On October 14, 2015, the Texas Supreme Court heard argument in a case styled Coyote Lake Ranch, LLC v. The City of Lubbock, which dealt with the question of whether the accommodation doctrine should apply when a groundwater estate has been severed from the surface estate. Coyote Lake Ranch, LLC owns a ranch in West Texas, near the New Mexico border. In 1953, the prior owner of the ranch conveyed some of the groundwater rights underneath the ranch to the City of Lubbock. The City of Lubbock recently released plans to develop approximately 80 additional municipal wells across the ranch. Coyote Lake argued that the city's development of additional wells would cause surface erosion and affect the ranch's ecosystem. Coyote Lake and Lubbock did not dispute that the groundwater purchase contract allowed Lubbock to use the ranch's surface to develop wells to extract the groundwater, but disagreed regarding whether the city is bound by the same rule that governs mineral owners—the duty to reasonably accommodate existing surface uses whenever possible.
Coyote Lake's brief on the merits may be accessed here. The City of Lubbock's brief on the merits may be accessed here.
Under the accommodation doctrine, the owner of a mineral estate can use as much of the surface estate as is reasonably necessary to extract and produce minerals, "since without that right, mineral ownership would be worthless." Harris v. Currie, 176 S.W.2d 302, 305 (Tex. 1943). The Texas Supreme Court has clarified, though, that a "mineral owner's exercise of its right to use the surface cannot unreasonably infringe on the surface owner's right of surface use if reasonable alternative surface uses are available to the mineral owner." Tarrant Cnty. Water Control & Improvement Dist. No. One v. Haupt, Inc., 854 S.W.2d 909, 912 (Tex. 1993).
At oral argument, counsel for Coyote Lake argued that the court should adopt a standard that would protect productive use of the groundwater and surface estates when they are separately owned. Additionally, Coyote Lake argued that the groundwater estate should, similarly to the mineral estate, be recognized as dominant to the surface estate and be required to accommodate the surface use of the property.
The City of Lubbock countered that historical precedent did not support placing the groundwater estate on the same plane as the mineral estate. Dale Wainwright, Lubbock's counsel, stated, "In Texas, oil and gas is king and has been for centuries. There is a centuries-old understanding that the mineral estate is dominant. To all of a sudden find that for groundwater, it would create tremendous angst and potentially incredible litigation to figure out what that means if the court were to decide after centuries another estate is dominant."
As Texas continues to endure a historic drought and operators consider the use of scarce water in hydraulic fracturing operations, the issue of whether the groundwater estate is under a duty to reasonably accommodate surface uses of property will only continue to grow in importance. BakerHostetler will continue to track the issue, as well as report on the Texas Supreme Court's opinion when it is issued.
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