RAIN VS. DROUGHT

On the 5,000-acre ranch and farm run by Guy Ellis, near Albany, Texas, the cattle had eaten the grass down to the dirt. The water ponds were running dry, and so was a local creek. Mr. Ellis was forced to ship his 220 cattle to another part of Texas where there was still good pasture.

Strong rains this month have brought a measure of relief to some areas of this parched state, after two years of prolonged drought. ''We sure are grateful ,'' says Ellis's wife, Shirley, explaining that many of their watering ponds, or ''tanks,'' are about half-full now.

But despite the welcome thunderclouds, Texas' long-run problem of diminishing water resources remains.

''The rain has not ended the drought,'' says Bob Riggio of the Texas Department of Water Resources.

''The rains were heavy, but most of them were localized. To really end this, we're looking for 10 inches over a large area.''

The drought, which hit hardest in 1983 in west Texas and this year in central Texas, has exposed a growing competition for water between livestock and people. Sometimes it comes down to ''baby getting a bath (or) baby calf getting water,'' says Steve Munday, spokesman for the Texas and Southwestern Cattle Raisers Association.

Ellis and his wife, Shirley, who helps him run the ranch, had to forgo a garden this year for lack of water. ''We don't wash as much or flush the commode as often or water the lawn,'' he adds.

But more than being just a temporary inconvenience, Texas' water shortages are likely to hamper projected urban and industrial growth in drier parts of the state.

''We do not have the supply (of water) to meet this demand,'' predicts Herbert Grubb, principal planner of the Texas Department of Water Resources. Instead, the wetter eastern portion of the state may get the growth, he says.

In the past half-century or so, the state has had severe droughts in 1932, ' 33, '39, '50-56, '63, '64, '80, and now in '83 and '84, says Mr. Riggio.

Each new drought has a greater impact, he notes, as the population of the state keeps growing. (Texas grew from 11,244,000 in 1970 to an estimated 15,280, 000 in 1982.) Mr. Riggio sums up the growth: ''a lot more taps'' into the state's water supply.

About three-fourths of the water used in the state is for agriculture. About 16 percent is for domestic use. The rest is for industry, mining, and other uses.

Of water used in the home, some 80 percent is used on yards, in toilets, and in bathing.

Texas draws about 40 percent of its water from the surface - from streams, rivers, lakes and man-made reservoirs. During the drought of 1983 and '84, many of these sources have run very low, although there is still a surplus for now.

The main source of Texas water, however, is underground water, stored in one of 23 aquifers that lie under much of the state. The largest of these is the giant Ogallala Aquifer, which extends into eight states and serves much of the Texas Panhandle and some nearby areas.

Usually it is much cheaper to draw aquifer water than, for example, to build a dam to store surface water. So every year Texans are sucking up more water from aquifers than is replenished by rains. Underground water tables are falling.

By the year 2020, total water demands in Texas could easily equal total water supply from surface and underground sources, according to the state's water planners. So legislators, scientists, and farmers are looking at new dam projects to trap surface supplies; experimenting with new ways to extricate more water from aquifers; and trying farming methods that are less water-greedy. The politics of building a dam

Dam construction has in the past been a long, drawn-out process. Some 180 major dams have been built across the state since the 1930s.

Another 65 potential major dam sites have been located, but only five are under construction. More dams are needed, according to farm, environmental, water policy, and political leaders.

Texas surface water could provide 11 million acre-feet a year; currently only 7 million are being used. (One acre-foot is enough water to flood an acre with a foot of water.) This leaves a surplus of 4 million a year. With completion of the projected 65 additional dams, more than 5 million more acre-feet could be available, the state estimates.

But there is strong debate over where to build the dams and what environmental safeguards are needed to prevent downstream areas from drying up and causing harm to plant and aquatic life, especially in bays and estuaries.

Lawsuits have been filed against some dam projects to win guarantees for the environment. This makes some Texans mad.

''Any long-haired, white-tennis-shoe type'' can slow up a dam project, says Wayne Wyatt, general manager of the High Plains Underground Water Conservation District in Lubbock. But Sierra Club lawyer Stuart Henry (who wears brown or black shoes and suits and ties) attributes many of the most serious delays in dam projects to mismanagement on the part of those in charge of the projects.

There has been ''an adversary'' relationship between those seeking environmental protection and those seeking to build more dams, he says. It has been a question of ''power politics,'' he says.

John Baker, a rancher and farmer in Temple, Texas, and a board member of the Texas Farm Bureau, says simply: ''We do too much finger-pointing.''

Mr. Munday of the Texas and Southwestern Cattle Raisers Association says his group favors more dams, but opposes forcing landowners to sell land for dam projects. It also wants more research into environmentally safe chemicals to control the water-greedy mesquite, a small, gnarled tree that is growing ''out of control'' on much of the state's rangeland, he says. A ground-water deficit

While a surplus of surface water still exists, Texas is running a deficit in underground water.

Ground-water aquifers are replenished each year with some 5 million acre-feet a year, from rainfall. But users are sucking up some 11 million acre-feet a year.

The encouraging news is that due to new water-conservation steps, the rate of decline in water tables of the huge Ogallala aquifer is slower now than 10 years ago, says Wayne Jordan. Mr. Jordan is director of the Water Resources Institute, part of the Texas Agricultural Experiment Station at Texas A&M University.

Agriculture is the big water-guzzler in Texas - farmers and ranchers users of three-fourths of the state's water. So these water-saving irrigation techniques steps are being tried, Jordan says, with promising results:

* Downward spraying instead of skyward, from giant, center-pivot irrigators. This results in less loss to evaporation and saves about one-third on energy costs.

* Surge irrigation. The flow of water into the dirt furrows between rows of crops is turned on, then off to create a pulsing effect. This is the most popular of the new water-saving steps, and uses less water than the slow, nonstop flow.

* Trickle irrigation from pipes on the ground. Still too expensive for most farmers, other than orchards and other high-cash-crop growers to use.

* Furrow diking. Dirt is moved by tractor attachment into the furrows at intervals to create little dams to trap rainwater. This method is catching on quickly.

Research is under way, says Jordan, to develop more drought-resistant crops and to improve plant root systems to use less water or extract more water from the soil.

Treated sewage water is being used to irrigate some farms and to cool electric-power plants; efforts are under way to use it in some city water systems. Desalination, which is still in its infancy in Texas, is expensive, but it holds promise.

In addition, experiments are being conducted to test a new method of drawing up additional water from the state's falling underground aquifers by pumping in air to force out more water, says Wayne Wyatt, a water-management official in Lubbock. A $26,000 water consultant

One of the big obstacles to meeting Texas' water needs is getting financing for large water projects.

The Texas Legislature failed in its last session to agree on a compromise water projects plan that would provide environmental protection guarantees and financial aid for local water projects.

But the session in January may be different, says Tom Craddick, a Republican who is chairman of the Natural Resources Committee in the state House of Representatives.

''I think we'll see a comprehensive program'' pass the Legislature, he predicts.

But will voters approve the constitutional changes it will likely require to establish a program of state loan and bond guarantees? Three times in recent years voters have turned such packages down.

Mr. Craddick says he thinks this time may be different. He compares it to the gasoline shortages of the 1970s:

''It took a (water) crisis to get people to think about it.''

But so far, most federal and state assistance to local governments has gone to big cities and major water-district agencies. Small towns often cannot afford to borrow for water projects; and grants for such projects have been very limited.

''We (small towns) have been totally ignored, from a federal standpoint,'' charges Cad Berry, city manager of Hamilton, Texas (pop. 3,200). ''We're not a large bloc of voters'' to win legislative help, he says.

Mr. Berry says an outside engineer wanted to charge the town $26,000 for a survey just to tell it what was wrong with the present water system. The town could not afford that.

''These are the things that are killing little towns,'' he says.

Yet these towns cannot afford to ignore the water challenge, either.

''Drought is a very normal thing here in Texas,'' says Riggio.

''There are more dry days than wet days. (But) when we get a wet day, it's a barnburner,'' he says, such as the strong, flooding rains that have swept parts of Texas, particularly some eastern regions, in the last month. Houston residents are still mopping up about 800 homes soaked by a near-record 15 inches of rain. But until those 'barnburners' come, many Texans have to adjust their life styles.

''We've taken 'Navy showers' (turning the water off while lathering up) all summer,'' says Jane Riley of Corpus Christi, Texas, one of some 90 Texan communities that imposed water-use restrictions sometime during the past two years. This summer the family did not water the grass, due to local restrictions that forced people to cut back on water use by about one-third, or face penalties. ''And,'' she said recently, ''we wash dishes with one little pan of water.''

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