In drought-prone East Texas, groundwater isn’t just a resource—it’s becoming currency. As aquifers shrink and climate risks rise, private companies are quietly staking claims to the region’s most vital asset: water.
They call it “conservation.” They use terms like “mitigation banking”, “habitat offsets”, and “water stewardship”. But behind the greenwashed language lies a simple, relentless motive—profit.
Texas operates under the “Rule of Capture,” a century-old doctrine that allows landowners to pump as much groundwater as they want—even if it drains neighbors’ wells. This legal framework, originating from the 1904 Texas Supreme Court decision Houston & T.C. Ry. Co. v. East, still governs groundwater use in most of the state. It favors landowners and allows unchecked groundwater extraction with limited liability.
While Groundwater Conservation Districts (GCDs) were created to manage water resources and ensure long-term sustainability, enforcement powers vary widely between districts. Some districts struggle with underfunding or political influence, which limits their ability to deny permits or enforce caps on groundwater withdrawals.
One such case involves CEM, a conservation finance firm led by hedge fund manager Kyle Bass. Through two affiliated properties—Pine Bliss and Redtown Ranch—CEM has applied for permits to drill dozens of high-capacity wells into the Carrizo-Wilcox Aquifer and adjacent minor aquifers. Located in Henderson, Anderson, and Houston Counties, these projects are promoted as mitigation banks to restore natural habitat. However, permit filings and public documents indicate industrial-scale groundwater extraction, with several wells proposed to exceed 500 gallons per minute. The true scope of these operations raises serious concerns about long-term water security for surrounding communities.
Across Texas, thousands of landowners engage in conservation and sustainable agriculture without extracting massive volumes of groundwater. From rotational grazing and cover cropping to rainwater harvesting and composting, many landowners have demonstrated that stewardship doesn’t require depleting aquifers.
According to the USDA’s Natural Resources Conservation Service (NRCS), more than 18,000 Texas producers participate in voluntary conservation programs annually. Most of these programs prioritize soil health, water retention, and reduced runoff rather than drilling new wells.
In contrast, mitigation banks like the one proposed by Pine Bliss rely on high-volume water use for site transformation and vegetation re-establishment, which may appear beneficial in satellite imagery but deplete groundwater in the process.
“Groundwater is the environmental crisis
that no one sees coming.”
In Texas, water is fast becoming the next boom commodity. Just as oil once drove land grabs and speculation, water rights are now drawing attention from hedge funds, investment groups, and land developers.
A 2021 report by the Texas Water Development Board (TWDB) noted that demand for groundwater is expected to remain high through 2070, especially in rural and agricultural counties. Some investors are acquiring rural land not for farming or livestock, but for the underground aquifers they sit on.
Kyle Bass, a Dallas-based hedge fund manager known for shorting the subprime mortgage market, has been tied to water rights and conservation banking in Texas. In 2024, Bass publicly posted that he was investing in land to protect and restore the environment. However, documents filed with the Texas Commission on Environmental Quality (TCEQ) and Groundwater Conservation Districts show that affiliated companies have also requested permits for significant groundwater extraction, citing mitigation use.
While mitigation banking can serve real environmental goals when managed properly, critics argue that in Texas, it is increasingly used as a legal and PR strategy to shield profit-driven water extraction projects from scrutiny.
“The studies point out that the easy access to pumped wells has led to a surge of groundwater use for municipal, industrial and agricultural purposes over the past 50 years. While the surge has created economic gains, it has led to declining groundwater levels, lower pump yields, increased pumping costs, deteriorating water quality and damaged aquatic ecosystems.”
— Circle of Blue, 2010 (Source)
Texas is not alone in its struggle with groundwater exploitation. California offers a stark cautionary tale. During the state’s most recent drought, groundwater consumption surged from around 40% to nearly 60% of total water use, turning aquifers into a hidden safety net as surface water supplies dwindled. As demand soared, well drillers reported wait times exceeding a year, and many communities found themselves in direct competition with corporate agriculture and private investors.
According to a 2014 National Geographic article, California’s prolonged overuse of groundwater—long unregulated until the 2014 Sustainable Groundwater Management Act (SGMA)—led to dramatic land subsidence in the Central Valley. In some areas, the ground sank by more than 28 feet due to aquifer collapse. This subsidence has damaged irrigation canals, pipelines, roads, and homes, with long-term impacts that will cost billions to mitigate (National Geographic).
The broader scientific literature echoes these impacts. According to a 2022 study in Nature Communications, overpumping has led not only to falling water tables but also to streamflow depletion, declining water quality, land subsidence, wells running dry, and wastewater intrusion—consequences that threaten ecosystems and communities alike (Nature Communications).
Texas is poised to repeat this pattern. Without stronger oversight, continued high-capacity withdrawals may permanently damage aquifers like the Carrizo-Wilcox, threatening both rural water supplies and long-term regional resilience.
If Pine Bliss and similar companies are granted drilling rights, it sets a troubling precedent: that private actors can use vague promises of conservation to justify large-scale groundwater extraction. It also weakens the ability of GCDs to enforce sustainable use limits across regions.
The Modeled Available Groundwater (MAG) values, developed by the TWDB, represent the estimated volumes of water that can be pumped annually without negatively impacting Desired Future Conditions (DFCs). Yet many GCDs are already issuing permits that exceed their MAGs.
For example, in GMA 11, which includes the Carrizo-Wilcox Aquifer in East Texas, permit requests and usage data suggest that some districts are approaching or exceeding sustainable pumping levels. Once MAG thresholds are surpassed, DFCs—the long-term goals for aquifer health—can no longer be met.
In Henderson County, groundwater data from the Neches-Trinity Valley Groundwater Conservation District (NTVGCD) shows that total reported usage in 2019 already placed stress on the local aquifer. Adding 20+ high-volume wells could push the region into critical decline.
“Forty percent of our groundwater withdrawals are coming from unsustainable sources of water. This water provides a lot of our food. And we’re basically drawing down the bank account.”
— Dr. Peter Gleick, co-founder, Pacific Institute (Circle of Blue, 2010)
“When plunder becomes a way of life for a group of men in a society, over time they create for themselves a legal system that authorizes it and a moral code that glorifies it.”
While state and federal agencies oversee water quality and environmental restoration, groundwater quantity is primarily a local issue. This decentralization has created legal gray areas where companies can exploit the rule of capture and push for permits through less-resourced GCDs.
In many cases, boards of directors for these districts are appointed by local county commissioners or city councils. That means political influence, personal relationships, or lack of technical knowledge can compromise decisions about major water developments.
Further complicating matters, many citizens have no legal standing to contest a well permit unless they can prove direct harm. That means rural neighbors might not be notified, let alone given a voice in the process, even if their water wells are at risk.
The Ozarka Example: A Cautionary Tale
In the late 1990s and early 2000s, Ozarka, then owned by Nestlé, drilled several deep wells in Henderson County. Though hydrogeological models suggested the impact would be minor, residents soon noticed declining well levels and pond drying.
Texas courts upheld the rule of capture, and the company was not held liable for nearby damages. A key case, Sipriano v. Great Spring Waters of America, Inc., reinforced the precedent that unless proven malicious or negligent, groundwater pumping cannot be legally challenged.
While some scientists and state agencies found that Ozarka’s impact was minimal, the community impact was real and lasting. It offers a stark warning about the dangers of assuming models over observable effects.
Protecting Texas groundwater will require action on multiple fronts:
As temperatures rise and rainfall becomes more erratic, water is no longer just a utility. It is wealth. It is power. And in the wrong hands, it is a weapon against rural communities and future generations.
It’s time to stop calling this “conservation” and start calling it what it is: extraction wrapped in green marketing. Texans must demand transparency, stronger oversight, and a reassessment of what’s truly sustainable.
Because once the water’s gone, it’s not coming back.
<a href=”https://img1.wsimg.com/blobby/go/d3e2692a-5f91-4ba7-8df6-bb9cc84ae837/downloads/e2cac896-dff7-4f16-98b8-7a994963f659/20250602134642420.pdf?ver=1750946247283” target=”_blank” rel=”noopener”>📄 View PDF</a>Accordion Content
<a href=”https://img1.wsimg.com/blobby/go/d3e2692a-5f91-4ba7-8df6-bb9cc84ae837/downloads/e2cac896-dff7-4f16-98b8-7a994963f659/20250602134642420.pdf?ver=1750946247283” target=”_blank” rel=”noopener”>📄 View PDF</a>Accordion Content
<a href=”https://img1.wsimg.com/blobby/go/d3e2692a-5f91-4ba7-8df6-bb9cc84ae837/downloads/e2cac896-dff7-4f16-98b8-7a994963f659/20250602134642420.pdf?ver=1750946247283” target=”_blank” rel=”noopener”>📄 View PDF</a>Accordion Content