R.R. Comm'n of Tex. v. Tex. Citizens For a Safe Future

• Decision Date: 14 April 2010
• Docket Number: No. 08–0497.,08–0497.
• Citation: 54 Tex. Sup. Ct. J. 642,336 S.W.3d 619
• Parties: RAILROAD COMMISSION OF TEXAS and Pioneer Exploration, Ltd., Petitioners,v.TEXAS CITIZENS FOR A SAFE FUTURE AND CLEAN WATER and James G. Popp, Respondents.
• Court: Texas Supreme Court

336 S.W.3d 619

54 Tex. Sup. Ct. J. 642

RAILROAD COMMISSION OF TEXAS and Pioneer Exploration, Ltd., Petitioners,

v.TEXAS CITIZENS FOR A SAFE FUTURE AND CLEAN WATER and James G. Popp, Respondents.

No. 08–0497.

Supreme Court of Texas.

Argued April 14, 2010.Decided March 11, 2011.Rehearing Denied May 27, 2011.

Greg W. Abbott, Jeffrey L. Rose, Attorney General of Texas, David Preister, George Thomas Bohl, Jeffee L. Palmer, Office of the Attorney General, Clarence Andrew Weber, First Assistant Attorney General, Barbara Bryant Deane, Assistant Attorney General, Daniel L. Geyser, Asst. Solicitor General, Office of the Attorney General of Texas, David S. Morales, Office of the Attorney General of Texas, Deputy First Assistant Attorney General, Kent C. Sullivan, Austin TX, James C. Ho, Gibson Dunn & Crutcher LLP, Dallas TX, for Railroad Commission of Texas.David Frederick, Marisa Perales, Lowerre, Frederick, Perales Allmon & Rockwell, Austin TX, for Texas Citizens for a Safe Future and Clean Water.David B. Gross, Gross & Nelson, Austin TX, for Pioneer Exploration, Ltd.Karen L. Watkins, W. Timothy George, McGinnis Lochridge & Kilgore, L.L.P., Austin TX, for Amicus Curiae Texas Oil & Gas Assoc.Mark A. Mayfield, Gardere Wynne Sewell LLP, Austin TX, for Amicus Curiae Pinnergy.Patrick Joseph Pearsall, Clark, Thomas & Winters, Austin TX, for Amicus Curiae Texas Pipeline Association.Edmond R. McCarthy Jr., Jackson Sjober McCarthy & Wilson LLP, for Amicus Curiae TX Water Conservation, et al.Gabriel Enrique Lopez, Texas Assoc'n of Realtors, Austin TX, for Amicus Curiae Texas Association of Realtors.Justice GUZMAN delivered the opinion of the Court, joined by Justice HECHT, Justice WAINWRIGHT, Justice MEDINA, Justice GREEN, and Justice JOHNSON.

The Texas Water Code requires the Railroad Commission of Texas to weigh the “public interest” in the permitting of proposed oil and gas waste injection wells. In a ruling, the Commission declined to consider traffic-safety factors in its public interest inquiry. We determine whether the Commission's interpretation of “public interest” is entitled to judicial deference. Because we conclude the Commission's construction of the phrase was reasonable and in accord with the plain language of the statute, we hold the court of appeals erred in not deferring to the Commission's interpretation. We therefore reverse the court of appeals' judgment and render judgment for the petitioners in accordance with the trial court's original judgment.

I. Background

The Barnett Shale is a large, prolific oil and gas field lying beneath several counties, including Wise County, in north Texas. As in other shale formations, wells in the Barnett Shale require fracture stimulation in order to produce. Fracing a well entails pumping large volumes of water and sand into reservoir rock, which then mixes with saline formation water and must be flowed back out of the well before production can begin. A company fracing a well must dispose of the resulting waste. Most companies do so by injecting the waste into subsurface zones which are naturally saline environments, usually in old wells converted to injection wells.¹ A company seeking to convert a well to an injection well for oil and gas waste must apply to the Commission for a permit. Tex. Water Code § 27.031.

In granting an injection well permit, the Commission is required to make the following findings:

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

(2) that the use or installation of the injection well will not endanger or injure any oil, gas, or other mineral formation;

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

(4) that the applicant has made a satisfactory showing of financial responsibility if required by Section 27.073.

Id. § 27.051(b) (emphasis added). The instant dispute centers on the requisite public interest finding in section 27.051(b)(1).

Pioneer Exploration, Ltd. (Pioneer) applied to the Commission for a permit to convert an existing well into an injection well for the disposal of oil and gas waste. But several Wise County residents living near the well—respondents Texas Citizens for a Safe Future and Clean Water and James Popp (collectively, Texas Citizens)—opposed the proposed injection well, necessitating a contested administrative hearing before Commission hearing examiners. At the hearing, Texas Citizens voiced a variety of concerns about the well's environmental soundness, but also presented arguments and evidence related to traffic-safety issues. Specifically, Texas Citizens argued that large trucks used to haul waste water to the well would damage nearby roads and pose a threat to area residents who use the roads, and thus would not serve the “public interest” under section 27.051(b)(1).² Pioneer did not rebut this traffic-safety evidence. Instead, Pioneer essentially argued that the production of natural gas is in the public interest.

The hearing examiners recommended issuing the permit. In the examiners' findings of fact and conclusions of law, adopted by the Commission in its final order, the examiners found

[u]se of the proposed disposal well is in the public interest because it will provide needed additional disposal capacity and an economical means of disposing of produced salt water from completed wells in the rapidly expanding Barnett Shale Field Area, thereby increasing ultimate recovery from these wells and preventing waste. The safe and proper disposal of produced saltwater serves the public interest.

...

The use of the proposed disposal well is in the public interest pursuant to Sec[tion] 27.051 of the Texas Water Code.

In the proposal for decision, the examiners additionally concluded the “production of hydrocarbons for use by the people of Texas and industry serves the public interest.” In addressing Texas Citizens' traffic-safety evidence, the examiners stated the Commission “does not have jurisdiction to regulate truck traffic on the state's roads and highways.” The examiners concluded that, while they empathized with Texas Citizens' concerns about property values and quality of life, Pioneer had met its burden of proof on the public interest finding.³

The Commission adopted the examiners' findings of fact and conclusions of law and approved Pioneer's application. Texas Citizens appealed to the trial court, which affirmed the Commission's order. The court of appeals, however, reversed, holding that the Commission abused its discretion in interpreting the “public interest” inquiry too narrowly by solely focusing on the proposed well's effect on the conservation of natural resources.⁴ See 254 S.W.3d 492, 503. The court of appeals remanded the case to the Commission to “reconsider its public interest determination, using a broader definition of ‘the public interest,’ which includes public-safety concerns where evidence of such concerns has been presented.” Id. The Commission moved for rehearing en banc, which the court of appeals denied in a per curiam opinion with two justices writing separately, concurring in the denial. See id. at 503–07. The Commission and Pioneer petitioned this Court for review of the court of appeals' holding on the “public interest” issue.

II. Standard of Review

The parties disagree on the contours of the precise issue in dispute, which is a matter we initially address. The Commission contends this case fundamentally concerns the need for court deference to an agency's interpretation of what it argues is an ambiguous statute. If an agency's construction of an ambiguous statute it is charged with administering is reasonable, the Commission urges, it is improper for a court to overturn that interpretation.⁵ Texas Citizens counters that the core issue is not an agency's interpretation of a statutory term or even the proper definition of “public interest,” but rather whether that phrase may include factors beyond the production of oil and gas, requiring the Commission to weigh all evidence offered in support of or against the public interest finding.

We agree with the Commission that this case turns on a matter of statutory construction—specifically, the definition of the term “public interest”—and therefore the proper level of deference a court must grant the Commission's interpretation of that term. As Texas Citizens asserts, the Commission's order does not expressly define the term “public interest.” Rather, the order—by way of adopting the examiners' findings of fact and conclusions of law—states that the well is in the public interest because of its positive effect on increased productivity from wells in the Barnett Shale field. But although the Commission's final order does not explicitly adopt the examiners' statements concerning Texas Citizens' traffic-safety evidence, the Commission has made clear, throughout these proceedings, that it does not view its public interest analysis as an open-ended inquiry including public-safety issues, but rather one limited to matters related to oil and gas production. The crux of the dispute, then, is whether the term “public interest” in section 27.051(b) of the Water Code is a broad, open-ended term, encompassing any conceivable subject potentially affecting the public, or a more narrow term that does not include a subsidiary issue like traffic safety but is limited to matters related to oil and gas production.

The Utilities Code generally requires a court to review a decision of the Commission under a substantial evidence standard. See Tex. Util. Code § 105.001(a) (“Any party to a proceeding before the railroad commission is entitled to judicial review under the substantial evidence rule.”). This standard requires a court to reverse or remand a case for further proceedings “if substantial rights of the appellant have been prejudiced because the administrative findings, inferences, conclusions, or decisions” are, among other things,...