Court of Appeals of Texas, Third District, Austin
Texas Commission on Environmental Quality and Dos Repúblicas Coal Partnership, Maverick County; City of Eagle Pass; Environmental Defense Fund; Walter Herring; Ernesto Ibarra; Gabriel De La Cerda; Mike Hernandez; Boulware and Anson Family, Ltd; and Maverick County Environmental and Public Health Association, Appellants// Cross-Appellants,
Maverick County; City of Eagle Pass; Environmental Defense Fund; Walter Herring; Ernesto Ibarra; Gabriel De La Cerda; Mike Hernandez; Boulware and nson Family, Ltd; and Maverick County Environmental and Public Health Association, Texas ommission on Environmental Quality and Dos Repúblicas Coal Partnership, Appellees// Cross-Appellees
THE DISTRICT COURT OF TRAVIS COUNTY, 250TH JUDICIAL DISTRICT
NO. D-1-GN-16-005038, HONORABLE TIM SULAK, JUDGE PRESIDING
Justices Goodwin, Baker, and Triana
Melissa Goodwin, Justice
administrative appeal concerns a Texas Pollutant Discharge
Elimination System (TPDES) permit application for industrial
wastewater discharges from the Eagle Pass Mine (the Mine)
that was submitted by Dos Repúblicas Coal Partnership
(DRCP) to the Texas Commission on Environmental Quality
(TCEQ). The City of Eagle Pass, Environmental Defense Fund,
Walter Herring, Ernesto Ibarra, Gabriel De La Cerda, Mike
Hernandez, Boulware and Anson Family, Ltd, and Maverick
County Environmental and Public Health Association
(collectively, the Downstream Landowners) and Maverick County
(the County) (collectively, with the Downstream Landowners,
the Permit Contestants) challenged the TPDES permit in a
contested case hearing.
final order, TCEQ granted the TPDES permit over the Permit
Contestants' challenges. The Travis County district court
reversed and remanded on one issue-whether DRCP, the
undisputed owner, was also properly considered the operator
for purposes of submitting the application-but affirmed
TCEQ's order in all other respects. DRCP and TCEQ now
appeal the district court's judgment reversing and
remanding the operator issue. On cross appeal, the Permit
Contestants challenge the district court's judgment
affirming TCEQ's order as to all other issues raised. For
the reasons described below, we agree with the district
court's judgment reversing TCEQ's order as to the
operator issue and remanding for further proceedings, but we
vacate in part the judgment affirming TCEQ's order as to
all other issues raised.
FACTUAL AND PROCEDURAL BACKGROUND
owns the subbituminous coal Mine located in Maverick County,
Texas. DRCP's predecessor in interest acquired a surface
coal mining permit for the Mine in 2000, which was
transferred to DRCP in 2009. See Tex. Nat. Res. Code
§ 134.051 (requiring permit before conducting surface
coal mining operations). In 2009, DRCP entered into a
Contract Mining Agreement with Camino Real Fuels, LLC (CRF)
for CRF to "develop, construct, operate and perform
on-going reclamation at the Mine and to remove and deliver
coal from the Mine" to DRCP. In 2013, the Railroad
Commission renewed and issued to DRCP the surface coal mining
permit and approved CRF as the operator of the Mine. See
id. § 134.004(10) (defining "operator"
for purposes of Texas Surface Coal Mining and Reclamation Act
as "person engaged in coal mining who removes or intends
to remove more than 250 tons of coal from the earth by coal
mining within 12 consecutive months in one location").
Removal of coal began in 2015. However, without a TPDES
permit, DRCP would not be able to operate the Mine as it is
currently designed. See Tex. Water Code §
26.121 (prohibiting unauthorized discharge of industrial
wastewater into or adjacent to water in the state); 30 Tex.
Admin. Code § 305.1(b) (Tex. Comm'n of Envtl.
Quality, Scope and Applicability) (describing TPDES permit
predecessor in interest acquired a wastewater discharge
permit for the Mine in 1994, which was renewed in 2001, 2006,
and most recently on November 7, 2011 (the Current TPDES
Permit), which was set to expire on September 1, 2015.
See Tex. Water Code § 26.027(a) (authorizing
TCEQ to issue permits "for the discharge of waste or
pollutants into or adjacent to water in the state"). On
September 5, 2013, DRCP applied to TCEQ to amend and renew
the Current TPDES Permit. Although DRCP had held a TPDES
permit for many years, it had not discharged prior to
submitting its September 2013 application. The Current TPDES
Permit authorized discharges of stormwater and mine seepage
water from active mining areas through certain outfalls,
imposed effluent limitations, required flow to be monitored
and reported, and included additional reporting, notice,
monitoring, testing, and record-keeping requirements. In its
application, DRCP sought to add certain mining areas and make
a boundary change; remove some outfalls; maintain certain
current outfalls and add new outfalls for discharging
stormwater, wastewater, and mine seepage; and allow water in
ponds to be used for dust suppression.
Executive Director declared the application complete in
January 2014. In February 2015, TCEQ referred the application
to the State Office of Administrative Hearings (SOAH) to be
heard by two administrative law judges (ALJs) on DRCP's
request. The Permit Contestants were admitted as parties, and
a four day contested case hearing occurred in November 2015.
As relevant to this appeal, the following five issues were
discussed at the hearing: (1) whether DRCP's contractor
CRF should have applied as the permit operator, (2) whether
TCEQ properly conducted its antidegradation review, (3)
whether water quality based effluent limits for aluminum and
boron should be imposed in the permit, (4) whether chronic
effluent limits are needed at certain outfalls, and (5)
whether TCEQ, by approving the draft permit, was thereby
approving an illegal discharge route on private property not
owned or controlled by DRCP.
April 2016, the ALJs issued a proposal for decision (PFD),
recommending that the draft permit be granted with a few
changes, including "the addition of a boron limit and a
requirement that aluminum be monitored." After
considering the PFD, TCEQ issued a July 2016 final order
granting DRCP's application. But in the final order, TCEQ
deleted the ALJ's recommended findings on the boron limit
and aluminum monitoring requirement and instead added what it
called Other Requirement No. 10 that imposed "a robust
and meaningful sampling regime" that "would occur
periodically over the life of the permit to ensure that the
effluent limits and monitoring requirements in the permit
reflect the continuing water quality at the site."
See Tex. Gov't Code § 2003.047(m)
(permitting amendment of PFD).
Permit Contestants appealed the issues described above to the
Travis County district court, adding as an issue that TCEQ
improperly modified the PFD by deleting the boron limit and
aluminum monitoring requirement. See id. §
2001.171 (providing for judicial review). The district court
reversed TCEQ's final order and remanded "because
the agency's determination regarding the proper entity to
be identified as the operator of the Mine was made in
violation of statutory and regulatory provisions, was not
reasonably supported by substantial evidence considering the
reliable and probative evidence in the record as a whole, and
was arbitrary and capricious," but affirmed TCEQ's
order "with respect to the other issues on appeal."
See generally id. § 2001.174 (providing that
reviewing court may affirm in whole or in part or reverse or
remand for further proceedings). All parties now appeal to
this Court. See id. § 2001.901(a) (providing
for appeal from final district court judgment).
STANDARD OF REVIEW
review of TCEQ's final order is governed by section
2001.174 of the Texas Administrative Procedure Act. See
id. § 2001.174. This standard requires that we
reverse or remand a case for further proceedings "if
substantial rights of the appellant have been prejudiced
because the administrative findings, inferences, conclusions,
or decisions" (A) violate constitutional or statutory
provisions, (B) exceed the agency's statutory authority,
(C) were made through unlawful procedure, (D) are affected by
other error of law, (E) are not reasonably supported by
substantial evidence considering the reliable and probative
evidence in the record as a whole; or (F) are arbitrary or
capricious or characterized by abuse of discretion of clearly
unwarranted exercise of discretion. Id. §
questions committed to agency discretion, a court may not
substitute its own judgment for the agency's judgment on
the weight of the evidence. Id. § 2001.174.
Essentially, this is a rational basis test to determine, as a
matter of law, whether there is a reasonable basis in the
record for the agency's action. Jenkins v. Crosby
Indep. Sch. Dist., 537 S.W.3d 142, 149 (Tex. App.-Austin
2017, no pet.) (citing Texas Health Facilities Comm'n
v. Charter Med.-Dall., Inc., 665 S.W.2d 446, 452-53
(Tex. 1984)). We therefore are not concerned with the
correctness of the agency's decision, but its
reasonableness, and we apply this analysis without deference
to the district court's judgment. Id. (citing
Sanchez v. Texas State Bd. of Med. Exam'rs, 229
S.W.3d 498, 510-11 (Tex. App.-Austin 2007, no pet.);
Texas Dep't of Pub. Safety v. Alford, 209 S.W.3d
101, 103 (Tex. 2006) (per curiam)).
substantial evidence review of an agency's final decision
or action involves the following two component inquiries:
(1) whether the agency made findings of underlying facts that
logically support the ultimate facts and legal conclusions
establishing the legal authority for the agency's
decision or action and, in turn, (2) whether the findings of
underlying fact are reasonably supported by the evidence.
Id. The first inquiry may entail questions of law
that we review de novo. Id. at 150. On the other
hand, the second inquiry is highly deferential to the
agency's determination-the evidence may even preponderate
against the agency's finding-and it requires only
"such relevant evidence as a reasonable mind might
accept as adequate to support a [finding] of fact."
Id. at 149 (quoting Slay v. Texas Comm'n on
Envtl. Quality, 351 S.W.3d 532, 549 (Tex. App.-Austin
2011, pet. denied)). In other words, it requires "only
more than a mere scintilla, to support an agency's
determination." City of Dallas v. Stewart, 361
S.W.3d 562, 566 (Tex. 2012) (quoting Montgomery Indep.
Sch. Dist. v. Davis, 34 S.W.3d 559, 566 (Tex. 2000)).
"We presume that the agency's findings, inferences,
conclusions, and decisions are supported by substantial
evidence, and the burden is on the contestant to demonstrate
otherwise." Jenkins, 537 S.W.3d at 149 (citing
Charter Med.-Dall., 665 S.W.2d at 453).
arbitrary and capricious standard and the substantial
evidence standard have, at times, "been considered two
sides of the same coin." Charter Med.-Dall.,
665 S.W.2d at 454. Yet, our case law has drawn demarcations
between these standards, see id., and we have
identified instances in which an action may be arbitrary and
capricious even if substantial evidence supports the
agency's order-e.g., "if a denial of due process has
prejudiced the litigant's rights or if the agency has
improperly based its decision on non-statutory criteria"
or "if it is based on legally irrelevant factors or if
legally relevant factors were not considered or if the agency
reached an unreasonable result," Texas Dep't of
Ins. v. State Farm Lloyds, 260 S.W.3d 233, 245 (Tex.
App.-Austin 2008, no pet.); see Public Util. Comm'n
v. Gulf States Utils., Co., 809 S.W.2d 201, 207 (Tex.
1991) ("[I]f the Commission has failed to follow the
clear, unambiguous language of its own regulation, we must
reverse its action as arbitrary and capricious.").
these standards in mind, we turn to the parties' dispute.
parties present five issues in this appeal. DRCP and TCEQ
appeal the operator issue. On cross appeal, the Permit
Contestants raise the antidegradation and improper
modification of the PFD issues. The Downstream Landowners,
but not the County, additionally raise the chronic effluent
limits and illegal discharge route issues. We first consider
DRCP and TCEQ's operator issue. Overruling DRCP and
TCEQ's issue, we affirm the district court's order
reversing TCEQ's final order. Because we affirm the
reversal and conclude that the TPDES permit application was
incomplete, we do not address the remaining four issues.
their first and only issue, DRCP and TCEQ challenge the
district court's reversal of TCEQ's determinations
that DRCP is the owner and operator for purposes of
submitting an application and that the TPDES permit
application was complete. See 30 Tex. Admin. Code
§ 305.43(a) (Who Applies) (noting that "it is the
duty of the operator and the owner to submit an application
for a [TPDES] permit"). The Permit Contestants argue
that CRF, not DRCP, is the operator, and we agree. To provide
context for this issue, we first ...