Oilfield Groundwater Contamination Law

Oilfield Groundwater Contamination Texas lawyer

Jul 22, 2013 — by Jeff Mundy
Tags: Groundwater Contamination

 

III. TCEQ PERMITS AND CIVIL LIABILITY

 The crux of the court of appeals' holding, determined “as an initial matter” before deciding FPL's jury charge, directed verdict, and evidence points on FPL's trespass tort claim, is that FPL had no common law cause of action for trespass because the TCEQ approved “an amended permit allowing EPS to inject wastewater into the Frio formation and when information before the Commission showed that EPS's waste plume was projected to migrate into the deep subsurface of the formation underlying FPL's property.”  The court of appeals' reasoning is inconsistent with our general view of the legal effect of an agency's permitting process, the specific statute authorizing the TCEQ's process in this case, and our precedent regarding court review of agency actions.

 As a general rule, a permit granted by an agency does not act to immunize the permit holder from civil tort liability from private parties for actions arising out of the use of the permit. This is because a permit is a “negative pronouncement” that “grants no affirmative rights to the permittee.” A permit removes the government imposed barrier to the particular activity requiring a permit. As the Amarillo Court of Appeals aptly stated: “[O]btaining a permit simply means that the government's concerns and interests, at the time, have been addressed; so, it, as a regulatory body, will not stop the applicant from proceeding under the conditions imposed, if any.”  Similarly, when the Board of Law Examiners grants an attorney a license to practice law in this state, even after undertaking a significant background check on the candidate's character and fitness to practice, the license does not preclude a private party from seeking damages for the attorney's malpractice. See Tex.R. Govern. Bar Adm'n IV, X. When the Austin health authority issues a permit after inspection for a person to operate a restaurant, and a patron gets sick from eating at the restaurant, the fact that the restaurant was licensed (and may have been in compliance with health regulations) does not, in and of itself, preclude the ill patron from recovering in a negligence action against the restaurant. See Austin City Code § 10–3–61.

An example of this situation arose in A person applied for a permit to drill an oil well, which was opposed before the Railroad Commission on the grounds that another entity, Magnolia Petroleum, actually had title to the land at issue in the permit. The Railroad Commission granted the permit, and Magnolia filed a district court action challenging the permit, introducing its chain of title and arguing that because it had proved superior title, the permit should not have been granted.  The trial court cancelled the permit and the court of appeals reversed, but suspended the permit, remanding with instructions to suspend the suit for a separate lawsuit in which title was being determined. We reversed because, even though the Railroad Commission could consider whether an applicant “appears” to have title, the mere fact that the applicant received the permit did not provide the applicant with any authority to drill on land that was not his, or shield him from tort liability or an injunction action should it be determined that he is not the rightful owner of the parcel.  We noted that, if the permit were granted,

the permittee may still have no such title as will authorize him to drill on the land.... In short, ... [the permit] merely removes the conservation laws and regulations as a bar to drilling the well, and leaves the permittee to his rights at common law. Where there is a dispute as to those rights, it must be settled in court. The permit may thus be perfectly valid, so far as the conservation laws are concerned, and yet the permittee's right to drill under it may depend upon his establishing title in a suit at law.

While we noted that the Railroad Commission “should not do the useless thing of granting a permit to one who does not claim the property in good faith,” the Railroad Commission's determination of the propriety of the permit has no effect on the propriety of the permittee's potentially tortious actions. 



Of course, statutory remedies may preempt common law actions or other standards that may set the bar for liability in tort, but a permit is not a get out of tort free card. ... (holding the federal motor vehicle safety standards do not preempt jury findings that a bus manufacturer's buses were defectively designed). But in this case, the statute authorizing the TCEQ to provide EPS the permit is consonant with the general rule, rather than the exception.

The Injection Well Act (the Act), Chapter 27 of the Texas Water Code, governs *312 the drilling and use of deep subsurface injection wells such as the one at issue in this case.  The Act's policy and purpose is to “maintain the quality of fresh water in the state to the extent consistent with the public health and welfare and the operation of existing industries, taking into consideration the economic development of the state, to prevent underground injection that may pollute fresh water, and to require the use of all reasonable methods to implement this policy.”  Absent from this policy determination is any intent, if permissible, to authorize an agency to determine ownership of the deep subsurface or determine whether authorized migration invades private property rights. The Act states that no person may drill, use, continue using, or convert a well into an injection well without first obtaining a permit from the TCEQ, unless the well comes under the jurisdiction of the Railroad Commission.  Chapter 27 lays out a method for applying for permits; lists general considerations the TCEQ may review in determining whether to grant a permit; provides the TCEQ with rule making authority as required for the performance of its duties; and establishes administrative, civil, and criminal penalties for disobedience. 
 The Act creates a similar structure for injection wells that are under the jurisdiction of the Railroad Commission. 

 
The Act does not preempt any civil actions. In fact, the text states just the opposite. Section 27.104 of the Act provides that “[t]he fact that a person has a permit issued under this chapter does not relieve him from any civil liability.”

 When construing statutes, we first look to the language used by the Legislature, which is the best indication of the Legislature's intent.  The “plain and common meaning of the statute's words” directly contradicts the court of appeals' holding in this case. The statute does not deny FPL a cause of action for trespass merely because the injection well owner had obtained a TCEQ permit. The court of appeals cited section 27.104 early in its opinion, but neglected to consider it in the determination that a permit could eradicate a trespass claim against a permit holder.
 
In addition, the section of the Texas Administrative Code governing TCEQ permits is in discord with the court of appeals' opinion. Section 305.122(c) states that:

The issuance of a permit does not authorize any injury to persons or property or an invasion of other property rights, or any infringement of state or local law or regulations.

 The holding of the court of appeals conflicts with the clear language of this provision. The statute specifically states that a permit does not authorize invasion of property rights, which is where the tort of trespass falls. The situation is analogous to the licensing of lawyers, regulation of restaurants, or the drilling of oil wells in Magnolia Petroleum. EPS may have permission from the TCEQ to inject authorized wastewater, but the consequences of acting under the permit have not been immunized.


 FPL argued before this Court that should a government permit immunize a permit holder from trespass liability, the Injection Well Act would become a condemnation statute and the subsurface migration would be a government taking. Because we determine that a permit holder is not shielded from liability because he or she holds a permit, we do not reach FPL's constitutional concern.

Instead of relying on the basic rule and the text of the Injection Water Act, the court of appeals based its ruling on two of this Court's opinions, Manziel and Garza.  In Manziel we addressed a permit granted by the Railroad Commission to inject water to flood a reservoir and recover oil.  The Manziels sought to set aside and cancel the permit issued by the Railroad Commission to the Whelans, who owned land adjoining the Manziels' tract, arguing that the injected water would constitute a trespass and would result in destruction of their own well.  In the case before us, the court of appeals interpreted the holding of Manziel to provide that “a secondary recovery operation involving the subsurface injection of salt water did not cause a trespass when the water migrated across property lines, in light of the Railroad Commission's approval of the operation,” which led to the court's conclusion that when a state agency authorizes injections, no trespass could occur when the injected substance migrates across property lines underground. 
The court of appeals misinterpreted this Court's holding in Manziel.  We stated there that we were “not confronted with the tort aspects” of subsurface injected water migration, nor did we decide “whether the [Railroad] Commission's authorization of such operations throws a protective cloak around the injecting operator who might otherwise be subjected to the risks of liability....” Instead, we held that Railroad Commission authorizations of secondary recovery projects are not subject to injunctive relief based on trespass claims. Consistent with our suggestion in Magnolia Petroleum that the Railroad Commission has the authority and obligation to look to the parties' legal status in determining whether a permit should be issued, we noted that “[t]he technical rules of trespass have no place in the consideration of the validity of the orders of the [Railroad] Commission.” We made the point in Manziel that we were not deciding whether a permit holder is immunized from trespass liability by virtue of the permit. The case is inapposite.

Our opinion in Garza, another opinion relied upon by the court of appeals, likewise did not hold that agency authorization or permission resulted in blanket immunity from trespass liability. Although Garza dealt with a subsurface trespass issue, it also was a different case than the one before us. In Garza, the Salinases, mineral owners of one tract, sued Coastal Oil & Gas Corporation, the entity leasing their mineral interest and the mineral interest in an adjoining tract, for trespass based on the underground invasion of the Salinases' reservoir by injected proppant used by *314 Coastal Oil in fracturing  to recover minerals from the adjoining tract that it also leased.  Because the Salinases were mineral owners and had leased the minerals to Coastal Oil, they merely had a royalty interest and possibility of reverter but did not possess the minerals.  Although the Salinases had standing to sue for a form of trespass, we held that, because they were not in possession of the mineral rights, they were not entitled to sue for trespass based on nominal damages but had to prove actual injury.  We held that the rule of capture precluded damages for drainage by fracturing, and thus the Salinases could not recover. 
Proppants are defined as “[s]mall granules contained in a slurry mix injected as a part of a hydraulic fracturing operation....” 

Hydraulic fracturing or “fracturing” is a method which “employs hydraulic pressure to fracture ... rock,” thereby “increasing the permeability of rock, and thus increasing the amount of oil or gas produced from it.”

The issues in Manziel and Garza were factually similar. They dealt with injected substances per agency authorization that had possibly migrated underground across property lines. The case before us is distinguishable on several grounds. Both of those cases dealt with the extraction of minerals in the oil and gas industry, and thus the rule of capture. The rule of capture, and administrative deference to agency interpretations, was critical to our holding in Garza. And although the Act contains provisions governing both Railroad Commission and TCEQ permits, injecting substances to aid in the extraction of minerals serves a different purpose than does injecting wastewater. We have recognized that “[i]t cannot be disputed that [secondary operations to recover oil and gas] should be encouraged” to “increase the ultimate recovery of oil and gas.” Under the rule of capture, a “cornerstone of the oil and gas industry ... fundamental both to property rights and to state regulation,” a mineral rights owner owns the oil and gas produced from his or her well even if the oil and gas migrated underground from a tract owned by someone else.  Manziel and Garza considered the justification for the rule of capture—greater oil and gas recovery—in their analyses. However, the rule of capture is not applicable to wastewater injection.  Mineral owners can protect their interests from drainage through means such as pooling or drilling their own wells. That is not necessarily the case when a landowner is trying to protect his or her subsurface from migrating wastewater. Manziel and Garza did not decide the issues in this case, and because of the oil and gas interests at issue in Manziel and Garza , their reasoning does not dictate our analysis in this wastewater injection trespass case.

IV. CONCLUSION

The language of the Injection Well Act and the portions of the Texas Administrative Code governing the TCEQ do not shield permit holders from civil tort liability that may result from actions governed by the permit. This is consistent with our common law rule that the mere fact that an administrative agency issues a permit to undertake an activity does not shield the permittee from third party tort liability stemming from consequences of the permitted activity. Accordingly, the court of appeals erred in determining that because the TCEQ permitted EPS' injection wells, there was no trespass. We do not decide today whether subsurface wastewater migration can constitute a trespass, or *315 whether it did so in this case. We remand to the court of appeals for determination of the issues originally presented by FPL at the court of appeals, including whether FPL was entitled to a directed verdict on the issue of its consent, whether the burden of proof on consent was erroneously shifted to FPL in the jury charge, and whether the jury charge should have included an instruction that injury is not a necessary element of trespass. Accordingly, we reverse the court of appeals' judgment and remand to that court for further proceedings consistent with this opinion.


FPL Farming Ltd. v. Environmental Processing Systems, L.C.
351 S.W.3d 306, 54 Tex. Sup. Ct. J. 1744 (Tex. 2011)

 

 

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