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By Colleen Schreiber SAN ANTONIO — For almost 100 years, Texas landowners have operated under the assumption that they have an unqualified right to capture the water beneath their land so long as they get to it first and so long as the water is put to a beneficial use and not wasted. After all, that is the right to capture, and the right to capture is the law of the land in Texas. Most have assumed that they have this unqualified right to that water regardless whether they’ve already captured it, are in the process of capturing it, or have chosen to capture it sometime in the future. But is that right to capture a vested right? When does it become a vested right? After the water has been captured, or while the water is still in the ground? San Antonio-based attorney Russ Johnson says that is the water issue of the year. The answer to that question, he insists, largely dictates the course of all water litigation in Texas. "Some argue that the rule of capture is not vested at all. They say that the right to capture is vested only after the landowner exercises that right, when he actually captures the water itself. Only then does it become a vested right." Johnson, who specializes in water law with Bracewell & Patterson, says he counts himself in the opposite end of that extreme. "I believe that the rule of capture is a real property right vested in every real property owner." But deciding when the right to capture becomes a vested right is only part of the equation. Other open-ended questions that must be addressed and most likely will be addressed by the courts, Johnson says, include: If it is a vested right, is it protected against certain regulation? How will future rights of landowners who have not exercised that right to capture be affected? Are landowners who have not exercised this right in jeopardy of losing their rights based on a local groundwater district’s interpretation of historic use, and who qualifies as historic users? To what extent is historic use going to be used as a means of limiting groundwater use by other landowners? To what extent can groundwater districts validate or secure historic use to the exclusion of rights of other landowners? In 1904, the Texas Supreme Court in Houston & T.C.Ry. vs. East said that groundwater is subject to the absolute ownership rule or the rule of capture. It remains the law of the land though there have been challenges, most notably, perhaps, Sipriano v Great Springs, et. al. The Supreme Court’s ruling in this particular case indicates, Johnson says, just how unwilling the courts are to overturn case law that has stood true for nearly 100 years. In essence, the right to capture gives the landowner the right to withdraw any amount of groundwater, so long as it is beneficially used and not wasted. "Given the courts’ view of waste, waste is pretty much a non-limiting factor," Johnson remarks. He refers to the case involving a catfish farmer who was using one-quarter of the amount of water that it took to supply the entire city of San Antonio — 50 million gallons per day. "The catfish farmer is the poster child for the inadequacies of the rule of capture as a means of protecting a resource," Johnson opines. "That landowner was free to do what he wanted with the water under the rule of capture. After that ruling, it struck me that the legislature would eventually be called upon to strike a balance, to help manage the right to capture." That process began in 1997 when the legislature significantly revamped Texas water law through the adoption of Senate Bill 1. Senate Bill 1 mandated the development of a statewide water plan, but more significantly, it said that groundwater conservation districts are the state’s preferred method of groundwater management. The state authorized the creation of groundwater conservation districts in 1949, but the power given to groundwater districts back then with regard to regulating production, Johnson notes, had to do mostly with well spacing and size of wells. "It worked well because the majority of the groundwater districts back then were located in the Panhandle, and they were created for irrigation purposes," he explains. Those needs changed however, and Senate Bill 1 was, in part, an attempt to address those changes. "Senate Bill 1 contained the first major rewrite of general groundwater conservation district law, clarifying the district’s right to require permits and develop and implement management plans," Johnson says. "In addition to general reorganization, SB-1 authorized districts to require a permit for transfer of groundwater outside the district." In this process, Chapter 36 of the Texas Water Code was essentially rewritten. The end result was extensive new provisions for establishing the framework for local groundwater regulation. The empowerment of groundwater districts through Senate Bill 1 led to a flurry of proposed new groundwater districts. In 1999, there were 28 new ones proposed, and most, Johnson points out, were created to take advantage of one of their new powers, that of regulating transfers. Then Senate Natural Resources Committee Chairman Buster Brown expressed some concern over the haphazard way many of these proposed districts were created. He also expressed concern that the new powers given to local groundwater districts were inconsistent with the statewide planning effort in terms of locating and developing resources and requiring the water needed for the future. These concerns led Brown and others on the House and Senate Natural Resources committees to carefully re-examine groundwater issues, which set the stage for Senate Bill 2 in the 77th Legislature. Senate Bill 2, Johnson says, reiterated once again the longstanding policy that groundwater districts are the state’s preferred method of managing groundwater resources. It also amended Chapter 36 again by adding a new subsection. "Senate Bill 2 basically corrected what I considered to be an imbalance in the powers of the districts by doing two things. It gave local districts more power to manage the resource, and it scaled back their power to limit transfers. It said that the districts can’t regulate transfers based on location of use." These new additions to Chapter 36 have sparked another round of water litigation. More and more landowners are suing their local water districts. Johnson represents a West Texas client engaged in one of those battles. "I’m not advocating for changes in the current law with regard to Chapter 36 and the power granted to groundwater districts," he says. "Those are well thought-out. They were in most instances a result of a process undertaken by the legislature that contemplated the balance that needed to be struck with groundwater district powers and the property rights of landowners within the groundwater districts. "I think what has happened is that groundwater districts think they have more power than they were granted by the legislature, and I think the most glaring example is the example in Hudspeth County." Johnson is specifically referring to Guitar Holding Co., L.P. v. Hudspeth County Underground Water District No. 1. The Phil Guitar family of Abilene owns 38,000 acres near Dell City in Hudspeth County. It’s mostly native rangeland, but on that land are 15 existing water wells, 10 of which are large irrigation type wells. The Guitar family never farmed their property themselves. Instead, in the 1940s after discovering water, they enticed others to come to the area to farm it for them. The enticement went something like this: "Drill a well, and if you find water, we’ll sell you a section of land for ‘X’ amount of dollars, and we’ll even carry the note." Dell City became an oasis in the middle of a desert. Some of the families who came to the area made a go of it in farming. Others didn’t. Some of that land with its large irrigation wells came back to the Guitar family. None of those wells, however, has been used in the last 20 years, and herein lays the catch, the problem that the Guitar family now faces. It all goes back to the new parts of Chapter 36 of the Texas Water Code. Section 36.116, titled Regulation of Spacing and Production, describes what these groundwater districts can do to regulate production within their districts. Landowners within a groundwater district who want to drill a new well must now get a permit, and Chapter 36 gives each district the power to set their own permitting regulations. The ability of a landowner to drill a well for domestic or livestock use, however, is not limited by Chapter 36. "That landowner couldn’t drill a well for irrigation purposes or to build a manufacturing operation, for example," says Johnson. "In other words, it totally limits a landowner’s ability to use his water for anything other than for domestic and livestock purposes." The legislature in SB-2, Johnson says, also had to address how to deal with historic users versus new users. Section B of 36.116 says in promulgating rules that limit groundwater production, "the district may preserve historic use prior to the effective date of these rules to the maximum extent practical consistent with the district’s comprehensive management plan." "In essence," Johnson explains, "the district in exercising these powers has the right to consider and protect historic use in a way that is potentially different from the way they regulate new users." Based on these new rights, the Hudspeth County Underground Water District No. 1 decided that the rules for historic users would be different than the rules for new users. "The district established a permitting system whereby existing users were guaranteed no fewer than four acre-feet of water per irrigitable acre. "Furthermore, they defined an existing user as one who had irrigated in the 10-year period prior to the adoption of the new rules. All others in the district were entitled to an operating permit, which is a variable permit based upon aquifer levels," Johnson explains. Chapter 36 does give underground water districts some power to recognize or delineate some historic use, the attorney admits, but the debate is about whether or not they have the authority to cut off historic use based on a time period. One of the claims in the Guitar lawsuit is that the district’s decision to establish a 10-year historic use period was inconsistent with the powers granted the district. "We’re arguing that because they (the district) knew that the bulk of historic use occurred in the 1960s-1980s and not in the 1990s and by establishing a 10-year time period they are, in essence, not preserving all historic use but rather just recent historic use." New district rules not only protect historic users (at least those who fall within that 10-year period) but they allow historic users to transfer that use to some other use, from irrigation to municipal use, for example, without any kind of limitations. Section 36.113 says a district can apply different rules to new users if it is necessary to protect the existing uses. In doing so, however, the district must impose those same restrictions on everyone in the future. Johnson asks, "Why is the transfer of use from farming to municipal use not a new use under Chapter 36? "Seems to me the water is now intended for something completely different. It’s going to a completely different location. Everything about the use is different, yet the district’s authorization protects that under the guise of historic use." So not only does the Guitar family not qualify as a "historic user" under the new guidelines, any use other than for livestock or domestic use would be considered a "new use" based on the district’s new rules. In a nutshell, Johnson insists, the Guitars’ water-rich property has been severely devalued. "What we believe is fundamentally wrong with the Hudspeth County district’s approach is that they’re not protecting historic use to protect the farmer’s right to farm. Instead, they’re saying that there is a limited resource out here, and the only people who are going to be allowed to produce it in the future for any purpose are those who have been producing water in the past 10 years, and it doesn’t matter to us whether they continue to farm or they sell it to the City of El Paso." The Guitar case is in a holding pattern while they wait for the Texas Supreme Court to decide whether it will hear and review a ruling on another matter that directly ties to this case. The courts, however, can’t stop the politics involved in the water battles in Hudspeth County. "There’s tons of politics involved here," Johnson remarks. He says the political game is being driven, in large part, by two of the district’s wealthiest landowners. Philip Anschutz, founder of Qwest Communications International Inc., and Woody Hunt, chairman of Hunt Building Corp., both acquired thousands of acres of farmland in and around Dell City for water rights in early 2000. All of the lands acquired fall under the district’s definition of historic users. Farming, many critics contend, was never their intent; selling water to water-starved El Paso was. And to that end, their critics claim, Anschutz and Hunt have managed to stack the cards in their favor. Perhaps the most audacious political maneuver came during the final hours of the last legislative session when a lobbyist for Anschutz managed to get an amendment before Sen. Frank Madla, D-San Antonio, whose district also includes Hudspeth County. The lobbyist/attorney reportedly convinced Madla that the Hudspeth County Underground Water District boundaries needed to be extended to bring them in line with the boundaries of the Bone Spring-Victoria Peak Aquifer. Madla was misled, Johnson says. He contends that the intent of the parties who brought the amendment to Madla was not to protect the district but rather to protect the few who stood to benefit by having the boundaries extended, i.e. Anschutz and Hunt. They were interested in limiting competition by somehow reducing the number of landowners who could potentially sell their water rights to El Paso. Expanding the district’s boundaries accomplished that quite well. Landowners who were previously outside the district boundaries and, under the rule of capture had the right to capture as much water as they wanted and do with it what they wished, lost most of those rights. Eighty-two year-old Jack Lynch was one of the landowners impacted by the district’s boundary change. Just last year he signed an option with the City of El Paso to sell his water rights for $8.2 million. When the district changed its boundaries, that deal became null and void because Lynch, like the Guitar family, had not used his water in the last 10 years. Based on the district’s definition, he is not considered a historic user, and he can now only use his water for domestic and livestock purposes. Lynch was not the only landowner impacted by the tripling of the Hudspeth district. The 577,000-a re-district now includes land owned by the University of Texas system, Dallas-based Texas Pacific Land Trust, and an Oklahoma farmer. All own substantial acreage in Hudspeth County. "The way I look at it is that they’ve expanded the zone of obliteration of property rights from 200,000 acres to 600,000 acres," Johnson remarks. Johnson doesn’t deny that the legislature has the authority to change the boundaries of a water district, but he opposes the way it was done and the reason it was done. "The fight in Hudspeth County is not about preserving the farmers’ right to farm, but rather preserving those billionaires’ right to benefit from production of groundwater in the future for a purpose entirely different from farming. "Most all of the farming is concentrated right around Dell City," Johnson continues. "It’s those existing farms that have all the rights while others who also clearly have access to the resource don’t have any rights at all, and it’s largely because of the way the district has written their rules. "The way I read Chapter 36 is that to the extent that it is a new use, which selling water to the City of El Paso clearly is, everyone should have an equal right to participate in that revenue stream. "I’m of the belief that all landowners have a property right in their groundwater, and they should be free to exercise that right. They should have the right to determine how and to what extent and for what purpose they use that property," Johnson reiterates. That said, the litigator admits that the right to capture is not a perfect law, particularly in terms of protecting the groundwater resources of the state of Texas. Johnson, however, reiterates that the courts will be inherently reluctant to change a law that has been in existence for more than 100 years. "If the Supreme Court decided to change the rule of capture and apply a reasonable use rule or correlative rights rule, all those industries that have been relying on groundwater based on their rule of capture all of a sudden would be looking at how much land they own versus how much water they use. Their whole investment could be jeopardized because of their lack of land ownership. "Take the city of Bryan, for example. They have municipal wells located on five-acre tracts, so their total land ownership associated with their groundwater production is maybe 100 acres, and yet they’re producing enough water for the entire city. "If the courts decided to put correlative rights in place, then Bryan would only have 100 acres worth of water rights. All of a sudden the city doesn’t own enough land to produce nearly enough water to supply their city. What do they do then? "So will the courts change the right to capture? No. Will the legislature change it somehow? Most likely." Johnson says there is a lot of talk about the need for statewide supervision of groundwater districts. "I think the legislature is going to have to take a hard look at the abuse of power by some groundwater districts. By and large, the problems are only being created in a few districts. "Should the answer be to take away those powers? I’m not an advocate of that. I think that local control makes sense as long as that local control is limited or constrained by management of the resource issues and not location of use issues," he says. "There may be, however, some real merit to having a state agency or a branch of government to supervise the exercise of powers by these groundwater districts. "I would think that the rest of these districts are going to be anxious to see some resolution in these maverick districts that doesn’t result in an obliteration of power of all underground water districts," Johnson concludes. |
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