Title: Black Hills Trucking, Inc. v. N.D. Industrial Commission

State: north-dakota

Issuer: North Dakota Supreme Court

Document:

IN THE SUPREME COURT STATE OF NORTH
DAKOTA 2017 ND 284Black Hills
Trucking, Inc., Appellantv.North Dakota Industrial Commission, AppelleeNo. 20170086Appeal from the District Court of Williams County, Northwest
Judicial District, the Honorable Paul W. Jacobson,
Judge.AFFIRMED.Opinion of the Court by Kapsner, Surrogate Judge.John W. Morrison Jr. (argued) and Anthony J. Ford (appeared), Bismarck, ND, for
appellant.Hope L. Hogan (argued) and David P. Garner (appeared), Office of the Attorney
General, Bismarck, ND, for appellee.Black Hills Trucking, Inc.
v. N.D. Indus. Comm'nNo. 20170086Kapsner,
Surrogate Judge.[¶1] Black Hills Trucking, Inc., appeals
from a judgment affirming an Industrial Commission order assessing a $950,000 civil penalty
and costs and expenses against it for illegally dumping saltwater on roads in Williams County.
We conclude the Commission regularly pursued its authority and its findings and conclusions are
sustained by the law and by substantial and credible evidence. We affirm.I[¶2] Black Hills is a Wyoming corporation that is
in the business of transporting crude oil, produced saltwater, petroleum products, oilfield
equipment and other materials. During 2014 Black Hills owned and operated trucks in North
Dakota for the purpose of transporting oilfield waste. On February 11, 2014, the Commission
received a report from a security officer for Continental Resources, Inc., that he had photos and
video of a Black Hills truck dumping substantial amounts of fluids onto roads near a saltwater
disposal well in Williams County. Commission staff examined the affected roads and collected a
soil sample. The Commission also collected logs from the well which indicated a Black Hills
driver had transported saltwater to the well on February 8, 2014.[¶3] On February 14, 2014, a Commission field technician observed a Black Hills
truck leave the same well site and stop on the road. The driver opened the valves on the tractor
trailer and drove away discharging produced fluids on the road. The technician followed the truck
until it pulled off of the highway and into a truck yard where it continued to discharge fluids on
the ground that pooled under the open valves. The technician took a sample directly from the
discharging fluids and took soil samples from the road. Commission staff then requested a
meeting with Black Hills to discuss the incident, and a meeting was held on February 28,
2014.[¶4] At the meeting, Commission staff discussed Black
Hills' understanding of the February 14 incident and the company's response to it. The February 8
incident was not discussed because the Commission was continuing to investigate what occurred.
Black Hills placed the truck driver on probation and reprimanded him through the loss of his
safety award and bonus.[¶5] On March 3, 2014, the Commission
confirmed through lab analysis that the soil sample from the February 8 incident contained
elevated levels of electrical conductivity and chlorides consistent with saltwater. On the same day
the Commission received another report of a Black Hills truck improperly dumping fluids.
Employees at the same well site observed the truck unloading saltwater and exiting, leaving a
trail of saltwater from the disposal well, continuing off the well site and onto a county road until
it intersected a highway. One of the employees confirmed that the discharged fluids contained
saltwater. On March 6, 2014, the Commission received the lab analysis of the samples related to
the February 14 incident which also indicated high levels of electrical conductivity and chlorides
consistent with saltwater. Black Hills did not file a spill report, test to determine the extent of
contamination, develop a remediation plan or take any further actions to clean up or remediate
the areas affected by the improper discharge of saltwater from the three incidents.[¶6] On March 13, 2014, the Commission issued an administrative complaint
against Black Hills for the three incidents and requested penalties in the amount of $950,000 and
costs and expenses of $1,526. Counts one through three of the complaint claimed violations of
N.D. Admin. Code § 43-02-03-19.2 for dumping the produced fluids on three occasions.
Counts four through six alleged violations of N.D. Admin. Code § 43-02-03-30.1 for
allowing the fluids to infiltrate the soils on three occasions. Counts seven through nine alleged
violations of N.D. Admin. Code § 43-02-03-30.1 for failing to properly remove the
discharged fluids from the roads. Count 10 sought the Commission's investigative costs and
expenses under N.D.C.C. § 28-32-26. The Commission sought fines of $12,500 per day
for each violation. The vast majority of the Commission's proposed fine related to the violations
alleged in counts seven through nine.[¶7] On March 19, 2014, the
Department of Health issued a notice of violation against Black Hills concerning the three
incidents and its failure to report them, as well as its failure to have a valid waste transporter's
permit for the previous six years. The Department alleged Black Hills "placed wastes where they
may cause pollution of waters of the state" in violation of N.D.C.C. § 61-28-06(1). To
resolve that proceeding, Black Hills entered into an administrative consent agreement with the
Department under which Black Hills admitted responsibility for the oilfield waste illegally
discharged during the three incidents. Black Hills agreed to an administrative penalty of
$459,000, with $259,000 of that amount suspended.[¶8] An
evidentiary hearing on the Commission's administrative complaint was held in December 2015
before an administrative law judge ("ALJ"). In February 2016, the ALJ recommended that the
complaint against Black Hills be dismissed with prejudice. The ALJ's decision was presented to
the Commission at its March 2016 meeting, and after an executive session with its legal counsel,
the Commission rejected most of the ALJ's recommendations and directed its legal counsel to
draft an alternative order for consideration. At its April 2016 meeting, the Commission approved
an alternative decision by unanimous vote finding Black Hills violated the regulations and
assessing against it a $950,000 civil penalty and $1,526 in costs and expenses. The district court
affirmed the Commission's order.II[¶9] On
appeal, Black Hills challenges the Commission's order on numerous grounds.[¶10] Our standard of review of Commission orders is very limited. In Langved v. Cont'l Res., Inc., 2017 ND 179, ¶ 8, 899 N.W.2d 267, we
explained:The standard of judicial review of Commission orders is set
forth in N.D.C.C. § 38-08-14(3), which provides that "[o]rders of the commission must be
sustained by the district court if the commission has regularly pursued its authority and its
findings and conclusions are sustained by the law and by substantial and credible evidence." This
Court applies the same standard of review in appeals from district court involving orders of the
Commission. See Amoco Prod. Co. v. North Dakota
Indus. Comm'n, 307 N.W.2d 839, 842 (N.D. 1981). The "substantial evidence" test "is
something less" than the greater weight of the evidence and the preponderance of the evidence
tests, and differs from the usual standard of review for administrative decisions under N.D.C.C.
§ 28-32-46. Hanson v. Industrial
Comm'n, 466 N.W.2d 587, 590
(N.D. 1991). "Substantial evidence is such relevant evidence as a reasonable mind might accept
as adequate to support a conclusion," and we "accord greater deference to Industrial Commission
findings of fact than we ordinarily accord to other administrative agencies' findings of fact."
Id. The Commission's decisions on
questions of law are fully reviewable on appeal. See Imperial Oil of North Dakota, Inc. v. Industrial
Comm'n, 406 N.W.2d 700, 702
(N.D. 1987). (quoting Gadeco, LLC v. Indus. Comm'n, 2012 ND 33,
¶ 15, 812 N.W.2d 405).A[¶11] Black Hills argues the Commission lacks
jurisdiction over a discharge of produced saltwater on a public road occurring away from an oil
and gas well site, disposal site, treatment plant, or other facility.[¶12] "Under N.D.C.C. ch. 38-08, the Commission has extremely broad and
comprehensive powers to regulate oil and gas development in the state." Langved, 2017 ND 179, ¶ 12, 899 N.W.2d 267; see
also Envtl. Driven Solutions, LLC v.
Dunn Cty., 2017 ND 45, ¶ 9,
890 N.W.2d 841; GEM Razorback, LLC v.
Zenergy, Inc., 2017 ND 33, ¶
10, 890 N.W.2d 544. "'The Commission's powers are continuous . . . and are exclusive.'"
Dunn Cty., at ¶ 9 (quoting Egeland v. Cont'l Res., Inc., 2000 ND 169, ¶ 11, 616 N.W.2d 861). Section 38-08-04,
N.D.C.C., provides in relevant part:The commission has continuing
jurisdiction and authority over all persons and property, public and private, necessary to enforce
effectively the provisions of this chapter. The commission has authority, and it is its duty, to
make such investigations as it deems proper to determine whether waste exists or is imminent or
whether other facts exist which justify action by the commission. The commission has the
authority:. . . .2. To regulate:a. The drilling, producing, and plugging of wells, the
restoration of drilling and production sites, and all other operations for the production of oil or
gas.. . . .e. Disposal of saltwater and oilfield wastes.(1) The commission shall give
all affected counties written notice of hearings in such matters at least fifteen days before the
hearing.(2) The commission may consider, in addition to other authority granted under this
section, safety of the location and road access to saltwater disposal wells, treating plants, and all
associated facilities.[¶13] Section
38-08-04(2)(a) and (e), N.D.C.C., unambiguously give the Commission authority to regulate "all
other operations for the production of oil or gas" including "[d]isposal of saltwater and oilfield
wastes." We have interpreted these provisions broadly in recognizing the Commission's statutory
authority to regulate "the disposal of saltwater and oilfield wastes." Dunn Cty., 2017 ND 45, ¶ 13, 890 N.W.2d 841. The Commission
has promulgated a regulation governing disposal of waste material which provides "[a]ll waste
material associated with exploration or production of oil and gas must be properly disposed of in
an authorized facility in accord with all applicable local, state, and federal laws and regulations,"
and "[a]ll waste material recovered from spills, leaks, and other such events shall immediately be
disposed of in an authorized facility, although the remediation of such material may be allowed
onsite if approved by the director." N.D. Admin. Code § 43-02-03-19.2. Although Black
Hills suggests on appeal that saltwater does not qualify as oilfield waste, Black Hills admitted in
the administrative proceedings that "produced water is included within either 'saltwater and
oilfield wastes' [under N.D.C.C. § 38-08-04(2)(e)] or 'waste material associated with the
exploration or production of oil and gas' [under N.D. Admin. Code § 43-02-03-19.2]."
See also N.D. Admin. Code § 43-02-03-19.3 ("no saltwater, drilling mud,
crude oil, waste oil, or other waste shall be stored in earthen pits or open
receptacles").[¶14] Black Hills argues that N.D.C.C. §
38-08-04(2)(e) does not support the Commission's assertion of jurisdiction because Williams
County was not provided written notice of the hearing in this case and because its jurisdiction is
limited to saltwater disposal wells, treating plants, and facilities. First, Williams County is the
entity entitled to complain about lack of notice in this case, and it has not done so. Black Hills
has not alleged prejudice from the county's lack of notice. A party "must assert his own legal
rights and interests, and cannot rest his claim to relief on the legal rights and interests of third
parties." Flatt ex rel. Flatt v. Kantak,
2004 ND 173, ¶ 38, 687 N.W.2d 208
(internal citation omitted). Second, Black Hills' narrow interpretation of N.D.C.C. §
38-08-04(2)(a) and (e) conflicts with our recognition of the broad and unambiguous authority the
legislature has given the Commission to "regulat[e] the disposal of saltwater and oilfield wastes."
Dunn Cty., 2017 ND 45, ¶ 13, 890 N.W.2d 841. Black Hills'
argument limiting the Commission's jurisdiction over saltwater or other oilfield waste disposal to
only the physical location of the facilities themselves, and not to any property between the site
the waste is generated and the site the waste is disposed, ignores the plain language of the statute
and reality. Saltwater and other oilfield wastes by necessity must often be transported to a
disposal site. The Commission has the authority to regulate the disposal of saltwater and oilfield
waste and has continuing jurisdiction "over all persons and property, public and private,
necessary to enforce effectively the provisions" of N.D.C.C. ch. 38-08. N.D.C.C. §
38-08-04; see also Dunn
Cty., at ¶ 13.[¶15] Black Hills contends the Commission's jurisdictional claims over the
cleanup of a produced water spill occurring away from a well site or disposal facility are
contradicted by N.D. Admin. Code § 43-02-03-30.1, which in 2014
provided:At no time shall any spill or leak be allowed to flow over, pool,
or rest on the surface of the land or infiltrate the soil. Discharged fluids must be properly
removed and may not be allowed to remain standing within or outside of diked areas, although
the remediation of such fluids may be allowed onsite if approved by the director. Operators must
respond with appropriate resources to contain and clean up
spills.[¶16] Black Hills contends that the
regulation imposes spill containment and cleanup responsibilities only on "operators," and an
"operator" is defined by the regulations as "the principal on the bond covering a well and such
person shall be responsible for drilling, completion, and operation of the well, including plugging
and reclamation of the well site." N.D. Admin. Code § 43-02-03-01(37). Because Black
Hills is a hauler of produced saltwater and not a principal on a bond covering a well, Black Hills
argues it did not violate any duty to contain and clean up spills. Furthermore, because N.D.
Admin. Code § 43-02-03-30.1 has since been amended to read "Operators and
responsible parties must respond with appropriate resources to contain and clean up spills"
(emphasis added), Black Hills argues the amendment evidences that no duties were imposed
upon non-operators when the spills occurred. The Commission argues the amendment merely
clarified its intention that all culpable parties are responsible for remediation and
cleanup.[¶17] "Administrative regulations are derivatives of
statutes and are construed under rules of statutory construction." Gadeco, LLC v. Indus. Comm'n, 2013 ND 72,
¶ 10, 830 N.W.2d 535. We have often
said "'[t]he principles of statutory construction do not prevent a court from looking to subsequent
enactments and amendments as an aid in arriving at the correct meaning of a prior statute.'"
N.D. Pub. Serv. Comm'n v. Valley Farmers Bean
Ass'n, 365 N.W.2d 528, 546-47
(N.D. 1985) (quoting State v. Novak, 338 N.W.2d 637, 640 (N.D. 1983)); see
also City of Bismarck v.
Santineau, 509 N.W.2d 56, 58 n.1
(N.D. 1993); State v. Thomas, 420 N.W.2d 747, 753 n.5 (N.D. 1988); Slawson v. N.D. Indus. Comm'n, 339 N.W.2d 772,
775 n.2 (N.D. 1983). The first sentence of N.D.
Admin. Code § 43-02-03-30.1 contains a general prohibition against spills or leaks
regardless of where they occur. The second sentence requires that discharged fluids be "properly
removed" regardless of where the discharge occurs, i.e., "within or outside of diked
areas." The third sentence speaks only of an operator's duty to respond "with appropriate
resources" to contain and clean up spills. Black Hills' argument that only "operators" are
responsible for cleanup ignores the first two sentences of the regulation. We agree with the
Commission that the third sentence's silence regarding the "resources" non-operators should
apply to contain and clean up spills does not relieve non-operators from their duty to properly
remove any spill or leak that occurs beyond a well site. The amendment to the rule merely
requires all responsible parties to respond with appropriate resources to clean up
spills.[¶18] Black Hills' reliance on N.D. Admin. Code §
43-02-03-30.1 is solely for the purpose of attacking the Commission's jurisdiction, which clearly
exists under N.D.C.C. § 38-08-04(2)(a) and (e). We recognize a defendant's reasonable
interpretation of and reliance on an ambiguous regulation may be a successful defense based on
lack of notice in an administrative enforcement proceeding. See, e.g., Elgin
Nursing and Rehab. Ctr. v. U.S. Dep't of Health and Human Servs., 718 F.3d 488, 494 (5th
Cir. 2013); United States v. Sci. Applications Int'l Corp., 653 F. Supp. 2d 87, 97
(D.Ct. D.C. 2009). But Black Hills is not claiming a lack of notice because it believed the
regulation only applied to "operators" in an oil and gas sense. In other words, Black Hills does
not assert that during the February 28, 2014 meeting with Commission staff it disclaimed
responsibility for remediation because it was not an "operator" under the regulation. Instead,
Black Hills disciplined the driver of the truck. This is not a notice issue.[¶19] Although we generally defer to an administrative agency's reasonable
interpretation of its governing statutes and rules, see, e.g., Indus. Contractors, Inc. v. Workforce Safety &
Ins., 2009 ND 157, ¶ 6, 772 N.W.2d 582; St. Benedicts Health Ctr. v. N.D.
Dep't of Human Servs., 2004 ND 63, ¶ 9, 677 N.W.2d 202, no deference is
required to support the Commission's jurisdiction in this case. We conclude the Commission has
jurisdiction over the illegal discharge of saltwater from the point it was generated to the point it
is disposed, and Black Hills' actions fall within the Commission's jurisdiction.B[¶20] Black Hills argues that even if the
Commission has jurisdiction over these incidents, its order unnecessarily encroaches on the
primary jurisdiction of the Department of Health.[¶21] The
Department has the statutory authority to supervise the administration and enforcement of
N.D.C.C. ch. 61-28 relating to the control, prevention, and abatement of the pollution of surface
waters. See N.D.C.C. § 61-28-04(1); N.D. Admin. Code art. 33-16. The
Department also has the authority to administer N.D.C.C. ch. 23-29 relating to solid waste
management and land protection. See N.D.C.C. § 23-29-04(1); N.D. Admin.
Code art. 33-20. Black Hills argues the Department's "comprehensive authority over the
transportation of solid waste," including liquids, gives the Department primary jurisdiction over
the spills in this case. The Commission acknowledges that the agencies' jurisdiction over oilfield
waste may overlap to some degree, but argues this situation is not prohibited under the
law.[¶22] The United States Supreme Court has recognized that
"[r]edundancies across statutes are not unusual events in drafting, and so long as there is no
'positive repugnancy' between two laws, . . . a court must give effect to both." Connecticut
Nat'l Bank v. Germain, 503 U.S. 249, 253 (1992) (internal citation omitted); see
also United States v. Borden Co., 308 U.S. 188, 198 (1939) ("When there are
two acts upon the same subject, the rule is to give effect to both if possible."). There is no
positive repugnancy between the authority granted to the Commission and the authority granted
to the Department.[¶23] We conclude the Department does not
have primary jurisdiction over this oilfield waste matter and both the Department and the
Commission could exercise their regulatory jurisdiction.C[¶24] Black Hills argues the penalties assessed against it are unconstitutionally
excessive in violation of N.D. Const. art. I, § 11.[¶25] The
parties agree that, because of the similarities between the state and federal excessive fines
clauses, this Court should analyze the issue under United States v. Bajakajian, 524 U.S. 321, 334 (1998), where the United States Supreme Court held the federal excessive fines
clause is violated if the fine "is grossly disproportional to the gravity of a defendant's offense."
The two considerations identified by the Supreme Court for judging constitutional excessiveness
are: 1) "judgments about the appropriate punishment for an offense belong in the first instance to
the legislature;" and 2) "any judicial determination regarding the gravity of a particular criminal
offense will be inherently imprecise." Id. at 336.[¶26] Here, the legislature through its enactment of N.D.C.C. §
38-08-16(1), has authorized a civil penalty "not to exceed twelve thousand five hundred dollars
for each offense, and each day's violation is a separate offense." "Generally, a sentence within the
statutory sentencing range is neither excessive nor cruel." State v. Gomez, 2011 ND 29, ¶ 28, 793 N.W.2d 451; see
also State v. Flohr, 310 N.W.2d 735, 738 (N.D. 1981) (where sentence was authorized
by statute, it did not violate the state excessive fines clause). In imposing the penalty, the
Commission explained in its order:Contrary to the ALJ's conclusion, the
Commission believes the penalty it seeks to assess is appropriate and constitutional. The
Commission is charged with the orderly control of the State's oil and gas resources, which
includes the protection of the State and its citizens from these types of reckless and detrimental
violations to the environment. Although the harm from Black Hill's illegal dumping may not be
readily quantifiable, the illegal dumping of saltwater is a legitimate and obvious harm and the
levying of penalties against companies that damage the environment but refuse to clean their
illegal spills, may deter future illegal activities in the future. See, e.g., Towers
v. City of Chicago, 173 F.3d 619, 625 (7th Cir. 1999). A penalty is not unconstitutional
simply because it may serve as a deterrent. The Commission takes these issues so seriously that
the Commission sought a criminal conviction against [the truck driver] for the February 14, 2014
incident.[¶27] Black Hills argues there is no
proportionality between the size of the fine and the harm suffered by the public. According to
Black Hills, this is evidenced by the Commission's estimation of the spills to range "from a few
gallons to a hundred gallons" and the lack of requests for remediation from the Department and
local officials. Because the Commission did not quantify the volume of saltwater discharged and
did not present evidence of the amount of harm to the environment caused by the discharges,
Black Hills argues the fine is unconstitutional.[¶28] The party
challenging the constitutionality of governmental actions bears the heavy burden of producing
evidence showing why the actions are unconstitutionally defective. See, e.g.,
State v. Francis, 2016 ND 154, ¶ 18, 882 N.W.2d 270; Newman Signs, Inc. v. Hjelle, 268 N.W.2d 741, 756 (N.D. 1978). The fine imposed by the
Commission is authorized under N.D.C.C. § 38-08-16(1). If the volume of saltwater
discharged and the resulting environmental harm are "minimal" in this case as Black Hills
suggests, it had the burden to establish these facts. Black Hills presented no evidence on these
issues, and consequently, it has not established the fine is unconstitutionally excessive.D[¶29] Black Hills argues the Commission's
conduct during this case violated basic notions of fundamental fairness.[¶30] Due process requires that administrative proceedings conform with
"[b]asic notions of fundamental fairness." Morrell
v. N.D. Dep't of Transp., 1999 ND 140, ¶ 9, 598 N.W.2d 111. "[D]ue process is
flexible and must be analyzed on a case-by-case basis, balancing the competing interests and
assessing whether the basic due process requirement of fairness has been satisfied." Wahl v. Morton Cty. Soc. Servs., 1998 ND 48,
¶ 6, 574 N.W.2d 859. Black Hills relies
upon an unreported decision, United States v. ITT Cont'l Baking Co., No. C-1220,
1971 WL 596 *2 (D.Ct. Colo. Aug. 2, 1971), in which the court, in the context of a Federal
Trade Commission proceeding, stated, "as obiter dictum, it would seem unreasonable to permit
the Commission to knowingly let daily penalties accrue without giving notice of the
Commission's position at the earliest reasonable time." Black Hills contends that when it met
with Commission staff on February 28, 2014 to discuss the February 14, 2014 incident, the
Commission "intentionally withheld the information" about the February 8, 2014 incident. Black
Hills argues that if it had been informed of the February 8 incident at the meeting, "the third
incident on March 3, 2014 could have been prevented." By failing to notify Black Hills of either
the February 8 or March 3 incidents until it was served with the complaint, Black Hills argues the
Commission, in the words of the ALJ, "was holding its aces up its sleeve" by unnecessarily
allowing the daily fines to accrue. Assuming for purposes of argument only that the ITT
Cont'l Baking dictum is a correct statement of the law, Black Hills has not established that
the Commission's penalties were fundamentally unfair in this case.[¶31] In its order, the Commission cogently
explained:The Commission has consistently taken the position that its
computation of penalties was fair and reasonable and did not violate Black Hills' due process
rights. Regarding the February 8, 2014 illegal dumping, the record indicates the Commission
promptly started its investigation and took soil samples on February 11, 2014. . . . The
Commission did not receive the results of the sample analysis until March 3, 2014. . . . Regarding
the February 14, 2014 spill, the Commission's field technician witnessed the dumping of
produced fluids and promptly investigated the illegal activity by acquiring a water sample from
the actual truck. The Commission results of the lab analysis of the water, received on March 6,
2014, confirmed the fluid was produced water. . . . Finally, regarding the March 3, 2014 spill, the
Commission had eyewitness reports that a Black Hills truck had dumped produced water--it
would have been impossible to inform Black Hills of this violation during its February 28
meeting as implied by the ALJ. The Commission filed its complaint on March 13, 2014. . .
.Although the Commission timely notified Black Hills of the February 14, 2014 illegal
dumping witnessed by the Commission's field technician, Black Hills did nothing except
interview its driver; it did not do any testing, it did not fire [the driver] or provide him with
further training, it did not contact the Commission to discuss remediation or file a spill report,
and it did not perform any remediation. Black Hills admits that other than the two meetings it had
with the Commission, it had no other interaction with the agency. As testified by [Commission
staff], that is unusual. Other trucking companies that have had spill incidents have been proactive
and contacted the Commission to determine what steps needed to be taken to remedy the
violations.The record indicates the Commission did not immediately notify Black Hills of the
saltwater dumping because the Commission was actively investigating the matter and trying to
identify the truck driver responsible for February 8, 2014 and March 3, 2014 incidents. As
[Commission staff] testified, spill violators are difficult to catch and the claims are difficult to
prove. Furthermore, it would be inappropriate for an agency to issue a formal notice of violation
or complaint before finishing its investigation.[¶32] We conclude the Commission's conduct did not violate basic notions of
fundamental fairness.III[¶33] It is
unnecessary to address other arguments raised because they either are unnecessary to the decision
or are without merit. We conclude the Commission regularly pursued its authority and its
findings and conclusions are sustained by the law and by substantial and credible evidence.
Because the Commission prevailed, Black Hills is not entitled to attorney fees under N.D.C.C.
§ 28-32-50(1). The judgment is affirmed.[¶34] Carol Ronning Kapsner, S.J.William A. Neumann,
S.J.Lisa Fair McEversGerald W. VandeWalle, C.J.
[¶35] The Honorable William A. Neumann, S.J., sitting in place of Tufte, J., disqualified.[¶36] The Honorable Jon J. Jensen was
not a member of the Court when this case was heard and did not participate in this decision. Surrogate Judge Carol Ronning Kapsner, sitting.Crothers, Justice,
dissenting.[¶37] I respectfully dissent.[¶38] Black Hills Trucking ("BHT") argues the North Dakota Industrial
Commission ("NDIC") lacks jurisdiction over the discharge of produced saltwater on a public
road. The majority responds by discussing NDIC's general authority over petroleum well-site
operations and disposal of oilfield wastes, including saltwater. Majority opinion, ¶¶ 12-19. But they do not examine
the actual grounds on which NDIC seeks to impose nearly $1 million in penalties.[¶39] Examination of the particular statutes and regulations relied upon by
NDIC as a basis for the complaint in this case leads me to agree with BHT. I reach this
conclusion because the NDIC's adjudicatory authority is not plenary, but instead is limited to that
delegated by the legislature. See Schwind v. Dir., N.D. Dept. of Transp., 462 N.W.2d 147, 150 (N.D. 1990) ("A public
administrative body has such adjudicatory jurisdiction as is conferred on it by statute. The
jurisdiction of an administrative agency is dependent upon the terms of the statute and must meet
at least the basic mandatory provisions of the statute before jurisdiction is established." (citations
omitted)). I believe the majority errs here because it confers on NDIC greater authority than was
provided to NDIC in 2014 under the statutes and the administrative code. The majority also
erroneously concludes the North Dakota Legislature did not give primary jurisdiction over the
discharge of produced saltwater on a public road to the Department of Health, and the penalty
imposed by NDIC violates the Constitution. I would reverse.A[¶40] NDIC charged BHT with violations of N.D. Admin. Code §
43-02-03-19.2 (2013) for a February 8, 2014 fluid dump on a gravel road (Count One); for a
February 14, 2014 fluid dump on a gravel road (Count Two); and for a March 3, 2014 incident
leaving "two puddles and a trail of fluid" on an area adjacent to a gravel road (Count
Three).[¶41] NDIC relies on N.D. Admin. Code §
43-02-03-30.1 (2013) for a claim that the February 8, 2014 and February 14, 2014 incidents each
were a "spill or leak" that unlawfully "allowed [fluid] to flow over, pool, or rest on the surface of
the land or infiltrate the soil on the gravel road" (Counts Four and Five); for the March 3, 2014
incident where BHT allowed the "two puddles and a trail of fluid" "to flow over, pool, or rest on
the surface of the land or infiltrate the soil on the gravel road" (Count Six); and for not properly
removing the discharged fluids and allowing the fluids "to remain standing within or outside of
diked areas" after the "discharged fluids were not properly removed from the gravel road" (Count
Seven, Eight and Nine).[¶42] Section 43-02-03-19.2, N.D.
Admin. Code, relates to NDIC regulation of mineral exploration and development, oil and gas
conservation, and is titled "disposal of waste material" and in 2014 provided in pertinent
part:"All waste material associated with exploration or production of oil
and gas must be properly disposed of in an authorized facility in accordance with all applicable
local, state, and federal laws and regulations."All waste material recovered from spills, leaks,
and other such events shall immediately be disposed of in an authorized facility, although the
remediation of such material may be allowed onsite if approved by the
director."[¶43] Section 43-02-03-30.1, N.D.
Admin. Code, is titled "leak and spill cleanup" and in 2014 provided:"At
no time shall any spill or leak be allowed to flow over, pool, or rest on the surface of the land or
infiltrate the soil. Discharged fluids must be properly removed and may not be allowed to remain
standing within or outside of diked areas, although the remediation of such fluids may be allowed
onsite if approved by the director. Operators must respond with appropriate resources to contain
and clean up spills."[¶44] I agree with the
majority that NDIC has extensive power and authority to regulate oil and gas development in
North Dakota. Majority opinion, ¶ 12. I also agree we have said NDIC's
"powers are continuous . . . and are exclusive."  Envtl. Driven Solutions, LLC v. Dunn Cty.,
2017 ND 45, ¶ 9, 890 N.W.2d 841
(quoting Egeland v. Cont'l Res., Inc.,
2000 ND 169, ¶ 11, 616 N.W.2d 861).
But the buzz words "continuous" and "exclusive" are being used here to supplant actual wording
of the statute, where in Dunn Cty. the
words were used in the context of comparing NDIC's legal authority to those of county
government when approving the construction location of a waste oil processing facility. Id.[¶45]
The actual statute conferring NDIC's regulatory authority to act stated: "The Commission has the
authority: * * * *(2) To regulate:(a) The drilling, producing, and
plugging of wells, the restoration of drilling and production sites, and all other operations for the
production of oil or gas.(b) The shooting and chemical treatment of wells.(c) The spacing
of wells.(d) Operations to increase ultimate recovery such as cycling of gas, the maintenance
of pressure, and the introduction of gas, water, or other substances into producing
formations.(e) Disposal of saltwater and oilfield wastes.(1) The commission shall give all
affected counties written notice of hearings in such matters at least fifteen days before the
hearing.(2) The commission may consider, in addition to other authority granted under this
section, safety of the location and road access to saltwater disposal wells, treating plants, and all
associated facilities." N.D.C.C. § 38-08-04(2) (2013). NDIC and the
majority rely on words in subdivisions (2)(a) and (2)(e), and the majority proclaims NDIC's
jurisdiction "clearly exists" under these provisions. Majority opinion, ¶ 18. I respectfully
disagree.[¶46] The words of this statute first state NDIC's
jurisdiction is over "all other operations for the production of oil and gas." N.D.C.C. §
38-08-04(2)(a) (2013). BHT was not the well operator and it is not reasonable to conclude that
the remote disposal of produced saltwater is "operations" by a non-operator for purposes of
NDIC's regulatory authority. To rule otherwise would grant NDIC plenary jurisdiction over
literally every person, piece of work, commerce, product and byproduct movement to or from a
well, all under the guise of being part of "operations for the production of oil or gas." Such an
expansive reading of the statute is not warranted by its plain words or by the context in which
those words appear.[¶47] Nor do I believe N.D.C.C. §
38-08-04(2)(e) (2013) provided NDIC authority to regulate the remote transportation or disposal
of produced saltwater. That section was, at the time of events pertinent to this case, limited to
"saltwater disposal wells, treating plants, and all associated facilities." Id. The
statutory specification of "wells," "plants" and "facilities" is far less authority than the
"cradle-to-grave jurisdiction over saltwater and oilfield waste" repeatedly claimed by NDIC in its
filings with this Court. Rather, the words of the statute make plain that NDIC's jurisdiction
related to "wells," "treating plants" and "associated facilities." Id. I do not agree
public roads could fairly be described as any of these three things.[¶48] NDIC next argued and the majority agreed that N.D. Admin. Code §
43-02-03-30.1 (2013) applied to more than "operators." Majority opinion, ¶¶ 15-17. At the time of events in
this case, the regulation applied to "operators." See ¶ 10, above. The
regulation was amended in 2015, after events in this matter, to state: "Operators and responsible
parties must respond [to any spill or leak] with appropriate resources to contain and clean up
spills." N.D. Admin. Code § 43-02-03-30.1 (2015). The majority characterizes the addition
of the words "and responsible parties" as a clarification rather than a substantive claim. Majority opinion, ¶ 16. They then build on the
"clarification" to conclude others who are not operators are responsible for spill or leak clean up.
Id.[¶49] I again respectfully disagree with the majority. While clean up obligations
now exist for operators and others, nothing in the prior plain language allowed for such a
conclusion. Rather, the prior statute limited clean up obligations to "operators," and BHT was not
an operator. We must accept this clear statement of law from the face of the statute.
See Estate of Christeson v.
Gilstad, 2013 ND 50, ¶ 12,
829 N.W.2d 453 ("When engaging in statutory interpretation, this Court has consistently
recognized that it must be presumed the legislature intended all that it said, said all that it
intended to say, and meant what it has plainly expressed."). Therefore, I do not believe the law
gave NDIC legal authority to seek the relief sought against BHT in Counts 1-3 of the
complaint.B[¶50] The majority next accepts
NDIC's argument that its assertion of jurisdiction over remote disposal of saltwater was not an
unlawful encroachment on the North Dakota Department of Health's ("DOH") primary
jurisdiction. Again, I do not agree.[¶51] The legislature
established a regulatory scheme granting NDIC authority over produced saltwater when it is
generated and stored at well sites, and when it is disposed of at a facility. See
N.D.C.C. § 38-08-04(2)(a), (2)(e) (2013). At the same time, the legislature expressly
provided DOH with jurisdiction over the transportation of produced saltwater. See
N.D.C.C. § 23-29-03(14) (2013) ("'Solid waste' means . . . discarded material, including
solid, liquid, semisolid, or contained gaseous material resulting from industrial, commercial,
mining, and agricultural operations"), 23-29-02 (2013) (declaring the regulation of solid waste
transportation to be one of the purposes of N.D.C.C. ch. 23-29); N.D. Admin. Code §
33-20-01.1-04(3) (2013) (requiring solid waste to be transported "in a manner that provides for
public safety, [and] prevents uncontrolled introduction into the environment").[¶52] BHT was transporting produced saltwater over public highways. Produced
saltwater is a solid waste under North Dakota law. N.D.C.C. § 23-29-03(14) (2013). DOH
has specific and comprehensive authority over transportation of solid waste, which vests DOH
with clear and direct (i.e. primary) jurisdiction in this matter.[¶53] The primary jurisdiction doctrine generally applies when an agency's
jurisdiction overlaps with a court's jurisdiction. This Court has expressed disapproval of
bifurcated legal proceedings that "create duplication, and uncertainty, and waste manpower and
money, with no appreciable result, and all without improving the administration of justice."
Shark Bros., Inc. v. Cass Cty., 256 N.W.2d 701, 705 (N.D. 1977); see Amerada Hess Corp. v. Conrad, 410 N.W.2d 124,
126 n.1 (N.D. 1987); City of Minot v. Central Ave. News, Inc., 325 N.W.2d 243, 243 (N.D. 1982) (illustrating "the
evils that flow from thoughtless bifurcation or trifurcation of actions").[¶54] In the exercise of its regulatory jurisdiction over hauling produced water,
DOH cited BHT with multiple violations relating to the spills,
including:
	That BHT hauled solid waste (produced saltwater) without a
valid waste transporter's permit issued by DOH;
	That BHT unlawfully abandoned solid waste
on a street or highway;
	That BHT deposited solid wastes where they may cause pollution of
the state's waters;
	That BHT did not report spills of solid waste to DOH.
  In
response to DOH's Notice of Violations, BHT entered an Administrative Consent Agreement
where it "[did] not dispute the findings in the Department's Notice of Violation." BHT agreed to
pay a $459,000 administrative penalty, with $259,000 suspended on certain conditions. Among
the conditions were that BHT would train its drivers on legal requirements regarding spills and
that BHT would not apply for a "Waste Transporter Permit" for five years. During the five year
period, BHT could apply to the DOH for a "probationary Waste Transporter Permit" which
would be subject to "any conditions reasonably related to environmental protection, such as
conditions requiring such waste tracking and equipment to prevent such waste leaking from
trucks."[¶55] In view of the regulatory system in place at the
time of the spills, I agree with BHT that the logic underlying our prior applications of the primary
jurisdiction doctrine should inform us in this case. Here, NDIC imposed daily $12,500 fines
totaling $875,000 for alleged failures to properly remove discharged fluids. At the same time,
DOH's Consent Agreement covered the same spills, imposed a substantial fine, and imposed
regulatory sanctions directly related to transportation of produced saltwater. It also should not be
lost on us that DOH--the Department with clear authority over transportation of waste--required
no remediation or reclamation. BHT contacted both the county and the township with jurisdiction
over the roads and neither required nor requested any remediation or reclamation. By contrast,
NDIC seeks to impose fines totaling $875,000 for BHT's failure to remediate, yet NDIC has not
and cannot articulate what environmental harms resulted from the spills or what efforts would be
needed to address them. When asked to identify any environmental consequence resulting from
the spills, NDIC's representative testified, "I believe there is probably some. I don't have the
evidence, though." And, while NDIC's order criticizes and fines BHT for failing to remediate the
spills, the order never specifies what remediation efforts could have or should have been
performed, and concedes that any harms arising from the spills "may not be readily
quantifiable."[¶56] In view of clear law vesting DOH with
jurisdiction over transportation of solid waste, and in view of NDIC's at best questionable
jurisdiction over produced saltwater that is moved away from a well site and that is not at a
facility, I would conclude NDIC has impermissibly interfered with DOH's primary jurisdiction in
this matter. As a result, NDIC cannot lawfully assert or prosecute any of the claims in the
complaint.C[¶57] The final issue upon which
I part company with the majority relates to whether the amount of NDIC's fine was
constitutionally suspect. BHT argues the fine was unconstitutionally excessive and due process
was violated when NDIC sought to impose daily fines for lack of remediation, yet did not give
BHT notice of violation or ever demand remediation. The Administrative Law Judge ("ALJ"),
Patrick Ward, addressed these issues. NDIC rejected ALJ Ward's recommendation. I agree with
ALJ Ward and incorporate the relevant portion of his decision
below."Administrative proceedings must not violate the due process
rights of the parties appearing, and must conform to '[b]asic notions of fundamental fairness.'
Morrell v. North Dakota Dep't of
Transp., 1999 ND 140, ¶ 9,
598 N.W.2d 111. Published cases in North Dakota dealing with due process in administrative
hearings have generally focused on the minimum requirements of procedural due process: notice
and a meaningful opportunity for a hearing. E.g., Schlittenhart v. North Dakota Dep't of Transp.,
2015 ND 179, ¶ 27, 865 N.W.2d 825.
However, the North Dakota Supreme Court has also recognized that the concepts of due process
and fairness 'are flexible and must be analyzed on a case-by-case basis.' Wahl v. Morton Cty. Soc. Servs., 1998 ND 48,
¶ 6, 574 N.W.2d 859."Federal courts
have recognized that when a party is potentially liable for penalties that accrue daily, an
administrative agency has an obligation to notify a party of a violation at the time the agency
acquires knowledge of that violation: 'it would seem unreasonable to permit the commission to
knowingly let daily penalties accrue without giving notice of the commission's position at the
earliest reasonable time.' [United States v. ITT Cont'l Baking Co., No. C-1220, slip
op. at 5, (D. Colo. Aug. 2, 1971), dismissal denied, 462 F.2d 1104 (10th Cir. 1972).]
The district court's opinion labeled this statement as 'obiter dictum,' because the court also held
that the Federal Trade Commission could not levy daily accruing penalties against the defendant.
The district court's ruling on daily-accruing penalties was upheld by the Tenth Circuit, but
overruled by the United States Supreme Court. United States v. ITT Cont'l Baking
Co., 420 U.S. 223, 243 (1975). The Supreme Court took note of the district court's
comments on the agency's need to give notice, but explicitly declined to rule on the issue.
Id. at 226 n.2. "The Second Circuit subsequently expressed broad agreement
with the idea that an agency cannot knowingly allow daily penalties to accrue without providing
notice of the violation, but noted that it was difficult for a reviewing court "unacquainted with the
Commission's workload" to determine what constituted reasonably timely notice. United
States v. J[.]B. Williams Co., 498 F.2d 414, 435 (2d Cir. 1974)."The rule proposed by
the federal district court in ITT Cont'l Baking is sound and should be adopted in this
case. Here, the Commission met with representatives of Black Hills after the February 8 and
February 14 incidents; those representatives informed Commission staff that, based on their
conversations with Leo Slemin, they believed that the February 14 incident was a one-time event.
Commission staff failed to notify Black Hills of the February 8 incident at this meeting, and
failed to notify Black Hills at that time of either the February 8 incident or the subsequent March
3 incident until it served Black Hills with the Complaint. The Commission had knowledge of
what it believed were violations that it could use as a basis to pursue daily $12,500 fines, knew
that Black Hills was not aware of two of the three alleged incidents, and still failed to notify
Black Hills of the incidents or order immediate remediation. The Commission's conduct in this
case violates basic notions of fundamental fairness, and this is another reason the Commission
should refrain from imposing the daily-accruing penalties it seeks in Count Seven (for the alleged
February 8 incident) and Count Nine (for the alleged March 3 incident)."The actions of Mr.
Slemin, the Black Hills[] driver, were deliberate and intentional, against the law, and clearly not
consistent with company policy, based on testimony of the various company witnesses who
participated in the hearing. Given that fact, it is difficult to see how BHT could have taken
remedial action or even been aware of Slemin's conduct without advice from someone who knew
what he was doing. It is fundamentally unfair for the Commission to now slam BHT with the
maximum allowable fine as a punitive and deterrent measure for incidents in which it was
holding its aces up its sleeve during its meeting with BHT. If any daily penalties are allowed to
accrue in this case, they should be reasonably related to the gravity of the offense and the
knowledge or scienter of BHT."[¶58] I agree
with ALJ Ward that NDIC's fines are both punitive and excessive because the fines bear no
relationship to the damage caused or the cost of remediation or reclamation. As indicated above,
NDIC could not identify environmental harm resulting from the spills, and neither it nor any
other governmental body ever requested much less ordered any work at the sites. The fines
therefore are aimed at punishing BHT and warning others that they will be treated harshly for
similar misconduct. While punishment might otherwise be an option if NDIC had jurisdiction
over the violation, the actual punishment meted out must comport with both due process and the
excessive fines clause. Here, the facts demonstrate that NDIC complied with neither, and the
fines sought in Counts 7, 8 and 9 of the complaint should have been barred by the
Constitution.[¶59] Daniel J. Crothers