(a) The board shall not release funds for the construction of that portion of a project that proposes surface water or groundwater development until the executive administrator makes a written finding:
(1) that an applicant proposing surface-water development has the necessary water right authorizing it to appropriate and use the water that the water supply project will provide; or
(2) that an applicant proposing groundwater development has the right to use water that the water supply project will provide.
(b) The board may release funds for the costs of planning, engineering, architectural, legal, title, fiscal, or economic investigation, studies, surveys, or designs before making the finding required under Subsection (a) if the executive administrator determines that a reasonable expectation exists that the finding will be made before the release of funds for construction.

(c) If an applicant includes a proposal for treatment works the board may not deliver funds for the treatment works until the applicant has received:
(1) a permit for construction and operation of the treatment works from the commission or other applicable permitting authority unless such a permit is not required; and
(2) approval of the plans and specifications from the commission, the executive administrator, or other applicable authority.