Top Story

Hot Spots in Texas Groundwater Law
By: Susana Canseco

Groundwater law in Texas is evolving rapidly, with many recent developments in caselaw and regulation.  In the landmark 2012 case Edwards Aquifer Authority v. Day, the Texas Supreme Court clarified that groundwater is owned in place just like oil, but is also subject to reasonable regulation by local groundwater conservation districts.  369 S.W.3d 814, 817, 834-35 (Tex. 2012).

The groundwater estate is a form of real property, and it is most analogous to the mineral estate under Texas law.  Id. at 829-30.  For those who don’t regularly encounter property law, if you’ll recall back to your law school property class, ownership of real property can be analogized to a bundle of sticks.  The various rights included in property ownership (each a stick) can be separated from the bundle (severed).  “Ownership in place” of groundwater means that the groundwater estate itself is its own bundle of sticks, which can be severed in whole or in part from the surface estate.  It can be bought, sold, leased, reserved, and conveyed. 

This year the Texas Supreme Court issued another important groundwater decision, Coyote Lake Ranch v. City of Lubbock, which took ownership in place a step further.  See 2016 WL 3176683 (Tex. 2016).  The Court held that the groundwater estate is dominant to the surface estate in the same way the mineral estate is.  Id. at *8.  This means that absent an agreement to the contrary, the owner of a severed groundwater estate has an implied right to use as much of the surface as necessary to produce the resource.  Id. at *5.  The court then held that oil-and-gas law’s accommodation doctrine applies to groundwater.  Id. at *8. 

My biggest takeaway from Coyote Lake Ranch is that Texas courts are going to look to oil and gas law to resolve issues about ownership of groundwater.  I believe we will begin to see more of these cases as groundwater severances become more common, and they have indeed become more common in recent years.

There are a few reasons for this uptick in groundwater severances.  The legal certainty engendered by Day is a start, but the bigger reason is economically motivated.  Our state’s population is growing rapidly, but population growth is not always centered where abundant water resources are.  Efforts are therefore underway to move groundwater around the state.  As that happens, landowners realize their groundwater may someday have economic value for uses off their property.  They preserve that potential future value for themselves by reserving water rights when they sell the property.  For example, they may hope to receive royalties on water produced in the future.

At the same time Texas law treats the groundwater estate like oil, our state government assigns the duty to manage groundwater to the Legislature.  The Legislature has declared local districts (officially called “groundwater conservation districts”) the state’s preferred method of groundwater management.  Groundwater conservation districts are governed by Chapter 36 of the Texas Water Code.  Among other powers, districts have the power to limit production of groundwater and require permits for groundwater production.  Day reaffirmed the validity of groundwater conservation district regulation, but also held that because groundwater is owned in place, it is a constitutionally protected property right.  Districts may therefore be liable for a regulatory taking if their rules “go too far.”  See Day, 369 S.W.3d at 838, 843.

In the past few years, many water developers have felt that groundwater conservation district rules have improperly hampered their ability to develop water projects.  They argue that local politics improperly affects districts’ permitting decisions.  Districts, on the other hand, point to their mandate from the Texas Water Code to manage groundwater and argue they are doing so in accordance with the law.  We are likely to see a battle this legislative session over whether groundwater regulation will stay at the local level or be elevated to a regional or state level.

Texas groundwater law is evolving rapidly in both its property-law and regulatory aspects.  It will remain an active, and in my biased opinion, fascinating, area in which to practice for the foreseeable future.

Susana E. Canseco is an associate at Branscomb|PC in San Antonio, where her practice focuses on Texas water rights, including work before groundwater conservation districts, the Texas Commission on Environmental Quality, and the Public Utility Commission. She can be reached by email at SCanseco@branscombpc.com.