Drinking Water

by James Salzman

  In 1905, recognizing the significance of the Catskills and Delaware watersheds to New York City’s drinking water, the state assembly had granted New York City the power to regulate polluting activities in these areas. This created the unusual situation, to say the least, of a city with land use controls over communities more than a hundred miles away. In the early 1990s, acting on Appleton’s strategy, the administration of Mayor David Dinkins announced new watershed rules for the Catskills and Delaware watersheds that would improve water quality, such as limits on the amount of paved surface on a property, buffers up to a thousand feet wide around reservoirs and up to five hundred feet from stream channels, and prohibitions on spreading manure within a hundred feet of a watercourse. Not surprisingly, the efforts of “rich city folk” in New York City to regulate, without prior consultation, how upstate farmers and landholders managed their properties were met with intense political opposition.

  Faced with the concern of the EPA that New York City could not ensure catchment management would work, the governor of New York state stepped in and organized a stakeholder consultation process. Conducted over two years with more than a hundred fifty meetings, the group finally came up with a complex Memorandum of Agreement signed by sixty towns, ten villages, seven counties, and environmental groups that essentially exchanged payments from New York City for specific land management practices. One participant described the exhaustive process as similar to a “rolling Thanksgiving dinner with relatives you only want to see once a year.”

  The Memorandum of Agreement provided for $1.5 billion of spending commitments over ten years, funded by taxes on water bills (which New York City residents voted to allow) and municipal bonds. Of this, $250 million was targeted to acquisition of title and conservation easements in critical areas. $240 million was provided for “partnership programs.” These ranged from new sewage treatment infrastructure, storm water infrastructure to environmental education, and purchasing 125,000 acres around reservoirs.

  The bottom line is that, for the cost at the time of a $600 million “green bond,” New York City ensured that its water remained legal under the Safe Drinking Water Act. A major review by the EPA in 2002 persuaded the agency to extend the waiver treatment of surface waters for a further five years and then again in 2007. The expectation is they will waive them again in 2012.

  The Catskills story is often held out as the poster child for an “ecosystem services” approach to providing clean water because it presents the core idea so neatly. New York City’s managers needed to deliver clean water. They could get it one of two ways: through “built capital”—where they would build a treatment plant, engineer it, and run the water through it—or by investing in what you might call “natural capital”—where they could change the landscape practices where the water flowed to ensure the service of water purification. They found that if they invested in the natural capital rather than the built capital, they got a better deal, purely in financial terms. Obviously, there are a lot of other nature conservation benefits, in addition to the public education benefit of water users better understanding where their water comes from. Since the Catskills story was first made popular in the late 1990s, it has been held out as the prime example for why we should think differently about the provision of basic amenities.

  There is a broader economic goal underpinning this approach. By making payments for ecosystem services, landowners’ visions of value start to shift away from traditional commodity crops of agriculture and toward service provision. In addition to grain, corn, and timber, landowners currently may provide ecosystem services such as controlling floods, conserving nature, and cleaning water—but they do so for free. If they could be paid for some of these services, farmers would think differently and farms would look different—if a landowner is receiving multiple income streams, the land will be managed differently. Right now, farmlands are largely managed for monocultures. That is hardly surprising, since that’s how farmers get paid. We have gotten very good at growing soybeans because there is a ready market for them. One can imagine a world, though, where farmers are paid for more than the produce they bring to market. A greater focus on natural capital to ensure freshwater supplies—through landowners planting riparian buffers or maintaining vegetation in critical watersheds, for example—would lead to regular payments for these valuable services. If you can change the landowners’ balance sheet, you can change the landscape.

  The approach of paying for ecosystem services has worked not only in New York City but also around the globe. A 2010 study reported 216 payments and $9.2 billion in transactions for watershed services protecting 289 million hectares. Most of these programs were in Latin America, where water trust funds have become an important mechanism to conserve land and protect watersheds. The Quito water fund, for example, was created by the joint efforts of the municipal drinking water provider, the electrical utility, a local brewery, and a water bottling company. These partners have committed resources toward an eighty-year trust fund. The six-million-dollar fund’s investment returns, supplemented by foreign aid from nongovernmental groups and development agencies, pay for conservation projects. These have ranged from strengthening protected areas and restoring degraded lands to supporting sustainable farming practices and reforestation. The primary goal in all these has been improved water quality, though there are significant additional benefits in terms of conservation and poverty alleviation. Quito’s example is being followed in other Andean cities, including Lima, Cartagena, and Bogotá.

  In Tanzania, CARE International has teamed with the World Wildlife Fund and other partners to create the Equitable Payment for Water Services program. Based in the Ruvu and Sigi river basins, the program aims to protect the primary water sources for the cities of Dar es Salaam and Tanga. To serve its four million residents and businesses, the Dar es Salaam Water and Sewerage Corporation has to spend roughly two million dollars every year treating water from the Ruvu River because of its high sediment load. Much as New York City paid landowners in the Catskills to change their land management practices, the Tanzanian program pays upper watershed farmers to improve their soil conservation activities. In practice, this means reducing farmland expansion, logging, and mining. The public water utility (and Coca-Cola, which also contributes) benefits by avoiding the cost of treating water loaded with eroded soil. The farmers benefit by being compensated for the loss of income from forgoing traditional activities. The larger community benefits from the injected resources that contribute to poverty reduction. By 2008, more than four hundred fifty farmers were receiving payments.

  BENJAMIN FRANKLIN IS REPUTED TO HAVE OBSERVED, “WHEN THE well’s dry, we know the worth of water.” This insight is as relevant today as it was in 1774. Cities that are thirsty and have the means will pay whatever it takes to obtain safe drinking water. A long line of entrepreneurs has already taken notice, hoping to profit from this undeniable demand. Whether money is to be made through pipelines, tankers, icebergs, desalination plants, treated sewage, LifeStraws, or some other innovative technology still on a drawing board remains to be seen. The clear message is that creative technologies and payment schemes for making, moving, and purifying water will only grow in importance in the coming decades.

  ARE COMPANIES REALLY GOING TO MINE WATER IN OUTER SPACE?

  Any business venture funded by Google billionaires, an Academy Award–winning filmmaker, and the former chief software architect for Microsoft and run by a former NASA Mars mission manager passes the laugh test. So when this group announced in April 2012 that it was launching the company Planetary Resources to mine asteroids, it garnered a lot of media attention. The plan seems simple on its face—mine near-Earth asteroids for water and precious metals—and dauntingly complicated in practice.

  Historically, the main actors in space ventures have been governments. Motivated in part by the Cold War, they were the only parties with the massive resources necessary to mobilize a space shot. This is all changing, for there are o
ther private sector space ventures afoot. The founder of Amazon.com, Jeff Bezos, is financing Blue Origin, a company that plans to provide commercial space travel through reusable rockets. Richard Branson has launched Virgin Galactic, providing suborbital flights for space tourists.

  Planetary Resources’ business plan is based on four phases. The first will involve the launch of its Arkyd 100 series spacecraft. Loaded with telescopes and remote sensing technology, about six of these relatively cheap craft (a mere $10 million each) will piggyback on the planned launches of other satellites and come to rest in low orbit around the Earth. They will take a close look at asteroids, using spectroscopy and other tools to assess their likely composition. The Arkyd 200 series will be launched to a higher orbit and have its own propulsion system so it can further examine promising asteroids. The Arkyd 300 series will comprise a “robotic swarm” of robots that will approach specific asteroids from different angles and determine the final choices for mining sites. Saving the hardest for last, the fourth stage involves mining and transporting the materials to consumers, whether back to Earth or to a space station.

  There are two major markets. The most obvious encompasses precious metals such as platinum, palladium, and iridium. Platinum is currently selling at $1,465 per ounce. Palladium comes in at a relative bargain of $600 per ounce. According to Planetary Resources, just one asteroid contains as much platinum, palladium, and other platinum-group precious metals than have been mined in human history. Simple math suggests the sales could be in the trillions of dollars. The problem, of course, is that if platinum and other precious metals do become more abundant because of asteroid mining, they will no longer be so precious and their price will drop. Even so, one could still expect a tidy profit. Getting the materials back to earth, though, is exceedingly difficult. And this makes mining water much more interesting.

  There is plentiful water on Earth, of course, so where is the demand for outer space water? Planetary Resources has identified two moneymaking opportunities. The first is providing water for astronauts in space stations or manned missions. Lifting anything two hundred miles or more above the surface of the Earth requires a lot of propulsion, and that’s expensive. It currently costs roughly $10,000 per pound of payload delivered into orbit. This means it costs $125,000 to provide drinking water for three astronauts on the space station. Using a local water source instead of transporting water into outer space is both cheaper and more efficient.

  Another market for water lies in energy. Splitting molecules of water releases hydrogen and oxygen—two of the key sources for rocket propulsion. As with water, this could provide a much cheaper local fuel source than flying a mission’s fuel from the Earth. One can imagine space vehicles filling up at “orbiting gas stations” before traveling beyond the earth’s orbit to the universe and beyond.

  There are plenty of criticisms one can make of Planetary Resources’ venture, but thinking small is not one of them. As journalist Will Oremus has succinctly described, “This space-mining venture is either going to be a spectacular success or a spectacular failure. Either way, the emphasis will be on spectacular.”

  Afterword:

  A Glass Half Empty/

  A Glass Half Full

  THE UNANIMOUS VOTE BY MCCLOUD’S DISTRICT COMMISSIONERS in 2003 to approve Nestlé’s bottling operations came as a shock to many of the town’s residents. Rather than settling the matter, however, the battle lines had just been drawn. A grass-roots group, the McCloud Watershed Council, quickly formed to challenge the proposed million-square-foot plant. The council’s stated goal was to look “for economic alternatives to Nestlé that bring living wage employment and long-term health to the community—without giving away the rights to our town’s water for the next 100 years.” If Nestlé’s bottled water was going to become the new “Mother McCloud” for the community, replacing the historic industry support of timber, it was increasingly looking like this would be a shotgun marriage.

  The first major counterattack was a legal challenge to the district commission’s contract with Nestlé. This met with early success, and the contract was declared void in 2005 by a local judge. The decision was appealed by Nestlé and reversed by a California appellate court. The contract and its terms were back in place. First round to the McCloud Watershed Council, second round to Nestlé.

  Meanwhile, as required by law, Nestlé was preparing an extensive Environmental Impact Review. When the review was submitted in 2007, more than four thousand public comments were filed. Opponents also lobbied at the state level, gaining the attention of Jerry Brown, the California attorney general at the time.

  In a press release, Brown denounced the plant’s impacts on climate change because of the oil needed to produce plastic water bottles and truck them across the United States. Going further, in a thinly veiled threat he stated that

  Nestlé will face swift legal challenge if it does not fully evaluate the environmental impact of diverting millions of gallons of spring water from the McCloud River into billions of plastic water bottles. … The suggested changes would require significant revision of the contract between Nestlé and the McCloud Community Services District, a new, formal project proposal, and circulation of a new Draft Environmental Impact Report.

  In response to Brown’s warning, Nestlé agreed to revise its environmental review and undertake studies of the proposed operation’s impacts on the Squaw Valley Creek Watershed to establish baseline data. To avoid charges of bias, the study was directed by scientists from the University of California in coordination with the McCloud Watershed Council. Nestlé also convened a series of community conversations to facilitate discussion of the different viewpoints.

  Realizing its original plans were no longer politically viable, in 2008 Nestlé made a major concession, proposing to reduce the size of the facility by two-thirds. Scaling back the project, however, did not quell the controversy. A year later, in September 2009, in a letter to the McCloud district board, Nestlé CEO Kim Jeffery wrote that “we have concluded that we no longer have a business need to build a new facility in McCloud and we are withdrawing our proposal to build a bottling facility in your community.”

  In its place, Nestlé planned to build a new fourteen-million-dollar facility in an industrial area of Sacramento. This would better serve the company’s urban customers in Northern California, resulting in lower distribution costs and environmental impact. Nestlé planned to appraise the mill site it had purchased for the McCloud plant and, presumably, sell it to the highest bidder.

  The fight was over.

  After six years of contentious arguments and frustrating delays, Nestlé walked away from McCloud’s glacier-fed springs. A local supporter, Doris Dragseth, was despondent. “The only thing we have to sell is water!” she lamented. “Now when [a potential water bottling company] sees the history, they are going to run.” To Dragseth, McCloud seems fated to continue its slide into obscurity. Despite their best efforts, the community’s elected leaders were unable to find a way for their drinking water to become an economic lifeblood for the town. Debra Anderson, an active member of the McCloud Watershed Council, saw things differently. She hailed Nestlé’s change in plans as a victory for McCloud and other local communities.

  Nestlé’s search for spring waters continues. It has begun plans to open three other regional locations, including at Cascade Locks, a town forty miles east of Portland, Oregon. It may not be greeted warmly. Anderson reports that she is already receiving calls from concerned citizens in Cascade Locks, eager to learn strategies to thwart Nestlé’s move to their community. The battle looks likely to be rejoined there.

  While Nestlé’s failure to build the bottling plant represented a real victory to some and defeat to others, in a larger sense it didn’t really resolve anything. The market for bottled water is still going strong, as are the local fights against new plants. The battle in McCloud is over, but the war continues. The McCloud Watershed Council’s activities have been mirrored by grassroots
groups in other communities. In New England alone, opposition efforts have been led by H2O for ME in Maine, Corporate Accountability International in Massachusetts, Save Our Groundwater in New Hampshire, and Water 1st in Vermont. The core issues of whether drinking water should be a commodity or a public good, and who gets access to the water, remain as divisive as ever.

  Ironically, just four days after Nestlé’s announcement, the McCloud District Council held a public hearing over a proposal to raise water rates. As with meetings over the Nestlé plant, the audience was packed and opinionated. A local business owner denounced the proposed increase, complaining that “people in this county are hurting all over. This smacks of the Boston Tea party … taxation without representation.” The applause following his remarks showed he spoke for many who felt cheap drinking water to be theirs by right.

  The story of drinking water is still being written.

  Notes

  Introduction: Mother McCloud

  p. 15

  the grocery store, the hotel: Michelle Conlin, “A Town Torn Apart by Nestlé; How a deal for a bottled water plant set off neighbor against neighbor in struggling McCloud, Calif.,” BusinessWeek, Apr. 16, 2008, http://www.businessweek.com/magazine/content/08_15/b4079042498703.htm.