Water rights can be an important consideration in the purchase and sale of both residential and commercial real estate. This is especially true for development projects for which surface water or groundwater ownership is an integral element. Knowing how to navigate Texas water rights law and transactions is important in these cases.
As a general rule, groundwater and surface water which is diffused are considered to be part of a landowner’s property and the landowner has rights over the water. On the other hand, surface water which is part of defined watercourses is owned by the state, and the state can therefore require permits for its use and enjoyment.
As for groundwater, under common law landowners generally have the ability to withdraw water under their property as long as the water isn’t intentionally wasted and the landowner doesn’t negligently cause harm to neighboring property. This is known as the rule of capture. The legislature does have the right to regulate groundwater use, though, and Texas does regulate groundwater use by means of groundwater districts which have limited power to regulate the use of groundwater. These districts regulate things like water table depletion, groundwater wells, artesian pressure, corrosion and waste.
Surface water which is subject to permitting falls under the oversight of the Texas Commission on Environmental Quality. Surface water rights are generally either perpetual rights or limited-term rights. Perpetual rights to surface water, which include permits and special certificates, usually specify the permit holder’s priority in terms of available water, the volume of water that may be taken or used annually or a diversion rate, and whether the permit holder has the ability to impound and/or divert the water. Limited-term rights can include term, temporary, seasonal, emergency and contractual types of permits.
Water rights can, of course, be bought, sold and leased. This is especially true of perpetual surface water rights, which are a true property interest, and it is true to a lesser extent for limited-term surface water rights and groundwater rights. In our next post, we’ll continue looking at this topic, focusing specifically on some common ways water rights are transferred and the importance of working with an experienced attorney to navigate these transactions.