February 24, 2014 by Tony McDonald
Today residents of Granbury are suffering from historically low lake levels that are devastating local property values. Citizens living around Possum Kingdom Lake are not faring much better. The Brazos River Authority blames the ongoing drought and claims that they are doing everything they can to manage the crisis. However, the evidence suggests that the powerful, who control the situation, are profiting off a crisis they designed while citizens suffer. It is worthy to examine what has happened, who has benefitted and how, and how the situation reflects a dangerous growing trend in Texas and American government.
State Rep. Jim Keffer has been involved in the plot to drain the lakes since 2004.
How the Lakes were Drained
It is best to divide the situation into what happened before February 26, 2007, what happened in the aftermath of that date, and what the situation is today.
For about fifty years before February 26, 2007, the Morris Sheppard hydro-electric power plant ran smoothly, supplying power to Brazos Electric. At the dam that forms Possum Kingdom lake, between 100,000 and 300,000 acre-feet of water passed through the turbines in a typical year. This rush of water produced between 10,000 and 30,000 Megawatt-hours of electricity each year. The water that traveled downstream also kept Lake Granbury full, causing it to be labeled a “constant level lake.” Consistent lake levels, coupled with the beautiful North Texas scenery, allowed the little village of Granbury to blossom as many Texans traveled there for recreation and to maintain lake houses.
However, the levels this arrangement maintained in both Lake Granbury and Possum Kingdom prevented the Brazos River Authority, a quasi-governmental entity with control of the lakes, from selling a large amount of water. Because of the flow through Morris Sheppard, Lake Granbury remained full. That meant water entering the lake from the local watershed spilled over downstream — essentially meaning lost profits for the River Authority. If the BRA could devise a way to drain the lake, like wringing out a sponge, that would give the lake a capacity to capture more runoff. That, in turn, would mean that the BRA could sell more of its water resources in anticipation of a recharge.
In the years preceding 2007, there were developments which laid the groundwork for this balance to be upset. In 2004, the BRA applied for Permit 5851 from the Texas Commission on Environmental Quality in order to sell over 421,000 acre-feet of water per year to users in the Brazos basin.
Around that same time, the BRA started working with State Representative Jim Keffer, who represents Hood and Palo Pinto Counties, to find a way to sell off the “buffer zone” around Possum Kingdom Lake. So long as the BRA continued to operate the power plant at Morris Sheppard, then the Federal Energy Regulatory Commission would require the Authority to maintain ownership of the land. But if the BRA could find a way for FERC to release the land, then it could be sold for tens of millions of dollars.
On October 13, 2006, Phil Ford, BRA’s General Manager and CEO noted a conflict of interest statement on the BRA website for “Stocks purchased through Merrill Lynch.” Those stocks happened to be in TXU Corp., the energy producer who, at that time, owned Comanche Peak Nuclear Power Plant near Glen Rose, just to the south of Granbury.
On Monday, February 26, 2007, Goldman Sachs, Kohlberg, Kravis, Roberts & Co, and Texas Pacific Group purchased TXU and took it private, executing the largest leveraged buyout in US history. The group paid $69.25 per share for the company, a premium of 15.4% over market closing the preceding Friday. The new company was called Energy Future Holdings and its subsidiary, Luminant, would come to control Comanche Peak nuclear power plant.
In the follow-up to the February 26th buyout, Brazos River Authority decided to close the hydro-electric plant at Morris Sheppard Dam, determining the equipment there to be obsolete. They made that decision despite $3.8 Million in issued bonds and millions more sitting in the Authority’s general fund being available to make necessary repairs. Following the decision to close the dam, the Federal Electric Regulatory Commission inspected the facilities at Morris Sheppard in January of 2008 and determined that they passed regulatory requirements. In April of 2008, Luminant dropped objections to Permit 5851 for the sale of water by the BRA in exchange for an arrangement that BRA would sell Luminant approximately 100,000 acre feet of water each year. This is approximately the amount required to maintain full lake levels in Lake Granbury.
Around that same time Luminant was working to expand the nuclear facility at Comanche Peak. In September 2008 they filed an application with the Nuclear Regulatory Commission to build units 3 and 4 at the facility. This expansion would require a significant new source of water for cooling purposes.
By 2009, levels at Lake Granbury were beginning to noticeably fall. However, with the turbines at Morris Sheppard silent, the Federal Energy Regulatory Commission ceased to be an obstacle to the sale of “buffer zone” lands at Possum Kingdom. In follow-up to a divestiture policy adopted by the BRA in October 2007, the BRA worked with Rep. Jim Keffer to sell off the lands once and for all. Keffer authored and passed House Bill 3031, which put the nails in the coffin of the Morris Sheppard hydroelectric power plant. Without ownership of the “buffer zone” the FERC would present an obstacle to reopening the dam.
These measures to make the BRA’s decision permanent were necessary because the decision was opposed by Brazos Electric Power Cooperative. The electric company fought the decision in court, but after a court ruled that the River Authority was protected by sovereign immunity, they lost their bid to force the dam to be reopened. With divestiture in place, the BRA cut off other options whereby Brazos Electric could take over and run the dam.
The BRA immediately acted on the authority granted them by Keffer in HB 3031. In July of 2009, they sold all of the “buffer zone” land to Mike Patterson of Arlington for $52 million. This price, despite the fact that a study by the Staubach company in 2006 determined that the value of the land was closer to $150 Million.
In the years following, there was a precipitous decline in levels at both Lake Granbury and Possum Kingdom. Despite these falling levels and an ongoing drought, the BRA still acted in August 2011 to lower both lakes in a one-time sell-off of water to Dow Chemicals. The BRA also declined a request by the Granbury Chamber of Commerce to conduct an economic impact study.
Today, Lake Granbury is starkly dry. The lake is currently 9.27 feet below normal levels and has fallen by almost two feet since July of 2013. Possum Kingdom Lake is even lower, at 13.5 feet below normal. These persistent low lake levels are anticipated to drive down lake-front property appraisals and could lead to decreases in services and higher property tax rates. This has caused citizen groups, like the Brazos River Alliance, Lake Granbury Coalition, who have acquired party status to the cause in an effort to fight the Brazos River Authority to keep them from receiving final approval for Permit 5851 which would make the catastrophically low lake levels permanent.
How the Powerful Players Have Benefitted
There are three groups that have benefitted from the plot to drain the lakes: The BRA and its directors, Energy Future Holdings, and Representative Jim Keffer and his political associates.
The BRA benefitted from the plot by being able to sell off land and water for a profit. By lowering Lake Granbury, like wringing out a sponge, the Authority was able to count future watershed runoff as a resource. Now, every time it does rain, the drops are like pennies from heaven. With this new accounting, the Authority is able to petition the Texas Commission on Environmental Quality to sell vast new amounts of Brazos River resources. Likewise, House Bill 3031 allowed the authority to finally sell-off the “buffer zone” lands at Possum Kingdom Lake. After the sale, the leaders of the BRA were positively jubilant with the fact that they no longer had to operate the hydro-electric power plant at Morris Sheppard and no longer had to act as a property management company in handling the leases on the “buffer zone” lands. So the Authority made more money, gained more power, and got rid of the parts of its portfolio that were a hassle.
Energy Future Holdings benefitted from the plot in that they eliminated a competing power plant at Morris Sheppard and they secured a source of water to use for cooling purposes at the proposed Comanche Peak nuclear power plant units three and four. While the impending bankruptcy of EFH and Luminant has sidelined these projects (EFH’s investors bet incorrectly in 2007 that natural gas prices would rise; they have fallen), it is unclear whether EFH’s settlement with the Brazos River Authority will still allow it to sell-off the 100,000 acre-feet of water they were promised to a third party.
How has Representative Jim Keffer benefitted from the plot? As the Chairman of the House Energy Resources Committee, Keffer has certainly benefitted from better relations with Energy Future Holdings. As a local politician, he has also benefitted in doing the bidding of the local river authority. But, Keffer and his associates have benefitted personally as well.
Jim Keffer is the President of EBAA Iron Sales of Eastland. That company produces pipe flanges which are used in municipal water projects. This company has struggled at times, facing foreign competition and rising raw materials costs. In 2008, the company was forced to raise prices by ten percent to combat the rising costs. This past session, plagued by foreign competition, Keffer worked behind-the-scenes with Democrat leaders in the House to pass a bill that would have required the state to purchase all of its iron and steel from domestic manufacturers like his own.
Likewise, Keffer’s son, Chris Keffer, is a lobbyist in Austin who works with political consultant Bryan Eppstein. Together they represent another company that deals in municipal water projects, Inland Pipe Rehabilitation, Inc. They also represent the Tarrant Regional Water District, another large water authority.
These men benefitted from the scheme to drain Lake Granbury and Possum Kingdom Lake because they essentially manufactured a drought. Persistently low lake levels were used as a visual marker to justify the need for additional state money to be spent on water projects. This scheme came to fruition in November of 2013 as voters approved Proposition 6, which Keffer fought for. The proposition allows the state to take $2 Billion in money from the Economic Stabilization Fund and use it to buttress $50 billion in total local spending on water projects. This means more money in the hands of water authorities like the Brazos River Authority and the Tarrant Regional Water District. And when those entities spend that money on projects to move water from place to place, it means more money in the pockets of Representative Jim Keffer as they spend money to purchase his company’s pipe flanges.
The plot to drain Possum Kingdom and Lake Granbury benefits seemingly every major player involved in some way. All benefit, except for the simple property owner and taxpayer who live and own property around the lakes. In that way, the plot resembles so many other government schemes at the Austin and Washington level. Oftentimes, in politics and in the legislature, proponents of various schemes will speak in terms of “stakeholders” and “seats at the table.” Politicians will present agreed-to plans that have buy-in from every stakeholder and every person who has a seat at the table. All will benefit, they will claim – and they will be partially right.
But they will be forgetting all of the countless voices who aren’t powerful enough to have a seat at the table. By taking a small piece from every affected person who doesn’t have the money or organization required to hire a lobbyist or form an advocacy group, they spread the opposition around and thin it out so that it can be defeated.
And they expect the people to grin and bear it. But the time has come to say “No more!” No more will citizens sit quietly as the powerful profit at our expense. The people are becoming more and more engaged, and on March 4th, we have the opportunity to choose new leaders who will serve the interests of the people and not just the various special interests with “seats at the table.”
Category: Economy, Election, Featured Articles, Issues, Legislators, Lobby
Tags: Brazos Electric, Brazos River Authority, Bryan Eppstein, Chris Keffer, Cullen Crisp, Granbury, Jim Keffer, Lake Granbury, Possum Kingdom Lake, Tarrant Regional Water District
Tony McDonald serves as General Counsel to Empower Texans. A licensed and practicing attorney, Tony received his J.D. in 2012 from UT Law School. While in school, Tony served as Senior Vice Chairman for Young Conservatives of Texas and helped manage its legislative affairs. After law school he served during the 83rd session as Chief of Staff for Rep. Jonathan Stickland. Tony resides in Austin and attends St. Paul Lutheran Church. In his spare time he enjoys mixology and smoking meats on his Big Green Egg.