About Air and Water

Friday, December 7, 2007

Railroad Commission overruled by 3rd Texas Court of Appeals

By Faith Chatham - DFWRCC - Dec. 7, 2007

Senator Estes and the Texas Railroad Commission are under fire for lax regulation and oversight. After confrontrations at a Town Hall Meeting with citizens who were dissatisfied with the oversight of the Natural Resource Committee in protecting water from contamination injection wells in Wise County, Senator Craig Estes wrote: I am concerned by reports that the Railroad Commission may have been too lax in its oversight of the oil and gas industry, and enforcement of the rules and regulations. It is my intention to share these concerns brought by my constituents to the Chairman of the Senate Natural Resources Committee with my recommendations that these concerns be throughly reviewed by this committee."
See TxSharon's diary on Texas Kaos.

Lax regulation by the Texas Railroad Commission has dominated the news in the Dallas Fort Worth Metroplex for weeks. Investigative WFAA Reporter Brett Shipps has hammered away at the failure of the Railroad Commission to force removal of dangerous compression couplings by Atmos Energy. The death of a couple in Wylie, Texas when their home exploded despite numerous reports by neighbors to the gas company of gas leaks has spurred public outcry against decisions by the Railroad Commission which allowed TXU and later ATMOS Energy to keep over a hundred thousand compression couplings in the ground and at gas meters in North Texas for years after other states (such as Missouri) demanded their removal. Recently the Railroad Commission has announced that they are requiring that compression couplings be replaced, however, despite their claim that it had nothing to do with the series of reports by Brett Shipps, most North Texans credit public pressure and the news coverage for the decision rather than due diligence on the part of the Railroad Commission.

While under scrunity by persistent bloggers like TXSharon and investigative television reporters such as Brett Shipps, the Railroad Commission also has taken a few "lumps" in court.

Wise County activists (Texas Citizens for a Safe Future and Clean Water) appealed the ruling of the Railroad Commission in permitting Pioneer Exploration, Ltd> to operate a commercial injection well to dispose of oil and gas waste. The Texas Third District Court of Appeals in Travis County overruled the Railroad Commission and found that:

The court found that:
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."

Part of the case:
Before issuing an injection well permit, the Commission must make a finding "that the use or installation of the injection well is in the public interest." Tex. Water Code Ann. § 27.051(b)(1) (West Supp. 2006). In its second issue, Texas Citizens argues that the Commission took too narrow a view of "the public interest" by focusing only on the increased recovery of oil and gas and disregarding the public interest concerns presented by Texas Citizens.
At the May hearing, Texas Citizens offered testimony and evidence that they alleged related to the public interest. Texas Citizens' primary concern was a public-safety issue regarding the fact that trucks hauling saltwater waste would frequently be accessing the well site using narrow, unpaved roads. Wefelmeyer testified that the proposed disposal well could operate 24 hours a day, 7 days a week, with 20 to 50 hauling trucks--each carrying up to 100 barrels of saltwater waste--accessing the site each day. Texas Citizens took the position that because the dirt roads contained blind curves and were often used by children and pedestrians, the presence of a large number of trucks hauling between 2,000 and 5,000 barrels of saltwater waste a day would create a public-safety issue.

The court did not uphold Pioneer's and the Railroad Commissions argument:
Pioneer and the Commission argue that the factor considered in granting Pioneer's application--the increased capacity for oil and gas production in Texas--is an appropriate factor for making a public interest finding and that, while the hearing examiners did in fact hear and consider evidence on Texas Citizens' traffic-related concerns, these types of issues were not within the Commission's jurisdiction and could not be considered.

Instead the court stated:
There is no controlling precedent interpreting what considerations the Commission may weigh when determining whether a proposed injection well is in the public interest under Texas Water Code § 27.051(b)(1). Administrative agencies have wide discretion in determining what factors to consider when deciding whether the public interest is served. See Public Util. Comm'n of Texas v. Texas Tel. Assoc., 163 S.W.3d 204, 213 (Tex. App.--Austin 2005, no pet.). "An agency abuses its discretion in reaching a decision if it omits from its consideration factors that the legislature intended the agency to consider, includes in its consideration irrelevant factors, or reaches a completely unreasonable result after weighing only relevant factors." Hinkley v. Texas State Bd. of Med. Examiners, 140 S.W.3d 737, 743 (Tex. App.--Austin 2004, pet. denied).

The court went back to the orignial intention of the Legislature and ruled that the Railroad Commission has:
abused its "discretion" by not weighing safety factors which the Legislature intended to be weighed and/or by "reaching unreasonable results after weighing reasonable factors!"

The Court ruled against The Railroad Commissioners ruling. In the permitting process the Railroad Commission stated:
is in the public interest to safely produce hydrocarbon reserves in order to meet market demand. . . . The production of hydrocarbons for use by the people of Texas and industry serves the public interest. Production from the Barnett Shale is obtained by fracing with large volumes of water and the frac water must then be recovered and disposed of. The safe and proper disposal of produced saltwater in disposal wells such as the one proposed by Pioneer meets this need and thereby serves the public interest. . . It is in the public's interest to encourage the safe drilling and completion of more wells for the production of oil and gas.

The court found that:
While relying solely on the increased production of oil and gas to indicate that Pioneer's well would be in the public interest, the hearing examiners declined to consider Texas Citizens' public-safety concerns, determining that traffic issues do not come within the Commission's jurisdiction.

The Court cited the The PFD in which the Railroad Commission explicitly stated:
The Commission does not have jurisdiction to regulate truck traffic on the state's roads and highways. The examiners sympathize with the Protestants' concerns about property values and other quality of life issues, but conclude that Pioneer has met its burden of proof on the statutory issues the Commission is required to consider, including the public interest issue.
The Court examined presecent and Legislative Intent in regard to public roadways and public safety hazards in location of injection wells. It overruled the finding of the Railroad Commission that public roadway hazards were not to be considered.

The Court ruled that

Because the Commission believed it could only review the effect on oil and gas production in making a public interest determination on Pioneer's permit, we hold that the Commission abused its discretion in failing to consider other factors in determining whether the permit would be in "the public interest" under Texas Water Code § 27.051(b)(1). While the legislature did not specify which factors should be considered, the scope of "the public interest" must be broader than the effect on oil and gas production. Such a narrow interpretation of "the public interest" could potentially allow the Commission to rubber stamp injection well permit applications despite legitimate public safety concerns, which the legislature, in passing § 27.051(b) and requiring that the effect on the public interest be considered, clearly did not intend.

The Court finding states:
the Commission continues to argue in its post-submission brief, as it did at oral argument and in its initial brief, that traffic-related concerns are not within the jurisdiction of the Commission and therefore should not be considered in public interest determinations. (6) The Commission's position taken on appeal and the statements made by the hearing examiners in the PFD provide sufficient evidence that Texas Citizens' traffic concerns were not considered as part of the public interest analysis.

Furthermore, the Commission argues that it cannot consider the effect of increased truck traffic on rural roads because regulating road-safety issues is solely within the jurisdiction of other governmental agencies. However, practically all matters of public safety are regulated by some governmental agency. If the Commission is foreclosed from considering any matter that falls within the jurisdiction of another governmental agency when making public interest determinations, then the Commission's realm of inquiry is essentially limited to reviewing a proposed injection well's effect on oil and gas production. Such a limited scope of review cannot have been the legislature's intent in giving the Commission the broad mandate found in Texas Water Code § 27.051(b) to consider "the public interest." The Commission does not need the authority to regulate road safety issues in order to determine whether the development of an injection well will create traffic-related problems of such magnitude that the harm to the public outweighs the benefit of increased oil and gas production. The Commission is not being asked to regulate road safety, but merely to consider potential threats to public safety before issuing an injection-well permit.

The Railroad Commission argued that they do not have authority to regulate public safety issues. However, the Court found that by requiring that security be at the site 24-7 and there be a locked fence and gate for public safety, they do in fact regulate public safety.

In addition to the power to deny applications that are not in the public interest, the Commission may also resolve public-safety issues by regulating the activities of the injection well itself. The Commission's final order places a number of "special conditions" and "standard conditions" on the proposed injection well. Standard condition number 12(e) states, "Prior to beginning operation, the facility shall have security to prevent unauthorized access. Access shall be secured by a 24-hour attendant, a fence and locked gate when unattended, or a key-controlled access system." This condition placed on Pioneer's permit requiring the maintenance of sufficient security to prevent unauthorized access suggests that the Commission has exercised authority to regulate the operations of the injection well in order to ensure public safety. Similarly, the Commission may be able to conserve natural resources, while also addressing any relevant public-safety concerns, by taking steps such as regulating the number of trucks accessing the well, limiting the hours of operation, or requiring the use of alternative access routes to the well. When reconsidering the public interest finding on remand, the Commission might also consider whether any possible conditions may be applied to the injection well to alleviate relevant public-safety concerns.

The court found that the Railroad Commission abused its discretion by limiting its public interest determination.

While administrative agencies have wide discretion in determining what factors to consider when deciding whether the public interest is served, we hold that the Commission abused its discretion by limiting its public interest determination to the conservation of natural resources. We remand 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.

The Court overturned the ruling of the Railroad Commission:

because the Commission relied on an improperly narrow definition of "the public interest" in granting Pioneer's application, we reverse the district court's judgment affirming the Commission's final order and remand to the Commission for further proceedings consistent with this opinion.

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