Last week, leaders from a range of industries convened for two days in Los Angeles for Brownstein and WestWater’s inaugural Sustainable Water Investment Summit.
The summit featured Antonio Villaraigosa, former mayor of Los Angeles and current infrastructure advisor for the state of California. Tasked by Gov. Gavin Newsom to collaborate across local, state and federal levels to identify priority projects to address California’s pressing infrastructure needs and serve as a liaison with federal leaders to maximize California’s access to federal funding across all regions of the state, Villaraigosa appears keenly aware of both the unprecedented challenges (including regulatory bottlenecks) that the state faces and unique opportunities presented by federal infrastructure funding.
While summit speakers and attendees were from diverse states, countries and industries of origin, the speakers appeared to be in agreement that our water regime is now at a point where, as one speaker put it, “there is no average year”—we are in a paradigm of dry, drier, driest, and then “call for the ark” with flooding and mudslides from torrential downpours throughout the West. This climate reality, coupled with changing population dynamics and preferences (where people live, actually want to live and demand for a protein-rich diet)—mean that these are unprecedented times of both challenge and opportunity.
Although we cannot capture each takeaway from the summit, we highlight a few standouts below:
1. No substitutes exist. Why does water get so much attention? As one speaker put it, water is the only commodity for which there is no substitute, at any price. Shortage of oil? Or wheat?—the market will find a substitute, perhaps at some cost and potential hassle. With water, there is no alternative.
2. Water scarcity exists despite impressive efficiency gains. We love to tout our improving water efficiency successes, whether in terms of appliances and new technology, agricultural practices or individual practices. But at a global scale, water scarcity is undoubtedly growing rapidly, driven by multiple factors such as economic growth, demand for more protein-rich diets and climate-driven changes to weather patterns.
3. Even the non-Westerners are catching on. Several speakers and attendees—like many in the finance community—commented that they hail from east of the Rockies and are seeing an emerging focus on the value of water and the impacts of its availability, reliability and quality on every sector of the economy. In the experience of the Western transplants in Brownstein’s water group, it doesn’t take long after moving to or doing business in the West to understand why so many investors—even those in water-rich regions like New York—are suddenly paying attention. This regional dynamic may mean that many Eastern-based investors (read: a sizable number of investors) underappreciate the value of water, creating potential opportunity for those ahead of the curve. As one speaker put it, you don’t need to sacrifice financial gains to get the beneficial environmental and conservation outcomes we all want and need.
4. Water rights reign. Water in America is an allegory for American history. We are a nation that prides itself on rugged individualism. For better or for worse, this translates to the governance of water rights. Our water rights regulatory regime is extremely complex and varies by state. The most successful investors must have access to teams with both legal and factual know-how. On the legal side, it is necessary to understand existing law and navigate regulatory ambiguity and varied water right regimes. What’s more, those with an understanding of key facts, like who has what rights in a specific basin or surface water body, will have a leg up.
5. A time of unprecedented challenges and opportunities. What keeps some of our panelists up at night? Polarization, byzantine regulatory processes and permitting hurdles, to name a few. These barriers threaten to slow much-needed infrastructure projects and make it hard to fathom the kind of compromise we’ve seen in the past over big infrastructure projects. What makes our panelists excited to get out of bed in the morning? New and promising water technologies, like those that significantly reduce agricultural water demand and allow the reuse of water produced in the oil and gas production process; innovative partnerships between the public and private sectors and even different levels of government; and the maturation of water markets, including in California.
6. We need the entire kitchen sink. We are living through an historic public funding opportunity for water infrastructure. But it’s just a drop in the bucket of what will be needed. Public-private partnerships and financial and regulatory innovation will be necessary to achieve the groundwater storage, desalination, recycling, multi-benefit land repurposing, water efficiency and pipeline infrastructure improvements that will be necessary to meet the challenges of tomorrow.
This document is intended to provide you with general information regarding the Sustainable Water Investment Summit. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions. The information in this article is accurate as of the publication date. Because the law in this area is changing rapidly, and insights are not automatically updated, continued accuracy cannot be guaranteed.