Private and Public Water Wars

Saturday, October 22, 2011

longhorn Several years ago, the crusty Texan entrepreneur, T. Boone Pickens, who has successfully owned and sold oil, natural gas and wind power, saw water as the source of his next gusher. He formed the Mesa Water Company and spent much of the early 2000’s buying up tens of millions of dollars worth of water rights in the Texas panhandle. The way he saw it, Dallas and Fort Worth were growing mightily and were going to need a lot more water than they had access to. If he had the water, they would come up with the money to buy it.

Trouble was, of course, that Texas is a big state, and the water would have to travel close to 300 miles to get out of the ground and into a Dallas faucet. No problem, said Pickens, who bought up rights of way along the whole course by 2008, using his considerable political clout to threaten recalcitrant landowners with eminent domain. Once he made a deal for the water, he planned to build 0 pipeline along the route – the cost of which would be compensated for by the price he expected to be able to charge the citizens of the Dallas-Fort Worth metroplex.

Some three years later, despite the worst drought in the state’s history, the south Texas cities had made other arrangements (a couple of good rains filled up their reservoir) and Pickens was holding a lot of water and land rights with no takers. That’s when the city of Lubbock and ten other panhandle municipalities decided that it was a good time to make Pickens an offer he could no longer refuse. The Canadian River Municipal Water Authority, created to serve the eleven cities in the 1960, will issue bonds to return Pickens water rights to public hands.

“We were never mean to each other, but there were times when it wasn’t pleasant,” Pickens said when the negotiations were concluded. “I can say very sincerely, that the water is where it should be.”

That’s saying a mouthful. The Texas panhandle’s water is indeed where it should be: back in public hands. But much of the world’s water is not going that route. Much of it is being bought up by corporations and individuals with the idea that it is, as The Daily Beast titled it, “The New Oil.”

Oil and Water

Of course, it’s not the new oil. The values of oil and water cannot be mixed and should not be confused. However, hard you may find it in the contemporary world, you can live without oil if you have to, but you can’t live without water. The free market can work where the consumer can exercise discretion, but once you are down to basic, life-sustaining water consumption, no discretion is possible.

In the end, water is more precious than oil, and if you’re dying of thirst, more precious than anything else in the world. Yet in most of the world, water has been wildly underpriced. It seems to be everywhere, but it has taken millennia for people to understand that very little of it – less than 2.5 per cent is potable. And since 70 per cent, despite global warming, is still locked up as ice, only 0.0075 per cent – or 3/4ths of one per cent of the earth’s water, is available in rivers, lakes and aquifers for washing, drinking and irrigating.

In light of this, visitors from a far planet would be flummoxed to find that wedreamstime_xs_20898294 use drinkable water to flush toilets – a folly made possible because water has been so cheap, it was cheaper to waste it than to build a separate water delivery system for non-potable functions. But it is this very feature that has made water so attractive to sharp investors, who look for undervalued assets that they can sell for what they are really worth.

It is this that drives schemes like the two American companies that have bought billions of gallons of water rights to one of the purest lakes remaining on earth, Blue Lake in Sitka, Alaska. True Alaska Bottling will siphon millions of gallons a year from the lake and carry it (like oil) in tankers to India, where SC2 Global will bottle it and sell it in India and other countries short of potable water.

Tapping the relatively large Blue Lake with its tiny local population in quantities that will probably not significantly affect its natural environmental functions is a relatively benign example of privatized water. However, in many instances where water supplies have been privatized, the public has become very much a loser.

Several of the most egregious cases have been created in third world countries where the World Trade Association, despairing that incompetent and corrupt public institutions could create public utilities that would serve the population, demanded that public services, like waterworks, be privatized before the World Bank would issue loans.

image In 2000, in a typical move, a deal was rushed through with a consortium of major corporations to build and maintain a new water system in the Cochabamba district of Columbia. The deal simultaneously required the consortium, Aguas del Tunari, to complete a dam that had been deemed unnecessary and inefficient to serve the district while guaranteeing the company a profit of 15 per cent. To achieve these incompatible goals, Agua del Tunari raised water charges astronomically, in effect turning off the taps of the poorer residents. People took to the streets, the government declared a state of siege, people were killed. After months of conflict, the government told the company to depart, the company left, and everything returned to the way it was, with much too little good water for everyone. The poor are still getting the bottom of the bucket, but, at least, it is their bucket.

Private Profit vs. Public Need

As writers on the world’s water point out, the fundamental problem with private ownership of public water is that since private companies have to maximize profit, they have to maximize use and restrict users to those who can pay. Public water companies, however, must satisfy the well-being of the people they serve, and make sure that basic water requirements are met.

Unlike most commodities, where economies of scale reward larger users by lowering prices for greater consumption, water needs to be sold with its pricing in reverse of the commercial model. This means that the basic unit of water that fulfills basic needs has to be nominally priced, leaving the company to make its profit from those who use more than the basic amount.

Ownership of water rights by private companies also discourages conservation. Commercial enterprises make money when their customers consume more, not less of a product. Yet, as human populations exceed the recharge capacity of their water sources, the conservation of water will have to be at the heart of water use.

Only valuing water at its full price as a public good will make people willing to support the cost of maintaining and distributing it to serve both people and the earth. Our water wars are just beginning.

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Water: Our Most Precious Resource: by Marc Devilliers. This highly readable report on the looming global water crisis is amazingly informative on water issues around the world from China to Texas. Share and Enjoy: