Regulatory taking of water rights

In a prior post, I explained the holding of a Texas Supreme Court opinion that held that regulation of water rights might constitute a regulatory taking. The text of that post is at the end of this one. A subsequent case involving similar facts actually held that limits on withdrawal of groundwater designed to preserve water for drinking purposes actually took the property rights of water rights owners who had received permits to use the water to irrigate their pecan crops. That case is Edwards Aquifer Auth. v. Bragg, 421 S.W.3d 118 (Tex. Ct. App. 2013) and it meant that the regulation in question could not be enforced without just compensation.

It was expected that the Texas Supreme Court would hear that case on appeal to affirm or overrule its holding but surprisingly, the court has denied appellate review. Edwards Aquifer Auth. v. Bragg, 2015 Tex. LEXIS 400 (Tex. 2015). That either suggests approval of the lower court's ruling or no opinion on the matter. Either way it leaves the scope of state power to regulate the use of groundwater in some doubt.

Traditionally, regulations were allowed without compensation to prevent harm or to reconcile competing property rights. Either of those principles would seem to apply to a water shortage. For example, the case of Miller v. Schoene, 276 U.S. 272 (1928),  approved destruction without compensation of cedar trees because they communicated a disease that was killing apple trees that represented a major industry in the state. It is interesting to note that the Florida Supreme Court came to the opposite result in Dep't of Agric. & Consumer Servs. v. Mid-Florida Growers, Inc., 521 So. 2d 101, 103 (Fla. 1988) (holding that the state had to pay just compensation when it destroyed healthy orange trees to prevent the spread of citrus canker).

It is not clear if a takings challenge could be avoided by conditioning future grants of water rights on reasonableness limitations or making such rights defeasible in case of environmental need or water shortages. Clearly, the law in this area will develop further in the near future.

Text of prior post:

The Texas Supreme Court has issued a somewhat confusing opinion holding that landowners own the groundwater beneath the surface of their land. In Edwards Aquifer Auth. v. Day, No. 08-0964 (Feb.24, 2012), the Texas Supreme Court held that a water regulation commission may have taken an owner's groundwater rights without just compensation under the Penn Central test when it limited an owner's groundwater rights to the amounts of water he had historically taken from the land. The court found a state law that defined the amount of groundwater one can withdraw based on historical uses to be a potential taking of property because it believed an owner should not lose the right to withdraw vested rights in groundwater just because the landowner had failed to exercise his right to withdraw it in the past. The court did not overturn the state's free use or absolute ownership rule for groundwater that allows owners to withdraw water without liability to neighboring owners whose wells are dried up or whose water amounts are reduced. It did hold that the landowner "owns" the groundwater beneath the surface and that use of several factors, including but not limited to historical uses, might constitute a legitimate regulatory measure. The court remanded for a determination of whether the state statutes, as applied to this owner, constituted a taking of property under the multi-factor Penn Central test. The case leaves groundwater regulation in Texas in a state of great uncertainty since the allowable parameters of regulation of groundwater are now in doubt. The Court cautioned that it did not believe its ruling would be disruptive and the legislature remained empowered to enforce environmental laws regulating water withdrawal without violating the takings clause. At the same time, it suggested that environmental regulation of water might require compensation of owners whose rights to withdraw water are restricted