By Jake Rutherford, Editor-in-Chief.
I. INTRODUCTION: THE HEADWATERS
On February 19, 2016, the Texas Supreme Court quietly preserved over one hundred years of surface water administration procedure.[1] Assuming the Court agreed with the Thirteenth Court of Appeals’ analysis, it disposed of the case based on statutory interpretation issues and the breadth of administrative authority. But this case is an exemplar of a far more prevalent and ominous problem. Industries and special interest groups continuously attack Texas’s well- established water rights doctrines to carve out protections as the population increases and the availability of (cheap) water decreases. These groups seek to circumvent clear statutory policies and directives by increasing the discretion of state administrative officials. The economic burden of these exemptions falls mostly upon farmers and ranchers who rely on the certainty and predictability of the established system. The Texas courts and the Texas Legislature must resist these special interests and protect the title to century-old vested property rights and important Texas industries.
II. BACKGROUND: STILL WATERS RUN DEEP
In Texas Commission on Environmental Quality v. Texas Farm Bureau, the Thirteenth Court of Appeals in Corpus Christi considered the propriety of the Texas Commission on Environmental Quality’s (TCEQ) new “Drought Rules.”[2] Before detailing the case and the statutes in question, it is important to distinguish Texas’s bifurcated water doctrines and set the stage for the controversy.
Texas bifurcates surface water and groundwater and treats each as its own distinct legal concept. This legal fiction resulted from the lack of a true understanding of the hydrologic cycle when early courts and legislatures were developing water law to provide an orderly and predictable disposition of water rights.[3] Now that science has given us a clearer picture of the interconnected nature of water resources, we know that the legal distinction between surface water and groundwater creates a great deal of inefficiencies, inconsistencies, and downright bad decisions—although these issues are far beyond the scope of this Blog Post.[4]
Texas applies the rule of capture to groundwater.[5] This rule provides that a landowner owns all of the groundwater beneath his land and can use it for any non-wasteful purpose he desires.[6] The amount of groundwater a landowner can pump is subject to regulation by local sub state governmental entities called Groundwater Conservation Districts.[7] There are approximately 100 of these entities covering most of the state, and centralized oversight by the state government is somewhere between cursory and illusory, depending who you ask.[8]
The prior appropriation doctrine for surface water, on the other hand, is dictated by thorough, relatively clear-cut statutory guidelines. The State of Texas owns all surface water while it is in the stream, and a water user must apply for a permit to appropriate any unused water.[9] The permitting process is regulated by statutory preferences that reflect Texas’s public policy regarding the best uses of water.[10] Once permitted, the user has a vested right in the water.[11] The TCEQ is primarily responsible for administering and regulating Texas’s statutory surface water regime.[21] The TCEQ has broad authority to develop and implement rules to enforce statutory policy.
In times of shortage, the “first in time, first in right” rule applies—the shortfall between demand and supply is not proportionately allocated among all users.[13] Rather, users are cut-off in reverse chronological order based on permit date.[14] Most importantly, this system gives water users some degree of certainty based on their permit date and promotes rational economic planning—especially for farmers and ranchers who often have the thinnest economic cushion.[15] Additionally, it gives senior appropriators an asset they can sell in times of need.[16] Until very recently, the only way to circumvent the strict priority system was if the TCEQ found that there was an “imminent threat to the public health and safety.”[17]
In response to continuing severe drought conditions across the state, the Texas Legislature promulgated Texas Water Code § 11.053 in 2011.[18] Section 11.053(a) provides the Executive Director of the TCEQ authority to temporarily suspend or adjust the diversion of water so long as his or her decision is “in accordance with” the first in time, first in right order of priority found in § 11.027. Section 11.053(b) provides a list of other factors that “shall” be considered when enforcing these new rules, most notably, maximizing the beneficial use of water, minimizing the impact on water rights holders, and conforming—“to the extent practicable”—to the statutory order of preferences listed in § 11.024. Acting to effectuate the new statute, the TCEQ developed what are known as Drought Rules. These rules were designed to allow the TCEQ to more effectively and efficiently administer water rights in times of drought and extreme shortage. Unfortunately, the TCEQ took it one step too far when it allowed for the Executive Director to exempt junior municipal appropriators and power generators at the expense of more senior water rights holders.[19] The TCEQ essentially thought §11.053(b)’s reference to the statutory preferences gave it the authority to circumvent the strict priority system.
The TCEQ attempted to apply these rules to the Brazos River Basin in early 2013. The Dow Chemical Company, a very senior user, faced water shortages and made a priority call on the river; this compelled the TCEQ into action to protect senior water rights.[20] The TCEQ, noting that the basin was deeply distressed by the drought, shut down several junior users to protect senior appropriators.[20] But the TCEQ did not shut everyone down. Citing the municipal and electric power generation exceptions in the recently promulgated Drought Rules, the TCEQ exempted several junior municipal and electric water users.[22] The Texas Farm Bureau, among others, brought suit against the TCEQ to challenge these rules and their implementation because they threaten the well- established priority system and devalue many senior property rights.[23]
The district court held that the TCEQ exceeded its authority by allowing exemptions that ignored the statutory first in time, first in right doctrine.[24] On appeal to the Corpus Christi Court of Appeals, the TCEQ argued that the “in accordance with” language in § 11.053(a) and the “shall ensure” language in § 11.053(b) rendered the statute ambiguous by conflict and, therefore, their interpretation should control.[25] This argument did not hold water with the court. Texas courts only defer to an agency’s interpretation of a statute when the statute in question is ambiguous.[26] The court determined that the statute was not ambiguous and simply required that any suspensions or adjustments of surface water rights be administered “in accordance with” the priority system in § 11.027.[27] Beyond that, the Executive Director “shall ensure” that the decisions conform to the listed factors, including, “to the extent practicable,” the preferences listed in § 11.024. Even though § 11.024 ranks certain uses higher than others (e.g., municipal use is ranked higher than both industrial use and agricultural use), the court determined that this alone did not give the TCEQ discretion to ignore the mandate in § 11.024(a) that all decisions should be made “in accordance with” the first in time, first in right principal.[28]
While some senior uses are undoubtedly at odds with the highest preferred uses of the state’s most precious resource, it is not enough to overcome the clear mandate of the Texas Legislature that all decisions should be made within the strict priority system.[29] The TCEQ simply does not possess the authority to exempt junior users. The TCEQ appealed the decision to the Supreme Court of Texas, which denied review after ordering briefing on the merits.[30]
III. ANALYSIS: TCEQ V. TEXAS FARM BUREAU WAS JUST A DROP IN BUCKET
While Texas Commission on Environmental Quality v. Texas Farm Bureau is a huge win for farmers, ranchers, and other water-intensive industries across Texas, the celebration will likely not last long. Recent history has shown that the forces seeking to poke holes in the current water administration regimes will not stop. In the last legislative session, the legislature passed a similar bill that provided a statewide exemption for power generation and mining interests from groundwater curtailment by Groundwater Conservation Districts.[31] Fortunately, Governor Abbott vetoed this bill, citing the perceived effectiveness of local control of groundwater resources.[32] He did not feel it was prudent to impose an inflexible statewide rule on these groundwater basins considering their diverse and complex geology—as well as the diverse and complex needs of the Texans living above and relying on the water.[33]
As discussed above, surface water and groundwater are apples and oranges in Texas—but each is equally prone to attack. Municipalities and electric power generators will persist their efforts to protect their interests. And who could blame them? As Texas continues to shift from rural to urban, a steady source of drinking water and a stable electric grid become increasingly important.[34] While no one would argue that at some point human life and reliable and affordable electricity outweigh the value of crops and cows, exemption statutes are not the best vehicle to remedy these problems. There is a way to protect human life while still requiring these encroaching users to bear some of the burden.[35] In fact, in the surface water context, there is already an emergency statute that allows the diversion of water outside of the priority system to meet dire public health and safety needs.[36] Otherwise, there is a clear statutory preference for voluntary water transfers for those who are willing to pay a fair price for a more reliable water source.[37]
In reality, municipalities and power generators seek to jump to the front of the line rather than actually prevent public health emergencies.[38] As the population increases, water will get more expensive.[39] These interest groups seek economic insulation from the inevitable difficulties and higher costs Texas users will soon face. What’s worse, this is done at the expense of one of Texas’s most economically sensitive industries—agriculture.[40] Agriculture remains, at least for the time being, a vital part of the Texas economy. Because Texas’s agricultural economy developed before the state’s population explosion and before the development of the state’s complex electricity grid, farmers and ranchers often hold very senior water rights.[41] As a result, they often absorb the real costs of exemptions for municipalities and power generators.
Farming and ranching are difficult enough with a steady and reliable source of water. With these exemptions ominously looming, farmers and ranchers cannot plan for current and future needs.[42] At any time, these senior users could be forced to diminish their water usage in favor of a power plant or city whose appropriation rights are not nearly as strong. This translates to extensive economic harm to an industry with over $25 trillion of direct economic output each year.[43]
Even if it is time to start shifting away from an agricultural based economy—which it is not—these backhanded exemptions are not the way to affect that shift. A senior water right is an immense economic value to its holder.[44] If a farmer or rancher holding one of these coveted rights wants to call it quits, he should at least be able to sell his water right to the highest bidder. As such, any exemption statute devalues these vested property rights and places the burden on the multi-generational farmers, not the municipalities and power companies who often came much later. Additionally, the municipalities and power generators can easily pass the additional costs of securing a reliable water source onto the end user, rather than expecting farmers, ranchers, and other individuals to absorb all of the economic harm.[45] Why would a municipality or power generator ever pay for a water right if it knows that its use is protected outside of the priority system?
Likewise, a centralized administrative entity is not properly situated to determine when a municipal or power generator’s use should outweigh the use of a senior appropriator.[46] Short of a public health and safety emergency, an agency in Austin should not be expected to effectively determine where to draw the line between competing users across such a large state—especially when these determinations might have a profound economic impact on highly sensitive users.
Overall, the most compelling reason to stop these groups from using the Texas Legislature or administrative agencies to cut to the front of the line is because it is inherently unfair and un-Texan. Proponents of these types of exemptions cite the need for water for consumptive purposes and a reliable electricity grid to ensure public health and safety. This is all true; fortunately, the legislature has already provided a statutory route to protect human life in real emergencies.[47] Far from a desire to save lives, these interests simply try to secure cheap, reliable water.[48] This necessarily devalues the property of other users, artificially lowers the price of water for predetermined users, and prevents the free market from sorting out the best use of water.
IV. CONCLUSION: CLEAR AS MUD
It is unclear why the Texas Supreme Court denied review of the Corpus Christi Court of Appeals decision in Texas Commission on Environmental Quality v. Texas Farm Bureau. But it is certain that attacks against the established and vested water rights of farmers and ranchers will continue on every conceivable front. The exemptions discussed above go against the fundamental free market principles that justify our adherence to property rights. The Texas Legislature and the Texas courts must resist placing the burden of population growth entirely on the shoulders of one of Texas’s oldest and most vulnerable industries. Municipalities and power generators must shoulder their share of the burden rather than sit around and wait for their lobbyists to push them to the front of the priority line.
[1] Order Denying Petition for Review, Tex. Comm’n on Envtl. Quality v. Tex. Farm Bureau, No. 15-0359 (Tex. Feb. 19, 2016).
[2] Tex. Comm’n on Envtl. Quality v. Tex. Farm Bureau, 460 S.W.3d 264 (Tex. App.—Corpus Christi 2015, pet. denied).
[3] Otis W. Templer, Water Law, TEX. ST. HIST. ASS’N, https://tshaonline.org/handbook/online/articles/gyw01 (last visited Mar. 27, 2016).
[4] See generally Allison Evans, Comment, The Groundwater/Surface Water Dilemma in Arizona: A Look Back and a Look Ahead Toward Conjunctive Management Reform, 3 Phoenix L. Rev. 269 (2010).
[5] Edwards Aquifer Auth. v. Day, 369 S.W.3d 814, 817 (Tex. 2012).
[6] Id. at 826–29.
[7] TEX. WATER CODE ANN. § 36.101 (West, Westlaw through the 2015 Reg. Sess. of the 84th Legis.).
[8] See Amy Hardberger, World’s Worst Game of Telephone: Attempting to Understand the Conversation Between Texas’s Legislature and Courts on Groundwater, 43 TEX. ENVTL. L.J. 257 (2013).
[9] WATER §§ 11.021, 11.026.
[10] Id. §§ 11.024, 11.123.
[11] Id. § 11.121; Texas Water Rights Comm’n v. Wright, 464 S.W.2d 642 (Tex. 1971).
[12] WATER § 5.103.
[13] Id. § 11.027.
[14] Id. §§ 11.027, 11.121.
[15] See generally Amicus Curiae Letter Brief of the Texas Department of Agriculture at 1–2, Tex. Comm’n on Envtl. Quality v. Tex. Farm Bureau (Tex. 2016) (No. 15-0359).
[16] See WATER § 11.122; Jill Sacra Hoffman, Note, The Status of Surface Water Rights in Texas: A Comparison to Other Prior Appropriation States, 39 TEX. ENVTL. L.J. 167, 182–87 (2009).
[17] WATER § 11.139.
[18] Tex. Comm’n on Envtl. Quality v. Tex. Farm Bureau, 460 S.W.3d 264, 266–67 (Tex. App.—Corpus Christi 2015, pet. denied).
[19] Id. at 267 (citing 30 TEX. ADMIN. CODE § 36.5(c) (West, Westlaw through 40 Tex. Reg. No. 1152) (Tex. Comm’n on Envtl. Quality, Suspension or Adjustment During Drought or Emergency Water Shortage)).
[20] Id.
[21] Id.
[22] Id.
[23] Id.
[24] Id. at 267–68.
[25] Id. at 268.
[26] Id. at 270 (citing Meno v. Kitchens, 873 S.W.2d 789, 792 (Tex. App.—Austin 1994, writ denied)).
[27] Id.
[28] Id. at 270–71; see also TEX. WATER CODE ANN. § 11.024 (West, Westlaw through 2015 Reg. Sess. of 84th Legis.).
[29] Tex. Farm Bureau, 460 S.W.2d at 272.
[30] See Order Denying Petition for Review, supra note 1.
[31] Tex. H.B. 2647, 84th Leg., R.S. (2015).
[32] Governor Abbott Vetoes House Bill 2647, OFFICE GOVERNOR GREG ABBOTT (June 20, 2015), http://gov.texas.gov/news/veto/21083.
[33] See id.
[34] See Brief of Amici Curiae City of Abilene, et al. at 15, Tex. Comm’n on Envtl. Quality v. Tex. Farm Bureau (Tex. 2016) (No. 15-0359); Brief of Amicus Curiae The Association of Electric Companies of Texas in Support of Petition for Review at 5, Tex Farm Bureau, 460 S.W.3d 264 (No. 15-0359).
[35] See generally Andrew P. Morriss, Real People, Real Resources, and Real Choices: The Case for Market Valuation of Water, 38 TEX. TECH L. REV. 973 (2006).
[36] TEX. WATER CODE ANN § 11.139 (West, Westlaw through Reg. Sess. of 84th Legis.).
[37] See Brief of Amicus Curiae Texas Irrigation Council at 10–11, Tex. Farm Bureau, 460 S.W.3d 264 (No. 15-0359).
[38] See Brief of Amicus Curiae Texas and Southwestern Cattle Raisers Association at 10, Tex. Farm Bureau, 460 S.W.3d 264 (No. 15-0359).
[39] See Ronald Kaiser & Frank F. Skillern, Deep Trouble: Options for Managing the Hidden Threat of Aquifer Depletion in Texas, 32 TEX. TECH L. REV. 249, 259 n.53 (2001).
[40] See Brief of Amicus Curiae Texas and Southwestern Cattle Raisers Association, supra note 38, at 3.
[41] See Jim Malewitz, In Major Water Case, Win for Ranchers is Loss for Cities, TEX. TRIB. (Feb. 22, 2016), https://www.texastribune.org/2016/02/19/major-water-case-win-farmers-loss-cities/.
[42] See Amicus Curiae Letter Brief of the Texas Department of Agriculture, supra note 15, at 4.
[43] See id. at 1.
[44] Brief of Amicus Curiae Texas Irrigation Council, supra note 37, at 4.
[45] See, e.g., Brief of Amicus Curiae Texas and Southwestern Cattle Raisers Association, supra note 38 (“The deregulation of Texas’s energy grid over the past decade was designed to instill free market principals into energy pricing and has resulted in increased competition and efficiency.”).
[46] See Governor Abbott Vetoes House Bill 2647, supra note 32.
[47] TEX. WATER CODE ANN. § 11.139 (West, Westlaw through Reg. Sess. of 84th Legis.).
[48] See Kaiser & Skillern, supra note 39.