A Resource Critical Yet Taken for Granted
The world, or at least the scientific community, was thrilled in 2015 that NASA had found clear evidence of water on Mars. This is a big deal because water is a critical component for life as we know it.
Although there is no evidence that life currently exists on the red planet, proof that water can exist there opens up the possibility that microbes could have once existed there. That would be the first known instance of extraterrestrial life.
Today, NASA is scouring space beyond our solar system for signs of life. And not surprisingly, the evidence of water is one major marker it’s looking for. The presence of water on a celestial body does not prove that that there is life there, but without any water, based on the current knowledge of biology it’s highly unlikely that there could be life.
Earth is 70% water, but that doesn’t make water any less critical to life here. And water also is a critical investment opportunity.
A Vital Natural Resource
Water, after all, is one of three deeply interlinked commodities that make human life possible. The other two are food and energy. Among these three critical commodities, however, water has consistently played third fiddle.
One reason is that water’s cost is less readily obvious since there are no centralized markets where water futures trade. By contrast, crude oil prices are instantly available as well as reflected in gasoline prices posted at every gas station. The major food products, from corn to cattle, also trade in very liquid markets that correlate closely with prices at the supermarket after adding processing and transportation costs.
The lack of visibility for water’s costs affects water’s allocation in the face of competing demands. Agriculture and the energy industry are the two biggest users of water. When a locale lacks sufficient water to fully serve both industries, energy, as a front-burner issue, tends to win out—even though water used in energy production is more likely to be contaminated and hence not recyclable, while water used to grow food eventually returns as rain as part of the earth’s natural cycle.
But water’s orphan status doesn’t mean that water scarcities aren’t a real and growing problem. Water’s rising price is just one sign of how urgent it is to sharply upgrade U.S. water infrastructure. The mega-drought in California is another.
Aging and Inadequate Infrastructure
Some pipes in the country date back to the Civil War, while many newer pipes are made from inferior materials that hamper transporting water from wetter to drier places. Nearly 250,000 water main breaks occur each year, and there probably are millions more smaller leaks. In all, it’s estimated that more than 20% of freshwater is being leaked each year.
The same inadequate infrastructure has also led to problems with sewage, with around 50,000 sewage overflows occurring each year. Many sewage systems collect rainwater, storm water, sewage, and industrial wastewater in the same pipe, leading to contaminated rainwater. Even the drought in California, the nation’s largest state and major produce provider, hasn’t stirred up a sense of urgency in the country in regards to how critical the water situation has become.
Still, Americans aren’t completely oblivious to water issues. One sign is the rising appeal of bottled water, even though in some cases it’s estimated to cost an astounding 2,000 times more than tap water. While some of this extravagance reflects fashion and convenience, it also evidences a concern that tap water is unhealthful.
So far the response to the nation’s deteriorating water infrastructure has been woefully inadequate. Federal spending is under $10 billion a year, a trifling amount compared to the hundreds of billions of dollars spent on energy and food (and squandered on all kinds of boondoggles).
To completely refurbish the country’s water infrastructure would cost more than $2 trillion according to most estimates. But the structure of the water sector has worked against meaningful improvements. The industry is highly decentralized, with the country’s population of nearly 320 million served by some 170,000 public and private providers—an average of fewer than 2,000 citizens per provider.
However, I believe water won’t be ignored much longer. The risks of a water catastrophe are clearly growing, and companies positioned to keep our water supplies flowing and safe are investments to dive into.
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