The Edwards Aquifer Authority and the State of Texas v. Burrell Day and Joel McDaniel

IN THE SUPREME COURT OF TEXAS
444444444444
NO. 08-0964
444444444444
THE EDWARDS AQUIFER AUTHORITY
AND THE STATE OF TEXAS, PETITIONERS,
v.
BURRELL DAY AND JOEL MCDANIEL, RESPONDENTS
4444444444444444444444444444444444444444444444444444
ON PETITION FOR REVIEW FROM THE
COURT OF APPEALS FOR THE FOURTH DISTRICT OF TEXAS
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Argued February 17, 2010
JUSTICE HECHT delivered the opinion of the Court.
We decide in this case whether land ownership includes an interest in groundwater in place
that cannot be taken for public use without adequate compensation guaranteed by article I, section
17(a) of the Texas Constitution.1 We hold that it does. We affirm the judgment of the court of
appeals2 and remand the case to the district court for further proceedings.
I
In 1994, R. Burrell Day and Joel McDaniel (collectively, “Day”) bought 381.40 acres on
1
TEX. CONST. art. I, § 17(a) (“No person’s property shall be taken, damaged, or destroyed for or applied to
public use without adequate compensation being made . . . .”).
2
Edwards Aquifer Auth. v. Day, 274 S.W.3d 742 (Tex. App.–San Antonio 2008).
which to grow oats and peanuts and graze cattle. The land overlies the Edwards Aquifer, “an
underground layer of porous, water-bearing rock, 300-700 feet thick, and five to forty miles wide
at the surface, that stretches in an arced curve from Brackettville, 120 miles west of San Antonio,
to Austin.”3 A well drilled in 1956 had been used for irrigation through the early 1970s, but its
casing collapsed and its pump was removed sometime prior to 1983. The well had continued to flow
under artesian pressure, and while some of the water was still used for irrigation, most of it flowed
down a ditch several hundred yards into a 50-acre lake on the property. The lake was also fed by
an intermittent creek, but much of the water came from the well. Day’s predecessors had pumped
water from the lake for irrigation. The lake was also used for recreation.
To continue to use the well, or to drill a replacement as planned, Day needed a permit from
the Edwards Aquifer Authority. The Authority had been created by the Edwards Aquifer Authority
Act (“the EAAA” or “the Act”) in 1993, the year before Day bought the property.4 The Edwards
Aquifer is “the primary source of water for south central Texas and therefore vital to the residents,
3
Edwards Aquifer Auth. v. Chem. Lime, Ltd., 291 S.W.3d 392, 394 (Tex. 2009).
4
Act of May 30, 1993, 73d Leg., R.S., ch. 626, 1993 Tex. Gen. Laws 2350, amended by Act of May 16, 1995,
74th Leg., R.S., ch. 524, 1995 Tex. Gen. Laws 3280; Act of May 29, 1995, 74th Leg., R.S., ch. 261, 1995 Tex. Gen.
Laws 2505; Act of May 6, 1999, 76th Leg., R.S., ch. 163, 1999 Tex. Gen. Laws 634; Act of May 25, 2001, 77th Leg.,
R.S., ch. 1192, 2001 Tex. Gen. Laws 2696; Act of May 28, 2001, 77th Leg., R.S., ch. 966, §§ 2.60-.62 and 6.01-.05,
2001 Tex. Gen. Laws 1991, 2021-2022, 2075-2076; Act of May 25, 2001, 77th Leg., R.S., ch. 1192, 2001 Tex. Gen.
Laws 2696; Act of June 1, 2003, 78th Leg., R.S., ch. 1112, § 6.01(4), 2003 Tex. Gen. Laws 3188, 3193; Act of May 23,
2007, 80th Leg., R.S., ch. 510, 2007 Tex. Gen. Laws 900; Act of May 28, 2007, 80th Leg., R.S., ch. 1351, §§ 2.01-2.12,
2007 Tex. Gen Laws 4612, 4627-4634; Act of May 28, 2007, 80th Leg. R.S., ch. 1430, §§ 12.01-12.12, 2007 Tex. Gen.
Laws 5848, 5901-5909; Act of May 21, 2009, 81st Leg., R.S., ch. 1080, 2009 Tex. Gen. Laws 2818 [hereinafter
“EAAA”]. Citations are to the EAAA’s current sections, without separate references to amending enactments. The
EAAA remains uncodified, but an unofficial compilation can be found on the Authority’s website, at
http://www.edwardsaquifer.org/files/EAAact.pdf.
2
industry, and ecology of the region, the State’s economy, and the public welfare.”5 The Legislature
determined that the Authority was “required for the effective control of the resource to protect
terrestrial and aquatic life, domestic and municipal water supplies, the operation of existing
industries, and the economic development of the state.”6
The Act “prohibits withdrawals of water from the aquifer without a permit issued by the
Authority”.7 The only permanent exception is for wells producing less than 25,000 gallons per day
for domestic or livestock use.8 The Act gives preference to “existing user[s]” — defined as persons
who “withdr[ew] and beneficially used underground water from the aquifer on or before June 1,
1993”9 — and their successors and principals. With few exceptions, water may not be withdrawn
from the aquifer through wells drilled after June 1, 1993.10 Each permit must specify the maximum
rate and total volume of water that the water user may withdraw in a calendar year,11 and the total
of all permitted withdrawals per calendar year cannot exceed the amount specified by the Act.12
5
Chem. Line, 291 S.W.3d at 394.
6
EAAA § 1.01.
7
Chem. Line, 291 S.W.3d at 394 (citing EAAA § 1.15(b) (“Except as provided by Sections 1.17 [‘Interim
Authorization’] and 1.33 [wells producing less than 25,000 gallons per day for domestic or livestock use] of this article,
a person may not withdraw water from the aquifer or begin construction of a well or other works designed for the
withdrawal of water from the aquifer without obtaining a permit from the authority.”) and EAAA § 1.35(a) (“A person
may not withdraw water from the aquifer except as authorized by a permit issued by the authority or by this article.”)).
8
Id. at 394 n.10.
9
Id. at 395 (quoting EAAA § 1.03(10)).
10
EAAA § 1.14(e).
11
EAAA § 1.15(d).
12
EAAA 1.14(c) (formerly EAAA 1.14(b)); see also Chem. Line, 291 S.W.3d at 395 n.8 (providing the history
of 1.14(b) and (c)).
3
A user’s total annual withdrawal allowed under an “initial regular permit” (“IRP”) is
calculated based on the beneficial use of water without waste during the period from June 1, 1972,
to May 31, 1993.13 The Act, like the Water Code, defines beneficial use as “the use of the amount
of water that is economically necessary for a purpose authorized by law, when reasonable
intelligence and reasonable diligence are used in applying the water to that purpose.”14 Although
other provisions of the Water Code governing groundwater management districts define beneficial
use more broadly and include recreational purposes,15 they also state that “any special law governing
a specific district shall prevail”.16 “Waste” is broadly defined.17
13
EAAA § 1.16(a) (“An existing user may apply for an initial regular permit by filing a declaration of historical
use of underground water withdrawn from the aquifer during the historical period from June 1, 1972, through May 31,
1993.”); id. § 1.16(e) (“To the extent water is available for permitting, the board shall issue the existing user a permit
for withdrawal of an amount of water equal to the user’s maximum beneficial use of water without waste during any one
calendar year of the historical period. If a water user does not have historical use for a full year, then the authority shall
issue a permit for withdrawal based on an amount of water that would normally be beneficially used without waste for
the intended purpose for a calendar year.”).
14
EAAA § 1.03(4); see also TEX. WATER CODE § 11.002(4) (“‘Beneficial use’ means use of the amount of
water which is economically necessary for a purpose authorized by this chapter, when reasonable intelligence and
reasonable diligence are used in applying the water to that purpose and shall include conserved water.”).
15
TEX. WATER CODE § 36.001(9) (“‘Use for a beneficial purpose’ means use for: (A) agricultural, gardening,
domestic, stock raising, municipal, mining, manufacturing, industrial, commercial, recreational, or pleasure purposes;
(B) exploring for, producing, handling, or treating oil, gas, sulphur, or other minerals; or (C) any other purpose that is
useful and beneficial to the user.”).
16
Id. § 36.052(a).
17
EAAA § 1.03(21) (“‘Waste’ means: (A) withdrawal of underground water from the aquifer at a rate and in
an amount that causes or threatens to cause intrusion into the reservoir of water unsuitable for agricultural, gardening,
domestic, or stock raising purposes; (B) the flowing or producing of wells from the aquifer if the water produced is not
used for a beneficial purpose; (C) escape of underground water from the aquifer to any other reservoir that does not
contain underground water; (D) pollution or harmful alteration of underground water in the aquifer by salt water or other
deleterious matter admitted from another stratum or from the surface of the ground; (E) willfully or negligently causing,
suffering, or permitting underground water from the aquifer to escape into any river, creek, natural watercourse,
depression, lake, reservoir, drain, sewer, street, highway, road, or road ditch, or onto any land other than that of the
owner of the well unless such discharge is authorized by permit, rule, or order issued by the commission under Chapter
26, Water Code; (F) underground water pumped from the aquifer for irrigation that escapes as irrigation tailwater onto
land other than that of the owner of the well unless permission has been granted by the occupant of the land receiving
4
A user’s total permitted annual withdrawal cannot exceed his maximum beneficial use during
any single year of the historical period, or for a user with no historical use for an entire year, the
normal beneficial use for the intended purpose.18 But the total withdrawals under all permits must
be reduced proportionately as necessary so as to not exceed the statutory maximum annual
withdrawal from the aquifer.19 An “existing user” who operated a well for three or more years
during the historical period is entitled to a permit for at least the average amount of water withdrawn
annually.20 And every “existing irrigation user shall receive a permit for not less than two acre-feet
a year for each acre of land the user actually irrigated in any one calendar year during the historical
period.”21
For various reasons, the Authority did not become operational until 1996, and all IRP
applications were required to be filed before December 30, 1996.22 Day timely applied for
authorization to pump 700 acre-feet of water annually for irrigation. Attached to the application was
a statement by Day’s predecessors, Billy and Bret Mitchell, that they had “irrigated approximately
300 acres of Coastal Bermuda grass from this well during the drought years of 1983 and 1984.” The
the discharge; or (G) for water produced from an artesian well, “waste” has the meaning assigned by Section 11.205,
Water Code.”).
18
EAAA § 1.16(e).
19
Id. (“If the total amount of water determined to have been beneficially used without waste under this
subsection exceeds the amount of water available for permitting, the authority shall adjust the amount of water authorized
for withdrawal under the permits proportionately to meet the amount available for permitting.”).
20
Id.
21
Id. One acre-foot of water, enough to cover one acre one foot deep, is equal to 43,560 cubic feet or
325,851.43 gallons, slightly less than half the volume of an olympic-size swimming pool (660,430 gallons).
22
Edwards Aquifer Auth. v. Chem. Lime, Ltd., 291 S.W.3d 392, 396, 402 (Tex. 2009).
5
application’s request for 700 acre-feet appears to have been based on two acre-feet for the total
beneficial use of irrigating the 300 acres plus the recreational use of the 50-acre lake.
In December 1997, the Authority’s general manager wrote Day that the Authority staff had
“preliminarily found” that his application “provide[d] sufficient convincing evidence to substantiate”
the irrigation of 300 acres in 1983-1984 and thus an average annual beneficial use of 600 acre-feet
of water during the historical period. The letter invited Day to submit additional information, but
he did not respond. In December 1999, the Authority approved Day’s request to amend his
application to move the point of withdrawal from the existing well to a replacement well to be
drilled on the property. Although the Authority cautioned that it still had not acted on the
application, Day proceeded to drill the replacement well at a cost of $95,000. In November 2000,
the Authority notified Day that, “[b]ased on the information available,” his application would be
denied because “withdrawals [from the well during the historical period] were not placed to a
beneficial use”.
Day protested the Authority’s decision, and the matter was transferred to the State Office of
Administrative Hearings for hearing. During discovery, Billy Mitchell testified at his deposition that
in 1983 and 1984, an area totaling only about 150 acres had been irrigated, that this had been done
using an agricultural sprinkler system that drew water from the lake, and that no more than seven
acres had been irrigated with water directly from the well. Day offered no other evidence of
beneficial use during the historical period.23 The administrative law judge concluded that water from
23
Day offered a record of the United States Geological Survey Department to show that the well had pumped
39 million gallons in 1972 and 13.l million gallons in 1973, but the mere fact that water may have been pumped from
the well does not prove beneficial use, and in any event, Day did not base his application on any such use of water in
6
the lake, including the well water that had flowed into it, was state surface water, the use of which
could not support Day’s application for groundwater, and that the recreational use of the lake was
not a beneficial use as defined by the EAAA. The ALJ found that the maximum beneficial use of
groundwater shown by Day during the historical period was for the irrigation of seven acres of grass
and concluded that Day should be granted an IRP for 14 acre-feet of water. The Authority agreed.
Day appealed the Authority’s decision to the district court and also sued the Authority for
taking his property without compensation in violation of article I, section 17(a) of the Texas
Constitution, and for other constitutional violations. The Authority impleaded the State as a third-
party defendant, asserting indemnification and contribution for Day’s taking claim.24 The court
granted summary judgment for Day on his appeal, concluding that water from the well-fed lake used
to irrigate 150 acres during the historical period was groundwater, and that Day was entitled to an
IRP based on such beneficial use. The court granted summary judgment for the Authority on all of
Day’s constitutional claims, including his takings claim. The court remanded the case to the
Authority for issuance of a new IRP.
1972-1973.
24
The State argues for the first time in this Court that only the Authority, an independent political subdivision,
can be liable to Day on his takings claim, and therefore the State is immune from the Authority’s third-party suit. The
Authority responds that it was required by state law to act as it did and that it is the EAAA itself, rather than the
Authority’s actions under it, that resulted in any taking liability. Because the issue was not developed below and has
not been fully briefed in this Court, we decline to address it.
7
Day and the Authority appealed. The court of appeals agreed with the Authority that
groundwater from the well became state surface water in the lake and could not be considered in
determining the amount of Day’s IRP.25 Thus, the court affirmed the Authority’s decision to issue
Day a permit for 14 acre-feet. But the court held that “landowners have some ownership rights in
the groundwater beneath their property . . . entitled to constitutional protection”,26 and therefore
Day’s takings claim should not have been dismissed. Rejecting Day’s other constitutional
arguments, the court remanded the case to the district court for further proceedings.
The Authority, the State, and Day each petitioned for review. We granted all three
petitions.27 We begin by considering whether, under the EAAA, the Authority erred in limiting
Day’s IRP to 14 acre-feet and conclude that it did not. Next, we turn to whether Day has a
constitutionally protected interest in the groundwater beneath his property and conclude that he does.
We then consider whether the Authority’s denial of an IRP in the amount Day requested constitutes
a taking and conclude that the issue must be remanded to the trial court for further proceedings. We
end with Day’s other constitutional arguments, concluding that they are without merit.
25
Edwards Aquifer Auth. v. Day, 274 S.W.3d 742, 753-755 (Tex. App.–San Antonio 2008).
26
Id. at 756.
27
53 Tex. Sup. Ct. J. 230 (Jan. 15, 2010). The following have filed amici curiae briefs in support of the
Authority and the State: Alliance of EAA Permit Holders; Angela Garcia and Environmental Defense Fund, Inc.; City
of San Antonio by and through the San Antonio Water System; Harris-Galveston Subsidence District; Medina County
Irrigators Alliance; and Texas Alliance of Groundwater Districts. The following have filed amici curiae briefs in support
of Day: Glenn and JoLynn Bragg; Canadian River Municipal Water Authority; City of Amarillo; City of El Paso; Anne
Windfohr Marion and the Tom L. and Anne Burnett Trust; Mesa Water, L.P.; Pacific Legal Foundation; Texas Cattle
Feeders Association; Texas Farm Bureau; Texas Landowners Council; Texas and Southwestern Cattle Raisers
Association; and Texas Wildlife Association. The following have also filed amici curiae briefs: City of Victoria; the
Texas Comptroller of Public Accounts; and Senator Robert Duncan.
8
II
Day contends that the Authority was required to base his IRP on his predecessors’ beneficial
use of water drawn from the lake, supplied in part by the well, to irrigate 150 acres for two years
during the historical period. The Authority counters that the lake water, whatever its origin, was
state surface water and could not be considered in determining the amount of the IRP.
The Water Code defines state water — water owned by the State — as “[t]he water of
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”.28 Day argues that because
groundwater — defined by the Code as “water percolating below the surface of the earth”29 — is not
included in this list, it can never be state water. But the character of water as groundwater or state
water can change. The Code recognizes this reality, providing, for example, that storm water or
floodwater — state water — when “put or allowed to sink into the ground, . . . loses its character and
classification . . . and is considered percolating groundwater.”30 By the same token, irrigation runoff
draining into a stream or other watercourse wholly loses its character as groundwater and becomes
state water.
28
TEX. WATER CODE § 11.021(a). Such water “is the property of the state.” Id.; see also Goldsmith & Powell
v. State, 159 S.W.2d 534, 535 (Tex. Civ. App.–Dallas 1942, writ ref’d).
29
TEX. WATER CODE § 35.002(5).
30
Id. § 11.023(d).
9
There is an exception. Groundwater can be transported through a natural watercourse
without becoming state water. The Code specifically allows the Water Commission to authorize a
person to discharge privately owned groundwater into a natural watercourse and withdraw it
downstream.31 But this exception proves the rule. The necessary implication is that when the water
owner has not obtained the required authorization for such transportation, the water in the natural
watercourse becomes state water. Before such authorization was required,32 we, too, acknowledged
the propriety of transporting non-state-owned water by natural watercourse, but only when the water
owner controls the discharge and withdrawal so that the water moves directly from the source to
use.33
In this case, Day’s predecessors did not measure the amount of water flowing from the well
to the lake or the amount pumped from the lake into the irrigation system. There was no direct
transportation from source to use; the flow into the lake was as constant as the artesian pressure
allowed, except when water was diverted to irrigate the seven acres, while withdrawal was only
periodic as needed to irrigate the 150 acres. Nor does it appear that the lake was used to store water
for irrigation. While the water remained in the lake, it was used for recreation, and since most of
31
Id. § 11.042(b) (“A person who wishes to discharge and then subsequently divert and reuse the person’s
existing return flows derived from privately owned groundwater must obtain prior authorization from the commission
for the diversion and the reuse of these return flows. The authorization may allow for the diversion and reuse by the
discharger of existing return flows, less carriage losses, and shall be subject to special conditions if necessary to protect
an existing water right that was granted based on the use or availability of these return flows. Special conditions may
also be provided to help maintain instream uses and freshwater inflows to bays and estuaries. A person wishing to divert
and reuse future increases of return flows derived from privately owned groundwater must obtain authorization to reuse
increases in return flows before the increase.”).
32
Section 11.042(b) was adopted by Act of June 1, 1997, 75th Leg., R.S., ch. 1010, § 2.06, 1997 Tex. Gen.
Laws 3610, 3620.
33
City of Corpus Christi v. City of Pleasanton, 276 S.W.2d 798, 802-803 (Tex. 1955).
10
the water in the lake came from the well, that appears to have been its principal purpose. Indeed,
there is no evidence that lake water was used for irrigation during the historical period other than
in 1983 and 1984, while the lake was used constantly for recreation. This was substantial evidence
to support the Authority’s finding that the groundwater became state water in the lake. We do not
suggest that a lake can never be used to store or transport groundwater for use by its owner.34 We
conclude only that the Authority could find from the evidence before it that that was not what had
occurred on Day’s property.
Day having offered no other evidence of beneficial use during the historical period, the
Authority’s decision to issue an IRP for 14 acre-feet must be affirmed.
III
Whether groundwater can be owned in place is an issue we have never decided. But we held
long ago that oil and gas are owned in place, and we find no reason to treat groundwater differently.
A
We agree with the Authority that the rule of capture does not require ownership of water in
place, but we disagree that the rule, because it prohibits an action for drainage, is antithetical to such
ownership.
We adopted the rule of capture in 1904 in Houston & T.C. Railway v. East.35 A well on
East’s homestead, five feet in diameter and thirty-three feet deep, had long supplied him with water
for household purposes. But the Railroad dug a well nearby, twenty feet in diameter and sixty-six
34
A lake was used for part of the groundwater transportation in City of Corpus Christi, 276 S.W.2d at 799.
35
81 S.W. 279 (Tex. 1904).
11
feet deep, from which it pumped 25,000 gallons a day for use in its locomotives and machine shops,
and East’s well dried up. East sued the Railroad for the destruction of his well. After a bench trial,
the trial court found that the Railroad’s use of water was unreasonable under riparian law, but
concluded it was not actionable,36 and rendered judgment for the Railroad. The court of appeals
reversed and rendered judgment for East for the damages claimed, $206.25.37 The Railroad
appealed.
“Under the common law . . . , a riparian use must be a reasonable one, and . . . [a] use which
works substantial injury to the common right as between riparians is an unreasonable use . . . .”38
The issue before us was whether this law applied. The same issue had been considered by the
English Court of the Exchequer in Acton v. Blundell.39 As in East, a landowner had sued for damage
to his well from wells dug nearby,40 and the question was “whether the right to the enjoyment of an
underground spring, or of a well supplied by such underground spring, is governed by the same rule
36
Id. at 280 (“I further find that the use to which defendant puts its well was not a reasonable use of their
property as land, but was an artificial use of their property, and if the doctrine of reasonable use, as applicable to defined
streams, is applied to such cases, this was unreasonable.”).
37
Id.
38
Motl v. Boyd, 286 S.W. 458, 470 (Tex. 1926) (internal citations omitted).
39
(1843) 152 Eng. Rep. 1123 (Exch.); 12 Mees & W. 324.
40
Id. at 1232-1233 (“At the trial the plaintiff proved that, within twenty years before the commencement of the
suit, viz., in the latter end of 1821, a former owner and occupier of certain land and a cotton-mill, now belonging to the
plaintiff, had sunk and made in such land a well for raising water for the working of the mill; and that the defendants,
in the year 1837, had sunk a coal-pit in the land of one of the defendants, at about three quarters of a mile from the
plaintiff's well, and about three years after sunk a second, at a somewhat less distance; the consequence of which sinking
was, that by the first the supply of water was considerably diminished, and by the second was rendered altogether
insufficient for the purposes of the mill.”).
12
of law as that which applies to, and regulates, a watercourse flowing on the surface.”41 That rule was
“well established”:
each proprietor of the land has a right to the advantage of the stream flowing in its
natural course over his land, to use the same as he pleases, for any purposes of his
own, not inconsistent with a similar right in the proprietors of the land above or
below; so that, neither can any proprietor above diminish the quantity or injure the
quality of the water which would otherwise naturally descend, nor can any proprietor
below throw back the water without the license or the grant of the proprietor above.42
After considering the basis for the rule, the consequences of applying it to groundwater, and such
authorities as it could find, the court concluded that the law governing the use of groundwater should
be different.43 The court stated the applicable rule as follows:
That the person who owns the surface may dig therein and apply all that is there
found to his own purposes, at his free will and pleasure; and that if, in the exercise
of such right, he intercepts or drains off the water collected from the underground
springs in his neighbor’s well, this inconvenience to his neighbor falls within the
description of damnum absque injuria, which cannot become the ground of an
action.44
This Court, noting that arguments regarding the applicable law had been “thoroughly presented” in
Acton,45 and believing that the English court’s rule had been “recognized and followed . . . by all the
41
Id. at 1233.
42
Id.
43
Id. (“But we think, on considering the grounds and origin of the law which is held to govern running streams,
the consequences which would result if the same law is made applicable to springs beneath the surface, and, lastly, the
authorities to be found in the books, so far as any inference can be drawn from them bearing on the point now under
discussion, that there is a marked and substantial difference between the two cases, and that they are not to be governed
by the same rule of law.”).
44
Id. at 1235.
45
Houst. & T.C. Ry. v. East, 81 S.W. 279, 280 (Tex. 1904) (“The arguments in favor of the application to such
cases [involving groundwater] of the doctrines applicable to defined streams of water were thoroughly presented at the
bar in Acton v. Blundell, and the reasons for the conclusion of the court against such application were carefully stated
13
courts of last resort in this country before which the question has come, except the Supreme Court
of New Hampshire”,46 adopted the rule for Texas. We later came to refer to the rule as the “rule or
law of capture.”47
Under that rule, we held that the Railroad’s conduct was not actionable. “The practical
reasons” for the rule, we explained, had been summarized by the Ohio Supreme Court in Frazier
v. Brown:48
In the absence of express contract and a positive authorized legislation, as between
proprietors of adjoining land, the law recognizes no correlative rights in respect to
underground waters percolating, oozing, or filtrating through the earth; and this
mainly from considerations of public policy: (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 legal rules in respect to them 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.49
By “correlative rights”, we referred specifically to the right East claimed: to sue for damages from
a loss of water due to subsurface drainage by another user for legitimate purposes. The reasons the
law did not recognize that right — the “hopeless uncertainty” involved in its enforcement and the
in the opinion.”).
46
Id.
47
Elliff v. Texon Drilling Co., 210 S.W.2d 558, 561 (Tex. 1948). The historical origins and development of
the rule are thoroughly examined in Dylan O. Drummond, Lynn Ray Sherman & Edmond R. McCarthy, Jr., The Rule
of Capture in Texas — Still So Misunderstood After All These Years, 37 TEX. TECH L. REV. 1, 15-41 (2004).
48
12 Ohio St. 294 (1861), overruled by Cline v. Am. Aggregates Corp., 474 N.E.2d 324 (Ohio 1984).
49
East, 81 S.W. at 280-281 (quoting Frazier, 12 Ohio St. at 311).
14
material interference with public progress — did not preclude all correlative rights in groundwater.
On the contrary, we noted that East had made “no claim of malice or wanton conduct of any
character, and the effect to be given to such a fact when it exists is beside the present inquiry”,50
suggesting at least the possibility that an action for damages might lie in such circumstances, despite
difficulty in proof. Malice and wanton conduct were only examples. Acton’s rule of non-liability,
we said, was a “general doctrine”.51
The effect of our decision denying East a cause of action was to give the Railroad ownership
of the water pumped from its well at the surface. No issue of ownership of groundwater in place
was presented in East, and our decision implies no view of that issue. Riparian law, which East
invoked, governs users who do not own the water. Under that law, the Railroad would have been
liable even if East did not own the water in place. The Railroad escaped liability, certainly not
because East did own the water in place, but irrespective of whether he did. Our quote from the
New York Court of Appeals’ decision in Pixley v. Clark52 must be read in this context:
An owner of soil may divert percolating water, consume or cut it off, with impunity.
It is the same as land, and cannot be distinguished in law from land. So the owner of
land is the absolute owner of the soil and of percolating water, which is a part of, and
not different from, the soil. No action lies against the owner for interfering with or
destroying percolating or circulating water under the earth’s surface.53
50
Id. at 282.
51
Id.
52
35 N.Y. 520 (1866).
53
East, 81 S.W. at 280-281 (quoting Pixley, 35 N.Y. at 527).
15
Whatever the New York court may have intended by this statement,54 we could have meant only that
a landowner is the absolute owner of groundwater flowing at the surface from its well, even if the
water originated beneath the land of another.
In four cases since East, we have considered the rule of capture as applied to groundwater.
In none of them did we determine whether the water was owned in place. In City of Corpus Christi
v. City of Pleasanton,55 the parties all owned wells pumping from the same sands. The City of
Corpus Christi was using natural watercourses — the Nueces River and Lake Corpus Christi — to
transport its water 118 miles from its wells to the point where it withdrew the water for use. The
other well owners complained that the loss of water along the way to evaporation, transpiration, and
seepage was waste, and that water reserves for all the wells were being depleted unnecessarily
because the City was taking much more water than it used. We reaffirmed that, under the rule of
capture, “percolating waters are regarded as the property of the owner of the surface”,56 but as in
East, the water ownership to which we referred was at the surface, not in place. “The precise
question” in East, we said, was “whether the Railway Company was liable in damages to East” for
54
The issue in Pixley was whether landowners who raised their dam on a creek were liable for flooding other
landowners adjacent the creek. The court held they were, applying the law governing riparian use, not the law governing
the use of groundwater. Pixley, 35 N.Y. at 531-532. The statement quote is dicta apparently meant to distinguish
between the two.
55
276 S.W.2d 798 (Tex. 1955).
56
Id. at 800.
16
its use of water.57 East established
that an owner of land had a legal right to take all the water he could capture under
his land that was needed by him for his use, even though the use had no connection
with the use of the land as land and required the removal of the water from the
premises where the well was located.58
Just as the Railroad was not liable to East, the City was not liable to other well owners for the loss
of water involved in its transportation. But as we had suggested in East, the rule of capture was not
absolute. “Undoubtedly,” we noted, “the Legislature could prohibit the use of any means of
transportation of percolating or artesian water which permitted the escape of excessive amounts, but
it has not seen fit to do so.”59
In Friendswood Development Co. v. Smith-Southwest Industries, Inc.,60 the Court held that
a landowner pumping water from wells on its property was not liable for the resulting subsidence
in neighboring property. This result, the Court concluded, was necessitated by East, which had
“adopted the absolute ownership doctrine of underground percolating waters.”61 But without
overruling East, the Court held that prospectively, a landowner could be liable for subsidence caused
by removing groundwater.62 Avoiding the tension in these seemingly inconsistent views of East,
Justice Pope argued convincingly in dissent that the rule of capture was irrelevant to the case and
57
Id. at 801.
58
Id. at 800.
59
Id. at 803.
60
576 S.W.2d 21 (Tex. 1978).
61
Id. at 25.
62
Id. at 29-30.
17
that the Court had based its decision on “the mistaken belief that the case is governed by the
ownership of ground water.”63 East was about liability for a loss of water, not liability for a loss
from water. In any event, no claim of right to groundwater in place was made or decided.
In City of Sherman v. Public Utility Commission,64 a water utility petitioned the PUC to
prohibit the City of Sherman from drilling wells in the utility’s service area to obtain water for the
City’s needs outside the area. The Court concluded that the City’s activities were permitted by East,
which had adopted an “absolute ownership theory regarding groundwater”, to which “[a] corollary
. . . is the right of the landowner to capture such water.”65 The PUC, we held, had no statutory
authority “to regulate groundwater production or adjudicate correlative groundwater rights.”66
Rather, the Legislature had chosen to regulate groundwater use and production through groundwater
districts under the Water Code.67 The issues in the case did not implicate ownership of groundwater
in place.
Finally, in Sipriano v. Great Spring Waters of America, Inc.,68 we revisited the rule of
capture in a factual setting virtually identical to that in East: landowners sued their neighbor for
63
Id. at 31 (Pope, J., dissenting).
64
643 S.W.2d 681 (Tex. 1983).
65
Id. at 686.
66
Id.
67
Id.
68
1 S.W.3d 75 (Tex. 1999).
18
pumping so much water (90,000 gallons a day) that their wells were depleted. Once again, we
explained:
The rule of capture answers the question of what remedies, if any, a neighbor has
against a landowner based on the landowner’s use of the water under the landowner’s
land. Essentially, the rule provides that, absent malice or willful waste, landowners
have the right to take all the water they can capture under their land and do with it
what they please, and they will not be liable to neighbors even if in so doing they
deprive their neighbors of the water’s use.69
The right to capture was not unfettered; it precluded the plaintiffs’ suit but not legislative regulation,
which we expressly recognized and encouraged.70 The concern was that with no common law
liability for a landowner’s unlimited pumping, legislators had inadequately provided for the
protection of groundwater supplies.71 No issue regarding the ownership of groundwater in place was
involved.
But while the rule of capture does not entail ownership of groundwater in place, neither does
it preclude such ownership. Although we have never discussed this issue with respect to
groundwater, we have done so with respect to oil and gas, to which the rule of capture also applies.
In Stephens County v. Mid-Kansas Oil & Gas Co.,72 Mid-Kansas, the assignee of an oil and gas
lease, argued that its interest in the minerals was not taxable because, by the rule of capture, they
69
Id. at 76.
70
Id. at 79 (“Today, again, we reiterate that the people have constitutionally empowered the Legislature to act
in the best interest of the State to preserve our natural resources, including water. We see no reason . . . for the
Legislature to feel constrained from taking appropriate steps to protect groundwater. Indeed, we anticipated legislative
involvement in groundwater regulation in East: [‘]In the absence . . . of positive authorized legislation, as between
proprietors of adjoining lands, the law recognizes no correlative rights in respect to underground waters percolating,
oozing, or filtrating through the earth.[’]” (quoting Houst. & T.C. Ry. v. East, 81 S.W. 279, 280 (1904))).
71
Id. at 81 (Hecht, J., concurring).
72
254 S.W. 290 (Tex. 1923).
19
were “subject to appropriation, without the consent of the owner of the tract, through drainage from
wells on adjacent lands.”73 The argument “lack[ed] substantial foundation”, we explained, because
Mid-Kansas could likewise drain oil and gas from adjacent lands.74
Ultimate injury from the net results of drainage, where proper diligence is used is
altogether too conjectural to form the basis for the denial of a right of property in that
which is not only plainly as much realty as any other part of the earth’s contents, but
realty of the highest value to mankind . . . and often worth far more than anything
else on or beneath the surface within the proprietor’s boundaries.75
Ownership of gas in place did not entitle the owner to specific molecules of gas that might move
beneath surface tracts but to volumes that, while they could be diminished through drainage, with
“proper diligence”, could also be replenished through drainage. Recapping our decision years later,
we stated that while the rule of capture, “at first blush, would seem to conflict with the view of
absolute ownership of the minerals in place, . . . it was otherwise decided in [Stephens County].”76
[N]otwithstanding the fact that oil and gas beneath the surface are subject both to
capture and administrative regulation, the fundamental rule of absolute ownership
of the minerals in place is not affected in our state.77
Most recently, in Coastal Oil & Gas Corp. v. Garza Energy Trust,78 we observed that “the
rule of capture determines title to [natural] gas that drains from property owned by one person onto
73
Id. at 292.
74
Id.
75
Id.
76
Elliff v. Texon Drilling Co., 210 S.W.2d 558, 561 (Tex. 1948).
77
Id.
78
268 S.W.3d 1 (Tex. 2008).
20
property owned by another. It says nothing about the ownership of gas that has remained in place.”79
The same is true of groundwater.
B
We held long ago that oil and gas are owned in place. In Texas Co. v. Daugherty,80 the issue
was whether an oil and gas lessee’s interest was subject to ad valorem taxation. If the lessee’s
interest were “a mere franchise or privilege . . . with the usufructuary right . . . to appropriate a
portion of such oil and gas as might be discovered,” then the interest was part of the value of the
land on which the landowner, not the lessee, should be taxed.81 But we concluded that the lessee’s
interest was a separate, real interest, “amount[ing] to a defeasible title in fee to the oil and gas in the
ground”.82 We recognized that “[b]ecause of the fugitive nature of oil and gas, some courts,
emphasizing the doctrine that they are incapable of absolute ownership until captured and reduced
to possession and analogizing their ownership to that of things ferae naturae,” had held that oil and
gas interests, unlike interests in non-fugacious minerals, were not interests in realty.83 We thought
that the rule of capture provided no “substantial ground” for treating the two kinds of interests
differently.84
79
Id. at 14.
80
176 S.W. 717 (Tex. 1915).
81
Id. at 718.
82
Id. at 719.
83
Id.
84
Id. at 719-720.
21
The possibility of the escape of the oil and gas from beneath the land before being
finally brought within actual control may be recognized, as may also their
incapability of absolute ownership, in the sense of positive possession, until so
subjected. But nevertheless, while they are in the ground, they constitute a property
interest.85
Notwithstanding the rule of capture, we concluded, a landowner’s “right to the oil and gas beneath
his land is an exclusive and private property right . . . inhering in virtue of his proprietorship of the
land, and of which he may not be deprived without a taking of private property.”86 Ownership of
oil and gas in place is the prevailing rule among the states.87
Groundwater, like oil and gas, often exists in subterranean reservoirs in which it is fugacious.
Unless the law treats groundwater differently from oil and gas, Daugherty refutes the Authority’s
argument that the rule of capture precludes ownership in place. The Authority contends that the rule
of capture deprives a landowner’s interest in groundwater of two attributes essential to the
ownership of property: a right of possession (i) from which others are excluded88 and (ii) which may
be enforced. Because a landowner is not entitled to any specific molecules of groundwater or even
to any specific amount, the Authority argues that the landowner has no interest that entitles him to
85
Id. at 720.
86
Id. at 722; see also Brown v. Humble Oil & Ref. Co., 83 S.W.2d 935, 940 (Tex. 1935) (“The rule in Texas
recognizes the ownership of oil and gas in place . . . . Owing to the peculiar characteristics of oil and gas, the foregoing
rule of ownership of oil and gas in place should be considered in connection with the law of capture. This rule gives the
right to produce all of the oil and gas that will flow out of the well on one’s land; and this is a property right. And it is
limited only by the physical possibility of the adjoining landowner diminishing the oil and gas under one’s land by the
exercise of the same right of capture. . . . Both rules are subject to regulation under the police power of a state.”).
87
See HOWARD R. WILLIAMS ET AL., OIL & GAS LAW § 203.3 (2011).
88
See College Sav. Bank v. Fla. Prepaid Postsecondary Educ. Expense Bd., 527 U.S. 666, 673 (1999) (“The
hallmark of a protected property interest is the right to exclude others. That is one of the most essential sticks in the
bundle of rights that are commonly characterized as property.”) (internal citations and quotation marks omitted).
22
exclude others from taking water below his property and therefore no ownership in place. The
lessee in Daugherty made essentially the same argument, and we rejected it. Furthermore, we later
held that a landowner is entitled to prohibit a well from being drilled on other property but bottomed
in an oil and gas formation under his own — a slant or deviated well.89 Thus, a landowner has a
right to exclude others from groundwater beneath his property, but one that cannot be used to
prevent ordinary drainage.
The Authority argues that groundwater must be treated differently because the law
recognizes correlative rights in oil and gas but not in groundwater. The Authority points to East’s
observation that “the law recognizes no correlative rights in respect to underground waters
percolating . . . through the earth”90 but over-reads this statement. As we have explained above, East
did not rule out an action for “malice or wanton conduct”,91 including waste.92 Likewise, the rule
of capture does not preclude an action for drainage of oil and gas due to waste, as we held in Elliff
v. Texon Drilling Co.93 More importantly, however, the Court observed in Elliff that “correlative
rights between the various landowners over a common reservoir of oil or gas” have been recognized
through state regulation of oil and gas production that affords each landowner “the opportunity to
89
Hastings Oil Co. v. Tex. Co., 234 S.W.2d 389, 396 (Tex. 1950).
90
Hous.& T.C. Ry. v. East, 81 S.W. 279, 280 (Tex. 1904) (quoting Frazier v. Brown, 12 Ohio St. 294, 311
(1861)).
91
Id. at 282.
92
Sipriano v. Great Spring Waters of Am., Inc., 1 S.W.3d 75, 76 (Tex. 1999) (noting that the rule of capture
does not insulate “malice or willful waste” from liability).
93
210 S.W.2d 558, 582-583 (Tex. 1949).
23
produce his fair share of the recoverable oil and gas beneath his land”.94 Similarly, one purpose of
the EAAA’s regulatory provisions is to afford landowners their fair share of the groundwater
beneath their property. In both instances, correlative rights are a creature of regulation rather than
the common law. In 1904, when East was decided, neither groundwater production nor oil and gas
production were regulated, and we indicated that limiting groundwater production might impede
public purposes. The State soon decided that regulation of oil and gas production was essential,
adopting well-spacing regulations in 1919,95 and it has since determined that the same is true for
groundwater production, as for example, in the EAAA.
The Authority argues that regulation of oil and gas production to determine a landowner’s
fair share is based on the area of land owned and is fundamentally different from regulation of
groundwater production. It is true, of course, that the considerations shaping the regulatory schemes
differ markedly. The principal concerns in regulating oil and gas production are to prevent waste
and to provide a landowner a fair opportunity to extract and market the oil and gas beneath the
surface of the property. Groundwater is different in both its source and uses. Unlike oil and gas,
groundwater in an aquifer is often being replenished from the surface, and while it may be sold as
a commodity, its uses vary widely, from irrigation, to industry, to drinking, to recreation.
Groundwater regulation must take into account not only historical usage but future needs, including
the relative importance of various uses, as well as concerns unrelated to use, such as environmental
impacts and subsidence. But as the State tells us in its petition: “While there are some differences
94
Id. at 562.
95
Brown v. Humble Oil & Ref. Co., 83 S.W.2d 935, 941 (Tex. 1935).
24
in the rules governing groundwater and hydrocarbons, at heart both are governed by the same
fundamental principle: each represents a shared resource that must be conserved under the
Constitution.”96 In any event, the Authority’s argument is that groundwater cannot be treated like
oil and gas because landowners have no correlative rights, not because their rights are different.
That argument fails.
Finally, the Authority argues that groundwater is so fundamentally different from oil and gas
in nature, use, and value that ownership rights in oil and gas should have no bearing in determining
those in groundwater. Hydrocarbons are minerals; groundwater, at least in some contexts, is not.97
Groundwater is often a renewable resource, replenished in aquifers like the Edwards Aquifer; is used
not only for drinking but for recreation, agriculture, and the environment; and though life-sustaining,
has historically been valued much below oil and gas. Oil and gas are essentially non-renewable, are
used as a commodity for energy and in manufacturing, and have historically had a market value
higher than groundwater. But not all of these characteristics are fixed. Although today the price
of crude oil is hundreds of times more valuable than the price of municipal water, the price of bottled
water is roughly equivalent to, or in some cases, greater than the price of oil. To differentiate
between groundwater and oil and gas in terms of importance to modern life would be difficult.
Drinking water is essential for life, but fuel for heat and power, at least in this society, is also
indispensable. Again, the issue is not whether there are important differences between groundwater
96
State of Texas, Petition for Review at 11.
97
See TEX. NAT. RESOURCES CODE § 53.1631(a) (“Unless otherwise expressly provided by statute, deed, patent,
or other grant from the State of Texas, groundwater shall not be considered a mineral in any past or future reservation
of title or rights to minerals by the State of Texas.”).
25
and hydrocarbons; there certainly are. But we see no basis in these differences to conclude that the
common law allows ownership of oil and gas in place but not groundwater.
In Elliff, we 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.98
We now hold that this correctly states the common law regarding the ownership of groundwater in
place.
C
The Legislature appears to share this view of the common law. “The ownership and rights
of the owner of the land, his lessees and assigns, in underground water” were “recognized” in one
provision of the Groundwater Conservation District Act of 1949 (the “GCDA”),99 which later
became section 36.002 of the Water Code.100 That bare recognition of landowners’ rights did not
describe them with specificity, but last year, the Legislature amended section 36.002, to set out its
fuller understanding of the matter:
98
210 S.W.2d 558, 561 (internal citations omitted).
99
Act of May 23, 1949, 51st Leg., R.S., ch. 306, § 1, 1949 Tex. Gen. Laws 559, 562 (codified as TEX. REV. CIV.
STAT. ANN. art. 7880-3c(D), later codified as TEX. WATER CODE § 52.002).
100
Act of May 29, 1995, 74th Leg., R.S., ch. 933, § 2, 1995 Tex. Gen. Laws 4673, 4680 (adopting TEX. WATER
CODE § 36.002) (“The ownership and rights of the owners of the land and their lessees and assigns in groundwater are
hereby recognized, and nothing in this code shall be construed as depriving or divesting the owners or their lessees and
assigns of the ownership or rights, subject to rules promulgated by a district.”).
26
(a) The legislature recognizes that a landowner owns the groundwater
below the surface of the landowner’s land as real property.
(b) The groundwater ownership and rights described by this section:
(1) entitle the landowner, including a landowner’s lessees, heirs,
or assigns, to drill for and produce the groundwater below the surface of real
property, subject to Subsection (d), without causing waste or malicious
drainage of other property or negligently causing subsidence, but does not
entitle a landowner, including a landowner’s lessees, heirs, or assigns, to the
right to capture a specific amount of groundwater below the surface of that
landowner’s land; and
(2) do not affect the existence of common law defenses or other
defenses to liability under the rule of capture.101
By ownership of groundwater as real property, the Legislature appears to mean ownership in
place.102
The State distinguishes its position from the Authority’s. The State argues that landowners
have ownership rights in groundwater but those rights are “too inchoate” to be protected by the
Takings Clause of the Texas Constitution. Groundwater ownership, the State contends, cannot
entitle a landowner to any specific amount of water because its availability in a rechargeable aquifer
is difficult to determine and constantly changing due to climate conditions. In this same vein,
amicus curiae Houston-Galveston Subsidence District argues that while groundwater rights should
be severable from the land and freely transferable, the uncertainties involved in determining
ownership to any amount of water preclude constitutional compensation for a taking. But the State
acknowledges that its argument cannot be pushed to the extreme. Suppose a landowner were
101
TEX. WATER CODE § 36.002(a)-(b).
102
Importantly, the State does not claim to own groundwater.
27
prohibited from all access to groundwater. In its brief, the State concedes: “Given that there is a
property interest in groundwater, some manner and degree of groundwater regulation could, under
some facts, effect a compensable taking of property.”103 We agree, but the example demonstrates
the validity of Day’s claim. Groundwater rights are property rights subject to constitutional
protection, whatever difficulties may lie in determining adequate compensation for a taking.
The rest of section 36.002, not quoted here but discussed below, evidences the Legislature’s
understanding of the interplay between groundwater ownership and groundwater regulation, which
forms the backdrop of the issue to which we now turn: whether Day has stated a viable takings
claim.
IV
Day alleges that the EAAA’s permitting process has deprived him of his groundwater and
therefore constitutes a taking for which compensation is due under article I, section 17 of the Texas
Constitution. To assess this claim, we begin by surveying the history and current status of
groundwater regulation in Texas in order to place the EAAA in context, and then we turn to its
application.
A
103
Brief of Petitioner State of Texas at 26.
28
In 1917, following a period of severe droughts104 and floods,105 the people of Texas adopted
article XVI, section 59 of the Texas Constitution, the Conservation Amendment. The Amendment
provides in part: “The conservation and development of all of the natural resources of this State . . .
are each and all hereby declared to be public rights and duties; and the Legislature shall pass all such
laws as may be appropriate thereto.” Thus, the “responsibility for the regulation of natural
resources, including groundwater, rests in the hands of the Legislature.”106
The Groundwater Conservation District Act of 1949 was the first significant legislation
providing for the conservation and development of groundwater. Efforts to pass a comprehensive,
statewide, groundwater management scheme had repeatedly failed.107 The Act permitted landowners
to petition for creation of a groundwater conservation district to regulate production from an
underground reservoir. The petition was directed to the county commissioners’ court if the district
lay entirely within one county, or to the State Board of Water Engineers if it did not. A district was
required to be approved by voters and was governed by an elected board of directors. The Act, with
104
In re Adjudication of the Water Rights of Upper Guadalupe Segment of Guadalupe River Basin, 642 S.W.2d
438, 447 (Tex. 1982) (“The droughts in 1910 and 1917 prompted the citizens of Texas to adopt the ‘Conservation
Amendment’ to the Texas Constitution, mandating the conservation of public waters.”).
105
See TEX. CONST. art. XVI, § 59 interp. commentary, at 402 (West 1993) (“Inspired by the terrific floods in
Texas during 1913 and 1914, the citizens began to demand a constructive conservation program and agitated for an
amendment to the constitution which would recognize the state’s duty to prevent floods, or at least to take steps
necessary for the conservation of the state’s natural resources.”).
106
Sipriano v. Great Spring Waters of Am., Inc., 1 S.W.3d 75, 77 (Tex. 1999).
107
Edward P. Woodruff, Jr. & James Peter Williams, Jr., Comment, Texas Groundwater District Act of 1949:
Analysis and Criticism, 30 TEX. L. REV. 862, 865-866 (1952) (“During the past fifteen years, several attempts have been
made in the Legislature to provide the state with comprehensive groundwater legislation. Bills which would have
accomplished this object were introduced in 1937, 1939, 1941, and in 1947. The rejection of each of these proposed
measures made it apparent that if the state were to have any groundwater legislation, some retreat would have to be made
from the ideal of a comprehensive code. As a result of compromises between divergent factions of groundwater users,
the important and controversial Act of 1949 was passed.”).
29
many changes, is now chapter 36 of the Water Code. There are currently ninety-six groundwater
districts covering all or parts of 173 counties.108 While districts have broad statutory authority,109
their activities remain under the local electorate’s supervision.110
Groundwater conservation districts have little supervision beyond the local level. Each
district must develop a groundwater management plan every five years, which aims to address
pertinent issues such as water supply needs, management goals, and the amount of water estimated
to be used and recharged annually within the district.111 The management plan must be submitted
for approval by the Texas Water Development Board and its implementation is subject to review by
the State Auditor’s Office.112 Districts are also required to participate in joint planning within
designated groundwater management areas (“GMAs”).113 The regional water planning process was
108
See TEX. WATER DEV. BD., 2012 STATE WATER PLAN 23-24 (available from the Texas Water Development
Board’s website, at http://www.twdb.state.tx.us/publications/state_water_plan/2012/2012_SWP.pdf).
109
TEX. WATER CODE § 36.101(a) (“A district may make and enforce rules, including rules limiting groundwater
production based on tract size or the spacing of wells, to provide for conserving, preserving, protecting, and recharging
of the groundwater or of a groundwater reservoir or its subdivisions in order to control subsidence, prevent degradation
of water quality, or prevent waste of groundwater and to carry out the powers and duties provided by this chapter.”).
110
Id. §§ 36.011-36.0171. Voter approval is often the most significant hurdle, as unwanted taxes and
groundwater regulation lead to opposition to the creation of new districts. See TEX. COMM’N ON ENVTL. QUALITY &
TEX. WATER DEV. BD., PRIORITY GROUNDWATER MANAGEMENT AREAS AND GROUNDWATER CONSERVATION
DISTRICTS, REPORT TO THE 81ST TEXAS LEGISLATURE 37, tbl.6 (2009) (listing the failed GCDs since 1989), available
at http://www.tceq.state.tx.us/assets /public/comm_exec/pubs/sfr/053_06.pdf.
111
TEX. WATER CODE §§ 36.1072(e), 36.1071.
112
Id. §§ 36.1072(a), 36.302(c).
113
Id. § 35.002(11).
30
created in 1997,114 and since 2001 it has included all of the major and minor aquifers in the State.115
Now, sixteen regional groundwater management areas cover the State, with their borders mirroring
those of the State’s major aquifers.116 About 80% of Texas overlies nine major aquifers and twenty
minor aquifers, with the nine major aquifers providing about 97% of the State’s groundwater.117
Since 1995, groundwater conservation districts within a groundwater management area have been
required to work together.118
Still, as chapter 36 states, “[g]roundwater conservation districts created as provided by this
chapter are the state’s preferred method of groundwater management through rules developed,
adopted, and promulgated by a district in accordance with the provisions of this chapter.”119 Section
36.113 provides that districts must “require a permit for the drilling, equipping, operating, or
completing of wells or for substantially altering the size of wells or well pumps.”120 In acting on
permit requests, a district must consider, among other things, whether “the proposed use of water
114
Act of June 1, 1997, 75th Leg., R.S., ch. 1010, 1997 Tex. Gen. Laws 3610.
115
Act of May 27, 2001, 77th Leg., R.S., ch. 966, § 2.22, 2001 Tex. Gen. Laws 1991, 2003 (codified at TEX.
WATER CODE § 35.004).
116
See generally 31 TEX. ADMIN. CODE § 356(B); TEX. WATER DEV. BD., GROUNDWATER MANAGEMENT
AREAS IN TEXAS (providing a map of the sixteen GMAs), available at http://www.twdb.state.tx.us/mapping/maps/pdf/
GMA%20map%208x11.pdf.
117
Ronald Kaiser, Who Owns the Water?: A Primer on Texas Groundwater Law and Spring Flow, TEX. PARKS
& WILDLIFE, July 2005, at 33, available at http://www.tamu.edu/faculty/rakwater/research/tpwd_Water_Article.pdf.
118
Act of May 29, 1995, 79th Leg., R.S., ch. 933, § 5, 1995 Tex. Gen. Laws 4673, 4688 (codified at TEX.
WATER CODE § 36.108).
119
TEX. WATER CODE § 36.0015; cf. Sipriano v. Great Spring Waters of Am., Inc., 1 S.W.3d 75, 81 (Tex. 1999)
(Hecht, J., concurring) (“Actually, such districts are not just the preferred method of groundwater management, they are
the only method presently available.”).
120
TEX. WATER CODE § 36.113(a).
31
unreasonably affects existing groundwater and surface water resources or existing permit holders”,
whether “the proposed use of water is dedicated to any beneficial use”, and whether “the proposed
use of water is consistent with the district's approved management plan”.121 In issuing permits, a
district must also “manage total groundwater production on a long-term basis to achieve an
applicable desired future condition”, considering estimates of groundwater availability.122
Districts’ regulatory authority is broad:
In order to minimize as far as practicable the drawdown of the water table or
the reduction of artesian pressure, to control subsidence, to prevent interference
between wells, to prevent degradation of water quality, or to prevent waste, a district
by rule may regulate:
(1) the spacing of water wells by:
(A) requiring all water wells to be spaced a certain distance from
property lines or adjoining wells;
(B) requiring wells with a certain production capacity, pump size,
or other characteristic related to the construction or operation of and
production from a well to be spaced a certain distance from property lines or
adjoining wells; or
(C) imposing spacing requirements adopted by the board; and
(2) the production of groundwater by:
(A) setting production limits on wells;
(B) limiting the amount of water produced based on acreage or
tract size;
(C) limiting the amount of water that may be produced from a
121
Id. § 36.113(d)(2)-(4).
122
Id. § 36.1132(b)
32
defined number of acres assigned to an authorized well site;
(D) limiting the maximum amount of water that may be produced
on the basis of acre-feet per acre or gallons per minute per well site per acre;
(E) managed depletion; or
(F) any combination of the methods listed above in Paragraphs
(A) through (E).123
Section 36.116(b) provides that “[i]n promulgating any rules limiting groundwater
production, the district may preserve historic or existing use before the effective date of the rules
to the maximum extent practicable consistent with the district’s management plan . . . and as
provided by Section 36.113.”124 In Guitar Holding Co. v. Hudspeth County Underground Water
Conservation District,125 we rejected the argument that a district’s discretion in preserving “historic
or existing use” was limited to the amount of water permitted. Rather, we said,
the amount of groundwater withdrawn and its purpose are both relevant when
identifying an existing or historic use to be preserved. Indeed, in the context of
regulating the production of groundwater while preserving an existing use, it is
difficult to reconcile how the two might be separated. . . . [B]oth the amount of water
to be used and its purpose are normal terms of a groundwater production permit and
are likewise a part of any permit intended to “preserve historic or existing use.” A
district’s discretion to preserve historic or existing use is accordingly tied both to the
amount and purpose of the prior use.126
Districts may have different rules; indeed, a district may adopt different rules for different
123
Id. § 36.116(a).
124
Id. § 36.116(b).
125
263 S.W.3d 910 (Tex. 2004).
126
Id. at 916.
33
areas of the district.127 Special legislation, unique to each district, may also grant powers beyond
those provided in chapter 36.128
B
Although the Edwards Aquifer Authority is a “conservation and reclamation district”129
created under the Conservation Amendment,130 its powers and duties are governed by the EAAA,
not by chapter 36 of the Water Code. The EAAA does not refer to chapter 36. The Authority is
responsible not only for permitting groundwater use but for “protect[ing] terrestrial and aquatic
life”,131 specifically, “species that are designated as threatened or endangered under applicable
federal or state law”.132
As already noted, the EAAA requires the Authority, in issuing permits, to give preference
to “existing users”, considering only the amounts of groundwater put to beneficial use during the
127
TEX. WATER CODE § 36.116(d) (“For better management of the groundwater resources located in a district
or if a district determines that conditions in or use of an aquifer differ substantially from one geographic area of the
district to another, the district may adopt different rules for: (1) each aquifer, subdivision of an aquifer, or geologic strata
located in whole or in part within the boundaries of the district; or (2) each geographic area overlying an aquifer or
subdivision of an aquifer located in whole or in part within the boundaries of the district.”).
128
See, e.g., Act of June 18, 2005, 79th Leg., R.S., ch. 1324, § 1, 2005 Tex. Gen. Laws 4138 (creating the
Corpus Christi Aquifer Storage and Recovery Conservation District); Act of June 17, 2005, 79th Leg., R.S., ch. 661, § 1,
2005 Tex. Gen. Laws 1644 (creating the Victoria County Groundwater Conservation District).
129
EAAA § 1.02(a) (“A conservation and reclamation district, to be known as the Edwards Aquifer Authority,
is created . . . .”).
130
Id. § 1.02(b) (“The authority is created under and is essential to accomplish the purposes of Article XVI,
Section 59, of the Texas Constitution.”).
131
Id. § 1.01.
132
Id. § 1.14(a)(7). The Legislature passed the EAAA, in part, to end federal litigation that sought judicial
regulation of the Edwards Aquifer. See, e.g., Sierra Club v. City of San Antonio, 112 F.3d 789 (5th Cir. 1997) (vacating
preliminary injunction entered pursuant to the Endangered Species Act for lack of a showing of probable success on the
merits following enactment of the EAAA); Edwards Aquifer Auth. v. Bragg, 21 S.W.3d 375, 377 (Tex. App.– San
Antonio 2000), aff’d ,71 S.W.3d 375 (Tex. 2002). Chapter 36 does not mention endangered species.
34
twenty-year historical period ending May 31, 1993. The Authority received some 1,100 IRP
applications by the December 30, 1996 filing deadline, claiming 834,244 acre-feet per year, far more
than the 450,000 acre-feet-per-year cap then in place. Approximately 58% of the applications were
for irrigation, 20% for industrial use, 15% for municipal use, and 7% for permit-exempt domestic
and livestock wells.133 The Authority recommended denying 22% of the IRP applications and
reducing the permitted amounts for 71% of the applications granted.134 Of the total permitted annual
withdrawal of 563,300 acre-feet, approximately 47% was for irrigation, 13% for industrial use, and
40% for municipal use. Some 35% of the applicants requested review.135 (Day’s contest was the
first one decided.) Currently, the Authority has issued 1,975 permits to the limit of its statutory cap
of 572,000 acre-feet per year.136
Numerous facial constitutional challenges to the EAAA were asserted in Barshop v. Medina
County Underground Water Conservation District,137 and we rejected them all, concluding that the
EAAA “is a valid exercise of the police power necessary to safeguard the public safety and
welfare.”138 One claim was that the Act’s permitting process, on its face, constituted an
uncompensated taking in violation of article I, section 17 of the Texas Constitution. The parties
133
See Darcy Alan Frownfelter, Edwards Aquifer Authority, in ESSENTIALS OF TEXAS WATER RESOURCES 364-
365 (Mary K. Sahs ed., 2009).
134
Id. at 365-366.
135
Id. at 366.
136
EAAA § 1.14(c); Edwards Aquifer Authority, Groundwater Permit List, http://www.edwardsaquifer.org/
pweb/PermitList.aspx (last visited Feb. 23, 2012) (authorizing 571,599.500 acre-feet).
137
925 S.W.2d 618 (Tex. 1996).
138
Id. at 635.
35
differed over whether landowners had a property right in groundwater subject to the constitutional
provision. We explained their positions as follows:
Plaintiffs concede that the State has the right to regulate the use of underground
water, but maintain that they own the water beneath their land and that they have a
vested property right in this water. The State insists that, until the water is actually
reduced to possession, the right is not vested and no taking occurs. Thus, the State
argues that no constitutional taking occurs under the statute for landowners who have
not previously captured water, while Plaintiffs argue that these landowners have had
a constitutional deprivation of property rights. The parties simply fundamentally
disagree on the nature of the property rights affected by this Act.139
Noting that we had “not previously considered the point at which water regulation unconstitutionally
invades the property rights of landowners”, we concluded that that “complex and multi-faceted”
issue was not properly presented by a facial challenge to the Act.140
Assuming without deciding that Plaintiffs possess a vested property right in
the water beneath their land, the State still can take the property for a public use as
long as adequate compensation is provided. The Act expressly provides that the
Legislature “intends that just compensation be paid if implementation of [the Act]
causes a taking of private property or the impairment of a contract in contravention
of the Texas or federal constitution.” Based on this provision in the Act, we must
assume that the Legislature intends to compensate Plaintiffs for any taking that
occurs. As long as compensation is provided, the Act does not violate article I,
section 17.141
Today we have decided that landowners do have a constitutionally compensable interest in
groundwater, and we come at last to the issue not presented in Barshop: whether the EAAA’s
regulatory scheme has resulted in a taking of that interest.
139
Id. at 625 (citation omitted).
140
Id. at 626.
141
Id. at 630-631 (citation omitted) (quoting EAAA § 1.07).
36
C
As we noted in Sheffield Development Co. v. City of Glenn Heights,142 in construing article
I, section 17 of the Texas Constitution, we have generally been guided by the United States Supreme
Court’s construction and application of the similar guarantee provided by the Fifth Amendment to
the United States Constitution and made applicable to the states by the Fourteenth Amendment.143
We described the foundation principle of federal regulatory takings jurisprudence as follows:
“Government hardly could go on”, wrote Justice Holmes in the first
regulatory takings case in the United States Supreme Court, “if to some extent values
incident to property could not be diminished [by government regulation] without
paying for every such change in the general law.” Yet, he continued, “a strong
public desire to improve the public condition is not enough to warrant achieving the
desire by a shorter cut than the constitutional way of paying for the change.” “The
general rule at least”, he concluded, 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.” “[T]he question at bottom is upon whom the loss of the changes
desired should fall.”144
The Supreme Court has developed three analytical categories, as summarized in Lingle v.
Chevron U.S.A. Inc.:
Our precedents stake out two categories of regulatory action that generally
will be deemed per se takings for Fifth Amendment purposes. First, where
government requires an owner to suffer a permanent physical invasion of her
142
140 S.W.3d 660 (Tex. 2004).
143
Id. at 669 (“The two guarantees, though comparable, are worded differently. The Texas Constitution
provides that ‘[n]o person’s property shall be taken, damaged or destroyed for or applied to public use without adequate
compensation being made . . . .’ The Takings Clause of the Fifth Amendment states: ‘nor shall private property be taken
for public use without just compensation.’ . . . [I]t could be argued that the differences in the wording of the two
provisions are significant, [but absent such an argument] we . . . look to federal jurisprudence for guidance, as we have
in the past . . . .” (footnotes omitted)).
144
Id. at 670 (footnotes omitted) (emphasis in original) (quoting Pa. Coal Co. v. Mahon, 260 U.S. 393, 413,
416 (1922)).
37
property — however minor — it must provide just compensation. See Loretto v.
Teleprompter Manhattan CATV Corp., [458 U.S. 419] (1982) (state law requiring
landlords to permit cable companies to install cable facilities in apartment buildings
effected a taking). A second categorical rule applies to regulations that completely
deprive an owner of “all economically beneficial us[e]” of her property. [Lucas v.
South Carolina Coastal Council, 505 U.S. 1003, 1019 (1992) (emphasis in original).]
...
Outside these two relatively narrow categories (and the special context of
land-use exactions . . .), regulatory takings challenges are governed by the standards
set forth in Penn Central Transp. Co. v. New York City, [438 U.S. 104] (1978). The
Court in Penn Central acknowledged that it had hitherto been “unable to develop any
‘set formula’” for evaluating regulatory takings claims, but identified “several factors
that have particular significance.” [Id., at 124.] Primary among those factors are
“[t]he economic impact of the regulation on the claimant and, particularly, the extent
to which the regulation has interfered with distinct investment-backed expectations.”
Ibid. In addition, the “character of the governmental action” — for instance whether
it amounts to a physical invasion or instead merely affects property interests through
“some public program adjusting the benefits and burdens of economic life to promote
the common good” — may be relevant in discerning whether a taking has occurred.
Ibid. The Penn Central factors — though each has given rise to vexing subsidiary
questions — have served as the principal guidelines for resolving regulatory takings
claims that do not fall within the physical takings or Lucas rules.
Although our regulatory takings jurisprudence cannot be characterized as
unified, these three inquiries (reflected in Loretto, Lucas, and Penn Central) share
a common touchstone. Each aims to identify regulatory actions that are functionally
equivalent to the classic taking in which government directly appropriates private
property or ousts the owner from his domain. Accordingly, each of these tests
focuses directly upon the severity of the burden that government imposes upon
private property rights.145
We followed this analytical structure in Sheffield, adding that all of the surrounding circumstances
must be considered in applying “a fact-sensitive test of reasonableness”,146 but in the end, “whether
145
544 U.S. 528, 538-539 (2005) (citations omitted).
146
Sheffield, 140 S.W.3d at 672 (quoting City of Coll. Station v. Turtle Rock Corp., 680 S.W.2d 802, 804
(Tex.1984) (internal quotation marks omitted).
38
the facts are sufficient to constitute a taking is a question of law.”147
The first category — involving a physical invasion of property — does not apply to the
present case. It is an interesting question, and one we need not decide here, whether regulations
depriving a landowner of all access to groundwater — confiscating it, in effect — would fall into
the category. The EAAA does not restrict landowners’ access to as much as 25,000 gallons of
groundwater a day for domestic and livestock use.148 Also, we have held that Day is entitled to a
permit for fourteen acre-feet of water per year for irrigation.
With respect to the second category — for a deprivation of all economically beneficial use
of property — and the first of the three Penn Central factors for the third category — the economic
impact on the claimant — the summary judgment record before us is inconclusive. Day’s permit
will not allow him to irrigate as much as his predecessors, who used well water flowing into the
lake. By making it much more expensive, if not impossible, to raise crops and graze cattle, the
denial of Day’s application certainly appears to have had a significant, negative economic impact
on him, though it may be doubted whether it has denied him all economically beneficial use of his
property.
The second Penn Central factor — the interference with investment-backed expectations —
is somewhat difficult to apply to groundwater regulation under the EAAA. Presumably, Day knew
before he bought the property that the Act had passed the year before and could have determined
from the same investigation he made later that he could not prove much historical use of
147
Id. at 673 (quoting Mayhew v. Town of Sunnyvale, 964 S.W.2d 922, 933 (Tex.1998)).
148
EAAA §§ 1.15(b), 1.16(c), 1.33.
39
groundwater to obtain a permit. Had all this information demonstrated that his investment in the
property was not justified, one could argue that he had no reasonable expectation with which the
EAAA could interfere. But the government cannot immunize itself from its constitutional duty to
provide adequate compensation for property taken through a regulatory scheme merely by
discouraging investment. While Day should certainly have understood that the Edwards Aquifer
could not supply landowners’ unlimited demands for water, we cannot say that he should necessarily
have expected that his access to groundwater would be severely restricted. We underscore
“necessarily” because there is little in the record to illuminate what his expectations were or
reasonably should have been. In any event, no single Penn Central factor is determinative; all three
must be evaluated together, as well as any other relevant considerations.
The third Penn Central factor focuses on the nature of the regulation and is not as factually
dependent as the other two. Unquestionably, the State is empowered to regulate groundwater
production. In East, we concluded that there were no correlative rights in groundwater “[i]n the
absence of . . . legislation”,149 suggesting that legislation would be permitted. A few years later, the
Conservation Amendment made groundwater regulation “the responsibility . . . of the
Legislature.”150 Groundwater provides 60% of the 16.1 million acre-feet of water used in Texas each
year.151 In many areas of the state, and certainly in the Edwards Aquifer, demand exceeds supply.
Regulation is essential to its conservation and use.
149
Hous.& T.C. Ry. v. East, 81 S.W. 279, 280 (Tex. 1904).
150
Sipriano v. Great Spring Waters of Am., Inc., 1 S.W.3d 75, 77 (Tex. 1999).
151
See TEX. WATER DEV. BD., 2012 STATE WATER PLAN 163.
40
As with oil and gas, one purpose of groundwater regulation is to afford each owner of water
in a common, subsurface reservoir a fair share.152 Because a reservoir’s supply of oil or gas cannot
generally be replenished, and because oil and gas production is most commonly used solely as a
commodity for sale, land surface area is an important metric in determining an owner’s fair share.
Reasonable regulation aims at allowing an owner to withdraw the volume beneath his property and
sell it. Groundwater is different. Aquifers are often recharged by rainfall, drainage, or other surface
water. The amount of groundwater beneath the surface may increase as well as decrease; any
volume associated with the surface is constantly changing. Groundwater’s many beneficial uses —
for drinking, agriculture, industry, and recreation — often do not involve a sale of water. It value
is realized not only in personal consumption but through crops, products, and diversion.
Groundwater may be used entirely on the land from which it is pumped, or it may be transported for
use or sale elsewhere. Consequently, regulation that affords an owner a fair share of subsurface
water must take into account factors other than surface area.
As explained above, chapter 36 gives groundwater conservation districts the discretion in
regulating production to “preserve historic or existing use”.153 In Guitar Holding, district rules
required that a groundwater permit amount be based on the applicant’s use of water for irrigation
during a specified historical period. Guitar Holding, one of the largest landowners in the county,
152
See Elliff v. Texon Drilling Co. 210 S.W.2d 558, 562 (Tex. 1948) (“[O]ur courts, in decisions involving
well-spacing regulations of our Railroad Commission, have frequently announced the sound view that each landowner
should be afforded the opportunity to produce his fair share of the recoverable oil and gas beneath his land . . . .”).
153
TEXAS WATER CODE § 36.116(b).
41
had irrigated only a small part of its land during the period.154 When the district’s rules took effect,
the permits Guitar Holding received were limited in amount. Others who had irrigated more
obtained permits for greater amounts. Meanwhile, a market for transporting water for consumption
outside the district had developed, and landowners were turning from irrigation to selling water in
the new market. Guitar Holding complained that the rules preserved only historic amounts, not
historic use, and gave those who had used water for irrigation a perpetual franchise to transport it
for sale. We agreed that “use” under the statute included purpose as well as amount.155
As we have seen, chapter 36 requires groundwater districts to consider several factors in
permitting groundwater production, among them the proposed use of water, the effect on the supply
and other permittees, a district’s approved management plan.156 By contrast, the EAAA requires
that permit amounts be determined based solely on the amount of beneficial use during the historical
period and the available water supply. Under the EAAA, a landowner may be deprived of all use
of groundwater other than a small amount for domestic or livestock use,157 merely because he did
not use water during the historical period. The Authority argues that basing permits on historical
use is sound policy because it recognizes the investment landowners have made in developing
groundwater resources. But had the permit limitation been anticipated before the EAAA was
passed, landowners would have been perversely incentivized to pump as much water as possible,
154
Guitar Holding Co. v. Hudspeth Cnty. Underground Water Conservation Dist., 263 S.W.3d 910, 914-915
(Tex. 2008).
155
Id. at 916.
156
TEX. WATER CODE § 36.113(d)(2)-(4).
157
EAAA §§ 1.15(b), 1.16(c), and 1.33.
42
even if not put to best use, to preserve the right to do so going forward. Preserving groundwater for
future use has been an important strategy for groundwater rights owners. For example, amicus
curiae Canadian River Municipal Water Authority argues that it has acquired groundwater rights to
protect supplies for municipal use but has not produced them, waiting instead until they become
necessary. The Authority’s policy argument is flawed.
The Authority argues that this use-it-or-lose-it limitation is legally justified by In re
Adjudication of the Water Rights of the Upper Guadalupe Segment of the Guadalupe River Basin.158
There we held that landowners who had not used water from the Upper Guadalupe River during a
five-year historical period could be denied a permit for such water. We had previously upheld the
cancellation of permits for use of river water after ten years’ non-use.159 But riparian rights are
usufructuary, giving an owner only a right of use,160 not complete ownership. Furthermore, non-use
of groundwater conserves the resource, “whereas[] the non-use of appropriated waters is equivalent
to waste.”161 To forfeit a landowner’s right to groundwater for non-use would encourage waste.
As already discussed, the Legislature last year amended section 36.002 of the Water Code
to “recognize[] that a landowner owns the groundwater below the surface of the landowner’s land
as real property.” Regarding groundwater regulation, section 36.002 continues:
158
642 S.W.2d 438 (Tex. 1982).
159
Tex. Water Rights Comm’n v. Wright, 464 S.W.2d 642 (Tex. 1971).
160
Guadalupe, 642 S.W.2d at 444 (“It is true that riparians, whose land grants were acquired before July 1,
1895, have a vested right in the use of the non-flood waters, but that vested right is to a usufructory use of what the state
owns. A usufruct has been defined as the right to use, enjoy and receive the profits of property that belongs to another.”).
161
Id. at 445 (quoting Wright, 464 S.W.2d at 647).
43
(c) Nothing in this code shall be construed as granting the authority to
deprive or divest a landowner, including a landowner’s lessees, heirs, or assigns,
of the groundwater ownership and rights described by this section.
(d) This section does not:
(1) prohibit a district from limiting or prohibiting the drilling of
a well by a landowner for failure or inability to comply with minimum well
spacing or tract size requirements adopted by the district;
(2) affect the ability of a district to regulate groundwater
production as authorized under Section 36.113, 36.116, or 36.122 or
otherwise under this chapter or a special law governing a district; or
(3) require that a rule adopted by a district allocate to each
landowner a proportionate share of available groundwater for production
from the aquifer based on the number of acres owned by the landowner.
(e) This section does not affect the ability to regulate groundwater in any
manner authorized [for the Edwards Aquifer Authority, the Harris-Galveston
Subsidence District, and the Fort Bend Subsidence District].
Subsections (c) and (e) appear to be in some tension. Under the EAAA, a landowner can be
prohibited from producing groundwater except for domestic and livestock use. This regulation,
according to subsection (e), is unaffected by the Legislature’s recognition of groundwater ownership
in subsection (a). But subsection (c) abjures all “authority to deprive or divest a landowner . . . of
. . . groundwater ownership and rights”. If prohibiting all groundwater use except for domestic and
livestock purposes does not divest a landowner of groundwater ownership, then either the
groundwater rights recognized by section 36.002 are extremely limited, or else by “deprive” and
“divest” subsection (c) does not include a taking of property rights for which adequate compensation
is constitutionally guaranteed. We think the latter is true. The EAAA itself states: “The legislature
intends that just compensation be paid if implementation of this article causes a taking of private
44
property or the impairment of a contract in contravention of the Texas or federal constitution.”162
The requirement of compensation may make the regulatory scheme more expensive, but it does not
affect the regulations themselves or their goals for groundwater production.
The Legislature has declared that “rules developed, adopted, and promulgated by a district
in accordance with the provisions of [chapter 36]” comprise “the state’s preferred method of
groundwater management”.163 Chapter 36 allows districts to consider historical use in permitting
groundwater production, but it does not limit consideration to such use.164 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. But even if there were one, a
landowner cannot be deprived of all beneficial use of the groundwater below his property merely
because he did not use it during an historical period and supply is limited.
In sum, the three Penn Central factors do not support summary judgment for the Authority
and the State. A full development of the record may demonstrate that EAAA regulation is too
restrictive of Day’s groundwater rights and without justification in the overall regulatory scheme.
We therefore agree with the court of appeals that summary judgment against Day’s takings claim
must be reversed.
162
EAAA § 1.07.
163
TEX. WATER CODE § 36.0015.
164
See generally id. § 36.116.
45
D
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.
It must be pointed out that the Authority has identified only three takings claims that have
been filed in the more than fifteen years that it has been in operation. While the expense of such
litigation cannot be denied, groundwater regulation need not result in takings liability. The
Legislature’s general approach to such regulation has been to require that all relevant factors be
taken into account. The Legislature can discharge its responsibility under the Conservation
Amendment without triggering the Takings Clause. But the 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
46
applicability.
V
We turn briefly to Day’s other constitutional claims.
Day contends that he was denied procedural due process in the administrative proceedings
before the State Office of Administrative Hearings (“SOAH”). First, he complains that he was not
allowed to challenge the constitutionality of the EAAA. But as a rule, an agency lacks authority to
decide such an issue,165 and Day points to no exception for this case. Second, Day complains that
his case should have been heard by the Authority’s full board of directors rather than an
administrative law judge. But the Legislature created SOAH “to serve as an independent forum for
the conduct of adjudicative hearings” and “to separate the adjudicative function from the
investigative, prosecutorial, and policymaking functions in the executive branch”.166 SOAH was
authorized to hear Day’s case,167 and Day does not explain how a hearing in an independent forum
violated his constitutional rights. Third, Day complains that an administrative law judge’s statutory
authority to “communicate ex parte with an agency employee who has not participated in a hearing
in the case for the purpose of using the special skills or knowledge of the agency and its staff in
evaluating the evidence”168 violates constitutional guarantees of due process and open courts. The
165
Cent. Power & Light Co. v. Sharp, 960 S.W.2d 617, 618 (Tex. 1997) (per curiam) (“Where, as here, the final
agency order is challenged in the trial court on the ground that the underlying statute is unconstitutional, the agency lacks
the authority to decide that issue.”).
166
TEX. GOV’T CODE § 2003.021(a).
167
Id. § 2003.021(b)(4) (“[SOAH] may conduct . . . administrative hearings . . . in matters voluntarily referred
to the office by a governmental entity.”).
168
Id. § 2001.061(c).
47
authority quoted is an exception to the general statutory rule prohibiting ex parte contacts.169 We
need not address Day’s argument because he points to no ex parte contacts in this case.
Day argues that the substantial evidence rule deprives him of due process by restricting the
evidence he can present on judicial review of the administrative decision. Day does not identify
evidence he was prevented from presenting in the administrative proceeding that would have
affected the Authority’s decision. The substantial evidence rule does not operate to restrict Day’s
evidence on his takings claim.170
Day complains that the Authority acted arbitrarily by indicating its preliminary approval of
a 600 acre-feet permit, granting his application for a replacement well, which he drilled at a cost of
$95,000, then limiting his permit to 14 acre feet. But the Authority clearly communicated to Day
that neither decision suggested what its final decision would be.
Finally, Day complains that section 36.066(g) of the Water Code,171 which authorizes an
award of attorney fees and expenses to a groundwater conservation district that prevails in a suit like
this but not to an opposing party, violates equal protection. Day does not argue that the statute
“‘jeopardizes exercise of a fundamental right or categorizes on the basis of an inherently suspect
169
Id. § 2001.061(a) (“Unless required for the disposition of an ex parte matter authorized by law, a member
or employee of a state agency assigned to render a decision or to make findings of fact and conclusions of law in a
contested case may not directly or indirectly communicate in connection with an issue of fact or law with a state agency,
person, party, or a representative of those entities, except on notice and opportunity for each party to participate.”).
170
See City of Dall. v. Stewart, ___ S.W.3d ___, ___ (Tex. 2012).
171
TEX. WATER CODE § 36.066(g) (“If the district prevails in any suit other than a suit in which it voluntarily
intervenes, the district may seek and the court shall grant, in the same action, recovery for attorney’s fees, costs for expert
witnesses, and other costs incurred by the district before the court. The amount of the attorney's fees shall be fixed by
the court.”).
48
characteristic,’”172 and thus “the law will be upheld as long as it is rationally related to a legitimate
state interest.”173 We agree with the court of appeals that the State has a legitimate interest in
“discourag[ing] suits against groundwater districts to protect them from costs and burdens associated
with such suits”, and a cost-shifting statute is rationally related to advancing that interest.174
Accordingly, we conclude that Day’s various constitutional claims, other than his takings
claim, are without merit.
* * *
For these reasons, the judgment of the court of appeals is
Affirmed.
Nathan L. Hecht
Justice
Opinion delivered: February 24, 2012
172
First Am. Title Ins. Co. v. Combs, 258 S.W.3d 627, 639 (Tex. 2008) (quoting Nordlinger v. Hahn, 505 U.S.
1, 10 (1992)).
173
Id. at 639.
174
Edwards Aquifer Auth. v. Day, 274 S.W.3d 755 (Tex. App.–San Antonio 2008).
49