Desert Water Market

Update: the agreement was approved 09/27/17

The clock is ticking on resolution of water-sharing agreements among the Lower Basin states of the Colorado River, and between the US and Mexico, which may not go so smoothly once Trump takes office. Pressure to address at-risk ecosystems before the anti-environmentalist president has a say, however, may obscure continued appropriation of resources, such as water under the guise of watershed restoration.

With record low water levels in Lake Mead, a Colorado River reservoir, the lower basin Drought Contingency Plan (DCP) that is currently in the works, requires an official strategy for dealing with California’s Salton Sea. The DCP will shape the next steps for when a 5-year pilot water-sharing agreement between the US and Mexico expires next year. Trump’s presidency could impact Mexico’s decisions about storing water in Lake Mead and taking further reductions. Yet whether neoliberalism or climate-denying nationalism wins out on issues of water may just determine a few details in agreements made among capitalists on both sides of the border looking to bolster a water market, with unknown consequences for the entire region.

Helping to keep Lake Mead’s level above an official shortage declaration trigger point, which delays the reductions that Mexico, Arizona and Nevada have agreed to take, Mexico can store water in the US according to Minutes 318 and 319, amendments to the 1944 US-Mexico Water Treaty. California has senior priority rights to the Colorado River, yet might agree to make cuts as part of the Drought Contingency Plan, also to delay the unknown consequences should the lower basin’s water level fall below the point at which the Bureau of Reclamation could take unilateral action. Decisions about how each state will implement the reductions remain to be seen, although tribal water rights remain under attack.

Compounding these issues is the need to supply water to the Salton Sea, a shrinking, polluted, highly saline body of water in the Imperial Valley of California, which while important to migratory birds, is putting the health of human and non-human animals at risk as it dries up. California decision-makers must determine how to apportion water to this eco-fiasco while it’s withering due to drought and bad policy.

With Minute 319’s expiration at the end of 2017, a new minute is being negotiated behind closed doors, just as was 319. Aside from Mexicali farmers’ allegations that Mexico’s storage in Lake Mead is cutting into their supply, more concerning is that some of the arrangements in 319, which may be expanded upon, actually facilitate international water marketization.


Framed as an environmentally responsible, innovative, and exceptionally collaborative approach to water sharing, Minute 319 built a foundation for water banking and exchanges even while it incorporated water provisions to restore the ecosystem of the Colorado River Delta, where the river used to meet the Gulf of California. Clearly the ecosystem needs attention, yet proposed solutions function to shift responsibility away from irresponsible water users, concurrently enabling commodification of the precious liquid.

After the designation of a Biosphere Reserve in 1993 in the delta area, non-governmental organizations (NGOs) began investigating the importance and feasibility of supplying water to the delta. The United Nations Environmental Programme (UNEP) requested and funded a report on this subject published by the Pacific Institute in 1996. Around the same time, the Mexico-based NGO ProNatura (member of UNEP partner International Union for Conservation of Nature, IUCN) took up the cause, and soon the Environmental Defense Fund (EDF) got involved. These and other NGOs, especially those interested in market-based solutions to environmental problems, got themselves officially incorporated into the binational decision-making in 2004.

A growing interest in “ecosystem services” among UNEP, the Packard Foundation, Pew Charitable Trusts and associated NGOs was a major driver of these efforts. “Ecosystem services” are commonly defined as “the benefits people obtain from ecosystems” and has come to refer to the economic value of these “services.” This was initially meant as an educational tool, but has since taken the direction profit-making, whether by the fishing industry, for example, or through financial instruments.

In the delta region, fisheries, agriculture, the energy industry, mining, real estate, and tourism all gain from plentiful fresh water, with the less obvious benefit being an ability to skirt responsibility for exploitation and contamination.

Green Grabbing: a new appropriation of nature?” defines appropriation as “the transfer of ownership, use rights and control over resources that were once publicly or privately owned – or not even the subject of ownership – from the poor (or everyone including the poor) into the hands of the powerful.” Minute 319 is a bit more complicated, but various powerful people benefit from it, and it helps that the government and philanthropists pitch in for what they see as a good cause.

US diversions and development along the Colorado River can be blamed for curtailment of flows to the Gulf of California. US NGOs do not as readily acknowledge the additional role of dubious conservation projects such as the lining of California’s All-American Canal, with which the EDF was involved, as they even got a similar project incorporated into Minute 319. Contention surrounded the lining of the All-American Canal running parallel to the border, completed in 2010, which transfers the otherwise seeped water to Los Angeles and San Diego. Not considered part of Mexico’s official allocation, about 90% of the flow percolated into the Mexicali Aquifer upon which farmers and the Andrade Mesa wetlands came to rely since the canal was built in 1942. Provision of flows to this area through Minute 319 may have been meant in part to avoid a legal battle over this water diversion.

This water transfer, which has also resulted in a lack of water for the Salton Sea (becoming worse at the end of 2017 when “mitigation water” as part of this transfer deal will no longer be available), is essentially a water-marketing scheme of EDF’s design, involving a series of agreements initiated in 1989 by their newly-hired economists whom are also credited with the development of emissions trading and the carbon market.

EDF’s role within working groups for Minute 319 negotiation likely led to US acquisition of 124,000 acre feet (AF) of Mexico’s stored water of which 95,000 AF goes to the California and Arizona water agencies in exchange for US commitment of $21 million ($10 million from those water agencies), towards restoration ($3 million) and conservation projects ($18 million) such as lining Canal Revolución (although nothing has yet been decided). Ignoring the fact that canal seepage doesn’t disappear but goes into aquifers and supports plant life, the water supposedly conserved from lining the canal can then be claimed by those funding the project. The quantity of 52,626 acre feet that would have seeped into the groundwater from conservation projects was determined to constitute the US obligation for the the environmental flow dedicated to the delta.

Minute 319 is mostly known for Mexico and the US preparing to share in shortages and surpluses. Largely due to earthquake-induced destruction of the Mexicali canal system, Mexico had requested the ability to store water in Lake Mead, having no storage capacity itself. A precedent for storing water in the lower basin reservoir among the states existed in the form of Intentionally Created Surplus. The Minute instituted Intentionally Created Mexican Allocation (ICMA), allowing Mexico to continue deferring delivery of some of their water, conditionally available for future recovery. These mechanisms have had the added benefit of delaying an official shortage declaration which triggers reductions by Arizona and Nevada states (and now, Mexico), and supporting Hoover Dam hydropower by keeping the level artificially higher. However, as the reservoir gets closer to the shortage trigger level, the restrictions for access to which Mexico agrees may be different for the future minute.

The US, Mexico, and the NGOs each committed to supplying 1/3 of the water needed for environmental flows. Mexican NGO ProNatura Noroeste, and US NGO Sonoran Institute, along with EDF, had already created the Colorado River Delta Trust a few years before to create a foundation for the new minute they’d hoped to mobilize. The NGOs started buying water rights in Mexicali in 2006 and participated in an arrangement to deliver water to an area of the delta impacted by the Yuma desalination plant’s pilot run as part of the US’s obligation to deal with the salinity of Mexico’s water allocation.

Loans from the Packard Foundation assisted the NGOs’ purchase of permanent water rights in Mexicali, making the Trust function as a water bank. In the Trust’s brochure from 2010, the NGOs acknowledge that they purchased the water at far below US prices and that in the event of shortage, they could “withhold or withdraw water dedicated for environmental uses and temporarily or permanently return this water to productive on-farm applications, exchange, or sell it to other entities to free up monetary or water resources for investment elsewhere.” It is uncertain as to whether this applies to the water purchased for Minute 319 which was signed after the brochure was made.

NGOs are increasingly promoting trusts to circumvent water law red tape, as elaborated on in “Liquid Assets: Investing for Impact in the Colorado River Basin,” a 2015 report funded by the Walton Family Foundation, authored in part by Ricardo Bayon’s investment firm Encourage Capital. Bayon is the founder of Ecosystem Marketplace, which is involved in the carbon trade and was developed to “become the world’s leading source of information on markets and payment schemes for ecosystem services.” In “Banking Nature: The Spectacular Financialisation of Environmental Conservation,” Sian Sullivan argues that Ecosystem Marketplace exemplifies a transformation from simply recognizing the costs of environmental impacts “into an optimistic embrace of the financial returns that might accrue if this ‘value’ of environmental externalities could be priced and traded.”

The Nature Conservancy (TNC), who was also involved in the Trust’s purchase of water rights presented a role for trusts in a report in August 2016 titled, “Water Share: Using water markets and impact investment to drive sustainability.” Revenue can be made from the water rights obtained for conservation by leasing the bulk of the rights to cities or other users.

Read more on the activities of TNC, BEF, and Walton Family Foundation in Arizona on the Verde River page.

The Trust partnered with the Bonneville Environmental Foundation (BEF), which had been selling carbon offsets and later also began selling water offsets as Water Restoration Certificates® to corporations like Coca Cola. This was the brainchild of environmental entrepreneur Todd Reeve (now CEO of BEF) and Sandra Postel of Global Water Policy Project (she’d written on “ecosystem services” as a Pew Fellow and co-authored reports with the Pacific Institute). Postel now runs Change the Course, a pledge campaign which bolsters BEF’s water offset program. Two restoration areas for which water offsets can be purchased are in the delta region benefiting from the environmental flows arranged through Minute 319.

The Latin American Water Tribunal (Tribunal Latinoamericano del Agua) addressed in October 2016 the impacts of Minute 319 on availability of irrigation water for farmers in Mexicali Valley. ProNatura’s relationships with multinationals like Coca Cola and Nestlé and energy companies, as well as multimillionaire Carlos Slim’s foundation reveal them as far from grassroots. ProNatura promotes privatization, and projects like the international carbon offset scheme called REDD+ (Reducing Emissions from Deforestation and Degradation) administered by UNEP. Minute 319 was a binational agreement between powerful capitalists, and therefore even if it was not a direct theft of campesino water, it nonetheless contributes to a trajectory of resource appropriation.

The Salton Sea situation provides for water grabs as well. The Water Funder Initiative (WFI) has “set a goal of providing $10 million over five years to support implementation of a comprehensive plan to… promote drought resilience and encourage renewable energy and restoration efforts at the Salton Sea.” Among several foundations making up the WFI, a few (Walton Family, Rockefeller, and Packard Foundations) have funded Minute 319-related NGO activity. Listed as first priority strategy in the WFI March 2016 “Toward Water Sustainability: A Blueprint for Philanthropy” is to “Shape Healthy Water Markets.” The Blueprint addresses the Colorado River Delta, but the initiative thus far has only pledged money for the Salton Sea. Four of the foundations in WRI also funded a 2015 report called “Unbundling Water Rights,” which lays out a strategy for creating a water market system in the West.

Read more on WFI on the Water Funder Initiative page.

Finally, the Minute instituted a commitment to investigate possibilities for binational desalination projects, which resulted in the Rosarito desal plant in Baja California and plans for a possible plant in Sonora on the coast of the Gulf of California. The Rosarito plant, a public-private partnership, does not yet have solid plans to convey water to San Diego as proposed.

Those who prioritize industry and development expect desalination and wastewater treatment plants to provide a supply as freshwater becomes (increasingly) depleted and contaminated. These bring their own environmental issues, while technological fixes often lead to privatization. Trump’s stated enthusiasm for privatization of infrastructure will likely apply to water.

The urgency with which we must protect water is increasingly recognized. Yet fracking, other energy extraction, mining, beverage-bottling, water diversions, and new transportation infrastructure are not halted, but instead continue to proliferate on both sides of the border. Market-based so-called solutions to water problems, whether in the name of conservation or not, shift responsibility away from exploitation of water.


Media coverage of Minute 319’s negative impact on Mexico:

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