The document discusses the nature of property estates, including surface, mineral, and groundwater estates, and the relationships between these estates. It notes that mineral estates are considered dominant and carry an implied right to use as much of the surface as is reasonably necessary. It also discusses regulatory takings cases related to groundwater regulation, noting that groundwater conservation districts can effect regulatory takings through rules that deny landowners all economically beneficial use of their groundwater. The document concludes that determining if a regulatory taking has occurred is a fact-specific analysis considering the economic impact, investment-backed expectations, and the nature of the regulation.

2. Introduction
• Nature of Estates
• Surface v. Mineral v. Groundwater
• Relationship Between Estates
• Dominant and servient estates
• Priority
• Regulation of Estates
• Oil and gas exception
• Regulatory takings

3. Nature of Estates
•Unsevered fee ownership includes
surface, groundwater and minerals
•All estates may be severed, but until
severance groundwater part of
surface estate
•Once severed, estates are separate
fee simple estates of equal dignity

4. Nature of Estates
•Mineral owner’s absolute ownership
is subject to the “Rule of Capture”
• Doctrine of non-liability to
neighboring mineral owners for
drainage
• Encourages production, as remedy is
to “drill your own well”
• Subject to the State’s police power

5. Nature of Estates
• EAA v. Day 369 S.W.3d 814 (Tex. 2012):
• Landowner has absolute title in severalty to
the groundwater in place subject to rule of
capture and State’s police power
• Incorporated holding from Elliff v. Texon
Drilling Co. 210 S.W.2d 558 (Tex. 1949) to
Groundwater
• How far does incorporation of oil and gas
law go?

6. Relationship Between Estates
• Mineral estate is “dominant” and carries
“implied easement” to use the surface
estate:
• Mineral owner may use as much of the
surface as is “reasonably necessary” to
develop the minerals
• Includes right to use groundwater (at least
when still part of surface estate)
• Sun Oil Company v. Whitaker, 483 S.W.2d
808 (Tex. 1972)

7. Relationship Between Estates
• Limitations to the implied easement:
• Use cannot benefit other lands
• Robinson v. Robbins Petroleum Corp,
501 S.W.2d 856 (Tex. 1973)
• But see Key Operating & Equip., Inc.
v. Hegar, 435 S.W.3d 794 (Tex. 2014)
• Use cannot be negligent or wasteful
• Accommodation Doctrine
• GCD regluation

8. Relationship Between Estates
• Accommodation Doctrine:
Where there is an existing use by the surface
owner which would otherwise be precluded or
impaired, and where under established
practices in the industry there are alternatives
available to the lessee whereby minerals can
be recovered, the rules of reasonable usage of
the surface may require the adoption of an
alternative by the lessee

9. Relationship Between Estates
• Accommodation doctrine requires that
reasonable alternative be available to
Lessee on the leased premises
• May offer little help to landowners fighting
water use by oil and gas operators

10. Relationship Between Estates
•Does a severed groundwater estate
have an implied easement to use the
surface?
•City of Lubbock v. Coyote Lake Ranch,
LLC 440 S.W.3d 267 (Tex.App.—
Amarillo, 2014 pet filed)

11. Relationship Between Estates
• In 1953, the Purtell family conveyed
groundwater under subject tract to City of
Lubbock
• Surface of the property later acquired by
Coyote Lake Ranch, LLC
• In 2012, City of Lubbock proposed a “well
field plan” and began operations on the
property
• Coyote Lake sought an injunction, which
the trial court granted; City appealed

12. Relationship Between Estates
• Temporary injunction granted on the basis
that the City had failed to comply with the
Accommodation Doctrine
• Appellate Court reversed and remanded:
• “Nowhere in Day . . . does the court speak
to the implied rights of a severed
groundwater estate owner to use the
surface in production of groundwater”

13. Relationship Between Estates
• Should the groundwater estate have an
implied easement to use the surface?
• Without implied easement, severed
groundwater owner may be unable to
develop groundwater estate

14. Relationship Between Estates
• Does the mineral estate have an implied
easement to use a severed groundwater
estate?
• Would order of severance have any
bearing?
• Which estate would have priority to use
the surface?

15. Regulation
• Groundwater regulated by Groundwater
Conservation Districts; the “state’s
preferred method of groundwater
management”
• Article 16, Sec. 59 Texas Constitution:
“The preservation and conservation of all
such natural resources of the State are each
and all hereby declared public rights and
duties; and the Legislature shall pass all such
laws as may be appropriate thereto”

16. Regulation
• GCDs
• All non-exempt wells must be permitted
• Permits may impose limits on spacing and
production
• Section 36.117(b)(2):
• A district shall provide a [permitting]
exemption for: drilling a water well used
solely to support water for a rig that is
actively engaged in drilling or exploration
operations

17. Regulation
• Used “solely” for rig engaged in “drilling”
or “exploration”
• Water from well cannot be used for any
other purpose, and cannot be shared with
landowner
• Is Fracing “drilling” or “exploration”?
• Evergreen UWCD and High Plains UWCD No.
1 say “No”

18. Regulation-Regulatory Takings
• When does GCD regulation become a
“taking”?
• Day:
• “Today we have decided that landowners do
have a constitutionally compensable interest in
groundwater”
• 3 categories of regulatory takings:
• Physical Invasion (per se)
• Complete deprivation of all economically
beneficial use (per se)
• Penn Central Transp. Co. v. New York City taking

19. Regulation-Regulatory Takings
• Penn Central through Sheffield Development Co. v. City of
Glenn Heights 140 S.W.3d 660 (Tex. 2004)
• Three pronged test:
• 1. Economic impact on the claimant
• Inconclusive from summary judgment record
• 2. Interference with investment-backed expectations
• Little in record to illuminate what expectations were
• 3. Nature of regulation
• “A landowner cannot be deprived of all beneficial use of
the groundwater below his property merely because he did
not use it during an historical period”
• Held: Summary judgment for EAA was improper

20. Regulation-Regulatory Takings

21. Regulation-Regulatory Takings
• EAA v. Bragg 421 S.W.3d 118 (Tex.App.—San
Antonio 2013, pet denied)
• Bragg acquired 2 tracts in 1979 and 1983
• Planted pecan orchards and drilled EA well in
1995 under permit from Medina GCD
• In 1993 EAA was enacted
• Bragg applied for initial regular permits in 1996
• EAA renders decision in 2004 and 2005
• Granted 120.2 acre feet on “Home Place” tract
and permit was denied on “D’Hanis” tract

22. Regulation-Regulatory Takings
• Bragg sued in 2006
• Trial court granted Bragg’s MSJ:
• Awarded $134,918.40 for D’Hanis tract
• Awarded $597,575.00 for Home Place tract
• EAA appealed:
• EAA not liable party
• Statute of limitations
• No taking occurred
• If taking occurred, incorrect damages awarded

23. Regulation-Regulatory Takings
• Was there a taking?
• Held:
• Court reiterated three types of Regulatory
Takings
• Case governed by Penn Central test
• “in regulatory takings issues, we consider all
of the surrounding circumstances in
applying a fact-sensitive test of
reasonableness”

24. Regulation-Regulatory Takings
• Prong 1: Economic Impact
• The proper inquiry considers the
diminution in the value of the properties
brought on by the regulation in question
• Highest and best use of both properties
was as pecan orchards
• As a result of EAA regulation, Braggs
reduced number of trees 30%-50% and
reduced watering; resulted in the Braggs’
inability to raise commercially viable crops

25. Regulation-Regulatory Takings
• Prong 2: Investment-Backed Expectations
• Has the landowner taken legitimate risks
with the reasonable expectation of being
able to use the property?
• Braggs spent more than $2,000,000 on two
tracts since they were acquired
• Planted trees and drilled wells before EA
Act was implemented in 1996
• Bragg’s expectations were reasonable

26. Regulation-Regulatory Takings
• Prong 3: Nature of Regulation
• EA Act was enacted for the purpose of
“protecting terrestrial and aquatic life,
domestic and municipal water supplies, the
operation of existing industries, and the
economic development of the state”
• These important goals weigh heavily in
favor of the EAA

27. Regulation-Regulatory Takings
• Held:
• EAA’s actions against Bragg resulted in a
regulatory taking
• Adequate Compensation
• Time of Valuation
• EAA’s actions constituted an inverse
condemnation, therefor time of valuation
was time of taking in 2004 and 2005

28. Regulation-Regulatory Takings
• Value of Property Taken
• Trial Court valued Home Place tract on basis
of value of water taken
• Trial Court valued D’Hanis tract on value of
farm with irrigation rights vs. farm without
irrigation rights
• Great difference in value between the two
approaches

29. Regulation-Regulatory Takings
• What is the “property” actually taken?
• First Category: Value of land with and
without access to subsurface minerals
(decrease in market value of property)
• Second Category: Value of subsurface
estate as property separate from land
(actual value of subsurface minerals)

30. Regulation-Regulatory Takings
• “The water beneath the Braggs’ land is not the source of
their business—they do not buy, sell, or lease water as a
commodity.”
• “Compensation should be determined by highest and
best use of property, which here are as commercial
pecan orchards.”
• Held:
• Reversed and remanded
• Compensation should have been difference in market
value of the properties before and after the permits
were issued/denied

31. Regulation-Regulatory Takings
• Conclusions
• Reasonable investment-backed expectations
may be a difficult hurdle for some owners
• If groundwater is used for surface operations,
valuation will be diminution in market value
• Compensation for severed groundwater?
• Can a mineral owner claim GCD regulations
have resulted in a taking of the mineral estate?
• Answer seems to be Maybe?