Rural La Paz County, Arizona, positioned on the Colorado River across from California, is at the center of a growing fight over water in the American Southwest. At the heart of the battle is a question: Should water be treated as a human right, to be allocated by governments with the priority of sustaining life? Or is it a commodity to be bought, sold and invested in for the greatest profits?
As the West suffers its worst megadrought in 1,200 years, investors have increasingly eyed water as a valuable asset and a resource to be exploited. For years, investment firms have bought up farmland throughout the Southwest, drilling to new depths for their water-hungry crops and causing nearby wells to run dry. Now, new players have entered the scene: “Water management companies” are purchasing up thousands of acres of farmland, with the intention of selling the water rights at a profit to cities and suburbs elsewhere in the state. Some argue that treating water as a commodity can efficiently get it where it is needed most. But others fear that water markets open the door to profiteering and hoarding, leaving poorer communities in the dust.
In 2013 and 2014, GSC Farm, a subsidiary of a water management company called Greenstone Resource Partners, which is backed by MassMutual, bought nearly 500 acres of farmland in Cibola, a tiny town in Arizona’s La Paz County, for just under $10 million. The farmland comes with the rights to more than 2,000 acre-feet of Colorado River water a year. (An acre-foot is the amount of water it takes to cover one acre with one foot of water.) Then in 2018, Greenstone sold the water rights, in perpetuity, to Queen Creek, a rapidly growing suburb of Phoenix nearly 200 miles away, for $24 million.
The transfer marked the first time a water management company sold Colorado River water rights. La Paz and two other counties sued to block the transfer, arguing that the Bureau of Reclamation, the federal agency that oversees water resource management, had conducted an insufficient environmental review before signing off. The counties’ request for a preliminary injunction was denied in April 2023 by a federal judge, and three months later the water began flowing down the Central Arizona Project, a 336-mile canal. Then, the judge seemingly backtracked in February 2024, ordering a more thorough environmental review.
“In the meantime, they’re still allowing for the water to flow, which we argued should have been stopped completely until the complete environmental studies have been done,” Holly Irwin, a La Paz County supervisor, told Truthout. “It’s really frustrating, not only for myself, but for the other leaders and elected officials in what we refer to as the river communities.”
The ultimate results of the lawsuit could affect how easily water management companies are able to transfer river water rights for profit in the future.
“I’ve had people already contacting me, asking, ‘Hey, look, I’m looking to buy this piece of property. It’s got water rights. Can it be transferred off the Colorado River?’” said Irwin. “Which is what we knew was going to happen. They just opened up Pandora’s box.”
Companies like Greenstone are betting that the price of water will increase. Western states generally allocate water through a “prior appropriation” policy of “first in time, first in right.” In times of shortage, those with the most senior water claims — often farmers and ranchers whose ancestors claimed Native land — are allotted their full share of water first. Now, companies like Greenstone are lining up to buy those increasingly valuable water rights.
The Hunt for Groundwater
The Colorado River provides drinking water to 40 million people across seven U.S. states, two Mexican states, and multiple tribal lands. Since 1922, its water has been allocated among the states through a framework created by the Colorado River Compact. But river volume has decreased 20 percent since the beginning of the century, leading to tense renegotiations, with the three “lower basin” states — California, Arizona and Nevada — agreeing to reduce their water shares.
Major investment banks have spent hundreds of millions buying up farms with claims to the groundwater beneath them.
Compared to Colorado River water, groundwater tends to be less regulated. Major investment banks have spent hundreds of millions buying up farms with claims to the groundwater beneath them — part of a larger movement by investors into physical assets like lumber, buildings and infrastructure.
Once pumped, groundwater aquifers in warm, dry places can take thousands of years to replenish. In an effort to conserve water basins, Arizona passed the 1980 Groundwater Management Act, heavily restricting groundwater pumping in several urban “active-management areas” (AMAs), including the Phoenix and Tucson areas. It also mandated that developers obtain a state Certificate of Assured Water Supply, demonstrating their new projects have enough water for 100 years. The law is credited as a success for protecting water levels in urban areas. But its lack of restrictions on groundwater removal from rural basins has become a concern as the state population swells and rural wells run dry.
Farmers in non-AMAs, like La Paz County, can pump as much water as they want, with no restrictions. Many take advantage of this: Fondomonte Arizona LLC, a subsidiary of the Saudi Arabian dairy company Almarai, grows alfalfa on tens of thousands of acres in the state, which it ships overseas as cattle feed. Last year, Democratic Arizona Gov. Katie Hobbs terminated one of the company’s leases and chose not to renew three others, citing “excessive amounts of water being pumped from the land — free of charge.” The company continues to farm elsewhere in the state. Meanwhile, another alfalfa producer, the United Arab Emirates-based Al Dahra, grows alfalfa throughout Arizona and California.
The plundering of water by international companies mirrors the diversion of water in rural Indigenous Mexican communities by mines and other major U.S.- and Europe-based corporations.
In the Southwest, it’s not just international firms. Over the past 15 years, major domestic investment banks, pension funds and insurers have transformed California’s farmland — buying up huge farms, planting water-heavy crops like almonds and digging massive wells to water them. Almost 1,500 domestic wells went dry in California in 2022, and the overpumping is literally causing the land to sink. It’s happening in La Paz County too, where excessively pumped groundwater has caused parts of the county to sink as much as five feet.
“Investors know their drilling isn’t sustainable and won’t be possible in a few short years,” the NGO Food & Water Watch wrote in 2023. “But that doesn’t matter to them — they expect to make their money long before that time comes.”
Water Management Companies and Thirsty Desert Cities
Fast-growing desert cities and their sprawling suburbs need water, too. Although a 1991 Arizona law prohibited moving groundwater from non-AMAs to AMAs, it made exceptions of four so-called transfer basins. Three are at least partially in La Paz County.
This means that, in addition to international farms overpumping, faraway cities and suburbs are eyeing La Paz County water.
“We’re being targeted as a sacrificial lamb for everybody else to develop,” said Irwin. “But what about us?”
In June 2023, Governor Hobbs released a Department of Water Resources report — which she said had been suppressed by her Republican predecessor — revealing there was not enough groundwater to support all of the already-approved Phoenix-area development for the required 100 years. The state implemented new rules, including banning construction of new houses in Maricopa County if they require a well.
As the suburbs look for new water sources, water management companies see their opening.
While water has long been diverted from rural areas to cities in the West, the Cibola-Queen Creek transfer marked the first time a water management company brokered water off the Colorado River. A Guardian investigation found that Greenstone, which is financially backed by major investment firms and public pension funds, has at least 25 subsidiaries and affiliates, which it uses to purchase water rights throughout the Southwest. In 2021, The Arizona Republic found that 15 different companies listed under the same address as Greenstone owned nearly 9,000 acres of farmland in three Arizona counties. Yet its managing director has sought to present the company as a “farming operation,” not a hedge fund.
“We’re being targeted as a sacrificial lamb for everybody else to develop…. But what about us?”
Greenstone is not the only player in the game.
One of the largest players is Water Asset Management (WAM), a New York-based hedge fund whose various affiliated LLCs own more than 6,200 acres in Arizona’s Maricopa and Mohave Counties. It is also one of the largest landholders in Colorado’s Grand Valley, west of Denver.
In July, WAM used a subsidiary called Emporia III to purchase 12,793 acres in La Paz County, for $100 million. The seller, Arizona Valley Farms, had bought the land in 2012 for $30 million.
“Arizona Valley Farms has every right to sell their property if they want to. That’s the American way,” said Irwin. “It’s just unfortunate that you have these water brokers now, that are coming in and purchasing these lands so they can make millions off of it.”
Matthew Diserio, WAM’s president, has called water an “undervalued asset” and “the biggest emerging market on Earth … a trillion-dollar market opportunity.”
Arizona Attorney General Kris Mayes recently told the Arizona Daily Star she is considering suing WAM to block its recent La Paz County purchase, possibly on the grounds that overpumping creates a public nuisance. “This is an area that already rightfully believes it has been exploited by international companies,” she said. “Now we’ve got Wall Street swooping in, to take that water, with an obvious intent to sell it to cities in the [Phoenix] valley so they can continue to grow in an unfettered way.”
WAM’s general council, James Eklund, has pushed for water markets since his days as Colorado’s top water official from 2013 to 2017. In 2021, The New York Times reported that a range of investors are eyeing water in the West, “from financial firms to university endowments to investor groups.” One supporter of water markets is Michael Burry, the “Big Short” investor who made hundreds of millions predicting and betting on the subprime mortgage crisis.
Some officials and advocates worry that emerging water markets could effectively remove the power of governments and the Colorado River Compact to allocate water.
“When you allow these Wall Street firms to own the right to water, they get to make the decisions about where it goes,” Food & Water Watch’s Public Water for All Campaign Director Mary Grant told Truthout. “It’s not states or governments determining the best public need for this water. It’s about who can spend the most money. The decisions are made for profit. So you might have green golf courses, but wells going dry for rural farming communities.… We need to make decisions based on public good, not profit.”
Wall Street Water Rights Grab
Food & Water Watch and other water advocates warn that allowing investors to buy water rights could encourage water hoarding. It also incentivizes corporations that own farms to overpump their groundwater, extracting as much as they can before the water runs out. These practices leave farmers with dry wells, towns with destroyed infrastructure from sinking and everyday people with ever-rising water bills.
In 2022, two California legislators asked U.S. Attorney General Merrick Garland to investigate anti-competitive practices among water investors. They noted the sharp increase in hedge funds purchasing water rights, raising concerns about those firms potentially profiteering in the case of a drought. These firms, they wrote, “literally steal our most life dependent resource from ourselves and future generations in exchange for a profit.”
In 2020, the Chicago Mercantile Exchange offered speculators a new way to profit off water, when it began trading California water as a commodity with futures. The system sets a fluctuating price for water, allowing buyers and sellers to transfer water rights in the future at a predetermined price. In theory, this allows farmers and commercial water users to lock in prices, safeguarding them against price fluctuations. But it also tempts middlemen speculators.
Pedro Arrojo-Agudo, the United Nations special rapporteur on the human rights to safe drinking water and sanitation, criticized the water futures market. “You can’t put a value on water as you do with other traded commodities,” he said in December 2020. “Water belongs to everyone and is a public good.”
In April, Sen. Elizabeth Warren (D-Massachusetts) and Rep. Ro Khanna (D-California) introduced legislation to ban trading water and water rights in commodity futures contracts. In a press release, the legislators asserted that the current, unregulated system incentivizes water hoarding, price increases and further consolidation of farmland.
Social theorist and author Marjorie Kelly argues that water management companies and water markets are part of a larger problem of “wealth supremacy,” which she outlines in her 2023 book, Wealth Supremacy: How the Extractive Economy and the Biased Rules of Capitalism Drive Today’s Crises.
She writes that there are differing economic approaches to water and other resources: We can create systems that seek to serve life, or systems that seek to maximize financial wealth. As a society, she says, we are accustomed to the latter. “Extractive capitalism … embodies a worldview, a habit of mind, so pervasive as to be invisible. We can call it a bias, akin to race bias and sex bias, but toward capital and wealth, toward ensuring that economic activity is focused primarily on benefiting those who possess wealth.”
This bias causes us to view so-called wealth creation as “benign and wonderful,” she writes, without realizing that the great wealth of the few depends “upon the precarity and indebtedness of the rest of us.”
Grant said water markets are just one of several ways that water is privatized and monetized. Her organization fights against the commodification of water, such as bottled water sales; the privatization of municipal water and sewer utilities; and the financialization of water, like what is happening in the West.
“We believe that water itself is a public trust resource that needs to be managed by the public, for the public benefit,” Grant explained. At the federal level, she said Food & Water Watch supports the Water Affordability, Transparency, Equity, and Reliability Act, introduced by Representatives Ro Khanna and Bonnie Watson Coleman (D-New Jersey), as well as Sen. Bernie Sanders (I-Vermont), which would create a trust to fund water infrastructure across the country. Among other projects, it would provide grants for communities seeking to exit privatization deals and buy back their water systems.
In Arizona, Governor Hobbs created a Water Policy Council in 2023 to advise the Arizona legislature on water bills, and she ended up vetoing a number of bills that failed to follow the framework created by the council.
Irwin lamented that water reform has become increasingly partisan in the state. “For me, I don’t care what’s beside your name, water should be bipartisan,” she said. “We have a major problem that’s been ongoing for a very, very long time. Something’s got to give.”
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