Two East Texas real estate entities owned by Dallas hedge fund operator Kyle Bass have sued the Neches & Trinity Valleys Groundwater Conservation District seeking to force the agency to rule on their request to conduct exploratory drilling for East Texas’ most precious commodity: water.
In two separate lawsuits filed in two different Texas courts Friday — and filed just 90 minutes apart — lawyers for Bass and his properties accused the water board of “rogue, unlawful” conduct and illegally delaying approval of the drilling permits.
The 21-page lawsuit filed in Cherokee County accuses the seven water district board members of “unconstitutional” delays, despite agreeing earlier this year that the Bass entities had met all the requirements.
In a separate 22-page filing, the Bass properties filed a motion to intervene and to object to an Oct. 23 settlement of a lawsuit pending in Cherokee County District Court filed against the water district by poultry producer Sanderson Farms, a group of farmers and a water supply corporation that would have effectively shelved the Bass entities’ application to conduct exploratory drilling for water indefinitely.
“Plaintiffs are now stuck in administrative limbo while the District defers its authority pending resolution of an entirely different lawsuit to which plaintiffs are not even parties, based on complaints that have no bearing on the substance of the permits themselves,” the Bass lawsuit states. “This case involves the constitutionally protected property rights of the plaintiffs in the groundwater beneath their respective properties, including the right to produce and beneficially use the groundwater from beneath the more than 10,000 acres the plaintiffs collectively own in in Anderson and Henderson Counties, Texas, subject to the regulatory jurisdiction of the District.”
The two Bass entities are Pine Bliss, a 4,300-acre property that serves as the Bass family ranch in Henderson County, and Redtown Ranch Holdings, a 7,200-acre ranch in Anderson County. The two ranches are about 50 miles apart.
Bass is a hedge fund manager best known as the founder and chief investment officer of Dallas-based Hayman Capital Management. His fund gained widespread recognition for its accurate predictions of subprime mortgage failures during the financial crisis that led to the Great Recession.
Multiple efforts to reach board members for the Neches & Trinity Valleys Groundwater Conservation District on Friday were unsuccessful.
In its lawsuit, Sanderson Farms alleges that the Bass properties’ drilling efforts are the “exploitation of limited precious groundwater resources” and that Bass “manipulated the District’s process to his advantage (and to the detriment of the local communities) through improper board member participation.”
Court documents show that the Bass entities originally sought permits to drill 43 high-capacity water wells and ultimately produce more than 15 billion gallons of groundwater annually from the Carrizo-Wilcox Aquifer. The documents allege that Bass intends to export the groundwater outside the district and sell it for profit.
The Sanderson Farms filings also accuse the Bass entities of hiring a district board member to drill more than 40 high-capacity wells, leading to the board member’s resignation.
On Oct. 23, Anderson County District Judge C. Michael Davis entered a final judgment and permanent injunction, which was the result of a settlement agreement, that voided the water district’s declaration that the applications to drill were “administratively complete.”
Dallas lawyer Jeff Tillotson, who represents Bass and the properties, stated in court documents filed Friday that the Sanderson Farms’ lawsuit “has nothing to do with the merits or substance” of his clients’ application for drilling rights.
In the motion to intervene in the Sanderson Farms litigation, Tillotson points out that Bass was mentioned 11 times in the poultry company’s lawsuit but that his clients were not named as defendants intentionally to make sure they “were not afforded the ability to defend their interest.”
The motion to intervene states that the water district “reached a lopsided settlement” with Sanderson Farms in an agreement that violates Texas law.
“This case presents the following issue: can someone file a lawsuit that takes away or impairs another person’s statutory and constitutional rights without the affected person even being named a party?” the motion to intervene asked. “The correct legal answer is ‘no.’ But that is exactly what happened here.”
In the court documents, Tillotson also argues that Bass’ requests for drilling permits are “merely the first step of the development and beneficial use of the privately owned groundwater.”
“At this early stage in the process, the applicant is unsure whether water will even be produced,” the Bass lawsuit states. “The purpose of the drilling permit is to allow the applicant to conduct the work needed to determine whether drilling would be fruitful at all. It is only after the drilling permit is obtained, and the work is done to do that exploration, that the applicant then submits an additional specific application for the purpose of securing authorization for production.”
Lawyers for the Neches & Trinity Valleys Groundwater Conservation District will have 20 days to respond to the Cherokee County lawsuit.
The lawyers for Bass include Tillotson, Mollie Mallory, Sara Babineaux and Enrique Ramirez of Tillotson Johnson & Patton in Dallas.
In the Sanderson Farms case, the plaintiffs are represented by Clayton Bailey and Jared Wilkinson of Bailey Brauer, E. Spencer Nealy and Patrick Lindner of Davidson Troilo Ream & Garza and Stacey Reese, David Deaconson and Will Gray of Pakis, Giotes, Burleson & Deaconson.
Neches & Trinity is represented by John Stover of Skelton Slusher Barnhill Watkins Wells.
The lawsuit filed Friday is Pine Bliss and Redtown Ranch Holdings v. Neches and Trinity Valleys Groundwater Conservation District.