Texas Citizens v. Railroad Com'n of Texas

• Citation: 254 S.W.3d 492
• Decision Date: 06 December 2007
• Docket Number: No. 03-07-00025-CV.,03-07-00025-CV.
• Parties: TEXAS CITIZENS FOR A SAFE FUTURE AND CLEAN WATER and Mr. James G. Popp, Appellants, v. RAILROAD COMMISSION OF TEXAS and Pioneer Exploration, Ltd., Appellees.
• Court: Court of Appeals of Texas

254 S.W.3d 492

TEXAS CITIZENS FOR A SAFE FUTURE AND CLEAN WATER and Mr. James G. Popp, Appellants, v. RAILROAD COMMISSION OF TEXAS and Pioneer Exploration, Ltd., Appellees.

No. 03-07-00025-CV.

Court of Appeals of Texas, Austin.

December 6, 2007.

Concurring Opinion by Justice Pemberton May 23, 2008.

Concurring Opinion by Justice Waldrop May 23, 2008.

David O. Frederick, Marisa Perales, Lowerre & Frederick, Austin, TX, for Appellant.

George Thomas Bohl, Asst. Atty. Gen., and David B. Gross, Law Office of David Gross, Austin, for Appellee.

Before Chief Justice LAW, Justices WALDROP and HENSON.

OPINION

DIANE HENSON, Justice.

Appellants Texas Citizens for a Safe Future and Clean Water and James G. Popp (collectively, "Texas Citizens") appeal from a district court judgment affirming the Railroad Commission's decision to grant a permit to Pioneer Exploration, Ltd. to operate a commercial injection well for the disposal of oil and gas waste. Texas Citizens argues on appeal that the Commission, in granting the permit, denied Texas Citizens due process and failed to adequately consider the public interest.

We hold that while the Commission did not deny Texas Citizens due process in granting the permit, the Commission did interpret "the public interest" too narrowly and therefore failed to adequately consider additional factors that may affect the public interest. We remand this case to the Commission for a reconsideration of the permit under a broader interpretation of "the public interest."

BACKGROUND

Pioneer applied to the Commission for a permit to convert an old gas well in Wise County, Texas (the "Dinwiddie 1-A" well) into a commercial well for the disposal of oil and gas waste by underground injection. Several Wise County residents, including Texas Citizens, opposed Pioneer's application. Because the application was opposed, the Commission held an administrative hearing, during which all parties were allowed to present evidence.

The Commission requires that applications for injection wells include the identification of any wells located within a ¼-mile radius of the proposed injection well to ensure that there are no penetrations that could become a conduit for migration of the injected waste. In the area known as the Barnett Shale — the area where the Dinwiddie 1-A is located — the Commission's practice is to apply more stringent criteria to applications for injection wells, requiring that all wells located within a ½-mile radius of the proposed injection well be identified. Pioneer exceeded this requirement by including in its application a review of all wells located within a one-mile radius of the Dinwiddie 1-A.

During the initial administrative hearing, which was held on May 20, 2005,¹ Ronald Wefelmeyer, who prepared Pioneer's application, testified that there were no wells located within a ¼-mile radius of the proposed well. Wefelmeyer further testified that of the 14 wells located within a one-mile radius of the proposed well, all except one were cased in accordance with the surface-casing requirements established by the Texas Commission on Environment Quality (TCEQ) and that the remaining well was plugged properly according to the TCEQ's requirements. Wefelmeyer also stated, while looking at an exhibit showing the geologic cross-sections of the underground strata in the area, that a particular well, the Donaldson No. 1, was not correctly located on the Commission's maps, which were relied on by Pioneer in completing the application and preparing the exhibits. Wefelmeyer testified that the Donaldson No. 1 was actually closer to the Dinwiddie 1-A than indicated on the maps.

Later testimony by James Popp suggested that there was an additional well, referred to during the remainder of the May hearing as the "mystery well," located within a ¼-mile radius of the Dinwiddie 1-A and improperly identified on the Commission's maps as being located elsewhere. The Commission's underground-injection-control staff became concerned about the existence of the "mystery well" and indicated that they may have taken another position or a more active role at the hearing if they had been aware of the existence of this well. In response, the hearing examiners recessed the hearing to allow Pioneer the opportunity to supply the Commission's staff with additional information regarding the "mystery well."

Texas Citizens argued that because Pioneer failed to identify the "mystery well," the application should be dismissed. The hearing examiners refused to dismiss the proceeding, stating that "unless the application were dismissed with prejudice, it could simply be refiled in any event. And we think it's a waste of the parties' time and a waste of the Commission's time to adopt a procedure which would contemplate having to start over on this case, bring everybody back for another hearing." The examiners stated that all parties would have an opportunity to present any evidence they cared to present when the hearing was reconvened.

By letter dated June 6, 2005, the Commission informed Pioneer that it no longer considered Pioneer's permit application to be administratively complete and listed a number of items required in order for the application to be complete. Pioneer subsequently amended its permit application and provided the Commission with supplemental information.

The hearing on Pioneer's permit application was reconvened on October 6, 2005. Wefelmeyer testified that he had identified the "mystery well" as the Donaldson No. 1, the well that had been mislocated on the Commission's maps. The Commission's maps erroneously represented that the Donaldson No. 1 was outside of a ½-mile radius of the Dinwiddie 1-A, when in fact the Donaldson No. 1 was within a ¼-mile radius and should have been identified as such in Pioneer's application.

In the interval between the May hearing and the October hearing, Pioneer performed a remedial cement squeeze job on the Donaldson No. 1, which satisfied the concerns of Commission staff regarding risks posed by the proximity of the Donaldson No. 1 to the Dinwiddie 1-A. As a result of the remedial cement squeeze, Pioneer's application was declared administratively complete by the Commission.

On December 2, 2005, the Commission's hearing examiners issued a Proposal for Decision (PFD), recommending issuance of the permit. The Commission adopted the PFD and issued the permit. After exhausting its administrative remedies, Texas Citizens sought judicial review of the Commission's decision. The district court affirmed the Commission's decision and this appeal followed.

STANDARD OF REVIEW

We review the Commission's decision under a substantial evidence standard. See Tex. Util.Code Ann. § 105.001 (West 2007); ENTEX v. Railroad Comm'n of Texas, 18 S.W.3d 858, 862 (Tex.App.-Austin 2000, pet. denied). We shall reverse or remand a contested case if substantial rights of the appellant have been prejudiced because the administrative findings, inferences, conclusions, or decisions are (1) in violation of a constitutional or statutory provision, (2) in excess of the agency's statutory authority, (3) made through unlawful procedure, (4) affected by other error of law, (5) not reasonably supported by substantial evidence considering the reliable and probative evidence in the record as a whole, or (6) arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion. Tex. Gov't Code Ann. § 2001.174(2) (West 2000). In a substantial evidence review, "[t]he true test is not whether the agency reached the correct conclusion, but whether some reasonable basis exists in the record for the action taken by the agency." Texas Health Facilities Comm'n v. Charter Med. — Dallas, Inc., 665 S.W.2d 446, 452 (Tex.1984).

DISCUSSION

Due Process

In its first issue, Texas Citizens argues that it was denied an opportunity for a fair hearing because the administrative hearing should have been terminated at the time the Commission determined that Pioneer's application was not administratively complete. Texas Citizens asserts that the hearing examiners violated agency procedural rules by allowing Pioneer to amend its application and reconvening the hearing at a later date and that this failure to follow procedure resulted in a denial of Texas Citizens' procedural due process rights.

Due process requires notice and an opportunity to be heard at a meaningful time and in a meaningful manner. University of Texas Med. Sch. v. Than, 901 S.W.2d 926, 930 (Tex.1995). "What process is due is measured by a flexible standard that depends on the practical requirements of the circumstances." Id. A party to a contested case before a state agency is entitled to a hearing and an opportunity "to respond and to present evidence and argument on each issue involved in the case." Tex. Gov't Code Ann. § 2001.051 (West 2000).

Texas Citizens argues that because Pioneer's application was not administratively complete at the time of the May hearing, Pioneer failed to satisfy its burden of proof and the application should have been dismissed as a result. Texas Citizens further claims that by failing to dismiss the application, the hearing examiners violated an administrative code section stating that the Commission shall administratively deny any application that remains incomplete after the applicant has had the opportunity to make up to two supplemental filings. See 16 Tex. Admin. Code § 1.201 (2004) (Tex.R.R. Comm'n, Permit Processing). However, there is no evidence in the record to suggest that Pioneer had exhausted two supplemental filing opportunities at the time of the May hearing.² After the "mystery well" was discovered, the May hearing was adjourned and the Commission requested that Pioneer submit certain information required to complete the application. In response, Pioneer supplemented its application and the Commission determined that the application was administratively complete. These...