There’s not enough money — Yeah. — in the state of Texas to get me water that I have lost. (Community Member) When they talk about my water they’re talking about their commodity. (Community Member) It’s immoral what’s going on. (Host) This is the frontlines of America’s new water wars.
(Reporter) A massive groundwater project could pull billions of gallons of water from East Texas. They can take all of your water, all your neighbor’s water, and all your granddaddy’s water. (Host) One hedge fund manager claims that he can deliver billions of gallons of water to Texas cities that are running out. But he’s made a fortune off a crisis before. (Reporter) We’re talking to Kyle Bass.
He made $500 million shorting the subprime market. (Kyle Bass) And we made hundreds of millions of dollars in a day, and I sat there with my team and I said, “this is it.” (Host) Kyle Bass’s plan is part of a broader Wall Street trend of buying up water rights as water becomes a more valuable commodity. (Reporter) Private investors are betting that in a hotter and drier future, water is the new oil.
I believe that agricultural land with water on site will be very valuable in the future.
(Mae) Landowners and politicians are fighting back against this Wall Street water grab, and in the process, they just might change some antiquated water laws in Texas. (Rep. Cody Harris) Democrat, Republican, Black, white, everybody is in agreement, we’ve got to protect our water. (Mae) The first stop on my investigation in East Texas was with John McCall, a lifelong Republican who has become an unlikely water activist. Oh, thanks.
This is Texas. (Mae) John McCall’s ranch is right next to Kyle Bass’s property, where massive pumps could drain billions of gallons of water.
(John) I’ve lived here all my life. My ranch has been in the family for 100 years. (Mae) What do you think of Kyle Bass as a neighbor?
He didn’t apply for the doctrine of Good Neighbor Award because I would have thought I would have got a phone call. You can’t take a resource and say, I’m going to take 15 billion gallons away from that resource, and it’s going to be just fine. Per year. Every year. It’s not going to work.
(Mae) On the other side of Red Town Ranch is Melisa Meador. She showed me her small pecan orchard that could be devastated by Kyle Bass’s project. What would you do if there’s no water for the property? Well, I mean, unfortunately, we would have to move, because you can’t live without water and neither can your animals. Definitely not something we want to do, but if we’re forced to have to do it, then what else do you do?
You can’t live without water. This is my pig family. (Mae) How does it make you feel that someone like Kyle Bass wants to profit off of your water? I wake up every morning and that’s the first thing that I — that I open my eyes to, it’s scary. You know, this is my home.
I love it here.
You know, and it’s a shame that somebody could actually force me out. (Mae) What do you think needs to change in Texas? (Melisa) If we do not change the Rule of Capture laws, then it’s just going to keep happening. (Mae) Since 1904, Texas has had a groundwater law called the Rule of Capture.
Essentially, landowners can pump as much water as they want from their property without getting sued by their neighbors. Now, conservative Republican lawmakers from East Texas want to change this antiquated law. (Sen. Robert Nichols) The Rule of Capture basically says whoever has the biggest pump wins. And I don’t begrudge anybody for making money, we’re not communists.
I can count one person who owns property in my entire district who is in favor of this project, and that’s Kyle Bass. So whatever you’ve been reading about us trying to take all the water and going to leave — leave the whole area out of water, I would never do that. We are doing things that are responsible by law and by science. (Mae) What would it feel like see him start drilling these wells? I don’t — I don’t even think about that.
I think we’re at the right place at the right time to have this fight. I like a good fight. (Mae) Representative Cody Harris and Senator Robert Nichols are leading the fight to protect water in East Texas. But they’ll need support from lawmakers across the state. That’s why Harris called an 11-hour hearing this summer.
(Rep. Harris) Let’s say I’m your neighbor and I decide I’m going to drill the same number of wells, but drill them deeper. You can’t pump your water anymore. Who’s in the right? Not something I’ve thought about.
Do you believe that you have the capacity to feel empathy? (Kyle Bass) My wife asks me the same question all the time. Joking aside, yes, I do. (Mae) During the hearing, Kyle Bass was adamant that he is looking out for the greater good of Texas. So we sit here today because I read the state water plan.
And it is, I mean, it’s farcical. There isn’t a plan. And so as we sit here today, we worry about where we’re going to move it from and to, we’re going to stop exporting, and things like that, what’s going to happen is we’re going to run out of water somewhere and it’s going to happen soon.
(Mae) The thing is, Kyle Bass is right on this point. Right now, Texas is gaining about 1,500 people per day, in part because of Governor Abbott’s tax abatements that have brought more and more businesses to the state.
But its water plan hasn’t caught up yet. Do you think that there’s going to be a water war between cities and rural parts of Texas? I know that some areas of Texas are desperate for water. But you can solve that with surface water. You don’t have to go into the aquifer.
But Kyle Bass couldn’t make any money off of surface water. That’s exactly what I think this is all about. (Mae) In Texas, the state owns surface water like rivers and reservoirs.
But landowners own the water that comes from aquifers under their land. So Bass is legally able to pump extraordinary amounts of groundwater even if it leaves his neighbors’ wells dry.
This is not a philanthropic effort, we are doing our best to do things right. But there actually is a world where you don’t have to give up returns, and in the end, what that’s doing is bringing water from high concentrated areas to areas of desperate need, which is a societal benefit. (Mae) While Bass claims that this is a societal benefit, I think this is actually a classic case of ‘disaster capitalism,’ turning a crisis into a return for investors. This is not greenwashing. We’re actually creating things.
In 2021, Bass founded Conservation Equity Management. The firm does some real conservation projects, but it’s Responsible Water Development isn’t one of them. While this office may look pretty nondescript, it’s actually the East Texas headquarters for Kyle Bass’s Conservation Equity Management.
In three and a half years, they’ve already raised $185 million from their investors. Conservation Equity Management wants to pump water from counties that currently use 8 billion gallons total per year.
Their plan would use over 15 billion gallons, going beyond what many believe the aquifer can handle and potentially having consequences on nearby state-managed rivers. The Trinity River supplies water for Dallas, Fort Worth and Houston.
But if Kyle Bass’s wells go online, there could be a lot less water flowing here too. That’s because the water in the Carrizo-Wilcox Aquifer is connected to the Trinity River, so Bass’s pumps would potentially take water that a city like Dallas already depends on. (Sen.
Nichols) So if somebody like Dallas wants to buy from these wells, they’re going to be buying their own water back. (Reporter) Lawmakers advancing a bill that could put the brakes on major water pumping projects. (Mae) Representative Harris introduced a bill for a two year moratorium on Bass’s project so scientists could study the effects on the aquifer.
Move passage. (Mae) But when the bill reached the Senate, Senator Nichols removed its key provision: the two year moratorium on drilling.
(Sen. Nichols) I did not feel like I had the votes to do the two-year moratorium. (Mae) Why do you think you didn’t have the votes? He hired some of the most expensive lobbyists in the state of Texas. (Rep.
Harris) It was just a massive, massive disappointment that the bill ended up dying. I call on the Groundwater Conservation District to deny the permit applications. Stand firm, and this body will have your back. (Mae) Since there is no two year moratorium, local entities called Groundwater Conservation Districts will most likely decide the fate of Kyle Bass’s permits. Groundwater Conservation Districts are a patchwork of local entities, but some counties in Texas don’t have these districts at all.
One of them is Houston County, where part of Kyle Bass’s property sits.
You’re in Houston County, which actually doesn’t have a groundwater district. So technically, under the Rule of Capture, he could start pumping water tomorrow. If he really wanted to be the most unpopular man in the state of Texas, that’s what he would do. (Mae) We’re heading to a Groundwater Management meeting, where they’re in the middle of determining how much water could be pumped from the aquifer in the coming years.
The board hired a hydrologist to see how large-scale pumping could affect East Texas water. How much groundwater can be pumped from an aquifer without causing groundwater declines? Well, if it’s that simple we can all go home because that answer is zero.
You’re always going to cause some declines. 568 of these wells would go dry.
As a community, we need to give support to you guys. You Groundwater Districts need support and funding because you cannot fund yourselves. (Mae) The problem is these districts run on tight budgets. They have to choose between funding science about aquifers and fighting lawsuits. (Rep.
Harris) If you’re going to effectively manage the groundwater in our aquifers, you should be entirely focused on what the data says about the aquifers, and nothing else. (Mae) But even the aquifer data that Representative Harris wants is contentious. People like Kyle Bass can distort the science by hiring their own hydrologist to produce data that supports their groundwater projects. To understand the reality of a massive groundwater project like this one, I traveled to Lee County to see these high capacity water pumps in person.
This is the Vista Ridge Pipeline.
It provides 20% of San Antonio’s water, but it comes at a big cost for the people who live nearby. I met up with landowners who have been getting together for years to commiserate over the water they’ve lost. When Vista Ridge started pumping, that was in the fall, and the next April, in the spring, my pump started sucking air. And so the well fell from 120 feet to 200 feet in a six month period. And you get air into the water system and your shower will start spitting at ya.
It’s disgusting. So we’re sunk. They’ll pump until there’s no more water at all, then they’ll go on down the road. So you feel like in this case there does need to be some more regulation? Something, we got to somehow get control of this.
We need something now. (Mae) The $3 billion Vista Ridge project is one of the biggest private- public infrastructure projects in the U.S.
A consortium of major banks and private equity funded the project, and now they’re making money by depleting this local aquifer. Meanwhile, people like the McKees continue to pay the price.
How many acres do you have? (Nancy) We have 50 acres. (Mae) Nancy McKee invited me to her property that she and her husband built together over 30 years ago. (Nancy) What we’re looking at is our water well history. And I always find it quite telling when I look at September of 1990, then 20 years later, it was at 68.
That means that our water table dropped one foot in 20 years. That to me is incredible. Wow. Today, the McKee’s well is dropping one foot every month. But even after lowering their pump, it could run dry in about seven years.
(Nancy) This last lowering of our pump was over $10,000. For us at our age, that’s devastating. (Mae) Nancy fought hard to get mitigation funds to cover the costs of drilling a deeper well. She and her neighbors eventually won, but they faced opposition from none other than Ed McCarthy, Kyle Bass’s lawyer. I’ve been accused of stealing water from widows and babies.
We’re not goona steal any water. McCarthy has a history of using cunning legal tactics on poorly funded groundwater districts to secure water rights. Once he even sued every single person on the board of a Groundwater District in federal court because they took away a permit from one of his clients. (Andrew Wier) That’s very intimidating because the district can’t just cover all your legal fees. In this water wars, I think it’s you’re going to suffer from the pumping of the water, you’re going to benefit from the pumping, and then there’s just the right thing.
(Mae) Back in East Texas, a Groundwater Conservation Board is trying to determine if they did the right thing when they first reviewed Kyle Bass’s drilling application. A new lawsuit claims there’s a clear conflict of interest, because a man named Donald Foster already had the contract to drill Bass’s wells, but he was also on the very same board that processed the drilling application. (Ed McCarthy) Why was Mr. Foster picked? It wasn’t because he was on the board, it’s because he’s one of the best qualified drillers in that part of the country.
While I was reporting in Texas, a source told me that there could be a major development in this lawsuit. So our camera crew tagged along with Representative Harris to another local groundwater meeting. Mr. McCarthy has been successful because he’s been able to outspend and outlast the Groundwater Conservation Districts. So we got to make sure that that doesn’t happen this time.
(McCarthy) My clients have no interest in drying up the aquifer, no interest in harming anyone. And they have publicly stated that if the data doesn’t support the project or it requires a modification of whatever project may be requested, that that’s what they’ll do.
(Rep. Harris) Our community, East Texas and the entire state of Texas is depending on y’all. We support you and we’re behind you.
(Mae) Okay, this is actually a pretty pivotal moment in the case, but I’ll be honest, at first I didn’t really know what this decision meant, so listen carefully. I’d like to make the motion that the District Attorney are authorized to negotiate a judgment that will declare the prior votes on administrative completeness of applications to be voided. The board will reconsider administrative completeness in a future meeting. (Mae) To translate some of the legal talk, Kyle Bass’s application was just denied. Everybody approves, say aye.
(Mae) So today a little groundwater board in East Texas shut down Kyle Bass’s project, at least for now. Thank you guys for what y’all are doing. Appreciate you very much. Thank you. (Mae) These groundwater districts are the last line of defense against major pumping projects in Texas, but they’re also legally limited by the Rule of Capture.
And even Kyle Bass thinks that law needs to change. There are ten Rule of Capture states in America. Going forward, given the scarcity of water I think we’re going to have to see legislative changes. (Rep. Harris) I think it’s abundantly clear that it’s time for the state of Texas to modernize the Rule of Capture.
Oil and gas used to be Rule of Capture in Texas. Until the neighbors started screaming and yelling about it. And then the legislature changed the way that was handled. (Mae) Representative Harris also passed a bill for a $20 billion fund to invest in new state-led water supplies and literally fixing leaky pipes. In the city of San Antonio alone, they’re losing about 20 billion gallons of water a year because of aging pipes.
That’s basically the same amount of water that they get from the Vista Ridge pipeline. While there are some solutions to the Texas water crisis on the horizon, the reality is that there may not be enough water for everyone in the state.
(Andrew Wier) Groundwater is precious, it’s finite. It’s — this regimen of large-scale projects can’t go on forever. (Mae) This is probably just the beginning of water wars that will continue to play out in Texas and beyond.
Right now, private equity groups are selling water to Arizona suburbs. Bill Gates is the biggest private owner of U.S. farmland that has rich water resources. And the billionaire Resnicks are hoarding water rights in California.
But water isn’t just a business opportunity. It’s an essential part of life that needs to be protected. Unfortunately, Kyle Bass still thinks that he should be able to profit off of this precious resource.
He and Ed McCarthy just filed two new lawsuits against the local groundwater board. So the water wars between East Texans and Bass aren’t over yet.
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