Breakdown of LCRA-San Antonio Water Deal Has Rippling Implications

Jul 23, 2009 | Austin American-Statesman by Asher Price | Related Press

When the San Antonio Water System accused the Lower Colorado River Authority in May of reneging on a huge water deal, more than money was at stake.

The potential $2.2 billion water-sharing project ran aground after the river authority said it might not have enough water to meet the needs in its basin area while also

shipping water to San Antonio.

In one sense, the implosion of the deal was a numbers game, with the LCRA’s revised, higher estimates of the demand in its basin for Colorado River water crushing the pact.

But in a broader sense, it was about winners and losers, as fast-growing parts of the state compete for the lifeblood that feeds construction and economic development.

Here was San Antonio, an economic engine of South Texas and a major U.S. city that has been desperate to find an alternative to the Edwards Aquifer. The aquifer has long been good to the people of San Antonio, providing cheap, plentiful water. But in the 1990s, as the city’s population continued to skyrocket, the Legislature began setting limits on pumping from the aquifer. Attempts to find other sources have been largely unsuccessful.

And here were the Lower Counties of the Colorado — Matagorda, Wharton and Colorado — suspicious of any water deal that would upset the status quo, as their politicians sought to assure electricity producers that they would get enough water to operate their plants, and rice farmers that they would get enough water for their crops.

The San Antonio project would have sent nearly 30 billion gallons of water from the Colorado River to the city for 80 years. In return, the Colorado River basin would have received money to pay for reservoirs and conservation programs.

As recently as November, the boiler-plate project description in monthly LCRA reports said it would “increase lake levels in lakes Buchanan and Travis over those expected without the project.” Those lakes are the reservoirs that slake the thirst of more than a million Central Texans.

Now, the LCRA and the San Antonio Water System appear headed to court over whether San Antonio should be reimbursed for the $40 million it paid to study whether the deal would be feasible.

San Antonio wants water, but short of that, it wants money, said Jim George, its Austin-based lawyer. “A million people in San Antonio are relying on LCRA’s word. Simply by saying, ‘Sorry, the math is different. Sorry, we’ve changed our mind’ — well, we’ve lost 10 years of water planning and $40 million — to say, ‘Too bad, I need to look after my own and go back on my word’ is irresponsible.”

The LCRA counters that it was acting responsibly when it said new demand projections in its basin meant the project could not go forward.

The basis of those statistics is certain to be examined if the divorce becomes a court battle.

The LCRA forecast — with demand projections as much as 25 percent higher than those in a state water plan — was based on development permits, septic tank applications, state demographer’s data and birth and death rates, among other statistics.

“I don’t see how we can plan for a legitimate project” without using the more recent figures, said Tom Mason, general manager of the LCRA. “We are being responsible stewards of the basin.”

Pumping cap on aquifer

Until the early 1990s, there were no regulations on how much water San Antonio could pump from the Edwards Aquifer.

But in 1993, prompted by a successful lawsuit to protect endangered species, the Legislature capped the amount of water that could be pumped, prompting the San Antonio Water System to diversify its water sources and adopt strong conservation efforts.

San Antonio now has among the lowest water consumption per person in the country.

Even so, with a population projected to grow 63 percent in the next 50 years, the system needs to find more water in case of droughts.

Though the system has taken steps since the early ’90s to improve its outlook, some opportunities faded.

Between the 1960s and 2005, because of political forces, money pressures and environmental concerns, the water system board or city voters rejected several reservoir projects, pulled out of a deal with Alcoa to get water supplies from the Simsboro Aquifer and ended a plan with the Guadalupe-Blanco River Authority that would have piped water from near the Gulf Coast.

Recently, groundwater districts in rural counties thwarted San Antonio’s efforts to import water. Technology for a possible desalination plant remains experimental and enormously energy-intensive.

Finding another water source is crucial to development interests, said Enrique Valdivia, a board member of the Edwards Aquifer Authority and the Greater Edwards Aquifer Alliance. “As a practical matter, they can’t build out without water.”

Legislation in 2007 eased the pumping cap, buying San Antonio some time, but it still needs to find a long-term source for its water needs. And pumping from the aquifer has consequences for endangered species that occupy the springs, which are fed by the underground reservoir.

Power plant plans

The LCRA deal was a possible long-term solution for San Antonio, but the way Matagorda County Judge Nate McDonald sees it, the water-sharing deal would jeopardize the reliability of water in his county. That could threaten farms, power plants and population growth that depend on the water.

The utility NRG Energy has said it wants to expand the South Texas Project nuclear power plant, and White Stallion Energy Center plans to build a coal-fired plant in Matagorda.

Both would hire hundreds of workers and expand the tax base — and require massive amounts of water for their operations.

Reflecting suspicions about the San Antonio project held by some in the Lower Counties, McDonald said he was unconvinced by portions of the agreement that guaranteed water for the Colorado River basin area through water storage and conservation methods.

He took his case to LCRA board members.

In a board meeting Dec. 16, representatives of the Lower Counties called for the LCRA to make two decisions that San Antonio now says torpedoed its deal: Adopt the new numbers, and keep about 16 billion gallons of Highland Lakes water out of the water-sharing project, as a reserve. The LCRA says its models suggest that the reserve decision would have little impact on the project and says that it was looking out for the best interests of the basin area.

“The whole point of this was not a mandate to do some water for San Antonio. The whole point was to study if this was feasible and how much water we had in our basin,” said Linda Raun, a rice farmer and board member who said water should not be sent out of the basin area.

But members of the northern part of the LCRA’s basin argued in favor of the San Antonio plan.

“One thing we’re overlooking is the ultimate benefit to our basin of this project,” said B.R. “Skipper” Wallace, who represents Lampasas County, referring to the water that would be “created” through conservation and at least one reservoir. “There’s only two or three ways we can solve this big, monster problem we have, which is lack of water in the future.” Having a project “paid for by somebody else, that’s a pretty damn big advantage,” he said.

Ultimately, Raun and her allies won: On Dec. 17, the board voted to adopt the revised numbers and to take the 16 billion gallons off the table.

Role of Legislature

It was the Legislature that encouraged regional water-sharing deals, and, should lawmakers wade into the deal when they reconvene in 2011, the clout of each utility will be tested. Robert Puente, president of the San Antonio Water System, served for more than 15 years as a state representative, and House Speaker Joe Straus hails from San Antonio.

“You’re buying a world of political problems by leaving San Antonio high and dry,” said Glenn Smith, an Austin public relations specialist who works for the lawyer representing the city. “That’s not like leaving some small town high and dry.”

But the LCRA has its own friends. The decision by San Antonio to say that the LCRA is in breach of contract “doesn’t pass the common-sense smell test,” said state Sen. Glenn Hegar, R-Katy, whose district includes Matagorda, Colorado and Wharton counties. “Is this just some political move, so (the San Antonio Water System) doesn’t have a black eye? Maybe San Antonio wants out because they can find some cheaper source.”

Ken Kramer, director of the Lone Star Chapter of the Sierra Club, said there had been speculation that the ever-rising potential cost of the water-sharing deal might have led San Antonio to eventually cancel the deal.

Originally, the project was slated to send nearly 50 billion gallons of water to San Antonio each year at a total cost of about $900 million. Under more recent estimates, reflecting inflation and escalating infrastructure costs and shifts in modeling, the project would send less than 30 billion gallons of water to San Antonio

and cost more than $2 billion.

But Puente said the deal is still a good one for the San Antonio Water System and the surrounding region because of uncertainties about the future value of water.

Ultimately, the breakup of the expensive, energy-intensive project was “not a surprise,” said Carol Patterson, an Edwards Aquifer Authority board member. She said the nonprofit river authority should pay up.

The San Antonio Water System “has been paying for 50 years of (research and development) for the Colorado River basin,” she said. “Frankly, we’re not a wealthy city, and speaking to fairness, LCRA has a lot of money, and it seems to me it’s time to give it back, to reimburse.”

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