Rough Water Ahead
Growing up in the Panhandle on the tail end of the Dust Bowl, Gene Lutrick saw farmers warring over water more than 60 years ago. The nexus of their tussle was a lake near Amarillo—one of the few accessible irrigation sources left in the High Plains of Texas at that time. Now, a half century since moving to Hudspeth County, Lutrick is seeing a repeat of the bad blood, fractured friendships, and high-dollar feuding he first witnessed as a young man.
A founder of the Hudspeth County Underground Conservation District, No. 1—one of the most protective water conservation districts in the state—Lutrick recently lost his position with the conservation district, thanks in part to increased pressure on board members to accommodate a new generation of water prospectors from both the private sector and the El Paso Water Utility. At 82 years of age and in failing health, Lutrick isn’t certain about much in this world, but he knows one thing: This time the war won’t stop until the water of Hudspeth is flushing toilets and watering lawns hundreds of miles away.
“I might not see it in my lifetime, but I think eventually even Big Springs and Marfa and Midland and all them, they’re all looking at water out here,” Lutrick said. “It’s getting to the point where you can’t go take a pee without someone wanting to analyze it or something.”
Lutrick is not the only one expecting pipelines to soon move water from rural West Texas into growing population centers in the region. A group of investors —including Lajitas Resort owner Steve Smith—operating as Rio Nuevo, Ltd., are banking on it. The group is pursuing pumping access to 312,000 acres of state land, mostly in Hudspeth County, but including spots in Culberson, Jeff Davis, and Presidio counties. They first pitched their idea to the Texas General Land Office, which holds the state land, more than three years ago. (Brewster County was on the original short list, but was later dropped.) After a rowdy public meeting in Alpine a year ago, where hundreds of Big Bend locals were unified and vocal in their ire over the notion, silence settled over the project.
But the new frontier in privatization, a world wherein former oilmen and pyramid schemers work in tandem hustling deeds to the state’s greatest resource—its underground water supply—didn’t stay still for long. After release of an August report by Rio Nuevo and a new set of published state rules, water speculators are now headed back into the high desert of West Texas—this time with a gaggle of geologists, hydrologists, and surveyors in tow. The battle is about to begin anew.
The state General Land Office (GLO), which had been negotiating with Rio Nuevo privately for months before the Alpine meeting, issued a list of questions to the company shortly after the eruption of public outrage. Simple stuff, really, such as who would be buying the water. Roger Abel, then president of Rio Nuevo, had told Alpine audiences that El Paso was the “obvious” end user. However, Bill Hutchison, chief hydrologist for the El Paso Water Utility, attending the same meeting, interjected that was not the case. (See sidebar)
Months went by as Rio Nuevo set to work addressing GLO Commissioner Jerry Patterson’s questions. In late January, a set of proposed rules to govern groundwater leases on permanent school fund land was published in the Texas Register. Beyond stating the obvious—i.e. water mining would be restricted to the rules of the groundwater districts, and water marketers would be required to adhere to all applicable local, state, and federal laws—companies would also be forbidden from exporting water to other countries under Patterson’s proposed parameters. Also, water marketing off state land would be approved only after sufficient scientific data and technical information is available to show a sustained yield can be provided and that the exporting of groundwater won’t negatively affect adjoining users of the same source. This oversight authority will be given to the local groundwater districts.
Patterson also has required that—at least in the case of Rio Nuevo—southern Hudspeth County tracts (roughly 70 percent of Rio Nuevo’s targeted area, which happens to lie just beyond the jurisdiction of any groundwater district) be treated as if they were the domain of the nearest neighboring district, according to GLO spokesman Jim Suydam. But if this is GLO policy, it has yet to make it into the new proposed rules.
Bill Addington, a longtime activist and owner of Guerra Farm and Ranch outside Sierra Blanca, wasn’t impressed by the move to place unrepresented lands under the purview of the Hudspeth Underground Water District. He said “water pirates” working overtime to seal a deal with El Paso are gradually infiltrating the district and making the board more apt to sell out. This shift could result in Rio Nuevo getting special treatment when they come to pump the southern part of the county.
At Rio Nuevo headquarters in Austin the receptionist answers: “SRS Incorporated.” That’s Steve Smith’s outfit. A partner who identified himself as Bruce Puckett said company president Abel was no longer with SRS but refused to divulge if he was still involved with Rio Nuevo. Puckett also would not identify any of the other partners, comment regarding the proposed water lease, or discuss if the group had identified any customers or agreed to any changes to their proposed lease agreement. Plans to ship the water down the Rio Grande are officially out, he admitted but refused to elaborate beyond that.
At the GLO the rationale was plain, according to agency policy director Trace Finley: “The commissioner said we’re not putting (Permanent School Fund) water into the Rio Grande and transporting it down. You know, we don’t control both sides of that river.”
Public filings for Rio Nuevo, Ltd., and Rio Nuevo Management, LLC, suggest there have been some fissures in the membership. The registered agent for both companies resigned in December of 2004 and Rio Nuevo, Ltd., is under threat of forfeiture for failure to maintain an office. The management company underwent an involuntary dissolution in mid-2005, only to be reinstated the next month with a change of registered agent.
Maintaining his guarded front, Rio Nuevo’s Puckett said his group had met with GLO staff a number of times—three at least—though Finley says it was more like one. There really was nothing to talk about, Finley said, until the commissioner’s proposed rules were published.
But there was another delay, as well.
Rio Nuevo had been busy preparing their report in response to Patterson’s questions. The report, “Business Plan for Assessment of Groundwater Resources,” was released last August. The Observer obtained the report through a public records request that the GLO initially resisted. The 42-page document is essentially a plan to survey the resource. It has plenty of information about where the group wants to drill, how regional water is expected to be used in the next 50 years, and how the populations of Culberson, Jeff Davis, Presidio, and Hudspeth counties are expected to grow. What it doesn’t have is the “business plan” as requested by the state’s General Land Office.
That’s understandable, Finley said. Until the resource is identified and the plan is proved solid there is no way to even begin to shop the idea to potential customers or determine how much money the state stands to make, he said.
“It is premature,” Rio Nuevo officials wrote, “to attempt to plan the Development Phase until after the viability of the project has been demonstrated (or discounted) by the Exploration Phase.”
What drives the partnership’s willingness to spend up to $5 million over two years of exploration is the money state municipalities already expect to pay for water in the years ahead, the report says. For instance, El Paso County plans to invest $629 million in water infrastructure and supply before 2051 with estimates of paying up to $1,241 per acre-foot of potable water, the report states. If Rio Nuevo can beat that price, it continues, they’ll find a “receptive market.”
“The potential customers cannot be identified until the unit rates for [permanent school fund] land water have been estimated, at least primarily.”
Both Rio Nuevo and the state are staying mum on the topic of revenue—at least since it came out in The New York Times in December 2003 that Rio Nuevo officials intended on paying the state a meager 20 cents per acre for water rights. At that rate—even at the originally expanded acreage under discussion—the proposal offered hardly more than $100,000 to state coffers by some estimates. Company officials later retracted that estimate, saying they anticipated $7 million in profits would go to the state.
Now, both insist, nothing can be projected until the resource is better understood.
“We don’t know how much water will be produced, we don’t know the royalty rate, and we don’t know the price,” Finley said. “Because we own the land, the investment by the land office is zero… It would all be a gain if all those questions are answered and it’s a financially viable project.”
Rio Nuevo has promised to give water districts and the state the technical data it has collected but not everyone trusts company-provided information. Also still vexing ranchers, farmers, and town leaders across the high desert is the question of where the company plans to sell the water.
While Puckett kept his tongue, Finley said the group was still talking about El Paso, as well as Midland, Odessa, and San Angelo.
The suggestion that El Paso is somehow involved in Rio Nuevo’s plans has begun to wear on Hutchison, who says the group has not once approached the El Paso Water Utility. “It’s always been a fascinating thing to me that here these guys are supposedly pulling investors together and they keep saying, they sort of intimate that we’re the ones that would be a customer… Really, we’re not interested,” Hutchison said from the EPWU offices in El Paso. “We’ve got land right now that would serve our purposes until 2060.” Beyond that there’s still Hudspeth County if the lawsuits can be resolved.
“It’s been fascinating to us,” Hutchison continued, “they’re still out there sort of making the rounds saying we would be the end customer and I’m not exactly sure (laughter) how you attract investors with that strategy.”
Finley said whether or not Rio Nuevo ultimately is successful in steering water out of Far West Texas, private development of groundwater is coming to Texas. “There’s not been the big water deal struck yet by a private entity, but I think that’s coming. I know water prices are going to be going up. The state hasn’t built any new surface supplies in decades.”
While old timers like Lutrick harp on the state’s failure to continue to build dams and reservoirs, Finley said it’s all part of the paradigm shift of a new Republican leadership in the state. Just as highways are being turned over to private contractors to build and maintain, so private money interests are expected to take over water resources.
“The private sector’s going to start filling that void. That’s what you’re seeing with T. Boone Pickens, with Rio Nuevo, with Water Texas, Brazos Valley Water Alliance, and others—they’re filling that void that’s being left and we’re hoping—or the Commissioner’s hoping—that the school system… will be able to profit from that.”
It’s all a part of the shifting vision of the Land Office, which is banking on real estate investments and wind and water leases filling the fiscal hole left by drawn-down oil and gas deposits, Suydam said.
For Lutrick, it’s just a matter of time before the water in his county is piped out. “I think eventually that El Paso will take our water. But they won’t know what to do with it after they get it,” he said.
With the proposed rules now published, and a public comment period opened up, renewed negotiations are likely. But West Texas property owners will be reluctant to open access to their wells for testing without some explanation of what’s happening.
As Finley says, Patterson does intend to enter “some sort of negotiations to see if something can be worked out.” However, “in the event that a lease is signed does not mean that water instantly evaporates from far West Texas forever. You have to do the science. You got to find the customer. You got to get the permits. There are a lot of other things that have to go through in order to move that water.”
“I saw that carry on a long time ago,” says Lutrick. “My father would say, ‘Y’all are just throwing water away. Figure out how to use your water and not try to use somebody else’s.’ And that’s the only way.” ?
Greg Harman is a freelance writer based in Houston. He has covered environmental issues for a variety of news outlets in Texas, Mississippi, and Nevada.
WATER’S FOR FIGHTIN’ (sidebar)
Five years ago, water planners widely assumed that El Paso—”that parched desert city”—would run out of water by 2030. Juárez, El Paso’s Mexican sister city, they said, might deplete its water in a matter of several years. Into this “crisis” scenario stepped would-be water marketers like El Paso businessman and University of Texas regent Woody Hunt and Colorado billionaire Philip Anschutz. Reports described the two men gallivanting around West Texas in search of underground water sources and concocting high-flying plans to sell water to El Paso. Decades-old hydrogeological studies and a gloomy $3 million report commissioned by the Hunt-Anschutz team fueled widespread doomsday prognostication. However, in recent years, effective water planning carried out by the El Paso Water Utilities (EPWU) and new assessments of the aquifers that far West Texas relies on for its water needs have ushered in an era of more sober thinking. “The old myth that the fresh water would be gone by 2030 kept getting repeated year after year, decade after decade, without really recognizing that what had gone on here had made a difference,” said Bill Hutchison, the hydrogeology manager for the EPWU. Most significant, an aggressive, widely heralded conservation and reuse program has reduced per capita consumption of water from a high of 230 gallons per day in the late 1970s to around 140 gallons per day at
resent, the lowest in the state for an urban area.
This rosier long-term picture is reflected in the newly minted 2006 Far West Texas Water Management Plan, a 700-page document that is updated every five years to provide guidance for regional water planners. The plan, assembled through the Texas Water Development Board, projects that El Paso’s water needs can be met through 2020 by acquiring additional Rio Grande water rights, continuing conservation efforts, and constructing an $84 million desalination plant. However, with the region’s population expected to double to over 1.5 million by 2060, the plan calls for El Paso to look beyond the Rio Grande. The river is currently so overdrawn that it runs nearly dry for 150 miles south of El Paso. Thus, Hunt and Anschutz, being die-hard visionaries or unscrupulous speculators depending on your view, have not given up on their pipe dream to sell El Paso water from the water-rich Dell City area, 80 miles east of El Paso. They own thousands of acres over the Bone Spring-Victorio Peak Aquifer and have muscled the Texas Legislature and the local groundwater district into writing rules that favor their water rights at the expense of some longtime landowners within the district. The two sides are now embroiled in a legal fight over water rights in the area that could ultimately determine who can make future deals with El Paso.
The 2006 plan calls for the importation of 15,000 acre-feet of water per year from Dell City, starting in 2031, and 50,000 acre-feet by 2061. (An acre-foot is the amount of water needed to cover an area of one acre to a depth of one foot.) The plan lists the capital costs for the pipeline project at an astronomical $525 million, to be paid for primarily through revenue bonds, a cost that would be passed on to El Paso citizens.
Further complicating the picture is that the EPWU doesn’t currently own any land in the area and won’t look at purchasing either acreage or water rights until litigation between the Dell City landowners and the water district is resolved, says Hutchison. Meanwhile, talks between the EPWU and the Hunt-Anschutz team have been suspended until the water rights dispute in Dell City is settled. If Hunt-Anschutz prevail, then they might end up with a virtual monopoly on water; El Paso will need an estimated 20,000 acres of land to pump enough water to meet demand by 2060, more than most individual landowners have.
That Hunt and Anschutz or other speculators might end up with a monopoly on water in the area worries state Senator Eliot Shapleigh (D-El Paso). He filed a bill in the 2003 legislative session, when water speculation in West Texas spilled into the Legislature, that took aim at water privateers by requiring the state to fix the rates for water transported long distances by pipeline. The bill never got a hearing. Hutchison insists that despite past flirtations, the EPWU has “no desire to get involved” in a “public-private partnership” in which they have to purchase water from a profit-driven seller. “We want to be in a position where we own the land, we own the water rights, we own the facilities, and we deliver it to ourselves,” he said, although “15, 20 years from now there may be a totally different attitude.”