Windfall: The Booming Business of Global Warming (17 page)

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A HUNDRED MILES
east of San Diego, I witnessed the lengths to which the city was already going to secure more water supplies, how it was getting by until the tankers and water bags appeared. The first sign that something was odd was near the dusty town of Imperial, California, where there was lettuce growing in the desert. As I drove along Interstate 8, the lettuce gave way to cabbage. The cabbage gave way to alfalfa. “Now you see where all that water goes,” my host, an engineer named Todd Shields, said. We continued east, and soon enough it all gave way to sand once again. Just south of the freeway and just north of the new border fence with Mexico was the All-American Canal: the biggest irrigation canal on the planet, California’s first and biggest claim on the waters of the Colorado River, and, most recently, the site of the biggest bulk-water deal in history—a measure of the market that men like John Dickerson were chasing.

In 1899, the Canadian American entrepreneur George Chaffey, an irrigation genius who had founded the “model colony” of Ontario, California, before being recruited to Australia to duplicate his efforts on the banks of the Murray River, had begun staking out his latest venture, Imperial. Chaffey’s publicist sold settlers on the image of the Imperial Valley as the Egyptian delta, the Colorado River as the Nile, themselves as Joseph and the chosen people—pilgrims, not just pioneers. On May 14, 1901, near a volcanic outcropping called Pilot Knob, the wooden Chaffey Gate began diverting the waters of the Colorado through a series of trenches and canals toward Imperial. Water rights being a matter of seniority, not geography, it may have been the most important moment in California’s history—the start of its claim to a river whose flows come entirely from other states and the start of a system of aqueducts that have allowed its cities to flourish where no city should rightly be. Under the 1922 Colorado River Compact between seven western states and Mexico, California is apportioned 4.4 million acre-feet of water a year, or about 1.4 trillion gallons—the most of any state in the system, more than a third of what’s promised to the rest. If there’s any surplus above the 1.5 million acre-feet committed by treaty to flow onward to Mexico, California takes much of that, too. Thanks to the All-American, which got its name after an earlier canal was rerouted in the 1930s to stay wholly north of the border, the obscure Imperial Irrigation District (IID) now controls 20 percent of the Colorado’s flows. Imperial receives 2.92 inches of rain a year, a third of what San Diego gets. The surrounding desert, once known as the Valley of the Dead, has become one of America’s prime farming regions. Two-thirds of the country’s winter fruits and vegetables are grown here.

In 2003, as the Colorado fell into drought, the IID agreed under threat of federal intervention to sell a record 277,000 acre-feet of All-American water—equivalent to 90 billion gallons, 5,000 Panamax tankers, or 20,000 Spragg Bags—to the San Diego County Water Authority. Most of the new All-American water would go to the City of San Diego, where until 2012 voters kept rejecting the idea of bolstering their meager water supply with treated sewage. Most of the city’s water, if history was any guide, would go to keeping four hundred parks and golf courses green. Residents themselves would dump half their water into their yards. In poorer, politically weaker Imperial, farmers would idle tens of thousands of acres of cropland and take generous water-rights buyouts, some happily, many grudgingly. For me, the All-American Canal symbolized the essential truth of Marc Reisner’s adage about water and money, along with its corollary in a warming world: Shit rolls downhill.

Todd Shields, my host, was managing the most controversial part of the record water deal. For most of a century, the All-American Canal had been lined with dirt, and at least twenty-two billion gallons—enough for 122,000 American households—were lost each year through its porous walls. The IID would now line the canal with concrete, and San Diego would pay the $290 million in construction costs. The problem was that for most of a century the lost water had slipped under the Algodones Dunes, ignoring the international border, and percolated up in the Mexicali Valley. Farmers there had used the leakage to turn Mexicali into one of their country’s largest producers of alfalfa, asparagus, scallions, and cotton. Take it away, and soon hundreds of people would be out of work, tens of thousands of people would be out of potable water, and sensitive wetlands would be drained. Lawsuits against the canal upgrade had been filed by environmental groups, the city of Calexico, California, and the Mexicali Economic Development Council. But they’d been trumped by a provision slipped into the final lines of a 279-page tax bill in the final hours of the final congressional session of 2006. The edict—ignore environmental-assessment requirements and, “without delay, carry out the All-American Canal Lining Project”—was the doing of three Colorado River system senators: Dianne Feinstein of California, Harry Reid of Nevada, and Jon Kyl of Arizona. “In a time of increasing population and decreasing water supplies as a result of global warming,” said Feinstein, “I believe it is critical to save every drop of water.”

I watched the border fence rise and fall as Shields updated me on his four-hundred-person crew’s progress: twenty-three million cubic yards of sand and soil moved, eighteen of twenty-three miles nearly done, thirteen months to go. We passed an ad hoc roadblock stopping traffic in the opposite lane: orange cones and white SUVs with green bands marked “Border Patrol,” a cluster of officers looking for illegals. Since the All-American’s 1942 completion, there had been almost six hundred documented drownings of undocumented migrants—almost one a month—and workers regularly collected the dead from the pools above the hydropower plants. “There’s a trash rack before the water goes through,” Shields explained. “You don’t want debris to go into the turbines. That’s generally where they find the bodies.”

Near where the freeway crossed the canal, not far from Pilot Knob, Shields and I pulled over. Workers had dug an entirely new trench in this section, and there was a waterless, rectilinear canyon 150 feet across and nearly 100 feet deep, swarming with men and machines. Otherworldly “jumbos”—inclined platforms that stretched top to bottom on the far bank—were creeping east on metal tracks. One had four giant blue spools of plastic joint material and a vertical sluice that brought down endless streams of wet concrete. Another had a team of eight men in hard hats and blue jeans who buffed the concrete, leaning forward on what looked like industrial mops, straining in the sun. In this heat, the concrete would be dry within thirty minutes, and then another jumbo would grind past and spray sealant, and the bank would go from gray-brown to gleaming white. In about a month, Shields told me, they would cut the weirs at both ends, and the new section of canal would flood with water. He had donned a yellow safety vest over his flannel shirt, and now he stood at the edge of the void and watched his men work. They were speaking to one another in Spanish.

“This is kind of a special project for me,” Shields said. His grandfather Clyde had led the All-American’s 1930s survey crews, he explained, and had later worked on the California State Water Project. Shields had been inspired to become a civil engineer himself, but unlike his grandfather he was not technically a government employee: He had been remanded to the IID from Parsons, the Los Angeles engineering firm that had been the first to dream up NAWAPA, the North American Water and Power Alliance, which I had heard about when sitting in on Michael Byers’s class at the University of British Columbia. Early in his career, Shields had seen a scale model of it once, had gotten to really study the megaproject that had so scared Canadian water nationalists. “It was just this huge board with all these systems,” he said, “interesting as hell to me.” He thought it could work. “I’m sure it would work,” he told me. “It’s technically feasible. You know, it would solve water needs. It would probably violate lots of environmental needs. It’s a societal value judgment.”

Shields told me he believed the climate could be changing, sure, but he didn’t believe humans were causing it, and he didn’t believe it was a crisis. “What that whole global-warming fear leaves out,” he said, “is that there will also be positive effects.”

The next day, I crossed the border. The Mexicali Valley’s fields were flat, straight, perfectly manicured, lorded over by the Algodones Dunes yet radiantly green. An American company named El Toro shuttled workers back and forth in school buses, and massive sprinkler systems watered the land. In the city of Mexicali, three blocks from a border wall where the streets abruptly ended, near a florist and a health clinic, I entered a small blue building housing a plaintiff in the lawsuit against the lining project. René Acuña, the director of the Mexicali Economic Development Council, wore a maroon shirt and sat in a leather chair and explained, calmly at first, that Mexicali wasn’t some maquiladora town. It had a million people, and its entire population could live for a year on the water taken by the new Canal Todo Americano. A third of its economy was agriculture. “Our prosperity has always been based on water,” he said. He showed me a photograph of the clear, filtered water that bubbled up from the border—not too saline, not yet. “But those fields are going to die,” he said. “And then see where the people go.”

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JOHN DICKERSON HAD
wanted to make sure I understood how a water-rights hedge fund like his could exist, so he took the time to explain how something like water could be bought. The concept was straightforward: In some parts of the world, a water title was like a land title. The details, on the other hand, were extremely complicated.

“In the United States,” he began, “we have two systems with water rights.” In the eastern United States, as in most parts of the former British Empire, the courts followed riparian law, part of traditional English common law. “If you have ten hectares of land, you get
x
liters from the Thames,” he said. “If you have a hundred hectares, you get ten times
x
from the Thames.” In states like Indiana, Ohio, Michigan, and Maine, water could not be stripped from the land and sold as a separate commodity.

The West was different. The Homestead Acts let pioneers win deeds to federal land if they lived on it for a period and made improvements. “Wagon trains would leave Missouri, headed toward Oregon,” Dickerson said. “They would see a valley, stop, and say, ‘This looks good.’ They all settled along water.” In dry years, common law could not stop farmers living upstream from using up all the water before it reached the others, for none of the settlers yet owned the land they worked. “People living at the lower end of the valleys would go blow up dams,” he said. “The government had to start sending federal marshals out.” Water courts formed to sort out the mess, and as the deeds came, they came in pairs: one for land, one for water. The basic water law of the West became first come, first served. “First in time,” said Dickerson, “first in right.” This was why the All-American Canal was so important for California. So long as they had been exercised and thus kept valid—the water was put to “beneficial use,” not hoarded—the oldest rights were the most valuable, and they could be freely traded.

“Any water title sold to San Diego or Denver today was first bought off a farmer or rancher way back then,” Dickerson told me. He abruptly stood up, walked to the back of the room, and returned with a diagram that he slapped down on his desk. It was a hydrologist’s straight-line graph of Colorado’s South Platte River, a depiction of tributaries and water rights. “This is just to give you some sense of the complexity involved.” It showed a disorderly network of dozens of colored lines—reds, blues, and greens—that converged at odd angles across the page. “Those things are reservoirs,” he said, pointing. “Those are ditches. Just look at this stuff. You almost have to have a magnifying glass. See, here’s a water right: year 1910, thirty-two thousand acre-feet, so-and-so cubic feet a second. Everything has a date on it. It’s incredibly complex.” But once you understood the rules, he said, you were a big step ahead of the guys buying utility stocks. “A lot of people say to me, ‘John, water is a regulated business. What are you saying here, that water’s a free-market good?’ And I say, ‘Well, no, water is not a regulated business. Water
utilities
are a regulated business.’”

Dickerson planned to eventually take the Summit Water Development Group, his “wet water” fund, public—meaning a way for mom and pop in Peoria to finally speculate on water, plus a big payout for early fund investors who had put up the minimum $5 million buy in. In the meantime, he was playing what he called an “aggregation game.” Across the American West, up and down the Colorado River system, Summit took stakes in private reservoirs, in ditches dug 150 years ago by pioneering ranchers—spending $500,000 here, $1 million there—with the goal of accumulating enough water to sell as a package to suburban boomtowns within the basin. Once resold, the ditches’ water would be left in the river to be taken up by city pipes.

After the new millennium and the onset of the worst Colorado River drought in memory, the rural-to-urban flow of water—already the bulk of water trades since tracking began in 1987—had doubled in volume. In the Rockies, snow fell as rain. Sometimes, rain did not fall at all. It was a preview of the future, scientists said: Climate models projected a northward shift of the Hadley cell, a planetwide atmospheric system that circulates warm air from the tropics and cooler air from the subtropics, driving trade winds, jet streams, and, crucially, desertification. For the Southwest, eighteen of the nineteen major models predicted permanent drought by 2050, with an average surface-moisture decline of 15 percent—the size of the decline that precipitated the dust bowl in the 1930s. Now as then, there had been a rural exodus. The population followed the water to the cities or perhaps vice versa. There were now more people to eat food, and there were fewer people to grow it.

Developers had been on a water-buying spree until the housing market peaked in 2007, Dickerson told me. “Water went from $3,000 an acre-foot to $30,000 in some locales,” he said. Next came the crash—his moment. (“Three or four times,” he said, “we have bought water from bankruptcy courts.”) Now, with a fracking boom and an equally water-intensive hunt for other unconventional oils, petroleum interests were on a buying spree. In late 2008 in the upper Colorado basin, one of the biggest players, Royal Dutch Shell, filed for the first major water right on the Yampa River, requesting 375 cubic feet per second, or 8 percent of the river’s peak springtime flow. (It later withdrew the request after locals protested.) According to one study, energy companies controlled more than a quarter of the upper basin’s flow, more than half of its water storage. Farther south, in Texas, the onset of fracking corresponded to the driest year in state history, and ranchers and cities alike were priced out of the water market. To frack a single well can take as many as six million gallons. In 2011, petroleum companies drilled twice as many new water wells—2,232 across the Lone Star State—as they did oil and gas wells. For the Summit Water Development Group, all this was very good news.