Despite Water Woes, Texas Says “Pass the Hot Sauce”

IRWINDALE, Calif. — Surrounded by blue storage drums, thousands of plastic bottles and chile grinders the size of refrigerators, a Texas politician this week urged a Southern California businessman to move his factory to someplace more hospitable — like the Lone Star State.

“We’ll take care of you,” state Rep. Jason Villalba, R-Dallas, told David Tran, the founder and CEO of Huy Fong Foods, which makes the popular hot sauce sriracha.

“I trust you,” Tran replied as the Texas flag flew outside his shiny, 650,000-square-foot facility.

As the Irwindale City Council has made moves to clamp down on Tran’s factory because of itchy eyes and spicy smells, Villalba and other Texans have to tried lure the company east, arguing that such a dispute would happen only in overregulated California, not business-friendly Texas.

The theme is one that has been trumpeted by other Texas politicians like Gov. Rick Perry, who has toured the country to lure businesses from other states.

But Huy Fong Foods, which is staying put for now, is different from Toyota and other companies that have recently been wooed or moved to Texas. It is an agribusiness, relying on thousands of tons of local fresh chiles to operate. And in rapidly growing Texas, where the population is approaching 90 percent urban, some farming advocates complain that agriculture is being left behind in the scramble to accommodate growth. That is especially true when it comes to water policy, water planning specialists say.

“One of the dominant water management strategies for meeting future water supply needs is a conversion away from agriculture” in Texas and most of the West, said Bill Mullican, a former state water planner in Texas who now writes plans for nearby states.

With that in mind, he said, “if you’re going to bring agribusiness to Texas, I would think that you want to focus on those activities that were not water-dependent or at least heavily water-dependent.”

State officials disagree, pointing out that voters just approved spending $2 billion to help finance water projects, and 10 percent of that money is reserved for rural communities. Several dairy businesses have moved to the Texas Panhandle from California in recent years because of lower costs and less regulation, Texas Agriculture Commissioner Todd Staples said.

“We have a success story to share with this company on how other successful moves have been made,” Staples said.

But agricultural lobbyists have complained that no one leading the Texas Water Development Board, the planning agency that will disburse the water fund money, came from a solid farming background.

And most of the stories of Texas agriculture recently have been about high-profile closings and economic losses in the midst of drought, including the loss of a Cargill beef processing plant that employed more than 2,000 people in the Panhandle and the decimation of the Gulf Coast rice processing industry.

Some legislators have suggested that certain crops should not be grown in Texas at all. As the reservoirs that supply both Austin and rice farmers downstream continue to shrink, Austin-area lawmakers argue that growing rice requires too much water, and that those who live and do business alongside the reservoirs have more economic muscle. Along the Brazos River basin, Texas regulators prioritized cities and power plants over rice growers when the river’s users were asked to cut back.

“You already hear in the political realm, ‘Well, agriculture uses 95 percent of the water. We just need to turn the irrigation wells off,’” said Darren Hudson, an agricultural economist at Texas Tech University. “Those conflicts are going to just intensify.”

Villalba has suggested that the red jalapeño peppers needed to supply Huy Fong could be grown in the Rio Grande Valley. But the water rights system there, the result of a court case from the 1950s, prioritizes municipal use over agriculture.

“Agriculture is basically the user of last resort. They get what water is not for cities,” said Ray Prewett, the executive vice president of the Texas Vegetable Association, which is based in the border city of Mission. Even before the drought, agriculture in the region had suffered because of dwindling water supplies and urbanization, Prewett said. Farmers have found it more profitable to sell their water rights to growing cities, and to shift to dryland farming, which pays more in crop insurance.

Water for cities is also much more highly valued than irrigation water, according to the 2012 state water plan. The plan forecasts a shortfall of 260,000 acre-feet of agricultural water in the Rio Grande region by 2060, resulting in a loss of $48 million and 655 jobs. The water deficit for municipal users in the region is slightly above that, but its estimated impact is much greater — $2.2 billion and 54,000 jobs lost.

“Yes, we need food,” said Dan Hardin, a senior water planner for the state, pointing out that water for irrigation is important. But “unfortunately, we still don’t pay a lot for food in this country,” he said, “so the value of the product per acre-foot is a lot lower in agriculture.”

While chiles are a relatively drought-tolerant crop, requiring far less water than rice, other issues the agricultural industry faces could create problems. Ben Villalon, a well-known horticulturalist from Texas A&M University dubbed “Dr. Pepper” for his expertise in growing chiles, said chiles are largely gone from Texas because of higher labor costs and the difficulty of finding farm workers. Most Texas Republicans favor immigration policies that could further tighten the farm labor supply.

“It’s a sinking boat,” Villalon said. “They’ll never make it. The money’s just not there. It’s not profitable anymore.” Huy Fong’s pepper supplier has used mechanization and other techniques to cut costs, and in 2011, chile yields per acre were almost 10 times higher in California than in Texas.

Still, a single grower with a steady contract can prove more profitable for farmers. And Gene Hall, a spokesman for the Texas Farm Bureau, said agriculture’s water situation in the state is “just fine.”

After all, Hall pointed out, the farmers won their protest against state regulators who pushed them aside when restricting water use on the Brazos — although they had to go to court to do so.

“We know where the courthouse is,” Hall said, “and we’ll go there again if we have to.”

Disclosure: Texas A&M University and the Texas Farm Bureau are corporate sponsors of The Texas Tribune. A complete list of Texas Tribune donors and sponsors can be viewed here.