Walton Family Foundation

This page will primarily focus on the Walton Family Foundation (WFF) as their activities and strategies relate to Arizona water, most specifically related to the March 2017 agreement between WFF, the Gila River Indian Community (GRIC), the City of Phoenix, and the Arizona Department of Water Resources.

This is a work in progress….


1/17/19 “The Central Arizona Project (CAP) board authorized the amendment at its January meeting, paving the way for broader participation by new partners… The Walton Family Foundation has provided funding through Denver Water and California Six Agency has provided funding through MWD.” Pilot System Conservation Program Expands: New Partners Paving Way for Further Contributions to Lake Mead and Lake Powell

WFF has a member on the Lower Basin Drought Contingency Plan steering committee

“readiness of the Walton Family Foundation and Water Funders Initiative to work in partnership with public funders and other stakeholders to fill the $8 million funding gap for system conservation in the Lower Basin” (Source)

WFF is a top sponsor of the WRRC Conference 2019 – Arizona Runs On Water: Scarcity, Challenges, and Community-based Solutions

The new model for saving the Colorado River might just kill it” by Joel Dyer for the Boulder Weekly discusses WFF’s involvement in impact investing related to the Colorado River in Colorado

How ‘Impact Investing’ Can Increase America’s Water Security” by Barry D. Gold

Foundations may choose to make the actual for-profit investments directly or, as the Walton Family Foundation is doing, help set up the infrastructure and opportunity for others to do the investing…

Like many innovative approaches, initial demonstration projects are needed to prove the viability of the concept before they can be taken to scale. At the Walton Family Foundation, we funded a research project to explore the opportunity for impact investing in water and design sustainable water investment blueprints.

That research focused on the Colorado River basin and identified several types of investments with potential to advance water solutions while generating a financial return.

Hear Ted Kowalski of WFF speaking at the November 29, 2018 LBDCP steering committee meeting about “ramping up” market-based approaches in system conservation

PRESS RELEASE: Historic water-conservation pact a “down payment” on Arizona’s effort to protect water levels at Lake Mead – Arizona Water News

Foundation to Put $20 Million into Restoring Colorado River – AZPM

Walton Family Foundation Commits to America’s Great Rivers – Crossroads Today


The WFF’s Ted Kowalski described water markets as a very promising tool. “Water markets already have proven to be effective in the lower basin.”

A 2016 journal article called, “Marketing Conserved Water” proposes a strategy for developing a water market based on lessons learned from the Australian water market. Its authors were based out of the Getches-Wilkenson Center for Natural Resources, Energy, and the Environment at the University of Colorado, which has received funding from WFF, and was named in part after David Getches, for whom the current head of WFF’s Colorado River Initiative, Ted Kowalski was a research assistant.

The General Manager of Water Resources Planning at the Murray–Darling Basin Authority in Australia, Anthony (Tony) McLeod, contributed his input a Fulbright Fellow at the Getches-Wilkinson Center. It is worth noting that Australian water reform to create a water market dispossessed indigenous people of many of their water rights.

Focusing on conserved water was proposed as the most pragmatic approach considering “wholesale reform of current legal limits on water transfers seems unlikely,” due to the opposition from many farmers to a complete water market.

By focusing on “conserved water”—defined here as water that was previously but is no longer consumed by the water user—states will find it easier to adopt reforms that can provide farmers with incentives to make some portion of their water available for other uses.

The article summarizes, “Innovative water conservation strategies supported by arrangements that allow saved water to be transferred to other uses hold great promise for addressing stresses on water supplies…” (my emphasis). The conservation discussed here is not for the purposes of water storage and makes no mention of Lake Mead, nonetheless the ideas are still useful to WFF.

The authors also proposed temporary water transfers of a year or less because they seem, “far more likely to gain the acceptance, and perhaps even the support, of the agricultural community than a program for the permanent transfer of conserved water.” These could also function as pilot programs to test for the possibility of permanent transfers. “If a temporary water market can be established successfully and demonstrated to work efficiently, with minimal adverse impacts on the agricultural community, then the program might be more easily extended to include permanent transfers.”

A hypothetical model for water conservation that is said to benefit the environment is described in a report called “Water Share: Using water markets and impact investment to drive sustainability” published last year (to which Culp contributed) by TNC, which is also funded by WFF. They portrayed their model as providing conservation of an entire 15%, yet only 5% of it is actually being “saved” while the other 10% is sold or leased in order to fund the project (and to provide returns to investors), thereby reallocating water to some other consumptive use, such as to a city.

Walton Family Foundation as “Market Maker”

Potentially, WFF or their associates could benefit from a role as “market maker.” “[A]n opportunity exists for a willing ‘market maker’ to not only establish the rules for transactions, but also receive a percentage of the transaction costs in exchange for providing a well-functioning trading market,” says a WFF-funded 2015 report, “Liquid Assets: Investing for Impact in the Colorado River Basin” (see also Water in the West: How Impact Investing Can Help – YouTube), in reference to water storage trading, one of the market mechanisms described below.

Whether or not they would take such a role, there are many examples of their efforts to develop a water market and other ways they may try. WFF funded several other reports exploring ways to implement water markets for the Colorado River, Arizona specifically, and/or the U.S. West in general, several of which were authored in part by Peter Culp.

A 2015 report, “Unbundling Water Rights: A Blueprint for Development of Robust Water Allocation Systems in the Western United States” uses the Australian water market as a model to propose strategies to develop a water market, promoting conversion of water rights into two markets of shares and allocations. This report was was co-authored by Peter Culp and Disque Deane Jr., the hedge-fund manager featured in ProPublica’s “A Free-Market Plan to Save the American West From Drought.”

The “Cornerstones Report: Market-Based Responses to Arizona’s Water Sustainability Challenges” from 2011, also co-authored by Culp, provides recommendations to create conditions for a water market in Arizona, advocates for sever-and-transfer of water rights, and suggests the creation of a marketplace clearinghouse for water trade.

From this report:

Reallocation efforts also include the use of pilot forbearance agreements and interstate water marketing through the ‘intentionally created surplus’ program to exchange storage rights in Lake Mead among the Lower Basin states…
The Colorado River Basin states have developed a novel experiment in reservoir storage credits as a component of the shortage-sharing agreements passed in 2007 that is used to enable interstate marketing by establishing intentionally created surplus.

Nature’s Value in the Colorado River Basin” from 2015 (see also: Webinar: Nature’s Value in the Colorado River Basin – YouTube) isn’t so much about water marketing, but undertook the monetary valuation of the entire Colorado River basin, estimating that the “ecosystems in the Colorado River Basin provide between $56.5 billion and $466.5 billion in economic benefits every year at $1.65 billion per year,” as it incorporates not just the value of the water itself, but the so-called natural capital and ecosystem services of the basin. These concepts commodify aspects of nature, creating new ways to secure resources for business, as well as ways to profit via financial mechanisms.

The “Liquid Assets” report promotes payments for ecosystem services (PES). Arguably the funding of the system conservation compensation program is essentially a payments for ecosystem services scheme, paid through public subsidies, i.e. tax money. “Payments may also be made by stake-holders who want to manage risk (avoid running short of a resource they rely on) or to pre-empt anticipated regulations…” according to The Economics of Ecosystems and Biodiversity (TEEB). Whether or not projects to avoid federal reductions to Colorado River deliveries are being called PES, they may function as such.

The report was authored, along with Peter Culp, by Ricardo Bayon and others with his investment firm called Encourage Capital. Bayon is also the founder of Ecosystem Marketplace, described as “an asset management firm that has developed innovative financing approaches to a range of social and environmental problems” which is involved in the carbon market and promotes water marketing.

Authors of “Liquid Assets” believe there’s a strong potential for impact investing in the Colorado River Basin. Impact investing brings finance capital into the philanthropic realm, in this case in conservation. This allows for returns on investment. The authors specifically state:

We thus believe that there is strong potential for impact investment in the Basin… undertaking those investments would provide a powerful means for the Walton Family Foundation and other charitable actors to amplify relatively small investments of charitable money into large-scale impacts funded by outside private capital. Properly supported, such impact investment… could create momentum for regulatory reforms, and could powerfully shape the development of water markets as they begin to emerge in the Basin.

The authors also say that “A basic objective of Walton Family Foundations (WFF) exploration of potential water investment tools was to evaluate the means” to accomplish this.

According to Conservation Finance and Impact Investing for U.S. Water, foundations and NGOs “can guide the development of pilot projects that demonstrate how impact investing can benefit the water sector while generating financial profit. Once blueprints are established for structuring deals, the transaction costs and perceived risks will decrease, opening the water market to private and corporate capital.”

Water Storage Trading Blueprint

“Water storage trading” seems a likely market-based mechanism through which WFF hopes to gain. There are nine blueprints for investing contained in the “Liquid Assets” report, one of which, related mostly to ICS but perhaps also to system conservation, is water storage trading. According to the report, this mechanism, “is structured to generate ongoing returns from the establishment and operation of a water storage trading facility” in a situation where water is limited, using existing reservoirs (such as Lake Mead) or underground storage. The report gives ICS as an “excellent example of this type of storage program,”

Extraordinary Conservation ICS credits generated from one Contractor’s water may be used by another contractor located in the same state that either (a) funded or implemented the ICS project, or (b) has a written agreement for the transfer of the ICS credits with the entity that actually funded the project. This latter mechanism allows for some limited “trading” of water using the ICS mechanism, since one party can fund another party to generate ICS credits and receive the resulting credits in exchange for that funding. However, the arrangement for such transfers effectively has to be defined in advance, which prevents the development of a market in ICS credits.

The storage trading mechanism is likely intended to reform the rules for ICS to allow for active trading. “By creating tradable credits in water storage, this tool can help to create essential conditions for the development of a water market…” (my emphasis), notes the report.

Both a consultant for WFF, as well as a report called Conservation Finance & Impact Investing for U.S. Water (based on a forum sponsored by WFF and with participation of WFF’s Kowalski) brings up the significance of the blueprints in “Liquid Assets.” Water storage trading is notably categorized as “Market Development”.

From Conservation Finance & Impact Investing for U.S. Water:

Encourage Capital and Squire Patton Boggs were funded by the Walton Family Foundation to assess the potential for impact investment in the [Colorado River] basin and develop viable business lines to match investors with water projects. They developed nine blueprints outlining the potential environmental impact and financial risk of investment:
water storage trading

“Liquid Assets” elaborates:

By allowing the development and trade in storage credits among water users, storage facilities would provide a variety of physical and price hedging options and tools to water users to manage physical risks and control speculation, as well as insurance-type arrangements to cover water users and/or critical ecological values. This would be done while providing a return to the storage facility operator and underlying investors via transaction fees and a “tax” on storage transactions, together with the direct marketing of storage credits and services developed in the facility.

So water storage trading would allow for impact investment to generate ongoing returns and create conditions for development of a water market. Considering the proposed changes to include additional parties (including GRIC) to participate in ICS, and the potential for drought contingency-related reforms, the likelihood is that WFF is interested in adapting ICS to the storage trading mechanism model.

Water banks were also discussed in the report as part of water storage trading.

A recently published “Water: An Impact Investment Primer” refers to ICS and ICMA as water banks and WFF’s roles in them:

The Walton Family Foundation, for example, has been instrumental in supporting NGOs and governments in the development of a water bank for the lower Colorado Basin. The water bank helps the surrounding states improve efficiency in their water use and incentivizes water-saving behavior. The Walton Family Foundation has also helped fund NGOs that have developed a similar water banking agreement between the United States and Mexico. The U.S.-Mexico agreement was signed for the first time in 2012 and is set to expire later in 2017. The Walton Family Foundation is actively supporting the renewal of the agreement; if it is renewed, it may provide a market for the buying and selling of water-related ecosystem services.

Expansion of the Arizona Water Banking Authority and the long term storage credit system may be among of WFF’s desires.

“Liquid Assets” advocates for the creation of water trusts to circumvent obstacles to water exchanges.

The Pilot System Conservation Project in which GRIC and the Tohono O’odham Nation (TON) and others have been participating in 2015/2016 seems to have been modeled on a proposal called “Conservation Before Shortage” (CBS) which was described as a market-based mechanism. Peter Culp, who has various relationships with WFF, was involved, along with other Walton-funded NGOs, in developing the proposal. CBS was incorporated as an alternative in the Environmental Impact Statement for the 2007 Shortage Guidelines for the Colorado River lower basin states, although not ultimately adopted (it did strongly influence the development of ICMA in the Minute 319 agreement with Mexico, however).

A Wilson Center report credited Culp and Jennifer Pitt, who had been the Colorado River Project Director of the EDF (now she has a similar position in the National Audubon Society), as pioneers of the CBS proposal. A footnote in the report pointed out a relationship between the CBS proposal and the Pilot System Conservation Project noting the shared principles of the two. On his law firm’s website, Culp takes credit for both CBS and the pilot program, as well as related projects.

Pitt and Tom Graff of the EDF wrote about CBS in 2008:

Such a use of the market would leave high-value and uninterruptible water supplies untouched while providing compensation to contractors willing to forbear use. In practice, this would replace conventional rights-based shortage allocation with market-based allocations and could protect municipal water users, those least able to absorb shortages.