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New York investors snapping up Colorado River water rights, betting big on an increasingly scarce resource

Is water the new oil?
Wall Street investment firms buy up rights to scarce water throughout the West 07:43

With the federal government poised to force Western states to change how they manage the alarming shortfall in Colorado River water, there is one constituency with a growing interest in the river's fate that's little known to some: Wall Street investors.

Private investment firms are showing a growing interest in an increasingly scarce natural resource in the American West: water in the Colorado River, a joint investigation by CBS News and The Weather Channel has found. For some of the farmers and cities that depend on the river as a lifeline, that interest is concerning. 

"Our only source of water is the Colorado," says Joe Bernal, who raises cattle and grows crops on land across Colorado's Grand Valley, relying on water from the drought-depleted Colorado River.

"That's all we've got is that river," he says.

Bernal's family came to the Grand Valley nearly 100 years ago, and he has lived there his whole life. 

But now, he has a new neighbor: a New York-based investment firm called Water Asset Management, which he says bought a farm in the valley around 2017 that Bernal now rents and helps operate.

According to public records, the hedge fund — which is headquartered on Madison Avenue in Manhattan — has bought at least $20 million worth of land in Western Colorado in the last five years, making it one of the largest landowners in the Grand Valley.

The hedge fund, founded in 2005, says it invests exclusively in assets and companies that ensure water supply and quality. In 2021, its co-founder and president, Matthew Diserio, called water in the United States "a trillion-dollar market opportunity."

Bernal says that when first heard of the firm, he was concerned.

"Would I have invited them here? No." Bernal says. "Am I glad that there's a big company here buying properties in our valley, under our system? Not really."

Andy Mueller, general manager of the Colorado River Water Conservation District, says he doesn't think the firm wants much with the land.

"It's the water," Mueller says. 

"These are folks that have identified the drought as an opportunity to make money," he added.

Mueller's job is to protect Colorado's share of the river, which flows through seven states and is an important water source for cities including Denver, Salt Lake City, Albuquerque and Los Angeles. He said Water Asset Management has acquired more than 2,500 acres of farmland and is interested in the water rights that come with it.

"I view these drought profiteers as vultures," Mueller said. "They're looking to make a lot of money off this public resource. Water in Colorado, water in the West, is your future. Without water you have no future."

Water Asset Management declined requests from CBS News for an interview. Three years ago, in an interview with Fintech TV, the company's president, Diserio, said one of his firm's strategies is to profit from water in part by making the farms it buys more efficient and then selling parts of its water rights to other farmers and cities increasingly desperate for the natural resource.

Water Asset Management hired Colorado's former top water official as one of its lawyers.

The company's website states, "scarce clean water is the resource defining this century, much like plentiful oil defined the last."

Clean water is growing increasingly scarce due to a number of factors. 

"The Colorado River relies mostly on snowpack in the Rocky Mountains that feeds into the river as it melts in the spring and summer," says Greg Postel, a storm specialist at The Weather Channel. "But climate change is making the west hotter and drier. For every degree the temperature has gone up, the flow of the river has dropped by about 5% — a nearly 20% reduction over the past century."

On top of that, there has been a 23-year megadrought, the worst in 1,200 years. That's in addition to overuse by Western states.

"It's taken a major toll on the nation's largest reservoirs," Postel says. "Lake Powell in Arizona and Lake Mead in Nevada — they are at historic lows. They're at just 25% of their full, combined capacity. There are real fears that this crucial water supply for the West is on the brink of disaster."

People across the region are concerned, including ranchers high in the Colorado Rockies like Kerry Donovan, a former Colorado state senator. She is alarmed by the amount of land being bought in her state by investors for water rights.

"Scarcity does equal value, right?" Donovan says.

Donovan tried to make Colorado's anti-speculation laws stronger, but that effort failed.

She offered a theory on how investors could profit from water rights in the state. 

"They'll probably make money," she says, "because the state will be forced to create a system that doesn't exist right now to allow more flexibility in how a water right is used."

As the arid West gets more desperate, the federal government is expected to make sure the taps keep flowing in cities including Denver, Las Vegas, Phoenix and Los Angeles.

Congress recently allocated $4 billion in drought funding that can be used to pay farmers to fallow their land and not use their water. Some Western states, including Colorado, are also considering paying some farmers to keep their lands fallow.

As for Bernal, his fate is now tied — at least in part — to Water Asset Management and his new landlords from New York.

"They've invested in the properties with new irrigation systems," Bernal says. "So far, so good."

But Bernal said he's paying close attention.

"Good stewards of the land and stewards of the water rights will have their eyes open," Bernal says. "We'll be watching for what may be coming."

Sheena Samu contributed to this article.

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