However, several local environmentalist groups including the Save Our Springs Alliance (SOS) were strongly opposed to the development due to the subdivision's planned location over the recharge zone of the Edwards Aquifer.

In 1988, the Save Barton Creek Association filed a lawsuit against the Texas Highway Department in order to stop the extension of Texas State Highway Loop 1 into southwest Austin and to halt further development of Circle C Ranch.

However, in the same year, the Gibraltar Savings and Loan bank based in California failed to pay off its debts, and all of its assets were transferred; at the time, this was one of the largest insolvencies in American history.

Over the following years, several ordinances and lawsuits were filed in relation to Circle C Ranch and its environmental implications, resulting in the creation of the Southwest Travis County Water and Reclamation District in 1996 and the Slaughter Creek Water Protection Zone the following year.

[2] On December 18, 1997, Circle C Ranch was involuntarily annexed by the City of Austin after roughly 15 years of development.