SAWS LOOKS WEST FOR WATER

From the San Antonio Express News

On April 23, a group of investors seeking to build a pipeline to deliver surplus Edwards Aquifer water from Uvalde to San Antonio brought along a pair of hired guns guaranteed to turn heads at a meeting at the Oak Hills Country Club.

California-based economist and consultant Rodney Smith and his partners in Southwest Texas Water Resources strolled in with former state Rep. Robert Puente, who chaired the legislative Natural Resources Committee, and Marc Rodriguez, a longtime friend of Puente and well-known water lobbyist.

They were there to brief a small, influential clutch of business people on the plan.
Puente, an attorney, later said STWR hired him to do legal work. His and Rodriguez's appearance at the meeting signaled that STWR was serious about its drive for a pipeline from Uvalde, which is illegal under state law and long has been a bone of contention between San Antonio and its rural neighbors to the west.

Smith said his group plans to seek an exemption from the law in the 2009 Legislature, and that it's looking to build regional support. But as formidable as the team may have been, it didn't last long. On May 6, less than two weeks after the lunch meeting, Puente was named interim CEO of San Antonio Water System, and he severed ties with STWR after alerting the utility's trustees to his work for the group.

But Puente, who resigned from the Texas House in January and went to work for STWR in February, isn't out of the picture altogether. For the proposed pipeline — about which there have been few details — to make economic sense, SAWS would have to be a customer. At the utility, Puente met with Smith on July 2 to discuss STWR's evolving plan.

Rodriguez, meanwhile, lobbies for both STWR and SAWS, which has raised eyebrows here and in Uvalde. But SAWS officials say the situation will be addressed if the company eventually makes a formal offer.

To add to the confusion, Puente worked for SAWS as a consultant before taking the interim post. Speaking on Puente's behalf, SAWS spokesman Greg Flores said the former lawmaker's allegiance lies with SAWS. “He works full-time now for SAWS, and does not work for them anymore,” Flores said.

He also noted that Puente's work for the investors didn't include drafting an exemption to the pipeline ban, that STWR is nowhere close to submitting a proposal for water and that, if it gets to that point, SAWS will follow strict procurement rules.

Though the project still is sketchy, Uvalde leaders are up in arms, worried about a potential water drain that could hurt the region's largely agricultural economy.

The Uvalde City Council condemned the proposed pipeline in a June resolution, saying if it's built, “the very life of the city of Uvalde will be adversely affected for generations to come and (it would) threaten the economic life of the city of Uvalde.” The Uvalde County commissioners followed suit with a resolution of their own last week.

But beyond the opposition it's stoking in the region, STWR's project could suggest SAWS' leadership has taken a significant turn as it looks to ensure San Antonio's long-term water supply and wean the city from its heavy reliance on the Edwards Aquifer.

Where his predecessor, James Mayor, resisted the notion of tapping Uvalde water, SAWS Chairman Alex Briseño doesn't rule it out. He's just much more interested in pipeline projects in the works in Kinney and Val Verde counties, which would draw on the Edwards and the Edwards-Trinity aquifers — though SAWS acknowledges it's possible Uvalde water could be scooped up along the way if the law changed.

With so many hurdles to clear — winning community support for undoing the prohibition, securing water rights, starting a complicated permitting process — Briseño said STWR's project is speculative, far from being a formal proposal that SAWS could consider. “For me, the Uvalde thing is not on the front burner — Kinney and Val Verde water is on the front burner,” he said.

In Kinney and Val Verde counties, several water marketers are working on pipeline plans. The companies include Grass Valley Water Supply, WAVS and WaterTexas. Former state Sen. J.E. “Buster” Brown, another lobbyist for SAWS, worked for WaterTexas but no longer does.

Unlike Uvalde's pool, water in Kinney and Val Verde counties isn't regulated by the Edwards Aquifer Authority. For any pipeline project in Uvalde, Briseño said the utility had a list of conditions: the purveyor would have to fight to change the state law and line up support throughout the region necessary to make it happen.

“We don't want to buy water at the expense of problems with the communities it came from,” Puente said.

A purveyor also would have to pay for construction. With nearly 85 miles between Uvalde and San Antonio, a pipeline could cost as much as $2 million per mile.

Puente said the best approach would be for the groups, including STWR, to get together to pump their water through a single pipeline. “They'd be competing with other sources of water,” Puente said, referring to STWR. “They're not the only game in town.”

But some pipeline opponents, including EAA board member Mario Cruz, contend the purchase — if one came about — would run counter to SAWS' effort to bolster its non-Edwards sources of water.

“In the four years I've been on the board, it's gone from looking for alternative sources of water to looking at the same source of water,” said Cruz, who represents Uvalde. “When did we make that transition?”

Water in the Uvalde pool of the Edwards Aquifer is widely believed to flow east through the so-called Knippa Gap, into the San Antonio pool. Though the two pools are part of the same aquifer, no one knows how much water flows from one pool to the other — or exactly where the Knippa Gap is.

So far, opponents have won most of the skirmishes. Vic Hilderbran, general manager of the Uvalde County Underground Water Conservation District, said water purveyors tried and failed to change the law in 1999, 2003 and 2005, with the failure due to local opposition.

Charlie Cook, manager of Knippa Water Supply Co., is pessimistic about the latest pipeline plan. Standing next to a well north of tiny Knippa, about 8 miles east of Uvalde, Cook said Thursday that the lowest the water has dropped since recording started in 1978 was 285 feet. “When they put in a pipeline, it's going to go below that 285 feet,” he said, making pumping more expensive.

But Rodney Smith said STWR's proposed pipeline wouldn't threaten the water supply. In fact, he said, it would help the entire region manage its water supply better. “This project has to do more than profit rights-holders — I get that,” he said.

The pipeline would move up to 40,000 acre-feet of water from Uvalde to San Antonio. By comparison, SAWS customers used 169,000 acre-feet of water in 2007, an unusually wet year. The year before, they consumed 195,000 acre-feet.

Quest for ‘western water'

For years, a group of San Antonio business leaders has called on SAWS to consider western water, which would be cheaper than most other sources. Joe Krier, former president of the Greater San Antonio Chamber of Commerce, is one of them. Krier sat in on the briefing at the Oak Hills Country Club, but he's taking a wait-and-see approach on STWR's project. “It's sort of like the rumor that Disney is coming to San Antonio. It comes up every couple of years,” Krier said. “It was so speculative that, frankly, I tossed it into my mental file cabinet.”

Michael Beldon, former chairman of the Edwards Aquifer Authority and the politically connected owner of a roofing company, set up STWR's briefing at Oak Hills but says he has no financial stake in the partnership.

Several water policy watchers say Beldon has been vocal in calling for consideration of western water, and his interest in the STWR project was clear early on. Former SAWS CEO David Chardavoyne said Beldon asked last fall about a meeting Chardavoyne had with Smith.

The August 2007 meeting had been Chardavoyne's first face-to-face discussion of the proposed pipeline — though Smith had met with Briseño and trustee Doug Leonhard the previous February.

Not long after that session, Chardavoyne said he received a nine-page outline of the partnership's work in progress. He wasn't impressed with what he saw, dismissing the letter as “form over substance.”

STWR stepped into the public spotlight at a May 28 meeting with Uvalde Mayor Cody Smith and other city leaders. When they arrived at El Progreso Memorial Library, Rodrigruez and Rodney Smith found nearly 30 government officials from Crystal City, Devine, Brackettville and Del Rio — all there at the mayor's invitation.

“I warned (Smith) that the response probably wasn't going to be favorable,” Cody Smith said. “In my opinion, they wanted to be able to show (lawmakers) that they did their due diligence. The problem is, they didn't have any answers.”

Rodney Smith said the group is operating in the open but that the plan is in flux. “We're trying to be up-front, we're trying to tell people what we are up to,” said Smith, who's founding editor of the trade publication Water Strategist.

STWR certainly has the attention of EAA's Cruz, who noted: “This group has, by far, deeper pockets than I've seen.” He's an ardent opponent of STWR's proposal, while environmentalist Annalisa Peace worries about a Pandora's box of amendments that could result if the partnership changes state law to let the project go forward.

“These people seem to be pretty well connected,” said Annalisa Peace, executive director of the Greater Edwards Aquifer Alliance. “It seemed like all of a sudden, this project was on everybody's radar.”

Marc Rodriguez helped. He arranged the meeting with local officials in Uvalde and he briefed board members of the Edwards Aquifer Authority on the proposed pipeline during a retreat in Bandera in June at the invitation of EAA Chairman Doug Miller.
Miller said he'd heard about the project and thought EAA board members should be brought up to speed. He also noted that STWR's plan to seek an exemption of the Uvalde pipeline prohibition, which is embedded in 1993 law creating the EAA, would open the legislation to other potential changes.

Uvalde City Manager John Harrell said he worried about Rodriguez's relationship with Puente, noting the pair had invested together in a Hays County real estate venture. At the time, Puente led a committee, Natural Resources, before which Rodriguez routinely represented clients.

In the 2007 Legislature, Puente recused himself from a vote in his committee on a bill that could have affected the property, and last summer he pulled out of the partnership after the Express-News reported on the deal. The San Antonio Democrat maintained his friendship with Rodriguez had no bearing on how he conducted his committee.

“It seems kind of interesting that SAWS would be the biggest party interested in our water, and Robert Puente is now its interim president and Marc Rodriguez is leading the charge with Rod Smith for this pipeline,” Harrell said. “It just makes you a little nervous — the connection between SAWS and this group out here.”

Briseño said Rodriguez's work for STWR and SAWS hasn't been an issue at the utility because the group, at this point, is so far from making a proposal. He also said Rodriguez hasn't made calls to him on STWR's behalf.

“He has disclosed that to us, and it's been vetted by our legal department,” Briseño said. “Marc mentioned that he was being pursued by this group, and he assured me that if there was a conflict, he would resolve it.” Rodriguez didn't return several phone calls seeking comment.

Responding to perceptions that Puente and Rodriguez are too cozy, Flores suggested that state purchasing laws for public entities trump friendship. “First off, SAWS has not received any proposal for water from any of those western counties,” he said. “And securing water must be done in compliance with state procurement laws, so it's not as easy as receiving a proposal and signing a contract.” Flores said SAWS has discussed pipeline plans with a number of different entities, not just STWR.

The gamble

A tangle of factors is at the core of the often-angry debate over the possibility of a pipeline from Uvalde to San Antonio. Uvalde County has enough water to meet its current needs, although local leaders worry about the long-term outlook. Still, improved pivot irrigation systems that move sprinklers directly over crops to reduce evaporation mean farmers are conserving even more.

At the same time, urban Bexar County is growing rapidly and SAWS needs to hustle to insure adequate short- and long-term water supplies.

Under EAA rules, most irrigators can sell or lease one acre-foot of water for every acre-foot that stays with the land. Water in the region has become the new gold. Observers of the market say a permit to pump one acre-foot of groundwater sold for roughly $850 five years ago. Today, it would fetch more than $5,000.

STWR is looking to lease, not buy, unused water rights governed by the Edwards Aquifer Authority. Smith wouldn't say how much water STWR controls.

In a June 20 letter to permit holders, provided by Uvalde officials, Smith described what the partnership had in mind. “We are creating a project consortium that will include a nationally recognized company to build the pipeline and related well field, an experienced operator of municipal systems, and an internationally recognized U.S. investment bank that will assure that the project gets properly financed,” he wrote. Smith, who became familiar with the region through consulting work for permit holders in the 1990s, said he's been working on the project for about three years.

Two substantial permit holders in Uvalde — and past proponents of a pipeline — are former Gov. Dolph Briscoe's Briscoe Ranch Inc. and Bob Willoughby of Edwardswater.com. Neither Briscoe nor Willoughby returned phone calls seeking comment.

Smith's partners include David Ladensohn, retired chairman of KLN Steel Products, and Rod Sands, retired president of Pace Foods and CEO of a private investment firm. Smith said STWR had another San Antonio partner, but he declined to identify the person. “It's high-risk capital,” he said. “We are putting up all the risk and capital for this.”

Puente is re-evaluating SAWS' 50-year plan for its water supply. The existing plan includes the purchase of some Edwards water, brackish groundwater desalination, other groundwater sources and water from the Colorado River basin.

For decades, SAWS' stated aim was to turn away from a near-complete dependence on the Edwards Aquifer, as well as ensure adequate water supplies — a shift mandated by the 1993 law establishing the EAA. Now the utility is looking to bring several big projects online in the next few years to meet those goals. But Briseño said it's slow going.

One of the projects is a proposed desalination plant in South Bexar County to turn brackish water into drinking water, an effort punctuated by howls of protest from Atascosa County. SAWS had hoped the neighboring county would sell a portion of its brackish water, but local opinion is set against the utility.

Another project is an effort to pipe water from the Carrizo Aquifer in Gonzales and Wilson counties to San Antonio, the permitting of which is being contested. “Every one of them has challenges,” Briseño said. “So we need to look at other options, and among them is western water.”

The clash

Two years ago, a SAWS-commissioned study indicated that drawing groundwater from Uvalde County to pipe to San Antonio on a large scale would push the region into drought restrictions more often and would lower well levels in the area by an average of 13 feet.

But pipeline proponents have said the Uvalde pool of the Edwards Aquifer is under-utilized and more than capable of satisfying users' needs with no pumping restrictions.

During the last skirmish over a pipeline proposal, then-SAWS Chairman James Mayor sided against delivering Uvalde water to San Antonio, saying in May 2006: “I just don't think it would be the right thing to do. Uvalde County has a growing agricultural base.”

Mayor said he's now dismayed that the desalination project, which SAWS officials had hoped would be online by 2011, doesn't appear to be advancing.

In June, the trade publication Public Works Financing reported that SAWS told potential bidders on the desalination plant to expect a yearlong delay. But Greg Flores of SAWS said, “There has not been a postponement in the desalination project.”

Earlier this month, he noted, SAWS' board agreed to purchase another 450 acres in South Bexar County for the project.

The brackish groundwater desalination effort had been one of Chardavoyne's signature projects. But the projected cost lurched from $704 to $1,375 an acre-foot, drawing sharp questioning from the SAWS board and adding fuel to the drive to oust Chardavoyne.

Briseño said it would be “irresponsible” not to consider western water as a short-term supply option. However, he quickly added: “Our sources are adequate to fill in any gaps we might have.”

Attorney Trey Wilson is the principal of San Antonio-based R L Wilson, P.C. Law Firm. He is a water and real estate lawyer, specializing in litigation throughout the State of Texas. He has participated in the Edwards Aquifer Authority permitting process, and other water-related litigation throughout Texas. For more information, see www.texaswaterlaw.com