Utility Cracks Down On Private Water Sales

Well owner waits for word from lawyers on legality of water sale


Lanny Floyd, owner of Star Valley-based CJ Excavating, makes no secret of his multi-million dollar land holdings in the gated-golf communities east of Payson.

And when those neighborhoods -- The Rim Club and Chaparral Pines -- failed to receive allocations of lawn-watering effluent from the Northern Gila County Sanitation District earlier this month, and the fairways started to turn brown, Floyd stepped in.


Star Valley resident Lanny Floyd agreed to sell water from this well to Crescent Communities.

"You bet I have a big investment," Floyd said. "That golf course is dying. It'll cost a whole lot of money for them to replant it."

As a temporary solution, Floyd agreed to sell his water for an undisclosed amount to Crescent Communities -- the outfit that owns Chaparral Pines and The Rim Club.

During three, 12-hour days beginning June 13, Floyd hauled 452,000 gallons of potable water, pumped from his well, to several storage lakes at The Rim Club.

Members of the Star Valley Town Council noticed a truck hauling water away from Floyd's business, across the street from town hall.

That's when Mayor Chuck Heron made a phone call to Bob Hardcastle, president of Payson Water Co., a subsidiary of Brooke Utilities based out of Bakersfield, Calif.

"We knew they were doing it wrong (and) it had to fall back on Hardcastle," Heron said.

On June 16, Hardcastle faxed Floyd a cease-and-desist letter.

"Payson Water Co. has a regulatory approved, exclusive right to serve water to commercial and residential water customers in the Star Valley area," the letter stated.

In return, Floyd retained an attorney who specializes in water issues.

Floyd said it's his well and it's his water, and technically he's right, according to Town of Payson hydrogeologist Mike Ploughe.

But in Arizona, groundwater law is not that simple.

Under certain circumstances, transporting water between different groundwater basins is also illegal, however, Arizona Department of Water Resources PIO Jack Lavelle said, in this case, the water drawn out of Floyd's well shares the same groundwater basin with Chaparral Pines and The Rim Club.

Normally this discussion of right or wrong would be decided by the Arizona Corporation Commission (ACC) that regulates private water and sewer companies and investor-owned utilities, such as the Payson Water Co.

Heather Murphy, ACC public information officer said corporation commission doesn't have the authority to regulate the individual -- such as Lanny Floyd -- just entities that fall under the agency's control.

"I don't know that we would necessarily get involved in a matter like this," she said.

Brooke Utilities argues that state statutes prevent individuals and other entities from selling services -- such as water and power -- within the service area of a utility.

The ACC defines a service area by issuing a certificate of convenience and necessity (CC&N), which provides a legal description and a land survey of the boundaries of the utility.

"Our CC&N, as a public service corporation, gives us broad and exclusive rights to serve water to customers within our designated service area," Hardcastle wrote in a subsequent e-mail.

According to a Town of Payson utility-district map, neither Chaparral Pines nor The Rim Club fall within that service district.

Those communities instead are serviced by Payson's municipal water system, but because Payson town code prohibits the use of potable water for nonpotable uses, such as irrigation, Crescent Communities had to find it elsewhere.

The problem, Floyd said, is not with the law. It's a matter of communication.

"(The Star Valley Town Council) has their meeting right across the street," Floyd said. "You think they'd come over here and ask, ‘Hey, What's going on?'"

Heron said he deferred to Hardcastle, and Vice Mayor Randy White said he didn't know about the transaction between Floyd and Crescent Communities.

"I wasn't involved in it all," White said. Crescent Communities' water shortage began earlier this month after Northern Gila County Sanitary District dumped several million gallons of possibly contaminated wastewater down the American Gulch drainage canal.

Although tests later ruled out the concern, The Rim Club and Chaparral Pines lost a substantial amount of effluent allocation.

The reservoirs around the golf courses fill with effluent throughout the winter.

During the summer, water levels drop, and that's when Crescent relies on its collection of wells in nearby Calhoun Ranch to augment existing water supplies.

Floyd, who works with Crescent Communities and has access to Calhoun Ranch, said the wells were never meant to carry the entire water burden, and that's why he sold the output from his well to Crescent.

Meanwhile, Hardcastle said he plans to investigate other outfits -- such as Terra Capital, the development firm that sold water from a privately owned well in Star Valley -- impinging on the utility's service area.

"We are aware that there may be a lot of water use and transfers in the area that may require far more of our attention," Hardcastle wrote. "We are looking very closely at more of these issues than we wish existed."

Floyd said he will continue to provide his well water to Crescent Communities upon the advice of his attorney.

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