Water theft on the rise as California’s reservoirs shrink

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In California, the most populous US state and the third largest by area, a new kind of crime is on the rise: water theft. In the local media, there are regular reports of water-tankers being stolen, watercourses being diverted, wells drying up and water tanks being siphoned off.

Why is it happening? The state has been in the grips of a punishing drought for more than three years now. It has led to acute water access problems for everyone, from private individuals to large farming businesses. In late May 2015, the US Department of Agriculture announced that over 90% of California was suffering from a severe drought and almost 50% from exceptional drought (see attached map).

After three years of exceptionally scant rainfall, water tables are now extremely low. With less water coming in than is being drawn off, regulators’ room for manoeuvre is limited. Worse still, the situation looks unlikely to improve in the coming months. The snowpack of the surrounding Sierra Nevada mountains was estimated this April to contain only 5% of its average water content (Click here to see NASA satellite images contrasting Nevada snowpack levels in March 2010 and 2015). This past winter was the driest in California’s history, which bodes ill for future groundwater levels as these are normally replenished with snowmelt: in California’s second driest winter, in 1950, the water content of the snow cover was only 25% of the average level.

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The drought is hitting biodiversity, with local fish species in decline and fisheries stocks lower than ever before. To overcome this appalling situation, drastic water-conservation measures have been put in place. Governor Edmund G Brown Jr. has set a target of reducing urban water consumption by 25%. The public authorities are strictly monitoring water usage and imposing fines on those who waste it; any Hollywood stars who pretty much ignore all this are having fingers pointed at them.

California’s unique geography and Mediterranean climate have allowed the state to become one of the most productive agricultural regions in the world. The sector accounts for about 80% of water usage and it has to be said in this context that California produces 60% of the US’s fruit and 51% of its vegetables, so agriculture plays a major role in the state’s economy. Even so, the latest news is that the California authorities are set to impose tough restrictions on the farming sector as well. So many farming concerns will have to quickly abandon the traditional – and highly water-intensive – practice of irrigation by immersion, and instead install drip-irrigation systems if they are to comply and survive in the short and medium term.

At a broader level, major infrastructural work will have to be undertaken, channelling water to specific reservoirs during stormy weather; recycling treated wastewater back into the groundwater system; increasing sea water desalination capacity; drilling into deeper water tables; and even using brackish water in agriculture. All these projects should benefit companies such as Toro (irrigation), Xylem (water technology), Pentair (filters and pumps) and Arcadis.

Climate events are highly complex and multifaceted. Even so, the authorities’ California Water Action Plan cites global warming as the primary cause of this unprecedented drought. Global warming has become a reality. So it goes without saying that, beyond the immediate measures being taken in California, other far greater measures on a global scale will be needed to contain rising atmospheric temperatures to acceptable levels. According to leading climatologists, this means a rise of no more than 2°C. Beyond that, the consequences of climate change are hard to predict – for California just as much as for the rest of the planet.

Sustainable and Responsible Investing is one of the nine themes which we think reflect investors’ key priorities this year. Linked to those themes we have chosen funds which we believe represent the most relevant solutions to the challenges of the current market environment as well as the evolving needs of our clients.
Alexandre Jeanblanc

Investment Specialist, SRI

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