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Lone Star GCD approves settlement ending litigation with Conroe and Quadvest

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CONROE, TX – On January 22, 2019, the Lone Star Groundwater Conservation District Board of Directors approved execution of a Compromise and Settlement Agreement with the City of Conroe (“Conroe”), Quadvest, L.P., and other utilities (collectively, “Utilities”) that would end the protracted litigation over the validity of a provision in the District’s Regulatory Plan requiring Large Volume Groundwater Users (“LVGU”) to reduce their groundwater production by thirty-percent (30%). The terms of the Compromise and Settlement Agreement remained confidential and only became effective if approved by all parties. When the City and Utilities approved the Compromise and Settlement Agreement on January 24, 2019, the agreement became official. The agreement was reached after extensive negotiations with the City and Utilities and was based on a desire to end the risk, disruption, and expense being incurred by all parties.

The litigation began in August 2015, when Conroe and the Utilities sued the District, the General Manager, and former board members in Cause No. 15-08-08942 in the 284th Judicial District Court of Montgomery County, Texas over the validity of the following provisions of the District’s Regulatory Plan (“LVGU Rule”), among other claims (the “District Court Litigation”).

“1. By 2016, each LVGU in the District must meet its Initial Conversion Obligation, which means each LVGU must reduce its annual groundwater production to the greater of either:
    A. no more than 70 percent of its Total Qualifying Demand, which is based upon the LVGU’s 2009 permitted authorization and actually met not less than 30 percent of its Total Qualifying Demand by implementing water conservation measures and/or using an Alternative Water Source; or Lone Star Groundwater Conservation District
    B. 10 million gallons.
2. For any growth in water demand experienced by an LVGU after 2009 that cannot be met by the implementation of water conservation measures, such increased demand must be met using an Alternative Water Source beginning in 2016, unless:
    A. The LVGU does in fact timely meet or exceed its Initial Conversion Obligation; and
    B. the LVGU’s overall annual groundwater production, when averaged over the 2016-2045 planning period, does not exceed:
        i. 70 percent of its Total Qualifying Demand, or
        ii. 10 million gallons.

Thus, groundwater use by an LVGU after its successful 2016 groundwater reduction and conversion will not exceed either 70 percent of its Total Qualifying Demand or 10 million gallons per year, whichever amount is greater, except as specifically allowed under this averaging provision, regardless of what percentage such groundwater use is of an LVGU’s overall water use or demand. In addition, LVGU’s must also achieve any further groundwater reductions that may be adopted in the future by the District.”




In September 2018, Senior District Judge Lamar McCorkle issued an interlocutory order in the District Court Litigation declaring the LVGU Rule invalid based on arguments from Conroe and the Utilities that the rule exceeds the District’s statutory authority granted by the Legislature. Before the election and the newly elected board took office, the District perfected a permissive interlocutory appeal challenging Judge McCorkle’s interlocutory order in Cause No. 09-18-00383-CV in the Court of Appeals for the Ninth District of Texas at Beaumont (the “Interlocutory Appeal”).

When the newly elected board took office on November 16, 2018, it was faced with spending more money in an appeal attempting to overturn Judge McCorkle’s order with an uncertain outcome knowing that when the appellate process on the rule ran its course, Conroe and the Utilities’ takings claims would still need to be resolved causing further expense with an unknown outcome. The board voted to end the expensive and lengthy litigation so the District could focus its efforts and resources on adopting a management plan and rules that are valid and within the District’s authority.

The Compromise and Settlement Agreement will result in a dismissal of the Interlocutory Appeal with Prejudice, and eventually a Final Judgment in the District Court Litigation declaring the LVGU Rule void and unenforceable and dismissing with prejudice all other claims by all parties including the City’s and Utilities’ takings claims. When the Final Judgment takes effect, the LVGU Rule will become void and unenforceable and shall be stricken from the District’s Rules, Regulatory Plan and the LVGU Permits that recite the regulation. The District will send notice to the LVGU permit holders of the forthcoming modification to its permits and that all other provisions and conditions in those permits will remain valid and effective.

The District will post notice of hearing on any proposed rule(s) to replace the stricken LVGU Rule and will subsequently issue new permits if needed in connection with the adoption of new rule(s).