Non Profit Water Groups

In Arizona, an investor can speculate on water can try their hand in a few ways. They can buy land with rights to water, either ground or surface. Or they can purchase what’s called “paper water”— tradable credits for water artificially stored underground. They can also buy water, store it, and create those credits themselves.

In 1997, Vidler decided to build a storage facility on the land it purchased from Borowsky and his partners. The structure would transfer water to an aquifer, either by letting it sink through layers of silt, sand, clay, and gravel or by using a new technology, vadose zone wells, to inject it. Timian-Palmer estimated the company spent $15 million just to build the recharge project. “It was, by far, the state of the art in those days,” said Small, the groundwater hydrologist who designed the pilot site.

By October 1998, the Vidler Recharge Facility pilot project was up and running. It was likely “the first privately-owned water storage facility for the Colorado River system,” parent company PICO Holdings reported in its 10-K filing to the Securities and Exchange Commission in 2000. Once expanded to a full-scale facility, it would take in 100,000 acre-feet of water per year and could cumulatively store more than 1 million acre-feet, the company predicted.

“We anticipate that in the future, a significant amount of Vidler’s revenues and asset value may be derived from [this] single asset,” it said. “Potential users include local governments in Arizona, the Las Vegas metropolitan area, California, and the Bureau of Reclamation.” Vidler would charge users a fee depending on the amount of water stored, then more fees for recharging and recovering the water.

In those days, Arizona “pretty much encouraged people to come in and recharge water,” said Timian-Palmer. Excess Colorado River water was “competitively priced” if it went to underground storage.

Vidler started purchasing that water — at first about 1,000, maybe 2,000 acre-feet a year — in 1998 and storing it underground. By 2001, it had expanded its facility. That year, it was in the midst of negotiating with the Arizona Water Banking Authority “to begin recharging water and generating cash flow from the facility.”

That income never materialized. Although they signed an agreement, “water was never stored by the bank at Vidler,” said Virginia O’Connell, the water bank’s current manager, because Vidler’s was more expensive than other facilities.

In 2010, Vidler purchased a company with water credits in Phoenix. In 2013, it made $6.3 million selling about 1,000 acres of land and groundwater rights in the Harquahala Valley to Scottsdale for two of the city’s golf courses. But the company continued to lose money, operating at losses of more than $12.5 million in 2014 and nearly $4 million in 2015. In 2017, Vidler sold the Arizona Water Banking Authority about 50,000 acre-feet of its Phoenix credits, and the same amount to the Central Arizona Groundwater Replenishment District, for a total of $25.9 million.

The District, created by the Legislature in 1993, has been key in creating demand for credits in Arizona. In the areas around Prescott, Tucson, and Phoenix, state law requires developers to put as much water back into the ground as they take out, all in roughly the same geographic area. The District helps developers meet that requirement, but it doesn’t have to buy actual water and put it in the ground. Instead, it can buy credits from others who’ve already done so. Critics level that the District allowed development in areas that had no renewable water supply.

“What we’re talking about is transfers of water from the place where there is water to a place where there isn’t water,” said Sarah Porter, director of the Kyl Center for Water Policy at Arizona State University. “I think that there’s more speculation in water as a result of the creation of [the District].”

Vidler has stashed away more than 250,000 acre-feet of water in its recharge facility in the Harquahala Valley — a quarter of its capacity of 1 million acre-feet. The final year Vidler bought excess Colorado River water was 2010, when it put 50,000 acre-feet into the aquifer. After that, the supply dried up.

Last fall, the District hadn’t been interested in Vidler or Water Asset Management’s water because of the pending deal with the Gila River Indian Community, Grignano said. The District ultimately inked a $97.5 million deal to buy enough water from the Gila River Indian Community to fulfill “a substantial portion” of the water it would need over the next 25 years.