Beyond Senate Bill 3: How to Achieve Environmental Flows in Texas Under Prior Appropriation texaswaterjournal.org An online, peer-reviewed journal published in cooperation with the Texas Water Resources Institute Volume 13 Number 1 | 2022 http://texaswaterjournal.org Volume 13, Number 1 2022 ISSN 2160-5319 texaswaterjournal.org THE TEXAS WATER JOURNAL is an online, peer-reviewed journal devoted to the timely consideration of Texas water resources management, research, and policy issues. The journal provides in-depth analysis of Texas water resources management and policies from a multidisciplinary perspective that integrates science, engineering, law, planning, and other disciplines. It also provides updates on key state legislation and policy changes by Texas administrative agencies. For more information on on the Texas Water Journal as well as our policies and submission guidelines, please visit texaswaterjournal.org. 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George Texas Water Resources Institute Cover photo: A view of the Milky Way over Phoinix Ranch in Jim Wells and Live Oak counties. ©2022 Rey Garza and Jim Quisenberry The Texas Water Journal is indexed by Scopus, Google Scholar, and the Directory of Open Access Journals. http://texaswaterjournal.org https://twri.tamu.edu/ http://texaswaterjournal.org https://journals.tdl.org/twj/index.php/twj/support http://texaswaterjournal.org http://texaswaterjournal.org https://www.scopus.com/home.uri https://scholar.google.com/scholar?hl=en&as_sdt=0%2C44&q=source:%22Texas+Water+Journal%22&btnG= https://scholar.google.com/scholar?hl=en&as_sdt=0%2C44&q=source:%22Texas+Water+Journal%22&btnG= https://doaj.org/toc/2160-5319 https://doaj.org/apply/seal/ Texas Water Journal, Volume 12, Number 1 Texas Water Resources Institute Texas Water Journal Volume 13, Number 1, April 20, 2022 Pages 13-26 Beyond Senate Bill 3: How to Achieve Environmental Flows in Texas Under Prior Appropriation Abstract: In 2007, the 80th Texas Legislature enacted Senate Bill 3 on the 140th and last day of session. This bill was the third far-reaching piece of water legislation after Senate Bill 1 passed in 1997 and Senate Bill 2 passed in 2001. Collectively, these bills changed how Texas plans for future water needs, regulates groundwater, promotes conservation, studies the need for environ- mental flows balanced with population needs, and establishes environmental flow standards for Texas’ rivers, bays, and estuaries. Senate Bill 3 created a process through which scientists, stakeholders, and ultimately the Texas Commission on Environmental Quality set environmental flow standards. Over 15 years have passed since Senate Bill 3 became law, allowing us to consider the efficacy of the enabling legislation and the resulting rules. In short, identifying and securing water for the environment has been difficult due to little, if any, unappropriated water in the state’s river basins and limitations in Senate Bill 3 and the Texas Water Code. We identified seven options for stakeholders and the state to consider to increase the protection of environmental flows while respecting private property rights: (1) protecting water right owners who participate in forbearance agreements from water right cancellation; (2) pursuing cancellations and affirming abandonments; (3) requiring that cancelled or abandoned water be set aside to meet environmental flow standards; (4) modernizing how surface-water use and diversions are tracked; (5) requiring water right holders to demonstrate the pursuit of other water supplies before suspending environmental flows; (6) studying how environmental flows can coexist and be protected within a prior appropriation system; and (7) studying how dedications of water under existing water rights can be considered for tax credit or deductions to further incentivize transactions for environmental benefit. If implemented, these options could allow Texas and Texans to more closely achieve the outcomes many hoped for from Senate Bill 3. Keywords: environmental flows, instream flows, surface water, groundwater, water rights, water code 1 RSAH2O, LLC 2 Meadows Center for Water and the Environment, Texas State University * Corresponding author: carlos@rsah2o.com Received 19 May 2020, Accepted 10 February 2022, Published online 20 April 2022. Citation: Rubinstein C, Seaton C, Mace RE. 2022. Beyond Senate Bill 3: How to Achieve Environmental Flows in Texas Under Prior Appropriation. Texas Water Journal. 13(1):13-26. Available from: https://doi.org/10.21423/twj.v13i1.7115. © 2022 Carlos Rubinstein, Curtis Seaton, and Robert E. Mace. This work is licensed under the Creative Commons Attribution 4.0 Inter- national License. To view a copy of this license, visit https://creativecommons.org/licenses/by/4.0/ or visit the TWJ website. Carlos Rubinstein*1, Curtis Seaton1, and Robert E. Mace2 mailto:carlos%40rsah2o.com?subject=Texas%20Water%20Journal%3A%20Beyond%20Senate%20Bill%203%3A%20%0DHow%20to%20Achieve%20Environmental%20Flows%20in%20Texas%0DUnder%20Prior%20Appropriation%0D https://doi.org/10.21423/twj.v13i1.7115 https://creativecommons.org/licenses/by/4.0/ https://journals.tdl.org/twj/index.php/twj/about#licensing Texas Water Journal, Volume 12, Number 1 Beyond Senate Bill 3:14 Terms used in paper Acronym/Initialism Descriptive Name BBASC Basin and Bay Area Stakeholder Committees BBEST Basin and Bay Expert Science Team EFAG Environmental Flows Advisory Group HB House Bill IRS Internal Revenue Service SAC Environmental Flows Science Advisory Committee SB Senate Bill TAC Texas Administrative Code TCEQ Texas Commission on Environmental Quality TPWD Texas Parks and Wildlife Department TWDB Texas Water Development Board TWC Texas Water Code with municipal, domestic, and industrial uses having superior priority (TCEQ 2019). Neither the prior appropriation adju- dication nor the priority of use processes considered water nec- essary for environmental quality. In 1985, the Texas Legislature amended the Texas Water Code (TWC) to require the consideration of environmental permit conditions in future water rights, consistent with oth- er permit requirements, to protect instream uses (Alexander 2019). However, by 1985, Texas had been issuing water rights for over 100 years. Therefore, pre-1985 rights, which are the substantial majority of issued rights to surface water in Texas, do not contain protective language for instream flows (Hess 2005). The 1985 amendments added additional substantive requirements for reservoirs within 200 river miles of the coast. These mandated that instream flows for the protection of Tex- as’ bays and estuaries and associated marine life be protected by allocating 5% of the annual firm yield of such reservoirs permitted after 1985. The 5% allocation is dedicated to Texas Parks and Wildlife Department (TPWD) to make releases for instream flows (Roach 2013). The state issues water rights for beneficial purposes as enu- merated in Chapter 11 of the TWC. Environmental flows are not specifically listed among recognized beneficial uses for which water may be appropriated, although the statute rec- ognizes that “other beneficial uses” may exist (TWC § 11.024 2019). Amendments to the TWC due to passage of Senate Bill (SB) 3 in 2007 prohibited the Texas Commission on Environ- INTRODUCTION When it comes to providing and protecting water for the environment in Texas, the path has been anything but timely or easy. If measured by the volume of reliable and protected water set aside for the environment, the path to success remains elusive at best. Texas’ experience in this regard is not unique. We note similar difficulties among other western states. While the consideration of environmental water needs has been codified in Texas for 35 years, the fashion in which that end has been pursued means little water was available for envi- ronmental flows preservation. This paper offers potential solu- tions to that problem assuming the maintenance of the statu- tory status quo. Between 1967 and 2007, Texas undertook a statewide sur- face-water adjudication process called for by the Water Rights Adjudication Act (Gervais 2015). The adjudication process allowed the state to validate and quantify the volumes of water authorized under various other instruments (such as previously issued water rights or similar documents to include permits and certified filings) and practices prior to the Water Rights Adjudication Act. Except for the middle and lower Rio Grande (TCEQ 2019), water rights in Texas operate under the prior appropriation doctrine or “first in time first in right” (TWC § 11.027 2019). The middle and lower Rio Grande water rights (below the International Amistad Reservoir) were separate- ly adjudicated and are managed on a priority of use doctrine Texas Water Journal, Volume 12, Number 1 15How to Achieve Environmental Flows in Texas Under Prior Appropriation Figure 1. Timeline of Texas water rights, 1900–2014 (Wells and Barron Bradsby 2018). mental Quality (TCEQ) from allocating unappropriated water under a new water right specifically for instream flows dedicat- ed to environmental needs or bay and estuary inflows environ- mental use (TWC § 11.0237 2019). Under the same section of the water code, TCEQ and owners of water rights are allowed to amend existing water rights to add a use or to change a use to “instream flows dedicated to environmental needs or bay and estuary inflows” (TWC § 11.0237 2019). Passage of SB 3 in 2007 was anything but easy. SB 3 followed previous omnibus water bills enacted by the Legislature: SB 1 passed in 1997, followed by SB 2 in 2001. These bills brought substantial changes to Texas water laws governing water plan- ning and groundwater regulation and providing additional funding considerations and processes for Texas water projects (Rochelle 2007). The Texas Constitution limits regular legislative sessions to 140 days. Legislative calendars and rules severely limit action in the Texas House of Representatives and the Texas Senate during the last days of the session. For example, the 86th ses- sion 2019 calendar mandated that the 122nd day of the session was the last day for the House to consider house bills and joint resolutions on second reading. The deadline for the House to include in its daily calendar senate bills was the 132nd day of the session. The 140th day was reserved to consider only cor- rections in the House and the Senate (Dates of Interest 86th Legislature 2019). Provisions of SB 3 in 2007 were so con- tested that while SB 3 passed without much difficulty in the Senate, House adoption required an unprecedented two-thirds vote on the very last day of the session to concur with the SB 3 Conference Committee Report. The final bill included modifi- cations increasing the number of articles from four to 13, many of which were added language from local bills of interest in the final days of the session (Rochelle 2007). Proposed legislation similar to that enacted under portions of SB 3 had previously failed to pass in 2005 (Roach 2013). SB 3 provided for the identification of flow regimes and water volumes adequate to support a sound environment. It also required that TCEQ balance scientist and stakeholder process recommendations with the needs of the public in establishing environmental set asides for priority basins. The language man- dated that these set asides originate from unappropriated water that may be identified within a specific basin. Water appropri- ated under water rights issued prior to 2007 could not be taken to satisfy environmental needs (Puig-Williams 2013). Consequently, for water rights issued prior to 2007, when SB 3 was enacted, water for the environment was never even close to being first in time—and certainly not first in right. By the time TCEQ was directed in 1985 to consider permit conditions protective of the environment, the state had already allocated over 20,000,000 acre-feet of water without protec- tive language for instream flows (Figure 1; Hess 2005; Wells and Barron Bradsby 2018). While some water rights have since been amended to provide water for environmental flows, many of these limitations (such as standards applicable only to post- Texas Water Journal, Volume 12, Number 1 Beyond Senate Bill 3:16 3. Documents that take issue with either the modeling and/or process implemented to arrive at recommended flow regimes (or lack thereof ); 4. Documents that comment on what has been undertaken to try to implement SB 3; and 5. Documents that review and compare instream flow regulations in the West. As one would expect, several of the citations in this docu- ment include works that touch on any one or combination of the categories listed above. An excellent primer can be found within the fifth edition (2018) of the State Bar of Texas’ Essentials of Texas Water Resources, particularly chapter 11, which focuses on environ- mental flows (Wells and Barron Bradsby 2018). This chapter and its subsequent editions outline in great detail the many aspects, actions, and considerations the Legislature and state agencies have undertaken through time as it relates to water administration and environmental flow legislation. As a follow-up to the chapter on environmental flows noted above, we encourage readers to review The Rise of Water Con- servation and Efforts to Protect Environmental Flows (Alexander 2019). In this article, Alexander (2019) takes a focused view of how water conservation and concerns relative to the need to protect water for the environment have played a role in major water legislation in Texas. A reassuring conclusion in this arti- cle, which we echo herein, states that “[t]he progression of major initiatives…led to a 2017 Texas State Water plan that is the first state plan to include a significant share of capital costs associated with municipal conservation and to directly consid- er the adopted environmental flow standards in the evaluation of future water development strategies” (Alexander 2019). For a comparison of differences between science-based rec- ommendations and final standards adopted by TCEQ in rules, we recommend Implementing SB 3: Adopting Environmental Flows in Texas (Puig-Williams 2013). In particular, we note a conclusion of that paper that we share: “…it remains to be seen whether the standards will, in actuality, protect the ecology of the river and bays” (Puig-Williams 2013). The Texas Environmental Flows Initiative Final Report out- lines recent actions of the first organized effort taken to try to identify and execute a market-based transaction resulting in dedication of fresh water for the environment in Texas and associated challenges (Ducks Unlimited et al. 2019). Roach’s (2013) Texas water wars: How politics and scientific uncertainty influenced environmental flow decision-making in the Lone Star State opines on how final rules adopted by the TCEQ for the first two basins “did not mimic a natural flow regime…” and how the process was “derailed for these basins” due in part to the makeup and interests represented in the stakeholder committees charged with considering recommen- dations from their respective science committee and making 2007 water rights and consideration limited to unappropriated water) continue to hinder the identification, dedication, and protection of water of sufficient volume necessary to provide for a sound environment. Our paper is premised on a realistic acceptance of the status quo as it relates to enacted legislation and authorization with the aforementioned limitations granted to state agencies for the protection of instream flows. Our paper offers options that are either policy decisions or activities already authorized in the TWC that, if pursued, would enhance voluntary market-based transactions dedicating portions of already-appropriated water for the environment. We took care in choosing these options so as to not infringe on property interests and rights of water-right holders. Where we felt that a potential option would result in a property right infringement or a potential takings claim, we did not include the recommendation in this document. For example, one might suggest that the Legislature revisit SB 3 and authorize TCEQ to reopen all existing water rights, including those issued before 2007, to add permit provisions to protect environmental flows. Such a recommendation would not likely hold up to court challenges, nor do we see any viable political path now or in the future where the Legislature would entertain and/or enact this idea. Thus, we did not recommend those types of actions. In some limited instances we did offer recommendations for discussion and possible consideration in future legislative ses- sions of amendments to the TWC that could further enhance the ability to reach, in part, the desired outcomes of SB 3 while protecting property rights to water. PREVIOUS WORK In the interest of time and space, this paper will not include a detailed narrative of actions that led to the enactment of SB 3. As previously stated, our premise is that the narrative can best serve future interests by accepting as a starting point the status quo relative to TWC provisions governing instream flows and associated rules adopted by TCEQ to implement the same and offer recommendations from that as a starting point. History is important. We do rely on several excellent existing works, many of which are cited in this paper, to understand the thought process that informed the vision and desired out- come of SB 3. Our literature review identified works that can be aggregated into five distinct classes: 1. Documents that provide a historical perspective of conditions that led to the enactment of SB 3; 2. Documents that explain the regulatory process implemented under SB 3 to identify science-based flow recommendations and how these informed in part TCEQ adopted standards; Texas Water Journal, Volume 12, Number 1 17How to Achieve Environmental Flows in Texas Under Prior Appropriation Figure 2. Senate Bill 3 map (Puig-Williams 2013). final recommendations to TCEQ (Roach 2013). One inescap- able fact remains, as noted in this work: “In the end, TCEQ set environmental flow rules at levels lower than those recom- mended for protection of environmental benefits by the science teams” (Roach 2013). While we find the statement to be true, we also acknowledge that the SB 3 process specifically provid- ed that bay and basin area stakeholder committees (BBASCs) were to review the analyses and regime recommendations of their respective bay and basin expert science teams (BBESTs) and “consider them in conjunction with other factors, includ- ing the present and future needs for water for other uses [emphasis added] related to water supply planning in the perti- nent river basin and bay system” (TWC § 11.02362(o)). Water in the West’s Environmental Water Rights Transfers: A Review of State Laws provides an excellent summary of the ele- ments in common or lacking in the western states that regulate instream flows (Szeptycki et al. 2015). For a more extensive list of reference material considered in the development of this document, please see the references section at the end. SB 3 REQUIREMENTS AND RULE IMPLEMENTATION In order to evaluate and consider the recommendations that follow later in this document, let us first take a few moments to recall what SB 3 called for and how TCEQ implemented these legislative mandates in rule. SB 3 amendments to the TWC include §11.0236, which created a statewide Environmental Flows Advisory Group Texas Water Journal, Volume 12, Number 1 Beyond Senate Bill 3:18 (EFAG) consisting of nine members, three of which come from the Texas House of Representatives, three from the Texas Senate, and three appointed by the governor. The speaker of the house appoints members from the House, and the lieu- tenant governor appoints members from the Senate. Gover- nor appointments must come from TPWD, the Texas Water Development Board (TWDB), and TCEQ (Wells and Barron Bradsby 2018). SB 3 under TWC §11.02361 also called for the establish- ment of a Science Advisory Committee (SAC) to provide input to the EFAG and make recommendations to help guide the work of developing science-based flow recommendations (Wells and Barron Bradsby 2018). The priority by which Texas basins were to be addressed and for which environmental flow standards were to be developed was also dictated by SB 3 (Figure 2; TWC §11.02362(b); Puig-Williams 2013). For each priority basin, the EFAG appointed a BBASC, which in turn appointed a BBEST per TWC §11.2362(f ) and (i) (Wells and Barron Bradsby 2018). The BBEST for each priority basin was charged with devel- oping environmental flow regimes solely based on best avail- able science without regard to the need for water for other uses (see TWC §11.02362). These flow regimes, as defined in TWC §11.02(16) (2019) had to “reflect seasonal and yearly fluctua- tions that typically would vary geographically, by location in the watershed, and that are shown to be adequate to support a sound ecological environment and to maintain the productivi- ty, extent, and persistence of key aquatic habitats in and along the affected water bodies” (TWC §11.02(16) 2019). These rec- ommendations were in turn submitted by the BBEST to the EFAG, BBASC, and TCEQ. Changes to these recommenda- tions by the EFAG and BBASC were prohibited as per TWC §11.02362(n) (Wells and Barron Bradsby 2018). The Texas Instream Flow Program was established in 2001 pursuant to SB 2 and jointly administered by the TCEQ, TPWD, and TWDB. The program was charged with perform- ing scientific and engineering studies to determine flow condi- tions necessary for supporting a sound ecological environment (TWDB 2008). Texas Instream Flow Studies: Technical Over- view provides us with definitions of key concepts instructive in the deliberation and development of environmental flow regimes. Among these definitions are: • Subsistence flows: Infrequent, seasonal periods of low flow to maintain water quality criteria; • Base flows: Normal flow conditions between storm events to ensure adequate habitat conditions, including variability, to support the natural biological community; • High flow pulses: Short-duration, in-channel, high-flow events following storm events, which maintain import- ant physical habitat features; and • Overbank flows: Infrequent, high-flow events that exceed the normal channel and maintain riparian areas (Figure 3). The BBASCs were mandated to consider the BBESTs’ rec- ommendations and, together with other factors such as current and future water needs, make recommendations to TCEQ and Figure 3. Definitions and objectives for instream flow components (TWDB 2008). 19 EFAG. TCEQ was required under SB 3 to then adopt by rule environmental flow standards for the priority basins. In setting these standards, TCEQ, as required by TWC §11.1471, had to take into account the aforementioned BBEST recommen- dations, BBASC and EFAG comments and recommendations, existing competing uses and needs within the basins, as well as economic impacts and any other appropriate information (Fig- ure 4; Roach 2013; Wells and Barron Bradsby 2018). As previously mentioned, SB 3 limited action for the estab- lishment of environmental flow set-asides for the protection of environmental flows from water within a basin that had not yet been appropriated to anyone else under a water right (Wells and Barron Bradsby 2018). As compared with firm yield avail- ability within a basin, minus water already allocated for other uses, little if any unappropriated water was found either during the BBASC deliberation or in TCEQ rule development. Cer- tainly, there was not enough unappropriated water to meet the science-based recommendations of the BBEST. This is not a fault of the process or by action or lack thereof from TCEQ— it is simply an inherited legislative limitation and a reality. This is best captured by the following statement from Wells and Barron Bradsby (2018): One item of note is that, after the adoption of the third set of rules relating to the priority basins, the commission has not established any set-asides as part of the environmental flows rules adopted thus far. For example, with respect to the Nueces, Brazos, and Rio Grande bay and basin areas, the commission, in response to comments critical of the decision, stated that set- asides were not reasonable because of limited water availability (Wells and Barron Bradsby 2018). Based on this reality, it appears to us that we are left with two options: 1. Identify how more water can be made available within a basin to count towards the unappropriated water bucket that can then be considered for set-aside to meet desired benefits of environmental flows; and 2. Incentivize and add value to market-based transactions from already allocated water for environmental flow benefits. Put another way, 15 years after the passage of SB 3, identi- fying and securing water for the environment has been as dif- ficult, if not more so, than the actual passage of SB 3 in 2007. Figure 4. Texas Senate Bill 3 process for establishing environmental flows (e-flows). Grey arrows indicate appointment of agency or committee members, and black dotted arrows indicate submital of e-flow recommendations or standards (Roach 2013). Texas Water Journal, Volume 12, Number 1 Beyond Senate Bill 3:20 WESTERN STATES COMPARISON Szeptycki et al. (2015) examined statutes relative to environ- mental flows among 12 western states, identifying ten factors “to evaluate the effect of administrative review and approval processes on the past and near-term future ease and certainty of environmental rights transfers in each state.” These factors, which are shown in Table 1, include: 1. Whether state law explicitly recognizes fisheries habitat, recreation, or other environmental purposes as beneficial uses. 2. Whether transfers of existing diversionary rights to instream or other environmental uses are allowed by state law (whether by statute, court opinion, or agency opinion). 3. Whether transfers of water rights for environmental pur- poses are explicitly recognized by statute. 4. Whether private parties can hold instream flow rights. 5. Whether permanent transfers of diversionary rights to instream or other environmental uses are allowed. 6. Whether state law explicitly recognizes short-term leases and provides some form of expedited review for their approval. 7. Whether transfers of rights for environmental uses are subject to significant limitations that do not apply to other water rights transfers, including geographic limita- tions, limitations as to purpose, or more stringent proce- dural requirements. 8. Whether the state has a conserved water statute that explicitly allows some portion of water saved by irriga- tion efficiency improvements to be dedicated to environ- mental purposes. 9. Whether the state allows the instream uses to be added to a water right, along with diversionary uses, so that the holder of the right may “stack” instream and diver- sionary uses on a single water right and allocate water between the two uses each year without the need for additional state review or approval. 10. Whether the state’s law provides some mechanism for protecting informal short-term private transactions, such as split season agreements or forbearance agreements, from any risk of forfeiture or abandonment. (Szeptycki et al. 2015) Texas compares favorably to other western states, but some elements (recognizing and expediting short-term leases and protecting informal short-term private transactions from for- feiture or abandonment) are not currently available for Texas water rights. OPTIONS As previously noted, this paper is premised on the fact that SB 3 prevented direct action against pre-2007 water rights for identification and reallocation of water for environmental flows. SB 3 limited the origin of set-asides of water for the environment from unappropriated water and conditioned post-2007 new appropriations of water to such environmental flow criteria. At face value, this can be viewed by many as an opportunity lost or, at a minimum, a legal impediment. Nei- ther is necessarily true in its entirety. Pre-2007 rights issued before SB 3 hold a similar condition true of all issued water rights including those being issued today: that they are usufructuary rights. Simply put, sur- face-water rights in Texas grant the use of the water, not own- Table 1. Western states comparison of the 10 elements identified by Szeptycki et al. 2015. AZ CA CO ID MT NV NM OR TX UT WA WY Environmental Use as a Beneficial Use Specifically Recognized X X X X X X X X X X X X Transfer of Water Right for Environmental Uses Allowed X X X X X X X X X X X X Transfer of Water Right for Environmental Use Recognized in Statute X X X X X X X X X X Private Ownership of Instream Right Allowed X X X X X Permanent Transfers Allowed X X X X X X X X X X X Short-term Leases Recognized in Statute X X X X X X X X Limitations Specific to Transfers for Instream Uses X X X X X X Conserved Water Dedicated to Instream Use in Statute X X X X X X Environmental Use Allowed in a Multiuse Right X X Protection of Water Right for Forbearance and Short-term Agreements X X X X X Note: An X denotes that the element or a portion of the element exists in the noted state (Szeptycki et al. 2015). Texas Water Journal, Volume 12, Number 1 21How to Achieve Environmental Flows in Texas Under Prior Appropriation ership of the water. Surface water is owned by the state. Hold- ers of water rights may use state water in a particular place, from a particular diversion point, with any applicable volume and diversion rates for a particular beneficial use. Once this water has been diverted under the issued water right and put to beneficial use, the permit authorizing the same has been “per- fected” and thus a vested property right (Caroom and Maxwell 2018). For this reason, pre-2007 water rights were excluded by SB 3. But that does not mean that this appropriated water is lost from the system or for future consideration for environ- mental flows forever. Water appropriated under a previously issued permit, irrespective of when the right was issued, can be dedicated for environmental flows (Wells and Barron Bradsby 2018). Water appropriated under a previously issued permit, irrespective of the issued date, can be subject to cancellation in whole or in part or to abandonment (TWC Chapter 11 subchapter E 2019). TWC §§ 11.171-186 grants authority to TCEQ to cancel a water right in total or in part for nonuse over 10 consecutive years immediately before the cancellation process is undertak- en. TWC § 11.173(b) grants specific exemptions from cancel- lation: • for owners who participated in the Conservation Reserve Program authorized by the Food Security Act; • if a significant portion of a water right was used as a recommended strategy to meet a water need included in the regional water plan; • if the right was obtained to meet demonstrated long- term public water supply or electric generation needs consistent with projections for need in the state water plan; • if the water under the right was allocated as the result of a reservoir constructed and funded in whole or in part by the water right holder; • if the nonuse resulted from the implementation of water conservation measures as per applicable water conserva- tion plans; • if the nonuse resulted from a suspension or other restric- tion on the use of water under an order issued by the executive director of the TCEQ; or • the demonstration of inability to appropriate the water authorized under a water right due to drought condi- tions. TWC § 11.177 provides other critical findings of fact that the commissioners of TCEQ must determine prior to issuing a cancellation order: • whether the permit, certified filing, or certificate of adju- dication has been deposited into the Texas Water Bank (limited to a one-time exemption from cancellation as per TWC § 15.174); • whether the water right or water available under the water right is being made available for purchase through private marketing efforts; or • whether the water right has been reserved to provide for instream flows or bay and estuary inflows (TWC Chap- ter 11 subchapter E 2019). Additionally, as specified by TWC § 11.030, an owner of a water right that willfully abandons the use of state water pre- viously appropriated under a water right during any three suc- cessive years can forfeit the right to use the water and associated permit (Caroom and Maxwell 2018). Water previously appropriated under a water right that is subsequently cancelled or abandoned is again subject to appro- priation. Thus, cancellations and/or abandonments could result in additional unappropriated water within a basin. Our first and second options are that (1) the Legislature amend the exemptions in TWC § 11.173(b) by adding protec- tion from cancellation for owners of water rights that partici- pate in documented forbearance agreements (where the owner of the water right chooses not to divert water under a water right and allows the same quantity to remain in the stream for environmental benefit); and (2) TCEQ, either by its own ini- tiative or by legislative directive, exercise its existing legislative authority and pursue cancellations and affirm abandonments. House Bill (HB) 2710 from the 87th legislative session would have achieved one of these recommendations—forbear- ance protection from cancellation. Unfortunately, HB 2710 did not see final action in the Texas Senate. Cancellations, abandonments, and the basis to pursue either is based on the same set of facts: water under a previously issued water right has gone unused for at least 3 years for vol- untary abandonments and 10 years for cancellation. We note that while this water has gone unused by the existing owner and may contribute to some environmental flows in discrete segments, it is neither dedicated for the environment or pro- tected from other downstream diversions and uses. Pursuit of cancellations and affirmation of abandonment can also incentivize market-based transactions that could result in a dedication for environmental flows. Such proceedings could also result in increased deposits into the Texas Water Trust. The Texas Water Trust, created by the Legislature in 1997, provides an opportunity to acquire—by donation, lease, or purchase— water rights for environmental purposes. Existing water right holders can choose to donate or place their water right in the Texas Water Trust. Either voluntary abandonment or depos- it of the water right into the Texas Water Trust could benefit the environment and add value to water appropriated under a water right and available for market-based transactions. Our third option would require a legislative modification. Recognizing that the goal of SB 3 to have water identified and specifically set aside for the environment has not materialized, Texas Water Journal, Volume 12, Number 1 Beyond Senate Bill 3:22 the Legislature could consider amending TWC Chapter 11 to add a provision that all water previously appropriated under a water right that is cancelled or abandoned and returned to the system as unappropriated water is to be reflected by TCEQ as set-aside for compliance with the adopted environmental flow standards. Put another way, allocated water that is cancelled or abandoned should not be made available for appropriation to uses other than environmental flows. These options do not threaten a private interest to water under a previously issued water right. The water would become unappropriated due to a cancellation proceeding that is already protective of an owner’s interest to water (see Texas Supreme Court decision Texas Water Rights Commission v. Wright, 464 S.W.2d 642 [Tex. 1971]; Caroom and Maxwell 2018). Supporting the option for cancellation proceedings is the additional consideration that such actions result in a partial desirable resolution of an existing problem: addressing the over-appropriation of Texas rivers and streams. Coupled with the decline in sources of water availability in Texas as noted in the 2017 state water plan (TWDB 2017), projected to be 11% less than existing levels, not pursuing cancellations and affirming abandonments can augment the projected negative impacts due to declining water supplies for all uses—including the environment. Cancellations and legislative action to call for increased use of already existing legislative authority for the same would likely be opposed by water right holders and regulators. The burden of proof for such action rests with TCEQ. The last action by TCEQ to cancel water rights in moderate to substantial num- bers was January 2003 for the middle and lower Rio Grande (TCEQ 2003). Our fourth option is for the Legislature to enact legislation that modernizes the way in which surface water use and diver- sions are tracked. Among the data sets available to TCEQ to meet its burden of proof to undertake cancellation proceedings are the annual water use reports required of all water right holders in accor- dance with TWC § 11.031. Such reports are required to be submitted no later than March 1 (TWC § 11.031 2019). Within watermaster areas, the diversion of water under a water right is typically pre-approved by the watermaster and verified by metered diversion points and verified by assigned watermas- ter staff. For the remainder of the state, information submitted by the owners of water rights representing annual water use is largely on an honor system. Unless specifically called for in an individual water right, there is no metering requirement out- side of watermaster areas nor is there currently a requirement for a filing of intent to divert water or similar notification prior to an owner of a water right diverting water as authorized by a water right. The same is true for permit exempt diversions for domestic and livestock uses. To implement this option, the Legislature would need to modify TWC § 11.031 in four ways: 1. Remove the annual honor system-based water use report requirement. 2. Provide funding for TCEQ to develop an easy-to-use web-based application to capture diversion reporting by water users. This would be a reporting action and not a request for permission to divert, as those diversions should already be authorized under an issued water right. 3. Require that diversion reporting be more real-time in nature—for example, require that an owner of a water right report their diversion immediately prior to and no less than one week after the diversion or change in diver- sion rate. Where metering is not used, the pump’s max- imum diversion rate or other similar way of computing volume diverted and placed to beneficial use could be accepted. 4. Charge TCEQ that in the development of this online notification process, that data be captured relative to amount diverted, purpose of use, water right exercised, priority date of the water, and either consumptive or non-consumptive uses of the water diverted. Such data would allow TCEQ to better track water use against issued water rights and provide TWDB and regional water planners with better data representative of current actual uses of surface water. Such action could also assist in ensuring that only autho- rized amounts of water under a right are diverted and placed towards their intended use irrespective of whether those are occurring within or outside of a watermaster area. Obviously, this increased verification would also allow water not autho- rized for diversion to remain in the watercourse and benefit the environment. An additional benefit of implementing this option is that, as droughts have shown of late and senior calls are filed due to water shortages, a more real-time accounting of actual water use to date by TCEQ would allow it to better assess and imple- ment use restrictions and impacts to other users and the envi- ronment while responding to such calls for water. We take note of and commend TCEQ’s actions to automate water rights data through an effective tool they developed as a water rights viewer. We believe that this option is in keeping with such current advancements. Our fifth option is for the Legislature to modify the drought exemption allowing for suspension of environmental flows to make it clear that before TCEQ suspends provisions relative to environmental flows, persons or entities who will benefit from such suspension of environmental flow requirements would first have to demonstrate pursuit of water via provisions enu- merated under TWC§ 11.139. Texas Water Journal, Volume 12, Number 1 23How to Achieve Environmental Flows in Texas Under Prior Appropriation SB 3 requires that during times of drought, the environmen- tal flow criteria established by TCEQ under the required rules could be temporarily suspended. This is codified in TWC § 5.506 (2019): Sec. 5.506. EMERGENCY SUSPENSION OF PERMIT CONDITION RELATING TO, AND EMERGENCY AUTHORITY TO MAKE AVAIL- ABLE WATER SET ASIDE FOR, BENEFICIAL INFLOWS TO AFFECTED BAYS AND ESTU- ARIES AND INSTREAM USES. (a) The commis- sion by emergency or temporary order may suspend a permit condition relating to beneficial inflows to affected bays and estuaries and instream uses if the commission finds that an emergency exists that cannot practicably be resolved in another way. (a-1) State water that is set aside by the commission to meet the needs for freshwater inflows to affected bays and estuaries and instream uses under Section 11.1471(a)(2) may be made available temporarily for other essential beneficial uses if the commission finds that an emergency exists that cannot practi- cally be resolved in another way [emphasis added]. (b) The commission must give written notice of the proposed action to the Parks and Wildlife Depart- ment before the commission suspends a permit con- dition under Subsection (a) or makes water available temporarily under Subsection (a-1). The commission shall give the Parks and Wildlife Department an op- portunity to submit comments on the proposed ac- tion for a period of 72 hours from receipt of the notice and must consider those comments before is- suing an order implementing the proposed action. (c) The commission may suspend a permit con- dition under Subsection (a) or make water avail- able temporarily under Subsection (a-1) with- out notice except as required by Subsection (b). (d) The commission shall notify all affected persons immediately by publication (TWC §5.506 2019). Under separate authority, emergency orders for water can be issued by TCEQ as prescribed in TWC § 11.139 (2019): Sec. 11.139. EMERGENCY AUTHORIZATIONS. (a) Except as provided by Section 11.148 of this code, the commission may grant an emergency permit, order, or amendment to an existing permit, certified filing, or certificate of adjudication after notice to the gover- nor for an initial period of not more than 120 days if the commission finds that emergency conditions exist which present an imminent threat to the public health and safety and which override the necessity to comply with established statutory procedures and there are no feasible practicable alternatives to the emergency authorization [emphasis added]. Such emergency ac- tion may be renewed once for not longer than 60 days. (b) A person desiring to obtain an emergency authoriza- tion under this section shall submit to the commission a sworn application containing the following information: (1) a description of the condition of emergency jus- tifying the granting of the emergency authorization; (2) a statement setting forth facts which support the findings required under this section; (3) an estimate of the dates on which the proposed au- thorization should begin and end; (4) a description of the action sought, and the activity proposed to be allowed, mandated, or prohibited; and (5) any other statements or information required by the commission. … (h) The commission may grant an emergency autho- rization under this section for the temporary transfer and use of all or part of a permit, certified filing, or certificate of adjudication for other than domestic or municipal use to a retail or wholesale water supplier for public health and safety purposes. In addition to the requirements contained in Subsection (b) of this sec- tion, the commission may direct that the applicant will timely pay the amounts for which the applicant may be potentially liable under Subsection (j) [em- phasis added] of this section and to the extent autho- rized by law will fully indemnify and hold harmless the state, the executive director, and the commission from any and all liability for the authorization sought. The commission may order bond or other surety in a form acceptable to the commission as a condition for such emergency authorization. The commission may not grant an emergency authorization under this section which would cause a violation of a federal regulation. (i) In transferring the amount of water requested by the applicant, the executive director or the commis- sion shall allocate the requested amount among two or more permits, certified filings, or certificates of ad- judication for other than domestic or municipal use. (j) The person granted an emergency authorization under Subsection (h) of this section is liable to the owner and the owner's agent or lessee from whom the use is transferred for the fair market value of the water transferred as well as for any damages caused by the transfer of use [emphasis added]. If, within 60 days of the termination of the authori- zation, the parties do not agree on the amount due, Texas Water Journal, Volume 12, Number 1 Beyond Senate Bill 3:24 or if full payment is not made, either party may file a complaint with the commission to determine the amount due. The commission may use dispute reso- lution procedures for a complaint filed under this sub- section. After exhausting all administrative remedies under this subsection, an owner from whom the use is transferred may file suit to recover or determine the amount due in a district court in the county where the owner resides or has its headquarters. The prevailing party in a suit filed under this subsection is entitled to recover court costs and reasonable attorney's fees. … (l) An emergency authorization does not vest in the grantee any right to the diversion, impoundment, or use of water and shall expire and be cancelled in accordance with its terms (TWC §11.139 2019). Adding pursuit for emergency authorization of use of water under TWC § 11.139 as a precondition to temporarily sus- pending environmental flow requirements would assist TCEQ in making a finding that there are no other alternatives to alleviate an emergency. Such action would also add value to water—both for emergency use under TWC § 11.139 as well as recognizing the value of water for the environment. Our sixth option is for the Legislature to study ways in which water dedicated for environmental flows can coexist and be protected within our prior-appropriation system. A key disincentive for the pursuit of market-based transactions and dedication of water for the environment is the fact that such flows are not protected from downstream diversion and use. Water in the stream is available for diversion in accordance with issued water rights based on priority date or by permit-ex- empt domestic and livestock uses. In an ideal world, and if we could turn back the clock 120 years or so, it would have been better if environmental flows had received superior rights to water as permit exempt domes- tic and livestock uses continue to enjoy today. That is not the case. However, we should explore the intent of an environmen- tal flow set-aside. If the intent was to exclude this water from further consideration for appropriation for uses other than the environment, and if such set-asides were in fact established in rule (Wells and Barron Bradsby 2018), how would environ- mental flow set-asides be protected from diversion? The same holds true for water dedicated for the environment or diversion flow restrictions, particularly for post-2007 water rights. This issue requires further study and consideration and may in the end be incompatible within a prior appropriation sys- tem in as much as existing senior water right holders can today exercise their right to divert this water. Our seventh option is for the Legislature and interested parties to study how dedications of water under existing water rights can be considered for tax credit or deductions or buy- back so as to further incentivize transactions for environmental benefit. While there are examples of legislative action and/or dona- tions of water and dedication of the same for instream or envi- ronmental benefits that have successfully resulted in Internal Revenue Service (IRS) accepted tax credit (Hicks 2011), we were unable to identify clear IRS guidance or ruling on the issue. We noted state-specific actions like Colorado’s attempt under HB 15-1159 in 2015 and Washington state’s efforts under the Washington Water Trust program that may have tax benefits from in-state tax considerations among others. Clearly, states that impose various tax schemes can offer more flexibility than those that do not. In Texas, a mechanism that perhaps results in some property tax relief for dedications of water for the environment may incentivize market-based transactions. From a federal perspective, more flexible tax credit for chari- table donations or dedications of water for the environment under IRS Code 26 § 170 could serve as a powerful incentive for such transactions. INFORMAL ACTIONS In closing, we recognize that while this paper focused on providing options of formal or regulatory actions that could be undertaken to further incentivize the identification, acquisi- tion, dedication, and protection of environmental flows, there are proven examples across the West and in Texas of informal activities (not necessarily requiring regulatory action) with var- ious degrees of success that, in part, achieve the same desired goals. These include: • Establishment of a public, private, or public-private-part- nership water trust to serve as a recipient or holder of water rights for the environment or leased water under a market-based transaction (King 2004). • Establishment of public or private entities to serve as clearinghouses or to act in the marketplace for the acqui- sition of water for the environment. This includes the buyback of water rights by state agencies. Transactions can be outright purchases, leases, and donations of water for instream flows (Landry 1998). • Non-governmental organizations’ collaborative efforts with stakeholders and owners of water rights for the establishment of System Conservation Pilot Programs to promote funding for actions that include leaving water in the streams for environmental benefit (Szeptycki 2018). An added benefit of this type of effort is that by identi- fying within a targeted river reach or segment interested parties that agree to participate in a conservation pro- Texas Water Journal, Volume 12, Number 1 25How to Achieve Environmental Flows in Texas Under Prior Appropriation gram, including fallowing of fields and commitments to divert less water, such actions result in the protection of environmental flows that can be studied for intended benefits within these same targeted river reaches. o Related to incentivizing water conservation and reduced water demand, we note the interest in New Mexico to allocate funds in their state budget for implementation of a pilot program to incentivize and compensate reduced use of water on the Rio Grande by fallowing fields. In this case, the cause of action appears to be the ongoing Texas v. New Mexico Rio Grande Compact dispute (Nott 2020). While the outcome in this case is to make available additional water for compact compliance, it is ironic and inescapable that such actions result in leaving more water in the stream. These types of actions relate to both surface and ground- water rights. Such actions can assist in addressing and in part reversing negative impacts in areas where groundwater and sur- face-water interactions are evident. CONCLUSION Texas, like other western states, came to the realization that its water adjudication processes had not provided protections through time for instream flows providing environmental ben- efits. The prior appropriation system and property right inter- est it conveys, which governs most all western water law, is at a minimum incompatible with post-adjudication attempts to address the lack of reservation and protection of water for environmental flows. But this partial incompatibility has not deterred legislators, regulators, and stakeholders from pursu- ing transactions and dedications of water for the environment. Meeting environmental flow needs and addressing the associat- ed water issues are complex. The issue remains unresolved—but progress has been made. Continued creative efforts to address the issue are needed if we are to achieve the goals we strived for—water for the environment that is protected for such use and benefit. REFERENCES Alexander K. 2019. The rise of water conservation and efforts to Protect environmental flows. Water Resources IMPACT. 21(4):16-19. Available from: https://aquadoc.typepad. com/files/awras_awras0419final.pdf. Caroom DG, Maxwell SM. 2018. Chapter 9: Surface water rights permitting. In: Sahs M, editor. Essentials of Tex- as water resources. Austin (Texas): State Bar of Texas. p. 9-1–9-15. 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