If any more evidence were needed to substantiate my claims of a looming U.S. water shortage, I think the last two weeks offered plenty.

On Valentine's Eve, a story broke that went viral on the web almost instantly. It's worrisome, however, that there was so much interest in the story for where it was happening, rather than why it was happening or how to solve it.

At issue, in case you're wondering, is a study by two researchers at the Scripps Institution of Oceanography at the University of California San Diego. The study claims that Lake Mead—Las Vegas's prime source of water—will run dry in 13 years if usage is not reduced.

In case you were wondering, Lake Mead is the largest man-made lake and reservoir in the U.S. And yes, it's the resultant body of water from the construction of the Hoover Dam—one of the stalwart symbols in American iconography.

But if the researchers are right, that may no longer be the case. The study concludes that there's a 10% chance Lake Mead will run dry in six years and a 50% chance it will be gone by 2021.

Of course, that's not the outcome the researchers were looking for. In fact, they "had not expected the problem to be so severe and so up close to us in time."

Ultimately, the problem boils down to taking more out the reservoir than is going in. And that problem will be exacerbated as water levels in the Colorado River, which is fed by annual snowmelt, fluctuate with climate change.

Water Shortages are Becoming Reality

Other support comes from Georgia, where lawmakers want to extend their border into Tennessee to put a crucial reservoir inside the boundaries of the Peach State.

The reservoir, named the Nickajack Reservoir, is fed by the Tennessee River and lies about one mile inside the Volunteer State.

In this most recent Georgian water case—they've been battling Florida and Alabama for nearly two decades—lawmakers claim that the border with Tennessee was erroneously surveyed in 1818. But this case is obviously about water, not imaginary lines.

Nonetheless, representatives from both sides seem to think the issue is a laughing matter, with each proposing ludicrous solutions like winner-take-all football games or wrestling matches. Yes, really.

The only person involved in the issue that seems to make any sense is Gil Rogers, a staff attorney with the Southern Environmental Law Center. He believes states should focus on conservation and sustainable development, not impromptu land grabs.

I guess desperation is starting to set in, with Atlanta's largest source of water, Lake Lanier, shrinking to historic lows.

Maybe they should heed Mr. Roger's advice.

The True Price of Water

That, of course, would start with conservation and continue with sustainable development.

Both of those industries are shaping up to be billion—and even trillion—dollar markets. And if I could just interject with two more recent financial headlines, I think a clearer understanding of the evolving water market can be attained.

The first came yesterday from the Australian Broadcasting Corporation (ABC). In its online rural edition, Professor Mike Young of the Wentworth Group of Concerned Scientists said that charging the real price for water would make consumers more efficient water managers. (This would also work with gasoline if lifecycle/defense costs were included.)

He believes that fixed water prices do nothing to encourage water savings or to aid in the implementation of new technology. Having the price reflect actual cost, he notes, would mean leading edge water management everywhere.

And apparently, that's what the staff over at Financial Times believes as well. They ran a story yesterday entitled, "Openings to Flow from Water Demand," which stated: "Increasing pressure on global water supplies will create opportunities for investors, according to a report from Zurich-based Sustainable Asset Management Group."

That report identified four main ‘themes' of water-related investing that have or will emerge. They were: distribution and management; advanced water treatment; demand-side efficiency; and water and food.

Green Chip Stocks members already have access to a Water Index which includes companies that fall under many of those sectors. In the coming weeks, I'll be shifting the index around to fully encompass all this opportunity has to offer.

To gain access to the Water Index you need to be a member of Green Chip Stocks. You can become a member here.

In the meantime, I'd take a look at Gorman-Rupp Co. (AMEX: GRC). This pump manufacturer recently posted stellar fourth-quarter and 2007 numbers and should be a good bet around or under $30.

Until next time,

Nick

www.greenchipstocks.com