Written by Tony Malley
Although the Texas population is expected to double in size by 2050, the state’s water supplies are expected to decrease by 19 percent in that same time frame. Texans must make a concerted effort to conserve or find other sources of water.
Water Ownership in Texas
In Texas, ownership of water depends on whether the water is categorized as groundwater or surface water. Groundwater is water percolating below the earth’s surface. Generally, groundwater belongs to the landowner.
In contrast, surface water belongs to the State of Texas and is held in trust for the public. Surface water is the ordinary flow, underflow, and tides of any natural body of water (i.e. river, stream, lake, or bay) and watercourse in the state. A watercourse has a defined bed and banks with a current of water. Another subcategory of surface water is diffused water, which is rainwater or surface runoff. Before it enters a watercourse, landowners may capture and use the diffused surface water as it flows across their property. Once the diffused water flows into a watercourse, it is owned by the state. A landowner’s ability to use water on or beneath his or her property depends on the categories previously mentioned.
Groundwater provides 60 percent of the water used in Texas. Landowners have the right to capture any groundwater beneath their property based on a legal doctrine called the “Rule of Capture.” According to this doctrine, a landowner may extract or pump whatever groundwater water he or she can beneficially use or sell regardless of the impact on nearby property owners.
The Rule of Capture is often referred to as the “law of the biggest pump” as a neighboring property owner’s only remedy is drilling a larger or deeper water well. Even so, a landowner cannot: maliciously take water for the sole purpose of injuring a neighbor; willfully waste groundwater; negligently drill or pump water in a manner that causes subsidence (sinking) on a neighbor’s property; or trespass onto a neighbor’s land to extract water. Trespass would include drilling a “slant hole” that crosses over a subterranean property line into the neighbor’s land for the purpose of taking water.
Under authority of the Texas Constitution, the state legislature created Groundwater Conservation Districts (GCD) to regulate the spacing, drilling, and pumping of groundwater in the state. There are approximately 99 GCDs in Texas.
GCDs also develop and implement water management plans to manage their groundwater resources. Each water management plan is approved by the Texas Water Development Board (TWDB). The goal of each water management plan is to provide for the most efficient use of ground water; prevent waste and subsidence; address natural resource issues and drought conditions; encourage conservation; and achieve desired future conditions.
GCDs grant water well permits based on the TWDB’s determination of how much groundwater is available for extraction. Permits are issued to persons “with a legally defined interest in groundwater.” This may include a person or entity who owns or leases land or rights to groundwater, uses a well for beneficial use, or produces water in one of the 16 groundwater management areas in the state.
While a landowner may have the right under the Rule of Capture to extract groundwater underneath his or her land, a local GCD may impose additional restrictions on the placement of the well or limitations on the amount of water appropriated from said well.
All GCDs require landowners to register their wells. And each GCD has different rules so it is important that landowners find out if your property is covered by a GCD and its specific regulations. For example, some districts require landowners to obtain a permit before drilling a well or replacement well on their land. If the permit is granted, the landowners may be restricted as to the location of the well on the land or how much groundwater they are permitted to extract.
GCDs often use historical data, the intended usage (agricultural, livestock, etc.), and the impact on the aquifer overall to determine how much water may be appropriated. Landowners may find themselves in situations where they are denied additional wells or any wells at all. Some districts even impose restrictions on the transport of groundwater outside of the district after it has been extracted.
Groundwater extracted from properties outside of a GCD’s jurisdiction, however, is largely unregulated, although the Rule of Capture still applies.
Surface Water Use
Since surface water is owned by the State, landowners must obtain a “water right” from the State to use any surface water. A water right provides a landowner the legal right “to impound, divert, or use state water.”
Landowners may obtain a water right by applying for a permit from the Texas Commission on Environmental Quality (TCEQ). After obtaining a permit, the landowner can use surface water for domestic, agricultural, industrial, and other beneficial uses. The permit will specify the amount of surface water that can be appropriated and the water right’s duration. Regardless of the amount appropriated, a landowner cannot take more water than he or she can put to beneficial use. Generally, a permit will allow for appropriation as long as the beneficial use continues, but it can be limited to a matter of days or years.
The date the TCEQ grants the landowner a water right permit is especially important because it determines the permit holder’s “priority date.” Water law in Texas is based on the doctrine of prior appropriation, which stands for the proposition “first in time, first in right.” Landowners who received their water right first will have seniority over the landowners who obtained their permits later in time. If there is a shortage, the senior water right holder will get priority over the junior water right holders. The TCEQ is required to comply with the doctrine of prior appropriation when issuing curtailment orders in drought conditions. Value of Water Rights
The value of a water right depends on a variety of factors such as location, category (surface water or groundwater), priority date, quality and reliability of the water, alternative sources of water, and other administrative issues.
For surface water rights, the priority date of the right itself and the other water rights around it are especially important. A surface water right with the oldest priority date will be the most valuable as it will get seniority over the other junior water right holders in times of need.
Groundwater value may be affected by a local GCD’s limitations and regulations. For example, some GCDs limit the export of groundwater outside their jurisdiction. A permit for a well within a GCD’s jurisdiction, however, will have its own transferable value.
Conveying, Transferring, or Leasing Water Rights
A water right is a property interest and may be conveyed, transferred, or reserved. If a landowner sells his land without explicitly reserving his water right, it will pass with the land to the new owner.
Similar to minerals, a landowner can sell or reserve his groundwater rights separately from the rest of the property. This type of conveyance is referred to as a “severance” and is most recognizable in oil, gas, and mineral conveyances. A conveyance or reservation of “minerals” does not include water as water is not legally categorized as a mineral.
For these reasons, landowners should confirm that they are acquiring groundwater rights as part of their land or mineral purchase. If the land has been previously “severed,” the landowner should have an attorney examine the language of the prior conveyances to determine who owns the groundwater.
Similarly to oil, gas, and minerals, landowners can commercially lease their groundwater so long as the well is legally placed, production is within the set limitations, and other conditions are satisfied. This type of arrangement could be particularly beneficial in areas in which water is in high demand. However, transaction costs and a limited pool of buyers can make groundwater leasing challenging.
Since many of the same legal doctrines which apply to oil, gas, and minerals are applicable to water, a groundwater lease would follow a similar format to that of an oil, gas, or mineral lease. Among other things, the lease agreement should identify the amount of groundwater to be appropriated and the withdrawal rate. If you are interested or approached about leasing your groundwater rights, you should carefully consider your own current and future water needs, evaluate the potential impact on the value of the property, and contact an attorney to draft a bullet-proof lease agreement.
Surface water rights can also be sold through a contract for sale or leased. The water right should be explicitly transferred by deed and recorded. If a landowner sells or transfers a water right permit it obtained from the TCEQ, he or she must notify the TCEQ and amend the permit if the transferee will change the location, amount, or purpose of the water right being conveyed. The TCEQ must approve the amendment.
Whether you are buying or selling a water right, the first step is to determine who has ownership and the extent of their ownership rights over the water right. This may involve researching deeds, other county records, and files from the applicable state agency or GCD. Next, you will want to determine the amount water which can be appropriated, the diversion point, diversion rate, priority date, purpose, any limitations/restrictions, and more to help with valuation.
Protecting your Water Rights
You can lose your surface water rights. It may be considered “abandoned” if you do not use your water rights for 10 years or more. The TCEQ requires permit holders to submit an annual water-use report, even if they did not use any water. Additionally, if you are delinquent in paying any administrative fees to TCEQ for more than one year, your water balance will be reduced to zero, and diversions will not be authorized until all overdue assessments are paid. Accounts that remain inactive for 10 consecutive years can be considered for cancellation by the TCEQ.
Unlike surface water rights, groundwater rights cannot be abandoned, but they can be unintentionally lost through careless conveyances or infringed upon by administrative regulations or other landowners. Although GCDs cannot completely divest landowners of their right to groundwater beneath their land, their limitation or restrictions could impair the land’s market value and the use and enjoyment of the property.
Within the past few years, several landowners have sued their local GCD challenging its authority to regulate their groundwater usage. The Texas Supreme Court recently held that landowners have an interest in groundwater in place that cannot be taken for public use without adequate compensation as guaranteed by the Texas Constitution.4 If your groundwater rights have been unreasonably infringed upon or taken, you should seek counsel of an attorney to determine what rights and remedies are available to you.
- TCEQ v. Texas Farm Bureau, (2015)
- Moser v. U.S. Steel, 676 S.W.2d 99 (Tex. 1984).
- Day v. Edwards Aquifer Authority (Tex. 2012).
About the Author: Tony Malley is a licensed Texas Attorney, Texas Real Estate Broker, and approved course Instructor by the Texas Real Estate Commission. Tony owns and manages Malley Law Firm, PLLC which handles a wide range of litigation, trials and arbitrations all over Texas in state and federal courts. A growing area of his practice includes negotiating and litigating all matters of real estate, water and minerals. In 2014 H Texas Magazine recognized Tony as one of the Top 25 Attorneys in Houston. Texas Monthly, with Thomson Reuters, has selected Tony as a Super Lawyer in 2013, 2014, and 2015, with 2013 being the earliest age an attorney could be a candidate for Super Lawyer. This year the National Association of Distinguished Counsel made Tony a member of their organization restricted to the Nation’s Top One Percent of practicing attorneys. He is a member of the Million Dollar Advocates Forum and is Board Certified In Personal Injury Trial by the Texas Board of Legal Specialization.