IN THE SUPREME COURT OF TEXAS
════════════
No. 06-0904
Guitar Holding Company,
L.P., Petitioner,
v.
Hudspeth County Underground
Water
Conservation District No. 1,
et al., Respondents
════════════════════════════════════════════════════
On Petition for Review from the
Court of Appeals for the Eighth District of
Texas
Argued December 5,
2007
Justice Medina delivered
the opinion of the Court.
The Texas Water Code generally delegates the management and control of
groundwater production and use to local groundwater conservation districts,
vesting them with broad regulatory powers. Tex. Water Code §§ 36.001-.304. When
exercising these powers to limit groundwater production, local districts may
protect existing wells and production by continuing “historic or existing use”
to the extent possible under its comprehensive management plan. Id. § 36.116(b).
The scope of this “historic or existing use” exemption and the extent to which a
district’s rules may operate to preserve such use are at issue in this
appeal.
The underlying rules here grandfather “historic or existing use” of
groundwater in the district to an amount of water previously used during the
relevant historic period without regard to the intended future purpose for that
water. Thus, under the district rules, production from a grandfathered well,
historically used to irrigate crops, can in the future be sold for transport out
of the district as a preserved historic or existing use. The court of appeals
upheld the district’s permitting scheme, concluding, in effect, that the
district’s authority to preserve the “historic or existing use” of groundwater
pertained only to the amount of water used in the past and not its purpose. 209
S.W.3d 146, 158-59. We conclude, however, that the amount of groundwater used
and its beneficial purpose are components of “historic or existing use” and that
the district thus exceeded its rule-making authority in grandfathering existing
wells without regard for both. Accordingly, we reverse the court of appeals’
judgment and render judgment, declaring the district’s scheme for issuing
permits for the transfer of groundwater out of the district invalid.
I
Groundwater conservation districts are “the state’s preferred method of
groundwater management.” Tex. Water
Code § 36.0015. Chapter 36 of the Texas Water Code grants these districts
broad authority to manage, conserve, and protect groundwater resources through
rule-making and permitting. Id. §§ 36.101(a), 36.113(a).
Under this chapter, each groundwater conservation district is required to
develop a comprehensive management plan with stated goals, such as, promoting
the most efficient use of groundwater, preventing waste and subsidence, and
addressing conjunctive surface water management issues, natural resource issues,
drought conditions, and conservation. Id. § 36.1071(a)(1)-(7).
When adopting its plan, the district must consider all groundwater uses
and needs to develop rules that are fair and impartial. Id. §
36.101(a). Part of the plan must include a permitting system “for the drilling,
equipping, operating, or completing of wells or for substantially altering the
size of wells or well pumps.” Id. § 36.113(a). A district may also
regulate well spacing and water production. Id. § 36.116(a)(1)-(2). When regulating
production, a district may consider: setting production limits; limiting the
amount of water produced based on acreage or tract size; limiting the amount of
water produced from a defined number of acres assigned to an authorized well
site; limiting the maximum amount of water produced on the basis of acre-feet
per acre or gallons per minute per well site per acre; managed depletion, or a
combination of any of those. Id. § 36.116(a)(2)(A)-(F). When
promulgating rules that limit groundwater production, a district may preserve
historic or existing uses of groundwater in the district to the maximum extent
practicable consistent with its comprehensive management plan. Id. § 36.116(b).
Finally, the district must develop its plan using the best available data and
must forward its plan to the regional water planning group for consideration in
its planning process. Id. § 36.1071(b). The district’s plan
must also be certified by the Texas Water Development Board. Id. §
36.1072(d).
A
The Hudspeth County Underground Water Conservation District No. 1 is
situated in northeast Hudspeth County, at the western foot of the Guadalupe
Mountains less than a hundred miles east of El Paso. This is an arid part of the
state, averaging only eight to ten inches of rain annually. The Hudspeth
District, however, includes the Bone Springs-Victorio Peak Aquifer and the
fertile Dell
Valley where there has been
irrigation for over fifty years. Although one of the state’s earliest
conservation districts, having been created in response to the historic state
drought of the 1950s, the District’s management of the aquifer has not been a
success. In fact, by mid-2000, the state auditor deemed the District non-operational,
questioning whether it was appropriately managing its groundwater.
In response, the District brought in an expert consultant to help bring
its management plan into compliance and return to operational status. During
this time, the City of El
Paso targeted the area as a potential source of water for
its growing demand. The Legislature was also active, amending the Water Code to
facilitate the transfer of groundwater to places in need, such as growing
metropolitan areas. After the Seventy-seventh Legislature
adjourned in 2001, the reconstituted Hudspeth District Board met to adopt a new
management plan and new rules.
Under its new management plan, the District committed itself to
sustaining the Bone Springs-Victorio Peak Aquifer at an historically optimal
level by regulating the withdrawal of groundwater. Groundwater production was
divided among three core classes of users: (1) statutorily exempt users, (2)
existing and historic users, and (3) new users, which also might include
historic users seeking to increase consumption. The right to produce groundwater
from completed, non-exempt wells was linked directly to the aquifer’s level,
although groundwater production limitations were to operate differently
depending on the type of permit held by the well owner.
The District adopted the current rules on May 31, 2002. These rules
recognize three types of permits: (1) validation permits, (2) operating permits,
and (3) transfer permits. Wells operating before the adoption of the District’s
new rules are generally entitled to validation permits. If a well is not
eligible for a validation permit, the landowner may apply for an operating
permit. Finally, transfer permits must be obtained to transfer water out of the
district. A validation or operating permit is required to obtain a transfer
permit.
Landowners who qualify for validation permits are entitled to withdraw
from three to four acre-feet per year, depending on the aquifer’s elevation, for
every acre irrigated during a designated historic and existing use period. The
District’s rules define this period to be ten-and-a-half years, beginning
January 1, 1992, and ending May 31, 2002. Landowners with validation permits who
did not irrigate during the historic use period are entitled to produce the
maximum amount of water beneficially used in any one year during the period. An
operating permit, on the other hand, entitles a landowner to produce water from
a new well based upon surface acreage. The production right under an operating
permit is further conditioned upon the elevation of the Bone Springs-Victorio
Peak Aquifer. Thus, unlike the holder of a validation permit whose production
rights are guaranteed, the holder of an operating permit has no right to
groundwater until the aquifer reaches a designated average water level.
Transfer permits are available to any holder of either a validation or
operating permit. Validation permit holders, however, particularly those held by
landowners who irrigated during the historic use period, receive substantially
greater transfer rights under the rules than other landowners because they
receive substantially greater guaranteed allocations of groundwater than other
landowners. By contrast, landowners who hold operating permits receive no
guaranteed allocation and thus may not have any right to transfer water when the
aquifer fails to reach the designated elevation.
B
Guitar Holding Company, one of the largest landowners in Hudspeth County, irrigated only a small portion of
its land during the designated historic and existing use period. It has obtained
validation permits for fifteen existing wells and has made application to drill
fifty-two new wells. Cimarron Agriculture Ltd., CL Machinery Company, RBB Farms,
and Triple B Farms have also received validation permits from the District.
Because these Hudspeth County landowners irrigated their land
during the historic and existing use period, they are permitted to produce a
significantly greater amount of water than Guitar, even though Guitar owns more
land. Further, because the District links transfer permits to validation and
operating permits, landowners with validation permits, particularly those with
grandfathered irrigation rights, can transfer these greater amounts of water out
of the district.
In four separate administrative appeals to the Hudspeth County District
Court, Guitar challenged the facial validity of the District’s new rules
regarding production and transfer permits and raised as-applied challenges to
the validity of permits issued to Cimarron Agriculture, CL Machinery, RBB Farms,
and Triple B Farms. The district court upheld the validity of the District’s
rules and issued permits, and the court of appeals affirmed those rulings. 209
S.W.3d at 161. Guitar appeals, complaining the District has misapplied its
limited authority to preserve existing or historic groundwater use within the
district and in effect granted certain irrigators a perpetual franchise to
transfer and sell Hudspeth County groundwater.
II
Guitar complains that this franchise has been accomplished by the
District linking transfer permits to validation permits that preserve the
historic or existing use of groundwater within the district. Guitar argues the
Water Code only authorizes a district to preserve historic or existing use of
the same type or purpose. Because transferring water out of the district is a
new use, it cannot be preserved or “grandfathered” under section 36.116(b),
which extends only to the preservation of an existing or historic use.
The District, on the other hand, argues that the provision granting it
authority to preserve historic or existing use makes sense only if “use” refers
to an amount of groundwater, not its purpose. Section 36.116(b) provides:
In
promulgating any rules limiting groundwater production, the district may
preserve historic or existing use before the effective date of the rules to the
maximum extent practicable consistent with the district’s comprehensive
management plan under Section 36.1071 and as provided by Section 36.113.
Tex. Water Code § 36.116(b). The
District submits that the provision does not address the purposes to which the
production is applied but rather implies a quantity by telling districts that
they may “preserve historic or existing use . . . to the maximum extent
practicable consistent with the district’s comprehensive management
plan.” Id. From this dispute, it is apparent
that the meaning of the word “use” is key to understanding a groundwater
conservation district’s authority to “preserve historic or existing use” through
rule-making under section 36.116. Id.
Chapter 36 of the Water Code does not expressly define “use” or “historic
or existing use.” Terms that are not otherwise defined are typically given their
ordinary meaning. Tex. Dep’t of Transp. v. Needham, 82 S.W.3d 314, 318
(Tex. 2002);
see Tex. Gov’t Code §
311.011. But undefined terms are also not construed “in isolation from the rest
of the statute.” Cities of Austin, Dallas, Ft.
Worth, and Hereford v. Sw. Bell Tel. Co., 92 S.W.3d 434, 442
(Tex. 2002).
They are instead to be read in harmony with other provisions of the statute.
McIntyre v. Ramirez, 109 S.W.3d 741, 745 (Tex. 2003).
The noun “use” ordinarily conveys something with a purpose, an object, or
an end. This meaning is confirmed elsewhere in
the chapter when the term is combined with a type or purpose. For example,
Chapter 36 defines the terms “use for a beneficial purpose,” “agricultural use,”
and “conjunctive use.” Tex. Water Code
§ 36.001(9), (20), (21). An amendment to the chapter, after the adoption
of the present local rules, however, indicates that the Legislature intended for
the phrase “historic or existing use” to have a slightly broader meaning.
In 2005, the Legislature added a new definition for “evidence of historic
or existing use,” which it defined as “evidence that is material and relevant to
a determination of the amount of groundwater beneficially used” during the
relevant time period. Id. § 36.001(29). The chapter
already defined “use for a beneficial purpose” with a list of specific purposes
and “any other purpose that is useful and beneficial to the user.” Id. § 36.001(9).
Read together, these definitions indicate that the amount of groundwater
withdrawn and its purpose are both relevant when identifying an existing or
historic use to be preserved. Indeed, in the context of regulating the
production of groundwater while preserving an existing use, it is difficult to
reconcile how the two might be separated. See id. § 36.0015 (purpose of
groundwater conservation districts is to conserve, preserve, and protect
groundwater through regulation).
Apparently, that is the Legislature’s view about groundwater permits as
well. Both amount and purpose are listed in Chapter 36 as recommended elements
for all well permits. See id. § 36.1131(a). In addition to well
ownership, location, and completion date, the chapter expressly addresses both
the “purpose for which the well is to be used” and the “conditions and
restrictions . . . on the rate and amount of withdrawal.” Id. §
36.1131(a)(4), (8). Similarly, the District’s current rules require that all
applications for permits include “a statement of the nature and purpose of the
proposed use and the amount of water to be used for each purpose.” Hudspeth
County Underground Water Conservation District No. 1 Rule 6.4(c)(3) (adopted May
31, 2002). Thus, both the amount of water to be used and its purpose are normal
terms of a groundwater production permit and are likewise a part of any permit
intended to “preserve historic or existing use.” A district’s discretion to
preserve historic or existing use is accordingly tied both to the amount and
purpose of the prior use.
III
In a related dispute, the parties disagree about whether the transfer
permits issued by the District are from new permit applications. Classification
as a new permit application is significant because a district may impose more
restrictive conditions on new permit applications under certain circumstances.
Those circumstances are set out in section 36.113(e), which provides that more
restrictive permit conditions may be imposed on new applications when the
limitations (1) are applied uniformly to all subsequent new permit applications,
(2) bear a reasonable relationship to the existing district management plan, and
(3) are reasonably necessary to protect existing use. Tex. Water Code § 36.113(e)(1)-(3).
Guitar argues that transferring groundwater out of the district is a new
use for which a new application must be made, and that as a new permit
application, the District must comply with the requirements of section
36.113(e). Guitar submits, however, that by using its rules to link transfer
permits to existing permits, either validation or operating, the District has
avoided applying the same limitations to all of the new transfer permit
applications. Guitar further submits that the District has thereby granted
certain farmers, who irrigated their land in the past, a preferential right to
convert their existing irrigation wells to an entirely new use without
satisfying more restrictive conditions applied to other landowners. Guitar
concludes that the District has exceeded its authority by granting preferential
transfer rights to some in-district users who no longer seek to preserve their
historic or existing use.
The District responds that its permitting scheme complies fully with
section 36.122, the provision generally applicable to groundwater transfers out
of district. That section provides that “a district may not impose more
restrictive permit conditions on transporters than the district imposes on
existing in-district users.” Tex. Water
Code § 36.122(c). An exception is recognized for new permit applications
which, as already mentioned, can include additional limitations if uniformly
applied and necessary to protect existing use. See id. §§ 36.122(c),
36.113(e).
The District submits that by linking transfer permits to existing permits
it has strictly adhered to the statutory directive by treating in-district users
and transporters identically. Under its rules, any permittee, who has the right
to produce groundwater in the district under either a validation permit for
existing use or an operating permit for new use, is entitled to obtain a
transfer permit. Thus, the District concludes that because it has not tried to
impose more restrictive permit conditions on transporters than on in-district
users, section 36.113(e) does not apply.
We agree with Guitar, however, that the transfer permits here are from
new permit applications. No landowner in the Hudspeth District has ever
transferred water outside the district or obtained a permit to do so before the
adoption of these rules. Because a landowner must have a transfer permit to
transfer water outside the district, all of the transfer permit applications
here are new within the meaning of section 36.113(e).
IV
Generally, a groundwater district’s rules and decisions are reviewed
under the substantial evidence rule. See id. § 36.253. The review is de
novo, however, when, as here, an action is challenged on the ground that the
groundwater district has acted beyond its statutory authority. See In re
Entergy Corp. 142 S.W.3d 316, 322 (Tex. 2004); see also Pub. Util. Comm’n
of Tex. v. City Pub. Serv. Bd. of San Antonio, 53 S.W.3d 310, 316 (Tex.
2001). Chapter 36 authorizes a groundwater district to establish different rules
and limits for historic or existing use, in effect, grandfathering landowners’
historic use to protect their existing investments and activities. Tex. Water Code § 36.116(b). The
chapter, however, also requires that all new uses be treated equally, directing
that limitations may be imposed on new permit applications, but only when done
uniformly and when reasonably necessary to preserve existing use. Id. §
36.113(e).
Although there is existing irrigation use in the district, the transfer
rules do not protect that existing use. Instead, the transfer rules permit
in-district irrigators to convert their protected existing use to an entirely
new use, that is, to transfer it out of the district for municipal and
industrial purposes. Once the groundwater allocated for existing irrigation use
is transferred outside the district, however, the protected existing use ends,
as does the justification for protecting that use. Rather than protect historic
or existing use then, the District’s transfer rules, in essence, grant
franchises to some landowners to export water while denying that right to
others. Because the limitations are not uniformly applied to these new
applications and are not necessary to protect existing use, the District’s
transfer rules exceed the statutory authorization and are thus invalid.
* * *
Accordingly, we reverse the court of appeals’ judgment and render
judgment declaring the rules relating to transfer permits in Hudspeth County
Groundwater Conservation District No. 1 invalid, as are the transfer permits
issued pursuant thereto.
____________________________________
David M. Medina
Justice
Opinion
delivered: May 30, 2008
|
Average Water
Elevation |
Validation Permit
Allocation |
Operating Permit
Allocation |
|
Greater than 3,580
feet |
4.0 acre-feet per acre per
year |
Pro-rata up to 4.0 acre-feet
per acre per year |
|
Greater than 3,570 feet but
less than or equal to 3,580 feet |
|
None |
|
Equal to or greater than 3,565
feet but less than or equal to 3,570 feet |
Pro-rata between 3.0 and 4.0
acre-feet per acre per year |
|
|
Less than 3,560
feet |
For irrigation, 3.0 acre-feet
per acre per year; pro-rata for all other uses |
|