Southwest states consider pouring money into water resources

Bloomberg News

Texas Gov. Greg Abbott wants to pour billions of dollars into efforts to address water infrastructure and supply woes in order to sustain the state's growing population and economy. 

In his State of the State address this month, the Republican governor declared water one of  seven "emergency items" for the legislature to tackle this year and unveiled a proposal that includes spending $1 billion annually for 10 years on water-related efforts.

"We will make the largest investment in water in the history of Texas," Abbott said. "We will tap into new water supplies and repair pipes to save billions of gallons of water each year."

To ensure Texas has enough water for the next 50 years, his plan would invest in existing rural programs and in strategies to develop supply with measures like desalination and water transport. 

The state is already in talks with Houston to purchase the city's  excess water and transport it to west Texas, which is currently facing extreme drought conditions, according to a report last month in the Houston Chronicle. A spokesperson for Houston Public Works did not immediately respond to a request for comment.
 

A $1.56 billion Texas Water Development Board bond sale in September included $221 million for a Corpus Christi seawater desalination plant, the first to be built in the state for municipal use.

The 2025 legislative session could be one of the most consequential for water infrastructure this century, according to Texas 2036, a nonprofit, nonpartisan public policy research and advocacy group.  

"The great news is that House and Senate budget writers have released introduced versions of their respective budgets that include $2.5 billion for water infrastructure funding," Jeremy Mazur, the group's director of infrastructure and natural resources policy, said in a blog post. "This initial proposed amount is already historic: never before has the legislature proposed a water funding package of this magnitude."

A recent report  by Rice University's Baker Institute, which was commissioned by Texas 2036, warned of adverse economic impacts if multi-year droughts should occur in Texas.  It also said the state "could very plausibly require nearly $200 billion in water investments during the coming 50 years, or an average of $4 billion annually."

Texas voters in November 2023 approved a constitutional amendment creating a $1 billion water fund with at least 25% of the money allocated to a New Water Supply for Texas Fund to finance projects leading to 7 million acre feet of additional water supply by the end of 2033.

New Mexico Gov. Michelle Lujan Grisham is once again pushing a plan to treat brackish water from aquifers, or from oil and natural gas production, making it available for industrial and other uses, including battling wildfires.

"Our state, like so many others, is facing a severe water shortage, and climate change is only making the problem worse," the Democratic governor said in her Jan. 21 State of the State address. "Yet we have enormous reserves of brackish water lying beneath our feet." 

House Bill 137's Strategic Water Supply Act would establish a framework for the state to administer grants for local water systems to  treat and use brackish water or contract with private companies for produced water treatment, according to Drew Goretzka, spokesman for the New Mexico Environmental Department.

The measure would appropriate just over $100 million for program development, aquifer mapping, and research, funded by a five-cent-per-barrel fee on water produced from oil and gas wells, he added.

It differs from a plan the governor unveiled at an United Nations Climate Change Conference in Dubai that failed to make it out of the Democrat-controlled legislature last year. It aimed to incentivize private-sector investment in treatment infrastructure with long-term state contracts to purchase end-product water.  An internal debt sale backed by state severance tax revenue would have raised an initial $250 million for the plan.

Kansas Gov. Laura Kelly, who raised concerns about the state's dwindling water supply in her Jan. 15 State of the State address, proposed a $30 million funding boost to safeguard it in her fiscal 2026 budget.

"Forget making it 75 years down the road — some parts of western Kansas don't have the groundwater to last another 25 years," she said. "And without that water, the agricultural industry that fuels our economy and sustains our rural way of life cannot survive."

Not all Southwest states have money to back a hunt for water.

Tight budget conditions in Arizona have halted additional appropriations for the state's long-term water augmentation fund, although a quest for projects to bring new supply to the state continues.

In her State of the State address last month, Democratic Gov. Katie Hobbs said "securing our water future is essential to preserving our way of life," but her proposed fiscal 2026 budget includes no money for the fund, which was created in 2022 by the Republican-controlled legislature with appropriations to total $1 billion over three years.

"As usual, the governor talks a big game on water but does little to prioritize the solutions that matter," Republican State Rep. Gail Griffin, who chairs the House Natural Resources, Energy & Water Committee, said in a statement.

As a result of budget cutting, the fund only contains about $450 million. 

A resolution introduced in the House states that when budget conditions improve "the legislature commits to working with the Water Infrastructure Finance Authority to reemphasize its commitment to long-term water security and to reinstating the full appropriation envisioned and needed to secure new water supplies and enter strategic partnerships with the private sector."

WIFA launched a solicitation process in November for proposals that would tap the water augmentation fund to bring new water sources to the parched state. The money can be used to provide financial assistance to eligible entities, as well as for issuing debt, credit enhancements, and other forms of indebtedness, according to a solicitation document. 

Chelsea McGuire, WIFA's interim director, said the agency requested a "do-no-harm" funding approach after losing money in a funds sweep for the fiscal 2025 budget and will have "tangible" funding requests in the future as projects are identified through the solicitation process. 

"We designed it with the understanding that additional resources were unlikely and we are confident that we have sufficient resources to get us through the solicitation and the vetting/feasibility analysis that will follow," she said.

The latest U.S. Drought Monitor shows severe to extreme drought conditions in most of Arizona.