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Texas
Agriculture Archive
April 4, 2003
Liquid Assets
A hard look at Texas water...
Last of series
By Lana Robinson
Field Editor
"Water water everywhere and not a drop to drink." Samuel Taylor Coleridge's words from the Rhyme of the Ancient Mariner draw attention to the fundamental role of water in daily life. While the state has plenty of water, the problem, as one observer put it, seems to be that the water is located in the "wrong" places. To fix water shortages in one area, some think the solution is to buy water rights from others. A growing number of landowners see this as an opportunity to sell a resource, much like oil or gas, while farmers and ranchers, particularly, worry that big cities will drain them of this valuable resource. If water marketing is, indeed, the wave of the future, landowners should take certain precautions before jumping in head first.
Texas Farm Bureau released a "Model Lease of Groundwater Rights with Commentary," Feb. 3, 2003, at this year's Leadership Conference. The model lease, crafted by the organization with the help of Bickerstaff, Heath, Smiley, Pollan, Kever & McDaniel, LLP, is clearly no substitute for the independent legal advice needed to prepare a lease based on the facts and circumstances of a landowner's particular situation and goals. It is merely intended to assist landowners and their legal counsel in negotiating and preparing a groundwater lease.
Specifically of interest to TFB leaders is the current trend toward landowners leasing groundwater to companies who in turn sell it to various entities.
"Prior to 1997, just about the only water marketing going on was between the cities in West Texas and the big ranches, where they would buy ranchers' rights," said Judon Fambrough, a Texas A&M University real estate attorney. "I know of a more recent instance in which entrepreneurs leased 16,000 acres from 5,000 to 6,000 landowners in Burleson County for the production of water to sell to San Antonio."
As a matter of clarification, Fambrough said Texas property owners do not actually own the water beneath their land, but they do own the right to search (drill) and pump (capture) it when it's found. The Texas Supreme Court summarized the "rule of capture" in 2001 by stating, "The rule of capture essentially allows, with some exceptions, a landowner to pump as much groundwater as the landowner chooses, without liability to neighbors who claim that the pumping has depleted their wells."
Legislation (SB 1041) filed this session by State Sen. Kip Averitt (R) of McGregor attempts to place the common law right of capture for groundwater into state law. The right of capture doctrine states that a landowner does not own groundwater until it is "captured" at the surface of the land. Furthermore, the landowner is not liable for any harm caused to neighbors by pumping groundwater and putting it to a beneficial use. By placing the right of capture into the code, it cannot be changed by the courts, unless another case is filed where a landowner "harmed" another landowner's ability to pump groundwater.
As noted in a previous segment, Texas Farm Bureau supports the common law doctrine of right of capture. However, there is debate as to whether Sen. Averitt's bill has correctly described the landowner's rights to groundwater under the current right of capture. As it stands, if S.B. 1041 changes the current rights of landowners to groundwater, TFB will oppose the legislation.
One question on the minds of landowners these days is, "Who owns Texas groundwater when the minerals have been reserved?"
According to Fambrough, the answer is "the surface owner." Fam-brough said evolving case law recognizes a three-tiered ownership structure, which includes the mineral owner; surface owner, and water owner, in those instances where the land has been sold and water rights retained.
Fambrough said many of the water leases he has seen mirror oil and gas leases, which is problematic.
"There is a long-established rule allowing oil producers to use as much water as is reasonably necessary to explore for and produce oil and gas. Two public policies, one to enhance oil and gas production, the other to conserve the state's natural resources, appear destined to collide," he said, emphasizing once again, oil and water do not mix. "There is no standard form for water leasing. You must read the contract closely. Avoid ambiguous terms, like `reasonable damages' and 'paying quantities.' Be careful what you grant. Watch out for `horizontal severance claims.' When you grant a water lease, you cannot use your water for commercial use. What about your commercial cow/calf operation? You need to make sure you aren't signing something that prohibits you from using your water for that. Finally, always preserve the shallow aquifer for your own use and make them go below that to get theirs."
Proposed water legislation
During the water debate in the 2001 legislative session, a Texas Farm Bureau-backed amendment that would have required that the landowner be compensated for the value of the water taken by condemnation, rather than market value of the land, failed. That remains a goal. A bill before the 78th Legislature, which attempts to limit the authority of cities and municipal water suppliers to condemn both surface and groundwater rights, does contain a provision for an annual payment to the landowner.
HB 1760, filed by Rep. Harvey Hilderbran, R-Kerrville, adds new restrictions on condemning surface water rights that will require a city or municipal water supplier to prove that the water is necessary for drinking, bathing, sewage disposal, fire protection, or other basic domestic needs. The city must also show that these basic needs cannot be met through conservation or diverting water from other uses.
"The bill attempts to address the condemnation of groundwater, but only within a groundwater conservation district," Billy Howe, Texas Farm Bureau state legislative director, explained. "If a city or municipal water supplier intends to condemn groundwater within a groundwater conservation district, they cannot condemn land to get the groundwater. However, the bill does allow the city or municipal water supplier to condemn the groundwater without the land."
The bill allows the district to restrict the condemnation to the amount of water the city needs to meet its water needs for drinking, bathing, sewage disposal, fire protection, or other basic domestic needs. The landowner may receive an annual payment for the groundwater condemned; and, the groundwater conservation district will regulate the pumping of the groundwater that was condemned.
If a city or municipal water supplier does not pump the groundwater condemned within 10 years, the groundwater rights revert to the landowner. Any land condemned for pipelines and other transportation facilities would also revert to the landowners.
Texas Farm Bureau supports the part of HB 1760 that restricts the condemnation of surface water rights. However, the part that restricts the condemnation of groundwater causes some concern, according to Howe.
"Texas Farm Bureau policy opposes the authority of cities to condemn groundwater, and it opposes separating groundwater from the land. Our policy also supports protecting groundwater from seizure by eminent domain. This bill will allow cities to separate groundwater from the land by condemning only the groundwater rights. Another concern is that the bill only applies to condemning groundwater within a groundwater conservation district. Therefore, it provides no protection for landowners who do not live in a groundwater conservation district," Howe explained.
Howe indicated that the TFB legislative staff will work with Rep. Hilderbran to make changes to the groundwater section of HB 1760 so that the bill will better reflect the organization's policy.
Another bill worth noting which would increase the requirements a governmental entity must meet to condemn water rights, has been filed by State Rep. Robby Cook (D-Eagle Lake). According to Howe, Cook's bill, HB 1532, would add several requirements a governmental entity must meet before a court approves condemnation. As proposed, the petitioning entity would have to show: 1)it has created a drought contingency plan; 2)that a water conservation plan has been developed and implemented; 3) it has pursued feasible and practicable alternative water supplies; and 4)it has made a good faith effort to acquire the rights to the water being condemned by voluntary purchase or lease.
"Representative Cook's legislation promotes the free market system for the purchase of water rights," Howe said. "Additionally, it forces entities with the power of eminent domain to consider other alternatives before using condemnation authority. Accordingly, Texas Farm Bureau supports the passage of HB 1532."
TFB also supports another Cook bill, HB 1618, that would place new restrictions on the ability of someone to receive a permit to export groundwater. Howe said the bill promotes common sense limitations on the export of groundwater.
Interbasin transfers opposed
Texas Farm Bureau opposes two additional bills sponsored by Kip Averitt (R-McGregor): 1) SB 1040, which takes aim at provisions regarding interbasin transfers, which provides for the transfer of water from one river basin to another river basin; and 2) SB 1828, which seeks to abolish the State Soil and Water Conservation Board and place it within the Texas Department of Agriculture.
The first bill, according to Howe, would repeal two important provisions of the Texas Water Code for rural Texas and agriculture.
"Currently, the law states that any proposed interbasin transfer is junior in priority to water rights in the basin of origin. That means that any interbasin transfer is last in terms of priority. The importance of this distinction is that junior rights holders will be cut-off first during times of shortage and the more senior right-holders will continue to receive their water. In effect, the current law provision makes it unlikely that a city will use an interbasin transfer for its water needs because the water would not be available in a drought," he said. "Senator Averitt's bill would open the door for interbasin transfers depriving other users in the river basin of origin of the water during times of drought."
Texas Farm Bureau policy states that: "any interbasin transfer should be opposed unless it imposes a junior priority date for any transfer if it would harm existing water right holders or third party users in the basin of origin."
On the matter of the bill related to the Texas State Soil and Water Conservation Board, by making it a part of TDA, the State Soil and Water Conservation Board would exercise its functions, duties, and powers under the direction of the Commissioner of Agriculture rather than a five-member board elected by directors of local soil and water conservation districts. Additionally, the agency's budget would be transferred to TDA.
"Texas Farm Bureau policy supports maintaining the State Soil and Water Conservation Board as an independent agency and the current method of electing directors. TFB opposes SB 1828," Howe said.
The organization also opposes legislation by State Rep. Jessica Farrar (D-Houston), which attempts to narrow water rights. Farrar's HB 2854 would prohibit transfers of certain waters and potentially foster the cancellation of water rights. The bill aims to increase the amount of water in streams by reducing individual's water rights.
The legislation only allows for the transfer of water that has been classified for use as "beneficial consumptive." In effect, the bill severely limits the amount of water transferability.
"In addition to limiting water transfers, the bill encourages the Texas Commission on Environmental Quality (TCEQ) to take a more proactive role in canceling existing permits," Howe noted. "The bill requires TCEQ to cancel any permit whereby water has not been classified as `beneficial use' in the previous 10 years. Also, the bill directs TCEQ to dedicate any water rights acquired through cancellation to environmental needs and place the water right in the Texas Water Trust."
Duncan's bill protects water
Finally, TFB supports SB 1053, by State Senator Robert Duncan (R-Lubbock), because it aids landowners' efforts to conserve water and fight water pollution.
Howe said, "Senator Duncan's legislation would create a non-point source pollution linked deposit program. The linked deposit program would make it easier for the Texas Water Development Board to finance loans to individuals for non-point source pollution control projects. The maximum loan amount would be $250,000."
Additionally, the bill creates a new program for conservation projects, making use of funds already appropriated for conservation to the Texas Water Development Board. Under the bill, a conservation program includes an agricultural water conservation technical assistance program, a research or educational program relating to agricultural water use and conservation, a precipitation enhancement program, and any other type of agricultural water conservation program.
Obviously, going forward, Texans—particularly farmers and ranchers—cannot simply go with the flow in terms of water usage. Unforeseen droughts, increased consumption due to population growth, and other factors are draining the state's valuable liquid assets. Rough waters may lie ahead.
A combination of water management strategies, conservation efforts, and legislation crafted to ensure adequate supplies for all sectors—while protecting landowners' rights—is the right approach if agriculture is to stay afloat.
