Colorado River is drying up and states are bracing for Steep water Cuts in the near future you may
have heard about the Alfalfa Farm in Western Arizona run by a Saudi Arabian company and
never seen anything this agreed to us by state government in my life right now the company is
allowed to pump tons of groundwater to grow feed for cattle and now we have all these different
companies coming in foreign companies coming in and depleting our natural resource there's
no bigger problem facing us in our future here in the desert than water and we're supposed to
have reached a Collective Agreement on how to use less water from an Ever shrinking River people
look at it as a temporary situation this is not a temporary situation this might be our new future
America is running out of water a 23 year long so-called super drought is the worst
thing that the American West has experienced in the last 1200 years according to a recent study
published by the department of the Interior the drought that we are in we have not seen in our
lifetimes because it hasn't happened this deep since about 1200 years ago and it is projected
to continue to worsen and go on for at least another year maybe even more the Colorado River
a Waterway which supplies homes businesses and millions of Acres of Farmland is running
dry which could threaten the entire country right right water has become a precious resource so why
the [ __ ] are we selling it to hedge funds in New York and dairy companies in Saudi Arabia in
every crisis lies great opportunity and Market speculators are capitalizing on the scarcity
of water to generate profits by using complex financial instruments and shitty backroom deals
to hold a vital resource to Ransom I know this sounds like a crazy conspiracy theory so let's
start right away at the very beginning and learn how people in suits in New York are making money
off Alfalfa farmers in Colorado big farms and businesses do not get water from Municipal Water
Supplies because it is too expensive and for some applications they don't want it to be treated with
the chemicals that most tap water has to keep it safe to drink a lot of big farms are also so
remote that they simply do not have a connection to Municipal supplies so these businesses opt to
pump their own water directly out of lakes rivers or underground aquifers but if Farms have to pump
their own water from communal supplies there is no reason for them to stop pumping the more water
they collect themselves the less will be left over for their competitors to use on their crops
to make sure that this doesn't become a Mad Max style free-for-all of farms pumping as
much water as they can to put their Downstream competitors out of business the States along the
Colorado River all issue water rights and what you're trying to do is give everybody a chance
at water water rights are like a coupon to pump an acre foot of water an acre foot is
how much water would fit in a box that is one foot high and one acre across farmers use acre
feet because there is so much water involved that gallons or leaders would just get confusing every
state has different laws for allocating these water rights coupons but Colorado which believe
it or not is the starting point of the Colorado River has according to their own Department of
Natural Resources website a unique system when compared to the other parts of the United States
Colorado uses a prior appropriation system which means that whoever used the water first gets to
keep using it the law was first introduced way back in 1872 when the state's lawmakers first
noticed that the river could actually run out of water so something had to be done to make sure
that everybody got their fair share 19th century laws and 21st century obligations and expectations
water's not available the economic chaos that would be caused to be tremendous tremendous
the law worked for farmers and businesses proving that if they had put some amount of
water to a beneficial use they were then allowed to keep using that much water every year if Farms
stop using the water for a beneficial use for a period of 10 years or more their water rights are
abandoned and can be picked up by the next farmer in line that wants to use water for their crops
Farmers with water rights get audited every decade by an engineer who presents cases to a water core
of all the Farms they suspect have abandoned their water rights it's then the farmer's job to prove
that they did not intend to abandon their rights if they can't prove this in court their rights
are given to the next far more business in line on the waiting list Farmers obviously don't want to
lose their water right because without water they can't grow anything so to make sure that they can
always prove that they are putting their full extent of water rights to a beneficial use they
grow very water intensive crops like Alfalfa and almonds they use it or lose it business
model has worked hand in hand with record-setting droughts and greedy speculators to give us empty
legs and dwindling reserves of something that we all need to survive so if our Water Crisis
grows more intense we could potentially use the water from this Valley and that makes the water
very expensive so it's time to learn how money Works to find out how companies are making record
profits by literally sucking the country dry this week's lesson was sponsored by blinkist link is
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companies are making money off record drafts by employing three different strategies the first
strategy is buying up existing Farms that already have water rights and then making them more water
efficient by paying to upgrade irrigation systems or planting less water intensive crops
the companies then profit by renting out leftover water rights to Farmers that don't have any and
towns that need the water for their Municipal supplies this actually sounds like a good system
because it encourages all of the companies with water rights to use their water as efficiently
as possible to maximize profit companies like the new york-based water Asset Management talk about
their sustainability efforts on their website the company currently manages 450 million dollars in
assets raised from investment funds and high net worth individuals who are looking for an
alternative investment vehicle the problems start when you understand how these water rights really
work water rights in Colorado are an asset that can be bought sold or rented completely
separated from the Farmland that uses it but most investors keep the farm so they can pull a clever
trick water rights work on a hierarchy with the very first businesses that claim them way back
in 1872 getting priority use of the water in the most recent businesses to claim them getting the
lowest priority if there is lots of water flowing down the river then everybody's rights get filled
and some new Farmers might even be able to apply for new rights if they can prove that they could
put that excess water to good use to the people that own the highest priority water rights this is
actually far from the ideal if water is plentiful then farmers can apply for their own new water
rights making existing water rights worthless Farmers also don't want to rent the rights to use
the water because they can apply for new water rights and harvest it for free the reason that
hedge funds have become interested in water rights is because the opposite of this is happening the
current drought means that fewer water rights are getting filled and only the businesses with
the very oldest and highest priority rights get to pump water for free everyone else needs to
stop farming or get the rights to use the water off investors that have invested into the high
priority rights and they can use as much water as they want as much ground water as they want do we
know how much they're using we don't know how much they're using high priority rights to use water
are currently trading in the very opaque secondary markets for around sixty thousand dollars per acre
foot the average Farm in Colorado uses about 1.5 acre feet of water per acre of Farmland every year
the 2017 consensus of Agriculture conducted by the USDA reported that the average commercial
Farm in Colorado was 820 Acres that means that the average farmer would need to pay 73 million 800
000 to buy enough high priority water rights to tend to their crops since most Farms make
less than 5 million dollars a year in top line revenue this just simply doesn't work that means
that farmers have to rent the water this works by the rights holders telling the water authorities
that a farm will use some of the water they are entitled to in exchange for a fee depending on
the location an acre foot of water per year rents out for 500 to 1500 the cash flow on renting out
water rights is therefore between 0.5 percent and 2.5 percent to the investors this would be like
buying a sixty thousand dollar condo and then only renting it out for fifteen hundred dollars a year
it's not a great return so there has to be another reason why they are doing it the real opportunity
lies in the capital appreciation of water rights as less water flows down the river and less water
rights get filled this means only the oldest and highest priority rights holders get to pump water
and they can charge more to rent the water or can sell their rights at an even higher price to the
next Speculator investment funds like water Asset Management exist because wealthy investors want
to capitalize on climate change by speculating on a dwindling resource a quote from the company's
website wam's core belief is that scarce clean water is the resource defining this Century much
like plentiful oil defines the last they are probably right and they have already made their
investors lots of money but it does feel just a little bit wrong that something so vital to life
is being used for speculation the reason that a lot of these companies keep the farms at all is
so that if they can't rent out their water rights they can just use the excess water on their own
Farms so that the high priority water rights don't get taken away from them through the abandonment
process for other states water rights are a riskier investment with higher potential returns
if the water levels in Lake Mead and Lake Powell get too low they will turn into dead pools not the
R-rated superheroes but lakes that are not high enough to flow through the dams that hold them
back if this happens no water will flow Downstream at all and even the high highest priority
water rights will not get filled investing into Superior water rights Downstream from these dams
is a gamble that water will get scarce but not so scarce that it can't pass through these two Lakes
the second way that companies are making money off record droughts is by getting preferential access
to Alternative Water Supplies to run their Farms to see this strategy we need to move Downstream
a bit to Arizona which is depleting what is left of its precious underground water as rivers start
to run dry companies have been able to work out close deals with the Arizona state land Department
to pump water for suspiciously low prices this Scandal included a company by the name of Fonda
Monte which is an American subsidiary of the Saudi Arabian Dairy company Alma Ray Fonda Monte was
released 3 500 Acres of Farmland by the state land department for rate that could be as low as 1 6 of
market price according to a report published by the New York Times this was already big news but
it revealed to Outsiders something even more shocking unlike Colorado Arizona doesn't have
restrictions on groundwater use so rich companies like Fonda Monte can drill down deeper than
anybody else in Access unlimited water Arizona is very hot and dry and if the Colorado River
stops reliably supplying it water it's going to need that groundwater to make sure it still comes
out of the TAPS in people's homes this is a human issue illegal failing is allowing big companies to
pump unlimited amounts of this vital backup water supply to irrigate Alfalfa in the middle of the
desert a crop that uses more water than almost any other alternative fundamonte wasn't even selling
the Alfalfa to grocery stores or restaurants it was shipping at 8 000 miles back to Saudi Arabia
to feed dairy cows to make milk yogurt and cheese to sell in the Middle East since the Farmland was
so cheap and the water was Limitless it was cheaper to make feedstock in Arizona and ship
it all the way across the world to another desert than it was to let their cows graze like normal
dairy farms without any regulation they can just pump until the aquifer goes dry the Saudi Scandal
got a lot of attention but the problem won't go away while access to groundwater is a free-for-all
the Third Way that companies are making money off record droughts is by lobbying for government
bailouts Congress just recently allotted four billion dollars for Drought relief in western
states and a portion of that money will be used to pay Farmers to not Farm anything if Farmers don't
grow crops they won't need water which will hopefully restore water levels it will also
reduce Food Supplies but that means more money for the Farms that get to keep using water the real
solution is to stop businesses being so wasteful with water this includes more than just Farmers
although they are the biggest perpetrators because they insist on growing such water intensive crops
the farmers are saying that the only reason they grow water intensive crops is to maintain
compliance with their states use it or lose at water rights policies state legislators are
saying that the only reason they don't change the law is because they receive so much pushback from
special interest groups who have a lot of money riding on water rights special interest groups
will say that water rights have been done this way since the 1800s and any government attempt
to change policies now will only cause more water usage and hurt farmers and businesses there is a
lot of blame but as is often the case with these situations money is making it very hard for any
progress to be made in early 2022 a law was proposed in Arizona to allow rural communities
to opt into groundwater enforcement the law would allow communities to set up their own
limits on groundwater usage which would likely make wasteful crops like Alfalfa unviable this
would encourage more sustainable farming practices and the law wouldn't even Force any communities
to opt in but those that did would benefit from having a sustainable future the plan was lobbied
against by special interest groups that like the market opportunities that scarcity has created
for their benefactors this whole and investment scheme is surprisingly similar to the subprime
mortgage Market that caused the global financial crisis to find out how water rights and hormones
are basically the same thing to investors go and watch this video on how the big short actually
worked a special thanks again to blinkist for making it possible for everybody to keep on
learning how money works that means I get to take the water and it's very important because someday
water is going to be more precious than gold and people are going to kill each other to try to get