1. Conflicts, Curtailments and Conversions: Lessons From the Historic Texas Drought 25 th Annual Texas Environmental Superconference August 1, 2013 Austin, Texas Leonard H. Dougal Jackson Walker L.L.P. ldougal@jw.com (512) 236-2000

2. 2 Introduction 1.Surface Water Curtailment in Brazos Basin 2.Brackish Groundwater Resource Conflicts and Development 3.Conversion of Agricultural Supplies to Municipal/Industrial

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4. 4 Texas Reservoir Status – July 2013 Source: Texas Tribune/TWDB

5. 5 Prior Appropriation Doctrine “As between [surface water] appropriators, the first in time is the first in right.” Water Code § 11.027

6. Brazos River Curtailment Area This map depicts the area of the Brazos River where junior surface water rights have been curtailed. 6

7. 7 Surface Water Curtailment In Brazos Basin – Priority Call No Watermaster on the Brazos River “Priority Call” By Senior Water Rights Holder –TCEQ Suspends Water Rights Junior to Feb. 14, 1942 –But, Order Excludes Junior Muni and Power Generation Rights –ED Cites Public Health, Safety and Welfare and New Rules Texas Farm Bureau Sues TCEQ –Challenges TCEQ “Curtailment Rules” (Ch 36) –Judge Jenkins Invalidates Curtailment Rules –Decision Now on Appeal

8. 8 Brackish Groundwater Resources TWDB Estimates: 2.7 Billion Acre-Ft –Brackish = 1,000 – 10,000 TDS –Represents “New Water” if Developed TWDB Estimates Desal Production Costs of $1.09 to $2.40 per 1000 Gallons Less Costly than Seawater Desalination Currently 34 Operating Brackish GW Desalination Facilities in Texas

9. 9 Growth of Desalination Capacity in Texas Source: TWDB (includes both surface water and groundwater desalination plants)

10. 10 Brackish GW Development Policy Considerations Who Should Regulate Brackish GW? –Do GWCD’s Have the Knowledge and Resources to Regulate Brackish GW? –How Do We Encourage the Development of Brackish GW? Need for Better Characterization of Brackish GW Aquifers (TWDB/BRACS)

11. 11 Conversion of Irrigation Supplies TWDB Water Demand Projections (M AcFt/yr.)

12. 12 Conversion of Supplies SAWS Deals “Reverse Auction” to Purchase Edwards Aquifer Rights SAWS Stated Goal: “To Acquire an Additional 10,900 acre-feet of Edwards Aquifer Water Rights in the Years to Come.”

13. 13 Conversion of Supplies Colorado Basin Example

14. 14 Conversion of Supplies: Hydraulic Fracturing Example “It takes 407 million gallons to irrigate 640 acres and grow about $200,000 worth of corn.” “That amount of water, could be used to frack enough wells to generate $2.5 billion worth of oil.” “No water, no frack, no wealth,’ says Dr. Brownlow (who has leased his cattle ranch for oil exploration).” WSJ, Quoting Darrell Brownlow, Ph.D.

15. 15 Conclusions Priority System Affirmed; Legality of TCEQ “Curtailment Rules” Questioned Brackish Groundwater Is a Vast Resource; Policy Changes Needed to Spur Development Irrigated Agriculture Will Decline as Water Moves to Higher Value Municipal/Industrial Uses

16. QUESTIONS? Leonard H. Dougal Jackson Walker L.L.P. 100 Congress Avenue, Suite 1100 Austin, Texas 78701 Telephone: (512) 236-2000 ldougal@jw.com