Antiques roadshow: the common law and the coming age of groundwater marketing.

• Author: Baxtresser, Dean

Groundwater law in the United States is ill suited to deal with the issue of groundwater marketing. As freshwater shortages become more common with increasing population and a warming climate, scholars and business people are touting water markets as the solution to conservation and distribution, as well as a source of hefty profits. T. Boone Pickens--the famous oil tycoon of Texas--has turned this concept into reality with his attempt to exploit the groundwater of the Ogallala Aquifer in the Texas Panhandle for thirsty Texas cities. Despite the looming water shortages, however, states have not adapted their laws to deal with the marketing issue. As a result, the legality of groundwater marketing like the Pickens Plan is currently decided by outdated laws that were never meant to deal with groundwater marketing. In general, groundwater marketing is only legal where the law permits off-tract use--an old distinction that bears no relationship to the policy issues that must be raised by state legislatures to seriously address upcoming severe water shortages. This Note examines the various legal doctrines in the United States governing groundwater and determines that, whether for or against water marketing, states should affirmatively address the policy issues presented by the potential of marketing by updating their laws so that they can deal with the new paradigm of high-value groundwater in a thirsty age.

TABLE OF CONTENTS INTRODUCTION I. GROUNDWATER MARKETS AND THE COMMON LAW DOCTRINES A. The Doctrine of Capture B. The Doctrine of American Reasonable Use C. The Doctrine of Correlative Rights D. The Doctrine of Prior Appropriation E. The Second Restatement of Torts' Doctrine of Reasonable Use F. Doctrinal Solutions II. No WAY AROUND THE DOCTRINES A. The Dormant Commerce Clause B. The Public Trust Doctrine CONCLUSION "I know what people say--water's a lot like air. Do you charge for air? Course not; you shouldn't charge for water. Well, OK, watch what happens. You won't have any water."

--T. Boone Pickens (1)

INTRODUCTION

T. Boone Pickens, the oil tycoon of Texas, plans to pump groundwater from an aquifer underneath his ranch in the Texas panhandle and sell it to distant, thirsty cities. (2) His plan ("Pickens Plan" or "Plan") has attracted significant media attention and public controversy, both of which emphasize that the Plan is a serious gamble in the struggle for a new resource commodity. (3) The land controlled by Pickens is arid, but underneath it runs the largest groundwater source in the country: the Ogallala Aquifer. (4) Pickens's company, Mesa Water, Inc., ("Mesa") claims it is ready to pump 323,000 acre-feet of water per year via pipeline to "regions that desperately need it." (5) To date, no city has been willing to pay Mesa's price for water, yet Pickens seems unconcerned, predicting a potential profit in groundwater sales of $100 million--ten times the amount he has already invested. (6)

The Pickens Plan represents a concept that has recently taken center stage in water policy discussions: water marketing. As a commodity, water has the potential to be sold as a natural resource for a price much higher than most Americans pay today. Water in the United States is heavily subsidized, particularly for farmers in the arid West. (7) This subsidization incentivizes the use of large quantities of water, resulting in wasteful practices and economically inefficient uses. These policies hide the real cost of water--a cost that is climbing rapidly due to climate change and population growth, both of which deplete freshwater supplies.

Proponents of water marketing argue that the market itself can regulate supply and demand for water at realistic levels, thereby discouraging waste and increasing conservation. (8) Massive increases in demand in the Western United States have led many scholars to recommend water markets as a solution to the problems of conservation and reallocation. (9) Market solutions have even been proposed for heavily regulated supplies, such as the Colorado River. (10) Climate change has also been a rallying cry for water marketing, (11) since the scientific community predicts drastic decreases in replenishment rates for freshwater basins. (12) Even the historically humid Eastern United States will be affected by changes in precipitation patterns caused by climate change, (13) and some scholars have taken the debate to the Eastern United States as well. (14) The water-marketing concept has, by now, entered the public consciousness. A few proposals have reached the state legislative level, (15) and the idea has even entered the realm of popular culture. (16)

Despite the commentary, debates, and pop-culture references, water marketing has not yet significantly impacted the common law landscape for groundwater allocation in the United States. More bluntly, the common law groundwater doctrines throughout the country are stagnant, even in the face of a potential marketing era. This is a considerable problem, since the groundwater common laws in the United States are out of date and unsuited to deal with the new paradigm of high-value water. Many states place significant reliance on groundwater supplies, (17) yet they still apply old common law doctrines to allocate their groundwater. Most of these doctrines were developed over one hundred years ago and were never intended to deal with water shortages on such massive scales, nor the idea that water could be treated as a finite natural resource. As a result, across the country, the very laws that will determine the fate of groundwater marketing express no preference on the issue of groundwater marketing, and were enacted for different purposes entirely. Under these laws, the legality of marketing often rests upon an antiquated, and now-arbitrary, legal distinction of whether a given doctrine permits off-tract use. (18)

With water shortages looming, whether or not a state allows groundwater marketing should be a policy decision made by a legislature, not by the peculiarities of outdated laws. States should entertain the idea of groundwater markets and express a clear preference on its legality through legislation. Without this direction, state courts will likely have to resolve groundwater-marketing disputes based on doctrines adopted under different value-systems for water, and precedent that is devoid of groundwater policy considerations in this new era of climate change and shortage. Accordingly, this Note suggests that suitable groundwater policy from state legislatures regarding groundwater marketing (regardless of the determination of legality) should involve at least these three factors inherent in water allocation today: (1) efficient use, (2) balancing the utility of different uses such as development, and (3) the expression of clear water policy regarding groundwater marketing on which people can rely without resorting to excessive judicial interpretations. (19) None of the doctrines, as they stand today, meet these three factors.

Therefore, this Note argues that groundwater laws in the United States are inadequate to deal with groundwater marketing. As a case study, the Note applies the country's different common law doctrines to the Pickens Plan to explain the current legality of groundwater marketing. Part I summarizes the common law regimes that form the bedrock of groundwater law and assesses the feasibility of the Pickens Plan under each doctrine. It concludes that the groundwater doctrines in the United States are not suited to deal with marketing. Part II then argues that the Dormant Commerce Clause and the public trust doctrine do not alleviate the need for a change in the common law doctrines that address groundwater marketing. The Note concludes that state governments should proactively address the marketing issue, as their laws inadequately deal with the potential for groundwater marketing.

1. GROUNDWATER MARKETS AND THE COMMON LAW DOCTRINES

   Because water allocation is governed at the state level, the United States hosts as many water doctrines and legislative schemes as there are jurisdictions. Vast regional differences in freshwater supplies contribute to the differences in the law, as well as the fact that water allocation is instrumentalist law (20)--practical law that is outcome driven. (21) Instrumentalism has allowed courts and states to maintain doctrines for as long as they are useful and simply change the doctrines when the laws cease to provide the outcome appropriate for the jurisdiction. (22) Because states can have different concepts of equitable distribution of water, the law can vary significantly from one jurisdiction to another.

   Nowhere in water-allocation law is the variety more pronounced than with groundwater. Hugely different doctrines developed in the United States because of differences in the supply and need for groundwater. Changing scientific understandings also led to various approaches to groundwater allocation. Luckily, however, some states developed similar enough regimes so that they can be grouped together for a broad analysis. At present, five categories of groundwater common law doctrines govern different states across the nation: (1) the doctrine of capture; (2) the "American" reasonable-use doctrine; (3) the correlative rights doctrine; (4) the doctrine of prior appropriation; and (5) the Second Restatement of Torts' doctrine of reasonable use. (23) These categories are generalizations that ignore smaller differences in the laws of different states applying the same doctrine. They are helpful for broad analysis, but should not be interpreted as suggesting that courts of different states necessarily apply the doctrines in exactly the same way.

   Using the Pickens Plan as a case study, (24) this Part assesses the legality of groundwater marketing under each of the common law groundwater doctrines (25) The history and applicability of the groundwater doctrines indicate that they...