BREAKING NEWS: Court of Appeals Rules That Large Groundwater Producers May Challenge Regulations of Lone Star Groundwater Conservation District

Court of Appeals Justice Hollis Horton.

Beaumont, February 2 – In a major victory for water users in Montgomery County, the Ninth Court of Appeals at Beaumont ruled that large water producers may challenge the validity and reasonableness of the Lone Star Groundwater Conservative District’s (LSGCD) rules under the Texas Water Code and the Texas Declaratory Judgments Act. The opinion, which Justice Hollis Horton wrote, and in which Chief Justice McSteve McKeithen and Justice Leanne Johnson joined unanimously, arose out of the challenge of several large water producers to the LSGCD rules that place limits on the volume of groundwater that each large water producer may produce yearly from its wells. While the large water producers acknowledge that the Legislature delegated some authority to the LSGCD to regulate groundwater, they have claimed that the Legislature did not authorize groundwater districts to place annual production limits on individual groundwater producers regardless of the number of wells or acreage owned by a producer.

In summary, Justice Horton wrote, the Court of Appeals “conclude[s] that the Texas Water Code expressly authorizes courts to consider challenges that concern the validity of a groundwater district’s rules. We further conclude that the Legislature, in the Water Code, expressly authorized the courts to remedy a successful challenge to the validity of a groundwater district’s rules by declaring the groundwater district’s rules invalid.” The Court of Appeals upheld the ruling of Visiting District Judge Lamar McCorkle, sitting for the 284th District Court in Conroe, on that specific issue. The Court of Appeals also ruled that individual LSGCD board members are not liable, under sovereign immunity grounds, for actions of the LSGCD as a whole.

The ruling in the Court of Appeals is a major victory for the plaintiffs, which include the City of Conroe, Quadest, L.P., Woodland Oaks Utility, L.P., Crystal Springs Water Co., Inc., Everett Square, Inc., E.S. Water Consolidators, Inc., and others. Duane Ham, Conroe City Council, said “We’re very excited we can move forward in the case. We’re going to keep fighting for the taxpayers and get this done. We’re pleased they came out with the ruling as fast as they did. We look forward to seeing the District in the trial court.”

Mike Stoecker, President of Woodland Oaks Utility, L.P., added, “Ultimately this victory will lead to protection of private property rights throughout the State of Texas and that’s what I’m after.”

Simon Sequeira, President of Quadvest, L.P., told The Golden Hammer, “The good news is we have challenged Lone Star’s rules. They haven’t said they’re right but only that they’re immune. The district court ruled we can sue the district, and the Court of Appeals agreed. Lone Star can’t escape through immunity. We’re happy we won.”

The LSGCD has become a center of major controversy, because its rule making has forced water producers and users to purchase surface water from the San Jacinto River Authority at prices far greater than market prices for water. The regulations of LSGCD have, therefore, driven the price of water up substantially in the City of Conroe, The Woodlands, and many other parts of Montgomery County.

One board position, that of LSGCD’s President Richard Tramm, has expired and is set for a new appointment. The Montgomery County Commissioners Court previously appointed Tramm and will either re-appoint him or appoint a new board member after the Court interviews prospective nominees after the February 14, 2017, Commissioners Court meeting.

Mike Powell of Locke Lord law firm in Dallas represented the City of Conroe and large water producers in the Court of Appeals. James Stilwell of Martin, Earl, & Stilwell law firm in The Woodlands represented the LSGCD in the Court of Appeals.

The Court of Appeals affirmance of the 284th District Court’s earlier ruling gives substantial hope to water users in Montgomery County that the LSGCD’s over-regulation and the SJRA’s attempted monopolization of water sales might come to an end.

 

 

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