One of the biggest battles over Colorado River water is being staged in one of the west’s smallest rural enclaves.

Tucked into the bends of the lower Colorado River, Cibola, Arizona, is a community of about 200 people. Maybe 300, if you count the weekenders who come to boat and hunt. Dusty shrublands run into sleepy residential streets, which run into neat fields of cotton and alfalfa.

Nearly a decade ago, Greenstone Resource Partners LLC, a private company backed by global investors, bought almost 500 acres of agricultural land here in Cibola. In a first-of-its-kind deal, the company recently sold the water rights tied to the land to the town of Queen Creek, a suburb of Phoenix, for a $14m gross profit. More than 2,000 acre-feet of water from the Colorado River that was once used to irrigate farmland is now flowing, through a canal system, to the taps of homes more than 200 miles away.

A Guardian investigation into the unprecedented water transfer, and how it took shape, reveals that Greenstone strategically purchased land and influence to advance the deal. The company was able to do so by exploiting the arcane water policies governing the Colorado River.

Experts expect that such transfers will become more common as thirsty towns across the west seek increasingly scarce water. The climate crisis and chronic overuse have sapped the Colorado River watershed, leaving cities and farmers alike to contend with shortages. Amid a deepening drought and declines in the river’s reservoirs, Greenstone and firms like it have been discreetly acquiring thousands of acres of farmland.

As US states negotiate how they will divide up the river’s dwindling supplies, officials challenging the Greenstone transfer in court fear it will open the floodgates to many more private water sales, allowing investors to profit from scarcity. The purchases have alarmed local residents, who worry that water speculators scavenging agricultural land for valuable water rights will leave rural communities like Cibola in the dust.

“Here we are in the middle of a drought and trying to preserve the Colorado River, and we’re allowing water to be transferred off of the river,” said Regina Cobb, a former Republican state representative who has tried to limit transfers. “And in the process, we’re picking winners and losers.”

In February, a federal judge ruled that the Cibola-Queen Creek transfer was done without proper environmental review, ordering the federal Bureau of Reclamation to complete a more thorough evaluation. The US Department of Justice, which is representing the bureau in the legal proceeding, declined to comment on whether the bureau would be appealing the decision.

Meanwhile, Greenstone – which appears to be the first water brokerage firm to sell rights to the Colorado River – could help chart the course of how the resource can be bought and sold in the west.

The farm that was really an investment firm

Greenstone first arrived in Cibola a decade ago – though few here knew anything of the company at the time. Through a subsidiary called GSC Farm LLC, the company purchased 485 acres of land in the Cibola valley in 2013 and 2014, for about $9.8m. Hardly anyone in town took notice.

“Why would we?” said Holly Irwin, a supervisor for La Paz county, which encompasses Cibola.

Initially, Greenstone leased that land back to farmers, who planted fields of alfalfa and rows of puffball cotton.

Then, in 2018, the company sold the water tied to that farmland to Queen Creek, a fast-growing sprawl of gated communities on the outskirts of Arizona’s capital. The city’s government agreed to pay the company $24m for the annual entitlement to 2,033 acre-feet of Colorado River water.

In July of last year, amid continuing legal challenges and national scrutiny, that water was finally diverted. The alfalfa and cotton fields were fallowed – reduced to dry brush and cracked earth.

Many in town were blindsided. “We were all just like: what the heck?” Irwin recalled.

GSC Farm, she realized, wasn’t really a farm at all – it was part of a water investment firm that had brokered water transfer deals all across the south-west.

GSC Farm is one of at least 25 subsidiaries and affiliates of Greenstone, registered in Arizona and other states. Business registration records, deeds, loan documents and tax records show that these companies share the same executives. To local residents, including elected officials such as Irwin, it was initially unclear that the business – which had been acquiring thousands of acres of farmland not only in Cibola but across Arizona – went by so many names.

Greenstone’s executives and lawyers did not respond to the Guardian’s questions about the company’s corporate structure, its business model, and how it initiated the Queen Creek deal.

Public records revealed that Greenstone’s financial backers include the global investment firm MassMutual and its subsidiary Barings, as well as public pension funds. At least one of its acquisitions appears to be financed by Rabo AgriFinance, a subsidiary of the Dutch multinational banking and financial services company Rabobank.

On its website, Greenstone describes itself as “a water company” and as “a developer and owner of reliable, sustainable water supplies”. Its CEO, Mike Schlehuber, previously worked for Vidler Water Company – another firm that essentially brokers water supply – as well as Summit Global Management, a company that invests in water suppliers and water rights. Greenstone’s managing director and vice-president, Mike Malano – a former realtor based in Phoenix who remains “active in the Arizona development community”, per his company bio – got himself elected to the board of the Cibola valley irrigation and drainage district, a quasi-governmental organization that oversees the distribution of water for agriculture in the region.

Irwin was horrified. She felt that a company with ties to big banks and real estate developers, posing as a farm, had infiltrated her small town and sold off its most precious resource.

The deal won’t have an immediate impact on Cibola’s residents. It doesn’t affect the municipal water supply. But she worries that the transfer will be the first of many. And if more and more farms are fallowed to feed water to cities, what will become of rural towns along the river?

“It’ll be like Owens Valley,” she said, referring to the water grab that inspired the movie Chinatown. In the early 20th century, agents working for the city of Los Angeles, posing as farmers or ranchers, bought up land in the valley and diverted its water to sustain their metropolis, leaving behind a dustbowl.

By allowing the Greenstone deal to go through, “I’m afraid we’ve opened Pandora’s box,” she said.

The Colorado River, which stretches from the Rocky Mountains into Mexico, has declined by about 20% since the turn of the century, amid the most severe drought the west has seen in 1,200 years. In a painfully negotiated deal, Arizona, Nevada and California agreed to reduce the amount of water they draw from the river by 13% through 2026. Experts warned that even deeper cuts would be necessary in the coming decade, but states are currently deadlocked over a longer-term conservation plan.

“With ongoing shortages on the river, driven by climate change, Colorado River water is going to become very valuable,” said Rhett Larson, a professor of water law at Arizona State University. “Anyone who understands this dynamic thinks, ‘Well, if I could buy Colorado River water rights, that’s more valuable than owning oil in this country at this stage.’”

Though the price Queen Creek paid for the water was remarkable – amounting to more than $11,500 per acre-foot – lawyers and water experts in Arizona told the Guardian it would probably sell for even more today.

The process of selling and transferring the water, however, can be bureaucratic and complicated. In most cases, a company like Greenstone would have to first convince fellow landowners in their local irrigation district to allow the sale, and then secure approvals from the state department of water resources and the US Bureau of Reclamation, the federal agency that manages water in the west.

What Irwin and many of Cibola’s residents didn’t realize was that in their sleepy, riverside town, a select group of farmers and landowners had been working for years to facilitate such deals.

‘His dream was to sell this water’

Irrigation districts, as the name suggests, are designed to distribute water for irrigation across the US west. These districts were formed in the 19th and 20th centuries as cooperatives, allowing farmers to pool resources to develop water infrastructure. In the Colorado River basin, the districts contract with the Bureau of Reclamation to deliver water flowing through federal infrastructure to farms and ranches.

Farmers tend to be possessive of their precious water, explained Susanna Eden of the University of Arizona Water Resources Research Center. Most irrigation districts are set up to keep water for farming – and to keep it within their jurisdictions.

But in the Cibola valley irrigation and drainage district (CVIDD), landowners seem to have anticipated the market potential of their water.

“It has been said, and I think it has been demonstrated, that the Cibola valley irrigation and drainage district was set up by people who were investing in water, rather than pure agriculturalists,” said Eden.

In 1992, long before Greenstone arrived on the scene, CVIDD amended its contract with the Bureau of Reclamation to explicitly contemplate “water exchange, water lease, water transfer” or a change in the “type or place of use” of its water allotment.

The CVIDD board president, Michael Mullion, a farmer in Cibola who had been leasing land from GSC Farm in addition to tending his own land, vouched for the Greenstone’s water transfer at a 2019 hearing with the state’s department of water resources. In his testimony, Mullion talked about how his grandfather had come to the Cibola valley in 1949. “He brushed, cleared, levelled and built the canals for this particular ground,” he said. “But his dream was to actually sell this water.”

The district’s governing philosophy already aligned with Greenstone’s, but the company’s 500-acre purchase here allowed it to more directly influence the district’s policies. Irrigation district boards make key decisions about water in the district – and buying more land can buy more influence on the board. Landowners in the district are entitled to two votes for every acre they hold in board elections.

The district’s board of directors now includes the heads of prominent farming families in the area, including Mullion and his father, Bob, as well as Greenstone’s vice-president, Malano.

Over the years, CVIDD helped landowners, including Greenstone, gain more agency and direct control over their water rights. In most irrigation districts, the district contracts with the Bureau of Reclamation for the right to a lump sum of water, which it distributes to landowners and farmers.

However, a review of CVIDD’s contracts with the bureau revealed that between 2006 and 2014, the district began removing itself as the middleman – giving a few large landowners even more agency over how they use their water. Whereas in other irrigation districts, members would have to vote to approve a water transfer like the Greenstone deal, in the Cibola valley, some landowners can propose transfers as they please, subject to federal approval.

Amid growing public scrutiny of the Cibola-Queen Creek transfer, the CVIDD board in 2019 unanimously approved a resolution disputing the idea that water rights are reserved for local use, and supporting landowners’ right to change “the place of use and purpose of use” of their water.

“I believe they’ve been setting the stage for the Queen Creek transfer,” said Jamie Kelley, an attorney based in Bullhead City. “This was their long-term plan.”

Mullion and lawyers representing CVIDD did not respond to the Guardian’s questions about its founding principles. They also did not address critiques that their policies were set up to benefit landowners seeking to sell water rights.

Even now, after years of public debate and litigation, local residents remain baffled by the idea that water could be sold and siphoned away from them, for ever.

Down a dusty, two-lane road, just past the unassuming cream-colored building where the Cibola valley irrigation district is headquartered, a group gathered for an informal meeting with Holly Irwin last summer to discuss their grievances.

“Why is somebody coming from so far away to take water from here?” said Carol Stewart, who runs Karlz Country Store – the only shop in town.

She hosted a handful of friends and neighbors, mostly retirees and recreators who had settled here decades ago. Everyone huddled into Stewart’s wood-paneled mobile home, a respite from the searing heat, and shouted their questions over the buzz of the AC. What did the transfer mean? Would they have enough water to supply homes here?

“It’s all about the mighty dollar,” Irwin said. “It’s all about money, and how much they can come in and take advantage.”

This deal wouldn’t affect the town’s residential water supplies, Irwin explained. But it meant that more and more farmers might choose to sell out – the water that once irrigated Cibola’s fields could be diverted away. And as the Colorado River shrank, corporations were growing increasingly thirsty for rural supplies.

“Don’t we have water rights?” asked John Rosenfeld, who has lived in Cibola for 24 years. “I have a right to that water, because I’m paying for it.”

It wasn’t quite that simple, Irwin responded. Most of Cibola’s residents get their water from a municipal supply or from private wells. But some properties here come with water rights attached, sometimes dating back to before Arizona was a US state. In the 1800s and the decades following, miners and farmers could snatch water rights up and down the Colorado River simply by laying claim to the water and putting it to use for livestock or irrigating land. It didn’t matter to these settlers that some of that water and land was taken from Indigenous tribes that were here before them.

Those water rights were then passed down from generation to generation. They were formalized in agreements and interstate contracts that left some farming regions and tribes with the highest-priority water rights, while other rural and metropolitan areas received lower-priority rights. Such contracts assign water rights a “priority level” of one through six – priorities one through four represent rights for permanent water service, whereas priorities five and six represent the temporary rights to surplus supplies. The water rights Greenstone purchased in Cibola and sold to Queen Creek are fourth priority – permanently secured and prized.

Notably missing from the group at Karlz Country Store were farmers. The Guardian tried to contact a number of farmers in the region, but other than Mullion, none were available for an interview. Not all agriculturalists are interested in selling their water – but the option may be increasingly appealing as the climate crisis and water shortages disrupt their ability to farm effectively. “It’s hard to know, but demands create pressure,” said Wade Noble, an attorney representing farmers with the Wellton-Mohawk irrigation and drainage district, north of Cibola. “The drought on the river has created very high pressure.”

Greenstone isn’t the only company coveting such water rights. Across the US west, private investors have been scouring rural communities in search of high-priority water rights. In Arizona, Greenstone and firms like it have acquired thousands of acres of irrigable land and their corresponding water rights.

In the Cibola valley, for example, Western Water LLC, another company that specializes in “the sale and transfer of water rights”, owns about 100 acres of land, along with its entitlement to a modest 620 acre-feet of water, public records from the Bureau of Reclamation and La Paz county showed.

Before the Bureau of Reclamation approved Greenstone’s water transfer to Queen Creek, an investigation by the Arizona Republic found that Greenstone and its competitors had acquired thousands of acres of irrigable land across Arizona, including in La Paz, Pinal, Maricopa, Mohave and Yuma counties. The newspaper’s reports were cited by local officials who argued that Greenstone’s water transfer to Queen Creek would be a harbinger of many more such deals, as water becomes increasingly scarce across the west.

A Guardian review of deeds and other public records found that in Yuma county, companies associated with Greenstone hold about 5,300 acres of farmland, much of it within the Wellton-Mohawk irrigation and drainage district. Taxes on those lands were paid by Sunstone Farms LLC, a Greenstone subsidiary that leases agricultural properties.

There, unlike in CVIDD, individual landowners cannot initiate water transfer agreements on their own. But because votes within Wellton-Mohawk are also weighted based on how much land someone owns, larger landowners could seek more influence on its board. County records indicate that a Greenstone-affiliated LLC is one of the largest landowners in the district.

Meanwhile to the north, in Mohave county, Greenstone’s competitor Water Asset Management holds more than 2,400 acres, and access to nearly 16,000 acre-feet of water, per public records from the county.

In 2022, La Paz along with Mohave and Yuma counties filed a lawsuit against the Bureau of Reclamation, challenging its claim that the deal would cause “no significant” environmental impact.

“We are arguing in our lawsuit that Reclamation did not analyze the precedent that this transfer set,” said John Lemaster, an attorney representing Mohave county. “The entire purpose of Greenstone is to develop and sell water resources. We know future transfers are likely.”

This year, a federal judge in Arizona sided with them, ruling that the Bureau of Reclamation’s environmental evaluation was “arbitrary and capricious” and ordering the agency to prepare a more thorough assessment. While it’s unclear how the agency will proceed, given that water is already flowing to Queen Creek, the outcome could define how future deals are made and who can lay claim to the Colorado River’s water.

Greenstone, meanwhile, has tried to play down the significance of the transfer.

At a March 2022 committee hearing to discuss a bill introduced by Cobb, the former state representative who tried to limit water transfers, Malano balked at descriptions of his company as a hedge fund, describing Greenstone as “one of the largest farming operations in the state of Arizona”.

Indeed, Greenstone and its competitors, such as Water Asset Management, often lease their land to farmers. But Greenstone’s ultimate goal, per its website, “is to advance water transactions”. And it has been busy doing so. In 2017, it helped secure the right to Rio Grande water for a Facebook data center in Los Lunas, New Mexico. While the Queen Creek deal was the company’s first sale off the Colorado River, it has also brokered a number of deals to supply groundwater to developing communities across Arizona.

In September, the state’s Democratic attorney general filed an amicus brief in support of the counties challenging the transfer. “Future transfers will be likely, if not inevitable,” Kris Mayes wrote, “given the need for water across Arizona.”

A building boom strains a dwindling resource

Queen Creek is growing fast.

Wide, tree-lined boulevards vine off into neat, master-planned communities named Harvest and Encanterra, featuring resort pools, lush golf courses and ornamental lakes. Beyond the sand-hued estates, which blend into the Sonoran landscapes, there is construction. Cranes clear ground, crews build wood frames through suburban cul-de-sacs in various states of completion.

Queen Creek was the seventh-fastest growing city in the US, according to a Census Bureau report released last year. It, like many Arizona suburbs, has struggled to balance a development boom with a shrinking water supply.

Last year, the state moved to limit new housing construction in the suburbs of Phoenix – one of the fastest-growing metro areas in the country – to avoid emptying the region’s underground aquifers. Projecting a 4.86m acre-foot shortfall in groundwater supplies over the next century, the state announced that all future housing developments in the desert would have to find some other source of water, by purchasing or importing their supply.

Ambitious cities and developers have been left scrambling.

The suburb of Buckeye, west of Phoenix, has considered building a desalination plant in the Mexican town of Puerto Peñasco and piping the treated water several hundred miles north to Arizona.

Queen Creek’s water manager, Paul Gardner, said the town had been working for years to secure water for its future. In addition to piping water from the Colorado River, the city has also sought to import groundwater from the Harquahala valley, to the east of Cibola. It recently signed a $30m deal with Harquahala Valley Landowners LLC, a company that represents farmers and investors with water rights, to siphon off 5,000 acre-feet of ground water a year to feed its maze of gated communities and sprawling subdivisions.

Meanwhile, in Cibola, Holly Irwin dreams of development too – though of a different sort.

On the east bank of the Colorado, she recently oversaw the cleanup and restoration of a stretch of open space for residents and visitors. “Now we have trash cans, we have picnic tables,” Irwin said. “My goal is we’ll have campsites that stretch all the way down. And more electrical hookups for RVs.”

In the summertime, she hopes, the river will be filled with boats and its shore with picnickers and campers. “We could attract more people, from all over.”

Stewart, the shop owner, first came here as a “weekender” from San Diego, California. She was drawn to the region’s rugged beauty and rural familiarity. “This was a place to roam, to be with family.”

In the decade since she and her family moved here, she has also seen the Colorado shrink, and its lush banks fade. “There’s been years when you could basically walk across the river,” she said. “That is what has scared a lot of people. We need the water here.”

It’s taken a while to get here but Anthony Albanese is on the verge of promising what some economists and most clean energy advocates have been urging Australian governments to do for years. Or at least a version of it.

The prime minister’s promised “Future Made in Australia” act is clumsily named, and the announcement last week had few details, but the idea – that the government will need to use its weight to help develop green industries if the country is to make a rapid transition from fossil fuels to a clean economy – has been a long time coming.

Some of the criticism that followed has made headlines but been pretty unremarkable. It’s true that, if badly developed, an interventionist industry policy could become a money pit and create subsidy-dependent businesses. The government should absolutely aim not to do that. It underlines the importance of the decisions being made in Canberra before next month’s budget.

It’s also true that leaders will need to be bold, and an overly cautious approach is unlikely to do what’s needed. The expert consensus is that there is an opportunity in this moment – as the climate crisis worsens, and as countries comparable to Australia introduce strategies to attract trillions in clean investment – to spur the new industries needed to gain a foothold in new industries and help create green jobs.

It won’t last for ever at this scale. And taking it slow won’t avoid attacks on the government from people stuck on the idea that little of substance needs to change as the climate crisis rewrites the global economy. They’re going to happen anyway.

Other countries – in Europe, and Japan, Korea and Canada – are already chasing some of the trillions in global clean investment up for grabs in the decades ahead. They have mostly been reacting to what could be US$1tn in support for clean industries contained in that country’s paradigm-shifting Inflation Reduction Act.

But they are also responding to the slower creep of China’s massive green investment that has, for example, given it near complete dominance of the global solar supply chain that everyone relies on. It explains why several of the countries stuck the word “security” in the name of their green industry strategies.

The challenge for a resource-rich, medium-sized economy such as Australia is to identify industries in which it has a competitive advantage, and weigh how best to minimise the risks to taxpayers. It will be a while before it’s clear the extent to which the areas the government has backed to date – $2bn to kickstart a proposed green hydrogen industry, $1bn for solar panel supply chain manufacturing, and $4bn for mining and processing of critical minerals – fit into the category.

Smart minds have suggested that a sensible approach would be to mostly stop exporting raw materials and instead back onshore production and refinement of products such as ammonia, iron, steel, aluminium and a variety of critical minerals. Substantially more support will be needed, probably through tax breaks and direct investments as well as cheap loans and guarantees.

Consideration of how best to do this is running parallel with the equally important issue of how to ensure that people in the most fossil fuel-reliant parts of Australia are not trampled into the dust in a stampede for a clean future. We have known for years that parts of the country are likely to face a disproportionately hard future as dirty industries are inevitably phased down, and eventually out. Though often discussed, this issue has largely been ignored in national policy.

It hasn’t had the same attention as the promised shift to green industry policy, but there is evidence this is changing. Last month, as the government introduced legislation to create a Net Zero Economy Authority to help manage the transition to a clean economy, it quietly posted an impact analysis that is shaping its thinking.

The report assesses what will happen as at least 10 of the country’s remaining 19 coal-fired power plants shut by 2035. It estimates more than 3,000 coal power workers could lose their jobs, with spillover losses for about 900 contractors.

Past experience suggests as many as a third of the people who work at coal plants could still be unemployed a year after the generator has closed if left unsupported, and that their drop in earning capacity tends to be much greater than in other closing industries. The impact on financial hardship and health can ripple through a community and become a “self-reinforcing cycle” as people find it increasingly difficult to find work and lose skills and motivation.

These coal jobs are concentrated in just six regions across the country, notably Gladstone in central Queensland, the Hunter and Latrobe valleys, and Collie in Western Australia. Some of these areas are likely to benefit from new clean industries, which will mostly be regional, but it obviously won’t be a one-for-one match.

The report lists three ways the government could respond: do nothing, create a pooled redeployment policy for affected workers that the owners coal plants bosses can opt in to, or introduce laws that would allow it to force the owners of coal plants and their suppliers to take part in the redeployment arrangements and support their employees to find new jobs.

The latter two options would come at a public cost – almost $130m for the legislated third option – but the report argues the benefits that flowed from creating a pool of skilled workers for new employers, improving the social, health and welfare outcomes for workers and their families, and maintaining social cohesion and local identity would be significantly greater.

It also found more than 2.5 times as many workers were likely to be transferred into new jobs under the option that gave the government the power to force companies to act than if it made it a voluntary scheme. The “do nothing” option, in which the future of the workers would be left to the market, was not even assessed.

The implicit message is that the people affected by the historic transition under way need to be brought along for the ride, and given the help they need to get through it. As with the promised green industry policy, it’s taken a while to get here. But it’s the right place to start.

Australians are choosing hybrid over electric vehicles, but sales of both continue to climb while internal combustion engines record a decline.

Hybrids outsold EVs in three consecutive quarters with 95,129 sales – overtaking 69,593 EVs sold, according to the Australian Automobile Association’s quarterly EV Index released on Tuesday night.

The data also reinforced a recent trend of declining sales of conventional cars, which have fallen by 8.03% in the fourth quarter of 2023 to the first quarter of 2024. Their market share also dropped to 78.18%, sinking below 80% for the first time.

EVs rose to 8.70% market share in this time, while hybrids jumped to 11.95% – up from 6.26% in the first quarter of 2023.

“People are wanting to go into that lower cost, lower emissions motoring, but they just don’t think they are ready for the full EV experience,” Australian Automotive Dealer Association boss James Voortman said.

Premium prices amid a cost of living crisis, as well as a lack of recharging infrastructure, are the main concerns stopping consumers from making the transition to EVs, he said.

Three in five consumers are “less open to paying more money for an electric vehicle due to the current cost of living pressures,” Voortman said, pointing to AADA survey results released in February.

“During this time where everything is costing more” it can be more difficult for consumers to look beyond an EV’s upfront price premium and towards fuel savings, he said.

Charging infrastructure is “no doubt” another concern.

“There is a growing acceptance that you can do a lot of your charging at home, but not everyone has access to home charging,” Voortman said.

“I think as the infrastructure rolls out, we will see more and more people willing to take up an electric vehicle.”

The specific types of vehicles available can also pose as a barrier for consumers in need of a larger vehicle, like a ute, van or SUV are an affordable price point.

“It is going to take time for those vehicles to arrive,” Voortman said.

In the meantime, “hybrid technology [is] a stepping stone,” Voortman said.

While “there is no doubt that driving a hybrid is a lot more friendly for the environment than a pure petrol or diesel vehicle”, it is also “a lot more affordable for those customers”.

“There are significant benefits for for both customers but also for the environment,” Voortman said.

“There is no doubt the future is fully electric and zero emissions motoring, but there is going to be a bit of a journey to get there.”

“Hybrids are a good stepping stone to that future.”