1. Lone Star GCD. July 13, 2006 Final Presentation Groundwater Regulatory Program and Conjunctive Use Study

2. Lone Star GCD. July 13, 2006 Final Presentation AGENDA − Introduction of Lone Star Groundwater Conservation District − Background of Study Authorization − Review of the Problem − Summary of Study Findings − Questions and Answers − Introduction of Lone Star Groundwater Conservation District − Background of Study Authorization − Review of the Problem − Summary of Study Findings − Questions and Answers

3. Lone Star GCD. July 13, 2006 Final Presentation Lone Star Groundwater Conservation District − Authorized by 77th Legislature in 2001 by HB 2362 − Geographic boundaries encompass ALL of Montgomery County − Creation confirmed by popular vote on Nov 6, 2001 with 73.85 % approval − Amended Enabling Legislation in 2003 by SB 1930 to protect rulemaking authority − Authorized by 77th Legislature in 2001 by HB 2362 − Geographic boundaries encompass ALL of Montgomery County − Creation confirmed by popular vote on Nov 6, 2001 with 73.85 % approval − Amended Enabling Legislation in 2003 by SB 1930 to protect rulemaking authority

4. Lone Star GCD. July 13, 2006 Final Presentation Board Members Legislative Act provided for a nine-member Board of Board appointments are for staggered four-year terms, − MUDs east of I-45 − small cities excluding Conroe − Commissioner’s Court − MUDs east of I-45 − small cities excluding Conroe − Commissioner’s Court − MUDs west of I-45 − San Jacinto River Authority − Commissioner’s Court − MUDs west of I-45 − San Jacinto River Authority − Commissioner’s Court − City of Conroe − Woodlands Joint Powers Agency − Soil and Water Conservation District − City of Conroe − Woodlands Joint Powers Agency − Soil and Water Conservation District

5. Lone Star GCD. July 13, 2006 Final Presentation Role of the Lone Star Groundwater District − Conserve and Protect groundwater resources in Montgomery County − Control land subsidence − Develop rules and regulations as necessary to meet these objectives − Establish well registration and permit system − Work with Federal Government to monitor groundwater levels − Participate in joint planning with GMA 14 − Conserve and Protect groundwater resources in Montgomery County − Control land subsidence − Develop rules and regulations as necessary to meet these objectives − Establish well registration and permit system − Work with Federal Government to monitor groundwater levels − Participate in joint planning with GMA 14

6. Lone Star GCD. July 13, 2006 Final Presentation Why is Planning and Regulation Necessary? Texas Water Development Board Projections of Available Groundwater in Montgomery County (per approved plan)64,000 a-f /year Current GW Permit Requests70,000 a-f/year Projected water demand by 2040154,000 a-f /year Shortage 90,000 a-f/year Texas Water Development Board Projections of Available Groundwater in Montgomery County (per approved plan)64,000 a-f /year Current GW Permit Requests70,000 a-f/year Projected water demand by 2040154,000 a-f /year Shortage 90,000 a-f/year

7. Lone Star GCD. July 13, 2006 Final Presentation

8. Groundwater Regulatory Program and Conjunctive Use Study

9. Lone Star GCD. July 13, 2006 Final Presentation Study Background Authorization − Authorized by Board action of February 20, 2004 − Delayed until Planning Grant Application reviewed by TWDB ( April 2004) − Notice to Proceed in June 2004 − Authorized by Board action of February 20, 2004 − Delayed until Planning Grant Application reviewed by TWDB ( April 2004) − Notice to Proceed in June 2004

10. Lone Star GCD. July 13, 2006 Final Presentation − TWDB $141,000 − LSGCD Cash $ 25,000 − SJRA Cash $ 40,000 − LSGCD In-Kind $ 70,000 − SJRA In-Kind $ 25,000 − Total $302,000 − TWDB $141,000 − LSGCD Cash $ 25,000 − SJRA Cash $ 40,000 − LSGCD In-Kind $ 70,000 − SJRA In-Kind $ 25,000 − Total $302,000 Cost Sharing and Obligation

11. Lone Star GCD. July 13, 2006 Final Presentation Purpose and Scope − Groundwater Regulatory Plan (GRP) − Provides science and engineering justification for establishing management zones and goals for each zone − Establishes a need for reduction in groundwater usage to meet goals − Facilities Plan − Technical mechanism for implementing the GRP − Sets timetable for implementation of surface water ( or other alternatives) based on goals established in GRP − Groundwater Regulatory Plan (GRP) − Provides science and engineering justification for establishing management zones and goals for each zone − Establishes a need for reduction in groundwater usage to meet goals − Facilities Plan − Technical mechanism for implementing the GRP − Sets timetable for implementation of surface water ( or other alternatives) based on goals established in GRP

12. Lone Star GCD. July 13, 2006 Final Presentation Groundwater Regulatory Plan − Establishes population and water demand projections for next 40 years based on 5 year increments − Apply water demand projections to the TWDB GAM − Establishes goal for future water level declines − Evaluates alternative scenarios of management zones − Projects aquifer response based on scenario − Establishes population and water demand projections for next 40 years based on 5 year increments − Apply water demand projections to the TWDB GAM − Establishes goal for future water level declines − Evaluates alternative scenarios of management zones − Projects aquifer response based on scenario

13. Lone Star GCD. July 13, 2006 Final Presentation Facilities Implementation Plan − Interface with current planning, operating and management entities − Develop sizes for plant, storage and conveyance facilities for surface water treatment and conveyance − Establish preliminary routing and location of plants and pipelines − Discuss TCEQ requirements for blending surface and groundwater sources − Develop draft financial plan for implementing surface water − Impact on water districts − Current groundwater debt − Rate and debt structure − Review options for institutional mechanisms for implementing − Interface with current planning, operating and management entities − Develop sizes for plant, storage and conveyance facilities for surface water treatment and conveyance − Establish preliminary routing and location of plants and pipelines − Discuss TCEQ requirements for blending surface and groundwater sources − Develop draft financial plan for implementing surface water − Impact on water districts − Current groundwater debt − Rate and debt structure − Review options for institutional mechanisms for implementing

14. Lone Star GCD. July 13, 2006 Final Presentation REVIEW OF THE PROBLEM

15. Lone Star GCD. July 13, 2006 Final Presentation Discussion of the Fundamental Issue Facing Montgomery County − 26th fastest growing county in the United States − 5th fastest growing county in Texas − To date, entire water supply originates as groundwater from Gulf Coast Aquifer − Current usage is approaching (exceeding) sustainable yield of the aquifer − 26th fastest growing county in the United States − 5th fastest growing county in Texas − To date, entire water supply originates as groundwater from Gulf Coast Aquifer − Current usage is approaching (exceeding) sustainable yield of the aquifer

16. Lone Star GCD. July 13, 2006 Final Presentation Existing Sources of Water Grimes Montgomery Liberty HarrisWaller Fort Bend Galveston Evangeline Aquifer Recharge Zone Chicot Aquifer Recharge Zone Aquifer Recharge Areas Direction of Groundwater Flow Source: Harris Galveston Coastal Subsidence District

17. Lone Star GCD. July 13, 2006 Final Presentation Aquifer Characteristics Conroe

18. Lone Star GCD. July 13, 2006 Final Presentation

19. Historic Decline in Water Levels 1990-2004 Chicot Aquifer Water-Level Change

20. Lone Star GCD. July 13, 2006 Final Presentation Historic Decline in Water Levels 1990-2004 Evangeline Aquifer Water-Level Change

21. Lone Star GCD. July 13, 2006 Final Presentation Historic Decline in Water Levels 2000-2004 Jasper Aquifer Water-Level Change Decline > 50 ‘ Decline 20’ < 50’ Decline 1‘ < 20’

22. Lone Star GCD. July 13, 2006 Final Presentation Projected Decline in Water Levels (Evangeline 2000-2040)

23. Lone Star GCD. July 13, 2006 Final Presentation Projected Decline in Water Levels (Jasper 2000-2040)

24. Lone Star GCD. July 13, 2006 Final Presentation Regulatory Plan to Conserve Groundwater

25. Lone Star GCD. July 13, 2006 Final Presentation Projections of Water Usage Texas Water Development Board Projections of Available Groundwater in Montgomery County (per approved plan)64,000 a-f /year Current GW Permit Requests70,000 a-f/year Projected water demand by 2040154,000 a-f /year Shortage 90,000 a-f/year Note: 97% of the water used is for public water supply Texas Water Development Board Projections of Available Groundwater in Montgomery County (per approved plan)64,000 a-f /year Current GW Permit Requests70,000 a-f/year Projected water demand by 2040154,000 a-f /year Shortage 90,000 a-f/year Note: 97% of the water used is for public water supply

26. Lone Star GCD. July 13, 2006 Final Presentation Growth in Water Demand 15% 34% 46% 55% Alternative source requirement

27. Lone Star GCD. July 13, 2006 Final Presentation

28. Issues With Severe Water Level Decline Aquifer begins to dewater in areas of heavy pumpage. Potential problems include: − Worsens conditions that contribute to land subsidence − Water levels dropping below top of screen, reducing pump efficiency − Reduced saturated thickness and availability − Water quality degradation: arsenic, radioactivity, TDS Aquifer begins to dewater in areas of heavy pumpage. Potential problems include: − Worsens conditions that contribute to land subsidence − Water levels dropping below top of screen, reducing pump efficiency − Reduced saturated thickness and availability − Water quality degradation: arsenic, radioactivity, TDS

29. Lone Star GCD. July 13, 2006 Final Presentation Groundwater Regulatory Program Development

30. Lone Star GCD. July 13, 2006 Final Presentation What are the impacts of Regulating Groundwater − Regulation is structured to encourage conservation. − Conversion to alternative sources, including increased conservation, reclaimed water, surface water and other strategies will be necessary. − The cost for water will likely rise. − Regulation is structured to encourage conservation. − Conversion to alternative sources, including increased conservation, reclaimed water, surface water and other strategies will be necessary. − The cost for water will likely rise.

31. Lone Star GCD. July 13, 2006 Final Presentation What is a Regulatory Zone Accomplishing − Authorized by enabling legislation and board rules as a method on management − Establishes geographic boundaries and the allowable groundwater withdrawal within that boundary at a point in time. − It sets periodic milestone dates for groundwater reduction. − It provides for a continued “growth on groundwater” in the zone in between the milestone dates. − It does not preclude subdividing the zone at some future date, but makes it difficult to move from one zone to another zone. − It does not preclude changing the milestone dates, nor the amount of groundwater reduction within a zone at those milestone date. − Authorized by enabling legislation and board rules as a method on management − Establishes geographic boundaries and the allowable groundwater withdrawal within that boundary at a point in time. − It sets periodic milestone dates for groundwater reduction. − It provides for a continued “growth on groundwater” in the zone in between the milestone dates. − It does not preclude subdividing the zone at some future date, but makes it difficult to move from one zone to another zone. − It does not preclude changing the milestone dates, nor the amount of groundwater reduction within a zone at those milestone date.

32. Lone Star GCD. July 13, 2006 Final Presentation Population/Demand Projections 80% of Demand in these 5 areas

33. Lone Star GCD. July 13, 2006 Final Presentation Single Management Zone - Countywide HUP – 59,603 af Allow GW – 64,000 af 2013 Demand – 83,600 af 2013 Reduction – 30% 2040 Demand – 154,000 af 2040 Reduction – 60%

34. Lone Star GCD. July 13, 2006 Final Presentation Conroe/Woodlands Management Zone Conroe/Woodlands HUP – 36,968 af Allowable GW withdrawal – 7,359 af 2013 Demand – 38,376 af 2013 Reduction – 81% 2040 Demand – 59,928 af 2040 Reduction – 88% Balance of County HUP – 22,032 af Allowable GW withdrawal – 56,641 af 2013 Demand – 45,226 af 2013 Reduction – 0% 2040 Demand – 94,435 af 2040 Reduction – 40%

35. Lone Star GCD. July 13, 2006 Final Presentation Two Management Zones Zone covers 80% of the demand Increase from 2000 to 2040 HUP – 50,680 af Allowable GW withdrawal – 31,288 af 2013 Demand – 67,166 af 2013 Reduction – 53% 2040 Demand – 125,023 af 2040 Reduction – 75% Balance of County HUP – 8,320 af Allowable GW withdrawal – 32,712 af 2013 Demand – 16,436 af 2013 Reduction – 0% 2040 Demand – 29,340 af 2040 Reduction – 0%

36. Lone Star GCD. July 13, 2006 Final Presentation Three Management Zones HUP – 18,092 af Allow GW – 30,516 af 2013 Demand – 25,116 af 2013 Reduction – 0% 2040 Demand – 43,107 ac 2040 Reduction – 35% HUP – 30,492 af Allow GW – 15,673 af 2013 Demand – 36,343 af 2013 Reduction – 60% 2040 Demand – 60,079 af 2040 Reduction – 76% HUP – 10,416 af Allow GW – 17,811 af 2013 Demand – 22,142 af 2013 Reduction – 26% 2040 Demand – 51,177 ac 2040 Reduction – 68%

37. Lone Star GCD. July 13, 2006 Final Presentation 4 Management Zones HUP – 5,463 af Allowable GW withdrawal – 20,185 af 2013 Demand – 11,046 af 2013 Reduction – 0% 2040 Demand – 19,325 af 2040 Reduction – 0% HUP – 5,463 af Allowable GW withdrawal – 20,185 af 2013 Demand – 11,046 af 2013 Reduction – 0% 2040 Demand – 19,325 af 2040 Reduction – 0% HUP – 10,416 af Allow GW – 17,929 af 2013 Demand – 20,943 af 2013 Reduction – 14% 2040 Demand – 47,105 af 2040 Reduction – 49% HUP – 36,968 af Allow GW – 17,692 af 2013 Demand – 47,129 af 2013 Reduction – 62% 2040 Demand – 80,233 ac 2040 Reduction – 78% HUP – 6,402 af Allow GW – 8,192 af 2013 Demand – 4,485 af 2013 Reduction – 0% 2040 Demand – 7,700 ac 2040 Reduction – 0%

38. Lone Star GCD. July 13, 2006 Final Presentation Water Level Change in Evangeline Aquifer from 2000 to 2040 Baseline Run: Total Water Demand 50 ft contour

39. Lone Star GCD. July 13, 2006 Final Presentation Water Level Change in Evangeline Aquifer from 2000 to 2040 Reduction Scenario 2 : Four Zone Reduction 50 ft contour

40. Lone Star GCD. July 13, 2006 Final Presentation Water Level Change in Jasper Aquifer from 2000 to 2040 Baseline Run: Total Water Demand 50 ft contour

41. Lone Star GCD. July 13, 2006 Final Presentation Water Level Change in Jasper Aquifer from 2000 to 2040 Reduction Scenario 2 : Four Zone Reduction 50 ft contour

42. Lone Star GCD. July 13, 2006 Final Presentation Who is using the water?

43. Lone Star GCD. July 13, 2006 Final Presentation Who should be regulated ? − Types of users ? − agriculture, irrigation, public, commercial, industrial − Size of users ? − small users, large users, single demand users, wholesale suppliers, retail suppliers − Which of these users is causing the problem ? − Is it necessary to capture all users or only 90% of them ( what is the cost of the last 10%) − What would be the impact of regulation to the user group? − Is it gaining a positive impact ? − Is it punitive to the user group − Do you regulate by owner or by well? − Types of users ? − agriculture, irrigation, public, commercial, industrial − Size of users ? − small users, large users, single demand users, wholesale suppliers, retail suppliers − Which of these users is causing the problem ? − Is it necessary to capture all users or only 90% of them ( what is the cost of the last 10%) − What would be the impact of regulation to the user group? − Is it gaining a positive impact ? − Is it punitive to the user group − Do you regulate by owner or by well?

44. Lone Star GCD. July 13, 2006 Final Presentation

49. Wholesale Surface Water Supply

50. Lone Star GCD. July 13, 2006 Final Presentation Planning aspects of the Surface Water System − It will be a “wholesale” supply system that augments current retail systems − It will be designed cost effectively, providing surface water to areas needing expansion or experiencing problems − It will be designed to address the problems of over pumping − It will be a “wholesale” supply system that augments current retail systems − It will be designed cost effectively, providing surface water to areas needing expansion or experiencing problems − It will be designed to address the problems of over pumping

51. Lone Star GCD. July 13, 2006 Final Presentation 2013 Surface Water System

52. Lone Star GCD. July 13, 2006 Final Presentation 2020 Surface Water System

53. Lone Star GCD. July 13, 2006 Final Presentation 2030 Surface Water System

54. Lone Star GCD. July 13, 2006 Final Presentation The Cost of Water − Wholesale cost versus retail cost ( transmission versus distribution) − Capital cost of a surface water system − Operation and maintenance of the treatment plant, pumps and pipelines − Capital cost of existing and new groundwater wells − Operation and maintenance of the wells, storage facilities and pumps − Cost of the lost opportunity to use an existing investment − Cost of the distribution of water within the retail system − Wholesale cost versus retail cost ( transmission versus distribution) − Capital cost of a surface water system − Operation and maintenance of the treatment plant, pumps and pipelines − Capital cost of existing and new groundwater wells − Operation and maintenance of the wells, storage facilities and pumps − Cost of the lost opportunity to use an existing investment − Cost of the distribution of water within the retail system

55. Lone Star GCD. July 13, 2006 Final Presentation

56. 2013 Surface Water System Costs Pipeline $ 56.4 $ 77.5 Treatment $ 38.6 $ 38.6 Special Crossings $ 17.2 $ 29.5 Total Construction $ 112.2 $ 145.6 Engineering and Contingencies $ 35.6 $ 45.6 Land Acquisition $ 8.8 $ 8.8 Total Cost $ 156.6 $ 199.9 Pipeline $ 56.4 $ 77.5 Treatment $ 38.6 $ 38.6 Special Crossings $ 17.2 $ 29.5 Total Construction $ 112.2 $ 145.6 Engineering and Contingencies $ 35.6 $ 45.6 Land Acquisition $ 8.8 $ 8.8 Total Cost $ 156.6 $ 199.9 2013 Demands 2040 Demands Pipe Sizing Based On ( in $$ Millions)

57. Lone Star GCD. July 13, 2006 Final Presentation Unit Rate of Surface Water Supply 50% Value of Un-depreciated Asset * $ 18 $ 18 Water System Cost $ 156.6 $199.9 Total Cost $ 174.6 $217.9 Annual Cost ** $ 14.0 $ 17.5 Annual SW Treated 6,570 mg 6,570 mg Surface Water Cost / 1000g $ 2.13 $ 2.66 for water actually used Less savings for GW pumping ($ 0.40) ($ 0.40) Plus O&M for SW operation $0.26 $ 0.26 Total Cost of Water $ 1.99 $2.52 for SW actually used 50% Value of Un-depreciated Asset * $ 18 $ 18 Water System Cost $ 156.6 $199.9 Total Cost $ 174.6 $217.9 Annual Cost ** $ 14.0 $ 17.5 Annual SW Treated 6,570 mg 6,570 mg Surface Water Cost / 1000g $ 2.13 $ 2.66 for water actually used Less savings for GW pumping ($ 0.40) ($ 0.40) Plus O&M for SW operation $0.26 $ 0.26 Total Cost of Water $ 1.99 $2.52 for SW actually used 2013 Demands 2040 Demands Based On The value of a Historic Use Permit could be equal to the cost of surface water received less the capitalized cost of a new well (~ $0.40/1000 g) * Based on a 30 year active life of a well and an average cost of $1.2 million per well ** Assuming 5% interest and 20 year payment * Based on a 30 year active life of a well and an average cost of $1.2 million per well ** Assuming 5% interest and 20 year payment ( in $$ Millions)

58. Lone Star GCD. July 13, 2006 Final Presentation Other Cost Options Management Strategy SW Users SW Zone is County is Pay cost neutral cost neutral Management Strategy SW Users SW Zone is County is Pay cost neutral cost neutral Total SW used 20,000 a-f 20,000 a-f 20,000 a-f Total GW used 16,363 60,300 Capitalized cost of surf water ($2.13/1000g) $ 14.0 $ 14.0 $ 14.0 Capitalized cost of ground water ($0.40/1000g) $ 0.0 $ 2.2 $ 7.9 O&M cost for surface water ($0.26/1000g) $ 1.7 $ 1.7 $ 1.7 O&M cost for ground water ($0.40/1000g) $ 0.0 $ 2.2 $ 7.9 Total Cost for Water $ 15.7 $ 20.1 $ 31.5 Average Price per 1000 g in SW zone $ 2.39 $ 1.68 $ 1.19 Average Price per 1000 g in other zones $ 0.80 $ 0.80 $ 1.19 Total SW used 20,000 a-f 20,000 a-f 20,000 a-f Total GW used 16,363 60,300 Capitalized cost of surf water ($2.13/1000g) $ 14.0 $ 14.0 $ 14.0 Capitalized cost of ground water ($0.40/1000g) $ 0.0 $ 2.2 $ 7.9 O&M cost for surface water ($0.26/1000g) $ 1.7 $ 1.7 $ 1.7 O&M cost for ground water ($0.40/1000g) $ 0.0 $ 2.2 $ 7.9 Total Cost for Water $ 15.7 $ 20.1 $ 31.5 Average Price per 1000 g in SW zone $ 2.39 $ 1.68 $ 1.19 Average Price per 1000 g in other zones $ 0.80 $ 0.80 $ 1.19

59. Lone Star GCD. July 13, 2006 Final Presentation System Implementation

60. Lone Star GCD. July 13, 2006 Final Presentation CONSIDERATIONS IN PLAN IMPLEMENTATION − To be successful, the plan MUST have some level of support from the stakeholders involved − To Implement, the Plan must include − An incentive to conserve water − An incentive to use an alternative source − A financially equitable solution − Someone to build the system − Someone to administer the system and contractually obligate buyers and sellers of water − To be successful, the plan MUST have some level of support from the stakeholders involved − To Implement, the Plan must include − An incentive to conserve water − An incentive to use an alternative source − A financially equitable solution − Someone to build the system − Someone to administer the system and contractually obligate buyers and sellers of water

61. Lone Star GCD. July 13, 2006 Final Presentation

62. Comparison of Management Authorities NHCRWAWHCRWANFBCWAMontgomery County Population Served400,000300,000100,000380,000 Water Demand70 MGD40 MGD16 MGD68 MGD Formation76 th Legislature Chap 59 TAC 77 th Legislature Chap 59 79 th Legislature Chap 59 Number of Directors597 Method of electionPopulous voteMUD Boards vote weighted based on usages Named in legislation – MUD’s only Number of Special Districts/Cities 164/2105 / 135 /1160/13 Reduction Dates/Amounts 2010/30% 2020/70% 2030/80% 2010/30% 2020/70% 2030/80% 2013 / 30% 2025 / 60% Method of Incentive ( By Regulator – HGCSD) > 5MGY GRP $3/1000 g disincentive fee  10 MGY  GRP $3.50/1000 g disincentive fee GRP (by 2008 Disincentive fee ( $3.25/100 g)

63. Lone Star GCD. July 13, 2006 Final Presentation Current Status

64. Lone Star GCD. July 13, 2006 Final Presentation Current Status − Presentations made to 20+ water utilities in Montgomery County. − Draft report submitted to TWDB and comments received. − Following receipt of comments tonight, a final report will be submitted to TWDB − Board of Directors will authorize development of Regulatory Plan requirements. − Decisions need to be made on management/implementation strategy. − Presentations made to 20+ water utilities in Montgomery County. − Draft report submitted to TWDB and comments received. − Following receipt of comments tonight, a final report will be submitted to TWDB − Board of Directors will authorize development of Regulatory Plan requirements. − Decisions need to be made on management/implementation strategy.

65. Lone Star GCD. July 13, 2006 Final Presentation FOR MORE INFORMATION Kathy Turner Jones General Manager Lone Star Groundwater Conservation District PO Box 2467 207 W Phillips Street, Suite 300 Conroe, Texas 77305 936/494-3436 A copy of the Final Report and this presentation will be available on the District’s website: www.lonestargcd.org Kathy Turner Jones General Manager Lone Star Groundwater Conservation District PO Box 2467 207 W Phillips Street, Suite 300 Conroe, Texas 77305 936/494-3436 A copy of the Final Report and this presentation will be available on the District’s website: www.lonestargcd.org