WestWater Research is providing an updated Water Market Insider issue. This quarter, we focus on California’s Spot Market Price Forecast.
Prices and trading on the spot market for water in California are projected to rise this year, driven by reduced state and federal project water allocations. WestWater Research expects that high-value agriculture and coastal cities will acquire large water quantities to cope with the 2013 drought. The article is already getting media attention, so subscribe if you haven’t already and check out the Water Market Insider article.
WestWater Research would like to thank everyone who attended the Water & Energy Conference for their participation and contribution.
During the conference we were provided with an overview of the challenges and opportunities that the oil and gas industry face in regards to water sources, demand, storage, conveyance, treatment and reuse. We were introduced to existing and emerging technologies that help oil and gas producers efficiently pump, treat, and dispose of water and we were provided an in-depth look at investment opportunities around these technologies and other strategic investment plays. Finally, our panelists helped us understand the current water and energy regulatory environment and provided guidance about regulatory issues that may arise. We are already fully engaged in planning for next year’s “Water & Energy” conference which will be in September 2013 at the same location, the Houstonian Hotel in Houston, Texas.
Our next conference, “Water and Agriculture”, will be in May 2013 and focus on the water side of agriculture and real estate investments, water development projects, water rights trading, real asset water investments, and other related topics. For those interested in these conferences please save the dates below for your calenders:
California – Water & Agriculture
Terranea Resort; Los Angeles, CA
May 16-17, 2013
You may sign up for this conference here.
Texas – Water & Energy
Houstonian Hotel; Houston, TX
September 25-26, 2013
You may sign up for this conference here.
WestWater’s Matt Payne contributes to writing an important article, published on Taylor and Francis’s website, exploring the water rights market in the Rio Grande Basin in New Mexico. Provided is a quick summary of the article:
Water rights markets in the western United States have expanded over the last 40 years, as a result of population growth in the West and Southwest, and limited development of new storage. Until 2008, house prices, home construction and population growth appeared to be locked in an ever-increasing upward trend. With little historical experience to the contrary, water right market prices similarly appeared to be driven by real estate development. The collapse of the housing market in the last four years provides an opportunity to examine the connection between the real estate and water markets. It is found that Middle Rio Grande Basin water right prices are influenced by housing prices, per capita income in the buyer’s county, buyer type, point of diversion, and transaction volume. However, significant price dispersion remains, raising the question of how efficiently this market is currently working.
To learn more, please visit Taylor and Francis’s website here.
The media continues to paint a picture of hydraulic fracturing companies stealing water from farmers and municipalities alike. In April, Tim Hurst published such an article in Earth & Industry titled “Frackers outbid Farmers for Water as Colorado Enters Drought”. In this report, Hurst blames natural gas companies for driving up water costs and preventing Northeastern Colorado farmers from fulfilling demands.
But how accurate is this account?
After speaking with Northern Colorado Water Conservancy District, WestWater Research obtained copies of the results from the auctions that Hurst cites (information publically available here). Not only was the average price lower this year than last, but every bid for water was successful. Northern Water, who was as confused by Hurst’s report as we were, gladly shared the list of participants. Of the 24,999 AF of water transferred, less than 2.5% could have been used for fracking related purposes.
The demand for water from the natural gas sector has not had the impact that many have predicted. However, many journalists choose to overlook the facts to create controversy. While there is much to debate about the effects fracking, the idea that these companies are stealing our water is often misreported.
California officials recently supported the proposed construction of a giant conveyance system to divert Sacramento water out of the Delta. If you think this idea sounds familiar, you are correct; discussed as early as the 1940’s, the peripheral canal was defeated on the 1982 ballot despite support from Governor Jerry Brown. As Governor again, Jerry Brown is determined to finish what he considers as “profoundly important to California’s future”. However, Brown and other canal supporters will have to wait for 2014 after the initiative was recently removed from 2012 ballot because the financial climate was not right. Still, the estimated $13 million bond will have to overcome the skeptics who claim that the project is just another Southern California “water grab”. Many fear that once the canal begins delivering up to 5.5 million acre-feet annually, much of the Delta’s natural water supply will be permanently depleted. Two preliminary reports analyzing the costs and benefits of the conveyance project have only intensified debates. David Sunding of the Brattle Group concludes the project will have a net-positive impact while Jeffrey Michael from the University of Pacific refutes Sunding’s analysis. For a comprehensive overview of these reports and the controversy surrounding California’s proposed system, please refer to California Dreaming – Governor Brown’s Big Water Bond Set for 2014 Election in the upcoming September issue of AWRA’s IMPACT publication by Jackson Reed and Clay Landry.
WestWater Research is proud to present the updated WRPIx results for 2011. The WRPIx estimates the annual change in the general market price level for water rights transactions which include both sales and lease prices. The WRPIx is still a performing stronger than the Case-Shiller Home Price Index, but it is losing momentum against the increasing demands for Gold and Oil. Despite the fluctuations in the market, the WRPIx illustrates that the water market is still strong.
Here is a link to a summary of the performance of the WRPIx for 2011.
Join WestWater Research at our upcoming conference to discuss economic management for water and energy markets. Through a wide variety of topics we will address the environment of the supply and demand management, examine issues faced by the industry, and explore investor strategies.
This important and timely event will sponsor some of the industry’s leading figures in order to intelligently approach upcoming challenges. Come participate in the third and final conference of our Water Right & Trading series; jointly created by WestWater Research and American Water Intelligence.
Declining annual flows in the Colorado River Basin (CRB) have increased interest in quantifying both current and projected water supply and demand. Results from these research efforts are often bleak, predicting shortages in the near future. A recent paper by Richard A. Wildman Jr. and Noelani A. Forde outlines this problem and the short-term solutions policy makers have devised. While these solutions will help mitigate some of the more drastic impacts that states like Nevada and Arizona will endure under shortage scenarios, they are far from an adequate long-term solution. The Wildman and Forde paper relates the situation facing the CRB to Australia’s recent drought experience in the Murray-Darling Basin (MDB). Record drought in the MDB forced Australia to enact sweeping legislation, laying the groundwork for a fully functioning interstate water market. Wildman and Forde believe an interstate water market modeled after Australia’s MDB could provide a long-lasting, economically efficient answer to the CRB’s water problems. Such a market, likely implemented incrementally as rules, regulations, and norms are established, would be a boon for the water trading industry. Please refer to the forthcoming July issue of AWRA’s IMPACT publication for a summary article on this topic by Clay Landry, Matt Payne, and Jackson Reed.
Colorado has long been behind the curve in acquiring water for environmental/instream purposes to improve fish and wildlife habitat. The slow development of Colorado’s environmental water rights market is attributable to state laws allowing only the Colorado Water Conservation Board (CWCB) to own instream water rights for environmental purposes, and to the lack of funding for environmental water purchases. However, environmental water trading is heating up as the Colorado Water Trust (CWT) positions itself to facilitate instream water leases this summer. In response to this year’s severe drought conditions, the CWT will be partnering with the CWCB and local agencies to secure water rights, ensuring that threatened streams around the state stay flowing. These efforts are designed to promote win-win situations, benefiting farmers and anglers alike.
Gain valuable insight from experts. Unlock the value and opportunities in this emerging market for water. Experience unparallelled networking and access to investors, market makers and business executives.
The Water Resources Investor Event brings together leading market analysts, investment managers and technology leaders that are active in water resources and water asset development. This is the second in the series Water Rights & Trading, created by WestWater Research and American Water Intelligence.
April 12 & 13, 2012 | Bacara Resort | Santa Barbara, CA
View conference website