Articles Posted in Rural Water Utilities

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Texas rural water utilities and the attorneys representing Texas rural water companies are often faced with the challenge of making sense of the sometimes tangled layers of Texas statutes, Texas court decisions and the administrative rules of the Texas agency that regulates water utilities, the Texas Commission on Environmental Quality. As I indicated in a blog last week entitled “Texas Rural Water Utilities Faced With New Law: “Paint It Black!!”, House Bill 1717, effective June 15, 2007 (and now codified as Texas Health and Safety Code Section 341.0357), requires that a utility that provides fire hydrants paint black any “non functioning” hydrant. A hydrant is non functioning if “the device pumps less than 250 gallons of water per minute”. Because the statute does not specify over what period of time this standard must be met, it will almost certainly be interpreted by a Texas court to mean “at all times”. Many rural water companies simply cannot meet this standard 24/7, 365 days a year.A recent article by Michael Gresham in The Kaufman Herald illustrates that the controversy over this recent law is continuing. Rural water utilities are continuing to paint their hydrants black. Firefighters continue to disparage this practice on the basis that “this is not what the law intended”. As I have said before, water companies usually don’t get sued for acting contrary to what a law intended, but they regularly get sued if they do not follow what a law says. Instead of criticizing what the rural water companies are doing because they have no choice, hopefully the fire fighters will direct their concerns to the Texas Legislature!

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One of the challenges of serving as an attorney for rural water utilities in Texas is helping my clients navigate the increasing regulatory burden on Texas rural water utilities, an issue specifically addressed in a prior blog entitled Challenges Ahead for Texas Rural Water Companies in Texas. A recent law enacted by the Texas Legislature appears to add confusion to that burden.

House Bill 1717, effective on June 15, 2007 (and now codified as Texas Health and Safety Code Section 341.0357), requires that a utility that provides fire hydrants paint black any “non functioning” hydrant. “Non functioning” is defined by the law to mean any hydrant that cannot pump at least 250 gallons of water per minute, presumably at all times. Most rural water utilities I represent do not install fire hydrants, because they simply do not have the capacity to serve their customers and produce water for firefighting as well. Those rural water utilities that do install hydrants cannot always deliver 250 gallons per minute 100% of the time.

A recent article by Ron Maloney with the Seguin Gazette-Enterprise illustrates the confusion this new law can cause. The Green Valley Special Utility District, a water district that serves 25,000 customers in Guadalupe, Comal and Bexar Counties in Texas, painted all their fire hydrants black. The water district’s general manager is quoted in Mr. Maloney’s article as saying: “It’s different in a rural district from the type of system in a municipality and a lot of things can affect flow rate. I have the flow now. But I might not have it in an hour, and we can’t guarantee it.”This action has apparently angered fire departments and the emergency management coordinators of the involved counties. If I had represented the water district, I might have advised them to cover hydrants with a black tarp while the water district and the Texas Rural Water Association worked with state legislators to get an emergency bill passed to clarify the law, rather than go to the expense of painting. But tarps cost money too, the new law says you can only use tarps temporarily, and Green Valley SUD was painting the hydrants so as to leave them available for fire fighter use. The law, as currently worded, is quite clear that if the water district cannot supply 250 gallons per minute to the hydrant at all times, the hydrant must be painted black. If the water district did not paint these hydrants black, and a fire truck hooked up to the hydrant at a time when peak demand by the water district’s paying customers or a broken line caused the hydrant to deliver less than 250 gallons per minute, then you can bet that the water district will be sued by a homeowner whose house burned down. That kind of suit can result in higher insurance premiums for the water district, which translates into higher water bills for the water district’s customers. The best course of action for the rural water districts effected by this new law may be to remove all fire hydrants altogether, thus depriving the communities involved of helpful fire-fighting resources.

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In the course of representing rural water companies in Texas, I am always on the lookout for new resources and educational materials to help me expand my understanding of the challenges that water companies, and especially rural water companies in Texas, face each day. The American Water Works Association has just published a new book that looks like a fascinating addition to the library of any lawyer representing water companies. It’s called “The Business of Water”, and it’s edited by Steve Maxwell, Managing Director of TechKNOWLEDGEy Strategic Group in Boulder, Colorado.The advance press on this book indicates that it deals with some of the paradoxes that water companies face. For example, water is essential to life and thus incredibly valuable, yet drinking water costs us a fraction of a cent out of our tap. Another paradox is that many of us purchase bottled water that costs thousands of times as much as tap water, yet almost everyone screams if our monthly water bill goes up. Finally, the book notes that water companies must sell water in order to stay in business, yet are often in the position of asking their customers to conserve and use less water!

The book deals with water costs, strategic planning for water companies, government regulation and many other timely topics. I have ordered my copy and will report back to you after I have read it. It certainly appears to be a valuable addition to any water lawyer’s library. The price is $45.00 for AWWA members and $68.00 for nonmembers.

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I have served as an attorney representing both rural water companies and real estate developers in Texas for quite a few years. Very often, my representation involves negotiating “nonstandard service” contracts. These are contracts governing the conditions, terms and costs under which a rural water company will extend water service to a new development. At best, there is a bit of built-in tension between the two groups: real estate developers are appropriately mindful of their bottom line and want to minimize the costs and restrictions of obtaining water service, while rural water companies have legitimate concerns that their capital costs will be paid and that some amount of warranty service is covered. I emphasize to all my clients, whether they are real estate developers or rural water companies, that their agreements must be reduced to writing, to insure there is no misunderstanding in what can very often be a complex negotiation.A recent case, BCY Water Supply Corp. v. Residential Investments, Inc., illustrates the pitfalls when one or the other of the parties involved takes action based on (often misunderstood) oral statements. This case, decided by the 12th Court of Appeals in Tyler, Texas, involved a small rural water company serving Anderson County, Texas. The Plaintiff was a real estate developer who was the considering the purchase of a small tract of land within the water company’s service area. The developer came by the water company’s office, and visited with the water company’s bookkeeper and maintenance man. The developer questioned the maintenance man about the availability of water for the property the developer was thinking of buying. According to the developer, the maintenance man said that there would be “no problem” getting water service to the property. The maintenance man, on the other hand, testified that the developer requested a single meter at the property, and that he told the developer that, while he did not see a problem serving a single meter, all requests for service had to be directed to and approved by the board of directors and that the board might require capital improvements before service could be approved. The developer bought the property, and when he applied for service, the board of directors of the water company told him that he would have to install a new line prior to water service being supplied. The developer claimed that the representations by the maintenance man were negligent and sued the water company for denial of service.

The Court of Appeals held for the water company, ultimately. However, this litigation probably cost this small rural water company and its members dearly. The decision represents something I emphasize often to my rural water company clients: educate all your staff, whether office staff, maintenance people or operators, that whenever someone asks about the availability of water, always, and I mean always, tell them that they will have to talk to the manager of the company or the President of the board of directors. Do not guess, do not speculate and do not surmise. The maintenance man for this company was probably just trying to be helpful to this developer, and a lawsuit was the result.

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As the reader may be aware from one of my prior blogs concerning Texas rural water companies, not only have I served as an attorney for rural water and sewer companies in Texas for years, I have also spent the last year as President of the rural water company where I reside in east Texas. My term as a director and president will end next month, when our company holds its annual members meeting and elections. I have chosen not to run again because I believe it is important for the long term health of a water company for as many people as possible in the community to take a turn at being a director and an officer.

Alas, the problem is getting people interested. I have talked to many people in our community about running. Some say that they don’t know anything about treating water. My response is that they do not need to be an expert, they simply need integrity, common sense, and a willingness to base their decisions on what is best for the company and the community as a whole, rather than what may help a friend or neighbor.Some have told me that they are just too busy. I ask those people to consider that it is only a commitment for one board meeting a month. Is that too much of a price in terms of time for healthy drinking water for ourselves and for our children and parents, who are the people most vulnerable to pathogens in improperly treated water?

What often happens is that the people in the community who are best suited to serve on the board of directors don’t run for one reason or another. Instead, we often get candidates who are people who have been caught violating the rules, who have been forced to comply, and who are now mad. They want to be on the board so they can change those rules! This has got to be among the poorest of reasons to become a member of the board. In addition, in their ignorance and anger, these people are unaware that the local water company does not make the rules, the Texas Commission on Environmental Quality does that. However, we do have to enforce the rules. Not only can the board of directors not change the TCEQ’s rules, but in addition, the Texas Non-Profit Corporation Act prohibits a member of the board from voting on something that affects the member directly. Also important is the probability that if a rural water company director votes to violate the TCEQ rules, the water company may be fined and their officers and directors liability insurance will not pay for those fines. That means that those fines can come out of the pocket of the directors who voted to violate the rules.

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In Part One of this blog regarding resources available for Texas rural water and sewer companies, I discussed the tremendous resource that Texas rural water companies and their lawyers have in the Texas Rural Water Association. In addition to the TRWA, there are two other associations that can be tremendously helpful to Texas rural water companies and attorneys who represent them.

The National Rural Water Association is also a great resource. An individual membership is only $25.00 per year, and includes a subscription to their great magazine, “Rural Water”. One of the things I appreciate most about the National Rural Water Association is that they keep an eye on, and report on, research by and proposed new regulations of the Environmental Protection Agency (the “EPA”). The EPA is the federal agency that is primarily responsible for enforcement of the federal Safe Drinking Water Act. Since the rules and regulations of the EPA are passed on directly to the state agencies that regulate water supply (in Texas, that agency is the Texas Commission on Environmental Quality or “TCEQ”), the information provided by the National Rural Water Association is often a crystal ball of changes ahead for Texas rural water companies.Another worthwhile organization that is a great resource for rural water companies is the American Water Works Association. This is a national organization with a more technical focus. AWWA publishes three excellent journals: “Opflow”, “Journal AWWA” and “Mainstream”. Their online library is excellent, and gives you access to a wealth of technical information. Membership for a water company with 5000 connections or less is $280.00 per year.

Each of these resources, the TRWA, the NRWA and the AWWA, are excellent resources for rural water companies and their attorneys. I highly recommend them.

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As an attorney for rural water and sewer companies in Texas, I have experienced first hand the increased regulatory and legal challenges faced by Texas rural water companies and their lawyers. While there is no substitute for having a knowledgeable attorney, there are several nonlegal resources available that are invaluable to Texas rural water companies.

The first of these resources is the Texas Rural Water Association. According to the TRWA website, its mission is:”To help water and wastewater systems supply Texans with safe and affordable water and wastewater services by providing:

* technical assistance,

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As an attorney, I have represented rural water companies in Texas for years. I have prepared their corporate documents, assisted with government grant and loan applications, and negotiated non-standard and subdivision service contracts, among other things. I have also served as an officer and as a director on the board of a rural water company. Based on my experiences, I believe that many of Texas rural water utilities are struggling, and in some cases, may be headed for a crisis.

Rural water companies (also called community water systems) are, along with rural electric co-operatives, the backbone of American rural life. The U.S. Congressional Budget Office estimates that nationally, as of 1999, roughly 54,000 publicly or privately owned community drinking water systems provided drinking water to some 250 million people. Here in Texas, water companies are regulated by the Texas Commission on Environmental Quality (the “TCEQ”), and through the TCEQ, the Environmental Protection Agency, under the authority of the federal Safe Drinking Water Act. The problem begins with the fact that many of the rural water companies in Texas are so small. In many cases, the board of directors consists of a small group of farmers or ranchers or local residents, who are almost always great people, but who do not always have the tools or the background to deal with the increasingly complex technological and regulatory requirements imposed on all water companies, regardless of size.Here in Texas, rural water companies get tremendous technical and legal assistance from our state association, the nonprofit Texas Rural Water Association (“TRWA”). Notwithstanding this help, the diseconomies of scale and the increasing cost and complexity of complying with all the state and federal regulations are taking their toll on rural water companies.

The answer, I believe, is going to be in smaller companies banding together to create county-wide or even regional co-operatives. Initially, these co-operatives could use their buying power to save their members money on chemicals and other supplies. Ultimately, the co-operatives would jointly invest in treatment plants and other infrastructure needed to produce water.