July 17 2011

The Palisades Water Index is an unmanaged benchmark that many water indexes and ETFs track. Why the interest in water? Like gold and oil, water is a commodity – and it happens to be rather scarce.

Global Water Resources

About 70% of the earth’s surface is covered in water, but 97% of it is saltwater, which is unfit for human use. Saltwater cannot be used for drinking, crop irrigation or most industrial uses. Of the remaining 3% of the world’s water resources, only about 1% is readily available for human consumption.

Global Shortage

Rapid industrialization and increasing agricultural use have contributed to worldwide water shortages. Areas that have experienced water shortages include China, Egypt, India, Israel, Pakistan, Mexico, parts of Africa and the United States (Colorado, California, Las Vegas and the East Coast), to name but a few.

Pollution also highlights the need for clean water. In the U.S., the dead zone off the Gulf Coast highlights the impact of fertilizer runoff, and methyl tertiary butyl ether (MTBE), an additive in unleaded gasoline, can be found in well water from California to Maryland. Overseas, highly publicized incidents in Russia, China and elsewhere demonstrate that pollution isn’t limited to the West. Of course, fouled water supplies further limit the amount of fresh water available for human use.

Indexes

Like any other scarcity, the water shortage creates investment opportunities. Here are some of the more popular indexes designed to track various water-related investment opportunities:

Palisades Water Index – This index was designed to track the performance of companies involved in the global water industry, including pump and filter manufacturers, water utilities and irrigation equipment manufacturers. The index was set at 1000 as of December 31, 2003 and not even 10 years later is has fluctuated around the 2,000 mark.

Dow Jones U.S. Water Index – Composed of approximately 29 stocks, this barometer is comprised of a large number of international and domestic companies which are affiliated with the water business and have a minimum market capitalization of $150 million.

ISE-B&S Water Index – Launched in January 2006, this index represents water distribution, water filtration, flow technology and other companies that specialize in water-related solutions. It contains over 35 stocks.

S&P 1500 Water Utilities Index – A sub-sector of the Standard & Poor’s 1500 Utilities Index, this index is composed of just two companies, American States Water (NYSE:AWR) and Aqua America (NYSE: WTR) .

The Bloomberg World Water Index and the MSCI World Water Index provide a look at the water industry from an international perspective, although it can be rather difficult to find current information about either index. There are also a variety of utility indexes that include some water stocks. (For further reading, see Indexes: The Good, The Bad And The Ugly.)

Investment Opportunities

A look at the holdings of any of the water indexes provides an easy way to begin your search for suitable investments. Companies from blue chip stalwart General Electric to small cap Layne Christensen are all seeking a piece of the water market. In addition to direct stock purchases, some of the larger firms offer dividend reinvestment plans. Firms seeking to profit from water-related businesses include beverage providers, utilities, water treatment/purification firms and equipment makers, such as those that provide pumps, valves and desalination units.

When it comes to bottled water, the market is growing internationally. Demand is on the rise from China to Mexico, following in the footsteps of the spike in U.S. consumer demand. Estimates suggest that within the last ten years American per-capita consumption of bottled water has doubled – the average American drinks approximately 200 bottles of water a years. On the desalination front, some 100 countries currently rely on desalination for at least part of their freshwater consumption needs.

If stock picking doesn’t interest you, ETFs, mutual funds and unit investment trusts (UITs) also provide plenty of opportunities to invest in water. The PowerShares Water Resource ETF, mentioned earlier, tracks the Palisades Water Index, and the iShares Dow Jones U.S. Utilities Index ETF (ARCA:IDU) provides some exposure to water-related stocks. The largest water ETF is currently PowerShares Water Resources Portfolio (NYSE:PHO) but other new alternatives such as the PowerShares Global Water Portfolio ETF (NYSE:PIO) and the First Trust ISE Water Index Fund (NYSE:FIW) are also available. Based on popularity, new alternatives are slowly emerging.(To learn more, see Introduction To Exchange-Traded Funds.)

Additionally, two unit investment trusts that specialize in water-related investments are the Claymore-Boenning & Scattergood Global Water Equities UIT and the Claymore-Boenning & Scattergood U.S. Water Equities portfolio.

Conclusion

Recent years have seen an upswing in the demand for investments that seek to profit from the need for fresh, clean water. If the trend continues, and by all indications it will, investors can expect to see a host of new investments that provide exposure to this precious commodity and to the firms that deliver it to the marketplace. There are currently numerous ways to add water exposure to your portfolio – most simply require a bit of research.

Just as with any other investment in commodities or sector funds, wise investors should limit their exposure to water. Generally speaking, highly concentrated investments such as these should not represent more than 10% of the assets in a well-diversified portfolio. Limiting exposure to concentrated positions provides some opportunity to capture positive returns while limiting overall portfolio volatility.

For more information about concentrated portfolios and diversification, see Do Focused Funds Provide A Better Outlook?, Introduction To Diversification and The Importance Of Diversification.

by James E. McWhinney

Copyright The Financial Times Limited 2011.

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By Wang Qian and Li Jing

BEIJING – More than half of the groundwater monitored in the country’s major cities failed to meet standards for drinking, a report by the country’s land watchdog said.

Groundwater at 57.2 percent of the 4,110 monitoring stations in 182 cities was classified as bad, meaning people’s health could be harmed, according to a Ministry of Land and Resources report released on Wednesday.

The quality of groundwater in most northern and eastern parts of China was worse last year than in 2009, the report said, without stating locations. The level of groundwater had also dropped as a result of overexploitation.

Household sewage, industrial pollution and overuse of fertilizers and pesticides had led to further deterioration of groundwater, Ma Chaode, former director of the World Wide Fund For Nature’s freshwater program in China, told China Daily.

Pollution of groundwater and water in rivers and lakes had reached a serious level, he said.

Zhang Zhaoji, a researcher with the Chinese Academy of Geological Sciences, agreed. He said protecting groundwater in the northern parts of China was more challenging than in the south.

“In the northern parts, pollution of groundwater is widespread and the situation is getting worse,” Zhang told the 21st Century Business Herald.

Earlier statistics released by the State Council, the country’s Cabinet, showed the North China may be more affected by deteriorating groundwater quality because there are fewer rivers and lakes in the north.

In North China, about 65 percent of water supplies for residential use comes from groundwater.

More than 400 out of the country’s 657 cities use groundwater as major source of drinking water.

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For many Americans, India — home to more than 1.1 billion people — seems like a world away. Its staggering population growth in recent years might earn an occasional newspaper headline, but otherwise, the massive demographic shift taking place on our planet is out of sight, out of mind. Yet within 20 years, India is expected to eclipse China as the world’s most populous nation; by mid-century, it may be home to 1.6 billion people.

So what?

In a world that is increasingly connected by the forces of cultural, economic, and environmental globalization, the future of the United States is intertwined with that of India. Much of this shared fate stems from global resource scarcity. New population-driven demands for food and energy production will increase pressure on the world’s power-generating and agricultural capabilities. But for a crowded India, domestic scarcity of one key resource could destabilize the country in the decades to come: clean, fresh water.

Stepping Into a Water-Stressed Future

From Africa’s Nile Basin and the deserts of the Middle East to the arid reaches of northern China, water resources are being burdened as never before in human history. There may be more or less the same amount of water held in the earth’s atmosphere, oceans, surface waters, soils, and ice caps as there was 50 — or even 50 million — years ago, but demand on that finite supply is soaring.

Consider that since 1900, the world population has skyrocketed from one billion to the cusp of seven billion today, with mid-range projections placing the global total at roughly 9.5 billion by mid-century. And it only took 12 years to add the last billion.

Unlike the United States — which is a water-abundant country by global standards — India is growing weaker with each passing year in its ability to withstand drought or other water-related climate shocks. India’s water outlook is cause for alarm not just because of population growth but also because of climate change-induced shifts in the region’s water supply. Depletion of groundwater stocks in the country’s key agricultural breadbaskets has raised water worries even further. Water scarcity is not some abstract threat in India. As Ashok Jaitly, director of the water resources division at New Delhi’s Energy and Resources Institute, told me this past spring, “we are already in a crisis.”

How the country manages its water scarcity challenges over the coming decades will have repercussions on food prices, energy supplies, and security the world over — impacts that will be felt here in the United States. And India is not the only country wrestling with the intertwined challenges of population growth and water scarcity.

Transboundary Tensions

Several of the world’s most strategically important aquifers and river systems cross one or more major international boundaries. Disputes over dwindling surface- and groundwater supplies have remained local and have rarely boiled over into physical conflict thus far. But given the challenges faced by countries like India, small-scale water disputes may move beyond national borders before the end of this century.

Looming global water shortages, warns a recent World Economic Forum report, will “tear into various parts of the global economic system” and “start to emerge as a headline geopolitical issue” in the coming decades.

This has become a national security issue for the United States. Any country that cannot meet population-linked water demands runs the risk of becoming a failed state and potentially providing fertile ground for international terrorist networks. For that reason, the United States is keeping close track of how water relations evolve in countries like Yemen, Syria, Somalia, Pakistan, and Afghanistan. It is also one of the reasons water security is a key goal of U.S. development initiatives overseas. For instance, between 2007 and 2008, the U.S. Agency for International Development (USAID) invested nearly $500 million across more than 70 countries to boost water efficiency, improve water treatment, and promote more sustainable water management.

More Mouths to Feed, Limited Land to Farm

Water is a critical component of industrial processes the world over — from manufacturing and mining to generating energy — and shapes the everyday lives of the people who rely on it for drinking, cooking, and cleaning. But the aspect of modern society most affected by decreasing water availability is food production. According to the United Nations, agriculture accounts for roughly 70 percent of total worldwide water usage.

Global population growth translates into tens of millions of new mouths to feed with each passing year, straining the world’s ability to meet basic food needs. Given the finite amount of land on which crops can be productively and reliably grown and the constant pressure on farms to meet the needs of a growing population, the 20th and early 21st centuries have been marked by periodic regional food crises that were often induced by drought, poor stewardship of soil resources, or a combination of the two. As demographic change continues to rapidly unfold throughout much of Asia and sub-Saharan Africa, the ability of farmers and agribusinesses to keep pace with surging food demands will be continually challenged. Food shortages could very well emerge as a staple of 21st century life, particularly in the developing world.

Mirroring the growing burden on farmland will be a growing demand for water resources for agricultural use — and the outlook is not promising. According to a report from the International Water Management Institute in Sri Lanka, “Current estimates indicate that we will not have enough water to feed ourselves in 25 years’ time.”

As one of the world’s largest agricultural producers, the United States will be affected by this food crisis in multiple ways. Decreased food security abroad will increase demand for food products originating from American breadbaskets in California and the Midwest, possibly resulting in more intensive (and less sustainable) use of U.S. farmland. It may also drive up prices at the grocery store. Booming populations in east and south Asia could affect patterns of global food production, particularly if severe droughts spark downturns in food production in key Chinese or Indian agricultural centers. Such an outcome would push those countries to import huge quantities of grain and other food staples to avert widespread hunger — a move that would drive up food prices on the global market, possibly with little advance warning. Running out of arable land in the developing world could produce a similar outcome, Upmanu Lall, director of the Columbia Water Center at Columbia University, said via email.

Changing Tastes of the Developing World

Economic modernization and population growth in the developing world could affect global food production in other ways. In many developing countries, rising living standards are prompting changes in dietary preferences: More people are moving from traditional rice- and wheat-based diets to diets heavier in meat. Accommodating this shift at the global level results in greater demand on “virtual water” — the amount of water required to bring an agricultural or livestock product to market. According to the World Water Council, 264 gallons of water are needed to produce 2.2 pounds of wheat (370 gallons for 2.2 pounds rice), while producing an equivalent amount of beef requires a whopping 3,434 gallons of water.

In that way, the growing appeal of Western-style, meat-intensive diets for the developing world’s emerging middle classes may further strain global water resources. Frédéric Lasserre, a professor at Quebec’s Laval University who specializes in water issues, said in an interview about his book Eaux et Territories, that at the end of the day, it simply takes far more water to produce the food an average Westerner eats than it does to produce the traditional food staples of much of Africa or Asia.

As concerns over water resources have grown around the globe, so too have proposed solutions, which range from common sense to absurd. Towing icebergs into the Persian Gulf or floating giant bags of fresh water across oceans to water-scarce countries are among the non-starters. But more moderate versions of those ideas are already being put into practice. These solutions showcase the power of human ingenuity — and reveal just how desperate some nations have become to secure water.

For example, India is doing business with a company out of tiny Sitka, Alaska, laying the framework for a water-export deal that could see huge volumes of water shipped via supertankers from the water-rich state of Alaska to a depot south of Mumbai. Depending on the success of this arrangement, moving bulk water via ship could theoretically become as commonplace as transoceanic oil shipments are today.

There is far greater potential, however, in harnessing the water supply of the world’s oceans. Perhaps more than any other technological breakthrough, desalination offers the best chance to ease our population-driven water crunch, because it can bolster supply. Although current desalination technology is not perfect, Eric Hoke, an associate professor of environmental engineering at the University of California-Los Angeles, told me via email, it is already capable of converting practically any water source into water that is acceptable for use in households, agriculture, or industrial production. Distances between supply and demand would be relatively short, considering that 40 percent of the world’s population — some 2.7 billion people — live within 60 miles of a coastline.

The Lure of Desalination

Although desalination plants are already up and running from Florida to Australia, the jury is still out on the role desalination can play in mitigating the world’s fresh water crisis. Concerns persist over the environmental impact seawater-intake pipes have on marine life and delicate coastal ecosystems. Another question is cost: Desalination plants consume enormous amounts of electricity, which makes them prohibitively expensive in most parts of the world. Desalination technology may not be able to produce water in sufficient scale — or cheaply enough — to accommodate the growing need for agricultural water. “Desalination is more and more effective [in producing] large quantities of water,” notes Laval University Professor Frédéric Lasserre in an interview. “But the capital needed is huge, and the water cost, now about 75 cents per cubic meter, is far too expensive for agriculture.” Although desalination might be “a good solution for cities and industries that can afford such water,” Lasserre predicts it “will never be a solution for agricultural uses.”

Nevertheless, desalination’s promise of easing future water crunches in populous coastal regions gives the technology game-changing potential at the global level. “Desalination technology,” Columbia University’s Upmanu Lall told said in an email, “will improve to the point that [water scarcity] will not be an issue for coastal areas.”

A Glass Half Full

With world population projected to grow by at least 2 billion during the next 40 years, water will likely remain a chief source of global anxiety deep into the 21st century. Because water plays such a fundamental role in everyday life across every society on earth, its shared stewardship may become an absolute necessity.

Take India and Pakistan’s landmark Indus Waters Treaty of 1960, which is still in effect today. The agreement — signed by two countries that otherwise can’t stand each other — shows that when crafted appropriately and with enough patience, international water-sharing pacts can help defuse tensions over water access before those tensions escalate into violence. Similar collaboration on managing shared waters in other areas of the world — a process that can be a bit bumpy at times — has proven successful to date.

Meanwhile, more widespread distribution of reliable family planning tools and services across Latin America, sub-Saharan Africa, and Asia will also be needed if the international community hopes to meaningfully address water scarcity concerns. Better access to healthcare and family planning tools would empower women to take greater control over their reproductive health and potentially elevate living standards in crowded parts of the developing world. Smaller family sizes would help decelerate population growth over time, easing the burden on water and soil resources in many areas. The key is ensuring such efforts have adequate funding. The United States recently pledged $63 billion over the next six years through its Global Health Initiative to help partner countries improve health outcomes through strengthened health systems, with a particular focus on improving the health of women and children.

Putting a dent in the global population growth rate will be important, but it must be accompanied by a sustained push for conservation — nowhere more so than in agriculture. Investing in the repair of a leaky irrigation infrastructure could help save water that might otherwise literally slip through the cracks. Attention to maintaining healthy soil quality — by practicing regular crop rotation, for example — could also help boost the efficiency of irrigation water.

Setting a Fair Price

The most enduring changes to current water-use practices may have to come in the form of pricing. In most parts of the world, including parts of the United States, groundwater removal is conducted with virtually zero oversight, allowing farmers to withdraw water as if sitting atop a bottomless resource. But as groundwater tables approach exhaustion, the equation changes; as Ben Franklin famously pointed out, “when the well’s dry, we know the worth of water.”

The key, then, is to establish the worth of water before this comes to pass. Smart pricing could encourage conservation by making it less economical to grow water-intensive crops, particularly those ill-suited to a particular climate. “Some crops being grown should not be grown . . . once the true cost of water is factored in,” Nirvikar Singh, a University of California-Santa Cruz economics professor who focuses on water issues, told me via email. Pricing would also provide a revenue stream for modernizing irrigation infrastructures and maintaining sewage systems and water treatment centers, further bolstering water efficiency and quality both in the United States and around the globe.

To be sure, implementing a pricing scheme for water resources — which have been essentially free throughout history — will be unpopular in many parts of the world. It’s natural to expect some pushback from the public as water managers and governments take steps to address the 21st century water crunch. But given the resource’s undeniable and universal value on an ever-more crowded planet, few options exist aside from using the power of the purse to push for more efficient water use.

In the end, however, water pricing must be combined with greater public value on water conservation — we must not flush water down our drains before using it to its full potential. Whether that involves improving the water transportation infrastructure, recycling wastewater, taking shorter showers, or turning to less water-intensive plants and crops, steps big and small need to be taken to better conserve and more equitably divide the world’s water to irrigate our farms, grow our economies, and sustain future generations.

Sources: Columbia Water Center, National Geographic, Population Reference Bureau, White House.

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29 September 2010 Last updated at 17:01 GMT

The study maps water availability and quality down to the regional level

About 80% of the world’s population lives in areas where the fresh water supply is not secure, according to a new global analysis.

Researchers compiled a composite index of “water threats” that includes issues such as scarcity and pollution.

The most severe threat category encompasses 3.4 billion people.

Writing in the journal Nature, they say that in western countries, conserving water for people through reservoirs and dams works for people, but not nature.

They urge developing countries not to follow the same path.

Instead, they say governments should to invest in water management strategies that combine infrastructure with “natural” options such as safeguarding watersheds, wetlands and flood plains.

The analysis is a global snapshot, and the research team suggests more people are likely to encounter more severe stress on their water supply in the coming decades, as the climate changes and the human population continues to grow.

They have taken data on a variety of different threats, used models of threats where data is scarce, and used expert assessment to combine the various individual threats into a composite index.

The result is a map that plots the composite threat to human water security and to biodiversity in squares 50km by 50km (30 miles by 30 miles) across the world.

Changing pictures

“What we’ve done is to take a very dispassionate look at the facts on the ground – what is going on with respect to humanity’s water security and what the infrastructure that’s been thrown at this problem does to the natural world,” said study leader Charles Vorosmarty from the City College of New York.

“What we’re able to outline is a planet-wide pattern of threat, despite the trillions of dollars worth of engineering palliatives that have totally reconfigured the threat landscape.”

Those “trillions of dollars” are represented by the dams, canals, aqueducts, and pipelines that have been used throughout the developed world to safeguard drinking water supplies.

Their impact on the global picture is striking.

 Looking at the “raw threats” to people’s water security – the “natural” picture – much of western Europe and North America appears to be under high stress.

 However, when the impact of the infrastructure that distributes and conserves water is added in – the “managed” picture – most of the serious threat disappears from these regions.

Africa, however, moves in the opposite direction.

“The problem is, we know that a large proportion of the world’s population cannot afford these investments,” said Peter McIntyre from the University of Wisconsin, another of the researchers involved.

“In fact we show them benefiting less than a billion people, so we’re already excluding a large majority of the world’s population,” he told BBC News.

“But even in rich parts of the world, it’s not a sensible way to proceed. We could continue to build more dams and exploit deeper and deeper aquifers; but even if you can afford it, it’s not a cost-effective way of doing things.”

According to this analysis, and others, the way water has been managed in the west has left a significant legacy of issues for nature.

Whereas Western Europe and the US emerge from this analysis with good scores on water stress facing their citizens, wildlife there that depends on water is much less secure, it concludes.

Concrete realities

One concept advocated by development organisations nowadays is integrated water management, where the needs of all users are taken into account and where natural features are integrated with human engineering.

One widely-cited example concerns the watersheds that supply New York, in the Catskill Mountains and elsewhere around the city.

Water from these areas historically needed no filtering.

That threatened to change in the 1990s, due to agricultural pollution and other issues.

The city invested in a programme of land protection and conservation; this has maintained quality, and is calculated to have been cheaper than the alternative of building treatment works.

Mark Smith, head of the water programme at the International Union for the Conservation of Nature (IUCN) who was not involved in the current study, said this sort of approach was beginning to take hold in the developing world, though “the concrete and steel model remains the default”.

“One example is the Barotse Floodplain in Zambia, where there was a proposal for draining the wetland and developing an irrigation scheme to replace the wetlands,” he related.

“Some analysis was then done that showed the economic benefits of the irrigation scheme would have been less than the benefits currently delivered by the wetland in terms of fisheries, agriculture around the flood plain, water supply, water quality and so on.

“So it’s not a question of saying ‘No we don’t need any concrete infrastructure’ – what we need are portfolios of built infrastructure and natural environment that can address the needs of development, and the ecosystem needs of people and biodiversity.”

Dollars short

This analysis is likely to come in for some scrutiny, not least because it does contain an element of subjectivity in terms of how the various threats to water security are weighted and combined.

Developing countries are urged to think carefully about “concrete and steel” solutions

Nevertheless, Mark Smith hailed it as a “potentially powerful synthesis” of existing knowledge; while Gary Jones, chief executive of the eWater Co-operative Research Centre in Canberra, commented: “It’s a very important and timely global analysis of the joint threats of declining water security for humans and biodiversity loss for rivers.

“This study, for the first time, brings all our knowledge together under one global model of water security and aquatic biodiversity loss.”

For the team itself, it is a first attempt – a “placeholder”, or baseline – and they anticipate improvements as more accurate data emerges, not least from regions such as Africa that are traditionally data-scarce.

Already, they say, it provides a powerful indicator that governments and international institutions need to take water issues more seriously.

For developed countries and the Bric group – Brazil, Russia, India and China – alone, “$800bn per year will be required by 2015 to cover investments in water infrastructure, a target likely to go unmet,” they conclude.

For poorer countries, the outlook is considerably more bleak, they say.

“In reality this is a snapshot of the world about five or 10 years ago, because that’s the data that’s coming on line now,” said Dr McIntyre.

“It’s not about the future, but we would argue people should be even more worried if you start to account for climate change and population growth.

“Climate change is going to affect the amount of water that comes in as precipitation; and if you overlay that on an already stressed population, we’re rolling the dice.”

Richard.Black-INTERNET@bbc.co.uk

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September 8, 2010

Well-defined water rights, increasing demand and projections of scarcity are attracting investment funds from abroad.

Foreign investors have bought hundreds of millions of dollars worth of permanent water rights in Australia, according to a series of reports published this week by the Sydney Morning Herald.

Purchasing water rights represents a shift in investment strategy for water funds, which to this point have focused primarily on water utilities, water infrastructure and water-related technologies. Though formal water rights trading exists in Chile, the western United States, South Africa and China, no country matches the size of Australia’s market, worth AU$30 billion.

Australia’s water rights system has two tiers: entitlements and allocations. Entitlements are a permanent right to a share of the total water available. Allocations are a right to a specific, seasonal volume of water granted to an entitlement holder; they are for temporary use when traded.

Investment funds see big earnings from leasing annual allocations to farmers and cities. Since they hold entitlement, these allocations can be sold every year. Ten years ago one million liters traded for AU$2 in Australia. Last year at the peak of the market, the same volume sold for AU$1,300 to $2,400, the Herald reports.

But profits from sales can be volatile, while nearly AU$3 billion in rights was traded in 2009, but prices have dropped 40 percent in some cases due to more rain and changes in the government’s purchasing system this year.

The federal government has been the biggest player in the market, pledging to spend AU$3 billion to buy back water rights to restore rivers in the Murray-Darling Basin. Some farmers allege that the government’s buying flurry last year caused prices to spike and then fall when trading has been lighter in 2010.

The argument for water markets is that tradable rights apportion water to its highest valued use, creating a more efficient economy. According to Australia’s National Water Commission, water trading increased economic productivity in the country by $220 million between 2008 and 2009.

Critics counter that without better regulations, such as limitations on holdings, water rights can become consolidated in the hands of a few.

“We don’t have a problem with investment, or indeed, speculation in the water market,” said Andrew Gregson of the New South Wales Irrigators Council to the Herald. “We are concerned about market dominance. It’s a recently developed, relatively fragile market.”

Small farmers are worried about the strings that might come attached to water allocations purchased from a foreign owner.

Gregson told the Herald that a foreign rights holder could “buy a truckload of water and decide: ‘I’m going to lease it to somebody, but as part of that lease I’m going to tell them what to grow, when to grow it, who to sell it to and at what price’. We’re opening the door to potentially becoming the old feudal system of peasant farmers—on an enormous commercial scale, obviously.”

Those fears recall the recent trend of parched Persian Gulf countries and state-owned sovereign wealth funds buying farmland abroad – what some have called a land grab.

Both farmland acquisitions and water rights purchases are in their infancy, but are projected to grow. The Herald mentions Richard Lourey, the head of the Causeway Water Fund, trawling global financial capitals for AU$100 million to invest in Murray-Darling water.

Another investor Graham Dooley, the chair of Summit Water Holdings, would not say how much the company will invest in Australia, but he did tell the Herald that the thinking is long-term: “We have no upper limit [for acquisition]. We have a buy and hold strategy. We are in the build phase.”

Source: Sydney Morning Herald: Water Rights, Sydney Morning Herald: Liquid Gold, Sydney Morning Herald: Farmers

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August 27, 2010

 ‘Water has to come to the people,’ president of S2C Global tells Circle of Blue.

Photo creative commons by Judy Malley

Sitka, Alaska.

By Brett Walton
Circle of Blue

S2C Global—one of two companies in a partnership to export water from Sitka, Alaska to India—envisions water hubs in the Arabian Sea, East China Sea and Caribbean Sea, according to its 2010 second quarter U.S. Securities and Exchange Commission report.

In July, S2C announced a water hub in India for distributing water from Sitka, a town of 8,600 people on Baranof Island in the Alaskan panhandle. S2C’s president Rod Bartlett, who had previously restricted his comments to press releases, spoke with Circle of Blue on Wednesday about the company’s business plans.

While the East China and Caribbean hubs are planned expansions, S2C is concentrating on its Arabian Sea hub on the west coast of India to prove the feasibility of a regular bulk water trade. The company expects to complete its first shipment by the end of 2010.

Bartlett’s Bulk Water Vision
Bartlett sees bulk water as a logistics exercise. Pricing, supply and demand, transport costs and infrastructure must square. Only in the last 18 months has it become viable for large-volume water shipments, he said. The global economic crisis left a glut of tanker ships in its wake, pushing down the cost of chartering a vessel. Even cheaper are water bags, but the technology is still viewed as a promising curiosity.

The economy will eventually recover and charter prices will rise, but Bartlett expects the shipping trade will find a new equilibrium that offers bulk water purveyors entry into the market.

Distance, Desalination Issues May Stand in the Way
As befits the president of a company, Bartlett is bullish about his trade, but other people familiar with the bulk water industry are skeptical about the viability of an Alaska-to-India water business. Two concerns that came up most often in discussions were the price S2C is paying for the water and the transport distance between markets.

“They’re getting killed at dockside with a penny a gallon,” said Terry Spragg, designer of the Spragg Bag water delivery system, about S2C’s contract price with Sitka. “I could desalinate water for less than a penny a gallon right off my coast if you’re talking municipal and industrial purposes. If you’re talking bottled water, you could get water from Fiji cheaper. Fiji Water already has a market. I just don’t see how Alaska can compete shipping water at the dockside price they are trying to negotiate.”

“The premium market is the only way they could go and there are closer export markets with premium supplies: New Zealand and Tasmania,” Spragg added.

New Zealand is roughly 4,000 km closer to the Persian Gulf than Sitka: a considerable advantage because shipping costs are largely a function of distance.

Bartlett contends that distance is less a consideration than infrastructure. Sitka’s deep water port and dockside supply pipeline mean scale efficiencies for the amount of water that they can move.

“The direct competition is desalination,” Bartlett said. “But with desalination, the real costs are not reported. Many countries do not attach a market cost to the electricity used. They don’t factor the amortized cost of the plants into the per unit water cost, and they don’t account for the environmental costs.”

Graphic by Aubrey Ann Parker

Sitka, Alaska to sell bulk water exports to India. Click on image to see the complete infographic.

Strict environmental standards in Australia have driven up the cost of desalinated water to nearly $0.07 per gallon on average, according to an article in The New York Times. Bartlett says S2C can buy water from the city of Sitka, load it, ship it to India and unload it for the same price. Meanwhile water shipments can be turned on and off in response to demand, thereby avoiding the capital burden of a multi-billion dollar desalination plant mothballed during a rainy period.

Not a Money Mecca
Besides pricing and location considerations, potential deals in the bulk water business as a whole have been undermined by past chicanery, according to John Anderson of CWE, Inc., a New Jersey-based company involved in bulk water logistics and consulting.

“I think some of the greed in the shipped water trade is adversely affecting any sale taking place,” Anderson said. “People think it’s a money Mecca, but it’s not.”

Anderson, who has worked in the industry since 1993, told Circle of Blue that tanker owners are the ultimate arbiters in the business since they control the means of transport. He knows tanker operators who have soured on the trade because prices were changed at the last minute by water depot owners looking for a better deal.

“Tanker owners are adverse to risk,” Anderson said. “They are not going to take a tanker out of rotation and not have all the pieces in place.”

Though Anderson said the bulk water trade is territorial with insiders protecting proprietary information that gives them an edge, Spragg said that openness is essential for companies trying to kickstart a business.

“They should be as transparent as possible,” Spragg said. “That’s the only way to get this thing off the ground.”

Much of the business hinges on relationships with tanker owners, Anderson said, and an ability to manage often overlooked micro-details: things such as import permits and code regulations. Anderson said he knew of one transaction that was scuttled when the water importer failed to notify health inspectors and the ship was unable to unload.

Because it is a small company, S2C does not have the strength to develop the water hub alone. However, the company does have the strength to bring in an Indian partner in a joint venture to build the infrastructure, Bartlett stressed, adding that S2C is looking to incorporate an Indian subsidiary.

Bringing Water to the People
Bartlett said permits on both ends of the route are being finalized and construction for the India hub is in place. The tank farm to store the water is pre-fabricated while the pipeline at the Indian port is being fast-tracked by port officials.

“It can all be done very quickly,” he said, “once we say ‘go’.”

“There is plenty of water in the world,” he added, “but people don’t live where the water is and they aren’t all going to move north. Water has to come to the people, be it through pipelines or ships.”

Brett Walton is a Seattle-based reporter for Circle of Blue. Reach Walton at brett@circleofblue.org. Read more about bulk water exports on Circle of Blue.

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by Lisa Song – Sep 4th, 2010

Imagine an oil tanker plowing through the ocean, hauling valuable cargo from resource-rich nations of the world to the countries that need it: but instead of oil, the tanker holds millions of gallons of fresh water.

It’s not a vision from some futuristic film or doomsday novel, but the present-day intention of companies trying to launch the bulk water export business. The idea has been around since the 1990’s, yet no one has succeeded in making it a practical reality.

But last July, the US company S2C Global Systems, Inc. became the latest bulk water wanna-be by announcing it would begin shipping water from Alaska to India within the next six to eight months. Using large class vessels that can hold 50 million gallons at a time, S2C plans to sell the water for both manufacturing and drinking purposes to countries around the Arabian Sea.

“I think it’s a dream,” said Peter Gleick, a scientist and international water expert, in an interview with SolveClimate News. Gleick is President of the Pacific Institute for Studies in Development, Environment, and Security. “I don’t think bulk water transfers of any significant volume are ever going to happen, because the cost of moving water, especially across the ocean, is so high.”

Rod Bartlett, managing partner of Alaska Resource Management (a partnership between S2C and True Alaska Bottling), told SolveClimate News that S2C is finalizing legal issues and logistics for a “World Water Hub” on the western coast of India. Once it’s built, the hub will be a distribution point from which the company plans to deliver water to target destinations in the Middle East and northern Africa.

“Every nation within a four-day target of the hub is a potential customer or client that will need fresh water,” said Bartlett. Without revealing specific details, Bartlett added that S2C has received both spoken and “written expressions of interest.”

The water S2C plans to export will come from Alaska’s Blue Lake near the city of Sitka, about 90 miles southwest of Juneau. Since 1999, Sitka has promoted itself as a source for bulk water exports; True Alaska Bottling owns the water rights to 8 million gallons per day from Blue Lake.

As to why humans would want to move water around the world, Bartlett explained: “(You move the water) because you can’t move the population.” Most of the world’s freshwater is found near the Poles, while most people live closer to the equator.

Population growth, urbanization and irrigation place are creating increasing demand for water. But climate change is exacerbating the problem of supply, most notably in the Himalayan region, often referred to as Asia’s water tower.

According to a report from King’s College in London, about two-thirds of the Himalayan glaciers are shrinking, and decreased runoff will affect water levels in ten major rivers. All together, the rivers’ drainage basins are home to 1.3 billion people—close to one-fifth of the world’s population.

Many of them live in India. S2C originally chose to build their hub there because they couldn’t find an appropriate port in the Middle East. But now, said Bartlett, “as you continue to look at the potential in India, it’s going to be a natural place to sell water soon, no question about it.”

Desalinated Water 18 Times Cheaper

The idea of moving vast quantities of water is hardly new. The Romans did it with aqueducts; today, California pipes the Colorado River’s water hundreds of miles into its cities and farms. But when you ship water more than 1000 or 1500 miles, said Gleick, “the diesel costs kill you.”

International water shipments do occur on small geographic scales. In 1997, Greece began shipping water to the island of Aegina, 13 miles from the Greek coast. Singapore currently imports freshwater from Malaysia but vowed to build desalination plants for increased water security. A plan for Turkey to sell water to Israel was recently suspended due to political tension between the two nations.

What S2C has proposed—moving water halfway around the world, 50 million gallons at a time—is on a scale that dwarfs existing bulk water transfer efforts.

The biggest problem, said Gleick, is that S2C will be competing with desalination plants, which are very popular in the Middle East. “Saudi Arabia and Kuwait are almost completely dependent on desalinated (sea)water.”

Water from desalination plants costs about $1/cubic meter (this price includes the cost of building and running the plant), said Gleick. According to Bartlett, it will cost S2C $18/cubic meter to move the water from Alaska to India.

In order to make a profit, the company would then have to mark up the price before selling to customers. Some of the water will be sold in bulk to pharmaceuticals and manufacturers; the rest will be bottled for drinking. And after days in storage on board the ship, the water will need further processing before it’s clean enough to sell, further adding to the company’s costs.

Despite the abundance of cheap desalinated water, Bartlett believes that desalination has its drawbacks. In an email to SolveClimate News, he wrote that the process of purifying seawater has environmental impacts (such as pollution from the fossil fuels that power the plant). He also said that the desalinated water can leach minerals out of pipes, making the water less palatable.

Gleick acknowledged that the price of desalinated water doesn’t take into account the environmental costs. However, he said that the mineral-leaching problem comes from overly purified water and can be easily solved. Plant operators will either add minerals back into the desalinated water or mix it with existing tapwater. “This is routine (at) desalination plants.”

“(The process of) reverse osmosis can turn seawater into potable water,” said Gleick. After that, “you basically tune the system to the kind of water you want.”

Nevertheless, Bartlett was optimistic about his company’s future. In his opinion, S2C overcame a major hurdle by finding a deepwater port in India that can accommodate the large class vessels. It also helps that the ports at either end are quipped to load and unload the water quickly. Every day that a ship sits in port costs the company $50,000-$60,000.

But all those problems, said Gleick, are insignificant compared to the cost of transport. At the end of the day, S2C’s water is more than 18 times more expensive than existing sources.

Move to Ban Water Exports

Logistics and pricing aside, the mere idea of turning water into another internationally traded commodity has drawn mixed reactions.

Canada, which owns more freshwater resources than any other country, is moving to ban bulk exports. Greenland, Iceland and New Zealand are searching for investors.

Bartlett argued that bulk water trade would hardly make a difference in the grand scheme of things. For context, S2C’s maximum potential allocation from Blue Lake is 12 billion gallons per year (37,000 acre-feet), less than one percent of California’s yearly allotment (4.4 million acre-feet) from the Colorado River.

Bartlett said that S2C hopes to build two more Water Hubs, one in the Caribbean and another near eastern China.

Gleick remained doubtful about the success of the India venture: “I would be hugely surprised if this passed any economic or practical test…until I see a contract and an actual shipment, I’m going to remain skeptical.”

(Photo of Sitka Sound:David Baron)

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Minister Cannon Tables the Transboundary Waters Protection Act to Protect Canadian Waters

June 28, 2010 by mickiegirlca

(May 13, 2010 – 11:45 a.m. ET) The Honourable Lawrence Cannon, Minister of Foreign Affairs, today tabled a new bill, the Transboundary Waters Protection Act, which protects Canadian water by strengthening prohibitions on bulk removal of Canada’s water outside the country.

“This government is protecting Canadian waters for Canadians,” said Minister Cannon. “The protections in this new bill will preserve our drinking water and our natural heritage for generations to come.”

“Protection of our freshwater resources is a key priority under the government’s Action Plan for Clean Water. We are working to make sure that our water is accessible, clean and safe for Canadians today and in the future,” said the Honourable Jim Prentice, Minister of the Environment. “This important legislation makes it clear that we are not in the business of exporting our water. Canadian water is not a commodity. It is not for sale.”

The new act strengthens existing protections by bringing waters within federal jurisdiction under a more comprehensive prohibition against bulk water removals. Rivers and streams that cross international borders will now receive the same protection already in place for waters, such as the Great Lakes, that straddle them.

The Act gives the federal government new powers of inspection and enforcement and introduces tough new penalties for violations, including fines of up to $6 million for corporate violations. The bill offers unprecedented federal protection against bulk water exports while respecting provincial constitutional jurisdiction.

“The federal government will continue to work with provincial and territorial governments to ensure that Canadian water is protected,” said Minister Cannon.

For further information, media representatives may contact:

Ève Cardinal
Press Secretary
Office of the Minister of Foreign Affairs
613-995-1851

Foreign Affairs Media Relations Office
Foreign Affairs and International Trade Canada
613-995-1874

Media Relations
Environment Canada
819-934-8008
1-888-908-8008

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