussed remedies such as recycling more water and rethinking water pricing.

Afterward, as the guests stood chatting, Brown answered questions about the permit. Asked whether Nestle would consider scaling back its use of water from the national forest, he said: “The science will tell us.”

He pointed out that the U.S. Food and Drug Administration, which regulates bottled water, has specific requirements for companies to use the term “spring water,” including that water must continue flowing naturally to the surface through a spring.

“Our FDA regulations define spring water as groundwater that reaches the surface on its own, and so for us to be able to meet that definition, the aquifer has to be performing that way,” Brown said. “On any given day, if the flow is low enough that it wouldn’t meet the FDA definition of spring water, that’s when we would restrict flow. If there’s any other defined set of conditions that lead to an agreed up restriction of flow, we would follow those terms and conditions.”

The company has said it bottled nearly 25 million gallons from Arrowhead Springs last year, on average about 68,000 gallons a day. That was down from about 27 million gallons during 2013.

Those amounts are only a portion of the water drawn from the springs by Nestle. The state water code requires that groundwater pumping data be collected in four Southern California counties, and a group of local water districts gather the information. Records filed with the San Bernardino Valley Municipal Water District show a total of 28 million gallons of groundwater used in 2014. But the company says a portion of that water is delivered to the old Arrowhead Springs hotel under a contract with the owner, and some of the water is also regularly released back into the canyon, both near the springs and near the hotel.

Brown said the company expects the permit process will lead to an agreed upon set of requirements.

“We’ll follow the rules, we’ll follow the science, and it’ll reach some sort of conclusion,” Brown said. As for what the company hopes will come out of it, he said: “We just want to be treated like anybody else.”

“Ultimately, we want to understand what the defined playing field is so we can adapt and operate within it,” he added. “If another governing body, be it the state, be it the U.S. Forest Service, has a set of conditions that define use or flow, we’re going to follow those conditions as required.”

Brown referred specific questions about water rights to company spokeswoman Jane Lazgin, who said there are “validly recorded water rights” that have been in continuous use since the late 1800s, by Nestle and its predecessors.

“These ‘pre-1914’ water rights are, by law, valid rights that do not require further permitting and are vested rights that cannot be infringed by others,” Lazgin said in a statement, adding that the Forest Service has recognized those water rights and that the rights were confirmed by court judgments in the late 1800s and early 1900s.

Lazgin said that while the water rights predate the creation of the San Bernardino National Forest, Nestle has “consistently obtained and complied with” all Forest Service permits related to its pipeline access to the springs. The company also has filed information on its extraction of water with the state since that requirement was adopted in 1955.

“Certainly there’s a historical right,” Brown said. “And we’re open then to understanding the same as anybody else, any other water user in the state, how we access water in fairness with how anybody else accesses water. So given the fact that this is 120 years of use, that access could change and we’ll have to adapt to that change, or it could continue.”

Brown said he didn’t want to speculate about what might happen. “We’re just going to follow the process.”

Desert Sun photographer Jay Calderon contributed to this report.

Ian James can be reached by email at ian.james@desertsun.com. On Twitter: @TDSIanJames