The History of the Rule of Capture Doctrine in Texas, Part 2 – A Tragedy of the Commons?

dry-water-cartoon1or – “When everybody owns everything, nobody will take care of anything.” Will Durant

GROUNDWATER MANAGEMENT AREAS – A STEP BEYOND GROUNDWATER CONSERVATION DISTRICTS

A principal problem underlying the 1949 and 1985 GCD amendments was the failure to recognize that the flow of groundwater is not controlled by political, but by hydrogeologic, boundaries. Furthermore, there was no requirement that GCDs overlying a common aquifer develop a cooperative set of management plans. In most cases, there was no evidence that GCDs intended to develop plans that would have led to co-operation or to minimal departures from the Rule of Capture (ROC). Most GCDs, in fact, seem to have been committed to preserving the doctrine under the guise of “local control.”

As noted above, many GCDs were formed on the basis of political— not hydrogeological — boundaries. Although the districts have been encouraged to work with each other to produce coherent management plans, prior to 2005, it was often the case that there was little interaction among the districts and that many GCDs pursued objectives which were not in sync with those of neighboring districts. To rectify shortcomings of the GCD system, the Legislature, in 2005, adopted House Bill 1763, which required joint planning among the districts within designated Groundwater Management Areas (GMAs) that cover all of the State’s major and minor aquifers. The Legislature specified that TWDB was to use aquifer boundaries or subdivisions of aquifer boundaries in its delineation of each GMA. TWDB proposed 16 groundwater management areas, with boundaries which reflect those of the major hydrogeologic areas. (Mace, R.E., R. Petrossian, R. Bradley, and W.F. Mullican, III, A Streetcar Named Desired Future Conditions: The New Groundwater Availability for Texas; presented at the 7th Annual The Changing Face of Water Right in Texas, State Bar of Texas, May 18-19, San Antonio, TX. Under the provisions of the 2005 law, representatives of GCDs are required to meet at least once every year to conduct joint planning and to review groundwater management plans and accomplishments in their respective GMAs. The intended long-term effect is to get GCDs to work together under rules which will lead to a better understanding of hydrogeological conditions and the availability of groundwater throughout the State. From this, it is expected that coherent sets of regional management plans will be developed to ensure that groundwater resources will be available to residents of Texas through the year 2060.

ECONOMIC IMPLICATIONS OF THE RULE OF CAPTURE  … A TRAGEDY OF THE COMMONS

Was anything ever to be gained by embracing the ROC as the principal groundwater doctrine of Texas? Two factors often cited in favor of the ROC are: 1. The ROC encourages economic development through maximum utilization of a source or sources of groundwater; and 2. The ROC entails minimal government involvement in the operations of water wells.  It should be noted that “maximum utilization” is not synonymous with “optimal utilization.” Microeconomic theory emphasizes optimal over maximum utilization.  Optimal utilization embodies the concept of economic efficiency, as measured by marginal cost/profit. Maximum utilization embodies neither.

With respect to the exploitation of nonrenewable natural resources (e.g. gold, oil, uranium), this is best explained by Harold E. Hotelling’s theory of the mine (The Economics of Exhaustible Resources, in The Journal of Political Economy, v. 39, pp. 137–175 (1931)), in which Hotelling postulates that optimal resource exploitation is achieved when the marginal profit of the last extracted unit is zero. Although Hotelling’s theory is most often applied to mining operations, it is reasonable to extend the theory to an exhaustible or potentially exhaustible resource, such as groundwater. With regard to the second point above, there is nothing in economics to suggest that unfettered exploitation of a natural resource such as groundwater is economically efficient or amounts to sensible resource management. With respect to groundwater, “minimal government involvement” might be required to prevent over-exploitation, depletion, contamination, and, insofar as groundwater can be considered to be a “public good,” promotion of the health, safety, and welfare of the public.

Factors which might be cited as reasons to amend or replace the ROC with a different groundwater rights doctrine are the following:

1. The potential for overproduction and depletion;

Spindletop
Spindletop oilfield

2. Inefficient use and devaluation of the resource; and

3. The ROC ignores the needs of future generations.

Points 1 and 2 are well-established consequences associated with the aggressive exploitation not only of water but of other natural resources that can be considered to form a commons (e.g., petroleum reservoirs, forests, rangeland).   A prima facie example of points #1 and #2 is found in the petroleum industry of Texas, particularly in the overexploitation of early giant fields such as Spindletop (near Beaumont, Texas).  Discovered in January 1901, Spindletop (see photo on the right) attracted thousands of speculators and producers to Beaumont, Texas. Each producer sought to extract as much oil as possible from his small lease, under the assumption that other producers would drain “his” oil if he did not produce it first. The result was a proliferation of closely spaced drilling rigs, each producing from the same reservoir. The effect of the production frenzy was rapid depletion of reservoir pressure and rapidly decreasing output.  Initial production was as much as 100,000 barrels of oil per day, and total production in 1902 was 17,500,000 barrels (47,945 barrels per day).  By 1904, total production was 3,650,000 barrels   (10,000 barrels per day).  With regard to the production of oil at Spindletop:

Mineral rights to the oil under the leases worked according to the old English “rule of capture.” Under this principle, anybody who had property or a lease anywhere over the pool of crude had the right to suck it out of the ground as fast as he could.

and

With little understanding of the underground pressures of natural gas and water, the producers extracted too much oil too quickly. Water seeped into the reservoir. The flow of oil forced to the surface by pumps slowed to a trickle.

The original production area at Spindletop was reduced to a minor oil field by 1909.

Point #3 is a much-discussed and debated matter involving commitments of one generation to its successors. Given the opportunity to exploit aquifers, petroleum reservoirs, forests, and rangelands, it is reasonable to inquire whether the current generation has an obligation to generations yet to come to ensure that adequate resources will be available or that public lands will not be degraded from overuse.

DEFINITION OF A COMMONS 

A “commons” is any resource which is used as though it belongs to all. An aquifer would easily qualify as a commons. If anyone can use a shared resource simply because one wants or needs to use it, then one is exploiting a commons.  A commons can be destroyed by uncontrolled use.

Garrett Hardin described factors that underlie the destruction or degradation of a commons in his essay The Tragedy of the Commons .  (Refer to Science, Vol. 162, No. 3859, Dec. 13, 1968.)  Hardin’s essay is developed around a parable about the grazing of animals on open pastureland. The owners of the animals are motivated to increase their personal wealth by adding one head of stock at a time to their respective flocks. However, each animal added to the total stretches the carrying capacity of the land. The degradation attributable to each additional animal is small, yet if all owners pursue this strategy, the carrying capacity will be exceeded and the property severely damaged or destroyed. It is not necessary for all users of a commons to behave as described by Hardin. The destruction of the resource can occur if only one user attempts to dominate the commons.

Comanche%20Pool%201938

COMANCHE SPRING

The photo above is of the old pool at Comanche Spring (Fort Stockton, Texas), taken in 1938.  Comanche Spring was the third largest spring in Texas. It was also a source of irrigation water for at least 90 years, and a rare oasis in the semi-arid region of Trans-Pecos Texas. Average daily discharge was estimated to be 21 million gallons.  Comanche Spring ceased to flow more 50 years ago, after Clayton Williams, Sr. developed a well field to supply water to his crops.  Williams’ well field dried up the spring and captured the groundwater that had been used for decades to irrigate more than 6,000 acres of farmland near Fort Stockton. Comanche Spring stands out as a prime example of the destruction of a commons, as well as a basis for reasonable regulation of groundwater pumpage AND the assignment of well-defined and enforceable rights to groundwater in Texas.

One such example of damage to a commons involving the production of water is the matter of Comanche Spring, located at Fort Stockton, Texas (refer to the photo at the beginning of this post). Comanche Spring was a source of water for animals and humans, and the substantial discharge (estimated to be as much as 21 million gallons per day Mgd) made the spring a prime hunting ground for Indians and an ideal location for an army post and a stagecoach stop. The spring also provided water for irrigation, and, in later years, it was the site of a large pool in a municipal park. The spring, however, ceased to flow as a result of pumping to support irrigation, principally by one farmer. In A Primer for Understanding Texas Water Law,  Timothy L. Brown describes the facts and legal issues at the core of the matter.  The Comanche Spring case (Pecos County Water Control and Improvement District No. 1 v. Williams, 271 SW2d 503 (Tex.Civ.App–El Paso 1954, writ ref’d n.r.e.) is prominent in Texas water law. Brown’s account of the matter is reproduced below:

At Fort Stockton, Texas, there were large, prolific springs, named Comanche Springs. The springs provided a water supply for numerous irrigators in the Pecos County Water Control and Improvement District, which upon development, supplied water to irrigate over 6,000 acres.

Up gradient from the springs was land owned by Clayton Williams (Sr.) …. At the time the case arose, Texas was in the early stages of the Great Drought of the 1950s and Williams needed water for his crops. He developed a well field and began to pump water from the formation. The pumping resulted in drying up the springs, which cut off the water supply for the irrigators in the district. Litigation followed. The irrigators asserted that they and their predecessors had owned the location and flow of the spring and that they had used the water beneficially for ninety years. By virtue of this, they alleged, they acquired the right to be protected in the subsurface source of the water. They also plead in the alternative that if they did not own the source of the water supply, they were nevertheless entitled to a fair share of the source of supply. The gist of this argument was that they had a correlative right to the water. They also alleged that the spring was not fed by percolating groundwater, but rather by a well-defined underground stream in which they acquired rights by virtue of claims filed with the Board of Water Engineers. The remedy they sought was an injunction against Williams’ pumping.

Williams countered by filing exceptions to the plaintiffs’ petition. He asserted that the water was percolating groundwater and since no waste had been alleged, he was entitled to a judgment on the basis of the East case. He also asserted that the plaintiffs’ allegation about a well-defined underground stream was insufficient because the source, location, beds and banks and course of the so-called well-defined channel were not provided. The trial court sustained Williams’ exceptions. The irrigators appealed.

The El Paso Court of Civil Appeals affirmed the trial court judgment. The court held that Williams absolutely owned the water beneath his land and the plaintiffs had no correlative rights in it. As to the general allegation about the well-defined stream, Williams’ exceptions were well taken because there was no evidence to support the proposition. As to the failure of the spring when Williams pumped, that did not prove the existence of a well-defined underground channel.

On appeal to the Texas Supreme Court, the plaintiffs attempted to avoid the effect of the East case with an interesting argument. The argument was that the percolating groundwater referred to in the East case did not include water moving in well-defined underground strata. Percolating groundwater, according to modern hydrology, is divided into two classes: first, “diffused percolating water,” defined as slowly moving water which cannot be traced directly as the source of a natural stream, and, second, “percolating water feeding a natural water course,” defined as water which supplies a surface water stream. The former definition was what was used to define percolating groundwater at common law, so East did not apply.

The significance of this argument was, if the Supreme Court adopted the definitions, East would have been stripped of its significance. This is because the facts about most groundwater are known or subject to being known. Thus, once groundwater reached a known water sand, it would no longer be percolating water subject to private ownership as provided by East. This comports with the Attorney General’s earlier opinion.

The Supreme Court declined to take the case and did not write an opinion. By declining to take the case, we can only infer that the Supreme Court apparently rejected the proposition.

The Comanche Spring case stands out as an example of the destruction of a commons for several reasons:

  1. By 1954, hydrogeology had advanced enough since the formulation of Darcy’s law in 1856 that the fundamental principles of hydrostratigraphy and the flow of groundwater on local to subregional scales were well understood.
  2.  By 1954, the effects of pumping on water levels were not mysterious, many thanks to the work of hydrogeologists and civil engineers with the Water Resources Division of the United States Geological Survey.
  3.  Arguments that Comanche Spring was fed by “percolating water” (as understood in the East case) instead of “water moving in well-defined underground strata” (as made on appeal) were clearly absurd. All that was required to counter the claims of Williams’ attorneys was an investigation of the hydrostratigraphy of the area, measurements of water levels in wells between Williams’ property and properties downstream of the spring, and evaluation of drawdown and recovery from pumping tests. 4. Williams’ pumping caused water levels to fall below the discharge point of the spring, and the lower water levels led to the cessation of discharge. This amounted to as much as 21 Mgd of captured flow to support Williams’ farm and to the loss of water to support irrigation on 6,000 acres that had been sustained by spring flow for many years. This effectively gave Williams a monopoly over a commons that had served a great many people for at least 90 years. 5. The cessation of flow also destroyed a rare water resource in west Texas and denied residents of Fort Stockton and the surrounding area the recreational and aesthetic equivalent of the springs of Balmorhea (Reeves County) or Barton Springs (Travis County).

I have not attempted to calculate the economic loss stemming from the destruction of what might be referred to as the Comanche Spring Commons. Suffice it to say that the losses were and remain significant, particularly in the form of lost agricultural production and incomes, and losses to the City of Fort Stockton associated with the recreational and aesthetic values of the spring. It is far easier to calculate economic damage caused by the loss of irrigation water, than it is to place a dollar value on the loss of a recreational and aesthetic resource to a city, such as Comanche Spring. Imagine Zilker Park and Austin without Barton Springs, and then ask yourself what is the value of the springs at the park to the City of Austin and to Travis County.

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The History of the Rule of Capture Doctrine in Texas, Part 1

le-2012-02-Irrigation-4c-rgMuch of the following was extracted from my article “Rule of Capture and Groundwater Management in Texas”, as published in the April 2007 edition of The Water Report. In my next post, I will explain why the capture rule leads to what Garrett Hardin describes as a Tragedy of the Commons.

THE RULE OF CAPTURE

Among the states which make up the southwestern and western areas of the United States of America, Texas stands out as an anomaly with respect to the access to and use of groundwater. While most western states long ago adopted one allocation program or another based on systems of permits, correlative rights or prior appropriation, Texas has remained averse to state control of groundwater, preferring instead to rely on the English Common Law doctrine (Acton v. Blundell, 12 M. & W. 324, 152 Eng. Rep. 1223 (Ex. 1843)) of absolute ownership (i.e. the “Rule of Capture”).

Under the Rule the Capture, landowners are granted the right to pump water from wells on their respective properties, notwithstanding the impact on others, provided the pumping: (1) can be claimed to be for beneficial use; and (2) not be a cause of environmental damage. At least in Texas, pumping which is deemed to be wasteful or for malicious purposes is not protected by the doctrine. (The different water rights doctrines of the United States of America are explained in Who Owns the Water: A Summary of Existing Water Rights Laws (a Water Systems Council Report).

The Rule of Capture was enunciated in 1904 by the Supreme Court of Texas in Houston & Texas Central Railroad Co. v. East (98 Tex. 146, 81 S.W. 279 (1904)) and reaffirmed over the next 95 years in several cases which sought to overturn or modify the doctrine in order to establish pumping limits. For a complete discussion of this history, see Potter, H.G. III, History and Evolution of the Rule of Capture in 100 Years of Rule of Capture: From East to Groundwater Management, eds. William F. Mullican III and Suzanne Schwartz. Texas Water Development Board Report 361, Ch. 1, p 1-10. The Court’s decision in East was based on consideration of two factors which were first stated in a case decided in 1861 in Ohio (Frazier v. Brown, 12 Ohio St. 294 (1861)):

“… the existence, origin, movement, and course of such waters, and the causes which govern and direct their movements, are so secret, occult, and concealed that an attempt to administer any set of legal rules in respect to them would be involved in hopeless uncertainty, and would, therefore, be practically impossible.” In East, the Court quoting from the English doctrine, ruled as follows:

That the person who owns the surface may dig therein, and apply all that is there found to his own purposes at his free will and pleasure; and that if, in the exercise of such right, he intercepts or drains off the water collected from the underground springs in his neighbor’s well, this inconvenience to his neighbor falls within the description damnum absque injuria, which cannot become the ground of an action.

The phrase damnum absque injuria (Latin) means “loss or damage without injury.” The Court’s description of the flow of groundwater as “secret, occult, and concealed” has for many decades been a source of pointed commentary by hydrogeologists in Texas (see Mace, R.E., Cynthia Ridgeway, and J.M. Sharp, Jr. (2004), Groundwater is No Longer Secret and Occult – a Historical and Hydrogeological Analysis of the East Case in 100 Years of Rule of Capture: From East to Groundwater Management, eds. William F. Mullican III and Suzanne Schwartz, Texas Water Development Board Report 361, Ch. 5, p 63-88. The commentary serves to underscore what some might regard as a sharp divide between the perspective of the legal establishment with respect to matters of natural-resource evaluation and management, as opposed to hydrogeologists and civil engineers, who rely upon well-established principles of physics and hydraulics to describe, predict, and manage the flow of subsurface fluids.

THE CONSERVATION AMENDMENT

Texas, however, has not been entirely unrelenting in its support of the Rule of Capture, as indicated by the passage, in 1917, of the Conservation Amendment of the Texas Constitution (Const. art. XVI, § 59(a)) in the wake of droughts in 1910 and 1917. The Conservation Amendment declared:

The conservation and development of all of the natural resources of this State … and the preservation and conservation of all such natural resources of the State are each and all hereby declared public rights and duties; and the Legislature shall pass all such laws as may be appropriate thereto.

H.G. Potter, III, in History and Evolution of the Rule of Capture, explains:

This constitutional amendment would become critical to water law issues confronting the courts from the time of its passage to the present and would form the basis for much of the judicial branch’s reluctance to interfere with what it viewed as a legislative prerogative.

The Court, for example, cited the amendment in a 1996 ruling (Barshop v. Medina County UWCD, et al., 925 S.W.2d 618 (Tex. 1996)). In Barshop, the Court determined that the State has the responsibility under the Texas Constitution to preserve and conserve water resources (groundwater and surface water) for the benefit of all Texans. The effect of the ruling was to emphasize that natural resource management is the responsibility of the Legislature, not the Court. In a case decided in 1999 (Sipriano, et al. v. Great Spring Waters of America, Inc., et al., 1S.W. 2d 75, 77, 79-80 (Tex. 1999)) the Court commented on the Legislature’s efforts to fulfill its responsibility for water management under the provisions of the Conservation Amendment:

By constitutional amendment, Texas voters made groundwater regulation a duty of the Legislature. And by Senate Bill 1, the Legislature has chosen a process that permits the people most affected by groundwater regulation in particular areas to participate in democratic solutions to their groundwater issues. It would be improper for courts to intercede at this time by changing the common-law framework within which the Legislature has attempted to craft regulations to meet this State’s groundwater conservation needs. Given the Legislature’s recent actions to improve Texas’s groundwater management, we are reluctant to make so drastic a change as abandoning our rule of capture and moving into the arena of water-use regulation by judicial fiat. It is more prudent to wait and see if Senate Bill 1 will have its desired effect, and to save for another day the determination of whether further revising the common law is an appropriate prerequisite to preserve Texas’s natural resources and protect property owners’ interests.

NOTE: Senate Bill 1 is a comprehensive water planning bill passed by the 75th (1997) Legislature in response to a multi-year drought that wracked the State during the 1990’s. SECTION 1.01 of Senate Bill 1 amended SECTION 16.051 of the Water Code to read as follows:

No later than September 1, 2001, and every five years thereafter, the board shall adopt a comprehensive state water plan that incorporates the regional water plans approved under Section 16.053 of this code. The state water plan shall provide for the orderly development, management, and conservation of water resources and preparation for and response to drought conditions, in order that sufficient water will be available at a reasonable cost to ensure public health, safety, and welfare; further economic development; and protect the agricultural and natural resources of the entire state.

The Court’s rulings in Barshop and in Sipriano serve as much needed reminders that the Constitution of the State of Texas establishes the basis for the management of all of the State’s natural resources. This is good news for people who object to judicial activism, and bad news for all who hope for a solution, in the form of a Court-administered sledgehammer, to what they regard as a matter of major concern to all Texans. It was also a stern message to the Legislature that Texas could not continue to ignore current and future problems associated with the capture rule. Thus, it seems reasonable to infer that the Court will not intercede in water issues, as long as the Legislature takes seriously its obligation as required by the Conservation Amendment, to manage the State’s water resources for the benefit of the State’s residents.

ATTEMPTS TO SCUTTLE THE RULE OF CAPTURE

The Rule of Capture notwithstanding, the State has sought to manage groundwater through a decentralized system of conservation districts which allow a high degree of local control. In 1949, the Texas Legislature authorized the establishment of Groundwater Conservation Districts — GCDs. The establishment of GCDs was in response to recommendations in the 1930s and 1940s by the Texas Board of Water Engineers (TBWE), a predecessor of the Texas Water Development Board calling for a law to declare all underground waters to be public waters of the State.

In his book Land of the Underground Rain: Irrigation on the Texas High Plains, 1910 – 1970 (Green, D.E., 1973, The University of Texas Press, Austin, TX, p. 295), Donald Green quotes from TBWE’s 11th biennial report (1934) in which the board recommended a law

“first to declare the underground water of the State to be the property of the State; second, to guarantee the vested rights of those who have already made beneficial use of underground water; and third, to exercise proper control over future underground-water development.”

According to Green, TBWE reiterated in its 13th report (issued in 1938), the recommendation to declare groundwater a public resource. This was followed by recommendations from urban and industrial interests who were concerned about falling water levels throughout the High Plains and other areas of Texas. Green also notes that bills dealing with State control of groundwater were defeated in the Texas Legislature in 1937, 1941, and 1947. The issue of the control of groundwater came up again in the 1949 session of the Texas Legislature. Opposition from High Plains irrigation interests, however, was strong enough to defeat a proposal by the Texas Water Conservation Association (TWCA) that would have substituted a doctrine of correlative rights for the Rule of Capture. The Water Systems Council describes The Correlative Rights doctrine as one which:

…maintains that the authority to allocate water is held by the courts. As a result, owners of overlying land and non-owners or transporters have co-equal or correlative rights in the reasonable, beneficial use of groundwater. A major feature of the Correlative Rights doctrine, however, is the concept that adjoining lands can be served by a single aquifer. Therefore, the judicial power to allocate water permits protects both the public’s interest and the interests of private users.

AN APPARENT COMPROMISE

Negotiations between TWCA and the High Plains Water Conservation Users Association (HPWCUA) led to a compromise bill based on locally controlled districts. Green points out that some irrigators regarded the compromise as a capitulation by TWCA. He quotes the editor of Southwestern Crop and Stock:

Until such time as they deem it necessary to call in state assistance to protect the water supply, West Texans can consider the water their own — to use or to waste as they please.

That commentary can be considered as little more than a foolish and myopic understanding of the matter. What did the editor of the periodical think was to gained by a policy that turns a blind eye to the waste of groundwater … especially in a semi-arid region of Texas?

Under the 1949 law, districts could be established either by special legislation or by a petition from landowners. In 1985, an amendment also allowed TWDB and the Texas Commission on Environmental Quality (TCEQ) to recommend the formation of a district. As of January 2016, there are 100 GCDs in Texas.

This is a good stopping point. In the next post, I will explain how the rule of capture leads to what Garrett Hardin’s theory of a Tragedy of the Commons.

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