He added: “The market would say that water is much more valuable for serving urban populations.”
Interested participants range from financial firms to university funds and groups of investors, including at least two in Colorado led by former governors. T. Boone Pickens, the Texas oil man who died in 2019, was one of the first water purchase evangelists. Another supporter is Michael Burry, the hedge fund manager portrayed by Christian Bale in “The Big Short”, who made more than $ 800 million by selling the subprime mortgage market in the mid-2000s.
Matthew Diserio, the president and co-founder of the Water Asset Management hedge fund, called the U.S. water business “the largest emerging market on earth” and “a trillion dollar market opportunity”.
WAM, based in New York and San Francisco, invests extensively in water-related ventures and one of its main businesses is to obtain water rights in arid states like Arizona and Colorado. Since leaving the government, Mr. Eklund has become a legal advisor and public face of WAM.
“They are turning water into a commodity,” said Regina Cobb, the Arizona deputy who represents Cibola. “This is not what water should be.”
Private investors would like to bring or extend the existing elements of Wall Street to the water industry, such as futures markets and trades that occur in milliseconds. Most would like to see the price of water, long kept silent by utilities and governments, skyrocketing.
Traders can exploit volatility, whether due to drought, poor infrastructure or government restrictions. Water markets have been called a “haven for arbitration”, an approach in which professionals use speed of negotiation and access to information to make a profit. The situation was compared to the energy markets of the late 1990s, in which companies like Enron made money from scarcity (some of which, we found, traders themselves projected).
Many see the compact as a safeguard to isolate the river from the market.
The negotiating states will focus on restoring the flow of the Colorado River, so diminished by use that from 1998 to 2014 it did not even reach its natural end in the Gulf of California. But they will also seek to rebalance water levels at Lake Powell and Lake Mead, two federally owned reservoirs that retain water for use in the event of extreme drought.