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Two companies tied to a Dallas investor filed a federal lawsuit to lift a moratorium in an ongoing East Texas water dispute, alleging a groundwater district has illegally blocked their efforts to extract water from beneath land they own.
This is the latest legal action taken in a growing battle over groundwater resources in East Texas.
Kyle Bass, a venture capitalist and owner of Redtown Ranch Holdings LLC and Pine Bliss LLC, is seeking to end a moratorium on large-scale water extraction projects imposed by the Neches & Trinity Valleys Groundwater Conservation District. The lawsuit, filed through Redtown Ranch and Pine Bliss, argues that the conservation district violated the constitutional rights of Bass and his companies by denying access to water beneath the land and also seeks an undisclosed amount of compensation.
Redtown Ranch and Pine Bliss, both funded by Bass’ private equity firm Conservation Equity Management, filed permits with the Neches & Trinity Valleys Groundwater Conservation District to drill 43 water wells across two counties that, when fully operational, could extract billions of gallons of water from the Carrizo-Wilcox Aquifer.
“What we’re trying to do here is just prevent the district from weaponizing its regulatory power to strip my clients of their property rights,” said Mollie Mallory, an attorney with Tillotson Patton, the law firm representing Redtown Ranch and Pine Bliss LLC. “The whole purpose here is just to hold them accountable and to get them to follow their own rules.”
Bass said he hasn’t been treated fairly by the district despite following its rules for years. He said the roadblocks enacted by the district, such as the moratorium, prevented his company from testing the groundwater beneath land he owns.
“This is bigger than just what happened to me,” Bass wrote in a statement to The Texas Tribune. “My lawsuit is about protecting the property rights of all Texas landowners and making clear that government regulators cannot simply change the rules to pick winners and losers.”
The groundwater district had not been served with the new lawsuit as of Wednesday afternoon, said Holli Pryor-Baze of Skelton Slusher Barnhill Watkins Wells PLLC, the attorney representing the groundwater district.
“We certainly disagree with the allegations, but are not prepared to say more than that,” she said.
A board meeting for the district will be held next week, at which time Pryor-Baze said she hoped to have been served and given time to think through the lawsuit.
Battle over water rights
The lawsuit follows a yearslong battle over groundwater access that reached a fevered pitch during the second special session of the 2025 legislative session in August. State lawmakers at the time tried and failed to set a statewide moratorium on projects of this magnitude until the state could study its aquifers to determine how much water is available and how quickly the groundwater supply replenishes.
It all began when Conservation Equity Management purchased thousands of acres in Houston, Anderson and Henderson counties with the intent to drill 43 high-capacity water wells. The latter two counties are represented by a groundwater conservation district that gave initial approvals for the project to move forward because the applications were administratively complete, a legal term meaning they were filled out properly.
The project drew the ire of East Texans, who were already angry at a number of Dallas-area organizations seeking to extract water from the region. But poultry producer Wayne-Sanderson Farms LLC, which has operations in East Texas, sued to stop the project, claiming that the wells would drain the area of its main water source and impact its operations. Wayne-Sanderson Farms uses water from the Carrizo-Wilcox Aquifer for its processing plants and feed mills.
A district judge approved a settlement between the groundwater conservation district and Sanderson Farms and barred the district from approving certain applications until the aquifer could be studied. It also voided the original decision that the applications were administratively complete.
Then, on May 21, 2026, the district adopted a resolution calling for a moratorium on any “new non-exempt groundwater permit applications.” This moratorium prevents the district from taking action on applications for projects that don’t provide water for local use, such as for households, agriculture or local businesses.
The moratorium will end in October or when the district finishes reviewing and updating its rules — whichever is later. The district is in the process of doing so right now, Pryor-Baze said.
Conservation Equity Management sued to vacate the judge’s moratorium, then filed the latest lawsuit to stop the district’s moratorium in federal court in Tyler on July 7.
The goal is to allow Pine Bliss and Redtown Ranch to finish the administrative process as laid out in the district’s bylaws. This would include going through the State Office of Administrative Hearings before beginning operations.
“We would just continue down that road with the hope that we eventually get to do exploratory drilling to see what water is on their land,” Mallory said.
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