Issues of title and ownership aren’t the sexiest water issues in an era of aridification. But the competing interests that are wheeling and dealing for scarce water resources amid the hazy halls of government must not be immune to scrutiny. And when millions of dollars are at stake, well, it means a lot more than millions worth of crypto.
Hence, you can imagine our surprise when we walked into a courthouse this week to get a final order that ultimately denied Blockchains’ ownership claims to millions of dollars’ worth of water rights in the deserts north of Pyramid Lake.
Blockchains is a techy-crypto amalgamation that first appeared in Nevada a few years back, promising to shower riches on the state as long as the legislature would give it plenty of tax abatements and incentives. When Daniel Rothberg broke the news two years ago that Blockchains was acquiring groundwater north of Pyramid Lake in the San Emidio and Hualapai basins north of Pyramid Lake, GBWN took note.
But things have not gone smoothly since then.
In a final order issued in late August, Judge Kathleen Drakulich of Nevada’s Second Judicial District upheld the Nevada State Engineer’s decision to deny Blockchains’ request to update the title of ownership of the water rights to its own name. The judge’s decision was the result of a lawsuit by Blockchains alleging that the State Engineer was acting in an arbitrary and capricious manner. Simply put: Blockchains wanted to be recognized as having title in the State Engineer’s records after cutting a deal with Sonterra Development in late 2020 to acquire some $35 million worth of groundwater rights.
In court documents, the State Engineer alleged that –– due to language in the deed of trust –– it could not update the title transfer because a company with a financial stake in the water rights, Granite Investments, had an encumbrance. In other words, Granite had not yet given Sonterra its blessing on the sale of $35 million worth of water to the tech company.
Judge Drakulich ultimately agreed that until Granite Investments signed off on the transaction, the State Engineer was not in a position to update the title of ownership.
This is known as an issue of clouded title.
Just as nebulous are Blockchains long-term plans in a state where they have bought land and at least thought they had acquired water.
As we mentioned in our last post on this matter, why would Granite not want to recognize Blockchains? What information do they have that we don’t? What could possibly make one worry about Blockchains as a steward of water rights?
Your guess is as good as ours.
What we can take away from this so far, pending an appeal, is that Blockchains’ ownership status is not recognized by the State –– meaning that finance bros and real estate hustlers are still the rightful owners of the water in the eyes of the State of Nevada. Sonterra has been leasing the water to farmers and that appears to remain the case.
Since the term Blockchains became synonymous in Nevada with crypto bros who wanted to build a tech utopia in regions where no water was available, Great Basin Water Network took a keen interest in following their business dealings because we believe that exporting water from that region will ultimately harm Pyramid Lake and groundwater flow in the region.
Nevertheless, we were surprised when the issue landed in court more than a year ago. You would think that when a $35 million deal for water is hashed out, the particulars –– like reading a deed of trust –– would be figured out.
We are happy to see that the State Engineer was issuing proper, justifiable scrutiny, at least in the eyes of the courts. But if we can bet anything, it’s that powerful interests will want to ship that water somewhere else. Maybe a place like the Tahoe Reno Industrial Center –– where there is no available groundwater or surface water to appropriate. Home to Tesla and, wait for it, Blockchains.
I am afraid this saga is far from over. I’d bet a few crypto coins on that.