Water for Sale: How Business and the Market Can Resolve the Worlds Water Crisis


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As water shortages have slowly worsened over the past two decades, politicians have done little to avert the crisis. Where government has failed, Deane believes capitalism offers an elegant solution. W hen disque deane jr. Disque Sr. He raised Disque Jr. A famous hard-ass, he had no patience for stupidity or mistakes. Disque Jr. While still at Duke, he applied on a whim to join the CIA but was roundly rejected.

About a year later, looking to make more money, he decided to go to business school. After graduating, he took a job as a trader at Lazard, the global investment bank where his father had been a senior partner. In , he tried to start an online real-estate company, an idea before its time. He ran models calculating the past performance of companies whose business was tied to water—pipe manufacturers, treatment facilities, utilities—and found that they beat regular Wall Street indices.

He had an enviable life in Greenwich, Connecticut. But Deane saw opportunity: a resource everyone needed but almost no one valued. His first big investment, in , was an old mining tunnel in central Colorado that came with the rights to a large volume of water. With the Vidler purchase, Deane and Parker had bought the rights to water that flowed down a creek from high in the mountains in Summit County, Colorado—water that residents had been using for years to maintain their lawns and wash their cars.

One evening, Deane and Parker held a meeting and explained that locals could continue to take their fill, for a fee. Deane says he thought he and Parker were fixing a problem by making water legally available to people who needed it. But the more Parker tried to explain, the angrier the crowd got. Parker told me Deane is honest and highly intelligent, but also intense and opinionated—not always the easiest person to work with.

Deane left Vidler in and struck out on his own. The three had skied together long ago in Courchevel, France. Diserio focused on investing in stocks of companies that stood to profit as water became increasingly scarce; Deane set out to get as close as possible to buying the water itself, scouring parts of the country where water rights could be traded.

They shared office space in Midtown Manhattan with a group of lawyers who handled Hasidic divorces, and for two years none of them took a salary. It trades stocks of companies that manufacture pipes, pumps, and water meters. It bought and later sold a municipal water supplier, and has invested in treated wastewater.

Not all of the projects it has a stake in have succeeded: A controversial plan to develop a vast aquifer in the Mojave Desert and pipe the water to cities in Southern California failed to get an important federal approval, and some shareholders have filed a lawsuit against the company behind the plan.

Water security - Wikipedia

The company, Cadiz, has contested the suit and moved for its dismissal. But Deane and Diserio told me their two long-standing funds have shown annualized returns of 6. To Deane, the growing interest is a sign that the rest of the world is finally coming to see what he did long ago. A merica consumes more water per capita than just about any other country—more than three times as much as China, and 12 times as much as Denmark.

People in the driest states use the most: Residents of Arizona each use gallons a day not counting agricultural water or water used to generate power , compared with just 51 gallons in Wisconsin, largely by filling swimming pools and watering lawns year-round in the desert.

This extravagant use continues despite scarcity because water is kept artificially cheap. The water bills that Americans pay cover a mere sliver of the cost of the infrastructure that delivers water to them. On farms, water is even cheaper. One thousand gallons of agricultural water in western states can cost as little as a few pennies.

Water has been bought and sold in parts of the United States for decades. But arcane aspects of state laws have kept trading from becoming routine enough to make much difference in the overall supply. If Deane gets his way, barriers to trading will be removed and a market will form that can shift water to meet changing needs almost as quickly as the stock exchange moves shares. Australia has already instituted a water market similar to what Deane has in mind. Then, unexpectedly, the flows of the Murray dropped farther, falling to 40 percent below the previous record low. As in the U.

But as the drought worsened, the government backed a cap-and-trade system. As trading became more common, the market began to arbitrate that decision. As a result, people have found ways to reduce waste. Water-intensive crops such as cotton and rice were temporarily phased out as the water needed to grow them became more valuable than the crops themselves. In the western U.

Cities, too, are putting their weight behind trading. Even the nonprofit Environmental Defense Fund cautiously supports the idea: The organization joined other groups in purchasing Colorado River water in for the sole purpose of letting it flow. But one problem with developing a market for trading water is that many farmers—the people who control most of the water—are against the idea.

A cannery preserved tomatoes before shipping them on the Missouri Pacific Railroad to markets across the country. Ordway, the county seat, had two car dealerships, three grocery stores, a bustling JCPenney department store, and a movie theater that played family films on Sunday nights. Crowley County relied on water diverted from a tributary of the Colorado River near Aspen, miles away, in order to supplement the Arkansas River.

Farmers owned shares in ditch systems and reservoirs that distributed the water, and some 60, acres of farmland were cultivated with it. But in the s, the growing cities of Pueblo, Colorado Springs, and Aurora purchased a large portion of water rights from Crowley farmers, and all of that began to slowly slip away. For a while, farmers pledged to keep their water in the county. Farmers in Crowley, like those in so many agricultural communities across rural America, had long been struggling against low crop prices, an exodus of youth, and an aging population. The money offered an exit.

The offer was like a breach in a dam. Aurora also bought up almost all the water in another ditch system near the town of Rocky Ford, just across the county line. Pueblo West, 60 miles away, bought water to serve houses on just-constructed cul-de-sacs stretching all the way into the foothills of the Rocky Mountains.

Orville Tomky, a 10th Mountain Division soldier who had farmed in the area since shortly after World War II, tried to resist as the pressure mounted. One night he divided up the water rights, giving 20 shares to each of his four children, five shares to each of his five grandchildren, and 30 shares to his wife. Selling the shares put some of the kids through graduate school, gave them down payments for their own homes, and paid for a family ski lodge in the mountains. Eventually, though, Crowley County passed a point of no return. And with fewer and fewer farmers around to share the expense of maintaining the ditch systems, the cost kept rising.

Farmers had little choice but to sell, and all but 11 in the county did. The place literally dried up. Though tens of millions of dollars in water rights were sold, few of the proceeds were reinvested in the community, he said. One by one, families moved away. The tomato and sugar factories shut down, and without goods to ship, the railroad stopped sending trains through town.

As though someone had pulled a bottom block out from a Jenga tower, Crowley County fell into an inexorable collapse. Crowley County was itself diverting water from the Colorado River system, after all, under a legal system that encouraged waste. But the people still living in Crowley point to the green fields in adjacent counties, and say the water sales killed their towns. Of the 60, acres once farmed there, about 4, produce crops today.

The dead land has led to a sort of environmental catastrophe. The wildlife is all but gone. Few birds chirp. With nothing to pollinate, bees have abandoned their colonies. Crowley was once a paradise for hunters, Tobe Allumbaugh, a county commissioner, told me. In every direction, empty fields and pastures extend for miles. The wind in this part of Colorado can be merciless, and when it rakes across unfarmed fields, it scours loose soil and moves it. Another Crowley commissioner, Frank Grant, told me about the haboobs, huge black clouds of sand, that blow in, piling tumbleweeds against buildings and making it difficult to see across the street.

The dirt piles up in drifts, blocking roads, filling gutters, and burying windshields. C rowley county may be a worst-case scenario, but it is hardly unique. Even in neighboring counties, new water deals are being proposed all the time. To be sure, some of these sales have given farmers new income that helped keep them afloat—or allowed others who wanted to leave farming to cash out.

But Crowley reveals a broader risk. Could water sales that today appear logical and efficient one day come to seem shortsighted? Western states have already retired hundreds of thousands of acres of farmland as cities have built on them or taken their water. Once water is moved off a farm, that land is unlikely to ever produce crops again. The United States can probably afford to lose some of its farmland. But if left unchecked, these deals could begin to threaten the food supply. And, of course, growing more food requires more water.

But that cultural shift might prove even more difficult than reallocating water rights. Some opponents of water markets worry that when water is sold to the highest bidder, the poor could be priced out of an essential resource. Disque Deane thinks such concerns are overblown. But he says if markets jack up prices on higher levels of consumption, that may not be a bad thing.

Anyone who wants to fill a swimming pool, water a golf course, or use billions of gallons of Colorado River water to grow cotton in the Sonoran Desert, he says, should have to pay for that privilege. L ast winter in winnemucca , Deane parked outside a historic tavern called the Martin Hotel. Deane peppered the engineer with questions. Who are the big water users? Could the water from the Diamond S Ranch be used on the adjacent property he was also looking to buy? How about up the road on another farm he owns?

Deane already knew the answers to many of these questions; his lawyers and staff had done their due diligence. He was more interested in how his questions were addressed, in feeling out someone who had the authority to stand in the way of his plans. At the Diamond S, Deane talked about building a data center, because fiber-optic cables run along the railway near the property, or a small-scale power station that would take advantage of a natural-gas pipeline nearby.

That leaves little time for government policies to change and water markets to mature. The ideal opportunity, Deane said, involves high-priority water rights on a run-down farm with major cities in every direction. The Nevada Division of Environmental Protection has since confirmed that pollutants were found at the site. Ideal opportunities can be tough to find. They know what they need and they know who people are. He said he wants to work with communities, to facilitate mutually beneficial solutions, as someone who has the network, capital, and know-how to make a deal.

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Deane and his partners bought the rights to the cleaned-up water. The town got the money it needed for the upgrade, and Water Asset Management got water it could sell to local developers for a profit. Deane likes to see himself as a friend of farmers, someone who can get them the compensation they deserve for years of homesteading. He said he shares their values. But when I described to him the water sales in Crowley County, he had trouble explaining exactly how some of his deals have differed—except to say that the farmers he worked with went into those transactions with their eyes wide open.

One evening at a cocktail reception in Las Vegas, Deane told a conservationist how to deal with farmers who might say no to fallowing their fields. Since the current drought began, in , that shortfall has averaged 25 percent. Prior appropriation became the foundation of western water law, and it established order in the West. Today, though, state water laws are largely to blame for the crippling shortages. Many farmers have not adopted modern technology that can cut water use by up to 50 percent, in part because they need to protect their water rights. Farmers might prefer to sell their extra water rather than letting it soak into the ground, but there, too, the laws get in the way.

Not only is it difficult to prove that water sales satisfy standards for beneficial use, but they are generally forbidden across state lines. Where intrastate trades are allowed, they are conditioned on not causing harm to other rights holders in the surrounding area. City and state leaders have seriously discussed building a pipeline from the Missouri River, seeding clouds with silver iodide to create rain, and towing icebergs from the Arctic.

Their most pragmatic hopes lie in desalinating ocean water, an expensive and energy-intensive process. In theory, states could step in and reallocate water according to modern economic priorities. Few things are more controversial in the West, though, than even minor meddling with water laws. Canceling or redistributing rights that are more than a century old would be political suicide in a part of the country where personal property is sacrosanct and farmers wield a lot of influence.

As water shortages have slowly worsened over the past two decades, politicians have done little to avert the crisis. Where government has failed, Deane believes capitalism offers an elegant solution. W hen disque deane jr. Disque Sr. He raised Disque Jr. A famous hard-ass, he had no patience for stupidity or mistakes. Disque Jr. While still at Duke, he applied on a whim to join the CIA but was roundly rejected. About a year later, looking to make more money, he decided to go to business school.

After graduating, he took a job as a trader at Lazard, the global investment bank where his father had been a senior partner.

Water crisis: What's the best solution? - The Question

In , he tried to start an online real-estate company, an idea before its time. He ran models calculating the past performance of companies whose business was tied to water—pipe manufacturers, treatment facilities, utilities—and found that they beat regular Wall Street indices. He had an enviable life in Greenwich, Connecticut. But Deane saw opportunity: a resource everyone needed but almost no one valued. His first big investment, in , was an old mining tunnel in central Colorado that came with the rights to a large volume of water.

With the Vidler purchase, Deane and Parker had bought the rights to water that flowed down a creek from high in the mountains in Summit County, Colorado—water that residents had been using for years to maintain their lawns and wash their cars. One evening, Deane and Parker held a meeting and explained that locals could continue to take their fill, for a fee. Deane says he thought he and Parker were fixing a problem by making water legally available to people who needed it.

But the more Parker tried to explain, the angrier the crowd got. Parker told me Deane is honest and highly intelligent, but also intense and opinionated—not always the easiest person to work with. Deane left Vidler in and struck out on his own. The three had skied together long ago in Courchevel, France. Diserio focused on investing in stocks of companies that stood to profit as water became increasingly scarce; Deane set out to get as close as possible to buying the water itself, scouring parts of the country where water rights could be traded.

They shared office space in Midtown Manhattan with a group of lawyers who handled Hasidic divorces, and for two years none of them took a salary. It trades stocks of companies that manufacture pipes, pumps, and water meters. It bought and later sold a municipal water supplier, and has invested in treated wastewater.

Not all of the projects it has a stake in have succeeded: A controversial plan to develop a vast aquifer in the Mojave Desert and pipe the water to cities in Southern California failed to get an important federal approval, and some shareholders have filed a lawsuit against the company behind the plan. The company, Cadiz, has contested the suit and moved for its dismissal.

But Deane and Diserio told me their two long-standing funds have shown annualized returns of 6. To Deane, the growing interest is a sign that the rest of the world is finally coming to see what he did long ago. A merica consumes more water per capita than just about any other country—more than three times as much as China, and 12 times as much as Denmark. People in the driest states use the most: Residents of Arizona each use gallons a day not counting agricultural water or water used to generate power , compared with just 51 gallons in Wisconsin, largely by filling swimming pools and watering lawns year-round in the desert.

This extravagant use continues despite scarcity because water is kept artificially cheap. The water bills that Americans pay cover a mere sliver of the cost of the infrastructure that delivers water to them. On farms, water is even cheaper. One thousand gallons of agricultural water in western states can cost as little as a few pennies.

The Water Crisis In India: Everything You Need To Know

Water has been bought and sold in parts of the United States for decades. But arcane aspects of state laws have kept trading from becoming routine enough to make much difference in the overall supply. If Deane gets his way, barriers to trading will be removed and a market will form that can shift water to meet changing needs almost as quickly as the stock exchange moves shares.

Australia has already instituted a water market similar to what Deane has in mind. Then, unexpectedly, the flows of the Murray dropped farther, falling to 40 percent below the previous record low. As in the U. But as the drought worsened, the government backed a cap-and-trade system. As trading became more common, the market began to arbitrate that decision. As a result, people have found ways to reduce waste. Water-intensive crops such as cotton and rice were temporarily phased out as the water needed to grow them became more valuable than the crops themselves.

In the western U. Cities, too, are putting their weight behind trading. Even the nonprofit Environmental Defense Fund cautiously supports the idea: The organization joined other groups in purchasing Colorado River water in for the sole purpose of letting it flow. But one problem with developing a market for trading water is that many farmers—the people who control most of the water—are against the idea.

A cannery preserved tomatoes before shipping them on the Missouri Pacific Railroad to markets across the country. Ordway, the county seat, had two car dealerships, three grocery stores, a bustling JCPenney department store, and a movie theater that played family films on Sunday nights. Crowley County relied on water diverted from a tributary of the Colorado River near Aspen, miles away, in order to supplement the Arkansas River. Farmers owned shares in ditch systems and reservoirs that distributed the water, and some 60, acres of farmland were cultivated with it.

But in the s, the growing cities of Pueblo, Colorado Springs, and Aurora purchased a large portion of water rights from Crowley farmers, and all of that began to slowly slip away. For a while, farmers pledged to keep their water in the county. Farmers in Crowley, like those in so many agricultural communities across rural America, had long been struggling against low crop prices, an exodus of youth, and an aging population. The money offered an exit. The offer was like a breach in a dam.

Aurora also bought up almost all the water in another ditch system near the town of Rocky Ford, just across the county line. Pueblo West, 60 miles away, bought water to serve houses on just-constructed cul-de-sacs stretching all the way into the foothills of the Rocky Mountains. Orville Tomky, a 10th Mountain Division soldier who had farmed in the area since shortly after World War II, tried to resist as the pressure mounted. One night he divided up the water rights, giving 20 shares to each of his four children, five shares to each of his five grandchildren, and 30 shares to his wife.

Selling the shares put some of the kids through graduate school, gave them down payments for their own homes, and paid for a family ski lodge in the mountains. Eventually, though, Crowley County passed a point of no return. And with fewer and fewer farmers around to share the expense of maintaining the ditch systems, the cost kept rising. Farmers had little choice but to sell, and all but 11 in the county did.

The place literally dried up. Though tens of millions of dollars in water rights were sold, few of the proceeds were reinvested in the community, he said. One by one, families moved away. The tomato and sugar factories shut down, and without goods to ship, the railroad stopped sending trains through town.

As though someone had pulled a bottom block out from a Jenga tower, Crowley County fell into an inexorable collapse. Crowley County was itself diverting water from the Colorado River system, after all, under a legal system that encouraged waste. But the people still living in Crowley point to the green fields in adjacent counties, and say the water sales killed their towns.

Of the 60, acres once farmed there, about 4, produce crops today. The dead land has led to a sort of environmental catastrophe. The wildlife is all but gone. Few birds chirp. With nothing to pollinate, bees have abandoned their colonies. Crowley was once a paradise for hunters, Tobe Allumbaugh, a county commissioner, told me.

In every direction, empty fields and pastures extend for miles. The wind in this part of Colorado can be merciless, and when it rakes across unfarmed fields, it scours loose soil and moves it. Another Crowley commissioner, Frank Grant, told me about the haboobs, huge black clouds of sand, that blow in, piling tumbleweeds against buildings and making it difficult to see across the street.

The dirt piles up in drifts, blocking roads, filling gutters, and burying windshields. C rowley county may be a worst-case scenario, but it is hardly unique. Even in neighboring counties, new water deals are being proposed all the time. To be sure, some of these sales have given farmers new income that helped keep them afloat—or allowed others who wanted to leave farming to cash out. But Crowley reveals a broader risk. Could water sales that today appear logical and efficient one day come to seem shortsighted? Western states have already retired hundreds of thousands of acres of farmland as cities have built on them or taken their water.

Once water is moved off a farm, that land is unlikely to ever produce crops again. The United States can probably afford to lose some of its farmland. But if left unchecked, these deals could begin to threaten the food supply. And, of course, growing more food requires more water. But that cultural shift might prove even more difficult than reallocating water rights. Some opponents of water markets worry that when water is sold to the highest bidder, the poor could be priced out of an essential resource. Disque Deane thinks such concerns are overblown.

But he says if markets jack up prices on higher levels of consumption, that may not be a bad thing. Anyone who wants to fill a swimming pool, water a golf course, or use billions of gallons of Colorado River water to grow cotton in the Sonoran Desert, he says, should have to pay for that privilege.

L ast winter in winnemucca , Deane parked outside a historic tavern called the Martin Hotel.


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Deane peppered the engineer with questions. Who are the big water users? Could the water from the Diamond S Ranch be used on the adjacent property he was also looking to buy? How about up the road on another farm he owns? Deane already knew the answers to many of these questions; his lawyers and staff had done their due diligence. He was more interested in how his questions were addressed, in feeling out someone who had the authority to stand in the way of his plans.

At the Diamond S, Deane talked about building a data center, because fiber-optic cables run along the railway near the property, or a small-scale power station that would take advantage of a natural-gas pipeline nearby.

Water for Sale: How Business and the Market Can Resolve the Worlds Water Crisis Water for Sale: How Business and the Market Can Resolve the Worlds Water Crisis
Water for Sale: How Business and the Market Can Resolve the Worlds Water Crisis Water for Sale: How Business and the Market Can Resolve the Worlds Water Crisis
Water for Sale: How Business and the Market Can Resolve the Worlds Water Crisis Water for Sale: How Business and the Market Can Resolve the Worlds Water Crisis
Water for Sale: How Business and the Market Can Resolve the Worlds Water Crisis Water for Sale: How Business and the Market Can Resolve the Worlds Water Crisis
Water for Sale: How Business and the Market Can Resolve the Worlds Water Crisis Water for Sale: How Business and the Market Can Resolve the Worlds Water Crisis

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