Water Is The New Oil

May 12, 2023

It’s not unusual to read or hear about government agencies taking measures to protect a local water supply. California has its own Water Storage Investment Program, where billions of dollars were allocated to storing water for the State to use during dry seasons and sound environmental purposes. Now, however, the practice of storing water and purchasing water rights has caught the attention of Wall Street investment firms and are under the influence of a capitalistic, rather than conservational, model.

The problem with this approach is the inherent tension between monetizing water (and/or other natural resources) versus the public trust and the desire to protect certain things from going to the highest bidder. Under this model, if a foreign nation such as China wants to spend the most money for California’s water, an already scarce resource would be exported out of the country, leaving local communities very literally high and dry. Or perhaps the highest bidder would turn around and sell the scarce resource for even more to turn a profit. Consider the similarities this scenario has with our free-market oil supply and then consider the long-term impact of treating water, another limited resource, the same way.

The impact of such a practice would also cause significant harm to small communities depending on their local natural resources for survival. This is already playing out in Arizona, where foreign farms are using limited local water to grow water-intensive crops like alfalfa, which is then exported, leaving local farmers without the needed water for their crops and the local community without access to locally grown food.

Big investment firms are already purchasing farmland in small communities along the Colorado River, not for the land, but for the water rights. Cibola, Arizona lies along the California border in the Sonoran Desert. This tiny town of approximately 300 people is currently in litigation against a subsidiary of an East Coast corporation MassMutual, Greenstone Management Partners, over this very issue. Greenstone purchased 500 acres of land in Cibola with plans to sell the water to a larger community hundreds of miles away. If successful in litigation, more companies will engage is these practices and it will mean inevitable death to those small farms and areas like Cibola throughout the country.

Selling any natural resource for profit is a slippery slope and applying a capitalistic model to our water supply is dangerously short sighted. If purchasing water rights or water storage is normalized, it will only be a matter of time before the negative impacts and consequences overwhelm farms and small communities.