Nestle cancels contract, will continue McCloud studies


In a move certain to anger some and elate others on both sides of what has become a years-long, contentious debate, Nestle Waters North America announced Tuesday that it is “stepping out” of its contract with the McCloud Community  Services District to build a one million square foot water bottling plant, the largest plant of its kind in the country.

The contract, signed in 2003, called for 50 years of water rights to McCloud’s Squaw Valley Creek, with a possible 50 year renewal, and carried language that stated if Nestle hadn’t broken ground by 2010, the company would have pay penalties to the district. But the contract also allowed Nestle until October 1, 2008 to opt out of the contract without penalty, which the company yesterday elected to do.

While Nestle found many in the greater McCloud community eager to see the plant built, vocal opposition arose from environmental groups worried about the effects of such a large bottling plant on the McCloud watershed.

In a harbinger of today’s decision, in May Nestle scaled back the proposed McCloud project by 60%. The issue attracted even greater attention last week when the California’s Attorney General’s Office issued a letter to Nestle calling their Environmental Impact Report, “...fundamentally and basically inadequate.”

In the Tuesday afternoon press-release, Nestle’s project manager David Palais stated, “Nestle Waters is committed to working with the McCloud Community Services District Board to reach an agreement on a new contract that better reflects the reduced size and bottling capacity of our revised project proposal, benefits the people of McCloud, is protective of the watershed and provides much-needed jobs in the area.”

The company also announced in the same statement that, “...the first in a series of public meetings on the project] will take place in September...[it] will focus on water resources and biology.”

Under the contract between Nestle and the MCSD, the district, according to board president Tim Dickinson, would have begun collecting payments from Nestle early this fall. “The district would have been getting $100,000 here real soon,” he stated. “It was disappointing when they said they wanted to reduce the plant size [in May]. Now, to see this happen.... With the way this is going, conceivably, we could end up with a worse deal than before; we may not have a deal at all.”

In response to Nestle’s announcement, the Protect Our Waters Coalition – an environmental organization composed of the McCloud Watershed Council, California Trout, and Trout Unlimited that formed in 2007 because of this issue – released a statement which included the following: “[We are] pleased to learn that Nestle Waters North America has agreed to cancel its contract with the McCloud Community Services District to build a water bottling facility... In canceling this contract, [Nestle] has taken a major step toward a more environmentally responsible project in the town... If the project does eventually move forward, the coalition wishes to ensure that the company is held accountable to do everything possible to mitigate the plant’s environmental impacts and maximize the economic benefits for McCloud.”

When asked by email if Protect Our Waters, the sluggish US economy, or shrinking demand for bottled water played roles in Nestle’s  decision to cancel the McCloud contract, Palais responded by writing, “Our need for bottling capacity in McCloud has changed since the inception of this project five years ago.... [W]e have built another plant in Denver and expanded both water supplies and capacity at other western sites...a plant of the size we first proposed in McCloud no longer makes economic sense.”

Reached for comment, Curtis Knight of California Trout and Protect Our Waters said, “[The cancellation of the contract] is due to a variety of factors. It’s due in part to the work a lot of people have done locally, not just us. And I don’t think the Attorney General’s letter hurt at all. It was a combination of local scrutiny, statewide scrutiny, and maybe not as rosy an economic outlook, increased transportation costs...all of that added up. We’ve been focused on what’s best for McCloud. What’s not best for McCloud, especially these days, is to lock up its most precious resource in a 100 year contract.”

But McCloud Community Services District general manager Beth Steele said she is disheartened that the district has lost a significant revenue source at a time that McCloud is being financially burdened with high fuel costs, the escalating costs of doing business, and a new flood zone that will require more residents to purchase flood insurance.

“If the plant was up and running,” Steele said by phone, “Nestle would have represented the equivalent of 200 customers for the district in basic services...Growth of the customer base allows disbursement of financial obligations. Without growth, we have a small number of residents shouldering the entirety of all financial burdens. It is unfortunate that the financial base has been reduced at the same time that we need to address a huge financial obligation.”

The timing of Nestle opting out of the existing contract comes as McCloud is looking to replace an antiquated water infrastructure.