Our Woodlands. Our Future.

The Woodlands Township Elections November 2022

Montgomery County Water Wars - The Back Story

by Bob Leilich

By Robert H. Leilich and John Stautner

Jace Houston, the former General Manager of the San Jacinto River Authority, was pressured into resigning, effective June 30, 2023, amid a swirl of politics related to water. This is the back story as best as we can piece it together.

A Little History

The groundwater back story began in 2001 when stakeholders within Montgomery County agreed that a regional solution was needed to address growing concerns with subsidence, water supply, and declining water well levels resulting from over pumping of groundwater. All involved stakeholders agreed that groundwater alone could not keep up with the growing water demand in Montgomery County and that a solution was needed.  The Texas legislature also agreed and responded by creating the Lone Star Groundwater Conservation District (LSGCD) with the authority to specifically address these problems. Creation of the LSGCD was approved by 74 percent of the Montgomery County voters in November 2001.

After studying available scientific evidence, LSGCD concluded that no more than 64,000 acre-feet (21 billion gallons) should be pumped each year from the Gulf Coast Aquifers in Montgomery County.[1] In 2006, the LSGCD adopted rules regulating the amount of groundwater that could be pumped by utilities in Montgomery County.

To support LSGCD’s efforts, the San Jacinto River Authority (SJRA) proposed a joint Groundwater Reduction Plan (GRP). This regional partnership approach to solving groundwater challenges had been successfully implemented by utilities in Harris, Galveston, and Fort Bend counties.  Approximately regional 40 GRPs were created in Texas, including SJRA’s Montgomery County GRP to address LSGCD’s regulatory requirements. The SJRA GRP was implemented in 2010 with about 80 participating utilities. Among other things, it called for the construction of a surface water plant and a distribution system at a cost of around $550 million.

All participants signed (some now say were coerced to sign) contracts that shared the amortization of costs to build the plant and distribution lines through a GRP fee based on each utility’s water production, regardless of whether it was surface or groundwater, under the concept that those that use surface water allow others to pump more groundwater without increasing total groundwater pumping. This solution would help to prevent subsidence and stabilize aquifer levels for the benefit of everyone in Montgomery County. With these contractual guarantees, the Texas Water Development Board (TWDB) loaned the funds to build the plant and distribution system.

The Plan Begins to Fall Apart

Like the GRPs in Harris and other counties, the joint Montgomery County/SJRA GRP appeared to initially work well after the surface water treatment plant was built. Soon, however, a handful of private utilities and municipalities began to question the need to reduce groundwater pumping and complained about the costs associated with providing surface water including the costs of amortizing bonds to build the surface water plant and distribution infrastructure. They wanted more, less costly, groundwater without, in the opinion of many water experts, adequate consideration of the impacts that excessive groundwater pumping has on aquifer levels, subsidence, increased susceptibility to flooding, and potential increased infrastructure damage.

Under pressure from some local water utility constituents (and financial supporters), Representative Will Metcalf (District 16) responded by drafting successful legislation in 2017 to change nine appointed LSGCD directors to seven publicly elected directors. Many of those elected did not have the same level of expertise in water issues and appeared more partial to private utility interests.

All of these new directors were elected with financial support from a single private groundwater producer. Soon, the cordial working relationships between the LSGCD board and the SJRA began to deteriorate as the new directors seemed intent on downplaying previous studies that noted the serious, adverse effects of excessive groundwater pumping on irreversible subsidence and future groundwater supplies.[2] The LSGCD also went on to successfully engineer a 50 percent increase in groundwater pumping allowances, known as a Defined Future Condition (DFC), from 64,000 acre-feet to 97,000 acre-feet in 2022.[3]

The Lawsuits Begin

In the years leading up to the start of legal disputes, the Conroe City Council had been under increasing pressure by its citizens regarding rising water rates. Instead of explaining to citizens the need to develop new water supplies to meet growing demands, the Council voted, in 2016, not to pay a GRP fee increase.[4] Conroe charged its customers these increased fees, however, and proceeded to escrow the increased fees while awaiting a resolution. Magnolia soon did the same. Because this left the remaining 78 GRP members to cover the revenue shortfall and because of GRP bond covenants, the SJRA had no alternative but to file suit to enforce the legally binding contracts. Both Conroe and Magnolia now claim they have sovereign immunity and are not subject to lawsuits, a claim that is currently being tested in court.

Encouraged by Conroe’s action, a private utility, Quadvest, announced in July 2020 that it was totally suspending all GRP payments,[5] but continued to collect the fees from customers and put those payments in escrow. Woodland Oaks, another groundwater producer, soon followed Quadvest’s lead. Both then sued the SJRA claiming that the GRP contracts violated the Sherman Antitrust Act of 1892. A District Court denied SJRA’s request to dismiss the suit, but a motion for summary judgment is likely in the near future.[6] Quadvest and Woodland Oaks also filed a suit alleging that the GRP contracts are not valid.  That suit was resolved in SJRA’s favor with the court finding that the contracts are not only valid, but are also incontestable by law. Quadvest and Woodland Oaks are appealing that court decision.[7]

The TWDB, the Texas Attorney General’s office, and others at the state level were alarmed that the claim of sovereign immunity by Conroe and Magnolia and the actions of private utilities could lead the SJRA to potentially default on bond payments if not resolved. There was also concern that these actions could put all Texas regional water partnerships at risk, casting a chill, if not a halt, on regional projects that are critical to all of Texas’ future water supply developments. These concerns led to the preliminary drafting by Senator Charles Perry’s office of legislation that would invalidate any claim of immunity for regional water projects funded by the State of Texas.[8]

Innocent Bystanders

Innocent bystanders in this complex and senseless legal, and now political, battle are water rate payers who are on the hook for millions of dollars in past and ongoing legal fees. Also at risk are residents and businesses whose properties are in areas subject to flooding and irreversible subsidence as groundwater pumping continues at rates greater than natural aquifer recharge rates.

The Battle Becomes Personal

With the SJRA remaining firm in its insistence that all GRP participants honor their contracts, Representative Metcalf and his constituents at the LSGCD and the City of Conroe believed that SJRA was responsible for the state’s proposed legislation prohibiting utilities from claiming sovereign immunity, which SJRA emphatically denied. As the legal and legislative battle continued, Jace Houston became a personal target of parties opposed to SJRA and its regional water solution. These parties claimed that he was the main obstacle to a settlement. They mounted a full court press to get him fired, garnering the support of Representative Will Metcalf. Responding to his constituents, Metcalf attached a last-minute floor amendment to H.B. 1540 to effectively fire Jace Houston, bypassing a Natural Resources Committee hearing on this matter.

Based on videos of hearings and the legislative record, it appears that Rep. Metcalf also convinced fellow local legislators, Senators Lois Kolkhorst and Representative Steve Toth to support, or at least go along with, the amendment. Senator Brandon Creighton was taken by surprise by Metcalf’s amendment and did not get involved.[9] Metcalf pushed the amendment as a local issue, and with no opposition by local legislators, the amendment passed the House without a single nay vote. [10]

There is an unwritten protocol among legislators that when a member files a bill focusing on a local issue that only affects their district and there are no objections among local legislators, the House will rubber stamp the proposed legislation.  Despite the obvious negative precedent of this amendment, Metcalf used the “local bill” protocol to force it through.

This unwritten protocol means that passing bad “local” legislation also could set a bad precedent for broader statewide matters.  Should state representatives be able to create legislation to fire river authority employees, school superintendents, city managers, or any other local government employee, it would greatly diminish the privilege and authority of the Executive branch. This attempt to create a “vendetta law” needs to be addressed with laws that forbid this kind of legislative misuse.

The amendment to fire Houston moved from the House to the Senate for hearings in the Senate Committee on Water, Agriculture, and Rural Affairs, under Senator Charles Perry. Legislators received dozens – if not hundreds - of calls from constituents telling them that the amendment was a bad idea.  Testifying in favor of the amendment, however, were the chairman of the LSGCD, the president of Quadvest, Conroe City Council member Harry Hardman, and former Conroe Mayor Webb Melder.[11]  Their arguments in support of keeping the amendment were not convincing and were dismissed as inappropriate interference in the privilege of the Executive Branch to appoint the SJRA Board and its right to select a General Manager.

The dismissal of this amendment in the Senate Committee set up the potential for a bitter Senate Floor fight. Senator Kolkhorst threatened to propose a bill that would limit the SJRA board members to a one-year term. Also, if Metcalf’s amendment firing Jace Houston was offered on the Senate floor and supported by all local Conroe legislators, it too might pass under a similar unwritten general protocol. This would have put the governor in a difficult position to veto the bill and earn the ire of many Republicans in both the House and Senate, just when the governor needed their support for his broader legislative priorities.

Houston Does the Most Honorable Thing

Though the SJRA board and many state government leaders and the Texas water industry supported Houston as a highly effective, knowledgeable, and decisive manager, Houston saw himself being set up as a scapegoat – caught in the center of a dispute in which there would be no favorable outcome if he fought back or remained as General Manager. He offered to resign if the parties would drop the lawsuit and agree to honor their contracts. Conroe rejected this offer, but he resigned anyway to step out of the legislative mud being dumped on him, the theater of a potential Senate floor fight, and potentially even worse legislation (such as that threatened by Senator Kolkhorst).

A Tale of Legislative Misuse

This back story is a sad tale of Texas politics and legislative misuse that goes beyond water and one individual. It demonstrates the power of influence by special interests to override public interest and serves to further demonstrate the willingness of legislators to reward financially supportive constituents and gain support for re-election. It also encourages those with self-serving interests to push for even more control over water (and perhaps other) issues.

Meanwhile, the lawsuits continue to meander through the halls of Justice. A new SJRA general manager isn’t going to change the outcome of the lawsuits, but these actions could negatively affect Montgomery County’s future water sourcing and water rates. As a worst case, failure to honor GRP contracts could lead to a default on bond payments, putting all of the state’s taxpayers on the hook to pay for them, threaten future funding of civil works relating to water and other utility projects, and deem contracts with city governments as unenforceable.

Meanwhile, taxpayers continue to be dunned for legal fees, and efforts to control excessive groundwater pumping are virtually on hold with the surface water plant currently operating at about 50% of nominal (normal) capacity as GRP participants cannot agree on greater use of costlier surface water. The public needs to be more aware of the issues that affect short and long term water supplies as the county continues to grow.

Bob Leilich is a former Municipal Utility District (MUD) President and Trustee and is currently a MUD director. He is the retired owner of a professional business consulting firm and has lived in The Woodlands for over 16 years. He has been active in many community volunteer activities, including a Woodlands Village Association, a village Residential Design Review Committee, and Prison Ministry and Church Mission Trips. He has a BS degree in Mechanical Engineering and an MS in Industrial Management from Purdue University and has completed post graduate studies in transportation economics at Yale University. He can be reached at bobleilich@att.net.

John Stautner is the founder of ETSZONE, a developer of transformative digital communication strategies. He also founded the website www.theWoodlandsInFocus.com, which focuses on local issues affecting the community, including those related to water. Previously John was a vice president at Compaq and at Hewlett-Packard and has lived in The Woodlands for 28 years. He has degrees in Physics and in Music & Technology, both from the Massachusetts Institute of Technology.  He can be reached at John@etszone.com.

[3]  One acre-foot equals 325,851 gallons

[8] When asked to verify this statement, Senator Perry’s office, verbally and in an email, declined to comment on this statement.

[9] Based on personal conversations with both Senator Creighton and his office staff.