Thursday, February 13, 2014

SAWS' water deal doomed by Texas history

SAWS' water deal doomed by Texas history

By Greg Jefferson : February 7, 2014 : Updated: February 8, 2014 3:38pm
SAWS' surprise decision last week to recommend junking three proposals for a 30-year water supply deal proves once again that it's easier to take away Texans' guns than it is to win agreement to pipe significant amounts of water from one part of the state to another.

Chalk it up to Texas' habit of falling into deep drought; the state's fast-growing urban populations taking bigger gulps of increasingly scarce water; farmers' irrigation demands; and rural communities' suspicions of the motives of big cities. To these longstanding complications, you can now throw in drillers blasting vast amounts of water into tight rock formations to break them open to free oil and gas deposits.

SAWS trustees will have to decide whether to stop pursuing a megacontract for about 50,000 acre feet of non-Edwards Aquifer water to be delivered annually, starting in 2018.
Landing the agreement would have thrilled business leaders who for decades have pushed a big splashy project to secure San Antonio's water future, and to keep the city an attractive destination for companies and tourists. But staffers couldn't have taken a dimmer view of the prospects last week.
While the V.V. Water Co.'s bid to transport water from the Edwards-Trinity Aquifer sparked the fiercest opposition — from border communities and environmentalists — SAWS officials said the other two proposals also had fatal flaws.

Dimmit County's proposal to pump from the Carrizo Aquifer in Val Verde and Dimmit counties met with opposition from the Wintergarden Groundwater Conservation District.
The strongest bidder — the Spanish conglomerate Abengoa and Austin-based partner BlueWater Systems — refused to bear all of “the risk of water being cut off by the groundwater district that regulates the supply,” SAWS chief executive Robert Puente said.

In other words, the underwriters who would sell bonds to pay for the pipeline and related infrastructure wouldn't tolerate that much risk, not without sticking Abengoa with higher interest rates.

After confirming the Express-News' Thursday story on SAWS' proposed shift away from a big supply contract, Puente wasn't willing to say a deal of that magnitude was impossible in Texas. The former state representative, a onetime chair of the House Natural Resources Committee, would allow only that “these three particular projects are not possible.”

Rep. Trey Martinez-Fischer, a Democrat who sits on Puente's old committee and whose wife was a SAWS trustee until recently, got a little closer to the heart of the problem.
“Any time SAWS attempts to go into other people's backyard for water, I think they naturally get defensive,” the San Antonio Democrat said. Later, he added: “Bringing peace in an area where there's never, ever been peace — that's a tall order.”

Hence the allure of going big into desalination — making drinking water out of brackish water. The cruddy, salty water is right under our feet, and it's abundant.

SAWS will start building a desal plant in South Bexar County this summer, and last week proposed expanding its scope as an offset to dropping pursuit of a supply deal.

In SAWS' view, a budding partnership with CPS Energy that would have CPS locating a natural gas-fired power plant on the same site makes the dive into desal even more attractive.
SAWS said Thursday that co-location “would save money on additional land as well as consolidating management and operation of several water supply projects.” Those include desalination and the Aquifer Storage and Recovery facility, the underground vault where the utility keeps surplus Edwards water pumped in wet years.

Puente says the supply contract, had it been consummated, would have cost an average of $70 million per year for 30 years, which works out to a total of $2.1 billion.
Ratepayers would have blanched at the cost, eventually. They'd have seen their monthly bills increase greatly, by as much as 12 percent in 2019 alone, for example.
But don't think the city has dodged a big, expensive bullet. In a side-by-side comparison, desalination is more costly.

The difference is that San Antonio would have had to buy water under contract whether it was needed or not. But production at the desal plant could be ramped up or down, depending on demand, and the plant's expansion phased in to match the city's population growth.
As reporter Nolan Hicks wrote last week, SAWS “expects to finish all three phases of the plant by 2026, at a cost of nearly $300 million.”

But here's another hitch: expanding desal's scope would mean pumping more brackish water from under Bexar County, and also Wilson and Atascosa counties. Right now, the permits to do that last five years, which introduces risk. After five years, who's to say the groundwater districts controlling the permits won't pull them?

In last year's Legislature, SAWS tried to line up support for extending pumping permits' duration to 30 years. But the measure came up short. And while Puente thinks chances of passage in the 2015 session are good, few things are guaranteed in Austin in odd-numbered years.

Without the security of 30-year permits, or some other long-term protection for permit holders, the utility could expect to pay higher interest rates on the bonds that would pay for construction because of the risk. That's despite the fact that SAWS owns property in South Bexar for which it doesn't need permission to pump.

“There's uncertainty to it,” Puente said of the desal plan. “But the risks are manageable.”
He's got a point — it's at least more manageable than trying to overcome the many obstacles to regional water deals in Texas.

Greg Jefferson is business editor of the San Antonio Express-News. You can reach him at 210-250-3259 or gjefferson@

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