Vol. 52-1 Water Rights
Water Rights
Brazos River Auth. v. City of Houston, 628 S.W.3d 920 (Tex. App.—Austin 2021, pet. filed)
Background
This case arose over a dispute from the right to construct and operate a reservoir on Allens Creek.[1] The City of Houston sued the State of Texas and the Brazos River Authority (“BRA”), seeking to block the implementation of a new law that would force the City to sell its water rights in the proposed Allens Creek Reservoir to the BRA for up to $23 million by the end of 2021.[2] Specifically, the site of the proposed reservoir is a tract of about 9,5000 acres located in Austin County near the confluence of Allens Creek and the Brazos River.[3] This site was designated “a site of unique value for the construction of a dam and reservoir on Allens Creek” and “that construction and development of the Allens Creek Reservoir project” would be “in the public interest and would constitute a beneficial use of the water.”[4]
For over two decades, the City and the BRA have jointly held a water-appropriation permit authorizing them to construct the reservoir and to use the impounded water.[5] In 2019, however, the Texas State Legislature passed House Bill (H.B.) 2846, which instructed Houston to enter into a contractual agreement with the BRA to transfer its entire interest in the proposed reservoir, including its permit rights, to the Authority.[6] H.B. 2846 was intended to encourage development of the reservoir by transferring the City’s entire interest in the reservoir and all rights to the BRA.[7]
Houston responded by suing the State of Texas and the BRA, asserting that H.B. 2846 is invalid on multiple grounds.[8] The district court granted declaratory relief, finding that H.B. 2846 is “unconstitutional, void, and unenforceable” because it violates the Texas Constitution’s prohibition of retroactive laws, local or special laws, and the forced sale of government property.[9] In a separate order, the district court sustained Houston’s evidentiary objections in part and overruled them in part.[10] The State and the BRA appealed the decision.[11]
The Third Court of Appeals’ Decision and Discussion
The Texas Third District Court of Appeals upheld the lower court’s decision to protect the City of Houston’s interest in the unbuilt reservoir by striking down a state law and declaring it unconstitutionally retroactive based on its impairment of Houston’s water rights.[12]
First, the appellate court discussed why H.B. 2846, as a later-enacted and more specific statute, controls regardless of a conflict with the Local Government Code.[13] Next, the court examined the constitutional challenges to H.B. 2846 and elaborated on its conclusion that there was a failure to demonstrate an overriding public interest in violating the water rights of the City in the unbuilt reservoir.[14] Despite a presumption that the statute was valid, the court construed H.B. 2846 “as a whole” to determine that it had retroactive effect.[15] Thus, the analysis turned to whether the law was unconstitutionally retroactive.[16]
The City argued the law is unconstitutional in part because it violates prohibitions on retroactive laws and on forced sales of municipal property that have a public use.[17] On the other hand, the BRA argued that H.B. 2846 is in the public interest because it is necessary to discharge the legislature’s constitutional duty to conserve the state’s natural resources.[18] In its decision, the appellate court relied on the three-factor test established in a 2010 Texas Supreme Court decision, Robinson v. Crown Cork & Seal Co., to review whether a statute violates the state’s constitutional prohibition on retroactive laws under the following factors: (1) the nature and strength of the public interest served by the statute; (2) the nature of the prior right violated by the statute; and (3) the extent of the impairment.[19]
Although the court agreed that constructing the reservoir is in the public interest, concerns regarding the law remain unaddressed and, according to the majority, “nothing in the record supports a conclusion that H.B. 2846 resolves these concerns.”[20] The conclusion is bolstered by the fact that H.B. 2846 itself does little to advance construction of the reservoir without further action from the Legislature or the Commission.[21] Ultimately, the majority determined the legislature lacked justification to retroactively apply the state statute to Houston’s interest in the unbuilt reservoir because the legislation served a minimal public interest while having a significant impact on Houston’s settled property rights.[22] Therefore, even though H.B. 2846 could serve a compelling interest, the court concluded the statute was unconstitutionally retroactive in balancing the law’s “purpose against the nature of the prior right and the extent to which the statute impairs that right.”[23]
In affirming the trial court’s judgment and granting declaratory relief, the court found H.B. 2846 to be “unconstitutional, void, and unenforceable.”[24] However, dissenting Justice Melissa Goodwin said that the legislature’s action should carry a presumed constitutionality and require Houston to demonstrate the need to strike down the law.[25] Justice Goodwin points to the City of Houston’s failure to do so, and questioned Houston’s proof of its vested water rights in the reservoir because it received permits for the project’s development decades earlier but failed to move forward on construction.[26] Additionally, although Justice Goodwin admits to the questionable policy reasons behind the legislation, her dissent notes that the law’s constitutionality should be evaluated, rather than its policy.[27]
Implications of the Decision
This court’s decision restores the City of Houston’s interest in the Allens Creek reservoir project and affirms the state prohibition against retroactive statutes. This decision appears to be an obstacle to the legislature’s ability to take away rights and property from a city and transfer those interests to another governmental entity. This decision could be used in the future to prevent the legislature from using its powers to require the involuntary transfer of property from a city to another governmental entity. The court’s application also reinforces the Robinson factor test established by the Texas Supreme Court and provides insight into the courts’ decision-making process on issues involving the constitutionality of retroactive statutes.[28]
It remains to be seen how durable this finding, and its implications, will be—the State of Texas and the BRA filed petitions for review with the Texas Supreme Court on October 15, 2021.
Carlo Lipson is a second-year student at the University of Texas School of Law. He joined TELJ in the Spring of his 1L year, and has enjoyed being a part of the journal and learning about the many current environmental law issues and policies. Carlo is from San Francisco, attended undergrad at the Claremont Colleges outside of Los Angeles, and is planning to return to California after law school.
Emily Rogers is the Managing Partner of Bickerstaff Heath Delgado Acosta LLP and represents public and private clients in water rights, water quality, utility, and environmental law matters.
Kimberly Kelley is an attorney at Bickerstaff Heath Delgado Acosta LLP and practices in the areas of municipal, open government, water, and environmental law. She earned her undergraduate degree from Texas A&M University and graduated Texas Tech University School of Law, where she served on the editorial board of the Law Review.
[1] Brazos River Auth. v. City of Houston, 628 S.W.3d 920 (Tex. App.—Austin 2021, pet. filed).
[2] Id. at 925.
[3] Id. at 923.
[4] Id.; Act of May 22, 1999, 76th Leg., R.S., ch. 1291, § 1.01, 1999 Tex. Gen. Laws 4426, 4426 (S.B. 1593).
[5] Brazos River Auth., 628 S.W.3d at 922.
[6] See id.; See Act of May 16, 2019, 86th Leg., R.S., ch. 380, § 1, 2019 Tex. Gen. Laws 688, 688 (H.B. 2846).
[7] Brazos River Auth., 628 S.W.3d at 924.
[8] Id. at 925.
[9] Id. at 922.
[10] Id. at 925.
[11] Id.
[12] Id. at 936.
[13] Id. at 927; See Tex. Loc. Gov’t Code Ann. §§ 272.001(a), 552.020 (West 2019).
[14] Brazos River Auth., 628 S.W.3d at 936.
[15] Id. at 928.
[16] Id.
[17] See id. at 928.
[18] See Tex. Const. art. XVI, § 59(a); See Brazos River Auth., 628 S.W.3d at 929.
[19] Id. at 929; see Robinson v. Crown Cork & Seal Co., 335 S.W.3d 126, 145 (Tex. 2010).
[20] Brazos River Auth., 628 S.W.3d at 930.
[21] Id. at 931
[22] Id. at 936.
[23] See id. at 931.
[24] Id. at 936.
[25] See id. at 937.
[26] Id. at 930.
[27] See id. at 945.
[28] See id. at 929.