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Ware v. Texas Commission on Environmental Quality

Court of Appeals of Texas, Third District, Austin

March 3, 2017

Bradley B. Ware, Appellant
v.
Texas Commission on Environmental Quality, Appellee

         FROM THE DISTRICT COURT OF TRAVIS COUNTY, 53RD JUDICIAL DISTRICT NO. D-1-GN-10-002342, HONORABLE JOHN K. DIETZ, JUDGE PRESIDING

          Before Chief Justice Rose, Justices Pemberton and Field

          MEMORANDUM OPINION

          Bob Pemberton, Justice

         Bradley B. Ware appeals a district court judgment affirming an order of the Texas Commission on Environmental Quality (TCEQ) denying an application by Ware to extend and expand water rights previously granted him under a ten-year "term permit." We will affirm the district court's judgment.

         BACKGROUND

         Regulatory context

         This case arises under the regime of water-rights regulation prescribed by Chapter 11 of the Water Code, and an initial overview of some of that regime's basic features facilitates understanding of both the underlying dispute and its ultimate resolution. Under Chapter 11, the waters of Texas rivers, streams, and lakes (among other sources) are declared to be the property of the State (i.e., "state water")[1] held in trust for the public, [2] but the right to use state water (as opposed to corporeal ownership)[3] may be acquired by appropriation in the manner and for the purposes the chapter prescribes.[4] No new appropriation can be made unless a permit is first obtained from TCEQ.[5] The agency may grant the permit only upon application complying with various procedural requirements set forth in the chapter and, among other things, "unappropriated water is available in the source of supply, " and the proposed appropriation is intended for a "beneficial use, " does not impair the previously vested water rights of others, and "is not detrimental to the public welfare."[6]The permit may authorize an appropriation of up to three years' duration (termed a "temporary" permit) or one of perpetual or permanent duration under either a "seasonal" permit permitting use during certain portions of the calendar year or a "regular" permit with no such limitation.[7] A permanent water right is an easement that passes with the title to the land and may be conveyed as with other rights in land.[8]

         A permanent appropriative right conferred by a permit under Chapter 11 is, however, conditioned on ongoing "beneficial use" also prescribed in the permit. The right is "limited not only to the amount specifically appropriated" as stated in the permit, "but also to the amount which is being or can be beneficially used for the purposes specified in the appropriation, and all water not so used is considered not appropriated."[9] Similarly, no appropriative right is "perfected" unless the water has been "beneficially used" for a purpose specified in the permit.[10] And because "[n]o person is granted the right to waste water by not using it, "[11] an appropriative right is subject to forfeiture or cancellation for nonuse, [12] and also to loss by prescription.[13] But such rights continue to exist in perpetuity to the extent beneficial use does.[14]

         In its "Stacy Dam" decision, [15] the Texas Supreme Court held that "unappropriated water . . . available in the source of supply, " as required for issuance of a permit authorizing new appropriation of water, [16] excludes amounts that had been previously granted by permit but left unused-notwithstanding the proviso that "all water not so used is considered not appropriated"[17]-unless and to the extent such water is "freed" through cancellations of permits to which it is subject.[18] In the aftermath of Stacy Dam, the Legislature added a new permitting mechanism to Chapter 11 that gave TCEQ discretion to temporarily reallocate unperfected appropriated water rights to others who will use them, thereby providing the agency a means, short of cancellation, of ensuring utilization of the appropriative right.[19] A new Section 11.1381 provided that "[u]ntil a water right is perfected to the full extent provided by Section 11.026" (the above-referenced proviso that no appropriative right is "perfected" unless the water has been "beneficially used" for a purpose specified in the permit), TCEQ "may issue permits for a term of years for use of state water to which a senior water right has not been perfected."[20] These "term permits, " Section 11.1381 further specified, are "subordinate to any senior appropriative water rights"[21] and shall not be granted "if the holder of the senior appropriative water right" demonstrates that issuance would prohibit it "from beneficially using the senior rights during the term of the term permit."[22] An additional conforming change required that the form TCEQ provides applicants for term permits "must . . . state that on expiration of a term permit the applicant does not have an automatic right to renew the permit."[23]

         Of final note, the Legislature in Chapter 11 has codified the historical rule in prior-appropriation regimes that, "[a]s between appropriators, the first in time is the first in right."[24] It has further specified that "[w]hen the commission issues a permit, the priority of the appropriation of water and the claimant's right to use the water date from the date of filing of the application."[25] The TCEQ by rule has construed the "date of filing" for purposes of this requirement to mean the date the application that precedes the permitted appropriation is declared administratively complete.[26]

         Events below

         Since 1996, Ware has owned 261 acres of land situated along the Lampasas River-part of the Brazos River basin-in Bell County, about fifteen miles southwest of Killeen and upstream from the Stillhouse Hollow Lake.[27] Upon obtaining ownership, Ware desired to produce crops from the land with aid of irrigation water diverted from the Lampasas. He sought to acquire the necessary water rights by filing an application under Chapter 11 for a regular permit authorizing him to divert and use 130 acre-feet annually for irrigation purposes.

         At relevant times, TCEQ has ascertained the availability of water for purposes of both perpetual and term permits by using some version of a computer-based simulation known as a "water availability model" (WAM), whose general utility Ware does not dispute on appeal. The WAM, simply described, projects the availability of water at an applicant's diversion point in light of estimated streamflow at the location as compared to preexisting water rights in the same source, taking account of the full authorized amount of preexisting appropriative rights when determining availability of unappropriated water for perpetual permits, and taking account of estimated actual utilization of those preexisting rights in determining the amount of unperfected appropriated water that is available for term permits.

         After analyzing Ware's application with aid of the WAM, TCEQ staff determined that the amount of unappropriated water available at his location was insufficient to allow for a regular permit. However, agency staff determined that unperfected appropriated water would be available in sufficient amounts to support granting Ware a ten-year term permit. On November 7, 1997, TCEQ granted Ware Permit No. 5594 authorizing him to divert and use, for ten years hence, up to 130 acre-feet of Lampasas River water annually to irrigate 100 acres of his property. This right was conditioned on availability of a specified minimum flow in the river that varied according to the time of year. The permit further specified that the right granted was "subject to all superior and senior water rights in the Brazos River Basin" and was to "expire and become null and void on November 7, 2007" (ten years thereafter) unless Ware made application before that date for an extension and the application was subsequently granted "for an additional term or in perpetuity." The permit also included a statement that "[t]he priority date of this permit and all extensions hereof shall be July 1, 1997."

         In late 2005, Ware filed an application to renew Permit No. 5594, or alternatively convert it to a perpetual authorization, and also to increase his authorized usage by 20 acre-feet annually and his irrigation to cover 31 more acres. TCEQ staff analyzed the availability of water with aid of the current version of the WAM, but this time determined there was insufficient water available at Ware's location even to support renewing his term permit, let alone to increase his authorized usage or to make his right perpetual. The TCEQ Executive Director (ED) accordingly recommended that Ware's application be denied.

         Ware requested a contested-case hearing on his application, and the matter was referred for that purpose to the State Office of Administrative Hearings (SOAH).[28] Ware bore the burden of proof, [29] and a key focus of his case emphasized TCEQ actions in response to a water-rights application that had been filed by the Brazos River Authority (BRA). The BRA is the special district charged with developing and managing water resources throughout the almost 45, 000 square-mile Brazos River Basin, and to that end it holds permitted perpetual rights to large quantities of state water stored in a system of reservoirs located throughout the basin.[30] In the permit application in question, termed its "System Operations Permit, " BRA had requested numerous authorizations that included a new appropriation of over 400, 000 acre-feet of state water.

         In response to the BRA's application, agency staff had prepared a water-availability analysis, and two components of this document were the focus of Ware's complaints. First, staff had "modeled" or calculated the WAM projections assuming a "priority date" of October 14, 2004, the date the BRA's application had been deemed administratively complete. This date preceded the "priority date" staff had assumed when evaluating Ware's 2005 application-January 5, 2006, which, as with the BRA application, was the date Ware's current application had been declared administratively complete. Ware insisted, however, that TCEQ was required instead to credit him with a priority date of July 1, 1997, pointing to the statement in his 1997 term permit that "[t]he priority date of this permit and all extensions hereof shall be July 1, 1997." From this premise, Ware further reasoned that his rights (albeit under a term permit) were "first in time" and "first in right" over any water rights that had vested or been claimed subsequent to July 1, 1997-including any new appropriations granted or made under regular permits.

         Second, Ware emphasized that the BRA water-availability analysis reflected what was termed an "update" of inputs into the WAM to take account of a basin-wide total of approximately 75, 000 acre-feet annually in "return flows" (chiefly discharges of previously diverted water from approximately 135 water-treatment or power plants[31]) that staff was treating as water available for appropriation by BRA. Ware perceived that this "update" was tantamount to an admission by TCEQ that newly discovered additional unappropriated water existed that staff had not considered, and was required to consider, when determining whether water was available to him. And relying on the above premise that his rights dated back to 1997, Ware deduced that TCEQ was required to allocate the "new water" to him prior to BRA and grant his application. By failing to do so, Ware insisted, the ED was improperly attempting to "reserve" the return flows for BRA by "manipulating" priority dates.

         In response, the ED urged that Ware was mistaken about the role of priority dates and, more fundamentally, about the respective legal positions of term permits vis-à-vis perpetual water rights. The ED further urged that Ware's factual premises were similarly erroneous, and he presented staff testimony[32] to the effect that the return flows were "interruptible" (i.e., subject to being curtailed during shortages), but could appropriately be considered as a source of water as to BRA due to unique features of its system and the circumstances of its uses. Among these features were that BRA had the capacity to draw water it owns from one of several reservoirs if ever necessary to make up any shortages resulting from its using the amount of return flows, thereby ensuring that such use did not impinge upon any senior water rights if return flows proved to be less than the appropriated amount. In contrast, the ED emphasized, Ware had no capacity or right to store water from which he could make up any shortages. A further distinction was that the full amount of return flows was available to BRA only at the Gulf of Mexico, whereas Ware's diversion point was hundreds of miles upstream and situated on one of the Brazos's subtributaries.

         The Administrative Law Judge (ALJ) issued a proposal for decision (PFD) that Ware's permit application be denied in full. The TCEQ commissioners adopted the PFD with some modifications that did not change the result and issued a final order denying Ware's application. The order rested upon ultimate findings or conclusions that Ware had "failed to carry his burden of proving that sufficient water exists in the Brazos River basin or that all applicable statutory and regulatory requirements have been met to warrant issuing to him the proposed Water Use Permit" and that "[p]ursuant to the authority of, and in accordance with, applicable laws and regulations, the requested Permit should not be granted." The underlying findings and conclusions were consistent with the ED's view of the law and the evidence.

         After exhausting his remaining administrative remedies, Ware sued for judicial review of the TCEQ's final order in the district court. That court affirmed the order in full, and Ware perfected this appeal.

         STANDARD OF REVIEW

         Our review of the TCEQ's order on appeal is governed by the same analysis as in the district court-the familiar "substantial-evidence" rule that is codified in Section 2001.174 of the Administrative Procedure Act.[33] Under this standard, we must reverse or remand a case for further proceedings "if substantial rights of the appellant have been prejudiced because the administrative findings, inferences, conclusions, or decisions are":

(A) in violation of a constitutional or statutory provision;
(B) in excess of the agency's statutory authority;
(C) made through unlawful procedure;
(D) affected by other error of law;
(E) not reasonably supported by substantial evidence considering the reliable and probative evidence in the ...

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