Guitar Holding Co. LP v. Hudspeth County Underground Water Conservation
District (Tex. 2008)(Medina)
Guitar Holding Co. LP vs. Hudspeth County Underground Water Conservation District, No. 06-0904 (Tex.
May 30, 2008) (Medina)(water law | water use rights, administrative law, rule-making authority of
governmental unit) (district's rule / regulatory scheme at issue in the case declared invalid)
(retrieve 13 page opinion in pdf)
GUITAR HOLDING COMPANY, L.P. v. HUDSPETH COUNTY UNDERGROUND WATER CONSERVATION
DISTRICT NO. 1, ET AL.; from Hudspeth County; 8th district (08-04-00296-CV and 08-05-00115-CV, 209
S.W.3d 172, 08-31-06)
The Court reverses the court of appeals' judgment and renders judgment.
Justice David Medina wrote the opinion of the Court.
Subsequent supplemental Opinion in this appeal:
Guitar Holding Co., LP v. Hudspeth County Underground Water Conservation District No. 1,
No. 06-0904 (Tex. Aug. 29, 2008)(suppl. opinion on rehearing) (per curiam)
(abandonment of issues on appeal)
Links: Water law decisions | 2008 Texas Supreme Court Opinions | Texas Opinions Homepage
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OPINION BY JUSTICE DAVID MEDINA
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Argued December 5, 2007
Justice Medina delivered the opinion of the Court.
The Texas Water Code generally delegates the management and control of groundwater production and
use to local groundwater conservation districts, vesting them with broad regulatory powers. Tex. Water
Code §§ 36.001-.304. When exercising these powers to limit groundwater production, local districts may
protect existing wells and production by continuing “historic or existing use” to the extent possible under
its comprehensive management plan. Id. § 36.116(b). The scope of this “historic or existing use”
exemption and the extent to which a district’s rules may operate to preserve such use are at issue in this
appeal.
The underlying rules here grandfather “historic or existing use” of groundwater in the district to an
amount of water previously used during the relevant historic period without regard to the intended future
purpose for that water. Thus, under the district rules, production from a grandfathered well, historically
used to irrigate crops, can in the future be sold for transport out of the district as a preserved historic or
existing use. The court of appeals upheld the district’s permitting scheme, concluding, in effect, that the
district’s authority to preserve the “historic or existing use” of groundwater pertained only to the amount of
water used in the past and not its purpose. 209 S.W.3d 146, 158-59.
We conclude, however, that the amount of groundwater used and its beneficial purpose are components
of “historic or existing use” and that the district thus exceeded its rule-making authority in grandfathering
existing wells without regard for both. Accordingly, we reverse the court of appeals’ judgment and render
judgment, declaring the district’s scheme for issuing permits for the transfer of groundwater out of the
district invalid.
I
Groundwater conservation districts are “the state’s preferred method of groundwater management.” Tex.
Water Code § 36.0015. Chapter 36 of the Texas Water Code grants these districts broad authority to
manage, conserve, and protect groundwater resources through rule-making[1] and permitting.[2] Id. §§
36.101(a), 36.113(a). Under this chapter, each groundwater conservation district is required to develop a
comprehensive management plan with stated goals, such as, promoting the most efficient use of
groundwater, preventing waste and subsidence, and addressing conjunctive surface water management
issues, natural resource issues, drought conditions, and conservation. Id. § 36.1071(a)(1)-(7).
When adopting its plan, the district must consider all groundwater uses and needs to develop rules that
are fair and impartial. Id. § 36.101(a). Part of the plan must include a permitting system “for the drilling,
equipping, operating, or completing of wells or for substantially altering the size of wells or well pumps.” Id.
§ 36.113(a). A district may also regulate well spacing and water production. Id. § 36.116(a)(1)-(2). When
regulating production, a district may consider: setting production limits; limiting the amount of water
produced based on acreage or tract size; limiting the amount of water produced from a defined number of
acres assigned to an authorized well site; limiting the maximum amount of water produced on the basis of
acre-feet per acre or gallons per minute per well site per acre; managed depletion, or a combination of
any of those. Id. § 36.116(a)(2)(A)-(F). When promulgating rules that limit groundwater production, a
district may preserve historic or existing uses of groundwater in the district to the maximum extent
practicable consistent with its comprehensive management plan. Id. § 36.116(b). Finally, the district must
develop its plan using the best available data and must forward its plan to the regional water planning
group for consideration in its planning process. Id. § 36.1071(b). The district’s plan must also be certified
by the Texas Water Development Board. Id. § 36.1072(d).
A.
The Hudspeth County Underground Water Conservation District No. 1 is situated in northeast Hudspeth
County, at the western foot of the Guadalupe Mountains less than a hundred miles east of El Paso. This
is an arid part of the state, averaging only eight to ten inches of rain annually. The Hudspeth District,
however, includes the Bone Springs-Victorio Peak Aquifer and the fertile Dell Valley where there has
been irrigation for over fifty years. Although one of the state’s earliest conservation districts, having been
created in response to the historic state drought of the 1950s, the District’s management of the aquifer
has not been a success. In fact, by mid-2000, the state auditor[3] deemed the District non-operational,
questioning whether it was appropriately managing its groundwater.
In response, the District brought in an expert consultant to help bring its management plan into
compliance and return to operational status. During this time, the City of El Paso targeted the area as a
potential source of water for its growing demand. The Legislature was also active, amending the Water
Code to facilitate the transfer of groundwater to places in need, such as growing metropolitan areas.[4]
After the Seventy-seventh Legislature adjourned in 2001, the reconstituted Hudspeth District Board met
to adopt a new management plan and new rules.
Under its new management plan, the District committed itself to sustaining the Bone Springs-Victorio Peak
Aquifer at an historically optimal level by regulating the withdrawal of groundwater. Groundwater
production was divided among three core classes of users: (1) statutorily exempt users, (2) existing and
historic users, and (3) new users, which also might include historic users seeking to increase
consumption. The right to produce groundwater from completed, non-exempt wells was linked directly to
the aquifer’s level, although groundwater production limitations were to operate differently depending on
the type of permit held by the well owner.
The District adopted the current rules on May 31, 2002. These rules recognize three types of permits: (1)
validation permits, (2) operating permits, and (3) transfer permits. Wells operating before the adoption of
the District’s new rules are generally entitled to validation permits. If a well is not eligible for a validation
permit, the landowner may apply for an operating permit. Finally, transfer permits must be obtained to
transfer water out of the district. A validation or operating permit is required to obtain a transfer permit.
Landowners who qualify for validation permits are entitled to withdraw from three to four acre-feet per
year, depending on the aquifer’s elevation, for every acre irrigated during a designated historic and
existing use period. The District’s rules define this period to be ten-and-a-half years, beginning January
1, 1992, and ending May 31, 2002. Landowners with validation permits who did not irrigate during the
historic use period are entitled to produce the maximum amount of water beneficially used in any one
year during the period. An operating permit, on the other hand, entitles a landowner to produce water
from a new well based upon surface acreage. The production right under an operating permit is further
conditioned upon the elevation of the Bone Springs-Victorio Peak Aquifer. Thus, unlike the holder of a
validation permit whose production rights are guaranteed, the holder of an operating permit has no right
to groundwater until the aquifer reaches a designated average water level.
Transfer permits are available to any holder of either a validation or operating permit. Validation permit
holders, however, particularly those held by landowners who irrigated during the historic use period,
receive substantially greater transfer rights under the rules than other landowners because they receive
substantially greater guaranteed allocations of groundwater than other landowners. By contrast,
landowners who hold operating permits receive no guaranteed allocation and thus may not have any right
to transfer water when the aquifer fails to reach the designated elevation.[5]
B
Guitar Holding Company, one of the largest landowners in Hudspeth County, irrigated only a small portion
of its land during the designated historic and existing use period. It has obtained validation permits for
fifteen existing wells and has made application to drill fifty-two new wells. Cimarron Agriculture Ltd., CL
Machinery Company, RBB Farms, and Triple B Farms have also received validation permits from the
District. Because these Hudspeth County landowners irrigated their land during the historic and existing
use period, they are permitted to produce a significantly greater amount of water than Guitar, even
though Guitar owns more land. Further, because the District links transfer permits to validation and
operating permits, landowners with validation permits, particularly those with grandfathered irrigation
rights, can transfer these greater amounts of water out of the district.
In four separate administrative appeals to the Hudspeth County District Court, Guitar challenged the
facial validity of the District’s new rules regarding production and transfer permits and raised as-applied
challenges to the validity of permits issued to Cimarron Agriculture, CL Machinery, RBB Farms, and Triple
B Farms. The district court upheld the validity of the District’s rules and issued permits, and the court of
appeals affirmed those rulings. 209 S.W.3d at 161. Guitar appeals, complaining the District has
misapplied its limited authority to preserve existing or historic groundwater use within the district and in
effect granted certain irrigators a perpetual franchise to transfer and sell Hudspeth County groundwater.
II
Guitar complains that this franchise has been accomplished by the District linking transfer permits to
validation permits that preserve the historic or existing use of groundwater within the district. Guitar
argues the Water Code only authorizes a district to preserve historic or existing use of the same type or
purpose. Because transferring water out of the district is a new use, it cannot be preserved or
“grandfathered” under section 36.116(b), which extends only to the preservation of an existing or historic
use.
The District, on the other hand, argues that the provision granting it authority to preserve historic or
existing use makes sense only if “use” refers to an amount of groundwater, not its purpose. Section
36.116(b) provides:
In promulgating any rules limiting groundwater production, the district may preserve historic or existing
use before the effective date of the rules to the maximum extent practicable consistent with the district’s
comprehensive management plan under Section 36.1071 and as provided by Section 36.113.
Tex. Water Code § 36.116(b).
The District submits that the provision does not address the purposes to which the production is applied
but rather implies a quantity by telling districts that they may “preserve historic or existing use . . . to the
maximum extent practicable consistent with the district’s comprehensive management plan.” Id. From this
dispute, it is apparent that the meaning of the word “use” is key to understanding a groundwater
conservation district’s authority to “preserve historic or existing use” through rule-making under section
36.116. Id.
Chapter 36 of the Water Code does not expressly define “use” or “historic or existing use.” Terms that
are not otherwise defined are typically given their ordinary meaning. Tex. Dep’t of Transp. v. Needham,
82 S.W.3d 314, 318 (Tex. 2002); see Tex. Gov’t Code § 311.011. But undefined terms are also not
construed “in isolation from the rest of the statute.” Cities of Austin, Dallas, Ft. Worth, and Hereford v. Sw.
Bell Tel. Co., 92 S.W.3d 434, 442 (Tex. 2002). They are instead to be read in harmony with other
provisions of the statute. McIntyre v. Ramirez, 109 S.W.3d 741, 745 (Tex. 2003).
The noun “use” ordinarily conveys something with a purpose, an object, or an end.[6] This meaning is
confirmed elsewhere in the chapter when the term is combined with a type or purpose. For example,
Chapter 36 defines the terms “use for a beneficial purpose,” “agricultural use,” and “conjunctive use.”
Tex. Water Code § 36.001(9), (20), (21). An amendment to the chapter, after the adoption of the present
local rules, however, indicates that the Legislature intended for the phrase “historic or existing use” to
have a slightly broader meaning.
In 2005, the Legislature added a new definition for “evidence of historic or existing use,” which it defined
as “evidence that is material and relevant to a determination of the amount of groundwater beneficially
used” during the relevant time period. Id. § 36.001(29). The chapter already defined “use for a beneficial
purpose” with a list of specific purposes and “any other purpose that is useful and beneficial to the user.”
Id. § 36.001(9). Read together, these definitions indicate that the amount of groundwater withdrawn and
its purpose are both relevant when identifying an existing or historic use to be preserved. Indeed, in the
context of regulating the production of groundwater while preserving an existing use, it is difficult to
reconcile how the two might be separated. See id. § 36.0015 (purpose of groundwater conservation
districts is to conserve, preserve, and protect groundwater through regulation).
Apparently, that is the Legislature’s view about groundwater permits as well. Both amount and purpose
are listed in Chapter 36 as recommended elements for all well permits. See id. § 36.1131(a). In addition
to well ownership, location, and completion date, the chapter expressly addresses both the “purpose for
which the well is to be used” and the “conditions and restrictions . . . on the rate and amount of
withdrawal.” Id. § 36.1131(a)(4), (8). Similarly, the District’s current rules require that all applications for
permits include “a statement of the nature and purpose of the proposed use and the amount of water to
be used for each purpose.” Hudspeth County Underground Water Conservation District No. 1 Rule 6.4(c)
(3) (adopted May 31, 2002). Thus, both the amount of water to be used and its purpose are normal terms
of a groundwater production permit and are likewise a part of any permit intended to “preserve historic or
existing use.” A district’s discretion to preserve historic or existing use is accordingly tied both to the
amount and purpose of the prior use.
III
In a related dispute, the parties disagree about whether the transfer permits issued by the District are
from new permit applications. Classification as a new permit application is significant because a district
may impose more restrictive conditions on new permit applications under certain circumstances. Those
circumstances are set out in section 36.113(e), which provides that more restrictive permit conditions may
be imposed on new applications when the limitations (1) are applied uniformly to all subsequent new
permit applications, (2) bear a reasonable relationship to the existing district management plan, and (3)
are reasonably necessary to protect existing use. Tex. Water Code § 36.113(e)(1)-(3).
Guitar argues that transferring groundwater out of the district is a new use for which a new application
must be made, and that as a new permit application, the District must comply with the requirements of
section 36.113(e). Guitar submits, however, that by using its rules to link transfer permits to existing
permits, either validation or operating, the District has avoided applying the same limitations to all of the
new transfer permit applications. Guitar further submits that the District has thereby granted certain
farmers, who irrigated their land in the past, a preferential right to convert their existing irrigation wells to
an entirely new use without satisfying more restrictive conditions applied to other landowners. Guitar
concludes that the District has exceeded its authority by granting preferential transfer rights to some in-
district users who no longer seek to preserve their historic or existing use.
The District responds that its permitting scheme complies fully with section 36.122, the provision generally
applicable to groundwater transfers out of district. That section provides that “a district may not impose
more restrictive permit conditions on transporters than the district imposes on existing in-district users.”
Tex. Water Code § 36.122(c). An exception is recognized for new permit applications which, as already
mentioned, can include additional limitations if uniformly applied and necessary to protect existing use.
See id. §§ 36.122(c), 36.113(e).
The District submits that by linking transfer permits to existing permits it has strictly adhered to the
statutory directive by treating in-district users and transporters identically. Under its rules, any permittee,
who has the right to produce groundwater in the district under either a validation permit for existing use or
an operating permit for new use, is entitled to obtain a transfer permit. Thus, the District concludes that
because it has not tried to impose more restrictive permit conditions on transporters than on in-district
users, section 36.113(e) does not apply.
We agree with Guitar, however, that the transfer permits here are from new permit applications. No
landowner in the Hudspeth District has ever transferred water outside the district or obtained a permit to
do so before the adoption of these rules. Because a landowner must have a transfer permit to transfer
water outside the district, all of the transfer permit applications here are new within the meaning of section
36.113(e).
IV
Generally, a groundwater district’s rules and decisions are reviewed under the substantial evidence rule.
See id. § 36.253. The review is de novo, however, when, as here, an action is challenged on the ground
that the groundwater district has acted beyond its statutory authority. See In re Entergy Corp. 142 S.W.3d
316, 322 (Tex. 2004); see also Pub. Util. Comm’n of Tex. v. City Pub. Serv. Bd. of San Antonio, 53 S.W.
3d 310, 316 (Tex. 2001). Chapter 36 authorizes a groundwater district to establish different rules and
limits for historic or existing use, in effect, grandfathering landowners’ historic use to protect their existing
investments and activities. Tex. Water Code § 36.116(b). The chapter, however, also requires that all
new uses be treated equally, directing that limitations may be imposed on new permit applications, but
only when done uniformly and when reasonably necessary to preserve existing use. Id. § 36.113(e).
Although there is existing irrigation use in the district, the transfer rules do not protect that existing use.
Instead, the transfer rules permit in-district irrigators to convert their protected existing use to an entirely
new use, that is, to transfer it out of the district for municipal and industrial purposes. Once the
groundwater allocated for existing irrigation use is transferred outside the district, however, the protected
existing use ends, as does the justification for protecting that use. Rather than protect historic or existing
use then, the District’s transfer rules, in essence, grant franchises to some landowners to export water
while denying that right to others. Because the limitations are not uniformly applied to these new
applications and are not necessary to protect existing use, the District’s transfer rules exceed the
statutory authorization and are thus invalid.
* * *
Accordingly, we reverse the court of appeals’ judgment and render judgment declaring the rules relating
to transfer permits in Hudspeth County Groundwater Conservation District No. 1 invalid, as are the
transfer permits issued pursuant thereto.
____________________________________
David M. Medina
Justice
Opinion delivered: May 30, 2008
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[1] Through rules, a groundwater conservation district may limit groundwater production based on tract
size or well spacing, provide for the conservation, preservation, protection, and recharge of groundwater
to control subsidence, prevent degradation of water quality, or prevent the waste of groundwater. Tex.
Water Code § 36.101(a).
[2] The Water Code requires permits for most wells, although exception is made for certain exempt wells,
which generally include wells used for domestic purposes, livestock, and oil and gas production. Tex.
Water Code § 36.117(b)(1).
[3] “A district is subject to review by the state auditor under the direction of the legislative audit committee
pursuant to Chapter 321, Government Code.” Tex. Water Code § 36.302(a).
[4] On May 27, 2001, the Legislature enacted Senate Bill 2, which, among other things, amended Chapter
36 to prohibit groundwater districts from imposing more restrictive conditions on persons seeking permits
to transport water out of a district than on existing in-district users, except in limited circumstances. Act of
May 27, 2001, 77th Leg., R.S., ch. 966, §§ 2.49, 2.52, 2001 Tex. Gen. Laws 1991, 2015, 2018 (codified
as amended at Tex. Water Code §§ 36.113(e), 36.122(c)).
[5] The following table depicts the water allocations that holders of validation and operating permits
receive under Hudspeth County Underground Water Conservation District No. 1 Rule 3.5(c):
Average Water Elevation
Validation Permit Allocation
Operating Permit Allocation
Greater than 3,580 feet
4.0 acre-feet per acre per year
Pro-rata up to 4.0 acre-feet per acre per year
Greater than 3,570 feet but less than or equal to 3,580 feet
4.0 acre-feet per acre per year
None
Equal to or greater than 3,565 feet but less than or equal to 3,570 feet
Pro-rata between 3.0 and 4.0 acre-feet per acre per year
None
Less than 3,560 feet
For irrigation, 3.0 acre-feet per acre per year; pro-rata for all other uses
None
[6] See The New Shorter Oxford English Dictionary on Historical Principles 3531 (4th ed. 1993) (defining
“use” to mean, among other things, “application or conversion to some purpose,” “manner or mode of
using, employing, or utilizing something,” and “a purpose, an object, an end”); see also The American
Heritage College Dictionary 1486 (3d ed. 2000) (“To put into service or apply for a purpose; employ”);
Black’s Law Dictionary 1540 (7th ed. 1999) (“The application or employment of something; esp., a long-
continued possession and employment of a thing for the purpose for which it is adapted . . . .”); Webster’s
New Collegiate Dictionary 1279 (1981) (“the act or practice of employing something”).
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