MEMORANDUM ON SENATE BILL 332, AS PASSED BY THE TEXAS SENATE

Introduction:

SB 332, as passed by the Senate, is the child of a shotgun marriage between two
earlier-filed bills that are in deep conflict, SB 332 (filed version) and SB 667. The
basis for conflict is that each of these bills belongs to one of two deeply-opposing
traditions within Texas groundwater law.

SB 332 derives from the law of rain-soaked nineteenth-century England, within

which drainage for agriculture and mining was the most critical water issue and
groundwater was considered too “secret” to be understood. In fact, there was no way
to understand it at that time. Those circumstances yielded a “no liability for drainage”
rule – no matter the destruction of another private landowner’s supply – that was
“received” into Texas’s common law over a century ago.

This is the “Rule of Capture,” with its entirely private focus and its complete inattention
to public consequence that SB 332 seeks not merely to “clarify” but to extend. If SB 332
becomes law, it will be the agent of both immediate and long-term ill effects on Texas’s
current groundwater management system – a system stemming from the second tradition
that has animated this state’s groundwater law but has only recently begun to develop the
necessary machinery to do its work.

The alternate bill, SB 667, manifests a different intent. It is designed not to extend
but to affirm and protect the policy positions that the Legislature began, haltingly,
to shape for the public benefit after the people of Texas ratified the “Conservation
Amendment” to the state constitution. This constitutional provision – Article XVI,
Section 59 – contains an explicit mandate that all legislators have the duty – so it is stated
– to pursue the “preservation and conservation” of all of the natural resources of Texas by
passing “such laws as may be appropriate thereto.” The Amendment, motivated by the
experience of a terrible drought, refers to water or the vital functions of water nine times.

Given the later drought of record, more recent droughts, and predictions of chronic
water scarcity in the twenty-first century, the Texas House and the Senate have
worked constructively in the recent past to create a substantial edifice of agencies
and planning devices to bring groundwater management into alignment with the
current and oncoming needs of this vast, burgeoning, and complicated state. These
efforts did not deny a role to market forces. They were passed in full recognition of the
fact that quantities of water would have to become available for market-based transfers,
for example, from traditional agricultural users to growing urban centers and from one
type of “beneficial” use to another.

But the large umbrella statutes – Senate Bill 1 in 1997, Senate Bill 2 in 2001, and Senate
Bill 3 in 2007 – and other statutes such as House Bill 1763 in 2005 had a different
purpose, one responsive to the constitutional mandate: They facilitated coordinated,

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science-based groundwater management so as to try to prevent aquifer depletion,
diminution, and degradation and depleting effects on surface water as their by-product.

These by-products are effects, known as “negative externalities,” for which market forces
do not hold themselves responsible or accountable. These are effects that cause vast
injury – far beyond the drainage of a neighbor’s groundwater supply – to the people and
the interests of this state. That is because, unlike oil and gas, there is no substitute for
clean and sufficient water supplies. They are the lifeblood of civilization itself.

For these reasons, the Legislature undertook to invoke modeling and other science-based
planning into its water development regime—techniques that the winner-take-what-he-
wants Rule of Capture does not embrace. Moreover, the Legislature has moved to
incorporate not only respect for local groundwater diversities and the diversity of
local political cultures but an increasing respect for the integrity of aquifers as
whole and unique bodies that can only be protected by integrated means.

These efforts remain incomplete and underdeveloped. The groundwater conservation

districts on which they principally rely run on low infusions of funds by design and often
on the work of unpaid volunteers. The clear fact that there is a single hydrological cycle
and that groundwater and surface water therefore share an inevitably linked fate has not
yet been incorporated into the traditionally bifurcated management of both. Wildlife
species conservation through attention to the vigorous maintenance of instream flows is
barely underway, its connection to groundwater supplies not yet taken into account.

Crucially, the courts of Texas have sent mixed signals about their willingness to
become full partners in the coordination of old law and new, even as they await the
receipt of a firm sense of direction from the Legislature. A deeply mixed signal such
as SB 332, which is at war with itself, would not only throw wrenches into the works of
groundwater management for the indefinite future. It would also perpetuate the
ongoing struggle between the opposing traditions within Texas groundwater law and
policy – one tradition based on the law of another country’s soggy past, the other made
on the basis of increasingly sound groundwater policy for Texans by its constitutionally-
directed legislative stewards over the past several years.

It is too late in history for these two traditions to coexist. Their unsavory marriage
should be ended. It should not be newly, and chaotically, enshrined in SB 332. The
observations that follow demonstrate some of the regrettable consequences of SB 332.

Consequences of SB 332, By Example:

1—SB 332 was passed by the Senate on the receipt of no study or expert advice
about its potential effects on aquifers, rivers, and streams. It received a single day of
hearings in the Senate. No major piece of water legislation should receive the bum’s
rush from the Legislature. There is no emergency to which this bill responds.

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2—SB 332 is an attempt to newly implant the old Rule of Capture in new Texas law,
presumably to forestall any reconsideration of it in the Texas courts. The bill’s
denial of liability to one private landowner in consequence of another private owner
or agent’s aggressive groundwater production – unreasonable under the law of
other states and unlawful under the Texas law of oil and gas – is rightfully known as
“the Law of the Biggest Pump.”

In areas not under the management of groundwater districts, where no publicly-minded

agency exists, the depleting and degrading effects of over-aggressive production are of
vast consequence to entire aquifer segments and, on account of the hydrological
connection between groundwater and surface water, to rivers and streams, as well. This
is a direct affront to the Conservation Amendment’s mandate, setting the stage for legal
challenges of constitutional dimension, whether “facial” – because of the statute as
written – or applied.

3—The limited liability rule that the groundwater “Capture” doctrine entails – not
what the legislature would set loose on Texas highways, where traffic safety is at
risk, or in the oil fields, or in the mines – is an anti-conservation device. It invites old-
style aggressive pumping, as it does not recognize the need for reasonable pumping limits
and in fact, bars them from consideration except on narrow, largely unused and inflexible
grounds. The Rule inhibits reasonable sharing of the groundwater resource between
neighbors, competing industries, and adjacent states. It does not recognize shared rights
or needs, nor does it recognize the interdependence of surface water supplies on
groundwater supplies.

4—Invitations to aggressive groundwater pumping also invite expensive and

burdensome challenges under federal law, as soon as over-production threatens the
existence of endangered species, as it most surely will. As the Legislature knows, these
challenges cause the federal courts to impose resource management limits that agencies
of the state would be more prudent to undertake themselves.

5—SB 332 extends past the limits of the Texas common law in its codified insistence
that the Rule of Capture is also a “vested” private ownership right in groundwater,
a matter the Day case pending in the Supreme Court grants the first true opportunity in
many decades to the Court to settle. As critics of a strong property right and the limited-
liability Capture Rule have long observed, these are legal concepts that do not well co-
exist: Your property right in groundwater is only as secure as your neighbors’ pumping
allows; and your neighbors’ pumping is unrestrained under the Capture Rule, where even
the most aggressive but non-malicious pumping for any “beneficial” purpose – call it
production and out-of-basin removal for commercial bottled water sales – in areas not
under the management of groundwater districts can devastate the value of your land.

6—There is an open question about whether the Legislature has the legal authority
to characterize existing permitted groundwater rights as “vested” property rights or
whether this designation would apply prospectively to new rights only, however they
were to come into existence. This could well be implicated in the manner that the

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Supreme Court decides the Day case. If only “new” rights were lawfully able to receive
the “vested” designation, then the only boost in value to rights holders would go to the
new recipients of what would become premium-level groundwater rights, an issue it
could take the groundwater districts and the courts decades to settle out.

7—The idea of a “fair chance at production” that SB 332 contains has no conceptual
basis in law. This is known to lawyers as a “litigation breeder”. It will impoverish
groundwater districts who will become embroiled in legal challenges to their allocations
under mandated groundwater limits.

8—The transfer of groundwater rights through surface sales and severance

agreements would set up “takings” challenges to pumping limitations imposed by
groundwater conservation districts throughout the state. Because in Texas very few
cases are challenged “all the way” up to the Texas Supreme Court and such challenges
move slowly, divergent rulings by trial and intermediate level courts around the state
would decimate any chance for consistent groundwater planning under the proposed
legislation. Just the existence of multiple nodes of litigation and pressures on all levels of
agency planning that this would inevitably entail would result in a loss of momentum for
water resource management that could take decades to reverse, even if a reversal could be
practically put into effect—a situation the early oil boom was not allowed to create.

9—If the Legislature enacts SB 332, engendering heavy litigation assaults against
groundwater conservation districts in weak financial shape, it behooves the
Legislature to set aside funds for the coming biennium to prevent the financial
failure of any districts currently in place. It will be too late to save the solvency of
some of them by the time the next regular session of the Legislature comes around.

10—To the extent that SB 332 were to create a “vested” property right in
groundwater, its status would then be fully analogous to that of oil and gas, setting
up a challenge to the ad valorem tax as applied to those resources or a challenge to
any failure to impose one on groundwater on an equivalent set of terms. This matter
requires study before further action is taken on this bill.

11—SB 332 should be studied for its environmental impacts by well-recognized

hydrologists and scientists, as those impacts cannot fairly be understood by any
other means. Not only is there a constitutional mandate to the Legislature to preserve
and conserve the natural resources of the state of Texas, but there is also the reality that
major changes in state water law may have profound environmental impacts. The public
and public officials need to have as clear an understanding of what those impacts are
going to be when changes as far-reaching as SB 332 are pursued.

Lone Star Chapter, Sierra Club March 31, 2011