Meet the Businesses Hoping to Cash in on California's Water Crisis

A lack of water in California means big business for the desalination industry and their lobbyist.

For the scores of businesses in Southern California already supplying desalination equipment around the globe, California’s impending water crisis spells opportunity.

An estimated 3,000 people work for companies in the San Diego area supplying equipment or logistical support for desalination plants, earning the industry upwards of $350 million in annual revenues.

A key element of their business also supplies facilities that re-use and recycle water using similar technology including the membranes that make up the heart of any ocean desalination plant.

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“It’s a big industry,” said Tom Pankratz, who writes about desalination for Global Water Report and consults for various water agencies. “A lot of companies that make stuff for desalination plants also make stuff for power plants and automobile plants. There are a lot of major multi-national corporations that have desalination subsidiaries.”

Some of the biggest companies include General Electric, Dow Chemical, Acciona Aqua, Toray Membrane, Veolia Water Solutions and Hydronautics.

About 20 ocean desalination plants up and down the cost of California – most in the early planning stages – have stirred debate over whether adopting such an expensive technology with large environmental impacts is worth it.

Most of the world’s 2,000 desalination plants are currently located in the Middle East where water is in short supply but energy is cheap. In California, an estimated 40 percent of the cost of desalination is energy to run the plant.

Lobbying by companies that stand to gain financially from desalination has helped earn widespread support from California lawmakers, including strong backing from former Gov. Arnold Schwarzenegger.

In 2007, Schwarzenegger aligned with a group of nearly two-dozen lawmakers – local and statewide – supporting a proposed plant in Carlsbad by investor-owned Poseidon Resources. In a signed letter they urged the California Coastal Commission to approve the Poseidon project “on its first opportunity.”

In November of that year, the commission voted 9-to-3 in favor of the project even though Commission staff said Poseidon failed to provide complete information.

“Poseidon is very well connected,” said Glenn Pruim, Carlsbad public works director. “That’s one thing they’ve done very well is to make contacts in the industry whether it be politically or legally. They’ve been very successful in fighting off lawsuits against their project.”

In 2008, executive director of the California Energy Commission, Melissa Jones, abruptly changed positions on the Carlsbad project. First she wrote to the Coastal Commission that the project contained “several fundamental errors.” Eleven days later, Jones wrote to retract her comments. She said she had met with Poseidon representatives and concluded “the project and the plan for mitigation are laudable.”

Proposed desalination plants must also win approval from city and county governments as well as the Public Utilities Commission in the case of investor-owned utilities. First and foremost, however, desalination must win the nod from water agency officials, which, in large part, they have succeeded in doing.

A group of California water companies and public agencies formed the non-profit CalDesal last year to educate and lobby for desalination. So far the group has collected around $100,000 in membership dues, said Paul Shoenberger, general manager of Mesa Consolidated Water District in Costa Mesa. The group recently hired as executive director Ron Davis, former legislative director of the Association of California Water Agencies.

“Our main purpose is to promote environmentally friendly desalination in California,” Shoenberger said.

The desalination message also reaches water officials through sponsored conferences, such as the annual ACWA meeting. Public records indicate today’s West Basin board members attend annual conferences of the New Water Supply Coalition, which lobbies nationally for desalination, and the American Membrane Technology Association, representing companies integral to desalination plants.

The International Desalination Association plans to hold conferences this year in Dubai, Algiers, China and Antigua. Global Water Intelligence also convenes seminars around the world. At last year’s conference in Paris, event organizers tried to pay the airfare for a San Diego County Water Authority official to accept an award for public utility of the year.

“The legal departments said they couldn’t do it and don’t have a budget to pay themselves,” said Pankratz, who helped organize the conference.

But officials frequently travel overseas to see existing plants. Last year, Pankratz helped West Basin water officials travel to Australia – paid by the district – to see an ocean desalination plant in action.

“If you want to see a desalination plant that’s operating, you have to travel,” Pankratz said. “Whenever anyone is doing a new plant, the most senior engineers usually take a trip to visit some operating plant to see how it’s working.”

City councilmen sometimes go on trips, too, he said. “Most of the time the city pays for it.”

Adding to the obscure nature of California’s intricate network of water rights, water agency board meetings often operate with little oversight, said Conner Everts, director of the Desal Response Group. In 2004, two members of the West Basin Municipal Water District went to prison for accepting bribes.

Everts said the current board and the larger Metropolitan Water District of Southern California could do more to increase transparency. Projects are often approved, he said, “with little or no public scrutiny with subcommittee policy meetings and board meetings in the middle of the working day.”

The results of lobbying at the Public Utilities Commission and the California Coastal Commission are obvious. In August 2009, the Coastal Commission overruled an administrative law judge in a dispute over what California American Water could charge ratepayers for desalinated water.
A day before the ruling, company lawyers met with commission staff.

“It was a compromise,” said Diana Brooks with the Division of Ratepayer Advocates. “But on the last day before they voted on it, the commissioner changed his version of it, and adopted the settlement the way it was written.”

The settlement gave California American Water, a publicly traded company, authority to potentially quadruple water prices for desalinated water produced by a publicly owned plant.

David Rosenfeld is a freelance journalist based in Portland, Oregon with 10 years of experience writing for newspapers. He writes primarily about health care, conservation and the changing world around us.