Breakout 3: Latest on the Water Front

Transcription:

Matthew Lee (00:07):

All right. Good afternoon everybody. This is the second breakout session of the afternoon. We just heard from the electric side. Now we're going to talk about what's the latest on the waterfront here in Texas. Go ahead and get started. We've got a pretty good solid panel here, broad expertise, so we should be able to cover pretty much all aspects of water in Texas and we'll try to save some time at the end. So far during this conference, I haven't seen too many questions, so I'm going to challenge you guys to think about a question to ask our esteemed panel here at the end of the session. I'll go ahead and introduce the panel, and now they're kind of out of order, but we're going based on the screen. We thought that'd be helpful to match up people. On the screen we have George Peyton with The Texas Water Development Board, Kamil Taras from the City of Corpus Christi, John Beckham, North American Development Bank, and Jason, I'm sorry, you've told me how to pronounce it and I've already forgotten.

(01:14):

There you go. That's why I didn't pronounce it with Freese and Nichols. And my name's Matthew Lee with Norton Rose Fulbright. I'll be moderating the panel. I'll just give a quick introduction I guess just to the panel real quick or to what this panel will be discussing. If y'all have been attending some of the other panels during this conference, you've heard several different people talk about water needs in Texas. Some of those panelists refer to this panel saying we'll probably get some real time updates from George on the Texas Water Fund and some other things going on. And I know Kamil and others have some exciting news on what's going on, what projects they're working on. So hopefully we'll be able to go into a pretty deep dive on Texas Water. Lemme give a brief introduction to each of the panelists. George Peyton Water Development Board was appointed by Greg Governor Greg Abbott as a board member in July of 22, originally from Canadian, Texas, and Peyton now, or George now lives in Austin and is president of the River Valley Holdings, an investment holding company.

(02:19):

George began his career in finance and capital markets group of XTO energy in Fort Worth. Peyton received a bachelor of science in astro of Physics and a Bachelor of Business Administration in Entrepreneurial Management from TCU and you're in a Master of Business administration from Stanford. And then Kamil City of Corpus Christi has 15 years of experience in finance and budgeting in both the private and public sector. Kamil has worked for the city of Corpus Christi since 2015 as the city of Corpus Christi Capital Improvement Program Manager and was named Assistant Director of Corpus Christi Water in 2024. Recent John Beckham, North American Development Bank as some might colloquially refer to as NAD Bank. John started his four year term as NAD Bank Managing Director on January 1st, 2024. After serving as Deputy Managing Director of the bank since January of 21. John has worked in International Finance and Development since 1991 and prior to joining NAD Bank, John worked at the Inter-American Investment Corporation for 19 years where he held various positions including Chief of Debt, Chief of Equity, and Managing Director of the clients.

(03:36):

John has a Bachelor's in Administration from the University of Notre Dame and an MBA from Ohio State University. And last but not least, Jason with Freese and Nichols. He's a principal and a vice president at Far Nichols Freeze Nichols, where he serves as the National Practice Leader for water resource planning. Jason has been engaged in state and regional planning in Texas for 20 years, helping water utilities plan for their water needs over the upcoming decades. And most briefly, my name is Matthew Lee with the law firm of Nor Rose Fulbright. I exclusively practice in Municipal Finance serving as Bond Council to issuers across the state Underwriters Council Disclosure Council, anything municipal finance related, we've probably served in that role. So I'll go ahead and kick it off. We'll start with George and Texas Water Development Board. I'm sure everybody in this room is familiar with the Texas Water Development Board, but just in case, if you want to briefly explain water development board's role in the state of Texas and then maybe some of the plans that have been identified by the Texas Water Development Board and any updates that you can share on the new Texas Water Fund.

George Peyton (04:48):

Sure, I'm happy to do that. That's a lot. So I'll start with this. I think I was sitting here listening to the power panel before this panel, and I think the challenges that Texas has face from the power perspective are not dissimilar from those that we face in water. It's the great thing about Texas is this economic miracle that we are able to tout that is drawing so many companies and people to this state and that growth and that expectation of future growth places an enormous strain on the state on its basic infrastructure needs, whether that be transportation or power or in my case, water. And so being prepared for that is something that we are really trying to address.

(05:46):

So what does the Texas Water Development Board do? Well, the Texas Water Development Board is the state agency tasked with planning the science around water and finally the financing around water. So those three things, science planning and financing are our core missions at the Texas Water Development Board and we really focus from a water perspective on three main things in addition to that, which is we focus on aging infrastructure, we focus on future water supply needs of the state, and then we also, as of 2019 after Hurricane Harvey, we're tasked with focusing on flood and helping the state prepared for flood mitigation risks. So those are the main things that we focus on. I think for purposes of this conference, and one of the things that I really like to discuss is focusing on our future water supply needs from the state, like to talk about growth, and I think that is something that is really interesting to think about and it's a challenging problem to address and it's one that's a good problem.

(06:56):

It's a high class problem, just like they said with power. So for us, when we do our planning, we plan for the next 50 years. So we're looking at population growth starting from now to the next two through 2070. From that time, we think roughly the population of Texas is about 30 million today in 2070, we're anticipating it to be over 50 million. That's not just us, that's state demographers. That's a lot of demographers taking that into account. So what does that mean for water supplies? We have people coming to the state, they're bringing their ambition and their talents and their capital and they don't bring water as you guys have heard. So what does that look like for water? Well, currently if we did nothing, our current water supplies in the state are about 16 million acre feet per year. That's what we have from a supply side and our current demand roughly matches that.

(07:55):

It's about current demands somewhere around 16 million acre feet a year as well. So roughly we're balanced. I think in a time of drought we might be down to around 14 million acre feet a year supplies something like that. So there's a delta there that we need to address. If we do nothing, what happens to future water supplies? Well, future water supplies will actually decline, so it will go down by a few million acre feet a year because mainly because of drawdowns on our aquifers, right? Aquifers provide a lot of water in the state, and as we pull that down mainly for agriculture, that will reduce our water supplies. We also have some sedimentation in a lot of our reservoirs that causes that to decline a little bit, but it's roughly flat supplies will stay roughly flat decline a little bit. The big change is around demand.

(08:46):

So demand will go from about 16 million acre feet now to we think about 19 million acre feet a year, and if you're doing some math or keeping up with that, it ends up being about a 5 million acre feet per year deficit in the year 2070. If we were to do nothing, that's a big gap and that's a problem, and that isn't a normal year. If you were to extrapolate, if we have a really bad drought, like the drought we had in the fifties, really prolonged drought, that gap ends up going closer to 7 million acre feet a year because you have more people pulling on the water supplies and you also have a lot more evaporation in your reservoirs. Those things combine and it causes a big problem. What does that mean to the state? We have asked our good friends over at the comptroller's office to take an estimate of what that would look like economically, and they threw out a number somewhere in the range of 150 billion plus per year in economic damages if that were to happen, right?

(09:54):

If we were to have that gap in water not filled and we hit a drought, that's a big gap and that's a problem. So what are we doing to address that gap and what programs do we have in place? Like I said, we are the state agency tasked with planning, and when I say that it's really a bottoms up approach in Texas. So there are 16 regional water planning groups in Texas and each of those is tasked with coming up with a water plan to address their region's need. We aggregate those and synthesize that into a state water plan and our state water plan projects, what we need to do over the next 50 years to fill that gap. So looking at that, it would cost around 80 billion in today's dollars, and this is old, so it's probably around a hundred billion dollars with inflation or more.

(10:52):

We'll get new numbers on that in the next couple of years, but that would be the cost to kind of fill those gaps. So 150 billion a year in economic damages versus a hundred billion a year of today's or not a hundred billion a year, a hundred billion flat in today's dollars to address our needs. So that's what we are trying to do from a planning perspective is help regions understand what they need to do to address their water issues, and then we can provide low cost financing through our different funding mechanisms and through our different programs to help the regions meet their water needs. I just tal ked a lot. There's a whole lot more I can go through, but I'll stop there. Sorry.

Matthew Lee (11:34):

No, that's incredible. We'll let the other panelists kind of jump in and then we'll play off each other's experiences here in a second. Kamil City of Corpus Christi, and I know you guys are working with the Water Development Board as well, but why don't you give us a background on what the city's strategic plan and so the city of Corpus

Kamil Taras (11:52):

Christi is a poster child for chasing water as we chase a large industry coming into Corpus Christi to grow the city. We've been doing this since the sixties and we've been developing water projects. We built a dam, created Lake Corpus Christi in the late fifties, then we created another dam and created Cho Canyon in the seventies, which are 40 and 90 miles northwest away from the city. Then in the nineties we built a pipeline to Lake Tana, which is 101 miles away northeast in this case from Corpus Christi. And then just in 2016, we finished part two of the pipeline that got us to Colorado River, which is 150 miles away. So just to draw water to Corpus Christi to provide for the industry that we're trying to attract and be able to develop the city and grow the economy. I mean simple because we're talking about, if we just were talking about populations, it's not that big of a deal, but one of the petrochemical plants we're talking about putting a plant like that.

(13:09):

We're talking about 35,000 households. That one plant is basically equivalent to roughly 35,000 households just being added just by building that plant than water usage. And one plant in one plant is not enough. You need more. We in Corpus Christi have three refineries, so just alone, that's a hundred thousand households of daily water usage that push through. So we always have to, and I'm proud to say we always have to look forward as to where do we get water. We also unfortunately, are in a very drought prone region of Texas. We're in south Texas, even though central Texas right now is not experiencing a drought, south Texas is almost in a historical drought right now. Our lake levels are super low and we're very dependent on groundwater. So what we did back in 2016 17 is partnered with Freeze and Nichols and with the Texas Water Development Board and started to looking at a drought resistant source of water.

(14:17):

And because we're a coastal city, we decided to utilize the natural research you have, which is seawater. So we're looking to building the seawater, desalination, plant freezing, because we done an amazing job. We're almost at the end of all the permitting and then construction starts. So hopefully by 20 28, 29, we'll have a more drought resistant water source, but that's not enough. We already know at this point, even if we build that plant, we need other water sources. So we're always chasing that monkey around and it's very difficult and even with the best planning, that resource is scarce. And in some regions like the Raja come from very scarce and it's extremely expensive. And luckily we do have the Texas Water Development Board that allows us to at least help us with the interest rates and get us loans that are thing. But the rate payers, just like where they were talking on the electrical side, the rate payers are the ones that are going to bear the costs.

(15:29):

We need water to provide new sources of water that are not groundwater aquifer or river water are very expensive, but we cannot do without. We cannot ask. Another thing that the electrical grid can do is curtail and say, oh, we agree to lower our usage. People are not going to do that. They're not going to not have water in their tap, so we cannot curtail them. Industry can't really curtail their usage. They use it for cooling and for if we're talking about clean hydrogen, which is the new green thing, they use the water to produce their products so they're not willing to cut their usages down. So we are left with, we have to produce more. We really can't find the savings and be able to say, Hey, let's work together and curtail the usage down and be able to have some savings in that perspective.

(16:29):

We always have to look for more water and it's getting more difficult. And the more help we can get, the more resources we can get from the municipal perspective, the better it is to keep the growth going in Texas. That is very true. What the other panels were saying, what the keynote speakers were saying is that companies come to us when they make an initial look at the city is can we provide the electricity, which the city can't because we don't own our electrical things, so they go to a EP, but we do control the water. We do control the gas, and they come to us and they want proof, they want numbers, they just don't want to. It's like, yeah, we will get it done for you. Don't worry. No, they want to guarantee. And many a times they want to guarantee demand contract in place before they even commit to coming to the city to develop. So you have to build that infrastructure ahead of time to even attract companies to your region.

Matthew Lee (17:34):

Thank you. And Jason, can you explain to the audience the role that Freese and Nichols plays? I know Kamil just mentioned that they've been partnering with you on this project and others.

Jason Afinowicz (17:43):

Sure. And just to really underline a lot of what both George and Kamil have been talking about, I think our job is really to help take our clients to a point where they can develop the projects they need for their customers ultimately for those industries, for the municipal users that are coming in and trying to bridge that gap. And that could be quite the challenge. Now, I will go back to what George was saying earlier. That's the fact that it's absolutely essential that these projects we're talking about today do continue to be developed and that there is a future for them so that Texas can continue to develop at the rate that it has over time. It's absolutely true that Texas runs on water just as much as we need energy to make things work. We also need water in that equation as well. And so right now, entities are working with this growth that they see coming on, and we're helping them in a lot of cases with this planning.

(18:40):

They're looking at not just the municipal growth, they're probably a little bit more accustomed to because that kind of happens over time. They're used to adjusting to those things, but also the challenges that come along with industrial and commercial growth where you suddenly have demands that appear overnight almost when a business wants to open up or at least talks to you about developing a local facility that's going to require water. And so what sort of magnitude are we talking about in projects like this? These big projects come with a big price tag and also a lot of challenges as well. A good example of that is a project recently completed by nor Texas Municipal Water District, bodark Lake, right around Bonum. And this project provides about 82 MGD of farm water supply, and it has been a significant undertaking. It's the first major reservoir completed in the state of Texas in 30 years.

(19:36):

That's a big milestone now. It's about a 20 year project for that total timeline from when it was first planned to actually getting that in place with water in it. And 20 years sounds like a long time. I can assure you that's light speed for some of these projects we're talking about, especially for a reservoir. A reservoir is the poster child for a very long-term project. It takes an awful lot to get to that point. Similarly, other projects kind of more in my area where I am in the Houston area, not even talking about the development of new raw water projects, but more just focused on the implementation of transmission projects that allow us to utilize water that's already been developed. Those transmission projects have been going on for about a quarter of a century now. So 25 years of projects to help us limit our dependency on groundwater and make water more sustainable. And that's similarly also projects that have cost billions of dollars and have taken an awful lot of planning to implement. So that gives you an idea of what starts to add up to that 80 billion that George was talking about when we're talking about the overall needs for the state of Texas. And so definitely significant projects that are across the board.

(20:56):

And as you mentioned, that's definitely going to go over 80 billion. When we look at these numbers again, those are 20 $18, so already we're probably over a hundred probably going to add some more to that as we look at these new demands coming on. So significant needs overall, and the real key to this and what we tell clients all the time is a proactive approach to the way that they're planning, the reactive way of looking to see what's coming up or the next few years and then implementing the projects you need for that isn't necessarily going to work. And what's really successful are clients that are going out there and they're asking the right questions. They're thinking about not just what's coming up on the horizon, they can see, but also asking what ifs and what if a new data center pops up? What if a green hydrogen facility pops up?

(21:41):

How would we deal with those needs at a very short period of time? How do they move those sorts of things forward? The other thing that I would say in addition to the funding, we've talked about just the prize tag of some of these things, but also the need for proactive planning when it comes to permitting some of these projects, there's planning, there's permitting, there's design, there's implementation. Many different phases of this, but I can assure you there's no amount of money in the world that can move a project forward if you can't secure the state and federal permits to actually develop the project. So that's something to keep in mind. Water utilities are required to demonstrate needs for projects, and so it's very important to have that very close marriage between the water users and the water providers themselves. So there's an understanding as industries looking at potential expansions, how they can feed that information to utilities, so that can be put into those purpose and need statements for projects as they're implemented over time.

(22:44):

That's absolutely essential as we move forward. Something to look at just even beyond just the price tag things. The other key thing that we look for our clients to do and really promote is the diversification of resources. And Kamil talked a little bit about that and what they're doing. I mean, the desal project is the classic example that we like to point to use what you've got and provide a source of water that is reliable and also is completely different than all your other sources. But what he also spoke to was the work that Corpus Christi's been doing for decades now in diversifying geographically where their water's coming from. So although we're talking about multiple surface water sources, the way they've set up their network and their water supply is to look at multiple basins so they have options of where those different waters come from. What that means essentially is that they are very drought resistant in a way that a drought that impacts one or two basins doesn't necessarily impact their entire water portfolio. And that's something else that we also promote in that planning process.

(23:54):

So overall, we're going to be very creative with, we implement some of these things in the future. I mean long gone or the days from the end of the drought of the 1950s into the 1960s where we would just go out, money was cheap. Permitting. What's permitting? We don't need permitting. You would just develop projects. And what we've had done as a state at that point is developed this massive surplus and water supply that we're slowly eating away at right now and have been for several decades. Where we are right now, as George mentioned earlier, we're at a breaking point. We are pretty much utilizing what's already been developed in the past. We have to move forward with new projects that create new water, and that's a challenge in this atmosphere. It's very different than the way it had been in the past. So something to keep in mind, and of course SB 28 and Texas Water Fund, it's going to go a long way to help supporting those sorts of things.

(24:45):

But keep in mind, that's a billion dollars. Bo Ark Lake for instance, that first phase to develop the reservoir was $1.6 billion itself. And again, that's just a piece of that a hundred billion dollars prize tag that we're talking about overall. So I think more and more utilities are going to be thinking about how can they be creative with funding? Everything's on the table. They're looking at every sort of funding option. There is P three opportunities, everything that's out there. We're definitely looking for creative opportunities in both the water supplies we create and the way we get those implemented.

Matthew Lee (25:19):

Awesome. Thank you. John. Introduce NAD Bank to the audience and let us tell us how NAD Bank can help with the state's water needs.

John Beckham (25:29):

Thanks, Matt. And well, I don't know if you guys deliberately put the banker at the end here, but someone's got to pay for all this stuff and that's where we try to help out. Just by way of background, the NAD Bank or the North American Development Bank is a independent Binational Bank Development Institution founded by the United States and Mexico as part of the North American Free Trade Agreement. We were recapitalized as part of the US Mexico Canada free trade agreement that was done in 2020. And our mandate's really simple, is that to invest in the infrastructure to assure the quality of life of border region communities by having clean air, clean water, and clean land. So let's talk about that middle one since we're really talking about water today, which has been one of the core things that Banks's been working on for 30 years.

(26:18):

We've seen a lot of evolution about the success story of Texas and its southern counties and the northern cities and counties in Mexico as well, where the economic growth has surpassed national or even state averages, say with the demographic indicators. And the trends are that's accelerating due to the geopolitical shifts in supply chains where there's a lot of foreign direct investment going into Southern Texas and northern Mexico. So this is all great news from an economic point of view, but that's the challenge you guys are trying to plan for. And from our point of view, historically, we've always talked about cleaning wastewater and delivering potable water, which was the challenge 30 years ago. Really the challenges we see it in the border region and in all the South Texas is diversification of water resources, which was alluded to, and quality of water. Not all water is the same amount and the health effects of not having clean water of a good quality is detrimental to everyone's wellbeing to really try to get into that.

(27:25):

We continue to focus on our basic blocking and tackling of wastewater treatment and investing in water distribution, but we're increasingly trying to invest in planning for water reuse. Kamil talked about how industry wants reliable water. We believe that a potential solution with recurring droughts is giving water a couple different cycles before you try to discharge it back into nature. We think that's a possible solution. We also want to see that some of this water going into secondary recharges of aquifers and things of that nature to try to ensure the long-term stability of our water resources in Texas, there's been a lot more planning and effective planning on the water resources. Our neighbors in Mexico are much more dependent on ground and surface water, and that's a serious challenge there because the water resources at the end of the day are shared. And a lot of this dynamism is because of that, is because of that interchange.

(28:31):

And so we need to figure out how to collaborate. So we're working hard on that. A couple examples of how we try to do that, and then I'll turn it back to you, Matt, is we provide three tools in different sizes, shapes, and manners, technical assistance, which is basically know-how things for planning research studies, how can we try to help move things along. Some examples of what we're doing that is some water reuse and recharging out in the Tijuana and the way West Coast and Baja California. Another is grant resources. Everyone's eyes light up, love grants, it's free. Don't got a lot of that guys. So we do manage different types of grant facilities. Some of it is generated from the bank's own profitability, if you will, and other parts of it are administered by third parties, largely the EPA, we're trying to talk to George here to see if we can help him out. But more importantly, those resources we try to direct to and combine in a way with loans, which is a long-term financing can be 20 to 30 year financing. And hopefully what we all agree will be a competitive rate.

(29:40):

Examples that we've done in Texas of these blending is, well, it's not actually in Texas. We've done it in the neighbors in Tamale, Lippa and Chicago where you're doing a massive $80 million wastewater collection and treatment project in Wave Laredo, which it currently is discharging into the Rio Grande, Rio Bravo. It's a serious problem for the health of Laredo and Eva Laredo as well as everyone downstream from that. We're also working on a very substantial $25 million project in s Juarez just south of El Paso where we're putting in new sewage and collector lines for a whole part of the development where people have been moving into and constructing homes. And again, that's a shared watershed for everyone in both sides of the border. We've looked at some desal, mostly out west where their acute water needs were felt very early on. So we've done some, excuse me, seawater, desal plants in Ensenada, Mexico, and we work with El Paso water. They got some federal money that was quite cheap to do their own brackish desal plant, but we've helped them out a couple other different projects. And we know Brownsville, which is in our zip code that we operate, is also looking at some of these projects. So we're happy to help those out. We want to be creative. The numbers that are needed for the infrastructure are eye watering and relying on old tools I think is not going to get us to the infrastructure we our communities need. So with that, I'll turn it over to you.

Matthew Lee (31:16):

Thank you. And then Jason, you mentioned diversification of water sources and looking into all options, especially geographically. How come desal now it's not a new project, right? I mean we see that globally in other spots. And then I guess for Kamil and Corpus, why is it significant?

Jason Afinowicz (31:38):

Absolutely. It's one of those things we've talked many years about desalination as an emerging technology such to the point that it's not so much an emerging technology and we actually are benefiting as a state because we do have a lot of good examples that we can pull from around the country and around the world. So that's definitely a benefit for our own implementation here. And the real reason for that is just because we've really been blessed with a lot of options along the way that are the ones that we go to first. And so you don't necessarily want to jump directly to desal. There is a lot of sticker shock that comes with that. Now, if you do what Corpus Christi's doing and they're weaving that into their overall portfolio of water there, there's a lot of opportunity to really add that added resiliency that you get out of a practically a hundred percent reliable source without having to necessarily take all that sticker shock.

(32:36):

They're doing it a very smart way the way that they're implementing that. So I think it's an example that we can see elsewhere in a lot of places. It's just going to take time as we go through the state. I think if you went around a lot and asked people, a lot of them would say, oh yeah, we're really desperate for new options for water. Okay, are you really? And then once you start to see what those projects cost, people have differing opinions for how ready they are for some of those new opportunities, but the time is coming, it's just a matter of everyone getting to those new resources when it's affordable for them.

Kamil Taras (33:11):

As Jason stated,

(33:18):

The costs are astronomical for some of these projects. And we were talking about Corpus Christia, 30 million gallon per day plant is going to be at least $750 million. And so that alone is a sticker shock by itself. But desperations where the real driver is, and Jason is very correct. If you we for years try to diversify, but diversify with surface water availability, it's much cheaper to build a pipeline to some lake a hundred miles away, then build completely new infrastructure that it's energy demands and the cost for electricity to run it are high. The cost for that water is very high, but we're reaching that point where that easily accessible water is no longer available. And because of the region and because we experience drought much more often and for longer and extended periods of time, we have to find a source that can shore up our availability.

(34:28):

So yes, if our regional water, which would be the Lake Corpus Christi, Choke Canyon Dam, which are in that very drought prone area are affected, we can still depend on the Lake Sana and the Colorado River and the Northeast, but this recent summer, they experienced drought as well. And what do they do? They curtail us. They say, you have a junior water, right? We have a senior. We're going to provide the water to our community and we're going to sacrifice you. So we had to find a source to say, okay, we can't have that. We have business that it depends on, we have residents that depend on us. We have to provide this water. So the cell became now a very viable option. And even though there's a sticker shock with it, it's much better to pay the costs than not be able to provide a most essential resource to the community.

(35:29):

You can live without having electricity for a day or two a week. We all experienced it during Harvey. Well, many of us experienced it during Harvey and during winter storm Uri, but you can't go days or weeks without having a water in your tap or available in the city if somebody cuts off the supply. So we are desperate that we're doing it and we are thankful that we're able to use some expertise that's already been in the world, that it is not a new way of producing water, that there is experience out there and so we can do it right and we're not experimenting on it and having some state resources that allow us to finance it for a little bit cheaper to break that sticker shock a little bit.

George Peyton (36:21):

Yeah. Can I jump in here, Matt? Absolutely. Thanks. So just want to talk a little bit about desalination in general across the state. It's not anything new necessarily to Texas. There are somewhere in the range of 53, 54, 55 inland brackish desal plants in the state operating today already. And Texas has an enormous amount of brackish groundwater just sitting below the freshwater, right? And that's in general is a lot cheaper to develop than say seawater. It's a lot less total dissolved solid. So it doesn't take as much energy to clean that water up and force it through the membranes that you would typically have in a desalination plant. So we have some, in fact, the El Paso, the K Bailey Hutchinson plant out there I think is the largest inland desal plant in the country. And it's incredible. It really is something, if you have a chance to go out there and look at it, you should.

(37:15):

The issue with desal is that you do have this ongoing power costs, right? You're constantly pushing that water through the membranes and there's a power cost. So the upfront costs are one cost, but the ongoing power cost is another cost. And that kind of dovetails into this water energy nexus that you hear about often. So I think that's a really important point to make is that desalination is a viable option for the state. There are a lot of other viable options as well, reuse new surface reservoirs, and ultimately it comes down to economics. And we mentioned earlier on the panel that the rate payers are the ones that ultimately are going to be footing that bill. And so how does each community really want to address their water needs? How much are they willing to pay for that? And just to give you a sense of scale, we have some normalized costs of water in the state water plan.

(38:12):

I'd encourage you to go look at it as it goes through the different water projects available across the state, and they range anywhere from, for a new surface reservoir, that cost may be somewhere between $500 to a thousand dollars per acre foot. That has certainly gone up significantly and in certain places, that's not the cost, but that's in general for the projects that were in the plan, that's the realm. Seawater. Desal is somewhere between 5,000 to $7,000 per acre foot of water. So all of that ends up coming. And those are rough ballpark numbers. It's not specific really, but all of that ends up coming back on the rate payers. So like Kamil mentioned, it's a lot cheaper to run a pipeline to the Colorado River, pull water from there, but how much is your rate payer willing to pay? And really, if you have community buy-in on what needs to be done to meet their water needs, that's the best.

(39:14):

You really have to have folks willing to pitch in together and say, yes, our community, our region, is really willing to embrace this, whether it's new technology or whether it's conservation, conservation's the best. I was just in the panhandle, we were talking about agricultural conservation up there. You know what, it costs them like $20 per acre foot to move from pivot irrigation to drip irrigation, and you're saving millions of acre feet of water, not millions of acre, thousands of acre feet of water. You're saving a lot of water at an extremely low cost. So that's super beneficial. So ultimately getting these regions and folks to agree on it, ultimately the ones who are going to have to pay for it.

Matthew Lee (39:59):

Thank you.

George Peyton (40:01):

One more thing. Sorry, go for it. I forgot. I was going to say long-term, I'm extremely optimistic about what we have going in Texas, right? I used to get on these panels or give presentations and I felt like I was the Debbie Downer of the group. I'd be like, oh, we have such this massive gap in what we need for water. And oh, it's such a massive challenge. It's almost overwhelming Texas is going to find the water. We have some of the smartest people represented up here tackling this issue. We will be able to find the water, whether we desalinate the ocean, we can desalinate, we can pump it wherever it needs to go. We've got a million acre feet sitting in Lake Toledo, bend on the border of Texas and Louisiana. That's unallocated that can go someplace. We have a lot of different resources and a lot of smart people focused on the problem. So we will meet it. As Kamil said, the days of cheap and easy water are behind us, so you should expect that the cost of water is going to increase, and that's reasonable at the Texas Water Development Board. We are here to make that transition as helpful and easy as possible by keeping interest rates low and providing grants and loans. The legislature, the state legislature is focused on it. They're aware of the issue as evidenced by the new Texas Water Fund that was passed this last session. So we'll solve the problem.

Matthew Lee (41:24):

Thank you. I believe this session was supposed to end at three 50. We have a break after this, but I'll let them each give a little closing statement. If anybody has questions, feel free to go up to the mic and we will call on you. But I guess, John, any last thoughts for the audience?

John Beckham (41:41):

Wow, you have to put me on the spot, but I think the only final comment I think is twofold. One is I wouldn't ignore the possible solutions that involve private sector investment and operators. I think you alluded it to the p threes. I think necessity is the mother of invention, and I think that is one of the reinventions I think we should consider and should be on the table. It's something that the bank is prepared to offer and support. And lastly, I'll say this as a transplant from the border region, but by Canada. I think there's a practicality and a pragmatism that I find very refreshing in Texas. So I share your confidence. I think by putting some brains and effort together with some creativity, we can address these problems.

Matthew Lee (42:34):

Jason?

Jason Afinowicz (42:35):

Yeah, John, just to reiterate, yes, exactly. Any and all is the options that are on the table, and I think more and more utilities are looking at whatever makes sense. So if there are ideas, let's talk about them. But I'd say overall, going back to what George was just saying and kind of building on that, we are very fortunate in Texas, we almost have a wealth of options in how we can deal with some of these water issues. We've got recommended strategies in the plan. We have alternative strategies in the plan. We've got other wild ideas out there that we can implement. It's not for a lack of engineering or creativity from a technical standpoint, the challenges are how do you make the money work, how do you make that work with your public, and how do you move forward and have that motivation to get the projects done? So there's definitely a way,

Matthew Lee (43:21):

Kamil,

Kamil Taras (43:23):

I agree with thing, diversify. Make sure your water sources are as many as you can just like you would do in your financial portfolio. You don't just invest in one thing. You have to look at your yield versus risk, the same as water. There's risk involved with any source of water. There's yield and cost associated, but making sure that you have a good portfolio of available water sources that you can depend on is always essential, always. And planning. It's so underrated to just simple plan to look at and track of what's happening and having trigger points to say, okay, once we hit this point of daily usage, we have to start developing a new water source that is essential. That's what the city of Corpus Christi has always done, is setting trigger points and making sure that that next water source, we already are looking and potentially exploring to make sure that when we hit that we go for it. Because it is true what Jason said, diesel plan, something that's been done all over the world. I mean, permitting is going to take us nearly a decade just for permitting. We haven't started anything. We haven't designed it. We haven't done anything. Permitting is a decades long. So if we didn't pull the trigger at a certain point and given those sales time, we would've been in a situation where we cannot provide a major resource to our community because we didn't plan correctly.

Matthew Lee (45:03):

George?

George Peyton (45:05):

Yeah, I would echo all the above. And I would just say that it is a big challenge, but it's one that the folks focused on the problem have a lot of resources and a lot of tools. It's not a one size fits all thing. The difference between power and electron is an electron. If it gets to your house, it turns it on. The regulations to get to potable drinking water are extremely high, and that's why it takes so much longer to get these water resources online. So that planning is extremely important, and it's something that we want to make sure at the Texas Water Development Board that we are helping regions be planning and be proactive about their water needs. But I'm optimistic we'll get there.

Matthew Lee (45:53):

Thank you. Last chance for questions. All right. Thank you to the panel. Thank you, Bond Buyer, and thank you all. Thank you.