Maybe it’s the onset of summer, or perhaps the recent PBS movie on the Dust Bowl, but I am hearing more about water shortages. Then this morning two water related articles were forwarded to me by my friend Bill Tomko. The first article was from the NY Times, “High plains aquifer dwindles, hurting farmers” - and describes the draining of the High Plains Aquifer. The second was from Reuters – “The fight for North Dakota's fracking-water market” - and discusses the fight in North Dakota to supply water to the hydraulic fracking industry.
The High Plains Aquifer stretches from South Dakota and Wyoming in the north all the way south to the Texas Panhandle. The southern portion of the Aquifer is going dry with drought characteristics spreading north. One of the drivers of this depletion has been farmers switching to corn to both feed cows and, more recently, produce ethanol. One of the impacts will be the hydraulic fracking industry. One drilling well requires 2 million gallons of water. Water pricing is one of the key components of the drilling cost structure and water control is once again becoming a game changing business in the upper Midwest.
Initially, it is the Texas and Oklahoma drilling industries that will deal with the water crunch. It is striking that T. Boone Pickens is buying up water rights in Texas. The man who helped lead the latest natural gas renaissance is now putting capital into water. It may be the perfect hedge!