TBJ JANUARY 2023
When in Drought
Demand and constraints on Texas’ water supplies.
Written by Russell Johnson and Lecelle Clarke
The laws that apply to water in Texas were established over a century
ago, at a time when supplies were abundant and demand small.1
Texas recognizes and follows two distinctly different legal and
regulatory principles, depending on whether the water is surface water
or groundwater. Surface water (water in a water course) is owned by the
state. The right to divert and use it for commercial purposes requires a
permit issued by the state.2
Groundwater is owned by the landowner as part of the fee simple
estate.3 The right is, like minerals, a vested right
protected under the Constitution from uncompensated taking. The right
is, as with minerals, the dominant estate.4 Under this
absolute ownership rule of groundwater by the landowner or the Rule of
Capture, with limited exceptions, the landowner can produce and use
groundwater for a beneficial purpose without waste.5 In the
1950s, the state enacted legislation authorizing and creating “local”
groundwater conservation districts to manage groundwater within their
boundaries, and these districts now have broad authority to regulate
groundwater production. Senate Bill 1 in 1997 and Senate Bill 2 in 2001
empowered districts to require permits and limit use, to protect both
the resource and those already dependent on it. Subsequent legislation
requires districts to adopt management plans, set goals intended to be
achieved, and adopt rules to accomplish the goals.6
Both the surface water and groundwater regulations concentrate on
protecting existing users and the resource. In the state’s water
courses, very few unappropriated flows are available, and reservoirs
designed to catch periodic excess flow take decades to fully permit and
are vulnerable to drought. A new permit to divert surface water can only
be granted if it will not adversely affect existing permit holders and
is protective of environmental flows. Groundwater is subject to
management by local groundwater conservation districts that are
motivated to protect local use and reluctant to see water produced
locally transported to support demand outside local boundaries.
It is within these constraints that increased demand and the delivery of
water—from where it is to where it is needed—must be addressed.
Water Use Exempt From Regulation During Drought
Despite the different regulatory frameworks for surface and
groundwater, both recognize users exempt from regulatory oversight.
Landowners adjacent to surface water can divert and use surface water
for domestic, livestock, and wildlife purposes without a permit or
oversight, including the right to divert and impound up to 200 acre-feet
of water for these purposes.7 Similarly, groundwater
conservation districts cannot require a permit for domestic, livestock,
and wildlife wells if less than 25,000 gallons per day can be
produced.8 The absence of authority to limit use presents a
challenge during drought conditions, but such concerns may be addressed
by adopting statewide or local drought restrictions.
Drought and Surface Water
The Texas Commission on Environmental Quality, or TCEQ, the Public
Utility Commission of Texas, or PUC, and public utilities all require
drought management plans to address non-essential water use reduction
during droughts, but enforcement is difficult and largely non-existent.
Unfortunately, during drought shortages, surface water rights can be
completely curtailed based on the priority date of the permit, without
consideration of the importance of use. This means a senior water right
can require the TCEQ to completely curtail junior rights upstream to
protect the more senior downstream right. Many of the most senior rights
in Texas rivers are near the coast, rendering most upstream rights
vulnerable. During the drought in 2011, the TCEQ issued orders
curtailing junior water rights in several river basins but exempted
municipal and electric generation from the curtailment. This exemption
was challenged, and the court ruled9 this exemption to be beyond the
TCEQ’s authority and inconsistent with the law. Severe drought may thus
threaten water permits, no matter how essential.
Drought and Groundwater
Limiting groundwater use during drought is the responsibility of
groundwater conservation districts. Permit holders can be required to
have plans to reduce demand during drought, but enforcement of the
required reductions is challenging. Usage is generally regulated through
the permit, which establishes annual production authorizations. Some
groundwater conservation districts have adopted rules to administer
these programs based upon monthly usage, and some even restrict outdoor
usage, but enforcement is still difficult and mandated reductions
present different challenges for different types of use. Industrial,
commercial, and agricultural use cannot be easily reduced.
The planning process that groundwater conservation districts are
obliged to undertake requires the district to adopt “desired future
conditions,” or DFC, for the aquifers they manage, which are used to
determine, based on models, how much groundwater (the Modeled Available
Groundwater, or MAG), can be produced annually and still achieve the
DFC. Many groundwater conservation districts treat the MAG as a cap on
overall production. Most of the DFCs adopted to date were set to
accommodate anticipated local demand with no consideration of needs or
demands outside their area. The result is that large-scale projects can
be prevented or reduced to meet the adopted DFC.
The result is similar to the difficulty in moving surface water from one
basin to another. Both impede what is clearly needed—the ability to move
water from where it is abundant to where it is needed.
The Market and Constraints on Development of New Surface and
Groundwater Supplies
The “market” in water rights for both surface water and groundwater is
severely constrained by existing law and regulation. Moving a surface
water right from its authorized location or changing the purpose or
place of use requires a permit amendment. This process is time
consuming, expensive, and uncertain. Often the cost will exceed the
value. These factors make movement or change in use of permits rare,
except on the Rio Grande downstream of the Amistad Reservoir, where an
active market exists since all permits/rights are secured by the
reservoirs upstream.
Similarly, the market in groundwater is burdened by the time, expense,
and uncertainty of the regulatory process and the almost universal
opposition to production for use remote from the production. Those few
transactions involving transport of groundwater have either been
undertaken in a predictable regulatory environment or in areas not
within a GCD.
Likely, future demand will be difficult to satisfy by developing new
surface water supplies. Little unappropriated water is available in the
state’s rivers. Reservoirs to capture excess flow are extremely
expensive, take decades to permit and construct, and will inherently be
subject to drought since the reservoir must be operated to preserve all
previously issued permitted rights. Meeting future demand from
groundwater presents an even more daunting challenge when the intended
use is outside the local groundwater conservation district’s
jurisdiction or is for large amounts. Moving water from where it is to
where it is needed may be controversial, expensive, uncertain, and the
permit process can take years.
Future Groundwater Caselaw
As mentioned above, the dual fundamental principles that groundwater
is owned by the landowner as part of the fee simple
estate,10 and that this vested right in the
dominant groundwater estate is protected under the Constitution from
uncompensated taking,11 will undoubtably generate
litigation. The Texas Supreme Court has made clear that regulation that
precludes the exercise of this right is a
taking.12 What remains to be defined by the courts
is the extent to which restrictions or limits on this right result in a
compensable taking and the appropriate standards for assessing such
damage; the one reported case on this issue provides some guidance,
applying a loss of investment backed expectations is an appropriate
standard.13 As regulation by GCDs limits or
restricts usage to achieve their management goals, takings claims will
be pursued.
Disputes between the dominant groundwater estate, the dominant mineral
estate, and the subservient surface estate are similarly likely as these
rights come in conflict. The Accommodation Doctrine, as applied to
groundwater development, will likely be the subject of litigation and
disputes between the groundwater owner and the mineral owner and can
also be expected when groundwater is necessary for mineral
development.14
Likewise, severed groundwater interests or reserved royalties will
likely generate litigation. Reserved rights or royalties will inevitably
be divided, conveyed, and inherited, generating potential litigation.
Expect the courts to look to oil and gas law for guidance. Pooling of
groundwater rights is another area devoid of caselaw guidance and a
likely area of future litigation.
Conclusion
Texas faces numerous challenges in meeting future water demand and
protecting supplies during recurring drought. Declining availability,
drought, and regulatory constraints affect both surface water and
groundwater. While Texas has made major strides in planning and
regulation of these sources to support existing and future use, many
obstacles hinder development of new or repurposed use. Caselaw is not
well-developed, and the consequent uncertainty likewise constrains
development. Texas need not run out of water to support the growing
demand, but it must act to facilitate this development.
TBJ
RUSSELL JOHNSON
is of counsel to McGinnis Lochridge in Austin, where his water law
practice focuses on matters involving land use, water rights, and the
Endangered Species Act. He holds a B.A. in biology and chemistry from
Austin College and a J.D. from St. Mary’s University School of Law.
LECELLE CLARKE
is an associate with McGinnis Lochridge in Austin, where her practice
focuses on environmental law (air, water, and waste) and litigation on
behalf of private industry clients. She previously worked for the Texas
Commission on Environmental Quality and the Office of the Attorney
General’s Environmental Protection Division.