Should water be managed like oil and gas?

Groundwater law and oil and gas law share the same genesis—the ancient law of absolute ownership – the notion that a landowner owns everything above and beneath his land, “up to the sky and down to the depths.”[1] But after applying the rule of capture – a doctrine that does not impose liability against one landowner for draining the oil and gas or groundwater from beneath an adjacent landowner’s property – to both groundwater and oil and gas in the first part of the 20th century, the Texas Supreme Court did not decide another consequential groundwater case for another fifty years.[2]

In contrast, the laws that regulate Texas’ black gold have developed considerably over this last century, crafted and refined primarily by the Texas Supreme Court and resulting in a regulatory structure designed to prevent the waste of oil and gas and to ensure that landowners’ private property rights in the oil and gas beneath their land are protected. From the Texas Supreme Court’s decision in the 1915 case, Texas Co. v. Daugherty, 176 S.W. 717 (1915) that a landowner has a private property interest in the oil and gas beneath his land, to the Court’s conclusion in Elliff v. Texon Drilling Co., 146 Tex. 575 (1948), that each landowner should be afforded the opportunity to produce his fair share of the recoverable oil and gas beneath his land, the Court has weighed the conflicts inherent in regulating a privately owned resource for the benefit of the public with the undeniable necessity of doing so.

The development of groundwater law, in contrast, has been slower than oil and gas law, and a product of Legislative actions rather than judicial ones. This is likely because until recently, the pressure to develop groundwater resources for public use did not exist, and consequently, fewer disputes arose. For the majority of the last century, groundwater has been used primarily by the overlying landowner for personal and agricultural use. With a growing population and a deficit in water supplies, however, groundwater in Texas, like oil and gas, is now a commodity available to meet the needs of a growing state.

As a result, groups desiring to freely move groundwater across Texas are claiming that the current system of local, county based groundwater regulation is thwarting efforts to develop a reliable water supply for the state. These groups believe that there is far more groundwater in aquifers across the state available for production and that the current regulatory structure, which allows groundwater conservation districts to limit or deny groundwater production permits based on certain factors, such as historic use, subsidence, and impacts to other permit holders or surface water resources, is infringing upon landowners’ private property rights to fully develop their groundwater. They are arguing that groundwater should be regulated in a way similar to oil and gas, where management occurs on a more regional scale and the resource is allocated in a way that ensures all landowners are entitled to a fair share of the resource they own. Their argument that groundwater should be regulated like oil and gas is fueled by two recent Texas Supreme court decisions where the Court relied on oil and gas law to decide groundwater disputes.

In Coyote Lake Ranch v. City of Lubbock, the Texas Supreme Court held that the accommodation doctrine, a tenant used by courts to resolve disputes between mineral interest owners and surface owners, applies to severed groundwater estates in Texas, and perhaps most significantly, clarified that severed groundwater rights are dominant over the surface estate.[3]

In Edwards Aquifer Authority v. Day, the Court held that, like oil and gas, landowners own groundwater beneath their land in place.[4] In the decision, the Court pointed out that in oil and gas regulation, each landowner is afforded “the opportunity to produce his fair share of the recoverable oil and gas beneath his land,”[5] and that one purpose of groundwater regulation is “to afford each owner of water in a common, subsurface reservoir a fair share.”[6] Groundwater marketers and developers and large agricultural interests have seized the opportunity created by the Court’s discussion in Day to argue that like oil and gas, landowners are entitled to their “fair share” of groundwater. But what does a “fair share” of groundwater mean?

In an often overlooked passage of the Day decision, the Texas Supreme Court provided some guidance, recognizing that groundwater regulation is fundamentally different than oil and gas regulation. According to the Court,

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.[7]

Consistent with the Court’s holding that groundwater regulation must take into account other specific factors beyond ownership, one could argue that a landowner’s fair share of groundwater is what he can pump without unreasonably impacting aquifer levels or nearby wells. In essence, this is correlative rights—where a landowner’s right to pump groundwater is relative to the impacts of the pumping off tract.

This is also the law for oil and gas in Texas. A landowner’s right to produce oil and gas is limited by regulations intended to prevent waste of the common supply and drainage of oil and gas from adjacent tracts – this is a landowner’s fair share. The Railroad Commission has adopted well spacing rules, field rules, and production rules designed to ensure that landowners receive their fair share of the minerals beneath their property.

In the above sentence, one could easily substitute groundwater for oil and gas. A landowner’s right to produce oil and gas groundwater is limited by regulations intended to prevent waste of the common supply and drainage of oil and gas groundwater from adjacent tracts. In other words, a landowner’s right to produce his fair share of either oil and gas or groundwater is relative to the impacts caused by this pumping. It’s just that for groundwater, as the Texas Supreme Court astutely recognized, the types of impacts and the threshold of these impacts are different.

This is because, unlike oil and gas, groundwater has intrinsic value that is connected to and vital to the land above. Without water, land is worthless. Groundwater, replenished through rain at the surface, sustains flowing springs and rivers and ultimately bays and estuaries on the coast, providing value not only to people but to entire ecosystems.

With the 85th Legislature underway, there is a possibility that legislation will be introduced to restructure groundwater management in Texas.  Whether this is a push toward statewide correlative rights based on surface acreage, limitations placed on a groundwater district’s ability to consider historic use or prohibit speculative permit applications, or to regionalize groundwater management across the state, the argument will be that groundwater should be treated more like oil and gas, where ownership of the resource is valued above all else.

With the urgency to develop Texas’ water supplies, the idea of regulating groundwater similar to oil and gas – where the purpose of the entire regulatory structure is to ultimately produce the resource – is certainly intriguing.  But it is not what the Texas Supreme Court envisioned for groundwater in its decision in Day. It is important that policy makers do not overlook or diminish the Court’s discussion of the inherent differences between regulating groundwater and regulating oil and gas in an effort to produce greater amounts of groundwater across the state.

[1] Cuius est solum, eius est usque ad caelum et ad inferos (English translation: for whoever owns the soil, it is theirs up to the sky and down to the depths) is a Roman legal principle of property law that was passed down to common law and civil law systems. Black’s Law Dictionary.

[2] City of Corpus Christi v. City of Pleasanton, 154 Tex. 289, 276 S.W.2d 798 (1955) (holding that a landowner can use all of the groundwater he can capture from wells on his land for beneficial purposes, on or off of the land, and can sell it for use off of the land and outside of the basin where produced.)

[3] Coyote Lake Ranch, LLC v. City of Lubbock, No. 15-0572, 2016 WL3176683 (Tex. May 27, 2016).

[4] Edwards Aquifer Authority v. Day, 369 S.W.3d 814 (Tex. 2012)

[5] Day, 369 S.W.3d 814, 830, citing Elliff v. Texon Drilling Co., 146 Tex. 575 (1948).

[6] Id.

[7] Day, 369 S.W.3d 814, 831.

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