When Contract is Silent, Accommodation Doctrine Applies to Water Rights Disputes

A case that has been closely followed by oil and gas and other interests which involves groundwater disputes has now been decided by the Texas Supreme Court. In Coyote Lake Ranch, LLC, v. The City of Lubbock, decided on May 27, the Court held that the “accommodation doctrine,” a doctrine developed by the courts to assist in the resolution of disputes between landowners and their oil and gas lessees, can play a significant role in the resolution of disputes between landowners and the owner of an interest in the groundwater beneath the land. The doctrine refers to the rule that “[a]bsent an agreement to the contrary, an oil-and-gas lessee has an implied right to use the land as reasonably necessary to produce and remove the minerals but must exercise that right with due regard for the landowner’s rights. In so ruling, the Court reversed the U.S. Court of Appeals for the Seventh District sitting in Amarillo, Texas.

In 1953, Texas was enduring another long and severe drought. To provide residents of Lubbock and the residents of nearby communities with an additional source of water, the City of Lubbock entered into an agreement with the owners of the Coyote Lake Ranch, a very large ranch nearby comprising over 26,000 acres, purchasing an interest in the groundwater beneath the ranch. The City was authorized to install the necessary wells to recover this groundwater, and seven wells have been drilled to date. The most recent drought prompted the City to greatly increase its “water-extraction” efforts at the ranch. The City planned to install 20 test wells, followed by 60 new groundwater recovery wells. The owners of Coyote Lake Ranch protested, arguing that such a large-scale operation would adversely affect the ranch and its environment, as well as posing a threat to an endangered species, the lesser prairie chicken, that is located on the ranch. The City responded that its agreement with the ranch gave it full rights to go forth, and it had no duty to accommodate Coyote Lake Ranch or its concerns because the accommodation doctrine does not apply to the owners of groundwater such as the City. Coyote Lake Ranch prevailed at trial court and obtained an injunction.  On appeal, however, the Court of Appeals agreed with the City.

The Texas Supreme Court has now reversed the Court of Appeals. If the terms of the parties’ agreement do not address such conflicts, the courts must employ the accommodation doctrine as a vehicle to settle the dispute. In this context, the Doctrine would hold that the owner of an interest in the groundwater has an implied right to use the land as reasonably necessary to produce and remove the groundwater, but must exercise that right with due regard for the landowner’s rights. According to the Court, “[t]he accommodation doctrine, based on the principle that conflicting estates should act with due regard for each other’s rights, has provided a sound and workable basis for resolving conflicts between ownership interests.” Ultimately, the Court held “that the accommodation doctrine applies to resolve conflicts between a severed groundwater estate and the surface estate that are not governed by the express terms of the parties’ agreement.”