Water for Sale

A deal being considered by Louisiana officials could result in the delivery of life-giving waters to parts of sun-parched Texas while ushering in an economic boon for the state.

Jim Pratt, executive director of the Sabine River Authority, or SRA, of Louisiana, says that at the beginning of the year, the board of commissioners approved a committee recommendation to begin negotiating with a group of private investors from Louisiana and Texas that wants to buy water from the Toledo Bend Reservoir and send it flowing westward through a pipeline.

The reservoir is the largest man-made body of water in the South and the fifth- largest in surface acres in the United States. It was constructed by the SRAs of Louisiana and Texas for the purposes of water supplies, recreation and power generation.

With the approval of the committee recommendation, SRA-Louisiana officials began the process of hammering out
a long-term contract between the state and Toledo Bend Partners, the group of private investors.

FINAL APPROVAL
Any contract would have to have both the final approval of the SRA’s board of commissioners and Gov. Bobby Jindal.

“Early on we went to the governor’s office and asked for their support, and we will be meeting with the governor’s staff to review the contract,” Pratt says. “But the governor has the final say on any water sales.”

Toledo Bend Partners had to put up a $50,000 nonrefundable fee to cover the proposed contract’s legal work, Pratt says. He says the law firm of Jones Walker, which has offices in both Louisiana and Texas, was selected by the SRA to handle the legal work.

Pratt says the SRA is also in the process of working out a water sales agreement to supply water for a pipeline that will be used in the exploration of the Haynesville Shale Natural Gas Field Formation, which is also known as the Shreveport Shale. It is the fourth-largest natural gas shale in the world and is located in Northwest Louisiana, East Texas and Arkansas.

When exploration began in 2008, the SRA-Louisiana began selling a small amount of water for use in hydraulic fracturing, or fracking, as it is also known, Pratt says.

Once a well is drilled, water, sand and proprietary chemicals are injected under high pressure into a well, and pressure fractures the shale and opens fissures that enable natural gas to begin flowing out of the well.

Pratt says Energy Transfer Water Solutions wants the water and that
the SRA is encouraging exploration companies to use surface water
instead of groundwater due to aquifer depletion issues.

“From June 2008 through December 2010, what we sold came up to 1,000 acre-feet,” he says. “Now understand the evaporation for the month of August is 40,000 acre-feet. That means there is no impact on the lake, but it
will have a significant impact on preserving the groundwater aquifer.”

An acre-foot compares to an acre of land covered by 1 foot of water, or approximately 325,851 gallons of water.
The SRA is selling the water for
15 cents per 1,000 gallons.

“We are good with that, and we want them to use this water,” Pratt says.

“We don’t want them to slow down on the development of the shale up here.”

Toledo Bend Partners is asking to reserve up to 600,000 acre-feet of water while Energy Transfer Water Solutions wants 36,500 acre-feet a year.

The SRAs in Louisiana and Texas both have legal authority to sell close
to 1 million acre-feet of water each per year. Currently, the SRA-Louisiana
sells only 35,000 acre-feet per year.

OTHER COMPANIES
Besides selling water for drilling, the SRA-Louisiana also sells water to local municipalities, including Many, La. It also sells water from a diversion canal in Southwest Louisiana that is used by industries and farmers.
The SRA-Texas also sells a small amount of water for municipal, industrial and farming use.

Pratt says the potential of water sales offers opportunities to shift from hydropower generation to water sales as a financial alternative for the lake.

“Timing is everything, and to get out here with a drought going on and try to promote is tough,” Pratt says. “But we are working to educate people about what we are proposing.”

Larry Kelly, an SRA-Louisiana commissioner and longtime lake advocate, agrees with Pratt that educating the public is critical.

“If we are able to do this, we believe it will remove the burden of power generation off the lake,” he says.

“There is great value in water.”

For years, those concerned with the lake level battled to have power generation halted when the water level reached 168 mean sea level, or MSL. That agreement was reached a few years ago.

Kelly says that once he explains the process, people seem to understand.

He says Louisiana is blessed with an abundance of water, unlike its neighbor to the west.

Like Pratt, Kelly says he believes the governor will favor the plan.

“We are not going to do anything to hurt the Louisiana population,” he says. “It makes sense to look west to areas that are hurting for water, like Texas.”

To illustrate the size of the lake and the volume of water it contains, Kelly says that if the reservoir was at 172 MSL, which is normal, it would take six days to lower the water level 1 foot with both hydroelectric power generation units running 24 hours a day, barring any rainfall.

“This is a good deal for SRA, for the people and state,” he says. “Water sales is far better than power generation for this lake and the people.”

Pratt says Louisiana and Texas can legally sell nearly 2 million acre-feet of water annually but in reality are selling less than the natural evaporation rate of 40,000 acre-feet that occurs in August.

”What we are proposing is a total of 600,000 acre-feet over a 12-month period with a maximum per month withdrawal of 75,000 acre-feet, which is equivalent to running the generators two-and-one-half days per month,” Pratt says.

The power sales agreement expires in 2018.

Pratt says SRA-Louisiana is trying to get positioned to make changes in how it sells water.

“We will basically do a contract for power generation that says, ‘Maintaining downstream flows and getting rid of excess capacity during high rainfall events … will be all you get,’” he says. “We give them what
we don’t need.”

Pratt says there could be some changes in the downstream release into the Sabine River following the outcome of an environmental assessment being conducted by the Federal Energy Regulatory Commission, or FERC,
as part of the re-licensing process.

The only area of concern is the release of cold water at the spillway through pipes continuously, Pratt says. He says it may mean the way the water is released will have to be reconfigured.

The two major issues at hand are construction of a pipeline and water pricing.

“We believe the value of water will increase, especially in drought-stricken areas like Texas,” Pratt says.

The price of water is still being considered.

“During the course of the contract, we could take a basic water price and adjust it annually by Consumer Price Index with annual adjustments; we could do percentage of gross, which is 1 percent, but that does not excite me much; and the third way is 20 percent net profit, base water price plus 20 percent net profit,” Pratt says. “In the long term, once pipeline debt is paid off, that gives us [SRA] a significant return right there.”

The contract being considered is a 50-year initial term, with the option to renew for another 40 years.

IN THE PIPELINE
Pratt says the pipeline could serve the Dallas-Fort Worth area or possibly even San Antonio.

But before any water can start trickling west, a pipeline would have to be constructed, and that is a lengthy process.

“If we had the contract today, it would still take at least five – possibly as many as 10 – years to build the pipeline before any water would ever begin flowing,” Pratt says.

“So it won’t be something people will see overnight.”

But water sales could signal an economic boom.

“A million acre-feet sold to power companies at today’s rate is about $2.6 million annually, but if we were to sell the same million acre-feet – and we’re not even proposing to do that – [to other areas], it would give us $48 million,” Pratt says. “It would mean a lot for the lake and the state.”

Both Pratt and Kelly are optimistic that once a contract is signed by Louisiana, the SRA-Texas will
likely follow.

“Right now Texas can’t sell water outside of their basin,” Pratt says.

“We believe once this happens, that restriction will be lifted, and the SRA-Texas can kick in 300,000 acre-feet, and then we will really only be selling 300,000 acre-feet.”

State Rep. Frankie Howard, R-Many, says he and his colleague, state Sen. Gerald Long, R-Winnfield, whose districts represent the lake, both favor the governor signing the water sales agreement.

“What the SRA is proposing is to make more money from the water they have, and that is a good thing in my opinion, a win-win for all involved,” Howard says. “Another positive thing is it would shift the load off the aquifers by using surface water.”

Aside from increased water sales, Toledo Bend continues to be a drawing card for recreation and retirees.

Becky Anderson, Pratt’s executive secretary, oversees tourist-related activities for the board. She says there are 35 marinas on the Louisiana side; 40 homes and camps for rent; the North and South Toledo Bend state parks; and 50 fishing tournaments annually, including the B.A.S.S. Bassmaster Classic and the McDonald’s Big Bass Splash.

The lake is also home to the Cypress Bend Resort and Conference Center and the SRA-Louisiana-owned
Cypress Bend Park.