Who's profiting from the water crisis?

In January 2010, investment banker Goldman Sachs, along with General Electric and a high-powered Washington thinktank called the World Resources Institute (WRI), announced the launch of a new index measuring water-related risks facing companies and their investors.

In the words of their corporate news release: ‘In many regions around the world, water scarcity from climate change and pollution is starting to impact a company’s performance, yet few analysts account for water-related risks.’

Thirsty work: a man pours water from a stream into his paddy field. Excessive irrigation has caused groundwater levels in north India to drop dramatically.

Anupam Nath / AP / Press Association Images

This new water index would ‘draw on publicly available data regarding physical scarcity and water quality and overlay factors including the regulatory regime and social and reputational issues’ in various regions of the world.

Business jargon aside, if you think this will be a useful tool for corporations, you’d be right. In fact, the risk-index might more accurately be called an ‘opportunity-index’ for water speculators and investors.

Next year the water privatization market worldwide is expected to reach $1 trillion. As Goldman Sachs puts it, ‘There is no substitute for water. It is the only utility you ingest.’ According to Maude Barlow, a leading Canadian critic of water privatization, ‘The biggest water company of all is General Electric.’

By August 2011, Goldman Sachs, General Electric and WRI had not only found a name for their partnership – the Aqueduct Alliance – they had also developed the index into a water database and mapping tool, which can include the amount of infrastructure investment taking place in a given region.

‘If you play it right,’ says the advisor, ‘the results of this impending water crisis can be very good’

Moreover, they had put an ‘environmental’ spin on the project, claiming that it will help corporations, governments and stakeholders become more aware of their ‘water footprint’ and thus make more ‘sustainable’ decisions.

That same month the original threesome – Goldman Sachs, General Electric and WRI – invited into the Aqueduct Alliance some new corporate partners: Coca-Cola, Talisman Energy, Dow Chemical, United Technologies and the financial/news conglomerate, Bloomberg LP.

The WRI’s Kirsty Jenkinson told the Financial Times (FT): ‘Companies see the need to get better visibility about water if they are going to have to access it for their business.’ With the new water database, ‘they can see if they are at risk of not getting the water they need, or coming into conflict with other users of that water’.

Presumably, the potential for ‘conflict’ is what attracted United Technologies to join the Aqueduct Alliance. UT is the world’s 10th largest arms-producing company with sales of $11.1 billion in 2009.

Mired in controversy

Coca-Cola has handed over to the Alliance its own proprietary data on freshwater availability worldwide – data collected over years of research for its bottling enterprises. ‘Water is the lifeblood of our business,’ Coke spokesperson Joe Rozza told the FT. The Atlanta-based company has hundreds of bottling-franchises worldwide, many of them mired in controversy. In India and Latin America, Coca-Cola has regularly faced irate local communities who are losing their drinking and irrigation water to Coke’s local bottlers.

In January this year, Britain’s Guardian newspaper reported that Coca-Cola is under fire for propping up Mswati III of Swaziland, one of Africa’s most notorious dictators. Poverty is endemic, political parties are banned and activists are regularly imprisoned and tortured in the country.

Another Aqueduct Alliance partner is Talisman Energy, a Canadian natural gas company based in Calgary, Alberta. ‘We are very excited to have been asked to become the oil and gas sector sponsor for the Aqueduct Alliance,’ Talisman spokesperson Sandy Stash told Marketwire. ‘Talisman aspires to a water management strategy that defines best practices for water withdrawal, reuse, disposal and conservation in our North American shale gas operations.’

Just weeks earlier, in July 2011, the government of British Columbia (BC) awarded Talisman a licence to divert up to 10,000 cubic metres of water per day from the province’s major hydroelectric reservoir for the next 20 years. Talisman uses the water to ‘frack’ for shale gas in northeastern BC. The company has also secured access to 6,200 square kilometres of shale gas deposits along Quebec’s St Lawrence River.

$1 trillion - The value that the global water privatization market is expected to reach next year.

The Aqueduct Alliance intends to generate databases and water-maps with ‘an unprecedented level of detail and resolution’, including advanced hydrological data and ‘geographically specific indicators that capture the social, economic and governance factors that affect companies and economies’. The databases will include up-to-date regional news coverage on water issues.

By September 2011, the Aqueduct Alliance had developed a prototype database/map covering the Yellow River Basin in northern China. Water shortages in China are already so severe that more than half its cities are facing restrictions on water use.

In 2013 the Alliance intends to release four additional database/maps on river basins of ‘high priority’, including the 2,300-kilometre long Colorado River in the US which has experienced years of drought; the Orange-Sengu River in Africa which extends across Botswana, Lesotho, Namibia and South Africa; the Yangtze River in China, where 10 million people were displaced by the Three Gorges Dam; and the Murray Darling River in Australia.

All are regions where water scarcity is enticing speculators to secure water-rights in a ‘buy-and-hold’ strategy. Their model is based on recent events in Australia.

In a short-sighted cash grab, the Australian government in the 1990s introduced a water market for the Murray Darling River Basin – one of the longest river systems in the world and the heart of Australia’s agricultural production. But in 2001 a major drought struck the Basin and within a few years the federal government in Canberra was forced to start buying back water from private owners.

‘Water is the lifeblood of our business,’ Coke spokesperson Joe Rozza told the FT

The price shot up. By 2009, so many speculators had targeted the Basin that some $3 billion in water-rights were bought and sold in that year alone. The government was forced to compete with international speculators, including giant hedge-funds.

By September 2010, the Australian government had spent at least $1.4 billion buying back water-rights. Although the drought eased that same year, the fact that the Aqueduct Alliance is now focusing on the Murray Darling Basin means that the risks and opportunities there are still ‘high priority’.

As one hedge-fund advisor quipped, an emerging worldwide water crisis is creating ‘serious profit opportunities for those in the know’. The Aqueduct Alliance database/ maps will show where those opportunities are located. Another 15 regions across the world will be analyzed once the Alliance has created its first four database/maps.

‘If you play it right,’ says the advisor, ‘the results of this impending water crisis can be very good.’

Joyce Nelson is an award-winning freelance writer/ researcher and the author of five books.

Fracking the world

Warning: drink at your peril! Tap water drawn from aquifers that have been contaminated by fracking is so full of toxic chemicals that it can be set alight.


Antony Benham, Business Development Manager at the British Geological Survey, could smell trouble brewing. As he displayed a map at the Shale Gas World Europe conference in Warsaw, Poland, last November showing sites in Britain earmarked for future gas exploration, he warned his audience: ‘Activists are keen to stir up trouble wherever they can. It’s important that we communicate better with the general public and address their concerns, outline the pluses and the minuses, because if you don’t give them information they’ll be against it from the start.’

According to its website, the Shale Gas World Europe conference ‘was born out of extensive research with key players in the industry, who have expressed an urgent need to formulate strategies, understand technologies and foster relationships that will result in development of this new sector’.

But shale gas has become extremely controversial in Canada and the US where it was first developed. The industry is planning to go global quickly before the controversy spreads.

As conventional natural gas supplies dwindle, resource companies are going after ‘unconventional’ sources that depend on the new technologies of hydraulic fracturing (‘fracking’) and horizontal drilling to get the gas out of shale rock and coal-bed seams. The number of countries and regions that have been targeted for ‘unconventional’ natural gas development (shale gas, tight gas, and coal-bed methane) reads like a world atlas. Companies are already moving into these countries to buy or lease land where there is shale gas potential.

Tony Hayward – the ex-CEO of BP who fumbled last year’s Gulf of Mexico oil spill disaster – has been a big supporter of unconventional gas production. In a November 2009 op-ed for The Washington Post, Hayward opined: ‘We can’t afford to wait... BP believes there is the potential to find and develop tight gas and shale gas in North Africa and the Middle East, Europe, China and in the southern cone of Latin America. There’s also potentially high-quality coal-bed methane in Australia and Southeast Asia.’

This January, however, scientists at the Tyndall Centre of the University of Manchester called for the British government to impose an immediate moratorium on shale gas development to allow ‘the wider environmental concerns to be fully exposed and addressed’. In France, where at least 10 companies are vying to drill for shale gas and oil beneath the rich farmland of the Paris Basin, the government has said it will delay test drilling until it has determined the environmental impacts.

Caution: flammable water

I was getting horrible burns and rashes from taking a shower and then my dogs refused to drink the water...

In North America, shale gas has become increasingly controversial because of fracking. Huge volumes of water are mixed with sand and dozens of toxic chemicals like benzene, toluene and xylene, and then injected under extreme pressure to shatter the underground rock reservoir and release gas trapped in the rock pores. Each ‘slick-water frack’ uses nearly 20 million litres of freshwater. The toxic chemicals mixed in the water endanger groundwater aquifers and threaten to pollute nearby water-wells. With horizontal drilling, a well can be fracked more than a dozen times, making the fractures extend several kilometres.

The little town of Rosebud, Alberta, knows a lot about the dangers of fracking. At least 15 water-wells in the community have gone bad since EnCana Corporation fracked into their aquifer in search of shale gas in 2004. Says Rosebud resident Jessica Ernst: ‘EnCana told us they would never fracture near our aquifer.’ By 2005, she says, ‘my water began going bad. I was getting horrible burns and rashes from taking a shower and then my dogs refused to drink the water. That’s when I began to pay attention.’

In 2006, Ernst decided to go public, showing reporters how she could set fire to her tap water, and speaking out about the industry. Ernst says she heard from ‘at least 50 other landowners the first year’ and she continues to get calls. Groundwater contamination from fracking ‘is pretty widespread’ in Alberta, she says, ‘but they’re trying to keep it hidden’.

Filmmaker Josh Fox found the same thing happening across the US in many of the 34 states where fracking is taking place. His feature-length documentary, Gasland, won a Special Jury Prize at the Sundance Film Festival and was nominated for an Academy Award this year.

Gasland shows a man setting his water alight and people in 10 different states talking about how their communities were ruined by hydraulic fracturing. One gas company recently bought out the town of Dimock, Pennsylvania, for $4.1 million because fracking made the water completely undrinkable. Fox calls his documentary ‘a public health story’ because ‘health problems throughout these regions are really rampant’.

Little earthquakes

The US federal Environmental Protection Agency (EPA) has just begun a comprehensive two-year study of the risks associated with fracking. Much of the concern relates to contaminated water supplies. Other issues include air pollution, wastewater disposal, industrialization of farmland, increased carbon dioxide emissions and destruction of wildlife habitat.

But there’s another problem that is less well known – earthquakes.

In June 2009, the Wall Street Journal called earthquakes ‘the natural gas industry’s big fracking problem’.

In New York State, thousands of gas wells are being planned for both urban and rural areas. ‘They’re drilling all over Buffalo,’ says activist Pat Carson, ‘and there’s been a steady increase in local quakes in western New York since drilling began in this area.’ On 8 February this year Buffalo City Council banned fracking and wastewater disposal within city limits and is warning all Great Lakes cities to do the same.

Lawyer Rachel Treichler claims: ‘We’ve had two earthquakes in upstate New York that are associated with disposal wells. No community is a proper site for a deep injection well disposing of toxic fluids.’

In Texas, Oklahoma, Arkansas and West Virginia over the past two years, almost 1,000 small-to-medium-sized earthquakes are being investigated as ‘induced earthquakes’ caused by nearby fracking and wastewater disposal wells.

Meanwhile, the reputation of shale gas – as a clean fossil fuel that could last for a century – is rapidly deteriorating. In January, new research by the EPA found that greenhouse gas emissions from fracking are almost 9,000 times higher than previously calculated, because of methane emissions. And some petroleum geologists are now saying that because the wells deplete so quickly shale gas represents only about seven years’ supply in North America.

Given the consequences it’s no wonder the industry is fretting about its public image. As Kevin Anderson, Professor of Energy and Climate Change at the University of Manchester’s Tyndall Centre, puts it: ‘The only safe place for shale gas is in the ground.’

On the fracking radar

Some countries targeted for shale gas development.

Countries Companies interested
France Elixir Petroleum Ltd, Vermillion Energy, Toreador Resources
Poland ConocoPhillips, ExxonMobil, Talisman Energy, Chevron
Indonesia BP
China Royal Dutch Shell, Chevron, ConocoPhillips
Australia ConocoPhillips, Origin Energy Ltd, BP, Statoil, Chesapeake, Sasol
Nigeria ExxonMobil
Hungary ExxonMobil
Germany ExxonMobil
Austria OMV
Ukraine Royal Dutch Shell
Sweden Royal Dutch Shell
South Africa     Statoil, Chesapeake, Sasol
Algeria BP
India Statoil, Chesapeake, Sasol
New Zealand     Statoil, Chesapeake, Sasol, Energy Corp of America

Joyce Nelson is a freelance writer and researcher based in Toronto.

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