GUITAR HOLDING v. HUDSPETH CTY UNDG. WATER

• Decision Date: 31 August 2006
• Docket Number: No. 08-04-00296-CV.,08-04-00296-CV.
• Citation: 209 S.W.3d 146
• Parties: GUITAR HOLDING COMPANY, L.P., Appellant/Cross-Appellee, v. HUDSPETH COUNTY UNDERGROUND WATER CONSERVATION DISTRICT NO. 1, Appellee/Cross-Appellant, v. CL Machinery Company and Cimarron Agricultural, Ltd., Appellees.
• Court: Texas Court of Appeals

209 S.W.3d 146

GUITAR HOLDING COMPANY, L.P., Appellant/Cross-Appellee, v. HUDSPETH COUNTY UNDERGROUND WATER CONSERVATION DISTRICT NO. 1, Appellee/Cross-Appellant, v. CL Machinery Company and Cimarron Agricultural, Ltd., Appellees.

No. 08-04-00296-CV.

Court of Appeals of Texas, El Paso.

August 31, 2006.

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Joseph L. Hood, Jr., Scott, Hulse, Marshall, Feuille, Finger & Thurmond, El Paso, for Guitar.

John C. Steinberger, El Paso, Max Renea Hicks, Austin, for Hudspeth County Underground Water Conserv.

Lambeth Townsend,Lloyd Gosselink Blevins Rochelle Baldwind & Townsend, PC, Austin, for Cimarron & CL Machinery.

C.R. Kit Bramblett, Bramblett & Bramblett, P.C., Guy N. Fields, III, The Fields Law Firm PC, H. Keith Myers, Mounce, green, Myers, Safi & Galatzan, El Paso, Jeffrey B. Thompson, Granbury, Mark N. Osborn, Kemp, Smith, El Paso, for Intervenors.

Before BARAJAS, C.J., McCLURE, and CHEW, JJ.

OPINION

DAVID WELLINGTON CHEW, Justice.

This appeal arises from the implementation of groundwater regulations by Appellee Hudspeth County Underground Water Conservation District No. 1 ("the District") under its purported statutory authority under Chapter 36 of the Texas Water Code. On appeal, Appellant Guitar Holding Company, L.P. ("Guitar L.P.") contends the District exceeded its statutory authority under Chapter 36 when it adopted new rules for transfer permits that discriminate against similarly-situated landowners and rules for production permits that limit production based on a specific historic use period. Guitar L.P. also complains that the District's new transfer rules violate its equal protection rights under the United States and Texas Constitutions. In addition, Guitar L.P. claims that the District violated its vested rights by considering its permit applications under the new rules, rather than the old rules that were in effect when Guitar L.P. initially filed its applications, an action that it asserts is contrary to the Vested Rights Statute in Section 245.002 of the Texas Local Government Code. In a limited cross-appeal, the District challenges the trial court's denial of its attorney and expert fees, as well as the costs incurred in preparing the administrative record, and the court's ruling in favor of Guitar L.P. on Guitar L.P.'s claim for a refund of administrative fees. The District also argues that the trial court erred in apportioning partial court costs against the District. We affirm in part, and reverse and remand in part.

FACTUAL AND PROCEDURAL BACKGROUND

The Bone Spring-Victorio Peak Aquifer (the "BS-VP Aquifer" or "the Aquifer") produces groundwater for a region in west Texas commonly referred to as the Dell Valley located in northeast Hudspeth County. Prior to 1947, the Dell Valley area was primarily the site of cattle ranching. However, in the years that followed, an intense irrigated agricultural industry developed in the region, which led to a marked increase in the use of its groundwater for irrigation purposes. In the mid-1950s, the Hudspeth County Commissioners Court, by a petition followed by a confirmation election, created the District to conserve and protect the BS-VP Aquifer. Irrigation pumpage in the Dell Valley area peaked in the late 1970s, during which time pumpage exceeded recharge, resulting in a decline in the water table elevation for the BS-VP Aquifer. During the 1980s, irrigation pumpage diminished somewhat and water levels remained relatively constant, however, by the mid-1990s, water levels once again faced a downward trend.

In 1990, the District enacted Rules ("the 1990 Rules" or "old Rules"), which established a permitting system for drilling, equipping, or altering the size of a well and a certification process for validating existing wells within the district. Under the 1990 Rules, the allowable rate for each water well within the district was limited to five acre-feet of water per year, regardless of the proposed use of the water. However, the 1990 Rules placed stringent restrictions on the transport of groundwater for use outside the district. In 1998, the Board of the District adopted its groundwater management plan pursuant to Chapter 36 of the Texas Water Code. The State Auditor's Office audited the District's implementation of its certified groundwater management plan in 2000 and determined that the District had failed to meet its plan objectives and thus, was "not operational" and in violation of the provisions of the Code.

By March 2002, the District had developed a new management plan, which was later certified by the Texas Water Development Board. According to the 2002 management plan, the best available information suggests that 63,000 acre-feet per year is the long-term average amount of groundwater available for consumptive use or transfer from the District from the BS-VP Aquifer. Effective May 31, 2002, the District repealed its 1990 Rules and adopted new rules (the 2002 "Rules") regarding groundwater regulation within the district, which are now the subject of this appeal.

Guitar L.P.'s history in the region began in 1924 when John Guitar, Sr. purchased over 52,000 acres of land in the Dell Valley. Between the 1940s and 1960s, many parts of the Guitar family's land was irrigated, but since that time period, the land has been used primarily for cattle ranching. In 2002, Guitar L.P. was formed to manage the property, which today consists of approximately 38,296 acres, situated within the boundaries of the district. There are fifteen existing groundwater wells on the property, nine of which Guitar L.P. asserts have been used for irrigation purposes.

On May 14, 2002, Guitar L.P. filed an application for validation certificates for the fifteen existing wells, an application for fifty-two new water well drilling permits,¹ and an application for a permit to transfer water. Despite Guitar L.P.'s requests, the District processed its validation and transport permits under the 2002 Rules, not the 1990 Rules. After an evidentiary hearing, the District issued validation and transport permits to Guitar L.P., which, based on the production limits established under the 2002 Rules that inter alia designate an existing and historic use period, resulted in issuance of a validation permit for 57.96 irrigated acres, authorizing annual production of between 174 and 232 acre-feet of water depending on the level of the BS-VP Aquifer. The District also issued a transport permit authorizing Guitar L.P. to transport its water held under the validation permit out of the district. Appellees Cimarron Agricultural Ltd. ("Cimarron"), CL Machinery Company ("CLM"), the Rascoes, Robert L. Carpenter, Gail Carpenter, and Triple B. Farms had also applied for validation and transport permits, however, their permitted amounts of water production and its subsequent transport were significantly greater than Guitar L.P.'s permits despite Guitar L.P.'s much larger property holdings within the district. This was due to Appellees prior use of groundwater during the designated existing and historic use period under the 2002 Rules.

In four separate administrative appeals to the 205th Judicial District Court of Hudspeth County, Guitar L.P. challenged the facial validity of the District's adoption of new rules regarding production and transfer permits, raised an as-applied challenge to the validity of groundwater permits the District issued to inter alia Appellees Cimarron and CLM, and appealed the District's adverse actions on its own permit applications. Guitar I, Guitar II, and Guitar III. In the fourth administrative appeal, Guitar L.P. also raised an as-applied challenge to the validity of the groundwater permits issued to Robert L. Carpenter, Gail Carpenter, and Triple B. Farms and challenged the validity of the new rules. Guitar IV.

In the trial court's final judgment entered on October 15, 2004, in the first three suits, consolidated under trial cause number 3703-205, the court upheld the validity of the District's new rules, the validity of the permits to Cimarron and CLM, and application of the new rules to Guitar L.P.'s permit applications. However, with regard to Guitar L.P.'s permit applications, the court held in favor of Guitar L.P. on its claim for a $9,399.34 refund of administrative fees in connection with administrative proceedings before the District's board and denied attorney and expert fees in Guitar I-III. On March 11, 2005 under trial cause number 3790-205, the trial court rendered a final judgment in Guitar IV, which upheld the validity of the District's new rules as well as the groundwater permits issued to the Carpenters and Triple B. Farms, but denied attorney fees to any of the parties.

STATUTORY AUTHORITY

In Issues One and Three, Guitar L.P. challenges the validity of the District's 2002 Rules regarding transfer permit applications and production-based limitations for validation and operating permits, arguing that the District exceeded its statutory authority under Chapter 36 of the Texas Water Code.

Article 16, section 59 of the Texas Constitution imposes on the Legislature the duty to protect our state's natural resources. TEX.CONST. art. XVI, § 59(a). Pursuant to Section 59(b), the Legislature has the authority to create conservation districts to accomplish "the purposes of this amendment to the constitution, which districts shall be governmental agencies and bodies politic and corporate with such powers of government and with the authority to exercise such rights, privileges and functions concerning the subject matter of this amendment as may be conferred by law." Tex. Const. art. XVI, § 59(b). Consistent with the objectives of Article 16, section 59, the Legislature has adopted Chapter 36 of the Texas Water Code "in order to provide for the conservation, preservation, protection, recharging, and prevention of waste of groundwater, and of...