TITLE 31. NATURAL RESOURCES AND CONSERVATION

PART 10. TEXAS WATER DEVELOPMENT BOARD

CHAPTER 367. AGRICULTURAL WATER CONSERVATION PROGRAM

The Texas Water Development Board (TWDB) proposes an amendment to 31 Texas Administrative Code (TAC) §§367.2 - 367.7, 367.12 - 367.14, and 367.16.

BACKGROUND AND SUMMARY OF THE FACTUAL BASIS FOR THE PROPOSED AMENDMENT.

The TWDB proposes to add a definition of "agricultural" to the text of Chapter 367. Additionally, the TWDB proposes to add the phrase throughout the chapter to clarify that the use of the Agricultural Water Conservation Fund is only for conservation agricultural projects or programs. This rulemaking defines agricultural and clarifies the type of conservation projects or programs eligible for an agricultural water conservation grant to stakeholders.

SECTION BY SECTION DISCUSSION OF PROPOSED AMENDMENTS.

Section 367.2. Definition.

The TWDB proposes to add a definition for the term "agricultural" to read as follows:

Related to the production of food, fiber, or other agricultural projects.

(A) The term includes:

(i) the cultivation of soil to produce crops;

(ii) horticulture, floriculture, or viticulture;

(iii) aquaculture as defined in Texas Agriculture Code, §134.001;

(iv) forestry; and

(v) the raising or keeping of livestock or poultry.

(B) The term does not include activities that are primarily industrial, municipal, or commercial in nature.

The TWDB also proposes to correct a typo from "an" to "a" in the definition of "construction." The TWDB proposes to add the phrase "agricultural" to modify "conservation program or project" in the definition of "eligible cost." Because of the addition of a new definition, and to maintain the definitions in alphabetical order, the TWDB proposes to renumber all definitions in this section.

Section 367.3. Eligible Uses of the Fund.

The TWDB proposes to add the term "agricultural" to modify the terms "conservation program" and "conservation project" throughout this section. This addition will clarify that the

Agricultural Water Conservation Fund may only be used to provide funding for agricultural conservation programs and agricultural conservation projects.

Section 367.4. Determination of Availability.

The TWDB proposes to add the term "agricultural" to modify "conservation program or project." This is a conforming change to be consistent with changes throughout the chapter.

Section 367.5. Application Requirements.

The TWDB proposes to add the term "agricultural" to modify "conservation program or project." This is a conforming change to be consistent with changes throughout the chapter.

Section 367.6. Application with Engineering Report.

The TWDB proposes to add the term "agricultural" to modify "conservation program or project." This is a conforming change to be consistent with changes throughout the chapter.

Section 367.7. Application with Environmental Assessment.

The TWDB proposes to add the term "agricultural" to modify "conservation program or project." This is a conforming change to be consistent with changes throughout the chapter.

Section 367.12. Construction Requirements.

The TWDB proposes to add the term "agricultural" to modify "conservation program or project." This is a conforming change to be consistent with changes throughout the chapter. The TWDB also proposes to fix a typo from "insure" to "ensure" for clarity purposes.

Section 367.13. Amendments to a Program or Project.

The TWDB proposes to add the term "agricultural" to modify "conservation program or project." This is a conforming change to be consistent with changes throughout the chapter.

Section 367.14. Reporting Requirements for Loans.

The TWDB proposes to add the term "agricultural" to modify "conservation program or project." This is a conforming change to be consistent with changes throughout the chapter.

Section 367.16. Conditions prior to Execution.

The TWDB proposes to add the term "agricultural" to modify "conservation program or project." This is a conforming change to be consistent with changes throughout the chapter.

FISCAL NOTE: COSTS TO STATE AND LOCAL GOVERNMENTS (Texas Government Code §2001.024(a)(4))

Ms. Georgia Sanchez, Chief Financial Officer, has determined that there will be no fiscal implications for state or local governments as a result of the proposed rulemaking. For the first five years these rules are in effect, there is no expected additional cost to state or local governments resulting from their administration.

These rules are not expected to result in reductions in costs to either state or local governments. There is no change in costs because these rules simply provide clarification for a requirement that already applied to this fund. These rules are not expected to have any impact on state or local revenues. The rules do not require any increase in expenditures for state or local governments as a result of administering these rules. Additionally, there are no foreseeable implications relating to state or local governments' costs or revenue resulting from these rules.

Because these rules will not impose a cost on regulated persons, the requirement included in Texas Government Code, §2001.0045 to repeal a rule does not apply. Furthermore, the requirement in §2001.0045 does not apply because these rules are necessary to protect water resources of this state as authorized by the Texas Water Code.

The TWDB invites public comment regarding this fiscal note. Written comments on the fiscal note may be submitted to the contact person at the address listed under the Submission of Comments section of this preamble.

PUBLIC BENEFITS AND COSTS (Texas Government Code §2001.024(a)(5))

Ms. Georgia Sanchez also has determined that for each year of the first five years the proposed rulemaking is in effect, the public will benefit from the rulemaking as it clarifies requirements for TWDB grantees and borrowers for the Agricultural Water Conservation Fund. Ms. Georgia Sanchez also has determined that for each year of the first five years the proposed rulemaking is in effect, the rules will not impose an economic cost on persons required to comply with the rule as participation in TWDB financial assistance programs is voluntary.

ECONOMIC AND LOCAL EMPLOYMENT IMPACT STATEMENT (Texas Government Code §§2001.022, 2006.002); REGULATORY FLEXIBILITY ANALYSIS (Texas Government Code §2006.002)

The TWDB has determined that a local employment impact statement is not required because the proposed rule does not adversely affect a local economy in a material way for the first five years that the proposed rule is in effect because it will impose no new requirements on local economies. The TWDB also has determined that there will be no adverse economic effect on small businesses, micro-businesses, or rural communities as a result of enforcing this rulemaking. The TWDB also has determined that there is no anticipated economic cost to persons who are required to comply with the rulemaking as proposed. Therefore, no regulatory flexibility analysis is necessary.

DRAFT REGULATORY IMPACT ANALYSIS DETERMINATION (Texas Government Code §2001.0225)

The TWDB reviewed the proposed rulemaking in light of the regulatory analysis requirements of Texas Government Code §2001.0225 and determined that the rulemaking is not subject to Texas Government Code §2001.0225, because it does not meet the definition of a "major environmental rule" as defined in the Administrative Procedure Act. A "major environmental rule" is defined as a rule with the specific intent to protect the environment or reduce risks to human health from environmental exposure and that may adversely affect in a material way the economy or a sector of the economy, productivity, competition, jobs, the environment, or the public health and safety of the state or a sector of the state. The intent of the rulemaking is to clarify requirements for TWDB grantees and borrowers for the Agricultural Water Conservation Fund.

Even if the proposed rule were a major environmental rule, Texas Government Code §2001.0225 still would not apply to this rulemaking because Texas Government Code §2001.0225 only applies to a major environmental rule, the result of which is to: (1) exceed a standard set by federal law, unless the rule is specifically required by state law; (2) exceed an express requirement of state law, unless the rule is specifically required by federal law; (3) exceed a requirement of a delegation agreement or contract between the state and an agency or representative of the federal government to implement a state and federal program; or (4) adopt a rule solely under the general powers of the agency instead of under a specific state law. This rulemaking does not meet any of these four applicability criteria because it: (1) does not exceed any federal law; (2) does not exceed an express requirement of state law; (3) does not exceed a requirement of a delegation agreement or contract between the state and an agency or representative of the federal government to implement a state and federal program; and (4) is not proposed solely under the general powers of the agency, but rather Texas Water Code §17.912. Therefore, this proposed rule does not fall under any of the applicability criteria in Texas Government Code §2001.0225.

The TWDB invites public comment regarding this draft regulatory impact analysis determination. Written comments on the draft regulatory impact analysis determination may be submitted to the contact person at the address listed under the Submission of Comments section of this preamble.

TAKINGS IMPACT ASSESSMENT (Texas Government Code §2007.043)

The TWDB evaluated this proposed rule and performed an analysis of whether it constitutes a taking under Texas Government Code, Chapter 2007. The specific purpose of this rule is to clarify requirements for TWDB grantees and borrowers for the Agricultural Water Conservation Fund. The proposed rule would substantially advance this stated purpose by aligning definitions with agency and industry practice and providing greater detail on eligibility.

The TWDB's analysis indicates that Texas Government Code, Chapter 2007, does not apply to this proposed rule because this is an action that is reasonably taken to fulfill an obligation mandated by state law, which is exempt under Texas Government Code §2007.003(b)(4). The TWDB is the agency that implements the Agricultural Water Conservation Program.

Nevertheless, the TWDB further evaluated this proposed rule and performed an assessment of whether it constitutes a taking under Texas Government Code Chapter 2007. Promulgation and enforcement of this proposed rule would be neither a statutory nor a constitutional taking of private real property. Specifically, the subject proposed regulation does not affect a landowner's rights in private real property because this rulemaking does not burden, restrict, or limit the owner's right to property and reduce its value by 25% or more beyond that which would otherwise exist in the absence of the regulation. In other words, this rule clarifies requirements for TWDB grantees and borrowers for the Agricultural Water Conservation Fund. Therefore, the proposed rule does not constitute a taking under Texas Government Code, Chapter 2007.

GOVERNMENT GROWTH IMPACT STATEMENT (Texas Government Code §2001.0221)

The TWDB reviewed the proposed rulemaking in light of the government growth impact statement requirements of Texas Government Code §2001.0221 and has determined, for the first five years the proposed rule would be in effect, the proposed rule will not: (1) create or eliminate a government program; (2) require the creation of new employee positions or the elimination of existing employee positions; (3) require an increase or decrease in future legislative appropriations to the agency; (4) require an increase or decrease in fees paid to the agency; (5) create a new regulation; (6) expand, limit, or repeal an existing regulation; (7) increase or decrease the number of individuals subject to the rule's applicability; or (8) positively or adversely affect this state's economy.

SUBMISSION OF COMMENTS (Texas Government Code §2001.024(a)(7))

Written comments on the proposed rulemaking may be submitted by mail to Office of General Counsel, Texas Water Development Board, P.O. Box 13231, Austin, Texas 78711-3231, by email to rulescomments@twdb.texas.gov, or by fax to (512) 475-2053. If sent via email, all public comments should be sent directly to rulescomments@twdb.texas.gov. Please do not submit comments through any third-party forms or websites. Receipt of third-party submissions cannot be guaranteed. Comments will be accepted until 5:00 p.m. of the 31st day following publication in the Texas Register. Include "Chapter 367" in the subject line of any comments submitted.

STATUTORY AUTHORITY (Texas Government Code §2001.024(a)(3))

The amendment is proposed under the authority of Texas Water Code §6.101, which provides the TWDB with the authority to adopt rules necessary to carry out the powers and duties in the Water Code and other laws of the State, and also under the authority of Texas Water Code §17.912.

This rulemaking affects Water Code, Chapter 17.

§367.2. Definitions.

The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise.

(2) [(1)] Board--The governing body of the Texas Water Development Board.

(3) [(2)] Conservation program--A program that is:

(A) an agricultural water conservation technical assistance program, including a program for an on-farm soil and water conservation plan developed jointly by a landowner, an operator, and a local soil and water conservation district as provided by Subchapter H, Chapter 201, Agriculture Code;

(B) a research, demonstration, technology transfer, or educational program relating to agricultural water use and conservation;

(C) a precipitation enhancement program in an area of the state where the program, in the board's judgment, would be most effective;

(D) administered by a state agency that provides funding to a political subdivision or person for a conservation project; or

(E) administered by a political subdivision that provides loans to a person for a conservation project.

(4) [(3)] Conservation project--A project that:

(A) improves water use efficiency of water delivery and application on existing irrigation systems;

(B) prepares irrigated land for conversion to dryland conditions;

(C) prepares dryland for more efficient use of natural precipitation;

(D) purchases and installs on public or private property devices designed to indicate the amount of water withdrawn for irrigation purposes; or

(E) prepares and maintains land to be used for brush control activities in areas of the state where those activities in the board's judgment would be most effective, including activities conducted under Chapter 203, Agriculture Code.

(5) [(4)] The actual construction, alteration, or repair of a fixed improvement to real property requiring the preparation of plans, designs or drawings that are required to be prepared by a [an] professional engineer licensed in the State of Texas.

(6) [(5)] Eligible cost--Costs of the capital equipment, materials, labor, preparation, installation, or administration directly associated with implementing and completing an agricultural [a] conservation program or project.

(7) [(6)] Eligible lending institution--a financial institution that makes commercial loans, is either a designated depository of state funds by the Texas comptroller of public accounts, herein referred to as a state depository, or an institution of the Farm Credit System headquartered in this state, and agrees to participate in a linked deposit program established under Water Code §17.905 and is willing to agree to provide collateral equal to the amount of linked deposits placed with it.

(8) [(7)] Executive administrator--The executive administrator of the Texas Water Development Board, or an authorized representative of the executive administrator.

(9) [(8)] Fund--The agricultural water conservation fund authorized by Section 50-d, Article III, of the Texas Constitution.

(10) [(9)] Linked Deposit--a deposit governed by a linked deposit agreement between the board and an eligible lending institution that requires that:

(A) the eligible lending institution pay interest to the board on the deposit at a rate equal to the asking yield for a U.S. Treasury note with a twelve-month maturity as of the date five days preceding the submission of all the documents required of the eligible lending institution to the executive administrator requesting a linked deposit agreement;

(B) the state not withdraw any part of the deposit except as according to the terms of the linked deposit agreement and the terms of this division; and

(C) the eligible lending institution agree to lend the value of the deposit to a person at a rate not to exceed the interest paid by the eligible lending institution to the board plus four percent;

(11) [(10)] Linked Deposit Agreement--a written agreement between the board, acting through the executive administrator, and an eligible lending institution providing for the deposit by the board of an amount of money from the fund with the eligible lending institution executed pursuant to the authority and according to the conditions of this chapter.

(12) [(11)] Person--An individual, corporation, partnership, association, or other legal entity that is not a political subdivision.

(13) [(12)] Pledged security--Means the securities authorized by these rules and the linked deposit agreement to secure the board's deposit of funds with the eligible lending institution.

(14) [(13)] Political subdivision--Includes a municipality, county, district or authority created under the Texas Constitution Article III, Section 52, or Article XVI, Section 59, an institution of higher education as defined by §61.003, Education Code, any interstate compact commission to which the state is a party, and any nonprofit water supply corporation created and operating under Texas Water Code Chapter 67.

§367.3. Eligible Uses of the Fund.

To the extent authorized by Water Code §17.899, the board may use money in the fund to:

(1) provide a grant to a state agency to pay the eligible costs for an agricultural [a] conservation program or agricultural conservation project, including an agricultural [a] conservation program that provides funding to a political subdivision or person for an agricultural [a] conservation project;

(2) provide a grant or loan to a political subdivision to pay the eligible costs for an agricultural [a] conservation program or agricultural conservation project; and

(3) provide a linked deposit to an eligible lending institution for a loan to a person for an agricultural [a] conservation project pursuant to the terms of §§367.15 - 367.20 of this chapter.

§367.4. Determination of Availability.

(a) - (c) (No change.)

(d) Eligible applicants may also submit applications for agricultural conservation programs or projects at any time. The executive administrator shall periodically submit all such unsolicited applications for review and consideration by the board.

§367.5. Application Requirements.

(a) To be considered by the board, all applications submitted for money from the fund must include:

(1) the official name and address of the applicant;

(2) the constitutional and statutory authority creating the applicant and under which the applicant currently operates;

(3) the names and addresses of the individual or individuals with the legal authority to perform the acts of the entity, and title of position;

(4) an affidavit from the individual with the authority to act on behalf of the applicant, or a certified copy of a resolution adopted or minutes approved by the governing body with the authority to act on behalf of the applicant, which:

(A) identifies the amount that the applicant is requesting;

(B) authorizes the submission of an application on behalf of the entity; and

(C) designates an authorized representative to submit the application and perform all reasonable and necessary action in support of the application and, if approved by the board, to perform the terms and conditions of the award of money from the fund;

(5) the name, address, and title of the designated representative;

(6) a map and description of the geographic area in which the applicant is authorized to conduct such actions as are necessary for the proposed agricultural conservation program or project;

(7) a description of the proposed agricultural conservation program or project that includes:

(A) the geographic area in which it will occur; and

(B) the time schedule in which it will occur;

(8) a proposed budget for the agricultural conservation program or project that identifies:

(A) the total cost;

(B) the cost of each significant element of the program or project; and

(C) other sources of funds, if any;

(9) the predicted water conservation and other benefits that will be created from the proposed agricultural conservation program or project;

(10) a conservation plan and program of work or other sufficient description of the applicant's commitment to water conservation;

(11) identification of a water conservation water management strategy identified in the most recent applicable regional water plan or state water plan that it will be implemented by the use of the grant; and

(12) such additional information that may be requested by the executive administrator or the board.

(b) To be considered by the board, in addition to the requirements of subsection (a) of this section, all applications submitted for loans from the fund must include:

(1) fiscal information with a plan for repayment to the board of the loan; and

(2) if the political subdivision intends to use the board's loan to provide loans to persons;

(A) a description of the types of agricultural conservation projects which will be funded by the loans provided to the political subdivision's applicants;

(B) the standards applied by the political subdivision for the applications, security, repayment, and financial integrity for the loans;

(C) the procedures for considering and approving loan applications submitted to the political subdivision and to assess the financial integrity of the person applying for the loan; and

(D) a sample or adequate description of the agreement pursuant to which the funds will be provided.

§367.6. Application with Engineering Report.

In addition to the requirements of §367.5 of this chapter (relating to Application Requirements), if the funds provided by the board will be used for construction of an agricultural [a] conservation project, to be considered by the board, the application shall include an engineering feasibility report signed and sealed by a professional engineer licensed in the State of Texas which shall contain:

(1) description and purpose of the project;

(2) the cost of the project;

(3) a description of alternatives considered and reasons for the selection of the project proposed;

(4) sufficient information to evaluate the engineering feasibility;

(5) maps and drawings as necessary to locate and describe the project area;

(6) a statement as to whether the proposed construction will require surface or subsurface disturbance of the soil or alter the existing vegetation; and

(7) such other information or data as necessary to evaluate the project and requested by the executive administrator.

§367.7. Application with Environmental Assessment.

(a) In addition to the requirements of §367.5 and §367.6 of this chapter (relating to Application Requirements and Application with Engineering Report, respectively), if the funds provided by the board will be used for construction of an agricultural [a] conservation project which will require surface or subsurface disturbance of the soil or alter the existing vegetation, the applicant shall conduct an environmental assessment in compliance with this section. The purpose of this section is to provide the executive administrator with sufficient information to inform the board whether a proposed project has been adequately reviewed by the regulatory agencies and whether such review provides a reasonable level of certainty that the project will comply with state and federal environmental regulations.

(b) - (f) (No change.)

§367.12. Construction Requirements.

(a) This section applies to agricultural conservation projects financed by the board through a grant or loan and which include construction.

(b) Prior to the release of funds for construction of an agricultural [a] conservation project, an approved applicant shall:

(1) submit to the executive administrator engineering plans and specifications, which shall be as detailed as would be required for submission to contractors bidding on the work and which shall be consistent with the engineering feasibility information submitted with the application;

(2) obtain written approval from the executive administrator of the submitted engineering plans and specifications; and

(3) for projects which the approved applicant will execute construction contracts, prior to receiving bids and awarding the contract, obtain executive administrator approval of the contract documents, such documents to include:

(A) provisions assuring compliance with the board's rules and all relevant statutes;

(B) provisions providing for the district to retain a minimum of 5.0% of the progress payments otherwise due to the contractor until construction is substantially complete and reduction in the retainage is authorized by the executive administrator;

(C) a contractor's act of assurance form to be executed by the contractor which shall warrant compliance by the contractor with all laws of the State of Texas and all rules and published policies of the board; and

(D) any additional conditions that may be requested by the executive administrator.

(c) (No change.)

(d) After the construction contract is awarded, the approved applicant shall:

(1) ensure [insure] adequate inspection of the project by a registered professional engineer;

(2) obtain assurance from the engineer that the work is performed in a satisfactory manner in accordance with the approved plans and specifications, other engineering design or permit documents, approved alterations, and in accordance with sound engineering principles and construction practices;

(3) allow the executive administrator to inspect the construction and materials of any project at any time; and

(4) take corrective action as necessary to complete the project in accordance with approved plans and specifications or contract documents.

(e) - (f) (No change.)

§367.13. Amendments to a Program or Project.

Any substantial alteration which involves a change in the basic purpose of an agricultural conservation [a] program or project, or which involves an increase in the loan commitment of the board for the project, must be approved in writing by the board. All other changes to the agricultural conservation program or project must be approved by the executive administrator.

§367.14. Reporting Requirements for Loans.

A political subdivision that receives an agricultural [a] conservation program or project loan shall:

(1) upon request of the executive administrator, promptly provide certified copies of all minutes, operating budgets, monthly operating statements, contracts with borrowers, audit reports and other documents concerning the agricultural conservation program or project loan; and

(2) upon request of the executive administrator or at the end of each state fiscal year, shall provide to the executive administrator a report on the loans made to borrowers during the preceding state fiscal year, in a format specified by the executive administrator.

§367.16. Conditions Prior to Execution.

(a) Before the executive administrator may execute a linked deposit agreement, a lending institution shall submit to the executive administrator:

(1) the application of a person determined by the eligible lending institution to be eligible and creditworthy to receive a loan according the criteria of the institution;

(2) a draft loan agreement with such person that:

(A) identifies the principal amount of the loan which shall not exceed $250,000;

(B) identifies the interest rate to be paid by the borrower which shall not exceed the interest rate paid by the eligible lending institution to the board plus four percent;

(C) includes a repayment schedule which identifies the dates on which payments are due from the loan recipient to the lending institution;

(D) limits the use of the funds to an agricultural [a] conservation project certified pursuant to subsection (a)(3) of this section; and

(E) contains such other terms and conditions determined by the eligible lending institution in its sole discretion to be reasonable for the purposes of a private loan agreement;

(3) a certification from:

(A) the eligible lending institution of the interest rate applicable to the proposed loan;

(B) a director of a soil and water conservation district for the district in which the project is located certifying that:

(i) the loan recipient has a soil and water conservation plan approved by the district; and

(ii) the project furthers or implements such plan; and

(4) such other information or documentation as determined by the executive administrator to be reasonable and necessary to fulfill the objectives of this chapter.

(b) (No change.)

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on July 24, 2026.

TRD-202603139

Ashley Harden

General Counsel

Texas Water Development Board

Earliest possible date of adoption: September 6, 2026

For further information, please call: (512) 475-1673