Last week we reported on the Texas Supreme Court’s decision to grant review in a case from the San Antonio Court of Appeals involving an administrative order issued by the Railroad Commission. On the same day, the Court denied a motion for rehearing in a Austin Court of Appeals case involving an administrative order issued by the PUC, which the Court previously declined to hear. Setting aside the merits of these cases, we are interested in the standard of review adopted by each court for the respective administrative orders.
In Ammonite Oil and Gas Corporation v. Railroad Commission of Texas and EOG Resources, Inc. (No. 04-20-00465-CV), the San Antonio court stated that “[i]n a judicial review of the [RRC’s] decision in a contested case, the court applies the substantial evidence standard of review” (citing R.R. Comm. Of Tex. v. Torch Operating Co., 912 S.W.2d 790, 792 (Tex. 1995)). Again quoting Torch, the court averred that “[t]his is a limited standard of review that gives significant deference to the agency in its field of expertise.” An agency order, consequently, may only be reversed or remanded for further proceedings “if it concludes that the appellant’s substantial rights have been prejudiced ‘because the administrative findings, inferences, conclusions, or decisions are: (A) in violation of a constitutional or statutory provision; (B) in excess of the agency’s statutory authority; (C) made through unlawful procedure; (D) affected by an error of law; (E) not reasonably supported by substantial evidence considering the reliable and probative evidence in the record as a whole; or (F) arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion” (citations omitted). Reviewing courts may not “substitute [their] judgment for that of the state agency ‘on the weight of the evidence on questions committed to agency decision,” and must affirm the agency’s order if “considering the reliable and probative evidence in the record as a whole, some reasonable basis exists in the record for the agency’s action”—even if the record evidence “may preponderate against the decision of the agency.” Conclusions of law, on the other hand, are reviewed de novo under traditional principles of statutory construction.
In Texas Industrial Energy Consumers, Cities Advocating Reasonable Deregulation, and Office of Public Utility Counsel v. Public Utility Commission of Texas and Southwestern Electric Power Company (No. 03-17-00490-CV), the Austin Court of Appeals applied traditional principles of statutory construction to an “earlier” agency order (the PUC had issued an initial order in 2008, which it reheard in 2014, concluding that the order included recovery of certain construction financing costs). For this proposition the court of appeals cited a 1963 SCOTX decision, as well the court’s own authority and a 1974 Tyler Court of Appeals decision. In response to the utility’s argument that the PUC’s interpretation of its order was entitled to deference, the court of appeals responded that “an agency’s interpretation of a statute is given deference or ‘serious consideration’ by the courts only when the statute is ambiguous,” and the same rule applies to an agency order. The court of appeals ruled out any “extrinsic” evidence from the 2014 docket at which the 2008 order was discussed and found the 2008 order unambiguous.
According to the Office of the Attorney General’s 2022 Administrative Law Handbook, unless an agency’s enabling statute specifies otherwise, a court reviewing an agency’s “action” must apply the substantial evidence rule. There is no mention in the handbook of de novo review of an “agency’s decision” based on rules of statutory construction, just that such review “authorizes the reviewing court to conduct an evidentiary hearing on the very same issues presented at the administrative hearing.”
It is the case that when reviewing an agency’s interpretation of a statute, the Court “will generally uphold an agency’s interpretation of a statute it is charged with enforcing, so long as the construction is reasonable and does not contradict the plain language of the statute.” Railroad Commission of Texas v. Texas Citizens for a Safe Future, 336 S.W.3d 619, 625 (Tex. 2011). In other words, whether “deference” must be paid depends in the first instance on the application of the rules of statutory construction to determine what the plain language of the statute says. But this all has to do with the application of an agency’s specific expertise to a reasonable interpretation of its own enabling law. In the two cases outlined above, the issue involved review of any agency order, or as the attorney general puts it, “agency decision.” Of course, it’s one thing to construe an administrative rule according to the same rules courts use for statutes. Like statutes, administrative rules apply generally and not just to parties in an administrative proceeding.
In any event, these decisions, at least on their face, do not appear consistent. Perhaps the distinction lies in the way a court will review a “prior” order that underwent reconsideration at a later time as opposed to a “recent” order under current appeal. It’s not clear what the logic of such a rule might be, but in effect it means that once an agency issues an order resulting from a contested case hearing, the standard of review is substantial evidence. But if some time passes, a party requests rehearing, and the agency receives more evidence upon which it bases a modification of the order, the standard of review is de novo based on the rules of statutory construction. Perhaps the Austin decision is a one-off that is so dependent on specific circumstances that it’s not likely to recur again, but then again, perhaps not.
