Face Challenges Confidently

462 Walton v. City of Midland

Tuesday, September 8th, 2015

Richard F. Brown

The following is not a legal opinion.  You should consult your attorney if the case may be of significance to you.
Walton v. City of Midland, 409 S.W.3d 926 (Tex. App.—Eastland 2013, pet. denied) held that granting a permit to drill an oil and gas well did not constitute a regulatory taking by the city of the surface owner’s property.  Walton, an owner of a surface estate inside Midland’s city limits, brought an inverse condemnation claim against the city, claiming that granting a permit to drill a well to an operator constituted a regulatory taking pursuant to the Texas Constitution.  The permit required the operator to plant and maintain trees near the well and to drill a water well (to maintain the trees), no closer than 500 feet from the oil and gas well.  Walton’s evidence demonstrated that his property had a value of at least $3,000 per acre after the oil and gas well was drilled.  Walton asserted that requiring the water well constituted an invasion of his surface estate and groundwater and that permitting the oil and gas well deprived him of all economically beneficial use of his property.  The city brought a plea to the jurisdiction, arguing governmental immunity, the trial court granted the plea and Walton appealed.
A court is deprived of subject matter jurisdiction when a governmental entity is immune from suit.  The Texas Constitution waives immunity from suit for condemnation claims under the takings clause.  The waiver does not apply if a plaintiff cannot establish a viable takings claim.
In analyzing the present case to determine whether a regulatory taking had occurred, the court relied upon established authority in considering the two instances in which per se regulatory takings could occur: (1) where the government required an owner to suffer a permanent physical invasion, and (2) where a regulation completely deprived an owner of all economically beneficial use of the property.
Addressing permanent physical invasions, the appeals court determined that the water well did not constitute a physical invasion because the only permit requirement as to the water well was that the well could not be located within 500 feet of the oil and gas well.  Thus, the water well could have been drilled on someone else’s property.  Granting the permit to allow the operator to drill an oil and gas well also did not constitute a physical invasion because “a permit to drill an oil and gas well is ‘purely a negative pronouncement’ that ‘grants no affirmative rights to the permittee to occupy the property.’”  The court also cited FPL Farming Ltd. v. Environmental Processing Systems, L.C. for the general rule that a permit granted by an agency does not act to immunize the permit holder from civil tort liability from private parties for actions arising out of the use of the permit.  This particular permit was not a physical invasion by the city because it did not grant an affirmative right to the operator to use the property, did not shield the operator from any liability to Walton, did not require Walton to acquiesce in the operator’s actions, and did not limit the compensation Walton could seek from the operator.
Finally, the permit did not deprive Walton of all economic benefit from the property because the evidence showed that after the well was drilled, the property had a value of at least $3,000 an acre.  Therefore, the court held that the permit did not constitute a taking, governmental immunity from suit had not been waived, and the plea to jurisdiction was properly granted.
The court expressed no opinion on the oil and gas lessee’s potential liability to Walton.  This is particularly relevant because it is not clear that the owner of the mineral estate has the right to water belonging to the owner of the surface estate when the water is to be used to water trees.
The case continues the trend most recently expressed in FPL Farming to protect the state and its political subdivisions from any liability for the granting of permits, because the granting of a permit simply removes a governmental impediment without conferring any additional rights.  As between the parties and as to their respective property rights, nothing is changed by the granting of the permit.