Water Rights

[JGBRK]

I do not know if anyone can help on this topic.  But here it goes.  I have a piece of land that sits above an aquifer. The previous owner gave a 100 x 100 piece to a village to provide them water about 40 years ago.  They now need another parcel the same size to drill 2 more wells.  the village has about 600 people but they have been approached by another village to provide them water too as their well is drying up.  The second village has about 500 people.  I'm leaning toward leasing the land.  Any thoughts on calculating a price?  Thanks in advance.

[Packer16]

Depending on where the land is there has been some transactions in water rights especially in the Western states.  There are a number of publications which publish transactions.  I can look these up if you can tell me which state it is in.  A few years ago we valued one of these types of assets.  There are four publicly traded water rights cos: PICO (also an insurance co.), Pure Cycle, Cadiz and Two Rivers along with water rights being buried in some operating water utilities.

 

Packer

[JGBRK]

Central Illinois.

 

Thanks.

[netnet]

A few things occur to me:

 

• From your explanation they have the rights to the water already but they need to get access to it.
  
• If the above is true, they may actually be able to put a pump on your land regardless of what you want them to do. Depending on the state even private parties have this right
  
• Even if the above is not true, they may be able to use eminent domain to get to the water
  
• Check to see exactly what are their water rights
  
• In essence you are leasing the land and not the water rights, but that does not mean you can not charge accordingly.
  
• From all of the issues above, you may want to talk to a lawyer who specializes in this area.
  

 

[Sionnach]

I know water rights haven't been discussed here in a looooong time, but this is a really interesting write-up on water rights:
https://groundbreakerre.substack.com/p/water-rights-the-hidden-asset-thehttps://groundbreakerre.substack.com/p/water-rights-the-hidden-asset-the

 

Quote

What if I told you about an asset class that has compounded at roughly 11% annualized for thirty-five years, is inflation-protected, faces accelerating demand against diminishing supply, cannot be replicated by AI or any other technology, and is used by every American every single day?
 

No, it’s not bitcoin. It’s water - specifically, senior water rights in the western United States.
 

Water rights sit on company balance sheets at historical cost - often pennies on the dollar of fair market value. The public market hasn’t fully recognized this gap.
 

It’s reaching its breaking point.

Supply is drying up: The Colorado River simply doesn’t have enough water. April–July 2026 inflow to Lake Powell is forecast at 13% of normal - the lowest on record - driven by climate change and overuse. Lake Mead and Lake Powell sit at 30% and 23% of capacity. Arizona has already lost 18% of its allocation to mandatory cuts. The century-old framework allocating the river’s water to seven western states expires in October 2026 with no successor agreement, which would trigger federal intervention and forced cuts.

Incremental demand is accelerating: The trillion-dollar hyperscale data center buildout is doing to water what it already did to power over the last two years. Data center water demand is on track to triple from ~310 billion gallons today to nearly 1 trillion by 2028. Incremental water demand is an inevitable second derivative of power demand.
 

This is the setup for a multi-year repricing of water as an investable asset.

 

[Libs]

1 hour ago, Sionnach said:

I know water rights haven't been discussed here in a looooong time, but this is a really interesting write-up on water rights:
https://groundbreakerre.substack.com/p/water-rights-the-hidden-asset-thehttps://groundbreakerre.substack.com/p/water-rights-the-hidden-asset-the

 

 

Great read. Thanks.

[SharperDingaan]

Just some random thoughts.

 

Most of us acknowledge global warming ... but not the change in the distribution of the water cycle. We assume more water in evaporation, falling back as more/heavier rains, in the same catchment basins; yet geology shows otherwise; rivers routinely change course, previous grassland/forests become deserts (Sahara), etc. Hence, is the long-term dollar better invested in new/upgraded infrastructure where climate change rain is now falling?, or in ownership rights over water in current areas? I.E: Is the investment premise one of asset building, or asset stripping. 

 

Asset building could be everything from higher sea walls to save cities from flooding, through to new dams in those places now benefiting. Is the better instrument reinsurance or direct investment (Markel, or FFH India)? Liquidity, scale, expertise, experience all additional issues.

 

Enforceable? It's water, people die if they can't drink, and will do whatever necessary to avoid dying of thirst. The middle east evidences daily, that all the guns in the world can't change that. Your rights get expropriated by those bigger than you.

 

SD

[Saluki]

Anecdotally, I worked with a guy who, about 20 years ago, was the chief economist at one of the largest oil companies. He said that their internal think tank would run scenarios that way more complicated and implausible than Rand or the Pentagon would do, because they wanted to be prepared for anything. When I asked for an example, he said they tried to figure out what would happen (in terms of their business operations) if a war broke out between the US and Canada over water rights involving the great lakes and the border shifted 

 

With Trump threatening to annex Greenland and Canada and the aquifer in the middle of US getting more depleted every year it doesn't seem so far fetched anymore. 

[Fly]

15 hours ago, SharperDingaan said:

 

 

Enforceable? It's water, people die if they can't drink, and will do whatever necessary to avoid dying of thirst. The middle east evidences daily, that all the guns in the world can't change that. Your rights get expropriated by those bigger than you.

 

SD

 

That seems like a realistic concern. How long until the state of California for example declares some sort of water emergency and invalidates the rights held by these companies. 

[Fly]

1 hour ago, Saluki said:

Anecdotally, I worked with a guy who, about 20 years ago, was the chief economist at one of the largest oil companies. He said that their internal think tank would run scenarios that way more complicated and implausible than Rand or the Pentagon would do, because they wanted to be prepared for anything. When I asked for an example, he said they tried to figure out what would happen (in terms of their business operations) if a war broke out between the US and Canada over water rights involving the great lakes and the border shifted 

 

With Trump threatening to annex Greenland and Canada and the aquifer in the middle of US getting more depleted every year it doesn't seem so far fetched anymore. 

 

I'd love to just be in the room seeing the think tank game out the scenario. Pretty wild stuff

[SharperDingaan]

Way back in the day I used to do stress test scenarios around bank capital ... with the intent of failing the (Sched-1, Sched 2) bank. The issues were always that the scenario will never happen (denial), if it does .... others will be in worse shape than us (too big to fail), correlations failing to hold and going to 1 (we're all f****d). Basically, could the bank survive until the weekend (5 days), when a central bank bail-out could be implemented.

 

Typical scenario. The 'big one' happens tomorrow; a good chunk of tidal BC falls into the ocean (Vancouver, Victoria, etc), tsunamis reach into the BC interior, infrastructure likely out for months. Force majeure declarations everywhere, equity sell offs across the board, capital raises restricted, yada, yada, yada. Tail risk that the bank needs to survive.

 

SD

[Red Lion]

12 hours ago, Fly said:

 

That seems like a realistic concern. How long until the state of California for example declares some sort of water emergency and invalidates the rights held by these companies. 

 

They're already invalidating the rights of land owners to pump their own water without limitations set by water boards.