November 2002

Views expressed are those of the authors, not necessarily of the AFSC.

Water: Local Use or Global Market

Arnie Alpert is New Hampshire Program Coordinator for the AFSC.

Drought, e coli bacteria, and vandalism put the Aquarion Company, the new owners of the Hampton, NH Water Works, into the local Seacoast news in recent months. Aquarion acquired the local water utility earlier this year in a deal with its former owner, the American Water Works Company. But one would have to be a close reader of the news to know that Aquarion itself is owned by the Kelda Group, a British firm, one of the largest water companies in the world. New Hampshire's water supplies, and the ability of local residents to have a safe and affordable supply of water, are now at play in a global market.

A few miles from Hampton, a new company called USA. Springs plans to pump as much as 439,000 gallons of groundwater a day from land in Nottingham and Barrington. If it wins approvals from town and state officials, USA. Springs plans to bottle the water and sell it in Europe. Bottled water is now a $7 billion a year industry, dominated by Nestle (brands such as Poland Springs and Perrier), Coca Cola (Dasani), and Pepsi (Aquafina). With a gallon of water costing more than a gallon of gasoline in many parts of the United States, it is no wonder Governor Jeanne Shaheen called water "the gold of this century." Others say the global importance of water in the 21st century will be comparable to that of oil in the 20th.

That is why water is such a hot commodity on Wall Street. According to the Christian Science Monitor (May 13), water company stocks have beat market averages over the past seven years. "The high price of water stocks is partly the result of drought conditions," said staff writer Guy Halverson, and partly because "a number of US water utilities have been gobbled up through mergers and consolidations, with major European firms also coming to the US to buy water systems."

When the managers of greater Nashua's water company, Pennichuck, learned that American Water Works (former parent company of Hampton Water) had been bought by Germany-based RWE, they decided to position the local company for sale. In April, Pennichuck announced it had received a $106 million purchase offer from Philadelphia Suburban, the second largest investor-owned water utility in the US. It, in turn, is 17% owned by Vivendi, a huge French conglomerate that is the world's largest water company. (Vivendi may be getting out of the water business. It has put its Philadelphia Suburban shares up for sale; it is not clear who will buy them.)

The Pennichuck sale, which stands to put several million dollars in the pockets of the company's Directors, is being questioned by municipal officials from Nashua, Merrimack, Litchfield, Milford, and Hudson, Hollis, Bedford, and Londonderry, as well as by the Pennichuck Watershed Council, the Merrimack River Watershed Council, the Nashua Regional Planning Commission, the Amherst Conservation Commission, Nashua Fish and Game Association, and numerous area residents. Community concerns include protection of the watershed, rates, and a general unease about control of the water supply passing from a 150-year old local company to a huge out-of-state utility. The deal needs the approval of the state's Public Utilities Commission (PUC) before it can be finalized.

The City of Nashua has asked the PUC to proceed slowly, and has commissioned a study of the Pennichuck sale, including the possibility that the City would buy the utility itself.

The trend, however, is in the other direction: privatization of public water supplies. Pennichuck, for example, already runs some publicly-owned water companies under contract. "Because corporate mergers and acquisitions have consolidated much of the industry, the new frontier for corporate growth lies in privatizing public water services," writes Stephen Shrybman, a Canadian analyst.

"One of the attractions of privatizing water services," reports Joan Lowy of the Scripps Howard News Service, "is that private companies are often willing to make tough decisions that elected officials would rather forgo, such as raising water rates or cutting workforces." When private companies took over English water systems, they fired almost 100,000 workers, nearly 25% of the workforce. Similar mass layoffs have accompanied privatization in central Europe and Australia.

In poor, indebted countries, the World Bank, International Monetary Fund, and other financial institutions are pressuring governments to sell off their water companies. In Nicaragua, for example, the Inter-American Development Bank has conditioned loans on the privatization of water in four cities. The IMF has forced the government to raise rates, threatening to put potable water out of reach for poor people.

The theory behind privatization is that water will be managed more efficiently under the discipline of prices set by profit-minded firms. Under "free market democracy," both the poor and the rich can drink as much water as they can afford.

More than a billion people worldwide lack access to clean drinking water, and three times that many are without basic sanitation. While you and I might call this a crisis, global entrepreneurs spot an opportunity. "Water is the last infrastructure frontier for private investors," comments Johan Bastin of the European Bank for Reconstruction and Development.

Vivendi and another French firm, Suez, are the global leaders in water. "Between them," notes Canadian researcher Maude Barlow, "they own, or have controlling interest, in water companies in approximately 120 countries on five continents and distribute water to almost 100 million people in the world." Other big players include RWE and Bechtel, the California-based firm best known for its intimate relations with once and future Cabinet members. Until it ran into troubles, Enron was also big in the global water market.

The discipline of the "free" market is not only enforced by the international financial institutions; it is also enforced by the emerging frameworks of global trade rules. Water is already considered a "good" under the North American Free Trade Agreement (NAFTA) and World Trade Organization (WTO) systems of trade rules and enforcement mechanisms. This designation means, for starters, that any rules that prevent or restrict international trade in water would be considered unfair barriers to trade.

Now the European Union, where the world's biggest water companies are headquartered, wants commerce in water-related industries (including the vaguely defined area of "water collection") governed by the General Agreement on Trade in Services (GATS), a little known part of the WTO system. Under GATS, regulations that are considered "more burdensome than necessary" are considered unfair. Who decides what is necessary? Like other WTO procedures, such determinations are made by secret panels of trade experts. According to their rules, human rights and living wage standards are not considered necessary.

Gov. Jeanne Shaheen says "It is critical we do everything we can to protect water." But under the emerging rules of the global economy, the ability of New Hampshire communities and governments to protect water may be limited.

Trade Rules and Trade Rulers

If USA. Springs were owned by a foreign company, a decision to stop or limit its bottling plant could bring the US government before a trade tribunal. There, if limits on groundwater extraction or sale were deemed unfair trade practices, the United States could be forced to pay substantial penalties or repeal the offensive regulations.

For the time being, USA. Springs is a New Hampshire corporation, which cannot use NAFTA to fight local or state government rulings. But if USA. Springs were sold to a Canadian company, NAFTA rules would apply. If USA. Springs were sold to any foreign company, local regulations could be trumped by WTO rules, including the General Agreement on Trade in Services (GATS).

WTO and NAFTA rules constrain the ability of governments to set limits on the amount of a product that gets exported. The rules are so new that exactly how they will be interpreted is unknown.

And the trade rules keep changing. Negotiation of the Free Trade Area of the Americas is underway. WTO negotiations are ongoing, but their aim is the continued relaxation of government restrictions on trade, including trade in water.

Prudent to be alarmed

The notion that international trade rules could be used to force the privatization and deregulation of water supplies may sound like scare-mongering. But already a Canadian chemical company is using NAFTA rules to demand nearly a billion dollars in damages because California decided to phase out MTBE, a gasoline additive which was found to be polluting the state's water and which has also been found in New Hampshire wells and lakes. Governments that are forced to pay polluters to make them stop will think twice about environmental protection. We are entering a new era; it is only prudent to be alarmed.

New Hampshire law says ground and surface water are held in "public trust." The State has the obligation to protect it from unreasonable use. But the notion of "public trust" is under assault by global forces that seek to treat everything as a commodity, on sale to the highest bidder.

"Water is one of our most important natural resources, the one all life depends on," says Denise Hart, a Barrington resident, and one of the leaders of Save Our Groundwater (SOG). SOG is mobilizing people in the Seacoast area and beyond to oppose USA. Springs before local and state regulatory bodies. Each time the Nottingham Planning Board meets, for example, SOG members rally outside with signs, banners, a literature. Inside, they bring up-do-date information to the Planning Board members while peppering USA. Springs' representatives with questions. SOG's technical committee brings engineering, legal, and geological expertise to the grassroots struggle, while its website (www.saveourgroundwater.org) keeps the public informed.

SOG is part of a global movement to keep water safe, affordable, and accessible. They are not alone. In northern California, local activists are opposing a plan to pipe river water into giant baggies and tow them to San Diego. In Bolivia, thousands of poor people took to the streets to stop Bechtel Corp. from taking over a local water company. Organizations including the American Friends Service Committee and the Alliance for Democracy (www.thealliancefordemocracy.org) are studying the impact of global trade rules on the ability of local governments to safeguard their water supplies. By acting together we can protect our future access to safe, clean, and affordable water.

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