texas water conservation association newsletter june 2012

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1 June 2012 Texas Water Conservation Association 221 E. 9th Street, Ste. 206 Austin, Texas 78701-2510 512-472-7216 Fax: 512-472-0537 http://www.twca.org Officers Luana Buckner, President Phillip J. Ford, President-Elect James M. Parks, Immediate Past President Association Staff Leroy Goodson General Manager e-mail: [email protected] Dean Robbins Assistant General Manager [email protected] Opinions expressed in Confluence are those of the writer and not necessarily those of TWCA, its officers, directors or staff. © 2012, TWCA Popular Venue Draws A Crowd for TWCA June Meeting in Horseshoe Bay TWCA members will be travelling from all over the state to the popular Horseshoe Bay Resort in the Texas Hill Country. There’s a full agenda planned for the event, kicked off by the 6th Annual Jim Adams Memorial Golf Tournament on the Ram Rock Course Wednesday after- noon, with a 1:00 pm tee off. The TWCA/RMF reception will begin at 5:30 pm. (Visit the website--www.twca.org -- for the latest agenda.) Beginning in the morning on Thursday, the panels will all meet between 9 am and noon, with the General Session kicking off at 1 pm with remarks by the Mayor of Horseshoe Bay, Robert Lambert. Par- ticipants will have the opportunity to hear from the Chairman of the Senate Natural Resources Committee, Sen. Troy Fraser; from TCEQ Chair Bryan Shaw, PhD; and from Melanie Callahan, Executive Administrator, TWDB. Rounding out the session -- prior to the Board of Directors meeting -- is Carlos Peña, Principal Engineer, United States Section of the International Boundary & Water Commission. Critical top- ics, such as a national perspective on water issues, water conservation, and the Lake Granbury study, complete the afternoon’s discussions. Back by popular demand is a Reception and Dance, featuring Cactus Country Band that will surely set your toes a’tapping. The festivities begin at 6:30 in Salons ABCD. Off to an early start on Friday morning with opening remarks by Burnet County Judge, Donna Klaeger. Reuse will be one of the hot topics for the morning, along with remarks by Brigadier General Thomas W. Kula, U.S. Army Corps of Engineers. Robert Mace will be on hand to explain that the “Drought Ain’t Over ‘til it’s Over”. Developments in groundwater hydrology and a review of the endangered species act close out the program. According to General Manager Leroy Goodson, “We are look- ing forward to hearing from this distinguished group of speakers and to the fellowship these meetings provide.” FRASER SHAW CALLAHAN MACE

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Page 1: Texas Water Conservation Association Newsletter June 2012

1

June 2012

Texas WaterConservation Association221 E. 9th Street, Ste. 206Austin, Texas 78701-2510

512-472-7216Fax: 512-472-0537http://www.twca.org

OfficersLuana Buckner,

President

Phillip J. Ford,President-Elect

James M. Parks,Immediate Past President

Association StaffLeroy GoodsonGeneral Manager

e-mail: [email protected]

Dean RobbinsAssistant General Manager

[email protected]

Opinions expressed inConfluence are those of thewriter and not necessarily

those of TWCA, its officers,directors or staff.© 2012, TWCA

Popular Venue Draws A Crowd for TWCA June Meeting in Horseshoe Bay TWCA members will be travelling from all over the state to the popular Horseshoe Bay Resort in the Texas Hill Country. There’s a full agenda planned for the event, kicked off by the 6th Annual Jim Adams Memorial Golf Tournament on the Ram Rock Course Wednesday after-noon, with a 1:00 pm tee off. The TWCA/RMF reception will begin at 5:30 pm. (Visit the website--www.twca.org -- for the latest agenda.) Beginning in the morning on Thursday, the panels will all meet between 9 am and noon, with the General Session kicking off at 1 pm with remarks by the Mayor of Horseshoe Bay, Robert Lambert. Par-ticipants will have the opportunity to hear from the Chairman of the Senate Natural Resources Committee, Sen. Troy Fraser; from TCEQ Chair Bryan Shaw, PhD; and from Melanie Callahan, Executive Administrator, TWDB. Rounding out the session -- prior to the Board of Directors meeting -- is Carlos Peña, Principal Engineer, United States Section of the International Boundary & Water Commission. Critical top-ics, such as a national perspective on water issues, water conservation, and the Lake Granbury study, complete the afternoon’s discussions. Back by popular demand is a Reception and Dance, featuring Cactus Country Band that will surely set your toes a’tapping. The festivities begin at 6:30 in Salons ABCD. Off to an early start on Friday morning with opening remarks by Burnet County Judge, Donna Klaeger. Reuse will be one of the hot topics for the morning, along with remarks by Brigadier General Thomas W. Kula, U.S. Army Corps of Engineers. Robert Mace will be on hand to explain that the “Drought Ain’t Over ‘til it’s Over”. Developments in groundwater hydrology and a review of the endangered species act close out the program. According to General Manager Leroy Goodson, “We are look-ing forward to hearing from this distinguished group of speakers and to the fellowship these meetings provide.”

FRASER SHAW CALLAHAN MACE

Page 2: Texas Water Conservation Association Newsletter June 2012

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President’s Message...

Changing of the Guard but not the Mission

As one steps down, another steps up. Over the past year, it has been my pleasure and honor to serve as President of TWCA. I find it difficult to put into words what this experience has meant to me. There are no finer people to have your name forever associated with than those who make up the membership. Water providers are seldom appreciated by the millions that we serve and if not for the TWCA, most of us would spend our entire careers without recognition for the hard work and sacrifice that each of us make each day. Thank you, TWCA. Texas is going to continue to grow both economically and in population. Additional supplies of water are critically needed but will not come easily. It is incumbent on all of us to remain engaged and committed to the implementation of the State Water Plan, which has been thoughtfully and carefully developed over the past 15 years. The Plan is not perfect and can certainly be improved upon through the reoccurring planning cycles. There will always be challenges and obstacles to overcome so I encourage you to stay involved and engaged in the process.

In closing, I want to thank everyone associated with TWCA for making this last year so memorable for me. Now, please join me in pledging our support and offering congratulations to Luana Buckner as she begins her role as President of TWCA.

First, my sincere thanks and appreciation to Jim Parks for his leadership of TWCA during a very difficult and dry year. I hope you will join me in hoping that we’ll be able to put the drought behind us in the coming months during my tenure as President. I am honored and thankful for this opportunity to give a little back to a great organization that has given so much to me, personally and professionally. I ask for your help and support to keep this TWCA train on its tracks with full knowledge that I may be in the conductors chair but Leroy and Dean are in the caboose manning the brakes.

James M. Parks Luana Buckner

Page 3: Texas Water Conservation Association Newsletter June 2012

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Left to right: Leroy Goodson; Colby Goodson; Macie Goodson; Bobby Maddox, Bonham Cattle Co.; Dan Hoge, judge; Kyla Goodson; Judene Goodson; Lisa Goodson; Stanley Hoffman; Mildred Hoffman; Kannon Acker Goodson; Kandra Goodson; Kati Robinson; and Mandi Maddox, Bonham Cattle Co.

That “Freddy Krueger” is a mighty fine Steer!

On Friday the 13th, when Kannon Acker Goodson acquired a steer to raise for the Houston Live-stock Show and Rodeo, he figured that Freddy Krueger would be an appropriate name for the anmial -- after the horror movie bad guy. As the animal continued to grow, Kannon -- a member of the Canyon High School FFA -- knew he he had something special on his hands. According to family members, the young teen worked “diligently and enthusiastically” doing all the hard work necessary to raise the steer. It wasn’t Kannon’s first rodeo -- he had been exhibiting cattle for the past five years at the presti-gious Houston Livestock Show and Rodeo. The difference was that this year, his steer won the Grand Champion Junior Market Steer at the Houston event. If that honor weren’t enough, the animal was purchased at auction for $460,000 -- the highest bid in more than a decade! Show judge Dan Hoge slapped the steer on the haunches and said it was, “near perfect”. The crowd roared its approval! Kannon -- just 15 -- said it was a “once in a lifetime moment”. “I was nervous but confident,” he explained. Kannon had devoted countless hours to working with the splendid Charolais steer. “I had to make sure he was comfortable with me and okay in crowds of people and animals. There’s always a goat, pig or dog around, so he got used to them, too.” The young man said that he’s proud his hard work paid off, and acknowledged that, “It feels great to be champion.” He has new animals now, and will be out on the Texas Livestock Show circuit during the summer, and San Antonio, Fort Worth, Austin, and San Angelo during the winter. Kannon credits the support of his family for this success. “It’s something we do as a family and it means the world to me!” Congratulations Kannon!

Page 4: Texas Water Conservation Association Newsletter June 2012

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TWCA’s Confluence Newsletter gratefully acknowledges the

2012 Sponsors who make this communication among members

possible...

PLATINUM

AECOM Angelina & Neches River Authority

Freese and Nichols, Inc. Lloyd Gosselink Rochelle & Townsend, P. C.

North Texas Municipal Water District SAIC Energy, Environment & Infrastructure LLC

San Antonio River Authority Tarrant Regional Water District

GOLD

Brazoria Drainage District No. 4 Brown & Gay Engineers, Inc.

Chambers-Liberty Counties Navigation District Colorado River Municipal Water District

Guadalupe-Blanco River Authority Gulf Coast Waste Disposal Authority

Harlingen Irrigation District Cameron County #1 Jefferson County Drainage District #6

Lavaca-Navidad River Authority Lower Neches Valley Authority

North Harris County Regional Water Authority Northeast Texas Municipal Water District

Sabine River Authority of Texas San Jacinto River Authority

Titus County Fresh Water Supply District #1 TWCA Risk Management Fund

Upper Neches River Municipal Water Authority

SILVER

Barton Springs/Edwards Aquifer Conservation District

Cameron County Drainage District #1 Canadian River Municipal Water Authority

Evergreen Underground Water Conservation District Franklin County Water District

J. Stowe & Co., LLC K. Friese & Associates, Inc.

BRONZE

Bell Engineers and Consulting, Inc. Brazoria County Groundwater Conservation District

John E. Burke & Associates LLC Kimley-Horn and Associates, Inc.

Klotz Associates, Inc. Plum Creek Conservation District

Texas Water Foundation, Inc.

Although he was unable to be with us at the TWCA

68th Annual Meeting in Dallas, the conference was dedicated to

State Representative ALLAN B. RITTER

Chair, House Committee on Natural Resources

In recognition of his untiring effortsfor the betterment of water resources

in the State of Texas.

Page 5: Texas Water Conservation Association Newsletter June 2012

5

I. Introduction In February 2012, the Texas Supreme Court issued its landmark decision in Edwards Aquifer Authority v. Day. In that case, and for the first time, the Texas Supreme Court has held that landowners have a property interest in groundwater prior to capture that may be the subject of a regulatory takings claim. The obvious and immediate result of the Day decision is that landowners may assert regulatory takings claims against the Edwards Aquifer Authority (“EAA”), Chapter 36 groundwater conservation districts, and other governmental entities in response to regulation that limits or prohibits access to, or production of, groundwater. Whether and to what extent such claims will succeed under the facts of each case, including the situation of the particular claimant and the nature of the regulation at issue, is much less clear. In its Day decision, the Court did not hold that a compensable taking of Day’s property had occurred but, rather, remanded that question to the trial court for a determination of the merits of Day’s takings claim. In the wake of the Day decision, attention has been turned to the EAA’s remaining defenses to, and the merits of, Day’s takings claim, and to other takings claims that are pending and which are being threatened against the EAA. This article summarizes the Day case, and examines the issues on remand in that case as well as other pending takings litigation against the EAA.

II. Edwards Aquifer Authority v. Day Background In 1994, Burrell Day and Joel McDaniel (collectively, “Day”) purchased property in Bexar County upon which existed an uncontrolled, flowing, dilapidated Edwards Aquifer well with a collapsed casing and no pump. Water from the well flowed into a ditch and thereafter into a lake, which was fed by an intermittent creek, where it comingled Day & McDaniel’s well – September 2004 (from EAA files)

with surface water. Later, Day sought an initial regular permit (“IRP”) from the EAA pursuant to the Edwards Aquifer Authority Act (“EAA Act”) (Act of May 30, 1993, 73rd Leg., R.S., ch. 626, 1993 Tex. Gen. Laws 2350, as amended), based on his predecessors’ use of Edwards groundwater from the well during the Act’s statutorily-mandated historic period. Following a contested case hearing in which Day was able to show that his predecessor irrigated only seven acres with Edwards groundwater during the historic period, the EAA issued an IRP to Day with a withdrawal amount of 14 acre-feet (“AF”) per year. Under the terms of the EAA Act, Day was entitled to an IRP for 14 AF based on the number of acres of land that he was able to show had been irrigated with Edwards groundwater. Day filed a lawsuit against the EAA challenging the validity of the EAA’s decision to grant a permit to Day for only 14 AF per year, alleging numerous errors. The lawsuit also included a claim that the

Takings Litigation Against the Edwards Aquifer Authority After the

Day Caseby Andrew S. “Drew” Miller

Page 6: Texas Water Conservation Association Newsletter June 2012

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Day Case...ContinuedEAA’s permit decision amounted to a regulatory taking of Day’s vested ownership rights to the Edwards groundwater under his property therefore entitling Day to compensation. On the question of the validity of the EAA’s permit decision, the Texas Supreme Court held that the decision is valid and supported by evidence in the record before the agency. The trial court had granted summary judgment in favor of the EAA on Day’s regulatory takings claim on the ground that Day had no vested right to groundwater beneath his property prior to capture. The Court of Appeals reversed on that issue, holding that Day has a vested right and remanded the case to the trial court for further proceedings on the merits of Day’s takings claim. Both sides sought and were granted review by the Texas Supreme Court.

The Texas Supreme Court’s Holding The Texas Supreme Court addressed the vested rights issue – i.e., whether Day has a property interest in groundwater prior to capture entitled to protection under the takings clause of the Texas Constitution. The Court repeatedly emphasized that it had never before ruled on this question. The Court then declared that the common law of ownership of oil and gas applies to groundwater. Under that law, oil and gas (and now groundwater) are owned in place. They are considered a part of the realty, and the landowner is regarded as having absolute title to these substances, which each landowner owns privately, separately, distinctly, and exclusively, as a result of his proprietorship of the land. A landowner’s right in these substances prior to capture is entitled to protection under the takings clause of the Texas Constitution, and therefore may be the subject of regulatory takings claim.The Texas Supreme Court’s Discussion in Part IV of its Opinion: Whether the EAA Act’s Regulatory Scheme Results in a Compensable Taking as to Day In Part IV of its opinion, the Court discusses, at some length, the application of the standards and legal tests used by courts to determine whether a compensable taking has occurred (including the three-factor Penn Central balancing test) and how these tests and factors might play-out with respect

to Day. The Court ultimately remands the issue of whether Day has suffered a compensable taking as a result of the application of the EAA Act’s regulatory scheme to the trial court for further consideration and decision.

Motion for Rehearing In April, the EAA filed a motion for rehearing which: (1) asks the court to narrow its focus to Edwards groundwater and hold that any interest held by landowners in Edwards groundwater within the jurisdiction of the EAA beneath their property may not be the subject of a regulatory takings claim; and (2) argues that the discussion in Part IV of the Court’s opinion – related to whether the EAA Act’s regulatory scheme as applied to Day has resulted in a compensable taking – concerns issues that were not raised, briefed, or factually developed, are not properly before the Texas Supreme Court for decision and is unnecessary dicta, and therefore should be deleted from the opinion. As of this writing, the EAA’s motion for rehearing remains pending.

Likely Issues on Remand The Texas Supreme Court remanded the Day case so that the trial court could address Day’s takings claim on its merits and thus determine whether the legislatively-mandated Edwards permitting process, as applied to Day, deprives Day of his Edwards groundwater and constitutes a compensable taking. The Court discussed the standards and legal tests applicable to making such a determination and, in particular, the three-factor balancing test set forth by the United States Supreme Court in its 1978 decision in the Penn Central Transportation Company v. New York City case – the “Penn Central” factors. The three Penn Central factors to be looked at have been succinctly restated as: (1) the economic impact of the regulation on

the claimant; (2) the extent to which the regulation has

interfered with reasonable investment backed expectations; and

(3) the character of the governmental action. In the remanded proceeding, the EAA will advance at least one complete defense to takings liability: that the EAA is not liable for a regulatory taking of Day’s property because its actions with respect to Day’s permit application were mandated

Page 7: Texas Water Conservation Association Newsletter June 2012

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by the EAA Act. Therefore, regulatory takings liability, if any, properly lies with the State of Texas and not the EAA. In addition, the EAA will present evidence and legal arguments to support a decision that the EAA is not liable for a taking of Day’s property upon the court’s application and analysis of the Penn Central factors.III. Edwards Aquifer Authority v. Bragg

The Braggs, pecan farmers in Medina County, applied for two IRPs from the EAA for Edwards wells on each of their two orchards. The EAA denied the Braggs’ permit application for the well on their D’Hanis orchard, which had no historical use as it was drilled after the EAA Act was passed and after the close of the legislatively-mandated historic period. The EAA granted the Braggs’ permit application for the well on their Home Place orchard, but for an amount based on the number of acres irrigated during the historical period, which is less than the Braggs indicated they need to water their mature pecan trees. The EAA’s actions on both of these permit applications were mandated by the EAA Act. In 2011, the trial court in Medina County issued a judgment holding that the Braggs suffered a regulatory taking of both of their orchards under the Penn Central analysis, and are entitled to about $135,000 in compensation with respect to the D’Hanis orchard and about $598,000 in compensation with respect to the Home Place orchard. This case is currently on appeal to the Fourth Court of Appeals in San Antonio. The EAA argues on appeal that the trial court’s judgment should be reversed because, among other reasons: (1) the EAA is not liable for a taking because its actions on the Braggs’ permit applications were mandated by the State of Texas; (2) the applicable statute of limitations bars the Braggs’ takings claims; (3) the EAA Act increased the value of the Home Place orchard so no compensation is owed; (4) the trial court improperly determined the adequate compensation owed for a taking of the D’Hanis orchard; and (5) the trial court improperly determined that the Act and its implementation caused a taking of the

D’Hanis and Home Place orchards. The Braggs ask on appeal that the district court’s judgment be modified to correct (by increasing) the amount of just compensation to which the Braggs are entitled. The Braggs argue that the district court was required to value the Braggs’ groundwater rights separate from the land and failed to do so, and committed other valuation and calculation errors. The Braggs also argue that they have suffered a categorical or per se taking of their property (eliminating the need for a Penn Central analysis) because (1) Edwards regulation preventing them from withdrawing sufficient water denies them all economically viable use of their lands, and (2) the EAA’s actions on their permit applications constitute physical takings of their groundwater.

Drew Miller is the 2012-2013 TWCA Water Laws Committee Chair and a partner at the Austin office of Kemp Smith LLP where he serves as the chair of his firm’s Environmental, Adminis-trative and

Public Law Department. Drew represents public and private entity clients across Texas in the areas of water and environmental law, emphasizing groundwater regulation and issues involving contaminated property. He serves as counsel for the Edwards Aquifer Authority in the Day case and in other matters. If you would like additional information or have questions related to this article or other matters, please contact Drew at 512-320-5466 or [email protected].

MARK YOUR CALENDARS...

TWCA FALL MEETING October 24-26, 2012

The Crowne Plaza Riverwalk Hotel San Antonio, TX

Page 8: Texas Water Conservation Association Newsletter June 2012

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2011 Drought -- Lake Conroe Chapter

by Reed Eichelberger and Jace Houston San Jacinto River Authority

Writing an article about the recent Texas drought in the Confluence newsletter isn’t like preaching to the choir, it’s more like preaching to a group of seminary professors. What can we possibly say about this drought that hasn’t already been said or lived by everyone in the water industry? Perhaps not much, but over the past year, we gained valuable insights by hearing the various stories of how the drought impacted different organizations and individuals in TWCA, so we offer the following as the San Jacinto River Authority’s chapter in the ongoing story of the 2011 drought. You’ll find that many of the themes from our story are familiar. We faced similar challenges to those experienced in other parts of the state – testing the reliability of our water rights; attempting to educate the public about how water supply reservoirs and water rights work; and dealing with the hue and cry of lake-area residents and business owners as water levels declined and fears of the unknown increased. But we also had some unique challenges and interesting storylines that will hopefully make our chapter in this story…not dry reading!

How the Drought Unfolded in Montgomery County

As Figure 1 (below) demonstrates, East Texas got a head start on the drought. Starting basically in January 2010, Lake Conroe began receiving below-normal rainfall and experienced a steady decline in reservoir elevation that didn’t begin to take a positive turn until January 2012. If you scroll through a “time lapse” collection of the U.S. Drought Monitors from January 2010 through May of 2012 (which you can do at http://www.sjra.net/drought/index.php), you’ll see the early stages of the drought beginning in East Texas, and find that the drought still hasn’t let up in West Texas. Figure 1. U.S. Drought Monitor for May 2010 shows early signs of the 2011 drought beginning to settle into East Texas and Louisiana (right).

Figure 2 shows how Lake Conroe’s water level fared through the drought. As previously mentioned, the drought started in early 2010 in Montgomery County. The last time Lake Conroe was at full pool elevation was in April of 2010. After a complete lack of winter and spring rains in 2011, the lake level began to fall steadily throughout the summer as evaporation rates exceeded 150 million gallons per day and inflows into the lake were essentially negligible (right). Like most lakes that have a lot of lakefront residential development and recreational use, Lake Conroe has a “happy zone.” Whenever the lake is within about three feet of normal pool elevation (which for Lake Conroe has been the case approximately 95 percent of the time since the lake was constructed in 1973), most of the people within our community are satisfied. In fact, Lake Conroe has only dropped below this happy zone five times in the past 39 years. Lake Conroe left the happy zone in about May of 2011, surpassed its previous record low level in September, and finally bottomed out at approximately 8.4 feet low in December.

Phot

o by

Don

Sar

ich

Page 9: Texas Water Conservation Association Newsletter June 2012

9

Of course, Lake Conroe wasn’t the only lake in our region that was impacted by the drought. On August 15, 2011, the City of Houston called for the release of some of its water that it owns in Lake Conroe. This was only the second time in the history of Lake Conroe that Houston had called for the release of water from the Lake. The release started at 50 million gallons per day, but ramped up to 165 million gallons per day through most of September, October, and November. The release was finally suspended on November 30, 2011, when much-welcomed rains in the Lake Houston watershed restored Lake Houston to near-normal levels. Lake Conroe’s conservation capacity is approximately 416,000 acre-feet. This month (May 2012), Lake Conroe’s storage is at approximately 370,000 acre-feet, or 90 percent. When the lake reached its lowest point in December 2011, reservoir storage was at approximately 280,000 acre-feet, or 70 percent.

Fear of the Unknown Numerous times during the fall of 2011, we received calls from print and television reporters looking for a doom and gloom report about the drought’s effects on Lake Conroe. “Are we about to run out of water?” “Are we on the brink of a water supply disaster?” “How many days of water supply do we have left?” Over and over, we would explain the facts to these surprised reporters, which was that we had many years of water supply still available in Montgomery County. We would explain how all of the municipal water demand in Montgomery County is still met using groundwater and how there is actually very little water being used from Lake Conroe. Even with the City of Houston beginning

Figure 2. Water level in Lake Conroe from March 2010 to present.

Figure 1. U.S. Drought Monitor for May 2010

Page 10: Texas Water Conservation Association Newsletter June 2012

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to use a portion of its share of the lake, there is still a lot of supply available. But eventually the questions would come around to lake level. “But isn’t the falling lake level causing a lot of concern among residents, businesses, and community leaders around the lake?” Absolutely. Concern about how long the drought will last. Concern about whether or how long it will take Lake Conroe to ever recover. Concern about how property values and local businesses may be impacted. The basic problem is illustrated in the photos below. Even though Lake Conroe is first and foremost a water supply reservoir, it has become a major residential, commercial, and recreational venue. Approximately two-thirds of its 140-mile shoreline has been developed. There are over 4,000 residential docks and a dozen marinas on the lake. All of these residents and businesses have come to expect, and rely upon, a fairly constant lake level. In fact, many homes were sold in the early days of Lake Conroe with the erroneous promise by unknowing realtors and developers that Lake Conroe was a constant level lake. From May to December of 2011, as the drought drove Lake Conroe to record low levels, a permeating fear of the unknown created more and more anxiety among residents, business owners, and community leaders. At times it seemed that no amount of data or factual information could calm

people’s fears. Despite studies that showed how the lake reacts to rainfall cycles, despite historic data showing that Lake Conroe spills about seven feet of water per year on average, despite past experience demonstrating how quickly the lake could rebound; all of these efforts seemed to do little to calm the public’s concerns. We even directed their attention to other lakes in the State that have historically fluctuated much more than Lake Conroe and still have healthy businesses and home values. This did little to assuage their concerns.

A Perfect Storm Becomes a Perfect Opportunity

So what else could you add to the drought to create an even more perfect storm of public relations challenges? How about starting a project to build a $500 million dollar water treatment plant to begin taking water out of Lake Conroe for the first time for public water supply? So now in addition to plummeting lake levels, residents in the county are beginning to pay an additional fee on their water bills to build a water treatment plant to take more water out of the lake. Fortunately, this perfect storm has become a perfect opportunity to educate the public about how a water supply reservoir works. Beginning in January of this year, Lake Conroe finally began to receive significant rainfall. Water levels have rebounded to within two feet of full pool elevation – back within the happy zone. This has given residents and other

Figure 3. 3-D rendering of SJRA surface water treatment plant that will begin using approximately 24 million gallons of water from Lake Conroe beginning in 2016.

Page 11: Texas Water Conservation Association Newsletter June 2012

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interested parties a first-hand opportunity to see how quickly the lake can rebound with even moderate rainfall events; even following a record 12-month drought.

Putting it All in Perspective During the worst part of the drought, our staff was fielding numerous calls each day from angry lake-area residents complaining about not being able to use their docks or get their boats into the water from their boat lifts. At one point we finally began pointing out to them that agricultural losses in Texas had already exceeded $5 billion. We began pointing out that there were reservoirs in West Texas with less than 10 percent storage remaining. We explained that there were communities in the state that were down to less than one year of remaining water supply. It’s not that a prolonged drought won’t create real economic challenges in Montgomery County. It’s just that seeing the bigger picture helps people put their problems in perspective. It is also important to remember that even if our portion of the state has climbed out of the drought doldrums for now, we – and everyone across the state – will be coping with the economic impacts of the drought for years to come. We’ll all pay the costs of failed crops…of cotton left in the field because the plants didn’t mature or were too stunted to harvest…the staggering cost to ranchers to rebuild cattle herds lost or moved out of state because of insufficient or cost-prohibitive hay to

feed them. And consider the plight of farmers who had to decide which acreage to irrigate as they face the long-term prospect of having to return to dry land farming in the Panhandle. The challenge to all of us is to plan better; to anticipate drought impacts and prepare for them. Texans don’t give up, even in the wake of a record-setting drought. Necessity, they say, is the mother of invention…and we’ve learned from this “time it didn’t

Figure 4 shows two photos of the same cove on Lake Conroe – one taken in November 2011 at the height of the drought in our area, (above) and one taken in March 2012 after only three months of better-than-average rainfall (above right).

Page 12: Texas Water Conservation Association Newsletter June 2012

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rain.” This is another “teachable moment.” The National Drought Mitigation Center emphasizes the hydro-illogical cycle that exposes how people perceive and deal with drought: first there’s apathy…so what it if hasn’t rained for a few weeks? Then people start talking about drought…still no rain…deeper into drought. Folks start to panic. Then, miraculously, it rains! Well, the drought must be OVER…return to apathy. This perception is nothing new. As Ivan R. Tannehill, a forecaster with what became the United States Weather Bureau, noted in “Drought: Its Causes and Effects” in 1947:

We’re convinced that those of us in the water industry must continue educating the public about the real impacts of droughts, the real importance of long-term water planning, the real value of water, and the importance of conserving this precious resource. The drought of 2011 drove home the importance of this educational effort, and in fact, demands a redoubling of our efforts. The public must understand that much of our great State is still experiencing a serious drought, and that even the portions of the State that have experienced some relief are precariously close to slipping back into drought conditions.

PROP 2 CAMPAIGN

March TWCA meeting -- Leroy Goodson (left), Gen-eral Manager of the Texas Water Conservation Association, presented a Certificate of Apprecia-tion to Perry Fowler, Assoc. General Contractors of TX, for his leadership in creating a statewide education campaign about Proposition 2.

Reed Eichelberger (left) and Jace Houston San Jacinto River Authority

“We welcome the first clear day after a rainy spell. Rainless days continue for a time and we are pleased to have a long spell of such fine weather. It keeps on and we are a little worried. A few days more and we are really in trouble. The first rainless day in a spell of fine weather contributes as much to the drought as the last, but no one knows how serious it will be until the last dry day is gone and the rains have come again.”

Page 13: Texas Water Conservation Association Newsletter June 2012

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Throughout the years, the Association has awarded Honorary Life Memberships to those individuals who have contributed above and beyond in their service to the Association and its membership. At the March Annual Convention Dinner, seven outstanding individuals were presented this award. Presenting the awards, Jim Parks said, “If we combined all their service years as Directors and participants in TWCA, it would exceed two hundred years.” Left to right above are: James R. Nichols, Jimmy Banks, Jim Parks, Bruce Rigler, and Richard Bowers. Juan F. “Frank” Ruiz was also recognized but unable to attend, as were Robert & Shirley Wagner. The Wagners received their Certificate from Leroy Goodson at a water district meeting (above right).

The second President’s Award was presented to Elizabeth (“Liz”) A. Fazio. She currently serves as Committee Director of the House Committee on Natural Resources. President Jim Parks made the presentation.

THE PRESIDENT’S AWARDS

At the TWCA’s 68th Annual Convention in Dal-las, TX in March, Jim Parks (left) presented the President’s Award to Brian Sledge, an attorney and governmental relations consultant with the law firm of Lloyd Gosselink Rochelle & Townsend.

HONORARY LIFE MEMBERSHIPS

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soften it, make the cuts (revenue adjustments) early or postpone it by changing the dates in the BCA. However, not kicking this legislative mandate down the road will result in across-the-board budget cuts to non-exempt defense, domestic discretionary and some mandatory or entitlement programs. The numbers are interesting: Congress gives credit for interest ‘savings’, so the $1.2 tril-lion in cuts is reduced by 18% to $984 billion. The cuts are evenly divided annually for the next nine years, resulting in an annual cut of $109 billion. The annual cut is split evenly between non-exempt portions of defense and non-defense spending; unless exempt; the cuts are applied

to both mandatory and discretionary spending. Taking into account the number of do-mestic programs that are exempted from seques-ter and the relative size of the defense budget versus non-defense discretionary budget, the sequestration cuts will be 46% of the total de-fense budget as compared to 27.9% of non-de-fense and 14.8% of entitlement spending. The severe cuts, particularly to defense, are a major concern and Congressional efforts to

Having been called a “ticking time bomb”, “a sword of Damocles”, and the greatest threat to our national security by none other than the Chairman of the Joint Chiefs of Staff, sequestration (i.e., statutory mandated spending cuts) is set to explode on the federal budget on January 2, 2013 unless Congress and President act to soften or avoid the mandate. The debacle of the Budget Control Act of 2011 set up the problem and the consequences, particularly to our defense budget, are massive. Recall that the BCA, as it is often referred to, set up the “Super-Committee” to define at least $1.2 tril-lion in budget cuts over 10 years, which turned out to be a politically impossible task. No cuts defined; no Congressional action. Therefore, sequestra-tion will be triggered unless actions are taken to

By J. Tom Ray, Lockwood, Andrews, Newnam, Inc., Chair, TWCA Federal Affairs Committee

FEDERAL DEVELOPMENTS..SEQUESTRATION CALLED “TICKING TIME BOMB”

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soften or avoid sequestration are coming forward. On May 7th, Chairman Ryan and the House Budget Committee approved a bill (H.R. 4966) that would, among other things, stop the sequestration for defense and non-defense discretionary programs, but leave the sequester for entitlement programs. However, H.R. 4966 is linked to the Ryan budget and as a result would cut non-defense discretionary spending in 2013 to about the same levels that will result if sequestration does take place. The situation with Congress today is that Mr. Ryan’s proposal and any similar ac-tions in the House will not be taken up nor will they be initiated by the Senate. So, where does that leave us? Two possible outcomes: Expect the sword to drop. Unless Congress and President can act in a very limited time available, probably less than six working weeks left in this election year, to deal with sequestra-tion as well as the Bush tax cuts and debt ceiling, we can expect across-the-board cuts to every line item of every federal agency’s budget in the 10% range (for example, recent conversations with Bureau of Reclamation and EPA staff the expec-tation was 10% and 7.8%, respectively); or, Avoid the issue totally—kick-the-can. Since many economists are saying that if seques-tration occurs, it may throw the nation deeper into recession, a possible outcome will be that Congress and President decide to amend the dates in the BCA and push the burden off to another Congress. Energy & Water Appropriations There have been important recent develop-

ments with regard to water resources infrastructure funding and also on the Federal regulatory front. First, both the House and the Senate Energy and Water FY13 Appropriations bills have been passed out of full Appropriations Committee. It has been many years since such rapid progress was made on this bill which funds both the Bureau of Reclamation and the Corps of Engineers. A group of us recently meet with Roger Cockrell, Staff Director, Senate Subcommittee on Energy and Water Senate Appropriations. Mr. Cockrell discussed the disap-pointments of recent appropriations cycles, but was actually, at least somewhat, optimistic that the Senate would pass an E&W appropriations bill by October. (Some basic funding numbers in table below.) As you can see, the Senate version of the En-ergy and Water Appropriations bill is more generous than the House bill when it comes to water infra-structure funding. TWCA provided a support letter to the Senate Energy and Water Appropriations Committee for the additional funding in the FY12 bill and we need to continue this support for FY13. In another piece of good news, Senate En-ergy and Water Appropriators once again added $40 million for the Corps of Engineers Environ-mental Infrastructure Construction account. This is the section of the Corps budget that funds water resources infrastructure. Although $40 million is a modest sum when considered in context of total Federal spending, this add-on would provide for the continuation of this effort in FY13. Without specific support from the Congress, the Corps En-vironmental Infrastructure Program cannot exist.

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The House version of the FY13 Energy and Water Appropriations bill also includes an amend-ment proposed by Representative Rehberg [R:MT], which was adopted by a vote of 28 to 20 in House Appropriations and is now a part of the House Bill. This amendment prohibits the use of Corps FY13 funding to “develop, adopt, implement, administer, or enforce a change or supplement to the rule dated November 13, 1986, or guidance documents dated January 15, 2003, and December 2, 2008 pertain-ing to the definition of waters under the jurisdiction of the Federal Water Pollution Control Act.” The Sen-ate version of the bill has no similar provision. In addition to this House Appropria-tions amendment, two authorizing bills have also been introduced in the Congress which would prohibit both USEPA and the Corps of Engineers from finalizing the proposed Clean Water Act Guidance or of using the Guidance as the basis for any decision regarding the scope of the Federal Water Pollution Control Act. One of these bills is S. 2245, which is titled “To Preserve Existing Rights and Responsibilities

with Respect to Waters of the United States.” The chief sponsor is Senator John Barrasso of Wyoming who has been joined by 32 co-sponsors. S.2245 was introduced on March 28, 2012. The other is a House bill, HR 4965 which was introduced on April 27th by Transportation and Infrastructure Chair John Mica, joined by the full Committee Ranking Democrat Nick Rahall. Its provisions are virtually identical to S. 2245. Expect lots of action with regard to water resources to be centered on the FY13 Energy and Water Appro-priations bill and on the Congressional resistance to having the Administration finalize the proposed Guidance with regard to the Clean Water Act. Whether the Congress ever returns to the days when Members could request and support Appropriations funding on behalf of their constitu-ents, the one certainty is that the day of the “easy earmark” has passed and is unlikely to return any time soon.WIFIA As severe as the budget deficit and national debt are, and even with Sequestration looming, Congress does recognize the importance of water infrastructure—in the short term to help create jobs and fight the recession and in the long term to help sustain the economy and provide for public health and welfare. At Texas Water Day this year, the Texas delegation members from both parties voiced support and agreed, to varying degrees,

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Tom Ray, of Lockwood, Andrews & Newnam, hasfollowed national water is-

sues for more than 20 years. He can be reached [email protected].

that something should be done to properly define earmarks. Clearing the earmark constraint is certainly a key to the building the next WRDA bill and to federal support for financing the Texas water projects in the State Water Plan. The progress by the Senate Energy and Water Appropriations subcommittee to pass a spending bill, include plus-ups for the Corps of Engineers and Bureau of Reclamation, and working with the House subcommittee potentially pass out an appropriations bill by October, in regular order, is encouraging. So is the addition of another potential option for water infrastructure financing. Earlier this year, Chairman Gibbs of the Transportation & Infrastructure Committee introduced Water Infrastructure Financing and Innovation Act (WIFIA). At Federal Affairs Committee meeting in February, we discussed WIFIA. There is certainly a role for a bill that would provide revolving loan financing for large projects or combined projects of $20 million or more. Positive also is removing the Private Activity Bond and encouraging private

investment. The key concern, and apparently one that is slowing progress on the bill, is whether EPA or the States’ SRF agencies should administer the program. Whereas TWCA, WESTCAS and other water associations support the State option, others, notably including AWWA, support EPA. In April, I visited with T&I subcommittee staff in DC about this question. Who will administer the program is now the hang-up. Staff sees the points on both sides, and it is important for TWCA to continue not only to monitor but also to provide further input to committee on our position. At the upcoming Federal Affairs Committee meeting, we will consider more TWCA input on WIFIA.

68th Annual ConventionDinner Speaker

TX Agriculture CommissionerTodd Staples

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The production of oil and natural gas using long-lateral horizontal drilling combined with multi-stage hydraulic fracturing, also known as “fracking” or “fracing,” is revolutionizing domestic energy production in the United States. In Texas, fracing is creating enormous economic benefits, but at the same time stretching available water resources as operators move rigs into more arid areas of the state to target higher value oil and liquids, such as found in the Wolfberry Field in the Permian Basin and the Eagle Ford Shale in South Texas. A recent study by the University of Texas at San Antonio estimates that in a single year, 2011, the total economic impact of the drilling and production activity in the 20-county Eagle Ford Shale region was 25 billion dollars, including supporting more than 47,000 full time jobs.2 Despite more than sixty years of experience with hydraulic fracturing, the recent domestic expansion of oil and gas development has resulted in new opposition by environmental and community groups, especially as drilling moves into urban areas and regions that have not historically benefitted from production activities. Common concerns voiced by opposition groups include the volume of water consumed in the fracing process, potential contamination of drinking water supplies, adverse impacts to surface water, and excessive air emissions. In light of this heightened attention, there has been a significant increase in regulatory activity related to fracing at the local, state and federal levels. Th i s a r t i c l e b r i e f l y o u t l i n e s t h e hydraulic fracturing process and availability of shale gas, the potential impacts to ground and surface water, and the federal and state development of new regulations and guidance. Hydraulic Fracturing Basics Hydraulic fracturing has been around for generations. The basic process was first patented in 1949, but “shooting” a well by blasting

explosives down-hole, has been in use since the 1860s.3 Hydraulic fracturing by name is fairly self explanatory. The basic method is that fluids are pumped into hydrocarbon producing formations at high pressure, creating fractures which are pathways to allow more natural gas or oil to escape. The fluid used for hydraulic fracturing is typically about 90% water, 9.5% sand or other proppant, and 0.5% other chemicals.4 The proppant and chemicals increase the length of the fractured pathways within the formation rock and help the hydrocarbons escape through newly created propped fractures and flow to the wellbore. The chemical composition of the fluids used can vary among operators and locations. In Texas, hydraulic fracturing does not occur near the surface. Depending on the geography of the drilling location, the depth of the target formation can range from approximately one to two miles.5 This depth is normally far below the base of the useable groundwater. For instance, in the Barnett Shale in Texas, shale gas is often found at a depth of 6,500-8,500 feet while useable groundwater is generally located at depths shallower than 1,200 feet; likewise in the Haynesville Shale in Louisiana and Texas, the freshwater depth is above 400 feet while the gas formations are between 10,500 to

Hydraulic Fracturing in Texas: Economic Boom and Looming Water Resource Challenges

by Leonard Dougal, Partner at Jackson Walker L.L.P. 1

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13,500 feet.6 At that depth, the well lateral can extend for thousands of feet horizontally, and these long laterals are where the multi-stage fracture operations occur. Nearer to the surface, multiple strings of steel surface casing protect groundwater, including surface casing which is cemented into place below the depth of useable groundwater then all the way back to the surface. Additional well production casing is installed at deeper depths, and finally production tubing isolates the produced hydrocarbons from contacting the production casing. Consumption of Water Multi-stage hydraulic fracturing operations require large quantities of water. The Bureau of Economic Geology reports that individual fracing operations routinely consume millions of gallons of water.7 In the Eagle Ford it is not unusual for a fracing operation to use more than 5,000,000 gallons and some of the larger fracs can consume over 10,000,000 gallons. Securing such large quantities of water has posed a challenge to operators in arid areas of Texas, and has created a growing industry of water purveyors. Existing holders of surface water rights have been amending those rights to add “mining use” to allow the sale of such water to oil and gas operations. Tight supplies of water and local concerns about consumption are causing operators to devote increasing resources to reuse of frac fluids.

Oil and gas rigs routinely use groundwater produced from the well-site for drilling operations. The Water Code provides an exemption from permitting for the drilling of a water well used

solely to supply water on the lease for a rig that is actively engaged in oil and gas drilling or exploration operations.8 The scope of this exemption, especially as applied to fracing, is subject to debate. The Railroad Commission asserts that it exempts from permitting on-lease produced water used for fracing. Nevertheless, currently some groundwater conservation districts are requiring the operators to pay fees and obtain drilling permits for such water wells. Risks to Water Quality After studying areas of known oil and gas impacts to groundwater (presumably arising from surface spills), in May 2009 the Chairman of the Railroad Commission of Texas concluded that there was “not...a single documented contamination case associated with hydraulic fracturing.” More recently, the U.S Environmental Protection Agency dismissed its high profile enforcement case against Range Resources, in which the EPA alleged the company’s fracing operations in the Barnett Shale had led to hydrocarbon contamination of drinking water aquifers.9 The case was especially notable as EPA’s position was in direct conflict with findings by the Railroad Commission of Texas which, after a full evidentiary hearing, unanimously found that Range Resources did not contribute to the alleged contamination. Howeve r, c on t am ina t i on r i s k t o groundwater does exist. It comes from surface spills, mishandling of fluids, or the potential failure in the mechanical integrity of the well casing or the cement behind the casing. After fracing is completed, the pressure decreases within the well and frac fluid flows back to the surface. This is referred to as “flowback.” The amount of frac fluid recovered varies dramatically by well, but has been reported to range from 25% to 75%; the flowback rate in the first few days can exceed 100,000 gallons per day and then decreases over time. Flowback can contain high amounts of total dissolved solids (TDS), formation hydrocarbons, salts and other contaminants that need to be managed with care. Flowback and produced water are typically held in on-site storage

“In the Eagle Ford it is not unusual for a fracing operation to use more than 5,000,000 gallons and some of the larger fracs can consume over 10,000,000 gallons.”

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resources. The study will analyze and research questions involving water acquisition, chemical mixing, well injection, flowback and produced water, and wastewater treatment and waste disposal. The study will also include five retrospective case studies (Bakken Shale, North Dakota; Marcellus Shale, Pennsylvania (2 locations); Raton Basin, Colorado; and the Barnett Shale, Texas) and two prospective case studies (Marcellus Shale, Pennsylvania and Haynesville Shale, Louisiana). EPA expects the initial result of the study to be available in 2012, with a final report released in 2014.

Conclusion

The economic benefits of hydraulic fracturing in shale plays are an economic game-changer in many areas of the country. These operations use large quantities of water, which create resource challenges and conflicts in arid areas. New regulations require public disclosure of facing chemicals, and in response we may well find that oil and gas operators will voluntarily choose to use less exotic chemicals in their future hydraulic fracturing operations. Also coming will be more emphasis on recycling and reuse of flowback fluids to reduce the water consumption footprint of these operations.

tanks or water impoundment pits prior to and during treatment, recycling, and disposal. Underground injection is the primary method for disposal of flowback and produced water in Texas. Similar to the risk to groundwater, as long as the methods of managing flowback are properly implemented, there is normally very little risk to surface water. However, releases, leaks, and/or spills involving the storage or transportation of wastewater could pose a contamination risk to shallow aquifers and surface water bodies. Public Disclosure of Content of Hydraulic Fracturing Fluids Recently, one common theme among state legislatures and regulators is an increased desire for fracing operators to disclose the chemical ingredients used in fracing operations. In Texas, the legislature in 2011 passed a bill mandating the disclosure of chemical additives to fracing fluids.10 Pursuant to the legislation, the Railroad Commission of Texas has adopted regulations which require operators to disclose information on frac fluids, including the total volume of water used; each chemical ingredient added; the trade name and description of the chemical; and the concentration of each chemical.11 This information must be filed with the regulatory agency with the well completion reports and, significantly, posted online as well. The online postings are found at the website FracFocus.org. The regulations provide protection for trade secret information, consistent with existing state law as set forth in the Texas Public Information Act.

EPA Hydraulic Fracturing StudyStudy Plan on November 3, 2011. This

plan outlines a study process which will examine the entire “life cycle” of fracing, with specific focus on the potential impact to drinking water

Leonard Dougal, Partner at Jackson

Walker L.L.P. 1

(Footnotes on page 20)

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(Footnotes)

1I would like to express my thanks to Jacob Arechiga, an associate with Jackson Walker for his contributions to this article.2 Economic Impact of the Eagle Ford Shale, Center for Community and Business Research, The University of Texas at San Antonio Institute for Economic Development (May 2012).3 Carl T. Montgomery and Michael B. Smith, Hydraulic Fracturing: History of an Enduring Technology 27 (Dec. 2010).4 American Petroleum Institute, Freeing Up Energy, Hydraulic Fracturing: Unlocking America’s Natural Gas Resources 8 (July 19, 2010)

FRACKING ARTICLE...Pages 17-19 5 See U.S. Environmental Protection Agency, Office of Research and Development, Plan to Study the Potential Impacts of Hydraulic Fracturing on Drinking Water Resources 22 (Nov. 2011). 6 Id.7 Current and Projected Water Use in the Texas Mining and Oil and Gas Industry, The University of Texas Bureau of Economic Geology (June 2011). 8 Texas Water Code §36.117(b).9 The EPA action began on December 7, 2010, when EPA issued an Emergency Order under Section 1431 of the Safe Drinking Water Act alleging that Range Resources’ fracing operations had caused methane contamination to two domestic wells. 10 Tex. H.B. 3328, 82nd Leg., R.S. (2011).11 16 TAC §3.29.

Welcome to Horseshoe BayJune 13-15, 2012

TWCA Mid-Year Conference

WANTED!

Reservoir site in Texas for

pilot development

Please contact: Moshe Alamaro CTO, Interim CEO More Aqua, Inc. www.moreaqua.com 617-244-7995

More Aqua, Inc. is a spin off company from the Massachusetts Institute of Technology. We developed a water saving technology that reduces evaporation losses from water reservoirs.

We are seeking a reservoir in Texas to develop a pilot. The requirements are: 20 - 50 acre surface area The reservoir is known not to have seepage losses or is lined to prevent seepage losses The water is used for irrigation or industry. The pilot project will not interfere with the reservoir function. Water can be drained or added as long as we can account for it. The duration of the site rental would be for approximately 2 years.

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TWCA WELCOMES NEW MEMBERS

Resource Action Programs Contact: David Grider

Sparks, NV 89431

Freeman & Corbett, LLP Contact: Ronald J. Freeman

Austin, TX 78759

San Patricio Municipal Water District

Contact: Brian G. Williams Ingleside, TX 78362

Velma R. Danielson Spring Branch, TX 78070

EDITORIAL SERVICES...

Barbara Payne 281-893-2099

[email protected]