In 1937, LCRA broke ground on what would become Mansfield Dam, the only flood-control structure in the Highland Lakes. In 1938, LCRA completed construction of Buchanan and Inks dams upstream of Mansfield Dam.
Buchanan Dam was named in honor of U.S. Rep. James Buchanan, a longtime supporter of projects on the Colorado River. When Buchanan died in February 1937, he was succeeded by Lyndon Johnson, a protégé of Alvin Wirtz. Johnson realized the potential LCRA and its dams offered the region. He persuaded LCRA to use the electric power from its dams to benefit Central Texas communities and rural areas, and he forged a close partnership between LCRA and the two electric cooperatives he helped form, Pedernales Electric Cooperative and what is today known as Bluebonnet Electric Cooperative.
In 1938, LCRA faced its first critical test when heavy flooding swept the basin. Critics charged LCRA had worsened the flood by the way it operated Buchanan Dam, prompting an investigation by the Texas Senate. The investigation exonerated LCRA and also determined LCRA needed to extend the height of Mansfield Dam by an additional 78 feet to its current height of 278 feet to provide more protection to Austin and downstream communities.
In September 1939, LCRA began acquiring an electric service area surrounding Austin from private utilities. LCRA encouraged communities to purchase their local distribution systems and buy power from LCRA. Almost all communities did — and saw retail electric bills drop almost by half from what private utilities had charged. LCRA also sponsored "electric fairs" with local merchants to introduce residents to the benefits of electric appliances.
In 1940, LCRA completed reconstruction of Tom Miller Dam, owned by the City of Austin. The dam had twice been destroyed by floods. LCRA completed Mansfield Dam in early 1942, shortly after the United States entered World War II.
Post-World War II boom
The Central Texas area saw unprecedented growth in the years following World War II, and LCRA struggled to keep up with the demand for electricity. In 1947, LCRA leased a power plant in New Braunfels, its first non-hydroelectric generation source.
LCRA also built two smaller dams between Inks Dam and Lake Travis to increase LCRA's hydroelectric capacity. LCRA in 1951 completed the dams now known as Wirtz and Starcke dams. The chain of lakes created by LCRA's six dams became known as the Highland Lakes.
In the late 1940s, the region encountered what is known as its "Drought of Record" — the worst drought in the region's recorded history. It was a decade-long period infrequently interrupted by significant rains. A flood in 1957 finally broke the drought.
As LCRA dealt with electric and drought issues, then-U.S. Rep. Lyndon Johnson challenged the organization to fulfill one of its charter responsibilities. At his urging, LCRA launched an aggressive basinwide soil-conservation program in 1947. LCRA conducted education programs, loaned farming equipment and established "example farms" to demonstrate effective techniques. It phased out the program in the mid-1950s.
In December 1959, LCRA purchased the Gulf Coast Water Company, which provided irrigation water to farmers in Matagorda County near the Gulf Coast. The acquisition of Gulf Coast provided LCRA with additional Colorado River water rights.
By the early 1960s, demand for electricity had grown, and LCRA needed additional generating capacity. There were no suitable sites on the river for LCRA to build more hydroelectric dams, so it turned to natural gas, which was at the time one of the cheapest, most abundant fuels available. LCRA built three units at the Sim Gideon Power Plant site in Bastrop County by 1971. LCRA began planning a similar complex at what would become the Thomas C. Ferguson Power Plant in Llano County in the early 1970s.