Is water becoming a commodity to be bought, sold and traded by Wall Street firms and hedge funds?
That’s the concern of some as America fights out water wars across the country.
The Colorado River cuts through the Grand Canyon, providing water for about 40 million people and 5 and a half million acres of farmland. To some, the water is as valuable as oil.
In 1922, the seven U.S. states through which the river flows signed onto The Colorado River Compact, a water sharing agreement that divvies up the river’s annual flow.
The water must be shared equally between Upper Basin states: Wyoming, Colorado, Utah and New Mexico; and the Lower Basin: California, Arizona and Nevada. There’s been infighting ever since.
One example is in Arizona where the battle is over a proposal to move water from the Colorado River to a community hundreds of miles away outside Phoenix called Queen Creek.
The owner of the water rights is a hedge fund group that has bought farmland along the Colorado River. The prospective buyer, Queen Creek, says it can put the water to better use.
If both buyer and seller want to close the deal, who objects?
It turns out when it came to public comments on the proposal, there was overwhelming opposition.
Arizona state representative Regina Cobb is among those fighting the water transfer, in large part because of who owns the farmland that’s selling the water rights: a multi-national hedge fund.
“I would say it is commoditizing water and is picking winners and losers,” says Cobb. “This will be the first case that that water has been able to be transferred from the Colorado river internally into urban Arizona.”
“Is it a hedge fund group that's involved in this particular transaction that you object to?” I asked.
“Yeah, it's called Greenstone,” Cobb replied. “And they have bought up more than just this one piece of property.”
Attorney Michael Pearce represents both the farmland owner and Queen Creek— buyer and seller.
“We’re talking probably way less than 1% of the flow of the river. The Colorado River moves millions of acre feet, this water you wouldn't even be able to notice it. It will have no visible impact at all,” says Pearce.
Queen Creek is a quickly-expanding suburb of Phoenix. It’s seeking the Colorado River water not because its own supply is running dry; there’s plenty of that for the moment. But it’s cheaper to ship surface water into the city instead of spending money under complex requirements that make communities return a gallon of water to the ground for every gallon they pump out.
“Part of the law here in Arizona now is to, if you pump out a gallon of water, a gallon of water has to go back in to the ground. And there's a district that we belong to, it’s called a replenishment district, that does that. It sometimes can be very costly. And we decided as a town that we could do it more efficiently and that it would be more cost-effective if we had the control of what those costs were by getting our own water supplies,” explains Paul Gardner, the Queen Creek utility director.
Despite lots of public opposition, the state has given the green light to the water deal. It’s awaiting federal approval.
Whatever the final decision, it could help determine whether more international investors choose to dip their toes into America’s Water Wars... and forever change how our most critical natural resource is divvied up.
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