The General Land Office (GLO) adopts amendments to 31 TAC, Chapter 13, relating to Groundwater Leasing, 13.30 relating to Statement of Policy, 13.31 relating to Leasing Procedures. The amendments are adopted with changes to the proposed text as published in the January 27, 2006, issue of the Texas Register (31 TexReg 456). The new subchapter C will contain rules governing the procedures for the leasing of groundwater resources on state lands.

The amendments are intended provide guidance for interested parties as it relates to the GLO's policy and procedures regarding the exploration and development of groundwater resources on state lands.

Governing actions of the GLO and the commissioner in the exploration and leasing process as it relates to state groundwater resources, adopted 13.30, relating to Statement of Policy, describes the policies of the GLO regarding the development of State groundwater resources; requires the submission of any proposed leases involving groundwater resources on permanent school fund lands to the School Land Board for review; and requires notification of any regional water planning group and/or groundwater conservation district in which lands proposed for such leases are located. Section 13.31, relating to Leasing Procedures, sets out the procedures for leasing groundwater resources either by sealed bid or direct negotiation.

Written comments on the proposal were received from the Brewster County Groundwater Conservation District, Bluebonnet Groundwater Conservation District, Jeff Davis and Presidio Counties UWCD, and a joint comment on behalf of Environmental Defense, National Wildlife Federation, and the Lone Star Chapter of the Sierra Club.

The comments generally addressed the following concerns: (1) modifying the phrase "rules of any groundwater conservation district" with the word "administrative" might serve as a limitation of the district's authority; (2) that the rule language did not expressly address lands located outside the jurisdiction of a groundwater conservation district; (3) the term "quasi-municipal" was undefined; (4) that additional or alternate criteria should be considered before entering into any such leases; and (5) objections, generally, to the use of a sealed bid process.

In response to the first concern, the commissioner changed the word "administrative" in the proposed amendments at 13.30(c) to "applicable." This alteration in the text of the rule should make it more clear that any applicable rules of a groundwater conservation district with jurisdiction will be considered.

To address the second concern, a sentence stating that "For land not located in a groundwater conservation district, the commissioner may require development consistent with the rules of any groundwater conservation district with jurisdiction over an aquifer that is likely to be affected by the project" was added to the text of 13.30(c). The phrase "quasi-municipal" was replaced by "other" in 13.31(a) to address the third concern. This change was made so as to better effectuate the intent that potential lessees who are suppliers of public or domestic water systems will be given priority in the leasing process.

With regard to the fourth concern, specific proposals submitted by commentors were considered. The commissioner notes that, as published, the proposed rule sets out broad categories of criterion that may be used in the review of any proposed leases. The commissioner notes that the rule, as adopted, is consistent with existing policies of the General Land Office and does not limit the criteria by which a proposed lease may be evaluated.

The fifth category of concern mentioned by commentors relates to the potential use of a sealed bid process for the awarding of leases. The commissioner notes that this process is consistent with other procedures used in the leasing of State lands.

The justification for the adopted rulemaking is that the public will benefit because the new sections will set out both the policy and procedures for the exploration and development of groundwater resources on State Lands. There will be no effect on small businesses, and a local employment impact statement on these proposed regulations is not required, because the adopted rule will not have any identifiable material adverse affect on any local economy in the first five years it will be in effect.

Pursuant to Texas Government Code 2001.0225, a regulatory analysis is not required for the adopted rulemaking as a "major environmental rule." Under the Government Code, a "major environmental rule" is a rule the specific intent of which is to protect the environment or reduce risks to human health from environmental exposure and that may adversely affect, in a material way, the economy, a sector of the economy, productivity, competition, jobs, the environment, or the public health and safety of the state or a sector of the state. The adopted rulemaking does not exceed a standard set by federal law, does not exceed an express requirement of state law, does not exceed a requirement of a delegation agreement or contract between the state and an agency or representative of the federal government to implement a state or federal program.

The commissioner of the GLO has evaluated the adopted amendment to determine whether Texas Government Code, Chapter 2007, is applicable, and whether a detailed takings impact assessment is required. The commissioner has determined the adopted rules do not affect private real property in a manner that requires real property owners to be compensated as provided by the Fifth and Fourteenth Amendments to the United States Constitution or Article I, Sections 17 and 19, of the Texas Constitution. Furthermore, the commissioner has determined that the adopted rules will not affect any private real property in a manner that restricts or limits the owner's right to the property that would otherwise exist in the absence of the new rule being adopted.

These amendments are adopted under Texas Natural Resources Code, Chapter 31, including 31.051, which authorizes the commissioner to make and enforce suitable rules consistent with the law and Texas Natural Resources Code, Chapter 51, including 51.121 which authorizes the commissioner to lease unsold public school land for any purpose the commissioner determines is in the best interest of the state under terms and conditions set by the commissioner.

Texas Natural Resources Code 51.121 and 32.061 are affected by this rulemaking.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

13.30. Statement of Policy.

(a) This subchapter applies to applications to lease public lands dedicated to the permanent school fund for the purpose of exploring for or developing groundwater resources located on or under such lands.

(b) The provisions of this subchapter are intended to assure that the groundwater resources of permanent school fund lands are developed and produced in a manner that maximizes their potential while recognizing and taking into account the public interest, sound water use and conservation practices, and impacts on existing uses.

(c) Projects undertaken by a lessee to develop groundwater resources on permanent school fund lands will be subject to applicable local, state, and federal law as well as any applicable rules of groundwater conservation district(s) in which the lands may be located. For land not located in a groundwater conservation district, the commissioner may require development consistent with the rules of any groundwater conservation district with jurisdiction over an aquifer that is likely to be affected by the project. Such projects may not export groundwater produced from state-owned land to a foreign country.

(d) Lessees will be authorized to develop groundwater resources on permanent school fund lands only when sufficient scientific data and technical information is available for an informed determination that the groundwater resource can be produced in a manner that will support an economically viable market with a sustained yield that does not significantly affect current uses of adjoining users of water from the same source in an adverse manner.

(e) The commissioner shall submit proposed leases of permanent school fund lands that include authorization for the commercial development of groundwater resources to the School Land Board for review and comment prior to final approval and execution of any such leases. Additionally, any regional water planning group and/or groundwater conservation district in which lands proposed for such leases are located shall be notified prior to final approval and execution of any such leases.

13.31. Leasing Procedures.

(a) Permanent school fund lands may be leased for the exploration or development of groundwater resources through either a sealed bid procedure or through direct negotiation, at the discretion of the commissioner. Municipalities and other providers of public water supplies may be given a priority preference to lease permanent school fund lands for development of a municipal or domestic water supply.

(b) A party interested in leasing permanent school fund lands for the exploration or development of groundwater resources may submit a lease application. Alternatively, the commissioner or GLO staff may nominate a tract or tracts for inclusion in a sealed bid lease sale. A tract proposed for lease or nominated shall be described in sufficient detail that it can be identified and evaluated by interested parties. The commissioner will determine the lease procedure to be followed after considering interest in a tract and the best interest of the State.

(1) Contents of Application. A party interested in leasing permanent school fund lands for the exploration or development of groundwater resources shall submit an application to the GLO on forms approved by the commissioner. An acceptable application shall include the following information:

    (A) Name, address, and phone number of the person or entity submitting the application. For applicants other than natural persons, an organizational charter or certificate and related documentation of its current authority to conduct business in Texas and the name and official capacity of an authorized representative or agent shall also be provided.

   (B) A description of the permanent school fund lands sought to be leased.

   (C) A description of the purpose of the lease and the activities to be undertaken or conducted on the leased premises.

   (D) A map on a scale adequate to show the location of the proposed lease. State tract numbers and names of rivers, streams, and lakes shall be shown where applicable. Location of project features should be depicted to the extent such information is available.

   (E) A business plan that describes the various phases of a groundwater development project, including exploration and analysis, regulatory compliance, project budget and financing alternatives, marketing, development and production, right of way acquisition, and transportation and delivery. The plan should also detail the expertise available to evaluate scientific data and information and to assure that the permitted uses can be conducted in a manner consistent with sound engineering and management principles.

   (F) Such other financial and background information about the proposed lessee, related entities, principals, or guarantors as may be requested by the commissioner to evaluate the application, the creditworthiness and experience of the applicant, or the potential viability of the proposed project.

   (2) Nomination procedures. The commissioner or GLO staff may nominate a tract for lease. In the event the commissioner determines that a bid sale is in the best interest of the State, the commissioner will set the terms and conditions upon which such nominated tracts will be offered for lease. These terms will be advertised and bids taken. The commissioner may accept the best bid meeting the minimum requirement set by the commissioner or by law, or the commissioner may reject any or all bids.

(c) Leases under this chapter may include provisions for bonuses upon execution, delay rentals, shut-in royalties, production royalties, advance royalties, in-kind royalties, or include the State or the permanent school fund as a participating interest in the development or exploration.