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AT 4:47 IN THE afternoon on Sunday, February 12, more than 13,000 Californians were ordered to leave their homes.

Some, at the direction of the Butte County Sheriff’s Office, headed north, past the town of Oroville. Others, however, heeded the call of the Yuba County Office of Emergency Services, whose bulletin screamed different directions: “Take only routes to the east, south, or west. DO NOT TRAVEL NORTH TOWARD OROVILLE!!!!!”

Confusion and fear reigned. Highways turned into parking lots and then closed. Emergency evacuation centers filled up. “This is not a drill,” warned the initial alert. “Repeat, this is not a drill.”

After weeks of rain and snowmelt, immense flooding had severely strained the Oroville Dam. Authorities feared it could burst within the hour.

A Look Inside the Californian Water Crisis

Suspended above Oroville and the Sacramento Valley, the Oroville Dam blocks the Feather River as it emerges from the snow-covered mountains of the Sierra Nevada. On a typical day water freed from the dam flows in an orderly fashion through a hydraulic power plant before making its way down through the Central Valley and eventually to Los Angeles. But February 12 was no typical day.

The lake had been rising all week. By 3:00 that afternoon water levels were dangerously high. The decision had been made to use an emergency spillway to drain off the excess, like a valve releasing heat from a pressure cooker. But cracks and then a massive hole appeared in the spillway. Authorities were forced to turn to the backup spillway, which had not been used since the dam was constructed in 1968. That spillway began to rapidly erode; water flowed over the top of it. Suddenly, California was facing a disaster beyond the scope of most people’s imaginations.

That same day Oroville’s mayor, Linda Dahlmeier, was flying back from a business trip. Upon boarding her flight to Sacramento, she decided to get some rest. When she landed and turned on her cell phone, it exploded with urgent alerts, voice mails, and e-mails. During the mayor’s short flight, an emergency had been declared.

Dahlmeier immediately called Ted Craddock, chief of utility operations for the California Department of Water Resources. “I asked him two questions,” she recalls. “How could this have happened?” Nobody could have predicted it, Craddock replied. “Then I asked him, ‘How far down is the water?”

Forty feet, he said.

Dahlmeier has lived around water her entire life, and she knew immediately what that meant: A tidal wave of water could come crashing down on the communities below the dam.

“Nobody would have lived,” she says. “Life as we know it in California would have changed forever.”



FLOODING IS ONLY one of many water concerns in America. Although images of Hurricane Katrina’s aftermath still sear the country’s consciousness, droughts and contamination are more persistent, if less immediately damaging, than disasters on that scale. For every New Orleans there are many Flints (lead contamination) and Californias (until recently, persistent water shortages). The human toll is immense and hardly limited to the U.S.: flooding, droughts, and poor water quality affect countries worldwide.

A significant contributing factor is massive underinvestment. The Environmental Protection Agency estimates that the U.S. needs to spend a minimum of $655 billion on water infrastructure over the next 20 years to continue supplying Americans with healthy, safe water. California forecasts that it needs more than $50 billion to reduce flooding risk within its borders. Governor Jerry Brown’s ambitious WaterFix program — a controversial project formerly known as the Bay Delta Conservation Plan — seeks to address some of the state’s most pressing water problems. It is estimated to cost about $17 billion.

The scale of global water needs is hard to fathom. The Organization for Economic Cooperation and Development puts the bill for improved water supply and sanitation at $6.7 trillion by 2050. In remarks at the landmark 2015 United Nations Climate Change Conference in Paris, OECD Secretary General Angel Gurría explained that by 2050, “nearly 4 billion people will live in river basins under severe water stress, and global nitrogen effluents from wastewater are projected to grow by 180 percent. Over the same period, global demand for water is expected to grow by 55 percent. The international community is finally waking up to the gravity of the situation, and we have set ourselves a number of ambitious objectives.” Gurría continued, “But let’s be clear: These efforts will fall short unless we resolve the question of access to finance for water infrastructure.”

Governments alone will not be able to foot the bill. Private investors realize that water has the potential to be a multibillion-­dollar market, but the peculiar nature of water — it is essential for life, considered a human right, and the most valuable commodity on earth even though it’s often given away — makes privatization particularly sensitive. Yet investors’ participation is essential for a solution.

First, they must overcome water’s unique problems.

For one, scale is a challenge. There are 53,000 regulated community water systems in the U.S. Some are very large; most are tiny. The diffuse nature of America’s control over water makes it hard for investors to put money to work and for smaller entities — often those most in need of capital — to raise it.

Price is another problem. Bluntly put, water is not as expensive as it should be. “Ultimately, the solution is to price it and have everyone pay the same price, or a reasonable market price, for the cost of providing the water,” says David Richardson, a managing director at Impax Asset Management Group, one of the few equity managers to offer a specific water investment fund.

“The price of water is going to rise because it has to,” agrees Tom Ferguson, vice president at Imagine H2O, a San Francisco–based accelerator for water-focused start-ups. “The question is how fast and how far.”

Perhaps more problematic than water’s complexity and price is the fact that people aren’t entirely comfortable with billionaires and private equity firms owning what comes out of their taps. Because of this, investors’ experiences with water have been mixed. Legendary financier T. Boone Pickens is among the best known of the investors who have sought to get rich in water. During the late 1990s and early 2000s, the oil speculator began acquiring water rights in the Texas panhandle, with plans to sell the water — located on 443,000 acres below ground, in the Ogallala Aquifer — to the Dallas metro area. Pickens’s proposal outraged many environmentalists and communities, especially as it would have taken resources away from drought-stricken areas. In 2011, after more than a decade of negotiations, Pickens sold the rights to a local supplier for $103 million, having failed to strike a deal with Dallas or make as much money as he’d hoped. Other investors, such as private equity firm Carlyle Group, have dabbled in water with only moderate success.

Despite such controversies, outside money is expected to flow into this space like water over the Oroville Dam. The need for it is too great — and in California that need can be traced, in part, back to these very same investors.



THE PEOPLE OF OROVILLE  fled their homes because of almonds.

Their town is a straight one-hour drive north of Sacramento, California’s sleepy capital. The Feather River, passing through the Oroville Dam, is a major tributary of the Sacramento River, which shapes the Sacramento Valley. That valley and the San Joaquin Valley farther south make up the state’s Central Valley, which stretches 450 miles down the backbone of California.

The Central Valley is one of the most fertile places on earth. The vast majority of America’s fruits and vegetables are grown in California; the state and its Central Valley are responsible for 99 percent or more of the country’s almonds, artichokes, dates, figs, grapes, olives, peaches, pistachios, pomegranates, and walnuts. In January and February, when farmers markets in New York City offer only endless radishes and sad-looking root vegetables, the stalls in California boast a bounty of fruit, including avocados and Meyer lemons.

Such abundance requires immense amounts of water, and this demand, dating back to the California gold rush, spawned arcane rules governing the usage of the water pouring through, among other places, Oroville. The state’s fundamental problem isn’t so much a lack of water but its uneven distribution: Northern California has too much, while most of Central and Southern California has too little.

To solve this problem, a complex infrastructure developed, including the 21 dams and 700 miles of tunnels that make up the California State Water Project (SWP). On top of this are overwhelming numbers of water authorities and regulators. Rights are often fought over in court. Infrastructure construction is perpetual, and ambitious plans are always being proposed and opposed.

Established in 1960, the still-incomplete State Water Project was an engineering marvel of its time. The initiative gathers water from where it is plentiful and redistributes it to 28 agencies or enterprises farther south. Beneficiaries include Los Angeles, San Diego, the San Francisco Bay Area, the Santa Clara Valley, the Central Coast, and the San Joaquin Valley. Key to the project is the Oroville Dam, which at 770 feet is the tallest in the U.S. (The more famous Hoover Dam is 45 feet shorter.)

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