Ring Energy v. Trey Res., Inc.
| Decision Date | 18 January 2017 |
| Docket Number | No. 08–15–00080–CV,08–15–00080–CV |
| Citation | 546 S.W.3d 199 |
| Parties | RING ENERGY, Appellant, v. TREY RESOURCES, INC., Appellee. |
| Court | Texas Court of Appeals |
Christopher Watt, Reed Smith LLP, Houston, TX, for Trey Resources, Inc.
Steven C. Kiser, Lynch, Chappell & Alsup, Midland, TX, for Ring Energy.
Before McClure, C.J., Rodriguez, and Hughes, JJ.
Injecting fluids into an oil reservoir can, under the right conditions, enhance oil production.1 At the same time, it may change the dynamic of a reservoir and damage surrounding production wells, or pollute fresh water resources.2 Partly for these reasons, a party must obtain a permit from the Texas Railroad Commission (the Commission or Railroad Commission) to develop an injection well in an established field, and that process requires notification of some surrounding mineral and property owners.3
In this case, Trey Resources, Inc. (Trey) obtained the requisite permits from the Commission, but there is some dispute, unresolved on our record, as to whether the predecessor to Ring Energy, Inc. (Ring), which operated several nearby wells, got proper notice. Before Trey started its injection program, Ring filed suit in Andrews County seeking injunctive relief to stop the process because it claimed the water injection would cause it irreparable "waste" damage. The trial court ultimately dismissed the suit for want of jurisdiction.
We are faced with the narrow question, which appears to be one of first impression, as to whether a trial court outside of Travis County has the jurisdiction to enjoin a party with a valid permit from developing and using an injection well based on the claim that the injection well will cause imminent and irreparable injury to the complaining party. Texas law already allows a party to seek damages once the injection well is put to use if it did indeed caused "waste" to surrounding wells. We conclude that based on the text of the controlling statutes that pre-injury injunctive relief is available outside of Travis County.
Based on the pled allegations in this suit, on September 6, 2012 Trey applied for nine permits from the Commission to inject fluids into designated wells located in Andrews County. Stanford Energy, which is the predecessor to Ring, operated five wells in the immediate area. The Commission rules required Trey to provide a copy of the application to any surface owner or operator of a well within a half mile of the injection well, and also to publish notice of the application in the local paper. TEX.ADMIN.CODE § 3.46(c)(1)–(3)(2014)(Tex. R.R. Comm., Fluid Injection into Productive Reservoirs). Trey contends it substantially complied with the rule, while Ring pled that it did not. That issue is not before us. Ring (or its predecessor in interest) did not file a protest of the permits as Commission rules allowed, and it is uncontested that the Commission granted the applications without any formal hearing on January 17, 2013.
On September 23, 2013, and before any injection operations began, Ring filed suit against Trey in Andrews County. The suit first sought declaratory relief that the permits issued by the Commission were void ab initio . Next, the suit alleged that fluid injection would cause substantial damage to Ring's mineral interest, thus causing "waste." No specific explanation for how that waste would occur is contained in the pleading. Ring sought damages and equitable relief under TEX.NAT.RES.CODE ANN. § 85.321 (West 2011) which authorizes a cause of action in favor of an owner of an interest in property or production "that may be damaged" by waste. Ring further alleged that its interests were in imminent danger of irreparable harm, and sought a temporary restraining order, and a temporary and permanent injunction.
The parties agreed to several temporary restraining orders. Trey then filed a motion to dismiss for lack of subject matter jurisdiction. The motion argued that Ring failed to exhaust its administrative remedies before the Commission. Even at that, Trey contended any appeal of the Commission's order must be filed in Travis County. Ring's response conceded the motion as it applied to its declaratory relief claim seeking to invalidate the permits ab initio . It contended, however, that its claim for damages and injunctive relief under Section 85.321 were properly before the Andrews County trial court. The trial court granted the motion to dismiss. This appeal follows.
In a single issue, Ring contends that the trial court erred in dismissing its suit for lack of subject matter jurisdiction. If the injection wells do indeed actually cause injury, both sides apparently agree that damages are available. Trey additionally concedes that even before any damages are suffered, Ring can seek injunctive relief in Travis County. It maintains, however, any suit outside of Travis County is a collateral attack on a permit issued by the Commission. Ring views the issue as a simple application of Section 85.321 that allows equitable relief to prevent waste.
Whether a trial court has subject-matter jurisdiction is a question of law subject to de novo review. Texas Natural Res. Conservation Comm'n v. IT–Davy , 74 S.W.3d 849, 855 (Tex. 2002) ; In re Elamex, S.A. de C.V. , 367 S.W.3d 891, 897 (Tex.App.–El Paso 2012, orig. proceeding). When a challenge to subject matter jurisdiction is based only upon the pleadings, the trial court must determine if the plaintiff has alleged facts that affirmatively demonstrate its jurisdiction to hear the case. Tex. Dep't of Parks & Wildlife v. Miranda , 133 S.W.3d 217, 226 (Tex. 2004) ; Elamex , 367 S.W.3d at 897. The pleadings are liberally construed in favor of the plaintiff. Id. If the pleadings do not affirmatively demonstrate jurisdiction, but do not negate it outright, the pleader should be given the opportunity to amend. Elamex , 367 S.W.3d at 897. However, if the pleadings affirmatively negate jurisdiction, the trial court may grant the plea to the jurisdiction or the motion to dismiss without allowing the plaintiff an opportunity to amend. Id.
We begin with a summary of the permitting process required for injection wells in operating production fields. Both the Texas Commission on Environmental Quality (TCEQ) and the Railroad Commission have statutory mandates to oversee injection wells. TEX.WATER CODE ANN. § 27.011. Generally, injection wells used for disposal of industrial waste falls under the purview of the TCEQ. Id. at § 27.051(a). Injection wells used for disposal of oil and gas wastes are regulated by the Railroad Commission. Id. at § 27.031 and § 27.051(a). The application process for both types of wells are set out by statute and by rules that the TCEQ and Railroad Commission are authorized to enact. Id. at § 27.015, § 27.033, § 27.051(a)(b); TEX.ADMIN.CODE § 3.46. Less well defined, but also under the Railroad Commission's purview, are injection wells used for secondary recovery, such as are at issue here. Id. at § 27.0511 ().
The Railroad Commission by rule requires "any person who engages in fluid injection operations in reservoirs productive of oil, gas, or geothermal resources" to obtain a permit from the Commission. TEX.ADMIN.CODE § 3.46(a). The permit will only issue if the "injection will not endanger oil, gas, or geothermal resources or cause the pollution of freshwater strata unproductive of oil, gas, or geothermal resources." Id. The permitting process starts with an application. Id. at § 3.46 (b)(1)(A). The one page application form requests twenty six pieces of information, some technical in nature. See Form H–1 (05/2004) located at http://www.rrc.state.tx.us/media/2611/formh-1p.pdf. It also requires the applicant to provide, among other items, a map of wells located in a half mile radius from the proposed injection well, documentation of where usable water is found, and designated wells logs. Id. at Instructions, note 3 and 4.
The application itself must be mailed or delivered to any affected person, which includes the record owner of the surface tract on which the well is located, any Commission designated operator of a well within a half mile radius, the owner of any adjoining surface properties, and several governmental entities. TEX.ADMIN.CODE § 3.46 (c)(1)(2). The applicant must also publish a notice on a prescribed form in a newspaper of general circulation for the county where the well is to be located. Id. at § 3.46(c)(4). An interested person can file a protest within fifteen days of receipt of the application, or of publication, whichever is later. Id. at § 3.46(c)(5)(A). The Commission (or its delegate) will notice a hearing if it determines that a hearing is in the "public interest". Id. If there is no protest, the Commission (or its delegate) may "administratively approve the application." Id. at § 3.46(c)(6). The petition in this case alleges that the injection applications were all administratively approved without a formal hearing.
Once approved, the Commission can modify, suspend, or terminate the permit "for just cause" after notice and an opportunity for hearing, but only for several specified reasons. Id. at § 3.46 (d)(1)(A)–(G). Some of those reasons include a material change in conditions, the contamination of fresh water, violation of the terms of the permit, or that is there is a "waste of oil, gas, or geothermal resources is occurring or is likely to occur as a result of the permitted operations." Id. at § 3.46 (d)(1)(A)(B)(E),(G). Rule 3.46 does not provide any formal mechanism for an interested party to intervene and challenge the permit if they miss the fifteen day deadline for filing a protest, nor to intervene after the Commission has approved a permit.4
A party to any proceeding before the Commission is generally entitled to judicial review. That right is found several statutes. Se...
To continue reading
Request your trial