Water Rights: “The Supreme Court Giveth and it Taketh Away”

By: Jocelyn A. Holland and James B. Galbraith

In a watershed decision issued in May 2016, the Texas Supreme Court established that groundwater rights, like mineral rights, are a dominant estate over the surface rights.  See Coyote Lake Ranch, LLC v. City of Lubbock, No. 14-0572, ___ S.W.3d ___, 2016 WL 3176683, at *1 (Tex. May 27, 2016).  Although the Court tempered this holding by applying the accommodation doctrine to water rights, the opinion may ultimately take more from Texas landowners than it gives.

In Coyote Lake Ranch, LLC v. City of Lubbock, the Court was asked to decide whether the City of Lubbock’s groundwater rights in 26,600 acres owned by the Coyote Lake Ranch permitted the City to drill wells and install power lines for water extraction, without regard for the Ranch’s surface rights. After concluding that a severed groundwater estate has the same right to use the surface that a severed mineral estate does, the Court turned to the groundwater deed for guidance on limitations on the City’s use.

The deed granted the City the “full and exclusive rights of ingress and egress” over the Ranch, along with the right to use all of the Ranch lands “necessary or incidental to the taking” of the groundwater.  The specific language in the deed provided as follows:

Grantors convey … all of the percolating and underground water in, under, and that may be produced from the hereinafter described tracts of land … together with the exclusive right to take such water from said tracts of land … together with the full and exclusive rights of ingress and egress in, over, and on said lands, so that [the City] may at any time and location drill water wells and test wells on said lands for the purpose of investigating, exploring producing, and getting access to percolating and underground water … together with the rights to use all that part of said lands necessary or incidental to the taking of percolating and underground water and the production ….

2016 WL 3176683, at *2 n.6.  The Ranch argued this language meant the City could only do what was incidental and necessary to access the groundwater subject to the Ranch’s restrictions on the use of the land, so long as the Ranch did not prohibit the City from having full access to the groundwater.  The City argued the language meant it could do everything necessary or incidental to drilling anywhere.

The Court concluded the Deed language was ambiguous and turned to the accommodation doctrine for guidance.

The accommodation doctrine is based on the principle that surface and mineral owners who hold conflicting estates should act with due regard for each other’s rights. After listing the similarities between groundwater and mineral estates, the Court concluded the accommodation doctrine was a proven rule for determining the instant dispute:

What is reasonable, necessary, or incidental for the severed estate cannot be determined in the abstract but must be measured against, and with due regard for, the rights of the surface estate. That is the accommodation doctrine, and we are reluctant to search for a new approach to resolving disputes over a severed estate’s implied right to reasonable use of the surface when a proven rule is at hand.

2016 WL 3176683, at *9. The Court specifically declined to address how the accommodation doctrine would work if both the minerals and groundwater are severed.

Thus, following the Coyote Lake Ranch decision, a Texas landowner may seek relief under the accommodation doctrine from the groundwater owner’s actions.  While on its face the Coyote Lake Ranch decision appears to provide some relief for landowners, the accommodation doctrine imposes a heavy burden of proof.  To prevail, the surface owner must show that,

(1)  the groundwater owner’s use of the surface completely precludes or substantially impairs the existing surface use,

(2)  the surface owner has no available, reasonable alternative to continue the existing use, and

(3)  given the particular circumstances, the groundwater owner has available reasonable, customary, and industry-accepted methods to access and produce the water and allow continuation of the surface owner’s existing use.

While the accommodation rule does give the surface owner some basis to argue for consideration of his surface use needs, the limitations on the application of the accommodation rule historically has provided scant comfort to surface owners.  See, e.g., Merriman v. XTO Energy, Inc., 407 S.W.3d 244, 249 (Tex. 2013) (holding that the “surface owner’s burden to prove that his existing use cannot be maintained by some reasonable alternative method is not met by evidence that the alternative method is merely more inconvenient or less economically beneficial than the existing method.”); Sun Oil Co. v. Whitaker, 483 S.W.2d 808 (Tex. 1972) (refusing to apply accommodation doctrine, despite destruction of landowner’s crops and loss of groundwater, because mineral owner needed underlying groundwater to produce additional oil); Davis v. Devon Energy Prod. Co., L.P., 136 S.W.3d 419, 425 (Tex. App.—Amarillo 2004, no pet.) (accommodation doctrine did not prevent mineral lessee from building caliche roads across land: while caliche might cause some problems, there was no evidence it would destroy landowners’ ability to conduct a profitable farming operation).

It therefore remains to be seen whether surface owners are able to use the accommodation doctrine to their benefit.

In addition, because the Court’s decision turned on the interpretation of the specific contract language, Coyote Lake Ranch underscores the importance of carefully drafting. The majority concluded the groundwater deed did not address whether the City could do everything necessary or incidental to drilling anywhere; the three concurring justices, however, disagreed.  They thought the deed language expressly addressed this issue, and therefore the accommodation doctrine did not apply: “Because the express terms of the parties’ agreement address the issue, the accommodation doctrine does not apply and the Ranch cannot rely on the doctrine to require the City to adopt an alternative plan for different well sites.”

This begs the question: how specific must deed language be to foreclose application of the accommodation doctrine and protect the surface owner’s rights?  The Coyote Lake Ranch decision does not make this clear.  Given the importance of the rights at issue, and the Court’s emphasis and reliance on the conveyance language used deeds or contracts, it would be wise for anyone dealing with groundwater severances to protect their rights by consulting an attorney.

This article has been prepared for educational and informational purposes only and does not constitute legal advice. The laws of other states and nations may be entirely different from what is described in this article. Because of these differences, you should not act or rely on any information on this article without seeking the advice of a competent attorney licensed to practice law in your jurisdiction for your particular problem. The author has endeavored to comply with all legal and ethical requirements in writing this article and does not desire to solicit or represent clients based upon their review of any portions of this article which do not comply with the legal or ethical requirements of the jurisdiction in which the client is located. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship.

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