Sunday, February 26, 2012

Texas Water Law: Ownership Rights to Groundwater

The Texas Supreme Court issued a water law ruling this week that was cheered by those advocating for strong property rights and sharply criticized by environmentalists and others concerned about water use going forward.  Given water shortages in many areas and American agriculture's dependency on irrigated production, this decision is sure to spark discussion.

In Edwards Aquifer Authority and the State of Texas v. Burrell Day and Joel McDaniel, the court held that "land ownership includes an interest in groundwater in place that cannot be taken for public use without adequate compensation" under the takings clause of the Texas Constitution.  The District Court had denied the plaintiffs' claim in response to a summary judgment motion, so the matter will now go back for a takings analysis on the facts of the case.

Burrell Day and Joel McDaniel bought 381 acres of farm land overlying the Edwards aquifer, “the primary source of water for south central Texas and therefore vital to the residents, industry, and ecology of the region, the State’s economy, and the public welfare.”  Under Texas law, they were required to obtain a permit from the Edwards Aquifer Authority before using or improving the well.

Day and McDaniel were unable to establish a claim for “historical use” to support the 700 acre-feet of water they requested. The EAA therefore granted them a permit to use only 14 acre-feet of water. They challenged this decision in court, alleging that the EAA had violated their constitutional rights by "taking" their property without just compensation.

Noting that the issue of "whether groundwater can be owned in place is an issue we have never decided," the Texas Supreme Court based its reasoning on existing oil and gas law.  The court stated that it had held "long ago that oil and gas are owned in place" and it could "find no reason to treat groundwater differently."

The ultimate outcome of the case remains uncertain, and it will involve a complicated analysis of Texas water law and its application to the facts presented.  However, the court's ruling is almost certain to produce additional litigation.
The Authority warns that if its groundwater regulation can result in a compensable taking, the consequences will be nothing short of disastrous. A great majority of landowners in its area, it contends, cannot show the historical use necessary for a permit, and therefore the potential number of takings claims is enormous. The Authority worries that the financial burden of such claims could make regulation impossible, or at least call into question the validity of existing permits. Regulatory takings litigation is especially burdensome, the Authority notes, because of the uncertainties in applying the law that increase the expense and risk of liability. And the uncertainties are worse with groundwater regulation, the Authority contends, because there is no sure basis for determining permit amounts other than historical use. Moreover, the Authority is concerned that takings litigation will disrupt the robust market that has developed in its permits and that buyers will be wary of paying for permits that may later be reduced. . . .  
[T]he Takings Clause ensures that the problems of a limited public resource — the water supply — are shared by the public, not foisted onto a few.  We cannot know, of course, the extent to which the Authority’s fears will yet materialize, but the burden of the Takings Clause on government is no reason to excuse its applicability.  
My personal comment is that the public is at present ill-prepared to address the issue of water as "a limited public resource," whether one discusses the monetary costs or one considers the environmental and human costs. We cannot continue to use water as we have in the past. How this decision affects that ultimate fact remains uncertain.

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