News Feature | March 8, 2019

Drought Presents Business Opportunity For Private Companies

Peter Chawaga - editor

By Peter Chawaga

While pervasive drought in the American Southwest continues to present myriad problems for local water systems, it is also a dynamic opportunity — at least for private companies looking to capitalize on the scarcity.

In Arizona, for instance, water levels have been waning for two decades, setting up a contentious environment when it comes to securing the resource.

“With the Colorado River historically overdrawn and its water levels shrinking because of climate change, Arizona faces a reckoning,” the Phoenix New Times reported. “Last year, the National Climate Assessment warned that because of climate change and a growing population, the Southwest needed to figure out how to balance waning supplies of water with growing thirst for it.”

This growing need, along with increasingly flexible regulations around how water can be moved throughout Arizona, has encouraged private companies to invest in water supplies to resell to water districts as the resource becomes more scarce.

“Vidler [Water Company] and Water Asset Management are among a handful of companies vying to wring profits from the Southwest’s most critical, coveted, and contentious resource: water,” per the New Times. “[Vidler CEO Dorothy] Timian-Palmer offered that water, of which it had more than 80 billion gallons … to one of the biggest water buyers, the Central Arizona Groundwater Replenishment District. The District was deeply affected by the impending Colorado River shortages.”

While Vidler’s asking price for the water wasn’t reported, the company allegedly spent almost $100 million to secure it.

But while the supply-and-demand equation for drought-plagued water districts might seem straightforward, privately snapping up water resources and attempting to resell them isn’t necessarily as profitable as it may seem.

“Betting on water is a risky endeavor,” the New Times reported. “Experts on water in Arizona say that while it’s easy to start speculating on water, cashing out is not. Would-be profiteers have to buy water or land with rights to it. They have to work within the thicket of laws and regulations governing water in Arizona and contend with the fraught politics of Western water.”

But if these private companies can work through the obstacles, they can control one of the area’s most precious resources and profit from a water scarcity issue that only promises to become more fraught.

To read more about how communities deal with drought, visit Water Online’s Water Scarcity Solutions Center.