No further back than a decade ago Erath County, Texas, was milking a pretty good chunk of its economic health from the dairy industry.

That growth may be stymied, possibly reversed, if pending water quality issues are not soon resolved.

In the late 1990s dairies were moving in from California and other West Coast states, bringing in new, innovative technology. Dairymen from states with more rigorous restrictions and less available water saw this Central Texas area as an ideal spot to relocate.

“Dairymen built dairies in places where no dairies had been before,” says recently retired Erath County Extension agent Joe Pope. “They were looking for a location that already had a viable dairy industry with an established market. They also sought a favorable environment and reasonable land prices.”

Average size of dairies increased. “In 1978 average size was 500 cows. Now, our average is close to 800 cows and we have some 1,000- to 1,200-cow herds.”

Along with increased interest and larger herd sizes comes increased attention and scrutiny from close neighbors and municipalities concerned about water quality. With any unpleasant odor wafting across property lines or any suspicion of water contaminants, fingers point to dairies, regardless of evidence.

“We had some dairies move in where people were not accustomed to livestock neighbors,” Pope says. “There were complaints.”

And there have been more serious problems, some of which stem from a flawed water contamination model that shows potential for river contamination from a dairy as far as two miles away from the water source.

Even though the model was wrong and proved wrong, it made an impact, Pope says. Once the toothpaste was out of the tube, jamming it back in without leaving some residual suspicion proved impossible.

“Our biggest challenge was not reality but perception,” Pope says.

Residents in Waco, situated about 100 miles downriver from Erath County's dairies, noticed some odor and taste problems in its water supply. Pope says Waco city officials blamed Erath County dairies and runoff for polluting their reservoir and looked to the flawed model as proof that it could happen.

“Now, when it rains, we can count on seeing a helicopter flying over the county,” Pope says. “Six months later they'll show photos of the rain and claim runoff from dairies enters nearby streams. Our dairy industry has asked to work with Waco to study the issue. They have never come back to us to show where the problems are.”

So far, dairymen have only gotten sued.

Pope says the city of Waco has filed 10 separate lawsuits against 10 dairies (as of late summer). Five of those are state suits and five are federal. Another six actions are possible. Pope says not all dairies cited in the suits have had water quality violations.

“And a violation may not necessarily mean contamination,” he says. Violation could be as simple as a bookkeeping error.

“Some dairymen are considering leaving,” Pope says. “They'll spend from $100,000 to $1 million to defend themselves (in court) and they can't file to recover court costs.”

Pope says environmental requirements “keep changing. A new one went into effect in July.”

Willie DeYoung is one of those dairymen on the bubble. He wants to stay but says restrictions in the High Plains, where his family operates another dairy, are less burdensome than they are in Central Texas.

DeYoung has operated Hidden View Dairy since 1994. It's a large operation with 2,000 head capacity under a roof and open areas for special needs and maternity animals. He's currently milking 1,650 cows and would like to increase herd size.

“It's hard to get a permit to increase,” he says.

“Other dairies have tried to get permits to increase to 1,000 head,” Pope says. “Some have tried for three years without success. One moved to North Texas and requested a permit for 1,000 cows and had it in 75 days.”

A big part of the problem, DeYoung says, is “a misunderstanding (from the general public) about agriculture. We have to get our story out. We have tours on this farm and we have to educate each other on how to improve and to educate consumers about how we can produce milk and protect the environment.”

He says communication will be key. “We have to change the way we do business,” he says. “We have to start an open dialogue and cooperate with environmental groups.”

He says he's doing all he knows to protect the environment.

DeYoung uses third-party fields for waste disposal and he vacuums manure out of the stalls to prevent solids from getting into lagoons. The process eliminates about 90 percent of the phosphorous level he used to put into lagoons. He dumps the solids into a pit and provides it as nutrient to nearby farmers.

He says landowners are on a waiting list to get the manure. “We see a demand for it. We also work with the state to verify the third-party fields.”

Those fields are analyzed routinely to gauge nutrient levels and potential for runoff and leaching.

“We're willing to demonstrate what we're doing,” DeYoung says. “We have to be transparent. We can't afford for our customers to distrust our product. Wholesome food, clean water and clean air are what we want, too.”

He's participated in a voluntary compliance program that evaluates and monitors environmental practices. Pope says the program allows inspectors to come onto dairies and make detailed analyses. “They write a report that's tough to challenge. That report also comes with nutrient management recommendations.”

Dairies have to be inspected at least once a year.DeYoung believes he can run a competitive dairy in Erath County. “If I didn't believe that I wouldn't be here,” he says.

Pope would like to see the issues resolved so that the dairy industry could rebound. “Our dairy cow numbers peaked in 1997,” he says, “at 100,000. Now, we're down to 65,000 to 70,000.”

He agrees with DeYoung that public perception poses a big hurdle. “No longer does the population understand agriculture,” he says.

A lot is at stake. “The dairy industry is responsible for 36 percent of the county's economy,” Pope says. “And 31 percent of the county's jobs come from dairies.”

He says land prices also make agriculture a tougher go. “We can find nothing less than $1200 per acre,” he says. “For years, the going rate for farmland was $500 and now a lot is going for $3,000 and up.”

That makes it tough for an industry that sees steep peaks and deep valleys in income potential. “The return on a diary last year was a loss of $1,000 per acre because of low prices.” A rebound put money back in dairymen's pockets in 2004 but that price is never guaranteed to last.

“The economics of the dairy industry have changed tremendously,” Pope says. Burdensome regulations, unwarranted lawsuits and rising land prices make profit a moving target. And the pressure on dairies to exist with neighbors unused to agricultural sounds, activities and odors will increase. Pope says one-fourth of Texas' milk production is close to Interstate 35. That's an advantage because of transportation, but it's also where populations are growing.

“Still, this is one of the best places in the United States to produce milk,” he says.

e-mail: rsmith@primediabusiness.com