A Unique Discovery Request in a Texas Water Rights Fight

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In re Plains Pipeline, L.P., is a suit to adjudicate title to groundwater. Did the trial court err in allowing a party to drill seven test holes on a tank farm? (Spoiler alert: It didn’t.) This decision evaluates an order in a unique civil discovery situation, and the underlying claims exemplify approaches to disputes over groundwater rights.

The parties’ claims

Plains Pipeline entities are oil gathering/storage companies; Winkler Services is a water exploration company.  Both claim surface rights to 160 acres in Winkler County.

Plains acquired rights under a lease in 1928 to construct, maintain, and operate oil tanks and pipelines on the land. Plains asserted continuous use of the property in ways sufficient to maintain the lease since 1999 by a tank farm with nine 270,000 barrel storage tanks, 11 high-pressure oil pipelines, an office, and other uses.  According to Plains, the Texas Water Code gives a surface lessee the exclusive right to possess and use groundwater beneath the property.

Winkler’s competing claim was based on a previous severance by virtue of a 2014 groundwater lease over 28,000+ acres, Winkler’s undivided surface interest, an implied easement over the surface estate that requires Plains to reasonably accommodate Winkler’s interests, and expiration of Plains’ 1928 lease because the land was not continuously used.

Plains replied: Winkler owns only a contingent future interest in the right to the groundwater; alternatively, if the lease expired Plains acquired lease rights through adverse possession, and, if not, Winkler’s drilling activities would be subject to the accommodation doctrine.

After two lengthy hearings, the trial court granted Winkler’s request under TRCP 196.7 for pretrial inspection of the property and allowed Winkler to drill seven test holes on the land. The trial court concluded that Winkler’s request to inspect fell within the scope of discovery, was of minimal interference and burden to Plains, and the necessity of the information to be gleaned from the inspection outweighed any burden to Plains.

Judicial discretion and the civil procedure rule

A Rule 196.7 order permitting inspection is not an abuse of discretion if the request is relevant; the discovery cannot be obtained from a more convenient, less burdensome, or less expensive source; and the burden of the proposed discovery does not outweigh its likely benefits.

Plains argued that Winkler was not seeking information that was relevant to the issue of who held superior title to the groundwater, and even if the discovery was relevant the trial court failed to properly balance the competing interests.

Winkler asserted the information from the test holes would be relevant for two reasons: if Winkler has title to the groundwater, then Plains as the surface estate holder must accommodate Winkler’s interests; and it will give a more precise estimate of how much groundwater was located on the land.

The trial court was not required to resolve the merits of the title issue in order to resolve a discovery dispute.  The court of appeals held that the trial court did not abuse its discretion in finding the test holes were relevant, which is in line with “the bedrock principle” that the scope of discovery is generally within the trial court’s discretion.

The court disagreed with Plains that the information was available without entry onto the property. Plains further argued that drilling the test holes could disrupt its on-going business operations, and potentially the flow of oil owned by third parties due to, for example, a test hole striking a high pressure underground pipeline. The appellate court was not convinced.

The dissent didn’t believe Winkler established that the need for the discovery outweighed the burden inspection would place on Plains.

And today’s musical interlude.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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