Water Marketing in Texas

Ronald Kaiser, Texas A&M UniversityMay 4th, 2001

Texas Rural Land Market Conference

• Texas Water Uses and Sources

• Marketing Texas Style

• Drivers & Benefits of Water Marketing

• Marketing Model & Transactions

• Issues, Concerns & Opportunities

Texas

Water

Uses

1994 Texas Water Uses and Sources

• Groundwater (9.4 maf) capture rule• Agriculture80%• Municipal 15%• Other 5%

• Surface Water (7.1 maf) State permits • Agriculture 50% • Municipal 26% • Industrial 24%

Users by Source

WATER USE BY AQUIFERAQUIFER 1995 Annual

Pumping Recharge

Ogallala 6,200,000 AF 300,000 AFEdwards 730,000 AF 1,200,000 AFCarrizo 500,000 AF 645,000 AFTrinity 200,000 AF 100,000 AFGulf Coast 1,150,000 AF 1,230,000 AFBolsum 400,000 AF 430,000 AFAll Others 220,000 AF 200,000 AFTOTAL 9,400,000 AF 4,100,000 AF

• Limited water supplies•12/15 rivers appropriated•Fewer reservoirs to be built•Aquifer mining

• Increasing population growth•9 million (1950) 20 million (today) 40 million (2040)

Drivers for Change to Marketing

• Water shortages by 2010

• Environmental Water Needs

• Groundwater supporting agriculture

• Nonstructural Approaches•Conservation—15% of needs•Using Sewage—5% of needs•Marketing—10 % of needs

• Drought Management•Negotiating for water

Drivers for Change to Marketing

• Declining Irrigation Use•13.5 maf (1974) 10 maf (2000) 9.5 maf (2010)

• Economic Efficiency—highest/best use

• Reallocation of lower valued water

• Provides Water to Growing Cities

• Drought Management Tool

BENEFITS OF MARKETING

• Alternative to reservoir construction

• Minimizes water bureaucracy

• Incentives to conserve—sell the water

• Revenue source for agriculture

BENEFITS OF MARKETING

• 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

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Tuned for Political/Legal Changes