Several powerful state senators are warning the General Land Office to put the brakes on its rush into the water business, saying a new Senate panel needs a year -- and probably more -- to develop state policy before any deals are signed to sell water. Some say they fear that Land Commissioner Jerry Patterson has jumped into a complex, controversial business his agency knows little about, and is doing so without input from legislators assigned to make sure the state's water management benefits all of Texas.
"We're moving too fast on an issue that in my view is precedent-setting," said Sen. Robert Duncan, R-Lubbock. "We really do need to slow this thing down and see what's best for Texas. We don't have a water czar. We don't have a czarist government. Our government is very much spread out for a reason."
Major deals under consideration by the land office include allowing water prospectors to lease vast stretches of state lands in the West Texas desert and teaming up with a politically connected water broker to sell water from private lands in Central Texas. Senate leaders are scheduling meetings for next week with the land commissioner to air their concerns.
State Sen. Ken Armbrister, D-Victoria, chairman of the select water committee, said through a spokesman that the land office needs to quit thinking about signing water deals any time soon. "The people of Texas don't have all the facts," said his spokesman Mike Sizemore. "There is a rush to do this, and there is no need for that rush. Last time I checked, we've had plenty of rain in Texas." Mr. Patterson said he welcomes the committee's input and predicted its members eventually will embrace his agency's involvement in the water deals. But he added that he may not be willing to put all of the deals on hold while the committee appointed by Lt. Gov. David Dewhurst undertakes a comprehensive review of Texas water law and prepares recommendations for the 2005 Legislative session.
Mr. Patterson said state law allows his agency to do the deals as part of its management of several billion dollars in real estate and energy assets for the $18 billion permanent school fund. The fund receives all proceeds from state lands managed by the general land office, as well as income from the agency's real estate investments. He said his agency is committed to structuring investments to help solve the state's urban water supply problems. To that end, he said, he has ordered the first inventory of all state lands his agency has a role in managing for mineral rights -- including prison properties, State Parks and Wildlife Department lands -- to catalogue water resources. "Everyone says government should be run like a business, and that's what we're trying to do," he said.
The water committee was formed last month to review the state's antiquated water law. Texas is the only state that relies on a frontier-era doctrine stating that groundwater is private property that can be pumped at will by a landowner, even if it damages neighbors' water supplies. The Legislature has allowed local areas to form rund water districts to impose some pumping limits. But rural regions are increasingly fearful that the lack of regulation could allow speculators to snap up groundwater and sell it to cities -- leaving ailing rural economies high and dry.
Groundwater marketing plays have cropped up from the Panhandle, where T. Boone Pickens' water company is trying to produce massive amounts of water for resale to Texas cities, to Kinney County on the Rio Grande border and across much of the Hill Country and Brazos River basin. But until now, no water marketers have turned their bundles of water-rights leasers into a large, profitable water-supply deal.
The Senate committee was formed after news broke about the land office's foray into the water business. Many residents of West Texas reacted with alarm when the agency confirmed that it was considering leasing 355,000 acres of state lands to a group of politically connected oilmen for water exploration. Members of the group, Rio Nuevo Ltd., said at a hearing this week in Alpine that their project could mariket state-land water to a region stretching from El Paso to San Angelo. They said it could ultimately pay the state $7 million a year. But residents said too little is known about underground aquifers -- the sole sources of water for the state's remote and rugged mountain West -- that would be tapped.
State Sen. Frank Madla, D-San Antonio. chairman of the water subcommittee that will study the issue of water exploratino on state lands, said his panel will soon file an open records request to be sure it gets all information about the land office's potential water deals. Mr. Patterson said he was "flabbergasted" that Mr. Madla felt the need to take such a move. "We have no secrets," he said. He did concede that he would resist releasing specifc financial information because that might hamper his agency's ability to negotiate the best investments. "If the senator wanted to come over here personally, we would brief him ont he money," Mr. Patterson said. "We cannot do those numbers open to the public because it puts us at a tremendous disadvantage.
He said he understood legislators' calls for delaying the Rio Nuevo deal after Tuesday's hearings. "We were reaching a point where there were more answers than questions. I think the balance has swung the other way," Mr. Patterson said of the Rio Nuevo deal. "I'm more inclined to slow it down."
But he said he wants to move forward on a proposal to buy water rights from Water Texas of Austin, a private water marketer. That deal would position the agency to sell at least 20 million gallons of water daily to a fast-growing area of eastern Travis County.
The water firm's principals are powerful players in the state's infant private water development industry -- including former Lower Colorado River Authority executive Lynn Sherman and former state Sen. Buster Brown, author of the state's landmark 1997, water planning law. Mr. Sherman said the company has options to lease about 10,000 acres of land in Milam and Lee Counties for water development, and also has lined up a private California-based water supplier, Southwest Water Utilities Corp. to buy the resulting water supplies.
The water would go to three Southwest Water subsidiaries with small water operations in an area expected to undego major growth with the completion of the State Highway 130 corridor. Mr. Sherman said WaterTexas also is trying to line up customers for the deal in Williamson County, a thirsty suburban area that has attracted other water marketers. The deal will guarantee the land office at least a 5 percent annual return, and the agency could also invest in the 30-mile pipeline that Southwest Water or its municipal suppliers must build to get the water to customers.
Land office policy director Trace Finley, the agency's principal water negotiator, said the price paid to WaterTexas will hinge on how many buyers the firm can round up. Eventually, he said, the state's involvement would help attract municipal buyers uncomfortable buying from private water firms. Though the deal has no timeline, he said, Southwest Water needs water flowing by 2007, "which means they've got to have a deal very fast."
But some state officials are questioning the wisdom of such a hasty transaction. "Since when did the [General Land Office] become the water broker for Texas?" asked Mr Duncan. "It's a surprise to everybody, and it's not consistent with what we have worked hard in the Legislature to accomplish. It's one thing to say that we're gong to utilize state-owned water. It's another when the state goes out and starts acquiring or buying water rights."
Agriculture Commissioner Susan Combs said that could push the state into the already overheated ranks of private "water hustlers". Residents and businesses in the area where the water will go will face the prospect of paying what amounts to "a permanent tax on water" because the agency has to earn a return on its investment, she said. She added that she is particularly concerned about the state entering a private arena that is already in danger of becoming a free-for-all, elevating one water marketer above competitors by backing its deal.
Sen. Todd Staples, R-Palestine, a water committee member, said he has questions about whether such deals are a "proper role for the state. Usually when we do these pipeline things, it's usually with river authorites and municipalities, and not for people putting deals together and cashing out."