A Sustainable Water Plan for Texas 

Wednesday, July 10, 2013

Court to Texas Water Planners: The Law Matters

A recent Texas Court of Appeals ruling could result in some major changes in how Texas develops its State Water Plan.  The suit was  brought by Ward Timber and a number of East Texas landowners who challenged the 2012 decision by the Texas Water Development Board (TWDB) to approve the Region C regional water plan. The Court reversed this approval after ruling that TWDB can be sued if it does not follow and enforce the law and rules applicable to Texas water planning.    

This result should lead to a more sustainable and realistic water planning process.

The dispute focused initially on the challenge to TWDB’s approval of the regional plan for the Dallas-Fort Worth area.   The Region D plan for Northeast Texas identified a Region C water strategy that conflicted with the Region D plan. 

The conflict centered on the proposed Marvin Nichols Reservoir, on the Sulphur River in Region D.   The Region C plan included the proposed reservoir as a long-term water supply strategy for the Metroplex area.  Region D’s plan, however, expressly stated that the proposed reservoir conflicted with its plan,  which included the finding that a reservoir at the proposed location would destroy  important agricultural and natural resources that Region D intended to protect. 

The identification by one region of a potential interregional conflict is authorized, if not required, by Texas law at Section 16.053(h) of the Texas Water Code.  If such a conflict exists between two regional plans, TWDB is required by that same portion of the Code to bring the regions together in an effort to find a resolution.  If that is not successful, the law then requires that TWDB itself resolve the conflict. 

At the outset, TWDB argued that it could not be sued for its decision to approve a regional plan because these were just “plans” with no immediate effect. TWDB  also argued that there was no interregional conflict.

The Court’s May 2013 opinion upheld a lower court ruling, reversing the TWDB’s approval of the Region C plan.   The Court held that:

·         TWDB can be sued for failure to comply with Texas law or its rules on water planning;

·         The TWDB decision to approve the 2011 Region C plan violated Texas law; and

·         TWDB’s definition of  interregional conflicts as limited to instances where two regions relied on the same water to meet proposed demands was inconsistent with Texas law.

TWDB’s deadline to appeal to the Texas Supreme Court has now passed, so the Court’s holding stands.  It will be an important precedent for future water planning efforts, as well as for the current dispute between Regions C and D over the proposed Marvin Nichols Reservoir.

The Ward Timber decision provides valuable guidance and benchmarks for on-going water planning efforts.  While the Texas water plan is reasonably viewed as a “bottom-up” effort, it has to also reflect the broader state interests.  It has become increasingly clear over the last few planning rounds that more state level engagement is needed.  As reflected in HB 4, passed this year by the legislature, state funds need to be spent on strategies that are priorities for both the regions and the state.  The state needs a water plan that reflects a realistic future and that can be implemented in a cost-effective and environmentally-sound manner.  

State level engagement can come in many forms, but one important avenue  is TWDB rules and guidance implementing the statutory requirements for planning. The Ward Timber case holds that the regions and TWDB need to take those rules seriously.  The Court upheld Region D's position that state water planning law allows it to protect its important agricultural and natural resources, even as the state seeks to meet municipal and other needs for water now and in the future.

TWDB rules can be used to set rational boundaries on the regional planning process, as envisioned by the statutory language in Section 16.053of the Texas Water Code.  For example, TWDB’s current planning rules seek to establish consistent methods by which all regions project certain future water needs.  If a regional group does not comply with these or other elements of the rules, TWDB needs to enforce them by disapproving all or a part of the regional plan.  The Ward Timber case holds, in essence, that if TWDB does not do so, a court could invalidate the TWDB's decision to approve the regional plan.   

Thus, Ward Timber case has implications beyond the Region C and D conflict.  While resolution of that conflict will likely happen one way or another in the next six months to one year, the other aspects of the Court decision can affect all 16 regional planning processes for this next round and into the future.  Given the lack of attention in past rounds of planning to certain aspects of the legal requirements, such as protection of natural resources and environmental water needs, the Ward Timber case may also send a clear message that all aspects of the planning process established in the law and TWDB rules need to be addressed in the 2016 round of regional plans.

Sunday, June 30, 2013

Understanding House Bill 4

After several months of debate, the legislature approved and Governor Perry signed House Bill 4, setting up a revolving loan fund to implement the Texas Water Plan.  However, the proposed transfer of $ 2.0 billion from the Economic Stabilization Fund (known as the Rainy Day Fund) to capitalize the new implementation fund will not become effective unless authorized by a constitutional amendment that will be before voters in the November 2013 statewide election.

But, HB 4 is much more than just a new loan fund.  In fact, it restructures the Texas Water Development Board and, contingent on the passage of the constitution amendment, sets up a complex new prioritization process for deciding how to allocate the new loan funds. 

And, as with any major public policy initiative, the devil is in the details. So, what does HB 4 do and what can we expect to happen over the next few years?

First, let’s look at what happens even if the constitutional amendment authorizing the transfer from the Rainy Day Fund, SJR 1, does not pass in November. 

The Texas Water Development Board will change from the current six-member unpaid, part-time board to a three-member, paid, full-time board whether or not the voters approve the constitutional amendment.  As with the current TWDB, the Governor will make all board appointments, in this case by September 1, 2013.  Under the new legislation, one member must have experience in engineering, one in public or private finance, and one in law or business.   The new board is then required to hire a new Executive Administrator by October 1, 2013.  It’s likely that this new administrative team will also begin to set their own goals and policies.

Once the board members are appointed, they will face some looming deadlines under HB 4 to get the new infrastructure fund up and running and establish a process to set priorities for using the fund.  But, these actions will only be required if the constitutional amendment transferring rainy funds to the infrastructure fund is approved by the voters.

If SJR 1 does pass, then the board will begin a fairly complex process to prioritize spending from the new infrastructure fund, which will be known as the State Water Implementation Fund for Texas (SWIFT). The legislation itself sets some priorities for spending, requiring that not less than 10% of the funds disbursed go to projects for “rural political subdivisions or agricultural water conservation and that not less than 20% go to support projects for water conservation or reuse, including agricultural irrigation projects.

Beyond these directives, however, the Board has the primary role in prioritizing projects for funding. 

Here, in brief are the steps set out in HB 4:

First, the Board is to convene the chairs of the regional water planning groups (RWPGs).  This group is tasked with developing “uniform standards to be used by the regional water planning groups” in prioritizing projects. These standards must be developed by December 2013 and “approved by the Board.” 

Then, using these “standards”, each regional group is to prioritize projects in its respective regional water plan.  This prioritization will be conducted for both the existing 2012 plan and, at the appropriate time, for the new plans now under development.   The draft regional prioritization for the 2012 plans must be submitted to the Board by June 2014.  The Board can then comment on the RWPG draft prioritization.  The final RWP prioritization is due by September 2014.

At a minimum, a regional water planning group must consider the following criteria in prioritizing each project:

(1)        the decade in which the project will be needed;

(2 )   the feasibilityof the project, including the

availability of water rights for purposes of the project and the

hydrological and scientific practicability of the project;

(3)    the viabilityof the project, including whether

the project is a comprehensive solution with a measurable outcome;

(4)    the sustainabilityof the project, taking into

consideration the life of the project; and

(5)    the cost-effectivenessof the project, taking into

consideration the expected unit cost of the water to be supplied by

the project.

In prioritizing projects, each regional water planning group is to “include projects that meet long-term needs as well as projects that meet short-term needs.”

But, the regional prioritization is not the final step.  In fact, it is only one factor to be considered by the Board.  HB 4 provides that the Board has the final say on prioritization as it relates to providing financial assistance from the SWIFT.

The Board is charged with setting up a “point system” for prioritization.  This system must include a “standard for the board to apply in determining whether a project qualifies for financial assistance at the time the application for financial assistance is filed with the board.”

The legislation then provides fairly substantial direction to the Board in what should be considered in setting up this point system.  Specifically it provides:

(c)The board shall give the highest consideration in

awarding points to projects that will have a substantial effect,

including projects that will:

(1) serve a large population;

(2) provide assistance to a diverse urban and rural

population;

(3) provide regionalization; or

(4) meet a high percentage of the water supply needs of

the water users to be served by the project.

In addition to these criteria the Board must

must also consider at least the following criteria in

prioritizing projects:

(1)        the local contribution to be made to finance the

project, including the up-front capital to be provided by the

applicant;

(2)        the financial capacity of the applicant to repay

the financial assistance provided;

(3)        the ability of the board and the applicant to

timely leverage state financing with local and federal funding;

(4)        whether there is an emergency need for the

project, taking into consideration whether:

(A)the applicant is included at the time of the

application on the list maintained by the commission of local

public water systems that have a water supply that will last less

than 180 days without additional rainfall; and

(B)federal funding for which the project is

eligible has been used or sought;

… whether the applicant is ready to proceed with the project at the time of the application, including whether:

(A)        all preliminary planning and design work

associated with the project has been completed;

(B)        the applicant has acquired the water rights

associated with the project;

(C)        the applicant has secured funding for the

project from other sources; and

(D)        the applicant is able to begin implementing

or constructing the project;

(5)        the demonstrated or projected effect of the

project on water conservation, including preventing the loss of

water, taking into consideration, if applicable, whether the

applicant has filed a water audit with the board … that demonstrates that the applicant is accountable with regard to reducing water loss and increasing efficiency in the distribution of water; and

(6)        the priority given the project by the applicable

regional water planning group….

The Board will also have to consider comments from the SWIFT Advisory Committee created by HB 4.  This committee will be made up of the Comptroller, three senators appointed by the Lt. Governor and three representatives appointed by the Speaker of the House. 

House Bill 4 does not set a date by which the Board must complete the point system for administering the SWIFT, but it is unlikely to happen before September 2014, when the regional prioritizations of the 2012 plans are to be finalized.  By that time, of course, the current round of planning will be well underway and a new session of the legislature will be just around the corner.