Vol. 52-2 Water Quality

Water Quality

Ownership with Responsibility

The legal treatment and protections afforded to water resources and water quality control in the United States are complex. Water quality is regulated at both the federal and state level, and those regulations are not always consistent with each other. This note focuses on a recent Texas Supreme Court case, Texas Comm’n on Env’t Quality v. Maverick Cnty, which interpreted key language in the rules promulgated by the Texas Commission on Environmental Quality.[1]

The Texas Commission on Environmental Quality (TCEQ) is a state agency with the mission of “[p]rotecting Texas by reducing and preventing pollution.”[2] A primary function of the agency is to issue licenses and permits for the many business owners whose operations effect environmental resources within the state and to promulgate regulations designed to limit negative environmental impact from business operations. Each permit application has a unique review process with various procedures and components.[3] This system is the primary means of regulating the environmentally impactful conduct of businesses within Texas—without the proper permits from TCEQ, businesses cannot continue their operations. Therefore, the successful issuance of a permit or license is critical to any business whose operations fall under the purview of the TCEQ. It also means that challenging a permit or license is the best way for an advocate, who believes the environment is being harmed by certain business conduct, to try and stop operations.

The focus of Texas Comm’n on Env’t Quality v. Maverick Cnty was the renewal of a permit for wastewater being discharged from a coal mine applied for by mine’s owner, Dos Repúblicas Coal Partnerships (DRCP).[4] The primary issue involved the interpretation of the TCEQ rule that “if the facility is owned by one person and operated by another and the executive director determines that special circumstances exist (…) both [should] apply for a permit.”[5] This rule accommodates gives TECQ flexibility to require additional procedures for circumstances where owners are remote from the overall operations of the particular business. Therefore, the TCEQ is allowed to determine those non-owners who actually run the business must also comply with licensing requirements. Since DRCP has hired a contractor “to personally perform the day to day running of the mine,” those challenging the permit argued that both DRCP and the contractor needed to apply for the permit. [6] The court narrowed the issue to “whether DRCP or the contractor is the [coal] mine’s ‘operator’” under the definitions adopted by TCEQ. [7]

The court begins by discussing the lengthy application history of DRCP’s licensing application, showing that DRCP complied with the various procedures, and obtained all the needed consents in order to obtain a license from TCEQ.[8] Furthermore, the court acknowledged that TCEQ had complied with each required step. In reviewing agency actions, the court applies the reasonable basis test, which gives substantial deference to the agency’s actions.[9] Under a reasonable basis standard, the court is not evaluating the substantive correctness of the decision. Instead, the curt is deciding whether there is any legitimate basis for concluding as the regulatory authority did.

Accordingly, applying a textualist approach, the court looked to the literal language of the rules promulgated by TCEQ to determine what should be considered reasonable. The focus was on the definition of “Operator–The person responsible for the overall operation of a facility.”[10] The court acknowledged that although “overall operation” is open-ended and vague, that the court’s “principal goal when interpreting text is not to achieve simplicity or ease of application.”[11] Therefore, the court determined that specifying the meaning of the terms by adding other language such as “personal performance,” as the court of appeals had done, was an error. Adding such a qualifier unacceptably limited the scope of the term.[12] The court reasoned that there are entities that can be “responsible for [the] overall operation of a facility” without doing the day to day work.[13] 

In this holding, the court sticks to a broader, more flexible reading of the rule, which in turn gives TCEQ more discretion in how to apply it. However, the more encompassing the definition of “operator” is, the narrower the circumstances in which an owner and operator will be deemed separate entities. As a result, it is less likely that two licenses will be required in any given situation—making it easier for businesses to legally continue their possibly harmful conduct. 

From a practical perspective, the ruling does allow for a more streamlined application. There are many substantive issues which arise when multiple people or entities are required to obtain licenses which the court did not discuss, as its analysis solely pertained to the text of the rules. For example, contractors may change many times over the course of a business’s life. A lot of added difficulty would come to the businesses if any time it wanted a new contractor, the contractor had to go through the entire licensing process. This could cause the an owner to keep employing a bad contractor, simply because the time and expense of finding a new one to get permitted would be too costly. Once a contractor obtains a license, that could provide substantial negotiating leverage over the owners. Therefore, from a logistical standpoint, it makes a lot of sense maintain an approach that allows an owner to be the “operator” for purposes of licensing, while also contracting out experts to deal with the day-to-day maintenance and running of a facility. Furthermore, the definition does not mean that the owner and operator will always be the same entity. It just gives flexibility in the appropriate circumstances for TCEQ to make such a finding. 

Although this case may feel like a loss for those seeking a harsher licensing policy, it makes sense from both a textualist and realist approach. Those seeking to reform the policies regarding water treatment should do so through legislative or agency advocacy. However, the court showed that unless the circumstances are “unreasonable,” the agency’s decision will likely continue to be upheld. 

Jessica Rosenwasser is a 3L from New York City. She attended Washington and Lee University and joined TELJ during her second year of law school. Jessica will be working for Vinson & Elkins in the New York office after graduation.

Francesca Eick is an Associate with Baker Botts in Austin. Ms. Eick’s practice focuses on regulatory compliance, permitting, litigation, and transactions involving environmental, land use, natural resource, and energy issues. Ms. Eick has advised public and private clients on matters relating to a range of environmental statutes including the Clean Water Act (CWA), the Endangered Species Act (ESA), the Clean Air Act (CAA), and the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).