Path Forward is Tricky For Hughes

The intensifying attention to water supply is especially relevant to the Teravalis project. Hughes paid JDM Partners and El Dorado Holdings $600 million to purchase the property. The previous owners proposed to build Trillium West, a 3,000-acre planned community that would rely on the Hassayampa Basin, an aquifer beneath the project, to supply water. In 2006, the Arizona Department of Water Resources issued two certificates for 4,228 acre-feet of water –  1.35 billion gallons — to build 7,000 homes. The certificates are still valid so long as Hughes adheres to its terms.

But Hughes does not have access or certificates to supply water to the other 34,000 acres – 90 percent of its property. The Department of Water Resources has put the Hassayampa Basin off limits to new development while it studies how much water the underground reserve actually holds. It’s such a sensitive topic that Hughes cancelled a scheduled interview about the project and its water supply. 

Arizona’s development community is confident that Hughes Corporation has the capacity to build Teravalis. The company, which developed six other big planned communities in four other states, has 32 years of experience in managing water for a big desert community. Its first planned project is Summerlin, a 22,500-acre development with 100,000 residents outside Las Vegas. 

Hughes water supply options for Teravalis, some available now, others that will require a change in state law and regulation, include tapping another aquifer and delivering water by pipeline. It could lease water from one of Arizona’s Native American tribes that have extensive water rights.  

Hughes also could buy rights to Colorado River water. Queen Creek, a Phoenix suburb, secured state permission and is preparing to spend $27 million to draw 2,000-acre feet annually from the river– nearly 750 million gallons – for its 66,000 residents. Whatever the company decides, the cost of water for Teravalis, typically a few hundred dollars an acre-foot in Arizona (nearly 326,000 gallons) will be much higher than it is today. 

The adage in the West that “water runs uphill to money” applies. Earlier this year Arizona lawmakers approved a $1 billion, three-year appropriation, essentially a down payment to secure stable water supplies. “We’re at the very start of a new era of innovation and investment,” said Greg Vogel, founder and chief executive of Land Advisors Organization, a national brokerage and development consultancy based in Scottsdale. “Teravalis will be in the making for 50 years, maybe 70 years until buildout. They’ll have enough water.”

By no means, though, is that a consensus view. 

The city of Buckeye, where Teravalis is located, uses 11,000 acre-feet of water annually – nearly 3.5 billion gallons — for its 115,000 residents. At current rates of use in Arizona, Teravalis’ water consumption could amount to three times as much.

In 1980, Arizona enacted a groundwater conservation law that requires developers to assure buyers that their homes and businesses have a 100-year water supply. The law also requires developers to replenish aquifers with the same amount of water that they withdraw. 

Bruce Babbitt, who in the first of his two terms as Arizona’s governor signed the 1980 groundwater law, is not reticent. He asserted that Teravalis will not meet the 100-year water supply requirement. Nor will it be able to replenish the aquifer with the billions of gallons of water it will use annually. “My conclusion, based on a lot of analysis, is the project is not viable on the scale they are talking about,” Mr. Babbitt said.

Featured image: Water scarcity is intensifying the challenge in Arizona and four other fast-growing desert Southwest states of building mixed use residential projects, like this one south of Phoenix. Photo © Keith Schneider / Circle of Blue

A version of this article was published by The New York Times on December 27, 2022.