Water supplies are in great demand and under great stress in Texas as well as other places in the world. Water is needed for basically all economic endeavors: creating power requires water, a growing population requires water, farmers need water, and businesses themselves need water. In Texas, the massive drought, the increase in population, the increase in oil and gas production, and the increase in economic development, among other things, have caused water availability to be of great concern. The unease has reached the highest levels at corporations – the CEO level, the board of directors, and the shareholders. Making matters worse, a company’s access to water or having a “water right” or a “water permit” does not necessarily guarantee that water will be available for the company. A company must have a right to take the water and the water must be available. Companies must now go beyond making sure they have water rights and evaluate the availability of that water and, if necessary, obtain additional supplies. The company must feel “secure” that water will be available in the amount needed to support its business into the future.
Texas Water Framework
Texas has a disjointed water regulatory framework. With regard to surface water, the Texas Commission on Environmental Quality (“TCEQ”) administers a “first-in-time, first-in-right” priority permitting system for the State’s surface water. This results in water rights or water permits that will be subject to higher priority rights given to others for water from the same source. Recently, the TCEQ has actually suspended “junior” water right holders due to lack of water being available for the “senior” water right holders. Surface water accounts for about 40 percent of the total water used in Texas.
Groundwater is governed by a completely different set of rules. Generally, groundwater is subject to the rule of capture – landowners are able to capture water from wells on their lands. Therefore, the rule allows a landowner to take water from an aquifer that exists on neighboring land with a well on its land even if it impacts its neighbors. Over the past decade, groundwater conservation districts (“GCDs”) have increased in number and each has also increased its regulation of groundwater withdraws. GCDs are spread across the state and issue groundwater withdrawal permits, often controlling the rate of pumping. Texas currently has approximately 100 GCDs and each one has its own separate rules.
If that is not complicated enough, many other obstacles may prevent the availability of water even if you have a water right. There are water fights between states and between countries that will affect downstream states (such as Texas). There are recent cases in which withdrawing water that impacts endangered species may impact the right to withdraw water even if you have a valid permit and the water is available. Concerns exist with regard to: saltwater intrusion that may affect fresh water supplies; water infrastructure problems that results in loss of water; and subsidence that may affect groundwater withdraws. There also are numerous creative water uses – such as reusing wastewater for potable water – that will result in wastewater that currently is being used to recharge rivers and aquifers now going to other uses. There are lawsuits ongoing regarding interbasin water transfer rules, the Lacey Act and many others that may create additional water challenges. It is clear that being able to depend on a continued water supply for the future may be murky at best.
Governments Wade In
Texas is not alone. Water supply concerns are so well recognized that both federal and international bodies have begun studying the problem. A U.S. Forest Service Report, for example, concluded that U.S. water supplies will become increasingly vulnerable to shortages due to changes in supply. A Bureau of Reclamation study concluded that in the absence of timely action to ensure sustainability, water demand will likely outstrip water supply within the Colorado River Basin—which encompasses seven of the United States and two Mexican states—in the coming decades. Highlighting water supply issues more globally, a report released by the Organization for Economic Co-Operation and Development recommends that governments across the globe make a fundamental change in water management practices due to the estimation that by 2050 more than 40 percent of the world population, or 3.9 billion people, will live in river basins under severe water stress. Although drought and growing populations are outside the control of the organizations, the expectation is that globally governments will make water management a much higher priority and simultaneously encourage water conservation.
Bird’s Eye View
Companies are beginning to look deeper into water availability and future potential impacts. Many companies are creating water management plans, which include provisions related to reducing the loss or waste of water, improving or maintaining efficiency in the use of water, and increasing recycling and reuse of water. Companies also are implementing strategies to mitigate risks associated with losing withdrawal rights from sources of water. For energy, manufacturing, chemical, and other companies that depend on a reliable supply of water to sustain their businesses, their water management plans also include consideration of a number of alternative water sources, including surface water, groundwater, reclaimed water, recycled water, water purchased by contract, and desalinated water. Companies, for instance, are purchasing backup supplies or ensuring supplies from different aquifers or surface rights (diversification). Some companies are looking at trucking, transfers, and pipelines and entering into the water business. Companies are even exploring public-private partnerships with governmental entities to create new supplies of water in innovative ventures that benefit both the company and the government. With the new State Water Implementation Fund for Texas (“SWIFT”) funding, more public-private partnerships may be lucrative to both parties. Also, some companies are finding alternate sources from companies or other sources with regard to industrial wastewater additional uses (a type of water swap arrangement). The bottom line is that water availability is becoming a business in itself and something companies operating in Texas cannot afford to ignore – it’s time to dive in.
This article is intended for educational and informational purposes only and does not constitute legal advice or services. These materials represent the views of and summaries by the author. They do not necessarily reflect the opinions or views of Vinson & Elkins LLP or of any of its other attorneys or clients.
Sue Snyder is a Partner at Vinson & Elkins, LLP. She is an experienced environmental attorney with extensive experience with large scale projects and a demonstrated track record of solving complex matters, including creation of public private partnerships and coalitions.
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