Type: Development Article

By Emily Williams Rogers, Kimberly Kelley and Patrick Maloney

Water Rights

Texas Flood-Controlled Reservoirs

Introduction

Houston is located at the junction of the Buffalo Bayou and the White Oak Bayou, which drains into the Galveston Bay. As a result, Houston has a history of flooding and is familiar with flooding hazards. In response, Congress created flood control measures with the Rivers and Harbors Act of 1938.[1] Through this Act, the U.S. Army Corps of Engineers (the Corps) built both Addicks and Barker Dams and connected them to the Buffalo Bayou as part of an extensive flood control effort.[2] The purpose of the program was to protect Houston as it existed at the time the law passed, namely downtown Houston and the areas nearby.

The city originally purchased substantial amounts of land upstream of the dams to create reservoirs to hold flood water.[3] While the Corps acquired a significant amount of upstream land, it acquired less than initially planned, meaning that “the dams were designed to contain more water than the acquired land could hold.”[4] The Corps diminished its land requirements based off a large 1935 storm, although the  risk of a more significant storm was considered—approximately the size of Hurricane Harvey—that could occur once every fifty years.[5] However, the Corps expected that the rural areas surrounding the reservoirs would stay rural, therefore mitigating the potential risk posed by flooding.[6] Despite the Corps’ original expectations, rapid urbanization ensued, and by the late 1970s, the area upstream of the reservoirs were no longer rural.[7]

 In 2017, Hurricane Harvey unexpectedly poured an average of thirty-four inches of water on Houston in four days.[8] The Corps followed its mandate and protected downtown Houston. Thus, the area upstream of the dams experienced significant flooding, causing extensive property damage.[9] According to the Corps, the dams functioned properly and per their original purpose.[10]        

Upstream Addicks and Barker Takings Claims

With the wave of litigation against the Corps that followed, the cases were split between the upstream properties and the downstream properties.[11] This article analyzes upstream property owners’ cases who successfully argued that the Corps is liable for taking. Interestingly, the claims court found the downstream property owners did not own a protected property interest and therefore could not recover.  

Takings derive from the Takings Clause of the Fifth Amendment, which states that “private property [shall not] be taken for public use without just compensation.”[12] The Takings Clause holds the government liable for negatively affecting the value of private property in exchange for a public purpose. There are two, layered elements to a takings analysis. The first element is whether the plaintiff has a property interest within the meaning of the Fifth Amendment.[13] The second element is whether the government’s action amounted to a compensable taking of that interest.[14] 

Property Interest

The court began its analysis by noting that the homeowners own private property without flowage easements, ultimately concluding that the plaintiffs maintained a property interest within the meaning of the Fifth Amendment.[15] The Corps provided three reasons why the homeowners do not hold compensable property interests, all of which the court rejected. First, the Corps argued that under Texas law, it has the right to mitigate floodwaters.[16] The court disagreed, explaining that the law the Corps cited was an exception for the specific circumstance of constructing or maintaining levees, not for consciously diverting water onto private property.[17]  Second, the Corps argued that the upstream homeowners purchased their property after the dams’ construction and therefore, cannot argue that they should be free from flooding.[18] The court disagreed, noting that this argument is more appropriate for analyzing the homeowners’ reasonable investment-backed expectations.[19] Third, the Corps argued that under the Flood Control Act of 1928, the homeowners’ right to compensation is limited. Again, the court disagreed, maintaining that the Flood Control Act did not override the Constitution’s requirement that the government compensate when it takes private property for public use.[20] With this analysis, the court established that the plaintiffs maintained a vested property interest under the Fifth Amendment.[21]

Takings

Whether government action requires compensation for taking requires considering six elements articulated by the Supreme Court in Arkansas Game and Fish Commission v. United States.[22] The factors include (1) time and duration, (2) intent, (3) foreseeability, (4) character of the land, (5) reasonable investment-backed expectations, and (6) severity.[23] The court addressed all factors except for the “character of the land.”

The time factor is highly weighted. When the taking is permanent, then a taking is virtually conclusive.[24] The court shot down the Corps’ argument that its actions only temporarily took the homeowners’ properties since the floodwater dissipated within days.[25] Instead, the court concluded that the Corps’ history with the dams, including construction, maintenance, and operation, demonstrates that the Corps took a permanent flowage easement.[26] The court reasoned that ever since the dams’ construction, the Corps’ actions subjected the upstream homeowners to the “probability” that the Corps will induce flooding.[27] That is, the time and duration does not mean the duration of the flooding; rather it involved the government’s permanent right to inundate the property with floodwater. But the court did not address the fact that the homeowners purchased their property after the construction of the dams.

The court cited precedent holding that in “the flooding context, ‘property may be taken by the invasion of water where subjected to intermittent, but inevitably recurring, inundation due to authorized government action.’”[28] Flooding by means of flood control is defined as a taking when the government retains the right to flood it in the future, since reserving such a right is more than an “isolated invasion.” [29] It is essentially a flowage easement.[30] The Corps responded by arguing that each upstream property was repairable, and therefore, the damage was temporary.[31] Even if the properties are repairable, however, the court countered that the likelihood of a similar event in the future is determinative.[32] Some properties required months for repairs due to structural damage; furthermore, the fact that the owners can repair the property to its previous condition is irrelevant in a severity analysis, especially when the Corps may flood the property again.[33]

Intent is defined as whether the Corps intended to occupy the homeowners’ property without authority or excuse, meaning that intent to occupy is sufficient without requiring intent to create a taking.[34] The court drew on the Corps’ failure to purchase the proper amount of land to affect the dams’ original design requirements.[35] Even though the Corps knew it did not have enough land upstream of the dams to prevent flooding for a storm the size of Harvey, it also knew that a storm the size of Harvey was probable.[36] Moreover, even though the Corps knew that if a storm like Harvey would occur, it never strayed from the primary objective to prevent downstream flooding.[37] The Corps’ decision to prevent downstream flooding, then, showed its intent to use the upstream homeowners’ properties for flood control because it knew a storm like Harvey would occur.[38]

The bulk of the court’s decision lies in its foreseeability analysis. Whether an invasion of private property is the foreseeable result of government action addresses whether the government intended to invade as the “direct, natural, or probable result of an authorized activity,” and not invasions incidental or consequential injuries from an action.[39] The distinction between intent and foreseeability is that the foreseeable result may not have been intended, but an action cannot be intended without being foreseeable.[40] As noted above, the court found intent, and therefore the taking was foreseeable.[41]

The court rejected two of the Corps’ important arguments. First, the Corps argued that the foreseeability analysis should focus on the time the Corps constructed the dams.[42] The Corps’ argument here focused on the fact that it could never have anticipated the vast urbanization that would occur in the late 20^th century, and that while the upstream flooding was possible, it was not the “direct, natural, or probable result.”[43] The court responded by saying that foreseeability “should not be so constrained” because foreseeability is an objective measurement.[44] The court asked, “would an objective person reasonably foresee that the actual results which occurred would have been the direct, natural or probably results of the government’s actions? Whether the Corps subjectively foresaw the results may bear on objective foreseeability, but it is not the only consideration.”[45] The court eventually concluded that measuring the date of foreseeability is irrelevant because the Corps objectively should have known that the water would invade private property.[46] Moreover, the Corps’ ongoing operation and modification of the dams occurred even as the possibility of flooding increased.[47]

The second notable argument focused on the extent of damages. The Corps argued that “the claimed losses were not the direct, natural, or probably result” since the Corps could not have anticipated the urbanization upstream of the dams.[48] Instead, the Corps said it should not be liable for damages to businesses and homes that did not exist in the 1940s.[49] The court cast the Corps’ argument aside and stated that unforeseeable urbanization is irrelevant.[50] Instead, the court focused on the fact that the Corps should have foreseen that when it did not purchase all of the required by the original project’s design, it effectively guaranteed a taking of private property via flooding easement.[51]

Two factors are relevant to investment-backed expectations. First, the expectation must be objectively reasonable.[52] Second, the court must consider the extent that the Corps’ action interfered with reasonable expectations.[53] The court concluded that the homeowners’ expectations were reasonable, and notice does not immunize the government. Further, the court said that even if the various forms of notice were sufficient, the Corps did not show that the homeowners were aware of the scale of the risk.[54] Whether the Corps’ action interfered with reasonable expectations, the court concluded that the degree of interference was substantial.[55] Importantly, the court also noted that after Harvey, the Texas Legislature passed a statute mandating disclosure if a property is located in a reservoir.[56] An interesting question is whether such a disclosure would bar future claims of this sort by upstream homeowners.

Conclusion

The potential ramifications of this case are significant. In a world where the government necessarily has limited resources requiring it to make incremental decisions, this case appears to hold the government liable for the ripple effects of decisions made generations ago that were considered reasonable by the Corps at the time. The fact that the Corps knew at all times that it would need to flood private property eventually appears to be central to the court’s decision.  The fact that landowners may have had notice of the potential for flooding was equally unpersuasive, with the court noting that the government cannot escape liability by simply notifying the landowner of a potential taking. The court reserved the question of damages for later proceedings. 

Emily Williams 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.

Patrick Maloney is a third-year student at The University of Texas School of Law and Articles & Notes Editor of the Texas Environmental Law Journal.

By Emily Willms Rogers, Kimberly Kelley, and Rachel C. Nipper

Water Rights

Groundwater Permitting

Introduction

Under Texas law, a person’s property rights include ownership of groundwater beneath his or her property.^[1] A recent Fifth Circuit case concluded these property rights are subject to Fifth Amendment takings claims.^[2] In Stratta v. Roe, the Fifth Circuit reversed and remanded a district court’s dismissal of a landowner’s claim that a groundwater-conservation district (GCD) violated the Constitution’s Equal Protection and Takings clauses by allowing a city to drain groundwater from underneath the landowner’s property without compensation.^[3]

Stratta v. Roe

The Brazos Valley Groundwater Conservation District (BVGCD) is a state political subdivision that manages, protects, and conserves water resources within its jurisdiction.^[4] Both the Texas Constitution and the Texas Water Code provide for such GCDs,^[5] which create groundwater-management plans regulating water production and conservation, govern water use, study water quantities flowing into and out of aquifers, and minimize waste.^[6] Under this authority, BVGCD created new rules in December 2004 governing landowners’ groundwater production.^[7] Through spacing requirements and production limitations, BVGCD regulates the amount of water landowners can withdraw from a well.^[8] The rules differentiate between existing wells, new wells, and wells with historic use^[9]  and regulate groundwater pumpage apply in each category.^[10] For instance, the rules cap the amount of allowable production for new wells based on a formula that calculates the number of contiguous acres required to be assigned to the well site.^[11]

Almost a week after BVGCD’s new rules took effect, the City of Bryan drilled a well on a 2.7-acre land tract located less than 3,000 feet from appellant Fazzino’s property.^[12] The city applied for a permit to operate the well at a groundwater-production rate of 3,000 gallons per minute (gpm).^[13] Under the currently-enacted rules, the city would have been required to own a 649-acre tract to pump water at that rate from a “new” well.^[14] However, BVGCD classified the city’s well as an “existing” well—one for which drilling or significant development began before the effective date of the rules^[15]—and conditionally granted the permit, authorizing production of 4,838 acre-feet annually at the requested rate.^[16] BVGCD later reissued an identical conditional permit in 2013, despite the fact that there was no growth of city acreage around the well and even though, before the rules took effect, the well at most existed “in the form of ‘significant development,’ at least on paper.”^[17] Had the city’s well been classified as a “new” well, the rules would have capped the well’s maximum allowable production at over fifteen times less than what the conditionally-granted permits allow.^[18]

BVGCD created the new rule’s spacing and production requirements to minimize “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.”^[19] However, as the new rules do not apply to the city’s well, they do not operate to protect Fazzino from the potential threat of dissipation from the city’s pumping; as water comes from a well, it creates a cone-of-depression impact, and Fazzino’s property is within the city well’s anticipated cone of depression.^[20] Fazzino filed a complaint challenging BVGCD’s designation of the well as an “existing” or “historical use” well, but the State Office of Administrative Hearings found that he did not have standing to assert such a claim.^[21] Therefore, in an effort to “offset” the production, Fazzino applied for a permit to operate the well on his larger piece of property at the same groundwater-production rate as the city.^[22] BVGCD twice denied Fazzino’s request, citing insufficient acreage—Fazzino owned 26 contiguous acres, but like any “new” well owner, he must own or control 649 acres to support production at the requested 3,000 gpm rate.^[23] Fazzino then sued BVGCD and its directors under 42 U.S.C. § 1983, alleging violations of the Equal Protection and Takings clauses.^[24]

Jurisdictional Objections

Eleventh Amendment Immunity

First, the Fifth Circuit held that the district court erroneously concluded that BVGCD is an arm of the state and immune from suit in federal court under the Eleventh Amendment.^[25] A court looks to six factors identified in Clark v. Tarrant County to determine whether a governmental agency qualifies for Eleventh Amendment immunity.^[26] The first Clark factor considers whether state statutes and case law view the agency as an arm of the state.^[27] The Fifth Circuit held that a GCD is a political subdivision rather than a state agency, and most political subdivisions are not entitled to this immunity.^[28] Because one of Eleventh Amendment’s goals is to protect state treasuries, the second Clark factor considers the source of the entity’s funding.^[29] The Fifth Circuit concluded that GCDs lack any meaningful financial relationship with the Texas treasury—weighing against immunity.^[30] The third Clark factor considers the entity’s degree of local autonomy.^[31] While GCDs have broad authority to make and enforce rules,^[32] the Texas Water Development Board and the Texas Commission on Environmental Quality provide assistance,^[33] and the Texas Water Development Board must approve local groundwater management plans.^[34] A state auditor^[35] and the state legislature also occasionally audit GCDs’ operations.^[36] The Fifth Circuit reasoned that all these facts considered together “at most merely offset each other.”^[37]

The fourth Clark factor considers whether the entity deals mostly with local rather than state problems.^[38] The fact that an entity deals with local problems suggests that it is not an arm of the state.^[39] Because GCDs can exercise their authority only within their territorial boundaries, the Fifth Circuit reasoned this factor weighed against granting immunity to BVGCD.^[40] The Fifth Circuit set aside the fifth and sixth Clark factors, considerations of whether the entity has authority to sue and be sued in its own name and its right to hold and use property, because all parties and the district court agreed they weighed against granting immunity.^[41] The Fifth Circuit thus concluded that the district court erred in dismissing the landowners’ action for lack of jurisdiction in this regard.^[42]

Ripeness for Adjudication

Second, the Fifth Circuit concluded that, contrary to the district court’s findings, Fazzino’s takings claim was ripe for adjudication.^[43] The district court had relied on Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City, a case recently overturned by the Supreme Court, in its dismissal of Fazzino’s takings claims as unripe.^[44] The Fifth Circuit reasoned that not only had Fazzino already pursued available administrative remedies, but the Supreme Court had also held that a property owner can bring a federal-court claim at the time he or she suffers a violation of Fifth Amendment rights, and a landowner is said to have suffered such a violation when the government takes his or her property without just compensation.^[45]

Abstaining under Burford

Third, the Fifth Circuit concluded that the district court abused its discretion when it decided to abstain under Burford.^[46] Burford allows a federal court to dismiss cases presenting “difficult questions of state law bearing on policy problems of substantial public import whose importance transcends the result in the case then at bar” or if “its adjudication in a federal forum ‘would be disruptive of state efforts to establish a coherent policy with respect to a matter of substantial state concern.’”^[47] A Burford analysis involves five considerations.^[48] Fazzino’s claims allege constitutional violations, satisfying the first consideration—whether the cause of action arises under federal or state law—in favor of federal jurisdiction.^[49] The second consideration involves “whether the case requires inquiry into unsettled issues of state law or into local facts.”^[50] The district court reasoned there was an unsettled issue in state courts pertaining to the applicability of Texas oil and as common law to GCDs’ regulations.^[51] However, the Fifth Circuit reasoned that the Texas Supreme Court has already settled that landowners own the groundwater beneath their properties and that such ownership “may be enforced in takings law and under doctrines of equal protection.”^[52]

Because Fazzino asked that BVGCD either apply its rules equally to landowners or give landowners just compensation, the Fifth Circuit reasoned his lawsuit “poses little threat to the general state interest,” the third Burford consideration.^[53] The fourth consideration involves the state’s need for a coherent policy, here regarding groundwater regulations.^[54] Because GCDs are “decentralized” and “fragmentary” to enforce their own rules in their local areas, the Fifth Circuit concluded Fazzino’s lawsuit does not threaten a coherent policy.^[55] Lastly, the Fifth Circuit reasoned that the fifth consideration involving the presence of a special state forum for judicial review did not apply because state courts review GCD decisions.^[56]

Merits of the Case

The district court dismissed Fazzino’s takings and equal protection claims because it concluded “they rested on unsettled questions” regarding the application of oil and gas law to a landowner’s rights in groundwater beneath his or her property.^[57] However, the Fifth Circuit concluded that the law is settled enough for Fazzino’s claims to be heard because such a formulation of his claims “is at too high a level of generality.”^[58]

Takings Clause

The Fifth Circuit recognized that Fazzino’s property rights “constitute whatever he has that BVGCD may not constitutionally ‘take’ without compensation.”^[59] The Texas Supreme Court in Edwards Aquifer Authority v. Day held that a landowner’s property rights, subject to takings claims, include ownership of the groundwater beneath his or her land.^[60] Indeed, the Texas Water Code specifies that nothing in the code can be “construed as granting the authority to deprive or divest a landowner . . . of the groundwater ownership and rights” described in the section.^[61] It requires groundwater districts, like BVGCD, to consider many factors in permitting groundwater production, including the effect on the supply and other permit holders.^[62] Thus, giving groundwater owners their fair shares involves more than considering surface area.^[63] Fazzino claimed BVGCD “took” his groundwater without compensation when it allowed the City of Bryan to drain water from an area far outside its surface ownership, including the surface area of Fazzino’s property.^[64] The Fifth Circuit reasoned it to be the task of the district court to assess whether BVGCD’s groundwater regulation scheme resulted in a “taking” of Fazzino’s interest.^[65]

Equal Protection Clause

The Fifth Circuit concluded that Fazzino’s property rights provide “the baseline by which to determine whether he has been treated ‘unequally’ by the district vis a vis the City’s permit.”^[66]  The Texas Water Code requires GCDs like BVGCD to consider groundwater ownership and rights and to develop rules that are fair and impartial.^[67] Indeed, one of the purposes of groundwater regulation is to afford fair shares to owners in common reservoirs.^[68] Fazzino alleged that BVGCD unequally applied its new rules by exempting the City of Bryan from the production limit’s surface-area formula while enforcing it against Fazzino, resulting in what the Fifth Circuit considered “dramatic” results.^[69] Fazzino also alleged that BVGCD had no rational basis for treating him differently, implying the disparate treatment resulted from the relationship between BVGCD board members and the City of Bryan.^[70] A class-of-one equal protection claim like this involves “whether the plaintiff was ‘intentionally treated differently from others similarly situated’” and “whether there was a ‘rational basis’” for the difference.^[71] Because Fazzino sufficiently alleged disparity and intentional conduct, the Fifth Circuit reasoned the allegations’ substance needs to be tested by discovery and further proceedings, and it reversed the dismissal.^[72]

Emily Willms 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.

Rachel C. Nipper is a third-year student at The University of Texas School of Law and Managing Editor of the Texas Environmental Law Journal.