Wednesday, September 18, 2013
Tethys’ pullout draws mixed response
BY KIMBERLY JACOBSON
Reactions are mixed to the announcement last week that Tethys Enterprises backed out of its plans for a bottling facility on the island.
Some residents were pleased the proposed 1-million-square-foot plant is off the table while others are lamenting the potential jobs lost. But all are looking to the future and how Anacortes could plan to best utilize the property — and how to attract a business that more people can get behind and support.
In a letter sent to Mayor Dean Maxwell last week, Tethys CEO Steve Winter said the project was viable, but the company and its principals had other opportunities come up over time. They opted to halt their efforts on the bottling plant project.
Tethys has worked on the project for several years and signed a water contract with the city in late 2010.
Winter has not answered requests for further comment.
Sandra Spargo, who organized Defending Water in the Skagit River Basin, said she’s received about 200 emails since the announcement last week.
“I am getting a lot of emails from people who are happy about this,” she said. “I am relieved but cautiously relieved because I don’t know what this means.”
She has heard from residents who still have questions: Can Tethys sell the water contract to another company? Has Tethys reimbursed the city for all expenses? Will the city still pursue the urban growth area expansion request?
Mayor Dean Maxwell said the contract is “dead.” In order to transfer water rights, Tethys would have to make a request and it would have to be OK’d by the City Council. He said there’s been no request. He said a new company couldn’t meet deadlines built into the contract anyway.
“It’s just not going to happen,” he said.
Tethys has one more small payment to the city to reimburse it for all expenses, Maxwell said.
He said the city will discuss the UGA expansion request after the November election. It could be rolled into the city’s 2016 comprehensive plan update — but that’s up to the City Council.
“There’s no urgency now,” Maxwell said.
City Council member Ryan Walters said he’d like the city to send a letter to Tethys thanking them for their time and indicating the contract is terminated because they say they will not fulfill their side.
“I think we need to clean that up,” he said.
Walters said he wasn’t surprised Tethys backed out. He said the idea didn’t seem conceivable. The plant was proposed to be the largest in the country, but Tethys hadn’t bottled beverages before and it didn’t appear to have any real assets, he said.
“It didn’t really strike me as a very serious effort,” Walters said.
Peggy Flynn, who met Winter in an MBA program in 1986, introduced him at some of the community events he attended.
She said Anacortes has lost the economic benefits of a construction project that would have hired 250 workers and spent $500 million to build the facility as well as the potential for a significant number of well-paying jobs.
“We’ve lost what would have been the most environmentally and technologically advanced beverage manufacturing plant in the world,” Flynn said — citing plans for biodegradable and recyclable packaging materials, reduced and recycled wastewater, and the use of rail instead of trucks.
She said the good news is that Anacortes still has water rights and can look for other economic opportunities going forward.
Spargo said now is the time for a community discussion.
“I think this is an opportunity for the community to come together and give their vision of what they would like to see out there as possibilities,” she said. “We need a plan. We need a plan for all our city.”
She sees the grassroots Defending Water group continuing to have a voice in the process.
Walters said he’d like to see the city continue to explore the current comprehensive plan proposal that would limit the size of facilities on industrial property.
“If something is going to be massive, 1 million square feet, then we need to look at it and it needs to be not outright allowed,” he said.
The approval process wouldn’t have to take long, he said. As it is now, a massive facility could come in for a building permit with environmental review, but without council consultation. He said in the future water shouldn’t be the focus.
“When we look at economic development look for industries that provide good jobs — not industries that use water,” Walters said.
• April 2008 — Tethys Enterprises is formed.
• April 12, 2010 — Everett Mayor Ray Stephanson, in a letter to Tethys CEO Steve Winter, says the city will discontinue any further work on the proposed agreement to build a bottling plant there. He cited a concern that Tethys refused to link water provided to the number of jobs created.
• Sept. 13, 2010 — The Anacortes City Council approves a contract to provide up to 5 million gallons of water a day to Tethys. The contract, dated Oct. 1, 2010, requires the company to provide a legal description and map of property for the development. It must be at least 30 acres, served by rail and within the city limits.
• October 2010 — Defending Water in the Skagit River Basin was formed as a “grass-roots educational influence to promote citizen input regarding the contract signed between the City of Anacortes and Tethys Enterprises.” It is associated with the Alliance for Democracy.
• Sept. 26, 2011 — The City Council approves a contract extension, requiring Tethys to find property by Dec. 1, 2012.
• July 31, 2012 — The City of Anacortes requests adding about 11 acres off Highway 20 near Stevenson Road to its urban growth area. The site was being eyed for Tethys. At the time, Mayor Dean Maxwell said the city will benefit from the added industrial property no matter what ends up there.
• Oct. 10, 2012 — The county requests more information from the city about its UGA request.
• Nov. 29, 2012 — Tethys gets title commitments for 30.33 acres of property at Highway 20 and Reservation Road near Stevenson Road. At the time, Winter told the American the 30.33-acre site was just part of the plan. It also proposed to use about 11 acres the city requested to be added to its urban growth area and, at the time, Tethys was in discussion with other property owners.
According to the contract, Tethys then had two years to complete the necessary studies and apply for permits. The plant was required to be up and running by June 1, 2018, according to the contract.
• April 9, 2013 — Skagit County commissioners hold a public hearing on the city’s UGA expansion request. Speakers brought up issues including traffic concerns, the size of the proposed Tethys plant, the city infrastructure to support any amount of acreage outside the presently designated city limits and the Tethys project being out of scale for the site and nearby communities.
• July 10, 2013 — Skagit County commissioners voted unanimously to docket the City of Anacortes UGA expansion request, allowing the review process to continue. An environmental review process was the next step.
• Sept. 10, 2013 — The city announces Tethys has backed out of its proposal.
Anacortes land expansion to be reviewed
By KATE MARTIN
MOUNT VERNON — Anacortes’ proposal to expand its city boundaries to accommodate a beverage bottling plant has passed one of several administrative hurdles, despite reservations by one county commissioner.
Skagit County commissioners voted unanimously Tuesday to review the city of Anacortes’ proposal, which includes incorporating and rezoning 11.2 acres southwest of the intersection of Reservation and Stevenson roads into the city’s long-term growth area. In return, the city would redesignate 16.6 acres of city industrial-zoned land on the southern shore of Fidalgo Bay for public use.
The proposed land-use change could make way for Tethys Enterprises Inc. to build a massive bottling plant on the land and surrounding urban growth area.
The bottling plant would eventually reach 1 million square feet, according to CEO Steve Winter, and make all manner of beverages. Tethys has a contract with the city for 5 million gallons of water per day — the same amount the Tesoro Refinery uses.
But the proposal has sparked controversy, with opponents saying the city is squandering a public resource — water — for corporate interests. Some have concerns about the way the city handled the process of signing a contract with Tethys that would provide the city-owned water.
Supporters of the proposal, including the city’s Chamber of Commerce, say it would provide much-needed jobs for Skagit County residents.
Skagit County’s planning department received nearly 400 pages of comments from 174 residents by early May about the proposal.
County commissioners held a public hearing on the land-use change in April, where questions were raised about the legality of the process. Commissioners decided to have attorneys review the legal and procedural concerns of the proposal before making a decision about how to move forward.
Commissioners hired Seattle firm Gordon Derr because of the complexity of the case and to alleviate community concerns about conflicts of interest.
An issue that arose was whether the city was required to submit project-specific plans to the county or if the county would evaluate the proposal only on the request to rezone land for industrial use.
A memo to commissioners last month from Jay Derr, the contracted legal counsel on the issue, says it is appropriate for commissioners to review project-specific components of the proposal. A review may consider the city’s “population allocation and commensurate employment needs to support the UGA application,” the memo states.
Derr told commissioners they can request more information about the project. But moving forward, the commissioners might want to bring up impacts to water resources and rail traffic, he said.
“You know enough about the specific plans and the future for this site that those project-specific issues should be addressed as part of the environmental review,” Derr told commissioners Tuesday.
Commissioner Sharon Dillon seemed torn and asked Derr if the county could require the official in charge of the State Environmental Policy Act review to do a stringent Environmental Impact Statement analysis, instead of the less rigorous Mitigated Determination of Nonsignificance.
Derr said a MDNS is not a “minor effort” and would require the applicant to address and mitigate for environmental impacts.
Dillon said she believes the city should ask for the land designation change in 2015, when the county issues its full comprehensive plan update. Nevertheless, she said, “we might as well deal with it this year.”
The county had several options: Move the request forward, deny the request or delay it until the county’s next comprehensive update.
When commissioners voted unanimously to move the request forward, Dillon winced as she cast her vote.
The land designation change is the first of many steps that must be taken, according to Planning and Development Services Director Dale Pernula.
Next, the county and city will negotiate an agreement on the SEPA process, costs and responsibilities. The issue will eventually be held in a public meeting in front of the county Planning Commission. It could take many months before that happens.
Wednesday, April 24, 2013 9:41 PM
Reader Commentary, Anacortes American
Wednesday, April 24, 2012
BY ROSS O. BARNES
The City of Anacortes’ 55 million gallons per day of continuous and 11 million gallons per day of interruptible Skagit River water rights are recognized as a principal water supply resource in Skagit County that will be increasingly called on to supply the future needs and growth of Skagit County residents and businesses.
With commendable foresight, the city took advantage of temporary inexpensive funding opportunities to rebuild its water treatment plant to technological state-of-the-art and to fully exploit the hydraulic capacity of the existing water intake structure on the Skagit River. The plant is now ready to serve the needs of water customers for the next 40 years or so.
However, Anacortes officials torpedo and submerge this “good” story with other actions and statements that demonstrate they have neither the sense of responsibility nor basic intellectual honesty to be trusted as stewards of an essential public water resource.
City Council member Cynthia Richardson’s commentary on local water issues in the March 6 American is typical of the self-serving fairy story on water promulgated by City Hall that misdirects and misinforms the public on the reality of future supply and demand issues in the Anacortes water supply system.
Ms. Richardson spins an anecdotal tale of Skagit River hydrology that, although factually correct in the narrow sense, is irrelevant to the technical and legal constraints on future water supply in Skagit County.
I can discuss here only a small sample of Anacortes’ irresponsible actions and misstatements on Skagit County water supply issues.
Skagit County has projected water supply needs and preliminary water system planning to the year 2050. This Skagit County Coordinated Water System Plan (CWSP) is part of the Anacortes Comprehensive Plan, and Anacortes is legally obliged to operate its water supply system in conformity with the long-range planning horizon and policies of the CWSP.
The current CWSP was published in 1999, which predates the severe future water supply constraints introduced by the infamous Skagit Basin In-stream Flow Rule that has spawned endless controversy and litigation between “water factions” in Skagit County. Thus, the water supply projections of the CWSP must be modified by subsequent legal developments such as the In-stream Flow Rule, which is a Washington state administrative regulation, and the state Municipal Water Law of 2003.
The distribution of future population growth in Skagit County assumed by the CWSP is not supported by current comprehensive planning in Skagit County, so water demand projections are best evaluated by combining the two principal municipal water system service areas — Anacortes and Skagit PUD — to avoid speculation on where long-term urban growth will occur in the county (this is one reason for having coordinated countywide water supply planning).
Indeed, there are multiple interties between the Anacortes and PUD water systems, and PUD is a major wholesale customer of the Anacortes water system. Also, the boundary between the two water system service areas may change in the future to achieve better balance between water supply and demand.
The In-stream Flow Rule does not contemplate increasing the existing continuous Skagit Basin water rights of the Anacortes and PUD water systems to meet future demand. This fundamental restriction on future water supply was not considered by the earlier CWSP.
To quantify the magnitude of Anacortes’ irresponsible actions and misstatements, I need to discuss a few actual numbers from the CWSP and other water planning documents.
For the year 2050, the CWSP projects a potential peak water demand in the combined Anacortes/PUD service areas of 117.8 MGD against combined Anacortes/PUD continuous Skagit Basin water supply rights of 82.5 MGD — a supply deficit of 35.3 MGD, that must be met, if at all, from raw water storage reservoirs.
PUD has a raw water storage reservoir that will allow it to fully utilize its 8.3 MGD of interruptible water rights that cannot be drawn during low-flow conditions in the water source areas that coincide with the peak demand period of late summer and early fall. The 8.3 MGD is typically not available for about one-fourth of the year, which reduces the average yearly interruptible draw to 6.3 MGD and the peak demand deficit to 29 MGD versus averaged water rights.
Anacortes has no significant raw water storage capacity, so the future utility of its 11 MGD of interruptible water to meet dry season peak demand is unknown. Against this serious peak demand deficit, the CWSP projects and allocates a total of 21 MGD of industrial water use for the whole of Skagit County to the year 2050 — 16 MGD to Anacortes and 5 MGD to PUD.
But as stated above, all of this water may not actually be available, or may have to be “taken” from other users during periods of peak demand. In spite of the county water supply deficits projected in the Anacortes Comprehensive Plan, Anacortes signed a contract with Tethys Enterprises to supply up to 5.5 MGD of new industrial water out to 2050. Combined with the existing 12.9 MGD of water used by Shell and Tesoro refineries, the Tethys contract alone brings the large industrial water use in the Anacortes system to 18.4 MGD or 2.4 MGD greater than Anacortes’ projected industrial allocation in the CWSP.
The Tethys contract also uses up all of the 1 MGD of new industrial water use allocated to the rest of Skagit County through the PUD, plus another 1.4 MGD.
In summary, Anacortes (1) ignores the long-range water demand/supply forecasts of its own comprehensive water planning documents that project serious potential water supply deficits by 2050 in Skagit County, (2) contracts to give all of the projected new industrial water supply for all of Skagit County, plus more, to one new industrial customer, and (3) requires that all of that overallocated water be delivered within Anacortes city limits.
And then Anacortes complains that increasing numbers of Skagit County residents and their government representatives are antagonistic to Anacortes’ shortsighted actions and continuous misstatements with respect to county water supply issues that will affect everyone and every business and community in Skagit County.
A more detailed discussion of the quantitative water supply and demand projections for Skagit County, including graphical presentations, can be found at www.evergreenislands.org under the title City of Anacortes Petition to Modify UGA Boundary, posted January 29, 2013.
Anacortes American, Feb. 27, 2013
In response to the City Council and others’ injudicious resolve to continue moving forward with the Tethys proposal, I ask that we consider the following:
Water is Earth’s most vital resource. The next world war will be over water rights. Scientists have already predicted which countries will run out of water first and the mass exodus that will follow.
Can you imagine entire countries void of human life because there is no water to support civilization there? Even if you cannot imagine it, it would be prudent to heed the warning of those that study such things.
Ironically, the latest Anacortes City Briefing was devoted entirely to water use and the importance of clean water:
“The City’s Water System supports the jobs and economy not only in Anacortes but also La Conner, Mount Vernon, Burlington, Oak Harbor, The Port of Anacortes and March’s Point, and it supports national defense by assuring water to the Whidbey Island Naval Air Station.”
“Notably, reliable clean water as provided by the City’s Water System is key to the success of Skagit Valley farmers. A consortium of specialists have supposedly determined that we have nothing to fear in terms of the impact of climate change and the Skagit River levels … well, at least until 2080.”
I suppose our great grandchildren don’t need clean drinking water.
Communities worldwide are investing in more sustainable practices as they recognize humanity’s headlong dive into oblivion via untempered consumption of natural resources. We can persist in gorging ourselves on Earth’s resources to our own detriment or choose self-preservation, for the benefit of all of Earth’s inhabitants.
I have lived in places where water is scarce. It is a life disconnected from nature and full of urban and industrial sprawl.
I have lived in Spokane, Wash. Spokane’s main street is an unending tract of strip malls, decrepit buildings, fast food joints and vacant lots swathed in dead grass and swirling dust. Spokane has but one source of water, a polluted river that runs through the center of town.
And yet I witnessed unabashed use of water there. Most people in Spokane water their lawns through the entire summer. Their yards remain a sinful lush green while around them the scorched earth cracks and blows away in dust storms. There is no respite from the heat of summer.
I have lived in Denver, Colo. In Denver, you cannot hear the birds for the incessant drone of traffic. The trees, most non-native and ill-suited for the high desert plains climate, grow stunted and misshapen.
Those rare few that fruit release their harvest prematurely in a desperate act of self-preservation when the water still does not come, day after day. They curl their leaves inward to protect themselves from the unceasing heat, their unsowed crop shriveling into nothingness at the base of their cracked and peeling trunks.
It is so dry, that your skin and the insides of your nostrils crack and bleed as your body’s liquid equilibrium is assaulted.
I have lived in Austin, Texas. The summer of 2011 saw almost 1,700 homes in and around the nearby community of Bastrop burn to the ground and fires raging uncurbed near Austin. We had water rationing and energy brown-outs while fire fighters battled sweltering winds that aided the inferno, a consequence of no rain for many months while temperatures soared above 100 degrees.
The farther I traveled from the Puget Sound, the more I desired to come back. In Texas I developed a keen longing to walk among damp foliage beneath towering trees. My lungs yearned for air dense with moisture and my ears for the sound of gulls and lapping water. It is only when you lose something precious that you truly understand the extent of how precious it was.
While Mayor Dean Maxwell’s vision is to revive a flagging economy, the long-term vision is to encourage the irrevocable desecration of Fidalgo Island and the resources we share with our neighboring communities, to say nothing of how it will change our way of life.
Tethys will exhaust whatever resources allocated and as an added bonus erect a vast concrete blight and create billions of tons of petroleum waste in the form of plastic bottles. Do we develop infrastructure that aids our ability to be a green, sustainable community for the next hundred years and beyond ,or do we, the citizens of Anacortes, permit a handful of people to choose to send our community back 100 years to the industrial era?
Industrial America has targeted Fidalgo Island for a facility that epitomizes the heedless practices of humankind. To permit Tethys to build near our home and sell our water is short-sighted at best, permanent, destructive and regretful at worst. I have seen the way people live in other places where water is scarce and I can tell you, Fidalgo Island is special!
The mayor says, “It seems we are once again in a crucial time, when the decisions we make today will have a very major impact on the future of our city,”(Feb. 20, Anacortes American, page 1). How right he is!
Today, I join my Anacortes neighbors in crying foul on the Tethys proposal. A few members of our community are not righteous enough to decide for us all something that will forever change the landscape and spirit of Anacortes and its neighboring communities.
The Tethys plant proposal must be put to public vote.
The New Oil
Oct 8, 2010 9:45 AM EDT
Should private companies control our most precious natural resource?
Sitka, Alaska, is home to one of the world’s most spectacular lakes. Nestled into a U-shaped valley of dense forests and majestic peaks, and fed by snowpack and glaciers, the reservoir, named Blue Lake for its deep blue hues, holds trillions of gallons of water so pure it requires no treatment. The city’s tiny population—fewer than 10,000 people spread across 5,000 square miles—makes this an embarrassment of riches. Every year, as countries around the world struggle to meet the water needs of their citizens, 6.2 billion gallons of Sitka’s reserves go unused. That could soon change. In a few months, if all goes according to plan, 80 million gallons of Blue Lake water will be siphoned into the kind of tankers normally reserved for oil—and shipped to a bulk bottling facility near Mumbai. From there it will be dispersed among several drought-plagued cities throughout the Middle East. The project is the brainchild of two American companies. One, True Alaska Bottling, has purchased the rights to transfer 3 billion gallons of water a year from Sitka’s bountiful reserves. The other, S2C Global, is building the water-processing facility in India. If the companies succeed, they will have brought what Sitka hopes will be a $90 million industry to their city, not to mention a solution to one of the world’s most pressing climate conundrums. They will also have turned life’s most essential molecule into a global commodity.
The transfer of water is nothing new. New York City is supplied by a web of tunnels and pipes that stretch 125 miles north into the Catskills Mountains; Southern California gets its water from the Sierra Nevada Mountains and the Colorado River Basin, which are hundreds of miles to the north and west, respectively. The distance between Alaska and India is much farther, to be sure. But it’s not the distance that worries critics. It’s the transfer of so much water from public hands to private ones. “Water has been a public resource under public domain for more than 2,000 years,” says James Olson, an attorney who specializes in water rights. “Ceding it to private entities feels both morally wrong and dangerous.”
Everyone agrees that we are in the midst of a global freshwater crisis. Around the world, rivers, lakes, and aquifers are dwindling faster than Mother Nature can possibly replenish them; industrial and household chemicals are rapidly polluting what’s left. Meanwhile, global population is ticking skyward. Goldman Sachs estimates that global water consumption is doubling every 20 years, and the United Nations expects demand to outstrip supply by more than 30 percent come 2040.
Proponents of privatization say markets are the best way to solve that problem: only the invisible hand can bring supply and demand into harmony, and only market pricing will drive water use down enough to make a dent in water scarcity. But the benefits of the market come at a price. By definition, a commodity is sold to the highest bidder, not the customer with the most compelling moral claim. As the crisis worsens, companies like True Alaska that own the rights to vast stores of water (and have the capacity to move it in bulk) won’t necessarily weigh the needs of wealthy water-guzzling companies like Coca-Cola or Nestlé against those of water-starved communities in Phoenix or Ghana; privately owned water utilities will charge what the market can bear, and spend as little as they can get away with on maintenance and environmental protection. Other commodities are subject to the same laws, of course. But with energy, or food, customers have options: they can switch from oil to natural gas, or eat more chicken and less beef. There is no substitute for water, not even Coca-Cola. And, of course, those other things don’t just fall from the sky on whoever happens to be lucky enough to be living below. “Markets don’t care about the environment,” says Olson. “And they don’t care about human rights. They care about profit.”
In the developed world—America especially—it’s easy to take water for granted. Turn on any tap, and it comes rushing out, clean and plentiful, even in the arid Southwest, where the Colorado River Basin is struggling through its 11th year of drought; in most cities a month’s supply still costs less than premium cable or a generous cell-phone plan. Many of us have no idea where our water comes from, let alone who owns it. In fact, most of us would probably agree that water is too precious for anybody to own. But the rights to divert water—from a river or lake or underground aquifer—are indeed sellable commodities; so too are the plants and pipes that process that water and deliver it to our taps. And as demand outstrips supply, those commodities are set to appreciate precipitously. According to a 2009 report by the World Bank, private investment in the water industry is set to double in the next five years; the water-supply market alone will increase by 20 percent.
Unlike the villain in James Bond’s Quantum of Solace who hatched a secret plot to monopolize Bolivia’s fresh-water supply, the real water barons cannot be reduced to a simple archetype. They include a diverse array of buyers and sellers—from multinational water giants like Suez and Veolia that together deliver water to some 260 million taps around the world, to wildcatter oil converts like T. Boone Pickens who wants to sell the water under his Texas Panhandle ranch to thirsty cities like Dallas. “The water market has become much more sophisticated in the last two decades,” says Clay Landry, director of WestWater Research, a consulting firm that specializes in water rights. “It’s gone from parochial transactions—back-of-the-truck, handshake–type deals—to a serious market with increasingly serious players.”
Eventually, Olson worries, every last drop will be privately controlled. And when that happens, the world will find itself divided along a new set of boundaries: water haves on one side, water have-nots on the other. The winners (Canada, Alaska, Russia) and losers (India, Syria, Jordan) will be different from those of the oil conflicts of the 20th century, but the bottom line will be much the same: countries that have the means to exploit large reserves will prosper. The rest will be left to fight over ever-shrinking reserves. Some will go to war.
Until recently, water privatization was an almost exclusively Third World issue. In the late 1990s the World Bank infamously required scores of impoverished countries—most notably Bolivia—to privatize their water supplies as a condition of desperately needed economic assistance. The hope was that markets would eliminate corruption and big multinationals would invest the resources needed to bring more water to more people. By 2000, Bolivian citizens had taken to the streets in a string of violent protests. Bechtel—the multinational corporation that had leased their pipes and plants—had more than doubled water rates, leaving tens of thousands of Bolivians who couldn’t pay without any water whatsoever. The company said price hikes were needed to repair and expand the dilapidated infrastructure. Critics insisted they served only to maintain unrealistic profit margins. Either way, the rioters sent the companies packing; by 2001, the public utility had resumed control.
These days, global water barons have set their sights on a more appealing target: countries with dwindling water supplies and aging infrastructure, but better economies than Bolivia’s. “These are the countries that can afford to pay,” says Olson. “They’ve got huge infrastructure needs, shrinking water reserves, and money.”
Nowhere is this truer than China. As the water table under Beijing plummets, wells dug around the city must reach ever-greater depths (nearly two thirds of a mile or more, according to a recent World Bank report) to hit fresh water. That has made water drilling more costly and water contracts more lucrative. Since 2000, when the country opened its municipal services to foreign investment, the number of private water utilities has skyrocketed. But as private companies absorb water systems throughout the country, the cost of water has risen precipitously. “It’s more than most families can afford to pay,” says Ge Yun, an economist with the Xinjiang Conservation Fund. “So as more water goes private, fewer people have access to it.”
In the U.S., federal funds for repairing water infrastructure—most of which was built around the same time that Henry Ford built the first Model T—are sorely lacking. The Obama administration has secured just $6 billion for repairs that the EPA estimates will cost $300 billion. Meanwhile, more than half a million pipes burst every year, according to the American Water Works Association, and more than 6 billion gallons of water are lost to leaky pipes. In response to the funding gap, hundreds of U.S. cities—including Pittsburgh, Chicago, and Santa Fe, N.M.—are now looking to privatize. On its face, the move makes obvious sense: elected officials can use the profits from water sales to balance city budgets, while simultaneously offloading the huge cost of repairing and expanding infrastructure—not to mention the politically unpopular necessity of raising water rates to do so—to companies that promise both jobs and economy-stimulating profits.
Of course, the reality doesn’t always meet that ideal. “Because water infrastructure is too expensive to allow multiple providers, the only real competition occurs during the bidding process,” says Wenonah Hauter, executive director of the nonprofit, antiprivatization group Food and Water Watch. “After that, the private utility has a virtual monopoly. And because 70 to 80 percent of water and sewer assets are underground, municipalities can have a tough time monitoring a contractor’s performance.” According to some reports, private operators often reduce the workforce, neglect water conservation, and shift the cost of environmental violations onto the city. For example, when two Veolia-operated plants spilled millions of gallons of sewage into San Francisco Bay, at least one city was forced to make multimillion-dollar upgrades to the offending sewage plant. (Veolia has defended its record.)
Even as many U.S. cities look toward ceding their water infrastructure to private interests, others are waging expensive legal battles to get out of such contracts. In 2009 Camden, N.J., sued United Water (an American subsidiary of the French giant Suez) for $29 million in unapproved payments, high unaccounted-for water losses, poor maintenance, and service disruptions. In Milwaukee a state audit found that the same company violated its contract by shutting down sewage pumps to save money; the move resulted in billions of gallons of raw sewage spilling into Lake Michigan. And in Gary, Ind., which canceled its contract with United Water after 12 years, critics say privatization more than doubled annual operating costs. “It ends up being a roundabout way to tax people,” Hauter says. “Only it’s worse than a tax because they don’t spend the money maintaining the system.”
Representatives of United Water point out that 95 percent of its contracts are in fact renewed and say that a few bad examples don’t tell the whole story. “We are dealing with facilities that were designed and built at the end of World War II,” says United Water CEO Bertrand Camus. “We have plenty of horror stories on our side, too.” The Gary facility, to take one example, went private only after the EPA forced the public utility to find a more experienced operator to solve a range of problems. “Individual municipalities don’t have the expertise to employ all the new technology to meet the new standards,” Camus says. “We do.”
The bottom line is this: that water is essential to life makes it no less expensive to obtain, purify, and deliver, and does nothing to change the fact that as supplies dwindle and demand grows, that expense will only increase. The World Bank has argued that higher prices are a good thing. Right now, no public utility anywhere prices water based on how scarce it is or how much it costs to deliver, and that, privatization proponents argue, is the root cause of such rampant overuse. If water costs more, they say, we will conserve it better.
The main problem with this argument is what economists call price inelasticity: no matter what water costs, we still need it to survive. So beyond trimming nonessential uses like lawn maintenance, car washing, and swimming pools, consumers really can’t reduce water consumption in proportion to rate increases. “Free-market theory works great for discretionary consumer purchases,” says Hauter. “But water is not like other commodities—it’s not something people can substitute or choose to forgo.” Dozens of studies have found that even with steep rate hikes, consumers tend to reduce water consumption by only a little, and that even in the worst cases, the crunch is disproportionately shouldered by the poor. In the string of droughts that plagued California during the 1980s, for example, doubling the price of water drove household consumption down by a third, but households earning less than $20,000 cut their consumption by half, while households earning more than $100,000 reduced use by only 10 percent.
In fact, critics say, private water companies usually have very little incentive to encourage conservation; after all, when water use falls, revenue declines. In 2005 a second Bolivian riot erupted when another private water company raised rates beyond what average people could afford. The company had dutifully expanded the city’s water system to several poor neighborhoods outside the city. But the villagers there, accustomed to life without taps, were obsessive water conservers and hadn’t used enough water to make the investment profitable.
The biggest winners of a sophisticated water market are likely to be the very few water-rich regions of the global north that can profitably move massive quantities across huge distances. Russian entrepreneurs want to sell Siberian water to China; Canadian and American ones are vying to sell Canadian water to the Southwestern U.S. So far, such bulk transfers have been impeded by the high cost of tanker ships. Now, thanks to the global recession, the tankers’ rates have dropped significantly. If the Sitka plan succeeds, other water-rich cities may soon follow.
But in between the countries that will profit from the freshwater crisis, and those that will buy their way out of it, are the countries that have neither water to sell nor money with which to buy it. In fact, if there’s one thing water has in common with oil, it’s that people will go to war over it. Already, Pakistan has accused India of diverting too much water from rivers running off the Himalayas; India, in turn, is complaining that China’s colossal diversion of rivers and aquifers near the countries’ shared border will deprive it of its fair share; and Jordan and Syria are bickering over access to flows from a dam the two countries built together.
So what do we do? On the one hand, most of the world views water as a basic human right (the U.N. General Assembly voted unanimously to affirm it as such this July). On the other, it’s becoming so expensive to obtain and supply that most governments cannot afford to shoulder the cost alone. By themselves, markets will never be able to balance these competing realities. That means state and federal governments will have to play a stronger role in managing freshwater resources. In the U.S., investing as much money in water infrastructure as the federal government has invested in other public-works projects would not only create jobs but also alleviate some of the financial pressure that has sent so many municipal governments running to private industry. That is not to say that industry doesn’t also have a role to play. With the right incentives, it can develop and supply the technology needed to make water delivery more cost-effective and environmentally sound. Ultimately both public and private entities will have to work together. And soon. Unless we manage our water better now, we will run out. When that happens, no pricing or management scheme in the world will save us.
With Ryan Tracy