Financing a Sustainable Water Plan for Texas

In a series of three guest blogs over the next several days, Sharlene Leurig, Water Program Director for CERES, examines the details of Proposition 6, the water project financing measure approved by Texas voters on November 5^th.  Proposition 6 amends the Texas constitution to appropriate $2 billion from the state’s Rainy Day Fund to seed a new water infrastructure loan fund directed to water supply projects included in the State Water Plan. 

 Sharlene’s three posts examine how this new fund will work (in concert with House Bill 4, passed in the recent session of the Texas legislature) and what it could achieve—or fail to achieve—in terms of Texas’ water security.  Today’s post focuses on the mechanics of the fund and what choices the Texas Water Development Board (TWDB) is likely to face in ensuring that the $ 2 billion appropriation is used for maximum public benefit.  The second post looks at how administration of the fund will be affected by the new project prioritization process authorized by House Bill 4, the companion legislation passed earlier this year.  The third post explores whether and how the fund can be used to support water conservation projects. 

 Installment 1: Proposition 6 and the Mechanics of

Funding State Water Plan Projects

This post examines how the new infrastructure loan fund will operate and the choices that will need to be made to ensure that the funds are allocated for maximum public benefit.  It explores the tensions between using the new fund for “state participation” in longer-term, big-ticket projects, such as reservoirs and pipelines, versus distributing funds more widely to smaller, near-term projects across the state.  (Note: the following discussion draws on an excellent analysis of the mechanics of Prop 6 and differences with existing financing mechanisms by the Energy Center at the University of Texas School of Law.)

The 2012 State Water Plan estimates that the cumulative capital cost of all recommended water management strategies through 2060 would be $53.1 billion, only $26 billion of which the Regional Planning Groups reported could be financed through local capacity.  As part of the 2012 Plan, TWDB recommended that the Legislature “develop a long-term, affordable, and sustainable method to provide financing assistance for the implementation of the state water plan.”

 This recommendation was taken up by the Legislature in the 2013 session in three pieces of legislation: House Bill 4, House Bill 1025 and Senate Joint Resolution 1. Collectively, these bills:  restructured the Texas Water Development Board (see TCPS’s post on the restructuring here), established the State Water Implementation Fund for Texas (SWIFT); and sent voters a ballot proposition to approve the transfer of $2 billion from the Economic Stabilization Fund (“Rainy Day Fund”) to SWIFT. With Proposition 6 approval, the $2 billion will be permanently transferred from the State Treasury to a trust held by the state on behalf of the Texas Water Development Board, to be used exclusively for the financing of recommended water management strategies in the State Water Plan.

TWDB is the state’s water infrastructure financing agency, providing $14.3 billion in loans for water and wastewater infrastructure across the state over the last 56 years. TWDB makes use of its superior credit rating and low borrowing costs to raise money through bond sales. It then lends that money to local sponsors of water projects at a lower interest rate than what would be available to the local if it sold its own bonds in the open market. For very small systems, the subsidized lending made available by the TWDB is especially critical as they have fewer options for borrowing money.   

 Despite this substantial amount of financing activity at the state level, Texas water infrastructure needs have been growing, while TWDB’s lending capacity has been limited by Article III, § 49 of the state Constitution, which generally prohibits the state from issuing debt without voter-approved expansion of constitutional authority.

 In 2011, Texas voters approved a constitutional amendment granting TWDB authority to issue up to $6 billion worth of debt for the Texas Water Development Fund II.  One of the issues in the Prop 6 election was the difference between the new Prop 6 funding and the previously authorized $6 billion.  The answer generally comes down to the state’s constitutional debt limit.

 While bonds sold under this new authority were considered “self-sustaining” they are counted against the debt limit of the state—which prohibits new bond issuances when the percentage of debt service payable by general revenue in any fiscal year exceeds 5% of the average unrestricted general revenue for the past three years. This can theoretically limit the ability of the TWDB to issue future bonds.  So while the TWDB technically could have $6 billion of active market debt, it is constrained in its own debt issuance by the larger set of debt obligations undertaken by other Texas agencies and by the state’s constitutional debt limit. 

 Thus, H.B. 4 and Prop 6 seek to create a self-sustaining funding mechanism for water supply projects that can grow beyond the initial $2 billion allocation without bumping up against the state’s debt limit. That is, the $2 billion can be used to fund much more than $2 billion in capital costs, but the total amount of financing will depend on how the funds are used.

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Table 1 provides a definition of some terms that are key to understanding the specifics of the new financing mechanisms.

 

Table 1. Glossary of Key Terms (adapted from Investopedia)

 

Term	Brief definition
Revolving Loan Fund	A fund that is structured so that repayments can be used to make more loans. As borrowers repay their loans, this money is made available to new applicants. A fund has fully revolved when all of the original principal lent has been repaid
Bond	A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. Bond buyers are repaid both principal and interest
General Obligation Bond	A municipal bond backed by the credit and "taxing power" of the issuing jurisdiction rather than the revenue from a given project. Also called a “GO” bond. Most bonds issued by the Texas Water Development Board have been GO bonds.
Revenue Bond	A municipal bond supported by the revenue from a specific project, such as a wastewater treatment plant or reservoir. Revenue bonds are municipal bonds that finance income-producing projects and are secured by a specified revenue source. Most locally-financed water infrastructure in the United States is financed by revenue bonds repaid by payments from water or wastewater system customers.
Credit Enhancement	A method whereby a borrower attempts to improve its debt or credit worthiness. Through credit enhancement, bond buyers are provided with reassurance that the borrower will honor the obligation. Credit enhancement can take many different forms, including additional collateral, insurance, or a third party guarantee to pay a defined amount of principal and interest. Credit enhancement reduces credit/default risk of a debt, thereby increasing the overall credit rating and lowering interest rates for the borrower.
Deferred principal/interest loans	Loans can be structured using terms that allow the borrower to defer payments for a specified period of time. Lending terms can defer principal payments, interest payments or both. For example, a loan with a 10-year deferred principal period would mean that for the first decade, the borrower would pay only interest on the amount borrowed, and not begin paying down the principle until after the 10-yr period.
Leverage	Leverage is a technique for multiplying limited funding by using those funds as collateral for debt issued. For many years, the Texas Water Development Board has used leverage to amplify the amount of funding it receives from the Environmental Protection Agency under the EPA’s State Revolving Funds for water and wastewater projects. TWDB issues bonds secured by its State Revolving Fund allocation. The proceeds of those bonds are then used to lend money to local water project sponsors to comply with drinking water and surface water standards. The money received from the EPA is invested by the TWDB in low-risk securities, like Treasury bonds. That investment is pledged as collateral to bond buyers, thereby securing a strong credit rating and low borrowing cost for TWDB. In addition, the interest gained by its investments is used to subsidize the interest rate for TWDB’s borrowers. Through leverage, TWDB is able to make more money available to its borrowers

 

SWIFT AND SWIRFT

Prop 6 enables the TWDB to expand the amount of loans available to local sponsors applying for financial support for water supply projects, by creating two separate but related funds: 1) the State Implementation Fund for Texas (SWIFT) and 2) the State Water Implementation Revenue Fund for Texas (SWIRFT). Though the latter has received less media attention, it is actually the more important of the two when it comes to the matter of growing the $2 billion seed fund.

SWIFT exists to subsidize loans made by the TWDB to local sponsors of water supply projects—it is simply a dedicated pool of money to allow TWDB to lower the effective interest rates paid by its borrowers. SWIFT can only be used to subsidize lending through five of TWDB’s funding programs.  Four of these programs are briefly described in the table below; the fifth, SWIRFT, is described in Table 2.

 

Table 2.  TWDB Water Financing Programs

Eligible TWDB Program	Purpose of Program
Water Infrastructure Fund	Subsidized and deferred loans for state political subdivisions and water supply corporations, for projects in SWP or approved regional water plans
Rural Water Assistance Fund	Loans for political subdivisions and nonprofit water supply corporations, for infrastructure or for consolidation or regionalization
Agricultural Water Conservation Fund	Loans for political subdivisions, colleges, interstate compact commissions and nonprofit water supply corporations, for conservation projects
State Participation Program accounts in Texas Water Development Fund II	Deferred interest obligations to repurchase TWDB’s temporary ownership interest in facilities, for political subdivisions and water supply corporations

 

These four programs are funded by the TWDB through the sale of general obligation bonds, which are then used to create revolving loan funds (meaning that as borrowers repay their debts to the board, the fund is replenished to be made available to other beneficiaries).  

At its heart, SWIFT is a means of subsidizing these revolving loan funds. There are four types of subsidy SWIFT can provide: 1) low-interest loans (TWDB may lend at as little as 50% the rate of interest at which it borrows); 2) longer repayment terms for loans; 3) incremental repurchase terms for projects in which the state owns a share; and 4) deferral of loan payments. For example, under Option 1, if TWDB can borrow money at 3%, SWIFT funds could be used to lower the interest rates of the TWDB’s own lending programs to as little as 1.5%. An example of Option 4 would be TWDB purchasing up to 80% of a water supply facility, with no principal repayment due from the borrower for as long as 20 years.

Because SWIFT subsidizes revolving funds (repayments from existing borrowers are used to make new loans), SWIFT could enable more than $2 billion worth of projects over time as loans are repaid with interest.  Combined with SWIRFT, however, SWIFT can, in theory, be leveraged to provide substantially greater amounts of financing.

SWIRFT is one of the funds that may receive disbursements from SWIFT.  Like SWIFT, SWIRFT can only be used to finance water projects in the State Water Plan, through same set of existing TWDB loan programs to which SWIFT is targeted (those in the table above). Unlike the other funds eligible for SWIFT subsidies, SWIRFT is capitalized through new revenue bonding authority granted under H.B. 4, meaning it is totally free of any constraints related to the state debt limit.  Also, unlike the other four programs eligible for SWIFT subsidies, SWIRFT revenue bonds can be used for an expanded set of financial assistance tools, including direct loans to local water project sponsors, purchasing of debt obligations from these local sponsors, or credit enhancement for TWDB’s own funding programs.

SWIRFT thereby opens a new chapter in the board’s financing programs. The credit enhancement component of SWIRFT is especially important to understand because of its potential for amplifying TWDB’s lending capacity. Under H.B. 4, TWDB may pledge SWIRFT as collateral for the debts it incurs through the funding programs eligible for SWIFT support. In this way, SWIRFT could increase substantially the amount of debt TWDB could sell, as bond buyers would be promised revenues from borrower repayments and have as added security access to SWIRFT funds in the event that borrower repayments fell short of TWDB’s own obligations.

This credit enhancement authority under SWIRFT, combined with its revenue-backed bond authorization collectively create the potential for TWDB to multiply the $2 billion authorized by voters to provide up to $26 billion in total financial support.  That is an important figure only in as much as it is the full amount of state financial support requested by Regional Planning Groups in the 2012 State Water Plan. (Whether the political subdivisions and water authorities who participate in the Regional Planning Groups will ever ask the Board to make the full $26 billion available to them is another matter entirely, and will be discussed more fully in the second blog in this series.)

 However, there are a number of factors that will determine how much the $2 billion appropriation to TWDB will actually grow over time.  That will in turn determine how well the new funds can be used to support the wide range of needs in the State Water Plan, from conservation and reuse, to smaller scale projects in rural areas, to larger, longer-term projects proposed for growing urban areas.

 As one option, TWDB could simply move the $2 billion through SWIFT, bypassing SWIRFT, and directly support its existing funding programs. While the money would be repaid to SWIFT over time, it would not necessarily take advantage of leverage to grow the $2 billion.  It would then be simply be a $2 billion revolving loan fund, recapitalized as borrowers repaid their debts to the board, with (subsidized) interest. In addition, if SWIFT is managed to provide financing subsidies (cash outflows) that outpace the value gained in the fund through market investments (cash inflows), the $2 billion could be substantially drained.

Another option would be for TWDB to put the lion’s share of the $2 billion into the State Participation Program fund.  This fund is generally used for longer-term, big-ticket projects, such as reservoirs and pipelines, a number of which are proposed in the 2012 State Water Plan.  The State Participation Program allows TWDB to purchase a temporary ownership stake in a water project, with the idea that the loan would be paid back after the project was built and operating near capacity.  Nearly 30% of funds the state has already made available to projects in the State Water Plan have been through programs with deferred repayment, including some $93 million through the State Participation Program in which repayment of the principal typically is deferred for 20 years, and $189 million through the Water Infrastructure Fund Deferred program, which defers principal and interest for up to 10 years.

This approach, however, would tie up most of the money in deferred loans, as illustrated by a January 10, 2013 memo to the Members of the State House of Representatives from H.B. 4’s sponsor, House Natural Resources Chairman Allan Ritter:   loans with 20-year deferred repayment periods would prevent SWIFT from fully revolving for more than 30 years.  

If most of the SWIFT seed funds were sent directly to the state participation programs with deferred payments, then these few borrowers would receive the greatest benefit, and the opportunity to use the Prop 6 funds to shore up water security throughout the state could be compromised.  In essence, a “big dog eats first” approach to using the new funds would mean that smaller projects for meeting real short-term water needs in smaller communities, including throughout rural Texas, could be undermined.  On the other hand, a more balanced approach, more equitably distributed among different financing options, would allow greater leverage for the $ 2 billion and cover more water needs throughout the state. 

 

The TWDB now has the task of balancing these competing interests, all of which will take place in the context of the project prioritization process set up by HB 4.  We’ll look at that topic in our next blog.

Integrating Environmental Water Needs in the Regional Planning Process

(Note: the full white paper from which this post is extracted is available here).

 Since 1997, the Senate Bill 1 water planning process has required protection of natural resources as the state determines how to meet needs for water for the future.  For example, the basic directive of the legislature in Senate Bill 1 is:

 

The state water plan shall provide for the orderly development, management and conservation of water resources and preparation for and response to drought conditions, in order that sufficient water will be available at a reasonable cost to ensure public health, safety and welfare, further economic development and protection of agricultural and natural resources of the entire state." (Texas Water Code, Section. 16.051, emphasis added.)

 One of the "Guiding Principles" as adopted by the Texas Water Development Board (TWBD) for the 2017 State Water Plan is:

(23) Consideration of environmental water needs, including instream flows and bay and estuary inflows, including adjustments by the [Regional Water Planning Groups] to water management strategies to provide for environmental water needs including instream flows and bay and estuary needs.…( TWDB rule at 31 Texas Admin. Code Section 358.3.)

This guiding principle makes sense not only because of the language in Senate Bill 1, but also because the legislature has enacted two other laws that focus on protecting environmental water needs:  Senate Bill 2 in 2001 and Senate Bill 3 in 2007.  These laws recognized the important role that water left in rivers and available to flow to bays and estuaries plays in conserving fish and wildlife habitat, protecting healthy timber and agricultural lands, providing recreational opportunities and sustaining economic and cultural values.  Even the value of private property along a river and associated riparian rights can vary significantly with the flow conditions in the river.

 Yet, to date, the results of work done under Senate Bills 2 and 3 have played a very limited role in determining how Texas will use its water resources over the next 50 years. The work of these bills has not been fully integrated into the Senate Bill 1 water planning process.  This next round of regional planning provides an important opportunity to help provide for environmental water needs.

For those regions that want to do more to protect environmental water needs the question is how to use the water planning process.   The most straightforward approach would be to treat environmental water needs like other water needs.   Healthy river and bay systems need flows that mimic natural conditions, but not necessarily all the water that has historically flowed in them.  Once the healthy flow needs are identified, the regional planning groups could develop suggested strategies to meet those needs over time.  In many cases, strategies to meet environmental flow needs can work in combination with strategies to provide water for municipal, agricultural or industrial needs

Current TWDB rules and guidance do not treat environmental water needs in the same fashion as other needs, however.  Instead, the rules and guidance focus on evaluating the water supply strategies for other needs and then identifying the effects of the strategies on environmental water needs.     The rules and guidance suggest that regional water plans and the state water plan need only adjust their strategies for obtaining new water supplies with considerations of existing environmental flows.  Thus, if we have already created unhealthy rivers and bays, there is no process to try to reverse that situation over the next 50 years or more. 

Thus, the current state approach gives environmental water needs a very limited role in the regional planning process.  TWDB rules and guidance do not promote the idea that regional planning groups should find strategies to ensure healthy rivers and bays and, thus, actually develop comprehensive plans that “protect natural resources.” 

 Second, while TWDB encourages the use of TCEQ "environmental flow standards" under SB 3, TWDB  fails to acknowledge that such standards are very limited. They do not reflect the types of flows that scientists and stakeholders in the SB 2 and SB 3 processes determined are needed to sustain a sound ecological environment in our rivers and bays.  TCEQ's standards apply only to surface water rights permit applications that seek new appropriations of state water.  That is a very different process from one that is seeking to develop strategies to fill water needs for the future.

TWDB rules do, however, allow regional water planning groups to use a different process to develop strategies for meeting environmental water needs in the future.  Regional groups wanting to do so simply have to develop their own approach. 

There are a number of options for regional planning groups that want to protect and enhance environmental water needs while not limiting the growth of cities, industries or agriculture.    

For example, the Brazos River Authority (BRA) sends large amounts of water from Possum Kingdom Lake downstream to Lake Granbury for transfer to Squaw Creek Lake and use there by Luminant as cooling water for the Comanche Peak Nuclear Power Plant. That water could be delivered in different ways from Possum Kingdom Lake. It could be released in one large pulse once a day or once a week, leaving the river mostly dry the rest of the time.  It could be released at a constant low flow. Or BRA could send the water down in a fashion that meets some, possibly all, of the SB 3 recommendations for environmental water needs in the segment of the river between the two lakes. 

Thus, the Region G planning group could, with the assistance of BRA and Luminant, develop strategies for meeting all or some of the recommendations of scientists and stakeholders who worked to develop an environmental flow regime for that segment of the river under Senate Bill 3.  Water needed for existing and new uses could be released in a fashion that also helps meet the environmental flow needs identified in the SB 3 process.

As discussed in detail in the white paper, while such an approach is not encouraged by the TWDB rules and guidelines, it is not prohibited.  It will, unfortunately, be up to the regional planning groups to take the initiative in the 2016 round of planning with little assistance from TWDB.

Region O Reverses Course on Irrigation Demand Projections

(Note: this post is also available as a PDF at www.texascenter.org/water/region_o_blog.pdf).

The 2012 State Water Plan projects a statewide demand/supply (needs) gap of 8.325 million acre-feet/year by 2060.  That scary number is often presented as the reason the state needs to fund implementation of the state water plan.

But, when you break it down (see Table 6.1 in the 2012 plan), you see that three regions together account for two-thirds of the gap: 

·         Region C (Dallas/Fort Worth area) with 1.588 million acre-feet/yr;

·         Region H (Houston area) with 1.236 million acre-feet/yr and

·         Region O (Llano Estacado) with 2.366 million acre-feet/yr. 

 

We have explored the over-inflated Region C demand projections elsewhere, and a similar analysis of Region H is forthcoming.  But, today we take a closer look at the 2.366 million acre-feet annual gap projected for Region O, which is over 28% of the total projected statewide gap for 2060.  Not surprisingly, it’s all about the sustainability of irrigation water from the High Plains Ogallala Aquifer.

Region O covers much of the Southern High Plains of Texas.   Irrigation dominates, accounting for 95 % of the total regional use in 2010, or 4.186 million acre-feet/yr.  Virtually all of this irrigation water is supplied by the Ogallala (Figure 1). 

Figure 1.  Ogallala Aquifer from High Plains Water District

Figure 2 shows the various irrigation demand projections for Region O for the current (2017) and past planning cycles.  While these projected demands do decline over time, as discussed below, they do not reflect the constraints on availability of Ogallala water that would be in place with implementation of management systems designed to preserve some aquifer capacity for the future.  The decreasing trend in these demand projections is “due to declining well yields and increased irrigation efficiencies.” (State Water Plan, p 118, Region O Summary).

 

 

 

 

 

Figure 2.  Current and Past Irrigation Demand Projections for Region O

Instead, the effect of water management goals on ground water availability is incorporated into the supply side of the planning process.   For example, the 2011 Region O Plan projected that water supply will decline 56 % between 2010 and 2060 “due to the managed depletion of the Ogallala Aquifer,” with ground water availability decreasing from 3.076 million acre-feet in 2010 to 1.337 million acre-feet in 2060.   

This approach results in the large demand/supply gap, which is theoretically to be addressed with water supply strategies.  But, the 2011 Region O plan projects that advanced irrigation conservation will only be able to provide 479,466 acre-feet/year of water in 2010 at a capital cost of $ 346 million. 

As the 2011 planning process was coming to a conclusion, the regional groundwater conservation districts in Groundwater Management Area 2, were finalizing their desired future conditions (DFCs)for the Ogallala aquifer and beginning to adopt rules to ensure those DFCs could be met.  For the portion of the Ogallala covered by Region O, the central DFC is a 50 % depletion of the aquifer over 50 years.

If the Ogallala is, in fact, to be managed to meet the desired future conditions set by the regional groundwater conservation districts, shouldn’t the projected “demands” reflect that management, thus potentially significantly decreasing the statewide projected demand/supply gap that generates so much attention and paints Texas as a state running out of water?  Put another way, doesn’t showing a huge demand that can never realistically be met undermine the integrity of the planning process?

Region O initially seemed poised to address this important issue in the current round of planning.  Earlier this year, Region O consultants worked with irrigators throughout the region to review the 2017 irrigation demand projections from the Texas Water Development Board.  While the 2017 projections were on average about 500,000 acre-feet/yr less than the projections from the 2011/2012 planning period (Figure 1), they were still far above the ground water availability under the managed depletion scenario reflected through DFC implementation. 

According to the consultant’s July 2013 report (available here as part of the background materials for the Region O August 1, 2013 meeting (pp. 9-12 of draft non-municipal demand Technical Memorandum from  Daniel B. Stephens & Associates, dated July 26, 2013):

The revision to the demand estimates that is proposed here is an attempt to apply the limitations set forth in the DFC process to the demands previously estimated…

Subcommittee meetings with irrigation interests discussed current and future needs of producers and what measures would be required in order to implement the DFC.  The general concern was over the best way to account for real unmet needs, particularly for irrigation, and to continue to show irrigation water shortages.  Under the proposed methodology, the irrigation demand would be set equal to the volume of water that is available in the policy sense for irrigators to use.  This would incorrectly show no unmet needs for the region’s irrigators.

Unmet needs are the impetus for development of a particular water management strategy.  Advanced irrigation conservation, beyond the conservation measures currently being taken, is a water management strategy that would need to be pursued for the region to meet their groundwater conservation goals.  To account for increased conservation, an estimate of conservation volumes was added back into the irrigation demand:

Total irrigation demand = Baseline for irrigation demand + advanced conservation

Thus, the proposed approach was to base the projected irrigation demand on water available under the DFC plus an amount that could be achieved via advanced conservation (and then translate that advanced conservation to the water supply strategy side of the plan).

Under this approach, 2060 total projected irrigation demand for Region O would have been 1.328 million acre-feet/yr for 2060 (Figure 5 in the July 2013 consultants’ report) versus the 2011/2012 plan’s projected 2060 demand of 3.474 million acre-ft/yr.  And the 2070 projected demand under the consultant’s approach would have been 1.273 million acre-feet/yr. 

For perspective, this proposed approach have meant over 2 million acre-feet less than 2011/2012 plan’s  projected demand, or nearly one-quarter of the projected 2060 statewide demand/supply gap from the 2012 plan. 

However, between July and the August 1, 2013 meeting of Region O, the Region O planning group decided instead to request no changes in the TWDB irrigation demand projections.  (The revised consultant report and adoption of the TWDB projections can be found here.

What changed?  That requires a look behind the scenes at development in groundwater management in Region O, particularly in the High Plains Underground Water Conservation District (HPWD), which covers 16 of the 21 counties in Region O and accounts for the vast majority of irrigation use from the Ogallala.

Established in 1951, the HPWD has been working for decades to conserve and protect the basically non-renewable reserves of the Ogallala.  In recent years, as aquifer levels have begun to drop even more steeply than in the past, HPWD sought to enact phased-in metering requirements and pumping limits generally 1.5 acre-feet/acre).  While not free from controversy, the new rules—enacted in July 2011 were approved 4-0 by the board as necessary to meet the 50/50 goal for the Southern High Plains portion of the Ogallala. 

Two factors appear to have combined to generate resistance to the HPWD’s efforts to sustainably manage the Ogallala for both current and future generations:  commodity prices and the second is the Edwards Aquifer v. Day case (discussed here). 

Corn, along with cotton and wheat, is one of the major irrigated crops in the High Plains, from Texas up through Kansas.  As shown in the recent report of results from the Texas Alliance for Water Conservation work in the Southern High Plains, crop choices fluctuate with “anticipated prices, weather conditions, and water availability.”  When corn prices are high, there is an incentive for growers to irrigate as much as possible in order to take advantage of the market.  Under that perspective, pumping limitations can be a barrier to short-term profits. 

Cropping fluctuations for the 4,700 irrigated acres involved in the TAWA project are shown in Figure 3. These thirty voluntarily-enrolled sites represent only a tiny portion of the over 2 million irrgated acres in the Southern High Plains, but may be somewhat indicative of overall trends.

Figure 3.  Irrigated crop trends on TAWA sites

Figure 4 shows irrigation use in Region O as compared to national average corn prices for the last five years.  Both 2009 and 2011 were years of severe drought in the region, requiring additional irrigation. 

Figure 4. Region O Irrigation Use (million acre-feet/yr) v. National Calendar Yr Average Corn Prices

(Sources: Texas Water Development Board and Farmdoc.illinois.edu)

 Region O water use is not as closely correlated with cotton prices (Figure 5), though 2010 was a relatively normal precipitation year, which could have reduced cotton irrigation demands. 

Figure 5.  Region O Irrigation Use (1000s AF/yr) v. Calendar Year Avg Cotton Price

(Sources: TWDB and National Cotton Council)

Adding to these higher commodity price-related incentives, in February 2012, the Texas Supreme Court held in the Day case that groundwater is owned in place by the overlying landowner.  The ruling added fuel to a small group of High Plains farmers arguing against pumping limits on constitutional grounds.  The Protect Water Rights Coalition has opposed HPWD’s efforts to enact measurement and pumping limits at every turn, often finding support from the Texas Corn Producers.

In November 2012, two HPWD board incumbents were defeated and two more resigned in early 2013.  The 12-year director of HPWD, James Conkwright, resigned in July 2013.  Mr. Conkwright also stepped down from his position representing HPWD on the Region O planning group.

So, where does Region O go from here?  As noted above, the TWDB projections adopted by the Region unfortunately also fail to reflect the aquifer management goal.  But, because these demand projections were initially supplied to the Region by TWDB, there is no clear step to change them at this point. 

The Region’s next steps will be to look at the demand/supply gap and water management strategies.  Presumably, the Region should apply the current DFC to determine available supply (as required by 31 T.A.C. Section 357.32(d)).  With the application of the DFC/managed available groundwater standard, the demand/supply gap will be as large as or greater than that shown in the 2011/2012 plan, again distorting the total statewide gap significantly.  While advanced conservation can be used to help reduce irrigation demand, the over-stated gap and some completely unrealistic figure of “unmet needs” will likely remain. 

It’s unfortunate that Region O (and TWDB) missed a golden opportunity to help improve the overall integrity of the state planning process and focus instead on what is really needed to achieve sustainable management of the High Plains portion of the Ogallala Aquifer, which continues to decline at alarming rates. 

The future of the HPWD, one of the oldest and most successful of Texas groundwater districts would also appear to be in jeopardy unless those many farmers who do care about the future condition of this unique resource, and the communities that depend upon it, become more vocal. 

 

 

Data Reliability Undermines Water for Mining Projections

While the demands for Texas water by mining are not large compared to other demands, an analysis of projections for demands and needs in this sector provides an example of how our regional and state water planning process often fails to collect and use the type of accurate data needed for a state water plan.  For planning purposes, water demands for mining include oil and gas activities, as well as those demands for coal, uranium, rock, sand, gravel and other traditional mining activities.   

This new analysis shows that water use for mining—both actual and projected—is significant in some regions of the state, but the projections do not appear to be based on reliable data.  The analysis also reviews the existing statutory authority of various agencies to collect water use data and discusses how that authority might be used to develop better projections.

Coming soon:  an analysis of irrigation water use projections.

Edwards Aquifer Authority v. Bragg: Resource Links

While this important case has not yet run its full course, the ultimate outcome of Edwards Aquifer Authority v. Bragg could significantly affect how regional water planning groups determine how much ground water will be available in the future.  Last week, the San Antonio Court of Appeals issued its opinion regarding whether certain permitting decisions by the Edwards Aquifer Authority constitute a compensable regulatory taking.  Here are some links for further reading:

EAA v. Bragg opinion, August 28, 2013

Edwards Aquifer Authority v. Day (2012 Texas Supreme Court opinion which Bragg court relies upon)

Environmental Law Prof Blog (Dave Owen, University of Maine School of Law)

Texas Living Waters Blog (Amy Hardberger, St. Mary’s School of Law)

Texas Observer article

Texas Agriculture Law Blog

University of Texas Energy Center Blog

Pacific Legal Foundation Blog

New Board Can Fill Leadership Vacuum on Texas Water

Tomorrow, September 3rd, the three new members of the Texas Water Development Board  will convene for the first time since being appointed by Governor Rick Perry.  At their September 3^rd meeting, Chairman Carlos Rubenstein and fellow board members Mary Ann Williamson and Bech Bruun will make opening remarks, appoint an Executive Administrator and hear comments from the public.  But this short first meeting is only a prelude to the real work that lies ahead for this now full-time board:  providing the statewide agency leadership needed to achieve a sustainable water future in Texas.

Jack Welch, business guru and former CEO of General Electric, once said that “a leader’s job is to look into the future and see the organization, not as it is, but as it should be.” The new TWDB members have an unprecedented opportunity to do just that. 

The new board has the opportunity, first and foremost, to ensure that the state’s water planning process is grounded in reality, not wishful thinking, with respect to both projected demands and available supply.  It can move the planning process away from the current exercise of producing a long-term oriented wish list of expensive infrastructure projects to a focus on what, exactly, needs to be done to accelerate cost-effective efficiency strategies to stretch our existing supplies and meet real needs over the next two decades.  House Bill 4, passed in May 2013, provides the board with a prioritization process to accomplish these goals. 

The board can protect the value of healthy rivers and streams to the Texas economy and to the state’s future generations by:  working with rural landowners to protect watersheds and aquifer recharge zones; developing the science and policy tools the state needs to ensure that drought and increased climate variability don’t result in dried up rivers and lifeless bays; and recognizing that healthy flows will ensure that Texas water management decisions are not driven by federal laws like the Endangered Species Act. 

While groundwater management authority remains dispersed among over 100 local and regional districts, the board can play a role in raising awareness about the value of careful aquifer stewardship and it can help the public and water managers understand how groundwater and surface water are inter-connected. 

And, finally, the board can and should ensure that the legislature is aware of the need to invest in modern management and protection of Texas water resources.  Texas needs much better information on actual water use, near-term demands and environmental water needs.

Texas has come a long way in water management and planning since the TWDB was first established in 1957, during a devastating drought that may be exceeded only by the current one.  But, there is much more to do to respond to new challenges.  Here is hoping the new board will reimagine a TWDB that provides the statewide leadership essential to meeting those challenges and developing a sustainable water future.

By: Mary E. Kelly, Parula, LLC for Texas Center for Policy Studies

Water for Steam Electric Power Generation: Planning or Pie in the Sky?

The Texas Water Plan projections for steam electric power generation (SEPG) provide a stark example of how the planning process often fails to live up to its potential to guide the state to a sustainable water future.     

Our new analysis, available at www.texascenter.org, shows that the regions often ignored reasonable guidance from the TWDB that would have resulted in substantially lower projected SEPG water demand.  Instead, many of the regional planning groups have included unsubstantiated projections for future demand by steam electric plants. 

More troubling, TWDB has failed to push back against these inappropriate projections and failed to adopt rules that would direct the regions to substantiate the SEPG water demand. 

Finally, the process for developing SEPG water demand projections is essentially disconnected from the reality of how many new power plants Texas might actually need or expect over the next 50 years and where those plants should be located from an available water supply perspective.