12th Court of Appeals holds a regulatory civil enforcement suit did not constitute a taking by a conservation district
Neches and Trinity Valleys Groundwater Conservation District v. Mountain Pure TX, LLC 12-19-00172-CV (Tex. App. – Tyler, September 18, 2019).
This is a regulatory takings/compliance enforcement case where the Tyler Court of Appeals reversed the denial of a conservation district’s plea to the jurisdiction and dismissed the property owner’s counterclaims.
The District adopted rules requiring all persons owning a groundwater well to obtain permits to drill and operate the well unless exempt. Mountain Pure owns a spring water bottling plant in Palestine, Texas. Mountain Pure refused to acknowledge that it owns or operates a water well, refused to apply for a permit to operate a water well, failed to file quarterly production reports or pay quarterly production fees and overall refused to acknowledge the District’s authority. Mountain Pure took the position its water came from an “underground formation from which water flows naturally to the surface of the earth.” Therefore, the District has no authority to regulate spring water. The District filed a compliance suit against Mountain Pure to which Mountain Pure counter-claimed for tortious interference with their lucrative operating contracts and also asserted a takings claim. The District filed a plea to the jurisdiction as to the counterclaims which was denied. The District appealed.
Governments must sometimes impose restrictions on and regulations affecting the use of private property in order to secure the safety, health, and general welfare of its citizens. Although those restrictions and regulations sometimes result in inconvenience to owners, the government is not generally required to compensate for accompanying loss. However, if regulations go too far, they will be recognized as a taking.
A civil enforcement procedure alone cannot serve as the basis of a regulatory takings claim. A denial of access is compensable if the denial of access is substantial and material. Mountain Pure does not contend that the District’s rules and regulations it seeks to enforce are unconstitutional or otherwise invalid. But it maintains that the District is wrongfully attempting to apply them to its property. The record shows that Mountain Pure’s Palestine plant, after the government action, retains a value of $4,090,000. Mountain Pure cannot contend that the District’s action renders its property valueless. The loss of anticipated gains or future profits is not usually considered in a regulatory takings analysis. “The existing and permitted uses of the property constitute the ‘primary expectation’ of the landowner affected by regulation.” There is no pleading or evidence which show that the application of the groundwater rules, should they be held to apply, will interfere with production and sale of bottled water from the property. If the District is successful, the enforcement of the production reporting rules would represent a restriction on the property’s use. There is no pleading that the imposition of a three cent per 1000 gallons fee will be so onerous as to affect the present use of the property or significantly diminish its economic viability. Neither a diminution in property value nor a “substantial reduction of the attractiveness of the property to potential purchasers’ will suffice to establish that a taking has occurred.” Neither the District’s rules nor its attempt at their enforcement has deprived Mountain Pure of any reasonable investment backed expectation for bottling water. There is no showing that the enforcement of the reporting rules and the accompanying fee will affect production. Mountain Pure’s pleadings do not contain facts that allege a compensable denial of access, nor do they show how the District’s suit forced a cessation of operation. The operating lessee’s termination of its lease purchase operating agreement may have been influenced by the District’s civil enforcement suit. But there are no facts pleaded to show it was required by the District’s action. The District’s suit neither denied access to the spring nor prevented its operation. The court held “[i]t is impossible to avoid the conclusion that Mountain Pure’s inverse condemnation claim is no more that its dismissed tortious interference claim thinly disguised as a taking.” However, no taking has occurred under the facts. No waiver of immunity exists and the plea should have been granted.
If you would like to read this opinion click here. Panel consists of Justices Worthen, C.J., Hoyle, J., and Bass, Retired, J., Opinion issued by Justice Bass. The attorney listed for the district is John D. Stover. The attorneys listed for Mountain Pure are Danny R. Crabtree and Jeffrey L. Coe.