LONG-TERM WATER ASSETS

12 Months Ended

Dec. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Long-term water assets consist of water and water contracts held for future use or sale. The water is held at cost, which includes the price paid for the water and the cost to pump and deliver the water from the California aqueduct into the water bank. Water is currently held in a water bank on Company land in southern Kern County and by TCWD in Kern Water Banks.

The Company has secured State Water Project, or SWP, entitlements under long-term SWP water contracts within the Tulare Lake Basin Water Storage District and the Dudley-Ridge Water District, totaling 3,444 acre-feet of SWP entitlement annually, subject to SWP allocations. These contracts extend through 2035 and have been transferred to AVEK for the Company's use in the Antelope Valley. In 2013, the Company acquired a contract to purchase water that obligates the Company to purchase 6,693 acre-feet of water each year from the Nickel Family, LLC, or Nickel, a California limited liability company that is located in Kern County.

The initial term of the water purchase agreement with Nickel runs to 2044 and includes a Company option to extend the contract for an additional 35 years. The purchase cost of water in 2023 was $928 per acre-foot. The purchase cost is subject to annual cost increases based on the greater of the consumer price index or 3%.

The water purchased above will ultimately be used in the development of the Company’s land for commercial/industrial real estate development, resort/residential real estate development, and farming. Interim uses may include the sale of portions of this water to third party users on an annual basis until this water is fully allocated to Company uses, as just described.

Water revenues and cost of sales were as follows as of December 31:


($ in thousands)	2023		2022		2021

Acre-Feet Sold	5,145		10,400		13,651

Revenues	$	8,033	$	14,658	$	15,523
Cost of sales	5,220		9,549		10,669
Profit	$	2,813	$	5,109	$	4,854

Costs assigned to water assets held for future use were as follows ($ in thousands):


	December 31, 2023		December 31, 2022
Banked water and water for future delivery	$	31,002	$	23,855
Transferable water	756		1,455
Total water held for future use at cost	$	31,758	$	25,310

Intangible Water Assets

The Company's carrying amounts of its purchased water contracts were as follows ($ in thousands):


	December 31, 2023				December 31, 2022
	Costs		Accumulated Depreciation		Costs		Accumulated Depreciation
Dudley-Ridge water rights	$	11,581	$	(6,272)	$	11,581	$	(5,790)
Nickel water rights	18,740		(6,532)		18,740		(5,890)
Tulare Lake Basin water rights	6,479		(3,624)		6,479		(3,386)
	$	36,800	$	(16,428)	$	36,800	$	(15,066)
Net cost of purchased water contracts	20,372				21,735
Total cost water held for future use	31,758				25,310
Net investments in water assets	$	52,130			$	47,045

Water contracts with the Wheeler Ridge Maricopa Water Storage District, or WRMWSD, and the Tejon-Castac Water District, or TCWD, are also in place, but were entered into with each district at inception of the contract and not purchased later from third parties, and do not have a related financial value on the books of the Company. Therefore, there is no amortization expense related to these contracts. Total water resources, including both recurring and one-time usage are:


(in acre feet, unaudited)	December 31, 2023	December 31, 2022
Water held for future use
TCWD - Banked water owned by the Company	65,005	52,554
Company water bank	54,728	50,349
Transferable water	1,000	2,548
Recharged project water	6,590	—
Total water held for future use	127,323	105,451
Purchased water contracts
Water Contracts (Dudley-Ridge, Nickel and Tulare)	10,137	10,137
WRMWSD - Contracts with Company	15,547	15,547
TCWD - Contracts with Company	5,749	5,749
Total purchased water contracts	31,433	31,433
Total water held for future use and purchased water contracts	158,756	136,884

Tejon Ranchcorp, or Ranchcorp, a wholly-owned subsidiary of Tejon Ranch Co., entered into a Water Supply Agreement with PEF in 2015. PEF is the current lessee under the power plant lease. Pursuant to the Water Supply Agreement, PEF may purchase from Ranchcorp up to 3,500 acre-feet of water per year from January 1, 2017 through July 31, 2030, with an option to extend the term by three additional five-year periods. PEF is under no obligation to purchase water from Ranchcorp in any year, but is required to pay Ranchcorp an annual option payment equal to 30% of the maximum annual payment. The price of the water under the Water Supply Agreement for 2023 was $1,261 per acre-foot of annual water, subject to 3% annual increases over the life of the contract. The Water Supply Agreement contains other customary terms and conditions, including representations and warranties, which are typical for agreements of this type. The Company's commitments to sell water can be met through current water assets.