A recent decision of the Texas Supreme Court is thought provoking. In that state, withdrawal of ground water is subject to permitting regulation by an Aquifer Authority. Certain landowners applied for a permit to withdraw from wells a quantity of ground water to be used for irrigation purposes. The Authority denied a permit based upon historic use, and the landowners went to court.
On appeal from lower courts, the Supreme Court first reviewed the law regarding ownership of oil and gas in place under a landowner's property:
"in our state the landowner is regarded as having absolute title in severalty to the oil and gas in place beneath his land. The only qualification of that rule of ownership is that it must be considered in connection with the law of capture and is subject to police regulations. The oil and gas beneath the soil are considered a part of the realty. Each owner of land owns separately, distinctly and exclusively all the oil and gas under his land and is accorded the usual remedies against trespassers who appropriate the minerals or destroy their market value."
The Court then held that the law regarding ownership of oil and gas "states the common law regarding the ownership of ground water in place."
Having determined that the landowners own the ground water below their land, the Court then addressed the question whether denial of the requested permit to withdraw that water was a violation of the Texas constitution. The Court decided that landowners have a constitutionally compensable interest in groundwater in place. "We decide in this case whether land ownership includes an interest in ground water in place that cannot be taken for public use without compensation guaranteed by article I, section 17 (a) of the Texas Constitution. We hold that it does."
The Authority asserted "that if its ground water regulation can result in a compensable taking, the consequences will be nothing short of disastrous." It expressed concern that the financial burden of taking claims could make regulation impossible. The Court responded: "We cannot know, of course, the extent to which the Authority's fears will yet materialize, but the burden of the Taking Clause on government is no reason to excuse its applicability." (Edwards Aquifer Authority and the State of Texas v. Burrell Day and Joel McDaniel, Texas Supreme Court, No. 08-0964, 2012)
One should bear in mind that some states may not accept the notion that ground water in place is owned by the land owner. Instead, some states may have adopted the concept that a land owner simply has reasonable use of such ground water, again subject to regulation. Also, another court might decide that denial of a permit would be arbitrary or contrary to the manifest weight of the evidence, without reaching a constitutional issue. When a regulation may violate a constitutional right can be a complicated issue and will be discussed more generally in a future post.
Fresh water is essential for life and commerce. However, its scarcity is resulting in increased regulation of water resources and their corollary, wastewater. This blog will discuss developments in such regulation. It will be my clepsydra measured by the flow of water law.
Friday, March 9, 2012
Wednesday, February 29, 2012
WHEN ARE CONNECTION CHARGES APPROPRIATE?
Water and wastewater utilities often charge new customers a fee for connection to their systems, commonly called a connection or tap-on fee. Historically, some have asserted that such fees are unreasonable extra charges unrelated to costs of service. Are they correct?
The propriety of connection fees imposed by regulated utilities generally is determined by the particular regulatory commission. However, the reasonableness of tap-on fees imposed by unregulated municipal-owned utilities is for the courts.
The basic rationale for a legitimate connection fee is to avoid subsidization of service to new customers by current customers; and to shift costs and risks incurred to serve new customers to those who benefit or cause risks.
So, for example, a water utility may construct a main extension to serve potential customers in a proposed subdivision. It may then charge a connection fee to new customers as they attach so as to recover a portion of the costs incurred to extend service.
In one case, a court upheld a connection fee imposed on new connections where the fee was used to help finance a new project for an additional source of water. The court concluded that the new customers benefited because without the new water source they could not have been served. (Tidewater Association of Homebuilders v. City of Virginia Beach, 400 S.E. 523 (Va. 1991))
Sometimes, a utility may be unwilling to extend a main to a proposed development because of the risk that the development will not be built out as expected. The developer may assume the risk by constructing the main extension at its cost and contributing the main to the utility. As new customers attach to the main extension, the utility may charge a connection fee which it then refunds in whole or in part to the developer who financed the main extension.
How is the reasonableness of a connection charge to be measured? One Illinois court said that a connection charge is to recover the deferred cost of extending service to new customers. (City of Pontiac v. Mason, 50 ILL.App. 3d 102 (4th Dist. 1977). A Massachusetts court said that connection fees should reasonably relate to the cost of service to new customers, including the incremental cost of additional facilities that are required. (Bertone . v. Dept. of Public Utilities, 583 N.E.2d 829 (Mass. 1992))
Regulated utilities may have main extension rules in their tariffs approved or required by their regulatory agencies. Unregulated utilities may have connection fees governed by developer contracts or annexation agreements, as well as by ordinance.
A challenge to an unregulated utility's connection fee is subject to a heavy burden of proof. Generally, courts accord a presumption of validity to charges set by municipal ordinance (Inland Real Estate Corp. v. Palatine, 146 Ill.App. 3d 92 (1st Dist 1986)) So, in a Vermont case, the court held that plaintiffs did not prove that a connection fee was unreasonable because they did not present a cost analysis showing that it was unreasonable or set in an arbitrary manner. Handy v. City of Rutland, 598 A.2d 114 (Vt. 1990). In a Texas case, the court held that plaintiff failed to establish tap on fees were unreasonable because there was no evidence that the fees were in excess of the costs of providing services. It said that plaintiff did not carry his substantial burden of showing that the connection fee ordinance was invalid. (Black v. City of Killeen, 78 S.W.3d 686 (Ct App Tex. 2002))
It appears that, if connection fees are reasonably related to the costs of serving new customers, they likely will be found to be reasonable.
The propriety of connection fees imposed by regulated utilities generally is determined by the particular regulatory commission. However, the reasonableness of tap-on fees imposed by unregulated municipal-owned utilities is for the courts.
The basic rationale for a legitimate connection fee is to avoid subsidization of service to new customers by current customers; and to shift costs and risks incurred to serve new customers to those who benefit or cause risks.
So, for example, a water utility may construct a main extension to serve potential customers in a proposed subdivision. It may then charge a connection fee to new customers as they attach so as to recover a portion of the costs incurred to extend service.
In one case, a court upheld a connection fee imposed on new connections where the fee was used to help finance a new project for an additional source of water. The court concluded that the new customers benefited because without the new water source they could not have been served. (Tidewater Association of Homebuilders v. City of Virginia Beach, 400 S.E. 523 (Va. 1991))
Sometimes, a utility may be unwilling to extend a main to a proposed development because of the risk that the development will not be built out as expected. The developer may assume the risk by constructing the main extension at its cost and contributing the main to the utility. As new customers attach to the main extension, the utility may charge a connection fee which it then refunds in whole or in part to the developer who financed the main extension.
How is the reasonableness of a connection charge to be measured? One Illinois court said that a connection charge is to recover the deferred cost of extending service to new customers. (City of Pontiac v. Mason, 50 ILL.App. 3d 102 (4th Dist. 1977). A Massachusetts court said that connection fees should reasonably relate to the cost of service to new customers, including the incremental cost of additional facilities that are required. (Bertone . v. Dept. of Public Utilities, 583 N.E.2d 829 (Mass. 1992))
Regulated utilities may have main extension rules in their tariffs approved or required by their regulatory agencies. Unregulated utilities may have connection fees governed by developer contracts or annexation agreements, as well as by ordinance.
A challenge to an unregulated utility's connection fee is subject to a heavy burden of proof. Generally, courts accord a presumption of validity to charges set by municipal ordinance (Inland Real Estate Corp. v. Palatine, 146 Ill.App. 3d 92 (1st Dist 1986)) So, in a Vermont case, the court held that plaintiffs did not prove that a connection fee was unreasonable because they did not present a cost analysis showing that it was unreasonable or set in an arbitrary manner. Handy v. City of Rutland, 598 A.2d 114 (Vt. 1990). In a Texas case, the court held that plaintiff failed to establish tap on fees were unreasonable because there was no evidence that the fees were in excess of the costs of providing services. It said that plaintiff did not carry his substantial burden of showing that the connection fee ordinance was invalid. (Black v. City of Killeen, 78 S.W.3d 686 (Ct App Tex. 2002))
It appears that, if connection fees are reasonably related to the costs of serving new customers, they likely will be found to be reasonable.
Thursday, February 16, 2012
LOOKING FOR LOVE? SAY IT WITH SEWAGE
Our Valentines Day was rather sedate...no flowers, no candy, no jewelry, no special dinner. My wife and I each were out of town at separate meetings, at which she celebrated with a sandwich and I with grocery fried chicken. I did get home in time to watch re-runs of Swamp People, and for some live mud wrestling on the Forlorn channel.
When I was a young kid, as in first and second grade, I really looked forward to Valentines Day-- not because it meant candy but because it meant that I might get a card from some girl in my class with pigtails on which I had a crush. You know, one of those mass-produced cards that came in a box of 100 that probably cost a dollar. But, alas, romantic disappointment always arrived at my desk, as I received cards only from Gertrude, Cedric and Henry.
After some life review, I brightened as I read this week a Wall Street Journal article telling how 100 people spent a romantic Valentines Day visiting the largest New York City sewage treatment plant. The facility treats 1.5 million gallons of wastewater per day. The visitors were shown how the plant operates and toured control rooms and digesters. One man said it was something fun to do together, as he kissed his girlfriend.
Of course, some persons noticed a certain rotten egg smell. ( I will not repeat my wool suit at a sewage treatment plant story, as with causal days maybe people do not wear that much wool anymore).
Odor leads me to another story I read this week. It appears that scientists at the City College of New York have discovered that a material made from used coffee grounds can absorb hydrogen sulfide gas--the stuff that smells like rotten eggs at sewage treatment plants. Actually, the process is called "adsorption." Caffeine in the grounds facilitates the process because it contains nitrogen.
So, next Valentines Day, or if you are looking for romance anytime, forget the flowers, candy, jewelry and special dinner. Just go visit a sewage treatment plant and have a cup of coffee there. It can be stimulating, and is so organic!
When I was a young kid, as in first and second grade, I really looked forward to Valentines Day-- not because it meant candy but because it meant that I might get a card from some girl in my class with pigtails on which I had a crush. You know, one of those mass-produced cards that came in a box of 100 that probably cost a dollar. But, alas, romantic disappointment always arrived at my desk, as I received cards only from Gertrude, Cedric and Henry.
After some life review, I brightened as I read this week a Wall Street Journal article telling how 100 people spent a romantic Valentines Day visiting the largest New York City sewage treatment plant. The facility treats 1.5 million gallons of wastewater per day. The visitors were shown how the plant operates and toured control rooms and digesters. One man said it was something fun to do together, as he kissed his girlfriend.
Of course, some persons noticed a certain rotten egg smell. ( I will not repeat my wool suit at a sewage treatment plant story, as with causal days maybe people do not wear that much wool anymore).
Odor leads me to another story I read this week. It appears that scientists at the City College of New York have discovered that a material made from used coffee grounds can absorb hydrogen sulfide gas--the stuff that smells like rotten eggs at sewage treatment plants. Actually, the process is called "adsorption." Caffeine in the grounds facilitates the process because it contains nitrogen.
So, next Valentines Day, or if you are looking for romance anytime, forget the flowers, candy, jewelry and special dinner. Just go visit a sewage treatment plant and have a cup of coffee there. It can be stimulating, and is so organic!
Sunday, February 5, 2012
WATER CONSERVATION MEETS RATE INCREASE...COMING SOON TO A THEATRE NEAR YOU
No--not another Godzilla movie. Rather, a potential dramatic confrontation that is not fictional.
A hot topic currently in the water industry is water sustainability and, consequently, its conservation. Generally, it appears that efforts to promote conservation of water can be either voluntary or mandatory.
Voluntary conservation can range from educational programs to inform customers how to avoid wasteful water use to financial incentives for installation of more efficient or low flow appliances and to promotion of downspout rain barrels.
Mandatory water conservation can arise through regulatory requirements for the use of low flow toilets, faucets, shower heads, and appliances; irrigation and sprinkling restrictions, and limits on sources of supply. One form of mandatory water conservation can occur when a regulatory agency imposes conservation requirements on a water utility and its end users as well. Such regulation can raise an interesting potential conflict between a utility's legal obligation to serve the demands of its customers and its legal obligation to impose restrictions on those very demands. See, for example, Arizona Water Company v. Arizona Department of Water Resources, 91 F.3rd 990 (AZ 2004).
A customer of a water utility may conclude that if less water is used due to conservation, the water bill should be lower. However, this belief is not necessarily true; and, in point of fact, in the case of a well managed water system, likely will not be true. Water utilities may be finding that conservation is resulting in decreasing system water demand. Lower water sales translates into less revenue to cover fixed costs, debt service and funding of reserves for repairs and replacements. Further, if a utility is compelled to meet tight limits on unaccounted for water, less revenue also makes leak detection, main repair and meter replacement programs more difficult to perform.
As a result, a utility that experiences declining revenue due to conservation will have to increase rates to satisfy its ongoing revenue requirements. And, customers who may be using less water may end up paying more for the water they do use. Again, rates should be sufficient to cover all costs of service.
If conservation results in such a reduction in system demand that system capacity may be viewed as excess, a question can arise as to recovery of costs associated with that excess capacity. That is a question for another day!
A hot topic currently in the water industry is water sustainability and, consequently, its conservation. Generally, it appears that efforts to promote conservation of water can be either voluntary or mandatory.
Voluntary conservation can range from educational programs to inform customers how to avoid wasteful water use to financial incentives for installation of more efficient or low flow appliances and to promotion of downspout rain barrels.
Mandatory water conservation can arise through regulatory requirements for the use of low flow toilets, faucets, shower heads, and appliances; irrigation and sprinkling restrictions, and limits on sources of supply. One form of mandatory water conservation can occur when a regulatory agency imposes conservation requirements on a water utility and its end users as well. Such regulation can raise an interesting potential conflict between a utility's legal obligation to serve the demands of its customers and its legal obligation to impose restrictions on those very demands. See, for example, Arizona Water Company v. Arizona Department of Water Resources, 91 F.3rd 990 (AZ 2004).
A customer of a water utility may conclude that if less water is used due to conservation, the water bill should be lower. However, this belief is not necessarily true; and, in point of fact, in the case of a well managed water system, likely will not be true. Water utilities may be finding that conservation is resulting in decreasing system water demand. Lower water sales translates into less revenue to cover fixed costs, debt service and funding of reserves for repairs and replacements. Further, if a utility is compelled to meet tight limits on unaccounted for water, less revenue also makes leak detection, main repair and meter replacement programs more difficult to perform.
As a result, a utility that experiences declining revenue due to conservation will have to increase rates to satisfy its ongoing revenue requirements. And, customers who may be using less water may end up paying more for the water they do use. Again, rates should be sufficient to cover all costs of service.
If conservation results in such a reduction in system demand that system capacity may be viewed as excess, a question can arise as to recovery of costs associated with that excess capacity. That is a question for another day!
Wednesday, January 25, 2012
ARE WE WATCHING THE WELL GO DRY?
Water sustainability has become a hot issue for utilities and water users. In many areas of the world, including the United States, demand for water is exceeding sources of supply. For example, it appears that ground water use is becoming unsustainable in some locations.
Recently, gravity-monitoring satellites have disclosed that ground water supplies have diminished substantially over the past nine years in many parts of the world, including California's Central Valley. (See Science News, January 14, 2012, p.9). It seems that rapid depletion of ground water particularly is occurring in major aquifers underlying arid regions.
While some reduced recharge may be attributed to climate conditions such as drought, it has been asserted that the largest depletion is due to farming irrigation uses. (Id at p.9).
No doubt, urban development also has been a cause for ground water depletion. For example, rapid housing growth in suburban Chicago resulted in serious mining and reduction of ground water of acceptable quality. Only the availability of Lake Michigan water through pipeline extensions enabled communities to abandon their diminishing wells.
Water sustainability, of course, also is an issue for surface water sources of supply. The same factors of demand and climate create stresses on rivers, lakes and reservoirs.
Concerns over water sustainability are growing. For example, the American Water Works Association is presenting a four day sustainable water management conference March 18-21, 2012, in Portland, Oregon.
Attention to water sustainability by everyone is important. If we simply watch the well go dry, we surely will miss the water...and a lot more.
Recently, gravity-monitoring satellites have disclosed that ground water supplies have diminished substantially over the past nine years in many parts of the world, including California's Central Valley. (See Science News, January 14, 2012, p.9). It seems that rapid depletion of ground water particularly is occurring in major aquifers underlying arid regions.
While some reduced recharge may be attributed to climate conditions such as drought, it has been asserted that the largest depletion is due to farming irrigation uses. (Id at p.9).
No doubt, urban development also has been a cause for ground water depletion. For example, rapid housing growth in suburban Chicago resulted in serious mining and reduction of ground water of acceptable quality. Only the availability of Lake Michigan water through pipeline extensions enabled communities to abandon their diminishing wells.
Water sustainability, of course, also is an issue for surface water sources of supply. The same factors of demand and climate create stresses on rivers, lakes and reservoirs.
Concerns over water sustainability are growing. For example, the American Water Works Association is presenting a four day sustainable water management conference March 18-21, 2012, in Portland, Oregon.
Attention to water sustainability by everyone is important. If we simply watch the well go dry, we surely will miss the water...and a lot more.
Monday, January 16, 2012
EPA BRINGS BED BUGS TO JUSTICE
This month USEPA announced its $25,000 "environmental justice" grant to a tenants organization to "prevent and treat issues with bed bug infestations."
This announcement is interesting for a couple of reasons. First, traditionally "justice" has been a matter for courts to dispense, adjudged based upon an evidentiary trial or hearing and applicable law. Now, it appears that administrative agencies can dispense "justice", perhaps by internal decision-making and without a public hearing.
But what is "environmental justice"? EPA's Environmental Justice Small Grants Program Fact Sheet discloses the following quote, in part, attributed to Administrator Jackson: "We must take special pains to connect with those who have been historically underrepresented in EPA decision-making, including the disenfranchised in our cities and rural areas, communities of color, native Americans, people disproportionately impacted by pollution and small businesses, cities, and towns working to meet their environmental responsibilities. Like all Americans, they deserve an EPA with an open mind, a big heart and a willingness to listen." It still is not entirely clear what "environmental justice" may be or how it is to be determined, but it does seem to have a flavor of social engineering.
A second interesting observation is to learn that bed bugs are jurisdictional for EPA. It is obvious that EPA is concerned with issues involving safe drinking water, wastewater, clean air, and solid waste. However, it is less obvious that EPA also is fighting insects. Is there any limit to its "big heart"? For example, will stray cats be next?
When I was a small child, my parents often sent be to bed with "sleep tight and don't let the bed bugs bite." As an adult, I now can sleep tight knowing that EPA will put the bite on my bed bugs.
This announcement is interesting for a couple of reasons. First, traditionally "justice" has been a matter for courts to dispense, adjudged based upon an evidentiary trial or hearing and applicable law. Now, it appears that administrative agencies can dispense "justice", perhaps by internal decision-making and without a public hearing.
But what is "environmental justice"? EPA's Environmental Justice Small Grants Program Fact Sheet discloses the following quote, in part, attributed to Administrator Jackson: "We must take special pains to connect with those who have been historically underrepresented in EPA decision-making, including the disenfranchised in our cities and rural areas, communities of color, native Americans, people disproportionately impacted by pollution and small businesses, cities, and towns working to meet their environmental responsibilities. Like all Americans, they deserve an EPA with an open mind, a big heart and a willingness to listen." It still is not entirely clear what "environmental justice" may be or how it is to be determined, but it does seem to have a flavor of social engineering.
A second interesting observation is to learn that bed bugs are jurisdictional for EPA. It is obvious that EPA is concerned with issues involving safe drinking water, wastewater, clean air, and solid waste. However, it is less obvious that EPA also is fighting insects. Is there any limit to its "big heart"? For example, will stray cats be next?
When I was a small child, my parents often sent be to bed with "sleep tight and don't let the bed bugs bite." As an adult, I now can sleep tight knowing that EPA will put the bite on my bed bugs.
Monday, January 9, 2012
A FEW GOOD MEN ARE FEWER
In December, 2011, Vaclav Havel died. He was the leader of the 1989 "Velvet Revolution" that overthrew communism in Czechoslovakia and brought democracy to that country. He became the first and only president of Czechoslovakia and the first president of the Czech Republic after Slovakia became independent.
It is a paradox that media in the United States gave limited attention to Havel's passing, although he defeated communism. Yet, the media gave extensive coverage to the death of the North Korean communist leader a couple of weeks later.
Communism, or for that matter any dictatorship government, can be viewed as the ultimate form of government regulation. Havel referred to communism as an attempt to impose "holistic social engineering." (Havel, The Art of the Impossible, p. 203). "It was an attempt, on the basis of a few propositions masquerading as the only scientific truth, to organize all of life according to a single model, and to subject it to central planning and control regardless of whether or not that was what life wanted." (Id. at p. 89).
Havel also said: "By its very nature, life is infinitely colorful and varied. We are constantly being astonished by something new in the rich fabric of social relations, interests, and activities. It simply cannot be predicted, yet alone be planned for or regulated....Democracy is a system based on trust in the human sense of responsibility, which it ought to awaken and cultivate. Democracy and civil society are thus two sides of the same coin." (Id. at p.145).
Government regulation in the United States of commercial and personal activities, including water and wastewater operations, is an ever-expanding phenomenon. Administrative agencies engage in rule-making based upon staff input and often with limited public comment or a public evidentiary hearing. If a hearing is held, evidentiary rules often are relaxed or ignored. As a result, rule-making can have a potential for unspoken agendas, social engineering and unreasonable burdens on those affected.
Those in the water and wastewater operations community-no matter how small or large- have a responsibility to monitor rule-making proceedings that may affect them and to address questions and concerns to the regulatory agency involved. Most agencies have some mechanisms to present these concerns in rule-making proceedings, and if not, court challenges may be available. The time to challenge a regulation which imposes costs in excess of benefits or is unreasonably burdensome, for example, is not when an operator is sued for non-compliance. It is when the regulation is being considered for adoption.
Havel did not disdain all regulation, particularly environmental regulation. However, his message was that environmental regulation must be free of broad social engineering and pie in the sky dreaming. " I believe you should read the message coming to you from our part of the world as an appeal to protect the world against all those who despise the mystery of Being, whether they be cynical businessmen with only the interests of their corporations at heart, or left-wing saviors high on cheap idealogical utopias. Both lack what I would call a metaphysical anchor, and a consciousness of our obligation to it." (Id. at 80-89).
And, so, a thoughtful man has passed into history, but he gave us something to think about.
It is a paradox that media in the United States gave limited attention to Havel's passing, although he defeated communism. Yet, the media gave extensive coverage to the death of the North Korean communist leader a couple of weeks later.
Communism, or for that matter any dictatorship government, can be viewed as the ultimate form of government regulation. Havel referred to communism as an attempt to impose "holistic social engineering." (Havel, The Art of the Impossible, p. 203). "It was an attempt, on the basis of a few propositions masquerading as the only scientific truth, to organize all of life according to a single model, and to subject it to central planning and control regardless of whether or not that was what life wanted." (Id. at p. 89).
Havel also said: "By its very nature, life is infinitely colorful and varied. We are constantly being astonished by something new in the rich fabric of social relations, interests, and activities. It simply cannot be predicted, yet alone be planned for or regulated....Democracy is a system based on trust in the human sense of responsibility, which it ought to awaken and cultivate. Democracy and civil society are thus two sides of the same coin." (Id. at p.145).
Government regulation in the United States of commercial and personal activities, including water and wastewater operations, is an ever-expanding phenomenon. Administrative agencies engage in rule-making based upon staff input and often with limited public comment or a public evidentiary hearing. If a hearing is held, evidentiary rules often are relaxed or ignored. As a result, rule-making can have a potential for unspoken agendas, social engineering and unreasonable burdens on those affected.
Those in the water and wastewater operations community-no matter how small or large- have a responsibility to monitor rule-making proceedings that may affect them and to address questions and concerns to the regulatory agency involved. Most agencies have some mechanisms to present these concerns in rule-making proceedings, and if not, court challenges may be available. The time to challenge a regulation which imposes costs in excess of benefits or is unreasonably burdensome, for example, is not when an operator is sued for non-compliance. It is when the regulation is being considered for adoption.
Havel did not disdain all regulation, particularly environmental regulation. However, his message was that environmental regulation must be free of broad social engineering and pie in the sky dreaming. " I believe you should read the message coming to you from our part of the world as an appeal to protect the world against all those who despise the mystery of Being, whether they be cynical businessmen with only the interests of their corporations at heart, or left-wing saviors high on cheap idealogical utopias. Both lack what I would call a metaphysical anchor, and a consciousness of our obligation to it." (Id. at 80-89).
And, so, a thoughtful man has passed into history, but he gave us something to think about.
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