Texas Supreme Court Lets Stand Ruling That Farms' Groundwater Limits Are Takings

By Lars-Eric Hedberg

May 4 — A permit issued by a Texas aquifer authority restricting farmers' use of groundwater beneath their land amounts to a taking without just compensation, the state supreme court affirmed in denying petitions seeking to overturn a lower court ruling.

The May 1 denial by the Texas Supreme Court lets stand a November 2013 decision by the Texas Court of Appeals, Fourth District, which affirmed that permit decisions by the Edwards Aquifer Authority (EEA) amounted to a regulatory taking of Glenn and JoLynn Braggs' two orchards (Edwards Aquifer Auth. v. Bragg, 421 S.W.3d 118, 2013 BL 313489 (Tex. App. 2013)).

The case is the latest in a line of groundwater cases that highlight the tension between private property ownership and government regulation of groundwater, Steve Kosub, an attorney for San Antonio Water System, told Bloomberg BNA.

“The Texas Supreme Court has held that groundwater is owned by the owner of the surface estate, and there is a strong private property notion in play here in Texas,” Kosub said. “But society and the courts recognize the government's right to regulate the resource.”

Kosub said the Texas Supreme Court's denial of the petition, however, should not be read so broadly as to mean that authorities and groundwater conservation districts cannot regulate groundwater.

“All of these groundwater takings cases are very fact-specific, and we shouldn't read much beyond the merits of the case,” he said. “The EAA may be more cautious than before the opinion, but this is one particular case where the government regulation went too far.”

The appeals court had previously ruled in August 2013 that the authority committed an unlawful taking, but it withdrew that opinion when it issued the November decision.

Petitions for rehearing are due May 18.

Edwards Aquifer Act Issue

The dispute centered on whether the 1993 Edwards Aquifer Act, which created the authority and directed it to implement a regulatory scheme, goes so far in restricting the farmers' use of water beneath their land as to constitute a taking. The act went into effect in 1996 and caps withdrawals from the aquifer.

Under the act, an existing user who obtains a permit is allowed to withdraw an amount of water equal to the maximum amount beneficially used without waste in any one calendar year. The authority can adjust this amount to meet the cap.

“The act is unique because the legislature said the authority must issue permits based on historical use,” Kosub said. “Other districts have choices and ways to regulate, and how these tools are used or applied will ultimately be among the key factors in a takings inquiry.”

Groundwater Applications Denied 

The Braggs purchased the Home Place Orchard, a 60-acre commercial pecan orchard, in 1979. The following year, they drilled a well into the Edwards Aquifer and installed an irrigation system.

In 1983, they purchased the D'Hanis Orchard, a 42-acre commercial pecan orchard. When non-Edwards Aquifer wells became inadequate, they obtained a permit from the Medina County Groundwater Conservation District to drill an Edwards Aquifer well, which they completed in 1995. Medina County is about 30 miles west of San Antonio.

The Braggs applied for permits from the authority for their orchards based on their 1996 groundwater use, claiming 229 acre-feet for Home Place and 193 acre-feet for D'Hanis.

The authority denied the D'Hanis application in 2004 because the Braggs could not show historical use of Edwards Aquifer water prior to May 1993.

Based on the Braggs' historical use, however, the authority granted a permit in 2005 for Home Place for 120.2 acre-feet of water per year.

After the Braggs filed their takings claims, the 38th Judicial District Court, Medina County, granted their motion for partial summary judgment, ruling that the authority's denial of the permit applications, in whole and in part, resulted in a regulatory taking. Both parties appealed.

Appeals Court Affirms Taking

The appeals court analyzed the takings claim in the context of state groundwater law and federal takings law.

In Edwards Aquifer Authority v. Day, 369 S.W.3d 814, 2012 BL 51815 (Tex. 2012), the state supreme court ruled that an overlying landowner has absolute title in severalty to the water beneath its land, subject to the common law rule of capture, which governs Texas groundwater, and also the police power, which gives states the authority to regulate and enforce rules for the general public's health, safety and welfare.

The appeals court then applied the Penn Central Transportation Co. v. New York City, 438 U.S. 104 (U.S. 1978), balancing test for regulatory takings.

As to the first two factors, the appeals court found that the economic impact of the permit decisions and the farmers' investment-backed expectations weigh “heavily in favor of a finding of a compensable taking of both orchards.” Although it found that the character of the government action—the need to protect groundwater—cuts against finding a taking, it nonetheless concluded that the weight the evidence supports a ruling that the act's restrictions amount to a regulatory taking.

It also remanded the compensation issue to the trial court to calculate the compensation—in this case the difference between the orchards' values before the application denials and after the denials.

Andrew Aelvoet of The Nunley Firm; Paul M. Terrill III and Schuyler Marshall of The Terrill Firm; G. Alan Waldrop of The Waldrop Firm; Christian Ward of Yetter Coleman LLP; and Ryan Bates of Bates PLLC represent the Braggs.

Ken Slavin, Mark Osborn, and Deborah Trejo of Kemp Smith LLP represent the authority.

To contact the reporter on this story: Lars-Eric Hedberg in Washington at lhedberg@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com