The Texas Supreme Court Turns Water into Oil in a Landmark Groundwater Decision
The Supreme Court of Texas finally ruled this morning in Day vs. Edwards Aquifer Authority, the most important groundwater case in at least a decade. It’s a victory for landowners and private-property rights activists.
In a 9-0 decision, the all-Republican court sided with two farmers who argued that the Edwards Aquifer Authority had trampled on their property rights by only granting them permission to pump some of the water beneath their land. The Edwards Aquifer Authority, the two claimed, owed them monetary compensation for the groundwater. The Supreme Court agreed that the landowners, Burrell Day (now deceased) and Joel McDaniel, could proceed with a “takings” claim, but kicked the specifics back to the trial court.
Although it’s murky on many points the Supreme Court opinion is a blow to water regulation and conservation. Landowners, the court said, have an ownership right to the water “in place” beneath their land in the same manner as oil and gas. Moreover, the court decided that “landowners do have a constitutionally compensable interest in groundwater.” That is, regulators may have to pony up when they deny or limit a request to pump.
The fear is that individuals could financially bleed the Edwards Aquifer Authority as well as the roughly 100 groundwater conservation districts in Texas—locally-controlled boards that provide virtually all the groudnwater management that exists in the sate—and ultimately make conservation difficult, if not infeasible.
Opinions vary, however, on the extent of the fallout from the ruling.
“If the implication is that every landowner is entitled to a well or compensation we could have some major lawsuits, not just against groundwater conservation districts but cities,” said Greg Ellis, a former general manager of the Edwards Aquifer Authority.
Russ Johnson, an Austin attorney who represents both groundwater districts and landowners, said that “takings” claims mostly come into play with groundwater districts that completely turn down new pumping requests.
“The question will be in any regulatory context, Did they strike the proper balance between conservation of the resource and the property right of the landowner?” He compared it to zoning laws. “Just like zoning you can limit the value of a piece of property but you can’t effectively deprive the owner of that use of property.”
But Marisa Perales, an attorney who often represents environmental groups, said that the decision provides little clarity on how to strike that balance. “The only thing that was clear was that if you deny a landowner who previously had acces to groundwater and you were to deny them all access to groundwater that would definitely be a taking,” she said.
The court also provided little guidance on how such “takings” claims might proceed. How, for example, do you determine the value of water? How do you know how much a landowner has been deprived of?
“My entire issue is that they’re saying you have a vested property right but not in any particular amount of water,” said Ellis. “That’s kinda like saying you own your land but we haven’t taken a suervey so we can’t tell you how much land you own.”
Attention is likely to turn to another case, Bragg vs. Edwards Aquifer Authority. In that case, a Medina County farming couple, Glenn and JoLynn Bragg, sued the authority after it issued permits to pump water from the aquifer in amounts less than they had requested. The authority, they argued, had unconstitutionally taken their private property (groundwater) without compensation. In May 2010, a retired district judge agreed and calculated the loss of value at $867,000. Bragg is on appeal with the Fourth Circuit Court of Appeals.
Although parties to the Day case were hardly surprised that the Supreme Court applied oil and gas law to groundwater, it’s worth noting the lengths, in my opinion at least, that the court went to in order to equate the two. Maybe from a legal standpoint, the decision was prudent and sound. From a layman’s perspective, which is all I have to offer, I found the argument…. well, curious.
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. 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 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.
Here’s my take on this: The court wants to say that groundwater is owned “in place” just like oil and gas, but they can’t completely dismiss the arguments of the plaintiffs nor the no-shit differences between oil and water (I even hear they don’t mix), so they peremptorily acknowledge the differences while still arriving at the pre-determined conclusion, but in getting there they skip flatfooted over some faily treacherous terrain.
To wit: “To differentiate between groundwater and oil and gas in terms of importance to modern life would be difficult.”
Actually, it’s not. Oil and gas are finite commodities non-essential to human life. Their value is determined in a global marketplace in terms of dollars per unit. Water, on the other hand, is absolutely essential to human life, in all places at all times. You cannot drink fossil fuels.
The value of water, then, is essentially infinite, at least when viewed from the point of view of basic human need.
But, the court protests, while “drinking water is essential for life, fuel for heat and power, at least in this society, is also indispensable.” Notice, first of all, that the writer does not refer to “oil and gas”; he refers to “fuel.” Why? Because oil and gas are neither “essential for life” nor are they “indispensable”—there are plenty of other fuels one could use for heat and power.
The court seems to be trying to acknowledge that they too understand the importance of water because, after all, some people are willing to spend a lot of money on bottled water. The comparison, despite a misunderstanding of why people purchase bottled water (hint: Fiji and Evian are not really about the H2O), rests on the notion that water’s value is measured in dollars per liter—a commodity, in other words.
Back in 1904, when the Supreme Court first devised the Rule of Capture, they ruled that groundwater couldn’t be subject to rules because it was too “occult.” A hundred and eight years later, the court discovers its own occult skill: turning water into oil.