In old-time Athens, hundreds of miles of sewer pipes were made out of clay.

The pipes were only intended to carry raw sewage into nearby creeks. Most were never watertight, even when first installed.

But I'm not talking about Athens, Greece. . . I'm talking about Athens, Alabama. And those pipes — some put in place as early as 1909 — are still in use.

In some places the clay pipes are totally collapsed, heavily taxing treatment plants as millions of gallons of groundwater infiltrate the system. . . and unknown amounts of raw sewage escape.

City Water Manager John Stockton said the system is in danger of "catastrophic failure" within the next five years.

And this isn't just an Athens, Alabama, problem. Water systems all across the country are facing a similar plight.

The billions of dollars spent to fix these aging systems have the potential to make alert investors handsome returns.

As part of the stimulus, $40 million has been awarded to Alabama for sewer installation or repair. Athens is getting $6.8 million of it.

That's $40 million worth of pipe and labor in a single state — all ending up on some lucky companies' balance sheets.

But infrastructure is only one prong of a growing water problem-profit dichotomy.

Rumor Spreadin' 'Round, in that Texas Town

Apparently 'bout the threat of losin' water.

In drought-stricken Texas, over 230 public water systems are under "mandatory water restrictions," including those in major cities like Houston, Dallas, San Antonio, and Austin.

One local water company's website reads in big bold red letters: "If we follow these strict guidelines, we may have drinking water." This is Texas — not a developing nation — worrying about whether or not its citizens will have potable water.

In fact, according to one local paper, plainclothes police officers are "patrolling streets, looking for people illegally watering their lawns and gardens." And "residents are encouraged to stealthily rat out water scofflaws on a 24-hour hot line."

I guess so. Over 75 Texas counties are in extreme or exceptional drought — the two worst categories on the Dept. of Agriculture's monitoring list. The drought, which began in 2007, has been worsened by 36 days of 100 degree or hotter weather so far this year.

Streams that feed Lake Travis and Lake Buchanan — the sources of water for 1 million Austin residents — have "all but dried up," according to the Lower Colorado River Authority. Lake Travis, down 54%, is now more empty than it is full. And only one of the lake's 12 boat ramps still reaches the water.

In San Antonio, the two-year dry period is the worst since records started being kept in 1885.

As bad as it sounds, the problem-profit equation still holds true. Section 16.060 of the Texas Water Code directs the Texas Water Development board "to take all necessary actions to further the development of cost-effective water supplies from seawater desalination in the state."

The state has already contributed hundreds of millions of dollars to build desalinations plants. And more is on the way from the stimulus.

And it's not just desalination.

Conservation and effective infrastructure management will also help ease Texas's water woes. The stimulus has already provided nearly $200 million to that end.

Again, all that money will be paid to companies that execute the projects. Smart investors are finding the public ones and making early bets.

And I'm certainly not mistaken.

Developing World Even Worse, Still Profitable

Of course, if the U.S. is experiencing such drastic water issues, you can imagine what's happening elsewhere.

In India, booming population and agriculture have led to dramatic drops in groundwater levels. And it's only getting worse.

A recent satellite study by the Goddard Space Center found that groundwater "dropped at a rate of 1.6 inches (4 centimeters) per year between August 2002 and October 2008."

The study concluded that "severe groundwater depletion is occurring as a result of human consumption."

India's population has tripled since 1950 to over 1.15 billion people. By 2030, India will surpass China's population with 1.53 billion people.

All of them will need water, not only to drink, but to grow food and produce other necessary goods.

The government and international organizations are already fervently trying to secure adequate supply.

The Asian Development Bank announced last month they'll help improve water management in the area through grants. A recent government announcement said $129 million will be spent on "drinking water supply in at least 24 towns." It seems like new treatment plants are commissioned monthly.

And earlier this summer, India awarded contracts for its first Ultra Mega Power Project, capable of desalinating over 25,000 cubic meters per day. The contract was awarded to Aquatech, a global leader in water purification technology.

As more measures are taken, more investment opportunities will abound.

Taking the Macro View

These aren't three isolated events. . . they're microcosms of water problems now more common than not — from Podunk to the Big Apple, from Timbuktu to Thailand.

If they haven't affected you yet, they will.

Water main replacements, new water treatment plants, warnings of shortages; these are the local symptoms of a global disease, and the constant reminders of an obvious investment angle.

And in the unlikely event those physical reminders aren't available, check your quarterly water bill. The growing cost of freshwater was evidenced for me this month by a $0.06 rise in my still-too-cheap water rate — from $1.26 per cubic foot to $1.32 per cubic foot.

Stick with Green Chip as our family of publications profits from this macro trend for years to come.

Call it like you see it,

Nick

P.S. I examined avenues for water profit last week in our companion publication, Energy & Capital. For further reading on the topic, be sure to check out that article on top water ETFs and stocks.