The profits on water are huge, but the raw material is free

By Ivan Penn, Times Staff Writer
In print: Sunday, March 16, 2008

Branding expert Kevin Keller says it’s “misleading’’ for Nestle to draw water from wells near here, the Madison Blue Spring State Park, and label it as a brand associated with Western Maryland.
	[Ivan Penn | Times]

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Nestle came into Florida and managed to pull off quite the coup.

The company got a permit to take water belonging to Floridians — hundreds of millions of gallons a year from a spring in a state park — at no cost to Nestle.

No taxes. No fees. Just a $230 permit to pump water until 2018.

Nestle bottles that water, ships it throughout the Southeast — much of it to Georgia and the Carolinas — and makes millions upon millions of dollars in profits on it.

The state granted Nestle permission to draw so much water against the strong recommendation of the local water management district staff. Because drought conditions were stressing the Madison Blue Spring, the staff said the amount of water drawn on the permit should be cut by more than two-thirds.

So while Florida is in a bitter dispute with its state neighbors over water use, it's giving its water away to a private company that bottles and ships it to those very same states.

Nestle says Floridians should be grateful. Its bottling plant has generated taxes and created jobs. "You're talking about millions and millions of dollars in tax benefit,'' said spokesman Jim McClellan. "It's a very good deal for the state of Florida.''

• • •

In northernmost Florida, Madison County runs right up to the Georgia border, mostly vast stretches of rolling farmland. The entire county is home to about 20,000, with a claim to fame that the late, great rhythm-and-blues singer Ray Charles lived here as a child.

In a wooded area between Interstate 10 and the Georgia line flows the deep, cavernous Madison Blue Spring. Locals frolic in its year-round, 70-degree waters; divers troll its narrow underwater caves.

Anna Bruic of the small town of Lee owned 65 acres surrounding the spring that she was looking to develop. In 1998, Bruic received a permit to bottle water from Madison Blue. She never used the permit.

In October 2000, she sold 38 acres to the state. The spring, which bubbles up to a limestone basin on the west bank of the Withlacoochee River, became Madison Blue Springs State Park.

Months later, she sold 2 acres of her land and her water-bottling permit to Blue Springs LLC, owned by Bill Blanchard of Tampa. He in turn negotiated to sell the land and the permit to Nestle.

To those pushing economic development in Madison County, an international corporation wanting to build a huge manufacturing plant there was a dream come true.

Since 1972, the only major manufacturing operation was a meat-packing plant operated by Winn-Dixie. Smithfield — which produces sausage, hot dogs and lunch meats — bought the plant in 2004, the same year Nestle opened its bottling facility, promising hundreds of new jobs and an economic windfall.

Rural, small towns are almost a signature for Nestle's bottling operations, which include 21 plants in the United States and two in Canada.

The Swiss company holds about one-third of the bottled-water market in America. When Nestle made overtures to come into Madison County, it already had bought up many of the nation's major water brands, including Arrowhead, Ice Mountain, Ozarka and Deer Park.

Nestle initially planned to produce the Zephyrhills spring water brand at the Madison plant, but the company changed up. It made Deer Park, a brand originally from western Maryland, the focus in Madison, with Zephyrhills a smaller component.

But by the time Nestle was ready to close its deal with Blanchard, the staff at the Suwannee River Water Management District, which oversees the Madison Blue Spring, recommended several permits related to the spring be revoked or changed.

Part of the concern was about speculation on selling permits for big money, and part of it was about drought.

In a memo dated Nov. 15, 2002, the water management district staff recommended reducing the amount of water Nestle could draw under the permit it would obtain from 1.47-million gallons a day to 400,000 a day.

Historically, the average flow of the spring is 55-million gallons a day, but it was down to 34-million gallons a day.

"The current drought has reduced the flow of Madison Blue Springs to record lows," Jon Dinges, director of resource management, wrote to the water management district's governing board. "The drought has become severe since the permit was issued, thus requiring a reduction of the (average daily withdrawal) to ensure resource protection."

In January 2003, the governing board — gubernatorial appointees who make final decisions about water use — heard Nestle's pitch to continue the permit as originally approved.

The company promised to invest $100-million in the plant over seven years and create 300 jobs — but only if the permit remained as it had been when first approved for Bruic.

"The volumes and all of that are critical to Nestle's long-term investment," S. Austin Peele, a Lake City lawyer representing the company, told the governing board.

Nestle had a key ally at the meeting: the state of Florida, in the form of the economic development entity, Enterprise Florida Inc.

"We have been working with representatives of the company for about two months, in trying to secure 300 jobs that will be present at this facility upon build out," Bridget Merrill of Enterprise Florida told the board. "It is with certainty that the company has to proceed."

To the disappointment of those working to protect the springs, Nestle got its wish.

Jim Stevenson, chairman of the Florida springs task force, said that with the staff recommending against the permit, the governing board should have made some adjustments.

"I would side with the staff," Stevenson said. In protecting the springs, "the responsibility lies with the water management district. They're the ones that have to ensure that our springs remain healthy.

"Once you get up to the board, these are political appointees," he said. "The step up from that is governor, in that he appoints the board members for the water management district."

Jeb Bush, who was governor at the time, did not respond to questions about Nestle's Madison County operations.

• • •

The state did much more than fight to get Nestle the right to pump as much water as possible from the spring.

As an added incentive for Nestle, the state approved a tax refund of up to $1.68-million for the Madison bottling operation. To date, Nestle has received two refunds totaling $196,000 and requested a third tax refund.

Nestle had promised to create 300 jobs over five years. The most people it has ever employed was about 250. The number dropped to 205 late last year, 46 of them from Georgia, which Nestle defends as common for a work force along a state line.

The state estimated that the plant, which has a payroll of $6.5-million, would bring some $12-million a year in direct economic benefit to the county and the region.

The state says its work on behalf of Nestle was well worth it because the county was dealing with the shuttering of its other major economic engine, the meat-processing plant.

"This project was very important to the economic health of this rural county as the community recently suffered the closure of a major private-sector employer with the resulting loss of several hundred jobs," Page Bass, spokeswoman for the state Office of Tourism, Trade and Economic Development, said this month.

The Nestle plant opened in 2004. The Smithfield meat plant closed in 2006.

• • •

Nestle touts the 470-acre, "eco-friendly'' plant in Madison as its premier water bottling facility in America. Under the permit that started with Anna Bruic, the company will receive for free the product it sells, through 2018.

"Everybody owns the water," said Tim Sagul, assistant director of resource management for the Suwannee River Water Management District.

In essence, the government never charges for water. For tap water, the charge is essentially a processing and delivery charge, but not a water charge. Agriculture, which uses the most water, is not charged, either.

McClellan, the Nestle spokesman, said bottled-water companies should not be singled out.

"Treat us like any other user," he said. "People do not take bottled water and wash their dog. They do not wash their car with it. They drink it. That's the highest and best use of water."

Stevenson, the state's spring expert, says to look at the big picture. "As I see it, a real problem is the public thinks of water as limitless and valueless. ... The less water you pull out of the ground, the better for the spring,'' he said.

"The bottled water companies serve as a lightning rod for those concerned about water because they're located near the spring.

"Yet we're all robbing water from those springs. Our springs are silent. They've got no voice."

Times researchers Shirl Kennedy and Carolyn Edds contributed to this report. Ivan Penn can be reached at ipenn@sptimes.com or (727) 892-2332.