Resolution of a bitter dispute under way in the West Texas town of Dell City could affect the way the state decides to manage water resources as more and more municipalities look to rural areas to meet rapidly rising water demands.

A lot rides on what happens in this tiny farm town of 539 souls located about halfway between El Paso, Texas, and Carlsbad, N.M., as farmers, ranchers, land owners, big businesses and some companies buying land and water rights for the sole purpose of selling and transferring water to El Paso vie for dibs on an aquifer that holds from 65,000 acre feet to more than 100,000 acre feet, depending on whose figures you accept.

This and other disputes likely to emerge across the state are possible because of a Texas Legislature action several years ago that allows transfer of water out of natural water basins and into areas of heavy need.

The City of El Paso expects current water supplies will fail to meet demand as population increases over the next 20 to 50 years. And, about 75 miles to the East, lies the Bone Springs-Victoria Peak Aquifer, upon which Dell City was established and began to thrive as an agricultural community about 60 years ago.

Some accounts suggest that oil drillers found little petroleum but plenty of water in the Dell Valley. Farmers began moving into the area in the late 1940s, producing irrigated cotton at first and then switching to more valuable crops such as chili peppers, melons and alfalfa. Several abandoned cotton gins stand as icons of changing times and evolving economies.

Pipe out water?

The economy may be due for an even more radical change if the area's most valuable resource is piped out.

Local farmers fear that depletion of the aquifer will limit their ability to irrigate, restrict production and damage the local economy. They already see how fragile a farm-based community can be. Boarded-up buildings along Dell City's main street remind residents where the movie theater, farm equipment dealership and other thriving businesses used to be, back when the agricultural economy was more robust. An economic hit from reduced capacity to irrigate the chili and alfalfa crops that dominate the farm economy could kill the town, some fear.

Others say the revenue from water rights sales would more than make up for lost farm income.

And there's the rub.

The pressure rests on the shoulders of the Hudspeth County Underground Water District (HCUWD) to protect the aquifer from depletion. The water district, created in 1956 and reputed to be the fourth oldest in the state, was, by some accounts, inactive for years. Few rules existed or were enforced.

Following passage of Senate bills No. 1 and 2, however, and after a thorough evaluation of the state's water resources and future needs, the district was mandated to devise rules to protect the aquifer, especially in light of a landowner's new right to transfer water out of the basin.

Without oversight of a water district, an area's water resources fall under the state's long-held policy, the right of capture, which allows a land owner to pull as much water as he wants for “legitimate use” from underneath his property.

4 acre-feet

Currently, farmers within the jurisdiction of HCUWD and with acreage qualified for irrigation are allowed to use about 4 acre-feet of water per year for crop production. That's down from 5 acre-feet in previous years, reflecting a lower aquifer level from several years of drought. Permits change as the aquifer moves up or down, which depends on recharge from the Sacramento Mountains in New Mexico.

Qualified acreage represents another bone of contention.

Two years ago, the district's board of directors devised new rules for allocating water. A controversial aspect of those rules is a requirement that to qualify for irrigation a landowner must have irrigated his acreage during a 10-year historical use period, 1992 through 2002. Land that was idle during that time does not qualify for irrigation rights.

The rule also affects land entered into the conservation reserve program (CRP). However, a stipulation allows CRP land to qualify for irrigation if the land was irrigated two of five years prior to entering CRP and if the acreage was enrolled in CRP during the entire historical use period, 1992-2002.

Keith Richardson, who farms 590 acres in the district, stands to lose irrigation on about 100 acres of land because it was enrolled in CRP from 1989 through 1998. In 1999, Richardson brought the land back into production and started irrigating to produce grazing for sheep. He also raises alfalfa.

Based on the water district's rules, Richardson is not entitled to irrigate the CRP acreage, a finding he challenged at a recent HCUWD board hearing, complete with a presiding judge and a room full of lawyers.

Based on the water board consultant's figures, Richardson was entitled to irrigate 311.35 acres. Mark Brown, Richardson's attorney, argued that historical use should include the time the land was in CRP and claimed Richardson was entitled to irrigate 496.4 acres.

CRP acres denied

The board allowed 52 acres on which Richardson had produced crops during the historical use period but had not kept production records. They denied water for the CRP acreage.

“They are trying to take away one-third of my land,” Richardson said.

Brown said the rule could be “a constitutional issue.”

John Navar, a native of Mexico and a neighbor of Richardson's, said he never expected to see farmers taken advantage of this way in the United States. “It's a matter of economics,” he said. “What does it take for me to lose my farm?”

Navar is proud that he's never accepted government payments on his farm and said the “biggest recipients of the government programs came up with the (water district) rules. If I had known two years prior to the rules what would come down, I would have altered my farm operation to get into compliance,” he said. “I had no chance to comply.”

Navar lost water rights on 50 of his 690 acres. He produces forage crops.

Neither Navar nor Richardson plans to sell water. “We just want to farm,” Richardson said.

“Corporate farming, is that what we want to do in this country?” Navar asked.

He's skeptical of what he sees as pie in the sky promises for water sales. “I've never believed El Paso would come over and make me a millionaire,” he said. “I still don't believe it.”

Richardson said water has value “but only with the land.”

Jim Lynch is also fighting for water rights on CRP land, more than 3,300 acres. The Lynch family traces a farming and ranching heritage back to 1950, when Jim's father sold land in California and moved to Dell City. Jim and two brothers inherited the operation, which Jim oversees, and members of a third generation scattered across the country also have vested interests in how the water rights issue is settled.

Contract void

At one time, the Lynch family contracted with El Paso to sell water. That agreement is void until the water rights issue is decided, a process that could take years.

Lynch, who serves on the water district board, said the family put land in the CRP program in 1987.

“Two years ago, the board changed the rules to historic use so that if landowners did not irrigate in those 10 years, they lose water rights on the property,” Lynch said. He opposed the rule change but was in the minority.

“The key is that El Paso wants to buy water and no one can sell if they don't have water rights,” he said. “The rules are not fair and are like taking of property.”

Lynch said the operation is permitted “only enough water for cattle. We can't irrigate or sell water.”

Lynch said under the water district's rules, “Five percent of the property gets 95 percent of the water rights.”

Woody Hunt, an El Paso builder, and Denver billionaire Phillip Anschutz, control much of the Dell Valley acreage. Both have extensive farming operations within the water district's jurisdiction. Hunt has proposed that the Dell Valley could provide up to 45,000 acre-feet for future El Paso water demand.

Robert Carpenter manages the CLM Co. Farm in Dell City, an operation of some 16,000 acres owned by Anschutz. Carpenter also farms on his own and sits on the water district board. He said the rules are fair and designed to protect the aquifer.

“Our main objective is to protect the water,” he said. “Most western states control water rights and control has to be bound by historical use.”

Sticking point

Carpenter said the sticking point in the rules centers on historical use. He said the board could have decided on a 20-year historical use period or five (or any other number) but thought 10 was fair. “If the aquifer recharges, land owners (without current water rights) have a secondary right to file for validation.”

He also said the rules were based on sound water management principles and could be used as a model for other water districts in the state. “At some point, the state legislature may consider any area outside an established water district as part of a state water district,” he said.

Currently, the district controls about 600,000 acres of land and the water underneath it. The district expanded several years ago to take in all of the Bone Springs-Victoria Peak aquifer.

“It made sense for the district to control all the water in the aquifer,” Carpenter said, “so no one could pump us dry.”

And therein lies another controversy. The Lynch family owned some of the land that was outside the district before expansion and contends the expansion was designed to deny them water rights.

“No one asked for expansion,” said Bill Lynch, Jim's nephew who lives in San Diego.

He said the Texas legislature passed a bill expanding the aquifer after encouragement by a lobbyist who Lynch says represents Hunt's interests.

Bill and two brothers, James and Mick, own an interest in the Lynch operation, inherited from their father. Jim and his brother Jack also control part of the Lynch operation. Some 13 Lynch offspring and their families also have interests in the farm.

Bill takes issue with the rules adopted by the water board in May 2002. “These new rules effectively strip commercial water rights forever from any landowners who did not irrigate land during a very narrow and arbitrarily chosen ‘historic use’ period,” he said.

Lynch said the board's “lopsided water allocation…is not fair or impartial rule-making as required under Chapter 36 of the Water Code.”

Lynch said the issue in Dell City holds implications for water districts across the state. “This is the first of (an anticipated) many water districts to re-write their rules.”

He also said water speculators are hard at work to “scoop up more water rights at the expense of unsuspecting long time farmers and landowners.”

‘Will need water’

Lynch said the rule disallowing CRP acreage seems arbitrary and ill conceived since the CRP contract requires that farmers not irrigate or cultivate enrolled acreage.

“Farmers will need water when they exit the CRP contract,” he said.

“We and others have experienced enormous damage to our property rights and in particular our water rights by virtue of these new rules and laws,” he said.

Lynch said legislative action would be necessary to preserve groundwater rights for Texans.

Carpenter said Anschutz also has a long history of farming in the valley. “He's been here for 27 years,” Carpenter said, “and he's invested a lot of money in the town and employs a lot of people.”

But whether to sell water or continue to maintain the farming operation will be “a business decision,” Carpenter said. “If an opportunity comes along and shows that (selling water) makes more sense than farming, he'll take advantage.”

James Rasco doesn't believe selling water to El Paso will affect his farm operation significantly. “I plan to continue farming,” he said. “I'll be a captive farmer. I won't sell my land so I'll continue to farm.”

He said that selling out would mean abandoning the investment and effort he's put into his farm since 1959. He employs about 20 people on 3,500 acres of land.

If I ever sold, water rights would be divided among other farmers. If I ever sell, and I don't intend to, I'd sell to another farmer.”

Rasco has no problem with the district's water rules, even though he's lost acreage because of them.

“We've all lost some acreage,” he said. “We can't take all the water in the aquifer and divide it up among all the land owners. There would not be enough water for anyone to do anything. Some owners just want a water ranch.”

Rasco said his water validation is 4 acre-feet a year, down from 5 acre-feet. “I had to lay out some land because I couldn't irrigate,” he said. He grows alfalfa and chili peppers.

Values oversight

Without oversight of the water district, Rasco fears that all the farmland could dry up.

“The district does not have to sell water. They can't let anyone pump the aquifer dry. We have to maintain the water level in the aquifer.”

He said some 30,000 acres are currently in crop production in the valley. At the height of the ag economy, in the 1950s, farmers had around 40,000 acres in production Rasco said the dispute has created ill will in Dell City. “People who grew up together are not friendly any more. In some cases it's pitted ranchers against farmers,” he said.

Ranchers are limited to the amount necessary to water cattle, not to irrigate. That's fair, Rasco said. Farmland value and crop moisture demand are considerably higher than for rangeland.

“The taxes (on farmland) are greater, too,” he said.

He said landowners who put land in CRP were paid to enroll their acreage “and got a tax break,” while the land was idle.

He said the farmers who live in the valley are not the ones causing problems.

Speculators are buying land and water rights for sale and transfer. Carpenter said Cimarron Ag, for instance, “wants to sell water and is not interested in farming.”

He's also concerned that some landowners are “asking for more water than they are entitled to and do not want to farm. The people taking a hit are the farmers,” he said.

Most observers agree that the water dispute would be moot if El Paso didn't need water and was not willing to pay for water and to install pipelines to move it.

In the near term, farmers should have enough water to continue operations. If the district, a partnership or individuals eventually contract with El Paso to sell a significant amount of the Dell Valley water, the chore of building the infrastructure necessary to desalinate (The water is a bit too salty for human consumption as is.) and transport the water will take years. And the hearings, lawsuits and appeals process could muddy these already turbulent waters for a long time.

And before any of that happens, the state of Texas could step in and alter the way it manages its water resources.

e-mail: rsmith@primediabusiness.com