Previously, we began discussing some of the basic principles of water rights in Texas, with respect to both surface water and groundwater. As we noted last time, water rights can be purchased, sold and leased, and this can occur in various ways according to different terms.
One way to transfer surface water rights is by a contract for sale. In many cases, surface water rights are transferred by wholesale contract, which often involves an entity that has developed a water supply and then sold the supply to another party as par t of a larger transaction. These types of transactions are governed by the principles of contract law and public utility requirements. Transactions which involve a change in purpose or place of use of the surface water are subject to administrative oversight, which is an important point to keep in mind for these transactions.
Surface water rights can also be leased, which involves the short or long term transfer of water use rights to another party. Leases which would involve changing the use, location or volume of water diverted would require a permit.
Groundwater may also be sold, if the rights to it are severed from the land, and it is also possible to lease groundwater. In these transactions, a contract is formed with an existing landowner for the sale or lease of groundwater, with terms similar to those contained in surface water contracts for sale.
Some other ways water rights can be transferred include interbasin transfers of surface water, dry-year option contracts for surface water, and transfer of conserved surface water or groundwater. Navigating these specialized transfers also requires working with state authorities.
In any contract for the transfer of water rights, it is critical to thoroughly address issues like the scope of the water right, the amount, purpose, and means of diversion of the water, any conditions or limitations on the water rights, and the date of priority for use of the water. Proper transfer of title is another important issue to ensure there are no encumbrances.
Working through such issues is particularly important for businesses which depend on water supplies to move forward with a project. For these, an experienced attorney can provide knowledgeable guidance about the law, effective negotiation of the terms of the transaction, and zealously advocacy when disputes arise concerning water rights.