The Texas Supreme Court has reversed a decision by the Austin Court of Appeals in Texas Commission on Environmental Quality and Dos Republícas Coal Partnership v. 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 (No. 19-1108). The issue before the Court was whether the Austin Court of Appeals erred in reversing in its entirety a trial court decision that found in favor of TCEQ on four of five issues, including whether Dos Republicas was the “operator” of the mine for purposes of applying for a permit.

As we reported last September, the pertinent facts are these. Dos Republícas (DRCP) owns a bituminous coal mine in Maverick County, which it bought from a previous owner in 2000. In 2009 DCRP contracted with Camino Real Fuels, LLC (CRF) to operate the mine. In 2013 the Railroad Commission renewed and issued a surface mining permit to DCRP and approved CRF as operator. DCRP’s predecessor obtained a TPDES (discharge of industrial wastewater) permit in 1994 and renewed the permit in 2001, 2006, and 2011. In 2013 DCRP applied to TCEQ for renewal of the permit. The appellants contested the permit, and TCEQ referred the case to SOAH.

A four-day contested case hearing took place in November, 2015 on five issues: (1), whether CRF, the operator, should have applied for the permit instead of DCRP; (2) whether TCEQ properly conducted its antidegradation review; (3) whether water quality based effluent limit 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, thereby approved a legal discharge route on private property not owned or controlled by DCRP. The ALJs recommended approval of the permit with modifications, and the TCEQ issued the permit in July 2016. The contestants appealed to Travis County district court. The district court reversed TCEQ’s final order and remanded on the basis that CRF should have filed the application as operator, not the owner DCRP. The court, however, affirmed the final order on the remaining four issues. All parties appealed.

The Austin Court of Appeals affirmed the trial court’s reversal and remand based on its finding that the application was approved for the wrong applicant. TCEQ and DCRP argued in vain that the agency’s rule defines “operator” as “the person responsible for the overall operation of the facility.” 30 TAC ^305.2(24), and that DCRP satisfies that definition. To the contrary, the court of appeals held that for purposes of permit applications (Rule 305.43(b)), “operator” means the entity personally responsible for causing the facility to function. It relied on both the language of the rule, which requires an “operator” to file the permit application if that person is distinct from the “owner,” and on the court’s 2020 decision in Heritage on the San Gabriel Homeowners Ass’n v. TCEQ, 393 S.W.3d 417, pet. denied. In that case, however, the court ruled that Waste Management properly filed a permit application as operator of a landfill owned by Williamson County. At this point, the court of appeals abruptly ended its analysis, declining to reach the remaining four issues subject to the appeal. It justified its decision by claiming that considering the issues dealing with the details of the permit would constitute an impermissible “advisory opinion” under the Texas Constitution. It reached this odd conclusion even though the Administrative Procedures Act, specifically §2001.174(1), Government Code, explicitly states that a reviewing court “may affirm the agency decision in whole or in part.” Ironically, even the San Gabriel Homeowners case, which the court of appeals found so persuasive on the “operator” issue, at the same time affirmed part of an agency order and reversed and remanded another part.

SCOTX reversed, holding that TCEQ had shown by substantial evidence that DCRP met the definition of “operator” and appropriately filed the permit application, even though it contracted out the day-to-day operation of the mine. The court of appeals thus erred in relying on San Gabriel Homeowners for the proposition that the term “operator” required “personal performance,” which does not appear in the rule. As the Court noted, a “judicial paraphrase of a legislatively supplied rule of decision—no matter how well-reasoned or suitable to the case then before the court—does not become the rule of decision applicable to future cases. That role is reserved for the text chosen by the Legislature—or, in this case, by an agency acting with the Legislature’s permission” [citing PHI, Inc. v. Tex. Juv. Just. Dep’t, 593 S.W.3d 296, 305 (Tex. 2019)].

The Court further held that the court of appeals erred by not reaching the other four issues on appeal on the basis of its “advisory opinion” reasoning. “‘The distinctive feature of an advisory opinion is that it decides an abstract question of law without binding the parties,’” the Court observed, citing Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440,444 (Tex. 1993). The administrative proceeding at issue in this case, however, is anything but “abstract” because it involved questions over whether the agency conducted its scientific and environmental review in accordance with its own rules. The Court remanded the remaining issues (which the district court determined in TCEQ’s favor) to the court of appeals for further consideration.

The Texas Farm Bureau, Texas Cattle Feeders Association, Texas Egg Council, Texas Poultry Association, and Texas Pork Producers Association filed a joint amicus brief in support of TCEQ. The Texas Water Conservation Association also filed a brief in support. They pointed out (rightly in our view) that the court of appeals opinion misinterpreted the pertinent rules and would introduce significant uncertainty into the permitting process. We are pleased that SCOTX stepped in to provide necessary clarity.

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