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Panhandle Water Export Issue
Involves More Than One Player

By David Bowser

CANADIAN, Texas As the Roberts County water war bubbles, T. Boone Pickens makes appearances in The New York Times, on CNN and in coming months Texas Monthly to talk about needing to pump water from beneath his Mesa Vista Ranch and selling it to thirsty urban areas before a local water authority pumps the aquifer beneath his and his neighbors' ranches dry.

But while Pickens wants to sell underground water from Roberts County in the Texas Panhandle to San Antonio, El Paso or the Dallas-Fort Worth metroplex, a businessman and rancher in neighboring Hemphill County is quietly working on a project that may slow criticism of Pickens in the Panhandle and may also solve water shortage problems in West Texas and Eastern New Mexico.

Salem Abraham, one of the first entrepreneurs to package and sell water in this area, is negotiating with the City of Amarillo, communities along the western edge of the Texas Panhandle and communities in Eastern New Mexico as well as the states of Texas and New Mexico and the federal government in a multi-layered deal that would provide drinking water for at least half a dozen communities in two states, help save an endangered minnow, keep water from Roberts County in the neighborhood and possibly take some heat off Pickens from some of his Panhandle critics and still make a profit.

Abraham has an option with the City of Amarillo to swap water rights Amarillo holds in Hartley County near the Texas-New Mexico state line for water rights in Roberts County northeast of Amarillo.

Across the state line in New Mexico, Clovis, Portales and Cannon Air Force Base are looking at piping water south from Ute Reservoir on the Canadian River, which cuts across northeastern New Mexico, the Texas Panhandle and into Oklahoma.

At the same time, the towns of Dimmitt, Hereford and Friona are looking for water resources. These three towns are between Amarillo and Clovis.

The 35 year-old Abraham says he wants to swap water located beneath Roberts County for water under Hartley County, and then pipe water from Hartley County to Dimmitt, Hereford, Friona, Clovis, Portales and Cannon Air Force Base.

Such a project could solve several problems, Abraham says.

It provides water to a number of towns that need it. It releases the water to which Clovis, Portales and Cannon Air Force Base have a legal claim in Ute Reservoir. That in turn provides more water flow down the Canadian River to Lake Meredith where the Canadian River Municipal Water Authority gathers most of the water for its eleven member cities in the Texas Panhandle and on the Texas South Plains.

In addition, Abraham says, the additional water flow down the Canadian may help save the endangered Arkansas River shiner, a two-inch long minnow whose numbers in the river are diminishing.

The U.S. Fish and Wildlife Service this spring designated the stretch of the Canadian River from Ute Reservoir to Lake Meredith as critical habitat for the shiner. Abraham says there may be money available through the Fish and Wildlife Service to reimburse New Mexicans for the water released from Ute Reservoir so it can flow on down the river for the endangered shiner.

There is also a chance that Clovis and other New Mexico communities might be able to sell the water they hold in Ute Reservoir at a profit.

The federal government is already looking at building a pipeline south from Ute Reservoir to serve Clovis and surrounding communities.

At the same time, several groups are exploring building a pipeline that would run roughly parallel on the Texas side of the state line to take water to Hereford and its neighbors.

Abraham believes the two projects can be consolidated so only one pipeline has to be built to serve communities on both sides of the border. He says the costs of one pipeline could save an immense amount of money, both for the communities involved and for the state and federal governments.

If such a project can be organized, Abraham wants to provide the water for that pipeline from Hartley County.

But that would necessitate gaining enough water in Roberts County to swap with the City of Amarillo for their Hartley County water rights, and in order to get that much water from Roberts County, Abraham would need Pickens' water.

Pickens and his neighbors last year formed Mesa Water Inc., as a way to sell the water beneath their ranches in Roberts County. Pickens says the measure was one of self-defense. He says he and his neighbors took the step because CRMWA and the City of Amarillo had bought water rights in Roberts County for the purpose of pumping it out of the county for municipal use in Amarillo, Lubbock, and member communities in the water authority.

Pickens says CRMWA and Amarillo, under the rule of capture, the prevailing water law in Texas, could suck the water out from beneath their ranches. The only alternative, Pickens says, is to pump the water themselves and sell. Otherwise, he says they lose a resource and receive no remuneration for it.

While Pickens says he has offered to sell his water to CRMWA and Amarillo, they have both turned him down. He consequently went to San Antonio, El Paso and Dallas-Fort Worth to talk to them about buying Mesa's water.

The thought of underground water being piped from the semi-arid plains to cities downstate riled a number of people in the Panhandle. If Mesa's water were to go to Amarillo in exchange for water in Hartley County, it could be a public relations coup for Pickens. At least the water would stay in the neighborhood.

While relations between Pickens and his former hometown, Amarillo, have not always been amicable, Abraham appears to be on good terms with all entities involved.

"Salem and I are friends," Pickens says. "We have talked and talked and talked, but we haven't made a deal."

Salem Abraham was born at Bossier City, La., Air Force Base, while his father Dr. Malouf Abraham was in the Air Force.

"We moved here probably when I was a year and a half, two years old," Abraham says. "I was raised in Canadian."

He is the fourth generation to call Canadian home.

"My great grandparents came in 1913 on the Abraham side," he says.

His grandmother's family, the Lewis family, came to the area in the 1880s.

The six children that Salem and Ruth Ann have will be the fifth generation. They live in the same home in which Salem's great grandparents lived, complete with the paintings on the walls of the ocean liners that brought the family to America from Lebanon.

His great grandparents traveled overland to Canadian, where they opened a department store.

"They lived in the back of the store from 1913 to 1938," Abraham says. "In 1938, they bought that house."

Salem Abraham was reared in Canadian, graduating from Canadian High School, and then went on to the University of Notre Dame, graduating with a finance degree.

"I got out a semester early," he says. "It was December 1987. It was the Class of '88."

He earned his degree in three and a half years, graduating with honors.

"I had Ruth Ann back home," Abraham grins. "We were dating. We dated through high school and I had an incentive. There weren't as many girls at Notre Dame that I was as fond of as the one back home."

In addition to Ruth Ann, Abraham says he was in a hurry to get home and work with 'Oofie,' his grandfather, Malouf Abraham, who had been active in oil and gas in the Texas Panhandle.

"I worked with Oofie for six and a half years," Abraham says. "In 1988, I went to work for him. The oil and gas business was pretty much in the toilet by then and had already been in the toilet for a couple of years."

They dealt a little in oil and gas, but mostly it was buying and selling ranchland and operating ranches.

"On the side from January of 1988 on, I've done my trading business in the futures markets," Abraham says. "That's when I started trading, in January of '88."

He had actually started trading earlier, but January 1988, was when he started managing money in his trading business.

"I've been managing money in the futures markets ever since," he says.

"We trade in about 51 different markets all around the world," Abraham says.

Currently, he manages about $7 million. He has had in the past up to $130 million in managed accounts.

"That has been an on-going business in the last 12 years," Abraham says.

The trading company has averaged over the years a return of over 25 percent annually.

"That's due to some big years in there and some mediocre years," he points out.

He says the company has ranged from being down 10 percent one year to being up 142 percent in another year.

In the last couple of years, he has started SAA Ventures.

"That's a broker-dealer and proprietary trading deal," Abraham says. "We're members of lots of exchanges, the Chicago Mercantile Exchange, the Chicago Board of Trade, Paris Bourse, LIFFE (London International Financial Futures Exchange), EUREX."

EUREX is the largest futures exchange in the world out of Frankfurt, Germany.

"The Chicago Board of Trade used to be the largest," Abraham says. EUREX, however, has surpassed the Chicago Board of Trade. EUREX is 100 percent electronic.

"We're hooked into Frankfurt here with an electronic terminal," he says.

They are also hooked to London and Paris futures markets exchanges.

"As far as equities," he says, "we trade equities through ECMs, which are electronic stock exchanges."

Abraham says the futures trading was a sideline business for a couple of years while he worked for his grandfather and drew a salary.

Between 1992 and 1994, Abraham says they began to see some water dealings going on with Quixx, a subsidiary of the local electric utility. They had bought water rights in Roberts County in preparation for building a nuclear power plant that never came to fruition.

"We started seeing some of the things going on and some of the water rights issues coming up in land transactions we were doing when we were purchasing Mendota Ranch," Abraham says.

Quixx had talked to CRMWA about selling water to the water authority.

"We had seen some of that and some of the deals that were talked about," Abraham says. "We started seeing that there was at least one entity out there, CRMWA, paying a lot of money for water rights. We had always just taken for granted the fact that anywhere you wanted to drill a well, you could drill a well in our part of the world. If you wanted to drill a well, you drill a well. There was lots of water, and water wasn't any issue at all."

He says they had the false assumption that every place else was like Canadian.

"We never gave it much thought until we started seeing someone like CRMWA come to Roberts County and pay a lot of money for water rights," Abraham says.

He says he thought they were paying much more than it was worth until he began analyzing their economic needs.

"We saw that to them it was worth that," Abraham says.

While Abraham's grandfather was involved at the beginning, he died in 1994, leaving Salem and his two brothers, Jason and Eddie.

"Oofie was in there a little bit, but he died before we really realized the benefits of the water," Abraham says.

When this part of the world was first settled, ranch land was bought and sold with little regard for the mineral rights. As oil and gas become increasingly important commodities, landowners began to pay more attention to the mineral rights.

"We had seen that what we had been doing was the same with the ranch land with regards to water, and maybe there was something we ought to be doing with water," Abraham says. "Because of our buying and selling of ranch land, we were in a very unique position as far as water was concerned."

A lot of the ranchers in the area and people who wanted to sell ranches would call the Abrahams before it was publicly known that the ranches were for sale.

"They all knew we were interested and we were always interested in buying a ranch at the right price," Abraham says.

They bought a 12,000-acre ranch just two miles east of the CRMWA holdings in Roberts County.

"We saw the potential for CRMWA needing more water because of the permit fight with the water district," Abraham says. "We also understood the economics of a pipeline at a million dollars a mile. Because of the cost of the pipeline, you want to be close to your existing pipeline."

He says they saw the benefit of buying ranch land for ranch land prices, but there could be the water rights that might be sold off.

"We weren't sure at that time," Abraham says, "the likelihood of that ever happening."

When they approached CRMWA, the water authority didn't show much interest.

"Their feeling at the time was don't call us, we'll call you," Abraham says, "and we'll tell you how much we're going to pay if we do call you."

CRMWA left the impression that they were the only people who would ever buy water rights in the Panhandle.

"That was troubling, given the fact that they were getting ready to start a well field, and we saw and the other neighbors saw the potential for drainage of our water with no compensation," Abraham says. "We were a little frustrated with the prospect of not being able to market our water, so I started approaching the neighbors up there and said, 'Look, if we're in together, there's the potential for other purchasers maybe getting interested, but you need a big block.'"

He says that once he studied the economics of water, he realized the importance of a big block.

"If you're going to build a pipeline, you want to go after a significant chunk of water," Abraham says.

He says he felt that once they could put together a big block, they could attract buyers other than CRMWA.

"You bring in competition for CRMWA," Abraham says.

Consequently, he and his brothers started putting together landowners, but they did it differently than Mesa has.

"Boone has bought options," Abraham says. "We looked at options, but that's a tougher deal."

Instead of getting options, Moody Land and Cattle Company composed of Abraham, his brothers, a cousin and another investor bought a third to a half of people's water rights.

"We would pay cash to be their broker," Abraham says. "We couldn't sell our part unless we sold their part. We were partners with their water."

They agreed on a floor price.

"We said, 'Look, we'll buy the first part cheap, and if we can sell it for more, we can make money off our part of the water rights you sold us, but you get some cash,'" Abraham says. "We invested a pretty significant chunk of cash, well over a million bucks in water rights."

He admits it was a high-risk operation.

"We were going to do all the hydrology," Abraham says.

Moody Land and Cattle and SAA Properties, Salem's company, partnered and did some water right studies together.

SAA Properties (Salem Andrew Abraham) had about half the deal and Salem had about 30 percent of Moody Land and Cattle Company.

"Moody could only stretch so far, so I started taking over the deal after they said they had enough," Abraham says. "I said 'I want more.'"

Abraham knew he had to have at least 50,000 acres.

"The last big chunk I put in was the Morrisons, and that was 32,000 acres," Abraham says. "That took me from about 40,000 to about 70,000."

It ended up being 72,000 acres.

"It was big enough then that people took me a little more seriously," Abraham says. "You're talking about water rights for probably 300,000 people."

It was big enough that it would justify a pipeline of at least a couple of hundred miles.

"It was within reach that if I could put that much together, people would realize that it wouldn't be unreasonable to think I could put maybe another 50,000 to 75,000 acres into it and have some serious size that would be worth building a big pipeline," Abraham says.

It was at that point went Abraham thought it would eventually get too big for Amarillo, Lubbock or CRMWA.

"I had a hydrology study done on that particular block and started marketing it locally," Abraham says. "CRMWA said no thanks, they couldn't do it quite yet, but they were real interested at that point. They were taking us a little more seriously then, but they were at a point where they could financially go and buy more water rights."

Since CRMWA was not interested, Amarillo was interested. The City of Amarillo said they could develop the Roberts County water more cheaply than they could their Hartley County water.

"They saw the benefits of having this water and bought," Abraham says. "It was right about $20 million."

As far as water legislation, one of the big issues is rule of capture.

"One of the things I see that's unfortunate as far as rule of capture goes is that if there are two neighbors, and one wants to sell his water and one wants to conserve his water, the law is very much tilted in favor of the one who wants to sell his water and pump his water," Abraham says. "Most ranchers understand and respect their rights as a private property owner. You can do whatever you want to do with your own land. But with water, when you pump water out from under your own land, it also has the result of draining your neighbors."

When it's draining a neighbor's underground water, and there is no protection for the neighbor, then the neighbor's private property rights are being compromised.

"If you're in search of fairness, rule of capture is not totally fair," Abraham says. "It is lop-sided toward the person who wants to pump water."

He says one thing that is interesting about the Roberts County water is that CRMWA bought water rights from Quixx, so a group shows up planning to pump water from beneath 42,000 acres.

"Because of them, the surrounding neighbors which I was involved with," Abraham says, "we jump up with 72,000 acres and say we could keep our water and have it sucked out and get nothing or we could sell our water and get something. Either way, we are to some extent probably going to lose our water, so we might as well get paid for it."

Consequently, they decided to sell their water to Amarillo.

"Like dropping a rock in the pond and the ripples getting bigger all the way out," Abraham says, "now you have the Pickens group looking at 100,000 to 200,000 acres surrounding our 72,000 acres with the 42,000 acres at the core that CRMWA had, now they're looking at selling their water rights. But let's say there's some old rancher out there with 10,000 acres in the middle of it and he says he's not selling. He wants to conserve his water. He doesn't have much of a chance. That's unfair."

That is the problem with the rule of capture, Abraham says. He admits the water districts do a lot to help that situation.

"That's a great start," he says. "Local control is certainly the way to go, but I think there's probably some other rules or changes to make the rule of capture not quite so anti-conservationist."

Abraham thinks the water districts need to be given power to help the conservationists.

"I think it could be tilted a little more in his favor," Abraham says, "and I think that would be helpful."

He says it would also help prevent the domino effect that landowners appear to be getting caught up in.

"The concern with aquifer water that I have is spring flow," Abraham says. "That's definitely an issue when you start getting near springs. That's something that truly can affect a neighbor on rule of capture."

If one rancher is pumping water a couple of miles away, it could stop the spring flow on a neighboring ranch.

"I like the idea of private property rights," Abraham says, "but at some point they have to be balanced against your neighbor's private property rights of wanting to conserve his water."

Even though he's a capitalist, Abraham points to the increasing number of hog operations going into the Panhandle. He says if someone wants to foul the air on his place iy's one thing, but to foul a neighbor's air is a different matter.

"There's a little bit of infringement on the rights of somebody to smell their own fresh air," Abraham says. "It's a balancing act."

He questions whether it's fair to prohibit the sale of water out of a given region when corn from the Texas High Plains is being sold to China.

"There's water in that corn that was pumped from the aquifer," Abraham says. "It's like saying you can't sell wheat, but you can bake cakes all day long and sell the cakes. In that cake is flour, and the flour is from the wheat. That's nutty. If you don't think we're exporting water to China, you haven't thought it all the way through."

Not only that, he says, but the government is subsidizing the exports to China.

"That's fine," he says. "I don't have a problem with any of that, but to put a double standard on it and say that some guy like Pickens can't sell what's rightfully his to somewhere else ... we may not like it, but it is his property."

Abraham says if people dislike it enough, they could go buy it from him.

"You may not like it, but at least you've got to respect his right to do with his own property what he wants," Abraham says. "That's what this country was founded upon."

He says he thinks it's wrong to compromise private property rights just because someone doesn't like what someone else is doing with his property.

"I think the free market can solve people's water problems," Abraham says.

In Roberts County, he says, there is enough water for at least two million people for the next 70 or more years.

"There's a lot of water in Roberts County," he contends, "and you've got 950 people living in Roberts County."

Looking out 100 years, Abraham says he thinks there are some technologies, like purifying ocean water, that will solve some of the problems with water development.

"In the short term, it's probably cheaper to ship water from the Panhandle down to San Antonio or even Corpus Christi than get it out of the ocean," Abraham says. "Right now, that's not economically feasible, but at some point down the road, with the advances in technology, it probably will be."

     



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