More on Ground Water Takings: The Federal Courts Weigh In


A new federal decision concerning regulatory takings adds potential support to the recent Texas decisions of Edwards Aquifer Authority v. Day,  369 S.W.3d 814 (Tex. 2012) and Edwards Aquifer Authority v. Bragg, No. 04-11-00018-CV, ____ S.W.3d ____ (Tex. App.—San Antonio, Nov. 13, 2013, pet. filed), each of which provide a legal avenue for land owners to seek compensation for a governmental taking of their right to use the groundwater underlying their property, including the denial or reduction of a permit by a groundwater conservation district.  The hot-button issue in Texas groundwater right now is a district’s liability for a taking by restricting or denying a permit, as seen in Bragg, now headed to the Texas Supreme Court.


Adding some federal clout to this application of takings law, a recent case out of the United States Court of Federal Claims applies similar reasoning to hold that the Army Corps of Engineers’ denial of a Section 404 permit to a developer may constitute a compensable taking. In Lost Tree Village Corp., v. United States, No. 08-117L (filed Mar. 14, 2014) the Court of Federal Claims applied the Lucas (requiring a total loss of economically beneficial use for compensable taking) and Penn Central factors (considering the character of the governmental action, investment-backed expectations, and the economic impact) to determine whether the denial of a Section 404 permit on a parcel  constituted a compensable taking. Finding that the parcel was worth over $4.2 million with a Section 404 permit and only $27,500 without a permit, the Court concluded that the denial of the permit resulted in a 99.4% diminution in value. Under both the Lucas and Penn Central tests, the Court held that the permit denial was a compensatory taking and awarded over $4.2 million in damages to the developer. While this case dealt with a Corps permit, the issues and analysis are much the same as seen in the Court’s opinion in Bragg.  This increases the focus on whether and to what extent a district will be liable for denying or reducing a groundwater permit in accordance with its rules.

Courtney C Smith/