West Texas Water "Mining" Proposal: Short-Sighted?
I'm pleased to see that the local media is now jumping on the Rio Nuevo "water mining" issue with both feet. Today's MRT coverage of last night's meeting in Alpine highlighted several unaddressed and troubling questions with the proposal to sell water under state lands in far west Texas.
First, this:
Rio Nuevo partner Robert Canon estimated the company could sell the water at around $1,000 per-acre foot, giving 10 percent royalties to the State Land Board.
Canon likened the setup to an oil deal, citing up-front costs Rio Nuevo was willing to risk.
OK...I've been out of the oil bidness for a couple of years now, but is anyone...especially the State of Texas...doing oil and gas leases for a 10% royalty? C'mon...a 1/8th (12.5%) royalty is the standard, and 15-18% isn't unheard of. If you're going to sell this concept on an oil-deal basis, at least use a credible model.
Then this:
In return, the deal would benefit the local area by generating $1.65 million in production and export fees each year, provide tax benefits to counties and school districts and creating jobs, according to Canon.
The state would also benefit from future royalties, totaling up to $7 million annually on currently unprofitable lands. This money would go to the Permanent School Fund, Canon said.
Setting aside for a moment the fact that there are no up-to-date comprehensive studies that delineate exactly how much water is present in the targeted aquifers, the numbers don't add up. 50,000 acre-ft/year x $1,000/acre-ft x 10% royalty = $5 million, not the $7 million quoted in the article. Where's the other $2 million coming from, out of the kindness of Rio Nuevo's heart?
I also have to wonder about the description of these lands as "currently unprofitable." What's the measure? Is the state actually incurring any cost to hold title to this land? I suspect that the "unprofitable" label is accurate without being meaningful.
And, finally, the thought that the revenue from the water royalties will go to the Permanent School Fund is one of those heart-warming proposals that actually generates no practical warmth. Aside from being a drop in the bucket (pun intended), we need only look at the educational funding windfall provided by the state lottery to relegate this argument into the rhetorical dustbin.
Bottom line is that we can always find alternatives to fund state education, if we get serious about it. We can always find alternatives to oil and gas, when they begin to run short. We can always find alternatives to water when...uh, no. There is no alternative for water. Once it runs out, so does the viability, economic and otherwise, of the region from whence it came.
I commend the General Land Office for its stated intent to take things nice and slow with respect to this proposal. We need a credible comprehensive study of the water reserves in-place, perhaps jointly funded by the State and Rio Nuevo, before even beginning to contemplate producing and sending that water to other places in (or outside) the state. In the end, there may well be a compromise position that satisfies all agendas, but it's much too early to know that.
The state of Texas may well own the legal rights to that water. But, let's don't forget who owns...who is...the state of Texas.
This is not a politcal issue!! Once our state has been pumped dry it will not matter if we have the nations best schools. Lets not fall for the "lets do this for the kids" rallying cry again. The water in these aquifers did not gush in over the last couple of years, in some cases it has taken millions of years to get there. I don't know about you but if anyone is willing to pay so much for water, I figure there has got to a real good reason for it. This water belongs to us, all of us.
Posted by: JESSE at December 9, 2003 10:25 PMIt should be illegal for anyone to ever outright sell a water right. Water rights should forever belong to the land where the water is at. The only way water should ever be permitted to leave the land is by a yearly lease of a portion of the water, to be either renewed or not the next year by the owner of the water right. The outright sale of a water right always immmediately decreases the value of the land. Period.
Posted by: concermed citizen at March 22, 2004 05:07 PMIt should be illegal to ever outright sell a water right. Water rights should belong to the land where the water is at. The only way water should be allowed to leave the land where the water is at is by allowing a yearly lease for a portion of the water, (never all of the water), to be renewed or not renewed , year by year. When water rights are outright sold from the land where the water is at, then the value of the land depreciates to the point of worthlessness. Period. End of discussion.
Posted by: concermed citizen at March 28, 2004 06:03 PMAbout the publisher
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Here, here! In many of the counties in West Texas, water is the only asset.
Posted by: Wallace at December 3, 2003 03:37 PM