SB 332:
You Own the Groundwater

A bill adopted during this year's session of the Texas Legislature, SB 332, clarifies that the water beneath private land is real property and subject to the same constitutional protections as the land itself.

It passed in large part due to a push by a group led by Texas and Southwestern Cattle Raisers Association (TSCRA), Texas Wildlife Association (TWA) and Texas Farm Bureau (TFB). Those groups made that push because some of the state's groundwater districts have been making plans that would entail taking those real property rights away.

The issue came to a head during TSCRA Past President Dave Scott's just-concluded 2-year tenure as head of the organization. He traveled to groundwater issues forums across the state and was instrumental in encouraging TSCRA staff to take a statewide leadership role in the education of the public on the issue, and the development of the bill's language.

"In Texas, most people just think that they own the water beneath their land and have always taken it for granted," Scott says. He says the stimulus for his determination was a case in which it was claimed that groundwater should be subject to government and not private control. "This was what started the Cattle Raisers and the Texas Wildlife Association and the Farm Bureau saying, ‘We'd better try to rectify this before it gets too far,'" he says.

Jason Skaggs, TSCRA executive director of government and public affairs, calls SB 332 a major step forward. "As fast as Texas is growing, and as short of supply as water is in this state, I don't think this is the last time we'll be talking about groundwater," he says. "But we as landowner representatives needed to get this big issue solved once and for all … SB 332 says that groundwater is real property, just like your land is your real property, and that real property is subject to certain constitutional protections and cannot be taken from you without compensation."

Reframe the statement
Attorney Russ Johnson, a partner with the firm McGinnis, Lochridge and Kilgore in Austin, says the legislature did not "change" the law. He says they reframed the statement of ownership in Chapter 36 — the section of the Texas Water Code that provides for groundwater conservation districts — to make it clear that while the legislature intended for there to be regulation, it also intended for that regulation to be a property right that was protectable under the Constitution.

"I hate to be simplistic about it," says Johnson, "but I think the pendulum had swung from an absolute absence of regulation and, therefore, potential for abuse, to an exercise of regulatory powers to the extent the intent of the legislature was being threatened."

But he says the districts themselves were taking a simplistic management approach that was threatening the rights of landowners who had not been using their groundwater.

Chapter 36 requires districts to develop 50-year plans for use of the managed available groundwater within the district. "The concern among landowners was that because historic use can be protected, and because many of these groundwater districts are dominated by historic user board members, the conclusion of the groundwater district would be, ‘We are currently at our limit with our historic users, and if you haven't used groundwater previously, your opportunity to produce groundwater is now foreclosed.'"

Although districts were not taking that position universally, he says, it was common enough statewide that the legislature felt the need to act.

The new language does not assure landowners of the right to produce any specific quantity of water — only that they'll have a fair chance to produce. That leaves it up to the district how to regulate production and still assure that all of its landowners can produce their fair share of water.

Although Johnson believes the new rules will actually reduce conflict between landowners and districts, he expects challenges to take place, mostly to rules adopted by districts that presumed their regulation of water would not be subject to the takings provisions of the U.S. or Texas Constitutions.

Johnson participated in the educational sessions sponsored by TSCRA, at which he described his own experiences representing a large West Texas landowner, the Guitar family, in a case that was finally resolved in his clients' favor by the Texas Supreme Court in 2008. The local groundwater district, he says, had adopted "a set of rules that, if they had not been challenged, would have precluded the Guitar family from ever producing any commercial quantities of groundwater from their ranch, even though their ranch at that time comprised about 20 percent of the geographic area of the aquifer that was being regulated."

They had lost their court challenges to the district rules at each step prior to the Supreme Court ruling. "It was kind of a complicated case," he says, "but the end result was the district could not adopt rules awarding a monopoly to a limited number of landowners, and then allow those landowners to change the character or type of use, and still obtain this monopoly protection."

Working with the districts
TSCRA and other groups asked groundwater districts to pass a resolution recognizing property owners have a vested right that entitles them to produce a reasonable amount of groundwater, while still leaving them subject to fair and reasonable regulation that protects groundwater for the future.

The Central Texas Groundwater Conservation District in Burnet was one of the first to adopt the resolution. One of the district's directors, Wayne Brown, says they felt SB 332 was needed. "We're very concerned in the rural areas where we depend upon our well water, and part of the value of our property, of course, is having access to groundwater," he says. "We're afraid there was movement by the state to get control of the groundwater before it's captured; that way, there's no fear of a takings contract."

Brown says the new language will make it easier for districts to regulate water, because they'll know who owns it. "It puts the burden on the water districts to have good science," he says. "If we're going to manage this groundwater, we need to be able to say here's the scientific fact of what the aquifer looks like, how much is recharged, how much we're using, how we're affecting the water levels, etc." If the district can't demonstrate the logic of its water use planning, he says, they should lose their takings contract.

And Brown believes water districts overstated concerns that the bill would take away their ability to regulate. "We have our property rights managed every day by somebody at the federal, state and local level. If you live in a town, it's how you build a fence, or if you live in the country, it's which herbicide or pesticide that you can put on your property …. What I think it does do, and rightfully so, is put more pressure to get the public involved, get the interested parties involved, in determining what the desired future conditions for a district are going to be."

Brown says he hasn't gotten many inquiries about the new law, because most people in his district thought the landowner owned the water beneath the property to start with. He says their district was established for a couple of reasons. First, they were concerned that Texas' rule of capture would allow someone to buy a very small tract of land and siphon the water out from under other peoples' property. Second, the state had threatened to put Burnet County into a Priority Management Area with their more urban neighbors, Travis and Williamson Counties. "People in Burnet County wanted to have local management of that groundwater, as opposed to being put in with counties that have a different perspective of groundwater and its importance," he says.

Brown says SB 332 will also provide stability. "There are just a lot more votes in the urban areas," he points out. "As the urban areas need the water, the ranchers and the farmers are trying to conserve it and protect it, and clear cedar and remove brush to maintain water. And so there was just a concern that this was an effort for the state to get control of groundwater, and we would be outvoted in the state by the urban areas, and they'd take the groundwater away from us. There will always be that concern, because in the next 50 years we'll have water shortages, but, at least for now, this quiets the waters and we can move forward with trying to enhance and protect our groundwater."

SB 18: You Get a Bona Fide Offer in Writing

The third time turned out to be the charm — but experts on the exercise of eminent domain in Texas say despite the passage of Senate Bill (SB) 18 in the 2011 legislative session, there is still work to be done to ensure the rights of landowners are protected.

On May 19, Gov. Rick Perry signed SB 18 into law. Four years earlier, the Governor had vetoed an eminent domain bill. Jason Skaggs, Texas and Southwestern Cattle Raisers Association (TSCRA) executive director of government and public affairs, blames an amendment added to the bill on the Senate floor that would have compensated landowners for loss of direct access. Although TSCRA and other landowner groups supported the amendment, says Skaggs, "it was the reason the governor vetoed the bill."

TSCRA Past President Dave Scott of Richmond recalls Gov. Perry saying the way the '07 bill had been written, it would have been a field day for attorneys. Then, in 2009, the bill's second incarnation passed the Senate, but the session ran out before it could get through the House. "So this time," Scott says, "we had to get it done, and I think everybody was on board … it went right on through, pretty well unharmed, this session."

There were some changes from the initial draft, though. "We did have it probably a little stronger when we first wrote it," says Scott, but property rights attorneys have told TSCRA they "are fairly confident that they can win with" the revised version.

Zach Brady, an attorney with ZS Brady & Co. of Lubbock, says SB 18 isn't much different from the legislation that ran out of time in 2009, but during the last 3 sessions it had moved toward becoming a consensus bill. Brady worked during the session with some of the Senate sponsors and co-sponsors on portions of the bill that deal with diminished access and with condemnation procedures. The latter is intended to overturn Hubenak v. San Jacinto Gas Transmission Co., the 2004 ruling in which Brady says the Texas Supreme Court found if a condemnor had failed to negotiate in good faith, then the remedy was for them to go back and renegotiate. "That rendered a lot of those protections basically toothless," he says, "and so the authors of the bill and SB 18 tried to level the playing field."

Protections provided by SB 18
Brady says SB 18 defines negotiating in good faith and sets out those actions that a condemnor must take to meet that definition. "They have to make a written offer, and the offer has to be accompanied by a written appraisal," he says.

"The bill sets out time frames during which the offers have to stay open. It also brings some clarity and some uniformity to the process around appointing what we call ‘special commissioners,' the 3 individuals the judge appoints who hear the first condemnation hearing." If either side objects to 1 of the 3 special commissioners, the judge must appoint a replacement.

The bill took effect Sept. 1, but Brady anticipates many eminent domain lawsuits would have been filed prior to that date in West Texas and would not gain the landowner protections of the new law.

"We're in the middle of an incredibly large set of condemnation cases in West Texas," he says, "probably the largest single group of condemnation cases that West Texas has ever seen, and that's for all of these power lines that are being built as part of the CREZ (Competitive Renewable Electric Zones) process," where lines are moving renewable power from windmills to more populous areas. He doesn't believe SB 18 will deter condemnations, and says he hopes it "allows landowners to have a little more time and a little more predictability so that they can make the decision of whether or not they're going to go to condemnation or negotiate … I don't think it's going to change the fact that for a landowner to receive full compensation for something like a power line, they're going to have to go to litigation."

SB 18 also requires a condemning entity to compensate landowners for loss of access to their property and to take a public and record vote to initiate any eminent domain proceedings. It establishes that eminent domain can be used only to acquire property for public use, and gives landowners the right to repurchase their condemned land at the original price if it is not used within 10 years for the purpose stated at the time it was acquired.

That had become a problem, says Dave Scott. "There were some instances where property was condemned and they didn't build on it right away," he says. "And then when they did, they just built on part of it and resold the other part for quite a bit more than what it cost the state to begin with."

SB 18, he says, came about because the condemnation process seemed unfair. Producers "wanted fair market price, and they wanted access where it had been cut off. They wanted to be compensated for lack of access to other properties where a freeway or something would go through, and they'd have to go 20 miles up the road to come around and get to that property."

Landowner groups also wanted reform because the process itself is being used more. "We're building so many highways in Texas," Scott says. "Nobody wants to give up their land, and of course the government has the right of eminent domain, but they also — now — have to compensate a person, at a fair market price, for what they take from him or her."

Skaggs says it took a while to persuade some of the lawmakers and condemning entities that the intent of TSCRA and other landowner groups was not to gain advantage, but to level the playing field. "I'm still not sure if we're 100 percent there — we've got a ways to go yet — but it's sure better than it was," he says.

Among areas that still need work, he says, are those relating to compensation, and to who has the ability to have the power of eminent domain. He says, "All of the entities that currently have eminent domain are required to register with the Comptroller by December 2012 and if they do not do that, they lose their authority. So I think that will help in identifying all those entities that are out there, but I think there's still some work to be done on exactly who should have those powers, and why they're necessary in some situations."

He says with the state's rapid growth and the need for additional resources like highways and utilities to serve those newcomers, it's understood that eminent domain will be needed "in certain, limited circumstances … We want the economic growth, but with that comes growing pains."

Skaggs says the first thing a landowner facing a condemnation proposal should do is hire an attorney with knowledge of Texas eminent domain laws. "You'll save yourself a lot of time and stress in trying to figure out what your rights are and what the rules of the games are," he says. "Even though it's an expensive investment, depending on the situation, it's one I think that can really help you down the road. As some have said, it's not a matter of if these entities are going to condemn your property; it's really oftentimes a matter of when they're going to get it, and how much you get paid for it, and I think a good attorney can help landowners navigate through that very complicated process."