Posted on January 12, 2012

Goldman Sachs, General Electric, and the World Resources Institute (WRI) form a partnership - the Aqueduct Alliance - with a new strategy to increase profit: water privatization.

by Joyce Nelson

Investment banker Goldman Sachs has famously been described by the Rolling Stone's business writer Matt

Taibbi (July 2009) as "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."

So it's a good idea to take notice whenever that Vampire Squid moves its blood funnel towards something. Having profited handsomely from the Wall Street bailouts, the Squid has smelled money in a new direction: water privatization.

In January 2010, Goldman Sachs, General Electric, and the World Resources Institute (WRI), a Washington-based think tank, together launched a water "initiative" to develop an index measuring water-related risks facing companies and their investors. As their news release put it, "In many regions around the world, water scarcity from climate change and pollution is starting to impact a company's performance, yet few analysts account for water-related risks."

Their new water index would "draw on publicly available data regarding physical scarcity and water quality and overlay factors including the regulatory regime and social and reputational issues" in various regions of the world. In other words, their risk-index might more accurately be called an "opportunity-index" for water-investors.

Goldman Sachs' partner General Electric has long smelled money from that sector. According to Canada's water expert Maude Barlow, "The biggest water company of all is General Electric."

The Aqueduct Alliance

By August 2011, Goldman Sachs, General Electric, and WRI had not only found a name for their partnership - the Aqueduct Alliance - but they had also developed their index into a water database and mapping tool, which can include the amount of infrastructure investment taking place in a given region.

Moreover, they had put an "environmental" spin on the project, claiming that it will help corporations, governments and stakeholders become more aware of their "water footprint" and thus make more "sustainable" decisions.

As well, by August 2011, Goldman Sachs, General Electric and WRI had invited into the Alliance some new corporate partners (or Vampire Squids, if you prefer): Coca-Cola, Talisman Energy, Dow Chemical, United Technologies, and Bloomberg. The WRI's Kirsty Jenkinson told the Financial Times (Aug. 16), "Companies see the need to get better visibility about water if they are going to have to access it for their business." With the new Aqueduct Alliance water database, "they can see if they are at risk of not getting the water they need, or coming into conflict with other users of that water."

Presumably, the potential for "conflict" is what attracted United Technologies to join the Aqueduct Alliance. United Technologies is the world's tenth largest arms-producing company, with arms sales of $11.1 billion in 2009.

Coca-Cola has handed over to the Alliance its own proprietary data on freshwater availability worldwide - data collected over years of research for its water-bottling enterprises.  "Water is the lifeblood of our business," Coca-Cola spokesman Joe Rozza told the Financial Times. Coca-Cola's Canadian director, J. Trevor Eyton, is a director of Brookfield Asset Management Inc., which is heavily involved in BC power, energy, and logging issues [see sidebar, page 12].

Calgary-based Talisman Energy spokesman Sandy Stash told Marketwire (Aug. 19), "We are very excited to have been asked to become the oil and gas sector sponsor for the Aqueduct Alliance.... Talisman aspires to a water management strategy that defines best practices for water withdrawal, reuse, disposal and conservation in our North American shale gas operations." Just three weeks earlier, the BC Liberal government had awarded Talisman Energy a licence to divert up to 10,000 cubic metres of water per day from the Williston reservoir for the next 20 years. The Williston reservoir is BC's main hydroelectric reservoir, serving the WAC Bennett Dam and Shrum Generating Station on the Peace River.

The Aqueduct Alliance intends to generate databases and water-maps with "an unprecedented level of detail and resolution," including advanced hydrological data and "geographically specific indicators that capture the social, economic, and governance factors that affect companies and economies." The databases will include up-to-date news coverage on water issues in a given region.

By September 2011, the Aqueduct Alliance had developed a prototype database/map covering the Yellow River Basin in Northern China. In January 2012, the Aqueduct Alliance intends to release four additional database/maps on river basins of "high priority," including the Colorado River in the USA, the Orange-Sengu River in Africa, the Yangtze River in China, and the Murray Darling River in Australia. Fifteen more regions across the world will then be analyzed.

The Murray Darling

In a very short-sighted move, the Australian government in the 1990s implemented a water-market for the Murray Darling River Basin - one of the longest river systems in the world and the heart of Australia's agricultural production. But in 2001, a major drought struck the Basin. Within a few years of  the long-lasting drought, the federal government was forced to start buying back water for the region. This inflated the price in the water market. By 2009, so many water speculators had moved in on the Basin that in that year alone, some $3 billion in water-rights were bought and sold, with the federal government forced to compete with international water investors. By September 2010, the government had spent at least $1.4 billion buying back water-rights. Although the drought eased in 2010, the fact that the Aqueduct Alliance is now focusing on the Murray Darling Basin means that the risks and opportunities there are still "high priority."

Some critics have called the Australian government's implementation of a water market very similar to what Alberta and BC are proposing.

Alberta Water Markets

In their April 2008 report, A Fight To the Last Drop: A Glimpse Into Alberta's Water Future, Randy Christensen (staff lawyer with Ecojustice) and Danielle Droitsch of Bow Riverkeeper warned that the Alberta government was moving in "the wrong direction," opening the way for "speculators devising ways to create profits from an increasingly scarce public resource," and doing so without consulting the public. They also noted "the government's failure to collect any royalties from the granting or subsequent sale of water rights. The property right in water is vested in the Crown under the Water Act, but Alberta treats it as something that ought to be given away."

Then on May 5 of 2011, the Alberta Premier's Council for Economic Strategy - chaired by David Emerson, with General Electric Canada's President and CEO M. Elyse Allan as a member - released its report, Shaping Alberta's Future. The report recommended the creation of a new Alberta Water Authority to oversee all water allocation license trades across the province. The purpose of this body would include facilitating the buying and selling of water licenses within a market-oriented system. As the report states: "The Alberta Water Authority will oversee an Alberta water allocation exchange. The Authority will maintain information on use and return flow. It will track trades permissible under current policy. It will also advise on policy changes to give holders of water licenses more opportunity to sell, lease or trade some or all of their right to draw water. Such changes will allow licensees holding water allocations they are not currently using or no longer need to lease or sell this surplus to others within the watershed at a price set by market forces of supply-and-demand."

Just days later (May 10), the chairman of water-bottling giant Nestle told Reuters, "We are actively dealing with the government of Alberta to think about a water exchange," prompting denials from Alberta's Environment Minister Rob Renner.

The Council of Canadians immediately deplored "the creation of a province-wide deregulated water market," and noted, "Two and a half years since announcing it was reviewing Alberta's water allocation system, the government has failed to consult with Albertans - the owners of the water - to hear their views about how water should be governed in the future, but has apparently made time to listen to what Nestle would like to see in a new allocation system."

BC Water Act Proposal

In December 2010, the BC Liberal government released its Framework for the Modernization of the British Columbia Water Act. The government is expecting to table a new Water Act in 2012.

In assessing this policy proposal, West Coast Environmental Law noted that it introduces the possibility of a water market, which would "likely result in a huge financial windfall for current licence holders while failing to recognize issues raised by public and First Nations rights over the resource." In 2010, there were 44,000 water licence holders in B.C.

The Council of Canadians stated:  "The proposal now being considered would allow for water users who currently hold a licence to sell it to the highest bidder on an open market.  Whoever purchases the licence may be able to change what the water is used for, potentially setting up a situation where water currently being used in agriculture ends up being used in a hydraulic fracturing operation. Worse yet, the proposal talks about creating ‘a more flexible system ... by reducing the government decision-making burden and streamlining requirements.'  In other words, it would create a deregulated market for BC's water."

Ecojustice's Randy Christensen called the proposed framework "a pretty sweet deal for the fortunate few who happen to have water rights - primarily electricity generators (including Independent Power Producers), oil and gas companies, mining companies, and agriculture." He added: "What's most dangerous about this proposal is that it will privatize water in a way that becomes effectively irreversible. Right now, one gets a ‘licence' to use water that the Government may alter or revoke without (generally speaking) having to pay compensation. However, once the licence to use a public resource is converted into a tradable economic right, that is held and may be sold, any changes to the system that affect that right will undoubtedly spur lawsuits against the government."


This should remind readers of the Harper government's outrageous (August 2010) $130 million rollover regarding AbitibiBowater's NAFTA challenge [see sidebar]. Rather than defend Newfoundland and Labrador's legal rights, the Harper government - a mere six months into the NAFTA case - reached an out-of-court settlement that has far-reaching implications for every province.

According to Steven Shrybman, lawyer for the Council of Canadians, because of this legal precedent, "it is not therefore an overstatement to describe the consequences of this settlement as effectively representing a coup-de-grace for public ownership and control of water and other natural resources with respect to which some license or permit had been granted. ... By settling with AbitibiBowater, the federal government has invited claims by any foreign owned company that loses an entitlement to take surface or groundwater in Canada for commercial purposes."

Moreover, according to Scott Sinclair of the Canadian Centre for Policy Alternatives, those potential future claims will be provincial, rather than federal, liabilities. As Sinclair wrote for The Tyee (March 25, 2011), "Ottawa settled the case without defending the province's rights. While the Harper government has pledged it will not try to recover the costs of this settlement from the Newfoundland and Labrador government, it has put provincial and territorial governments on notice that it intends to hold them liable for future NAFTA-related damages with respect to provincial measures."

The NAFTA cave-in by the Feds, combined with the pending new Water Acts in Alberta and BC, have released such a smell of money around water that a veritable coterie of Vampire Squids have gathered. After all, they could profit either by getting the water through a water-market, or by launching a NAFTA Chapter 11 claim.

Their blood funnels have been quivering especially over the national energy plan drawn up by the Energy Policy Institute of Canada (EPIC), whose chair is David Emerson, and whose vice-chair is General Electric Canada's President and CEO M. Elyse Allan.

As detailed in "High Voltage,"  (Watershed Sentinel, September-October 2011), EPIC's plan is for high-voltage/smart-grid electricity export corridors, which would include pipelines for shale gas, tar sands bitumen, and (potentially) water.

The Role Model

As usual, there is a billionaire role model at work: in this case, T. Boone Pickens.

The Texas energy tycoon spent at least a decade buying up water-rights in the Texas Panhandle and telling the press and anybody who would listen that he was planning to build a high-voltage transmission corridor that would take his wind-powered electricity, his natural gas, and all that water he'd bought, and pipe it down to the big cities of south Texas. Of course, such talk terrified his neighbours, who foresaw their own homesteads withering away into dry clods and tumbleweeds.

Then in April 2011, the local Municipal Water Authority - having long listened to its panicked constituency members - reached an agreement with Pickens to purchase most of his water-rights for $103 million. Since he'd paid about $75 million for those rights, it was a cool profit of about $28 million. All those other homeowners and business owners, however, will be paying off the purchase for the next 20 years through increased water and sewer rates to pay off the bonds that financed the deal.

Then, in July 2011, Pickens swung his attention North. He launched a $775 million NAFTA challenge against the Ontario government over regulations surrounding his planned wind farms in southwestern Ontario.

When Vampire Squids start jamming their blood funnels into anything that smells like money, it's hard to get them to stop.


Joyce Nelson is an award-winning freelance writer/researcher and the author of 5 books.

[From Watershed Sentinel January/February 2012 issue]