18 Jun 2008

Texas Pump 'em

Businessweek covers T. Boone Pickens' plan to export water from the Texas Panhandle to Dallas. Pickens, a famous oilman, appears to think that pumping water will be as lucrative as pumping oil. His plan to sell 200,000 acre-feet a year to Dallas at $825/AF depends on a few things:
  • Getting the right of way to ship water across 250 miles, and 650 tracts of property. Interesting details of how Pickens manipulated the rules on special-district formation to get the rights to eminent domain.
  • Pumping faster than his neighbors: Texas has the worst ground water rights I've ever heard of ("If I can pump it, it's mine"), and Pickens will be competing with neighbors to draw down the local aquifer. (He claims to be ok with a 1.2% drawdown on a 0.1% recharge.)
  • Dallas being willing to buy some pretty expensive water. There may be competition from farmers who are closer to the city (prior post).
Bottom Line: Pickens is onto something, and he'll make a killing -- unless Dallas reforms its water pricing and/or ag-urban water markets are allowed to work. Watch this one.