R.E. Janes Gravel Company v. the Texas Commission on Environmental Quality , It's Executive Director, Richard A. Hyde, It's Commissioners Bryan Shaw and Toby Baker, and the City of Lubbock

Affirmed and Opinion filed December 15, 2016.

In The

Fourteenth Court of Appeals

NO. 14-15-00031-CV

R.E. JANES GRAVEL COMPANY, Appellant
V.
THE TEXAS COMMISSION ON ENVIRONMENTAL QUALITY, ITS
EXECUTIVE DIRECTOR, RICHARD A. HYDE, ITS COMMISSIONERS
BRYAN SHAW AND TOBY BAKER, AND THE CITY OF LUBBOCK,
Appellees

On Appeal from the 345th District Court
Travis County, Texas
Trial Court Cause No. D-1-GN-13-000150

OPINION

Appellee, The City of Lubbock (“the City”), applied to appellee, The Texas
Commission on Environmental Quality (“the Commission”), for an amendment to
an existing permit, which would authorize the City to use a portion of the Brazos
River to convey treated wastewater effluent from a discharge point to a point
downstream, where the effluent would be diverted for beneficial purposes.
Appellant, R.E. Janes Gravel Company (“Janes”), whose property is downstream
from the proposed diversion point, contested the application. The Commission
issued an order granting the amended permit. In the present suit, Janes sought
judicial review of that order and sued the City and the Commission, as well as its
executive director—Richard A. Hyde, and its commissioners—Bryan Shaw and
Toby Baker, all in their official capacities.1 A district court rendered judgment for
appellees, affirming the Commission’s order. We affirm the district court’s
judgment.

I. BACKGROUND

The City is located entirely within the Brazos River Basin. However, the
City has not historically received its water supply from the Brazos River or its
tributaries because of intermittent flows. Rather, the City satisfies its water needs
from a combination of imported surface water, groundwater, and reuse of treated
wastewater effluent.

The City purchases the surface water from the Canadian River Municipal
Water Authority (“CRMWA”). That water, originating in Lake Meredith, is
transported by pipeline in the Canadian River Basin to the Brazos River Basin to
the City’s raw water treatment facility. The City produces the groundwater from
wells and also purchases well-produced groundwater from CRMWA.

1
Janes originally sued then-executive director, Zachary Covar, and another then-
commissioner, Carlos Rubenstein. According to the Commission, the executive director is now
Richard A. Hyde, and Rubenstein is no longer a commissioner, with his former seat now vacant.
The Commission requests that we substitute Hyde for Covar and drop Rubenstein as a party. See
Tex. R. App. P. 7.2(a) (providing that when a public officer is a party in an official capacity to an
appeal and ceases to hold office before disposition of the appeal, the public officer’s successor is
automatically substituted as a party, if appropriate, and subsequent proceedings are to be in the
name of the substituted party). Janes does not oppose the Commission’s request or dispute its
assertions regarding the changes. Accordingly, we grant the Commission’s request and refer to
the current executive director and commissioners as though they were the parties from the outset.

2
Additionally, sewage from customers is returned to the City’s wastewater
treatment facility where it is converted into treated wastewater effluent (hereinafter
“the effluent”). In 1983, the City obtained a permit—No. 3985—authorizing the
City to reuse for industrial and agricultural purposes within the Brazos River Basin
a maximum of 22,910 acre-feet per year of the effluent derived from the surface
water purchased from CRMWA.

In 2001, the City was also granted a wastewater discharge permit, allowing,
but not requiring, the City to discharge a maximum of 10,081 acre-feet per year,
with a maximum of 9 million gallons per day, of the effluent into the North Fork of
the Double Mountain Fork of the Brazos River (“the North Fork”) at a point called
Outfall No. 001.2 In May 2003, the City began discharging at Outfall No. 001. As
of the 2011 administrative hearing in the present case, the City had never
discharged the daily permitted maximum; rather, discharge rates have varied based
on usage patterns and amounts discharged at other authorized locations. The
discharged effluent has been a varied mixture of the surface-water-based effluent
and groundwater-based effluent as the source of the City’s water supply has
fluctuated.

In 2004, the City applied for an amendment to Permit No. 3985, requesting
what is commonly known as a “bed and banks” permit and governed by statute.
See Tex. Water Code Ann. § 11.042 (West Supp. 2016). The City requested
authorization to use the bed and banks of the North Fork to transport the 10,081
acre-feet per year of treated effluent that it is allowed to discharge at Outfall No.
001 to a point 2.7 miles downstream, where an equal amount, less “carriage losses”
(the amount lost during conveyance) would be diverted and reused for municipal,

2
The North Fork starts where two ravines converge in Lubbock, Texas. The river then
flows away from the City in an east-southeasterly direction.

3
recreational, industrial, and agricultural purposes. Because the requested diversion
is directly tied to the discharge at Outfall No. 001, the City requested permission to
divert the maximum it is permitted to discharge although it has never discharged
the full authorized amount on a daily basis.3

The Commission conducted water-availability, environmental, and
conservation analyses. The Commission then prepared a draft permit granting the
application.

Janes contested the application. Janes is a family-owned gravel company
which has supplied aggregates, including gravel, sand, and limestone, to the City
and surrounding areas since the 1950s. Janes has a permit, issued in 1968, to
divert up to 450 acre-feet of water annually from the North Fork, at a point
downstream from the diversion point referenced in the City’s application for an
amended permit. According to Janes, its operation depends heavily on its water
supply, the North Fork is its primary source of water, and its operations would be
affected if that source were compromised. Janes believes that the City diverting
10,081 acre-feet of water upstream will threaten Janes’s viability.

The Commission referred the application to the State Office of
Administrative Hearings for a contested case hearing. An administrative law judge
conducted a hearing during October 2011, at which it considered pre-filed
testimony, live testimony, and numerous exhibits. Subsequently, that judge issued
a proposal that the Commission grant the application. Janes filed a motion for
rehearing which was overruled by operation of law.

3
The City also requested permission to increase the amount of the effluent the City may
use from 22,910 acre-feet per year to 32,991 acre-feet per year (an increase of 10,081 acre-feet),
but the portion of the order permitting that increase is not challenged by Janes.

4
 On October 24, 2012, the Commission issued its final order (“the Order”)
granting the amended permit—No. 3985A—authorizing the City to convey, via the
bed and banks of the North Fork, flows of up to 10,081 acre-feet per year
discharged at Outfall No. 001 and divert that amount of existing and future
discharges, less carriage losses of .47%, at a certain point downstream. Under the
permit, the City may not divert more than the amount discharged and must
maintain a water accounting plan to ensure compliance. The order included
findings of fact and conclusions of law.

Janes then filed the present suit in a Travis County District Court against the
Commission and its executive director and commissioners, seeking judicial review
of the Order, as permitted by statute. See Tex. Gov’t Code Ann. § 2001.171 (West
2016). The City intervened. The trial court conducted a bench trial, at which it
admitted the record of the administrative proceeding, as required by statute. See
id. 2001.175(d), (e) (West 2016). The parties also filed written briefs and
presented argument at the bench trial. On October 13, 2014, the trial court signed
a final judgment in favor of the City and all the Commission defendants, thereby
affirming the Order. Janes appealed to the Third Court of Appeals, and the case
was subsequently transferred to our court.4

II. ISSUES AND STANDARD OF REVIEW

On appeal, Janes challenges the Order for two alternative reasons: (1) the
Commission failed to comply with Texas law when authorizing the amended
permit, or (2) even if the Commission may grant the permit, the Commission failed
to properly measure carriage losses.

4
Because of the transfer, we must decide the case in accordance with Third Court of
Appeals’s precedent if our decision otherwise would have been inconsistent with that court’s
precedent. See Tex. R. App. P. 41.3.
5
 Judicial review of the Commission’s order is governed by the substantial-
evidence rule set forth in Texas Government Code section 2001.174:

If the law authorizes review of a decision in a contested case
under the substantial evidence rule . . . , a court may not substitute its
judgment for the judgment of the state agency on the weight of the
evidence on questions committed to agency discretion but:
(1) may affirm the agency decision in whole or in part;
and
(2) shall reverse or remand the case for further
proceedings if the substantial rights of the appellant have been
prejudiced because the administrative findings, inferences,
conclusions or decisions are:
(A) in violation of a constitutional or statutory provision;
(B) in excess of the agency’s statutory authority;
(C) made through unlawful procedure;
(D) affected by other error of law;
(E) not reasonably supported by substantial evidence
considering the reliable and probative evidence in the
record as a whole; or
(F) arbitrary or capricious or characterized by abuse of
discretion or clearly unwarranted exercise of discretion.

See Tex. Gov’t Code Ann. § 2001.174 (West 2016); Heritage on the San Gabriel
Homeowners Ass’n v. Tex. Comm’n on Envtl. Quality, 393 S.W.3d 417, 423–24
(Tex. App.—Austin 2012, pet. denied); Citizens Against Landfill Location v. Tex.
Comm’n on Envtl. Quality, 169 S.W.3d 258, 263 (Tex. App.—Austin 2005, pet.
denied).

Under this standard, we review the Commission’s legal conclusions for
errors of law and its factual findings for support by substantial evidence. Heritage,
393 S.W.3d at 424. The substantial-evidence standard “is a limited standard of
review that gives significant deference to the agency in its field of expertise.” R.R.

6
Comm’n of Tex. v. Torch Operating Co., 912 S.W.2d 790, 792 (Tex. 1995). We
may not substitute our judgment for the agency’s. Id.; Citizens, 169 S.W.3d at
264. The issue before us is not whether the agency reached the correct conclusion
but whether there is some reasonable basis in the record for the agency’s action.
R.R. Comm’n, 912 S.W.2d at 792; Citizens, 169 S.W.3d at 264. The standard
requires “only more than a scintilla” of evidence, and the evidence “actually may
preponderate against the decision of the agency and nonetheless amount to
substantial evidence.” R.R. Comm’n, 912 S.W.2d at 792–93; see Citizens, 169
S.W.3d at 264. We presume that the agency’s findings, inferences, conclusions,
and decisions are supported by substantial evidence, and the party challenging the
decision bears the burden to prove otherwise. See State v. Pub. Util. Comm’n of
Tex., 883 S.W.2d 190, 204 (Tex. 1994); Tex.-Fin, Inc. v. Ducharne, 492 S.W.3d
430, 439 (Tex. App.—Houston [14th Dist.] 2016, no pet.); AEP Texas Commercial
& Indus. Retail Ltd. P’ship v. Pub. Util. Comm’n of Tex., 436 S.W.3d 890, 904–05
(Tex. App.—Austin 2014, no pet.); Heritage, 393 S.W.3d at 424; Citizens, 169
S.W.3d at 264. Further, the agency’s decision should be reversed only if the
challenging party demonstrates that the absence of substantial evidence has
prejudiced the party’s substantial rights. See Tex. Gov’t Code Ann. § 2001.174(2);
Citizens, 169 S.W.3d at 264.

Whether the agency’s order satisfies the substantial-evidence standard is a
question of law. Heritage, 393 S.W.3d at 424. In other words, we do not defer to
the district court’s judgment that there was substantial evidence supporting the
agency’s order. Id. On appeal from the district court’s judgment, our focus, as in
the district court, is on the agency’s decision. Id.

Additionally, this appeal involves issues of statutory construction.
Construction of a statute is a question of law, which we review de novo. See

7
Lippincott v. Whisenhunt, 462 S.W.3d 507, 509 (Tex. 2015) (per curiam). If the
statutory language is unambiguous, we interpret the statute according to its plain
meaning. See id. With respect to traditional statutory-construction principles
applicable to this case, generally a more specific statute controls over the more
general. See Horizon/CMS Healthcare Corp. v. Auld, 34 S.W.3d 887, 901 (Tex.
2000). Further, as a general principle, we should avoid interpretation of a statute
that would render any part meaningless. See City of Dallas v. TCI West End, Inc.,
463 S.W.3d 53, 57 (Tex. 2015).

III. CHALLENGE TO ISSUANCE OF THE AMENDED PERMIT

As all parties agree, the City must obtain a permit from the Commission for
the activities described in the City’s application. Specifically, section 11.042 of
the Water Code, which governs “Delivering Water Down Banks and Beds,”
requires authorization for the City to use the bed and banks of the North Fork to
convey the surface-water-based effluent from Outfall No. 001 to the proposed
diversion point:

. . . a person who wishes to convey and subsequently divert water in a
watercourse or stream must obtain the prior approval of the
commission through a bed and banks authorization. The authorization
shall allow to be diverted only the amount of water put into a
watercourse or stream, less carriage losses and subject to any special
conditions that may address the impact of the discharge, conveyance,
and diversion on existing permits, certified filings, or certificates of
adjudication, instream uses, and freshwater inflows to bays and
estuaries. . . .
Tex. Water Code Ann. § 11.042(c). Because the effluent would be partially
derived from surface water, in addition to privately owned groundwater, the City
sought a bed and banks permit under section 11.042(c).5 And, because the City

5
Section 11.042 also requires a bed-and-banks permit to convey and divert return flows
derived from privately owned groundwater. See Tex. Water Code Ann. § 11.042(b) (West Supp.
8
had an existing permit to reuse such effluent, it sought authorization to convey and
divert the effluent via the bed and banks of the North Fork as an amendment to the
existing permit.

A. Janes’s Contentions

Janes presents its challenge to issuance of the amended permit as invoking
the portions of the substantial-evidence standard set forth under subsections (2)(A)
and (D) of Government Code section 2001.174, asserting that Janes’s substantial
rights were prejudiced because the Order was affected by a violation of statutes
and an error of law. See Tex. Gov’t Code Ann. § 2001.174(2)(A), (D). The crux
of Janes’s argument is that under applicable statutes, the Commission may not
permit the City to divert the discharged effluent without first protecting Janes’s
senior rights to that water. Janes cites several principles and statutes collectively to
support its position.

Janes emphasizes that the discharged effluent is derived from both surface
water and groundwater. It is undisputed that generally surface water in natural
watercourses is State water, whereas groundwater is privately owned. See Edwards
Aquifer Auth. v. Day, 369 S.W.3d 814, 822–23 (Tex. 2012).

Janes relies on Texas Water Code section 11.046(c), entitled “Return
Surplus Water,” which provides:

2016). Before the Commission, Janes challenged the request for an amended permit to the extent
the discharged effluent also was derived from groundwater. However, on appeal, Janes does not
challenge the City’s right to divert the groundwater-sourced effluent and relies instead on the fact
that the effluent is also derived from surface water. Evidence showed that because of declining
levels in Lake Meredith, during the recent years before the Order, the City’s predominant source
of potable water had been groundwater and the discharges from Outfall No. 001 have been
predominantly comprised of groundwater-based effluent. Regardless, because the discharged
effluent has variously consisted also of effluent derived from surface water, the City sought a
bed-and-banks permit under section 11.042(c)

9
 (c) Except as specifically provided otherwise in the water right, water
appropriated under a permit, certified filing, or certificate of
adjudication may, prior to its release into a watercourse or stream, be
beneficially used and reused by the holder of a permit, certified filing,
or certificate of adjudication for the purposes and locations of use
provided in the permit, certified filing, or certificate of adjudication.
Once water has been diverted under a permit, certified filing, or
certificate of adjudication and then returned to a watercourse or
stream, however, it is considered surplus water and therefore subject
to reservation for instream uses or beneficial inflows or to
appropriation by others unless expressly provided otherwise in the
permit, certified filing, or certificate of adjudication.

Tex. Water Code Ann. § 11.046(c) (West 2008). Janes asserts that this statute
applies to the discharged effluent because (1) “water has been diverted under a
permit” because the effluent is derived in part from surface water purchased from
CRMWA pursuant to a permit, (2) the water has “then [been] returned to a
watercourse or stream” through the City’s discharge into the North Fork, and (3)
there was no permit, certified filing, or certificate of adjudication expressly
providing that the discharged flows are not considered surplus water.

Janes also relies on section 11.042(c) and maintains that the statute does not
authorize a bed and banks permit when the party has already begun discharging
water before obtaining the permit, as in the present case. Janes cites the portion of
the statute stating that “a person who wishes to convey and subsequently divert
water in a watercourse or stream must obtain the prior approval of the
commission through a bed and banks authorization.” See id. § 11.042(c) (emphasis
added).

Janes also cites two other sections in the Water Code: Section 11.134, which
provides, relative to a permit to appropriate State water, that the Commission
“shall” grant the application if, among other requirements, the appropriation “does

10
not impair existing water rights . . . .” Id. § 11.134(b)(3)(B) (West 2008); and
section 11.027, providing that with respect to State water, “As between
appropriators, the first in time is the first in right.” Id. § 11.027 (West 2008).

Based on the above-cited authority collectively, Janes’s argument may be
summarized as follows: (1) because the City has been discharging the effluent
derived from surface water into the North Fork before obtaining a bed-and-banks
permit, existing discharges have become surplus water, the City’s requested
diversion would constitute a new appropriation of water, and the discharges are
subject to appropriation by others with rights in the North Fork (reading section
11.046(c) and 11.042(c) together); (2) thus, the Commission may not grant the City
a bed-and-banks permit to divert both existing and future discharges without
considering the impact on existing water rights holders (per section
11.134(b)(3)(B)); and (3) the discharges are “subject to reservation” for Janes’s
appropriation by virtue of its first-in-time permit issued in 1968 (per section
11.027). Hence, Janes’s first stated issue is the following:

When a person has already commenced discharging his effluent
derived from surface water, is the [Commission] prohibited from
granting the person a permit to divert such discharged amount
downstream, without subordinating such diversion to senior water
right holders who are downstream from the diversion?
Janes maintains that the Commission failed to consider, or properly apply,
all of the above-cited statutes when granting the amended permit and whether
Janes will remain able to divert its annual permitted 450 acre-feet of water if the
City were granted the amended permit. Janes does not claim the amendment will
necessarily adversely impact Janes’s appropriation but that the Commission at least
should have evaluated whether there will be such an adverse effect.

11
 Alternatively, Janes argues that even if section 11.046(c) is inapplicable and
the effluent is not considered surplus water when discharged into the North Fork,
section 11.042(c) still does not authorize a bed-and-banks permit when the party
has already begun discharging before obtaining the permit without the City
determining whether senior rights holders will be adversely affected. Therefore,
Janes maintains that even considering section 11.042(c) alone, the permit was
improper and Janes’s substantial rights were affected.

B. Appellees’ Contentions

Appellees disagree that the treated effluent can be considered surplus water
under section 11.046(c) after being discharged into the North Fork. Appellees cite
various reasons that the effluent does not satisfy section 11.046(c) or that the
exception therein applies. Appellees also dispute that the City’s request for a bed-
and-banks permit, as an amendment to the existing permit, must yield to any senior
rights of Janes. Appellees point to section 11.042(c) and the statute and rule
governing amended permits as the controlling authority.

Specifically, appellees maintain that because the City’s request complies
with section 11.042(c)—it seeks to divert no more than the amount discharged
(minus carriage losses)—the effluent is not a new appropriation of State water
subject to appropriation by senior water rights holders in the North Fork. In this
regard, appellees also dispute that a bed-and-banks permit is limited to new
discharges of surface water. Appellees thus contend that the amended permit
satisfies section 11.042(c).

Appellees agree that the amendment may not adversely affect Janes but
argue that any adverse effect must be evaluated under the standard prescribed in
Texas Water Code section 11.122, entitled “Amendments to Water Rights
Required,” which provides in pertinent part:
12
 (a) All holders of permits . . . shall obtain from the commission
authority to change the place of use, purpose of use, point of
diversion, rate of diversion, acreage to be irrigated, or otherwise alter
a water right. . . .
(b) Subject to meeting all other applicable requirements of this chapter
for the approval of an application, an amendment, except an
amendment to a water right that increases the amount of water
authorized to be diverted or the authorized rate of diversion, shall be
authorized if the requested change will not cause adverse impact on
other water right holders or the environment on the stream of greater
magnitude than under circumstances in which the permit . . . that is
sought to be amended was fully exercised according to its terms and
conditions as they existed before the requested amendment.
(c) The commission shall adopt rules to effectuate the provisions of
this section.
Tex. Water Code Ann. § 11.122 (West 2008). The Texas Administrative Code
includes such a “No injury” rule, essentially mirroring the pertinent provisions of
section 11.122 and placing the burden on the applicant to prove that the amended
permit will not adversely impact other water-rights holders under the standards in
section 11.122. See 30 Tex. Admin. Code § 297.45(b), (d).

According to appellees, there will be no adverse effect on Janes “of greater
magnitude than under circumstances in which [the City’s original permit] was fully
exercised according to its terms and conditions as they existed before the requested
amendment”: under the original permit, the City has the exclusive right to fully use
22,910 acre-feet per year of its effluent; thus, its conveyance and diversion via the
North Fork of no more than the amount of effluent it is permitted to use has a “net
effect” of “zero” on Janes. The City characterizes Janes’s complaint as seeking to
improperly lay claim to the City’s own effluent which it has a right to transport via
the North Fork for reuse.

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C. The Commission’s Order

In the Order, the Commission made numerous findings of fact and
conclusions of law, including the following, which are pertinent to the issues on
appeal and cumulatively rejected Janes’s position and adopted appellees’ position:

Findings of Fact:

52. The Application does not request a new or additional
appropriation of State water.
60. No water rights have been granted based on the availability of
the City’s discharge of any of its developed water-based treated
effluent from Outfall No. 001.
61. The flows in the North Fork created by the City through
discharges of its developed water-based treated effluent at
Outfall No. 001 are not part of the normal flow of the North
Fork.
62. A water availability analysis using the Brazos [Water
Availability Model] was not required for the Application
because the Application is not a request for a new appropriation
of State water.
64. As a result of the technical review of the Application, the
[Commission] staff determined that no water rights in the
Brazos River Basin have been granted based on the City’s
discharge of its developed water-based treated effluent from
Outfall No. 001.
71. [The Commission] staff concluded that the amendments sought
in the Application would not impair any water rights within the
Brazos River Basin.
92. The City did not request in the Application the authority to
divert any flows that have historically been in the Brazos River
Basin.
134. Under draft Permit 3985A, the City’s diversions of flows
created by the discharge at Outfall No. 001 of its Canadian
River Basin surface water-based treated effluent pursuant to the
[discharge] Permit do not have a priority date and are not

14
 subject to priority calls from existing water rights holders in the
Brazos River Basin.
135. Draft permit 3985A does not authorize the City to divert any
State water.
136. Draft Permit 3985A will not deprive appropriators of state
water within the Brazos River Basin of the equivalent quantity
or quality of water that was available with the full, legal
exercise of existing water rights before the change requested in
the Application.
137. The terms and conditions of draft Permit 3985A will not
increase any appropriator’s legal obligation to a senior water
right holder.
138. The terms and conditions of draft Permit 3985A will not
substantially affect the continuation of stream conditions as
they would exist with the full, legal exercise of existing water
rights at the time those water rights were granted.
Conclusions of law:

6. The City must obtain prior authority from the [Commission] to
convey the flows created by the discharge of . . . its developed
Canadian River surface water-based treated effluent from
Outfall No. 001 to the diversion point identified in draft Permit
3985A using the bed and banks of the North Fork. [citing, inter
alia, section 11.042(c)]
10. [I]t is unnecessary to determine whether the requirements of
Water Code § 11.134(b), have been met in order to grant the
Application . . .
11. Because the City has requested authorization to divert and reuse
its developed water-based treated effluent that it discharges
from Outfall No. 001, the Application does not request a new or
increased appropriation. . . .
20. The City has demonstrated that the Application satisfies each
applicable statutory and regulatory requirement.
21. The evidence admitted in this case supports granting the
Application and issuing draft Permit 3985A.6
6
We have recited above the pertinent findings and conclusions challenged by Janes as
15
 In summary, the import of the findings and conclusions is that (1) the
discharged effluent to be diverted is not part of the normal flow of the North Fork,
(2) the City did not request a new or increased appropriation of State water, (3) the
effluent is not subject to appropriation by others with rights in the North Fork, (4)
there was no requirement that the City prove the diversion would not impair
existing water rights pursuant to section 11.134(b)(3)(B), (5) the amended permit
will not cause adverse impact on other water-rights holders in the North Fork “of
greater magnitude than under circumstances in which [the City’s original permit]
was fully exercised according to its terms and conditions as they existed before the
requested amendment,” and (6) the City met the requirements for obtaining the
bed-and-banks permit as an amendment to its existing permit. Although the
Commission did not expressly mention section 11.046(c), it essentially rejected
Janes’s “surplus water” argument via the other findings and conclusions. As
discussed below, we agree with the conclusions of law, and the administrative
findings, inferences, conclusions, and decisions are reasonably supported by
substantial evidence considering the reliable and probative evidence in the record
as a whole.

D. Analysis

Initially, we note, as mentioned above, that appellees proffer reasons that
section 11.046(c) alone would not apply to the City’s discharges of effluent into
the North Fork and render the effluent surplus water subject to appropriation by
others. The parties spend time disputing whether the discharged effluent could
ever be considered surplus water under section 11.046(c).7 However, we need not

well as others we glean pertinent to understanding the Commission’s determinations regarding
the issues raised on appeal.
7
For instance, appellees cumulatively posit that (1) the discharged effluent does not
satisfy the general definition of “surplus water” in the Water Code, (2) section 11.046(c) applies
16
decide whether the discharged effluent would ever become surplus water because
the Order may be affirmed under the statute governing bed-and-banks permits and
the statutory standard for evaluating a request for an amended permit.

Apparently, Janes recognizes, as asserted by appellees, that section
11.042(c) is the statute most directly governing the activities planned by the City,
rather than section 11.046(c), which generally describes situations under which
surface water returned to a waterway becomes surplus water subject to
appropriation by others. Compare Tex. Water Code Ann. § 11.042(c) with §
11.046(c). As we construe section 11.042(c), the Commission’s authority to grant
a party the right to use a stream to convey surface water from a discharge point to a
point downstream, where it will be diverted for re-use, would be meaningless if,
under section 11.046(c), the water became surplus water available for
appropriation by senior rights holder upon being discharged into the stream.

In fact, Janes’s argument that the effluent is surplus water subject to
appropriation by those with superior rights in the North Fork depends not only on
section 11.046(c) but also on construing that provision together with section
11.042(c) in the manner proffered by Janes. As mentioned above, Janes argues
that the discharged effluent became surplus water subject to appropriation by those
with superior rights because the City failed to comply with section 11.042(c) and
obtain a bed-and-banks permit before discharging. Hence, in its appellate brief,
Janes acknowledges that section 11.042(c), if satisfied, would control over section
11.046(c), but Janes maintains that section 11.042(c) was not satisfied;

only to water returned to the same watercourse from which it originally was diverted, and (3)
water diverted under a permit and then returned to a watercourse becomes surplus water “unless
otherwise expressly provided in the permit” and Permit No. 3985 expressly provided otherwise
by authorizing the City exclusively to use all its Canadian River Basin sourced effluent. Janes
attacks these points raised by appellees.

17
specifically, Janes asserts, “[O]nce [the City’s] discharge of surface water
commenced, the City could no longer get special treatment for its downstream
diversion just because its amount diverted is less than its amount discharged.” We
disagree.

Nothing in section 11.042(c) precluded the City from obtaining a bed-and-
banks permit although it already had been discharging the effluent. See id. §
11.042(c). The statute requires a party who wishes to convey and divert the same
amount of water to obtain “prior approval” from the Commission. See id. But the
statute does not require “prior approval” before making the discharges that might
ultimately be diverted. See id. It is clearly the diversion that is the hallmark of a
bed-and-banks permit because the discharge alone would not constitute a
conveyance to a diversion point. We see no difference in effect on the ultimate
transportation via the bed and banks between obtaining the permit after the
discharge but before the diversion or obtaining the permit before both the
discharge and the diversion, as long as no more water is diverted than discharged.
Consequently, we disagree that the fact the City had discharged effluent before
seeking permission to divert precluded the Commission from allowing the
conveyance and diversion via a bed-and-banks permit.

Therefore, because the diversion is permitted under a bed-and-banks permit,
we agree with the import of the Commission’s findings and conclusions that the
discharged effluent was not surplus water subject to appropriation by other water
rights holders in the North Fork and that the City’s diversion would not constitute a
new appropriation of water. Accordingly, the Commission did not improperly
ignore or misapply sections 11.046(c) and 11.042(c). In turn, the Commission was
not required to evaluate whether senior rights holders, including Janes, would be
able to satisfy their permitted amounts from the discharged effluent if there were

18
insufficient water in the North Fork to otherwise satisfy their permits.
Consequently, the Commission did not improperly ignore or misapply sections
11.134(b)(3)(B) and 11.027.8

We turn to appellees’ contention that we must apply the standard for
evaluating an application for an amended permit: it “shall” be granted if it will not
cause adverse impact on Janes “of greater magnitude than under circumstances in
which [the City’s original permit] was fully exercised according to its terms and
conditions as they existed before the requested amendment.” See id. § 11.122(b);
see also 30 Tex. Admin. Code § 297.45(b).

In this regard, we first address Janes’s argument that section 11.122(b) is
inapplicable because of the exception therein. The standard applies “except [to] an
amendment to a water right that increases the amount of water authorized to be
diverted or the authorized rate of diversion.” See Tex. Water Code Ann. §
11.122(b); see also 30 Tex. Admin. Code § 297.45(b) (prescribing standard of
section 11.122(b) as applicable except for an amendment “for the increase in the
appropriative amount or diversion rate.”). Janes asserts the bed-and-banks permit,
because it involves a request to divert the discharged effluent, is plainly an
amendment that “increases the amount of water authorized to be diverted.” We
disagree.

Although the bed-and-banks permit would authorize the City to divert water,
it would not authorize any increase over an existing diversion. The original permit
did not involve any diversion from the North Fork. Rather, the original permit

8
We note that although the Commission concluded that it was unnecessary to determine
whether the requirements of section 11.134(b) were satisfied, it also concluded the City proved it
had met the requirements of that statute. Because the City was not required to prove section
11.134(b) was met, we need not address the Commission’s additional conclusions that the
requirements were met and we have omitted a recitation of the conclusions on that issue.

19
authorized the City to use 22,910 acre-feet per year of its effluent derived from
surface water purchased from CRMWA. The amended permit would authorize the
City to use the North Fork to transport a certain amount of that effluent to a point
downstream where the effluent would be diverted for re-use. Contrary to Janes’s
suggestion, the exception under section 11.122(b) does not apply to any request to
divert water but to an “increase[]” to the amount diverted. See Tex. Water Code
Ann. § 11.122(b). The term “increase[]”connotes there has already been a
diversion permitted.

Consequently, the Commission was required to evaluate conditions as
though all waters-rights holders along the North Fork, including the City, would
use their rights to the fullest extent allowed under their permits. See id. Under its
original permit, the City was authorized to reuse a maximum of 22,910 acre-feet
per year of its effluent. The City was not required to discharge any of that effluent
into the North Fork. Nothing in the original permit removed the City’s exclusive
right to use the effluent in the event any were discharged. The source of all the
water for the requested diversion is that 22,910 acre-feet of effluent. Further, the
original permit was expressly issued subject to all superior rights in the Canadian
River Basin and not subject to such rights in the Brazos River Basin. Finally,
under the amended permit, the City may divert only the amount of effluent that it
discharges. The Commission requires an accounting plan to ensure compliance.
Janes does not challenge additional findings of the Commission that the accounting
plan is reasonable and reliable and will ensure compliance.

Thus, the effect on other waters rights holders in the North Fork, including
Janes, if the City discharges 10,081 acre-feet of effluent into the North Fork and
then diverts it downstream is the same as the effect on such water rights holders if
the City had fully exercised its rights under the original permit. As appellees

20
assert, the effect of the amended permit is no different than if the City used a
pipeline instead of the North Fork to transport the effluent from the treatment
facility to the diversion point; the effect on downstream water rights holders is as
though the City did not discharge any water into the North Fork. Accordingly,
there is no adverse effect on Janes under the standard prescribed in section
11.122(b).

In summary, we conclude James has not shown that the Commission
improperly granted the City’s request for the amended permit or that the
Commission violated any statute or committed any legal error in granting this
request. Accordingly, we overrule Janes’s first issue.

IV. CHALLENGE TO CALCULATION OF CARRIAGE LOSSES

In its second issue, Janes asserts that its substantial rights have been
prejudiced because there is no evidence to support the Commission’s findings,
conclusions, and decision with respect to the calculation of carriage losses.

As stated above, the Commission may permit, via a bed-and-banks permit,
the diversion of only the amount of water put into a watercourse or stream, “less
carriage losses.” See id. § 11.042(c). Carriage losses refers to the amount of flow
lost during conveyance between the discharge and diversion points and includes
the water lost to evaporation from the surface, evapotranspiration by plants along
the stream, and seepage through the channel bed. Carriage losses are typically
quantified as a percentage of the total volume of water lost between the beginning
of transportation and the diversion point. The Commission requires that an
application for a bed-and-banks permit under section 11.042(c) include an estimate
of carriage losses. See 30 Tex. Admin. Code § 295.113(b)(7).

21
A. The City’s Evidence and the Commission’s Findings

To prove carriage losses, the City submitted with its application a
memorandum prepared by Chester Carthel, who was the City’s then-Water
Planning Manager (“the Carthel memo”). At the administrative hearing, the City
relied on the Carthel memo, plus the testimony of Dunn, Alexander, and Aubrey
Spear (the City’s director of water resources).

In the memo, Carthel calculated the carriage losses, and the witnesses
essentially reiterated the method relied on in the memo. The Carthel memo was
originally prepared in 2004, to support an application for an amendment to an
unrelated permit but included data pertinent to the application at issue. Carthel
summarized methodologies used to estimate losses in the Jim Bertram Lake
System in Lubbock County, which included a string of lakes upstream and the
portion of the North Fork between Outfall No. 001 and the City’s proposed
diversion point—the stream segment at issue in the present case.

According to this evidence, carriage losses are categorized into two
components: (1) Net Annual Evaporation, which is the total lost to evaporation and
evapotranspiration; and (2) stream losses, which represent all other losses such as
seepage and channel losses. The Net Annual Evaporation information was
obtained from the Texas Water Development Board data for Lubbock County and
covered a period of approximately fifty years preceding the City’s 2004
application. The Net Annual Evaporation factor was applied to the surface area of
the lakes and streams, including the segment at issue in the present case. Then, the
stream losses were estimated by applying a reduction factor to the Net Annual
Evaporation, according to a process used by an engineering firm for another
project. That firm estimated stream losses at 50% of the Net Annual Evaporation.
Carthel applied the 50% figure to most lakes in the system. Carthel doubled that

22
50% figure to 100% of the Net Annual Evaporation for streams in the system,
which the City believed was conservative as an overestimation of the stream
losses. Carthel stated that to support this hypothesis, the City (1) interviewed
landowners “along the canyon” who reported that “springs still exist,” and (2)
surveyed the segment at issue on May 19, 2003, before discharge began, and
observed a steady stream flow of approximately 10 million gallons per day at
Outfall No. 001. Applying his calculations to the surface area of the segment,
Carthel assigned a figure of .47% to the 10,081 acre-feet of water to be conveyed.

The City’s expert, Dunn, has personally calculated carriage losses, including
in the Brazos River Basin. Dunn opined that (1) the City’s method in the present
case was reasonable and accepted in the Texas water-resources industry, (2) the
supporting data was reliable and commonly used in the industry, (3) .47% is a
reliable reflection and “a good, strong estimate,” of the carriage losses that will
actually occur during the transport from Outfall No. 001 to the diversion point, and
(4) carriage losses will be small due to the short distance between such points,
which provides little opportunity for flows to be lost. Similarly, the Commission
employee, Alexander, testified that the Commission staff reviewed the City’s
information and found the calculations to be reasonable considering the short
distance and recommended the City’s figure be approved. Spear also testified that
a minimal amount is lost because of the length of the segment.

In the Order, the Commission made several findings of fact relative to the
determination of carriage losses:

65. The City estimated the carriage losses to be 0.47 percent of the
total amount it discharges into the North Fork at Outfall No.
001 and conveys to the Diversion Point.
66. The methodology used by the City to determine the carriage
losses associated with the requests made in the Application

23
 provides a reasonable assessment of the carriage losses that can
be expected to occur between Outfall No. 001 and the
Diversion Point.
67. The underlying data used by the City to determine the carriage
losses associated with the requests made in the Application is
data that is commonly relied upon in the Texas water resources
industry for making these types of assessments.
68. The 2.7 river-mile distance between Outfall No. 001 and the
Diversion Point provides little opportunity for the loss of
significant volumes of flows during the conveyance of the
City’s developed water-based treated effluent using the bed and
banks of the North Fork.
69. The 0.47 percent carriage loss factor used by the City in the
Application is a reliable reflection of the carriage losses that
will occur during the City’s transport of its developed water-
based treated effluent from Outfall No. 001 to the Diversion
Point.
70. As a result of the technical review of the Application, [the
Commission] staff determined that the City’s estimate of
carriage losses between Outfall No. 001 and the Diversion
Point was reasonable and the method used to determine the
losses was acceptable.
To summarize the findings, the Commission adopted the .47% carriage loss
figure estimated by the City, determining its methodology and conclusion were
reasonable and reliable.

B. Janes’s Contentions and Analysis

Janes contends that its substantial rights have been prejudiced because there
is legally insufficient evidence to support the Commission’s determination of
carriage losses. Though Janes does not expressly assert in its appellate brief that
this determination is not supported by substantial evidence, legally insufficient
evidence is not substantial evidence. See R.R. Comm’n, 912 S.W.2d at 792–93.
Therefore, Janes is seeking relief under section 2001.174(2)(E) and effectively

24
asserting that the Commission’s determination of carriage losses is not reasonably
supported by substantial evidence considering the reliable and probative evidence
in the record as a whole. See Tex. Gov’t Code Ann. § 2001.174(2)(E); R.R.
Comm’n, 912 S.W.2d at 792–93. In this context, Janes asserts that the City failed
to submit any reliable evidence of the total amount of carriage losses. According
to Janes, the only support in the administrative record for the City’s .47% figure is
the Carthel memo, which reveals that this figure is “a product of guesswork.”

Janes focuses on Carthel’s calculation of the second component—stream
losses—and particularly the seepage factor. Janes complains that Carthel
estimated, rather than measured, the stream losses and his estimation of the 100%
multiplier (applied to the Net Annual Evaporation) to determine stream losses is
unreliable. For several reasons, Janes posits that the City failed to show why the
50% multiplier for lakes upstream was merely doubled for the segment at issue
instead of multiplied by, for example, four, eight, or twenty, and there is an
analytical gap between the 50% and 100%. Janes argues, in turn, that because the
100% multiplier has no factual basis, the .47% figure has no factual basis, and
Carthel’s conclusion is legally no evidence. Janes asserts its substantial rights
were affected because understatement of carriage losses results in less water
available to downstream users than if the discharge and diversion did not occur.

Janes asserts that the Commission’s carriage-loss calculation is not
supported by any evidence because there is no reasonable or reliable basis to make
a seepage determination for the 2.7 mile stream segment. Janes’s arguments in this
regard may be summarized as follows: (1) the City did not account for the dry,
sandy composition of the streambed, leading to larger carriage losses, and no one
walked the 2.7 mile stream segment to accurately assess the conditions; (2)
Carthel’s discussions with landowners and field observations were insufficient; (3)

25
no one actually measured the reduction in flow between the discharge and
diversion points, as a method of calculating stream losses; and (4) the City failed to
consider a larger carriage loss figure under another method.9 We conclude that
substantial evidence supports the reasonableness and reliability of Carthel’s
calculation of stream losses and negates Janes’s points challenging Carthel’s
method and underlying data.10

Composition of the soil and conditions of the segment

First, Janes complains that Carthel did not take into account that the riverbed
of the segment is composed of dry, sandy soil, which could allow seepage of a

9
Janes cites the Robinson and Havner cases for a few general propositions regarding
expert testimony and scientific testimony. See E.I. du Pont de Nemours & Co., Inc. v. Robinson,
923 S.W.2d 549, 556–57 (Tex. 1995); Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706,
714 (Tex. 1997). But, Janes does not set forth in its appellant’s brief the Robinson factors or the
Gammill analysis, nor does Janes provide analysis and citation to legal authorities as to the
application of the Robinson factors or the Gammill analysis to the carriage-loss issues in this
case. See Transcontinental Ins. Co. v. Crump, 330 S.W.3d 211, 215–17 (Tex. 2010) (discussing
legal standard under the Robinson analysis and the Gammill analysis); Gammill v. Jack Williams
Chevrolet, Inc., 972 S.W.2d 713, 726–28 (Tex. 1998) (outlining the Gammill analysis);
Robinson, 923 S.W.2d 549, 557 (listing six non-exclusive factors). Because Janes has not
sufficiently briefed the issue of whether any evidence is unreliable under the Robinson factors or
the Gammill analysis, we do not address these issues. We do address Janes’s assertions that
certain evidence is unreliable or unreasonable as part of our analysis as to whether the
Commission’s determination of carriage losses is not reasonably supported by substantial
evidence considering the reliable and probative evidence in the record as a whole. See Tex.
Gov’t Code Ann. § 2001.174(2)(E).
10
Appellees contend Janes waived its challenge to the reliability of Carthel’s conclusion
by not only failing to object to admission of the Carthel memo during the administrative
proceeding but also by offering the memo into evidence. As discussed in the prior footnote, we
are considering Janes’s assertions that certain evidence is unreliable only as part of our analysis
as to whether the Commission’s determination of carriage losses is not reasonably supported by
substantial evidence considering the reliable and probative evidence in the record as a whole.
Because we conclude that the Commission’s findings as to carriage losses are reasonably
supported by substantial evidence considering the reliable and probative evidence, we need not
decide whether Janes was required to object in order to challenge the reliability of Carthel’s
conclusion.

26
“tremendous” volume of water. As Janes asserts, Dunn agreed that a dry, sandy
bed probably would have greater seepage rates temporarily until the pores are
filled, seepage is ultimately related to porosity and permeability, and he was
unaware of any testing regarding those characteristics of the soil in the segment at
issue. Additionally, Spear acknowledged the City does not discharge continuously
from Outfall No. 001, the amount varies widely from zero to closer to the
maximum volume authorized by the discharge permit, and the North Fork is dry
90% of the time. Moreover, in a 1990 document regarding intended wastewater
treatment and conveyance, the City stated, “Much of the water discharged would
be lost to evaporation before it reached an area where it could be used to meet
existing and future water demands.” According to Janes, this statement was made
before the City requested its amended permit and thus before it had an incentive to
reduce its calculation of carriage losses. Finally, Janes’s engineering expert, Tom
Koch, who disagreed with the .47% figure testified it was inconsistent with his
personal observations on August 11, 2011 that streamflow in the North Fork
“disappeared” as it moved downstream.

However, some evidence negated Janes’s assertion that the bed is dry and
thus would allow for significant seepage. Although no witness walked the length
of the segment, Dunn observed the discharge and diversion points and opined that
there is a “pretty strong inference” based on observed flows at both points “that it’s
flowing in between.” Dunn also testified that at the time of the hearing (October
2011), the City was discharging every day and the diversion point would never be
dry. Spear added that although the discharges varied widely, the City was
discharging an average of two to three million gallons per day at Outfall No. 001.
Spear explained that during the nine months before the hearing, the City had
discharged every day and based on his several, periodic observations of the

27
discharge and diversion points, the segment remained saturated, with the same
amount of discharged water passing the diversion point. Spear qualified that his
statement about the North Fork being dry 90% of the time was made during his
pre-filed testimony, it generally referred to the entire length (250 miles), which, as
an intermittent segment of the Brazos, does not have flow, but some segments
(including the one at issue) have become saturated because the City is discharging
water. Additionally, the City’s document (referenced above), acknowledging the
possibility that much of the water would be lost before reaching a diversion point,
was prepared years before the Commission hearing at which the City’s witnesses
explained the current conditions of the segment.

The City’s surveys and observations

Next, Janes challenges Carthel’s reliance on surveys and observations,
asserting they highlight the lack of an evidentiary basis for his opinion. Janes
attacks Carthel’s reference to a one-day survey observing a steady stream flow at
the discharge point. Janes maintains that one day’s survey is insufficient to
determine the daily, monthly, or annual stream flow, but even if it was, there was
no measurement of flow at the diversion point. Janes’s expert, Koch, opined that it
is nonsensical to assume that the same percentage of flow is lost every day
regardless of whether it has rained and regardless of the season. Although that
survey was only one day and Carthrel described only the flow at the discharge
point, other evidence, as cited above, indicated that the flows were similar between
the discharge and diversion points at various times closer to the time of the
hearing. And, Dunn explained that because conditions vary from time to time, an
expert tries to achieve a long-term average stream loss, thus disputing Janes’s
suggestion that an average rather than daily calculation is insufficient.

28
 Janes also attacks Carthel’s statement that “discussions with landowners
along the canyon indicate that springs still exist” because (1) Carthel did not set
forth the location, flow, or regularity of any springs or whether they feed into the
stream segment at issue, and (2) even if a spring did feed into the segment, such
fact would possibly indicate a higher seepage amount because Dunn acknowledged
that intervening sources adding water to a stream factor into carriage losses. We
acknowledge that Carthel’s vague reference to springs did not establish such
springs fed into the segment at issue. Nonetheless, even omitting his reference to
springs, his opinion was sufficiently supported by the City’s observation of flows
at the discharge point, as referenced in the memo, together with the other
testimony, as discussed above, regarding flows between the discharge and
diversion points closer to the time of the hearing.

Alternative methods

Additionally, Janes emphasizes that the City failed to utilize the paired-
discharged method for calculating stream losses, which would involve measuring
flows at the discharge and diversion points and discovering whether there are
intervening water sources, such as springs. Janes points out that Dunn suggested
time and money were obstacles to utilizing that method but also acknowledged he
has never taken more than two weeks to perform the task using that method and
has been paid more than $1 million for his total work for the City while the method
would cost at most $50,000. However, Dunn also testified that while the paired-
discharge method is an accurate method, it is not the only accurate method.

Janes also points out that Dunn acknowledged that the .47% figure is smaller
than a figure of 1.6%, which would be based on the Water Availability Model for
the Brazos River Basin, which Dunn helped develop and has used to calculate
carriage losses in the basin. He explained that the model did not calculate carriage

29
losses for the segment at issue, but he took information for a segment between two
points, which bracketed the segment at issue, and interpolated the value. But,
Dunn also opined that the 1.6% figure is still a small carriage loss factor because of
the short length of the stream and compared to the .47%, it is “a large difference of
two relatively small numbers” and both are very small numbers “volumetrically.”
According to Janes, the City improperly considered the difference as insignificant
simply because both numbers are small and there is no legal basis for the
proposition that the Commission may accept a carriage-loss figure because “the
applicant does not think it is worth his time to actually calculate it.” However,
Dunn also testified that the difference between .47% and 1.6% is within the State
and industry-standard requirements that carriage losses be measured with an
accuracy of plus or minus 5%. And, Dunn implicitly negated that a calculation
based on the Water Availability Model was definitive. He testified that the factors
in the model are based upon overall carriage loss over 183 miles of river in the
basin and considering the conditions anticipated over a 2.7 mile segment, instead
of over a much longer and more diverse segment, the City’s figure of .47% was
reasonable.

Finally, relative to all of Janes’s complaints, Dunn testified that methods
for determining carriage losses vary, depending on the availability of data to make
the determination, and there is no single method. He explained that carriage
losses, particularly evapotranspiration and stream losses, are difficult to measure, it
is not an exact science, and because evaporation is easier to measure, an expert
may take that figure and then account for the other components within the bounds
of the evaporation figure. Dunn opined that the other methods mentioned by Janes
for determining stream losses are alternatives but “I wouldn’t say it would be any
more reliable or any less reliable” than Carthel’s method.

30
 In summary, even if the alleged deficiencies raised by Janes would
preponderate against the City’s carriage-loss figure, we are bound under the
substantial-evidence standard to uphold the Commission’s findings if supported by
more than a scintilla of evidence. See R.R. Comm’n, 912 S.W.2d at 792–93;
Citizens, 169 S.W.3d at 264. We hold that Carthel’s calculation of the 100%
multiplier to determine stream losses is supported by more than a scintilla of
evidence. The Commission adopted the .47% carriage loss figure estimated by the
City, finding that the City’s methodology and conclusion are reasonable and
reliable. We conclude that these findings are supported by more than a scintilla of
evidence and that Janes has not met its burden to rebut the presumption that
substantial evidence supports these findings. See Pub. Util. Comm’n, 883 S.W.2d
at 204; Tex.-Fin, Inc., 492 S.W.3d at 439; AEP Texas Commercial & Indus., 436
S.W.3d at 904–05; Heritage; 393 S.W.3d at 424; Citizens, 169 S.W.3d at 264.
Under the applicable standard of review, we conclude that the Commission’s
findings regarding carriage losses are supported by substantial evidence
considering the reliable and probative evidence in the record as a whole. See Pub.
Util. Comm’n, 883 S.W.2d at 204; Heritage; 393 S.W.3d at 424; Citizens, 169
S.W.3d at 264. Accordingly, we overrule Janes’s second issue.

V. CONCLUSION

Janes has not shown any grounds under Texas Government Code section
2001.174 for reversing the Commission’s order or remanding the case for further
proceedings. Therefore, the trial court did not err by upholding the Commission’s
order. We affirm the trial court’s judgment.

/s/ John Donovan
Justice
Panel consists of Chief Justice Frost and Justices Christopher and Donovan.
31