q&a+water: Mike Gershon

q&a+water: Mike Gershon

Law Partner and Chairman of Water Practice Group at Lloyd Gosselink, P.C.

In this issue’s Q&A, Texas+Water Editor-in-Chief, Dr. Todd Votteler, interviews Mike Gershon, a law partner and Chairman of the 18-lawyer Water Practice Group at Lloyd Gosselink, P.C.

Mike Gershon focuses on water planning and management, water quality, permitting, utility and endangered species matters. He is a Life Fellow of the Texas Bar Foundation and Fellow of the Austin Bar Foundation and has served as Chairman of the State Bar of Texas’s Environmental and Natural Resources Law Section and Chairman of the San Antonio Bar Environmental Law Section. Recognized as an AV/Preeminent-Rated attorney, the highest peer rating standard, in Natural Resources and Water Law, Gershon is named in the Best Lawyers in America in Water Law.

What is a typical day like for you as a water attorney?

Sometimes I’m at my office on Congress Avenue or in court, though often I’m in the field with clients and scientists and meeting with clients’ senior management and other stakeholders. We are routinely working on highly technical issues with engineers, hydrogeologists and biologists—assessing water availability and local impacts, vetting options with clients and implementing strategies through permitting, negotiations and contracting.

You have been involved in some of the state’s most high-profile water disputes and court battles. Does the legal system in Texas provide adequate options and incentives for parties to avoid litigation?

Over the years, yes, I have been involved in many of the high-profile water disputes. Fortunately for our clients and other stakeholders, most deals are made and plans implemented by working through even the most complex problems with other stakeholders without having to fight about it.

Texas law does provide the framework for resolving problems amicably. But both parties have to want to resolve their differences and avoid the costs and substantial time required for litigation. The Texas Water Code integrates mediation in regional water planning and other types of water disputes. Many trial judges and administrative law judges encourage parties to consider alternative dispute resolution, which can result in settlement in less time and at a lower cost than litigation. However, if one party is not satisfied, they still have legal remedies and a legal venue to advocate their position.

There is a sense that there is much more fighting over water issues than cooperation. However, as a water professional I see something different. In your line of work, what are you experiencing?

There are usually a handful of contentious matters pending around the state that attract a lot of attention. But for the thousands of transactions that occur each year, whether private dealings or public and regulatory matters, most do not head to the courthouse. This is not to say that it’s always easy—there’s still a lot of activity and work for water managers and professionals.

Why do you believe the few ongoing water disputes out there attract so much attention?

We all need water—as individuals, businesses and communities. The stories that make the headlines usually involve big, new deals that involve large volumes of water. Someone may be profiting at another’s expense, or local landowners may be worried that the new water project may dry up the local water source over time.

For years now there is this notion that water is the new oil, and that landowners are getting rich selling it. Are you seeing a wave of deals where landowners are profiting from selling their water?

There has not been a wave of water deals with landowners around the state—only a few deals. The only exception is where dozens of landowners qualified for an Edwards Aquifer Authority (EAA) permit under a very unique statute who were then able to sell and lease their water rights. That same opportunity does not exist around the state, at least not yet. And I would not consider the EAA market to be at all like the oil market.

One of the key factors driving the establishment of the Edwards Aquifer Authority water market is economics, with demand exceeding supply. The EAA market is unique because the Texas Legislature set a cap on pumping, which caused the supply to be limited, where outside the EAA there are no statutory limits on pumping, right?

I think you’re right. You had a high-growth I-35 corridor with increasing demand for water and a finite yet renewable supply that could be easily transferred from one property to another without the high costs of pipelines. There was more certainty about the reliability of the water supply because of the Legislature’s action, which made EAA water more valuable.

Do you think the Texas Legislature should consider incentivizing groundwater markets for other aquifers in Texas?

It’s the Texas way. I think it would be popular among many stakeholders who benefit from the certainty in an established market for “firm” water.

What are the downsides to creating more markets?

To create a market where water is a valuable commodity, the water resource typically has to be limited. Otherwise, the resource will be readily available, of lower value and more easily developed by the purchaser rather than by acquisition through a market. If the resource is limited, then the initial permitting does result in some winners and losers. If ever there was a reallocation of previously permitted groundwater rights, there would likely be lawsuits filed by those who’ve been relying on their permitted rights.

I believe there is significant confusion among the public, including landowners, about groundwater ownership, the Rule of Capture and groundwater permitting under Texas law. Can you set us straight?

The “rule” of capture simply means that you don’t have to pay damages if your pumping causes harm to your neighbor’s groundwater rights, with very few exceptions. However, this rule does not define who owns the groundwater. The Texas Supreme Court held that landowners own absolute title to groundwater “in place” beneath their property (1) subject to their neighbor’s right to pump them dry without damages (rule of capture) and (2) subject to the reasonable regulations of a groundwater district. The Texas Water Code states that this ownership right does not entitle a landowner to a specific amount of groundwater but rather obligates the landowner to follow permitting production requirements of the local district. Those permitting limits are set forth in rules and case-by-case decisions on permit applications based on statutory permitting criteria. If the land is outside a groundwater district, then there is no regulation of groundwater withdrawals—only of well spacing by the Texas Department of Licensing and Regulation.

The Texas Legislature passed the Water Rights Adjudication Act in 1967 governing allocation of surface water rights. The Act merged the riparian rights system into the prior appropriation system, and even allowed claims based on historic use. Should the Texas Legislature consider passing a Groundwater Rights Adjudication Act to provide more certainty regarding groundwater management?

The more certainty the better. Our State’s businesses, water utilities and water planners definitely would benefit from knowing how much they can pump or contract for. How you’d go about allocating the volume of groundwater that can be pumped under legislation similar to the 1967 act is a challenging question. Even though groundwater rights are privately owned, I could envision workable legislation that would provide landowners with certainty on the volume of groundwater that may be pumped.

What are your thoughts on how we’d allocate groundwater?

I’m sure the thousands of landowners—including not only private individuals, but businesses and utilities—who have been pumping and who’ve made investments in their wells and infrastructure would want to be grandfathered or have some priority in their currently held permits. In Texas and other Western states, there is precedent for this. If we wait too long, to a time when the stresses on our state’s aquifers are greater, and water levels are expected to decline, it will be more difficult. Same as with the 1967 Act, which was passed and implemented at a time when our river basins were not fully allocated.