Owner Howard Hughes Corp. is continuing its fight with the Arizona Department of Water Resources over groundwater for the Teravalis (formerly Douglas Ranch) master- planned community in Buckeye.
HHC broke ground on Floreo, the 3,000-acre first phase of Teravalis, last year. Water supplies for the remainder of the 37,000-acre site remain in limbo.
Teravalis previously had conditional groundwater rights in place under a “conditional analysis.” Those rights expired in 2020 and ADWR did not extend them. Douglas Ranch was supposed to submit a hydrological study to reserve a portion of groundwater for 10 years. When the study was not submitted, ADWR refused the conditional analysis extension.
Douglas Ranch’s original developers—JDM Partners and El Dorado Holdings—appealed that decision. HHC picked up the case when it purchased Douglas Ranch for $521M and renamed it Teravalis in 2021. JDM and El Dorado are 50/50 partners with HHC on Floreo, and JDM has reacquired a 12% stake in the rest of Teravalis.
Floreo has sufficient water in place, but a Certificate of Assured Water Supply from ADWR will be required for any additional development. Master plan developers usually request an analysis from ADWR, which is a determination that some assured water supply requirements have been met. When an analysis is granted, the groundwater is reserved for 10 years and is eligible for five-year extensions afterward if requirements are met.
Teravalis had two analyses in place. One was issued in 2004 and has been extended. The conditional analysis was first issued in 2009.
ADWR showed Phoenix area groundwater was overallocated earlier this year, and the state declared it will no longer issue new CAWS for groundwater in the Phoenix Active Management Area. As a result, HHC cannot convert its analyses into groundwater and will have to find a different source of water for the 100,000 homes planned for Teravalis.
HHC is arguing that the 2020 denial of the extension was against the law. The case was the only instance of ADWR issuing a conditional analysis, and HHC is arguing the denial was based on a policy disagreement with Teravalis’ previous leaders. The 2009 conditional analysis found 26,000 acre-feet of water could be available under certain conditions. Douglas Ranch was supposed to submit a hydrologic study in 2010 that would identify groundwater sources for the next 100 years.
Douglas Ranch requested the study be waived in 2010 because of the bad economy. The waiver was granted. All other conditions under the analysis remained in effect, according to Douglas Ranch’s lawyers. One condition stipulated Douglas Ranch can submit a groundwater study at any time to show groundwater is available.
ADWR has argued Douglas Ranch was still required to prove groundwater availability. When it did not, the Department denied the requested extension. Douglas Ranch appealed that decision.
An administrative law judge upheld the denial in April of this year.
HHC officials say the company continues to pursue acceptable sources of water for Teravalis and that they are committed to working with ADWR, Gov. Katie Hobbs and local stakeholders to obtain the necessary permissions and water supplies to proceed with the development. (Source)
