The of Water - colinmayfield.com · [Cover Photo: Digital Vision “North American Scenics,” No. 030311) AMERICAN WATER RESOURCES ASSOCIATION 4 WEST FEDERAL STREET P.O. BOX 1626

Jaunuary 2002 | Volume 4 | Number 1

AM E R I C A N WAT E R RE S O U R C E S AS S O C I AT I O N

The New Economy

of Water

[Cover Photo: Digital Vision “North American Scenics,” No. 030311)

AMERICAN WATERRESOURCES ASSOCIATION

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ISSN 1522-3175VOL. 4 • NO. 1JANUARY 2002

THE NEW ECONOMY OF WATER

Clay J. Landry, Associate Editor([email protected])

This issue of IMPACT is devoted to understanding the newglobal economy of water. It looks at how policy changesare stimulating the new economy. Water remains the onlycritical utility service that has not yet undergone broadrestructuring. The new economy of water, however, isushering in consolidation, privatization, and market com-petition – changes similar to those that have occurred inthe gas, electricity, and telecom industries over the pastdecade.

Overview2 The New Economy of Water

Clay J. Landry ([email protected])

Feature Articles4 Water: From a Public Resource to a Market

CommodityTerry L. Anderson ([email protected])Reviews the policy changes that are driving the evolutionof water markets.

6 The Politics and Economics of Water Pricing inDeveloping CountriesMark W. Rosegrant ([email protected])Sarah ClineExamines the challenges and opportunities of adoptingefficiency-oriented water pricing policies by developingcountries.

9 Mobilizing the Private Sector to Serve the UrbanPoorPenelope J. Brook ([email protected])Focuses on adopting “pro-poor” reform in an era ofprivate sector water management.

14 Looking at Water: A View From Wall StreetDebra G. Coy ([email protected])Provides a Wall Street perspective on the performance,growth, and investment opportunities for the U.S.water industry.

20 Global Private Finance in the Water IndustryPeter Allison ([email protected])Examines the growing global industry of privatelyfinanced water projects.

23 Water Markets: The Global PerspectiveK. William Easter ([email protected])Sandra ArchibaldLooks at the emergence of the water trading marketaround the world.

26 The Rising Tide of Water MarketsClay J. Landry ([email protected])Examines the new development of water marketsand changes in pricing policies.

Editorial StaffEDITOR-IN-CHIEF

N. EARL SPANGENBERG

([email protected])University of Wisconsin-Stevens Point,

Stevens Point,Wisconsin

ASSOCIATE EDITORS

Volume 4 • Number 1 • January 2002

▲ Employment Opportunities . .18,37

▲ Future Issues of IMPACT . . . . . . 25

▲ President’s Message . . . . . . . . . 29

▲ Water Resources Puzzler . . . . . 30

▲ AWRA Business

31 Recipients of AWRA’s Annual Awards

33 News of Friends & Members

35 December 2001 JAWRA Papers

35 Feedback

36 2002 Membership Application

▲ Water Resources ContinuingEducation Opportunities

34 Meetings, Workshops, Short Courses

Managing Water Resources And Human Impacts In Our Dynamic World

FAYE ANDERSON([email protected])College Park, Maryland

ERICH P. DITSCHMAN([email protected])Tetra Tech MPSLansing, Michigan

JEFFERSON G. EDGENS([email protected])University of KentuckyJackson, Kentucky

JOHN H. HERRING([email protected])NYS Department of StateAlbany, New York

JONATHAN E. JONES([email protected])Wright Water EngineersDenver, Colorado

CLAY J. LANDRY([email protected])Political Economy Research Ctr.Bozeman, Montana

RICHARD H. MCCUEN([email protected])University of MarylandCollege Park, Maryland

LAUREL E. PHOENIX([email protected])University of WisconsinGreen Bay, Wisconsin

CHARLES W. SLAUGHTER([email protected])University of IdahoBoise, Idaho

ROBERT C. WARD([email protected])CO Water Res. Research Inst.Fort Collins, Colorado

Water management is undergoing significant and im-portant economic and financial changes. This sleepy lit-tle industry once dominated by public bureaucracies israpidly transforming into a global business that is drivenby shareholder interests and profit and loss statements.In fact, the water industry is already a booming business.Worldwide, annual industry revenues are estimated at$300 billion, with the United States accounting for morethan half that amount, and this number is expected todouble as water becomes scarce and the industry ma-tures.

This issue of IMPACT is devoted to understanding thenew global economy of water. It looks at how policychanges are stimulating this new economy. As Terry An-derson points out in the first article, the development ofa global market for water is emerging because water israpidly moving from a publicly managed resource to aneconomic commodity. He points out that these policychanges are driven by the simple need to improve watermanagement.

Water remains the only critical utility service that hasnot yet undergone broad restructuring. The new economyof water, however, is ushering in consolidation, privatiza-tion, and market competition – changes similar to thosethat have occurred in the gas, electricity, and telecom in-dustries over the past decade.

New pricing polices are another key factor in the evo-lution of the new economy of water. As a society, we arerethinking the way we price water. For years, water hasbeen highly subsidized and provided at little or no cost.The rationale for these policies was that water is a basicservice of life and should be free to all. While a noble goal,the legacy of subsidized water has created an infrastruc-ture crisis and has left many of the poorest of societywithout access to good clean water. New pricing policiesare moving toward real cost pricing to address waterscarcity, encourage conservation, provide infrastructurefunding, and most importantly, attract private sector in-vestment. Private companies are far more interested infunding water projects now that revenues can be gener-ated from those investments. Mark Rosegrant and SarahCline examine the politics and economics of water pricingin developing countries. Many of the lessons and experi-ences they share are clearly transferable to developedcountries.

The new economy of water has caught the eye of WallStreet. Historically, investors have shied away from thewater industry because of its reputation of being highlyregulated with little opportunity for growth. That attitudeis changing. Debra Coy of Schwab Capital points out inher article that over the past two decades the water in-dustry has shown considerable growth and consistentlyout performed wider market indexes such as the DowJones Industrial Average and the NASDAQ.

The transformation of the water industry isn't limit-ed to the United States. The new economy of water is aglobal one. In fact, some of the most innovative and en-trepreneurial developments are occurring at the interna-tional level. Countries such as Chile, Spain, the UnitedKingdom, and Brazil have adopted legislation to encour-age greater competition and market development. Privatesector banks and water companies from Germany,France, and Australia are stepping forward as globalleaders in project finance. Peter Allison wades throughthe high-flying sector of global private finance in thewater industry. He simply and concisely explains thecomplicated financial agreements between internationalinvestment banks and global water companies.

The new economy of water is not without its chal-lenges and critics. Most critics warn that the private sec-tor cannot be trusted with the responsibilities of manag-ing and allocating water. They cling to the idea that watershould be a free resource that is controlled, allocated,and provided by government agencies. That view, howev-er, overlooks the dark history of water exploitation bygovernment agencies and publicly funded boondoggles.All one has to do is look at the environmental legacy leftby federal water projects that dot the American West.

The new economy of water will have to overcome sev-eral hurdles if it is to successfully move forward. One ofthe first will be addressing the water needs of the poor.Will the poor be able to afford water in this new economythat is driven by profits and prices? The article by Pene-lope Brook examines this crucial issue. She presentscompelling evidence that prices and tariffs can be struc-tured so that they provide basic water needs at affordablerates. Also, as evident in her article, the new economy ofwater is resulting in better service and greater access foreveryone, including the poor.

The new economy of water is also creating opportu-nities for active markets for water trading. K. WilliamEaster and Sandra Archibald of the University of Min-nesota provides a global perspective of evolution of watermarkets. While a number of countries such as Chile,Australia, the Canary Islands, and the United Kingdom,are seeing the emergence of water markets, the idea ofusing markets is not wide spread. Easter identifies keyrequirements for water markets to help explain why moremarkets have not taken root. Finally, I have taken edito-rial privilege by including an article with my ownthoughts and observations on water markets and pricing.

Certainly there will be winners and losers in the evo-lution of the new economy of water. Without significantchanges, however, the industry simply will not be able tomeet the growing global thirst for clean water, nor will itbe able to raise hundreds of billions of dollars needed toupgrade and expand a woefully neglected water infra-structure. The new economy offers a great deal of

2 • Water Resources IMPACT January • 2002

OVERVIEW: THE NEW ECONOMY OF WATERClay J. Landry

promise for meeting those financial needs. It also pro-vides a way of enlisting the private sector to help solve thelooming global water crisis.

Clay J. LandryResearch AssociatePolitical Economy Research Center502 S 19th Avenue, Suite 211Bozeman, MT 59718(406) 587-9591 / Fax: (406) 586-7555

[email protected]

Clay J. Landry is a research associate with the PoliticalEconomy Research Center and author of "Saving OurStreams Through Water Markets: A Practical Guide." Heserves as the financial and regulatory affairs editor forGlobal Water Intelligence and has published in profes-sional journals and the popular press, including the WallStreet Journal and the Orange County Register. He holdsa master's degree in agricultural and resource economicsfrom Oregon State University and a bachelor degree ineconomics from the University of Wyoming.

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Volume 4 • Number 1 Water Resources IMPACT • 3

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Many of the irrigation dams and ditches that divertwater from the Gallatin River near where I live predateMontana statehood. They were built before there wereany government rules and regulations governing wateruse and before federal subsidies were even a glint in theeyes of Washington politicians. Yet each of those irriga-tion projects required large amounts of capital invest-ment at the time and needed rules for allocation. In thisage when government subsidies and regulations are sointertwined with water, it is hard to imagine how the earlysettlers in the West made this work.

A quick review of western history reveals that theearly miners and farmers recognized the need to estab-lish rules for dealing with one of the West's most preciousresources. Hence out of the mining camps and irrigatedvalleys came the prior appropriation doctrine. It replacedthe common law riparian doctrine that prevails today inthe East because that doctrine made no provision for di-verting water from streams to off-stream locations whereit was needed. In short, the prior appropriation doctrineestablished property rights to water on a first-come first-served basis and allowed individuals to trade thoserights. In some ways water in the West was more of acommodity in the late 19th century than it is today.

For a variety of reasons, trading opportunities werefurther limited as state governments codified the rulesthat had evolved out of necessity. As they did so, moreconstraints were placed on establishingand trading water rights. When the federalgovernment got involved with the Reclama-tion Act of 1902, massive water projectswere built to try to overcome scarcity. Withmore regulations that raised the transac-tion costs for marketing water and withsubsidized prices that made water virtuallya free good, it is not surprising that watermarkets are only now coming back onto thescene.

As demands have increased, especiallyfor municipal and environmental uses,there has been pressure to reallocate west-ern water from agriculture to these highervalued uses. But facilitating the realloca-tion has not been easy. Indeed, from in theearly 1980s when I first began writingabout the issue, water marketing was mostly a theoreti-cal idea with a few economists arguing that gains fromtrade should drive the reallocation. However, many morepeople were unmoved by the economists’ argument.

I recall vividly being invited to present a seminar atthe Department of Interior in the early years of the Rea-gan administration. I had just published my book “WaterCrisis: Ending the Policy Drought” and was happy for theopportunity to extol the virtues of water markets to

people at the Bureau of Reclamation. When I finished mypresentation, a person stood up and said “I've hadenough of you kiddie-car economists telling us how torun this place.” I later found out that the comment camefrom the commissioner of the Bureau of Reclamation.Clearly proponents of water markets had an uphill battlegiven the entrenched bureaucracy whose job it was to“make the dessert bloom like a rose.”

But change does occur. About a decade later, I re-ceived a call from the Clinton administration asking meto attend a meeting in a seminar room at the Departmentof Interior not far from the one where I presented my“kiddie-car” ideas. The purpose of the meeting was to dis-cuss how we might introduce market incentives in someof the Bureau of Reclamation water projects. Indeed, wehad come a long way in a relatively short time.

How did this change come about? I think the answeris twofold. First, ideas do have consequences, and manyscholars were laying the foundation for the efficacy ofwater markets. Starting with the simple notion of down-ward sloping demand, economists were presenting datashowing that farmers and urbanites alike reduce con-sumption if faced with higher prices. Economists andlawyers have also examined the regulatory quagmire, re-vealing outdated requirements such as restrictions onownership of water for environmental needs. Even envi-ronmentalists such as Tom Graff, a lawyer for the Envi-ronmental Defense, recognize that subsidized water

prices are driving environmental degrada-tion. In 1982 after the defeat of an initiativeto subsidize the delivery of water fromnorthern to southern California, Graffasked, “has all future water project devel-opment been choked off by the new con-servationist-conservative alliance . . . ?”

Second, it is hard to keep a good mar-ket down when the gains from trade are solarge. With water being delivered from fed-eral irrigation projects to farms at pricesbelow $10 per acre foot, while cities suchas Santa Barbara are desalinating water atcosts in excess of $2000 per acre foot, thepressure for reallocation is tremendous.Moreover, growing environmental demandsfor water quality and for fish and wildlife

habitat are putting pressure on irrigators to stop dewa-tering streams. Unfortunately, not all environmentalgroups recognize the potential of the market place. Someinsist on fighting contentious regulatory battles that areslow to provide protection. For example, a coalition ofenvironmental groups filed suit in the early 1980s to stopLos Angeles from diverting water from the Mono Lakewatershed on the grounds that the diversion were harm-ing the environment and thus violating the state’s


The Federal

government still

subsidizes water

projects without

encouraging water

from those projects

to be reallocated

through willing-seller/

willing-buyer

transactions

WATER: FROM A PUBLIC RESOURCE TO A MARKET COMMODITYTerry L. Anderson

responsibility as trustee of the environment. The coali-tion won the suit, but the victory was rather hollow giventhat it took more than a decade before diversions were re-duced.

In a relatively short time new ideas and the potentialgains from trade have significantly altered the way wethink about and deal with water. Some people say thatwater is too precious to leave to the marketplace. To thecontrary! Because water is so precious there is no alter-native as effective as the marketplace at encouragingconservation. Cities are paying for on-farm improve-ments of irrigation systems in return for conserved water.Water salvage laws allow water-rights holders to marketwater they save. Indian tribes are settling long-standingwater disputes with the provision that they be able tomarket water off their reservations, and environmentalgroups are purchasing water to enhance instream flowsfor fish and wildlife.

Water markets are surely here to stay, and they canbe even more effective. At all levels of government thereare bottlenecks that raise the transaction costs of movingwater to higher valued alternatives. Many states still en-courage wasteful uses of water and discourage marketsfor instream flows, and the federal government still sub-sidizes water projects without encouraging water fromthose projects to be reallocated through willing-seller/

willing-buyer transactions. By removing these and many other political impediments, we cannot eliminate waterscarcity, but we can deal with it more effectively.

Terry L. AndersonExecutive DirectorPERC502 S. 19th Avenue, Suite 211Bozeman, MT 59715(406) 587-9591 / Fax: (406) 586-7555

[email protected]

Terry Anderson is the Executive Director of the PoliticalEconomy Research Center (PERC), a public policy re-search institute that provides market solutions to envi-ronmental problems. Anderson is also a Senior Fellowwith the Hoover Institution. He is the author of numer-ous books and articles on water marketing policy includ-ing “Water Markets: Priming the Invisible Pump.”

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Water: From a Public Resource to a Market Commodity . . . cont’d.

AUTHOR LINK

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INTRODUCTION

Increasing water scarcity poses a significant chal-lenge to many developing countries. New sources of waterare increasingly expensive to exploit, limiting the poten-tial for expansion in new water supplies. Nearly two-thirds of grain production in developing countries is har-vested from irrigated land, so irrigation must remain aprimary source of agricultural growth. But rapidly ex-panding domestic and industrial demand will constrainthe availability of water for agriculture. Despite thesechallenges, in most of the developing world water is nottreated as a scarce resource – irrigation water is provid-ed at little or no cost, in urban areas the price of waterdoes not cover the cost of delivery, and capital investmentdecisions in all sectors are divorced from management ofthe resource. With little incentive for water managers,farmer-irrigators, and urban water consumers to con-serve, water is overused and wasted.

However, some developing countries are graduallymoving toward efficiency-oriented water pricing policiesas a method to help rationalize water allocation and alle-viate water scarcity. The main objectives of water pricinginclude: (1) creation of incentives for efficient water use,(2) cost recovery in the water sector, and (3) financial sus-tainability for urban water supply systems and irrigation,including the ability to raise capital for expansion of ser-vices to meet future demand.

Effective water-pricing policiescan contribute to the objectives listedabove, but several problems are asso-ciated with the implementation ofsuch policies in developing countries.Equity issues must be addressedwhen considering water pricing. Theconcept of water pricing may conflictwith the idea that the provision ofwater services is a basic right to all in-dividuals if water prices rise to a levelthat low-income households cannotafford. Adding to the difficulty of pricing reform, bothlong-standing practice and cultural and religious beliefshave treated water as a free good, and entrenched inter-ests benefit from the existing system of subsidies and ad-ministered allocations of water. The remainder of thispaper discusses these issues with reference to urban andagricultural water.

Urban Water Pricing

The provision of urban water services in many devel-oping countries has been poor, with waste, and no ser-vices for low-income households. Low water prices are amajor cause of this poor performance, providing littleincentive for increased water use efficiency and reducing

the ability to finance capital improvement and expansion.In 1995, 58 percent of the nonagricultural water suppliedin Manila, The Philippines, was “unaccounted-for water”(UFW), consumed by “illegal” users and lost during dis-tribution (Ebarvia, 1995). Through the early 1990s, theaverage level of UFW in World Bank-assisted urban waterprojects was about 36 percent (Bhatia and Falkenmark,1993). In the early 1990s, Cairo, Egypt, Mexico City,Mexico, Lima, Peru, and Jakarta, Indonesia, had UFWlevels as high as 60 percent, compared to 10-15 percentin well-managed systems.

Service coverage is poor in many developing coun-tries, although recent water sector reforms have helpedto increase coverage in some countries. In Buenos Aires,for example, before the 1993 privatization, only around70 percent of the population was served by the water sys-tem and only about 58 percent of the population was pro-vided with sewerage services (Crampes and Estache,1996). The lack of service was concentrated in poorersuburban areas where only 55 percent of the populationhad water services and 35 percent received sewerage ser-vices (Zérah, 2001). Although water price increases asso-ciated with privatization were highly contentious, withintwo and a half years after the privatization began, an ad-ditional 570,000 persons received water (a 9 percent in-crease) and water production capacity increased from 3.4million to 4.2 million cubic meters per day. By 2000,

water services had been extended to 1.2million additional poor people (Zérah,2001). The establishment of tradablewater rights in Chile contributed to anincrease of urban potable water cover-age to 99 percent from the pre-reformlevel of 63 percent (Gazmuri Schleyerand Rosegrant, 1996).

Evidence from several countries hasshown that incentive pricing also leadsto water conservation by householdsand industrial water users. At a house-hold level, the removal of subsidies and

increased tariffs can have a substantial impact on wateruse. An increase in the water tariff in Bogor, Indonesia,from US$0.15 to US$0.42 per cubic meter led to a 30 per-cent decrease in household demand. Increased waterprices and pollution restrictions have led to significantreductions in industrial water use through conservationand water recycling. In Beijing, China, for example,water-recycling rates increased from 61 percent in 1980to 72 percent in 1985; and between 1977 and 1991, totalindustrial water use declined steadily while output in-creased by 44 percent in real terms. These improvementsfollowed the implementation of the monitoring of thelargest water users in 1981 and the establishment of asteeply rising block rate fee system in 1982 (Nickum,1994).


THE POLITICS AND ECONOMICS OF WATERPRICING IN DEVELOPING COUNTRIES

Mark W. Rosegrant and Sarah Cline

... innovative water pricing

should be implemented that

would introduce incentives

efficient water use, recover

at least O&M costs,

protect farm incomes, and

minimize transaction costs

Subsidies on urban water continue to be justified onthe basis of the need to protect the poor from excessivewater prices. However, urban water subsidies in most de-veloping countries go disproportionately to the better off– urban water users connected to the public system andirrigated farmers. The equity impacts are worsened be-cause subsidies are often financed from regressive taxes.The negative effects on equity are shown in Table 1,which shows the ratio between the price charged forwater by informal vendors and the price charged byurban water systems. The urban poor, who must rely onwater vendors, pay many times more for water than thegenerally better-off residents who receive subsidizedwater from the public systems.

In order to improve both efficiency and equity in suchsituations, urban water prices should be increased tocover the costs of delivery and to generate adequate rev-enues to finance the needed growth in supplies. General-ized subsidies should be replaced with subsidies target-ed to the poor. Such was the case in Chile after the reor-ganization of its water sector to allow for the allocation ofwater rights through markets.

Agricultural Water Pricing

Low water charges and poor cost recovery cause arange of problems for agricultural water developmentprojects (Saleth, 2001). The lack of pricing limitsoperation efficiency, constrains future investment, andencourages waste. Although individual project perfor-mances vary considerably, irrigation water use efficien-cies in developing countries are low, ranging from 25-40percent for the Philippines, Thailand, India, Pakistan,

and Mexico, to 40-45 percent in Malaysia and Morocco(Rosegrant and Shetty, 1994). These low water use effi-ciencies are often cited as evidence that very large sav-ings in water use can be obtained. However, some effi-ciency gains may be limited due to downstream depen-dency of return flows.

Farmers respond to higher prices by decreased wateruse on a given crop, adoption of water-conserving irriga-tion technology, shifting water applications to morewater-efficient crops, and changing the crop mix to favorhigher valued crops (Rosegrant et al., 1995; Gardner,1983). But growing evidence in developing countries in-dicates that farmer demand for irrigation water is priceinelastic, and that prices high enough to induce signifi-cant changes in water allocation (or recover capital costs)will severely reduce farm income (Rosegrant et al., 2000;Perry, 2001; Löfgren, 1996).

Irrigation water pricing for full capital cost recoveryin existing systems is highly unlikely in most of the de-veloping world, but pricing to cover operations and main-tenance (O&M) costs and capital asset replacement or de-preciation costs appears feasible. Full capital cost recov-ery requires that the project costs must be allocatedacross beneficiaries – farmers, villages that receive do-mestic water supplies, flood control, and hydropower.The direct production benefits of irrigation must also beadjusted for crop output price effects. With imperfect in-ternal agricultural markets in many developing coun-tries, the increased crop production from new irrigationcan reduce crop prices in local markets, shifting benefitsto consumers. However, even with proper allocation ofcosts, full recovery of both capital and O&M costs ap-pears politically infeasible, because the resultant chargesto farmers would be prohibitive. The lack of feasibility indeveloping countries is not surprising; developed coun-tries have rarely attempted full capital cost recovery forirrigation (OECD, 1999; Dinar and Subramanian, 1997).Even recovery of O&M costs would require a major re-form in pricing policy, monitoring, and enforcement. Afurther significant advance would be to recover replace-ment of assets or depreciation of the existing systems,costs that are rarely covered, leading to periodic rehabil-itations of irrigation systems. In developing countries, therecovery of irrigation O&M costs range from 20-30 per-cent in India and Pakistan to 75 percent in Madagascar,and depreciation is virtually uncovered (Dinar and Sub-ramanian, 1997).

A FEASIBLE APPROACH TO PRICING

Despite these constraints, innovative water pricingshould be implemented that would introduce incentivesfor efficient water use, recover at least O&M costs, pro-tect farm incomes, and minimize transaction costs. Forexample, a “charge-subsidy” scheme achieves efficientoutcomes and appears to be politically and administra-tively feasible. A base water right would be established atmajor turnouts to water user groups or privately runirrigation subunits (rights could be assigned directly toindividual irrigators where administratively feasible).The user group would subsequently be responsible for


The Politics and Economics of Water Pricing in Developing Countries . . . cont’d.

TABLE 1. Ratio of Water Prices Charged by Vendors toPrices Charged by Public Utilities in Selected Cities.

Country City Ratio

Bangladesh Dacca 12-25:1Colombia Cali 10:1Côte d’Ivoire Abidjan 5:1Ecuador Guayaquil 20:1Haiti Port-au-Prince 17-100:1Honduras Tegucigalpa 16-34:1Indonesia Jakarta 4-60:1

Surabaya 20-60:1Kenya Nairobi 7-11:1Mauritania Nouakchott 100:1Nigeria Lagos 4-10:1

Onitsha 6-38:1Pakistan Karachi 28-83:1Peru Lima 17:1Togo Lomé 7-10:1Turkey Istanbul 10:1Uganda Kampala 4-9:1

Source: Bhatia and Falkenmark (1993).

internal water allocation. The base water right would beset based on historical allocation (but likely somewhatlower than the historical allocation in water-scarcebasins). A fixed base charge would be applied to thisquantity, sufficient to cover O&M and longer term assetreplacement (depreciation) costs. For demand greaterthan the base water right, an efficiency price equal to thevalue of water in alternative uses would be charged to theusers; for demand below the base right, the same pricewould be paid to the water user.

Specification of the base rights, base charges, and ef-ficiency prices in such a scheme will be politically diffi-cult, but appears feasible. The establishment of basewater rights would increase the political feasibility ofwater pricing by formalizing existing water rights, ratherthan being seen as an expropriation of these rights. Withefficiency prices paid on only the marginal demand aboveor below the base right, nonpunitive incentives are intro-duced. The reliance on water user associations to man-age water “below the turnout” improves local account-ability, transparency, and the flexibility of water alloca-tion. Information costs would be reduced because localirrigators with expert knowledge of the value of waterwould bear the costs and generate the necessary infor-mation on the value and opportunity costs of water belowmajor turnouts.

CONCLUSIONSReform of water pricing policy in developing coun-

tries faces many technical, administrative, and politicalconstraints, but with increasing water scarcity and de-clining financial resources available for irrigation andwater resource development, reform of water pricing isessential. For both urban and agricultural water, innova-tive and pragmatic water pricing reform that introducesincentives for efficient use and enhances cost recoverywhile improving equity in water allocation is feasible.Agricultural water pricing reform that establishes waterrights for users, such as suggested above, would be par-ticularly beneficial, protecting farmers against capriciouschanges in water allocation, ensuring that farmers bene-fit from more efficient water use, and providing a basisfor trading of water among farmers and across sectorsthat would further enhance efficiency.

LITERATURE CITED

Bhatia, R. and M. Falkenmark, 1993. Water Resource Policies and the Urban Poor: Innovative Approaches and Policy Imper-atives. Water and Sanitation Current UNDP-World Bank Water and Sanitation Program, The World Bank, Washington, D.C.

Crampes, C. and A. Estache, 1996. Regulating Water Conces-sions: Lessons From the Buenos Aires Concession. Public Policy for the Private Sector, Note No. 91, The World Bank, Private Sector Development Department, Washington, D.C.

Dinar, A. and A. Subramanian, 1997. Water Pricing Experiences: An International Perspective. World Bank Technical Paper No. 386, The World Bank, Washington, D.C.

Ebarvia, M., 1995. Water Supply and Demand Conditions in Metro Manila. University of the Philippines, Quezon City, Metro Manila, the Philippines (Mimeo).

Gardner, B.D., 1983. Water Pricing and Rent Seeking in Califor-nia Agriculture. In: Water Rights, Scarce Resource Allocation,

Bureaucracy, and the Environment, T.L. Anderson (Editor).Pacific Studies in Public Policy, Pacific Institute for PublicPolicy Research, Ballinger, Cambridge, Massachusetts.

Gazmuri Schleyer, R. and M.W. Rosegrant, 1996. Chilean Water Policy: The Role of Water Rights, Institutions, and Markets. International Journal of Water Resources Development 12(1):33-48.

Löfgren, H., 1996. The Cost of Managing With Less: CuttingWater Subsidies and Supplies in Egypt’s Agriculture. TMDDiscussion Paper 7, International Food Policy Research Inst., Washington, D.C.

Nickum, J.E., 1994. Beijing's Maturing Socialist Water Econo-my. In: Metropolitan Water Use Conflicts in Asia and the Pacific, J.E. Nickum and K.W. Easter (Editors). East-West Center and United Nations Centre for Regional Development, Westview Press, Oxford, United Kingdom.

OECD, 1999. Agricultural Water Pricing in OECD Countries. OECD, Paris, France (Mimeo).

Perry, C.J., 2001. Charging for Irrigation Water: The Issues andOptions, With a Case Study From Iran. Research Report 52,International Water Management Inst., Colombo, Sri Lanka.

Rosegrant, M.W., R. Gazmuri Schleyer, and S. Yadav, 1995. Water Policy for Efficient Agricultural Diversification: Market-Based Approaches. Food Policy 20(3):203-233.

Rosegrant, M.W., C. Ringler, D.C. McKinney, X. Cai, A. Keller, and G. Donoso, 2000. Integrated Economic-Hydrologic Water Modeling at the Basin Scale: The Maipo River Basin. Agricul-tural Economics 24(1):33-46.

Rosegrant, M.W. and S. Shetty, 1994. Production and Income Benefits From Improved Irrigation Efficiency: What is the Potential? Irrigation and Drainage Systems 8(4):251-270.

Saleth, R.M., 2001. Water Pricing: Potential and Problems. In: Overcoming Water Scarcity and Quality Constraints, 2020 Focus 9, R.S. Meinzen-Dick and M.W. Rosegrant (Editors). In-ternational Food Policy Research Institute, Washington, D.C.

Zérah, M.H., 2001. The Buenos Aires Concession: The Private Sector Serving the Poor. Water and Sanitation Program – South Asia, New Delhi, India. Available at: http://www. wsp.org/pdfs/sa_buenos.pdf

Mark W. Rosegrant Senior Research FellowEnvironment & Production Tech. Div.International Food Policy Research Inst.2033 K Street, N.W. Washington, DC 20006 (202) 862-5621 / Fax: (202) 467-4439

[email protected]

Mark W. Rosegrant is a Senior Research Fellow at the In-ternational Food Policy Research Institute (IFPRI).Rosegrant coordinates IFPRI’s research program on waterresource policy in developing countries with a focus onthe following policies: to maintain growth in irrigatedagricultural production; to promote efficient and equi-table intersectoral water allocation; and to improve thequality of the water resource base. He has publishedwidely on food and water resource policy issues and pro-vided policy advice to a number of governments.

Sarah Cline is a Senior Research Assistant at IFPRIworking on water resource policy ([email protected]).

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The Politics and Economics of Water Pricing in Developing Countries . . . cont’d.

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Reliable, affordable access to potable water and safesanitation is critical to the well-being of the world’s poor.These services are essential both for basic health, and forimproved economic opportunities. Yet about one billionpeople around the world are estimated to lack ready ac-cess to potable water, and two billion to safe sanitation.While detailed country data on who has and who lacksaccess are in short supply, the evidence is that these arepredominantly the poor, living in rural areas and, in-creasingly, urban and peri-urban slums.

Expanding access to these critical services was tradi-tionally regarded as a task for public sector providers.However, in many developing countries public water andsanitation providers, plagued by stubborn inefficienciesand chronic underfunding linked to substantially below-cost tariffs, have had limited success in expanding ser-vice to the growing urban poor. Many governments haveturned to the private sector to assist in increasing serviceefficiency and expanding service. Between 1990 and2000, 187 private sector water and sanitation projectsreached financial closure in developing countries, at-tracting US$36 billion in investment commitments (Fig-ure 1). (These data are drawn from the PPI Project Data-base maintained by the Private Provision of Public Ser-vices Group of the World Bank. The database tracks in-frastructure projects newly owned or managed by privatecompanies that reached financial closure between 1990and 2000. Further information is available fromShokraneh Minovi at [email protected].) While theearliest private sector schemes were in relatively well-offdeveloping countries in Latin America and East Asia,lower-income countries are also engaging insuch projects (Houskamp and Tynan, 2000).

The expansion and improvement of ser-vices to the poor was not a primary focus ofearly private participation schemes in thewater and sanitation sectors. There was ageneral expectation that benefits would flowto the poor as efficiency gains translated intoreduced service costs for connected house-holds and finance was mobilized for morerapid network expansion, including into low-income areas. To date there has been littlesystematic analysis of the impact of theseschemes on the poor. However, the early evi-dence suggests that the detailed design ofany private sector reform is critical to the ex-tent of benefits to the poor (one exception is Estache etal., 2000). In this article, I focus on what I see as thequestions to address, and policy levers for, “pro-poor” re-form – and the implications for how reform processes aredesigned and implemented.

IMPROVING ACCESS: KEY QUESTIONS

Two questions are key in identifying a sound andsustainable policy approach for improved access: (1) Howto improve the service options available to consumers, in-cluding the poor? and (2) How to empower the poor totake advantage of these options?

Many public and private sector reforms have focusedon extending a high quality of piped service to all house-holds in an urban area. It is common, for example, forconcession contracts to mandate expansion of conven-tional water and sewerage services to an increasing shareof a city’s population over a period of 25 or 30 years. Butmany of those currently poor will not benefit from suchmandates in the short or medium term. While not deny-ing the benefit of receiving a full-fledged conventional ser-vice in the long-term, the first question above focuses onhow to achieve some incremental service improvementfor all consumers in a relatively short time frame. Often,this will involve service providers other than the existingutility.

The second question embraces a range of concerns –from ensuring the basic affordability of an acceptableservice to ensuring that the poor are aware of the serviceoptions available to them, facilitating access to micro-credit, or overcoming access problems from insecure landtenure.

EMERGING LESSONS: POLICIES FORIMPROVING SERVICE TO THE POOR

For services to the poor to improve, service providersmust have incentives to innovate – to findways of delivering services at a cost and qual-ity that meets the needs and preferences oflow-income households. Government poli-cies, including policies enshrined in the de-tails of the contracts they write with the pri-vate sector, can have a profound impact onthese incentives. Here, I focus on five keyareas of policy: (1) policies on who can pro-vide services, and under what circumstances– in particular, the rules surrounding entryby small-scale service providers; (2) policiesshaping the interaction between existing util-ities and other service providers; (3) policiesfor the regulation of service quality; (4) poli-cies on the prices that the utility can charge

for services; and (5) policies on subsidies.

Entry

Private water and sanitation contracts – from man-agement contracts to concessions – routinely confer on


The cost and

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MOBILIZING THE PRIVATE SECTORTO SERVE THE URBAN POOR

Penelope J. Brook

the private company an exclusive right to provide water and sanitation services in a defined area, to the exclusion of other potential suppliers. In exchange, these contractsroutinely establish an obligation to provide services tothose requiring them, and in the case of concessions, toexpand services at a defined pace. Because water andsanitation have long been thought to have strong natur-al monopoly characteristics – to be insusceptible to com-petition – exclusivity provisions were regarded as rela-tively harmless, and indeed as a good way of enhancingthe financeability of private services and investment.However, they do come at the cost of legitimizing servicesby alternative suppliers to customers in the contract areawho currently lack service. In many developing cities,these customers account for a large percentage of thetotal population, and a disproportionate percentage ofthe poor. Small-scale providers – from tanker drivers andhandcart water deliverers to Paraguay-style aguateros(see box below) and private septic tank companies – arethe primary source of service to these households.Illegalizing service by such suppliers runs the risk ofpushing up prices, reducing quality – and quite possibly

fostering monopolization (or mafia-type control) of their activities at the expense of the households they serve. If legitimized, they can, by contrast, play an important rolein providing improved services in that possibly lengthyperiod before conventional services reach all poor house-holds. Avoiding fully exclusive contracts, and allowingentry to unserved areas, is the key to making this possi-ble.


Mobilizing the Private Sector to Serve the Urban Poor . . . cont’d.

The Aguateros in Paraguay

In Paraguay, about 300 to 400 private firms and indi-viduals – called aguateros – supply piped water tohouseholds not served by public water companies.These range from very small operations supplying alocal neighborhood to larger companies with as manyas 800 connections. While in many developing coun-tries water vendors have a reputation for selling waterat a much higher price than local utilities, theaguateros charge prices broadly in line with utilityprices. (Source: Solo and Snell,1998.)

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Figure 1. Private Water and Sanitation Projects, 1990-2000 (Source: World Bank PPI Project Database).

Interactions Between Utilitiesand Small-Scale Providers

The cost and quality of services offered by small-scaleproviders may depend on the terms on which they can in-teract with formal utilities. Small-scale providers may, forexample, be able to offer a cheaper, safer service if theycan purchase bulk water from the utility. In Teshie, asuburb of Accra in Ghana, tanker associations operateunder contract with the public water company to provideservices to unconnected households, at what appear tobe lower prices and better quality than when they oper-ated in the black market. (For more information on theTeshie case, see Kariuki and Acolor, 2000.) In Manila,one of the two concessionaires is working with low-in-come communities to install metered master connectionsfor the community as a whole, which then takes respon-sibility for extending service to individual households,and managing micro-billing. The cost of bulk purchaseswill be a critical determinant of final prices to consumers.In the great majority of cases, utilities use a retail tariffstructure where per unit prices rise as the quantity con-sumed rises. If water retailers purchase against this tar-iff structure, they will routinely face high prices, andpass these on to their customers. Establishing a bulkwater tariff that does not discriminate against such sup-ply is, therefore, an important policy step.

Quality

Good basic water services – and especially good basicsanitation services – are vital to human health. The flipside is that poor services can constitute a major healththreat. The regulation of quality is, therefore, an impor-tant policy concern. Traditional regulation focused on theinputs used to treat water and deliver it, and to remove

wastewater and treat it (the treatment methods to beused, for example, and the technical specifications of thedelivery network). Over recent years, there has been moreof a focus on the quality of outputs – the quality of servicedelivered to the household. This shift from inputs to out-puts makes possible innovation to find better, less ex-pensive, ways of delivering service of a given quality (a re-liable supply of potable water at reasonable pressure, forexample). In the city of El Alto in Bolivia, for example, aprivate concessionaire is working with poor neighbor-hoods to develop relatively low-cost “condominial” sys-tems for water delivery and wastewater removal (prompt-ing similar initiatives in one of the Manila concessions).However, outputs can still be pitched higher than is nec-essary to meet basic concerns about health and systemviability, possibly ruling out services that poor house-holds would prefer. For example, it has been reportedthat some households in El Alto prefer staying with thestandpipe service, rather than paying the cost of thehousehold connections mandated by the La Paz-El Altoconcession contract (Komives and Brook Cowen, 1999).

Prices

Rising block tariff structures (where per-unit pricesrise as the volume of consumption increases) apply wide-ly in both public and private utilities throughout thedeveloping world. Very often the lowest tariff block,sometimes called a “lifeline” or “social” tariff, is set wellbelow the cost of supply. The usual rationale for suchtariff structures is that they are meant to ensure afford-ability for poor households. In practice, there is often apoor match between low-income households and low-consuming households. In a recent survey of connectedhouseholds in Central American cities, for example, poorhouseholds were found to have roughly the same



consumption levels as richer households (Walker et al.,2000). Where a number of poor families share a connec-tion, they may indeed find themselves in a higher tariffbracket than smaller, richer, families. In addition, lifelinetariffs are only available to households that have connec-tions. In many developing cities vast numbers of thepoorest households lack connections – leaving the better-off to take most of the benefit from subsidized tariffs.Moreover, below-cost tariffs for lower levels of consump-tion are likely to actively discourage utilities from ex-panding service to these households (as they only standto lose money on every unit of service provided). Contraryto the conventional wisdom, a more “pro-poor” approachmay be to make tariffs fully cost-reflective – and rely onother kinds of subsidy to meet affordability concerns.(For a good discussion of the impacts of rising block tar-iffs, see Boland and Whittington, 2000.)

Subsidies

Surveys of low-income households frequently sug-gest a willingness to pay prices in excess of utility waterand sewerage costs (if for relatively modest levels of ser-vice). However, affordability may still be a problem. Meet-ing the cost of a connection to a formal water or sewer-age network is a major challenge for many poor house-holds; and where incomes are very low, households mayhave difficulty affording a level of consumption consis-tent with basic hygiene requirements. Governmentswanting to expand network services to the poor may,therefore, need to provide subsidies. To be effective andefficient, these subsidies need to be well-targeted to theirintended beneficiaries (and to avoid crowding out expen-ditures that these beneficiaries would willingly pay forservice access). Connection subsidies may range from fullsubsidization of the cost of connection, to concessionaryterms for repaying the cost of connection. In this context,a number of governments are utilizing what are some-times called “negative” or “least subsidy” concessions asa means of rapidly expanding service (though currentlyprimarily in sectors other than water). In Peru, for exam-ple, licenses for pay phones in rural villages are allocat-ed to the providers requiring the smallest subsidy to in-stall and maintain payphone services (Cannock, 2001). Asimilar approach has been used for rural phones andelectrification in Chile (Jadresic, 2000). Explicit con-sumption subsidies are less common. Chile has devel-oped a relatively sophisticated system for identifying andproviding relief on water bills to low-income households(Gomez-Lobo, 2001). However, targeting need not be soprecise. In Colombia, for example, eligibility for certainsubsidies is based on residence zones.

IMPLICATIONS FOR REFORM PROCESSES

Each of the policy issues discussed above has impli-cations for the design and implementation of arrange-ments for private participation in the delivery of waterand sanitation services. To be handled adequately, theyneed to be addressed in the process of developing anyprivate sector transaction. What does this mean for the

things that governments and their advisors need tothink about in preparing a policy framework for privateparticipation, and the transaction itself? Clearly there areimplications for the content of policy (e.g., rules on entryand bulk sales, on pricing structure, and on quality ofservice). But there are also implications for what must beresearched, and what conversations conducted, in thecourse of preparing a reform. For example, the prepara-tion processes for “conventional” private sector reforms ofwater and sanitation utilities spend relatively little timeidentifying the service providers who are currently serv-ing the poor, and considering whether and how theymight continue to be engaged in service provision wherenetwork expansion is going to be a lengthy process. Sim-ilarly, many reform processes involve only rudimentaryanalysis of unserved households’ willingness to pay forimproved services, and their service preferences. Bothkinds of information assume more importance in a delib-erately “pro-poor” reform process.

A pro-poor focus will also require broadening thestakeholder consultations that typically accompany re-form processes. The poor who live in urban slums maydiffer from conventional utility consumers in many re-spects, and generally do not have a voice in the kinds offormal consumer groups that may be involved in reformand subsequent regulatory processes. It is, therefore, im-portant early on to identify community organizations orother nongovernmental organizations that can crediblyrepresent the interests of these households, or serve asintermediaries in discussions with them on service pref-erences and options.

CONCLUSION

Closing the water and sanitation service gap will like-ly require considerable innovation and entrepreneurialeffort to find ways of better tailoring services to the needsof low-income households, and reducing costs to improveaffordability. The private sector, both for-profit and non-profit, has a central role to play in this process. However,the policies that governments put in place to frame pri-vate service provision, and to subsidize service access,can make or break such entrepreneurial efforts. Carefuland early attention is, therefore, needed to ensure thatany water and sanitation reform is, indeed, pro-poor.

LITERATURE CITED

Boland, J. and D. Whittington, 2000. The Political Economy of Water Tariff Design in Developing Countries: Increasing Block Tariffs Versus Uniform Price With Rebate. In: The Political Economy of Water Pricing Reforms, A. Dinar (Editor). Oxford University Press, New York, New York.

Cannock, G., 2001. Expanding Rural Telephony: Output-Based Contracts for Pay Phones in Peru. In: Contracting for Public Services: Output-Based Aid and Its Applications, P. Brook and S. Smith (Editors). World Bank Private Sector Advisory Services, Washington D.C., pp. 15-21.

Estache, A., A. Gomez-Lobo, and D. Leipziger, 2000. Utilities Privatization and the Poor’s Needs in Latin America: Have We Learned Enough to Get It Right?” Policy Research Working Paper No. 2407, World Bank, Washington, D.C.



Gomez-Lobo, A., 2001. Making Water Affordable: Output-Based Consumption Subsidies in Chile. In: Contracting for Public Services: Output-Based Aid and Its Applications, P. Brook and S. Smith (Editors). World Bank Private Sector Advisory Services, Washington D.C., pp. 23-29.

Houskamp, M. and N. Tynan, 2000. Private Infrastructure: Are the Trends in Low-Income Countries Different?” Viewpoint Note #216, Private Sector and Infrastructure Network, World Bank, Washington D.C.

Jadresic, A., 2000. Promoting Private Investment in Rural Elec-trification: The Case of Chile. Viewpoint Note #214, Private Sector and Infrastructure Network, World Bank, Washington D.C.

Kariuki, M. and G. Acolor, 2000. Delivery of Water Supply to Low Income Urban Communities Through the Teshie Tankers Association: A Case Study of Public-Private Initiatives in Ghana. Conference Papers for Infrastructure and Develop-ment: Private Solutions and the Poor, PPIAF, DfID and the World Bank, May 31-June 2, 2000, London, United Kingdom.

Komives, K. and P. Brook Cowen, 1999. Expanding Water and Sanitation Services to Low-Income Households: The Case of the La Paz-El Alto Concession. Viewpoint Note #178, Private Sector and Infrastructure Network, World Bank, Washington D.C.

Solo, T. and S. Snell, 1998. Water and Sanitation Services for the Urban Poor. UNDP-World Bank, Washington D.C.

Walker, I., F. Ordonez, P. Serrano, and J. Halpern, 2000. Pricing, Subsidies and the Poor: Demand for Improved Water Services in Central America. Policy Research Working Paper #2468, World Bank, Washington D.C.

[Note: Many of the documents listed above can be downloadedfrom the World Bank’s Private Sector Advisory Services “RapidResponse” Web site at: http://rru.worldbank.org.]

Penelope J. BrookSector Manager, EnergySouth Asia Energy and Infrastructure

UnitThe World Bank1818 H Street NWWashington, DC 20433(202) 473-3784 / Fax (202) 522-2427

[email protected]

Penelope Brook is currently Sector Manager, Energy, inthe South Asia Energy and Infrastructure Unit at theWorld Bank. In recent years, a major focus of her workhas been the design of private sector reforms and subsidyarrangements to improve access to infrastructure ser-vices by the poor. The views expressed here are those ofthe author and should not be attributed to the WorldBank or any other affiliated organizations, nor do any ofthe conclusions represent official policy of the WorldBank or of its Executive Directors or the countries theyrepresent.

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INTRODUCTION

Water has been called “blue gold” or “the oil of the21st century.” It is an irreplaceable commodity in finitesupply, while the world’s population and industrial activ-ities continue to grow, producing ever-rising demand forclean water. Newspapers are now carrying more andmore stories about broken water mains, water shortages,contaminated water outbreaks – and, most recently, con-cerns about water safety and security. Local politiciansand U.S. congressmen are now paying more attention towater issues, and finally, so are some on Wall Street.

Except for the larger foreign firms that lead the sec-tor, most U.S. companies in the water business are rela-tively small, and the stocks are considered “small capi-talization” names. About 85 percent of people in the U.S.still get their water from a municipal utility, making theprivate sector utility operators less visible on a nationalbasis. The sector has also been highly fragmented, withutilities, treatment and technology firms, and services providers seen as parts of separate industry sectors. Only

now is water starting to be viewed as an integrated in-dustry.

WATER: A SOLID INVESTMENT

One reason the water sector is now catching the eyeof investors is that it has been a solid performer, partic-ularly during the past two years. In nearly every monthsince the beginning of January 2000, the water industryhas outperformed the broader market averages. As of theend of October 2001, the water industry index main-tained by Schwab Capital Markets was up more than 10percent for the year, while Dow Industrial average wasdown nearly 10 percent and the NASDAQ was off by al-most 20 percent. Though past performance does notguarantee future results, as the classic Wall Street dis-claimer says, the water industry may attract more atten-tion and investment as Wall Street seeks out historically dependable growth industries during a bear market dri-ven by the global economic slowdown (see Figure 1below).


LOOKING AT WATER: A VIEW FROM WALL STREETDebra G. Coy

Figure 1. Schwab Capital Markets, L.P. Water Index Relative Weekly Performance,January 1, 2001 to November 2, 2001.

CONSOLIDATION AND THEFOREIGN INVASION

Over the last few years, the industry has undergone astunning round of consolidation, with more than $15 bil-lion worth of major acquisitions announced during 1999alone, though 2000 was a somewhat quieter year. Thebulk of this activity came from foreign buyers, includingFrench utility services conglomerates Vivendi Environ-nement and Suez, as well as British water companiessuch as Thames Water and Kelda Group. Thames Water,the largest UK water company, was in turn acquired bythe much larger German utility RWE AG last year (seebelow).

U.S. Filter, the leading U.S. water technology compa-ny, was acquired by Vivendi Environment for $6.2 billionin 1999, creating the world's largest water services andtechnology firm. Also in 1999, Suez acquired U.S.-basedNalco Chemical, a water treatment and filtration compa-ny, for $4.1 billion, and said it would acquire the re-maining 70 percent of United Water Services, the secondlargest U.S. water utility, in which it already held a mi-nority stake. Both Suez and Vivendi Environment listedtheir shares on the New York Stock Exchange in the fallof 2001, signaling their intent to further establish theiroperating presence in the U.S. The U.S. listings will allowboth companies to more easily access the U.S. capitalmarkets and gain a broader U.S. shareholder base.

German conglomerate RWE is the newest entrantinto the U.S. water industry. It announced in Septemberof 2001 that it would purchase American Water Works,the largest investor-owned water utility in the U.S., for$7.6 billion in cash and assumed debt. The acquisitionshocked many industry observers, who hadn't expectedthat the company that had most championed American

leadership in a fast-consolidating global water industrywould sell itself to a European utility conglomerate withlimited water experience. Industry observers were alsosurprised that American Water Works, the premier U.S.water utility, would agree to a sell itself for a lower valu-ation than United Water Resources commanded fromSuez two years ago.

WHAT IS THE WATER INDUSTRY ANYWAY?

There are several distinct sectors that have developedwithin the water industry as it moves forward and ma-tures. While the lines between these sectors are nowstarting to blur as the larger water companies build inte-grated, full-service firms, there are still key subsectorsand distinct groups of companies inside the industry.These include: (1) municipal and private water utilities,(2) commercial and industrial water filtration technology,and (3) water resources development.

Municipal Water Sector

The municipal water sector includes both regulated,investor-owned utilities and publicly owned municipalwater providers. Currently, investor-owned utilities makeup only about 15 percent of the overall utility market, aslocal government continues to dominate the sector. Thelargest investor-owned utilities include American WaterWorks (now being acquired by RWE), United Water Re-sources (owned by Suez), and Philadelphia Suburban(which remains independent). In fact, these companieshave been top performers among the water stocks, withAmerican Water Works up 48 percent since the beginningof the year in the wake of its merger announcement andPhiladelphia Suburban up 30 percent.

Other smaller companies, such as California WaterService and Southwest Water, have seen their stock


Looking at Water: A View From Wall Street . . . cont’d.

Major U.S. Water Industry Transactions.

TransactionTarget Acquirer Value

United Water Suez (France) $2.2 billionNalco Chemical Suez (France) $4.1 billionU.S. Filter Vivendi $6.2 billion

EnvironmentAquarion Kelda Group (U.K.) $600 millionCitizens American Water $835 million

Works (U.S.)E’town Corp. Thames Water (U.K.) $950 millionUtilities Inc. Nuon NV $400 millionAmerican Water RWE (Germany) $7.6 billionWorks

Source: Company data.

Global Leaders in Water.

Home 2000Company Country Revenues

Vivendi Water France $12 billionSuez´ ONDEO France $9 billionRWE/Thames* Germany/UK $2.5 billionSevern Trent UK $2.3 billionSaur France $2.2 billionAguas de Barcelona Spain $2 billionAnglian Water UK $1.8 billionAmerican Water Works* U.S. $1.3 billionSABESP Brazil $1.3 billionNuon NV Netherlands $750 million

*RWE AG announced in September that it would acquire *American Water Works.

Source: Company data and Schwab WRG estimates.

prices perform reasonably well over the last year. Howev-er, the revenues and stock performance of these smallercompanies are much more susceptible to local climateconditions. Revenues for water supply companies areclosely tied to climate. Hot dry conditions tend to in-crease water usage, and as a result, increase revenues,unless water restrictions are imposed. Unlike their largercounterparts, smaller investor-owned utilities are not re-gionally diversified. These companies tend to have small-er customer bases and limited service areas. For exam-ple, California Water Services saw a downturn in rev-enues this year due to unseasonably cool and wet condi-tions in its service area.

The larger, multi-state companies led by AmericanWater Works and Philadelphia Suburban have been ac-tively acquiring small regional water providers to expandtheir service area and client base. American Water Workshas made several large regulated utility acquisitions, andit recently acquired the holdings of Azurix North Americafor $150 million (see box on pg. 17 for information onAzurix). The acquisition of the Azurix operations willallow American to expand into the unregulated waterutility services business. This move marked an importanta strategic shift for American Water Works, giving it abase from which to compete more directly with Vivendiand Suez.

Water Treatment and Technology Sector

In the past, the water treatment sector has been evenmore fragmented than the water utility and services sec-tor. Water treatment technology includes many types ofcapital equipment and replacement parts, with varyinglevels of complexity, from basic pumps and valves tohigh-tech specialty membrane filters and analytical in-struments. Equipment needs vary from huge sewagetreatment screens that handle millions ofgallons of effluent per day to small filtra-tion cartridges used to provide molecu-lar-level ultrapure water for semiconduc-tor manufacturing.

Customers include utilities, individ-ual consumers, and industrial waterusers. For example, the power generationsector has become a major customer forfiltration firms as it undergoes expan-sion. Particularly in the western U.S.,where water supplies are scarce, “zeroliquid discharge” systems, which treatwastewater and loop it back into feedwa-ter, are becoming more common. Vivendi’s U.S. Filter andothers are angling to provide filtration technology to themore than 1,900 new power generation facilities that theenergy industry has planned to come online over the next20 years.

In addition to Vivendi’s U.S. Filter, leading publiclytraded companies in the membrane and desalination in-dustry include CUNO, Ionics, Osmonics, Pall Corp., andZenon. In water testing and infrastructure equipment,companies such as Danaher, Insituform, and ITT Indus-tries lead the way. Finally, in carbon filtration and ultra-

violet purification, companies such as Calgon Carbonand Trojan Technologies, though small, are leadersamong publicly traded stocks in this subsegment.

Like the rest of the water industry, the technologyand filtration sector is ripe for consolidation. Only U.S.Filter, now a wholly owned subsidiary of Vivendi Envi-ronnement, has made a significant attempt to roll up thesector. In the past year, larger firms such as ITT Indus-tries and General Electric have indicated interest in ex-panding into the filtration sector, though no major dealshave been announced so far.

Several publicly traded filtration companies, such asPall Corp, Ionics, Osmonics and Calgon Carbon, could beprime takeover candidates for larger firms that would beable to leverage the technology capabilities of these com-panies through better manufacturing and global market-ing capabilities. While market fundamentals are good, allof these firms have experienced operational problemsthat have constrained their stock values and thus in-creased the attractiveness of a strategic buyout.

Water Resources Development Sector

Water resources development is the newest sector ofthe water industry. This industry is primarily emerging inthe western United States, where water authorities areattempting to manage increasingly scarce resourcesthrough a combination of reduced water usage and de-velopment of new water supplies. The types projectsbeing developed include: (1) private water storage in un-derground aquifers, (2) bulk water marketing and watertrading, and (3) water recycling and desalination pro-jects.

The most visible player in the water resources mar-ket is California-based Cadiz, Inc. The company has beenworking on a ground water storage and water sales pro-

ject on its property in the Mojave Desert.The company is negotiating with south-ern California's Metropolitan Water Dis-trict (Met) to store up to 1 million acre-feet of water from the Colorado River foruse during dry years. Once completed,the project will be the biggest public-pri-vate partnership agreement in water stor-age and supply undertaken in the UnitedStates. The project, however, has takenlonger than expected due to regulatoryand environmental review requirements.It is now expected to gain final approvalin early 2002. Based on the terms of the

agreement between Met and Cadiz, we estimate the netpresent value of the 50-year contract to be in the rangeof $12-14 per share.

Other companies that are participating in this early-stage market development include PICO Holding’s VidlerWater subsidiary, and Western Water – none of which areyet generating significant profits from water resourcesoperations.

Tetra Tech, the national leader in water resourcesconsulting, is also seeing new business as California andother states expand their water management plans to



The shift toward the

design-build method of

project delivery in the

U.S. civil infrastructure

market is beginning

to have a significant

impact on the water

and wastewater industry

meet long-term needs. Among all the water stocks, TetraTech has been among the most consistent in showingstrong annual earnings growth. California's investor-owned water utilities – California Water Service Group,American States Water, and the Southwest Water Com-pany – are beginning to get involved in water resourcesprojects as well, though this is still a small part of theiroverall business.

THE CRYSTAL BALL: WHAT’S THEFUTURE OF THE WATER INDUSTRY?

Looking ahead, more changes are likely. Here arethree important trends that are just beginning to emerge.

A Shift Toward Design-Build Project Delivery – The shifttoward the design-build method of project delivery in theU.S. civil infrastructure market is beginning to have asignificant impact on the water and wastewater industry.The Design-Build Institute of America (DBIA) is nowtracking more than $4 billion worth of water-relateddesign-build projects underway in the U.S. municipalmarket, up from less than $1 billion of projects in the1990-2000 database. The historic approach of using dif-ferent vendors for design and construction is shifting toa more integrated approach, with one entity taking re-sponsibility for all phases of construction and sometimesfor long-term operations of a facility as well (hence the DBO – Design-Build-Operate – designation). This ap-proach is speeding up project delivery and reducingcosts, and it is also drawing larger firms with greater project management and financial resources into the

market. International banks with project developmentexperience are also becoming more active in the watersector.

In the U.S., one of the more prominent DBO con-tracts was the Tolt River water filtration plant awarded bySeattle Public Utilities in 1997. Closely held engineeringfirm Camp Dresser McKee teamed with a predecessor toAzurix for the project, which had a capital cost of $65million and a 15-year operating contract with two five-year renewal options. The utility expects to save $70 mil-lion in life cycle costs, about 40 percent below its bench-mark cost estimate.

Development of a Wholesale Trading Market for Water – Asnoted above, the private sector is beginning to get in-volved in providing wholesale water supply and storage inthe western U.S. Water rights have a long history of own-ership in the West, but efficient allocation and trading ofwater as a commodity has yet to take hold. As farmersand other major water owners are beginning to look atthe value of selling their water, a market-driven pricingand trading system should develop over the next fiveyears, gradually creating opportunity for private sectorwater brokers.

A Larger Role for the Internet – While the recent deflationof the dot.com bubble has slowed down Internet-relatedprojects across all industry lines, the use of the Internetin the water industry has wider promise than has thusfar been apparent. An eventual water trading marketwill likely be Internet-based. A few web sites have been



THE RISE AND FALL OF AZURIX

Energy trading giant Enron, then in its heyday, plunged into the water industry in 1998 with a big idea but little ex-perience. After purchasing Wessex, a well-regarded but modest-sized UK water utility that was to provide its base ofglobal operations, Enron quickly spun off Azurix in a $700 million initial public offering (IPO) in June 1999 priced at$19 per share. Azurix made additional acquisitions in the U.S., Argentina, and Mexico, and launched an innovative e-business strategy. Brash and over-confident, Azurix intended to bring Enron's skills in project development, financing,and risk management to the staid water industry, competing on a grand scale with the French water companies formulti-billion dollar water projects around the world.

But Azurix soon learned that the water industry was not as ready for change as it had thought. The company facedstiff competition on the international scene, losing several key contract negotiations to Suez and Vivendi Environ-nement. Even in the U.S., the company wasn't able to build the critical mass necessary to win major contracts. Itscostly Argentina operation performed poorly, mandated price cuts hurt the UK operation's financial results, and thecompany soon began to miss its overly aggressive earnings growth projections, spooking investors and hurting its stockprice. This in turn limited its ability to make new acquisitions, stunting its high-flying growth plans, and by late 2000the stock had fallen to $4 per share and the game was over.

Enron bought back the remaining shares from frustrated investors for $7 per share in early 2001, far below the IPOprice, and failing to sell the whole thing outright to a large European player, it began to slowly dismantle its troubledwater company. Ultimately, its losses on the venture will likely be in the range of $1 billion. In its third quarter 2001earnings report, Enron recorded a $350 million loss related to Azurix, with more to come. In November 2001, it soldthe Azurix North America operations to American Water Works for about $150 million. Now that Enron has filed forbankruptcy, the remaining water operations will almost certainly be sold or closed over the coming year, leaving theonce bright and shining idea of Azurix only a footnote in the history of the water industry.

started to participate in this trend, but they are thus farseeing little traffic:

• Azurix’s water2water.com• coloradowater.com,• waterrightsmarket.com,• water2water.com,• waterexchange.com, and• waterrightsmarket.com.

Others, such as:

• Azurix's waterdesk.com and• VerticalNet’s WaterOnline.com

have been formed to develop online markets for procure-ment of goods and services. This market has also not yetfulfilled the promise investors were hoping for when B2B(business-to-business) sites were hot, but as the waterindustry itself matures, online buying is likely to furtherstreamline the supply chain. Large buyers such as Viven-di's U.S. Filter are already using the Internet to conductreverse auctions to reduce their procurement costs.

CONCLUSION

In conclusion, it is useful to note that a year ago,CBS MarketWatch.com reported that “Water companystocks have outperformed most U.S. stock market index-es over the past 20 years, but it seems Wall Street is onlyjust now taking notice.” As consolidation, privatization,and technology innovation continue to transform the in-dustry, water stocks should continue to be solid per-formers in the coming years.

Debra G. CoySenior Analyst for Water Industry and

Environmental PolicyWashington Research GroupSchwab Capital Markets1000 Thomas Jefferson Street, N.W.Suite 606Washington, DC 20007(202) 298-6226 / Fax: (202) 298-6146

[email protected]

Debra G. Coy is a Senior Analyst for Water Industry andEnvironmental Policy at the Washington ResearchGroup, which provides political, economic, and industryresearch for institutional and corporate investors. She re-ceived her Bachelor’s degree from Southern College andher Master’s degree in Journalism from the University ofMaryland. The Washington Research Group is part ofSchwab Capital Markets L.P.

❖ ❖ ❖


Looking at Water:A View From Wall Street . . . cont’d.

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▲ Employment Opportunity

DIRECTORWATER QUALITY LABORATORY

HEIDELBERG COLLEGE – TIFFIN, OHIO

Heidelberg College is re-opening its search for appli-cants for the position of Director of the Water QualityLaboratory (WQL). The WQL, founded in 1969, is anationally recognized environmental research, moni-toring and educational organization associated withthe science departments of Heidelberg College. TheWQL’s mission is to help protect the aquatic re-sources of Ohio, the Midwest, and the Lake Erie andGreat Lakes ecosystems by evaluating water qualityimpacts of agricultural and other land uses, support-ing remedial programs, and assessing their effective-ness. This is accomplished through research, exten-sion activities, and support of the educational pro-grams of the College.

We seek a Director who can guide the continuing evo-lution of the WQL programs in response to this mis-sion. Applicants must possess a doctoral degree withat least five years of experience in water resources ora related environmental or agricultural discipline. Werequire a person with a documented record of profes-sional accomplishments and the ability to maintainand expand a network of contacts for research andfunding at local, state, and national levels. The Direc-tor has primary responsibility for maintaining ongo-ing funding from governmental, industrial, and pri-vate sources, and for securing new funding sources.Administrative and project management skills in anacademic research environment, excellent oral andwritten communication skills, and energetic leader-ship are essential in this position.

Heidelberg College is a private liberal arts institutionlocated in northwestern Ohio. The College has an es-tablished reputation for academic excellence and out-standing teaching.

Please send a letter of application, full curriculumvitae, a 1- to 2-page narrative summarizing your ad-ministrative philosophy, and names and contact in-formation for three references to Dr. Kenneth Krieger,Water Quality Laboratory, Heidelberg College, 310 E.Market Street, Tiffin, Ohio 44883, (419) 448-2226.Additional materials will be requested from appli-cants selected for further consideration.

Screening of applications will begin on February 1,2002, and will continue until the position is filled.

More information about the WQL and this positioncan be found at http://www.heidelberg.edu/wql orby contacting [email protected].

Water and wastewater projects require significantamounts of investment. A recent estimate reckoned thatcompliance with the European Union’s (EU) directives ondrinking water, wastewater and bathing water would costsomewhere between 100 and 200 billion Euros. For theformer communist countries of central and eastern Eu-rope hoping to become members of the EU, the cost ofcompliance is reckoned to be between 15 and 35 billionEuros (Owen 2001).

In the United States, upgrading water and waste-water systems to comply with U.S. Environmental Pro-tection Agency (USEPA) environmental standards is esti-mated to cost anywhere between $275 billion and $1 tril-lion between now and 2017 (Owen, 2001).

In Europe and the United States, federal and localgovernments have proved increasingly unwilling to fi-nance these huge investment requirements. Many publicauthorities are restricted in their borrowing capabilities,and even in cases where they are not, politicians prefer tospend money on more eye-catching projects such asschools and hospitals.

For the United Kingdom (UK) water industry, the ideathat the private sector should be more involved in fund-ing water projects dates back to the time of the ThatcherGovernment. Former Prime Minister Margaret Thatcherargued that public borrowing was not the best way offunding expensive water projects, leaving private capitalas the only source of funds. Thus, the water industry inEngland and Wales was floated on the stock market in1989.

Governments in a number of developing world coun-tries have reached a similar conclusion totheir counterparts in Europe. In parts ofAfrica, the Middle East, and Asia water andwastewater systems are hugely underdevel-oped or badly run down, investment is vir-tually non-existent, and large numbers ofpeople go without basic water services. Forexample, in the Middle East and Africa as awhole, only 20 percent of the population isserved via a formal water network and only10 percent is served via a formal seweragenetwork. This compares to 86 percent and74 percent, respectively, in western Europe.

The service is extremely bad in thesecountries, and consequently, customer tar-iffs are low, making it difficult for serviceproviders to generate the funds required tomake improvements. Local governmentsalso lack the required funds and are unlikely to have ac-cess to commercial loans. Private finance is one way ofbreaking the cycle and raising the required funds to im-prove services.

FINANCING A PROJECT

Private sector participation, or PSP for short, in-creases the availability of capital for building new watertreatment and sewage plants and extending or upgradingdistribution networks. It also brings access to other ben-efits such as new technology and private sector operatingskills. For example, in the United States the private sec-tor has delivered cost savings of between 20 and 35 per-cent on some contracts by making efficiency savings andoperating in a more streamlined and focused way thanthe public sector can.

The main reason for involving a private company,however, is the access to capital it brings. There are anumber of global private water companies prepared tobecome investors in a project. These include Ondeo(Suez) and Vivendi Water (Vivendi Environnement) ofFrance, the Anglo/German group RWE Thames Water,and smaller companies such as the UK’s AWG and Inter-national Water. Between them the two market leadersOndeo and Vivendi supply over 200 million peoplearound the world with water and sewerage services.Ondeo’s cumulative revenues at the end of September2001 were 7.4 billion Euros while those of Vivendi Waterstood at 10.1 billion Euros. Both companies were recent-ly floated on the New York Stock Exchange.

An international private water company taking on aproject – often referred to as the project sponsor – has ac-cess to various sources of capital. The first is its own eq-uity. Other sources are syndicated bank loans, loans orequity provided by multilateral lending agencies such asthe World Bank and Asian Development Bank (ADB), and

the flotation of shares or issue of bonds intocapital markets.

Since there are a number of risks involved inlending money to water projects – especially indeveloping countries – sponsors like Vivendiand Ondeo prefer not to finance a deal ‘on bal-ance sheet’ (i.e., through corporate lending). In-stead, they devise a structure and means of fi-nancing which is based on the project itself.

In corporate finance deals, the primarysource for repayment of lenders is the sponsor-ing company itself, backed by its balance sheet.In a project finance deal, loan and interest re-payments and dividend payments to sharehold-ers rely on the cash flow and assets of the pro-ject.

Project financing thus helps to fund new in-vestments by structuring the finance around the project’sown operating cash flow, without additional sponsorguarantees. Most importantly, it means that no publicsector finance is required. The project is built with pri-vate money and handed back to the public sector, at nocost, at the end of the contract.


GLOBAL PRIVATE FINANCE IN THE WATER INDUSTRYPeter Allison

In many parts

of the world,

water is still

regarded as a

‘gift from God’

and people are

suspicious of

private companies

and banks making

a profit from it

POLITICS: A CAVEAT

There are several requirements for a successful pro-ject finance deal but the overriding one is political will.According to ANZ Investment Bank’s Douglas G. Strong,political commitment includes a willingness to instigatepotentially unpopular tariff increases or the initial intro-duction of water pricing (Strong, 2001)

Banks such as ANZ need to be assured that an in-come stream will finance their cash outflow and that debtcan be supported over the duration of the project. They

also look for political stability and a legal and regulatoryframework which makes investment in a project attrac-tive to foreign companies. Lenders may also require somekind of exchange rate hedge to be in place or an auto-matic price adjustment to cover exchange rate devalua-tion. Often, project revenues are collected in the localcurrency but the debt is repayable in US dollars.

In a recent case, Maynilad Water Services – an Ondeocompany set up to provide water and sewerage servicesin the west zone of Manila, The Philippines – saw a loanoriginally valued at 20 billion pesos rocket to 40 billion


Global Private Finance in the Water Industry . . . cont’d.

Selected Project Finance Deals in the Water Industry.

Lead Total Type of ArrangingProject Sponsor Cost Financing Bank Syndicate

Chengdu, China Vivendi/ $106.5 Principal ADB Credit Lyonnais Includes ANZ,400Mld Water Plant Marubeni million loan of $26.5M; Dresdner Kleinwort

ADB complementary Wasserstein, Fuji,loan of $21.5M from and Barclayscommercial lenders; CapitalEIB $26.5M loan

Thu Duc, Vietnam Ondeo $135 $35M ADB loan; The commercial loan300,000 m3/d million $65M export credit is underwritten byWater Plant tranche ANZ, Fortis Bank,

and Credit Lyonnaisand is insuredby export creditagencies

Barka, Oman AES $420 $332 million loan Includes Bank of A numer of banksPower and Water Corporation milion with $16.6 million Toyko Mitsubishi, came into the dealPlant standby facility BNP Paribas, and at the general

Credit Agricole syndication stageIndosuez

Izmit BOT, Turkey Thames $900 $236M ECGD Launched as anDam, 480 Mld Water million supported loan; internationalWater Plant and $167M Turkish syndicate by ChasePipeline commercial loan; with RBoS, Société

$180M Coface Générale, Fuji, andbuyer credit loan; Sumitomo as$40M Japanese co-arrangerscommercial loan;$180M JEXIMloan

Shuweihat, UAE CMS Energy $164 $1.2 billion loan Barclays Capital, Still to achievePower and Water Energy and billion Citibank, Bank of syndicationPlant International Tokyo Mitsubishi,

Power RBoS, NationalBank of Abu Dhabi,Abu DhabiInvestmentCompany, KfW

pesos because of the devaluation of the peso against thedollar. The company has just secured a tariff increasefrom the government to help recover its losses.

Politically, however, introducing tariff rises is notstraightforward. In many parts of the world, water is stillregarded as a ‘gift from God’ and people are suspicious ofprivate companies and banks making a profit from it.

WHERE ITS HAPPENING

Around 7 percent of the world’s population is cur-rently supplied with water and wastewater services byprivately financed water companies or projects. In somecases, such as the UK and Chile, assets have been soldoff to private companies. More common are BOT (BuildOperate Transfer) or concession projects, where the as-sets remain in public hands and private companies arehired to operate and improve them.

In the latter scenario, the period of the contract hasto be long enough to allow the private investors to makea return on their outlay. Substantial capital investmentis likely to be required in the early phase of the contract,which means that the business is likely to be cash nega-tive in the first few years. Typically these types of contractare for 20, 25, or 30 years allowing investors to make re-turns in the long term.

There have been some notable successes in the pri-vate finance market. These include Buenos Aires in Ar-gentina. Ondeo is the technical operator of this contract,but there are other investors including Vivendi andAguas de Barcelona, a local bank, and other Argentinecorporate investors. The sponsors aim to invest $4 billionover a 30-year period, which commenced in 1995. Theinitial phase of development was financed with $450 mil-lion of equity in combination with successive debt fi-nancings totaling $750 million.

According to consulting company Halcrow, the evi-dence to date suggests that the Buenos Aires contracthas proved effective. Badly needed investment has risenrapidly, service to customers has improved, as has oper-ational efficiency. Tariffs have risen since 1993 but arestill almost certainly lower than they would have beenwithout privatization (Clark, 2001).

In the UK, privatization has also been a success.Over 50 billion Euros have been invested since 1989 andmore investment is in the pipeline. This has resulted in abetter service to customers and an improved environ-ment. Prices went up after privatization in 1989 but havefallen recently as the private water companies have beenable to run their businesses more efficiently than the oldpublic authorities.

Project finance deals in the water industry continueto close on a regular basis as governments come understill greater pressure to restrain public spending. MiddleEast water and power projects, or IWPPs (IndependentWater and Power Projects), has been an especially attrac-tive market in 2001. A number of deals have closed andmore are set to do so. Countries such as the United ArabEmirates and Oman have established the required regu-latory and legal framework to enable foreign companiesto invest in new plants.

A $350 million project financing for a power and de-salination plant at Barka in Oman was successfullyclosed in July, and the UAE’s Shuweihat IWPP was dueto close at the time of writing. The Shuweihat project,which includes a 100 million imperial gallons/day de-salination facility, will require a loan of $1.25 billion.

REFERENCES

Clark, Robin, 2001. PFI in the Water Industry: Practical Lessons From Europe and Latin America. Author Interview, Novem-ber 1, 2001, Halcrow Group, London, United Kingdom.

Owen, David. 2001. PSP and Prospects in Water and Wastewater Services. Author Interview, November 14, 2001, International, London, United Kingdom.

Strong, Douglas, 2001. Structuring for a Successful Financial Close. Author Interview, November 1, 2001, ANZ Investment Bank, London, United Kingdom.

Peter AllisonCWC Publishing3 Tyers GateLondon SE1 3HX UK+44 207 089 4161Fax: +44 207 354 9590

[email protected]

Peter Allison is the editor of “Global Water Intelligence,”a monthly newsletter on the international water industrypublished by the London-based CWC Group. Mr Allisonalso heads the group’s Water Industry Sector, which pro-vides management reports, conferences and strategicmarket analysis.

❖ ❖ ❖


Global Private Finance in the Water Industry . . . cont’d.

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SPRING SPECIALTY CONFERENCE“COASTAL WATER RESOURCES”

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INTERACTIONS”

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“ANNUAL WATER RESOURCES CONFERENCE”

For additional [email protected]


INTRODUCTION

This article introduces the reader to the argumentbehind the idea for using water markets to allocate inareas where water is scarce. Water markets have clearadvantages over conventional command and controlmethods of allocating or reallocating water. Yet problemscan arise with markets, such as monopoly control, wheninformation about market exchanges is not widely sharedor when new water rights are not carefully allocated. It isalso likely that the strong desire for local control overwater resources will prevent the expansion of water mar-kets much beyond the neighboring water districts. Thisarticle explains why this is so and what the likely out-come will be for global markets.

ROLE OF WATER MARKETS

As we consider the use of markets for water, severalimportant questions arise. First, are markets being usedwidely around the world; and second, what is the poten-tial for the spread of water markets? If the answer to thefirst questions is a qualified no, but the answer to thesecond questions is a qualified yes, then a third questionbecomes important. What is constraining the use ofwater markets to allocate scarce water resources? Final-ly, do markets pose some dangers for water users?

In answering the first question, one finds that thereare numerous examples of where water markets have ef-ficiently reallocated water to higher valued uses. Howev-er, in terms of the total amount of surface water allocat-ed around the world, government command and controlsystems are by far the most common means of allocatingand reallocating large quantities of water among users.For ground water the situation is somewhat different. Inmany countries ground water use is tied toland ownership. Thus, in those countrieswith private land ownership, farmers controlground water allocation.

Formal and informal water marketshave appeared around the world in placeswhere water is scarce. In Spain, water mar-kets developed several centuries ago to helpallocate scarce surface water (Maass andAnderson, 1978). Other examples are foundin India where it has been estimated that 50percent of the farmers using ground waterhave purchased water through informalmarkets among farmers. Active water mar-kets are also found in Chile, Australia, andin the Canary Islands where water laws facilitate watertrading. Closer to home, we find active water markets inNew Mexico, Northern Colorado, and the Central Valley ofCalifornia. The groundwork has also been completed formarkets to develop in Brazil, Mexico, and Texas (Simpson

and Ringskog, 1997; Easter et al., 1998). Also small, in-formal, local water markets have developed in manyplaces such as in parts of Pakistan and Bolivia (Easter etal., 1998).

CONDITIONS FOR EFFECTIVE MARKETS

Although some informal water markets have devel-oped under less than ideal settings, they generally, oper-ate much more effectively if the following conditions exist:

1. Water rights or water use rights are well-estab-lished, quantified, and separate from land.

2. Organizational or management mechanisms arein place to assure that the traded water reaches the newowner or owners.

3. The infrastructure for conveying water is flexibleenough for water to be rerouted to the new owner.

4. Mechanisms are in place to provide “reasonable”protection against damages caused by a water sale forparties not directly involved in the sale.

5. Mechanisms are in place to resolve conflicts overwater rights and changes in water use.

6. Water rights are registered and people are well-informed about water trading.

BENEFITS FROM MARKETS

Both the recent development of water markets andthe growing scarcity of water suggest that there is a large

potential for the use of water markets as atool to allocate or reallocate water. The bigadvantage of water markets is the increasedincentive for efficient water use. Users nowhave the option to save water and sell itrather than use more than they “reallyneed.” Furthermore, this incentive worksjust like higher prices but only those whobuy new supplies have to pay the higherprices. All existing users see water as hav-ing a new higher “market value” eventhough they don't have to pay the higherprice for their existing water rights or allo-cations.

Consequently, the water will generatehigher net economic benefits because it is allocated tothose uses offering the highest net returns. For example,the ground water markets in India create $1.4 billion inannual net gains of which 70 to 80 percent accrues tobuyers (Easter et al., 1998). Furthermore, the potential


WATER MARKETS: THE GLOBAL PERSPECTIVEK. William Easter and Sandra Archibald

... it does seem

clear that water

markets will play

a significantly

larger role in the

future allocation

of water currently

used for irrigation

economic benefits for southern California of adoptingwater markets has been estimated to be from $0.7 to 1.2billion per year (Newlin et al., 2001).

Effective water markets offer at least two additionalbenefits when compared to the traditional commandand control approach for reallocating water. First,reallocation of water is generally easier and more equi-table through markets since those giving up the waterare paid for their water and will generally support thetransfer as do the potential buyers. If a market-based ap-proach was used to reallocate water to meet water quali-ty standards in the Sacramento/San Joaquin Delta –rather than through regulatory reallocation without com-pensation – there would be a social net gain of approxi-mately $225 million (Easter et al., 1998). Second, watermarkets can provide environmental benefits in areaswhere overirrigation has caused drainage and salinityproblems. With water markets farmers have an incentiveto stop overirrigating and sell some of their water. Thiscan reduce the amount of water applied and help lowerthe water table. In areas of India and Pakistan – irrigatedwith large government surface systems – markets couldbecome an important tool in reducing their drainageproblems. The same is true in the San Joaquin Valley ofCalifornia where there are almost 200 thousand acres ofoverirrigated land with drainage problems.

PROBLEMS WITH MARKETS

Still there are some concerns about water markets,particularly when it means moving control of water usefrom the public to the private sector. One of these con-cerns involves the potential for a monopoly to developwhere an individual, or company, gains control over thewater source. Farmers are concerned that monopoly con-trol will result in higher water prices and water diver-sions. Concern over the loss of control occurred in NorthColorado when Thornton, a suburb of Denver, purchasedalmost 50 percent of the stocks of a privately held watersupply and storage company. Since the city wanted to di-vert the water for urban uses, many downstream waterusers protested. In the end the city was only allowed todivert half of the water they purchased. This case is alsoan example of another potential problem with water trad-ing: downstream users don't get the same quantity orquality of return flows that they did in the past becauseof the trade. The problem in this example was resolved bylimiting the amount of water that Thornton was allowedto divert (Simpson and Ringskog, 1997).

A better example of monopoly power is found in Chile(Bauer, 1998). The primary cause of the monopoly powerwas an initial misallocation of water rights. The govern-ment issued large water rights in the Bio Bio River to aprivately-owned power company for power generation. Atfirst, this did not appear to be a problem because the firmwas not diverting the water and only using to power itsgeneration turbines. However, the company changed thetiming of water releases and river flows, which had an ad-verse effect on downstream irrigators. The end result wasa change in consumptive water use. The downstreamwater right holders had no recourse because Chile’s

water law provided no mechanism for protecting theirwater claims. The problem would have been avoided if thestate had been more careful in how it distributed the“new” water use rights.

Another concern is the potential for overdraftingground water because of offsite water users. In otherwords, water markets create incentives for landowners topump more water than the natural recharge over time.In many cases this is partly the result of incomplete prop-erty rights that allow pumpers to pump water that comesfrom under their neighbor's property. One example wherewater markets and overdrafting appears to be a concernis the Canary Islands. Here water markets have added tothe incentives to overuse the ground water in a regionfacing declining water tables. The problem could havebeen avoided by setting limits on the quantity of waterwithdrawn and limiting sales to this quantity or by es-tablishing proportional water rights that are based on theannual recharge rates.

Finally, many local communities become concernedif water markets transfer “their” water to “outside” com-munities. The concern comes primarily from firms thatprovide goods or services to water users (in most cases ir-rigators), and those firms that purchase goods from thewater users. The wider community also becomes con-cerned if large quantities of water are traded to outsideusers. The loss of water can cause a general downturn ina local economy dependent on irrigated agriculture.Again a solution to the problem is to set limits on theamount of water that can be sold outside the region.

WHAT SHOULD WE DO?

If policy makers are innovative, and can develop thenecessary rules and incentives, the above problems canbe solved. The critical thing is to do it without damagingthe goose that can lay a golden egg. Care must be takenin developing the rules so that they provide safeguardsbut still allow ease of water trading. In areas such as Cal-ifornia, the policy makers have errored on the side of toomany rules that effectively constrain trading, and restrictregional exchanges to a very highly structured marketthat does not allow the market to determine a price (East-er et al., 1998). As a result, in California and other areaswith similar local concerns, we find mostly localizedwater markets operating within irrigation districts andsome limited trading between districts. This is, in largepart, due to the strong pressure to keep water in localareas.

In conclusion, it does seem clear that water marketswill play a significantly larger role in the future allocationof water currently used for irrigation. Yet these marketsare likely to be fairly localized and limited to individualwater districts and their neighbors in water scarce re-gions. A few exceptions may develop in areas with exten-sive interconnected canal systems and rapid urbangrowth. Here, if policy makers can be innovative, moreextensive water markets will develop as water scarcity in-creases.


Water Markets: The Global Perspective . . . cont’d.

LITERATURE CITED

Bauer, Carl J., 1998. Against the Current Privatization Water Markets, and the State in Chile. Kluwer Academic Publishers, Norwell, Massachusetts, 164 pp.

Easter, K. William, Mark W. Rosegrant, and Ariel Dinar, 1998. Markets for Water Potential and Performance. Kluwer Acade-mic Publishers, Norwell, Massachusetts, 298 pp.

Maass, A. and R.L. Anderson, 1978. ...and the Desert ShallRejoice: Conflict, Growth and Justice in Arid Environment. MIT Press, Cambridge, Massachusetts, 447 pp.

Newlin, Brad D., Jay R. Land, and Richard E. Howitt, 2001. Southern California Water Markets: Potential and Limitations. Journal of Water Resources Planning and Management (in press).

Simpson, Larry and Klas Ringskog, 1997. Water Markets in the Americas. The World Bank, Washington, D.C., 51 pp.

K. William EasterUniversity of MinnesotaDepartment of Applied Economics317 Classroom Office BuildingSt. Paul, MN 55108(612) 625-7728 / Fax: (612) 625-2729

[email protected]

K. William Easter is professor in the Department of Ap-plied Economics at the University of Minnesota. He re-ceived B.S. and M.S. degrees from the University of Cali-fornia-Davis and a Ph.D. degree in agricultural econom-ics from Michigan State University. He has conducted ex-tensive research on the topic of water management andwater markets and has published numerous articles andbooks including “Markets for Water: Potential and Perfor-mance” published by Kluwer Academic Publishers.

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Water Markets: The Global Perspective . . . cont’d.▲ Employment Opportunity

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▲ Future Issues of IMPACT

MARCH 2002 SEPTEMBER 2002SMALL MUNICIPALITIES AND WATER SUPPLY DISTANCE LEARNING IN WATER RESOURCES

LAUREL E. PHOENIX FAYE ANDERSON

([email protected]) ([email protected])

MAY 2002 NOVEMBER 2002COASTAL MANAGEMENT PROBLEMS INTERNATIONAL TRANS-BOUNDARY WATER DISPUTES

JEFFERSON G. EDGENS CLAY J. LANDRY

([email protected]) ([email protected])

JULY 2002 If you wish to submit an article for any ofHISTORICAL ASPECTS OF WATER RESOURCES-II the above issues, contact the designated

RICHARD H. MCCUEN Associate Editor or the Editor-in-Chief([email protected]) N. Earl Spangenberg ([email protected]).

INTRODUCTION

Water has been traditionally viewed as an inex-haustible resource that should be available to everyoneat little or no charge. However, this view is changing withdemand outstripping supply wherever water is treated asa “free” good. A recent study by Johns Hopkins Universi-ty predicts that, under current water management, 35percent of the world’s population will run short of waterin the next 25 years (Hinrichsen et al., 1997). With theimpending water shortages, countries are looking fornew, innovative ways to manage this valuable resource.

Most experts agree that the opportunities for ex-panding traditional water sources such as ground waterand reservoir storage is limited due to rising environ-mental and economic costs. For example, in some partsof the world, the cost of tapping new ground water sup-plies has tripled as a result of aquifers being drawndown. The draw down is also causing pollution problems,further driving up the cost of treating water. With limitedsupplies of fresh water, some users are turning to de-salinization to meet the rising demands. Even with recenttechnological advances, desalinization still comes with ahefty price tag.

With the high cost of development limiting expansionof water supply, the growing demand for water will bekept in check by higher prices, and supplies to meet thedemand will have to come from reallocating water fromcurrent uses. Neither of these has occurred becauseprices and allocation have been determined in the politi-cal arena. In that setting, powerful interestgroups have prevented any meaningful in-creases in water prices or reallocations.

MARKETS FOR WATER

To bring demand and supply into bal-ance, water markets are necessary. Under amarket system, prices are not regulated, butare determined by supply, demand, compe-tition, and the cost of providing services. Inmost countries where water is scarce orcostly to access, systems of rights for waterhave emerged either through custom orthrough laws and regulations. The rightsdefine the amount of water to which theowner is entitled.

The western United States is home to some of theworld’s best established water markets. Colorado, for ex-ample, has one of the most active, with tens of thousandsof acre-feet (an acre-foot is enough water to supply a fam-ily of four for a year) of water traded each year throughprivate, voluntary transactions. Profits go to those whoconserve water and sell it. During the last few years, the

market has grown considerably, providing a reliablesource of water for farmers as well as thirsty residents ofDenver, Fort Collins, and Colorado Springs.

Water markets are forming elsewhere in the westernUnited States. Westlands Irrigation District in Californiahas an electronic trading board where farmers buy andsell water. In Utah and Nevada, residential buildingbooms have given rise to active markets as well. In thosestates, developers are buying water to ensure that newhomes have an adequate supply. Oregon has even devel-oped an energetic market for water intended for environ-mental needs. In that state, an environmental organiza-tion is paying farmers to use less water for irrigation andleave more water in the rivers to help protect endangeredsalmon. Similarly, the city of Reno, Nevada, is buyingwater from farmers to increase flows and solve some ofthe water quality problems in the Truckee River. The riverserves as the city’s primary source of drinking water.

Active environmental water markets are emergingaround the western United States. From 1990 to 1998,water sales for environmental uses such as maintainingstream flows for fish and water quality totaled more than$61 million (Landry, 1998). In 1997 alone, $11 millionwas spent on instream water acquisitions and that num-ber is expected to double by in the coming years.

The market revolution has not been confined to theUnited States. Markets can be found in Australia, Chile,and Mexico (Anderson and Snyder, 1997). The introduc-tion of markets in these countries has encouraged con-servation and stimulated economic opportunities. For ex-

ample in Santiago, Chile, the water compa-ny EMOS found it cheaper to rehabilitate itsaging pipe system and thus reduce leaksthan to pay the market price for waterrights (Thobani, 1998). Some Chilean farm-ers have even used dry year options con-tracts as a way to save on buying waterrights that are only needed duringdroughts. Dry year options are contractualarrangements made ahead of time for ac-cess to water during droughts. Similarly,Mexican farmers have adopted water savingirrigation systems when confronted withprices. In Mexico, water markets enabled anentrepreneur to start a bottled water com-pany by purchasing water rights to a spring

from a farmer. Not only was the farmer better off, but thecompany created employment opportunities for the localcommunity.

PRICING WATER

Historically, water has been underpriced. Most coun-tries have treated it as a public resource rather than an


THE RISING TIDE OF WATER MARKETSClay J. Landry

Prices set by

municipal governments

at levels below the

cost of services

limits the

opportunity for

utilities to

generate revenues

economic commodity, subsidizing prices so that it is af-fordable for everyone, especially the poor. In fact, thesesubsidies do little to help the poor. In developing andtransitional economies, 30 to 60 percent of the urbanpopulation has no formal hook-up to potable water. Be-cause of the lack of revenue, municipalities cannot affordto expand services to keep up with growing demands.Usually, the poorest of neighborhoods are the last to re-ceive services, if ever. Often water vendors with tankertrucks are the only source of water for poor neighbor-hoods. That water can be expensive. A United Nationsstudy found that the poor pay on average 10 to 20 timesmore per liter (and sometimes as much as 300 timesmore) for water purchased from water vendors. Conse-quently, many people go without adequate water suppliesfor basic needs. Estimates of basic water needs by theWorld Health Organization, World Bank, and the U.S.Agency for International Development range from 20 to40 liters per person per day.

Prices set by municipal governments at levels belowthe cost of services limit the opportunity for utilities togenerate revenues. According to the World Bank, publiclyoperated water utilities in many developing countriesrarely collect revenues on as much as one-third of thewater they supply. Cost recovery in developed countriesis not much better. Without adequate revenues, publicwater utilities have no incentive or ability to expandwater services to large sectors of the population, espe-cially low-income people without political clout.

Recent pricing reforms that charge customers com-mercial rates is attracting private capital and transform-ing many publicly held water systems into economicallyviable and financially attractive enterprises. According tothe Organization for Economic Cooperation and Develop-ment (OECD), most countries have made progress “to-ward the goal of more efficient and effective pricing” ofwater services. However, while water prices have in-creased in real terms in nearly every country, most stillfall short of the full cost of supplying water. Also, subsi-dies for certain types of uses are still prominent. Table 1provides a comparison of water prices for different usesin various countries.

The OECD found that for most countries industrialand agricultural water users received the largest subsi-dies in the delivery of water (OECD, 1999). Yet, some ofthe most significant changes in pricing are occurring inthese sectors. For example, water metering of agricultur-al users in the United Kingdom is standard practice sincewater services were privatized. Also, other countries suchas the United States and Australia have developed trad-able water right markets as a way to make farmers con-sider the opportunity cost of the water and encourageconservation.

Potential for investment in the water supply industryis massive. Cities throughout the world are facing grow-ing populations and aging water systems in desperateneed of capital improvements. The World Bank estimatesthat nearly $600 billion is needed globally to meet the de-mand for services in water supply over the next ten years.Much of this investment is expected to come from the pri-vate sector (World Bank,1999).

PRIVATIZING WATER SERVICES

The wave of privatization sweeping out from the de-veloped world is starting to reach developing countries.Already the private sector has invested more than $25billion to upgrade water systems in developing countrieswhere lack of sound management and leaky pipes resultin substantial losses of both revenues and water (WorldBank, 1999). By involving the private sector, these utili-ties can achieve greater efficiency, improved access tocapital for new investment, and provide better, more reli-able service to its customers.

Probably the single most critical factor for the privateinvestor in making a commitment to purchase and oper-ate water supply systems is securing the right to chargea commercial rate to its customers. The private sector isreluctant to make substantial investments in regionsthat lack reliable political and legal system for protectingprivate ownership.

This problem is particularly true for developing coun-tries. Consider that there is almost no private investmentin African countries for water projects, while, Argentina,with a stronger legal system, has attracted over $6 billionfrom private water companies. Companies are still ex-ploring opportunities in developing countries, but inrisky regions they are limiting their investments to man-agement operating contracts.

Despite a move toward privatization, the water sup-ply market is still highly restricted. Most governmentshave placed tight regulations on such things as owner-ship, management, and prices. Yet these controls may beexcluding potential buyers and could very well be caus-ing the massive consolidation that is occurring in the in-dustry. It may be difficult for smaller companies to com-pete successfully in a market with tight regulatory con-trols on profits, prices and ownership.

The United Kingdom has acknowledged this problemand is looking for ways to introduce competition into itsprivatized water supply industry. Rather than imposingadditional restrictions, Britain’s water regulatory agencyis considering further deregulation by allowing waterright trading. The proposal is designed to create opportu-nities for new water supply companies to enter the mar-ket by purchasing water that could then be delivered tohouseholds.

CONCLUSION

All across the globe, water markets are driving inno-vation, conservation, and investment. These changes areimproving the way water is used. When faced with prices,buyers and sellers are given incentives to conserve water.Prices are also helping bring about equitable and efficientwater reallocation. While some critics assert that the poorwill be hurt by water markets, in reality, the markets cre-ated through private investment are expanding the poor’saccess to water. Despite their rapid advancement aroundthe world, water markets are still in their infancy. This islikely to change, however, as more countries face waterscarcity problems and look for better ways to allocate thelifeblood of the planet.


The Rising Tide of Water Markets . . . cont’d.



TABLE 1. Water Prices From Around the World.

Country Agriculture ($/m3) Domestic ($/m3) Industry ($/m3)

Algeria 0.197 – 0.229 0.059 – 0.281 4.821

Australia 0.0024 – 0.0203 0.239 – 0.561 8.125

Austria 0.23 – 1.78 1.067

Belgium 1.905 – 2.158

Botswana 0.291 – 1.538

Brazil 0.0044 – 0.0332 0.416

Canada 0.00016 – 0.002 0.353 – 1.413 0.17 – 3.038

Denmark 2.994

Finland 2.318

France 0.0031 – 0.158 0.374 – 2.743 0.374 – 2.244

Germany 1.717 0.889 – 3.221

Greece 0.021 – 0.082 0.951

Hungary 0.833

India 0.0099 – 0.0852 0.141 – 0.301

Israel 0.166 – 0.270 0.374 0.27

Italy 0.145 – 0.852

Japan 2.182

Korea 0.353

Luxembourg 1.111

Madagascar 0.338 – 1.299

Mexico 0.163 – 1.087

Namibia 0.0039 – 0.0291 0.2286 – 1.434

Netherlands 1.44 1.106 0.549 – 1.636

New Zealand 0.322 – 0.717

Pakistan 0.062 – 0.104 0.395 – 1.008

Poland 0.203 – 0.955

Portugal 0.0099 – 0.042 0.159 – 0.550 0.417 – 2.134

Spain 0.0001 – 0.133 0.0004 – 1.1770 0.0004 – 0.0048

Sweden 1.768

Switzerland 1.34

Sudan 0.083 – 0.104 0.083 – 0.104

Taiwan 0.260 – 0.436

Tanzania 0.270 – 0.414 0.064 – 0.250 0.271 – 0.414

Tunisia 0.021 – 0.081 0.100 – 0.550 0.606

Turkey 1.51

Uganda 0.395 – 0.613 0.748 – 1.403

United Kingdom 0.013 – 0.136 0.0099 – 3.11 0.559 – 2.845

United States 0.0129 – 0.0455 1.27 0.030 – 0.996

Sources: Dinar and Subramanian (1997) and OECD (1999).

LITERATURE CITED

Anderson, Terry and Pamela Snyeder, 1997. Water Markets: Priming the Invisible Pump. Cato Institute, Washington, D.C.

Dinar, Ariel and Ashok Subramanian (Editors). 1997. World Water Pricing Experiences. World Bank Technical Paper No. 386, The World Bank, Washington, D.C.

Hinrichsen, D., B. Robey, and U. D. Upadhyay, 1997. Solutions for a Water-Short World. Population Reports, Series M, No. 14, Population Information Program, Johns Hopkins School of Public Health, Baltimore, Maryland. Available at http://www. jhuccp.org/pr/m14edsum.stm.

Landry, Clay J., 1998. Market Transfers of Water for Environ-mental Protection in the Western United States. Water Policy 1(5):457-469.

OECD, 1999. The Price of Water: Trends in OECD Countries. Paris, France.

Thobani, Marteen, 1998. Meeting Water Needs in Developing Countries: Resolving Issues in Establishing Tradable Water Rights. In: Markets for Water: Potential and Performance, K. William Easter, Mark W. Rosegrant, and Ariel Dinar (Editors). Kluwer Academic Publishers. Boston, Massachusetts.

World Bank, 1999. The Private Sector in Water: Competition and Regulation. Finance, Private Sector, and Infrastructure Net-work, Washington, D.C.

Clay J. LandryResearch AssociatePolitical Economy Research Center502 S 19th Avenue, Suite 211Bozeman, MT 59718(406) 587-9591 / Fax: (406) 586-7555

[email protected]

Clay J. Landry is a research associate with the PoliticalEconomy Research Center and author of "Saving OurStreams Through Water Markets: A Practical Guide." Heserves as the financial and regulatory affairs editor forGlobal Water Intelligence and has published in profes-sional journals and the popular press, including the WallStreet Journal and the Orange County Register. He holdsa master's degree in agricultural and resource economicsfrom Oregon State University and a bachelor degree ineconomics from the University of Wyoming.

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WHAT ARE WE DOING RIGHT?

AWRA membership grew 8percent in 2001, despite a slow-ing economy. JAWRA citationsare beginning to match the mostrespectable scientific journals.The AWRA 2001 Annual Confer-ence had more abstract submit-tals than could be handled. Wemust be doing something right.What's going on?

I found some answers in thepresentations at Dundee, Scotland, where AWRA held theInternational Specialty Conference on Globalization andWater Management. Presenter after presenter, in caseafter case, showed how taking a narrow view of water re-sources led to unhappy situations. Legal solutions needto obey the laws of engineering, ecology, and economics,and engineering solutions must be politically and social-ly acceptable. The answer, as AWRA members have longknown, is to take a multidisciplinary approach. But the-ory is not enough. At the closing session, a delegate fromthe UK called out for better information sources on prac-tical solutions to multidisciplinary problems. I recom-mended he take a look at IMPACT.

This is going to be a great year! AWRA has the rightproducts and services to meet our members’ needs forboth technical and practical information. Moreover,AWRA conferences and Technical Committee discussionsprovide networking in a friendly, collegial, environment.The AWRA website will begin placing JAWRA articles online – IMPACT has been on line for a while – to give mem-bers a portable water library. A new International Associ-ate Membership category will make AWRA’s on-line jour-nals and discussions affordable for members in develop-ing nations.

I will be talking about these new benefits in futuremessages. For now, enjoy another great issue of IMPACTon “The New Economy of Water.”

Kenneth J. LanfearAWRA President, 2002

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AUTHOR LINK

E-MAIL

▲ President’s MessageKenneth J. LanfearAWRA President, 2002

ADVERTISE YOUR PRODUCTS AND SERVICES

CONTACT THE AWRA PUBLICATIONS OFFICE FORSPECIFICATIONS & PRICING FOR ADVERTISING

(ADVERTISING SPACE AVAILABLE FOR

1/6, 1/4, 1/3, 1/2, 2/3, AND FULL PAGE)

CALL: (256) 650-0701

AWRA’S unique multidisciplinary structure provides theopportunity to advertise to readers representing over 60

professions and living in over 65 countries around the world.

ACROSS1 river in Louisiana5 not busy8 1957 Nobelist

12 lake in Nevada14 location of Skunk River15 to make dirty16 33-1/3 r.p.m.18 shoreline barrier21 type of military discharge22 Linkletter24 hated25 Red or Black _____26 Coral _____28 river in Italy29 legally restricted symbol (abbr.)30 bridge31 a Malayan sailboat33 Queen _____36 indebted38 city on the Tiber40 compass direction41 prophet43 type of room?45 originator of F=ma48 award for TV show50 Frau’s partner51 Marx, Engels, and Lenin52 Clement Moore’s start?53 Shakespearean villain55 not off56 deep cut58 type of tape59 type of bean or pea61 followed by kill or gang63 frost64 college degree65 alien (abbr.)67 realtor’s map69 Annapolis grad70 one-celled organisms74 cotton gin name75 location of Elkhorn River76 plant destroying chemicals78 military rank79 Tiger’s tools?80 location of Merrimack River81 god of love83 echolocation method84 followed by light or watch85 river in Missouri

DOWN1 cap or bear2 before noon3 Johnny _____4 fat6 river embankment7 _____ of motion


▲ Water Resources Puzzler (answers on pg. 35)

58 eat59 religious group60 start for scope or meter62 lake in Arkansas63 leases64 spiny-finned fish66 spring or neap68 followed by insurance or page70 pub order71 dye72 followed by chamber or

question73 air (comb. form)76 type of soup or coat77 call for help (abbr.)79 location of Buffalo River82 symbol for samarium

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8 campus resident9 type of bag

10 vol. unit11 Nile River country13 followed by fryer or freezer15 part of a rose17 type of a school19 nucleus and electrons20 lawyer (abbr.)21 _____ End Gang23 enclosed gardens25 square-snouted mammal27 marathon30 sugarapple32 radio band34 being in a fainting fit35 part of an eyeball36 unit of magnetic intensity

(abbr.)37 reverberate39 within (comb. form)41 restrain42 a vesicle44 symbol for helium46 room in a hopsital47 famous corral?49 location of Charles River54 _____ car (abbr.)57 location of Fourche River

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The following awards for 2001 were presented at AWRA’sAnnual Water Resources Conference in Albuquerque,New Mexico:

HONORARY MEMBER – MIGUEL A. MARINOUniversity of California, Davis, California

Over the last 30 years MiguelMariño has been extremely ac-tive in research and teaching inthe area of hydrology and waterresources. He began his academ-ic career at UC-Davis in 1972,after receiving a Ph.D. degree incivil engineering from UCLA. In1999, he was promoted to Profes-sor Above-Scale for his outstand-ing contributions to teaching, re-search, and service.

Miguel has published exten-sively in the field of water re-sources. He has developed opti-mization models for the plan-ning, management, and opera-

tion of several water resource systems, such as the CaliforniaCentral Valley Project and hydrosystems in Brazil, Chile, Iran,Korea, Mexico, and China. He has also contributed significant-ly to ground water modeling and management as well as to theplanning, design, and management of irrigation systems. Hisresearch has been recognized by two outstanding paper awardsfrom the American Society of Civil Engineers, a best paperaward from the International Water Resources Association, andtwo best paper awards from the Iranian Research Council.

Miguel’s expertise in hydrology and water resource plan-ning, development, and management is highly sought at the in-ternational level. For example, he has given invited lectures inBelgium, Brazil, Chile, China, Japan, Mexico, The Netherlands,Russia, Spain, and other countries.

In addition to his research accomplishments, Miguel con-tributes greatly to the education of students in hydrology andwater resources. To date, he has supervised 25 Ph.D. studentson their dissertation research and more than 50 M.S. students atUC-Davis – most of whom have coauthored papers withMiguel after completing their degrees. Many of these formerstudents are now successful teachers and researchers at variousdistinguished institutions in the U.S. as well as abroad.

Miguel has been an active participant in the activities ofAWRA (Fellow, 1995), ASCE (Honorary Member, 1999), AGU(Fellow, 2001), and other societies. He has served as Editor oftwo AWRA publications – Proceedings of the National Symposiumon Ground Water Hydrology in 1967; and in 1987, Monograph No. 8, Subsurface Flow and Contamination: Methods of Analysis andParameter Uncertainty. In addition, he served as Associate Editorof AWRA’s Water Resources Bulletin during 1978-82. He has alsoserved as Editor of the ASCE Journal of Water Resources Planningand Management during 1984-88. In 1986, he was awarded thefirst Richard R. Torrens Award for Outstanding Editor by ASCEand in 1996 he was awarded the Julian Hinds Award by ASCEfor his many contributions to research and teaching in hydrol-ogy and water resource systems analysis. In 1999 he was elect-ed to Corresponding Member of Mexico’s National Academy ofEngineering.

WILLIAM R. BOGGESS AWARD“Pacific Northwest Regional Assessment:

The Impacts of Climate Variability and ClimateChange on the Water Resources of the

Columbia River Basin”JAWRA • Vol. 36 • No. 2 • Pgs. 399-420

Edward L. Miles, Amy K. Snover, Alan F. Hamlet,Bridget Callahan, and David Fluharty

EDWARD L. MILESUniversity of Washington, Seattle, Washington

Edward L. Miles is Virginiaand Prentice Bloedel Profes-sor of Marine Studies andPublic Affairs at the Univer-sity of Washington. Heholds joint appointments inthe School of Marine Affairsand the Graduate School ofPublic Affairs and is concur-rently a Senior Fellow in theJoint Institute for the Studyof the Atmosphere andOceans (JISAO). His fieldsof specialization are: Inter-national Law and Organiza-tion; Marine Policy and

Ocean Management; Science, Technology, and International Re-lations; and the Impacts of Climate Variability and ClimateChange.

Professor Miles has served as chairman of the Ocean Poli-cy Committee, National Academy of Sciences/National Re-search Council (1974-1979); member of the Executive Board,Law of the Sea Institute, 1972-81 and 1985-89, and President1989-93; Chairman of the Legal and Institutional Task Group onthe Implications of Disposal of High-Level Radioactive WasteInto the Seabed and Advisor to the Executive Committee,Seabed Working Group, Nuclear Energy Agency, OECD, 1981-87; Chairman of the Advisory Committee on International Pro-grams of the National Science Foundation, 1990-92; and mem-ber, Advisory Committee for the Social, Behavioral, and Eco-nomics Sciences, National Science Foundation, 1992-94.

AMY K. SNOVERUniversity of Washington, Seattle, Washington

Amy Katherine Snover re-ceived her B.A. in Chem-istry from Carleton Collegein 1980 and her Ph.D. inEnvironmental Chemistryfrom the University ofWashington in 1998 withdissertation research on thestable isotope biogeochem-istry of atmosphericmethane. She is currently aResearch Scientist with theClimate Impacts Group atthe University of Washing-


▲ Recipients of AWRA’s Annual Awards

ton where she performs integrated assessment of the impacts ofnatural climate variability and human-caused climate changeon the natural and human systems of the U.S. Pacific North-west. She recently finished editing and co-authoring a book-length manuscript titled “Rhythms of Change: Climate Impactson the Pacific Northwest,” which is currently under review atMIT Press. She contributed to the National Assessment of Im-pacts of Climate Variabiity and Change on the United States(Pacific Northwest Assessment) and in 1997 helped organize ahigh-profile regional workshop on the impacts of climatechange on the Pacific Northwest, sponsored by the WhiteHouse Office of Science and Technology Policy.

ALAN F. HAMLETUniversity of Washington, Seattle, Washington

Alan F. Hamlet is a hydrologistand water resources engineer inthe Department of Civil and En-vironmental Engineering at theUniversity of Washington. Hehas been a core member of theJISAO (Joint Institute for theStudy of Atmosphere andOceans) Climate Impacts Groupsince 1996, studying the impactsof climate on Pacific Northwesthydrology and water resources.His research has primarily fo-cused on the Columbia Riverbasin, and includes studies ofthe effects of climate variability

and climate change on hydrology and water resources in theColumbia, use of climate and hydrologic models for long-rangestreamflow forecasting, and utilization of streamflow forecastsin Pacific Northwest water resources management.

BRIDGET CALLAHANApplied Technology & Management, Inc.

Charleston, South Carolina

Bridget Callahan specializesin fisheries, yet her researchspans a range of topics, suchas assessing the impacts of cli-mate variability on water re-sources, developing customtools to manage and dissemi-nate protected area ecosysteminformation, and delineatingessential spawning habitat bymonitoring the courtship callsof soniferous fish. She re-ceived her undergraduate de-gree in Biology and MarineScience from Smith College,then a certification in Wetland

Science and Management and a Masters of Marine Affairs fromthe University of Washington, after which she completed aCoastal Management Fellowship at the Kachemak Bay Nation-al Estuarine Research Reserve in Alaska. The fellowship (and a

desire to experience a warming climate trend) brought her toSouth Carolina, where fisheries research projects with manage-ment agencies prepared her for her current challenge – evaluat-ing and addressing port development impacts on essential fishhabitat and endangered and threatened species.

DAVID FLUHARTYUniversity of Washington, Seattle, Washington

David Fluharty received hisPh.D. in Natural ResourcesConservation and Planningfrom the University of Michi-gan in 1977, his M.A. in Geog-raphy from the University ofWashington in 1972, and hisB.A. in Political Science/Swedish (double major) in1968. His primary interests arein marine resource manage-ment with a focus on climatevariability and fishieries andcoastal resources management.His other research emphases

include fisheries development, management of marine regions(especially marginal seas in the North Pacific), marine protect-ed area management, and implementation of ecosystem-basedmanagement for marine living resources. He currently serveson the North Pacific Fishery Management Council that man-ages federal fisheries off Alaska.

PYRAMID AWARD

JOHN T. HINESPennsylvania Department of Environmental Protection

Harrisburg, Pennsylvania

John T. Hines currentlyserves as Director of Poli-cy for the PennsylvaniaDepartment of Environ-mental Protection. Ap-pointed in September2001, Mr. Hines is respon-sible for all Departmentpolicy and legislative ini-tiatives, Governor’s Of-fice coordination, andregulatory reviews.

Prior to his appoint-ment as Director of Poli-cy, Mr. Hines was Associ-ate Director in the De-

partment of Environmental Protection’s Office for River Basin.As part of his responsibilities, Mr. Hines oversaw program op-erations for the Office’s River Basin Coordination and CoastalZone Management programs. He also served as advisor toPennsylvania’s Commissioner on various interstate river basinorganizations, including the Great Lakes Commission, OhioRiver Basin Commission, Ohio River Valley Sanitation Com-


▲ Recipients of AWRA’s Annual Awards . . . cont’d.

mission, the Susquehanna River Basin Commission, theDelaware River Basin Commission, and the Delaware EstuaryProgram. In 1998, Mr. Hines was appointed as an alternateCommissioner for both the Great Lakes and the Ohio RiverBasin Commissions. In 2000 he was appointed alternate to theInterstate Commission on the Potomac River Basin.

Mr. Hines also served as Pennsylvania’s State Coordinatorfor the Delaware Estuary Program and worked on variouscoastal and interstate issues. Mr. Hines holds a Bachelors De-gree in Social Sciences and a Masters Degree in Geography andRegional Planning.

SANDOR C. CSALLANY INSTITUTIONAL AWARDFOR EXEMPLARY CONTRIBUTIONS TOWATER RESOURCES MANAGEMENT

CIVIL ENGINEERING DEPARTMENTCOLORADO STATE UNIVERSITY

Fort Collins, Colorado

Colorado State University's Department of Civil Engineering ishome to 36 faculty and 357 baccalaureate, 78 masters, and 78Ph.D. students. The Department offers B.S., M.S. and Ph.D. pro-grams in civil engineering and bioresource and agricultural en-gineering as well as a B.S. in environmental engineering. Al-though research focuses on all aspects of civil engineering, re-search focusing on water resources, hydraulics, river mechanicsand sediment transport, hydrology, geoenvironmental engi-neering and groundwater, environmental engineering andstream restoration are among the Department's strongest.

The CE Department is unique in its use of large-scale phys-ical models in research. Many faculty also conduct extensivefield research. Research expenditures by faculty average$206,000/FTE-year. New research awards increased 30% andenrollments of new graduate students increased 50% in the lastyear (comparing January through October 2000 and the sameperiod during 2001). In addition, Colorado State University andthe Colorado School of Mines also were recently selected by theEnvironmental Protection Agency for a five-year HazardousSubstance Research Center. This Center will focus on minewastes and acid mine drainage and draws upon faculty in Col-orado State's Departments of Civil Engineering, Chemical En-gineering, Microbiology, Environmental Health, and Fisheriesand Wildlife.

The civil engineering and bioresource engineering facultiesmerged during 2000 to better coordinate academic programsand research focusing on water resources and the environment.The Bioresource and Agricultural Engineering faculty broughtwith them expertise in environmental engineering, irrigationand drainage, non-point source pollution, conjunctive use ofgroundwater and surface water, decision support systems, andwater quality. This combination of faculty has strengthenedboth academic and research programs.

In addition to the above, the following awards were also pre-sented:

AWRA 2001 OUTSTANDINGSTUDENT CHAPTER AWARD

UNIVERSITY OF WASHINGTONSTUDENT CHAPTER

AWRA 2001 OUTSTANDINGSTATE SECTION AWARD

ALASKA STATE SECTION

2001 PRESIDENT’S AWARD FOROUTSTANDING SERVICE

DAVID W. MOODYBeaver Wood Associates, Alstead, New Hampshire

2001 AQUARIUS CLUB MEMBERS

MICHAEL E. CAMPANARICHARD A. ENGBERG

J. PAUL RILEYN. EARL SPANGENBERG

SCOTT W. TYLER

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WASHINGTON, D.C. – President George W. Bush ap-pointed AWRA member MARTHA W. GILLILAND, Ph.D.,the Chancellor of the University of Missouri-Kansas City,to the President’s Council of Advisors on Science andTechnology (PCAST).

The PCAST, a presidential advisory panel within theWhite House Office of Science and Technology Policy(OSTP), is composed of leaders from industry, educationand technology, who are selected for their diverse per-spectives and uniquely strong credentials as experts inscience, technology, education and research. Dr.Gilliland and the 21 other PCAST members advise thePresident on issues involving science and technology andtheir role in achieving national goals, and assists the Na-tional Science and Technology Council (NTCS) in secur-ing private sector participation in its activities.

The PCAST was established by executive order byPresident George Bush, Sr., in 1990 to enable the Presi-dent to receive advice from the private sector and the aca-demic community on technology, scientific research pri-orities, and math and science education.

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▲ Recipients of AWRA’s Annual Awards . . . cont’d.

▲ News of Friends & Members

MEETINGS, WORKSHOPS, SHORT COURSES

FEBRUARY 200215-19/Society for Range Mgmt. Annual Meeting.

Kansas City, MO. Contact Paul Ohlenbusch([email protected])

18-20/USEPA SWMM & PCSWMM 2002 StormwaterModeling Intro. & Advanced Workshops. Toronto, Ontario. Contact Lyn James, CHI, 36 Stuart St.,Guelph, ON N1E 4S5 (519/767-0197; f: 591/767-2770; e: [email protected]; www.chi.on.ca/confsem.html)

21-22/Conf. on Stormwater & Urban Water SystemsModeling. Toronto, Ontario. Contact Lyn James, CHI,36 Stuart St., Guelph, ON N1E 4S5 (519/767-0197; f: 591/767-2770; e: [email protected];www.chi.on.ca/confsem.html)

23-27/Watershed 2002. Ft. Lauderdale, FL. Contact(703/684-2442)

25-March 1/IECA 33rd Annual Conf. Orlando, FL. Contact International Erosion Control Association,P.O. Box 774904, Steamboat Springs, CO 80477-4904(970/879-3010; f: 970/879-8563; e: [email protected]; w: www.ieca.org)

27-March 1/Mitigation Banking Conf. Washington, DC.Contact (703/548-5473; e: [email protected])

MARCH 200211-13/Watershed Mgmt. to Meet Emerging TMDL Envi-

ronmental Regulations. Ft. Worth, TX. Contactwww.asae.org/meetings/tmdl/index.html

APRIL 20027-10/Floodplain Mgmt. Planning. San Diego, CA.

Contact L. Hromadka. Conf. Planning Coordinator,Floodplain Mgmt. Assoc., Exec. Dir., P.O. Box 2972,Mission Viejo, CA 92690-0972 (949/766-8112; f: 949/459-8364; e: [email protected])

21-24/National Hydropower Assoc. 2002. Washington,DC. Contact (816/931-1311 x105)

23-27/World Aquaculture 2002. Beijing, China. Contact (760/432-4270)

MAY 200213-15/AWRA’s Annual Spring Conf. – “Coastal Water

Resources.” New Orleans, LA. Contact AWRA, 4West Federal St., P.O. Box 1626, Middleburg, VA20118-1626 (540/687-8390; f: 540/687-8395; e: [email protected])

29-31/Ninth International Conf. on Hydraulic Informa-tion Management – HYDROSOFT 2002. Montreal,Canada. Contact Lucy Southcott, Conf. Secretatiat,HYDROSOFT 2002, Wessex Inst. of Technology,Ashurst Lodge, Ashurst, Sjouthhampton, SO40 7AA,UK (+44(0)238-029-3223; f: +44(0)238-029-2853; e: [email protected]; www.wessex.ac.uk/conferences/2002/hy02

JUNE 200211-14/Allocating & Managing Water for a Sustainable

Future: Lessons From Around the World. Boulder, CO.Contact Natural Res. Law Ctr., 401 UCB, University

of Colorado Law School, Boulder, CO 80309-0401(303/492-1272; fax: 303/492-1297; e:[email protected]; web: www.colorado.edu/law/NRLC/2002Conference.html

JULY 20021-3/AWRA’s Annual Summer Conf. – “Ground

Water/Surface Water Interactions.” Keystone, CO.Contact AWRA, 4 West Federal St., P.O. Box 1626,Middleburg, VA 20118-1626 (540/687-8390; f: 540/687-8395; e: [email protected])

23-26/Integrated Transboundary Water Mgmt. TraverseCity, MI. Contact EWRI of ASCE, 2002 Conference(UCOWR), 1015 15th St., NW, Ste 600, Washington,D.C. 20005 (202/789-2200; f: 202/ 789-0212; e: [email protected]; w: www.uwin.siu. edu/ucowr)

28-Aug. 1/2nd Federal Interagency Hydrologic Model-ing Conf. Las Vegas, NV. Contact Don Frevert, Co-Tech. Prog. Chair, USBR, P.O. Box 25007, M/C D-8510, Lakewood, CO 80225 (303/445-2473; f:303/445-6351; e: [email protected]); or GeorgeLeavesley, Co-Tech. Prog. Chr., USGS, Box 25046,MS 412, Lakewood, CO 80225 (303/236-5026; f: 303/236-5034; e: [email protected])

AUGUST 200212-15/StormConTM – The North American Surface

Water Quality Conf. & Exposition. Marco Island, FL. Contact Janice Kaspersen (805/681-1300 x12; e: [email protected])

SEPTEMBER 200222-26/Rocky Mountain Summit: Sustaining Ecosys-

tems & their People. Whitefish, MT. Contact RMS2002, Attn: Julia Rodriguez, 130 Mumford Hall, Columbia, MO 65211-6200 (573/882-7458;f: 573/884-2199; e: [email protected];w: www.cares.missouri.edu/rms2002

30-Oct. 4/6th Intern’l. Conf. on Diffuse Pollution. Ams-terdam, The Netherlands. Contact www.nva.net/agenda/conference.htm or Govert Verstappen [email protected] [email protected]

OCTOBER 20028-10/Changing Faces of Conservation & Agriculture:

The Future of Working Lands. Moline, IL. ContactChris Murray (e: [email protected])

13-17/Hydrologic Extremes: Challenges for Science &Mgmt. AIH 2002 Annual Meeting. Portland, OR. Con-tact AIH, 2499 Rice St., Ste. 135, St. Paul, MN 55113(651/484-8169; f: 651/484-8357; e: [email protected]; w: www.aihydro.org)

NOVEMBER 20024-7/AWRA’s Annual Water Resources Conf. Philadel-

phia, PA. Contact AWRA, 4 West Federal St., P.O. Box 1626, Middleburg, VA 20118-1626(540/687-8390; f: 540/687-8395; e: [email protected])

❖ ❖ ❖


▲ Water Resources Continuing Education Opportunities

Vol. 3, No. 5, September 2001 – Historical Aspects ofWater Resources, Richard H. McCuen, Associate Edi-tor

I really enjoyed your historical water resources issue ofthe September IMPACT. That is one of the few times thatI have read IMPACT from cover to cover. It seems likethese days the journals get so technical that you can'tenjoy an article unless it is in your field. The historicalissue articles were interesting even if they weren't in yourparticular field. Once in awhile it is fascinating to stepback and see where we have been and how we got towhere we are today. I hope you have future issues likethis planned because there are so many other historicalwater resource areas to cover.

Thanks!Bob Bird, P.E., USDA-NRCS (retired)

(Editor’s Note: Don’t miss Part II on this topic that isscheduled for the July 2002 issue of IMPACT.)


▲ December 2001 JAWRA Papers (Vol. 37, No. 6)

RIPARIAN ECOLOGY AND MANAGEMENT IN MULTI-LAND USE WATERSHEDSPARKER J. WIGINGTON, JR., GUEST ASSOCIATE EDITOR

• Meeting Public Expectations With Ecological Innovation in Riparian Landscapes• Evaluation of Coastal Plain Conservation Buffers Using the Riparian Ecosystem Management Model• Landscape Attributes as Controls on Ground Water Nitrate Removal Capacity of Riparian Zones• Relation Between Fish Communities and Riparian Zone Conditions at Two Spatial Scales• Influences of Watershed, Riparian-Corridor, and Reach-Scale Characteristics on Aquatic Biota in Agricultural

Watersheds• Effects of Multi-Scale Environmental Characteristics on Agricultural Stream Biota in Eastern Wisconsin• Riparian Zone Classification for Management of Stream Water Quality and Ecosystem Health• Near-Stream Landuse Effects on Streamwater Nutrient Distribution in an Urbanizing Watershed• Timber Harvest Impacts on Small Headwater Stream Channels in the Coast Ranges of Washington• Long-Term Changes in Regional Hydrologic Regime Following Impoundment in a Humid-Climate Watershed• The Importance of Beaver to Wetland Habitats and Waterfowl in Wyoming• Changing Near-Stream Land Use and River Channel Morphology in the Venezuelan Andes• Techniques for Detecting Hydrologic Change in High Resource Streams• Landscape-Scale Analysis and Management of Cumulative Impacts to Riparian Ecosystems: Past, Present,

and Future• GIS-Based Hydrologic Modeling of Riparian Areas: Implications for Stream Water Quality• Functional Significance of Species Composition in Riparian Plant Communities• Channel Response From Shrub Dominated Riparian Communities and Associated Effects on Salmonid Habitat• Root Biomass in Relation to Channel Morphology of Headwater Streams• Analyzing Riparian Site Capability and Management Options• Transport and Fate of Atrazine in Midwestern Riparian Buffer Strips• Ten Years of Vegetation Succession on a Debris-Flow Deposit in Oregon• Inundation Tolerances of Riparian Willows and Cottonwoods• Effects of Scale on Land Use and Water Quality Relationships: A Longitudinal Basin-Wide Perspective

JAWRA

Solution to Puzzle on pg. 30▲ Feedback


AWRA MEMBERSHIP APPLICATION – 2002American Water Resources Association4 West Federal St. • P.O. Box 1626 • Middleburg, VA 20118-1626(540) 687-8390 • Fax: (540) 687-8395 • E-Mail: [email protected]

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➤ KEY FOR MEMBERSHIP CATEGORIES:JAWRA – JOURNAL OF THE AWRA (BI-MONTHLY JOURNAL)IMPACT – IMPACT (BI-MONTHLY MAGAZINE)PROC. – 1 COPY OF AWRA’S ANNUAL SYMPOSIUM PROCEEDINGS

ENCLOSED IS PAYMENT FOR MEMBERSHIP (PLEASE CHECK ONE)❑ FULL YEAR ❑ HALF YEAR

❑ REGULAR MEMBER (JAWRA & IMPACT)..............................................$130.00❑ STUDENT MEMBER (IMPACT) FULL YEAR ONLY ......................................$25.00❑ INSTITUTIONAL MEMBER (JAWRA, IMPACT, & PROC.)............................$275.00❑ CORPORATE MEMBER (JAWRA, IMPACT, & PROC.)...............................$375.00❑ AWRA NETWORKING DIRECTORY (MEMBERSHIP LISTING) .......................$5.00❑ MEMBERSHIP CERTIFICATE ...................................................................$6.00

➤ FOREIGN AIRMAIL OPTIONS: PLEASE CONTACT AWRA FOR PRICING.

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• MEMBERSHIP IS BASED ON A CALENDAR-YEAR; AFTER JULY 1ST REGULAR,INSTITUTIONAL, OR CORPORATE MEMBERS MAY ELECT A 6-MONTH MEMBERSHIP

FOR ONE-HALF OF THE ANNUAL DUES.• STUDENTS DO NOT QUALIFY FOR HALF-YEAR MEMBERSHIP.• REMITTANCE MUST BE MADE IN U.S. DOLLARS DRAWN ON A U.S. BANK.

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PAYMENT MUST BE MADE BY CHECK OR ONE OF THE FOLLOWING CREDIT CARDS:❑ VISA ❑ MASTERCARD ❑ DINERS CLUB ❑ AMEX ❑ DISCOVER

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MAIL THIS FORM TO: AWRA, 4 WEST FEDERAL ST., P.O. BOX 1626MIDDLEBURG, VA 20118-1626

For Fastest ServiceFAX THIS FORM (CREDIT CARD OR P.O. ORDERS ONLY) TO (540) 687-8395

QUESTIONS? . . . CALL AWRA HQ AT (540) 687-8390OR E-MAIL AT [email protected]

DEMOGRAPHIC CODES(PLEASE LIMIT YOUR CHOICE TO ONE IN EACH CATEGORY)

JOB TITLE CODES

JT1 Management (Pres., VP, Div. Head, Sect. Head, Manager,Chief Engineer)

JT2 Engineering (non-mgmt.; i.e., civil, mechanical, planning,systems designer)

JT3 Scientific (non-mgmt.; i.e., chemist, biologist, hydrologist,analyst, geologist, hydrogeologist)

JT4 Marketing/Sales (non-mgmt.)JT5 FacultyJT6 StudentJT7 AttorneyJT8 RetiredJT9 Computer Scientist (GIS, modeling, data mgmt., etc.)JT10 Elected/Appointed OfficialJT11 Volunteer/Interested CitizenJT12 Non-ProfitJT13 Other

EMPLOYER CODES

CF Consulting Firm IN IndustryEI Educational Institution LF Law Firm

(faculty/staff) FG Federal GovernmentES Educational Institution RE Retired

(student) NP Non-ProfitLR Local/Regional Gov’t. Organization

Agency OT OtherSI State/Interstate Gov’t.

Agency

WATER RESOURCES DISCIPLINE CODES

AG Agronomy HY HydrologyBI Biology JR JournalismCH Chemistry LA LawEC Economics LM LimnologyED Education OE OceanographyEG Engineering PH PhysicsFO Forestry PS Political ScienceGR Geography PB Public HealthGE Geology SO Soil ScienceGI Geographic Information OT Other

Systems

EDUCATION CODES

HS High School MS Master of ScienceAA Associates JD Juris DoctorBA Bachelor of Arts PhD DoctorateBS Bachelor of Science OT OtherMA Master of Arts

PLEASE NOTE YOUR SELECTED CODE NUMBERS FROM ABOVE

JOB TITLE CODE ................................................

EMPLOYER CODE ...............................................

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EXECUTIVE DIRECTOR – DIVISION OF HYDROLOGIC SCIENCES

LAS VEGAS AND RENO, NEVADA

About DRI: The Desert Research Institute (DRI) is an internationally recognized environ-mental research institution and a component of the University and Community College Sys-tem of Nevada (UCCSN), which includes the sister organizations of the University of Nevada,Reno and the University of Nevada, Las Vegas. The Institute is comprised of approximately400 employees in three Divisions (Hydrologic Sciences, Atmospheric Sciences, and Earth and

Ecosystem Sciences), and two new interdisciplinary centers (Watersheds and Environmental Sustainability, and Arid LandsEnvironmental Management). Please go to www.dri.edu for additional information.

About the Division: The Division of Hydrologic Sciences (DHS), with campuses in both Las Vegas and Reno, Nevada, has 50faculty and support staff, as well as 40 graduate research assistants and hourly employees. Approximately 15 of DHS facultyare involved with graduate education within UCCSN. The faculty and staff are approximately split equally between Reno andLas Vegas. DHS has an annual research budget of approximately $7 million from contracts and grants. The Division's diverseresearch, which has a unique mix of sponsors and scientific and engineering projects, includes both basic and applied re-search. Some of the areas include: integrating physical, chemical, and biological processes in emerging disciplines such asglobal environmental hydrology, climate change, and watershed hydrology; traditional disciplines such as groundwater hy-drology and hydraulics; hydraulic engineering and surface water hydrology; contaminant transport in both surface and sub-surface systems; aqueous geochemistry; and snow, ice, and unsaturated zone hydrology. DHS research includes state, nationaland international funding through grants and contracts from federal agencies, state and local governments, private industryand foundations.

About the Position: Reporting to the President, our Division Directors are equivalent to University Deans. The Director pro-motes the needs of our Divisions and their personnel; serves as faculty mentor and collaborator; works with the Vice Presidentfor Academic Affairs to foster cooperation and collaboration in teaching and research with related departments and programsat the University of Nevada, Reno and the University of Nevada, Las Vegas; and interacts directly with current and potentialsponsors to further the strategic goals of the Divisions and the Institute. The Executive Director we are seeking will bring toDRI a strong scientific background, with proven leadership, communication, administrative, and personnel skills. The Direc-tor develops and leads new scientific direction for the Division through interactions with all DHS faculty. The Director is re-sponsible for both Reno and Las Vegas offices with support from technical and administrative personnel. His/her key respon-sibilities in the Division are as follows: (1) Research and Business Development – Identify and pursue research opportunitiesrelevant to the interests and capabilities of the faculty; represent faculty research to constituencies both within and externalto the Institute; and develop, and work with the Vice President for Research and Business Development to foster interdiscipli-nary research across the Institute, with the other UCCSN campuses and other organizations. (2) Personnel – Establish and pro-mote faculty recruitment and retention; oversee annual evaluations of the faculty and staff; recommend faculty for promotions,awards, and sabbatical leave; and supervise the Division administrative personnel. (3) Financial – Establish revenue projec-tions, balance revenue and expenditures, and allocate Institutional research and development and proposal developmentfunds; set budget priorities in collaboration with the President, the Executive Staff, and the faculty; and coordinate general fis-cal affairs of the division with the Vice President for Finance and Administration.

About the Successful Candidate: S/he will bring to DRI a Ph.D or equivalent graduate degree in a relevant field and a strongcombination of scientific leadership, administrative and personnel skills. The candidate must show: • evidence of scientificachievement in hydrologic sciences, including a record of noteworthy, peer-reviewed publications; • evidence of building suc-cessful collaborations in research and educational programs; • evidence of successfully building and managing large, multi-disciplinary research programs; • experience in, or an understanding of, the soft-money research environment; • effective com-munication skills; • demonstrated budgetary and strategic planning skills; and • experience in managing personnel and orga-nizations.

What DRI Can Offer: DRI expects the starting salary for this state funded position to be in the range of $120,000 to $140,000.DRI can also offer an excellent fringe benefits package, an outstanding faculty, opportunities for strong scientific collaboration,a team-oriented environment, and the opportunity to build new research programs.

Application/Review Process: Review of applications will begin on March 1, 2002. The desired start date is July 1, 2002. Toensure full consideration, your application packet must refer to Position #40-001 and include: (1) a cover letter describing yourqualifications for the position and your vision for scientific and engineering issues and opportunities you believe DHS shouldseek to address; (2) a current curriculum vitae; and (3) contact information for a minimum of three references.

MAIL to: Human Resources Department, DRI, 2215 Raggio Parkway, Reno, NV 89512; FAX to: 775-673-7339; or E-MAIL MS Word-Compatible Attachments to: [email protected].

If you have specific questions, please contact Search Committee Chair Dr. Roger L. Jacobson: 775-673-7364; [email protected] more information about DRI faculty and research projects/publications, please visit us at: www.dri.edu.

DRI IS AN AA/EEO EMPLOYER. WE EMPLOY ONLY U.S. CITIZENS AND THOSE AUTHORIZED TO WORK IN THE U.S.

POSITION #40-001

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The of Water - colinmayfield.com · [Cover Photo: Digital Vision “North American Scenics,” No. 030311) AMERICAN WATER RESOURCES ASSOCIATION 4 WEST FEDERAL STREET P.O. BOX 1626