In October 2011, I wrote in American Water Intelligence about the decision by the US Court of Appeals for the Tenth Circuit in Tarrant Regional Water District v. Hermann. Last week the US Supreme Court granted certiorari and will hear the case this session. My article from October 2011 is below for background. The case presents an interesting dispute regarding transboundary water management.

Back to the Whiteboard?

In 1878, explorer John Wesley Powell famously suggested that Congress draw the boundaries of western states by watershed. Congress demurred, and both western and eastern states have battled over shared water resources ever since. Particularly contentious are proposals for interstate water transfers, which tend to evoke strong protectionist emotions.

In September, the US Court of Appeals for the Tenth Circuit issued an important decision in Tarrant Regional Water District v. Hermann, involving an interstate dispute between Tarrant Regional Water District in Texas and members of the Oklahoma Water Resources Board. The dispute relates to rules governing Tarrant’s application to appropriate water from the Red River basin in Oklahoma for transfer and use in the Dallas-Fort Worth Metroplex.

Description of the Case

The 1,360-mile Red River forms part of the northern border between Texas and Oklahoma on its way to joining the Mississippi River downstream. In 1978, the four river states of Texas, Oklahoma, Arkansas and Louisiana signed and Congress approved the Red River Compact to govern their respective rights and obligations on the stream. Over the past decade, Tarrant has sought additional water supplies to meet growing urban demands in the Metroplex, and one planned project involved the diversion of water in Oklahoma for conveyance to Texas.

In order to accomplish this interstate water transfer project, Tarrant filed suit against the OWRB in 2007, seeking a declaration that certain Oklahoma statutes were discriminatory against proposed out-of-state water users, in violation of the dormant commerce clause of the U.S. Constitution, and an injunction against the OWRB’s application of those statutes in evaluating Tarrant’s application to appropriate. Tarrant also claimed that it had the right to divert water in Oklahoma based on the compact, and that the compact preempted the Oklahoma statutes.

The disputed statutes mandate that any proposed diversion of water for use outside the state obtain approval from the Oklahoma Legislature, prohibit certain public agencies from selling water outside the state and express a preference for in-state water use. Those rules generally contravene the normal priority rule for appropriators of “first in time, first in right,” and substitute a preferred outcome for the neutral position that arguably should be maintained by state governments for administration of a liberal, market-based water rights system.

The district court held that the Red River Compact authorized Oklahoma to block use of water by other states because “the essence of what Congress did was to allocate resources between states.” OWRB argued on appeal that the compact governing water resources was “inherently protectionist” and gave each state absolute control over water within its allocation. The Tenth Circuit agreed with Oklahoma that the compact constituted Congressional intent to allow the states to discriminate in the allocation of water resources within their boundaries.

While there is no language in the compact that references the commerce clause or interstate discrimination, the court held that the overall purpose of the compact and of several provisions within it is to divide the waters of the Red River between the four states and to give each of them exclusive use and control of a portion of those waters. The court interpreted the scope of state control over water resources to include the ability to direct who may and may not divert water from streams within its boundaries. Based on that expansive conception of state power, the court held that discrimination against interstate water transfers was consented to by Congress in the compact, and thus the Oklahoma statutes did not violate the dormant commerce clause. In addition, the court held that the compact did not preempt state legislative authority regarding diversions from the Red River.

Related to two other water development projects that Tarrant is planning in Oklahoma, the court decided that issues related to Tarrant’s potential purchase of groundwater from Stephens County or reserved water rights from the Apache Tribe were non-justiciable based on Tarrant’s lack of standing and those disputes not being ripe for court review.

Implications and Consequences

The Tarrant decision represents a serious setback for long-term water supply plans of the Metroplex, as well as for other potential interstate water transfers. By assuming that state control over water resources includes the power to determine outcomes, rather than simply establish a neutral process for administration of water rights, the court elevated legislative discretion over the common law of water rights. In jurisprudential terms, this can be described as the supremacy of public over private law. If the court had interpreted state water resource laws to merely create a set of rules that may be followed by all users in an equal, non-discriminatory manner, it would not have found that the Oklahoma statutes were consented to by Congress in the compact. This decision bodes poorly for water right holders in a broad range of relations with their respective states, and will likely have an impact on the interpretation of other interstate stream compacts or interstate water transfers in streams without compacts in place.

For now, Tarrant has decided to continue its efforts to obtain water from Oklahoma by requesting review of the three-judge panel decision by the full court sitting en banc. If that fails, Tarrant may request review by the Supreme Court, or seek a permit from the OWRB under the existing, discriminatory statutory rules. If those efforts are not successful, the Metroplex may find itself back at the water planning whiteboard.