From his realization of the commercialization of Colorado River water, Ben Ryder Howe began the new year by updating readers on its current realities. As any Coloradoan knows, water availability and growing urban populations do not always match--headwaters on the western slope and urban growth on the eastern slope. The Colorado River, a 1,450 mile resource, has it headwaters in Colorado and flows to California and down to Mexico. As the title indicates, a scarcity of any undervalued natural resource causes price hikes. Howe begins the article by citing Cibola, Arizona, a small town along the Colorado River. Greenstone, a subsidiary of MassMutual brought the water rights of Cibola to supply water to a suburb of Phoenix, Queen Creek, 175 miles away. The policy that regulates water in the west, prior appropriation, separates the ownership of water from the land, therefore, Greenstone could purchase the water rights. The sale threatens the ecosystems and farming that the Colorado River supports in Cibola--the birds, alfalfa, and cotton. Acknowledging that "buy and dry", the transfer of water from agriculture to urban municipal water districts, is common, Howe alerts the reader of a new player in the transactions, private investors.
The meeting of states bound by the Colorado River Compact will meet this month adds a backdrop to this scenario. The Colorado River Compact defines the Law of the River--how the Colorado River's water gets allocated to the various signatories of the compact. "Drafted in 1922, it allocates the river's annual flow, dividing the water among seven states desperate for their share." Beneficiaries of the water include 40 million people, seven states, 29 Native American tribal nations, and the country of Mexico. Obviously, the realities of 1922 do not reflect the realities of 2021. Climate change and drought, growing populations, agriculture and industrial water needs have changed the supply/demand dynamic.
The discussion regarding the future of the Colorado River includes proponents that support private sector, market-based involvement in water negotiations and those that view water as a public good subject to public policy. Among the former include the heirs of T. Boone Pickens, and Michael Burry and Matthew Diserio, hedge fund managers, among others such as WAM. They envision water trading like any other commodity, traded on the futures market or flipped like real estate. Believing that current regulations and management of water are obsolete and out-dated, they feel that a market driven system would force change. On the other hand, proponents of water as a public good cite the multi-state nature of water and the public financed dams and reservoirs, such as Lake Powell. Those who take a compromised view, such as Gary Libecap, a professor of economics at the University of California, Santa Barbara, argues that "an investor like WAM could help combat drought by creating its own storage account in Lake Powell.
How the seven states react and respond to these developments will get reported in a future blog.
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