Wildcatting For Water

He clenches his glasses between his teeth and peers warily at the screen behind his desk. A smear of red arrows means another dismal day for the $200 million energy fund that T. Boone Pickens, the onetime oilman and corporate raider, manages in Dallas. But his face brightens as he bounds across the room to a huge hydrologic map of the Texas Panhandle, turning his attention to another commodity. Blue-and-white swirls show underground water deposits that stretch from Amarillo ("where it's flatter than a bookkeeper's a--") to the mesa and canyon country where Pickens owns a ranch and recently leased the water rights to 150,000 surrounding acres. He wants to turn those swirls into dollars, by pumping water from the aquifer under his land and building a pipeline to a thirsty city like Dallas or San Antonio.

The American West was settled like this--by brash men jabbing at maps, decreeing where dams should go so lush cities and farms could rise from the desert. They succeeded in making water so cheap, so plentiful and so ordinary that most Americans take it for granted. Now there's a new reality. A mix of drought, rampant growth and increasingly tough environmental restrictions has left virtually every commu-nity in America facing a water shortage. Nearly half of the United States is now affected by drought. From the Chattahoochee to the Rio Grande to the Colorado, major rivers are running at record low flows--leaving cities and farmers desperate for new sources of fresh water. "We are rapidly reaching the limits of our ability to build new infrastructure and redistribute water," says Peter Gleick of the Pacific Institute, a California think tank.

Environmentalists see conservation as the best solution. But Pickens and a handful of other entrepreneurs think converting the precious resource to a private enterprise is the answer. The population of Texas is expected to double by 2050, and Pickens says cities will soon turn to private suppliers to meet surging demand. "You've got the surplus water up here," says Pickens, pointing at the northern Panhandle. "And the demand growing downstate. There's 150 years' worth of water here, and we are the logical supplier."

Although multinational companies have been building and operating municipal water systems in the developing world for decades, privatization in the United States is still in the early stages. In most places, water distribution--and pricing--are controlled by public utilities, which get water rights, reservoirs and pipelines from government, allowing them to sell at subsidized prices to farmers and consumers. That makes it hard for capitalists like Pickens to provide their water at competitive prices. Environmental laws and community opposition often limit the water rights available for purchase.

Despite the obstacles, water cowboys are forging ahead. Ric Davidge, an Alaska businessman, wants to capture water from northern California rivers and tow it in giant plastic bladders down the coast. San Diego and Monterey are looking at his proposal. In Las Vegas, a company called Southwestern Water Exploration is hunting for water as though it were oil, drilling 1,500 feet into the earth's surface. The company recently discovered a new aquifer in Colorado and is trying to get the state court's go-ahead to claim the water rights.

If such private deals are going to work, chances are that Pickens will help pave the way. In the 1980s, he made--then lost-- hundreds of millions by sniffing out undervalued commodities, from natural gas to the stock of vulnerable public corporations. Still a gambler at 74, Pickens says he got into the water business by "accident," when officials in Roberts County, where Pickens owns 27,000 acres, started buying underground water rights from ranches overlying the Ogallala aquifer, a vast, water-soaked cavern that extends from the Texas Panhandle to South Dakota. The contracts allow the utility to pump water when surface reserves run low--while ranchers continue to use the land for cattle. But pumping an aquifer is like sticking a straw into a giant sponge; eventually all the water can be drawn through a single opening, no matter who owns the surface. "I didn't want to get drained," says Pickens. "It would have been stupid to let someone have my water without paying for it."

In 1999 Pickens formed a company called Mesa Water and started leasing rights from neighbors. Many locals were furious that he planned exports from the arid Panhandle to fill swimming pools and irrigate golf courses in Dallas. Pickens was so eager to prove he was merely fighting for his rights as a landowner that he pledged to donate future pipeline profits to charity. After a fierce legal battle, Pickens prevailed. In July the water board granted Mesa the right to pump and sell water from the aquifer, the first time such permission has been granted to a private company. Last week Pickens announced that JP Morgan would finance the estimated $1 billion to build a pipeline, once he finds a buyer.

So far, Dallas, San Antonio and El Paso have rejected his offer, saying they can find cheaper water sources close to home. But Pickens, ever the wheeler-dealer, is undeterred. "If you've drilled as many dry holes as I have, you'd better be an optimist," he says. "Someone is going to buy." If he succeeds, T. Boone Pickens may have finally hit his gusher.