Water Usage Reporting and Cancellation

The impact of the current drought has been well chronicled, in government reports, in economic postmortems, in endless news accounts showing images of cracked earth, emaciated cattle and stranded boats.  But for all of the misery that the drought has inflicted, and for all the analysis it has inspired, we still have a far-from-perfect understanding of precisely how much water is being used and how much the state actually needs.

Section 11.031 of the Texas Water Code requires anyone who owns a surface water right to submit an annual report to the Texas Commission on Environmental Quality (TCEQ) documenting “all information required by the commission to aid in administering the water law and in making inventory of the state’s water resources.”  Among other things, the reports are supposed to include information on rights holders’ water usage.  In spite of this requirement, more than 40 percent of water rights holders outside of watermaster basins do not report their water usage.

This year, the state legislature passed H.B. 2615, which increases the penalties that TCEQ can impose on water rights holders who fail to file reports.  Until now, TCEQ could only threaten violators with a relatively trivial fine: a $25 base late fee, plus $1 per day after March 1, with a maximum cap of $150.  These amounts have remained the same since 1977 – when the original Dallas television series had yet to premiere, the state had a smaller population than New York, and there all told about 12 million fewer Texans.

H.B. 2615 increases the penalty to $100-a-day for rights holders with appropriations of 5,000 acre-feet or less per year and $500 per day for rights holders with appropriations of more than 5,000 acre-feet per year.  (As originally introduced, the bill gave TCEQ the discretion to set penalties, with a daily maximum of $5,000.)


The House Research Organization analysis of H.B. 2615 said that the bill would promote compliance with the reporting requirement and provide TCEQ with information needed to respond to priority calls.  Certainly, usage information could help TCEQ to understand the impacts of calls and to design appropriate curtailments (particularly if the curtailments are not driven strictly by priority of rights).

But that information could perhaps serve an even more important purpose if it gives the agency sufficient evidence to cancel unused water rights.  Like other Western states, Texas governs surface water according to the appropriations doctrine, one tenant of which is that water rights holders can lose rights to water they do not beneficially use.

This use-it-or-lose-it ethos evolved from a historical desire in water-scarce regions to ensure that available water was used to the fullest extent, that it was not wasted by being allowed to flush out to sea.  But over time the West (for the most part) has come to appreciate that what was once considered waste can be quite beneficial and that what was once considered beneficial use can be quite wasteful.

In Texas, Water Code § 11.173 is the statutory basis for cancellation.  It authorizes TCEQ to initiate cancellation proceedings against water rights that have gone unused for at least 10 years and that do not qualify for a statutory exception to cancellation.

Exceptions to Cancellation

In some ways, cancellation acts as more of a paper threat than a practical one, due to the factual difficulty of proving nonuse.  No published judicial opinion in the last 30 years has even cited § 11.173.  Over time, the legislature has made cancellation progressively more difficult and has enacted seven exceptions to cancellation:

1. Conservation Reserve Program:  This federal USDA program pays farmers not to work environmentally sensitive lands for periods of 10 to 15 years.  Farmers would theoretically be less inclined to participate if they believed they could lose their water rights due to nonuse during that time.

2. Regional Water Plan:  Texas’ current water planning process divides the state into 16 geographic regions and charges each with preparing a water plan for its jurisdiction.  Section 11.173 shields a water right from cancellation “if a significant portion of the water … has been used in accordance with a specific recommendation for meeting a water need included in the regional water plan.”  But regional water plans are relatively comprehensive and include many recommendations.  See, e.g., Texas Water Code § 16.053(e)(5)(A) (requiring regional planning groups to consider “all potentially feasible water management strategies.”)

As a result, this exception could be read broadly.  It requires only that a “significant portion” (undefined, of course) of a right must have already been used.  A water rights holder could thus use significant portions and treat less-than-significant as standby/future reserves.  The upside: exception could reduce the likelihood of being left high and literally dry.  The downside: it could encourage hoarding and discourage water rights holders from addressing future needs through nimbler market transfers.

3.  Long-Term Supply:  A similar exception, added in 2001, applies if a water right “(A) was obtained to meet demonstrated long-term water supply needs as evidenced by a water management plan developed by the holder; and (B) is consistent with projections of future water needs contained in the state water plan.”  The wrinkle is that long-term needs may never come to fruition, particularly if water rights holders overestimate future needs, as incentives like the exception would encourage.  For years, the State Water Plan included a project that would have piped water from the Mississippi River to Texas.  Inclusion in state planning documents is not de facto proof that a project is feasible or inevitable or that the rights associated with it will actually be used as expected.

4.  Reservoir Rights:  A right cannot be cancelled if it “was obtained as the result of the construction of a reservoir funded, in whole or in part, by the [right] holder … as part of the holder’s long-term water planning.”  On one hand, this exception respects that reservoirs represent significant capital investments with long time horizons.  On the other hand, it acts as a free pass for any water right associated with a reservoir, no matter much demographic, economic, ecological, or hydrological conditions may have changed since the construction of that reservoir.  The requirement that a right be consistent with the right holder’s long-term planning is meaningless since the right holder has total control over its own planning.

5.  Environmental Flows: In 2005, H.B. 1225 created a carveout for water that a rights holder has not used because of conservation measures.

6.  Suspension Orders:  H.B. 2615 adds a new exception for nonuse resulting from “a suspension, adjustment, or other restriction on the use of the water . . . imposed under an order issued by the [TCEQ] executive director.”  This exception eliminates any risk that a rights holder could permanently lose a right because TCEQ responds to a priority call or a public health emergency by temporarily suspending or reallocating rights.  The controversy surrounding Water Code § 11.053 and the TCEQ’s actions on the Brazos may have heightened concerns about such risks.

7. Drought Conditions: H.B. 2615 also adds an exception for when there is “an inability to appropriate the water . . . due to drought conditions.”  This exception assures that a rights holder will not lose a right for failing to divert water that was not there to divert.  But it does not explain when an “inability” will be “due” to drought conditions.  If a utility pipe cannot intake water because reservoir levels have dropped, is the situation due to the drought, or to engineering that failed to foresee the drought, or to the unwillingness of the utility to pay for a new, lower pipe.

Expected Impact

Altogether, these exceptions impose a high legal burden for cancellation, on top of the high factual burden of proving extended nonuse and the high political burden of moving from a policy of tolerating nonuse to one of policing water rights.  Still, water that has been allocated but that is going unused could offer an important new supply source if TCEQ has the means to cancel and reallocate it.

Indeed, the toughened reporting requirement under H.B. 2615 could provide T.C.E.Q. with data needed to more effectively scrutinize estimates of current and future water use and to separate reasonable expectations from self-protecting speculations.  Or perhaps it will make no difference whatsoever: the agency has received usage reports from most water rights holders for years and has cancelled few water rights.


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