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

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

4. Texas Water Uses

8. 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% Industrial24% Users by Source

10. WATER USE BY AQUIFER AQUIFER1995 Annual PumpingRecharge Ogallala6,200,000 AF 300,000 AF Edwards 730,000 AF1,200,000 AF Carrizo 500,000 AF 645,000 AF Trinity 200,000 AF 100,000 AF Gulf Coast1,150,000 AF1,230,000 AF Bolsum 400,000 AF 430,000 AF All Others 220,000 AF 200,000 AF TOTAL9,400,000 AF4,100,000 AF

11. 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

12. 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

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

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

15. MARKET MODEL ECONOMIC FACTORS LEGAL CONSIDERATIONS TECHNICAL CONDITIONS INSTITUTIONAL/POLITICAL FACTORS

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

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

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

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

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

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

22. 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**

23. 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

24. 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

25. 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

26. 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

27. MORE UNRESOLVED ISSUES Groundwater Districts & Rural Texas

29. 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

30. 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)

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