Surface Water: Case Law Update & TWCA Surface Water Committee Legislative Preview Emily W. Rogers Bickerstaff Heath Delgado Acosta LLP 3711 S. MoPac Expwy. Bldg. 1, Suite 300 Austin, TX 78746 512-472-8021 erogers@bickerstaff.com Lyn Clancy Lower Colorado River Authority 3700 Lake Austin Blvd. Austin, TX 78703 512-578-3378 lclancy@lcra.org

Texas v. New Mexico, Original No. 141 Texas alleges New Mexico is depleting Texas’ share of Rio Grande Water. United States was allowed to intervene. New Mexico filed a motion to dismiss Texas’ complaint and the U.S.’s motion to intervene. Special Master Draft Report recommends: Deny New Mexico’s motion Dismiss U.S. to the extent it does not have a plausible compact claim Dismiss intervenor districts

Harris Cnty Flood Control Dist. et al. v. Kerr, ___ S. W Harris Cnty Flood Control Dist. et al. v. Kerr, ___ S.W.3d ___, 2016 Tex. LEXIS 501 (Tex. June 17, 2016) Inverse condemnation case concerning 400 plus homes in the Houston area. Landowners argued the district’s failure to implement flood control plan, and county’s approval of development caused flooding. Supreme Court initially affirmed lower court’s denial of the county’s plea to the jurisdiction and remanded for trial: Some evidence that county was substantially certain development would cause flooding of homes The flood control plan only targeted a 10-year flood Decision was 5-4 with strong dissent In June 2016, the Texas Supreme Court issued a new opinion on after granting the County’s and the District’s motion for rehearing, holding: Defendants did not have the requisite intent to flood and they did not take any affirmative actions. Failure to take discretionary action is not an affirmative action.

City of Socorro v. Campos __ S. W. 3d __, 2016 WL 4801600 (Ct. App City of Socorro v. Campos __ S.W.3d __, 2016 WL 4801600 (Ct. App. – El Paso, Sept. 14, 2016) Property owners in one subdivision claim the City caused flooding of their homes by constructing a ditch and two embankments to address flooding in another neighborhood. City filed a plea to the jurisdiction claiming that the Plaintiffs had failed to demonstrate that the City took property for a public use, or that the City had the requisite intent. The trial court denied the plea. The court of appeals agreed with the trial court finding that the Plaintiffs had sufficiently pleaded claims which allow them to attempt to prove the allegations. The court noted that the City’s plea had no evidence supporting it and the court only had the four corners of the Plaintiff’s Second Amended Petition to consider. The court of appeals distinguished this case from the Kerr case. In Kerr, the landowners claimed inaction caused flooding and the County did not know which properties might be flooded. This case is really about how to plead a case.

Navarro County Wholesale Ratepayers v. Covar, 2015 WL 3916249 (Tex.App. – Houston 1st, June 25, 2015, pet. denied) (mem. op., not designated for publication) City of Corsicana rate increase for its wholesale water customers. TCEQ found contract did not violate the public interest. The Court of Appeals upheld the TCEQ’s decision: Public interest factors in the rules are non-exclusive No factor that allows a comparison of rate impact on wholesale customers versus retail customers Alleged subsidy of wastewater fund was a “cost of service” issue and not part of “public interest” evaluation The existence of a deficit, and not its cause, was the changed condition that provided a reasonably necessary basis for raising rates For background, to get a full-blown cost-of-service rate case, a WHOLESALE water customer (i.e. a customer who resells the water to others) that has a rate set by a contract first has to prove that the “public interest” was adversely affected by the rate charged.  The rules adopted by the TCEQ (which remain unchanged at this point by the PUC) set out various factors to be considered for determining whether the public interest is violated.  This “public interest” concept came out of a court case that relied heavily on some old PUC cases involving oil and gas contracts and the constitutional prohibition on interfering with contracts.  To date, no one has successfully overcome the public interest test.  Here are a few key points from the opinion: The wholesale customers claimed that the rates adversely affected the public interest because they discriminated between wholesale and retail customers. The court held that the Commission properly considered rate discrimination claims ONLY in the context of whether the rates charged to other wholesale customers were disparate. The court also rejected an attempt to overcome the public interest test based on Corsicana’s wholesale customers’ allegation that their rates were improperly subsidizing Corsicana’s wastewater fund. The court held that this was a ‘cost-of-service’ issue that could not be considered in evaluating whether the “public interest”  was adversely affected.  Finally, the court also rejected the claim that Corsicana did not have “changed conditions” warranting a rate change and thus had abused its monopoly power. Corsicana raised rates in part to cover a $1 million deficit in its Utility Fund (a cash reserve used to cover shortfalls and emergencies).  The Court held that the fact of the deficit, and not its cause, was the changed condition that provided a reasonably necessary basis for raising rates. (Customers alleged that the deficit was caused by undercharging wastewater customers.) I have heard that the Senate Ag/Water Committee may be holding a hearing on the “public interest” test and various other water rate issues later this summer. The lawyers who represent clients that may appeal rates have been increasingly frustrated by the failure to overcome the public interest test and there is apparently some sympathy at the Legislature on that issue.  The PUC has been doing some rulemakings to update and refine the TCEQ rules on rate appeals; however, to date the PUC hasn’t broached issues surrounding the public interest test.

Graham, et. Al v. Tex. Comm’n on Env’tl Quality, No Graham, et. Al v. Tex. Comm’n on Env’tl Quality, No. D-1-GN-005510 (53rd Dist. Ct., Travis County, Tex., filed Dec. 5, 2015) Wastewater permit appeal - DHJB Development, LLC for a Major Amendment to TPDES Permit No. WQ0014975001, TCEQ Docket No. 582-14-3427; SOAH Docket No. 2013-2228-MWD. At issue, in part, the characterization of the discharge route as a state watercourse. ALJ found that the discharge route was not into a state watercourse. TCEQ disagreed and found the discharge route was a watercourse and the State has a superior right to use the watercourse to carry effluent. Landowners appealed to the Travis County District Court; hearing scheduled for December 14, 2016.

Denial of Sierra Club’s request for a contested case hearing. Sierra Club v. Texas Commission on Environmental Quality, 455 S.W.3d 214 (Tex. App. –Austin 2015, pet. denied) Denial of Sierra Club’s request for a contested case hearing. A deeper inquiry into matters that might go to the underlying merits of the case is permissible to determine standing.

TCEQ’s implementation of its drought rules in the Brazos basin. Texas Comm. on Environmental Quality v. Texas Farm Bureau, 460 S.W.3d 264 (Tex. App. – Corpus Christi 2015, pet. denied). TCEQ’s implementation of its drought rules in the Brazos basin. Court of Appeals affirmed lower court decision holding: TCEQ exceeded authority when it exempted preferred junior water rights from priority call; TCEQ failed to consider Texas Water Code § 11.139. Texas Supreme Court denied TCEQ’s appeal.

Upper Trinity Regional Water Dist. & TCEQ v Upper Trinity Regional Water Dist. & TCEQ v. National Wildlife Fed’n, No. 01-15-00374-CV (1st Court of Appeals, filed April 21, 2015) Involves the adequacy of water conservation plans in an interbasin transfer permit under Water Code § 11.085(l)(2), which requires that: “the applicant for the interbasin transfer has … developed and implemented a water conservation plan that will result in the highest practicable levels of water conservation and efficiency achievable within the jurisdiction of the applicant.” Case argued on June 15, 2016.

R. E. Janes Gravel Co. v. Covar et al. , No. 14-15-00031-CV, 2016 Tex R.E. Janes Gravel Co. v. Covar et al., No. 14-15-00031-CV, 2016 Tex. App. LEXIS 13279 (14th Ct. App., Dec. 15 2016). Permit allows Lubbock to: Use the Brazos River to convey treated wastewater effluent derived from imported Canadian River surface water and groundwater Janes challenged the order for two alternative reasons: the Commission failed to comply with Texas law when authorizing the amended permit; and even if the Commission may grant the permit, the Commission failed to properly measure carriage losses.  Held: Commission properly applied Texas Water Code §§ 11.046(c) and 11.042(c).  Commission’s finding regarding carriage losses was supported by more than a scintilla of evidence. Rehearing en banc requested (pending)

Brazos Sysops Appeal Key Permit provisions: Specifies diversion points and diversion reaches; Establishes availability of water depending on location and demands; Special Condition to address sedimentation; Special Condition to address the recent drought; Uses the adopted environmental flow standards, and provides that the analysis under §§ 11.150, 11.151, and 11.152 is not required. Return Flows: Surface water and groundwater return flows of others are considered under § 11.046(c) and 11.121. Groundwater return flows of BRA are considered under § 11.042(b). Surface water return flows of BRA are considered under § 11.042(c). Decision appealed 12/9/2016 by three parties Main appeal points are: The permit doesn’t properly identify all of the diversion points. The total amount of water authorized is not stated in definitive terms. There is no water available for appropriation. The water is not intended for beneficial use. The permit is contract to the public welfare, including the impact on lake levels. The eflow rules promulgated pursuant to § 11.1471 do not replace the environmental analysis required by § 11.134. The commission conducted ad hoc rulemaking when issuing the permit. The commission failed to follow the law and its own rules when issuing the permit (this overlaps significantly with points 1-6) (this is the kitchen sink). Due process was denied when evidence was excluded. The commission failed to properly explain the changes it made to the PFD. The commission did not consider the rights of term permit holders.

TWCA Surface Water Committee Legislative Preview

Contested Case Hearings for Water Rights For water rights permits: Hearing request is valid only if: timely filed with commission identifies relevant issues of fact or law affected person After referral for hearing, no new parties or issues unless constitutional due process is implicated. Sets timelines for a proposal for decision in water rights cases Provides more clarity and flexibility on when the Executive Director may issue a permit when a matter is no longer contested.

Chapter 11 Cleanup & Conforming Practice Conforms the requirements of a water rights application with current TCEQ practice and modern technology. For example, it eliminates the requirement that maps be submitted on linen trace paper. Conforms the statute to how TCEQ evaluates an application’s consistency with regional and state water plans

Groundwater as Alternate Supply Requires notice to a groundwater conservation district if groundwater used as an alternative source for a state water right Also a TWCA Groundwater Committee Consensus Bill

Actions by Executive Director Clarifies process for seeking judicial review of a decision by the Executive Director that is subject to a motion to overturn under Commission rules