[Updated]: Red McCombs Tries His Hand at Water Marketing (and Fails)
McCombs and two Republican businessmen from Louisiana want to pipe water from Toledo Bend Reservoir to Texas.
-by FORREST WILDER -The Texas Observer- 307 West 7th Street - Austin, TX 78701
Published on: Thursday, January 12, 2012
The deal is off, apparently. The Shreveport Times reported today:
To the delight of approximately 300 people gathered tonight in the Cypress Bend Resort conference center, the Sabine River Authority voted to suspend out of state water sales until a comprehensive water plan for Louisiana has been developed.
Growing opposition to the contract with TB Partners that would send water from Toledo Bend Reservoir to Texas is one of the reasons Executive Director Jim Pratt cited in his recommendation to board commissioners. Their subsequent vote was unanimous and met with applause, whoops of joy, and a few offered a hearty “Amen.”
And once again, the involvement of citizens gets the credit for influencing critical SRA decision-making.
Wait a second. Citizen outcry killed this deal? Huh, I guess they do things differently in Louisiana.
First there was Boone Pickens. Then it was Clayton Williams. Now Red McCombs is the latest Texas high-roller to try his hand at an audacious water-marketing deal. And like Williams and Pickens, things are not going entirely to plan.
Over the past year, Toledo Bend Partners, the private company backed by McCombs and two wealthy Republican Louisiana businessmen, has been negotiating with the Sabine River Authority of Louisiana to lock up a large portion of the water in Toledo Bend Reservoir. The lake, the largest in the South, straddles the Texas-Louisiana border and is one of the last major sources of largely untapped surface water in Texas. The two states split the water evenly.
Toledo Bend Partners and the river authority have hammered out a draft contract that would allow TB Partners to secure the rights to 600,000 acre-feet — that's 196 billion gallons — of water per year from Louisiana's portion of Toledo Bend Reservoir and pump it to Texas. That's a huge amount of water. The city of Austin, for example, uses about 170,000 acre-feet a year. Six-hundred-thousand acre-feet also represents about 60 percent of Louisiana's "firm yield," the amount of water available during the worst drought on record.
The deal has attracted little attention in Texas but has roiled Louisiana in the past few weeks. The proposal seems to have blindsided residents around the lake, who've been bombarding the river authority with letters of protest. And though Louisianans have focused naturally on their own concerns, the project could have even bigger implications for Texans.
If approved by Jindal, who has final say over out-of-state water transfers, Toledo Bend Partners would then shop for thirsty customers in Texas. The Metroplex, Houston and the I-35 corridor between Austin and San Antonio top the list.
Shawn Rosenzweig, a partner with McCombs Enterprises who's spearheading the project, told the Observer on Tuesday that they hadn't studied specific pipeline routes or approached any potential buyers in Texas. "Truth be told I have no idea where that resource will go," he said, "or if anywhere at all."
Nonetheless, a proposal submitted to the river authority shows some provisional routes, including this one to North Central Texas.
Rosenzweig also couldn't say how much they might charge cities for the water.
Still, TB Partners is pitching their proposal as a big win for Texas and Louisiana. "I really honest to God believe this is something that if we really go about it the right way, it could be a fantastic project for both states and all the local stakeholders," said Rosenzweig.
Why did they go to Louisiana to buy water from Toledo Bend when the Sabine River Authority of Texas has water to spare too? Rosenzweig said that there were no competing interests for the water in rainy Louisiana. Jerry Clark, the general manager for Sabine River Authority of Texas had a different take.
"I think they felt they could circumvent some of the requirements that the state of Texas would potentially put on the movement of water," Clark said. In Texas, just getting permission to move surface water from one river basin to another can be an extremely arduous and politically-difficult proposition. Not so Louisiana. The Louisiana Legislature in 2005 explicitly authorized out-of-state water sales, if the governor approved.
Financing for pipelines and other infrastructure would total at least $2 billion, possibly taxpayer-subsidized, according to a company document. (In its proposal to the river authority, TB Partners brags about $250 million in state subsidies for the controversial McCombs-backed Formula One track in Austin.)
A 2009 study estimated the capital costs for a Toledo Bend-to-Metroplex pipeline carrying 700,000 acre-feet at $4.6 billion. And that was in 2007 dollars.
Under the proposed 50-year contract, Toledo Bend Partners would pay Sabine River Authority of Louisiana $91 for every acre-foot on top of an annual "reservation fee" that starts at $1 million and climbs gradually to $25 million after 35 years. In addition, the river authority could elect to take 1 percent of gross revenues from water sales or 20 percent of net profits.
Needless to say this ain't bean bag. Big money is at stake and big money is behind the proposal.
McCombs also pulled two Louisiana bigwigs into the deal: Donald "Boysie" Bollinger, a shipbuilder, and Aubrey Temple, a banker and former chairman of the Sabine River Authority of Louisiana. Both are major players in Louisiana Republican politics. Reported the Associated Press:
Bollinger, a Lockport shipbuilder, his family and their companies have given nearly $1 million in 500 contributions to candidates seeking a variety of offices in Louisiana over the past dozen years, according to disclosures made with the Louisiana Board of Ethics. Temple has given about $53,000 to GOP candidates in Louisiana.
Both have donated to Bobby Jindal's campaign.
Nonetheless, Jindal does seem to be slowing, possibly even nixing the TB Partners deal. Residents around the lake have raised a huge stink in the past month.
"It left property owners high and dry, no pun intended," said Ted Dove, a Toledo Bend resident who's been in talks with TB Partners and the river authority. "I'm all for private enterprise making money, my only problem is there are too many unknowns in allocating 600,000 acre-feet of Louisiana's water all to Texas."
This summer, the lake, the largest in the South, plunged to its lowest level since the dam was built in 1969. Dove says that he worries that the water sale could further deplete Toledo Bend if the contract isn't airtight. Toledo Bend Partners claims that pumping water to Texas will actually improve lake levels.
Currently about 3 million acre-feet of Toledo Bend water is used every year to generate electricity as part of a 50-year agreement with two power companies. That contract is set to expire in 2018. Under the TBP proposal, most power generation would be phased out and replaced with the water sales agreement.
The effect would be to reduce summertime withdrawals from the lake by more than 65 percent, a company document states.
"They don't want to get into another 50-year agreement to send 3 million acre-feet of water into the Gulf of Mexico when water needs are killing, just absolutely killing people around Toledo Bend because of those lake levels," said Shawn Rosenzweig, the McCombs representative.
So have local elected officials in the parishes next to Toledo Bend. Jindal already slowed the deal down once and his office is now warning SRA-Louisiana away from voting on final approval of the contract.
In fact, one well-placed source said the governor has quietly pulled the plug on the project. "It's a dead issue," the source said. Jindal "won't sign off on it without full public support."
Rosenzweig, however, said he hadn't heard that.
TB Partners probably has a strong case on the environmental benefits of using water from Toledo Bend. "From an environmental impact this really does look a lot better than some of the other alternatives for really large sources of water," said Rosenzweig.
Some conservationists agree — to an extent.
"There are probably better options for Dallas than Toledo Bend but Toledo Bend is certainly preferable to building any new reservoir such as Marvin Nichols," said Janice Bezanson, executive director of the Texas Conservation Alliance, which opposes new reservoirs. "Using water out of an existing reservoir that was built for water supply is better than building a new reservoir. But I don't know why we need an entity like Toledo Bend Partners."
And that, I think, is the rub for TB Partners. Why do we need a private entity to shuttle water between two public entities? McCombs may be a generous philanthropist but TB Partners isn't charity. Privatizing vast amounts of water is a hard sell, no matter who's pitching it.