The Accommodation Doctrine and Dominant Estate Rulings Regarding Groundwater

The Accommodation Doctrine and Dominant Estate Rulings Regarding Groundwater

(Coyote Lake Ranch, LLC v. The City of Lubbock)

A Landmark Groundwater Case

On May 27, 2016, in the case of Coyote Lake Ranch, LLC v. The City of Lubbock, the Texas Supreme Court held that groundwater estates are governed by the “accommodation doctrine.” This is the first time a court has held that groundwater owners have a duty to accommodate the surface owner.

Coyote Lake Ranch (the “Ranch”) comprises 26,600 acres of land in Bailey County, in the Texas Panhandle, on the New Mexico border. The Ranch is primarily used for agriculture, raising cattle, and recreational hunting. In 1953, the Ranch conveyed its groundwater to the City of Lubbock (the “City”). The deed provided that the City could drill at any time and in any place, so long as the drilling was for the purpose of investigating, exploring, producing, and getting access to underground water.

In 2012 the City announced its plan to increase its water extraction efforts, which possibly would have led to the drilling of 80 additional wells on the Ranch. The Ranch complained that this proposal would cause erosion and damage the surface unnecessarily. The Ranch sued to enjoin the City from proceeding, claiming that the City had a duty to accommodate the surface owner. The trial court granted a temporary injunction, stating that the City had other reasonable means of achieving their purpose without substantially interfering with the Ranch’s current uses. Furthermore, the court stated that the City’s proposed plan would likely cause irreparable harm to the Ranch in the future. The court’s injunction prevented the City from mowing grass or erecting power lines and required the City to consult with the Ranch before drilling wells.

The City appealed, arguing that its deed gave it the express right to carry out its operation and that the accommodation doctrine applied to mineral owners and not groundwater owners. The Ranch countered that the accommodation doctrine applied as a logical extension of the Supreme Court’s opinion in Edwards Aquifer Authority v. Day. The Court of Appeals, however, declined to extend the doctrine, finding no authority to do so, and reversed the temporary injunction against the City. The Ranch appealed.

The Supreme Court of Texas was tasked with the issue of deciding whether the accommodation doctrine applies as between a landowner and the owner of an interest in groundwater. The Court first held that the deed provisions alone did not resolve the disagreement between the Ranch and the City.

The Court then discussed the “dominance” of the mineral estate – Texas law has always recognized severance of the mineral estate from the surface and its priority as the dominant estate. Being a dominant estate, a severed mineral estate has an implied right to use as much of the surface as necessary to produce the minerals, as well as other legal benefits, such as access to the property for production.

The accommodation doctrine potentially reins in the dominant mineral estate. Where there is an existing use by the surface owner that would be impaired, and where there are reasonable industry-standard alternatives to recover the minerals, the rules of “reasonable usage by the surface may require the adoption of an alternative by the [mineral] lessee.”

The purpose of the accommodation doctrine is to balance the rights of the surface and mineral owners to use their respective estates in a way that is fair to both parties. In the past, the accommodation doctrine had only applied to mineral interests and not groundwater interests. In Coyote Lake Ranch, the Supreme Court chose to extend the accommodation doctrine to groundwater interests due to the similarities between mineral and groundwater estates and their conflicts with the surface estate.

Buried in its accommodation-doctrine discussion, the Court first had to hold that the groundwater estate, like the mineral estate, is dominant over the surface. This means that the groundwater estate receives the benefit of the implied right of use of the surface estate. The Court discussed how groundwater and mineral estates are both found in underground reservoirs, how they both can be severed from the land as a separate estate, and therefore how severed groundwater estates have the same right to use the surface as mineral estates. The Court cited its decision in Day, acknowledging again that although water and hydrocarbons have important differences, there is no basis for crafting new law for the groundwater estate. The finding of the Court that the groundwater estate is a dominant estate is as significant as the holding related to the accommodation doctrine.

The court stated that the accommodation doctrine was made to resolve disputes such as this. The court was reluctant to search for a new approach to resolving disputes over a severed estate’s implied right to reasonable use of the surface when a proven rule was already at hand. For these reasons, the Supreme Court of Texas held that the accommodation doctrine applies to resolve conflicts between a severed groundwater estate and the surface estate that are not governed by the express terms of the parties’ agreement.

In order for the surface owner to gain relief on an accommodation doctrine claim, the surface owner has the burden to prove “(1) the groundwater owner’s use of the surface completely precludes or substantially impairs the existing use, (2) the surface owner has no available, reasonable alternative to continue the existing use, and (3) given the particular circumstances, the groundwater owner has available reasonable, customary, and industry accepted methods to access and produce the water and allow continuation of the surface owner’s existing use.”

The trial court’s temporary injunction prevented the City from destroying any grass on the Ranch, denying the City its undisputed right to access groundwater. The Supreme Court found that the temporary injunction was too broad and an abuse of discretion. The Court, therefore, affirmed the court of appeals’ judgment reversing the temporary injunction and remanded the case for further proceedings consistent with its opinion.

The Coyote Lake Ranch decision is significant for a few reasons. At first glance, the case’s significance seems to lie in its holding about the accommodation doctrine. But the holding of larger significance was the Court’s holding that the groundwater estate is dominant to the surface in the same way the mineral estate is. As the City argued, the Court never held the groundwater estate to be dominant before. It seems the Court did not find the question to be a difficult one; it spent less than two pages analogizing groundwater to oil and gas and discussing its dicta from the Day opinion before quickly turning back to its accommodation-doctrine analysis.

So what are some implications of the dominant-estate holding? We now have legal certainty that a severed groundwater estate comes with an implied right of access to develop the groundwater. Until Coyote Lake Ranch, that point remained uncertain, and there was, at best, confusion as to whether or not the groundwater owner had that right.

The finding of the dominant groundwater estate has huge implications for both the surface and groundwater owners. Buyers of land now need to be more careful than ever that they understand the status of the groundwater rights under the property they are considering buying. A landowner reserving or severing groundwater now has certainty that it will be able to access and develop that water in the future. As before Coyote Lake Ranch, one should always take great care with contract and deed terms when reserving or conveying groundwater rights.

Another issue to be resolved is the relative priorities between the mineral estate and the groundwater estate. If they are both dominant to the surface estate and both want to use the same property for development, which of those two estates has “dominance” over the other? Another decision to come!

Of course, this is not an exhaustive discussion of the doctrine. For more information on this topic, email or call Rhonda Jolley, Real Estate & Water Law Attorney with BRANSCOMB LAW, at rjolley@branscomblaw.com or (210) 598-5400.