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

646 S.W.3d 498

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, Petitioners,

v.TEXAS COMMISSION ON ENVIRONMENTAL QUALITY and TexCom Gulf Disposal, LLC, Respondents

No. 19-1104

Supreme Court of Texas.

Argued January 12, 2022

OPINION DELIVERED: June 10, 2022

Angela C. Zambrano, Dallas, Kevin Andrew Forsberg, Montgomery, for Petitioner Hoagland, Shirley.

Kevin Andrew Forsberg, Montgomery, for Petitioners Nelson, Lois, Ward, Edwain A. (Art), Ward, Richard, Rodel, Brian, Harrell, Flora, Langston, III, James A., Langston, James, Dyer, Nicky E., Hoagland, Edgar.

James A. Holmes, Henderson, for Other interested party Bank of America, N.A., Trustee for Sabine Royalty Trust.

John Aloysius Riley, Austin, Paul C. Sarahan, Dale Wainwright, Austin, for Respondent TexCom Gulf Disposal, LLC.

Amy Warr, Houston, Deborah Clarke Trejo, Austin, Mark N. Osborn, El Paso, Andrew S. Miller, Austin, for Petitioners Montgomery County, City of Conroe.

Linda B. Secord, Austin, S. Grant Dorfman, Bellaire, Bill Davis, Austin, Shawn Cowles, Atty. Gen. W. Kenneth Paxton Jr., Priscilla M. Hubenak, Austin, Brent Webster, Houston, for Respondent Texas Commission on Environmental Quality.

Angela C. Zambrano, Robert Scott Velevis, Dallas, J. Stephen Ravel, Diana L. Nichols, Austin, for Other interested party Denbury Onshore, LLC.

Ron Beal, for Amicus Curiae.

J. Bruce Bennett, Pro Se.

Chief Justice Hecht delivered the opinion of the Court.

Class I underground injection-control wells manage industrial waste by injecting it thousands of feet underground. But these injection wells could potentially harm important subsurface resources—namely drinking water and petroleum. To "maintain the quality of fresh water in the state to the extent consistent with the public health ... and the operation of existing industries,"¹ these injection wells undergo an extensive permitting process with the Texas Commission on Environmental Quality (TCEQ). A permit application cannot get off the starting blocks unless accompanied by a letter from the Railroad Commission (RRC) concluding that the proposed wells "will not endanger or injure any known oil or gas reservoir."²

In this case, RRC issued such a letter but then rescinded it after six years of administrative hearings, around the same time TCEQ issued its final order granting the permit application. We conclude that the rescission did not deprive TCEQ of jurisdiction, and that on the facts of this case, TCEQ did not violate the Texas Administrative Procedure Act (APA)³ by declining to reopen the administrative record for further proceedings. We overrule petitioners’ remaining challenges to TCEQ's order and affirm the judgment of the court of appeals.⁴

I

The Injection Well Act (IWA) governs the permitting process for injection wells in the state.⁵ TCEQ has jurisdiction over wells that dispose of industrial and municipal waste, while RRC has jurisdiction over wells that dispose of oil-and-gas waste. Class I wells, the type at issue here, fall under TCEQ's jurisdiction. But the IWA still requires RRC involvement in the permitting process for Class I wells. TCEQ "may not proceed to hearing on any issues other than preliminary matters"⁶ until the applicant submits a letter from RRC "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."⁷

After receiving this no-harm letter, TCEQ's process may begin in earnest. Before granting a permit, TCEQ must make several findings, including that (1) "the injection well is in the public interest;" (2) "no existing rights, including ... mineral rights, will be impaired;" and (3) "both ground and surface fresh water can be adequately protected from pollution".⁸ TCEQ regulations flesh out these statutory directives by enumerating materials that TCEQ "shall consider ... before issuing a Class I Injection Well Permit",⁹ including geological maps, plans, and data to determine whether a given area is "geologically suitable" for an injection well.¹⁰ A key question to geological suitability is whether the underground rock formations will confine the injected waste, keeping it clear from underground sources of drinking water.

An applicant must specify both an injection zone and an injection interval. The injection zone is defined as "[a] formation, a group of formations, or part of a formation that receives fluid through a well."¹¹ In layman's terms, it is the area where the waste is permitted to flow. The injection interval is the portion of the injection zone where the well is perforated and the waste is directly placed.¹²

TCEQ "may" hold a hearing on a permit application "[i]f it is considered necessary and in the public interest," but TCEQ "shall" hold a hearing if one "is requested by a local government located in the county of the proposed disposal well site or by an affected person",¹³ which TCEQ regulations define as "[a]ny person who has a personal justiciable interest related to a legal right, duty, privilege, power, or economic interest affected by the proposed injection operation for which a permit is sought."¹⁴ These contested case hearings are formal, trial-like proceedings held before administrative law judges from the State Office of Administrative Hearings (SOAH).¹⁵ When "referring a matter for hearing," TCEQ provides SOAH with "a list of disputed issues."¹⁶ Before testimony can begin, there must be evidence "that proper notice regarding the hearing was given to affected persons."¹⁷ After the close of evidence, SOAH submits a proposal for decision (PFD) to TCEQ.¹⁸ The parties file briefs for or against it, and TCEQ issues a final order on the permit.¹⁹

II

A

TexCom Gulf Disposal, LLC²⁰ sought to develop a commercial-waste-disposal facility on a 27-acre site in Montgomery County, near the city of Conroe. The selected site had one nonoperative injection well already constructed. In 2005, TexCom applied to TCEQ for permits to operate this existing well and construct up to three additional wells. These wells would dispose of nonhazardous industrial wastewater, hauled to the facility from across the region.

The site is situated within the Conroe Oil Field and sits immediately atop an aquifer system. Montgomery County relies on this aquifer system as its sole source of drinking water. Directly beneath the aquifer system is the Jackson Shale—a 1,000-foot-thick sedimentary formation with a dough-like consistency.

Beneath the Jackson Shale lies the Cockfield Formation, which is made up of three distinct layers: the Upper Cockfield (5,134 to 5,629 feet below the surface), the Middle Cockfield (5,629 to 6,045 feet), and the Lower Cockfield (6,045 to 6,390 feet). Each Cockfield layer is separated by a layer of shale, and there is another massive shale layer beneath the Lower Cockfield. TCEQ describes the Cockfield Formation with the analogy of a three-layer cake that has layers of shale (icing) between each cake layer and additional layers of shale on top and on bottom.

B

TexCom's permit application included an RRC no-harm letter, as required by statute. TexCom's application represented that it owned the mineral rights underneath the site, when in fact an entity called Sabine Royalty Trust owned the mineral rights under the site and the right to receive royalties associated with them. Because Sabine was not identified as an affected person in TexCom's application, it was not given formal notice of the proceedings as required by the IWA.

TCEQ's Executive Director made a preliminary decision to approve the application and prepared draft permits, specifying the entire Cockfield Formation as the injection zone and the Lower Cockfield specifically as the injection interval. Montgomery County, the City of Conroe, the Lone Star Groundwater Conservation District, TCEQ's Public Interest Counsel, and several individuals opposed the application. They argued that the wells would harm the underground sources of drinking water and that less harmful alternative disposal options existed.

In 2007, SOAH conducted a contested case hearing and issued a PFD in 2008 recommending that TexCom's permits be granted, but with special conditions. Instead of granting the permits, TCEQ remanded the matter to SOAH with instructions to consider evidence of new modeling, the public interest, and alternative disposal options.

After the remand but before a new contested case hearing could be held, Denbury Onshore acquired mineral leases in the Conroe Oil Field within TexCom's proposed injection zone. Denbury then initiated proceedings at RRC to have the 2005 no-harm letter rescinded and, over TexCom's objections, intervened in the contested case proceedings before SOAH.

While Denbury's request to RRC was pending, the second contested case hearing at SOAH was held between June and September 2010, with Denbury as a party. In November, SOAH issued an amended PFD, this time recommending that TCEQ deny TexCom's permit application. That same month, after an evidentiary hearing, examiners at RRC issued a PFD recommending that the 2005 no-harm letter be rescinded. The RRC examiners concluded that TexCom's proposed waste-injection activities would endanger or injure a known oil or gas reservoir.

Two months later, on January 13, 2011, while SOAH's amended PFD was still pending before TCEQ, RRC issued a final order adopting the findings and conclusions in the examiners’ PFD and rescinding the 2005 no-harm letter. The order's effective date was delayed some 90 days to give the parties an opportunity to seek rehearing. The protesting parties moved to reopen the administrative record and include RRC's final order. They also brought RRC's final order to TCEQ's attention through their exceptions to SOAH's amended PFD, filed with TCEQ.

Two weeks later, TCEQ held an open meeting...