The Central Arizona Oasis

By Cameron Welker. 

As Arizona’s population grows, so does the demand for water. For residents, water is an essential resource, but for investment firms, it is a valuable asset. Arizona’s most populous county, Maricopa, experienced the largest population gain in the country in 2022, and the fourth largest in 2023, with 30,000 new residents moving in. Maricopa County relies on underground aquifers for water, and one plan to diversify its water portfolio and sustain its population growth is to pump in water from the Colorado River through the Central Arizona Project Canal. One way to facilitate this water transfer is through the private sale of agricultural water rights to Phoenix suburbs. However, those against the commoditization of agricultural water supplies argue that these sales will harm rural economies and leave farming towns barren, creating a central Arizona oasis surrounded by a dust bowl.

Investment Firms’ Efforts to Accumulate Water Rights

Farmland along the Arizona-California border with Colorado River water rights, which are especially valuable now that the federal government has declared the river’s first ever water shortage, has piqued the interest of big business. One investment company named Greenstone purchased 485 acres in La Paz County and sold most of the related water entitlement to the town of Queen Creek, a growing Arizona suburb located in Maricopa and Pinal County. The purchase price was $27 million.

This investment was one of many motivated by water rights attached to farmland. Greenstone and affiliated companies have acquired about 8,863 acres of farmland located in three Arizona counties as of 2021. Additionally, Water Asset Management and Vidler Water Company are two other companies that together own about 8,642 acres of land around the state. Greenstone has even purchased irrigated lands in Yuma County, where the Yuma irrigation districts control water contracts and landowners are prohibited from selling water rights. Greenstone’s move into Yuma has raised concerns that it will attempt to push for rule changes or influence the irrigation boards. Wade Noble, a coordinator for the Yuma County Agriculture Water Coalition, warns that investment firms offer “big money” to local farmers, continue farming the land for a period, and then move the associated water rights away permanently, harming local economies and national food supplies in the process. Greenstone’s lawyer, Grady Gammage Jr., argues that “[t]here is plenty of water on the river for both urban growth and continued agriculture use.” With a nationally recognized water shortage and the river dropping from ninety-five percent full in 2000 to thirty-nine percent in 2021, Greenstone has the burden of convincing the public that there is plenty of water to go around.

Criticisms of Investment Firms Acquiring Water Rights

         Some residents of rural farm towns that rely on water from the Colorado River fear that the deal made by Greenstone is just the beginning and that investment firms will continue to buy out farmers until all the water is gone. Arguments against these types of transactions take many forms. One concern relates to the damage that investment firms could do to farm town economies. Another involves the environmental concern that, if most of the water rights in farm towns are transferred away, Arizona would be reduced to one giant dust bowl with a central oasis. The Director of the Kyl Center for Water Policy at Arizona State University acknowledged this problem in an interview with PBS, saying that “if all the water were transferred off, then something has to be done to prevent a big dustbowl problem.” Other arguments center on fundamental fairness. One commenter from La Paz County stated, “We have the right to develop as well . . . . and not to [lose] our water so the metropolitan areas can prosper. It’s not fair.”

         Still, not all farming community members are opposed to the sale of farmland to investment companies. Michael Mullion, a farmer in La Paz County, argues that the water is what makes the land in La Paz valuable, and farmers should enjoy the right to profit off of their own investment in the land. While that may be true, if every farmer were to sell their land, farm towns would be reduced to dusty fields.

Safeguards Preventing Mass Sale of Water Rights

         Transfers of water rights from private investment firms to municipalities are subject to certain safeguards. Before sales like the one between Greenstone and the Town of Queen Creek can be finalized, they must pass an environmental review by the United States Bureau of Reclamation, which is within the Department of the Interior. To inform its decision, the Bureau of Reclamation may hold public hearings and gain insight from the Arizona Department of Water Resources. The Town of Queen Creek started using Colorado River water in the Summer of 2023 after receiving a recommendation from the Arizona Department of Water Resources and passing an environmental review by the Bureau of Reclamation.

Even though the purchase survived state and federal evaluations, it now must survive a lawsuit brought by municipal corporations. The plaintiffs’ preliminary injunction was denied, allowing Queen Creek to begin pumping Colorado River water, but the court recently found the Bureau of Reclamation’s decision in error and set a hearing to determine the appropriate remedy. Thus, purchasing Colorado River water rights is no easy process, and there is still uncertainty regarding Queen Creek’s water rights years after the Greenstone sale.

The Future of Selling Water Rights

         Alternatives to diverting Colorado River water might allow Phoenix to sustain its population growth. For example, the owners of central Arizona farmland with groundwater rights can choose to stop irrigating in return for “extinguishment credits,” which they can sell to free up their water allotment for use by municipalities and developers. These efforts, and other voluntary water cuts, may be vital to the continued existence of farming towns that rely on the Colorado River.

         Despite concerns regarding the amount of water needed to support the growing Phoenix area, seventy percent of Arizona’s water is consumed for agricultural use. One water researcher and professor of law, Robert Glennon, suggests that farming communities can survive Phoenix’s water demand through “[m]ore efficient irrigation practices.” Specifically, he proposes that urban water users should contribute funds to develop irrigation technologies that enable farmers to produce the same crop yields while using less water. Others suggest requiring water purchases to compensate the farm communities themselves in addition to the individuals selling their water rights.

         The key will be collaboration. Those working on sustainable water plans in Arizona have yet to develop a comprehensive solution for both farming and urban communities. While potential solutions are considered, individual landowners and investment firms must be cognizant of how their water consumption and investment plans will impact the future of Arizona’s water supply.