Livestock Weekly

January 7, 2010

Attorney Calls For Centralized Groundwater Management In Texas

By Colleen Schreiber

AUSTIN — “I am convinced that the current system of groundwater management in Texas is an obsolete model and has no place in Texas in the 21st century.” That was one of the opening remarks offered by Steve Kosub, water resource counsel for the San Antonio Water System, at a recent Texas Water Law conference sponsored by the University of Texas School of Law.

“Each biennium that passes without the Texas legislature recognizing this issue and confronting this issue places us further behind as a state in our efforts to develop the essential water resources necessary for the future,” Kosub continued. “Eventually we will find that the gap is too large to overcome.

“Longterm water supply plans by water developers and municipalities and other water agencies are being made, changed, or abandoned completely in a total vacuum of uncertainty that will ultimately result in enormous wasted public funds and future water shortages.”

In addition to offering some broad thoughts on whether or not local control and management of groundwater is working or can work, Kosub also discussed what he referred to as “checks and balances,” or regulatory restraint. Within that topic he voiced some concerns that he has with Chapter 36 of the Texas Water Code dealing with but not limited to the authority of groundwater districts and their relationship with the courts. Finally, he offered some thoughts and concerns with respect to the groundwater management planning/desired future condition process scheduled to be completed in 2010.

First, on the matter of local control, Kosub told listeners that two years ago his response with respect to whether or not local control of groundwater could work was a guarded “no.” Today, however, it’s a resounding “no.”

“After two additional years in the trenches on this issue, I’m much less judicious in my response,” he told fellow attorneys.

Part of the reason for his less judicious response is that over the last couple of years, two-thirds of the state’s groundwater resources — its usable aquifers — have been “Balkanized into a patchwork quilt” of close to 100 groundwater districts.

The problem as he sees it is that each district’s boundaries are drawn along political county lines without any consideration given to the physical boundaries of the resource itself, i.e. the aquifer or aquifers. Moreover, each district has its own locally elected directors who adopt a management plan, and within that plan are rules by which they make permitting decisions. These rules, Kosub insisted, can “literally change overnight.”

Kosub said he was not being critical of the groundwater districts and the people involved per se, but rather the system itself.

“By statutory design, directors of local groundwater districts are elected locally and must respond to local constituents, and protection of local groundwater resources is far and away the singular issue for the people who elect these folks to office.

“Directors have not been charged by the Texas legislature with providing water to urban areas; they have not been charged by the Texas legislature with managing the state’s groundwater resources for the benefit of the state, and they’re not elected to do so. Nonetheless, the groundwater that they are elected to manage absolutely must be produced and transported to distant urban areas if the state’s health, safety and economic needs are to be met,” Kosub told listeners. “This I would submit to you is the fundamental flaw in our current groundwater management system.”

It was a daunting picture he painted when he reminded listeners that the state’s population is projected to double over the next 50 years, and most of that doubling, some 25 million new people, will occur within 30 miles of Interstate 35 and Interstate 10. To meet that need, Kosub said the state will need an estimated seven million acre-feet of new water supplies. To put that in context, he noted that just one of San Antonio’s water supply projects, which is projected to cost in the range of $200 to $300 million and will take 10 years just to get underway, will only yield an estimated 10,000 acre-feet of new water.

“We need seven million acre-feet,” he reiterated.

The current surface water supplies, Kosub reminded, are essentially appropriated, and there is continual new demand placed on those resources to resolve such matters as environmental flow issues. Furthermore, even if there were an excess of available surface water in one area of the state, Kosub said, interbasin transfers, for all practical purposes, have been stopped.

He also opined that the chances of developing new reservoirs are nil. He pointed to the recently scrapped reservoir project in northeast Texas.

“Dallas started thinking about that reservoir in the early part of the 20th century, almost 100 years ago,” Kosub told listeners.

Coming back to the issue of local control, Kosub recognized again that local groundwater districts have neither a mandate nor an incentive from the state to make the water available to other users in the state. He shared a quote from a representative of a groundwater district published in a recent newspaper article.

“We’re not going to make real radical changes or restrict anybody’s freedoms. All we’re trying to do is protect inflows into the aquifer and keep people from taking water and selling it to outside interests.”

Kosub didn’t just point to the flaws he sees in the current groundwater management problem, but followed up with some ideas for a solution. He called for more centralized management of the state’s groundwater resources. As a model for such a system, he pointed to three state agencies — the Texas Commission on Environmental Quality, which manages surface water; the Public Utility Commission, which manages the state’s electricity; and the Texas Railroad Commission, which for a century now has managed oil and gas resources. All of these agencies, he noted, have done a relatively adequate job of management of commodities valuable to the entire state.

“Can you imagine how the economy of this state would have evolved if oil and gas were managed by 100 different county-based, locally elected entities that decided what oil and gas would be pumped and where it would be sent?”

Though the Texas Water Development Board doesn’t in the least appear to embrace the idea of taking on more of a regulatory role for groundwater management, there are some, including Kosub, who believe the agency should do that very thing.

“They have the necessary resources in place for management of groundwater; they have the science; they have the people that understand the turf,” Kosub told listeners.

Others believe that groundwater and surface water should be managed conjunctively, and supporters reason who better to do that than TCEQ.

Kosub noted that there were editorials in three of the state’s major urban newspapers calling for change in the current system of groundwater management. He pointed to the recently announced 81st legislative interim charges, specifically the House Committee on Natural Resources, as a hopeful sign that change may be forthcoming. The Speaker’s interim charge to the committee is to evaluate groundwater regulations and permitting processes throughout the state, including the role of state agencies in groundwater management, and development of DFCs and adoption of groundwater management plans in relation to regional and state water plans.

He identified a couple of other factors that are likely to prompt changes to the current system. One is what he called “the trumping” of an effective regional water planning process developed in Senate Bill 1 by local groundwater district decisions. Another is financially related.

“In the last few years we’ve seen for the first time some financial markets beginning to experience the implications of local permitting for the security of public debt issued to finance expensive water supply projects,” Kosub told listeners.

Parts of the state also experienced drouth this past year. All of these forces collectively, he insisted, will encourage and facilitate a change.

“With determination and visionary leadership, I think we can move into a different management system, moving from an uncontrolled, unregulated water supply to a fully permitted system transitioning from local management to state management of our groundwater supplies in a decade.”

Meanwhile, some changes need to be made to provide for temporary effective local management of groundwater resources in the interim, Kosub said. Those changes have to do with what he referred to as “checks and balances.”

With the evolution of administrative agencies, as government became more and more complex and issues became more and more technical and more and more difficult to address, the need for checks and balances has grown substantially, Kosub said. To that end, on the federal level there is the Administrative Procedure Act adopted in 1946. Texas adopted a similar law in 1975. The problem is that governing groundwater conservation districts are “neither beast nor fowl within the traditional notions of the state administrative practice.” Instead, districts are governed by Chapter 36 of the Texas Water Code, Kosub reminded, where the administrative processes for governing groundwater districts are found. The problem, he opined, is that Chapter 36 is a “hodgepodge” of administrative processes which have been evolving for 50 years, one legislative session at a time, a handshake here, a nod there.

“What we have is a piece of statutory work that is rapidly becoming incomprehensible. What it does not do is establish a comprehensive process by which permitting and regulatory decisions are made at the local level,” he insisted.

In recent years, Kosub continued, the legislature has inserted some rudimentary process requirements in Chapter 36, but it comes nowhere close to standards imposed on state agencies.

“If a permit applicant is unhappy with a decision made by their local groundwater district, the applicant may appeal the decision to the local district court. However, the local district court has but one function, Kosub said, and that is to look at the record developed before the agency and decide if there’s more than a scintilla of evidence to support the decision.”

He compared that system of checks and balances to that of the Administrative Proceedings Act and reiterated that that there is a “big disconnect” between the two.

Kosub identified some other challenges that he sees with Chapter 36, the biggest being the issue of attorneys’ fees. He pointed out that in two different sections of Chapter 36 the legislature mandated that if an unhappy applicant challenges a decision of the groundwater district and loses, the court has no choice but to award attorneys’ fees to the district. The rub, Kosub said, is that there is no precedent for that in Texas law.

“There are many circumstances in which courts have the discretion at the end of the hearing to award attorneys’ fees to the prevailing party, but nowhere else will you find a provision that says if you have the temerity to sue and lose, you’re going to be responsible for the district’s attorney fees.”

It’s a big deal, he said, because attorney fees are a big deal. Case in point is the recent groundwater cases that have worked their way up through the courts.

“We’re talking about districts’ attorney fees in the range of a half-million dollars.

“If you’re a landowner, farmer, rancher, and you feel you’ve been aggrieved by a decision of the groundwater district and you want to challenge that decision in court, what might your decision be if you know you have a better than 50 percent chance of losing, and if you lose you’re going to have to write a check for half a million to the groundwater district? I would submit to you its going to have a substantial effect on the willingness of landowners, the ability of landowners, to challenge the work of groundwater districts. That’s a bad thing.”

It’s something that could be amended through the legislature, Kosub noted, but as of yet that has not been accomplished.

In his paper, Kosub writes that other things in Chapter 36 that deal a “poor hand” to applicants include “statutory presumptions of validity, mandatory venue on the district’s home turf, mandatory and unfamiliar motion requirements, and extraordinarily short filing deadlines.”

Kosub turned next to the issue of desired future conditions. Essentially, the legislature charged groundwater districts to work together with other districts within their prescribed groundwater management area to determine what they wanted their aquifer or aquifers to look like in 50 years. The one DFC for the GMA is then forwarded to the Texas Water Development Board, which calculates how much groundwater is available to achieve those DFCs.

The problem has been that each of the groundwater districts is coming up with its own DFC, and there seems to be little consensus on what the actual DFC should be for the entire GMA.

“More importantly, we’re seeing that districts are backing into those numbers by determining what restrictions they want on pumping for particular projects,” Kosub told listeners.

The problem, he reiterated, is a lack of checks and balances. The only appeal for this decision-making process is through the TWDB. TWDB merely issues recommendations to the districts, and the districts can accept or ignore the recommendations.

“The process begins and ends with groundwater districts,” Kosub stressed.

Again, he said, it’s a process that can easily be improved by making the last word lie with TWDB on DFCs. However, the Edwards Aquifer Authority, as do some other groundwater districts, actually prefers to strengthen the hand of groundwater districts rather than enhance checks and balances.

“The relief sought by the EAA would further insulate groundwater districts from judicial review, and in some cases even legislative oversight,” he insisted.

To that end he quoted two excerpts from recent briefs submitted by the EAA. In the Day case and in the Del Rio case, the EAA asked the court to hold that landowners do not have a constitutionally protected interest in groundwater.

“In holding that landowners have vested ownership rights in groundwater, the San Antonio Court of Appeals decision jeopardizes the ability of the legislature to fulfill its mandatory duty under the Conservation Amendment of the Texas Constitution to provide for the regulation and management of vital and life-sustaining groundwater resources,” the EAA wrote.

A second quote from the EAA’s amicus brief in the Del Rio case is as follows:

“If groundwater regulation in Texas generally, and in the Edwards Region in particular, is to progress and succeed, the Court should clarify that landowners have no vested property rights to groundwater underlying their land.”

Calling the EAA “the gold standard for groundwater districts,” Kosub acknowledged that the EAA has crafted and implemented a fair, effective and successful regulatory program on a regional basis. That said, the EAA’s enabling legislation drafted by the legislature, he insisted, was also meant to recognize and respect a wide array of interests. He pointed to Section 1.07, Ownership of Underground Water, which says:

“The ownership and rights of the owner of the land and the owner’s lessees and assigns, including holders of recorded liens or other security interest in the land, in underground water and the contract rights of any person who purchases water for the provision of potable water to the public or for the resale of potable water to the public for any use are recognized. However, action taken pursuant to this act may not be construed as depriving or divesting the owner or the owner’s lessees or assigns including holders of recorded liens or other security interests in the land, of the ownership rights or as impairing the contract rights of any person who purchases water for the provision of potable water to the public for the resale of potable water to the public for any use, subject to the rules adopted by the authority or district exercising the powers provided by Chapter 52, Water Code. The legislature intends that just compensation be paid if implementation of this article causes a taking of private property or the impairment of a contract in contravention of the Texas or Federal Constitution.”

A similar recognition of property rights in groundwater is also found in Chapter 36.002 of the Texas Water Code and in the Fifth Amendment of the U.S. Constitution as well as the Texas Constitution, Article 1 Section 17, all of which refer to the taking of one’s property and the requirement of just compensation.

Kosub said the analysis for a takings case is relatively complex but “not as hard as we tend to make it.”

Essentially, if the regulation does not constitute a complete physical taking of the resource, then the courts look to the Penn Central analysis for a ruling. The problem, Kosub said, is one can’t get to that analysis if one never gets past the doorstep. That doorstep, he said, is whether or not there’s a property interest that needs to be protected and that can be taken.

He referred to the agreement that property ownership in groundwater should not be recognized as the “scorched earth defense.”

“It’s an effective strategy in the short term, but it’s going to have very significant long-term implications for the state of Texas in terms of groundwater management,” Kosub opined.

“If in fact the landowner has no interest in the groundwater until the groundwater district issues you a permit, then you’re going to cut the constitutional tether on regulatory constraint,” he added. “If you remove the constitutional restraints on regulation, in my opinion, that’s moving in the wrong direction. We need to encourage constitutional restraint if we’re going to have effective regulation of groundwater districts.”

This can be fixed, Kosub opined, through judicial response on the current pending groundwater cases, or by the legislature stating its clear intent with respect to the vesture of groundwater.

Other things can be done in the interim. One thing, he said, is to assure that groundwater districts have adequate funding to do the job they were charged with doing.

“The source of this funding should not be exclusively the property owners and pumpers who also bear the brunt of the district’s regulatory actions,” remarked Kosub. “Rather, these costs should be shared by the public which enjoys the district’s protection.”

He reiterated, however, that these are temporary remedies and should not be considered an adequate substitute for centralized state management of groundwater resources.

He concluded by reiterating the staggering growth statistic of 25 million new Texans over the next 50 years.

“If you leave here and remember nothing else from this presentation, leave with this thought on your mind. We have a system that is systemically broke. We have groundwater management placed in the hands of local groundwater districts with local officials elected to meet local needs who are nonetheless expected by the State of Texas to manage that resource for the benefit of the state.

“It’s a fundamental flaw, and all the nibbling in the world around the edges will not fix that flaw.

“Thus, our philosophy of groundwater management must be revised to ensure that we meet future demand as well as protect future supply. The task is monumental. We must begin now.”