As many centrally planned countries do, the Soviet Union, in the first few decades after its founding, moved to shore up its agricultural supply chain to ensure stability in its member states. One notable project the federation undertook as a part of this effort was a diversion of the Syr Darya and Amu Darya Rivers for irrigated cotton production. The Soviet Union accomplished its goal of becoming a global leader in cotton production (with Tajikistan and Uzbekistan remaining top exporters today), but the environmental consequences were disastrous. Once the fourth-largest freshwater body in the world, the Aral Sea, on the border of Kazakhstan and Uzbekistan and fed by the Syr Darya and Amu Darya Rivers, is little more than a desertscape in 2023.
While no irrigation-induced disaster may ever match the scale of the one that occurred on the Aral Sea, there will be—and have been—disasters equally detrimental to the fortunes of local economies and ecosystems right here in the Sorghum Belt. Many sorghum farmers who irrigate are painfully aware of the changes taking place in the Ogallala Aquifer but are powerless to stop it due to financial constraints, rental arrangements and other factors that prevent reduced pumping. Fortunately, the past decade has seen a dramatic increase in capital available for so-called environmental finance, and while instruments such as carbon credits receive most of the attention, the drought in the southwest has spurred interest in water finance in recent years.
What is water finance? And, how can it help prevent resources such as the Ogallala Aquifer from becoming the next Aral Sea?
“Water finance is a big concept,” said Scott Moorhead, chief strategy officer for Texas Water Trade (TWT), a Texas nonprofit formed in 2018 to catalyze sustainable water transactions that ensure durable, long-lasting water supplies in Texas. “It is simply the work of identifying and implementing innovative ways to use financial incentives to operate our economies while managing existing and future water supplies in a way that does not exhaust or limit them for future users, economic opportunities and the natural world.”
Moorhead, who holds a master’s degree in energy and earth resources and has spent his career in the water policy space, added that water finance involves the creative use of various financial instruments. These include debt, equity, loans, grants, public and private resources and other financial instruments in combination to make investment in water savings and management strategies economical to those deploying capital. The concept has already seen results in a stretch of West Texas desert that was once home to Texas’s sixth-largest spring system.
“Comanche Springs is one of the great spring complexes in Texas and has supported life for thousands of years,” Moorhead noted. “Increased groundwater production during the past century has led to depleted aquifer levels and diminished spring flow. TWT is working to restore sustainable flow in the spring complex by cooperating with area agricultural producers to reduce reliance on groundwater by providing financial incentives for irrigation technologies such as efficient sprinklers. Water saved is then left in the aquifer by the producer for a period, and TWT compensates the producer for the value of this saved water.”
Comanche Springs stopped flowing in 1961 and did not flow again until 1986, after which it only flowed sporadically for the next three decades. In recent years, the efforts of TWT and partners like Quantified Ventures and other private financiers have brought hope for consistent flows from the once world-renowned spring system.
“We are seeing that it is indeed possible to mitigate costs to the landowner, improve on-farm efficiencies, promote healthier soils and protect the sustainable yield of the water resource in a way that does not harm production or quality,” Moorhead said. “That protects the critical inputs of water and soil for future crops and generations.”
Water Foundry Ventures is one such private financier intent on driving these types of positive outcomes. Led by founder and general partner Will Sarni, Water Foundry Ventures invests in companies working to solve modern water challenges in agriculture, commercial and industrial applications. Its sister organization, Water Foundry, provides consulting services to multinationals on water strategy and advises investment funds and water technology startups. For both organizations, the goal is to direct public and private investment into the future of water.
“Individuals can invest either in mutual funds or as angel investors in venture funds,” said Sarni, who holds degrees in earth and environmental sciences and began his career as a hydrogeologist. “Family offices and multinationals can also invest in private equity funds deploying capital in companies focused on water.”
In either case (investing directly in technology deployment or in companies investing in water themselves), a long road lies ahead, but given the scale of the challenge across the Ogallala Aquifer region, the road must be traveled. Fortunately, the frameworks put in place by TWT and Water Foundry Ventures will serve as a guide along that journey.
“We have all heard and seen a lot of noise around carbon credits, and it is inevitable that similar opportunities will emerge in the water world,” Moorhead said. “In Texas, there is already some buying, selling and trading of water withdrawal permits or surface water rights. Properly managed, these trades along with less commonly seen credits can help allocate water to priority uses while also rewarding land managers for the kinds of conservation behavior needed to sustainably manage what is left.”
Without a doubt, technology will play an increasingly important role not only in the future of the Ogallala Aquifer, but in the future of water in general. “The future of water will be digital,” Sarni said, listing smart precision agriculture as an important tool in water’s digital future.
“It will also be democratized with customer and consumer access to data and actionable information, and it will be decentralized with regard to supply as well as treatment and reuse.” Moorhead agreed, adding that in the future, there will be no easy water, where access is cheap and potentially even subsidized.
However, given technologies already available, preventing resources such as the Ogallala Aquifer from resembling the Aral Sea in the coming decades is an achievable goal, with the largest remaining obstacle being funding for deployment of these technologies and development of additional technologies. Fortunately, the financial mechanisms being championed by the likes of TWT and Water Foundry Ventures combined with increasing investor interest both in direct compensation of farmers for technology deployment and in the companies tackling tomorrow’s water challenges will supply the financing needed. With this obstacle out of the way, a better water future is within reach.
This story originally appeared in the Summer 2023 Issue of Sorghum Grower magazine.