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Water Log 19.1

Fifth Circuit Upholds EPA Zero-Discharge Mandate

Texas Oil & Gas Association v. EPA, 161 F. 3d 923 (5th Cir. 1998).

Tammy L. Shaw, 2L

In December of 1998, the Fifth Circuit decided that the Environmental Protection Agency (EPA) properly set zero discharge limits for sand, water and drilling waste produced by coastal oil and gas producing operations. This ruling was the result of the consolidation of six separate actions, bringing together both major oil companies challenging the nationwide zero discharge limits and environmental groups challenging the more lenient limits granted to producers in Cook Inlet, Alaska.

EPA Sets New Guidelines

The EPA regulates discharge from oil and gas producers under authority of the Clean Water Act (CWA), enacted to gradually reduce allowable discharge by point source polluters.¹ To achieve this goal, the EPA requires point source facilities to obtain a permit and then promulgates Effluent Limitation Guidelines (Guidelines) for particular industries restricting the quantities of pollutants that may be discharged by point sources working in those industries.

To determine the Guidelines, the EPA conducted a study of coastal oil and gas producers to determine what type of technology was being used to reduce the discharge of pollutants. As a result of this study, the EPA set a zero-discharge limit on produced water and drilling waste for all coastal oil and gas facilities. Produced water is a highly saline water brought up by the drilling process and drilling waste includes fluids and cuttings that are generated during the drilling process. When it set these zero-discharge limits, it exempted the coastal facilities of Cook Inlet, Alaska.

The EPA also set a zero-discharge limit on produced sand, made up of small particles from fractured sub-strata, for all costal facilities, including Cook Inlet facilities. Coastal oil and gas producers were required to reinject these by-products or provide on-site storage facilities.
 

Effluent Limitation Guidelines Challenged

the Guidelines were challenged by three different groups of plaintiffs. The Texas Oil and Gas Association, the Texas Railroad Commission and other members of the coastal oil and gas industry (Texas petitioners) challenged the EPA study as inadequate on several levels. First, the Texas petitioners contended the EPA failed to consider the economic effects the zero-discharge standard would have on older wells because its study excluded pre-1980 wells.

The court responded that although this exclusion "may have had some effect on the precision of the EPA's analysis of the age factor . . .an agency's choice to proceed on the basis of 'imperfect' information" does not meet the level of arbitrary and capricious, and canot be overturned. ²

Next, the Texas petitioners argued that the EPA study was not sufficient representative of the facilities impacted by the Guidelines and did not address the cost-benefit ratio associated with achieving zero-discharge limits. In reality, the EPA data showed a high percentage of coastal oil and gas facilities already practicing zero discharge by 1992 and that 80% of coastal facilities in Louisiana and Texas would be required to practice zero discharge by 1997 due to new state water quality regulations.

Having recognized that the Texas petitioners "face an especially difficult challenge in this care, given the proportion of dischargers already practicing zero discharge at the time of rule-making," the court rejected this argument and found that the agency determination was a rational one.³

The second group of plaintiffs, the Cook Inlet producers, also challenged the EPA application of zero-discharge for produced sand. They argued that the EPA did not adequately consider an alternative to zero-discharge, a method of pollution control by washing the produced sand and allowing a minimal discharge, that would cost less for the producers. The court rejected this argument, finding that the EPA dis consider the alternative, but found it inconsistent in eliminating residual pollutants from produced sand. The court also noted undisputed evidence that all of the coastal facilities, minus one, were already practicing zero-discharge at the time of the new Guidelines.

Finally the third group of plaintiffs, the Alaska petitioners, included the Natural Resources Defense Council and other environmental groups that contended the EPA did not have the authority to single out one group of producers and set a different effluent standard. Specifically, the Alaska petitioners challenged the more lenient standards set for produced water and drilling wastes for Cook Inlet producers. They argued that the Cook Inlet producers were part of the same subcategory as the Louisiana and Texas producers and that the CWA requires the EPA to impose uniform guidelines for all the producers in this subcategory. The EPA countered that the Cook Inlet facilities were granted a more lenient discharge for several reasons. The facilities were located in relatively deep water, with a scarcity of land disposal facilities for by-products and geologic conditions that make reinjection unsuitable. In addition, the cost of compliance with a zero-discharge standard would be substantially higher.

The court found that the CWA does allow the EPA to promulgate different rules for some polluters within a category or subcategory. It analyzed the structure and language of the CWA and determined that while the EPA must promulgate rules for classes of polluters rather than individual polluters, the agency is not required to treat all polluters i a class identically.
 

Conclusion:

This Fifth Circuit decision is significant for coastal oil and gas producers in the Gulf of Mexico because it affirms the EPA decision to set zero-discharge limits for drilling and production by-products and supports the agency's finding that the effluent limitation guidelines are economically achievable within the industry. The decision has a national impact on producers and environmental groups by allowing the EPA's lenient determination for a category of oil and gas producers that are geographically diverse, affecting producers from the Gulf of Mexico to Cook Inlet, Alaska. The Court's decision also supports the EPA's authority to single out a polluter within a category or subcategory with different standards or requirements, without defeating the objectives of the Clean Water Act.
 

ENDNOTES

1. The goal of the Clean Water Act was to reduce discharge from point source polluters or "end of the pipeline" type polluters, those in which a source of discharge is identifiable and clearly linked to a particular source, by the year 1985. Clean Water Act, 33 U.S.C. § 1251 (1998).

2. 161 F. 3d at 935.

3. Id. at 934.
 

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