Who Owns the Country's Drinking Water?

Published By the Center for Responsive Politics
Originally Published on September 13, 2002

Across America, pipes are cracking, water systems are failing and century-old infrastructure is badly in need of repair. By some estimates, it will cost more than $300 billion to upgrade all of the aging water facilities in the country.

Congress is currently considering legislation that would pour money into communities to fix the ailing systems.

But tucked into the House version of the water bill is a little-noticed provision that could decide whether drinking water remains a public resource or becomes a private commodity. Under the House bill, if a community wants federal funds to help upgrade its infrastructure, then it has to agree to consider privatizing its water system. The bill also would make it easier for private water companies to be eligible for the same subsidies that public utilities currently receive.

The bill is at the top of the private water industry's legislative wish list. Only a few cities in the United States have privatized their water—San Francisco and Atlanta among them—and the industry has been struggling to compete with public utilities. The private water companies have long complained that the federal assistance offered to the public utilities gives them an unfair advantage in the marketplace, and the water companies have seized on the House bill as a way to force open the market.

The roster of private water companies in the U.S. is a complex web of foreign-owned subsidiaries that are constantly merging into even larger companies. The French firm Suez owns United Water Resources, the company that supplies water to the city of Atlanta. Paris-based Vivendi Universal is primarily an entertainment company, but it also runs the largest water distributor in the world, Vivendi Environnement. Vivendi Environnement, in turn, owns U.S. Filter, which distributes Culligan bottled water. And the German corporation RWE paid $4.6 billion this year to acquire American Water Works, the largest private water company in the United States.

The companies themselves have done some lobbying, but they've left most of the work in Congress up to their trade group, the National Association of Water Companies (NAWC). NAWC spent more than $360,000 on lobbying in 2001, and formed the "H2O Coalition" to push for privatization. The H2O Coalition also includes the Water and Wastewater Equipment Manufacturers Association and the National Council on Public-Private Partnerships as members, but it's primarily NAWC's creation. Representing the coalition, NAWC's executive director testified before Congress on the water bills.

The going for the industry's lobbyists has been tough. Despite the work of the H2O Coalition, pro-privatization language was removed from the Senate water bill earlier this year. NAWC acknowledged that it was outgunned by the larger, more powerful Water Infrastructure Network, an association of environmentalists, labor unions and trade groups. The network has heavily lobbied Congress for federal funds, mainly geared toward public utilities, to help upgrade the nation's water systems. Among the group's members is the International Brotherhood of Teamsters, which has contributed $1.8 million so far in the 2002 election cycle in individual, PAC and soft money donations, 83 percent to Democrats; and the Carpenters and Joiners Union, which has given $3.2 million, 85 percent to Democrats.

Against such a tide of giving, contributions from private water companies are barely a drop in the bucket. Vivendi Universal has given the most, more than $780,000 so far in the 2002 election cycle, 72 percent to Democrats. But only about $23,000 of that total came from the company's American subsidiary, U.S. Filter. American Water Works has given nearly $160,000, 74 percent to the GOP, while United Water Resources has contributed nearly $100,000, 75 percent to Democrats.

NAWC has contributed a little more than $38,000 to candidates, 69 percent to Republicans. In its 2001 annual report, NAWC bewailed a "downward trend" in industry contributions to the group's political action committee. The trend was "principally due to industry consolidation," the association wrote, with the PAC raising a "disappointing" $21,100 in 2001. Looking ahead to the 2002 elections, NAWC noted in its annual report that it had developed a series of "new procedures and practices designed to heighten awareness of the PAC and increase receipts."

NAWC did throw a successful fundraiser for Sen. Charles Grassley (R-Iowa), raising more than $23,000. Grassley is the ranking Republican on the Senate Finance Committee, which oversees tax issues. NAWC and the water companies have been lobbying the government to lift the federal cap on private-activity bonds, which the water companies use as a cheap way to borrow money. In 2001, Grassley added an amendment to the Senate's tax bill that would have allowed the industry to get around the cap, if they used the money they raised to meet arsenic safety standards. But Grassley's amendment was struck from the bill at the last minute.

Grassley is also a favorite of the water companies because of his strong support for the fuel-additive ethanol. Over the years, the Iowa senator has introduced several bills that would ban the use of the a rival additive, MTBE, and replace it with corn-derived ethanol. MTBE has been found to contaminate groundwater and has been linked in some scientific studies to cancer. Water companies have been footing the bill to purify the water of MTBE contamination and have been lobbying for either federal funding for the cleanup, or an outright ban of MTBE.

Privatizing U.S. Drinking Water

By Erica Gies
August 11, 2008

We turn on the tap, and clean water flows. Most of us take this service for granted because we consider water, necessary for life, a basic right. In fact, this notion stems back to an ancient Roman legal precedent called the public trust doctrine. This fundamental tenet says that crucial natural resources, especially water, belong to everyone.

But 1.1 billion people worldwide do not have access to clean water, according to the United Nations. Waterborne diseases such as cholera and dysentery kill 2.2 million a year. This was true in the United States until government took over our water infrastructure as a public health measure.

However, now many aging U.S. municipal water systems are deteriorating. One-fifth of our drinking water is lost to leaks, while overworked treatment plants release 1.2 trillion gallons of raw sewage into waterways annually, according to the Congressional Budget Office.

Stark estimates show that Americans will need to spend up to $1 trillion by 2019 to make necessary upgrades. Unfortunately, federal funding for water systems has plummeted, and some strapped communities have turned their facilities over to private companies, hoping they will make water system improvements government hasn’t.

Thirteen percent of U.S. municipal water systems have been privatized already, mostly turned over to European multinational companies with misleading names such as American Water Works and United Water.

Privatization advocates argue that corporations can best provide and update water infrastructure. However, early adopters, including Atlanta; New Orleans; Indianapolis; Jersey City, N.J.; and Lexington, Ky., have seen privatization fail by a number of measures.

Water prices usually rise shortly after privatization -- sometimes dramatically. Privately owned water utilities charge customers significantly higher rates than those publicly owned: up to 50 percent more, according to Food & Water Watch, which compared rates charged by publicly and privately owned utilities in California, Illinois, Wisconsin, and New York.

High water prices can be catastrophic for the poor. In Bolivia in 1999, the government granted a 40-year water privatization contract to a Bechtel subsidiary. Rates increased immediately by as much as 200 percent. Many families were paying one-fifth their income for water, which resulted in rioting, government instability, and Bechtel’s withdrawal from the country.

In some parts of the U.S., new industry-backed laws allow utility managers to turn off water due to customer nonpayment. In Pennsylvania in 2005, managers cut off water to thousands of people unable to pay their bills.

The significant environmental costs of privatization are just as troubling. Some companies push expensive, environmentally destructive schemes to increase water supply -- such as desalination plants -- because their profits are tied to how much they spend on infrastructure improvement. High-cost projects generate huge profits for the corporation, while draining public coffers. Tampa Bay Water partnered with private company Veolia Water to build the largest desalination plant in the nation. The facility cost $158 million and will serve just 10 percent of the area’s water customers.

The simple, inexpensive solution to meeting U.S. water needs is not privatization but conservation. California, the country’s biggest water consumer, could cut its wasteful use of water by 20 percent in the next 25 years, while meeting the needs of a growing population, a healthy agricultural sector, and vibrant economy, according to the Pacific Institute. Stormwater capture is also an important, less expensive strategy. But corporate water managers have little interest in conservation because the more water they sell, the bigger their profits.

One of the best and cheapest ways to assure a clean water supply is to let nature work. In 1989, New York City contemplated a new $6 billion water filtration plant. Instead, the city spent $1.2 billion over 10 years to purchase and restore its watersheds, allowing a 2,000-square-mile forest to clean the water. Other communities, such as Auburn, Maine, have done likewise. Private companies oppose this watershed approach, because it reduces the need for costly treatment methods, thus reducing water prices and profits.

In fact, water privatization can actually reduce water quality. In the United States, the National Association of Water Companies lobbies congress and the EPA to block higher clean water standards, which it views as an unnecessary expense.

For all these reasons, communities are breaking contracts with corporations. The list of the disenchanted includes Laredo and Angleton, Texas; Felton, Stockton, and Santa Paula, Calif.; Buffalo, N.Y.; East Cleveland, Ohio; Bridgeport, Conn.; Rockland and Lynn, Mass.; and Milwaukee, Wis.

A 2005 poll by an independent research company found that 86 percent of Americans support a national, long-term trust fund for water infrastructure. So do I. This solution would allow us to update aging community water systems, while keeping our drinking water securely in public hands.

Americans have a fundamental right to life, liberty, and the pursuit of happiness. Clean affordable drinking water is essential to life; it too is an inalienable right.

Erica Gies is a freelance reporter whose work has been published by the International Herald Tribune, Wired News, Grist, E/The Environmental Magazine, and The San Francisco Bay Guardian.

The Blue Gold Rush (Excerpt)

By Kayla M. Starr, Sentient Times
Originally Published in December 2002/January 2003

Water Privatization

Because multinational corporations now realize that water scarcity and pollution are going to define the next century, a huge movement is taking place to commodify and privatize ownership of water. Poised to capitalize on this crisis are giant “corporate water bandits,” multinationals who are searching the planet for opportunities to turn the misery of water-starved regions into profits for their executives and stockholders. As Bob Dylan sang, “The pump don’t work cause the vandals took the handle.” The results are higher bills, bad water, poor service, non-functioning fire hydrants—and no control over the corporate owners. The very survival of untold millions of people could rest on decisions being made today behind closed doors in corporate boardrooms and government offices throughout the world. With each drop of water that falls into the hands of private interests, any sustainable solution to the global water crisis moves further and further from the public’s grasp.

It goes without saying that those who control water supplies will exercise economic and political power at almost unimaginable degrees. Bulk water exports—transporting water from water-rich countries to water-poor countries—could have disastrous consequences. Massive extraction of water from its natural sources results in ecological imbalance and destruction. Groundwater is being over-extracted as it is, and once aquifers are emptied or polluted, they are almost impossible to restore.

There is a false perception that when water services are privatized, the financial burden will shift from the public to the private sector, which will save taxpayer money by assuming the costs of repairing, upgrading and maintaining infrastructure. In reality, taxpayers simply wind up paying for these projects through their monthly bills. Tax-free public financing translates into lower-cost projects, while taxable private financing results in higher interest rates. As a result, consumers are also forced to make higher payments on company loans.

In the U.S., the National Association of Water Companies is lobbying hard to push the Water Quality Investment Act through Congress. It contains a provision that requires cities to “consider” privatizing their water systems before receiving any federal support for upgrading or expanding municipal water systems. This boondoggle would spend your local taxes to offer your water for sale to private corporations, or else the city could be sued.

Once a government agency hands over its water system to a private company, withdrawing from the agreement borders on the impossible. Proving breach of contract is a difficult and costly ordeal. And multinational trade agreements, such as NAFTA and the pending FTAA, provide corporations with powerful legal recourse. A private company, for example, can use the North American Free Trade Agreement secretive tribunals to contest challenges to privatization. And in World Bank loan deals, which often makes water privatization a condition for loans to poor nations, companies are usually guaranteed cash payments if a government agency returns its water system to public control.

Both the World Bank and the International Monetary Fund strongly encourage the governments of developing countries to sell to private, multi-national companies the rights to deliver essential services, such as water, to the population. This is part of their controversial policy of “structural adjustment” for debt repayment.

As Marq De Villiers tells us in his well-researched book, “Water: The Fate of Our Most Precious Resource,” the trouble with water “is that they’re not making any more of it.” Maude Barlow and Tony Clarke, in their recent book, “Blue Gold: The Fight to Stop the Theft of the World’s Water,” echo his sentiment, writing that groundwater depletion is “one of the great unseen but looming crises facing our planet.” According to Barlow’s research “Aquifers cannot be cleaned once polluted and they’re shrinking rapidly. Global warming trends are rapidly destroying wetlands. Desertifi-cation is spreading and suppressing rainfall. There’s hardly a river flowing that’s not choked with human runoff. As the world’s population rapidly expands, these devel-opments are gradually intensifying into a ticking time bomb under the industrialized world’s complacent assumption that the water supply is endless. The world’s water supply is fast falling prey to corporate desire for the bottom line. Indeed, the human race has taken water for granted and massively misjudged the capacity of the earth’s water systems to recover from our carelessness.”

Vivid evidence mounts that corporate profits are increasingly drinking up scarce water resources. In some cities and countries, water has already been privatized, leading to higher rates of consumption and depleted resources. And in other places, poorer residents actually pay more for water than their richer neighbors, while Perrier, Pepsi and Coke’s sales of bottled water are taking water away from municipal supplies. Experience has been that the foreign company immediately raises prices so that many vulnerable members of the population are no longer able to afford the service they once had. This translates to disease and death for the helpless poor. As the population becomes resentful, riots and killings create a negative environment and the company may leave the area with losses and a bad reputation.

The Costs of Privatization

In places like Cochabamba, Bolivia the results of water privatization are resoundingly negative for the population, the local governments and the multi-national company. The Cochambamba water company was privatized in 1999, to a consortium including the Bechtel corporation, which engaged in an engineering scheme to drill a 19km tunnel in the hills to channel water to the city. To help finance this, water bills went up as much as 200%. Residents were enraged. Some people had to literally choose between buying food or water. Finally, tens of thousands of people protested, blocking roads out of Cochabamba for several days. Police responded with violence, killing several people. Bechtel ultimately canceled the contract, but filed a demand of $25 million from Bolivia to recoup its investment and to recover a portion of their anticipated profits.

With the privatization of water in Manila, capital of the Philippines, both consumers and workers shared the cost of creating enterprises profitable enough for the multinationals. Although the winning consortia had bid at certain price levels, within two years one company—led by International water, a UK/US consortium—was demanding a doubling of prices. Employees were reduced by a succession of measures. Workers were then effectively forced to apply for their own jobs. The net result? 7,370 employees were reduced to 4,580.

Cutting off consumers from a water supply has become a common occurrence under privatization. In 1992 in the UK, where there were sharp price increases following the privatization of water, a massive 21,282 customers were disconnected and there was widespread alarm at the health implications for poor families. The British Medical Association called for the disconnection of water supplies to be made illegal because of the vital role of water in health and disease prevention. New guidelines reduced the cutoffs, but the companies then introduced pre-payment meters, which effectively functioned as devices by which the consumers cut themselves off if they could not afford to pay. There continued to be bitter criticism from consumer groups, medical groups and the press. In 1998, after a court ruling, the new Labor government announced it would make it illegal for companies to cut off water supplies to homes, schools or hospitals for non-payment.

In the Czech Republic a multinational takeover of water dramatically raised prices. VaK Jizníechy, a subsidiary of the UK-based Anglian Water, increased water rates to households by 100.7% from 1994 to 1997, nearly double the national average. In 1999, following the company’s acquisition of the majority of the equity shares, water rates to households increased by 39.8%, while sewage rates to households increased by 66.6%, far higher than any other increase in the price of water in the country.

Here in the United States

Mecosta County, Michigan sits at the center of the largest supply of fresh water on Earth. But when the Perrier Group of America was given permission to drill wells and extract up to 260 million gallons of water per year for free, bottle it, and sell it throughout the Upper Midwest, the people of Mecosta County grew very concerned. A group of residents formed the Michigan Citizens for Water Conservation, and sued to stop the company, pointing out that water, like air, is a public resource—not a commodity.

In the mid-nineties the municipal water utility in Atlanta, Georgia, was sold to United Water Resources. URW has since been taken over by French-based Suez Lyonnaise, the biggest water conglomerate in the world, which has reaped millions in profits. Their first step in Atlanta was to cut 400 of the 700 employees from the water works. Customers began to complain that brown water was flowing from their faucets, fire hydrants were going dry, pipes leaked, water bills increased, and they were unable to get the company to respond. The city government is demanding that these problems be addressed or they will find the company in default of their contract. However, the taxpayers must pay for the expensive legal battle to attempt to regain control of their own water. Similar events occurred when URW took over the water system in Jacksonville, Florida. The residents have finally bought back their water service in a $219 million buy-out. The citizens of Huber Heights, Ohio and Chattanooga, Tennessee are now engaged in similar legal battles to get their water back.

These are but a few examples of the disastrous effects of privatization and what consumers are doing to save their water supplies. As citizens become more educated, they are finding ways to reclaim the rights to their own water.

Fighting Back

Water activists recommend a set of standards that should be included in any agreement of public-private partnerships in the water delivery sphere: The involvement of water users in the planning of the systems, local stewardship and watershed protection, water preservation and reclaiming of polluted water systems. Underlying all these standards is the recognition of water as an essential part of life and the right of all beings to clean water, whatever their social or economic status.

Barlow and Clarke lay the blame for the world’s water crisis squarely and unequivocally at the feet of global corporations. Blue Gold lavishes scorn on governments that “are abdicating their responsibility to protect and conserve water” while pointing fingers at oil, gas, rubber, paper, car, and commercial farming industries who use more than 25 percent of the world’s water and trash much of the rest. Governments, they argue, should eschew globalization and embrace “a set of principles and ethical considerations directly opposed to the predominant standpoint of the global economy.” Water must be “decommodified,” they explain, restored to its natural state, and turned over to local public control. Only then will access to water become a right rather than a privilege. Conservation projects must filter through political systems throughout the world and wash away once and for all the corporate scum that has so long treated water as an endlessly exploitable resource. We can all drink to that.

Resources: Public Citizen’s “Water for All Campaign” works with grassroots groups in the U.S. to oppose the privatization and bulk sale of water resources and to protect universal access to clean and affordable drinking water by keeping it in public hands. Public Citizen offers information on water privatization, networking and expertise for local groups fighting corporate water takeovers. You can learn more and get help by contacting Public Citizen at www.citizen.org/cmep/water; cmep@citizen.org; 215 Pennsylvania Ave., S.E., Washington, D.C., 20003, (202) 546-4996.