Friday, August 30, 2013

From Texas: Attempting to Deal Rationally with Limited Water Supplies is a Regulatory "Taking" of Private Water Rights

The Texas courts are once again refining their description of private water rights. On Wednesday (August 28, 2013), the Texas Court of Appeals in San Antonio confirmed that implementation of the Edwards Aquifer Act resulted in a constitutional "taking" of landowners' property rights in groundwater. Edwards Aquifer Authority v. Bragg, --- S.W.3d ---, 2013 WL 4535935 (Tex. App.--San Antonio Aug. 28, 2013). More disturbing than the actual decision, however, is its implications for state authorities trying to deal rationally with increasing water shortages.

Some background is in order, because EAA v. Bragg is the first application of the Texas Supreme Court's 2012 decision that overlying landowners in Texas own groundwater in situ. Edwards Aquifer Authority v. Day, 369 S.W.3d 814 (Tex. 2012). Many of us who teach Water Law would argue that EAA v. Day represented a radical departure from both traditional Texas groundwater law, which uses the English rule of capture, and the Edward Aquifer Act's possible creation of a correlative rights-type regime for the Edwards Aquifer. But hey, I'm not the Texas Supreme Court.

The Edwards Aquifer Act has a long and litigious history. The Texas Legislature enacted the Act in 1993 in response to increasing drought threats and Endangered Species Act litigation seeking to protect five listed species living (or trying to live) in the Edwards Aquifer. The Act created the Edwards Aquifer Authority and mandated a permit regime to limit withdrawals from the aquifer. As the Texas Court of Appeals explained in EAA v. Bragg, "In the Act, the Legislature established an aquifer-wide cap on water withdrawals by nonexempt wells of 450,000 acre-feet of water per year through 2007 and 400,000 acre-feet per year thereafter." 2013 WL 4535935, at *2. Moreover, "Under the Act, the Authority may grant initial regular permits ('IRPs') only to existing users who properly file a “declaration of historical use,” and who can establish, by “convincing evidence,” beneficial use of underground water withdrawn between June 1, 1972, and May 31, 1993." Id.

The Braggs own two properties overlying the Edwards Aquifer that are commercial pecan orchards. They have irrigated the pecan trees with two wells drawing water from the Edwards Aquifer, one drilled in 1980 and one drilled in 1995 as authorized by a permit from the Medina County Groundwater Conservation District. The EAA was not yet issuing permits; because of lawsuits, the Act did not become effective until 1996.

When the Braggs applied to the EAA for permits in 1996, they claimed withdrawals of 228.85 acre-feet of water per year from the 1980 well and 193.12 acre-feet of water per year from the 1995 well. Their permit authorized 120.2 acre-feet of water per yeard from the 1980 well and nothing from the 1995 well, the use of which was outside the historic period that the EAA could consider under the Act. The Braggs sued the EAA in November 2006, alleging a constitutional taking of private property and a violation of federal civil rights. The state trial court found in their favor, concluding that no physical taking of their water rights had occurred but that nevertheless both the denial of water rights from the 1995 well and the reduction in water rights from the 1980 well constituted regulatory takings that required compensation.

The Texas Court of Appeals affirmed the takings liability but remanded  for a re-calculation of the damages. First, it found that the EAA (as opposed to the State of Texas) was the proper defendant. Id. at *8. Second, it found that the statute of limitations was 10 years, id. at *10, and had not run because it did not accrue until the EAA acted on the Braggs' permit applications in 2004 and 2005. Id. at *13.

Third, with regard to the regulatory taking, the Texas Court of Appeals relied heavily on EAA v. Day, making short shrift of the EAA's argument "that the Act gave the Braggs something they did not previously own (permits) and, therefore, there is no taking . . . ." Id. at *14. With regard to the economic impact of the permit decisions (the first Penn Central factor for in the standard regulatory takings analysis), the court concluded that:

To reduce their water consumption, the Braggs reduced the number of trees by thirty to fifty percent and reduced the watering of the remaining trees. This, in turn, resulted in the Braggs' inability to raise a commercially viable crop on their properties, unless they purchased or leased water under the permit scheme. Despite what might amount to only a ten percent increase in their irrigation expense, we do not consider this merely an incidental diminution in value. The result of the regulation forces the Braggs to purchase or lease what they had prior to the regulation—an unrestricted right to the use of the water beneath their land.

Id. at *17.

With respect to the Braggs' investment-backed expectations, the court emphasized that they purchased both properties as pecan orchards before the Texas Legislative enacted the Edwards Aquifer Act. As a result, "Although the Braggs had no reasonable investment-backed expectation that there would never be a regulatory scheme in place that might govern their use of the water beneath their land, the lack of such regulations when they purchased both orchards shaped their expectation that they would have unrestricted use of their water to supply the needs of their pecan trees." Id. at *19. Moreover, "considering Mr. Bragg's extensive understanding of pecan crops, the Braggs' understanding that they owned the water under their land, and that no regulatory entity existed that governed the use of their water when they purchased the property as an existing pecan orchard, we conclude the Braggs' investment-backed expectations as to the D'Hanis Orchard were reasonable." Id. at *20.

Finally, with respect to the character of the government action, the Texas Court of Appeals acknowledged that groundwater regulation is a legitimate government purpose and that "[o]ne purpose of groundwater regulation is to afford each owner of water in a common, subsurface reservoir a fair share of the water." Id. Nevertheless, while this factor thus counted against finding a taking, the court emphasized the surrounding circumstances (i.e., drought) to conclude, on balance, that a regulatory taking had in fact occurred:

In this case, the Braggs' business is agricultural and therefore heavily dependent on water. The particular crop cultivated by the Braggs, pecans, needs water year-round. The Braggs' source of water is either sub-surface or rain. Rain, at least in drought-ridden Texas, is inconsistent and unpredictable. . . . This is especially so in semi-arid Medina County, Texas. Mr. Bragg's testimony established that a lack of sufficient water not only effects the yield of the current crop but also the quality and size of the pecans in a future crop. No expert disputed that rain alone could not provide a sufficient source of water. Therefore, we conclude the Act's restrictions on the amount of water the Braggs could draw from their own wells weighs in favor of a compensable taking. 

Id. at *21.

With this declaration, I submit, the Texas Court of Appeals both has attempted to elevate historical water rights over new ecological realities and created a major legal impediment for any government entity trying to rationally address changing--especially declining--water resources. Endangered species or not, government regulation or not, overpumping the Edwards Aquifer and increasing droughts in Texas will eventually destroy the value of all private property claims to water (and maybe the value of all private property, period) in many parts of Texas. Instead of encouraging the Texas Legislature and the EAA to deal rationally with these new realities--including the reality that there just isn't enough water for everyone to do everything they want for the rest of their lives--the Texas courts have effectively forced the EAA to assume all costs of attempting to ameliorate the shortage. 

Should the State of Texas or EAA callously let the Edwards Aquifer go dry? I'd like to argue "no"--but I don't think it should have to pay landowners who rush headlong into that disastrous result, either. Constitutional "takings" clauses need to accommodate changing ecological realities and the tragedy of the commons, or they will just make those tragedies worse. At one point, the common law recognized this hard reality through the doctrine of public necessity and police power defenses to takings liability, but those limitations on "takings" liability seem to have been forgotten.

So, the question we should all be contemplating: When does groundwater pumping become a public nuisance, or create a public emergency?

--Robin Kundis Craig, William H. Leary Professor of Law, University of Utah S.J. Quinney College of Law

August 30, 2013 | Permalink | Comments (4) | TrackBack (0)

Thursday, August 29, 2013

Bragg, Takings, and the Economics of Limited Resources

Yesterday the Court of Appeals of Texas, Fourth District handed down Bragg v. Edwards Aquifer Authority, a decision that anyone interested in takings or water law ought to read (the Lexis cite is 2013 Tex. App. LEXIS 10838).  The Braggs had brought a takings claim alleging that the Edwards Aquifer Authority’s regulatory restrictions on the Braggs’ groundwater use amounted to a regulatory taking.  The appellate court agreed and remanded for an assessment of damages.  But I suspect—and hope—the case will first be appealed to the Texas Supreme Court.  It is a deeply flawed and harmful decision with mistakes that additional appellate review hopefully will fix.

Understanding those problems requires a little bit of factual context.  The Edwards Aquifer is a large and highly productive aquifer in central Texas.  It provides an important source of water for municipal and agricultural users, and its discharges support vibrant ecosystems, several of which contain unique and threatened or endangered species.  But those competing uses came into stark conflict, and in the mid-1990s the Texas Legislature responded by creating the Edwards Aquifer Authority and charging it with regulating water withdrawals (for articles on that history, see here and here). 

In 1979 and 1983, years before the Edwards Aquifer Authority’s regulatory scheme went into effect, the Braggs bought two parcels of land with the intention of growing pecans.  Initially, their water needs were modest; young pecan trees are small and do not require much water.  But as the trees grew, the Braggs sought regulatory authorization to increase their water use.  The Edwards Aquifer Authority authorized a lower level of use than the Braggs wanted (according to the Braggs, the limits rendered their farming operation economically inoperable), and the Braggs sued, alleging a taking.  The trial court ruled in their favor, and the current appeal followed.

Before getting to the problems with the court’s decision, it’s worth noting a few things the court did right.  First, the court analyzed the Bragg’s claims using the regulatory takings analytical framework set forth in Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978).  The appropriateness of that analytical framework for this case might seem obvious, but in recent years some takings advocates have argued—on rare occasions successfully—that regulatory restrictions on water rights should be analyzed as potential physical takings.  The Bragg court appropriately avoided that path.  Additionally, I have no quibble with the court’s application of the nature-of-the-government-action prong of the Penn Central analysis.  The court wrote that “[g]iven the importance of ‘protecting terrestrial and aquatic life, domestic and municipal water suppliers, the operation of existing industries, and economic development of the state,’ we conclude this factor weighs heavily against a finding of a compensable taking.”  That seems rather sensible.

But the Edwards Aquifer Authority still lost.  That’s primarily because of the court’s application of the other two Penn Central factors—the diminution in value and the interference with reasonable investment-backed expectations—both of which the court found weighed in favor of the Braggs.  And it reached both findings largely because of a consistent and deeply flawed reason: in applying each factor, it simply assumed away the reality that the Edwards Aquifer is a limited, oversubscribed resource.

The court's diminution in value analysis illustrates that problem.  That analysis reduces to a mathematical problem: the court’s job is to ask what the value of the property would have been without the contested restriction and what the value was with the restriction.  The court purported to do that, but instead its denominator was the value of the property assuming the viability of the Braggs’ desired property use.  In other words, the court simply assumed that without the restriction in question, the Braggs would have been able to use as much water as they wanted.  When the time came to instruct the lower court on a damages formula, the court of appeals said the same thing: “we conclude that the ‘property’ actually taken is the unlimited use of water to irrigate a commercial-grade pecan orchard.”  But even if the regulation had not existed, there was no guarantee that the Braggs could have withdrawn as much water as they wanted (unless, of course, the Braggs were the only landowners exempted from the Authority's regulatory scheme).  The Edwards Aquifer does not have unlimited quantities of water, and the Braggs would have been in competition with every other user whose pumping might affect water levels beneath the Braggs’ land.  In that competition, they might well have fared worse than they did under the EAA’s scheme, and at the very least they would have confronted greater uncertainty.   Thus a more appropriate denominator would have been the value of the Bragg’s land in a legal environment of unfettered competition for a limited resource, with all the uncertainty and risk that entails. 

The same problem applies to the court’s analysis of reasonable investment-backed expectations.  Essentially, the court held that it was reasonable for the Braggs to invest in a large, water-intensive, long-term farming operation in reliance on pumping from a shared and strained aquifer.  That does not seem like something a wise business owner would do, or that law should encourage businesses to do.  Granted, at the time, no regulatory restriction limited their pumping, but that cuts both ways: it meant less reason to anticipate governmental restriction but also less reason to anticipate governmental protection from competing users.  And even by the late 1970s and early 1980s, any reasonable expectation ought to have factored in the possibility that environmentally valuable resources would receive government protection.  Yet the court’s analysis of reasonable investment-backed expectations  discounts any factor other than the Bragg’s unilateral expectation that they would be able to pump whatever they needed.

The consequences of these errors are serious and far-reaching.  A simplified hypothetical illustrates the problem.  Suppose that 10 farmers own land above an aquifer with a sustainable annual yield of 1000 acre-feet of water.  Suppose that each landowner wants to create a pecan farm, and each anticipates that the pecan farm, at maturity, will require 200 acre-feet of water per year.  And suppose a regulatory body instead restricts each landowner to an equivalent share of the aquifer, so each instead receives 100 acre-feet per year.  Under the valuation formula propounded by the Braggs and adopted by the court, each landowner has suffered a substantial diminution in value, and therefore could be entitled to takings compensation for a “lost” 100 acre-feet/year of water, even though all the regulator did was restrict their collective use to the amount of water actually available.  If each landowners sues—and with this formula, they would be fools not to—the regulator will wind up paying compensation for “taking” 1,000 acre-feet/year of water that the aquifer never could have sustainably supplied anyway.  On a larger and more complicated scale, that essentially is the reality of the Edwards Aquifer, and of a great many other aquifers—a fact that was not lost on the Texas Legislature when it passed the Edwards Aquifer Act.  But that reality seems to have eluded the court.

To all of this, some readers might have a response: weren’t the court’s hands tied by Edwards Aquifer v. Day, 369 S.W.3d 814 (Tex. 2012)?  In Day, the Texas Supreme Court held that landowners hold property rights in water beneath their land, and that restrictions on those water rights could create compensable takings.  But that holding doesn’t inexorably lead to kind of analysis the Bragg court used.  As I’ve argued in much more detail in a forthcoming article, Day's holding is not unique; most states that have considered the issue consider groundwater use rights to be property rights with potential constitutional protection against takings.  Yet other states also have repeatedely held that the exercise of those rights may—indeed should—be substantially regulated without any need for the state to pay compensation.  Even in Texas, which has a partially-deserved reputation for particularly lax groundwater use regulation, court cases—including the Day decision itself—contain abundant language acknowledging the important governmental role in regulating groundwater use.  So, while I think there are problems with Day, it did not preordain this extreme result.

-Dave Owen

August 29, 2013 | Permalink | Comments (0) | TrackBack (0)

Tuesday, August 27, 2013

"Science: What's it Up To?"

Today in my international environmental law class I showed the below clip from the Daily Show to add some levity to the classroom. We were discussing scientific uncertainty, the precautionary principle, scientific consensus and a variety of other issues related to climate change and other global problems. Scientific data rarely, if ever, meets the 100% certainty mark, and the 95% certainty (now higher than that according to the recently leaked IPCC report) that scientists maintain about human contribution to climate change may be as close as we can get to absolute certainty.

We discussed "50-50" journalism, which is the concept that news media - in an effort to be "balanced" - often portray to the public one party agreeing with a majority of climate scientists and one party in opposition. The public, therefore, believes that the issue is a close call, or that the race for the truth is "spandex tight," as Dan Rather would say. Never mind the fact that if I offered climate skeptics a drink that was tasty, gave a boost of energy, and came in a cool can, but which also had a 50% chance of giving them cancer, they would surely turn it down. 

At any rate, this video gets at the heart of the contention that climate change is a conspiracy to line the pockets of academics. I first note for the class that, of course, there are extreme groups on both sides of the issue. But assuming for a moment that certain groups had more of a vested interest in skewing public perception on climate, would it be scientists in an effort to get "rich" on grant money (does this actually happen?) or entities within the economic sector most reliant on the burning of fossil fuels? To choose the former just indicates a serious deficit of common sense. 

At any rate, this is a fairly hilarious clip - and does get a few chuckles from the class, which is nice from time to time.

 

- Blake Hudson

August 27, 2013 | Permalink | Comments (2) | TrackBack (0)

Monday, August 19, 2013

EPA's Vapor Intrusion Guidance

In April, EPA’s Office of Solid Waste and Emergency Response issued an external review draft of its Final Guidance for Assessing and Mitigating the Vapor Intrusion Pathway from Subsurface Sources to Indoor Air.  Vapor intrusion, as the title of the document suggests, is the migration of volatile chemicals from subsurface sources into overlying buildings. It occurs as a result of environmental contamination, when chemicals volatilize from contaminated soil and groundwater beneath buildings and other structures. 

In a 2011 article in the Virginia Environmental Law Journal, I examined the jurisdictional quandary that vapor intrusion presents for EPA and OSHA.  As a form of environmental contamination, vapor intrusion triggers EPA’s cleanup authority under RCRA and CERCLA.  But some buildings in which vapor intrusion is a problem are workplaces, potentially implicating OSHA’s regulatory authority as well.  Whether vapor intrusion in workplaces should be the province of OSHA, EPA, or both agencies has been a matter of considerable disagreement. 

EPA’s previous draft guidance document regarding vapor intrusion, issued in November 2002, conveyed mixed signals about EPA’s jurisdiction over vapor intrusion in occupational settings.  The document stated that “OSHA and EPA have agreed that OSHA generally will take the lead role in addressing occupational exposures” and that “EPA does not expect this guidance be used for settings that are primarily occupational,” but also noted that vapor intrusion is not a typical occupational exposure and that OSHA exposure limits may therefore not be adequate.

EPA’s new draft final guidance seems to assert EPA authority to address vapor intrusion in occupational settings.  The draft states, “EPA’s statutory authorities to protect human health . . . include mandates to protect the public and workers’ health in nonresidential settings where hazardous vapors may be intruding into occupied buildings from vapor intrusion.”  The draft does not specifically address the question of how EPA’s authority interacts with OSHA’s authority, but its language is consistent with the position EPA seemed to settle on after its 2002 draft guidance, which is that EPA can appropriately regulate occupational exposures at least as to chemicals not in use at the worksite, because OSHA has concluded that it lacks authority over contamination that does not originate from the workplace.

The comments EPA received on the draft final guidance are available on regulations.gov.  Some commenters—mainly state environmental regulators, from what I saw—would like EPA to go further in its guidance and explicitly assert authority over vapor intrusion in all occupational settings.  The regulated industry—potentially responsible parties and property owners—would prefer for EPA to simply apply OSHA’s apparently more lenient standards. 

In defense of their assertion that EPA should apply OSHA’s standards, regulated industry’s comments cite a need for “consistency” and “uniformity.”  But even if consistency and uniformity are desirable in this context—there are policy considerations here that mirror the policy debates over federalism—this would not necessarily support the conclusion that OSHA’s more lenient standards are superior to EPA’s more stringent ones.  Indeed, a disparity between OSHA’s standards and EPA’s standards could indicate the inadequacy of OSHA’s standards, rather than excessive conservatism in EPA’s standards.  In sum, it is not at all clear that the industry commenters’ calls for uniformity and consistency get them to their goal of EPA adopting OSHA’s standards.

My article argued that overlapping regulatory jurisdictions can be an opportunity for agencies to address in constructive ways the discontinuities that exist between statutory schemes, such as differences between RCRA and CERCLA and the OSH Act.  EPA, in its guidance, seems to be making a concerted effort to engage thoughtfully with the issue of its regulatory overlap with OSHA.  Let’s hope the agency continues to move in that direction, rather than the more knee-jerk direction advocated in the regulated industry’s comments.

--Todd Aagaard

August 19, 2013 | Permalink | TrackBack (0)

Monday, August 12, 2013

Wisconsin Backs Off Its Public Trust Doctrine

On July 16, 2013, the Wisconsin Supreme Court decided Rock-Koshkonong Lake District v. Wisconsin Department of Natural Resources, 833 N.W.2d 800 (Wis. 2013), reversing a Wisconsin Court of Appeals decision that had incorporated Wisconsin's broad constitutional public trust doctrine into the Wisconsin Department of Natural Resources' (WDNR's) statutory authority to regulate the levels and flows of Wisconsin's navigable waters. Among other things, for example, the Wisconsin Court of Appeals had held that WDNR could use its authority to consider non-navigable wetlands when it was asked to change the level of a navigable lake.

The Wisconsin Supreme Court's reversal sparked a lively debate among the Justices regarding Wisconsin's public trust doctrine--with the dissenters, in my humble opinion, having the more accurate view of the history of Wisconsin's public trust jurisprudence. Giving little deference to the WDNR (¶¶ 52-64), the majority held that Wisconsin's constitutional public trust doctrine does not extend beyond the (traditionally) navigable waters: "Applying the public trust doctrine to non-navigable land above the OHWM would eliminate the rationale for the doctrine. The ramifications for private property owners could be very significant" (p. 819, ¶ 77). In particular, the majority was concerned about the effects of an extended public trust doctrine on private ownership of lands submerged beneath non-navigable waters: "Contemplating the question of ownership is important because the public trust doctrine implicates state ownership or virtual state ownership—by virtue of its trust responsibility—of land under navigable waters. If the public trust were extended to cover wetlands that are not navigable, it would create significant questions about ownership of and trespass on private land, and it would be difficult to cabin expansion of the state's new constitutionally based jurisdiction over private land" (p. 820, ¶ 84).

Perhaps most disturbingly--and a development that Natural Resources and Water Law professors should be aware of--the Rock-Koshkonong majority reinterpreted a classic public trust doctrine case, Just v. Marinette County, 56 Wis.2d 7, 201 N.W.2d 761 (1972), to be a police power case (pp. 823-24, ¶¶ 95-103). While it is true that the court upheld WDNR's broad powers to protect the state's water resources pursuant to the police power, its reinterpretation of Just and its reversal of the Wisconsin Court of Appeals divorced WDNR's regulatory authority from its constitutional public trust doctrine duties, suggesting that water resource regulation in Wisconsin is now subject to legislative revision more protective of riparian property owners' claims of harm. The majority's conclusion that the WDNR must consider economic impacts on riparian owners when deciding petitions to change lake levels (pp. 828-35, ¶¶ 126-148) may be one hint of developments to come in Wisconsin water resources law.

The three dissenting Justices most vehemently criticized the majority for overreaching:

¶ 153 This case presents a question that the majority can—indeed does—answer by interpreting Wis. Stat. § 31.02(1) (2009–10). Yet the majority unnecessarily reaches out to the constitutional principle of the public trust doctrine from the Wisconsin Constitution, constricting the doctrine and misreading this court's precedent, especially the well-settled law articulated in Just v. Marinette County, 56 Wis.2d 7, 201 N.W.2d 761 (1972). Wisconsin's long and robust history of protecting the public trust is widely acknowledged and respected. The public trust doctrine imposes on the state, as trustee, the affirmative duty to protect, preserve, and promote the public's right to Wisconsin's waters.

¶ 154 The majority opinion attempts to undermine this court's precedent, recharacterize its holdings, and rewrite history. Instead of limiting itself to addressing only what must be addressed, the majority seizes this opportunity to limit the public trust doctrine in an unforeseen way, transforming the state's affirmative duty to protect the public trust into a legislative choice. It needlessly unsettles our precedent and weakens the public trust doctrine that is enshrined in the Wisconsin Constitution. This represents a significant and disturbing shift in Wisconsin law.

(pp. 835-36, J. Crooks, dissenting). Only time will tell how correct the dissenters prove to be, but this case represents a significant reversal in thinking by one of the most traditionally protective states in terms of an environmental public trust doctrine.

       -- Robin Kundis Craig

      NOTE: Bob Adler, Noah Hall, and I include the Court of Appeals/Wisconsin Supreme Court dialectic in our new casebook, Modern Water Law: Private Property, Public Rights, and Environmental Protection (Foundation Press 2013) and its forthcoming Teachers Manual. You can download an electronic version of the casebook for free through West Academic.

August 12, 2013 | Permalink | Comments (1) | TrackBack (0)

Thursday, August 8, 2013

A Really Good Book on Invasive Species

I recently finished reading Out of Eden: An Odyssey of Ecological Invasion by Alan Burdick (thanks to Jim Salzman for letting me know about the book).  It's a wonderful book, and I would recommend it to anyone with an interest in the science, policy, or law of biodiversity.

GreenCrab_USGSAs its title suggests, the book is about invasive species (like the European green crab shown to the left).  That's a pretty big and important subject, and Burdick makes it compelling, but he also manages to pack much more in.  The book also is a broader study ecology and ecologists, and in its mix of scientific and human stories, it's quite similar to David Quammen's The Song of the Dodo, which I also loved.  The law of invasive species is more of a secondary focus, but environmental lawyers also will find quite a lot to think about.  And it's very readable.  I couldn't put it down.

-Dave Owen

August 8, 2013 | Permalink | Comments (0) | TrackBack (0)