## Facts

- The City of Marshall held a water right authorizing diversion from Cypress Creek for municipal (potable) use, later reflected in a certificate of adjudication authorizing up to 16,000 acre-feet.
- Marshall applied to the Texas Commission on Environmental Quality (TCEQ) to amend its certificate to (1) recognize service to customers located outside the originating basin (an interbasin transfer) and (2) allow supply of untreated water for industrial use, while not increasing the authorized amount of water or the diversion rate.
- The City of Uncertain, environmental and civic organizations, and landowners opposed the amendment, alleging adverse environmental and socio-economic impacts, including effects on Caddo Lake.
- Opponents sought a contested-case hearing.
- TCEQ granted the amendment and denied a contested-case hearing, concluding Texas Water Code § 11.122(b) required approval without a hearing for amendments that do not increase the amount appropriated or the diversion rate.
- On judicial review, the district court reversed and remanded for a contested-case hearing; the court of appeals issued a mixed disposition.
- The Texas Supreme Court granted review to decide whether § 11.122(b) precludes a contested-case hearing for a “no-increase” amendment that changes use and/or recognizes an interbasin transfer.

## Issues

1. Whether Texas Water Code § 11.122(b) categorically precludes a contested-case hearing on a water-right amendment that does not increase the amount appropriated or the diversion rate, but seeks a change in use and/or recognition of an interbasin transfer.
2. Whether, notwithstanding § 11.122(b), TCEQ must consider other statutory public-interest criteria that may require an evidentiary hearing when material factual disputes exist.

## Decision

- The Texas Supreme Court held that § 11.122(b) does not categorically bar a contested-case hearing for “no-increase” amendment applications.
- The Court concluded § 11.122(b) limits the scope of issues in a contested-case proceeding, but does not eliminate TCEQ’s obligation to apply other statutory criteria that protect the public interest.
- The Court affirmed the court of appeals’ judgment in part and remanded to TCEQ for further proceedings consistent with the Court’s interpretation.

## Legal Principles

- Texas Water Code § 11.122(b) streamlines review of amendment applications that do not increase the amount appropriated or the diversion rate, but it does not create an absolute prohibition on contested-case hearings.
- Even for “no-increase” amendments, TCEQ must evaluate applicable statutory public-interest criteria beyond impacts on other water-right holders and the on-stream environment, including water conservation requirements, consistency with state and regional water plans, and potential groundwater effects.
- When evaluation of applicable statutory criteria depends on disputed facts that cannot be adequately resolved on the written application record, a contested-case hearing may be required; the need for a hearing is determined case by case.
- An agency interpretation that treats § 11.122(b) as mandating approval without any contested-case process is inconsistent with the statute when it would prevent consideration of applicable statutory criteria.

## Conclusion

The Texas Supreme Court ruled that Water Code § 11.122(b) narrows the issues in contested-case review for certain water-right amendments but does not eliminate hearings altogether; TCEQ must still assess other statutory public-interest criteria and provide a contested-case hearing when necessary to resolve material factual disputes affecting those criteria.


City of Marshall v. City of Uncertain, 206 S.W.3d 97 (Tex. 2006)