NO. 03-14-00667-CV

IN THE COURT OF APPEALS FOR THE THIRD DISTRICT OF TEXAS AT AUSTIN

T EXAS C OMMISSION ON E NVIRONMENTAL Q UALITY , Appellant,

v. E XXON M OBIL C ORPORATION , E XXON M OBIL O IL C ORPORATION , P ENNZOIL -Q UAKER S TATE C OMPANY , AND S HELL O IL C OMPANY , Appellees.

APPELLEES’ SURREPLY BRIEF
John R. Eldridge State Bar No. 06513520 john.eldridge@haynesboone.com Kent Rutter State Bar No. 00797364 kent.rutter@haynesboone.com Adam Sencenbaugh State Bar No. 24060584 adam.sencenbaugh@haynesboone.com HAYNES AND BOONE, LLP 1221 McKinney Street, Suite 2100 Houston, Texas 77010 Telephone: (713) 547-2000 Telecopier: (713) 547-2600

ORAL ARGUMENT REQUESTED ATTORNEYS FOR APPELLEES ACCEPTED 03-14-00667-CV 4457253 THIRD COURT OF APPEALS

AUSTIN, TEXAS 3/11/2015 1:30:00 PM JEFFREY D. KYLE

CLERKNot until the State filed its Reply did it set forth the full basis for its appeal. The State’s opening brief merely sketched the basics of its appellate argument, leaving much of the substance for its Reply. The State’s Reply exceeded the length of the opening brief by nearly 800 words and introduced new arguments, authorities, and theories in support of the State’s appeal. ExxonMobil and Shell therefore submit the following as a limited surreply.
A. The Legislature has waiv ed sovereign immunity to review the AO under § 361.322. The State’s principal argument in re ply rests on a misunderstanding of ExxonMobil and Shell’s response. ExxonMob il and Shell do not argue that the TCEQ can “waive, agree to, or confer jurisdiction” when it otherwise does not exist. (Appellant’s Reply Brief at 21. ) What the State can do—and what it did through issuance of the AO for the Voda Site—is invoke its powers under the SWDA to issue an administrative or der for which the Legislature has already enacted a “clear and unambiguous” waiver of sovereign immunity. Tex. Natural Res. Conserv. Comm’n v. IT-Davy , 74 S.W.3d 849, 853-54 (Tex. 2002). The SWDA empowers the TCEQ to issue Superfund orders pursuant to § 361.188, § 361.272, or bot h, and the structure of the SWDA provides that a person subject to any of these Superfund or ders may appeal to district court under § 361.322. Even the State acknowledges th at § 361.322 is an unequivocal waiver of sovereign immunity. (Appellant’s Reply Brief at 30.) Because the TCEQ issued- 2 - a Superfund order under the SWDA seek ing response costs from ExxonMobil and Shell, ExxonMobil and Shell may appeal under § 361.322.
B. The State’s argument that the SW DA creates mutually exclusive orders rests on a logical fallacy. The State reasons that if the Legi slature intended to create mutually exclusive Superfund orders under § 361.188 and § 361.272, then it would have created two appellate provisions under th e SWDA. Because the Legislature did so, the State argues, § 361.188 and § 361.272 or ders must be mutually exclusive. This argument is based on a logical fall acy. The flaw in the argument is that a Legislative intent to create mutually exclusive Superfund orders is not the only possible reason the Legislature would creat e two appellate provisions. Thus, even if the State’s premises are true, its conclusion does not follow. A classic example of this fallacy he lps to illustrate the point. Suppose one were to argue as follows: (1 ) if Bill Gates owns Fort Knox, then he is rich; (2) Bill Gates is rich; (3) therefore, Bill Gates owns Fort Knox. Even if both the first and second premises are true, the conclusion do es not follow, for much the same reason that the State’s conclusion does not follow here: owning Fort Knox is not the only possible explanation for why Bill Gates is rich. Setting aside the State’s flawed logic, th e fact is that nothing in the SWDA states that § 361.188 and § 361.272 orders ar e mutually exclusive, and despite the distinct appellate provisions there is no reason why they must be mutually- 3 - exclusive. Until the State decided late in this case to advance its expedient argument, the State never believed the two t ypes of orders were mutually exclusive either, as it stated on many occasions.
C. The State misconstrues the definiti on of “person affected,” which limits standing for parties under § 361.321. The State acknowledges that § 361.321 is limited to a “person affected” under the statute, which restricts the class of potential appellants to those with a specific geographic tie to a solid waste fa cility and sufficient economic injury. But the State glosses over these limitations and suggests that “[i]n context, this definition is broad enough to encompass persons named in Superfund orders.” (Appellant’s Reply Brief at 14.) That a ssertion might allow the State’s desired conclusion to trump a plain reading of the text and an honest assessment of Legislative intent. Moreover, the State ignores that the definition of “person affected” has a temporal component, which limits the class to those with a geographic tie to the county “in which a solid waste facility is to be located .” Tex. Health & Safety Code Ann. § 361.303(24) (West 2010) (e mphasis added). There is no reason to believe the Legislature intended to limit appeals from Superfund orders to persons residing or doing busine ss in counties where solid waste facilities would be built in the futu re. Beyond its clear limitation for standing, the definition reflects a Legislative intent to tie this a ppellate provision to prospective solid waste permits, not the Superfund program.- 4 - D. The language of the AO and the actions of the TCEQ reflect an unmistakable intent to issue an order under both § 361.188 and § 361.272. In construing orders of an administra tive agency, this Court will “apply the same rules as when [it] interprets statutes ; the ultimate object of construction is to ascertain the intent of the administrative body.” Office of the Pub. Util. Counsel v.
Texas-New Mexi co Power Co ., 344 S.W.3d 446, 450-51 (Tex. App.—Austin 2011, pet. denied). When construing statutes, c ourts “ascertain and give effect to the Legislature’s intent as expresse d by the language of the statute.” City of Rockwall v. Hughes , 246 S.W.3d 621, 625 (Tex. 2008). The State dismisses Section I of the AO—expressing the TCEQ’s intent to invoke both § 361.188 and § 361.272—as merely “boilerplate language” from the “preamble” that is not “controlling or di spositive.” (Appellant’s Reply Brief at 29.) But as the Texas Supreme Court has em phasized, “[i]t is presumed the entire statute is intended to be effective” and th erefore the court shou ld not read a word, phrase, or sentence to be useless or a nullity. Meritor Auto., Inc. v. Ruan Leasing
Co ., 44 S.W.3d 86, 89–90 (Tex. 2001). The ope ning paragraph of the AO is not a meaningless “preamble” and is no more “ boilerplate” than any other provision of the Order. Instead, it is an un mistakable expression of th e TCEQ’s intent in issuing the AO, and there is no basis for the Court to disregard it. To the extent the State attempts to dismiss the formal invoca tion of § 361.272 on the ground that it is- 5 - contained in AO paragraph “I. Introduction,” that th eory is defeated by AO paragraph XXVIII, which prov ides that section headi ngs are for convenience and “will be disregarded in the construction a nd interpretation of a ny of the provisions of this AO.” (CR:87.) The State asks the Court to ignor e the actual text of the AO, the circumstances of its issuance, and the une quivocal descriptions it offered of the AO for years after its issuance, including its pl eadings in this case. Instead, the State suggests, the Court should focus exclusiv ely on the AO’s “essential nature” and conclude that it was issued solely under § 361.188 simply because the TCEQ purportedly followed the listing proce dures of § 361.181 through § 361.188. (Appellant’s Reply Brief at 17.) But the proper classification of an order does not turn on whether the TCEQ followed particul ar listing procedures. For example, the State surely would not argue that if the TCEQ failed to satisfy one of the procedures of Subchapter F— e.g. , by neglecting to publish notice in the Texas Register—that a § 361.188 order would some how convert to a § 361.272 order that would be subject to appella te review under § 361.322. Finally, the State argues that the AO mu st have been issued solely under § 361.188 because it contains all the const ituent parts of § 361. 188 order. But this is another version of the same fallacy discussed above. Using the same logic, because the AO contains all of the elements of a § 361.272 order, one could just as- 6 - easily conclude that the AO was issued solely under § 361.272, not § 361.188. The State’s efforts to rewrite the hi story of the Order are unavailing.
E. Judicial review of the AO under § 361.322 would not be redundant. The State asserts in Reply that review under § 361.322 would be “redundant” because the TC EQ would not go throu gh the “elaborate, timeconsuming, and expensive Subchapter F pr ocess if it had to re-prove liability at trial by a preponderance of the evidence a nyway.” (Appellant’s Reply Brief at 26.) But the Subchapter F process does not “prove liability” by a preponderance of evidence to anyone—it merely identifies parties the TCEQ believes are responsible simply because their names appeared on r ecords associated with the site. Liability is not proven to a neutral third-party or even to a hearings examiner affiliated with the TCEQ. In the absence of any hearing before the agency, judicial review under § 361.322 is not redundant of anything. The State further suggests that it drew on its own “expertise” in identifying the PRPs for the Voda Site, so the Court should be confident that the rights of named PRPs were sufficiently protected. But as this Court has recognized when faced with similar arguments, “expertne ss is not a magic wand which can be waved over the corpus of an agency’s fi ndings to preserve them from judicial review.” Lamb County Elec. Co-op, Inc. v. Pub. Util. Comm’n , No. 03-00-00113- CV, 2001 WL 23142, at *7 (Tex. App.—Aus tin Jan. 11, 2001, no pet.) (not- 7 - designated for publication). The TCEQ has no particular expertise in identifying PRPs and no incentive to lim it the PRPs listed in an administrative order. The AO mentions nothing about the statutory defe nses to liability being considered or rejected.
F. City of Waco does not authorize the TCEQ to make decisions on the merits without robust judicial review. The State argues in Reply that City of Waco was more than a mere “threshold determination” and was in stead based “on the substance of the applications.” (Appellant’s Reply Brief at 38.) Making a logical leap, the State then concludes that the TCEQ made “a similar determination respecting the Site remedy and Appellees’ status as PRP’s [sic]” in this case. (Appellant’s Reply Brief at 36.) Therefore, the State argues, City of Waco must “define the proper approach here.” (Appellant’s Reply Brief at 35.) The State misreads City of Waco . Although the agency in City of Waco examined issues that went to the merits of the application, it did not decide the merits—instead, it determined only whethe r the applicable third party was an “affected person” who was entitled to interven e. It was this decision, not a decision on the merits, that was held to be within the TCEQ’s discretion. As this Court recently summarized: TCEQ’s discretion over contested- case hearing requests naturally includes its “threshold” determination of whether the person seeking the hearing is an affected person. See City of Waco , 413 S.W.3d at- 8 - 410, 417. And in making that particular decision , TCEQ enjoys the discretion to weigh and resolve matte rs that may go to the merits of the underlying application, including the likely impact the regulated activity—here, under-ground dispos al of by-product material—will have on the health, safety, and us e of property by the hearing requestor and on the use of natural resources. Sierra Club v. Texas Comm’n on Envtl. Quality , No. 03-11-00102-CV, 2014 WL 7463875, at *5 (Tex. App.—Austin Dec. 30, 2014, no pet. h.) (emphasis added). In contrast, the TCEQ’s decision to issue an AO imposing liability on ExxonMobil and Shell was not a threshold de termination, but a final decision on the merits. The State now seeks to expand the City of Waco holding so that its limited exception swallows the rule, gran ting the TCEQ power to make final decisions on the merits without affordi ng the potentially responsible party a contested case hearing. Neither City of Waco nor its limited progeny support such a broad interpretation. CONCLUSION The State spent four years telling ever yone who would listen that the TCEQ issued an administrative order for the Voda Site unde r both § 361.188 and § 361.272. Its recent attempts to erase that history are perplexing. The State provides a half-hearted explanation for its about-face when it states: “Prior to the Supreme Court’s opinion in City of Waco ...[t]he parties believed that, if the matter were appealed, some judicial fact-findi ng was inevitable in the trial court.” (Appellant’s Reply Brief at 19.) In other wo rds, the TCEQ fully intended to invoke- 9 - its broadest powers under the AO and saw no procedural downside in doing so, believing that the trial court would revi ew the AO under the preponderance of the evidence standard regardless. But after City of Waco , the State mistakenly concluded that a Superfund order issued purely under § 3 61.188 could be shielded from scrutiny during either a contested case hearing at th e agency or a trial at the district court. The State’s problem is that the TCEQ never intended to issue an order for the Voda Site solely under § 361.188. Undaunted, the State acte d on its misguided belief and pursued its bizarre and disingenuous plan to disa vow virtually everything it said and did with respect to the Voda AO befo re the Supreme Court’s decision in City of Waco

. The SWDA requires that appeals of Superfund orde rs come under § 361.322. Moreover, the State’s desperat e attempt to recast the Voda AO as a purely § 361.188 order is contradicted by th e language, structure, and history of the AO. Therefore, Appellees request that this Court affirm the trial court’s order denying the State’s Plea to the Jurisdiction, or in the alternativ e, overturn the Order as a violation of the TCEQ’s power under the SWDA.- 10 - Dated: March 9, 2015. Respectfully submitted, /s/ John Eldridge John R. Eldridge State Bar No. 06513520 john.eldridge@haynesboone.com Kent G. Rutter State Bar No. 00797364 kent.rutter@haynesboone.com H AYNES AND B OONE , LLP 1221 McKinney Street, Suite 2100 Houston, Texas 77010-2007 Telephone: (713) 547-2000 Telecopier: (713) 547-2600 Adam H. Sencenbaugh State Bar No. 24060584 adam.sencenbaugh@haynesboone.com H AYNES AND B OONE , LLP 600 Congress Avenue, Suite 1300 Austin, Texas 78701 Telephone: (512) 867-8489 Telecopier: (512) 867-8606 ATTORNEYS FOR APPELLEES EXXON MOBIL CORPORATION, EXXONMOBILOIL CORPORATION, PENNZOILQUAKER STATE COMPANY, AND SHELL OIL COMPANY- 11 - CERTIFICATE OF COMPLIANCE T EX . R. A PP . P. 9.4(i)(3) I hereby certify that this Brief contains a total of 2,237 words, excluding the parts of the brief exempted under T EX
. R. A PP
. P. 9.4(i)(1), as verified by Microsoft Word 2010. This Brief is th erefore in compliance with T EX
. R. A PP
. P. 9.4(i)(2).

/s/ Adam Sencenbaugh Adam Sencenbaugh- 12 - CERTIFICATE OF SERVICE In accordance with the Texas Rules of Appellate Procedure, I certify that a true and correct copy of the Appellees’ Surreply Brief was served by electronic service on the following parties or attorneys of record on this 9th day of March, 2015: Attorneys Parties Thomas H. Edwards Texa s Commission on Environmental Quality Craig J. Pritzlaff Linda Secord Assistant Attorney General Office of the Attorney General Environmental Protection Division P. O. Box 12548, Capitol Station Austin, TX 78711-2548
N ON P ARTIES TO A PPEAL : Janessa M. Glenn Ca bot Norit Americas, Inc. R. Steven Morton M OLTZ M ORTON & G LENN , LLP 5113 Southwest Parkway, Suite 120 Austin, TX 78735-8969 John E. Leslie Howard Freilich/ d/b/a Quick Stop J OHN L ESLIE | PLLC Brake and Muffler 1216 Florida Dr., Suite 140 Arlington, TX 76015-2393 Cynthia J. Bishop Baxter Oil Service C B ISHOP L AW PC P. O. Box 612994 Dallas, TX 75261-2994- 13 - Paul Craig Laird II Frank Kosa r, d/b/a Rite Way Truck Rental A SHLEY & L AIRD , L.C. 800 W. Airport Fwy., Suite 880 Irving, TX 75062-6274 Billy D. Cox Billy D. Cox Truck Leasing, Inc. 128 Red Oak Ln. Flower Mound, TX 75028-3501 David F. Zalkovsky, Agent Cen tral Transfer & Storage Co. 11302 Ferndale Rd. Dallas, TX 75238-1020 George E. Kuehn SBC Ho ldings, Inc., f/k/a The Stroh B UTZEL L ONG Brewery Company 301 E. Liberty St., Suite 500 Ann Arbor, MI 48102-2283

/s/ Adam Sencenbaugh Adam Sencenbaugh

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