A Watershed Case

On the surface, it’s a case about an oat-and-peanut farm and two South Texas men who wanted enough water to operate it. But underneath lies a century-old tug-of-war — between landowners, groundwater conservation districts, municipalities and the Legislature — over who really owns the water beneath the land.

When the Texas Supreme Court took up Edwards Aquifer Authority v. Day in January — a year after Day’s death and almost 15 years after the original claim — representatives of water interests across the state began churning out amicus briefs. Now, after February’s oral arguments, they wait anxiously for the court to parse the 19 briefs currently on file. At the core of the case is how the court will interpret Texas law, which currently acknowledges not only landowners’ rights to water beneath the land but also the authority of groundwater districts to regulate it.

“This is the water case in the state of Texas. The opinion that’s going to come out of this court — I can’t even think of the superlative to use to describe it,” says Luana Buckner, the chairman of the EAA’s board of directors. “The amount of nail-biting that is going on over it is just phenomenal. This ownership issue is at the heart of every major groundwater issue that’s being talked about across the state.”

The court is considering the Day case as the state struggles to preserve a drought-prone resource dubbed the “new oil” for a population that’s expected to reach 35 million by 2040, amid the attempts of powerbrokers like T. Boone Pickens and Clayton Williams to resell their rights at a profit and balance the environmental demands of federal laws like the Endangered Species Act.

The basic facts are these: Day and McDaniel, who are farmers, requested a permit to pump from the Edwards Aquifer in 1996 to grow crops on their 350-acre ranch in Van Ormy, just south of San Antonio. They figured they had rights to the water because their ranch sits right on top of it, within the boundaries of the aquifer, if they extended upward to the surface. But because they were unable to prove “historical use” — the method the EAA allocates water under its enacting legislation — of the full 700 acre-feet of water they wanted, the authority granted them a permit for only 14 acre-feet. Their subsequent "takings claim," which alleged the EAA had violated their constitutional rights by depriving them of their property without compensation, failed at the district court but was upheld by the San Antonio Court of Appeals. The EAA then appealed the case to the Texas Supreme Court.

Groundwater districts like the Edwards Aquifer Authority fear they could lose their regulatory muscle, which allows them to ensure there’s enough water to go around in the future, if the court decides landowners have an absolute right to the water beneath their land. Such a ruling could throw off balance a decade’s worth of legislation governing groundwater management — and force districts to litigate pricey takings claims.

The city of San Antonio, the authority’s biggest permit holder, gets the vast majority of its water from the Edwards. If the court rules that the EAA violated Day and McDaniel’s constitutional rights by issuing them a permit beneath the amount they requested, the San Antonio Water System believes it will likely foot the bill — possibly though higher water rates — for the compensation and for all future takings claims litigation. “If the Supreme Court ruled there was a taking, I think the EAA would get inundated with lawsuits to protect the private interests that individuals think they have in the property underground, the water,” says Robert Puente, a former legislator who is now the chief executive officer of San Antonio Water Systems.  “We provide 55 percent of the funding for EAA, so we, in essence, would be funding the defense of all these lawsuits.”

And Puente says such a ruling could call into question San Antonio’s existing water rights. “We have water under the ground,” Puente says, “If there’s a taking, the Supreme Court has basically ruled that we no longer own that water, but that it belongs to [landowners] who can pump that water out from the ground into their holdings.”

Crystal clear

Landowners — small-time farmers like Day and McDaniel and would-be big-time water barons alike — aren’t so convinced a ruling in their favor would do more than to clarify what existing law says about groundwater rights and serve to keep groundwater districts fair in their dealings.

McDaniel’s lawyer, Tom Joseph, sees the matter simply, in the red, white and blue of property rights: “For me to sit quietly here as an American citizen, and most assuredly as a Texan, to know that over half of the land sitting over the aquifer which had access to the aquifer before has been denied access is an egregious, entirely overreaching result I don’t think the Legislature ever intended.”

Marty Jones, an Amarillo lawyer who represents Panhandle landowners against groundwater districts and counts Pickens as a client, says he doesn’t understand why the Day case has assumed the importance it has, because the law is “crystal clear about who owns groundwater” — the landowners on top of it.

“If the court decides to rule on a central issue of ownership and says that why, yes, Texas law has always recognized the ownership of groundwater in place, that’s going to crystallize some things for us that are important,” he says. Chief among them, Jones says, is that groundwater districts can’t implement regulations that he characterizes as “arbitrary, discriminatory, unequal, unbalanced treatment of groundwater owners in the same district.”

“I don’t know why groundwater conservation districts have such a resistance to treating everyone in the same aquifer equally, but they seem to,” he says, noting that a ruling from the court that landowners don’t own the water beneath their land could allow the districts to “draw lines in the middle of an aquifer and say the folks on this side of the line can produce water, and the folks on this side can’t. … And that would essentially be allowing some people to drain their neighbors without any recourse [against them].”

The American way

The notion that groundwater districts will trample landowners' rights if they aren’t threatened by takings claims is “just ludicrous” to Greg Ellis, the executive director of the Texas Alliance of Groundwater Districts, because they operate with boards of all locally appointed or elected members who also depend on groundwater.

“As far as I know, the opinions of groundwater conservation districts haven’t changed in the 50 years they’ve been around, and they haven’t run rampant yet,” says Ellis, who also represents groundwater districts in private practice.

Ellis — who says his alliance will soon file an amicus brief with the court outlining its position that landowners have the rights to groundwater but aren't constitutionally entitled to file a takings claim if it's regulated — also challenges the contention that groundwater districts won’t face takings claims as long as their regulations are reasonable.

“Eventually, there will absolutely be a takings claim,” he says, in particular because of the desired future conditions provision of a law the Legislature passed in 2005. Under House Bill 1763, groundwater conservation districts must submit plans to the Texas Water Development Board that detail their goals for future groundwater conditions. The conditions, which are set individually by each district and could include such things as maintaining spring flow and ensuring groundwater gets recharged, are meant to preserve and maintain the resource. The Texas Water Development Board then uses the desired future condition plans designed by the districts to place a cap on the amount of water districts can issue permits for.

Once district hits that cap, he says, “the very next person that comes in, the district has a choice: Say no to that person and maintain that number [the cap] or say yes to that person and tell everyone else they have to reduce their pumping. Either way, there’s takings litigation.” And according to Buckner, a ruling that landowners had an absolute right to water under their land could render HB 1763 “completely ineffective and meaningless,” because that would mean the state had no authority to limit pumping.

Joseph doesn’t see it in such complicated terms. “If the sovereign needs what you have, the sovereign pays for it — that’s the American way, that’s been the Texan way, except now,” he says, “Now all of a sudden the argument is that the landowner doesn’t own the groundwater. And they’re saying that because they don’t want to pay for it.”