NEW DEVELOPMENTS IN TEXAS WATER LAW, PLANNING AND MANAGEMENT

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1 NEW DEVELOPMENTS IN TEXAS WATER LAW, PLANNING AND MANAGEMENT Robin A. Melvin GRAVES, DOUGHERTY, HEARON & MOODY, P.C Thomas G. Mason GRAVES, DOUGHERTY, HEARON & MOODY, P.C Austin Bar Association Real Estate Section Meeting March 6, 2012

2 NEW DEVELOPMENTS IN TEXAS WATER LAW, PLANNING AND MANAGEMENT Robin A. Melvin and Thomas G. Mason In just the past few months, there have been a number of important development in Texas water law, water planning, and water management. Since November 2011: the Texas Supreme Court issued its most important decision on groundwater rights since 1999; the Texas Water Development Board has issued a new State Water Plan; the Texas Commission on Environmental Quality has proposed new rules for curtailing surface water use during droughts; and the Lower Colorado River Authority has adopted a new Water Management Plan that changes its rules for allocating water during droughts. In addition, groundwater conservation districts are completing a groundwater planning process that will influence their permitting decision for at least the next five years. This paper begins with a review of the law of surface water and groundwater in Texas, then provides details on these new developments. I. The Basics of the Texas Water Law A. Surface water rights Texas law categorizes surface water into one of two general types: diffuse surface water and water in a water course. Diffuse surface water belongs to the owner of the land until it enters a watercourse. Turner v. Big Lake Oil Co., 128 Tex. 155, 96 S.W.2d 221, 228 (1936). Water in a watercourse is the property of the sovereign, and the right to use it must be granted by the sovereign. This section of the paper discusses rights to use surface water that has reached a watercourse. 1. The history of surface water rights The Texas law that applies to water that has reached a watercourse grew out of a hodgepodge of historical and contradictory water rights systems: the Spanish water rights system, the English doctrine of riparian rights, and the western American doctrine of appropriative rights. Spanish water rights. Spanish law defined water rights granted before Texas independence in Under Spanish and Mexican law, the water in a natural watercourse belonged to the sovereign. A landowner did not have the right to use surface water unless his land grant specifically provided it. See BETTY EAKLE DOBKINS, THE SPANISH ELEMENT IN TEXAS WATER LAW (1959); State v. Valmont Plantations, 346 S.W.2d 853 (Tex. Civ. App. San Antonio 1961), aff d, 355 S.W.2d 502 (Tex. 1962). Riparian rights. Following independence from Mexico, Texas legal community became increasingly Anglicized. In 1840, the Republic of Texas adopted the common law, insofar as it was not inconsistent with the Texas constitution or statutes. As a result, state courts began to apply the English common law doctrine of riparian rights. The application of English riparian rights to Texas geography proved difficult. The classic statement of the English doctrine of riparian rights is found in Kent s Commentaries: 1

3 Every proprietor of lands on the banks of a river has naturally an equal right to use of water which flows in the stream adjacent to his lands, as it was wont to run...without diminution or alteration. In the relatively arid areas of Texas, irrigation was necessary for successful agriculture. But a strict application of the riparian doctrine prevented the diversion of even moderate quantities of water for irrigation, because it prohibited the diminution or alteration of streamflow and the use of water on nonriparian lands. The Texas Supreme Court struggled for years to apply the riparian rights doctrine to the diversion of water for irrigation purposes, while encouraging the Legislature to adopt legislation concerning the use of water in areas of the state in which irrigation was needed to produce crops. See, e.g., Watkins Land Co. v. Clements, 98 Tex. 578, 86 S.W. 733 (1905). Appropriative rights. In 1889 and 1895, the Texas Legislature did adopt legislation regarding the use of water for irrigation. The 1889 and 1895 Irrigation Acts added the appropriative system of acquiring water rights to the riparian and Spanish law systems already in place. Act of Mar. 19, 1889, 21st Leg., Reg. Sess., ch. 88, 1889 Tex. Gen. Laws 100; Act of Mar. 9, 1895, 24th Leg., Reg. Sess., ch. 21; 1895 Tex. Gen. Laws 21. The appropriative rights doctrine was originally developed by miners in California. DUNBAR, supra at 61. It provides that the first person to divert a specific quantity of water from a source of supply and put it to beneficial use at a definite place has the right to use that water when it is available as against all others. The classic statement of the appropriative rights doctrine is: First in time is first in right. As applied to irrigation, the doctrine of appropriative rights solved many of the problems associated with the application of the doctrine of riparian rights in arid areas. Diversion of large quantities of water was permissible if used for beneficial purposes. A water user who had begun his use early could count on being able to use whatever water was available. Water could be used on non-riparian lands; therefore, all lands to which water could be transported could be irrigated. Thus, it is not surprising that the appropriative rights doctrine came to be recognized in all of the western states as governing the diversion of water for all purposes. See Frank J. Trelease, Coordination of Riparian and Appropriative Rights to the Use of Water, 33 TEX. LAW REV. 24, (1954). The 1889 Texas Irrigation Act declared that certain unappropriated waters in the arid part of Texas were public and could be acquired by appropriation. The 1895 statute expanded the definition of waters belonging to the State all unappropriated waters of the state were declared to be public. As a result, land grants made after the adoption of the 1895 act no longer granted riparians any right to use water. See, e.g., In re Adjudication of Water Rights in the Llano River Watershed of Colorado River Basin, 642 S.W.2d 446, (Tex. 1982). Rights to water could only be secured by appropriation. Both the 1889 Act and the 1895 Act authorized a record of appropriations to be made by filing a sworn description with the county clerk, but failure to file such a statement in no way extinguished previously acquired rights to use water. Permits. In 1913, the Texas Legislature decided to adopt the permitting system for all new water rights in Texas, to be administered by a new Board of Water Engineers. The 1913 act also required every person who had constructed diversion works to file a description of those works with the county clerk, and a certified copy of that document with the Board of Water Engineers. The Act stated that every person making such a filing would have the right to take 2

4 the amount of water he had beneficially used before January 1, 1913, as against the State. Act of Apr. 9, 1913, 33rd Leg., Reg. Sess., ch. 171; 1913 Tex. Gen. Laws 358. In 1917, a new Irrigation Act, also known as the Canales Act, was enacted. In addition to continuing the permitting system adopted in the 1913 Irrigation Act, the Canales Act gave the Board of Water Engineers the power to adjudicate i.e, to determine the scope of all existing water rights, and the power to administer the use of those water rights. Act of Mar. 19, 1917, 35th Leg., Reg. Sess., ch. 88; 1917 Tex. Gen. Laws 211. However, the Texas Supreme Court struck down the adjudication provisions of the 1917 Irrigation Act in 1921 on the ground that it gave an executive agency the power to adjudicate private property rights, a judicial function. Board of Water Engineers v. McKnight, 111 Tex. 82, 229 S.W. 301 (1921). Water Rights Adjudication Act. A new adjudication act was not adopted until Act of Apr. 13, 1967, 60th Leg., Reg. Sess., ch. 45; 1967 Tex. Gen. Laws 86. During the 1970s and 1980s, the Texas Water Commission conducted sub-basin by sub-basin adjudications of all existing surface water rights under the Act, and the courts approved these determinations. See, e.g., In re Adjudication of Water Rights in the Upper Guadalupe River Segment of the Guadalupe River Basin, 642 S.W.2d 438 (Tex. 1982); In re Adjudication of Water Rights in the Llano River Watershed of the Colorado River Basin, 642 S.W.2d 446 (Tex. 1982). After court approval, the Commission issued certificates of adjudication to all water users found to have valid water rights. These certificates defined the amount of water that could be diverted, the purpose for which the water could be used, the place at which it could be used, the rate at which it could be diverted. They also define the water right s priority date (i.e., the date of its first use). See TEX. WATER CODE The priority date defines who is first for purposes of the appropriative rights system rule first in time is first in right. See id Assignment of a priority date, in essence, has brought all adjudicated rights into the appropriative rights system. 2. Current regulation of surface water rights State ownership of surface water. Today, [t]he water of the ordinary flow, underflow, and tides of every flowing river, natural stream, and lake, and of every bay or arm of the Gulf of Mexico, and the storm water, floodwater, and rainwater of every river, natural stream, canyon, ravine, depression, and watershed in the state is the property of the state. TEX. WATER CODE (a). Certificates of adjudication and permits. As a result of the 1967 Water Rights Adjudication Act, all rights to use surface water are now defined by a piece of paper, with only a few exceptions discussed below. Surface water rights acquired before the final adjudication of a river basin whether those rights were granted by Spanish or Mexican land grants, pre-1895 Texas republic or state land grants, the 1889, 1895 or 1913 Irrigation Acts, or a permit are now defined in a certificate of adjudication. Surface water rights acquired after the final adjudications are defined by an amendment to a certificate of adjudication or a new permit. 3

5 Anyone seeking a new right to divert surface water must seek a permit from the Texas Commission on Environmental Quality (TCEQ). See TEX. WATER CODE ( no person may appropriate any state water or begin construction of any work designed for the storage, taking, or diversion of water without first obtaining a permit from the commission to make the appropriation ). Notice of the application is mailed to all water rights holders in the basin and must be published in a newspaper of general circulation in the section of the state where the source of water is located. Id Affected persons may request a contested case hearing on the application. Id. TCEQ shall grant the application if it finds that: unappropriated water is available in the source of supply; the proposed appropriation is intended for a beneficial use, does not impair existing water rights or vested riparian rights, is not detrimental to the public welfare, considers any applicable environmental flow, and addresses a water supply need in a manner that is consistent with the state water plan and the relevant approved regional water plan; and the applicant has provided evidence that reasonable diligence will be used to avoid waste and achieve water conservation. Id (b). As a practical matter, TCEQ is granting very few new permits to use water, because most Texas streams and rivers are fully appropriated that is, the amount authorized to be diverted in existing certificates of adjudication and permits equals or exceeds the amount of water that is available most of the time. Water may be available in certain periods of high flows, but a right to divert water under those circumstances may only be useful if the applicant is prepared to construct an off-channel reservoir to store that water for later use. Exceptions to permitting requirement. There are a few exceptions to the permit requirement. The broadest exception provides that a riparian landowner does not need a permit to use water for domestic and livestock purposes, and a person may construct a reservoir on the person s own property with normal storage of not more than 200 acre-feet of water for domestic, livestock, and wildlife management purposes. Id (a), (b). B. Groundwater Rights Unlike other western states, Texas has developed separate legal doctrines governing the use of surface water and groundwater. Under Texas law, groundwater is privately owned, not owned by the state. Groundwater is regulated by local groundwater conservation districts, not by a state agencies like TCEQ. 1. The history of groundwater rights Texas law began addressing the legal status of groundwater and the right to produce it in 1904, and since then there have been relatively few Texas Supreme Court cases addressing these issues. On February 24, 2012, the Supreme Court issued a new opinion that better defines legal rights in surface water, but still leaves a number of open questions. Adoption of the rule of capture. The Texas Supreme Court first addressed the question of how groundwater would be treated in law at the turn of this century, when groundwater use was relatively insignificant and the study of groundwater hydrology was in its infancy. Houston & Texas Central Ry. Co. v. East, 98 Tex. 146, 81 S.W. 279 (1904) (East). In East, the Court 4

6 adopted the English common law rule of capture, which allows the owner of the overlying land to pump essentially unlimited quantities of water from under his land. The Court quoted the public policy considerations behind this rule from an Ohio Supreme Court case: (1) Because the existence, origin, movement, and course of such waters, and the causes which govern and direct their movements, are so secret, occult, and concealed that an attempt to administer any set of rules would be involved in hopeless uncertainty, and would, therefore, be practically impossible. (2) Because any such recognition of correlative rights would interfere, to the material detriment of the commonwealth, with drainage and agriculture, mining, the construction of highways and railroads, with sanitary regulations, building, and the general progress of improvement in works of embellishment and utility. Id. at 281. Confirmation of the rule of capture. In 1999, the Texas Supreme Court confirmed the continuing validity of the rule of capture in Sipriano v. Great Spring Waters of Am., Inc., 1 S.W.3d 75 (Tex. 1999) (Ozarka). In Ozarka, plaintiffs claimed that Ozarka s production of 90,000 gallons of water per day from its land had injured their nearby groundwater wells. Ozarka filed a motion for summary judgment based on the rule of capture. Plaintiffs argued that the East case was based on an outdated understanding of groundwater hydrology and that Texas should abandon the rule of capture and adopt the rule of reasonable use in its stead. The trial court granted the summary judgment in favor of Ozarka, and the Tyler court of appeals affirmed. The Supreme Court affirmed the trial court and the court of appeals and upheld the rule of capture. The Court based its decision in large part on the Texas legislature s recent passage of SB 1, the comprehensive water management act adopted by the Legislature in The Court stated: By constitutional amendment [art. 16, 59], Texas voters made groundwater regulation a duty of the Legislature. And by Senate Bill 1, the Legislature has chosen a process that permits the people most affected by groundwater regulation in particular areas to participate in democratic solutions to their groundwater issues. It would be improper for courts to intercede at this time by changing the common-law framework within which the Legislature has attempted to craft regulations to meet this state s groundwater issues. Given the Legislature s recent actions to improve Texas groundwater management, we are reluctant to make so drastic a change as abandoning our rule of capture and moving into the arena of water-use regulation by judicial fiat. Id. at 80. Edwards Aquifer Authority v Day. Less than two weeks ago, the Texas Supreme Court issued an opinion on the relationship between the rule of capture and groundwater ownership that will impact district regulation of groundwater. That opinion, in Edwards Aquifer Authority v. Day, --- S.W.3d ---, 2012 WL (Tex., Feb. 24, 2012), will be discussed in the Section II of this paper, which addressed new developments in Texas water law. 2. Current regulation of groundwater rights Groundwater conservation districts. SB 1, the 1997 water management act reference in Ozarka, declared that: Groundwater conservation districts are the state s preferred method of groundwater management through rules developed, adopted, and promulgated by a district in accordance with the provisions of [Texas Water Code Chapter 36]. TEX. WATER CODE

7 Groundwater districts already existed in The Legislature first authorized the creation of groundwater districts in A number of the original groundwater districts were organized to regulate wells drilled into the Ogallala Aquifer in the Texas Panhandle, where irrigation was causing a rapid fall in groundwater levels. See DONALD E. GREEN, LAND OF UNDERGROUND RAIN: IRRIGATION ON THE TEXAS HIGH PLAINS ( ) (1973). But groundwater districts proliferated after SB 1 s adoption. There are now 96 groundwater districts in Texas covering all or part of 173 counties. Groundwater conservation districts may be created by TCEQ, on the petition of landowners in the proposed district, or by the Legislature. Many of the groundwater districts that have come into existence since 1997 have been created by statute. Most of these districts have the powers and duties provided by Chapter 36 of the Texas Water Code. See, e.g., TEX. SPEC. DIST. CODE (describing powers and duties of legislatively-created Coastal Plains Groundwater Conservation District). But the statute creating a district may provide one or more specific exceptions to the general law that apply only to the specific district. See, e.g., id (authorizing appointment, rather than Chapter 36 election, of Lost Pines Groundwater Conservation District directors); id (prohibiting Harrison County Groundwater Conservation District from exercising Chapter 36 power of eminent domain). Other groundwater district, like the Edwards Aquifer Authority, are governed almost exclusively by the provisions of their own creation statutes. Under Chapter 36 of the Texas Water Code, groundwater conservation district have a number of regulatory powers, including: Well registration A district must require well owners to register all wells with the district and to drill and equip each well in accordance with district rules. TEX. WATER CODE (h). Well permitting A district shall require a person to obtain a permit from the district for drilling or operating any well, except wells that the Legislature has exempted by statute or that the district has exempted by rule. Id (a). Well exempted by statute include: o Wells used solely for domestic use or livestock use if the well is located on a tract of land larger than 10 acres and is drilled, completed, or equipped so that it is incapable of producing more than 25,000 gallons of groundwater a day. Id (b)(1). o Well used solely to supply water for a rig that is actively engaged in drilling or exploration operations for an oil or gas well permitted by the Railroad Commission, if the person holding the permit is responsible for drilling and operating the water well and the water well is located on the same lease or field associated with the drilling rig. Id (b)(2). o A water well authorized under a permit issued by the Railroad Commission under Chapter 134, Natural Resources Code, or for production from the well to the extent the withdrawals are required for mining activities. Id (b)(3). 6

8 Well spacing A district may regulate the spacing of wells by distance from property lines and/or other wells. Id (a)(1). Well production A district may regulate production based on tract size or managed depletion and have different production limits for different aquifers or geographic areas in the district. Id (a)(2), (d). When limiting production, a district may preserve historic or existing use before the effective date of the rules to the maximum extent practicable and may consider the service needs or service area of a retail water utility. Id (b), (d). Production and transport fees A district may charge production fees based on the amount of water withdrawn under a permit or the amount of water authorized to be withdrawn under a permit, up to a maximum charge defined by statute. Id A district may also charge an export fee on water transported outside the boundaries of the district, although that fee may not exceed statutory maximums. Id (e). No groundwater conservation district. There are still areas in Texas that are not covered by a groundwater conservation district. In these districts, the rule of capture still applies. Landowners may generally pump as much groundwater as they can from beneath their property, even if it draws down their neighbors wells the law of the biggest pump. II. New Developments in Texas Water Law Edwards Aquifer Authority v. Day On February 24, 2012, the Texas Supreme Court issued a long awaited opinion on ownership of groundwater. Edwards Aquifer Authority v. Day, --- S.W.3d ----, 2012 WL (Tex., Feb. 24, 2012). In a unanimous decision, the Court ruled that Texas landowners own the groundwater in place beneath their property, and that landowners may have a valid claim for compensation from the government if regulations go too far in limiting groundwater production and take their private property. A. Background The case arose from a dispute between the Edward Aquifer Authority (EAA) and two farmers who owned land south of San Antonio within the boundaries of the EAA. The Edwards Aquifer Authority Act allowed persons who had used groundwater before the Act became effective to apply for an initial regular permit. An applicant for an initial regular permit was required to prove, by clear and convincing evidence: (1) beneficial use of groundwater from the Edwards Aquifer by themselves or a predecessor-in-interest during the historical period June 1, 1972 through May 31, 1993; and (2) the maximum amount of water pumped and used without waste during any one year of the historical period. The farmers applied to EAA for an initial regular permit authorizing them to pump 700 acre-feet of water per year for irrigation. At a contested case hearing, the farmers presented the testimony of two witnesses who had irrigated their property during the historical period. The witnesses described two methods of irrigation. In one method, water from an artesian well flowed through a ditch to a 50 acre-foot reservoir, then was pumped from the reservoir to a mobile sprinkler system. In the second 7

9 method, the ditch was dammed and 5 to 7 acres were irrigated by flooding. One witness testified that the reservoir was on Post Oak Creek. A State Office of Administrative Hearings Administrative Law Judge (ALJ) issued a proposal for decision, in which the ALJ concluded: (i) the reservoir was on a natural watercourse; (ii) the groundwater became state water when it entered the reservoir; and (iii) irrigation with state water could not be the basis for an initial regular permit authorizing groundwater use. The ALJ recommended issuance of an initial regular permit authorizing the use of 14 acre-feet of groundwater, 2 acre-feet for each of the 7 acres irrigated by flooding. EAA adopted the ALJ s proposal for decision. The farmers appealed EAA s final order. They argued that the groundwater did not become state water when it entered the reservoir, and that the Edwards Aquifer Act, several statutes governing the contested case hearing, and the Texas Water Code provision defining state water violated their constitutional rights to substantive and procedural due process. They also argued that EAA s final order resulted in an taking of their groundwater rights, in violation of the Texas Constitution. The trial court reversed EAA s final order on the ground that the water taken from the reservoir was not state water. But it dismissed the farmers constitutional claims, including the takings claim, on summary judgment. The trial court granted summary judgment on the takings claim on the ground that the farmers had no vested right in groundwater, so no vested right could have been taken. The San Antonio court of appeals reversed two parts of the trial court s judgment. First, the court held that the reservoir was on a watercourse, and that the groundwater discharged into the reservoir became state water when it entered the watercourse. Edwards Aquifer Auth. v. Day, 274 S.W.3d 742, 752 (Tex. App. San Antonio 2008). The trial court, therefore, erred when it reversed EAA s final order on that ground. Second, the court of appeals held that: landowners have some ownership rights in the groundwater beneath their property. Because Applicants have some ownership rights in the groundwater, they have a vested right therein. Id. at 756. The San Antonio court remanded the case to the trial court, so that it could consider the merits of the farmers takings claim. B. Texas Supreme Court opinion The Texas Supreme Court agreed to review the case after receiving petitions from the EAA, the farmers, and the State of Texas. Private landowners, groundwater districts, cities, and a host of statewide organizations saw this as an important case and filed over twenty amicus briefs outlining their concerns and positions. Ownership in place. In its briefing in the Supreme Court, EAA argued that landowners cannot have a vested right to the groundwater beneath their property because the rule of capture allows the groundwater to be produced by others. The Court rejects this argument, relying on earlier decisions on the relationship between the rule of capture and the ownership of oil and gas 8

10 in place. The Court quotes a portion of its opinion in Elliff v. Texon Drilling Co., 146 Tex. 575, 210 S.W.2d 558, 561 (1948), that restated the law regarding ownership of oil and gas in place: In our state the landowner is regarded as having absolute title in severalty to the oil and gas in place beneath his land. The only qualification of that rule of ownership is that it must be considered in connection with the law of capture and is subject to police regulations. The oil and gas beneath the soil are considered a part of the realty. Each owner of land owns separately, distinctly and exclusively all the oil and gas under his land and is accorded the usual remedies against trespassers who appropriate the minerals or destroy their market value. The Court then concludes: We now hold that this correctly states the common law regarding the ownership of groundwater in place WL at * Regulatory taking. While the Court is very clear about ownership of groundwater in place, the opinion gives much less guidance about exactly how far a groundwater district may limit pumping before it amounts to a taking of private property that entitles a landowner to compensation. The Court admits the difficulty of establishing a clearly defined standard for these regulatory takings. and quotes the U.S. Supreme Court, which said the general rule is that while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking, adding this is a question of degree and therefore cannot be disposed of by general propositions. Id. at *15. The Court notes that federal case law has developed three analytical frameworks for courts to apply when engaging in an ad hoc, factual inquiry into whether a regulatory taking has occurred. First, a per se taking occurs when government requires an owner to suffer a permanent physical invasion of his or her property. Second, a per se taking occurs when regulation deprives an owner of all economically beneficial use of the property. Third, outside the two per se categories, regulatory takings are governed by the standards set out in Penn Central Transp. Co. v. New York City, 438 U.S. 104 (1978). Penn Central identified three factors for courts to consider in making regulatory takings decisions: (1) the economic impact of the regulation on the claimant; (2) the extent to which the regulation has interfered with distinct investmentbacked expectations; (3) the character of the governmental action. Id. at *16. The Court notes that there was no physical invasion in the Day case, so the first per se takings category does not apply. Id. The Court finds that the evidence before it is not sufficient to establish whether EAA s decision deprived the farmers of all economically beneficial use of the property, or to establish the impact of the regulation under the first Penn Central factor. Id. at *17. The Court acknowledges that the second Penn Central factor interference with investment-backed expectations is somewhat difficult to apply to groundwater regulation under the [Edwards Aquifer Authority Act], but notes that there is little in the record to illuminate what [the landowners ] expectations were or reasonably should have been. Id. As to the third Penn Central factor, the Court does not question districts rights to limit groundwater production: Unquestionably, the State is empowered to regulate groundwater production. In East, we concluded that there were no correlative rights in groundwater [i]n the 9

11 absence of... legislation, suggesting that legislation would be permitted. A few years later, the Conservation Amendment made groundwater regulation the responsibility... of the Legislature. Groundwater provides 60% of the 16.1 million acre-feet of water used in Texas each year. In many areas of the state, and certainly in the Edwards Aquifer, demand exceeds supply. Regulation is essential to its conservation and use. Id. at 17 (footnotes omitted). But the Court expresses concern that the Edwards Aquifer Authority Act production limits, which are based solely on historic use, may be too restrictive of [a landowner s] groundwater rights and without justification in the overall regulatory scheme. The Court expressly contrasts this historic-use-only production limit with the types of production limits that other groundwater conservation districts are authorized to adopt: Chapter 36 allows districts to consider historical use in permitting groundwater production, but it does not limit consideration to such use. Neither the Authority nor the State has suggested a reason why the EAAA must be more restrictive in permitting groundwater use than chapter 36, nor does the Act suggest any justification. Id. at 19. Ultimately, the Court concludes that, on the record before it, it cannot determine, as a matter of law, whether the EAA has or has not taken the farmers property. Instead, it affirms the court of appeals decision, which remanded the case to the trial court for further proceedings. Id. at 21. As a practical matter, Day means it may take a number of landowner lawsuits that assert takings claims against groundwater districts each based on unique facts and circumstances before enough case law is developed to provide clearer guidance on how much groundwater regulation is too much. III. New Developments in Water Planning and Management A. The State Water Plan In December 2011, the Texas Water Development Board ( TWDB ) published its 2012 State Water Plan. See: The Plan was developed by 16 regional planning groups and includes 562 recommended water supply projects and strategies designed to meet the State s expected water demands through the year 2060 during a drought as severe as the 1950 s drought of record. The estimated capital cost to design, construct, and implement all of the recommendations is $53 billion. Five elements of the Water Plan account for most of the new proposed water supplies. Each one has potential benefits and challenges. Conservation. Conservation makes up almost 25% of the proposed new water to meet projected demands by About two-thirds of this is agricultural conservation, with most of the rest municipal. This is the fastest and cheapest way to get new water, and there is almost unanimous support for the concept. What are the potential challenges with this strategy? 10

12 Habits are hard to break. We like long showers and lush lawns of St. Augustine grass, even in August. It is not necessarily quick or easy. San Antonio has reduced per capita water consumption by over 40%, but it took 26 years to do so, and only because a federal court ordered the city to limit withdrawals from the Edwards Aquifer due to environmental concerns. El Paso is another success story for water conservation. How did they do it? Education campaigns; new water pricing (in old days, the more you used the cheaper the price); low flow toilets and repairs of leaky pipes; outdoor watering restrictions; and most importantly, necessity. It can get expensive. o For farmers, water conservation often means additional costs laser leveling of fields or buying new, more efficient irrigation equipment. o For cities and local water utilities, aggressive conservation reduces revenues. Most, though not all, agree that conservation alone will not likely meet all of the state s projected water demands through the year New reservoirs. New reservoirs account for almost 17% of the proposed new water supplies in the State Plan. Building dams and reservoirs has long been the standard method to meet demands for more water supplies. Hoover, Grand Coulee, and our own Mansfield Dam, along with many others in the western United States, were built in the 1930s and 1940s. What has changed since then? There are not many good reservoir sites left in Texas. New dams and reservoirs are very expensive, and federal funding has largely disappeared. We now have environmental laws that place significant limits on many sites. Texas has a strong private property rights tradition and landowners resist the use of eminent domain for reservoirs. Most of the new reservoir projects in the 2012 Water Plan call for off-channel reservoirs. Rather than build a dam across the main channel of a river, during times of heavy flood flows water is scalped from the river and pumped into very large ponds that are built nearby. Groundwater. Groundwater accounts for about 9% of new water supplies under the 2012 Plan. Many parts of Texas have an abundance of groundwater, and about 60% of all water use in Texas now comes from groundwater. 11

13 Reliance on groundwater poses a number of challenges: Not all groundwater is created equal. The Ogallala aquifer that stretches from north Texas to Nebraska is very slow to recharge farmers are mining it pumping more water than is being replaced. Other sources, such as the Edwards Aquifer and the very prolific Carrizo aquifer recharge quickly (provided there is adequate rain). As discussed above, State law governing groundwater is very different from surface water laws, and is the subject of growing litigation and uncertainty: o Texas is the only western state that continues to follow the rule of capture. If land is not in a groundwater conservation district, the law of the biggest pump applies. o Groundwater districts are typically drawn on county lines, not aquifer boundaries. They can have inconsistent rules governing the same aquifer, and the groundwater management area planning process discussed in Section II.C. below may not solve some inconsistencies. o There is often a sense of local ownership and resistance to allowing water to be exported out of the district or county. o Many districts are underfunded and short on professional resources. o Litigation has been very common as districts have developed and implemented new rules. After the Texas Supreme Court decision in Edwards Aquifer Authority v. Day, litigation may become more common. With this sort of legal uncertainty, it is difficult to make reliable long-term investments in major groundwater projects. Water reuse. Water reuse accounts for a little over 10% of proposed new supplies in the 2012 Water Plan. This involves reusing treated sewage effluent as a water source for irrigation, drinking, and other purposes. It is fairly common in Texas and elsewhere, although not always directly acknowledged. For example, each summer, most of Houston s drinking water comes from the effluent that Dallas/Fort Worth discharges from their wastewater plants into the Trinity River. And El Paso injects effluent that is treated to drinking water standards directly into a local aquifer and retrieves it some distance away with city wells. Reclaimed water has become so valuable that there is considerable litigation over who owns it. LCRA, Austin, Waco, and water providers in the Dallas/Fort Worth area have all been involved in disputes over ownership and use. The greatest obstacle to water reuse is public perception. Opponents to San Diego s plan to supplement drinking water supplies with highly treated effluent dubbed it the Toilet to Tap proposal. Desalination. Desalination accounts for 3.5% of the new water supplies in the Water Plan. It is a proven technology in use throughout the world. With the Gulf of Mexico and plenty of brackish groundwater aquifers, Texas has an ample supply to treat. 12

14 The most significant drawback is cost: Desalination can easily be 2 to 7 times more expensive than treating river water or fresh groundwater. This is primarily energy costs; it takes a great deal of energy to force salty water through filter membranes to remove the chlorides. Brackish groundwater is much cheaper to treat because it is less salty than seawater, but still expensive. Another potential problem: disposal of the concentrated salts and minerals removed from the water. El Paso and Fort Bliss recently opened a desalination plant that uses brackish groundwater; federal grants helped make this 27.5 million gallon per day plant possible. Laguna Madre Water District in south Texas is also building a plant because its current sole source of supply the Rio Grande has dried up twice since 2001 before reaching the Gulf of Mexico. B. Water Management in Drought TCEQ curtailments. As was discussed in Section I.A.1., under Texas surface water law, first in time is first in right. This means that, when there is not enough water for all water rights holders, the right to divert is suspended starting with the newest, most junior water right and ending with the oldest, most senior water rights. Beginning last summer, TCEQ issued a series of priority calls suspending the right to divert under junior water rights so that the water demands (or calls ) of senior water rights could be met. For example: Brazos River basin On May 18, 2011, TCEQ suspended diversions under all water rights with a priority date of 1980 or later for a portion of the Brazos River basin, except rights to use water for municipal and power generation purposes. On June 27, TCEQ expanded the suspension to all non-municipal and non-power generation water rights with a priority date of 1960 or later. On August 8, 2011, TCEQ expanded the portion of the Brazos River basin covered by the suspension. All suspensions ended on January 27, Llano River basin On July 5, 2011, TCEQ suspended diversions under all water rights with a priority date of 1950 or later in the Llano River basin upstream of the City of Llano, except rights to use water for municipal and power generation purposes. This curtailment was in response to a senior call from the City of Llano. This suspension was rescinded on October 31, San Saba River basin On August 8, 2011, TCEQ suspended diversions under all water rights in Menard and Schleicher Counties in the San Saba River basin with a 13

15 priority date of 1900 or later, except rights to divert water for municipal and power generation purposes. The suspension ended on February 7, Neches River basin On November 14, 2011, TCEQ suspended diversions under all water rights in the Neches River Basin with a priority date of August 13, 1913 or later, except rights to use water for municipal and power generation purposes. On January 25, 2012, the suspension was lifted for a number of junior rights, but the right to divert under other non-municipal junior water rights remains suspended. Sabine River basin On January 9, 2012, TCEQ suspended diversions under all water rights in the Little Sandy Creek watershed of the Sabine River basin with a priority date of January 2, 1903 or later, except rights to divert water for municipal and power generation purposes. The suspension ended on February 16, TCEQ drought rules. In 2011, as part of the TCEQ Sunset Bill, the Legislature adopted Section of the Texas Water Code. Section provides that, during a period of drought to emergency shortage of water, the TCEQ Executive Director may, in accordance with the priority of water rights established by Section , temporarily suspend or adjust diversion under a water rights. TEX. WATER CODE (a). Section provides that: As between appropriators, the first in time is the first in right. The Executive Director must ensure that any action taken: (1) maximizes the beneficial use of water; (2) minimizes the impact on water rights holders; (3) prevents the waste of water; (4) takes into consideration the efforts of the affected water rights holders to develop and implement the water conservation plans and drought contingency plans required by this chapter; (5) to the greatest extent practicable, conforms to the order of preferences established by Section ; and (6) does not require the release of water that, at the time the order is issued, is lawfully stored in a reservoir under water rights associated with that reservoir. Id (b). Section provides an order of preference between beneficial uses, with domestic and municipal uses at the top. The new statute requires TCEQ to adopt rules defining drought or other emergency shortage of water, for purposes of this section, and specifying the conditions under which the Executive Director can issue an order, the terms of an order, and procedures for an appeal to the Commissioners. Id (c). On November 4, 2011, TCEQ published proposed rules. See At the end of the public comment period, TCEQ had received over thirty comment letters on the proposed rules that addressed nearly every portion of the rules. TCEQ is currently scheduled to consider adoption of the proposed rules on April 11, LCRA water management plan. Closer to home, the LCRA Board of Directors adopted a new Water Management Plan on February 22, 2012, by a 10 to 5 vote. See _DRAFT_redline.pdf. The plan will now be submitted to TCEQ for approval. The new plan is intended to give LCRA greater flexibility in managing water supplies during drought periods. See: 14

16 C. Groundwater Planning GMAs, DFCs, and MAGs In SB 2, adopted in 2001, the Legislature directed TWDB to designate groundwater management areas ( GMAs ) covering all major and minor aquifers in the state by September 1, TEX. WATER CODE (a). In response, TWDB established 16 GMAs across the state. See for a map showing the 16 GMAs. In 2005, the Legislature required groundwater conservation districts in each GMA to participate in a joint planning process. Texas Water Code Section (d) provides that: Not later than September 1, 2010, and every five years thereafter, the districts shall consider groundwater availability models and other data or information for the management area and shall establish desired future conditions for the relevant aquifers within the management area. All 16 GMAs have now conducted public hearings, considered public comments and established desired future conditions (DFCs) for the relevant aquifers in their area. The manner in which DFCs are expressed varies between GMAs. For example: GMA 1, in the northern Panhandle has adopted a 50/50 DFC 50% of volume in storage in the Ogallala Aquifer will remain in place in 50 years for the High Plains Underground Water Conservation District, the North Plains Groundwater Conservation District, and the Panhandle Groundwater Conservation District. GMA 1 adopted 40/50 DFCs and 80/50 DFCs for other areas. GMA 9, which covers all or part of Bandera, Bexar, Blanco, Comal, Hays, Kendall, Kerr, Medina, and Travis Counties adopted a DFC that allows a 30-foot average drawdown in the Trinity Aquifer over the next 60 years. GMA 7 s DFC for the Edwards-Trinity Aquifer is that drawdown that is consistent with maintaining, at Las Moras Springs, an average annual flow of 23.9 cfs and a median flow of 24.4 cfs based on Scenario 3 of the Texas Water Development Board s flow model presented on July 27, A person with a legally defined interest in the groundwater in a GMA, a district in or adjacent to a GMA, or a regional water planning group for a region in the GMA may appeal the approved DFCs to TWDB. TEX. WATER CODE (b). The petition must provide evidence that the GMA did not establish a reasonable desired future condition of the groundwater resources in the management area. Id. TWDB must have at least one public hearing in the GMA to take testimony on the petition. Id (c). If TWDB finds that the conditions require revision, TWDB shall submit a report to the districts [in the GMA] that includes a list of findings and recommended revisions to the desired future conditions of the groundwater resources. Id. The districts must prepare revised plan in accordance with development board recommendations, then submit it to TWDB for review. TWDB is currently hearing and making decisions on appeals of DFCs adopted by a number of GMA, including several in the central Texas area. For example, on February 29, 15

17 2012, TWDB held a hearing in Milano, Texas on a petition challenging DFCs adopted by GMA 12, which includes Bastrop, Lee, Fayette, and Milam Counties. On March 1, 2012, TWDB held that the Trinity Aquifer DFC adopted by GMA 9 is reasonable. When DFCs become final, the Water Code requires TWDB to provide each district and regional water planning group located in the GMA with the modeled available groundwater in the GMA based upon the desired future conditions adopted by the GMA. TEX. WATER CODE (b). The modeled available groundwater or MAG means the amount of water that TWDB determines may be produced on an average annual basis to achieve a DFC. Id (25). (As a practical matter, TWDB has already run its groundwater availability models ( GAMs ) to determine the MAG under DFCs adopted by GMAs. Where DFC appeals are still in process, the model runs are labeled draft. ) The amount of the MAG is important, because a groundwater conservation district is required to consider the MAG in determining whether to issue a permit for a non-exempt well. Before 2011, the Water Code provided that: A district, to the extent possible, shall issue permits up to the point that the total volume of groundwater permitted equals the managed available groundwater, if administratively complete permit applications are submitted to the district. TEXAS WATER CODE (pre-2011). The Legislature softened that requirement in the most recent legislative session. The Water Code now provides that: In issuing permits, the district shall manage total groundwater production on a long-term basis to achieve an applicable desired future condition and consider : (1) the MAG; (2) TWDB s estimate of the current and projected amount of groundwater produced from exempt wells; (3) the amount of groundwater authorized under permits previously issued by the district; (4) a reasonable estimate of the amount of groundwater that is actually produced under those permits; and (5) yearly precipitation and production patterns. Id. (post-2011). III. Conclusion The new developments discussed in this paper are beginnings rather than an endings. The decision in Edwards Aquifer Authority v. Day is likely to lead to more litigation to resolve the question of when regulatory limits on groundwater pumping amount to a taking. The State Water Plan is a plan for the future that must be implemented in the future. The groundwater district joint planning is just now resulting in final DFCs and MAGs that will apply to future permitting decisions, and in five years, the GMAs will start the joint planning process all over again. TCEQ has proposed new drought rules, but has not adopted them or implemented them. So, except more water developments soon. 16