In the Courts

Water Cases

Hyde v. Harrison County, No. 14-18-00628-CV, 2020 WL 4360350 (Tex. App.—Houston [14th Dist.] July 30, 2020, no pet. h.).

Following a Texas Commission on Environmental Quality (“TCEQ”) investigation that determined that Harrison County had failed to provide release detection for certain underground fuel storage tanks, TCEQ initiated an enforcement action seeking an administrative penalty of $5,626. Harrison County challenged this penalty in state district court, arguing that it was shielded by governmental immunity. In a case of first impression, the Fourteenth Court of Appeals held that the Texas Legislature waived governmental immunity for administrative penalties under the Texas Water Code.

According to Texas Supreme Court precedent, courts may find that immunity has been waived when (1) a statute defines “person” to include governmental entities, (2) a statute imposes liability on a “person,” and (3) construing the statute not to waive immunity would make part of the statutory scheme meaningless. Harrison County’s argument involved Texas Water Code § 7.051, which authorizes the TCEQ to assess administrative penalties against any “person” who violates the Water Code or the Health and Safety Code. The Fourteenth Court of Appeals looked to the Texas Government Code’s definition of “person,” which includes any “government or governmental subdivision or agency.” To satisfy the last prong of this test, the Fourteenth Court of Appeals pointed to Texas Water Code § 7.067, which provides specific standards for supplemental environmental projects when a “local government” faces an administrative penalty. Noting that governmental immunity would render this provision meaningless, the court held that the Legislature has waived governmental immunity for administrative penalties under the Texas Water Code, and thus Harrison County could be held liable for TCEQ’s administrative penalty.

Green Valley Special Util. Dist. v. City of Schertz, Tex., 969 F.3d 460 (5th Cir. 2020).

In 2003, the Green Valley Special Utility District (“Green Valley”) obtained a $584,000 federal loan from the U.S. Department of Agriculture to fund its water service. In 2016, the Texas Public Utility Commission (“PUC”) issued two orders that decertified territory from Green Valley’s state-issued Certificate of Convenience and Necessity (“CCN”). Green Valley challenged the PUC’s orders in federal district court, arguing that because it had already “provided or made available” sewer service, federal law prevented encroachment on its service area.

Under 7 U.S.C. § 1926(b), recipients of federal loans are protected from encroachment if they have “provided or made available” water or sewer service in the service area at issue. Green Valley argued that the PUC unlawfully allowed encroachment by approving two petitions to decertify portions of its CCN: (1) a 160-acre tract owned by the Guadalupe Valley Development Corporation (“GVDC”) and (2) a 405-acre tract within the City of Schertz’s corporate limits. Green Valley ultimately settled with GVDC, leaving the Fifth Circuit to consider only the decertification issue involving the City of Schertz.

In decertifying the City’s tract, the PUC found that Green Valley: (1) “provide[d] no retail sewer service,” (2) had no contractual obligations to do so, (3) had not received any requests for such service, (4) had made no physical improvements, and (5) was not (at the time of decertification) capable of providing sewer service to anyone in the decertified area. Green Valley argued that its service area was nonetheless protected from encroachment because previous Fifth Circuit precedent had held that a utility with a “state law duty to provide service” has “ma[de] service available” under the federal statute.

The Fifth Circuit did not decide whether Green Valley had “provided or made available” sewer service, but instead articulated a new test for what protects a utility from encroachment under 7 U.S.C. § 1926(b). The court determined that a “physical capability” test better satisfied the “provided or made available” standard in the federal statute: under this test, a utility can be protected by 7 U.S.C. § 1926(b) only if it shows that it has: (1) adequate facilities to provide service to the area within a reasonable time after a request for service is made, and (2) the legal right to provide service. The court noted that a utility cannot satisfy the test if “it has no nearby infrastructure,” but that the “pipes in the ground” idea is “not a strict requirement.”

The Fifth Circuit remanded the case to district court to determine if Green Valley had satisfied the “physical capability” test with regard to the City of Schertz tract.

Quadvest, L.P. v. San Jacinto River Auth., No. 4:19-CV-4508, 2020 WL 5034155 (S.D. Tex. Aug. 14, 2020).

The federal district court for the Southern District of Texas recently denied a motion to dismiss a lawsuit brought by the San Jacinto River Authority (“SJRA”) in a case where several private utility companies alleged violations of federal antitrust law. Plaintiffs claim that SJRA’s groundwater reduction plan creates a monopoly and artificially inflates the price of wholesale raw water. SJRA’s groundwater reduction plan involves contracts with large-volume groundwater users that impose withdrawal fees in exchange for SJRA’s financing of a surface water treatment plant on Lake Conroe.

After disposing of SJRA’s arguments that the claim was barred by the statute of limitations and the laches doctrine, the court addressed SJRA’s contention that it is protected by state action immunity. The court held that SJRA was not shielded by immunity because its enabling statute does not authorize it to “displace or regulate competition in the wholesale raw water market.” The court also determined that Plaintiffs alleged sufficient factual allegations to satisfy their antitrust claim.

On August 21, 2020, SJRA filed a notice to appeal the district court’s order.

Motley v. Gulf Coast Authority, September 11, 2020; Memorandum Opinion, 2020 WL 5491201.

The City of Odessa has an easement for a wastewater pipeline through a property owned by Motley Capital, LLC (“Motley”). The City granted a license to the Gulf Coast Authority (“the GCA”) to operate, maintain, and repair the pipeline. In April 2018, the pipeline was shut down for twenty days due to damage to the section of the pipeline that was on Motley’s property. The GCA alleges that it suffered lost income while the pipeline was shut down and that it incurred costs to repair the damage to the pipeline.

The GCA sued Motley for negligence, for violation of the Texas Water Code, and for tortious interference with the license. The GCA also sought a declaration that it had the right to install steel bollards around the manholes on the easement. Motley filed a motion to dismiss the GCA’s claims pursuant to the Texas Citizens Participation Act. The trial court denied the motion.

Motley initially argued that the trial court erred when it denied the motion to dismiss because (1) the TCPA applies to the GCA’s claims, (2) the GCA did not establish by clear and specific evidence a prima facie case for each essential element of its claims, and (3) Appellants proved each essential element of any valid defenses by a preponderance of the evidence.

The Eastland Court of Appeals held that the GCA had standing to assert its claims, and therefore, the trial court had jurisdiction to rule on the motion to dismiss. The court of appeals affirmed the trial court’s order denying Motley’s motion to dismiss because (1) the TCPA does not apply to the GCA’s claims for negligence and for violation of the Texas Water Code; (2) even if the TCPA applies to the GCA’s claim for tortious interference and to its request for declaratory relief, the GCA established by clear and specific evidence a prima facie case for each essential element of those claims; and (3) Motley’s claimed defenses, even if preserved, either relate to the claims to which the TCPA does not apply, were not established by a preponderance of the evidence, or require a merits determination more appropriately made after a trial or in a summary judgment procedure.

Air and Waste Cases

Environmental Groups Lack Standing to Sue EPA over COVID-19 Enforcement Guidance: Natural Resources Defense Council, et al. v. EPA, et al., No. 1:20-cv-03058-CM (S.D. N.Y., July 8, 2020) and New York, et al. v. EPA et al., No. 1:20-cv-03714 (S.D. N.Y., pet. filed May 13, 2020).

In the July 2020 edition of The Lone Star Current, we reported that 15 environmental groups (one Texas-based: Texas Environmental Justice Advocacy Services) and nine states (New York, California, Illinois, Maryland, Michigan, Minnesota, Oregon, Vermont, and Virginia) filed separate lawsuits against the EPA earlier this year, opposing the agency’s guidance on enforcement discretion due to COVID-19. The guidance allows regulated entities to seek enforcement discretion from the EPA for non-compliance issues caused by COVID-19, but the plaintiffs claim that the guidance promotes non-compliance.

The EPA responded to the lawsuits, arguing that the plaintiffs do not challenge the actual merits of the enforcement discretion policy, but have instead wrongly demanded that the agency undertake a multi-state rulemaking imposing an enforceable requirement that all regulated entities unable to comply with EPA’s monitoring or reporting requirements because of COVID-19 file a public justification for their reasons and other information.

Since EPA’s response, the Southern District Court of New York found that the 15 environmental groups lack standing to pursue their lawsuit because they failed to show a concrete injury fairly traceable to the EPA’s actions. While that lawsuit concerns a requested adaptation of the EPA’s policy, the litigation over the EPA’s authority to adopt the policy in the first place is still pending in the same court and is currently being briefed by the nine states’ Attorneys General. This litigation continues even after the EPA terminated its COVID-19 enforcement discretion guidance policy on August 31, 2020.

EPA Sued for Delaying Landfill Methane Emissions Guidelines: Environmental Defense Fund, et al. v. EPA, No. 19-1222 (D.C. Cir., pet. filed Oct. 23, 2019).

In the October 2019 edition of The Lone Star Current, we reported on the EPA’s decision to delay the deadline for the agency to promulgate a federal plan to administer the 2016 Emissions Guidelines (“EG”) rule until August 30, 2021. The EG rule is aimed at regulated air emissions from existing landfills. Currently, EPA has only approved state plans for CA, AZ, NM, DE, WV, and VA.

The Environmental Defense Fund and a coalition of nine states (CA, IL, MD, NJ, NM, OR, RI, VT, and PA) previously filed suit against the EPA in the U.S. Court of Appeals for the District of Columbia Circuit, challenging the agency’s decision to delay implementation of the federal plan. The petitioners filed a brief on August 12, 2020, claiming “EPA has deployed a series of tactics to delay implementing the standards, without ever providing a valid reason for doing so.” The petitioners are now asking the court to vacate the delay and require EPA to immediately implement the federal plan, asserting that any further delays will have adverse environmental and public health effects.

This lawsuit is pending while some states that did not timely submit a state plan to EPA are announcing plans for future rulemakings to ensure the state rules comply with the federal regulations. Specifically, TCEQ announced earlier this year plans for a future rulemaking to revise 30 Texas Administrative Code, Chapter 113, Subchapter D to incorporate a new state plan in compliance with the Federal Clean Air Act and 2016 Emission Guidelines. The future rulemaking would revise Subchapter D to remove outdated references to prior Emission Guidelines and add references to the provisions of the 2016 Emission Guidelines under 40 C.F.R. Part 60. TCEQ anticipates proposing the rulemaking in the September 25, 2020 edition of the Texas Register.

ExxonMobil Awarded Over $20 Million from U.S. for Cleanup of Wartime Environmental Contamination: Exxon Mobil Corporation v. U.S., No. 10-2386 (Tex. S.D. 2020).

On August 19, 2020, the U.S. District Court for the Southern District of Texas issued its opinion in the decade-long lawsuit between the U.S. government and ExxonMobile concerning which party is responsible for remediation costs incurred to clean up contamination caused by ExxonMobile’s Baytown and Baton Rouge refineries, used during World War II and the Korean War to produce aviation fuel and rubber under government control.

ExxonMobile first sued the U.S. government 10 years ago seeking more than $45 million in damages associated with groundwater contamination at the Baytown refinery. In 2011, the company filed a second lawsuit seeking costs associated with cleanup for the Baton Rouge refinery. Both cases were consolidated and ExxonMobile argued that the federal government was liable under the Comprehensive Environmental Response Compensation and Liability Act (CERCLA) as a past operator of the plants due to the government’s level of control and involvement.

The U.S. District Court for the Southern District of Texas sided with ExxonMobil, ruling that the federal government was responsible under CERCLA for an allocated share of past response costs incurred for cleanup measures at the plants. The court applied the equitable “Gore” and “Torres” factors in reasoning that (1) the government’s knowledge and acquiescence in the contamination-causing activities at the plants, (2) the value of the war materials produced at the plants to support national defense, (3) certain cost reimbursement provisions in wartime contracts, and (4) the plants’ substantial post-war waste handling improvements all supported a “substantial” or “increased” allocation of the response costs to the government. Accordingly, the court awarded ExxonMobil $20,328,670 and allocated a future share of response costs to the government.

Utilities Cases

New Boston Litigation.

Last month we became aware of a suit filed by the City of New Boston in the Texarkana federal court against Netflix, Inc., and Hulu, Inc. on August 11, 2020. Defendants have been given extensions of time until October 2, 2020 to file their answers; therefore, nothing has transpired procedurally in the case.

The suit alleges that these companies are video service providers using wireline facilities, and should be required to obtain a State Issued Certificate of Franchise Authority (SICFA) and pay the City a cable franchise fee under Chapter 66, Texas Utilities Code. The Complaint requests certification of a class consisting of all Texas municipalities in which one or more of the defendants has provided video service. The cause of action is similar to that alleged in state court in Missouri by the City of Creve Coeur against DIRECTV, LLC, DISH Network Corp., and Dish Network, LLC. The Missouri case has not yet gone to trial.

“In the Courts” is prepared by Cole Ruiz, an Associate in the Districts and Water Practice Groups; Samuel Ballard, an Associate in the Air and Waste Practice Group; and Patrick Dinnin, an Associate in the Energy and Utility Practice Group. If you would like additional information, please contact Cole at 512.322.5887 or cruiz@lglawfirm.com, Sam at 512.322.5825 or sballard@lglawfirm.com, or Patrick at 512.322.5848 or pdinnin@lglawfirm.com.