The Cut and Dry of Texas Groundwater Law: Unconstitutional Takings of Produced Water from Oil and Gas Wells as a Result of House Bill 3246

Abstract

With legislative action that went into effect on September 1, 2019, the state of Texas affected a taking of groundwater against surface owners. House Bill 3246 gives title of produced water, as part of fluid oil and gas waste, to whoever takes possession of it to put it to a beneficial use. Produced water is water that is trapped deep in rock with hydrocarbons. It comes to the surface with oil and gas production, and produced water is best described as water that has solubles, often salts, dissolved in it. The Texas Water Code defines groundwater as “water percolating below the surface.” If produced water were to fall within this definition, the owner of it would have a vested property right in it. In the Edwards Aquifer Authority v. Day and Edwards Aquifer Authority v. Bragg decisions, the Texas Supreme Court established the ability for groundwater to be taken, as defined by the Fifth Amendment of the United States Constitution. Following this logic, if produced water is groundwater, the state cannot pass legislation that transfers its ownership to an oil and gas producer without paying a surface owner for the water without affecting a taking. This article posits that produced water can be defined as percolating, because of this fact, House Bill 3246 acts as an unconstitutional taking of groundwater from the surface estate. The bill is an unconstitutional taking because it violates the restrictions that the Texas Constitution puts on the public use requirement of a taking, and even if it were to not violate this requirement, just compensation would still have to be paid. In addition to the offenses against the surface estate, this article presents an argument that, in the event that produced water is found to be in the mineral estate, House Bill 3246 still affects a taking, this time against the mineral estate owner, because the bill gives fee simple absolute ownership of a substance in the mineral estate that a mineral lessee would otherwise have fee simple determinable ownership of. The situation created by House Bill 3246 needs to be addressed by the legislature with the offending section of the Natural Resources Code changed so that the interests of surface owners in all groundwater beneath their property are recognized. Additionally, oil and gas producers need to approach surface owners and enter into agreements to purchase produced water brought to the surface incidental to oil and gas production. The value of produced water is increasing, what was once a substance with no value that had to be disposed of now has applications in other oil and gas recovery operations and increasingly in other industries as well. In a state with the water deficits that Texas regularly sees, all water has to be respected as the valuable resource that it is. With the legislation only being recently passed, the both the novelty and urgency of this topic are great. This article addresses a critically important aspect of Texas property law and constitutional law is often overlooked because of the insistence that produced water is not percolating.