Legal E.A.F. Inc. v. U.S. EPA, No. 00-10381

• Decision Date: 21 December 2001
• Docket Number: No. 00-10381
• Citation: 276 F.3d 1253
• Parties: (11th Cir. 2001) LEGAL ENVIRONMENTAL ASSISTANCE FOUNDATION, INC., Petitioner, v. UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, Respondent
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1253

276 F.3d 1253 (11th Cir. 2001)

LEGAL ENVIRONMENTAL ASSISTANCE FOUNDATION, INC., Petitioner, v. UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, Respondent.

No. 00-10381

UNITED STATES COURT OF APPEALS ELEVENTH CIRCUIT

December 21, 2001

Petition for Review of a Final Order of the Environmental Protection Agency, EPA No. 65-02889-FED.REG.

Before BLACK and MARCUS, Circuit Judges, and HANCOCK^*, District Judge.

BLACK, Circuit Judge:

Petitioner, the Legal Environmental Assistance Foundation (LEAF), seeks review of the United States Environmental Protection Agency's (EPA's) approval of Alabama's revised underground injection control (UIC) program for the underground injection of hydraulic fracturing fluids to enhance the recovery of methane gas from coal beds. For the reasons discussed below, we deny in part and grant in part the petition and remand for further proceedings.

I. BACKGROUND

A. Regulation of Underground Injection under the Safe Drinking Water Act

Part C of the Safe Drinking Water Act (SDWA) is designed to protect underground drinking water sources from contamination caused by underground injection of fluids. See 42 U.S.C. §§ 300h to 300h-8. This program requires EPA to promulgate regulations that set forth minimum requirements for state UIC programs. See id. § 300h. A state must submit to EPA a proposed UIC program that satisfies these minimum requirements, and must meet EPA approval in order to obtain primary regulatory and enforcement responsibility for underground injection activities within that state. See id. § 300h-1. The state retains primary responsibility until EPA determines, by rule, that the state UIC program no longer meets the minimum requirements established under the SDWA. See id. § 300h-1(b)(3).

B. Procedural History of Alabama's UIC Program

Alabama's UIC program for Class II wells¹ was initially approved by EPA in 1982.² See 47 Fed. Reg. 33268 (1982); 40 C.F.R. § 147.50. The UIC program approved in 1982 did not regulate hydraulic fracturing associated with methane production.³ In 1994, LEAF petitioned EPA to withdraw approval of the Alabama UIC program. See Legal Envt'l Assist. Found., Inc. v. United States Envt'l Protection Agency, 118 F.3d 1467, 1471 (11th Cir. 1997) (LEAF I). LEAF alleged that the Alabama program was deficient because it did not regulate hydraulic fracturing activities associated with methane gas production as required under Part C of the SDWA. See id. EPA denied LEAF's petition because it determined that hydraulic fracturing did not fall within the regulatory definition of "underground injection." See id. EPA decided that methane gas production wells, which are also used for hydraulic fracturing, need not be regulated under UIC programs because the principal function of these wells is methane gas production and not the underground emplacement of fluids. See id. LEAF subsequently petitioned this Court for review, contending that EPA's interpretation of the regulations rendered the regulations inconsistent with the statute. See id. at 1472. We concluded that hydraulic fracturing activities constitute underground injection under Part C of the SDWA. See id. at 1478. Since EPA's contrary interpretation could not be squared with the plain language of the statute, we granted LEAF's petition for review and remanded for further proceedings. See id.

Thereafter, LEAF sought, and this Court issued, a writ of mandamus to enforce the Court's mandate in LEAF I. See In re Legal Envtl. Assist. Found., Inc., No. 98-06929 (11th Cir. Feb. 18, 1999) (unpublished). EPA subsequently initiated proceedings to withdraw approval of Alabama's Class II UIC program. See 64 Fed. Reg. 27744 (1999) (proposed rule). Before the withdrawal proceedings were completed, however, Alabama submitted a revised UIC program to the EPA, see 64 Fed. Reg. 56986 (1999) (proposed rule), seeking approval of its revised UIC program under the alternative demonstration provision in § 1425 of the SDWA, 42 U.S.C. § 300h-4(a). EPA proposed to approve Alabama's revised UIC program, see 64 Fed. Reg. 56986 (1999), and conducted a public hearing and received written comments thereon. LEAF objected, arguing that approval under § 300h-4(a) was improper because hydraulic fracturing did not fall within the scope of activities identified in § 1425, and approval under that section was therefore improper. See LEAF Comments (Nov. 26, 1999) at 3-8. EPA rejected LEAF's argument, and, on January 19, 2000, promulgated a final rule approving Alabama's revised UIC program under § 1425. See 65 Fed. Reg. 2889 (2000). Thereafter, LEAF timely filed this petition for review.

In this appeal, LEAF argues that EPA's approval of Alabama's UIC program should be set aside for three reasons. First, LEAF argues that the underground injection of hydraulic fracturing fluids to enhance the recovery of methane gas from coal beds is not "underground injection for the secondary or tertiary recovery of . . . natural gas" under § 1425 and, therefore, EPA's approval of Alabama's revised UIC program under that section is not "in accordance with the law." Second, LEAF contends that wells used for the injection of hydraulic fracturing fluids to enhance the recovery of methane gas from coal beds are "Class II wells" as defined in 40 C.F.R. § 144.6(b). According to LEAF, it follows that EPA's approval of Alabama's revised UIC program, which regulates such hydraulic fracturing as a "Class II-like underground injection activity" is "not in accordance with law." Third, LEAF argues that even if Alabama's revised UIC program is covered by the alternative approval procedure pursuant to § 1425, EPA's approval of the revised program is arbitrary and capricious. We address each argument in turn.

II. DISCUSSION

A. EPA's Approval of Alabama's UIC Program under Section 1425

1. Statutory Framework

The SDWA provides two statutory methods for approval of a state's UIC program. See SDWA § 1422(b) (codified at 42 U.S.C. § 300h-1(b)); SDWA § 1425 (codified at 42 U.S.C. § 300h-4(a)). Approval under § 1422(b) requires a state to show that its UIC program satisfies applicable federal regulations promulgated by EPA under 42 U.S.C. § 300h and set forth in 40 C.F.R. Part 145. Approval under § 1425 requires a state to demonstrate that its UIC program meets the requirements of SDWA §§ 1421(b)(1)(A)-(D), and represents an effective program to prevent underground injection which endangers drinking water sources. Significantly, the practical difference between the two statutory methods for approval is that the requirements for those programs covered under § 1425 are more flexible than the requirements for those programs covered under § 1422(b). Section 1425, however, only applies to specific types of UIC programs.

Section 1425 provides:

For purposes of the Administrator's approval or disapproval under section 300h-1 of this title of that portion of any State underground injection control program which relates to--

(1) the underground injection of brine or other fluids which are brought to the surface in connection with oil or natural gas production or natural gas storage operations, or

(2) any underground injection for the secondary or tertiary recovery of oil or natural gas,

in lieu of the showing required under subparagraph (A) of section 300h-1(b)(1) of this title the State may demonstrate that such portion of the State program meets the requirements of subparagraphs (A) through (D) of section 300h(b)(1) of this title and represents an effective program (including adequate recordkeeping and reporting) to prevent underground injection which endangers drinking water sources.

SDWA § 1425 (codified at 42 U.S.C. § 300h-4(a)).

In approving Alabama's revised UIC program regulating the hydraulic fracturing of coal beds under this section, EPA recognized that the language of § 1425 does not specifically mention hydraulic fracturing. See 65 Fed. Reg. at 2892. EPA perceived the absence of hydraulic fracturing from § 1425 as a gap in the statutory scheme. See id. Seeking to fill this perceived gap in the statute, EPA construed § 1425 as applying not only to specific processes used during secondary or tertiary recovery of natural gas, but also generally to techniques and processes -- such as hydraulic fracturing -- broadly related to secondary or tertiary recovery. See id. On this basis, EPA concluded that the process of hydraulic fracturing, while not technically identical to secondary or tertiary recovery of natural gas, is an "analogous" process, and therefore covered by the alternate approval method set forth in § 1425. See id. at 2892-93.

2. Standard of Review

LEAF challenges EPA's construction of § 1425 as contrary to the statute's plain meaning and therefore not in accordance with the law. The standard against which we evaluate LEAF's argument is set forth in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-45, 104 S. Ct. 2778, 2781-83 (1984). The Chevron test has two steps. "First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress." Id. at 842-43, 104 S. Ct. at 2781. "If, however, the court determines Congress has not directly addressed precise question at issue," the court proceeds to step two. Id. at 843, 104 S. Ct. at 2781-82. There, "the question for the court is whether the agency's answer is based on a permissible construction of the statute." Id., 104 S. Ct. at 2782. If the agency's interpretation is reasonable, a reviewing court may not substitute its own construction of the statutory provision for that of the agency. See id. at 844, 104 S. Ct. at 2782. An agency's reasonable statutory interpretation must therefore stand even in the face of other permissible interpretations, including that which the court...