Exporting Fresh Water

By Stephen Handelman/New York

Water has been called the oil of the 21st century. It is in ever shorter supply, and its price is rising in thirsty cities and farming regions from the Middle East to the American West. And what Kuwait is to oil, Canada could be to water. President George W. Bush suggested as much before last month's global economic summit, when he noted that "water will forever be an issue in the U.S., particularly the Western part," and added, "I look forward to discussing this with Prime Minister Jean Chretien."

That raised the hackles of Canadian Environment Minister David Anderson, who snapped that the Bush-Chretien discussion will be "brief." The Prime Minister "will tell the President that we have a policy of not exporting water, and that, I guess, will be it." Bush's casual comment, though, lent encouragement to a handful of Canadian entrepreneurs who for years have been promoting schemes to export their country's plentiful water. "It's going to happen for sure," says Gerry White, president of McCurdy Enterprises, a real estate and construction firm in Gander, Newfoundland. "Trying to stop people from selling water is like telling Saudi Arabia not to sell oil."

White is preparing to invest $24 million in a plan to ship 132 million gal. of pristine lake water every week via specially lined oil tankers to prospective buyers (whom he declines to name) in the Southern U.S. and elsewhere. Canada's provinces prohibit bulk water shipments, on environmental grounds. Still, White's prospects have improved with official hints that Newfoundland's ban might be dropped--and with court challenges arguing that such bans are illegal under terms of the North American Free Trade Agreement. Says Bill Turner, who runs WaterBank.com an enterprise based in Albuquerque, N.M., that locates new water supplies for cities and industries around the world: "We're just at the beginning of the boom."

Even so, the dreams of an H2O bonanza can be maddeningly elusive. During the past half-century, there have been at least nine proposals for large-scale water diversions from Canada and Alaska, including a $100 billion megaproject to pipe water from James Bay in northern Quebec to the Western U.S. and a bizarre scheme for tugboats to tow icebergs to Mexico. Just three months ago, a Greek company, Aquarius Water Transportation, was in Houston trying to interest clients in pumping North American water into rafts the size of football fields and towing them to parched locales around the world--a method Aquarius uses to haul water around the Aegean.

Although bottled water is already a $30 billion global industry, the technological challenge of shipping bulk quantities of freshwater between distant points and distributing it to customers has so far stumped some major would-be players. For example, Azurix, a water-retailing company and a subsidiary of the energy multinational Enron, is struggling. "Enron thought it could use its expertise as a commodity trader to market water like energy," says Debra Coy, a water analyst with Charles Schwab. "But water is more complex politically."

Just ask President Bush. Or the municipal leaders of Webster, N.Y. In March the tiny village (pop. 2,500) just south of Lake Ontario placed ads in the Wall Street Journal and the New York Times offering to sell 2 million gal. a day of "crystal clear well water." That bit of enterprise earned an icy reprimand from Michigan Governor John Engler, former chairman of the Council of Great Lakes Governors, who reminded village officials that the eight Great Lakes Governors were "required to approve all diversions and exports of water" from the U.S. section of the Great Lakes basin. "There are places even in New York State that are crazy for water," steamed Mayor William Ruoff, who added that inquiries had come from as far away as Texas and Switzerland. "Why shouldn't we help them when we have water to spare?" Not to mention village coffers to line. At current bulk-water prices of $2 per 1,000 gal. for shipping within the U.S., Webster stood to earn as much as $2 million a year from the scheme.

Opponents say it's not the profit they object to but the precedent Webster's plan would set. The Great Lakes basin contains 18% of the world's freshwater, though that doesn't necessarily mean there is water to spare. In a 1999 report, the U.S.-Canada International Joint Commission warned that levels in lakes Michigan and Huron had dropped 22 in. from the previous year--"the most precipitous drop in recorded history," says the IJC's Frank Bevacqua--and last year the U.S. National Oceanic and Atmospheric Administration predicted that levels would fall an additional 2 ft. by 2030. A prolonged dry spell has hurt, but water consumption is also rising.

Until now, the most effective limits on the water trade have been economic. Compared with the costs of shipping freshwater by sea, "it's still cheaper to get freshwater by other means, even by desalinization of seawater," admits Turner of WaterBank.com But Turner, who is assembling a consortium of Mexican municipalities to import water from the U.S., adds that aging infrastructure and mounting worries over contaminated groundwater are helping make larger ventures worthwhile. Schwab's Coy estimates that the world market for private distribution of water, and the bill for wastewater treatment, now amounts to $300 billion annually. The market has already attracted global giants like Monsanto and Vivendi, and more are expected to enter. Johan Bastin of the European Bank for Reconstruction and Development noted in 1999 that "water is the last infrastructure frontier for private investors."

Experts say public-subsidy schemes often give water to farms and industries for as little as $16 an acre-foot when it's worth as much as $400 to municipal water systems. That encourages uneconomic uses of the precious resource. Water consumption in the U.S. averages 100 gal. a day per person, nearly three times the European average. Coy predicts that once private buyers and sellers are allowed to determine a market price for water, international trade in the commodity will boom.

Gerry White of McCurdy Enterprises is preparing for that day and thinks it's not far off. He's planning to build a five-mile pipeline to carry water from Gisborne Lake to Newfoundland's southern coast, then pump it into tanker ships. White estimates it will cost less than a penny a gallon to get water from the lake to his potential buyers. Bulk water now sells for about 2[cents] per gal. in the U.S. At 66 million gal. a shipload, twice a week, that's a lot of pennies.

For more information on the worldwide water trade, visit our website time.com/global