America's Thirstiest Cities

California owns four slots in our ranking of the 10 cities with the biggest water problems. Can the Pacific provide an answer?
By Christopher Helman

Just north of San Diego, on a site overlooking the Pacific Ocean, Poseidon Resources is building the biggest water desalination plant in the United States. When completed in 2012, the $350 million plant will suck in salty ocean water and pipe out fresh drinking water--50 million gallons of it each day--enough to slake the thirsts and fill the pools of 300,000 households.

Could this be the answer to California's water crisis? Could ocean water desalination end the fight over water rights to the Colorado River, eliminate the need for new canals and pipelines to bring water to Southern California and even allow for the return of stretches of biologically damaged parts of the Sacramento River delta to healthy wetlands?

The Golden State is in desperate need of solutions--it has the unfortunate distinction of holding four spots on Forbes' list of the Top 10 Thirstiest Cities, the American cities most likely to face dire water shortages in the next decade. Among these cities (of 750,000 population or more), the greater Los Angeles metroplex takes first place, followed by San Diego. Bakersfield comes in fifth, while Sacramento, despite being on a river, ranks eighth.

Our list was compiled with the help of Bert Sperling, who created his Sperling Drought Index by combining a variety of data and indices from the National Climatic Data Center. The rankings are based on long-term indicators like aquifer levels, precipitation patterns and historic balance of supply and demand.
As you'd expect, parched places like San Antonio, Phoenix, Las Vegas and Tuscon are also on the list. More surprising: Honolulu, where recent rainfall has been far short of historic norms, and Portland, Ore., where development means water needs have outstripped supply--even in the wettest region of the U.S.

But no state in the U.S. faces problems as big as California's. Even with the crush of snowfall the Sierra-Nevadas got this winter, enough to fill many of California's reservoirs to healthy levels, the states water woes are only getting worse.

California's Department of Water Resources says it would like ocean water desalination to add 500,000 acre feet a year of water to the Golden State's supplies, a modest amount compared with California's overall water consumption. Given 326,000 gallons in 1 acre foot, that would mean building roughly 10 plants the size of Poseidon's.

It sounds great in theory: using human ingenuity to make fresh water for the most parched state from the world's biggest ocean. Poseidon is working on permits to build a second plant up the coast in Huntington Beach; the military is considering a giant one at the Camp Pendleton Marine base. It could rival in size the world's largest, in Jubail, Saudi Arabia, which processes 200 million gallons a day. More than a dozen other plants have been proposed for California.

Disputes with environmentalists have slowed the first one. Poseidon has had to wade through legal appeals from groups concerned about intake pipes sucking in fish, and outflow pipes raising marine temperatures and salinity levels. Poseidon has gotten around that by promising to protect 55 acres of wetlands nearby, and will buy carbon offsets to balance out the emissions from the electricity it will use.

To avoid drawing more water than necessary out of the ocean, Poseidon is building adjacent to NRG Energy's ( NRG - news - people ) Encino, Calif., power generation plant, which currently sucks in ocean water to use for cooling, then pipes it back to the ocean. Poseidon will use the water when the power plant is done with it. For every two gallons of water the plant takes in, its reverse osmosis process will make one gallon of fresh water and send back to the ocean one gallon with twice the salinity level. Poseidon is still wrangling with environmentalists over a desalination plant it wants to build in Huntington Beach adjacent to a power plant owned by AES ( AES - news - people ).

Environmental issues aside, the biggest challenge for Poseidon, and desalination in general, is cost. Scott Maloni, a vice president with Poseidon, explains that it costs $1,100 to desalinate 1 acre foot of water. A third of that is the electricity to run the plant. Then there's another $400 per acre foot to transport the water by pipe into San Diego's water system. Compare that all-in cost of $1,500 to the roughly $900 per acre foot it costs San Diego's water districts to top off its marginal water needs with piped-in imports.

To convince nine nearby water districts to sign 30-year contracts to take Poseidon's water, Maloni had to promise to never charge them more than the going price of imported water. This is not a path to profits, at least in the short run. But Maloni is convinced that within a decade those import costs will rise to meet and exceed Poseidon's production costs. This assumes population growth continues its pace, that people keep flushing toilets and filling pools, and that California rainfall doesn't rise much above its average of 24 inches per year.
To survive financially while waiting for those cost lines to cross, Poseidon has raised more cash than the $350 million needed to build the desalination plant. It has sold $530 million in bonds, and plans an equity offering of $120 million. That will cover $110 million in interest payments. The Connecticut-based company was founded by former executives at General Electric ( GE - news - people ). It built the nation's current largest desalination plant in Tampa Bay, Fla., and has done a host of water projects in Mexico.

Poseidon will probably make out well on this investment, but the risk associated with putting so much capital into a business that is not yet commercially viable means we won't see a building boom of desalination plants in California anytime soon.

Furthermore, even 20 desalination plants would only add a cup to California's water bucket. Though 500,000 acre feet might sound like a lot, California uses 80 million acre feet a year. Just 9 million of that goes to cities for people to use. Another 31 million is used to irrigate crops, and 39 million more flows through rivers and streams, keeping the fish and frogs wet.

So what to do? California's water bureaucrats figure homeowners could save 3 million acre feet a year by being smarter about home water use. Really? That's roughly one-third of urban water use, a fairly ambitious goal. Despite advances in efficient toilets and faucets, residential water use in the state remains where it was in 1972, at 220 gallons per person per day.

Nonetheless, cities can do a lot more with what they have, says Patricia Gober, professor of environmental studies at Arizona State University. In Phoenix (ranked sixth on the list), 70% of residential water is used for outdoor purposes, and an economist in Gober's research group has determined that people are willing to pay $200 more per month to live in a subdivision with lots of irrigated landscaping. For the same money, you can do some first-rate xeriscape landscaping that uses drought-tolerant plants and needs no additional irrigation.
Gober says it's unlikely that any new large dams will be built in the West, "thus any new sources of water for cities of the West will come from current agricultural uses." She says some 80% of the water in the Colorado River basin is now used for agriculture.

That seems like a lot, until you consider that California produces half of the country's fruits, vegetables and nuts and 90% of the wine (550 million gallons a year). Still, to maintain water supplies for city slickers, farmers have seen their allocations slashed, and have even been selling their water to cities. In 2003 San Diego bought rights to 200,000 acre feet a year from farms in the Imperial Valley.

"If you think about it," says drought indexer Gary Sperling, "with every truckload of watermelons or tomatoes that farmers ship, it's like California is exporting water to the rest of the country."