Environmental Engineering Reference
In-Depth Information
California's water bank, the so-called sale of water from the Imperial
Valley Irrigation District to the city of San Diego in California, those
weren't sales. You put a gun to someone's head and you say, 'sell,'
that's not a sale; that's not a market,” he adds.
Water banks are not really markets because the state decides
who must sell and who gets to buy, and the state sets the price by
administrative decision. Water banks
are
profi table, Dellapenna says,
and that's one of the reasons there is a great deal of hype pushing
them as markets. However, Idaho's Strong says, “Water banks will
always be subject to some degree of state regulatory control because
the states actually own the water, and individuals only own the right
to use the water.”
WATER—A COMMODITY ON THE MARKET?
Beyond water banks and the buying and selling of water rights in the
West, water is in demand by ordinary investors, too. Almost every
natural resource economist who works with water will agree that
water is undervalued in the market, says Colorado State University's
Mumme. In investment terms, that means room for growth, and
where there's growth, there's generally the potential to cash in.
No Ordinary Commodity
Water, however, is not like other commodities. “Water is not a com-
modity you can buy or sell like gold or tin or lumber or pork bel-
lies,” says Russell W. Bauman, senior vice president and branch
manager of David A. Noyes & Company, one of the largest full-
service brokerage fi rms in Indianapolis, Indiana. “But there are
areas where water is in short supply and people are looking for
pure plays in water (investments in which the majority of company
revenues come directly from water),” says Bauman. “People seek
water as an investment because they read about shortages in many
areas; a shortage always means demand, and demand greater than
supply means the price goes up.”
Nonetheless, even with all the warnings about water and water
shortages, Bauman says he's had very little demand for water equity
positions.
