Ring Energy v. Trey Res., Inc.
Ring Energy v. Trey Res., Inc.
Opinion of the Court
Injecting fluids into an oil reservoir can, under the right conditions, enhance oil production.
In this case, Trey Resources, Inc. (Trey) obtained the requisite permits from the Commission, but there is some dispute, unresolved on our record, as to whether the predecessor to Ring Energy, Inc. (Ring), which operated several nearby wells, got proper notice. Before Trey started its injection program, Ring filed suit in Andrews County seeking injunctive relief to stop the process because it claimed the water injection would cause it irreparable "waste" damage. The trial court ultimately dismissed the suit for want of jurisdiction.
We are faced with the narrow question, which appears to be one of first impression, as to whether a trial court outside of Travis County has the jurisdiction to enjoin a party with a valid permit from developing and using an injection well based on the claim that the injection well will cause imminent and irreparable injury to the complaining party. Texas law already allows a party to seek damages once the injection well is put to use if it did indeed caused "waste" to surrounding wells. We conclude that based on the text of the controlling statutes that pre-injury injunctive relief is available outside of Travis County.
FACTUAL SUMMARY
Based on the pled allegations in this suit, on September 6, 2012 Trey applied for nine permits from the Commission to *203inject fluids into designated wells located in Andrews County. Stanford Energy, which is the predecessor to Ring, operated five wells in the immediate area. The Commission rules required Trey to provide a copy of the application to any surface owner or operator of a well within a half mile of the injection well, and also to publish notice of the application in the local paper. TEX.ADMIN.CODE § 3.46(c)(1)-(3)(2014)(Tex. R.R. Comm., Fluid Injection into Productive Reservoirs). Trey contends it substantially complied with the rule, while Ring pled that it did not. That issue is not before us. Ring (or its predecessor in interest) did not file a protest of the permits as Commission rules allowed, and it is uncontested that the Commission granted the applications without any formal hearing on January 17, 2013.
On September 23, 2013, and before any injection operations began, Ring filed suit against Trey in Andrews County. The suit first sought declaratory relief that the permits issued by the Commission were void ab initio . Next, the suit alleged that fluid injection would cause substantial damage to Ring's mineral interest, thus causing "waste." No specific explanation for how that waste would occur is contained in the pleading. Ring sought damages and equitable relief under TEX.NAT.RES.CODE ANN. § 85.321 (West 2011) which authorizes a cause of action in favor of an owner of an interest in property or production "that may be damaged" by waste. Ring further alleged that its interests were in imminent danger of irreparable harm, and sought a temporary restraining order, and a temporary and permanent injunction.
The parties agreed to several temporary restraining orders. Trey then filed a motion to dismiss for lack of subject matter jurisdiction. The motion argued that Ring failed to exhaust its administrative remedies before the Commission. Even at that, Trey contended any appeal of the Commission's order must be filed in Travis County. Ring's response conceded the motion as it applied to its declaratory relief claim seeking to invalidate the permits ab initio . It contended, however, that its claim for damages and injunctive relief under Section 85.321 were properly before the Andrews County trial court. The trial court granted the motion to dismiss. This appeal follows.
In a single issue, Ring contends that the trial court erred in dismissing its suit for lack of subject matter jurisdiction. If the injection wells do indeed actually cause injury, both sides apparently agree that damages are available. Trey additionally concedes that even before any damages are suffered, Ring can seek injunctive relief in Travis County. It maintains, however, any suit outside of Travis County is a collateral attack on a permit issued by the Commission. Ring views the issue as a simple application of Section 85.321 that allows equitable relief to prevent waste.
STANDARD OF REVIEW
Whether a trial court has subject-matter jurisdiction is a question of law subject to de novo review. Texas Natural Res. Conservation Comm'n v. IT-Davy ,
OVERVIEW OF PERMITTING PROCESS FOR INJECTION WELLS
We begin with a summary of the permitting process required for injection wells in operating production fields. Both the Texas Commission on Environmental Quality (TCEQ) and the Railroad Commission have statutory mandates to oversee injection wells. TEX.WATER CODE ANN. § 27.011. Generally, injection wells used for disposal of industrial waste falls under the purview of the TCEQ.
The Railroad Commission by rule requires "any person who engages in fluid injection operations in reservoirs productive of oil, gas, or geothermal resources" to obtain a permit from the Commission. TEX.ADMIN.CODE § 3.46(a). The permit will only issue if the "injection will not endanger oil, gas, or geothermal resources or cause the pollution of freshwater strata unproductive of oil, gas, or geothermal resources."
The application itself must be mailed or delivered to any affected person, which includes the record owner of the surface tract on which the well is located, any Commission designated operator of a well within a half mile radius, the owner of any adjoining surface properties, and several governmental entities. TEX.ADMIN.CODE § 3.46 (c)(1)(2). The applicant must also publish a notice on a prescribed form in a newspaper of general circulation for the county where the well is to be located.
Once approved, the Commission can modify, suspend, or terminate the permit "for just cause" after notice and an opportunity for hearing, but only for several specified reasons.
JUDICIAL REVIEW
A party to any proceeding before the Commission is generally entitled to judicial review. That right is found several statutes. See TEX.UTIL.CODE ANN. § 105.001(a) (West 2007)("Any party to a proceeding before the railroad commission is entitled to judicial review under the substantial evidence rule."); see also TEX. GOV'T CODE ANN. § 2001.171 (West 2016) (a person "who is aggrieved by a final decision in a contested case" is entitled to seek judicial review.). Most germane here, however, is TEX.NAT.RES.CODE ANN. § 85.241 which provides: that "[a]ny interested person who is affected by the conservation laws of this state or orders of the commission relating to oil or gas and the waste of oil or gas, and who is dissatisfied with any of these law or orders, may file suit against the commission" in Travis County. An "order" of the Commission can include its approval of a permit. See
As an appeal from an administrative agency, the courts will employ a distinct standard for review. Review of a state administrative agency's decision is generally restricted to those decisions that prejudice substantial rights of the complaining party if the decision is in violation of a constitutional or statutory provision, in excess of the agency's authority, made through unlawful procedure or affected by other error of law, not reasonably supported by substantial evidence, or arbitrary or capricious or characterized by an abuse of discretion. TEX. GOV'T CODE ANN. § 2001.174(2)(A)-(F) ; Railroad Comm'n v. Torch Operating Co.,
Once a permit issued by the Commission has actually been put to use, Texas courts are available to redress the consequences of a permit holder's actions. The Amarillo *206Court of Appeals likened the permit to a driver's license which allows one to drive a car, but does not provide immunity for any resulting damages:
Specifically, securing a permit does not immunize the recipient from the consequences of its actions if those actions affect the rights of third parties. Nor does it authorize the recipient to act with impunity viz third parties. Rather, obtaining 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. ... The situation is much like getting a driver's license. While some may think that the license allows them to drive upon a neighbor's lawn, it does not. The home owner may still undertake effort to protect his yard or recover for damages suffered. Nor does the license allow them to ignore other laws and restrictions whether related to or unrelated to driving.
Berkley v. R.R. Commn. of Texas ,
The rationale flows in part from prior cases holding that a permit is a "negative pronouncement" that "grants no affirmative rights to the permittee." Magnolia Petroleum Co. v. R.R. Comm'n,
Central to the dispute before us, Section 85.321 of the Natural Resources Code specifically authorizes a judicial remedy in relevant part as follows:
A party who owns an interest in property or production that may be damaged by another party violating the provisions of this chapter that were formerly a part of Chapter 26, Acts of the 42nd Legislature, 1st Called Session, 1931, as amended, or another law of this state prohibiting waste or a valid rule or order of the commission may sue for and recover damages and have any other relief to which he may be entitled at law or in equity. Provided, however, that in any action brought under this section or otherwise, alleging waste to have been caused by an act or omission of a lease owner or operator, it shall be a defense that the lease owner or operator was acting as a reasonably prudent operator would act under the same or similar facts and circumstances.
TEX.NAT.RES.CODE ANN. § 85.321. Section 85.322, which immediately follows, provides that no suit by or against the Commission "shall impair or abridge or delay a cause of action for damages or other relief" that a land owner, or producer might have for violation of a rule or order of the Commission.
No doubt, Section 85.321 creates a private cause of action for breach of Commission imposed duties, including the breach of the statutory duty not to commit waste. Exxon Corp. v. Emerald Oil & Gas Co., L.C. ,
This background brings us to the heart of the dispute. Trey acknowledges that once its injection operations commence, and if it indeed damages Ring, that a claim for damages in the courts might be cognizable under Section 85.321. Trey also acknowledges that some form of equitable relief might also be available before the injection well is put to use, but only in an action filed in Travis County challenging the order authorizing the permit. But it contends that the Andrews County district court lacks subject matter jurisdiction to prohibit the injection operation, and thus effectively invalidate the Commission's permits. Ring counters that the plain language of Section 85.321 grants the courts of this state jurisdiction to hear not only suits for damages, but also claims for equitable relief, which includes claims for injunctive relief.
When Is Equitable Relief Available?
Whether Ring has a pre-injury equitable remedy turns on the text of the legislation before us. In interpreting the text of the statute, we start with its plain language. McIntyre v. Ramirez ,
With these standards in mind, we turn to the statute at hand. Stripped to its core, Section 85.321 states: "[a] party that may be damaged by another party['s] ... waste ... may sue for and recover damages and have any other relief to which he may be entitled at law or in equity ." [Emphasis added].
Ring focuses on the phrase "may be damaged" as evidence that the statute contemplates future, but as yet theoretical damages, and thus equitable relief is available. Trey argues in part that the term "recover damages" necessarily requires that some damages have been incurred, and thus this statute limits any injunctive relief to situations where the permit has already been put to use. It bolsters this claim with language from the proviso that follows, which states "that in any action brought under this section or otherwise, alleging waste to have been caused, " a reasonably prudent operator defense is available.
Both parties' arguments fall short of giving clear meaning to the statute. A grammar construct undermines Ring's contention that the phrase "may be damaged" necessarily contemplates future damages. The word "may" is used here as a modal auxiliary verb. See Webster New Universal Unabridged Dictionary, p 1189 ("may" can be used as auxiliary verb). A modal auxiliary verb's function can either be to indicate tense (i.e. something in the past, present, or future) or denote probability (i.e., how likely something might be to occur). See Altizer v. Commonwealth of Virginia ,
But neither does Trey's construction provide clear evidence of the Legislature's intent. Trey focuses on the phrase "may sue for and recover damages and have any other relief to which he may be entitled at law or in equity" as an indication that one must first have some damages to invoke the equitable remedy. It correctly notes that prior cases involving suits under this section have all involved claims where the plaintiff contended actual damages had already been incurred. See e.g. Emerald Oil & Gas ,
Turning to the text of the statute, the question here is whether the clause allowing equitable relief ("and have any other relief to which he may be entitled at law or in equity") is tied to, and limited by the phrase immediately preceding it ("may sue for and recover damages") such that only someone who has incurred actual damages might seek equitable relief. The last antecedent canon might provide some support for that construction. It holds "that a qualifying phrase in a statute or the Constitution must be confined to the words and phrases immediately preceding it to which it may, without impairing the meaning of the sentence, be applied."
*209Spradlin v. Jim Walter Homes, Inc.,
Punctuation "will often determine whether a modifying phrase or clause applies to all that preceded it or only to a part." Sullivan v. Abraham ,
The present Natural Resources Code finds its origin in the Act of August 12, 1931 42nd Leg., 1st Called Sess., ch. 26, 1931 Gen. Session Law Pamp. 46. The predecessor to Sections 85.321 and 85.322 originally appeared together in reverse order, and the relevant language at issue here read:
Any party owning any interest in any property or production which may be damaged by any other party violating this Act or any other statute of this State prohibiting waste or violating any valid rule, regulation or order of the Commission, may sue for and recover such damages, and have such other relief as he may be entitled to in law or equity.
The serial comma is apparent in the earlier text. The recodification of the prior law into the Natural Resources Code was not intended to make substantive changes. TEX.NAT.RES.CODE ANN. § 1.001(a) (West 2011). Accordingly, if anything, the original placement of the comma indicates the Legislature set off equitable relief as something distinct from the damages relief available under the act.
Trey also focuses on the proviso in Section 85.321 which states that:
Provided, however, that in any action brought under this section or otherwise, alleging waste to have been caused by an act or omission of a lease owner or operator, it shall be a defense that the lease owner or operator was acting as a reasonably prudent operator would act under the same or similar facts and circumstances.
[Emphasis added]. It contends the use of the past tense "have been caused" shows the legislation is limited to situations where the complained of actions have already occurred, and not merely about to occur. We first note the Code Construction Act provides that "[w]ords in the present or past tense include the future tense." TEX.GOV'T CODE ANN. § 312.003 (West 2013). Thus the use of the past tense loses its import. Second, the proviso was added to the statute at a later time, and creates a defense to a particular subset of claims that could be brought under Section 85.321. Act of June 20, 1987, 70th Leg., ch. 1071, § 1, 1987 Gen. Session Law 3608. We do not believe it is meant as a limitation on the type of claims that may be brought in the first place.
*210Finding no clear answer in either party's construction of Section 85.321, we examine the act as a whole. Legislative intent must be ascertained from the entire act and not from isolated portions thereof. Calvert v. Texas Pipe Line Co. ,
While it might seem a strange legislative scheme that would set out detailed provisions for suits to be filed in Travis County, yet simultaneously allow litigants to go to their local courthouse to obtain the similar relief, the text of Section 85.322 cannot be read any other way. That section provides:
None of the provisions of this chapter that were formerly a part of Chapter 26, Acts of the 42nd Legislature, 1st Called Session, 1931, as amended, no suit by or against the commission , and no penalties imposed on or claimed against any party violating a law, rule, or order of the commission shall impair or abridge or delay a cause of action for damages or other relief that an owner of land or a producer of oil or gas, or any other party at interest, may have or assert against any party violating any rule or order of the commission or any judgment under this chapter.13
This section contemplates that even were some other proceeding filed pursuant to Section 85.242 et. seq. , the aggrieved party would still have the right to pursue a claim for damages, and for equitable relief. And any suit against the Commission cannot "impair or abridge or delay" the land owner or producer's cause of action for damages "or other relief." Id. We simply cannot square this legislative language with Trey's construction which requires only an appeal through the rubric of Section 85.242.
Trey's additional argument that any suit must be filed in Austin also stumbles on *211the text of the statute. Section 85.241 indeed requires that any suit against the Commission or its members be filed in Austin. At the same time, Section 85.321 creates a cause of action for damages and injunctive relief, and Section 85.322 allows such suit against any party who violates a law, rule, or order of the Commission. Section 85.322 contains no venue provision, indicating to us that a Section 85.322 suit is governed by the venue restrictions applicable to any suit. The general venue provisions permit a suit to be filed where all or a substantial part of the events giving rise to the claim occurred, which would often be outside of Travis County. TEX. CIV. PRAC. & REM. CODE ANN. § 15.002 (West 2002).
Exclusive Jurisdiction
We also disagree with Trey's argument that the Commission has exclusive jurisdiction .over injection wells until all administrative avenues have been exhausted. The Texas Constitution gives district courts jurisdiction over "all actions" unless "exclusive" jurisdiction is "conferred by this Constitution or other law on some other court, tribunal, or administrative body." Tex. Const. art. V, § 8. District courts are courts of general jurisdiction and generally have subject matter jurisdiction absent a showing to the contrary. In re Entergy Corp. ,
An administrative agency has exclusive jurisdiction when the Legislature has granted it sole authority to make an initial determination in a dispute. In re Entergy Corp. ,
Our sister court in Eastland recently considered the doctrine of exclusive jurisdiction in the context of injection wells. In re Discovery Operating, Inc. ,
In a mandamus proceeding challenging that abatement, the Eastland court first held that the Commission did not have exclusive jurisdiction over the injection wells. Despite the statutory provisions *212vesting authority in the Commission to permit and regulate injection wells, the Legislature also expressly allowed for a cause of action in Section 85.321 and 85.322 which belied exclusive jurisdiction with the Commission.
Primary Jurisdiction
The doctrine of primary jurisdiction is judicially created and allocates power between courts and agencies when both have authority to make initial dispute determinations. David McDavid Nissan,
Trey does not separately argue that primary jurisdiction should apply here. The relief it sought below was dismissal, and not abatement. We nonetheless consider primary jurisdiction. We start with the Eastland court's decision of In re Discovery , which also declined to hold the Commission had primary jurisdiction over the issues in that case.
Trey distinguishes these case by noting that the Texas Supreme Court later dispatched the trespass-based theories in R.R. Commn. of Tex. v. Manziel ,
Hastings and Gregg declined to defer to the Commission on trespass issues over which the courts at the time were able to resolve. By the same token, courts have not deferred to the Commission over issues of title ownership of property. See Amarillo Oil Co. v. Energy-Agri Prods., Inc.,
*213R.R. Comm'n v. City of Austin,
The Eastland court similarly reasoned that issues of negligence and waste were also inherently judicial, and held the Commission does not have primary jurisdiction. In re Discovery ,
Under the Commission rules, an interested person must quickly file their protest to protect their rights before the Commission (and are given as little as fifteen days to do so). TEX. ADMIN. CODE § 3.46(c)(1). If the interested party fails to file a protest, or the Commission declines to grant a hearing, then the administrative record may contain little more than the permit application. Applying the substantial evidence review standard, how would an aggrieved person in those circumstances obtain any meaningful review of the waste considerations of such a permit? After the permit is issued, only the Commission can then move to cancel it, and then only for a limited category of reasons. No provision is expressly made for a party to intervene and assert those reasons. We are accordingly unconvinced that Ring could file an appeal of the Commission's failure to seek cancellation of the permits it had earlier approved.
We acknowledge Trey's concern that injunctive relief has the effect of negating a permit issued by the Commission. The permit itself should have only issued after some consideration by the Commission of potential waste that the injection well might cause. Nonetheless, we believe the safeguards built into the issuance of injunctive relief militate against the risk of abuse. For the temporary injunction sought here, a court could not grant Ring relief unless it pled and proved three elements: (1) a cause of action against Trey; (2) a probable right to the relief sought; and (3) a probable, imminent, and irreparable injury in the interim.
COLLATERAL ATTACK
Trey also contends that Ring's pleading is effectively a collateral attack on the permit itself. Trey cites a number of cases in support of the general proposition that one cannot collaterally attack an order of the Commission, and cannot do so outside of Travis County. Some of the cases are distinguishable because they do not involve a claim filed under Section 85.321,
Trey cites to this court's decision in Zimmerman v. Texaco, Inc. ,
Trey cites Looney v. Sun Oil Co. ,
Trey also directs us to Tide Water Oil Co. v. Railroad Commission ,
In Arkla Exploration Co. v. Haywood, Rice & William Venture ,
Concluding that none of the authorities cited directly addresses our situation here, and looking to the language of Sections 85.321 and 85.322 in the context of the entire Act, we conclude the Legislature intended to allow pre-injury injunctive relief in the county where the injury is threatened. Ring of course carries a significant burden to demonstrate the requisites for injunctive relief. Whether it can ever meet that burden is not before us. But the trial court has jurisdiction to at least hear Ring's claim, and we accordingly reverse its order to the contrary.
Hughes, J., not participating
See Paula C. Murray, Frank B. Cross, The Case for A Texas Compulsory Unitization Statute ,
The process and issues that arise between operators is further described in R.R. Comm'n of Tex. v. Manziel ,
See Tex.Water Code Ann. § 27.0511 (West 2008) (noting permit requirement for enhanced recovery injection wells);
The Commission's general procedural rules allow that "any person or agency who has a justiciable or administratively cognizable interest and who is not an applicant, petitioner, complainant, respondent, or protestant and who desires to be designated as a party in any contested case before the commission may file a petition for leave to intervene no later than five days prior to the hearing date." Tex.Admin.Code Rule 1.64 (a)(1991)(Tex. R.R. Comm., Intervention). This rule might permit a party who missed the fifteen day response period to intervene, but if no actual hearing is set, the timing of the petition under this rule seems problematic.
"Modals also lack productive past tense forms. It is true that could, might, should, and would originated in Germanic as past tense forms of can, may, shall, and will. But today, only could can serve as the past tense of can , and that only in certain contexts." http://www.ling.upenn.edu/~beatrice/syntax-textbook/box-modals.html.
A statutory heading does not limit or expand a statute's meaning, Tex.Gov't Code Ann. § 311.024, but might inform as to the Legislature's intent. In re United Servs. Auto. Ass'n ,
As with Section 85.321, the original text of Section 85.322 from the 1931 law contained a comma setting off the phrase "or other relief" from the phrase "a cause of action for damages". Act of August 12, 1931 42nd Leg., 1st Called Sess., ch. 26, 1931 Gen. Session Law Pamp. 46.
The pleading here sought an injunction under Tex.Civ.Prac.&Rem.Code § 65.011(5) (West 2008). We note that Section 65.012 has specific requirements for injunctive relief when the relief prohibits "subsurface drilling or mining operations" and requires showing of not only an injury, but also that the party against whom "the injunction is sought is unable to respond in damages for the resulting injuries."
E.g. Magnolia Petroleum Co. v. New Process Production Co. ,
Justice Bleil dissented in Arkla , contending the case involved more than simple violations of Commission rules, because it also included a negligence claim for which a cause of action is allowed by statute.
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