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2019-024 Water Supply Indirect Reuse Permit UpdateDate: February 8, 2019 Report No. 2019-024 INFORMAL STAFF REPORT TO MAYOR AND CITY COUNCIL SUBJECT: Status update on the Indirect Reuse Permit application with the TCEQ for an expanded water supply. BACKGROUND: The City of Denton submitted an application to the Texas Commission on Environmental Quality (TCEQ) for an indirect reuse permit in order to claim a portion of the City’s effluent water as a water right. This application was submitted on February 4, 2010 and was deemed administratively complete on May 11, 2011. Once deemed complete, the application was placed in the que for permit drafting. Permit drafting tends to be a slow and iterative process, and has taken approximately seven and a half years to complete. On December 13, 2018, staff received notice that the TCEQ had completed the City’s draft indirect reuse permit. Staff reviewed this draft and directed the TCEQ to proceed with the required 30 day public notice process on January 30, 2019. Staff estimates that it will be approximately one month before this public notice is released. The purpose of this informal staff report is to inform the council of the status of the permit and to provide the background of the direct and indirect reuse programs at the City of Denton. Direct and Indirect Reuse Summary Expanding the City’s current water supply through Direct and Indirect Reuse of the City’s treated wastewater effluent has been a long term water supply strategy for nearly fifty years. Direct Reuse programs use treated wastewater plant flows prior to discharge into the receiving stream and are mostly used for non-potable water uses, such as irrigation or industrial uses. Indirect Reuse programs apply to a water right holder wanting to claim the use of wastewater effluent discharges (also known as return flows) into “waters of the state” for diversion and subsequent use downstream of the point of discharge. Indirect Reuse programs require conveyance of these return flows through natural water bodies through the use of a “bed and banks” permit from the TCEQ. Direct Reuse permits tend to be much simpler to obtain than Indirect Reuse permits. However, indirect reuse programs are frequently used in Texas as a means to extend existing surface water supplies that are used for municipal purposes. Direct Reuse Program Direct Reuse of the wastewater effluent was first used back in 1971 for the Denton Municipal Electric Generating Facility as an alternative non-potable water supply for the generating facility’s cooling tower. The use of this treated effluent reduced water demands that would otherwise have come from the City’s surface water supply from Lake Lewisville. Approximately 30 years later, the City applied for a Direct Non-Potable Reuse permit from the TCEQ to allow diversion of up to 6 million gallons of treated wastewater effluent for non-potable water use to potential water irrigation customers on the southeast side of town. After obtaining the Direct Reuse permit from the TCEQ in 2001, a 16 inch treated effluent transmission line was constructed from the Pecan Creek Water Reclamation Plant south along Mayhill Road to serve Date: February 8, 2019 Report No. 2019-024 irrigation customers that include the Denton Regional Medical Center, the Denton State School, and the Oakmont Country Club golf course. At the time this second Direct Reuse project was permitted, the City of Denton had limited access to their wastewater treatment discharges into Lake Lewisville. Although these return flows helped to support the existing water rights held by the Cities of Dallas and Denton, the 1985 Untreated Water Supply Contract between Denton and Dallas limited Denton’s withdrawals from Lake Lewisville to firm yield. Firm yield is defined as the water supply available in a reservoir system that could be diverted and used over a seven year drought of record condition. Denton’s firm yield share in Lake Lewisville was only 4.34 MGD and wastewater discharges from treatment plants going into the lake were considered effluent return credits. These credits were shared between Denton and Dallas on the basis of the original water right shares in Lake Lewisville with 5% going to Denton and 95% going to Dallas. Hence, the City of Denton had very limited water supply value for its wastewater return flows into Lake Lewisville under the 1985 Untreated Water Sales Agreement with the City of Dallas. Long Range Water Supply Planning The statewide water supply planning process under Senate Bill 1 is a regional planning process administered by the Texas Water Development Board. This process requires Regional and Statewide Water Supply Plans to be developed every five years with a 50 year planning horizon Region C is comprised of a 16 county area that includes most of the North Central Texas Council of Governments (NCTCOG) planning area and the four primary counties of the Dallas-Ft. Worth (DFW) Metroplex The City of Denton has had a representative on the Region C Water Supply Planning Group since it was originally formed after Senate Bill 1 in 1996. In accordance with Senate Bill 1, Regional and Statewide plans have been developed four times in the past beginning in 2001 with the last plan adopted in 2016 and incorporated into the 2017 Texas Water Plan. The Region C Water Supply Planning Group is currently working on the fifth round of water supply planning cycle that will be completed in 2021 and this plan examines water demands and supply options out to the year 2070. The statewide plans have a large emphasis on reducing water demands through water conservation programs and extending existing water supplies through reuse programs. In the DFW region, the vast majority of water demands are from municipal water users and the wastewater return flows from users are a substantial new source of water supply through Direct and Indirect Reuse programs. Compared to all other Regions in the state, Region C has the most reliance on water conservation and reuse as a means of meeting future water supply demands over the next 50 years. All of the major water suppliers in the DFW region, including Tarrant Regional Water District, North Texas Municipal Water District, the Cities of Dallas and Fort Worth as well as the Upper Trinity Regional Water District have all developed significant enhancements to their water supply portfolio through implementation of Direct and Indirect Reuse. Denton’s current water supply plan under the Region C Water Supply Planning Process is based upon water conservation, expansion of reuse programs and ultimately additional purchases of Date: February 8, 2019 Report No. 2019-024 untreated water from the City of Dallas. Denton in is the Dallas Water Utility water supply planning area and has been an untreated water wholesale customer city of Dallas since 1962. Denton’s joint development of Lake Lewisville and Lake Ray Roberts with the City of Dallas provides water rights for Denton of 5% of Lake Lewisville and 26% of Lake Ray Roberts. The City of Dallas has the remaining water rights for each reservoir. Due to these shared reservoir projects, Denton has not purchased water from Dallas Water Utilities since the Ray Roberts Reservoir was filled. Development of the City’s Indirect Reuse Program The City of Denton’s Indirect Reuse program has been developed over nearly twenty years. As mentioned, Denton was restricted under the 1985 Untreated Water Purchase Agreement with the City of Dallas to only claiming 5% of its wastewater return flows into Lake Lewisville. Staff made some attempts to renegotiate these terms with the City of Dallas dating back to approximately 1999, but were unsuccessful. However, when the City of Dallas made an application for a major Indirect Reuse permit to import up to 60 million gallons per day (MGD) of their Southside Wastewater Treatment Plant effluent into Lake Lewisville, the City of Denton protested this permit and was able to resolve the protest by a settlement agreement. This agreement stipulated that the City of Denton would withdraw their protest in exchange for the City of Denton having rights to claim up to 50% of its wastewater return flows into Lake Lewisville to an amount that could not exceed 50% percent of Denton’s total firm yield of the combined Lake Lewisville and Lake Ray Roberts reservoir systems (24.1 MGD; 4.34 MGD from Lake Lewisville and 19.76 MGD from Lake Ray Roberts). The Settlement Agreement further stated that the City of Dallas would support a water right permit amendment application to the TCEQ for the City of Denton to claim this additional 12.05 MGD Indirect Reuse permitted water right. Since the City of Denton currently discharges treated wastewater effluent into Pecan Creek and this stream flows into Lake Lewisville, Denton does not need any new facilities to claim this additional water right. The resulting water rights from the settlement agreement were incorporated into the Region C Water Supply Plan and the Denton and Dallas Long Range Water Supply Plans. These were important actions, since the TCEQ will not issue a water permit in Texas unless it is consistent with the current statewide water plan. The results of these efforts are reflected in both the 2012 and the 2017 plans. Knowing that the application and permit amendment would take several years to complete, Denton Water Utility staff submitted a permit amendment application to the TCEQ on February 4, 2010 to claim the return flows discharged into Lake Lewisville. After a series of information requests and responses, this permit application was officially declared administratively complete on May 11, 2011. This date is significant since it establishes the priority date for the water right in the Trinity River Basin. After working extensively with the TCEQ Water Rights Permitting Team on various issues centered on the required reuse accounting plan, Denton received written notice from the TCEQ on December 13, 2018 that the draft permit had been developed and was ready for Denton’s review and subsequent release for the 30 day public notification process. After requesting a time extension until February 1, 2019 for our review, we notified the TCEQ on January 30, 2019 to proceed forward with the release of the draft permit amendment as soon as possible. Date: February 8, 2019 Report No. 2019-024 The permit request received very favorable responses from TCEQ staff. TCEQ staff acknowledged the City’s Water Conservation Plan and our achieved performance in reducing per capita water use. The TCEQ’s Surface Water Availability Team reviewed the examined the hydrology and potential impacts to senior water right holders, and the Resource Protection Team reviewed the potential for environmental impacts to aquatic and riparian habitats, recreational uses, water quality, and bay and estuary freshwater inflows. The last item is of particular note since reuse projects in the upper portion of the Trinity River Basin have raised some concerns to regarding environmental impacts. Based upon the TCEQ’s staff analyses, Denton’s reuse permit amendment represents less than 0.1% of the total inflow volumes into the Galveston Bay estuary system. DISCUSSION: The next steps in the water rights permit amendment process will be a required 30 day public notice process. If any entity that has standing in the process, (typically other water right holders in the basin) requests a contested case hearing on the permit, the City may elect to negotiate a settlement agreement similar to the Denton/Dallas settlement agreement to withdraw the protest, or the case will be referred to mediation at the TCEQ. If this effort fails, a contested case hearing will be referred to the State Office of Administrative Hearings (SOAH) to be heard prior to the TCEQ making a final decision. Contested case hearings at SOAH are conducted in a manner that is similar to a standard court proceeding. An appointed official will hear the case and make a final decision and recommendation to the Executive Director of the TCEQ. The TCEQ then makes a decision if the permit is to be issued or denied. The costs and time to obtain the final permit depends on the number and merit of requests for a contested case hearing and Denton’s ability to resolve these requests and obtain withdrawals from contesters. To assist in these efforts, the City of Denton secured the services of the law firm of Booth, Ahrens and Werkenthin (BAW). BAW represented the City of Denton in our protests and settlements of the Upper Trinity and Dallas Water Utilities Indirect Reuse permit applications, provided assistance for Denton’s Direct Reuse permit application, and provided a review of the indirect reuse draft permit from the TCEQ. If the draft permit results in opposition leading up to a contested case hearing process, staff will continue to keep the Public Utilities Board and City Council informed and obtain the necessary approval to expand the existing contract with BAW that is currently limited to $40,000. It is possible that a contested case hearing could require considerable expenditures by the City of Denton for legal representation and expert testimony. However, it is also possible that a contested case hearing may not be required at all. We have a settlement agreement with the City of Dallas that commits to supporting this permit application by the City of Denton. As the majority water right holder in the Elm Fork Upper Trinity River Basin, the City of Dallas represents the most important water right stakeholder in this permit application and would clearly have the most standing in this water right permit application. The 12.05 MGD additional water supply that this Indirect Reuse permit brings to the City of Denton’s water supply portfolio has the potential to extend the City’s water supply independence for the next 15 to 27 years depending upon growth, weather and return flows back into Lake Date: February 8, 2019 Report No. 2019-024 Lewisville from the Water Reclamation Plants. In economic terms this represents a new water supply worth approximately up to 3.5 million dollars a year of untreated water purchases that can be avoided in future years. CONCLUSION: The proposed indirect reuse water right permit application process has taken many years to reach this point and remains a critical component to the City’s long range water supply plan. Obtaining the permit will help City of Denton extend its significant financial investments in its water supply projects and lessens the City’s dependence on untreated water purchases from the City of Dallas. Staff will be glad to provide additional information upon request. STAFF CONTACT: Tim Fisher, P.E., Director of Water (940) 349-7190 Tim.Fisher@cityofdenton.com