City of Marshall v. City of Uncertain

• Citation: 206 S.W.3d 97
• Decision Date: 09 June 2006
• Docket Number: No. 03-1111.,03-1111.
• Parties: CITY OF MARSHALL and Texas Commission on Environmental Quality, Petitioners, v. CITY OF UNCERTAIN, Caddo Lake Area Chamber of Commerce and Tourism, Greater Caddo Lake Association, Caddo Lake Institute, John T. Echols and Barry L. Bennick, Respondents.
• Court: Supreme Court of Texas

Page 97

206 S.W.3d 97

CITY OF MARSHALL and Texas Commission on Environmental Quality, Petitioners, v. CITY OF UNCERTAIN, Caddo Lake Area Chamber of Commerce and Tourism, Greater Caddo Lake Association, Caddo Lake Institute, John T. Echols and Barry L. Bennick, Respondents.

No. 03-1111.

Supreme Court of Texas.

Argued October 21, 2004.

Decided June 9, 2006.

Rehearing Denied December 15, 2006.

R. Lambeth Townsend, Lloyd Gosselink Blevins Rochelle & Townsend, P.C., Martha S. Dickie, Minton Burton Foster & Collins, Martin C. Rochelle, Lloyd Gosselink Blevins Rochelle, George Thomas Bohl, Cynthia Woelk, Brian E. Berwick, Greg Abbott, Barry Ross McBee, Edward D. Burbach, Karen Watson Kornell, Office of Attorney General, Austin, for Petitioners.

Richard W. Lowerre, Lowerre & Kelly, Craig T. Enoch, Winstead Sechrest & Minick, P.C., Austin, Beth Ann Blackwood, Koledey, Thomas & Blackwood, Tom Max Thomas II, Dallas, for Respondents.

R. Glenn Jarvis, Law Offices of Glenn Jarvis, McAllen, Aric Kurtis Short, Molly Cagle, David P. Blanke, Vinson & Elkins L.L.P., Roger P. Nevola, Law Offices of Roger P. Nevola, Austin, Frank R. Booth, Aransas Pass, Jonathan D. Pauerstein, Loeffler Tuggey Pauerstein Rosenthal LLP, San Antonio, P.M. Schenkkan, Graves Dougherty Hearon & Moody, P.C., Timothy L. Brown, Austin, for Amicus Curiae.

Justice O'NEILL delivered the opinion of the Court.

In 1986, the City of Marshall received a certificate of adjudication recognizing a right to divert and use up to 16,000 acre-feet of water from Cypress Creek for municipal use, meaning that the water it supplied had to be potable. In 2001, the City applied to the Texas Commission on Environmental Quality¹ to change the purpose of use in its certificate so that it could supply untreated water for industrial use. The City's application did not request a change in the amount of water or rate of diversion. The City of Uncertain and others opposed the application, alleging the amendment would have serious adverse environmental and socio-economic consequences, and sought a contested-case hearing. The Commission concluded that section 11.122(b) of the Texas Water Code mandated approval of the amendment without a contested-case hearing. We must decide whether that provision precludes a contested-case hearing when a proposed water-rights amendment requests a change in use but does not seek to increase the amount of water appropriated or the rate of diversion. We conclude that, while section 11.122(b) significantly restricts the issues that may be reviewed in a contested-case proceeding, it does not altogether preclude one. Depending upon the particular amendment application, a hearing may be necessary to allow the Commission to assess certain limited criteria other than the application's effect on other water-rights holders and the on-stream environment that the Legislature considered necessary to protect the public interest, including assessment of water conservation plans, consistency with the state and any approved regional water plans, and groundwater effects. Accordingly, we affirm the court of appeals' judgment in part and remand to the Commission for further proceedings.

I. Background

The City of Marshall is located in Harrison County, Texas, which is located partially within the Cypress Creek Basin and partially within the Sabine River Basin. Marshall received a permit in 1947 from the Texas Board of Water Engineers, a predecessor of the Texas Commission on Environmental Quality, authorizing Marshall to divert 7,558 acre-feet of water per year from Cypress Creek. Almost a decade later, the permit was amended to authorize an additional 8,442 acre-feet diversion. In 1986, Marshall received a certification of adjudication² from the Commission under the Water Rights Adjudication Act³ recognizing its right to divert a total of 16,000 acre-feet of water for municipal use per year. The Commission's rules define "municipal use" as "the use of potable water within a community or municipality and its environs for domestic, recreational, commercial, or industrial purposes." 30 TEX. ADMIN. CODE § 297.1(32). It is undisputed that Marshall has never used more than half of its authorized amount of water.

In 2001, Marshall applied to the Commission for a permit amendment authorizing it to change the purpose of use so that it could supply untreated water for industrial purposes. The record suggests that Marshall was negotiating to sell the water to a power company and possibly to other industrial users. Marshall also sought recognition of its historical practice of providing water to customers in the portion of Harrison County located within the Sabine River Basin in addition to its existing authorization to provide water to customers within the Cypress Creek Basin. Hundreds of individuals and organizations filed requests for notice and hearing on the application, including the City of Uncertain, the Greater Caddo Lake Association, the Caddo Lake Institute, the Caddo Lake Area Chamber of Commerce, John Echols, and Barry Bennick (collectively, "Uncertain"), respondents in this Court. Uncertain asserted that the application posed a serious threat to Big Cypress Bayou and Caddo Lake, which has been designated by the state and federal governments as a wetland of international importance. Tourism centered around Caddo Lake is a significant component of the City of Uncertain's local economy, and the other opponents and their constituents either operate businesses, own land, hold water rights, or reside downstream from Marshall's point of diversion. Uncertain asserted that the amendment would impair existing water rights and adversely affect the public welfare. It also contended that the application was inconsistent with the regional water plan and that Marshall's objectives in seeking the amendment could be met through conservation measures. In addition, Uncertain argued that there were indications of a hydrological relationship between Caddo Lake and groundwater resources that the Commission was required to consider under the Commission's rules. See 30 TEX. ADMIN. CODE § 297.47(a).

The Commission's executive director determined that neither of Marshall's requested amendments required notice and hearing.⁴ The director concluded that section 11.085(v)(4) of the Water Code exempted the requested change in basin of use from notice and hearing requirements.⁵ He also concluded that notice and hearing were not required for the requested change in use, reasoning that section 11.122(b)'s "full use" assumption mandated authorization of the change. TEX. WATER CODE § 11.122(b). The full-use assumption, also known as the four-corners doctrine, requires the Commission to assess a requested amendment's impact on other water rights and the on-stream environment based upon the full amount of water authorized by the existing permit irrespective of the amount that the permit holder has actually used. See id. The executive director granted Marshall's application in March 2002, and the Commission denied Uncertain's appeal of that decision. See 30 TEX. ADMIN. CODE § 55.201.

Uncertain appealed to the district court, naming the Commission and Marshall as defendants. Uncertain sought a temporary restraining order and temporary injunction to prevent Marshall from selling untreated water for industrial use pending disposition of the lawsuit, and also sought reversal of the executive director's decision to grant the permit without allowing a contested-case hearing. Uncertain further alleged that the approval violated several Water Code provisions and its right to due process under Article I, sections 17 and 19 of the Texas Constitution. The parties filed cross-motions for summary judgment; the trial court granted Uncertain's motion and denied Marshall's and the Commission's, holding that the Commission erred in its determination that the Water Code mandated approval of the amendment without a contested-case hearing.

The court of appeals affirmed in part, and reversed in part the trial court's judgment. 124 S.W.3d 690. The court held that section 11.085(v)(4) of the Water Code did not require a hearing on Marshall's request to change its permitted basin of use, id. at 696, but that section 11.122(b) allowed a hearing on Marshall's request to change the purpose of use, id. at 698. The court further held that notice and hearing were required under sections 11.132 and 11.133 of the Water Code. Id. We granted the Commission's and Marshall's petitions for review to determine section 11.122(b)'s effect on section 11.132 and 11.133 notice and hearing requirements when a proposed permit amendment changes the permit's purpose of use but does not affect the amount of water appropriated or the authorized diversion rate. Uncertain does not contest the court of appeals' decision that no hearing was required on Marshall's change-in-basin-of-use request, so that issue is not before us.

II. Discussion

Before addressing the parties' arguments regarding section 11.122(b)'s import, it is helpful to consider the statute's origin in the context of the development of water law in Texas. That development illustrates the Legislature's continuing efforts to properly conserve and manage this increasingly vital resource.

A. Water Law Background

Surface water⁶ in Texas is generally owned by the State of Texas and held in trust for the public, and the preservation and conservation of water resources are "public rights and duties." TEX. CONST. ART. XVI, § 59; TEX. WATER CODE § 11.021(a); FRANK F. SKILLERN, 1 TEXAS WATER LAW SERIES 29 (1992). Current laws governing Texas surface-water rights have grown out of "a hodge-podge of historical and contradictory water rights systems." Robin A. Melvin, Transferring Water Rights in Texas, in 14.1, THE CHANGING FACE OF TEXAS WATER RIGHTS IN TEXAS 2003 (State Bar of Texas 2003).

1. Spanish, Mexican, and Common Law

Spanish or Mexican law governed water rights granted before...