Water markets for Texas?
Last week, the Texas House Committee on Natural Resources held a lengthy hearing on groundwater resources and management. This was the second extensive hearing that the committee held on this subject this legislative interim.
There are several reasons why the committee has spent considerable time on groundwater. For starters, the water beneath our feet often serves as a water supply — in some cases, the only water supply — for many Texas communities. The emergence of large pumping projects, such as those required for data centers or for exporting water to other areas, are anticipated to have an impact on future groundwater availability. For many aquifers in Texas, groundwater availability is limited, and the depletion of resources today will affect generations tomorrow.
The committee’s discussion honed in on two key questions. First, how much groundwater can be pumped without injury to existing or future users? And second, how and should groundwater be regulated?
Arguably, the most comprehensive groundwater regulation may be found in the Edwards Aquifer in the form of the Edwards Aquifer Authority (EAA). Unlike other aquifers, which are often overseen by a patchwork of different groundwater conservation districts, the EAA regulates pumping within a hydrologically defined portion of the aquifer. More critically, the amount of water that may be pumped from the aquifer is capped by state law at 572,000 acre-feet per year.
A creative solution to water management
Perhaps the most interesting phenomenon about the Edwards is that the imposition of a regulatory authority and pumping caps set the foundation for a uniquely innovative water management strategy: a robust, functioning water market.
Texas 2036 recently released “Water Markets for Texas,” a report that explores the Edwards Aquifer water market in detail. This market emerged in the late 1990s, shortly after the EAA’s creation and the imposition of an aquifer-wide pumping cap. Landowners with water rights found that they could sell or lease their water to other parties within the Edwards areas.
As the report discusses, the advent of the Edwards water market facilitated voluntary transactions between willing buyers and sellers. Cities, farmers and industrial users could purchase or lease water rights to meet their needs. The market provided these users with a flexible, adaptive management strategy to procure water to satisfy timely demands.
More critically, the Edwards water market helped identify a genuine economic value of water. Groundwater there was priced according to the laws of supply and demand. This triggered substantive changes in behavior. Once water was priced and accordingly purchased, users became more judicious in how it was used. Water use efficiency, including water conservation and the deployment of better irrigation practices, increased within the region, contributing to a net decline in overall water pumping.
The ingredients of a successful water market
As the report points out, the Edwards water market’s success stems from the implementation of several key requirements. These include the imposition of a pumping cap, consistent regulation of the aquifer, and sufficient data regarding groundwater availability. More critically, the prohibition on the sale and export of groundwater water outside of the Edwards region — a transaction commonly associated with water marketing — works to maintain a healthy regional water market.
In addition to describing the Edwards water market, the report explores the surface water market in the Middle and Lower Rio Grande Valley and identifies a framework for developing other, new water markets in Texas. While it’s true that water markets originate from regulation, once created, they offer an innovative framework for managing water within a specific region. And this framework offers significant market-driven opportunities for willing buyers and sellers alike.