Texas Bar Journal • September 2025

The Legislative Update

Environmental and Water Law

Written by Claudia Russell and Emily Rogers

Because population growth, extreme weather, and economic development needs are placing significant pressure on the state’s aging water, wastewater, and flood infrastructure, investment in Texas water infrastructure was a top priority during the 89th legislative session. Several key measures passed that will fund water infrastructure needs, promote regional solutions, and establish performance standards for meeting long-term goals. Those and other water-related bills are discussed below. All bills are effective September 1, 2025, unless otherwise noted.

SB 7 and HJR 7

SB 7, “[r]elating to the oversight and financing of certain water infrastructure matters under the jurisdiction of the Texas Water Development Board,” is effective September 1, 2025, except for Sections 1.04, 1.06, and 1.09, which are effective September 1, 2027, if HJR 7, “[p]roposing a constitutional amendment to dedicate a portion of the revenue derived from state sales and use taxes to the Texas Water Fund and to provide for the allocation and use of that revenue,” is approved by the voters in November 2025.

By far the most significant water-related bills passed in the 89th regular session were SB 7 and HJR 7. Pending statewide voter approval on November 4, 2025, $20 billion will be dedicated to water infrastructure investments: $1 billion per year in dedicated state sales and use tax revenues to the Texas Water Fund (TWF) administered by the Texas Water Development Board (TWDB) beginning in 2027 and ending in 2047. SB 7 stipulates that of the $1 billion in annual dedicated funding, at least 50% must be allocated to the New Water Supply for Texas Fund and state water implementation fund for Texas, permitting TWDB discretion to use the remaining 50% for water supply, wastewater, or flood infrastructure. In fact, all of TWDB’s financial assistance programs will be eligible for funding, including the Flood Infrastructure Fund, the Agriculture Water Conservation Fund, and the Economically Distressed Areas Program. It also prohibits the Legislature from changing the allocation for the first 10 years. The bills did leave some room to maneuver. During a state of disaster, the Legislature can suspend the funding allocation and appropriate funds for any purpose, with the intent of restoring the funds to the TWF when practicable.

The New Water Supply for Texas Fund’s project eligibility was first limited to construction and transport of marine and brackish desalination, aquifer storage and recovery, and produced water projects. It was amended through the legislative process and now also includes reservoirs that have obtained state and federal permits and acquired 100% of needed property, water and wastewater reuse projects, and purchase of out-of-state water.

Other policy provisions of SB 7 include:

  • Requiring TWDB to facilitate planning and best practices for water supply conveyance projects related to eminent domain, existing easements, and project design and construction;

  • Requiring a study of adding wastewater to the state water planning process;

  • Authorizing the Texas Water Trust to hold water rights from out of state;

  • For the Economically Distressed Areas Program, increasing TWDB’s bonding authority limitation to $100 million annually and raising the cap on the grant component from 70% to 90%; and

  • Creating a TWF advisory committee and requiring additional TWDB reporting.

HB 49

HB 49 amends Chapter 122 of the Natural Resource Code to remove liability for surface estate owners, producers, and suppliers/conveyers of fluid oil/gas waste for any issues related to the subsequent treatment, use, or exposure to any component of the waste or its byproduct used to generate the treated waste. It also provides exceptions for a person’s gross negligence or intentional wrongful act or omission or if the damage was the result of negligence and regulatory nonconformity. It does not affect existing liability on property where fluid oil/gas waste is produced, transported, or treated. The Texas Railroad Commission is required to adopt rules governing the treated product and byproducts of the treatment process.

HB 517

HB 517 adds Section 202.008 of the Texas Property Code to prohibit a property owners’ association from assessing a fine against a property owner for failing to comply with a covenant requiring installation or maintenance of green vegetation, or prohibiting discolored or brown vegetation, during a period when the property is subject to residential water restrictions and for 60 days after those restrictions are lifted.

HB 1633

HB 1633 amends Section 36.113 of the Texas Water Code to require a groundwater conservation district before granting or denying a permit or permit amendment to consider if “the proposed use of water unreasonably affects wells that are registered with the district and exempt from permitting.” HB 1633 became effective June 20, 2025.

HB 1689

HB 1689 amends Section 36.207 of the Texas Water Code to provide that a groundwater conservation district (GCD) may use export fees for mitigation of wells outside of the district if the district enters into an interlocal agreement with another district authorizing the funds to be used for that purpose.

HB 5560

HB 5560 amends Section 36.102 of the Texas Water Code to increase the amount of civil penalties a district can recover from a person for a violation of district rules to $25,000 (from $10,000) per day per violation. It also:

  • Requires the court to consider certain factors in determining the amount of the civil penalty, including assessment of a greater penalty if the court determines the person gained an economic benefit because of the violation that was greater than the maximum civil penalty;

  • Allows a court to defer a penalty by not more than 50% of the total civil penalties if the person complies with all provisions of corrective action to address the violation and lists factors to consider for a deferral; and

  • Allows a court to authorize a utility to recover all or part of a civil penalty in certain circumstances.

SB 17

SB 17 amends various provisions of law to prohibit a person who is domiciled in or a government entity or organization headquartered in or controlled by a designated country from purchasing real property in the state, including groundwater or water rights.

SB 480

SB 480 adds Section 791.038 of the Texas Government Code to clarify that “a local government may contract with another local government, the state, or the federal government to jointly participate in research or planning activities related to water resources.” SB 480 became effective May 28, 2025.

SB 1145

SB 1145 amends Chapter 26 of the Texas Water Code to provide that the Texas Commission on Environmental Quality (TCEQ) may issue permits for land application of produced water that has been treated for beneficial use. It requires TCEQ to adopt standards to prevent the pollution of surface and subsurface water.

SB 1261

SB 1261 adds Chapter 1373 to the Texas Government Code to provide that financing may not exceed the lesser of 50 years or the reasonable expected weighted average useful life of certain eligible projects in the state water plan. It amends Chapter 15 of the Texas Water Code to allow for TWDB financing of 40 years or the useful life for eligible projects within TWDB’s SWIFT Program. It sets forth authority and security for obligations of an issuer, requirements of an obligation authorization, delegation of authority, review and approval of the Office of the Texas Attorney General, comptroller registration, and validity and incontestability of the obligation.

SB 2550

SB 2550 amends Sections 33.135 and 61.025 of the Texas Natural Resources Code, Section 5.014(c) of the Texas Property Code, and Section 13.257(c) of the Texas Water Code to remove seller disclosure notice requirements of the sale of certain groundwater and surface water property rights located in certain coastal areas of the state or a public improvement district or a certificate of convenience and necessity.

claudia russellCLAUDIA RUSSELL is a partner in Bickerstaff Heath Delgado Acosta in Austin. She helps clients navigate the legislative process.

emily rogersEMILY ROGERS is the managing partner in Bickerstaff Heath Delgado Acosta in Austin. She practices in the areas of water and environmental law.