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 Sheriffs
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
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
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
That same day Orovilles 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 mayors 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
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 Katrinas
aftermath still sear the countrys 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 Browns
ambitious WaterFix program a controversial project
formerly known as the Bay Delta Conservation Plan seeks
to address some of the states 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 lets be clear: These
efforts will fall short unless we resolve the question of
access to finance for water
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
its often given away makes privatization
particularly sensitive. Yet investors participation is
essential for a solution.
First, they must overcome waters 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 Americas 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
The price of water is going to rise because it has
to, agrees Tom Ferguson, vice president at Imagine H2O, a
San Franciscobased accelerator for water-focused
start-ups. The question is how fast and how
Perhaps more problematic than waters complexity and
price is the fact that people arent 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. Pickenss 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 hed
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,
Californias 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
states 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 Americas fruits and
vegetables are grown in California; the state and its Central
Valley are responsible for 99 percent or more of the
countrys 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 states fundamental problem
isnt 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.)