Water Marketing in Texas Rural Land Market Conference

Water Marketing in Texas Rural Land Market Conference Ronald Kaiser, Texas A&M University May 4 th, 2001

• Texas Water Uses and Sources • Drivers & Benefits of Water Marketing • Marketing Model & Transactions • Marketing Texas Style • Issues, Concerns & Opportunities

Texas Water Uses

1994 Texas Water Uses and Sources Users by Source • Groundwater (9. 4 maf) capture rule • Agriculture • Municipal • Other 80% 15% 5% • Surface Water (7. 1 maf) State permits • Agriculture • Municipal • Industrial 50% 26% 24%

WATER USE BY AQUIFER Ogallala Edwards Carrizo Trinity Gulf Coast Bolsum All Others TOTAL 1995 Pumping Annual Recharge 6, 200, 000 AF 300, 000 AF 730, 000 AF 1, 200, 000 AF 500, 000 AF 645, 000 AF 200, 000 AF 1, 150, 000 AF 1, 230, 000 AF 400, 000 AF 430, 000 AF 220, 000 AF 200, 000 AF 9, 400, 000 AF 4, 100, 000 AF

Drivers for Change to Marketing • Increasing population growth • 9 million (1950) 20 million (today) 40 million (2040) • Limited water supplies • 12/15 rivers appropriated • Fewer reservoirs to be built • Aquifer mining • Water shortages by 2010 • Environmental Water Needs • Groundwater supporting agriculture

Drivers for Change to Marketing • Drought Management • Negotiating for water • Nonstructural Approaches • Conservation— 15% of needs • Using Sewage— 5% of needs • Marketing— 10 % of needs • Declining Irrigation Use • 13. 5 maf (1974) 10 maf (2000) 9. 5 maf (2010) • Economic Efficiency—highest/best use

BENEFITS OF MARKETING • Provides Water to Growing Cities • Drought Management Tool • Reallocation of lower valued water • Alternative to reservoir construction

BENEFITS OF MARKETING • Incentives to conserve—sell the water • Revenue source for agriculture • Minimizes water bureaucracy • Requires negotiation with impact parties

MARKET MODEL • ECONOMIC FACTORS • LEGAL CONSIDERATIONS • TECHNICAL CONDITIONS • INSTITUTIONAL/POLITICAL FACTORS

MARKET MODEL • ECONOMIC FACTORS • Increasing Demand • Limited Supply Options • Low Valued Uses • Buyer and Seller Base • Market Data Base • Transaction Cost Consideration

MARKET MODEL • LEGAL CONSIDERATION • Property Rights • Transfer Authorizations • Transfer Barriers • Third Party Impacts • Interbasin/Aquifer Transfers

MARKET MODEL • TECHNICAL CONSIDERATIONS • Conveyance Systems • Pipelines • Natural Watercourses • Statewide Plumbing Systems • Urban Growth

MARKET MODEL • INSTITUTIONAL/POLITICAL SUPPORT • Agency Promotion • Planning support • Regulatory approval • Public Agency Water Ownership—River Authorities • Clearing House for Transactions

TRANSACTION TYPES • Public Nature of Surface Water • Shapes Process • Affects Parties • Impacts transactions • Legal Rules—Surface & Groundwater Law • Shapes Process • Affects Parties • Impacts transactions

TRANSACTION TYPES • Sale of Water Right • Legal entitlement • Priority date—Appropriation doctrine • Sale or Lease of Water • Contractually based • Term Limits • Opportunities to renegotiate

Transaction Examples • Sale of right • Water Ranching • Water Banking • Contractual Sale • Term contracts • Dry year options • Conservation measures—Calif. Tx • Exchanges—ground for surface **creativity of parties guides transaction form**

Marketing—Texas Style • Agric. to Urban • Where • Lower Rio Grande Valley • West Texas—El Paso • San Antonio, Corpus Christi, Austin • Mid sized & smaller cities • Transactions—Surface v. Groundwater • Sale/lease of water • Few sale of right • Transaction format • Surface water—multi-party involvement • Groundwater—two party but changing

Marketing—Texas Style • Parties • Public • TPWD, TNRCC, TWDB • River Authorities 10/20% • Cities • Water districts • Private • Landowners • Corporations • Co-Operatives • Examples • Garwood Irrigation Sale • El Paso Water Ranch • San Antonio/ Alcoa/Edwards Aquifer • West Texas Groundwater—Boone Pickens

UNRESOLVED ISSUES • Surface Water • Interbasin transfers • Third party impacts & involvement • Junior rights & impact on bargaining • Sale of treated effluent • Sale of conserved water • Environment water needs • Role for Water Banks • Cancellation of unused water rights

STILL MORE UNRESOLVED ISSUES • Groundwater • Changing the Capture Rule • Impact on Rural Texas • Two party transactions • Type and Level of Management/Groundwater districts • Regional • Local • Exporting water—Boone Pickens Proposal • Conjunctive Management– Surface Water • River Authority Role • Integration with Regional Planning

MORE UNRESOLVED ISSUES • Groundwater Districts & Rural Texas

Issues with Districts • LIMITED REGULATORY AUTHORITY • Well Spacing/Waste Prevention • Overdrafting & Mining • Pumping Limitations? ? ? —High Plains Case • COUNTY & POLITCAL BOUNDARIES • NO UNIFORM AQUIFER STANDARDS • Ogallala & Hueco Bolson—no recharge • Sustainability standards • Surface & groundwater linkage

Management Options • Domestic Wells • Pre-existing • Reasonable Use • Sustainability of aquifers • Limiting overdrafting--drought • Uniform rules • Depletion Allowances • Time (25— 50 years) • Amount Remaining (50— 25 Percent)

End of Show but Not the Story Stay Tuned for Political/Legal Changes