Here is a one sentence overview of the status of the law and where I think it is going.  As the state did in the 1960’s when it converted surface water rights from riparian rights to streamflow to a permit system for surface water, the State of Texas has started the process to convert groundwater rights from the rule of capture to a permit system; i.e, a landowner will no longer be able to take as much water as he can produce from his land, rather he will have to get an annual permit to take a certain volume of water from his well, and those permits may be limited to less than a landowner wants to use.
Here is a one sentence overview of the status of the law and where I think it is going.  As the state did in the 1960’s when it converted surface water rights from riparian rights to streamflow to a permit system for surface water, the State of Texas has started the process to convert groundwater rights from the rule of capture to a permit system; i.e, a landowner will no longer be able to take as much water as he can produce from his land, rather he will have to get an annual permit to take a certain volume of water from his well, and those permits may be limited to less than a landowner wants to use.

Already state law has set up regional water planning groups that are coming up with estimates of available volumes of water within the areas of the respective regional water planning groups. Those numbers will be the basis for establishing annual limits for pumping from those areas.  The rule of capture already can be restricted in areas that have groundwater conservation districts, and the general push is to include all parts of the state in one or more groundwater conservation districts.

The San Antonio area in the Edwards Aquifer Authority is the prototype for this permitting process.  A landowner in the EAA can only pump groundwater if he has a permit, even if he has significant Edwards resources under his property.  Those permits initially sold for less than $1,000 per acre-foot per year in 2001, but commercial quantities of water were selling for between $5,000 and $6,000 per acre-foot a year ago, and with the drought in effect right now, I am sure that those prices would be low if someone really needed the water today.

On the other hand, having a permit system is not all bad either.  Many financial institutions are not valuing water rights until they are reduced to permits issued by state agencies.  It is a very complicated issue, and the ramifications are different for different parts of the state.  Each area needs to assess its situation separately.  For example, in certain circumstances, there is potential harm in being drawn into a water district, but there is considerable financial risk in being left out, too.

I suggest the following initial steps in evaluating each property under consideration:

1.       Identify the groundwater conservation districts (GWCD’s) and the regional water planning groups (RWPG’s) in the area of the property under consideration.

2.       Define how the GWCD’s and RWPG’s are responding to the Desired Future Conditions mandate (this will be the key to the evolution of water rights in the area.)

3.       Determine what are the various future uses of the property under consideration and what is the potential for commercial use of groundwater in the area.

4.       Determine how other landowners are addressing their water rights, especially those with similar historical uses of water; e.g., continuation of status quo or initiation of new uses that are intended to increase claims to limited regional water availability.

5.       Assess the risk and cost of establishing and documenting water use versus doing nothing.

Will Jones has served for 25 years as corporate legal counsel for companies dealing with energy, water and other real property interests.  He was the lead participant or primary advisor in multi-million dollar acquisitions, innovative corporate finance, federal and state securities matters, operations of growing companies, and corporate internal affairs.  He is “AV” rated by Martindale-Hubbell.  He also have 7 years experience as a construction engineer.

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