The Fifth Circuit Court of Appeals has held that a landowner has stated a judiciable claim against the Brazos Valley Groundwater Conservation District (BVGCD) for an unconstitutional taking of his groundwater rights. David Strata, et al. v. Jan A. Roe, et al., No. 18-60994. Fascinating facts.
Groundwater Districts were created by the Texas Legislature to manage production of groundwater. Most Districts cover one county. The BVGCD covers Robertson and Brazos Counties. There are nearly 100 Districts encompassing 72 percent of major and minor aquifers in the State. Each District adopts its own rules governing permitting of and production from water wells.
BVGCD’s rules create three categories of water wells: Existing Wells, New Wells, and Wells with Historic Use. Its rules are designed to “minimize as far as practicable the drawdown of the water table and the reduction of artesian pressure, to control subsidence, to prevent interference between wells, to prevent degradation of water quality, and to prevent waste.” The rules provide that Historic Use Wells are generally limited to producing the maximum amount of groundwater used before the effective date of the District’s rules. New Wells have a maximum allowable production based on the number of contiguous acres assigned to the well. When a water well is produced it creates a “cone of depression” in the aquifer – the more water withdrawn, the greater the cone of depression. The District’s rules establish a formula that calculates the amount of water that can be withdrawn from a well based on the number of acres assigned to the well. For example, a New Well producing 3,00 gallons per minute must have 649 continuous acres assigned the well – a circle with a radius of 3,003 feet. No other wells may be permitted in this 649 acres. The District’s rules define “Existing Wells” as those wells “for which drilling or significant development of the well commenced before the effective date of these Rules.” But the rules do not establish production limits for Existing Wells that have no established historic use. Continue reading →
H2O Midstream recently announced its acquisition of “produced water infrastructure” from Sabalo Energy in Howard County – 37 miles of pipeline, nine salt water disposal wells, four Ellenburger salt water disposal well permits, and other assets. This brings H2O Midstream’s produced water network up to a combined “supersystem” for handling produced water of up to 435,000 barrels per day, 190 total miles of pipeline, and 40,000 barrels per day of recycling capacity. The deal includes a 15-year “acreage dedication” of Sabalo’s leases to provide produced water gathering, disposal and recycling services to Sabalo. H2O Midstream is funded by EIV Capital and its institutional partners.
H2O is one of several companies trying to create supersystem produced-water handling systems in the Permian and the Eagle Ford. Like H2O’s deal with Sabalo, these acquisitions typically involve transferring produced water infrastructure assets to the company and dedication of the seller’s leases to the system – a commitment to pay an agreed amount to the company for produced water disposal services.
From landowners’ point of view, this development presents some interesting questions and challenges.
A recent opinion from the El Paso Court of Appeals, Harrison v. Rosetta Resources, illustrates how important groundwater has become in oil and gas development in the Permian Basin.
Harrison signed a lease on Relinquishment Act land, as agent for the State. The lease provided that the Lessee has the right to use groundwater in its operations, except for waterflood operations. Harrison sued the lessee for tearing up an irrigation ditch and other claims, and the lessee agreed as part of the settlement of those claims to purchase 120,000 barrels of water from Harrison’s water well at fifty cents a barrel. The lessee built a frac pit and bought the required amount of water from Harrison. But then the lessee sold the lease to Rosetta. Rosetta drilled additional wells but, instead of buying the water from Harrison, it piped the water onto the lease from another source. Harrison sued. He claimed that Rosetta had orally agreed to continue the same arrangement he had with the previous operator. He also alleged that there was a local custom, known as the “West Texas Rule,” that the lessee would purchase groundwater from the surface owner. He also alleged negligence and violation of the accommodation doctrine. The trial court granted Rosetta’s motions for summary judgment, and the court of appeals affirmed. Harrison has no right to require Rosetta to purchase his groundwater.
In Texas an oil and gas lease conveys the mineral estate to the lessee for the term of the lease. Because the mineral estate is the “dominant” estate, the mineral owner/lessee has the right to use so much of the surface estate as is reasonably necessary to exploit the mineral estate. The surface estate includes groundwater, so the lessee has the right, unless limited by the lease, to use groundwater in its operations — even to the point of depleting the groundwater aquifer. This is true as to fee lands as well as Relinquishment Act lands.
Solaris Water Midstream announced last month that it is building an 11-mile water supply line from Loving County to Eddy County, New Mexico that will be able to transport about 150,000 barrels of day to supply water for completion operations in Eddy County. The water comes from wells in Loving County.
Some authorities in New Mexico are concerned that the Texas water comes from the same aquifer that extends into New Mexico. Loving County is not in a groundwater district, so there is no regulation of water wells, and landowners are free to pump as much as they like under the “rule of capture.” Groundwater is regulated in New Mexico, which taxes groundwater extracted in Eddy County. Aubrey Dunn, the state land commissioner in New Mexico, has complained that New Mexico is missing out on millions of dollars in taxes and suffering from depletion of its groundwater: “they’re taking water that’s New Mexico’s, pumping it out in Texas, and selling it back to us. It’s depleting a resource from future generations being able to use it.” He says New Mexico should sue Texas to force it to enact groundwater regulations. Dunn is running for the U.S. Senate as a Libertarian.
As they say, in Texas – Whiskey’s for drinkin’, water’s for fightin’.
The protest movement over the Dakota Access pipeline in North Dakota has moved to West Texas. According to the Houston Chronicle, three camps are taking shape – two camps to protest the proposed Trans Pecos pipeline, near Alpine, and one camp in Toyahvale, home to the famous spring and pool at Balmorhea State Park, to protest Apache’s plan to develop its Alpine High discovery. Energy Transfer Partners, the owner of the Dakota Access line, is also the developer and owner of the Trans Pecos line. Some of the protesters who camped out in North Dakota are moving down to the camps in Reeves County. The segment of the Dakota Access line being protested in North Dakota has been at least temporarily halted by the Corps of Engineers, but efforts to block construction of the Trans Pecos line have so far been unsuccessful.
Efforts to protect the spring at Balmorhea State Park focus more on use of fresh groundwater for hydraulic fracturing than on risk of pollution of the springs. Apache claims it will not tap the spring’s aquifer but will use deeper brackish water for fracking. But protestors remember Clayton Williams’ use of unrestricted pumping rights from the aquifer that supplied Comanche Springs in Fort Stockton. In 1951, Clayton Williams Sr. drilled 52 irrigation wells into the aquifer that fed the springs, and within hours the spring flow slowed to a trickle, and has never recovered. The Texas Supreme Court held that, under Texas’ “rule of capture,” Williams had the right to pump as much water as he wanted and had no liability for drying up the springs.
More recently, Clayton Williams Jr. has sought to sell water from these same wells for municipal supply to the City of Midland, but so far the Middle Pecos Groundwater Conservation District has blocked his efforts. The case is now pending on appeal in the El Paso Court of Appeals, Cause No. 08-16-00382-CV, Fort Stockton Holdings, L.P. v. Middle Pecos Groundwater Conservation District.
The Texas Supreme Court last week handed down its opinion in Coyote Lake Ranch v. City of Lubbock, holding, in a case of first impression, that the accommodation doctrine applies to govern the City’s right to use the surface of the Ranch to develop its groundwater.
Coyote Lake Ranch covers 40 square miles in Bailey County, on the Texas-New Mexico border northwest of Lubbock. In 1953, the then owners of the Ranch sold the groundwater under the Ranch to the City of Lubbock. The Ranch reserved the right to use groundwater for domestic use, ranching operations, oil and gas production, and agricultural irrigation, but the conveyance limits the Ranch to one or two wells in each of 16 specified locations. The Deed contains lengthy, detailed provisions on the City’s right to use the land. It grants to the City the right “at any time and location [to] drill water wells and test wells” on the Ranch, and to build roads, power lines and other improvements and otherwise make use of the Ranch lands “necessary and incidental” to the production of groundwater.
The groundwater underlying the Ranch is the Ogallala Aquifer, a huge aquifer that underlies much of north Texas as well as parts Oklahoma, New Mexico, Kansas, Colorado, and Nebraska. Water from the aquifer has made the arid high plains one of the most prolific agricultural regions of the United States. It is also a depleting resource and has been depleted in substantial areas of the Texas Panhandle. Continue reading →
The Texas Supreme Court yesterday granted Coyote Lake Ranch’s petition to review the Amarillo Court of Appeals’ opinion holding that the accommodation doctrine does not apply to severed groundwater. View my previous post on the case here.
The Atlantic Council, a Washington-based think tank, has published a draft white paper on the exploration industry’s use of water in Texas. The draft paper, “Sustainable Water Management in the Texas Oil and Gas Industry,” was written by John Tintera, of the Austin firm Sebree & Tintera. Tintera, formerly executive director of the Texas Railroad Commission, is now president of the Texas Water Recycling Association. The draft paper can be viewed here: DID264_1_073014.pdf. The Atlantic Council also has a white paper, “Produced Water: Asset or Waste?“, on its website.
Last week, the Amarillo Court of Appeals issued its opinion inn City of Lubbock v. Coyote Lake Ranch, LLC, No. 07-14-00006-CV, holding that the accommodation doctrine did not apply to restrict the City’s use of Coyote’s land to develop the City’s groundwater under the land.
In 1953, the City of Lubbock bought the rights to groundwater under the land now owned by Coyote Lake Ranch. In that deed, the City acquired all groundwater rights, and “the full and exclusive rights of ingress and egress in, over and on said lands so that the Grantee of said water rights 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.” The deed granted the right to lay water lines, build reservoirs, booster stations, houses for employees, and roads, “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, treating and transmission of water therefrom and delivery of said water to the water system of the City of Lubbock only.”
In 2012, the City proposed a well field plan for the property and began testing and development under that plan. Coyote sued, asking for a temporary injunction to halt the City’s activity. Coyote claimed that the City failed to accommodate Coyote’s existing uses of the property (the opinion does not say what those uses are), and that the City could use alternatives that would lessen damage to Coyote’s use of the land. The trial court granted the temporary injunction, holding that Coyote was likely to be able to show at trial that the City’s plan could be “accomplished through reasonable alternative means that do not unreasonably interfere with [Coyote’s] current uses.” The City appealed from that order.