Our latest bulletin discussing the watershed Texas Supreme Court opinion in Day regarding ownership rights of groundwater may soon be joined by a federal court ruling dealing with regulation of those waters flowing above the surface in Texas rivers, creeks and other watercourses. At stake may lie the habitat and future of the whooping crane. The whooping crane is listed as an endangered species and as such is entitled to broad federal protection which includes its habitat. This litigation raises allegations that decisions made by the Texas Commission on Environmental Quality to divert water from the San Antonio and Guadalupe rivers damaged the crane's habitat in San Antonio Bay resulting in a significant shortfall in blue crab production (their favorite food) resulting in an increase of crane mortality rates which might constitute a "taking" contrary to the prohibitions of the Endangered Species Act. The current case, The Aransas Project v. Bryan Shaw, Civil Action No. C-10-75, United States District Court for the Southern District of Texas, Corpus Christi Division, has already been tried and is awaiting the Court's ruling this summer. The outcome may affect the State's regulation of water that flows above the ground. Although the Court's earlier 45-page Order issued Dec. 5, 2011 did not receive significant publicity, the Court decided several crucial issues providing insight into the likely outcome of its anticipated ruling. It appears that the State of Texas will be under federal and state judicial scrutiny as it works to develop a methodology to preserve, conserve, and allocate precious water resources.
The Court made several broad rulings that will more than likely be reflected in its final judgment. The Court rejected "Defendants' argument that they [basically the TCEQ] are essentially powerless to regulate water resources in the manner Plaintiffs suggest," concluding that the TCEQ had authority over water permits and the diversion of water from rivers. Order at 11 "Even if it is true that the TCEQ Defendants can do little about existing permit holders, they most certainly can implement changes with respect to new permits." Id. The Court believes that injunctive relief with respect to new permits might be appropriate until "sufficient assurances" are provided that new permits "will not result in harm to the Whooping Cranes." Id. The Court does not address its ability to affect adjudicated previously existing water rights, but does suggest in a footnote that the TCEQ will have the authority under SB 3 to adjust conditions for new permits or amendments to existing water rights for permits that seek to increase the amounts of water taken, stored, or diverted. Id. at 11 The impact of the State's authority remains unclear.
The Court rejected the State's argument for immunity finding that the plaintiffs only sought injunctive relief and not monetary damages. Prospective declaratory and injunctive relief against the State is allowed by the Eleventh Amendment to the Constitution of the United States. The Court also found that Section 9 of the ESA which prohibits takings of endangered species applies to regulators in part based on the definition of "person" which applies to any "officer, employee, agent, department or instrumentality ... of any State ... or political subdivision of a State." The Court also found that "the weight of persuasive authority strongly supports the conclusion that ESA Section 9 extends to permit lawsuits against state or federal regulators for regulatory failures that result in a 'taking' even if that taking is directly caused by the actions of a regulated party." Id. at 25
Finally, the Court decided that it was not required to abstain from making a ruling on this matter because of the Burford abstention doctrine. In essence, the Court found the Burford abstention only applies when a complex issue of unsettled state law is presented that is better resolved by the state's comprehensive regulatory scheme. The Court's analysis focused on: (1) the specific protection afforded endangered species under the Edwards Aquifer Act; (2) the limited temporal authority of the of SB 3; (3) the uncertain schedule of the regulatory deadline for environmental flow standards; and (4) the interstate and international scope of the protection of the endangered birds. The Court noted the existence of an SB 3 process that was underway and that it was not nearly complete. Although TCEQ adopted environmental flow standards for surface water on May 6, 2011, the regulations will have no effect on permits issued before Sept. 1, 2007. The published standards may be viewed here. At the present time, it is unclear whether the environmental flow standards will be sufficient to meet the Court's criteria for protection of the whooping crane and its habitat. Ultimately, the success of the plaintiffs' case depends on the ability to produce sufficient evidence to prove that whooping cranes have been taken as a result of the defendants' actions. A hotly debated issue, the question of causation (the connection between low flow conditions and crane mortality) remains the factual backdrop to be decided by the Court.
While owners of groundwater in place may be facing new legal and regulatory challenges, it is clear that state regulators are also facing challenges by vocal environmental interests to the administration of surface water rights. Indeed the ESA may and undoubtedly will fuel regulation by litigation as environmental interests rise to claim their share of water resources in the state. Given the number of endangered species and candidates waiting for protection, Texas regulators and owners of water rights may face these concerns as each interest jousts for its share of resources.