In late October, Prescott, Ariz., auctioned 2,274 acre-feet of effluent for more than $67 million. One month later, a huge plant in Orange County, Calif., began purifying sewerage, including runoff and household waste, into drinking water and is projected to produce 70 million gallons a day that is being injected into aquifers that supply two-thirds of the county's population. Effluent-wastewater that comes from residential and commercial structures and is treated and reused-is emerging as an important water source for states such as Arizona, whose existing water supply is "fully allocated," says Clay Landry, president of Vancouver, Wash.-based West Water, which conducted the Prescott auction.

Effluent fills about 12 percent of Arizona's annual water needs and is used primarily for irrigation. Jack Lavelle, public information officer for the Arizona Department of Water Resources, predicts that effluent could represent a much larger portion of Arizona's water as residential development expands. At least one developer-Robson Communities in Sun Lakes, Ariz., which operates 11 water and waste utilities throughout the state-has long been on the cutting edge of water reuse: In 1996, its plant in Pima County, Ariz., was the first in the country to inject advanced-treated effluent back into an aquifer, according to Robson's vice president of operations Jim Poulos. Robson has also been aggressive about securing effluent from within and outside of its communities, says Poulos, who points to the developer's Quail Creek community in Tucson that draws effluent from Pima County's system.

A conservative rule of thumb is that about three-fifths of household water could be reused. But some communities aren't tapping into effluent as a secondary water source, sometimes because local residents are against it. "Las Vegas is not a big fan of 'gray water,' " observes Doug Bennett, conservation manager for the Southern Nevada Water Authority. Nat Hodgson, vice president of construction for Pulte Homes' Southern Nevada division, says his company isn't using effluent for irrigation purposes, and he knows of only one small local builder that does. That could be changing, though, as Focus Property Group, a major developer in Las Vegas, is currently looking into systems that can recapture gray water from houses for irrigation reuse, says Focus' CEO John Ritter. Turning sewerage, including runoff and household waste, into drinking water is far more controversial but is currently being considered in San Jose, South Florida, and Texas, according to the New York Times.

There's lots of room to expand effluent use when only about one-fifth of California's households have access to reclaimed water, estimates Steve Doyle, president of Brookfield Homes' San Diego division, whose five communities draw recycled water from reclamation plants (through pipes whose purple color indicates what kind of water they convey) for irrigation. "Any discussion about water supply in the future has to include reuse," says Greg Bielli, Western region president for the developer Newland Communities. In Phoenix, Newland is funneling effluent from its communities into a lake that is purified and recycled by the city's treatment plant. What Newland would like to do, says Bielli, is to inject more effluent into an aquifer for storage during winter months, so that it could extract it during the summer, when demand is higher. Bielli also notes that injecting more treated effluent into the aquifer would dilute some of the salt content in its water.

In 2009, M3 Cos. plans to open Wickenburg Ranch in Arizona, which when built out will have 2,300 homes supported by a dedicated aquifer and a $1 million sewer treatment plant that M3 is building to handle effluent that would be reused to irrigate open spaces and landscaping, says Bill Brownlee, M3's managing partner.

Distant Thunder

Western cities are pushing water conservation aggressively, but will residents push back when the price tag for infrastructure improvements comes due?

Water has yet to cause the same anxieties about shortages and rising prices, or inspire conservation, they way energy does for many people. "Water is the ugly duckling of the green movement," observes Charles Gale, senior government affairs representative for the Los Angeles-based water wholesaler, the Metropolitan Water District. And water conservation isn't exactly top of mind with Westerners, not when Las Vegas has "water police" patrolling neighborhoods and fining residents who violate water restrictions (such as watering their lawns or washing their cars outside of designated days). "I don't think people who move west give much thought to water; they're more concerned about jobs and lifestyle," says Tom McCormick, president of Las Vegas-based Astoria Homes.

But maintaining some balance between supply and demand for water is going to require users to alter their habits or pay more. That might not mean substantially higher water bills, but residents are already being asked to foot the bill for major infrastructure projects being proposed to improve water storage and supply.

What's ironic is that water shortages would be less of an immediate concern if homeowners were just a bit more environmentally conscious. That's one conclusion of a report that the research firm Pacific Institute and Western Resource Advocates, a nonprofit environmental law organization, issued in October, which finds Las Vegas' water conservation and water efficiency efforts to be wanting. Peter Glieck, Pacific's president, tells Builder that Las Vegas uses more water per person-264 gallons per day in 2006-than many Western cities, "and more than it has to." He notes that Las Vegas' water-pricing system is too narrowly tiered to be a disincentive for people and businesses to use less. The report recommends widespread installation of water-efficient fixtures and appliances, and drought-tolerant landscaping, which it estimates could reduce the amount of water single-family homes consume by 40 percent.

Some Western builders and developers would probably concur with this report's findings up to a point, because the consensus among them is that older existing homes with grass yards and 6-gallon toilets in their bathrooms are the real water hogs. "A well-equipped [new] house uses 50 percent to 70 percent less water than an existing home," says Larry Gotlieb, vice president of government and public affairs for KB Home. His company and other builders now include options such as tankless water heaters and front-load washing machines that use three-fifths less water than conventional top-load models. The developer Newland Communities has been looking at providing shade structures that reduce pool water evaporation.

Gotlieb points to a new product, which Los Angeles has been testing, which captures rainwater runoff from a home's roof and stores it in PVC fencing around the property. "Water conservation isn't like recycling, which took years for people to accept," says Gotlieb. "It doesn't ask a lot from homeowners."

Structural repair Still, some homeowners need incentives before they'll jump on any conservation bandwagon. Jerry Wade, the president of Artistic Homes in Albuquerque, N.M., says that water conservation became "real important" to homeowners only after Gov. Bill Richardson signed into law tax credits for homes that meet certain energy- and water-saving standards.

Builders in the West are already complaining about being saddled with impact fees for water-related infrastructure upgrades that, they say, local voters won't fund through taxes or bonds. But the ballot box is where water allocation and delivery issues inevitably will be settled, as western cities and states scramble to find, use, and convey every drop of water at their disposal.

Aurora, Colo.'s Prairie Water Project is building 34 miles of new pipeline and pumping stations, at a cost of $750 million, to draw more water from the South Platte River, which would provide Aurora with an extra 10,000 acre-feet. The Southern Nevada Water Authority (SNWD), which will need 400,000 extra acre-feet of water by 2025 to meet its projected population growth, is planning a 300-mile-long, $2 billion pipeline, 100 feet underground, that would deliver 150 million gallons of groundwater from Northeast White Pine and Lincoln counties. The Authority is also building a third "straw," or pipeline, from Lake Mead, which currently supplies 90 percent of Southern Nevada's water. That latter pipeline, budgeted at $817 million, is fast-tracked for completion by 2013, says Doug Bennett, SNWD's conservation manager.

Voter-approved bonds are funding these public works, and voters in California could soon be asked to choose between competing bond issues to pay for multibillion-dollar water projects. Gov. Arnold Schwarzenegger has proposed a $10.2 billion bond to build two water storage facilities in central California, expand another, restore the antiquated 1,300 miles of levees buttressing the Sacramento-San Joaquin Delta that supplies water to 25 million Californians, and upgrade delivery systems to the south. Democratic lawmakers prefer a more modest $5.6 billion plan that would improve the state's underground storage systems.

Builders and developers in California say all of these things are needed. But it looks like the state is headed towards a political showdown by referendum next November. The California BIA supports Schwarzenegger's plan, which Bob Rivinius, its president, calls "a great leap" towards providing more water throughout the state.

Learn more about markets featured in this article: Las Vegas, NV, Los Angeles, CA, Phoenix, AZ.