Dyer v. Tex. Comm'n On Envtl. Quality

639 S.W.3d 721

Nicky E. DYER; Flora Harrell; Edgar Hoagland; Shirley Hoagland; James Langston; James A. Langston, III; Lois Nelson; Brian Rodel; Richard Ward; Edward A. (Art) Wilson; Montgomery County; and City of Conroe, Appellants

v.TEXAS COMMISSION ON ENVIRONMENTAL QUALITY; Bryan W. Shaw, in his official capacity as Chairman of the Texas Commission on Environmental Quality; Buddy Garcia and Carlos Rubinstein, in their official capacities as Commissioners of the Texas Commission on Environmental Quality; and TexCom Gulf Disposal, LLC, Appellees

NO. 03-17-00499-CV

Court of Appeals of Texas, Austin.

Filed: October 11, 2019

Angela C. Zambrano, Sidley Austin LLP, 2021 McKinney Avenue, Suite 2000, Dallas, TX 75201, Deborah C. Trejo, Andrew S. Miller, Kemp Smith LLP, 919 Congress Ave. Ste. 1305, Austin, TX 78701, Mark N. Osborn, Kemp Smith, LLP, 221 N. Kansas, Suite 1700, El Paso, TX 79901-1401, Kevin A. Forsberg, The Forsberg Law Firm, P.C., 15899 Hwy. 105 W, Montgomery, TX 77356, for Appellants.

Linda B. Secord, Assistant Attorney General, Environmental Protection Division, P. O. Box 12548 (MC-066), Austin, TX 78711-2548, John A. Riley, Paul C. Sarahan, Holland & Knight, LLP, 111 Congress Ave., Suite 540, Austin, TX 78701, for Appellees.

Before Chief Justice Rose, Justices Goodwin and Kelly

ON REHEARING

MEMORANDUM OPINION

Melissa Goodwin, Justice On this Court's motion, we withdraw our opinions and judgment issued on May 22, 2019, and substitute the following opinion and judgment in their place.

Raising multiple issues, appellants Nicky E. Dyer; Flora Harrell; Edgar Hoagland; Shirley Hoagland; James Langston; James A. Langston, III; Lois Nelson; Brian Rodel; Richard Ward; Edward A. (Art) Wilson (Individual Appellants); Montgomery County; and the City of Conroe appeal from the trial court's final judgment that affirmed appellee Texas Commission on Environmental Quality's order granting appellee TexCom Gulf Disposal, LLC's application for permits to construct and operate underground injection control wells for the disposal of non-hazardous, industrial waste.¹ See Tex. Water Code § 27.051 (addressing issuance of permit for injection wells). The trial court also dismissed or, in the alternative, denied appellants’ claims seeking declaratory relief. For the following reasons, we affirm the trial court's final judgment.

BACKGROUND

Statutory Framework

To give context to the parties’ dispute, we begin with a brief overview of the Injection Well Act, which governs the permitting process for underground injection wells in this State. See generally Tex. Water Code §§ 27.001 –.157; Railroad Comm'n v. Texas Citizens for a Safe Future & Clean Water , 336 S.W.3d 619, 626 (Tex. 2011) (discussing Injection Well Act). Under the Injection Well Act, the Texas Commission on Environmental Quality (the TCEQ or the Commission) has jurisdiction over injection wells used for the disposal of "industrial and municipal waste," see Tex. Water Code §§ 27.011, .051(a), and the Railroad Commission has jurisdiction over injection wells used "to dispose of oil and gas waste," see id. §§ 27.031, .051(b).² The purpose of the act is "to maintain the quality of fresh water in the state to the extent consistent with public health and welfare and the operation of existing industries, taking into consideration the economic development of the state, to prevent underground injection that may pollute fresh water, and to require the use of all reasonable methods to implement this policy." Id. § 27.003.

A company seeking to construct and operate an injection well to dispose of industrial and municipal waste must apply to the TCEQ for a permit. See id. § 27.051(a). Among the applicant's requirements, it must "submit with the application a letter from the [R]ailroad [C]ommission concluding that drilling or using the disposal well and injecting industrial and municipal waste into the subsurface stratum will not endanger or injure any known oil or gas reservoir." Id. § 27.015(a). Until the applicant has provided the TCEQ with this "no-harm" letter from the Railroad Commission, "the [TCEQ] may not proceed to hearing on any issues other than preliminary matters such as notice." Id. § 27.015(b). If the Railroad Commission has issued a no-harm letter under subsection (a), the TCEQ "shall find that there will be no impairment of oil or gas mineral rights." Id. § 27.015(c).

In granting an application for an injection well permit, the TCEQ's required findings include:

(1) that the use or installation of the injection well is in the public interest;

(2) that no existing rights, including, but not limited to, mineral rights, will be impaired;

(3) that, with proper safeguards, both ground and surface fresh water can be adequately protected from pollution; ....

Id. § 27.051(a)(1)–(3). In its public interest inquiry under subsection (a)(1), the TCEQ must consider specific criteria, including "whether there is a practical, economic, and feasible alternative to an injection well reasonably available," but the TCEQ may consider other factors as well. See id. § 27.051(d).

Administrative Proceedings

Appellant TexCom Gulf Disposal, LLC submitted its application to the TCEQ in August 2005.³ See id. § 27.011 ; see also 30 Tex. Admin. Code § 39.651 (Tex. Comm'n on Environmental Quality, Application for Injection Well Permit).⁴ TexCom sought to develop a commercial non-hazardous industrial wastewater disposal facility on an approximately 27-acre site in Montgomery County. TexCom's plans for the proposed facility included operating an existing injection well and constructing and operating up to three additional wells to dispose of non-hazardous, industrial wastewater. The existing well's permit had expired, and it had never been operated commercially.

As part of its application, TexCom provided the TCEQ with a no-harm letter from the Railroad Commission dated September 16, 2005, which stated that, based on staff review, the Railroad Commission "[had] concluded that the operation of the proposed wells ... will not injure or endanger any known oil or gas reservoir." See Tex. Water Code § 27.015(a). TexCom's proposed facility would be located within the Conroe Oil Field and would lie atop the Jackson Shale.⁵ Below the Jackson Shale is the Cockfield Formation. The Cockfield Formation is comprised of lower, middle, and upper formations or members, and oil and gas has been produced from the Upper Cockfield Formation for over 70 years. TexCom's proposed "injection interval" was the Lower Cockfield Formation, and its proposed "injection zone" was the entire Cockfield Formation. See 30 Tex. Admin. Code § 331.2(56), (59) (Definitions).⁶ The Jackson Shale is more than 1,000-feet thick and would prevent any migration of fluids out of the Cockfield Formation in the area of review (AOR).⁷ The underground sources of drinking water (USDWs) in the AOR lie above the Jackson Shale.

The contested-case hearing on TexCom's permit application was held in December 2007. The evidence before the administrative law judges (ALJs) included the suitability of the proposed site geologically for injection wells, the known faults and artificial penetrations in the AOR, and the merit of injection wells to dispose of non-hazardous, industrial waste, generally and specifically as to TexCom's proposed wells, as compared with alternative disposal options, including available options in Montgomery County.⁸ The evidence also included the Railroad Commission's 2005 no-harm letter, which was admitted without objection, but other evidence on the proposed injection wells’ impact on mineral interests was limited. The lessee-operator of the mineral interests underlying TexCom's proposed site at the time did not seek party status and did not participate in the contested-case hearing. The ALJs issued a proposal for decision (PFD) in April 2008 recommending that the permits be granted with special conditions, but the TCEQ issued an interim order, remanding the matter to the State Office of Administrative Hearings (SOAH) in December 2008 for the parties to undertake additional modeling with more conservative assumptions and another hearing to receive evidence on the modeling, the public interest requirements, and alternative disposal options.⁹

Denbury Onshore, LLC became the lessee-operator of the mineral interests underlying TexCom's proposed site in December 2009 and filed a motion to intervene in the contested case in March 2010. In its motion to intervene, Denbury contended that it was "actively producing oil and gas from the Cockfield Formation in the Conroe Field in the area" of TexCom's proposed facility and that TexCom's proposed operations were "incompatible with Denbury's operations to recover oil, gas and minerals from the Conroe Oil Sands; TexCom's injection activities will allow the injected fluids to migrate into the portions of the Cockfield from which Denbury is recovering oil and gas." Denbury's motion to intervene was granted, and it was designated a party in April 2010.

In a separate matter before the Railroad Commission, the Railroad Commission notified TexCom and Denbury on June 14, 2010, that it would hold a hearing to address Denbury's request that the Railroad Commission withdraw the 2005 no-harm letter. Based on this notice from the Railroad Commission, Denbury filed a motion for continuance in the administrative proceeding in this case on June 15, 2010, the first day of the hearing on remand. Denbury requested abatement until after the Railroad Commission proceeding concerning the no-harm letter was completed. The ALJs denied Denbury's motion for continuance and proceeded with the hearing on remand.

The ALJs primarily limited the evidence at the hearing on remand to the topics or subjects as directed by the TCEQ in its remand order. The evidence at the hearing on remand included evidence addressing: (i) TexCom's additional testing and reservoir modeling after the initial hearing, including the accuracy of its...